U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2/A
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 of jurisdiction of (Primary Standard (IRS Employer
incorporation or Industrial Identification No.)
organization) Classification
Code Number)
31310 Eaglehaven Center
Suite 10
Rancho Palos Verdes, California 90275; (310) 541-4393
(Address and telephone number of Registrant's 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
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. 1
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.1
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. 1
If the delivery of the
prospectus is expected to
be made pursuant to Rule
434, check the following
box.1
CALCULATION OF REGISTRATION FEE
Title of each
class of
securities to
be registered Common shares
Amount to be
registered (1) 20,000,000
Proposed
maximum
offering price
per unit (2) $0.43
Proposed
maximum
aggregate
offering price $8,600,000
Amount of
registration
fee $2,390.80
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 June 25, 1999.
PART I. INFORMATION REQUIRED IN PROSPCTUS
PROSPECTUS
eCONNECT
(previously know as Betting, Inc.)
20,000,000 Shares (1)
Common Stock
Offering Price $0.43 per Share
eConnect, a Nevada corporation ("Company"), is hereby offering
up to 20,000,000 shares of its $0.001 par value common stock
("Shares") at an offering price of $0.43 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 Proceeds
and Commissions (2) to Issuer (3)
Per Share $0.43 $0 $0.43
Total Minimum (1) $500,000 $0 $500,000
Total Maximum $8,600,000 $0 $8,600,000
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.
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 20,000,000 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
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 company's
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
today's 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. Effective 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 4, 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 $0.43 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." In addition, the shares
will be offered and sold in connection with acquisitions which the
Company may become involved with in the future. If all the Shares
offered are transferred under the debentures and/or warrants, and in
connection with acquisitions, this will represent the net proceeds
of a maximum of $8,600,000, 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 (15,250,000 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
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
Company's 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 Company's 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
Company's 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 Company's 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 Company's ability to utilize
funds for the successful development and distribution of revenues as
derived by the revenues received by the Company's 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 Company's 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 Company's 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 management's
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 Company's 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 Company's
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 arm's
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 Company's Board of Directors is responsible for valuation
of the Company's investments. There are a wide range of values which
are reasonable for an investment for the Company's 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
Company's investments. The Company's Board of Directors will serve
as the valuation committee, responsible for valuing each of the
Company's 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 Board's evaluation.
Additional Financing May Be Required.
Even if all of the 20,000,000 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 20,000,00 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 June 25, 1999 ($0.43). 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 Company's Securities.
Prior to the Offering, there has been only a limited public
market for the Shares being offered (a total of 15,250,000 as of
June 28, 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
Company's 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 Company's 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
Company's 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 purchaser's 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
Company's Shares and may affect the ability of purchasers in the
Offering to sell the Company's securities in the secondary market.
There is no assurance that a market will develop for the Company's
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
Company's business strategies, continued growth in the Company's
markets, projections, and anticipated trends in the Company's
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 Company's
expectations and are subject to a number of risks and uncertainties,
certain of which are beyond the Company's 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 Company's 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
Company's Year 2000 plans are based on management's best estimates.
USE OF PROCEEDS
Following the transfer of the 20,000,000 Shares offered by the
Company pursuant to the debentures and warrants, this will represent
gross proceeds to the Company of approximately $8,600,000 (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 Maximum Offering
Amount Percent Amount Percent
Transfer
Agent Fee $1,000 0.20% $1,000 0.01%
Printing Costs $1,000 0.20% $1,000 0.01%
Legal Fees $50,000 10.00% $50,000 0.58%
Accounting Fees $1,500 0.30% $1,500 0.02%
Working Capital $446,500 89.30% $8,546,500 99.38%
Total $500,000 100.00% $8,600,000 100.00%
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
The offering price is not based upon the Company's 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 (June 25, 1999): $0.43 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-QSB 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 $8,249,225, or $0.2340 per Share,
which would represent an immediate increase of $0.2585 in net
tangible book value per Share and $0.1960 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
(these are based on the outstanding shares of 15,250,000 as of June
28, 1999 and do not include further issuances in connection with the
Form S-8's recently filed, which will be a maximum of 1,600,000
additional shares - see "Description of Securities"):
Assuming Maximum
Shares Sold
Offering Price (1) $0.4300
Net tangible book value per share
before Offering (2) $(0.0245)
Net tangible book value Share after
offering (3) $0.2340
Increase attributable to issue of
stock to new investors (4) $0.2585
Dilution to new investors (5) $0.1960
Percent Dilution to new investors (6) 54.42%
(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 (15,250,000 as of June 28, 1999).
The net tangible book value per share after the offering ($0.2340)
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.
(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 ($0.2340) and subtracting from it the net
tangible book value per share before the offering ($0.0245) for an
increase of $0.2585.
(5) The dilution to new investors is determined by subtracting the
net tangible book value per share after the offering ($0.2340) from
the offering price of the Shares in this offering ($0.4300), giving
a dilution value of $0.1960.
(6) The Percent Dilution to new investors is determined by
dividing the book value after the offering ($0.2340) by the offering
price per Share ($0.4300), giving a dilution to new investors of
54.42%.
PLAN OF DISTRIBUTION
The Company will issue a maximum of 20,000,000 Shares of its
common stock, par value $0.001 per Share to the public in accordance
with a Registration Rights Agreement as explained below, and in
connection with acquisitions which the Company may make during the
term of the offering. 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
$8,600,000. 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 Company's 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 Company's 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 Company's 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
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 firm's expertise is churches and employs a staff of
five people. Ms. Hewitt currently devotes approximately 25 hours
per week in working with the Company's image development and
consulting with the Company's 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. Wexler's 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
Company's 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 Amount and Percent
Owner(1) Nature of of Class
Beneficial
Owner (2)
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 15,250,000 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
sold to certain consultants for the Company in exchange for services
rendered to the Company; in addition, on June 9, 1999 the Company
filed a Form S-8 for the registration of 1,450,000 shares of common
stock to be sold to certain consultants for the Company in exchange
for services rendered to the Company; as of June 28, 1999, only
750,000 shares out of the total of 2,350,000 shares of consultant
stock have been issued).
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 Company's directors.
Dividends.
The Company does not currently intend to pay cash dividends.
The Company's proposed dividend policy is to make distributions of
its revenues to its stockholders when the Company's 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 Company's Board of Directors, it is in the best
interest of the Company's 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 investee's securities on its
customers, joint venture associates, management contracts, other
investors, financial institutions, and the company's 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
offering of 20,000,000 is sold, and the issue of shares to
consultants of the Company pursuant to the Form S-8, the Company's
authorized but unissued capital stock will consist of 64,500,000
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
Company's 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 Company's 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 director's 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 shareholder's 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 we'll 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 Company's 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 Company's 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 CD's, 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 Company's largest
expense; the focus on attaining customers and keeping clients is the
Company's 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.com's 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 Company's 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.com's target market includes males between the ages
of 18 and 45 who are active sports gamblers currently. The most
typical customer for the Company's 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 Company's 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.com's
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 bettor's
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 it's easier to bet with us, more fun, more secure and potentially
more profitable we will get more customers.
(7) Marketing and Advertising Strategy.
eSportsbet.com's marketing strategy is to enhance, promote and
support the fact that the Company's product is unique in terms of
ease of operability, reliability, security. Most importantly, from
a bettor's perspective it is the opinion of management that the
Company's product offer the highest odds pay outs in the entire
industry.
The Company's 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.com's 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 Company's 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 Company's 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 bettor's 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.com's 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.com's 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 Company's 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 Company's 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
Company's 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 Company's
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 Company's plan of operation over the next
12 months in incorporated into the discussion of the Company's
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 NASD's Electronic Bulletin Board or NASDAQ's 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 Company's 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 *** 0.8125 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 June 25, 1999, the Company estimates there were
approximately 400 beneficial shareholders of the Company's 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 Company's
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 Company's 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 auditor's reports
for August 31, 1996 and 1995, were modified as to the uncertainties
about the Company's ability to continue as a going concern. The
decision to change accountants was approved by the Company's 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 June 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
June 28, 1999
/s/ Jack M. Hall
Jack M. Hall
Secretary, Director
June 28, 1999
/s/ Diane Hewitt
Diane Hewitt
Treasurer (Principal Financial and
Accounting Officer), Director
June 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 10.3 of the Form
10-KSB/A for the fiscal year
ended August 31, 1998) Incorporated by
Reference
10.4 Licensing Agreement
(incorporated by reference
to Exhibit 10.4 of the Form
10-KSB/A for the fiscal year
ended August 31, 1998) Incorporated by
Reference
13.1 Latest Annual Report to
Security Holders on Form
10-KSB/A See Below
13.2 Latest Quarterly Report
to Security Holders on
Form 10-QSB/A See Below
23.2 Consent of Accountant See Below
24 Special Power of Attorney See Signature Page