U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
eCONNECT
(Previously known as Betting, Inc.)
(Name of Small Business Issuer in its charter)
Nevada 454390 43-1239043
(State or jurisdiction (Primary Standard I.R.S.
Employer
of incorporation Industrial Classification Identification
No.)
or organization) Code Number)
31310 Eaglehaven Center, Suite 10,
Rancho Palos Verdes, California 90275
(310) 541-4393
(Address and telephone number of Registrants principal executive
offices and principal place of business)
Shawn F. Hackman, Esq.,
3360 West Sahara Avenue,
Suite 200, Las Vegas, Nevada 89102;
(702) 732-2253
(Name, address, and telephone number of agent for service)
Approximate date of proposed sale to the public: As soon as
practicable
after this Registration Statement becomes effective.
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 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
earlier effective
registration statement
for the same offering.?
If this Form is a
post-effective
amendment filed
pursuant to Rule
462(d) under the
Securities Act,
check the following
box and list the
Securities Act
registration
statement number of
the earlier
effective
registration
statement for the
same offering.?
If the delivery of the
prospectus is expected
to be made pursuant to
Rule 434, check the
following box.?
CALCULATION OF REGISTRATION FEE
Title of
each class
of
securities
to be
registered
Amount to
be
registered
(1)
Proposed
maximum
offering
price
per unit
(2)
Proposed
maximum
aggregate
offering
price
Amount of
registrati
on fee
Common
shares
10,000,000
$0.62
$6,200,000
$1,723.60
The registrant hereby amends this registration statement on such
date
or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states
that this registration statement shall thereafter become effective
in
accordance with Section 8(a) of the Securities Act of 1933 or until
the
registration statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
(1) Pursuant to Rule 416, such additional amounts to prevent
dilution
from stock splits or similar transactions.
(2) Calculated in accordance with Rule 457(g)(3): The average of
the
bid and asked price as of May 25, 1999.
PART I. INFORMATION REQUIRED IN PROSPCTU
PROSPECTUS
eCONNECT
(previously know as Betting, Inc.)
10,000,000 Shares (1)
Common Stock
Offering Price $0.62 per Share
eConnect, a Nevada corporation (Company), is hereby offering up
to 10,000,000 shares of its $0.001 par value common stock (Shares)
at
an offering price of $0.62 per Share on a delayed basis under Rule
415
pursuant to the terms of this Prospectus for the purpose of
providing
working capital for the Company.
The Shares offered hereby are highly speculative and involve a
high degree of risk to public investors and should be purchased only
by
persons who can afford to lose their entire investment (See Risk
Factors on page 4).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Public
Underwriting
Discounts and
Commissions
(2)
Proceeds to
Issuer (3)
Per Share
$0.62
$0
$0.62
Total Minimum (1)
$500,000
$0
$500,000
Total Maximum
$6,200,000
$0
$6,200,000
Information contained herein is subject to completion or
amendment. The registration statement relating to the securities
has
been filed with the Securities and Exchange Commission. The
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.
Subject to Completion, Dated ________________, 1999
(1) Pursuant to SEC Rule 416, there will be a change in the amount
of
securities being issued to prevent dilution resulting from stock
splits, stock dividends, or similar transaction.
(2)
THE SHARES ARE OFFERED BY THE COMPANY SUBJECT TO PRIOR SALE,
ACCEPTANCE OF THE SUBSCRIPTIONS BY THE COMPANY AND APPROVAL OF
CERTAIN
LEGAL MATTERS BY COUNSEL TO THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OPEN OFFER TO BUY INTO SECURITIES OFFERED HEREBY A
STATE
IN WHICH, OR TO A PERSON TRUE, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE INFORMATION CONTAINED HEREIN
SUBSEQUENT
TO THE DATE THEREOF. HOWEVER, IF A MATERIAL CHANGE OCCURS, THIS
PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY FOR ALL
EXISTING
SHAREHOLDERS, AND FOR ALL PROSPECTIVE INVESTORS WHO HAVE NOT YET
BEEN
ACCEPTED AS SHAREHOLDERS IN THE COMPANY.
THIS PROSPECTUS DOES NOT INTENTIONALLY OMIT ANY MATERIAL FACT OR
CONTAIN ANY UNTRUE STATEMENT OF MATERIAL FACT. NO PERSON OR ENTITY
HAS
BEEN AUTHORIZED BY THE COMPANY TO GIVE ANY INFORMATION OR MAKE A
REPRESENTATION, WARRANTY, COVENANT, OR AGREEMENT WHICH IS NOT
EXPRESSLY
PROVIDED FOR OR CONTAINED IN THIS PROSPECTUS; IF GIVEN OR MADE, SUCH
INFORMATION, REPRESENTATION, WARRANTY, COVENANT, OR AGREEMENT MUST
NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THE COMPANY IS A REPORTING COMPANY. EACH PERSON WHO RECEIVES A
PROPSECTUS WILL HAVE AN OPPORTUNITY TO MEET WITH REPRESENTATIVES OF
THE
COMPANY, DURING NORMAL BUSINESS HOURS UPON WRITTEN OR ORAL REQUEST
TO
THE COMPANY, IN ORDER TO VERIFY ANY OF THE INFORMATION INCLUDED IN
THIS
PROSPECTUS AND TO OBTAIN ADDITIONAL INFORMATION REGARDING THE
COMPANY.
IN ADDITION, EACH SUCH PERSON WILL BE PROVIDED WITHOUT CHARGE, UPON
WRITTEN OR ORAL REQUEST, A COPY OF ANY OF THE INFORMATION THAT IS
INCORPORATED BY REFERENCE IN THE PROSPECTUS AND THE ADDRESS
(INCLUDING
TITLE OR DEPARTMENT) AND TELEPHONE NUMBER TO WHICH SUCH REQUEST IS
TO
BE DIRECTED.
ALL OFFEREES AND SUBSCRIBERS WILL BE ASKED TO ACKNOWLEDGE IN
WRITING THAT THEY HAVE READ THIS PROSPECTUS CAREFULLY AND
THOROUGHLY,
AND UNDERSTOOD THE CONTENTS THEREOF, THEY WERE GIVEN THE OPPORTUNITY
TO
OBTAIN ADDITIONAL INFORMATION; AND THEY DID SO TO THEIR
SATISFACTION.
(1) A maximum of 10,000,000 shares may be sold on a delayed basis
under
Rule 415 under the Securities Act of 1933, as amended, pursuant to
the conversion of certain debentures into common stock of the
Company, and the exercise of certain warrants to purchase the common
stock. The offering will remain open until the maturity date of the
debentures on May 26, 2002 and the expiration date of the warrants,
also on May 26, 2002.
(2) No commissions will be paid in connection with the sale of the
Shares on this delayed basis.
(3) The Net Proceeds to the Company is before the payment of
certain
expenses in connection with this offering. See Use of
Proceeds.
TABLE OF CONTENTS
PROSPECTUS SUMMARY 1
RISK FACTORS 2
USE OF PROCEEDS 3
DETERMINATION OF OFFERING PRICE 4
DILUTION 5
PLAN OF DISTRIBUTION 6
LEGAL PROCEEDINGS 7
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 9
DESCRIPTION OF SECURITIES 10
INTEREST OF NAMED EXPERTS AND COUNSEL 11
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES 12
ORGANIZATION WITHIN LAST FIVE YEARS 13
DESCRIPTION OF BUSINESS 14
PLAN OF OPERATION 15
DESCRIPTION OF PROPERTY 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 17
MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 18
EXECUTIVE COMPENSATION 19
FINANCIAL STATEMENTS 20
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 21
PROSPECTUS SUMMARY tc \l1 MEMORANDUM SUMMARY
The following summary is qualified in its entirety by detailed
information appearing elsewhere in this prospectus (Prospectus).
Each
prospective investor is urged to read this Prospectus, and the
attached
Exhibits, in their entirety.
The Company.
(a) Background.
Betting, Inc. was originally organized under the laws of the
State of Missouri on September 1, 1981, as HANDY-TOP, INC. On April
20, 1983, the Articles of Incorporation were amended to change the
name
of the corporation to HTI Corporation. On May 28, 1993, the
Articles
of Incorporation were amended to change the name of the corporation
to
Leggoons, Inc. In addition to changing the companys name, the May
28,1993, amendment to the Articles of Incorporation increased the
number of authorized shares of common stock from 40,000 to
10,000,000
and decreased the par value of the common stock from $1.00 per share
to $.01 per share. Also on May 28, 1993, Leggoons, Inc., declared a
14-
for-1 stock split.
Leggoons, Inc., was engaged in the design, manufacture and
distribution of apparel and related accessories which are sold to
better specialty and department stores nationwide under the brands
Leggoons, CPO by Leggoons, John Lennon Artwork Apparel, and
Snooggel.
On January 19, 1996, Leggoons, Inc., entered into a Licensing
Agreement with Robert Tamsky, a former director and employee of the
Leggoons, Inc. Pursuant to the terms of the Licensing Agreement,
the
Leggoons, Inc., granted Mr. Tamsky effective January 1, 1996, the
right
to use the LEGGOONS trademark in connection with the design,
production, marketing, sales and sublicensing of all clothing,
wearing
apparel and accessories bearing the LEGGOONS symbol. This right
will
continue until December 31, 1998, and may be extended thereafter
each
year for an additional year. In consideration for the license, Mr.
Tamsky, according to the Licensing Agreement, shall pay to the
Leggoons, Inc. a royalty of five percent of the net sales of
LEGGOONS
products.
Also on January 19, 1996, the Leggoons, Inc., adopted a formal
plan to discontinue the designing, selling, manufacturing and
distribution of its apparel products. As part of such plan,
Leggoons,
Inc., discontinued production on April 30, 1996, and intended to
either
sell or liquidate the operations within twelve months of that date.
On June 12, 1996, Leggoons, Inc., transferred all of its assets
and liabilities to a third party assignee, under an Assignment for
the
Benefit of Creditors (the Assignment). An Assignment is a business
liquidation device available as an alternative to bankruptcy. The
third party assignee, a Nebraska corporation, also named Leggoons,
Inc.
(the Assignee), will be required to properly, timely, and orderly
dispose of all remaining assets for the benefit of creditors.
Included
in the Assignment were the rights and obligations of the Licensing
Agreement. Leggoons, Inc. continued to maintain its status as a
shell
corporation.
On February 18, 1997, Leggoons, Inc. entered into an
Agreement to
License Assets from Home Point of Sales, Inc.(now know as Electronic
Transactions & Technology-ET&T)) for the purpose of licensing
certain
technology for the development of Personal Encrypted Remote
Financial
Electronic Card Transactions (PERFECT). ET&T is a privately held
corporation 70% owned by Thomas S. Hughes, President of the Company.
This technology provides consumers with the option to instantly pay
bills or impulse purchase from home with real time cash
transactions.
Management believes the proprietary technology and the large demand
for
wagering opportunities in todays marketplace will combine to
generate
substantial sales for the Company over the medium term.
Thomas S. Hughes, Chairman of ET&T, became Chairman and
President
of Leggoons, Inc., on March 1, 1997. At that time, the name was
changed to Betting, Inc.
On April 28, 1997, the Company entered into a Host
Processing
Agreement with ET&T for the purpose of having ET&T act as the bank
host
processing for all Betting, Inc.s transactions that are sent by
terminal s that read credit cards or ATM cards. On March 27, 1998,
the
Company entered into a License Agreement with ET&T for the purpose
of
licensing additional technology for processing electronic banking
transactions. This licensing supplements the technology licensed
under
the Agreement dated February 18, 1997.
On May 17, 1999, an Agreement and Plan of Merger between
Betting,
Inc., a Missouri corporation, into Betting, Inc., a Nevada
corporation
(Company) was executed by an authorized signatory of each company.
At
a duly called meeting of shareholders on May 21, 1999, the merger of
the two companies was approved by a majority of the shareholders
appearing in person or by proxy. On June 1, 1999, Articles of
Merger
were filed with the Nevada Secretary of State, which formally
resulted
in the redomicile to the State of Nevada. On June 2, 1999, a
Certificate of Amendment of Amendment to Articles of Incorporation
was
filed with the Nevada Secretary of State changing the name of the
Company to eConnect.
(b) Business.
The Company is positioning itself to facilitate same as cash
ATM
card or smart card transactions that are originating from bank host
processing centers and are being sent to gaming operators. These
transactions are being effected with electronic equipment that
allows
self service pay per play and no actual communications between the
player and the gaming operator. These types of transactions will be
originating from homes, offices, and public walk in locations. The
Company will act as the interface that will communicate data to the
gaming operators, receive back their acknowledgment of the
transaction
and then pass on this gaming acknowledgment to the bank host
processing
center that has been standing by for this information and has
already
completed the bank authorization of the pay per play transaction.
See
Description of Business.
The business model of the Company is to receive a fee per
transaction paid by the bank host processing center at the moment of
the transaction. In general, this fee will be from between 2% to 6%
of
the wager placed on a pay per play or a $6 flat fee in the case of
an
account being opened.
The internet gaming industry is an industry that has developed
significantly in recent years. The internet gaming industry as a
whole
is under increasing governmental scrutiny as the industry develops.
It
is possible that at some point in the future there could be
legislation
against gambling on the internet or other similar methods. See Risk
Factors.
The Offering.
Shares of the Company will be offered as a shelf registration
under Securities and Exchange Commission Rule 415 at $0.62 per
Share.
See Plan of Distribution. Purchasers of certain debentures of the
Company will be permitted to convert the debentures into common
stock
covered by this Prospectus. Also, purchasers of certain warrants of
the Company will be permitted to exercise their warrants into common
stock covered by this Prospectus. See Plan of Distribution. If all
the
Shares offered are transferred under the debentures and/or warrants,
this will represent the net proceeds from sale of the warrants and
debentures of a maximum of $6,200,000, less certain costs associated
with this offering. See Use of Proceeds. This balance will be used
as
working capital for the Company.
Liquidity of Investment.
Although the Shares will be free trading, and is an established
market for the Shares, there is not a large public float in the
Shares
at this time (14,500,000 shares owned by approximately 400
shareholders. Therefore, an investor may not be able to sell is
Shares
when he or she wishes; therefore, an investor may consider his or
her
investment to be long-term. See Risk Factors.
Risk Factors.
And investment in the company involved risks due in part to a
limited previous financial and operating history of Company, as well
as
competition in the internet gaming industry. Also, certain
potential
conflicts of interest arise due to the relationship of the Company
to
management and others. See Risk Factors.
RISK FACTORS tc \l 1 RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE IN NATURE
AND INVOLVE A HIGH DEGREE OF RISK. THEY SHOULD BE PURCHASED ONLY BY
PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. THEREFORE,
EACH
PROSPECTIVE INVESTOR SHOULD, PRIOR TO PURCHASE, CONSIDER VERY
CAREFULLY
THE FOLLOWING RISK FACTORS AMONG OTHER THINGS, AS WELL AS ALL OTHER
INFORMATION SET FORTH IN THIS PROSPECTUS.
Limited Prior Operations and Experience.
The Company is newly reorganized, has only limited revenues from
its new internet operations, and has only limited assets. There can
be
no assurance that the Company will generate significant revenues in
the
future; and there can be no assurance that the Company will operate
at
a profitable level. See Description of Business. If the Company is
unable to obtain customers and generate sufficient revenues so that
it
can profitably operate, the Companys business will not succeed. In
such event, investors in the Shares may lose their entire cash
investment.
Also the Company and its management do not have significant
experience in the internet business, and in particular the on-line
gaming business. See Directors, Officers, Promoters, and Control
Persons.
Dependence on the Internet Industry
The Companys business is influenced by the rate of use and
expansion in the internet industry. Although this industry, and in
particular on-line gaming, have been expanding at a rapid rate in
recent years, there is no guarantee that it will continue to do so
in
the future. Declines in these industries may influence the Companys
revenues adversely.
Influence of Other External Factors.
The internet industry, and internet gaming in particular, is a
speculative venture necessarily involving some substantial risk.
There
is no certainty that the expenditures to be made by the Company will
result in commercially profitable business. The marketability of
internet gaming will be affected by numerous factors beyond the
control
of the Company. These factors include market fluctuations, and the
general state of the economy (including the rate of inflation, and
local
economic conditions), which can affect peoples discretionary
spending.
Factors which leave less money in the hands of potential clients of
the
Company will likely have an adverse effect on the Company. The
exact
effect of these factors cannot be accurately predicted, but the
combination of these factors may result in the Company not receiving
an
adequate return on invested capital.
Regulatory Factors.
Existing and possible future consumer legislation, regulations
and
actions could cause additional expense, capital expenditures,
restrictions and delays in the activities undertaken in connection
with
the party planning business, the extent of which cannot be
predicted.
The U.S. Senate is presenting discussing a proposed bill by Senator
Jon
Kyl of Arizona which would ban internet gaming in the United States.
The
passage of such a bill may adversely affect the operation of the
Company,
including increased costs if certain of the Company operations are
then
moved to a foreign jurisdiction. The exact affect of such
legislation
cannot be predicted until it is in final form. If, however, a
federal
statute was passed into legislation making Internet gambling
illegal,
eSportsbet.com is prepared to make the necessary adjustments to
continue to operate legally.
Competition.
The Company may experience substantial competition in its
efforts
to locate and attract clients. Many competitors in the internet
industry, and in particular internet gaming, have greater
experience,
resources, and managerial capabilities than the Company and may be
in
a better position than the Company to obtain access to attractive
clientele. There are a number of larger companies which will
directly
compete with the Company. Such competition could have a material
adverse effect on the Companys profitability.
Success of Management.
Any potential investor is strongly cautioned that the purchase of
these securities should be evaluated on the basis of: (i) the
limited
diversification of the venture capital opportunities afforded to the
Company, (ii) the high-risk nature and limited liquidity of the
Company, and (iii) the Companys ability to utilize funds for the
successful development and distribution of revenues as derived by
the
revenues received by the Companys yet undeveloped portfolio of
clients,
and any new potentially profitable ventures, among other things. The
Company can offer no assurance that any particular client and/or
property under its management contract will become successful.
Reliance on Management.
The Companys success is dependent upon the hiring of key
administrative personnel. None of the officers or directors, or any
of
the other key personnel, has any employment or non-competition
agreement with the Company. Therefore, there can be no assurance
that
these personnel will remain employed by the Company. Should any of
these individuals cease to be affiliated with the Company for any
reason
before qualified replacements could be found, there could be
material
adverse effects on the Companys business and prospects. In
addition,
management has no experience is managing companies in the same
business
as the Company.
In addition, all decisions with respect to the management of
the
Company will be made exclusively by the officers and directors of
the
Company. Investors will only have rights associated with minority
ownership interest rights to make decision which effect the Company.
The success of the Company, to a large extent, will depend on the
quality of the directors and officers of the Company. Accordingly,
no
person should invest in the Shares unless he is willing to entrust
all
aspects of the management of the Company to the officers and
directors.
Use of Proceeds Not Specific.
The proceeds of this offering have been allocated only generally.
Proceeds from the offering have been allocated generally to legal
and
accounting, and working capital. Accordingly, investors will entrust
their funds with management in whose judgment investors may depend,
with only limited information about managements specific intentions
with respect to a significant amount of the proceeds of this
offering.
See Use of Proceeds.
Lack of Diversification.
The size of the Company makes it unlikely that the Company will
be able to commit its funds to diversify the business until it has a
proven track record, and the Company may not be able to achieve the
same level of diversification as larger entities engaged in this
type
of business.
No Cumulative Voting
Holders of the Shares are not entitled to accumulate their votes
for the election of directors or otherwise. Accordingly, the holders
of
a majority of the Shares present at a meeting of shareholders will
be
able to elect all of the directors of the Company, and the minority
shareholders will not be able to elect a representative to the
Companys
board of directors.
Absence of Cash Dividends
The Board of Directors does not anticipate paying cash dividends
on the Shares for the foreseeable future and intends to retain any
future earnings to finance the growth of the Companys business.
Payment
of dividends, if any, will depend, among other factors, on earnings,
capital requirements, and the general operating and financial
condition
of the Company, and will be subject to legal limitations on the
payment
of dividends out of paid-in capital.
Conflicts of Interest.
The officers and directors have other interests to which they
devote substantial time, either individually or through partnerships
and corporations in which they have an interest, hold an office, or
serve on boards of directors, and each will continue to do so
notwithstanding the fact that management time may be necessary to
the
business of the Company. As a result, certain conflicts of interest
may
exist between the Company and its officers and/or directors which
may
not be susceptible to resolution.
In addition, conflicts of interest may arise in the area of
corporate opportunities which cannot be resolved through arms length
negotiations. All of the potential conflicts of interest will be
resolved only through exercise by the directors of such judgment as
is
consistent with their fiduciary duties to the Company. It is the
intention of management, so as to minimize any potential conflicts
of
interest, to present first to the Board of Directors to the Company,
any proposed investments for its evaluation.
Investment Valuation Determined by the Board of Directors.
The Companys Board of Directors is responsible for valuation of
the Companys investments. There are a wide range of values which are
reasonable for an investment for the Companys services. Although the
Board of Directors can adopt several methods for an accurate
evaluation, ultimately the determination of fair value involves
subjective judgment not capable of substantiation by auditing
standards. Accordingly, in some instances it may not be possible to
substantiate by auditing standards the value of the Companys
investments. The Companys Board of Directors will serve as the
valuation committee, responsible for valuing each of the Companys
investments. In connection with any future distributions which the
Company may make, the value of the securities received by investors
as
determined by the Board may not be the actual value that the
investors
would be able to obtain even if they sought to sell such securities
immediately after a distribution. In addition, the value of the
distribution may decrease or increase significantly subsequent to
the
distributee shareholders receipt thereof, notwithstanding the
accuracy
of the Boards evaluation.
Additional Financing May Be Required.
Even if all of the 10,000,000 Shares offered hereby are sold, the
funds available to the Company may not be adequate for it to be
competitive in the areas in which it intends to operate. There is no
assurance that additional funds will be available from any source
when
needed by the Company for expansion; and, if not available, the
Company
may not be able to expand its operation as rapidly as it could if
such
financing were available. The proceeds from this offering are
expected
to be sufficient for the Company to become develop and market it
line
of services. Additional financing could possibly come in the form of
debt/preferred stock. If additional shares were issued to obtain
financing, investors in this offering would suffer a dilutive effect
on
their percentage of stock ownership in the Company. However, the
book
value of their shares would not be diluted, provided additional
shares
are sold at a price greater than that paid by investors in this
offering. The Company does not anticipate having within the next 12
months any cash flow or liquidity problems
Purchases by Affiliates.
Certain officers, directors, principal shareholders and
affiliates may purchase, for investment purposes, a portion of the
Shares offered hereby, which could, upon conversion, increase the
percentage of the Shares owned by such persons. The purchases by
these
control persons may make it possible for the Offering to meet the
escrow amount.
No Assurance Shares Will Be Sold.
The 10,000,00 Shares are to be offered directly by the Company,
and no individual, firm, or corporation has agreed to purchase or
take
down any of the shares. No assurance can be given that any or all
of
the Shares will be sold.
Offering Price.
The offering price of the Shares bears no relation to book value,
assets, earnings, and was calculated in accordance with SEC Rule
457(g)(3): The average of the bid and asked price as of a date
within
five business days from the filing date of the Registration
Statement
covering this offering May 25, 1999 ($0.62). There can be no
assurance
that the Shares will maintain market values commensurate with the
offering price. See Determination of Offering Price.
Shelf Offering
The Shares are offered directly by the Company on a delayed basis
pursuant to certain exercise rights of warrants and conversion
rights
of debentures. No individual, firm or corporation has agreed to
elect
such exercise or conversion of any of the offered Shares. No
assurance
can be given that any or all of the Shares will be issued. No
broker-
dealer has been retained as an
underwriter and no broker-dealer is under any obligation to purchase
any of the Shares. In addition, the officers and directors of the
Company, collectively, have limited experience in the offer and sale
of
securities on behalf of the Company. See Plan of Distribution.
Limited Public Market for Companys Securities.
Prior to the Offering, there has been only a limited public
market for the Shares being offered (a total of 14,500,000 as of May
25, 1999). There can be no assurance that an active trading market
will develop or that purchasers of the Shares will be able to resell
their securities at prices equal to or greater than the respective
initial public offering prices. The market price of the Shares may
be
affected significantly by factors such as announcements by the
Company
or its competitors, variations in the Companys results of
operations,
and market conditions in the retail, electron commerce, and internet
industries in general. The market price may also be affected by
movements in prices of stock in general. As a result of these
factors,
purchasers of the Shares offered hereby may not be able to liquidate
an
investment in the Shares readily or at all.
Penny Stock Regulations.
The Companys Shares will be quoted on the Electronic Bulletin Board
maintained by the National Quotation Bureau, Inc., which reports
quotations by brokers or dealers making a market in particular
securities. In view of the fact that no broker will be involved in
the
Offering, it is likely to be difficult to find a broker who is
willing
to make an active market in the stock. The Securities and Exchange
Commission (the Commission) has adopted regulations which generally
define penny stock to be any equity security that has a market price
less than $5.00 per share. The Companys shares will become subject
to
rules that impose additional sales practice requirements on broker-
dealers who sell penny stocks to persons other than established
customers and accredited investors (generally those with assets in
excess of $1,000,000 or annual income exceeding $200,000, or
$300,000
together with their spouse). For transactions covered by these
rules,
broker-dealers must make a special suitability determination for the
purpose of such securities and must have received the purchasers
written consent to the transaction prior to the purchase.
Additionally, for any transaction effected involving a penny stock,
unless exempt, the rules require the delivery, prior to the
transaction, of a disclosure schedule prepared by the Commission
relating to the penny stock market. A broker-dealer also must
disclose
the commissions payable to both the broker--dealer and the
registered
representative, and current quotations for the securities. Finally,
monthly statements must be sent disclosing recent price information
for
the penny stock held in the account and information on the limited
market in penny stocks. Consequently, these rules may restrict the
ability of broker-dealers to sell the Companys Shares and may affect
the ability of purchasers in the Offering to sell the Companys
securities in the secondary market. There is no assurance that a
market
will develop for the Companys Shares.
Shares Eligible For Future Sale
All of the 9,385,000 Shares which are currently held, directly or
indirectly, by management have been issued in reliance on the
private
placement exemption under the Securities Act of 1933, as amended
(Act).
Such Shares will not be available for sale in the open market
without
separate registration except in reliance upon Rule 144 under the
Act.
In general, under Rule 144 a person (or persons whose shares are
aggregated) who has beneficially owned shares acquired in a non-
public
transaction for at least on year, including persons who may be
deemed
affiliates of the Company (as that term is defined under the Act)
would
be entitled to sell within any three-month period a number of shares
that does not exceed the greater of 1% of the then outstanding
shares
of common stock, or the average weekly reported trading volume on
all
national securities exchanges and through NASDAQ during the four
calendar weeks preceding such sale, provided that certain current
public information is then available. If a substantial number of
the
Shares owned by these shareholders were sold pursuant to Rule 144 or
a
registered offering, the market price of the Common Stock could be
adversely affected.
Forward-Looking Statements.
This Prospectus contains forward looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and
Section 21E of the Securities Act of 1934, as amended, and as
contemplated under the Private Securities Litigation Reform Act of
1995, including statements regarding, among other items, the
Companys
business strategies, continued growth in the Companys markets,
projections, and anticipated trends in the Companys business and the
industry in which it operates. The words believe, expect,
anticipate,
intends, forecast, project, and similar expressions identify
forward-
looking statements. These forward-looking statements are based
largely
on the Companys expectations and are subject to a number of risks
and
uncertainties, certain of which are beyond the Companys control. The
Company cautions that these statements are further qualified by
important factors that could cause actual results to differ
materially
from those in the forward looking statements, including those
factors
described under Risk Factors and elsewhere herein In light of these
risks and uncertainties, there can be no assurance that the forward-
looking information contained in this Prospectus will in fact
transpire
or prove to be accurate. All subsequent written and oral forward-
looking statements attributable to the Company or persons acting on
its
behalf are expressly qualified in their entirety by this section.
Uncertainty Due to Year 2000 Problem.
The Year 2000 issue arises because many computerized systems
use
two digits rather than four to identify a year. Date sensitive
systems
may recognize the year 2000 as 1900 or some other date, resulting in
errors when information using the year 2000 date is processed. In
addition, similar problems may arise in some systems which use
certain
dates in 1999 to represent something other than a date. The effects
of
the Year 2000 issue may be experienced before, on, or after January
1,
2000, and if not addressed, the impact on operations and financial
reporting may range from minor errors to significant system failure
which
could affect the Companys ability to conduct normal business
operations.
This creates potential risk for all companies, even if their own
computer systems are Year 2000 compliant. It is not possible to be
certain that all aspects of the Year 2000 issue affecting the
Company,
including those related to the efforts of customers, suppliers, or
other
third parties, will be fully resolved.
The Company currently believes that its systems are Year 2000
compliant in all material respects, its current systems and products
may contain undetected errors or defects with Year 2000 date
functions
that may result in material costs. Although management is not aware
of
any material operational issues or costs associated with preparing
its
internal systems for the Year 2000, the Company may experience
serious
unanticipated negative consequences (such as significant downtime
for
one or more of its web site properties) or material costs caused by
undetected errors or defects in the technology used in its internal
systems. Furthermore, the purchasing patterns of advertisers may be
affected by Year 2000 issues as companies expend significant
resources
to correct their current systems for Year 2000 compliance. The
Company
does not currently have any information about the Year 2000 status
of
its advertising customers. However, these expenditures may result
in
reduced funds available for web advertising or sponsorship of web
services, which could have a material adverse effect on its
business,
results of operations, and financial condition. The Companys Year
2000
plans are based on managements best estimates.
USE OF PROCEEDS tc \l 1 USEOFPROCEEDS
Following the transfer of the 10,000,000 Shares offered by the
Company pursuant to the debentures and warrants, this will represent
gross proceeds to the Company of approximately $6,200,000 (less
certain
expenses of this offering). These proceeds, less the expenses of
the
offering, will be used to provide working capital for the Company.
The following table sets forth the use of proceeds from this
offering (based on the minimum and maximum offering amounts):
Use of Proceeds
Minimum Offering
Amount Percent
Maximum Offering
Amount Percent
Transfer Agent
Fee
$1,000 0.20%
$1,000 0.02%
Printing Costs
$1,000 0.20%
$1,000 0.02%
Legal Fees
$50,000 10.00%
$50,000 0.81%
Accounting Fees
$1,500 0.30%
$1,500 0.02%
Working Capital
$446,500 89.30%
$6,146,500 99.13%
Total
$500,000 100.00%
$6,200,000 100.00%
Management anticipates expending these funds for the purposes
indicated above. To the extent that expenditures are less than
projected, the resulting balances will be retained and used for
general
working capital purposes or allocated according to the discretion of
the Board of Directors. Conversely, to the extent that such
expenditures require the utilization of funds in excess of the
amounts
anticipated, supplemental amounts may be drawn from other sources,
including, but not limited to, general working capital and/or
external
financing. The net proceeds of this offering that are not expended
immediately may be deposited in interest or non-interest bearing
accounts, or invested in government obligations, certificates of
deposit, commercial paper, money market mutual funds, or similar
investments.
DETERMINATION OF OFFERING PRICE
tc \l 1 DILUTION
The offering price is not based upon the Companys net worth,
total asset value, or any other objective measure of value based
upon
accounting measurements. The offering price was determined under
Securities and Exchange Commission Rule 457(g), which states that
where
the securities to be offered pursuant to warrants or other rights to
purchase such securities the registration fee is to be calculated
upon
the basis of the price at which the warrants or rights or securities
subject thereto are to be offered to the public. If such offering
price cannot be determined at the time of filing the registration
statement, the registration fee is to be calculated upon the basis
of
the highest of the following: (1) the price at which the warrants or
rights may be exercised, if known at the time of filing the
registration statement; (2) the offering price of securities of the
same class included in the registration statement; or (3) the price
of
securities of the same class, as determined in accordance with
paragraph (c) of that Rule. Since the offering price based on the
warrants and debentures cannot be determined based on (1) and (2),
it
was calculated under Rule 457(c) as the average of the bid and asked
price as of a date within five (5) business days of the filing date
(May 25, 1999): $0.62 per Share.
DILUTION
Net tangible book value is the amount that results from
subtracting the total liabilities and intangible assets of an entity
from its total assets. Dilution is the difference between the public
offering price of a security and its net tangible book value per
Share
immediately after the Offering, giving effect to the receipt of net
proceeds in the Offering. As of February 28, 1999 (the date of the
latest Form 10-Q for the Company, the net tangible book value of the
Company was $(350,775) or $(0.0245) per Share. Giving effect to the
issue by the Company of all offered Shares at the public offering
price, the pro forma net tangible book value of the Company would be
$5,849,225, or $0.4086 per Share, which would represent an immediate
increase of $0.4331 in net tangible book value per Share and $0.0127
per Share dilution per share to new investors. Dilution of the book
value of the Shares may result from future share offerings by the
Company.
The following table illustrates the pro forma per Share dilution:
Assuming Maximum
Shares Sold
Offering Price (1)
$0.6200
Net tangible book value per
share before Offering (2)
$(0.0245)
Net tangible book value
Share after offering (3)
$0.2405
Increase attributable to
issue of stock to
new investors (4)
$0.2605
Dilution to new investors (5)
$0.3795
Percent Dilution to new
investors (6,7)
38.79%
(1) Offering price before deduction of offering expenses,
calculated
on a Common Share Equivalent basis.
(2) The net tangible book value per share before the offering
($0.0245) is determined by dividing the number of Shares outstanding
prior to this offering into the net tangible book value of the
Company.
(3) The net tangible book value after the offering is determined
by
adding the net tangible book value before the offering to the
estimated
proceeds to the Corporation from the current offering (assuming all
the
Shares are issued), and dividing by the number of common shares to
be
outstanding. The net tangible book value per share after the
offering
($0.2405) is determined by dividing the number of Shares that will
be
outstanding, assuming issue of all the Shares offered, after the
offering into the net tangible book value after the offering as
determined in note 3 above.
(4) The increase attributable to purchase of stock by new
investors
is derived by taking the net tangible book value per share after the
offering $0.2405 and subtracting from it the net tangible book value
per share before the offering ($0.0245) for an increase of $0.2650.
(6) The dilution to new investors is determined by subtracting the
net tangible book value per share after the offering ($0.2405) from
the
offering price of the Shares in this offering ($0.6200), giving a
dilution value of ($0.3795).
(7) The Percent Dilution to new investors is determined by dividing
the Dilution to new investors ($0.3795) by the offering price per
Share ($0.6200) giving a dilution to new investors of 38.79%.
PLAN OF DISTRIBUTION tc \l 1 PLAN OF DISTRIBUTION
The Company will issue a maximum of 10,000,000 Shares of its
common stock, par value $0.001 per Share to the public in accordance
with a Registration Rights Agreement as explained below. There can
be
no assurance that any of these Shares will be issued. The gross
proceeds to the Company represented by issue of all the Shares under
this offering will be approximately $6,200,000. No commissions or
other fees will be paid, directly or indirectly, by the Company, or
any
of its principals, to any person or firm in connection with
solicitation of sales of the shares. The public offering price of
the
Shares will be modified, from time to time, by amendment to this
Prospectus, in accordance with changes in the market price of the
Companys common stock. These securities are offered by the Company
subject to prior issue and to approval of certain legal matters by
counsel.
As set forth in a Registration Rights Agreement and based upon
the terms and subject to the conditions of a subscription agreement
between the investor and the Company, the Company proposes to issue
and
sell to certain investors six percent (6%) convertible debentures of
the Company, which will be convertible into shares of the common
stock,
$0.001 par value (the Common Stock), of the Company upon the terms
and
subject to the conditions of such Debentures. In addition and
pursuant
to the terms of the same Registration Rights Agreement and
subscription
agreement, the Company proposes to issue to certain investors
150,000
Warrants exercisable at a strike price equal to 105% of the five (5)
day average closing bid price for the Companys Shares for the five
trading days prior to the Closing Date, as that term is defined in
the
Registration Rights Agreement. The Registration Rights Agreement,
Form
of Debenture, and Form of Warrant are incorporated herein by
reference,
and are set forth in their entirety as Exhibits 4.2, 4.2, and 4.4 to
this Form SB-2.
Under the terms of the Registration Rights Agreement, the Company
is required to prepare and file with the Securities and Exchange
Commission no later than ten days after the Closing Date, a
Registration Statement on Form SB-2, covering a sufficient number of
Shares for the investors into which the $500,000 of Debentures and
150,000 Warrants would be convertible. The Registration Statement
shall cover 10,000,000 shares of the Companys Common Stock. Such
Registration Statement shall state that, in accordance with the
Securities Act, it also covers such indeterminate number of
additional
shares of Common Stock as may become issuable to prevent dilution
resulting from Stock splits, or stock dividends. If at any time the
number of shares of Common Stock into which the Debenture and
Warrants
issued in this offering may be converted exceeds the aggregate
number
of shares of Common Stock then registered, the Company shall, within
ten (10) business days after receipt of written notice from any
Investor, either (i) amend the Registration Statement filed by the
Company pursuant to the preceding sentence, if such Registration
Statement has not been declared effective by the SEC at that time,
to
register all shares of Common Stock into which the Debenture may be
converted, or (ii) if such Registration Statement has been declared
effective by the SEC at that time, file with the SEC an additional
Registration Statement on Form SB-2 or any other applicable
registration statement, to register the shares of Common Stock into
which the Debenture may be converted that exceed the aggregate
number
of shares of Common Stock already registered.
Opportunity to Make Inquiries.
The Company will make available to each Offeree, prior to any
issue of the Shares, the opportunity to ask questions and receive
answers from the Company concerning any aspect of the investment and
to
obtain any additional information contained in this Prospectus, to
the
extent that the Company possesses such information or can acquire it
without unreasonable effort or expense.
Execution of Documents.
Each person desiring to be issued Shares, either as a conversion
of a debenture, or an exercise of a warrant, must complete, execute,
acknowledge, and delivered to the Company certain documents, By
executing
these documents, the subscriber is agreeing that such subscriber
will be,
a shareholder in the Company and will be otherwise bound by the
articles
of incorporation and the bylaws of the Company in the form attached
to
this Prospectus.
LEGAL PROCEEDINGS tc \l 1 LITIGATION
The Company is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by or
against the Company has been threatened.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS,
AND CONTROL PERSONS
The names, ages, and respective positions of the directors,
officers, and significant employees of the Company are set forth
below.
There are no other persons which can be classified as a promoter or
controlling person of the Company.
Thomas S. Hughes, President/Director.
Mr. Hughes, Age 52, has been President of the Company since
March
1997. From 1993 to the present, he has also served as the President
of
Electronic Transactions & Technologies, a privately held Nevada
corporation which developed terminals for wireless home and internet
applications.
Jack M. Hall, Secretary/Director.
Mr. Hall, age 72, founded and is currently President of Hall
Developments, a real estate development company he founded in 1991,
which employs a staff of 10 people. Mr. Hall spends approximately
20
hours per week searching out strategic alliances for the Company.
Diane Hewitt, Treasurer/Director.
Ms. Hewitt, age 51, has been an interior designer since 1991.
Currently she owns and manages her own firm, D. Diane Hewitt
Designs.
This firms expertise is churches and employs a staff of five
people.
Ms. Hewitt currently devotes approximately 25 hours per week in
working with the Companys image development and consulting with the
Companys advertising firm.
Anthony L. Hall, Vice President, Director of Technology.
Mr. Hall, age 34, has been Vice President and Director of Technology
of
the Company since inception. Mr. Hall has been the creative mind
behind
the state of the art advancements made by the company. Mr. Hall is
responsible for all technological decisions including but not
limited
to telephone call center, web site design and in- house software
implementation and computer systems engineering and support. Mr.
Hall
is a unique individual within the technological community. A
technological savante who combines incomparable knowledge of the
computer world with the savvy of a successful businessman. Mr. Hall
learned his trade over the last six years with such renowned
institutions as the Kraft Group (owners of International Forest
Products and the New England Patriots), Fidelity Investments,
Partners
Health Care and most recently as Managing Director of the firm he
founded, Isis Technology Group.
Kevin J. Lewis, Vice President, Sports Book Operations.
Mr. Lewis, age 36, has been Vice President and Senior Manager of
Sports Book Operations of the Company since it was founded. After a
long and exhaustive process, Mr. Lewis was selected from a select
group
of candidates to lead the operations and sports handicapping
management
of the company. He has 19 years experience as a sports book manager
with several of the largest and most profitable sports books in the
world. He has worked in Las Vegas, the Domincan Republic, Antigua,
Costa Rica and Canada with such respected sports books as
Tradewinds,
Grand Prix Sports Book and WWTS. Mr. Lewis is known as a sage
amongst
his peers and is, with little doubt, the best sports book and
betting
line manager in the industry.
Over the next few months, James Wexler, will phase into the position
as
CEO of the Company. Presently, Thomas S. Hughes is fulfilling that
role. Hughes will remain as the chairman of the Company once James
Wexler has taken the CEO position.
Mr. Wexler is a highly motivated professional with almost six years
experience in the investment banking industry primarily with the
firms
of Morgan Stanley Dean Witter and Bear Stearns & Co., Inc. In
addition,
Mr. Wexler has more than twelve years experience in the gambling and
sports handicapping fields and is considered a knowledgeable expert
within the industry. For many years, he has served as a consultant
to
off shore sports books, handicappers and sports bettors. Mr. Wexlers
visionary leadership creates the ideal union between fundamental
business theory, state of the art technology and the necessary
knowledge of sports gambling.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the date of this
Prospectus, the outstanding Shares of common stock of the Company
owned
of record or beneficially by each person who owned of record, or was
known by the Company to own beneficially, more than 5% of the
Companys
Common Stock, and the name and share holdings of each officer and
director and all officers and directors as a group.
Title of
Class
Name of Beneficial
Owner (1)
Amount and
Nature of
Beneficial
Owner (2)
Percent of Class
Common
Stock
Electronic
Transactions &
Technologies
7,685,000
53.00%
Common Stock
James S. Clinton
1,700,000
11.72%
Common
Stock
Thomas S. Hughes
1,000,000
6.90%
(1) Other than the Shares owned by Mr. Hughes, none of the other
officers or directors of the Company own any of the Shares.
Electronic Transactions & Technologies is a privately held Nevada
corporation, 70% of the stock of which is owned by Mr. Hughes.
(2) Neither Mr. Clinton nor Mr. Hughes have the right to acquire
any
amount of the Shares within sixty days from options, warrants,
rights,
conversion privilege, or similar obligations.
DESCRIPTION OF SECURITIES
General Description.
The securities being offered are shares of common stock. The
Articles of Incorporation authorize the issuance of 100,000,000
shares
of common stock, with a par value of $0.001. The holders of the
Shares:
(a) have equal ratable rights to dividends from funds legally
available
therefore, when, as, and if declared by the Board of Directors of
the
Company; (b) are entitled to share ratably in all of the assets of
the
Company available for distribution upon winding up of the affairs of
the Company; (c) do not have preemptive subscription or conversion
rights and there are no redemption or sinking fund applicable
thereto;
and (d) are entitled to one non-cumulative vote per share on all
matters on which shareholders may vote at all meetings of
shareholders.
These securities do not have any of the following rights: (a)
cumulative or special voting rights; (b) preemptive rights to
purchase
in new issues of Shares; (c) preference as to dividends or interest;
(d) preference upon liquidation; or (e) any other special rights or
preferences. In addition, the Shares are not convertible into any
other security. There are no restrictions on dividends under any
loan
other financing arrangements or otherwise. See a copy of the
Articles
of Incorporation, and amendments thereto, and Bylaws of the Company,
attached as Exhibit 3.1, Exhibit 3.2, and Exhibit 3.3, respectively,
to
this Form SB-2. As of the date of this Form SB-2, the Company has
14,500,000 Shares of common stock outstanding (the Company filed a
Form
S-8 with the Securities and Exchange Commission on May 14, 1999 for
the
registration of 900,000 shares of common stock to be given to
certain
consultants for the Company in exchange for services rendered to the
Company; as of the date of this Prospectus, these shares have not
yet
been issued pending qualification by coordination in the States of
California and Connecticut).
Non-Cumulative Voting.
The holders of Shares of Common Stock of the Company do not have
cumulative voting rights, which means that the holders of more than
50%
of such outstanding Shares, voting for the election of directors,
can
elect all of the directors to be elected, if they so choose. In such
event, the holders of the remaining Shares will not be able to elect
any of the Companys directors.
Dividends.
The Company does not currently intend to pay cash dividends. The
Companys proposed dividend policy is to make distributions of its
revenues to its stockholders when the Companys Board of Directors
deems
such distributions appropriate. Because the Company does not intend
to
make cash distributions, potential shareholders would need to sell
their shares to realize a return on their investment. There can be
no
assurances of the projected values of the shares, nor can there be
any
guarantees of the success of the Company.
A distribution of revenues will be made only when, in the
judgment of the Companys Board of Directors, it is in the best
interest
of the Companys stockholders to do so. The Board of Directors will
review, among other things, the investment quality and marketability
of
the securities considered for distribution; the impact of a
distribution of the investees securities on its customers, joint
venture associates, management contracts, other investors, financial
institutions, and the companys internal management, plus the tax
consequences and the market effects of an initial or broader
distribution of such securities.
Possible Anti-Takeover Effects of Authorized but Unissued Stock.
Upon the completion of this Offering (assuming the maximum of
10,000,000 is converted and/or exercised) and the issue of 900,000
shares to consultants of the Company pursuant to the Form S-8, the
Companys authorized but unissued capital stock will consist of
74,600,000 shares of common stock. One effect of the existence of
authorized but unissued capital stock may be to enable the Board of
Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a merger, tender offer,
proxy
contest, or otherwise, and thereby to protect the continuity of the
Companys management. If, in the due exercise of its fiduciary
obligations, for example, the Board of Directors were to determine
that
a takeover proposal was not in the Companys best interests, such
shares
could be issued by the Board of Directors without stockholder
approval
in one or more private placements or other transactions that might
prevent, or render more difficult or costly, completion of the
takeover
transaction by diluting the voting or other rights of the proposed
acquiror or insurgent stockholder or stockholder group, by creating
a
substantial voting block in institutional or other hands that might
undertake to support the position of the incumbent Board of
Directors,
by effecting an acquisition that might complicate or preclude the
takeover, or otherwise.
Transfer Agent.
The Company has engaged the services of Corporate Stock Transfer,
370 17th Street, Denver, Colorado 80202, to act as transfer agent
and
registrar.
INTEREST OF NAMED EXPERTS AND COUNSEL
No named expert or counsel was hired on a contingent basis,
will
receive a direct or indirect interest in the small business issuer,
or
was a promoter, underwriter, voting trustee, director, officer, or
employee of the small business issuer.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
No director of the Company will have personal liability to the
Company or any of its stockholders for monetary damages for breach
of
fiduciary duty as a director involving any act or omission of any
such
director since provisions have been made in the Articles of
Incorporation limiting such liability. The foregoing provisions
shall
not eliminate or limit the liability of a director (i) for any
breach
of the directors duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or, which involve
intentional misconduct or a knowing violation of law, (iii) under
applicable Sections of the Nevada Revised Statutes, (iv) the payment
of
dividends in violation of Section 78.300 of the Nevada Revised
Statutes
or, (v) for any transaction from which the director derived an
improper
personal benefit.
The By-laws provide for indemnification of the directors,
officers, and employees of the Company in most cases for any
liability
suffered by them or arising out of their activities as directors,
officers, and employees of the Company if they were not engaged in
willful misfeasance or malfeasance in the performance of his or her
duties; provided that in the event of a settlement the
indemnification
will apply only when the Board of Directors approves such settlement
and reimbursement as being for the best interests of the
Corporation.
The Bylaws, therefore, limit the liability of directors to the
maximum
extent permitted by Nevada law (Section 78.751).
The officers and directors of the Company are accountable to the
Company as fiduciaries, which means they are required to exercise
good
faith and fairness in all dealings affecting the Company. In the
event that a shareholder believes the officers and/or directors have
violated their fiduciary duties to the Company, the shareholder may,
subject to applicable rules of civil procedure, be able to bring a
class action or derivative suit to enforce the shareholders rights,
including rights under certain federal and state securities laws and
regulations to recover damages from and require an accounting by
management.. Shareholders who have suffered losses in connection
with
the purchase or sale of their interest in the Company in connection
with such sale or purchase, including the misapplication by any such
officer or director of the proceeds from the sale of these
securities,
may be able to recover such losses from the Company.
The registrant undertakes the following:
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 (the Act) may be permitted to
directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer 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.
ORGANIZATION WITHIN LAST FIVE YEARS
The names of the promoters of the registrant are the officers
and
directors as disclosed elsewhere in this Form SB-2. None of the
promoters have received anything of value from the registrant.
DESCRIPTION OF BUSINESS
The Business Vision of the Company.
The Company believes that by the year 2001, anyone with global
telephony will own or have access to different types of hardware
that
can send ATM card with PIN or smart card payments to merchants. ATM
card with PIN or smart card payments are the same-as-cash (only the
merchant can reverse the transaction). These devices will enable
the
consumer to send in what the Company calls transactions which are
Personal Encrypted Remote Financial Electronic Card Transactions
(PERFECT). These PERFECT transactions will originate from homes,
offices, cars, hotel rooms, and publicly placed PERFECT equipment.
The driving industries behind the placement of these PERFECT
devices into the home will be the telephone, utility, cable,
finance,
insurance and direct response industries who: (a) want their banked
consumers to pay cash from the home rather than a check; and (b)
want
their non-banked consumers to pay cash from the home rather send in
a
money order or walk in to pay the bills. The Company estimates that
over $1 billion in advertising and marketing will be willingly spent
by
these industries over the next two years to educate their consumers
to
pay their bills by same-as-cash hardware enabled PERFECT
transactions.
The Human Nature Question: The Company then asks the basic
question: After these PERFECT devices have migrated into global
homes
as a simple same-as-cash bill payment device, then how long before
the
average consumer demands to use the same device for PERFECT
wagering?
The PERFECT wagering marketplace: Presently, the global wagering
marketplace is estimated at $800 billion dollars. By 2001, it is
estimated at $1 trillion dollars.
The Company conservatively estimates that 30% of this or $300
billion dollars will be originating as PERFECT wagers from homes and
offices and cars. The long term goal of the Company is to establish
itself as the global leader in servicing PERFECT wagers.
The Company has also recently acquired Rogel Technologies, an
Internet
related software firm. Rogel Technologies has signed a Licensing
Agreement with JVC who will sell the secure email to Pacific Rim
companies. These companies will pay $5.95 US per employee per
month.
JVC will pay Rogel Technologies 50% of the monthly fees. JVC
expects
to launch this business in about 2 months. The purpose of the
acquisition is three fold:
1. Rogel Technologies is developing the Merchant Response Software
which is supplied by the Company to the gaming companies to respond
back to the PERFECT bank host commands through eGate.
2. The development of the PERFECT Portal which is where merchants
will
go to download their PERFECT Merchant Response Software and the
consumer will go to find out who are the PERFECT merchants accepting
PERFECT transactions.
3. To receive the projected 3 year $20 million in profits from the
JVC
sale and servicing of on line secure email.
The Mechanics of a PERFECT Wager.
A PERFECT wager is Jane Simms, effecting a $100 home Lottery
wager at 2 a.m. with her PERFECT hardware, which may have been made
by
Panasonic and delivered to her by Bell Atlantic as a bill payment
device. After inserting her ATM card and inputting her bank
assigned
PIN, she sends the transaction toll free by modem to the Company
bank
host or to another bank host who is driving the transaction. In
seconds, her card is authorized and the cash has been withdrawn from
her bank account. Since real cash in real time is now on the way to
the Lottery, the Company bank host needs to receive back an
acknowledgment from the Lottery that the wager has been accepted and
that Jane Simms is the player.
The next step is the long-term revenue generator for the Company.
The bank host, which could be the Company, or X host or Y Host then
connects with eGate, the transaction division of the Company, who
then
connects with the Lottery and basically says computer to computer:
We
have the cash completed, send back your acknowledgment of the wager
and
well pass it on to the bank host who is waiting for your reply. In
about 6 seconds, Jane Simms is receiving a printed receipt if she
has
a stand alone PERFECT device or an email if she used a wireless
mobile
PERFECT device. Her receipt will state the time and date of the
transaction, the numbers. She chose and her bank card
authorization.
Her receipt will also state any instant taxation of any winnings
which
may have already been sent to her bank account.
Jane could have just as easily played Bingo or Black Jack or
entered into a game of Bridge where she used her PERFECT equipment
and
her interactive television to see her fellow 2 a.m. Bridge players
who
all ante up real cash into a Pot to be held by an Ante Up service,
with
the winner then receiving her cash less Federal and State taxes and
the
10% Ante Up service fee.
Business and Goals of the Company.
A portion of the Company business will be in electronic
(eGate)gate servicing hundreds of global bank hosts, who are driving
in
millions of incoming second by second PERFECT wagers which are
originating from a variety of different PERFECT hardware devices,
such
as the Companys patented stand alone PayMaster or wireless PocketPay
or
Internet related SLICK or patent pending TV Pin Pad Remote. eGate
connects these bank hosts to the gaming companies and sends back the
gaming company pay per play same as cash acknowledgment to the bank
host.
One goal of the Company is to establish its presence in Europe,
Asia and Latin America as the prime source to service PERFECT
wagers.
Management of the Company feels that the Company is at least 2
years
ahead of any other competition, which at the present time is
minimal.
The Business Structure of the Company.
The Company is composed of two principal divisions: eGaming and
eGate. The reader already understands that eGate is directly
dependent
upon the emergence, marketing and distribution of basically free
PERFECT devices for home entry as same-as-cash bill payment devices.
The Company is priming the pump by now distributing the Company
PayMaster in public locations. This PayMaster will enable consumers
to
pay bills, shop from catalogs while waiting for the car to be
cleaned
or the oil to be changed or a business meeting to start in a hotel
lobby, and to use their ATM card to open or replenish their gaming
accounts with eSportsbet.com and 777WINS.com, two divisions of the
Company with operations in Costa Rica.
The business of eGate is a long term development. Today, PERFECT
wagers do not exist. Over the next few months, the Company will
effect
PERFECT wagers with eSportsbet.com and 777WINS.com.
The immediate 12 month goal of the Company is to acquire gaming
companies in the market segments of bingo, lottery, slots, and
racing.
We already have acquired the market segment of internet casino
which
is 777WINS.com and the market segment of sports bets which is
eSportsbet.com.
The acquisitions serve three purposes:
1. They are driving in revenues and profits for the Company.
2. They will serve as test beds for PERFECT wagering.
3. They will act as Group Gates to connect the PERFECT wager with
competitors in their specific market segment and they will take a
fee for the service.
One PERFECT wager could be coming in from a SONY device, being
driven by X bank host and being paid to Y Internet casino, but
routed
by X bank host to eGate, who then routes the command to 777WINS.com
who
then connects with Y to complete the PERFECT wager. For the
connect
service, 777WINS.com just generated a service fee from a payment to
a
competitor Internet casino.
(a) eSportsbet.com.
The offshore gambling market is growing at a rapid rate. The
market for these products is estimated to be $49 Billion by year end
1998. Research proves that the major trend is that the potentials
in
profits that will be reaped from offshore gambling have not
scratched
the surface of this market. The trend has been toward the
development
of off shore phone operations, not Internet capable betting sites.
Independent market research indicates that there are currently
only one licensed off shore gaming operation for every 500,000
customers. The market, as a whole, is looking towards the
additional
sports books for use in the expansion of the gambling market.
(1) Primer on Sports Book Operations.
Get a line. . .
The Company receives the most accurate starting line available
from Don Best Handicapping services in Las Vegas, Nevada. This line
is
an average of lines from 5 individual Las Vegas Sports Books and 2
off
shore sports books including the Mirage, Hilton, Stardust, the Carib
and WWTS.
Open for business. . .
Telephone lines are answered to provide lines and accept wagers
from 10:00 a.m. until the start of the last game of the day,
approximately 10:00 p.m. Second half lines are available for
Monday
Night Football and all major football games. Bets are accepted until
the start of the second half for these games.
Types of sports on which one can wager. . .
Anything you can find betting lines on; including, football,
baseball, basketball, hockey, college and pro. Additionally,
wagering
will be available on major Boxing, Golf, Tennis, and Auto-Racing
events.
Types of wagers accepted. . .
ESportsbet.com accepts all types of wagers including, straight
bets, over/unders, parlays, teasers, propositions, money-lines,
action-
reverses, buying points, sports futures and a variety of
propositions
bets.
Moving the line. . .
The Companys Handicapping Manager, Mr. Kevin Lewis, who has over
nineteen years experience in the sports gambling business, moves the
line accordingly as the bets flow into the book to assure a balance
of
bets for the Company.
Balancing the books. . .
If the book cannot equally balance the action, it will lay off
the necessary amounts of bets with other sports books.
eSportsbet.com
has established accounts at 12 different off shore gambling
companies
for this purpose.
In essence, the Company is in the banking business and not the
gambling business. The Company balances all bets and simply act as
a
bank for bettors. The goal of the Company is to let the losing
bettors
pay the winners and the Company, the bank, keeps the excess. Also,
the Company is not in the collection business. All players are
required to post up money to their account before they are able to
wager. A new account must post up money, by way of credit card,
money
gram, bank wire, or check, to his or her account and then may bet
only
with their available balance. Analogous to a bank, the Company
keeps
10% available at all times in case there is a demand for funds by
customers.
Further, as soon as an established client base has been
developed, an attractive profit center will be available. For
example,
when eSportsbet.com has 2000 clients, with an average post up of
$1,000, we will have $2 million at our disposal. The Company can
invest
this money in laddered CDs, Treasuries or money market instruments
in
order to earn interest on the float. A return of only 5% on $2
million
is an extra $100,000 to the Company, as the client base grows and
the
assets under management grow, so do the profits from our banking
business.
Pay outs/Pay-ins
Absolutely no credit customers accepted; a customer must pay to
play. Accounts are open within 15 minutes of credit card payment by
customer, money gram, or bank wire. Pay outs to customer upon
request
within 24 hours by any of the methods above.
(2) Business Strategy.
There are currently less than 50 off shore sports books servicing
an average less than 1000 clients each. In fact, there are less
than
10 Internet sites that are fully operational for on-line wagering.
In
concise terms, less than 0.06 % of bettors are wagering off shore.
More significantly, less than 0.0125% of bettors are wagering
through
the Internet. The off shore gambling market is a virgin industry
with
over 80 million potential customers and virtually no place for these
people to bet. We are in a position to exploit this opportunity and
have already begun the process.
eSportsbet.com was founded in early 1998 and has recently emerged
from its development stage. The sports book has been fully
operational
since September 1, 1998. Development of on-line sports wagering
services is now complete. This division of the company can best be
described as being in the business of providing a legal, reliable,
and
secure home or bank to place wagers. Our key strengths include
state-
of-the-art-technology, customer service and innovative marketing.
Our
management team is in place. We have hired a sports book manager to
complete our team. We are currently hiring ten employees to answer
phone calls from prospective customers and current clients who wish
to
place wagers.
The marketplace has been expanding rapidly. The Company is now
poised to capitalize on the convergence increased Internet access,
ease
of web site operability and security with a flourishing demand to
place
wagers in this form. Current customers of offshore sports books are
requesting that the Company provide the ability to place wagers on-
line
much in the same way that individual investors can enact stock
transactions on-line with companies such as Fidelity, Schwabb and E-
Trade.
In addition to the core services outlined above, eSportsbet.com
plans to develop its client relationships through other ancillary
services to enhance repeat customers and to provide more information
than other gambling services companies. The Company does not intend
to
re-invent the wheel. Gambling is centuries old; the Company is
simply
making it easier, more legitimate and more accessible to the
customer.
Advertising and marketing will be the Companys largest expense;
the focus on attaining customers and keeping clients is the Companys
foremost goal. The idea is to keep customers indefinitely by
continually offering them a valuable service, thereby diminishing
our
costs of continually reaching and appealing to them. In order to
separate the Company from others in this field, wise selection of
service offerings is therefore critical to eSportsbet.coms success.
(3) Attaining Customers.
A Boston advertising and marketing firm has been retained to lead
a direct marketing and advertising campaign that will focus on
separating the Company from its competition with the following: 10%
sign up bonus; $100 referral bonus; accounts insured by Barclays
Bank;
and the opinion of management, the highest pay off odds in the
industry.
(4) Servicing Clients.
To assure the best possible service decisions are made, the
Company has implemented the following criteria for servicing the
most
important asset, the Companys clients: Service assistance for
customers with opening new accounts, reducing time, effort and
expense
by delineating responsibilities by department. Service will be
implemented using six separate departments: new accounts, accounts
payable and receivable, customer service, phone clerks to accept
wagers
and the executive office.
(5) Customer Profile and Strategy.
eSportsbet.coms target market includes males between the ages of
18 and 45 who are active sports gamblers currently. The most
typical
customer for the Companys product is someone who is in either the
white
or blue-collar field, and who currently uses our product for
recreational purposes. The customer is a wholly dependent product of
marketing and advertising. It is likely that potential customers
are
going to be familiar with similar products, and it anticipated that
they will accept the Companys product because of magazine and
newspaper
advertising, Internet advertising, direct local marketing, referral
and
incentive based marketing directed towards sports gamblers.
A demographic profile of eSportsbet.com customers:
Demographic Segment: Males
Title: Sports fans
Power: Decision-maker
Viewpoint: Gambling is and should be legal
Position: Job holders with some disposable income
Emotional Influences: Money and peer acceptance
Practical Influences: Making quick money
Education: High school and college
Limitations: Access to gambling arenas (sports books, casinos)
Age: 18-38 years old
Income: $30,000 - $120,000
Geographic: Metropolitan with local favorite sports teams
Occupation: Both white and blue collar
Attitude: Hands off government, the government should not tell me
what
to do in the privacy of my own home
Responses from current off shore bettors indicate that off shore
betting is enjoying an excellent reputation and we fully intend to
continue this trend. Inquiries from prospective customers suggest
that
there is considerable and ever growing demand for new sports books.
eSportsbet.com is poised for explosive growth and accomplishment in
the
industry of sports gambling. eSportsbet.coms strategy is to
enhance,
promote and support the fact that our products are unique in terms
of
ease of operability, reliability, and security. Furthermore, and
most
importantly, from a bettors perspective, our products offer the
highest
odds payoffs in the entire industry.
(6) Sales Strategy.
Because of the special market characteristics (sports gambling is
a niche market), sales strategy includes a direct marketing plan
that
pinpoints men between the ages of 18 and 45, who have disposable
income, and who currently wager. The determining factors in choosing
these channels are customer profile; (i.e., age, gender, sports
enthusiast, etc.). Attracting new clients will be determined by the
benefits that we provide and other betting services do not. If its
easier to bet with us, more fun, more secure and potentially more
profitable we will get more customers.
(7) Marketing and Advertising Strategy.
eSportsbet.coms marketing strategy is to enhance, promote and
support the fact that the Companys product is unique in terms of
ease
of operability, reliability, security. Most importantly, from a
bettors
perspective it is the opinion of management that the Companys
product
offer the highest odds pay outs in the entire industry.
The Companys product should be treated as a niche product. As
such, the target market segments to focus on are men who gamble.
Because of the special market characteristics (sports gambling is a
niche market), the sales strategy includes a direct marketing plan
that
pinpoints men.
eSportsbet.coms marketing strategy incorporates plans to sell its
product through several channels. These distribution channels
include:
Friday, Saturday and Sunday sports sections of regional newspapers;
print media in direct market sports and male dominated periodicals;
thirty and sixty second radio spots on popular sports talk radio
shows;
printed flyers and brochures handed out at major sporting events.
The
determining factors in choosing these channels are customer profile;
i.e., age, gender, sports enthusiast, etc. Key competition uses only
print media in industry publications and word of mouth as
distribution
channels. The Companys mix of distribution channels will give the
advantages of complete market saturation, not limiting the Company
to
region or sports specific publications versus the competition.
eSportsbet.com recognizes the key to success at this time
requires extensive promotion. This must be done aggressively on a
wide
scale. To accomplish the Companys sales goals, an extremely capable
advertising agency and public relations firm is required.
The Company will develop an advertising campaign built around
ease of operability, reliability, security, instant pay outs if
requested and most importantly from a bettors perspective, and, in
the
opinion of the Company, the highest pay out odds available anywhere
in
the industry. Further, the Company will develop a consistent reach
and
frequency with advertising throughout the year. In addition to
standard advertising practices, eSportsbet.com will gain
considerable
recognition through grass roots, guerrilla marketing campaigns. This
strategy will include flyers handed out to spectators of the four
major
sporting events and boxing, promotions made available to local
sports
bars in Boston and other metropolitan areas, and hiring of age
college
students to pass out flyers on campus and fraternity houses across
the
country.
eSportsbet.coms overall advertising and promotional objectives
are to: Position eSportsbet.com as the leader in the market;
increase
company awareness and brand name recognition; generate qualified
sales
leads and potential new distributors; create product-advertising
programs supporting our market dominant position; coordinate sales
literature, materials, telemarketing programs; and direct response
promotions in order to continually saturate the market with our name
and logo. Establish the proper image of eSportsbet.com which in our
opinion is the bank of the betting world and indicates that
association
with security, safety and stability
eSportsbet.coms media strategy is to: Select primary sports
publications with high specific market penetration; frequent ads to
impact market with corporate image and product messages; strategic
positioning of ads around industry articles or appropriate
editorials;
utilize U.S. editions of consumer, trade, or specialty publications;
take advantage of special high-interest issues of major publications
when possible, i.e. Superbowl, College Bowl Season, NCAA Basketball
March Madness tournament and various other sports pre-season
annuals;
maximize ad life with monthly and weekly publications. To get the
most
out of our promotional budget, we will be selective and focus
acutely
as possible in choosing media coverage which will focus on a male
dominated audience.
In addition to standard advertising practices, considerable
recognition can be gained through grass roots campaigns; these
include
flyers handed out to spectators of the four major sporting events,
including boxing and promotions and brochures made available at
local
sports bars in Boston and other metropolitan areas. Further, on a
grass roots level, eSportsbet.com will be featured prominently in
the
form of promotions offered by attractive women at sports bars. In
addition, these same women will be found prior to game time in the
parking lots of major sporting events handing out flyers, brochures,
etc.
If these grass roots campaigns work on a local level, there is no
reason to believe these ideas would not work in other metropolitan
areas such as New York, Dallas, Miami, Los Angeles, and Chicago. If
successful, the Company will quickly move to exploit these fertile
markets.
The Company is building its capabilities in database marketing.
Registration cards and periodic customer surveys will help the
Company
understand the customer, and help to measure the success of the
marketing, sales and product activities. The Company plans to
develop
a customer information system that will help make sound decisions by
providing historical answers to the marketing questions that are
posed.
The Company will use in house telemarketing service to perform the
following functions:
Address customer complaints
Respond to inquiries
Generate new business
(8) Direct Response Mail.
The Company will be exploring the benefits of incremental,
coordinated direct mail programs in the next several months. The
Company will be approaching this quantitatively, as customer
targeting
ability is improved. The Company has purchased mailing lists from
sports gambling magazines and newsletters and sports bettors from
Las
Vegas casinos. In addition, the direct mail activities will be
continually directed to the existing customer base to ask for
referrals. A $100 betting voucher will be provided to these clients
for
every referral that signs up.
(9) Internal/External Newsletter.
The Company is currently planning to produce a newsletter to
serve as an informational piece for internal personnel, the sales
force, and customers. It will include sections covering each major
department or organization within eSportsbet.com, useful trade
information and the latest updates. Importantly, these newsletters
will
provide incentives and promotions for clients and new customers.
(10) The Competition.
Currently, the market is shared by less than 50 off shore
operations of which less than ten offer the capability for
interactive
on-line Internet sports wagers. Users of the sports book web sites
are
looking for such things as quality and security improvements.
Developments and increased traffic in the sports book industry have
resulted in the need to increase security, reliability and
simplicity
of operability.
Over the past year, similar companies have proven that meaningful
features can be developed for this arena. These companies have
primarily focused on the use of 800 phone numbers to improve the
quality of use and access in these products. These products have
been
successfully distributed in many areas of the industry. WWTS, ABC
Islands, Global Sports Network and Carib Sports Book provide
competitive products in this market.
In terms of product strength, eSportsbet.com has several distinct
advantages over the competition. First is its marked advancement in
web
site technology. Other product strengths include web site ease of
operability and security. In marketing, our most powerful assets are
direct market research resulting in a creative approach to reach new
bettors.
Companies that compete in this market are homogenous in nature in
terms of products and services offered. All companies mentioned
above,
the industry leaders, charge competitive prices as follows:
Competition:
$110 - $100 pay out
6 point 2-team teasers
13-5 parlay pay out
(800) phone betting
next day pay out to customers
no guarantee
no referral fee
no name bank insuring funds
eSportsbet.com:
$110 -$100 pay out
$105-$100 , bet by internet
(800) phone betting
internet betting
7 point 2-team teasers
14-5 parlay pay out
same day pay outs if requested
24 hour guarantee
$100 referral bonus
money held at Barclays Bank
The major strengths of our competitors are reputation only as a
result of length of service. The major weaknesses of our
competitors
are an apparent unwillingness to offer a fair market in terms of
pricing and quality services.
The major competitors most likely response to trends affecting
this industry will be inaction due stability in terms of their own
client base. The Companys product is positioned relative to the
major
competitors by equal or higher odds for equal wagers for our
customers.
The ability to interact by telephone or on-line via the Internet
with
ease, simplicity, reliability and security is unique to this
product,
and the Companys research indicates its performance is superior to
anything else on the market today.
An important point regarding industry competition: Data has shown
that where new gambling operations open for business, the number of
dollars spent by gamblers on total gambling activities doubles.
Rather
than diverting funds from other gaming operations, it simply draws
new
players into the market. Based on this important fact, the Company
expects to draw new bettors rather than compete with established
sports
books for their current clientele who are satisfied with the
antiquated
method of betting over the telephone.
eSportsbet.com is not yet an Internet presence and but is
presently accepting calls over the phone. The goal of the Company is
to
establish the Internet presence of eSportsbet.com by July 1999. Its
base of operations is in Costa Rica..
April 1999: Wagering transactions: $1.1 million
Revenues: $60,000
Net Profits: $15,000
May: About $600,000 in wagering transactions
(b) 777WINS.com.
The same general points made in the discussion as to
eSportsbet.com, set forth above, also apply to 777WINNS.com, the
Companys division for interest casino type games. On May 27, 1999,
the
Company established a larger incoming bandwidth by MCI
Communications
providing, at their cost, a satellite dish (the previous bandwidth
limited the speed of play and hence the number of players at any one
time).
The Revenue on a $100 wager is as follows:
If coming in from a Banner Ad at an Internet Merchants location, the
payment to the Merchant is 20% or $20. The present credit card fees
cost is 10% or $10. Therefore, the revenue from a $100 wager is
$70.
The revenue from a non banner ad contact is $90. Net profits are
about 15% of the Wager.
With increase band width, the Company is projecting a $1,000,000
plus month in June as the Company will be heavily promoting a
777WINS.com tournament where the winners are flown all expenses paid
to
the Gran Isle Casino in Costa Rica.
(c) Projected Budget Expenditures.
$5,000,000 Budget:
$1,000,000 to upgrade eSportsbet as a premier web site and to
aggressively market the services while at the same time holding on
to
the call in service for non Internet customers.
$1,000,000 to upgrade 777WINS.com into an expanded site and to
double
again the incoming band width.
$1,000,000 to put on fast track the development of the Company
PocketPay, which is a terminal and phone for the pocket, and which
would be marketed into the Asian market as a pay per play device and
also a business transaction device. And for the development of the
SLICK, which is an Internet device to bypass the Internet with same-
as-
cash transactions.
$1,000,000 for the establishment of the Company bank host and the
Company Gate in the United Kingdom, Hong Kong, Mexico, Australia and
South Africa by October 1999.
$1,000,000 in reserve to be used to buy back 20% of the Companys
stock
in the public float.
Conclusion.
By accepting the premise of global PERFECT devices available to
anyone with telephony by 2001, then one readily sees that the
PERFECT
wagering market is a natural evolution and will quickly become an
accepted and legitimate and regulated industry. The instant
taxation
of consumers PERFECT winnings is a given and one need only ask how
long
the USA lotteries would remain silent as they watched home consumers
using PERFECT devices to place same-as-cash bill payments. The only
reason lottery is not played from the home today is simply because
you
can non play lottery on credit... it must be cash. To date, no one
has
the ability to move real cash from home to the lotteries. The
PERFECT
industry will change that.
Add in the fact that the Company is leading the way with
777WINS.com flying tournament winners to a real Costa Rican casino
and
that the analogy of Internet casinos to land based casinos are as to
television is to the big screen cinemas, then one can readily see
that
the global PERFECT wagering marketplace of 2001 could easily be a
$300
to $400 billion global marketplace.
With over $500 Billion spent on gambling in the U.S. alone in
1993, where over 90% of adults participate in some form of gambling,
the market for in-home on-line gambling immeasurable. In 1997,
close
to 80 million Americans placed bets on sports. With less than one
offshore sports book operating for every 1,000,000 gamblers the
ground
is truly untouched.
PLAN OF OPERATION
A discussion of the Companys plan of operation over the next
12
months in incorporated into the discussion of the Companys business.
See Description of Business.
DESCRIPTION OF PROPERTY
The Company currently owns the following property in connection
with its operations:
(a) Four servers for the operation of eSportsbet.com and
777WINNS.com, valued at $15,000 each.
(b) Approximately $50,000 of various office equipment, including
personal computers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the past two years, certain transactions which occurred
between the Company and its officers and directors are set forth
below.
With respect to each such transaction, the Company believes that
the
terms of each transaction were approximately as favorable to the
Company as could have been obtained from an unrelated third party:
(1) The Company utilized cash accounts maintained by ET&T to
fund day to day operations of the Company over the period of March
1998
through September 1998. At August 31, 1998, the net result of these
transactions is a payable to ET&T of $18,969.
(2) The Company issued 1,000,000 shares of restricted common
stock to Thomas S. Hughes during May 1997 in exchange for service
rendered to the Company. The Company did not receive any cash
consideration for this common stock issuance and has treated this as
an
expense to the Company of $375,000.
(3) On February 18, 1997, Leggoons, Inc. entered into an
Agreement to License Assets from Home Point of Sales, Inc.(HPOS)
(now
know as Electronic Transactions & Technology-ET&T)) (this
agreement
is incorporated by reference at Exhibit 10.1 to this Form SB-2).
ET&T
is a privately held corporation 70% owned by Thomas S. Hughes,
President of the Company, which is focused on the emergence of the
Personal Encrypted Remote Financial Electronic Card Transactions
industry (although this agreement was entered into prior to Mr.
Hughes
becoming affiliated with the Company, it is included here since
certain
of the conditions under that agreement have not been completely
fulfilled, as discussed below).
The assets included under this agreement are the following: (a)
The name Betting, Inc., as trademarked by HPOS; (b) The Wagering
Gate
(receive incoming data transfer commands from the Host Center and
other
competitive Host Centers who have received ATM and SMART card
wagering
payment from off site home or office locations and then who command
the
Wagering GATE to alert the recipient gaming companies that they have
been paid and to respond back with an acknowledgement of such
payment;
and, the general promotion and education of home ATM and SMART card
wagering over the Internet through the HPOS Secure Computer Keyboard
or
over the telephone through the HPOS stand alone Infinity unit); (c)
the
specific application of Wagering with an ATM card or SMART card with
the Secure Computer Keyboard (any other uses of the Secure Computer
Keyboard, such as Bill Pay or Impulse Purchase that are not Wagering
transactions, are not included); (d) the HPOS developed Merchant
Response Software for the specific application only of transacting
Off
Site ATM and Smart card Wagering through the Wagering Gate; and (e)
HPOS interest in the use of and revenue from the HPOS Personal
Encrypted Remote Financial Electronic Card transaction relating to
the
Wagering Business in all HPOS partner countries.
Under terms of this licensing agreement, the Company is to issue
2,900,000 shares of restricted common stock to HPOS in exchange for
licensing home ATM card and SMART card wagering technology developed
by
HPOS. Of this amount, 2,755,000 shares were placed in escrow
subject
to cancellation on February 10, 1998, in the event the bid price of
the
common stock of the Company is not at least $3.00 per share for any
twenty consecutive day period as reported on the NASDs Electronic
Bulletin Board or NASDAQs Small Cap Market from the date of the
agreement through February 10, 1998 (this escrow agreement is
incorporated by reference at Exhibit 10.2 to the Form SB-2).
As of the date of this Prospectus, the terms of the Licensing
Agreement have not been met by the Company. However, the Company
has
entered into amendment(s) of the original agreement that provide for
an
extension of the cancellation deadline from February 10, 1998, to
September 1, 1999, subject to certain conditions specified in the
agreement. All conditions set forth in the original agreement need
to
be met on or before September 1, 1999.
The License Agreement also provides that in the event that the
bid price for the common stock of the Company is more than $3.00 per
share for any twenty consecutive day period, then HPOS shall have
the
option to purchase up to 13,822,000 additional shares of the Company
common stock at an exercise price of $.30 per share.
(4) On April 28, 1997, the Company entered into a Host
Processing
Agreement with ET&T for the purpose of having ET&T act as the bank
host
processing for all Company transactions that are sent by terminals
that
read credit cards or ATM cards (this agreement is incorporated by
reference at Exhibit 10.3 to this Form SB-2). ET&T is to charge the
Betting, Inc. a fee of $0.25 per transaction or 2.5% of the wager
being
sent by Betting, Inc. to gaming operators. These transactions are
to
originate from globally placed Betting, Inc. equipment and/or
Betting,
Inc. licensed operators.
(5) On March 27, 1998, the Company entered into a
License
Agreement with ET&T for the purpose of licensing additional
technology
for processing electronic banking transactions (this agreement is
incorporated by reference at Exhibit 10.4 to this Form SB-2). This
licensing supplements the technology licensed under the Agreement
date
February 18, 1997. This agreement states that ET&T licenses the
following ET&T products to Betting, Inc. for the exclusive global
usage
of wagering by PERFECT originated ATM cards, credit cards, and smart
cards:
The PayMaster, defined as a stand alone terminal that attaches to
phone
lines and which calls the ET&T host processing center with bank
data.
The SLICK, defined as a stand alone keyboard terminal that attaches
to
phone lines and call the ET&T host processing center with bank data
that has bypassed the Internet.
The PocketPay, defined as a pocket sized terminal and telephone that
sends bank data by wireless transmission to the ET&T host processing
center.
The TV Pin Pad Remote, defined as a set top box and TV remote that
sends bank data by landline dial up transmission to the ET&T host
processing center.
Each ET&T product is exclusively licensed to Betting, Inc. on a
global
basis for the application of PERFECT wagering at a licensing fee of
$2,000,000 each. This fee is being paid by the Company at the rate
of
$30,000 per month. The duration of the exclusive license is 20
years.
MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
(a) Market Information.
The Companys Shares are traded in the over-the-counter market and
the range of closing bid prices shown below is as reported by the
OTC
Bulletin Board. The quotations shown reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not
necessarily
represent actual transactions.
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ending on December 31, 1999
High
Low
First Quarter
1.0625
0.375
Per Share Common Stock Bid Prices by Quarter
For the Transition Period Ended on December 31, 1998 *
High
Low
Transition Period
0.98
0.05
* Due to a change in the fiscal year end of the Company from August
31
to December 31 as a result of the merger of the Company with
Betting,
Inc. (Missouri).
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended August 31, 1998
High
Low
First Quarter
0.12
0
Second Quarter **
0.08
0
Third Quarter
0.15
0.03
Fourth Quarter
0.20
0.06
** The Shares did not trade from February 18, 1998 through February
28,
1998
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended August 31, 1997
High
Low
First Quarter
8
5.875
Second Quarter ***
8.125
7.625
Third Quarter ***
.8125
0.0625
Fourth Quarter
0.5625
0.06
*** The Shares did not trade from December 13, 1996 through April
24,
1997
(b) Holders of Common Equity.
As of May 25, 1999, the Company estimates there were
approximately 400 beneficial shareholders of the Companys Common
Stock.
(c) Dividends.
The Company has not declared or paid a cash dividend to
stockholders since it became a C corporation on November 18, 1993.
The Board of Directors presently intends to retain any earnings to
finance Company operations and does not expect to authorize cash
dividends in the foreseeable future. Any payment of cash dividends
in
the future will depend upon the Companys earnings, capital
requirements
and other factors.
EXECUTIVE COMPENSATION
(a) No officer or director of the Company is receiving any
remuneration at this time.
(b) There are no annuity, pension or retirement benefits
proposed to be paid to officers, directors, or employees of the
corporation in the event of retirement at normal retirement date
pursuant to any presently existing plan provided or contributed to
by
the corporation or any of its subsidiaries.
(c) No remuneration is proposed to be in the future directly or
indirectly by the corporation to any officer or director under any
plan
which is presently existing.
FINANCIAL STATEMENTS
The Financial Statements required by Item 310 of Regulation S-B
(in the form of the latest Annual Report on Form 10-KSB and
Quarterly
Report on Form 10-QSB) are incorporated by reference in this
Prospectus, and are set forth in their entirety as Exhibits 13.1 and
13.2 to this Form SB-2.
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
On August 1, 1998, the Company engaged the services of George
Brenner, C.P.A. of Beverly Hills, California, to provide an audit of
the Companys financial statements for the fiscal years ended August
31,
1997 and 1998. The former accountant for the Company, BDO Seidman
L.L.P. of St. Louis Missouri declined the stand for re-election for
the
1997 engagement. The independent auditors reports for August 31,
1996
and 1995, were modified as to the uncertainties about the Companys
ability to continue as a going concern. The decision to change
accountants was approved by the Companys Board of Directors with the
selection of the successor accountant. The Company and its former
accountants had no disagreement during the fiscal years ended August
31, 1996 and 1995, and through the date they declined to stand for
re-
election.
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Information on this item is set forth in Propsectus under the
heading Disclosure of Commission Position on Indemnification for
Securities Act Liabilities.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Information on this item is set forth in the Prospectus under
the
heading Use of Proceeds.
RECENT SALES OF UNREGISTERED SECURITIES
None.
EXHIBITS
The Exhibits required by Item 601 of Regulation S-B, and an index
thereto, are attached.
UNDERTAKINGS
The undersigned registrant hereby undertakes to:
(a) (1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement
to:
(i) Include any prospectus required by section
10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental
change in the information in the registration statement;
and Notwithstanding the forgoing, any increase or decrease
in volume of securities offered (if the total dollar value
of securities offered would not exceed that which was
registered) and any deviation From the low or high end of
the estimated maximum offering range may be reflected in
the form of prospects filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in the volume
and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the
Calculation of Registration Fee table in the effective
registration statement.
(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act,
treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end
of the offering.
(d) Provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and
registered in such names as required by the underwriter to permit
prompt delivery to each purchaser.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the Act) may be permitted to directors,
officers and controlling persons of the small business issuer
pursuant
to the foregoing provisions, or otherwise, the small business issuer
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 that a
claim for indemnification against such liabilities (other than the
payment by the small business issuer of expenses incurred or paid by
a
director, officer or controlling person of the small business issuer
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 small business issuer 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 Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form SB-
2
and authorized this registration statement to be signed on its
behalf
by the undersigned, thereunto duly authorize, in the City of Rancho
Palos Verdes, State of California, on May 28, 1999.
eCONNECT
By: /s/ Thomas S. Hughes
Thomas S. Hughes, President
Special Power of Attorney
The undersigned constitute and appoint Thomas S. Hughes their
true and lawful attorney-in-fact and agent with full power of
substitution, for him and in his name, place, and stead, in any and
all
capacities, to sign any and all amendments, including post-effective
amendments, to this Form SB-2 Registration Statement, and to file
the
same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting
such
attorney-in-fact the full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and
about
the premises, as fully and to all intents and purposes as he might
or
could do in person, hereby ratifying and confirming all that such
attorney0in-fact may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in
the
capacities and on the date indicated:
Signature
Title
Date
/s/ Thomas S. Hughes
Thomas S. Hughes
President, Chief
Executive Officer,
Director
May 28, 1999
/s/ Jack M. Hall
Jack M. Hall
Secretary, Director
May 28, 1999
/s/ Diane Hewitt
Diane Hewitt
Treasurer (Principal
Financial and
Accounting Officer),
Director
May 28, 1999
EXHIBIT INDEX
Exhibit
Number
Description
Method of Filing
3.1
Articles of Incorporation
See Below
3.2
Certificate of Amendment of
Amendment to Articles of
Incorporation
See Below
3.3
Bylaws
See Below
4.1
Class A Warrant Agreement
(incorporated by reference to
Exhibit 4.2 of Leggoons, Inc.s
Registration Statement on Form
S-1 filed on October 28,
1993).
Incorporated by Reference
4.2
Registration Rights Agreement
See Below
4.3
Form of Debenture
See Below
4.4
Form of Warrant
See Below
5, 23.1
Opinion Re: Legality; Consent
of Counsel
See Below
10.1
Agreement to License Assets
(incorporated by reference to
Exhibit 10.16 to the Form 8-K
filed on February 25, 1997)
Incorporated by Reference
10.2
Escrow Agreement (incorporated
by reference to Exhibit 10.17
to the Form 8-K filed on
February 25, 1997)
Incorporated by Reference
10.3
Host Processing Agreement
(incorporated by reference to
Exhibit 10.1 of the Form 10-Q
for the quarter ended February
28, 1999)
Incorporated by Reference
10.4
Licensing Agreement
(incorporated by reference to
Exhibit 10.2 of the Form 10-Q
for the quarter ended February
28, 1999)
Incorporated by Reference
13.1
Latest Annual Report to
Security Holders on Form 10-
KSB
See Below
13.2
Latest Quarterly Report to
Security Holders on Form 10-
QSB
See Below
23.2
Consent of Accountant
See Below
24
Special Power of Attorney
See Signature Page