As filed with the Securities and Exchange Commission on February 14, 1997
Registration No. 333-13863
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1
To
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LOTTOWORLD, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0399794
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2150 Goodlette Road, Suite 200
Naples, Florida 34102
(941) 643-1677
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive office)
A. Richard Holman, President
LottoWorld, Inc.
2150 Goodlette Road, Suite 200
Naples, Florida 34102
(941) 643-1677
(Name, address, including zip code, and telephone number,
including area code, of agent of service)
Approximate date of commencement of proposed sale to public: From time to
time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in conjunction with dividend or
interest reinvestment plans, check the following box: [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earliest effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box:[ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Securities to be Offering Price Aggregate Registration
to be Registered Registered Per Share (1) Offering Price Fee(2)
- ---------------- ---------- -------------- ------------- ------------
<S> <C> <C> <C> <C>
Common Stock
$.001 par value 2,284,595 $ 1.3125 $ 2,998,531 $ 908.65
Common Stock
Underlying Series A
Convertible Pfd Stock 1,041,688 $ 1.3125 $ 1,367,215 $ 414.31
Common Stock
Underlying Warrants
Issued in 1994 Regulation
D Underwriting 1,360,677 $ 1.3125 $ 1,785,889 $ 541.18
Common Stock
Underlying
Convertible Notes 520,833 $ 1.3125 $ 683,593 $ 207.15
Total Fee $ 2,071.29
(1) Computed on the basis of the price at which stock of the same class was sold on February
7 1997, pursuant to Rule 457(h) of the Securities Act of 1933, as amended, solely for the
purpose of calculating the amount of the registration fee.
(2) This total includes $1,553.32 previously paid by LottoWorld, Inc. to the Securities and
Exchange Commission.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE
NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT THAT
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
Information contained herein is subject to completion or amendment. A registration statement
relating to these securities has been filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
<PAGE>
PROSPECTUS
LOTTOWORLD, INC.
5,207,793, SHARES OF
COMMON STOCK
This Prospectus relates to the offering of up to 5,207,793 shares (the
"Shares") of Common Stock, $.001 par value, of LottoWorld, Inc. (the "Company")
which may be offered from time to time by the individuals named herein (the
"Selling Shareholders"), of which; 1,562,521 shares are to be issued by the
Company upon the conversion of the Company's Convertible Notes (the "Notes")
and the Company's Series A Convertible Preferred Stock (the "Preferred
Stock"), 1,360,677 shares are to be issued upon the exercise of warrants which
were sold as part of a Unit Offering in 1994, and 204,341 shares are issuable
by the Company to certain of the Selling Shareholders upon the exercise of
outstanding warrants to purchase Common Stock (the "Warrants"). The Company will
receive proceeds upon the exercise of the Warrants, but will not receive any of
the proceeds from the sale of the Shares by the Selling Shareholders, nor the
conversion of the Notes or the Preferred Stock. See "Use of Proceeds".
The Company will bear all expenses of the offering hereunder other than
underwriting discounts and commissions incurred in connection with the sale of
the shares by the Selling Shareholders. The Company's Common Stock is traded on
the Nasdaq SmallCap Market under the symbol "LTTO". The closing bid and asked
price of the Company's Common Stock on February 7, 1997 were $ 1.1563 and $
1.3125 respectively, as reported by Nasdaq.
SEE "RISK FACTORS" ON PAGES 4 THROUGH 7 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
The common stock underlying both the Preferred Stock and the 1994
Regulation D offering, is to be issued, to the holders of these securities.
The securities contain anti-dilution provisions and the underlying shares
reflect those provisions. 1,569,664 of the Shares were originally issued by the
Company in June and September 1996 to the Selling Shareholders. 80,000 Shares
were issued in a private placement dated November 1994 and the remaiding,
48,375 of the Warrants, were issued in March 1996. The Selling Shareholders have
advised the Company that they intend to sell the Shares from time to time in
transactions on the Nasdaq SmallCap Market at prices prevailing at the time of
the sale or otherwise as set forth below. See "Plan of Distribution".
The Selling Shareholders have advised the Company that, as of the date
hereof, they have made no arrangements with any brokerage firm for the sale of
the Shares. The Selling Shareholders may be deemed to be "underwriters" within
the meaning of the Act, in which case commissions received by a broker or dealer
may be deemed to be underwriting commissions or discounts under the Act. See
"Plan of Distribution".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Underwriting
Discounts and
Price to Public Commissions
Per Share $ 1.3125 (1) (2)
Total $ 6,835,228 (1) (2)
1) Estimate based upon a per share price of $ 1.3125 as of February 7 1997
and assumes the sale of all Shares by the Selling Shareholders, with no
adjustment for commissions, discounts, brokerage and other fees that may
be paid by the Selling Shareholders, or expenses of the offering to be
paid by the Company.
(2) Commissions, discounts and brokerage fees will be payable by the Selling
Shareholders in such amounts as the Selling Shareholders may agree to from
time to time.
<PAGE>
THE DATE OF THIS PROSPECTUS IS February 14, 1997
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission ( the "Commission"). Reports, proxy and information statements and
other information can be inspected and copied at the public facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C., and the Commission's regional offices located at 7 World Trade Center,
14th Floor, New York, New York 10048, and Northeastern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company has filed with the Commission a registration statement under
the Securities Act of 1933 with respect to the shares offered hereby. This
Prospectus does not contain all information set forth in such registration
statement. For further information with respect to the Company and the shares
offered hereby, reference is made to such registration statement, including the
exhibits and financial schedules filed as part thereof. Such information may be
inspected in the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies thereof may be obtained from the Commission
at prescribed prices.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission are incorporated by reference in this Prospectus: (in) the Company's
Annual Report on Form 10-KSB and Form-10KSB/A for the fiscal year ended December
31, 1995; (ii) the Company's Quarterly Report on Form-10QSB for the quarters
ended March 31, 1996 June 30, 1996 and September 30, 1996; and (iii) the
Company's Proxy Statement for the Annual Shareholders Meeting held on April 29,
1996. All documents filed by the Company pursuant to Sections 13 (a), 13 (c), 14
or 15 (d) of the Securities Exchange Act of 1934 after the date of this
Prospectus and prior to the termination of the offering of the securities
contemplated hereby shall also be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded hereby to the extent that a
statement contained herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, upon the written or oral request of such
person, a copy of any or all of the documents which are incorporated by
reference into this Prospectus, other than exhibits to such documents (unless
such exhibits are specifically incorporated by reference in such documents.)
Requests for such copies should be directed to James D. Cullen, 2150 Goodlette
Road, Suite 200, Naples, Florida 34102, telephone number (941) 643-1677.
THE COMPANY
LottoWorld, Inc., a Florida corporation (the "Company") was founded in
1993 as Dynamic World Distributors, Inc. and changed its name to LottoWorld,
Inc. in April 1995. The Company publishes and distributes LottoWorld magazine, a
publication directed at lottery players, primarily through subscription and
retail sales at checkout and service counters. The 100+ page, four color
magazine, which currently is published monthly in a digest size format, deals
with all aspects of state lottery games, information and news. LottoWorld is
nationally distributed in 48 states, the District of Columbia and in twelve
foreign countries. At present there are over 50,000 subscribers and monthly
distribution of the magazine is over 210,000 copies per issue in nine separate
state and one national edition.
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<PAGE>
On April 8, 1996, the New York State Division of Lottery announced that
Lottery Players Publishing Company, Inc. (a wholly-owned subsidiary of
LottoWorld, Inc.) had won the award to publish a monthly New York Lottery
magazine based on the Company's response to a Request for Proposal. Initial
projections for the monthly magazine, NEW YORK PLAYERS MONTHLY, was to have been
650,000 copies distributed at more than 12,000 lottery retailers throughout the
state. On May 23, 1996, the New York Lottery increased the initial projection
from 650,000 copies monthly to a minimum of approximately 1,100,000 copies
monthly beginning in October 1996. The January 1997 issue had a circulation in
excess of 1,128,000.
The NEW YORK PLAYERS MONTHLY is a free 48-page, four color, digest-size
magazine offering lottery players information about new and existing New York
lottery games, profiles of lottery winners throughout the state, playing tips
and strategies, and state lottery news.
At 1,100,000 copies monthly the Company believes the NEW YORK PLAYERS
MONTHLY will be the largest newsstand distributed magazine in New York state
(more than twice the size of TV Guide's New York newsstand circulation). Based
on advertising revenue generated by other publications with a minimum of
circulation of at least 1,100,000 copies monthly, the Company estimates revenue
from the NEW YORK PLAYERS MONTHLY MAGAZINE could be in excess of $3,700,000
annually. There can be no assurance that the NEW YORK PLAYERS MONTHLY magazine
will generate revenue at the levels of similarly sized publications.
Recent Developments
- -------------------
State Lottery Magazine Program
Through Lottery Players Publishing Company, Inc. ("LPPC") (a wholly-owned
subsidiary of LottoWorld, Inc.) the company enters into exclusive contractual
agreements with individual state lottery authorities to publish a 48-page, four
color, digest-size magazine specifically tailored to offer lottery players
information about new and existing lottery games, profiles of lottery winners
throughout the state and state lottery news.
The primary benefit of this program to state lottery authorities is that
they receive, without any cost, an efficient and effective means of educating
and communicating with their lottery players. The primary benefits to the
Company are: (i) a unique distribution system, and (ii) potential advertising
revenue.
With respect to the distribution system, the program is designed so that
each state lottery is responsible for distribution of their magazine, without
cost to LPPC, to each retail lottery location statewide and to display the
magazine with lottery tickets. In the aggregate, there are more than 220,000
retail lottery ticket locations in the 38 states. Concerning potential
advertising revenue, there can be no assurance that advertising revenue will be
generated in excess of expenses associated with the program. However, the
Company has devoted significant personnel and capital resources to generate
advertising revenue. Although advertising revenue to- date has been less than
expected, the Company believes advertising sales should increase as the
advertising community becomes aware of the aggregate circulation of the
magazines within the program (the circulation goal for 1997 is 5,000,000 copies
monthly) and third party advertising research corroborates readership patterns
and demographic information usually required by advertisers.
LPPC now has exclusive contracts to publish magazines in conjunction with
state lotteries in New York, Georgia and Nebraska totaling a combined 1,650,000
copies distributed monthly.
NEBRASKA. On January 15, 1997, the Nebraska Lottery signed an exclusive three
year contract with LPPC to publish new monthly magazine, the NEBRASKA LOTTERY
PLAYERS DIGEST. Specifically tailored for the Nebraska Lottery, the NEBRASKA
LOTTERY PLAYERS DIGEST will have an initial circulation of 150,000 copies
monthly and will be available at over 1,300 Nebraska lottery ticket outlets
statewide.
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GEORGIA. On December 24, 1996, the Georgia Lottery Corporation signed an
exclusive three year contract with LPPC to publish a monthly Georgia Lottery
magazine similar in format to the NEW YORK PLAYERS MONTHLY. Initial projections
are for distribution of 400,000 copies monthly which will be available to more
than 5,700 retailers throughout Georgia.
WEST VIRGINIA. January 17, 1997, the West Virginia Lottery signed an exclusive
three year agreement with LPPC to publish a monthly West Virginia Lottery
magazine titled, WEST VIRGINIA LOTTERY PLAYERS DIGEST. Initial projections are
for distribution of 150,000 copies monthly to all lottery retailers throughout
the state.
NEW YORK. On April 8, 1996, the New York State Division of Lottery announced
that LPPC had won the award to publish a monthly New York Lottery magazine based
of the Company's response to a Request for Proposal. Initial circulation
projections for the monthly magazine, NEW YORK PLAYERS MONTHLY, were 650,000
copies distributed at more than 12,000 lottery retailers throughout the state.
On May 23, 1996, the New York Lottery increased the initial projection from
650,000 copies monthly to a minimum of 1,100,000 copies monthly which was
launched with the October 1996 inaugural issue. At 1,100,000 copies monthly the
Company believes the NEW YORK PLAYERS MONTHLY is the third most widely
circulated magazine in New York state.
LOTTOWORLD(R) Magazine
LOTTOWORLD(R) magazine continues to experience increasing subscriptions
sales and steady newsstand sales. Primarily due to the very significant capital
outlays necessary to successfully maintain a traditional newsstand distribution
system and promotional campaigns, the Company has decided to conserve capital in
this area and focus expansion of LOTTOWORLD(R) magazine circulation through
various subscription sales vehicles.
SUBSCRIPTION. Monthly subscribers to LOTTOWORLD(R) magazine numbered
approximately 75,000 at year end 1996. Current subscription sales programs for
LOTTOWORLD(R) magazine include: (i) the national Publishers Clearing House
Sweepstakes (PCH) mailing in March 1997, which PCH estimates could generate up
to 40,000 new subscribers; (ii) full-page advertising for LOTTOWORLD(R) magazine
subscriptions in each issue of the 1,100,000 copies per edition NEW YORK PLAYERS
MONTHLY; (iii) $3 Billion Lotto Club promotions sponsored by civic organization
like the Kiwanis Clubs; and (iv) through various promotional activities of
telemarketing organizations. LOTTOWORLD(R) magazine subscription sales have been
increasing at a rate of several thousand monthly.
NEWSSTAND. Effective with the March 1997, edition the single issue cover price
of LOTTOWORLD(R) magazine will be increased from $1.95 to $2.49 per copy.
Further changes to be instituted with this issue include consolidation of 8
separate state/regional editions to a single national edition and reduction of
the number of copies printed for newsstand sales to more closely match actual
newsstand sales. Monthly newsstand sales have been averaging approximately
25,000 copies monthly.
Risk Factors
- ------------
An investment in the Units offered hereby is speculative and involves a
risk of loss. The following risk factors should be considered carefully in
evaluating an investment in the Units offered hereby. The order in which the
risk factors appear is not intended as an indication of the relative weight or
importance thereof.
Prospective investors should carefully review all risk factors.
CONTINUING LOSSES. The Company commenced operations in August 1993, and
has had losses in each of the years since that date. For the year ended December
31, 1995, the Company incurred a net loss of $5,595,000 and for the three
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quarters ended September 30, 1996, incurred a net loss of $2,825,000. The
Company has incurred a cumulative net loss through September 30, 1996 of
$10,515,000. The Company expects losses to continue at least through the fourth
quarter ending December 31, 1997, as the Company prepares to begin publication
of a minimum of 1,100,000 copies of the New York Lottery Players Monthly
magazine and possibly similar monthly magazines for several other states. There
is no assurance that the Company will ever be able to conduct its operations
profitably.
NEED FOR ADDITIONAL CAPITAL. Management currently anticipates that revenue
generated from magazine/advertising sales will not be sufficient to fund its
operations for the foreseeable future. The Company anticipates a need for
additional financing of a total of $3.6 million by the end of 1997. The Company
does not have a definitive source of this financing, but management feels
confident that the financing can be accomplished within the time frame required.
However, any delays in market acceptance of the state digest magazine program,
significant complications in deriving acceptable advertising sales revenue,
along with numerous other factors, could cause the Company to require additional
capital. No assurance can be given that the Company will be able to obtain
additional funding on satisfactory terms. Any securities issued to raise
additional capital may be sold on terms more favorable to new investors than
those offered to investors in this offering.
MARKET ACCEPTANCE. The success of the Company is dependent upon the
ability to sell a substantial number of copies of each issue of LottoWorld(R)
through subscription or newsstand sales. Further, the success of the Company is
dependent upon the acceptance of the Monthly State Lottery Players Digest
program by state lottery authorities.
COMPETITION. Management is aware of only a few competitors in its market,
none of which has product lines or distribution channels which are comparable to
the Company's. However, there can be no assurance that other competitors, which
may have greater financial and other resources than the Company, will not be
drawn into the market, or that the Company's resources and marketing strategies
will allow the Company to compete successfully.
LIMITATIONS ON COPYRIGHT AND TRADEMARK PROTECTION. Although LOTTOWORLD(R)
is copyrighted by the Company, much of the information contained therein is
readily available from a number of sources, including daily newspapers. The
Company believes its copyrights and trademarks are highly important to the
Company's business and intends to vigorously defend its rights. However, while
copyright and trademark laws give owners of copyrights and trademarks certain
remedies against infringers, such laws do not assure that infringement will not
occur, and there can be no assurance that the available remedies would
adequately compensate the Company for any damage incurred if infringement were
to occur. In addition, since the playing methods and game strategies in the
Company's magazines are not protectible under the trademark and service mark
laws, the Company cannot preclude other parties from offering instructional aids
which might also employ these methods and strategies. Furthermore, there can be
no assurance that any action by the Company against an infringer would be
successful, or that any recovery by the Company would adequately compensate it
for any damages it might incur.
DEPENDENCE UPON OUTSIDE SUPPLIERS. Much of the content of each issue of
LOTTOWORLD(R) is obtained from outside sources, including columnists, freelance
writers, state lottery news releases and wire services. In addition, the Company
is dependent upon an outside printer, a subscription fulfillment firm and a
national newsstand distributor. Although the Company intends to expand its
internal staff, it will continue to be dependent on a number of sources outside
the Company in connection with its operations. No assurance can be given that
these sources will be available indefinitely or, that if such a source ceases to
supply the Company, it would be able to find an adequate substitute for it on a
timely basis, if at all. The loss of any of these suppliers could have a
material adverse affect on the Company.
LOTTERY INDUSTRY FACTORS. Although the lottery industry as a whole has
recently experienced significant growth and an increase in public interest,
there can be no assurance that this trend will continue. Management of the
Company believes that the expansion of state lottery games has been, to a
certain extent, the result of efforts by state and local governments to create a
new revenue source for government operations. If these efforts do not achieve
their desired effects, or have adverse side effects, there can be no assurance
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that lottery operations will sustain their current rates of growth, that
government authorization of lotteries will not be restricted or eliminated, or
that public interest in, or acceptance of, lottery games will not decline, any
of which could result in a substantial decline in the demand for the Company's
products.
GOVERNMENT REGULATION.. Lotteries, and activities associated therewith,
such as promotion, are subject to substantial regulation under federal laws and
by each state which conducts a lottery. The application of such regulation is
subject to the interpretation by, and the enforcement policy of, each state's
lottery commission and/or attorney general. The Company actively attempts to
comply with all applicable laws and has no knowledge of any regulatory action
that has been taken or threatened that would impact the activities of the
Company. Nevertheless, there can be no assurance that such regulatory action
could not be taken. Any regulatory action could have a material effect upon the
Company's business.
LIMITED LIQUIDITY, MARKET-RELATED FACTORS AND DETERMINATION OF OFFERING
PRICE. The Company's shares are publicly traded on the NASDAQ SmallCap
over-the-counter stock market. Investors may be subject to the risks commonly
associated with the over-the-counter trading markets. These markets are often
volatile, and such volatility can result in wide fluctuations in price and
trading volume. Accordingly, there can be no assurance that investors will be
able to resell the Shares at the offering price, or at all. In addition, the
offering price of the Shares offered hereby was determined by the Company and is
not related to any recognized criterion of value such as revenue, earnings or
net worth. There can be no assurance that the over-the-counter trading market
will value the Common Stock at or near the offering price.
LACK OF CASH DIVIDENDS. The Company has never paid or declared any cash
dividends on its Common Stock and does not contemplate paying any cash dividends
on its Common Stock in the foreseeable future. The payment by the Company of
cash dividends, if any, in the future rests within the discretion of its Board
of Directors and will depend, among other things, upon the Company's earnings,
its financial condition, any restrictions under credit agreements and other
relevant factors. The Company is prohibited from paying any dividends on its
Common Stock until all accrued dividends on the outstanding Preferred Stock have
been paid in full.
RESTRICTED SHARES; LIMITED PUBLIC MARKET TRADING. The shares purchased in
this Offering are restricted securities and may only be sold pursuant to an
effective registration statement under federal and applicable state securities
laws or exemptions therefrom. Prior to completion of this Offering, the Company
had outstanding 5,964,849 shares of its common stock, of which approximately
2,851,667 shares are traded in the public market. There can be no assurance that
an active market will exist for the stock purchased in this transaction, even if
registered with the Securities and Exchange Commission, or that such stock could
be sold without a significant negative impact on the publicly quoted price per
share.
EXECUTIVE EMPLOYMENT AGREEMENTS. The Company has entered into employment
agreements with the Chief Executive Officer and the President (collectively the
"employees"). Each agreement provides for an annual base salary and incentive
bonuses conditioned upon the Company's achieving certain levels of annual
after-tax earnings and certain levels of monthly circulation of the magazines.
Pursuant to the earnings bonus, each employee will receive a bonus of two
percent of annual after-tax earnings at the end of the fiscal year in which the
Company's first annual after-tax earnings are $3,000,000 or more. In addition,
for each subsequent year in which the Company's annual after-tax earnings
increase by additional $3,000,000 increments, each employee will receive a
one-time bonus of between three and five percent of such increase. Pursuant to
the circulation bonus, each employee will receive $.10 per copy of the first
time monthly sales of LottoWorld magazine reach 500,000. In addition, the first
time in which monthly sales of LottoWorld reach 1,000,000 copies, and for each
subsequent 1,000,000 copies, up to 6,000,000, each employee will receive a
one-time bonus ranging from $.12 to $.15 per additional copy. The agreements
also provide that the Company will grant an option to each employee for 50,000
shares at the end of each fiscal year in which the Company's annual after-tax
earnings first are $3,000,000 or more. In addition, for each subsequent year in
which the Company's annual after-tax earnings increase by an additional
$3,000,000, the Company will grant an option to each employee for an additional
50,000 shares. The agreements also provide that the Company will grant an option
to each employee for 25,000 shares at the end of the first month n which the
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Company first sells 500,000 or more copies of LottoWorld magazine and at the end
of each subsequent month that monthly sales of the magazine increase by an
additional 500,000 copies. The Company has also agreed to give the employees an
option to purchase 25,000 shares at the end of the first month in which the
circulation of the Digest program exceeds 1,000,000 and an additional option for
25,000 sharesfor each additional 1,000,000 of circulation up to 5,000,000, and
option for 50,000 shares when the Digest circulation exceeds 5,000,0000 and an
option for 100,000 shares when the circulation reaches 7,500,000. The initial
options of 25,000 shares for each officer have been issued by the Company.
USE OF PROCEEDS
The Company will receive the proceeds from the exercise of the Warrants,
which have an exercise price of $.96 per share. If the maximum number of
shares issuable under the Warrants are exercised, the Company's proceeds
therefrom, after expenses of this Offering (estimated at $15,000), will be
$1,291,250. The Company intends to use the proceeds to retain certain personnel
required to efficiently commence and expand the State Monthly Digest programs,
estimated to be $250,000; the remainder will be applied to working capital.
Pending their anticipated use, the proceeds will be invested in short term
interest bearing securities and other similar obligations.
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock by Selling Shareholders as of
February 7, 1997, and as adjusted to reflect the sale of the shares
Shares to be Shares to be
Beneficially Maximum Beneficially
Owned Prior Number of Owned After
To Offering Shares to be the Offering
Number Percent of Class Sold Number Percent of
Class
------ ---------------- ------------ ------ ---------------
- -
<S> <C> <C> <C> <C> <C>
Elaine Millard 29,000 * 29,000 -0-
Isadore J. Goldstein
Rev. Living Trust
dtd 3/14/90 10,000 * 10.000 -0-
Everett Jensen Rev
Trust 15,000 * 15,000 -0-
Dr. Robert Kay
Profit Sharing Tr. 10,000 * 10,000 -0-
Robert and Harriet
Terhaar 10,000 * 10,000 -0-
Michelle K. Cheng 212,500 3.40 212,500 -0-
Aaron Boxer Rev Trusr
TTEE dtd 8/1/89 248,571 3.97 200,000 48,571 *
Lawrence Schrader 10,000 * 10,000 -0-
William Van De Kreeke
Janice Van De Kreeke 10,000 * 10,000 -0-
Robert W., Clark
Slf-Del Trust 12,000 * 10,000 2,000 *
Joyce Guinther and
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Marie Ackerman 10,000 * 10,000 -0-
Robert W. Johnson 20,000 * 20,000 -0-
W. Harold and
Joyce Lee Davis 40,000 * 40,000 -0-
Betty Happel 10,500 * 10,000 500 *
Darel Happel 10,500 * 10,000 500 *
Donald Kettner 10,000 * 10,000 -0-
Kenneth Benson 10,000 * 10,000 -0-
Myron A. Naugle 10,000 * 10,000 -0-
Ila Waseka 35,000 * 25,000 10,000 *
Sanford Greeley 10,000 * 10,000 -0-
Frederick and
Betty Taylor 10,000 * 10,000 -0-
Grace Anderson
REV TRUST 10,000 * 10,000 -0-
Raymond Boisvert 2,666 * 999 1,667 *
Robert P. Lyon 666 * 666 -0-
Erik Dobberstein 2,666 * 999 1,667 *
VBS General Partnership 35,000 * 25,000 10,000 *
Kenneth R. Parker 55,000 * 50,000 5,000 *
John R. Albers 163,000 2.61 133,000 30,000 *
John & Jeannette
VonGunten Liv. Trust 10,000 * 10,000 -0-
Delores Merkley 15,000 * 15,000 -0-
Paul R. Owings 15,000 * 15,000 -0-
Phillip A. Dunbar 10,000 * 10,000 -0-
Paul and
Lenore Owings 15,000 * 15,000 -0-
Edward H. Rudoy
REV TRUST 10,000 * 10,000 -0-
Leola Vidger 10,000 * 10,000 -0-
Jerry N. Dedrick 10,000 * 10,000 -0-
James Owens
REV TRUST 50,000 * 50,000 -0-
Steve Romanek 20,000 * 20,000 -0-
Industricorp & Co., Inc.
FBO T. C. Carpenters 75,000 1.20 50,000 25,000 *
Ellis Limited Partnership 30,000 * 30,000 -0-
Perkins Capital Management
Profit Sharing Plan &
Trust 20,000 * 20,000 -0-
Pyramid Partners, L.P. 150,000 2.40 150,000 -0-
Harold Roitenberg Trust 20,000 * 20,000 -0-
Quest Venture Partners 50,000 * 50,000 -0-
Archie & Glenndora
Whitehead 15,000 * 15,000 -0-
Ed Koller 20,500 * 20,500 -0-
Alan & Corrine
Metcalf 50,000 * 50,000 -0-
Mitchell M. Boxer
Rev Trust 18,500 * 18,500 -0-
First Bank NA TTEE
for John Albers 103,000 1.65 103,000 -0-
Ebner Trust 10,000 * 5,000 5,000 *
8
<PAGE>
Earl L. Ferris 15,000 * 15,000 -0-
Alphonse Kraft 6,000 * 6,000 -0-
Dr. Robert Kay 5,000 * 5,000 -0-
David B. Johnson 128,487 2.04 58,487 70,000 1.12
Paul R. Kuehn 58,487 * 58,487 -0-
Eldon C. Miller 19,496 * 19,496 -0-
Stanley D. Rahm 19,496 * 19,496 -0-
Judy Peterson 5,000 * 5,000 -0-
Grayson & Associates 48,375 * 48,375 -0-
Jack Gernes 20,475 * 10,000 10,475
Brightstone Fund V, Ltd
Partnership 10,000 * 20,000 -0-
Walter S. Spokowski 14,000 * 10,000 4,000
Dennis B. Schroeder (1) 718,142 11.48 205,742 512,400 8.19
A. Richard Holman (1) 470,398 7.52 127,598 342,800 5.48
Wolf Pack Holdings 2,000 * 2,000 -0-
Parkway Financial Group 56,000 * 56,000 -0-
Total 3,364,175 52.73% 2,284.595 1,079,580 17.48%
</TABLE>
(1) Each is an officer and director of the Company
* Less than 1%
PLAN OF DISTRIBUTION
The Company has been advised that the Selling Shareholders may sell the
Shares, from time to time, in one or more transactions (which may include block
transactions) on the Nasdaq SmallCap Market at market prices prevailing at the
time of the sale or at prices otherwise negotiated.
The Shares may, without limitation, be sold by one or more of the
following: (in) a block trade in which the broker or dealer so engaged will
attempt to sell the securities as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (ii) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus; and (iii) ordinary brokerage transactions and
transactions in which the broker solicits purchasers.
The Company has been advised that, as of the date hereof, the Selling
Shareholders have made no arrangement with any broker for the sale of the
shares. Underwriters, brokers or dealers may participate in such transactions as
agents and may, in such capacity, receive brokerage commissions from the Selling
Shareholders or purchasers of such securities. Such underwriters, brokers or
dealers may also purchase Shares and resell such Shares for their own account in
the manner described above. The Selling Shareholders and such underwriters,
brokers or dealers may be considered "underwriters" as that term is defined by
the Securities Act of 1933, although the Selling Shareholders disclaim such
status. Any commissions, discounts or profits received by such underwriters,
brokers or dealers in connection with the foregoing transactions may be deemed
to be underwriting discounts and commissions under the Securities Act of 1933.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by James D. Cullen Esquire. Mr. Cullen is a Director
and a holder of Common Stock and options to purchase Common Stock of the
Company.
9
<PAGE>
EXPERTS
The financial statements of the Company incorporated in this Prospectus by
reference to the Annual Report on Form 10-KSB/A of LottoWorld, Inc. for the year
ended December 31, 1995 have been so incorporated on reliance on the report of
McGladrey & Pullen, LLP, independent accountants, given on the authority of said
firm as experts in accounting and auditing.
INDEMNIFICATION
The Company's Articles of Incorporation and the Company's Bylaws eliminate
or limit certain liabilities of its directors, officers and employees of the
Company in certain instances. Insofar as exculpation of, or indemnification for,
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the Securities
and Exchange Commission such exculpation or indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
10
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC registration fee $ 2,072
Accounting fees and expenses 1,500
Legal fees and expenses 5,000
Miscellaneous 6,428
-----------
Total $ 15,000
===========
Except for the SEC fee, all of the foregoing expenses have been estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 607.0805 of the Florida Corporation Act empowers the Company to,
and Article IX of the Company's Bylaws require it to:
(1) indemnify any person who was or is a party to any proceeding (other
than an action by, or in the right of, the corporation or is or was serving at
the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust , or other enterprise
against liability incurred in connection with such proceeding, including any
appeal thereof, if he acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful.
(2) indemnify any person, who was or is a party to any proceeding by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer employee, or agent of the corporation
or is or was serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise, against expenses and amounts paid in settlement not exceeding,
in the judgement of the board of directors, the estimated expense of litigating
the proceeding to conclusion, actually and reasonably incurred in connection
with the defense or settlement of such proceeding, including any appeal thereof.
Such indemnification is authorized if such person acted in good faith and in a
manner he reasonable believed to be in, or not opposed to, the best interests of
the corporation, except that no indemnification shall be made under this
subsection in respect of any claim, issue, or matter to which such person shall
have been adjudged to be liable unless, and only to extent that, the court in
which such proceeding was brought, or any other court of competent jurisdiction,
shall determine upon application that, despite the adjudication of liability but
in view of all circumstances of the case, such person is fairly and reasonable
entitled to indemnity for such expenses which such court shall deem proper.
(3) To the extent that a director, officer, employee, or agent of a
corporation has been successful on the merits or otherwise in defense of any
proceeding referred to in subsection (1) or subsection (2), or in defense of any
claim, issue, or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith.
(4) Expenses incurred by an officer or director in defending a civil or
criminal proceeding may be paid by the corporation in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if he is ultimately found not to
be entitled to indemnification by the corporation pursuant to this section.
11
<PAGE>
ITEM 16. EXHIBITS
Exhibit No. Description
5. Opinion of James D. Cullen, Esquire
23.3 Consent of McGladrey and Pullen, LLP
23.4 Consent of James D. Cullen, Esquire (included in Exhibit 5)
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a) (3) of the
Securities Act of 1933;
(ii) to reflect in the Prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
provided, however, that paragraphs (a) (1) (i) and (a) (1) (ii) do
not apply if the Registration Statement is on Form S-3 or Form S-8,
and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
by the Registrant pursuant to Section 13 or Section 15 (d) of the
Securities Exchange Act of 1934 that are incorporated by reference
in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or Section 15 (d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
12
<PAGE>
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event hat a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, hereunto duly
authorized, in the City of Naples and State of Florida, on this 14th day of
February, 1997.
LottoWorld, Inc.
Registrant
By s/Dennis B. Schroeder
-----------------------
Dennis B. Schroeder
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
s/ Dennis B. Schroeder Director, Chairman and February 14, 1997
- ---------------------- Chief Executive Officer
Dennis B. Schroeder (principal executive officer)
s/ A. Richard Holman Director and President February 14, 1997
- --------------------
A. Richard Holman
s/ James D. Cullen Director February 14, 1997
- ------------------
James D. Cullen
s/ Stuart Dubow Senior Vice President and February 14, 1997
- --------------- Chief Financial Officer
Stuart Dubow (principal accounting officer)
13
McGladrey & Pullen, LLP
----------------------------
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITOR
We hereby consent to the incorporation by reference in the February 14,
1997 Amendment No. 1 to Registration Statement on Form S-3 of our report dated
March 15, 1996, which appears on Page F-2 of the annual report on Form 10-KSB/A
of LottoWorld, Inc. for the year ended December 31, 1995. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
S/ McGladrey & Pullen, LLP
Naples, Florida
February 14, 1997
14
James D. Cullen, P.A.
Legal Professional Association
Business Law
James D. Cullen, J 2150 Goodlette Road, Suite 200
Admitted in Florida Naples, Florida 34102 Corporations
And Missouri
Securities
Telephone: 941-434-8405
Facsimile: 941-643-6670
Email: [email protected]
14 February 1997
Dennis B. Schroeder
LottoWorld, Inc.
2150 Goodlette Road
Suite 200
Naples, Florida 34102
Re: LottoWorld, Inc. ("LWI") Amendment No. 1 to Form S-3 Registration Form
Dear Mr. Schroeder:
As counsel for LWI, I have reviewed Amendment No. 1 to Form S-3
Registration Statement (the "Registration Statement") dated as of the date of
this opinion to be filed with the Securities and Exchange Commission. As General
Counsel, I have examined such documents, corporate records and instruments as I
have deemed necessary or appropriate for the purpose of this opinion.
Based on the foregoing, I am of the opinion that any shares of LWI common
stock issued pursuant to this Registration Statement will be validly issued,
fully-paid and non-assessable.
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement.
Very truly yours,
S/ James D. Cullen, Esq.
15
