UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 10 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: February 28, 1999
Commission file number: 33-68570
BETTING, INC.
(Exact name of registrant as specified in its charter)
MISSOURI 43-1239043
(State of incorporation) (IRS Employer Identification number)
31310 Eaglehaven Center, Suite 10
Rancho Palos Verdes, California 90275
(Address of principal executive offices and Zip Code)
(310) 541-4393
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all
reports required to be filed by Section 13 or 15(d) of the
Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes No X
Number of shares of common stock outstanding as of February 28,
1999:
14,354,798
Transitional Small Business Disclosure Format (Check one): Yes
No X
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
BETTING, INC.
BALANCE SHEETS
February 28, August 31,
1999 1998
ASSETS (Unaudited) (Audited)
Cash $ 22,510 $ 0
Total Assets $ 22,510 $ 0
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts payable $ 280,316 $ 283,971
Due to related party 35,569 18,969
Commissions payable 57,400 21,400
Total current liabilities 373,285
324,340
Commitments and Contingencies (Note 10)
Stockholders Equity (Deficit):
Common stock, $.01 par value, authorized
10,000,000 shares; issued and outstanding,14,354,798
and 14,284,234 at February 28, 1999 and 1998,
respectively 143,548 142,842
Preferred stock, $.01 par value, authorized 5,000,000
shares; issued and outstanding - none - -
Additional paid-in capital 5,157,064 5,000,420
Accumulated deficit (5,651,387)
(5,467,602)
Total stockholders equity (deficit)
(350,775) (324,340)
Total Liabilities and Stockholders Equity (Deficit) $
22,510 $ 0
See accompanying notes to interim financial statements
BETTING, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months
Ended
February 28, February 28,
1999 1998 1999
1998
General and
Administrative
expenses $175,730 $48,775 $183,785 $143,468
Total Operating
Expenses (175,730) (48,775) (183,785) (143,468)
Net loss (175,730) (48,775) $(183,785) $(143,468)
Net loss per
common share $(.01) $(.00) $(.01) $(.01)
Weighted average
shares outstanding 14,316,067 1,062,234 4,316,067
10,489,984
See accompanying notes to interim financial statements
BETTING, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
February 28, February
28,
1999
1998
Cash Flows From Operating Activities
Net loss (Note 9) $(175,735) $(25,128)
Changes in assets
and liabilities:
Accounts payable (3,655) 7,999
Commissions payable 36,000 3,001
Cash Used in
Operating Activities (143,390) (14,128)
Cash Flows From Financing Activities:
Proceeds from additional
borrowings from stockholder 0 0
Proceeds from issuance
of common stock 149,300 0
Proceeds from borrowings
from related party 16,600 15,694
Cash provided by financing
activities 165,900 15,694
Net increase in cash 22,510 1,566
Cash at beginning of period 0 45
Cash at end of period $22,510$ 1,611
Supplemental Disclosures:
The Company paid $0 and $0 for interest for the six months ended
February 28, 1999 and 1998, respectively.
The following summarizes noncash
investing and financing transactions:
Six Months Ended February 28, 1999
Issuance of 161,000 shares of common
stock for services rendered $8,050
Six Months Ended February 28, 1998
Issuance of 1,769,000 shares of common
stock for services rendered $82,590
Issuance of 750,000 shares of common
stock for due to stockholder 35,135
Issuance of 350,000 shares of common
stock for accounts payable 21,000
See accompanying notes to interim financial statements.
BETTING, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
1. Unaudited Interim Periods:
The information furnished herein relating to interim periods
has
not been audited by independent Certified Public Accountants. In
the
opinion of the Companys management, the financial information in
this
report reflects any adjustments that are necessary for a fair
statement
of results for the interim periods presented in accordance with
generally accepted accounting principles. All such adjustments are
of
a normal and recurring nature. The accounting policies followed by
the
Company, and additional footnotes, are set forth in the audited
financial statements included in the companys Annual Report Form 10-
KSB/A filed with the SEC on April 8, 1999.
2. Initial Public Stock Offering:
On November 18, 1993, the Company completed an initial public
offering in which it sold 900,000 Units at $3.125 per Unit. Each
Unit
consisted of one share of Common Stock and one Class A Warrant.
Three
Warrants entitled the holder thereof to purchase one share of Common
Stock at $3.75 per share and expired on November 18, 1997. The
warrants were callable in total by the Company after November 18,
1994,
at a redemption price of $.05 per warrant upon 60 days prior notice
if
the common stock has traded above $3.75 for at least 20 out of the
30
trading days preceding the date of the notice of redemption.
3. Earnings (loss) Per Share:
Net earnings (loss) per share are computed using the weighted
average number of common and common equivalent shares outstanding
during the period. The Class A Warrants issued during the public
offering are anti-dilutive and have not been included in the
computation of common equivalent shares outstanding. Fully diluted
net
earnings (loss) per share for all periods presented is not
materially
different from primary net earnings (loss) per share.
4. Income Taxes:
Effective September 1, 1987, the Company elected to be taxed
under Subchapter S of the Internal Revenue Code. As such, the
Companys
taxable income or loss was included in the individual tax returns of
its shareholders for Federal and State income tax purposes. Upon the
closing of the public stock offering on November 18, 1993, the
Company
terminated its Subchapter S election.
Betting, Inc., has unused net operating loss (NOL) carryforwards
of approximately $2,800,000 at August 31, 1997, that were generated
by
Leggoons, Inc. The unused net operating losses expire in various
amounts from 2009 to 2012. However, due to change of ownership
rules
of section 382 of the Internal Revenue Code some or all of these NOL
carryforwards may be unavailable to offset any future income of
Betting, Inc. The Company generated losses of approximately
$1,658,000
during the six month period ended August 31, 1997, losses of
approximately $197,000 during the year ended August 31, 1998, and
losses of approximately $183,000 during the six months ended
February
28, 1999. These losses, totaling $4,838,000, may not qualify as
federal and state NOL carryforwards due to the possible
nondeductibility of the noncash service costs incurred and the
change
of ownership rules of section 382 of the Internal Revenue Code. The
Company provides an allowance for the entire amount of any deferred
tax
assets that are applicable to the NOL.
5. Due to Stockholder
The Company had a due to stockholder payable to James S. Clinton,
former Chairman of Leggoons, Inc., in the amount of $35,135 for
advances made to Leggoons, Inc., prior to March 1, 1997. This
payable
was paid in full during the six months ended February 28, 1998, by
the
issuance of 750,000 shares of restricted common stock.
6. Due to Related Party
The Company utilizes cash advances from HPOS/E.T.T. to fund
day to
day operations of the Company. Thomas S. Hughes is the Chairman of
both the Company and HPOS/E.T.T.
7. Accumulated Deficit:
As a result of the termination of the Companys S Corporation
status on November 18, 1993, the accumulated deficit of $1,168,375
incurred through that date was closed out against additional paid-in
capital. The $5,651,387 of deficit on the balance sheet at February
28, 1999, is the result of operations from November 18, 1993, to
February 28, 1999..
8. Stockholders Equity:
During the period September 1, 1998, through February 28,
1999, the
Company issued 161,000 shares of common stock for services rendered.
The financial value of the common stock issued for no cash
consideration is required to be expensed by the Company. The fair
market value of such common stock issued, $8,050, has been expensed
as
consulting fees during the six months ended February 28, 1999.
During the period September 1, 1997, through November 30,
1997, the
Company issued 2,869,000 shares of common stock for payments on
accounts payable and services rendered. For the 1,769,000 shares of
common stock issued for services rendered during the period
September
1, 1997, through November 30, 1997, the closing market stock price
was
used to determine fair market value of the 569,000 unrestricted
common
shares issued; the closing market stock price less a 50% discount
was
used to determine fair market value of the 1,200,000 restricted
common
shares issued. The financial value of the common stock issued for
no
cash consideration is required to be expensed by the Company. The
fair
market value of such common stock issued, $82,590, has primarily
been
expensed as $63,450 in consulting fees, $7,140 in legal fees, and
$12,000 in general and administrative expenses during the three
months
ended November 30, 1997. Some of the common stock shares issued
were
registered with the Securities and Exchange Commission using Form S-
8
Registration Statements.
9. Cash Flow and Income Statement Reconciliation
The following reconciles noncash financing transactions for the
six months ended February 28, 1999:
Net loss $ 175,735
Issuance of 161,000 shares of common
stock for Consulting Fees 8,050
Income Statement Net Loss $ 183,785
The following reconciles noncash financing transactions for the
six months ended February 28, 1998:
Net loss $ 25,128
Issuance of 2,469,000 shares of common
stock for Consulting Fees, and General
and Administrative Expense 118,340
Income Statement Net Loss $ 143,468
10. Contingencies
(a) Going Concern
The Companys financial statements are presented on the going
concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. As
shown
in the accompanying financial statements, the Company has shown a
significant loss from operations and has negative working capital
and
a stockholders deficit. This raises substantial doubt about the
Companys ability to continue.
THE COMPANYS CONTINUED EXISTENCE IS DEPENDENT UPON ITS ABILITY TO
RESOLVE ITS LIQUIDITY PROBLEMS, PRINCIPALLY BY OBTAINING ADDITIONAL
DEBT FINANCING AND EQUITY CAPITAL AND ULTIMATELY UPON ACHIEVING
PROFITABILITY. WHILE PURSUING ADDITIONAL DEBT AND EQUITY FUNDING,
THE
COMPANY MUST CONTINUE TO OPERATE ON LIMITED CASH FLOW. MANAGEMENT IS
COMMITTED TO DEVELOPING THE PRODUCT AND CONTINUES TO RECEIVE SMALL
AMOUNTS OF FUNDING FROM PRIVATE INVESTORS. IT IS THE GOAL OF
MANAGEMENT TO RECEIVE ADDITIONAL FUNDING FROM AN ADDITIONAL PUBLIC
OFFERING OF ITS COMMON STOCK WITHIN TWELVE MONTHS.
There is no assurance that the Company can achieve the
profitability and positive liquidity discussed above. The financial
statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from
the
possible inability of the Company to continue as a going concern.
(b) Common Stock Issued in Excess of Authorized Shares
During the year ended August 31, 1998, the Company issued a total
of 6,441,000 shares of common stock. This has resulted in the total
issued common shares exceeding the 10,000,000 common shares
authorized
by 4,284,234 common shares. Most of these shares were to have been
preferred stock. Due to an error that was discovered after the
close
of the year, however, all of the shares were issued as common
shares,
resulting in the Company issuing more common shares than its
articles
of incorporation authorize. The Company is in the process of
recalling
these certificates totaling 4,550,000 shares and replacing them with
preferred certificates. The net result will not be significantly
different. Holders of preferred shares will have a priority over
common stockholders with respect to dividends and liquidation
rights,
but no dividends are required or anticipated. The preferred
stockholders will have voting rights equal to those of the common
stockholders. The stockholders equity (deficit) section of the
balance
sheet then would be restated as follows to take into account the
preferred stock:
February 28, Proforma Restated
1999 Adjustment February
28, 1999
Stockholders Equity (Deficit):
Common stock, $.01
par value, authorized
10,000,000 shares;
issued and outstanding,
9,803,834 143,548 $(45,500) $
98,048
Preferred stock, $.01
par value, authorized
5,000,000 shares; issued
and outstanding-4,550,000 0 45,500
45,500
Additional paid-in
capital 5,157,064 0
5,157,064
Accumulated deficit (5,651,387) 0
(5,651,387)
Total stockholders
equity (deficit) $ (350,775) $0 $
(350,775)
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FIINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the
financial statements of the Company and notes thereto contained
elsewhere in this report.
Results of Operations.
The Company had virtually no operations during the three month
period
ended November 30, 1998, due to the unavailability of funds. Near
the end of
the three month period ended November 30, 1998, and during the three
month
period ended February 28, 1999, the Company received cash from the
sale of
its common stock to a private investors and from advances to the
company by
related parties. These funds were used for operations during the
three month
period ending February 28, 1999. The primary general and
administrative
expenses incurred during the six month period ended February 28,
1999, were
consulting fees of $20,650, legal fees of $17,862, accounting fees
of
$21,559, license fees of $92,000 and stock expenses of $10,371. The
primary
general and administrative expenses incurred during the six month
period
ended February 28, 1998, were consulting fees, legal fees, office
expenses
and stock expenses.
Liquidity and Capital Resources.
Net cash used by the Company was $143,390 for the six month
period ended February 28, 1999 versus cash used in operating
activities
of $14,128 in the comparable prior year period.
Capital Expenditures.
No material capital expenditures were made during the quarter ended
on
February 28, 1999.
Year 2000 Issue.
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.
Forward Looking Statements.
The foregoing Managements Discussion and Analysis 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, among others, the following:
reduced or lack of increase in demand for the Companys products,
competitive pricing pressures, changes in the market price of
ingredients used in the Companys products and the level of expenses
incurred in the Companys operations. In light of these risks and
uncertainties, there can be no assurance that the forward-looking
information contained herein will in fact transpire or prove to be
accurate. The Company disclaims any intent or obligation to update
forward looking statements.
PART II.
ITEM 1. LEGAL PROCEEDINGS.
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.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Companys stockholders
during the first quarter of the fiscal year covered by this report.
ITEM 5. OTHER INFORMATION.
None.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BETTING, INC.
Dated: May 25, 1999 By: /s/ Thomas S. Hughes
Thomas S. Hughes, President
EXHIBIT INDEX
Exhibit No. Description
3.1 Leggoons, Inc. Articles of Incorporation and Amendments,
incorporated by reference to Exhibit 3.1 of Leggoons, Inc.
Registration Statement on Form S-1 filed on October 28, 1993.
3.2 Leggoons, Inc. Bylaws Amended, incorporated by reference to
Exhibit 3.2 of Leggoons, Inc. Registration Statement on Form S-1
filed on October 28, 1993.
4 Class A Warrant Agreement, incorporated by reference to
Exhibit
4.2 of Leggoons, Inc. Registration Statement on Form S-1 filed
on October 28, 1993.
10.1 ET&T Host Processing Agreement (see below).
10.2 ET&T Licensing Agreement (see below).
27 Financial Data Schedule (see below).