U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
FEBRUARY 28, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO ______________
COMMISSION FILE NUMBER: 33-68570
BETTING, INC. (1)
(Exact name of registrant as specified in its charter)
Missouri (2) 43-1239043
(State or jurisdiction of incorporation I.R.S. Employer
or organization) Identification No.)
31310 Eaglehaven Center
Suite 10
Rancho Palos Verdes, California 90275
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (310) 541-4393
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common
Stock, $0.01 Par Value; Class A Warrants
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) been subject to such filing requirements for
the past 90 days. Yes No X .
As of February 28, 1999, the registrant had 14,354,798 shares
of common stock issued and outstanding.
Transitional Small Business Dislcosure Format (check one): Yes
No X .
(1) Effective on June 4, 1999, the name was changed to eConnect.
(2) Effective on June 1, 1999, the jurisdiction of organization was
changed to Nevada.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS AS OF FEBRUARY 28, 1999
AND AUGUST 31, 1998 3
STATEMENTS OF OPERATIONS FOR THE THREE
AND SIX MONTHS ENDED FEBRUARY 28, 1999
AND FEBRUARY 28, 1998 4
STATEMENTS OF CASH FLOWS FOR THE SIX
MONTHS ENDED FEBRUARY 28, 1999 AND
FEBRUARY 28, 1998 5
NOTES TO FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
PART II
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 11
ITEM 5. OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURE 12
PART I.
ITEM 1. FINANCIAL STATEMENTS.
BETTING, INC.
BALANCE SHEETS
February 28, August 31,
1999 1998
ASSETS (Unaudited) (Audited)
Cash $ 22,510 $ 0
Total Assets $ 22,510 $ 0
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 280,316 $ 283,971
Due to related party 35,569 18,969
Commissions payable 57,400 21,400
Total current liabilities 373,285 324,340
Commitments and Contingencies (Note 10)
Stockholders' Equity (Deficit):
Common stock, $.01 par value,
authorized 10,000,000 shares;
issued and outstanding,14,354,798
and 14,284,234 at February 28,
1999 and 1998, respectively 143,548 142,842
Preferred stock, $.01 par
value, authorized 5,000,000
shares; issued and
outstanding - none - -
Additional paid-in capital 5,157,064 5,000,420
Accumulated deficit (5,651,387) (5,467,602)
Total stockholders' equity
(deficit) (350,775) (324,340)
Total Liabilities and
Stockholders' Equity (Deficit) $ 22,510 $ 0
See accompanying notes to interim financial statements
BETTING, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
February 28, February 28,
1999 1998 1999 1998
General and
Administrative expenses
$ 175,730 $ 48,775 $ 183,785 $143,468
Total Operating Expenses
(175,730) (48,775) (183,785) (143,468)
Net loss (175,730) (48,775) $(183,785) $(143,468)
Net loss per common share
$ (.01) $ (.00) $ (.01) $ (.01)
Weighted average
shares outstanding
14,316,067 11,062,234 14,316,067 10,489,984
See accompanying notes to interim financial statements
BETTING, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
February 28, February 28,
1999 1998
Cash Flows From Operating Activities
Net loss (Note 9) $ (175,735) $ (25,128)
Changes in assets and liabilities:
Accounts payable (3,655) 7,999
Commissions payable 36,000 3,001
Cash Used in Operating Activities (143,390) (14,128)
Cash Flows From Financing Activities:
Proceeds from additional borrowings
from stockholder 0 0
Proceeds from issuance of
common stock 149,300 0
Proceeds from borrowings
from related party 16,600 15,694
Cash provided by financing
activities 165,900 15,694
Net increase in cash 22,510 1,566
Cash at beginning of period 0 45
Cash at end of period $ 22,510 $ 1,611
Supplemental Disclosures:
The Company paid $0 and $0 for interest for the six months ended
February 28, 1999 and 1998, respectively.
The following summarizes noncash investing and financing
transactions:
Six Months Ended February 28, 1999
Issuance of 161,000 shares of common stock
for services rendered $8,050
Six Months Ended February 28, 1998
Issuance of 1,769,000 shares of common stock
for services rendered $82,590
Issuance of 750,000 shares of common stock
for due to stockholder 35,135
Issuance of 350,000 shares of common stock
for accounts payable 21,000
See accompanying notes to interim financial statements.
BETTING, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
1. Unaudited Interim Periods:
The information furnished herein relating to interim periods
has not been audited by independent Certified Public Accountants.
In the opinion of the Company's management, the financial
information in this report reflects any adjustments that are
necessary for a fair statement of results for the interim periods
presented in accordance with generally accepted accounting
principles. All such adjustments are of a normal and recurring
nature. The accounting policies followed by the Company, and
additional footnotes, are set forth in the audited financial
statements included in the company's Annual Report Form 10-KSB/A
filed with the SEC on April 8, 1999.
2. Initial Public Stock Offering:
On November 18, 1993, the Company completed an initial public
offering in which it sold 900,000 Units at $3.125 per Unit. Each
Unit consisted of one share of Common Stock and one Class A Warrant.
Three Warrants entitled the holder thereof to purchase one share of
Common Stock at $3.75 per share and expired on November 18, 1997.
The warrants were callable in total by the Company after November
18, 1994, at a redemption price of $.05 per warrant upon 60 days
prior notice if the common stock has traded above $3.75 for at least
20 out of the 30 trading days preceding the date of the notice of
redemption.
3. Earnings (loss) Per Share:
Net earnings (loss) per share are computed using the weighted
average number of common and common equivalent shares outstanding
during the period. The Class A Warrants issued during the public
offering are anti-dilutive and have not been included in the
computation of common equivalent shares outstanding. Fully diluted
net earnings (loss) per share for all periods presented is not
materially different from primary net earnings (loss) per share.
4. Income Taxes:
Effective September 1, 1987, the Company elected to be taxed
under Subchapter S of the Internal Revenue Code. As such, the
Company's taxable income or loss was included in the individual tax
returns of its shareholders for Federal and State income tax
purposes. Upon the closing of the public stock offering on November
18, 1993, the Company terminated its Subchapter S election.
Betting, Inc., has unused net operating loss (NOL)
carryforwards of approximately $2,800,000 at August 31, 1997, that
were generated by Leggoons, Inc. The unused net operating losses
expire in various amounts from 2009 to 2012. However, due to change
of ownership rules of section 382 of the Internal Revenue Code some
or all of these NOL carryforwards may be unavailable to offset any
future income of Betting, Inc. The Company generated losses of
approximately $1,658,000 during the six month period ended August
31, 1997, losses of approximately $197,000 during the year ended
August 31, 1998, and losses of approximately $183,000 during the six
months ended February 28, 1999. These losses, totaling $4,838,000,
may not qualify as federal and state NOL carryforwards due to the
possible nondeductibility of the noncash service costs incurred and
the change of ownership rules of section 382 of the Internal Revenue
Code. The Company provides an allowance for the entire amount of
any deferred tax assets that are applicable to the NOL.
5. Due to Stockholder
The Company had a due to stockholder payable to James S.
Clinton, former Chairman of Leggoons, Inc., in the amount of $35,135
for advances made to Leggoons, Inc., prior to March 1, 1997. This
payable was paid in full during the six months ended February 28,
1998, by the issuance of 750,000 shares of restricted common stock.
6. Due to Related Party
The Company utilizes cash advances from HPOS/E.T.T. to fund
day to day operations of the Company. Thomas S. Hughes is the
Chairman of both the Company and HPOS/E.T.T.
7. Accumulated Deficit:
As a result of the termination of the Company's S Corporation
status on November 18, 1993, the accumulated deficit of $1,168,375
incurred through that date was closed out against additional paid-in
capital. The $5,651,387 of deficit on the balance sheet at February
28, 1999, is the result of operations from November 18, 1993, to
February 28, 1999.
8. Stockholders Equity:
During the period September 1, 1998, through February 28,
1999, the Company issued 161,000 shares of common stock for services
rendered. The financial value of the common stock issued for no cash
consideration is required to be expensed by the Company. The "fair
market value" of such common stock issued, $8,050, has been expensed
as consulting fees during the six months ended February 28, 1999.
During the period September 1, 1997, through November 30,
1997, the Company issued 2,869,000 shares of common stock for
payments on accounts payable and services rendered. For the
1,769,000 shares of common stock issued for services rendered during
the period September 1, 1997, through November 30, 1997, the closing
"market" stock price was used to determine "fair market value" of
the 569,000 unrestricted common shares issued; the closing "market"
stock price less a 50% discount was used to determine "fair market
value" of the 1,200,000 restricted common shares issued. The
financial value of the common stock issued for no cash consideration
is required to be expensed by the Company. The "fair market value"
of such common stock issued, $82,590, has primarily been expensed as
$63,450 in consulting fees, $7,140 in legal fees, and $12,000 in
general and administrative expenses during the three months ended
November 30, 1997. Some of the common stock shares issued were
registered with the Securities and Exchange Commission using Form S-
8 Registration Statements.
9. Cash Flow and Income Statement Reconciliation
The following reconciles noncash financing transactions for the six
months ended February 28, 1999:
Net loss $ 175,735
Issuance of 161,000 shares of common stock for Consulting
Fees 8,050
Income Statement Net Loss $ 183,785
The following reconciles noncash financing transactions for the six
months ended February 28, 1998:
Net loss $ 25,128
Issuance of 2,469,000 shares of common stock for Consulting
Fees, and General and Administrative Expense 118,340
Income Statement Net Loss $ 143,468
10. Contingencies
(a) Going Concern.
The Company's financial statements are presented on the going
concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. As
shown in the accompanying financial statements, the Company has
shown a significant loss from operations and has negative working
capital and a stockholders' deficit. This raises substantial doubt
about the Company's ability to continue.
The Company's continued existence is dependent upon its
ability to resolve its liquidity problems, principally by obtaining
additional debt financing and equity capital and ultimately upon
achieving profitability. While pursuing additional debt and equity
funding, the Company must continue to operate on limited cash flow.
Management is committed to developing the product and continues to
receive small amounts of funding from private investors. It is the
goal of management to receive additional funding from an additional
public offering of its common stock within twelve months.
There is no assurance that the Company can achieve the
profitability and positive liquidity discussed above. The financial
statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from
the possible inability of the Company to continue as a going
concern.
(b) Common Stock Issued in Excess of Authorized Shares.
During the year ended August 31, 1998, the Company issued a
total of 6,441,000 shares of common stock. This has resulted in the
total issued common shares exceeding the 10,000,000 common shares
authorized by 4,284,234 common shares. Most of these shares were to
have been preferred stock. Due to an error that was discovered
after the close of the year, however, all of the shares were issued
as common shares, resulting in the Company issuing more common
shares than its articles of incorporation authorize. The Company is
in the process of "recalling" these certificates totaling 4,550,000
shares and replacing them with preferred certificates. The net
result will not be significantly different. Holders of preferred
shares will have a priority over common stockholders with respect to
dividends and liquidation rights, but no dividends are required or
anticipated. The preferred stockholders will have voting rights
equal to those of the common stockholders. The stockholders' equity
(deficit) section of the balance sheet then would be restated as
follows to take into account the preferred stock:
February 28, Proforma Restated
1999 Adjustment February 28, 1999
Stockholders' Equity (Deficit):
Common stock, $.01 par value, authorized
10,000,000 shares; issued and outstanding,
9,803,834
$143,548 $(45,500) $ 98,048
Preferred stock, $.01 par value, authorized 5,000,000
shares; issued and outstanding - 4,550,000
0 45,500 45,500
Additional paid-in capital
5,157,064 0 5,157,064
Accumulated deficit
(5,651,387) 0 (5,651,387)
Total stockholders' equity (deficit)
$ (350,775) $ 0 $ (350,775)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FIINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with
the financial statements of the Company and notes thereto contained
elsewhere in this report.
Results of Operations.
The Company had virtually no operations during the three month
period ended November 30, 1998, due to the unavailability of funds.
Near the end of the three month period ended November 30, 1998, and
during the three month period ended February 28, 1999, the Company
received cash from the sale of its common stock to a private
investors and from advances to the company by related parties.
These funds were used for operations during the three month period
ending February 28, 1999. The primary general and administrative
expenses incurred during the six month period ended February 28,
1999, were consulting fees of $20,650, legal fees of $17,862,
accounting fees of $21,559, license fees of $92,000 and stock
expenses of $10,371. The primary general and administrative expenses
incurred during the six month period ended February 28, 1998, were
consulting fees, legal fees, office expenses and stock expenses.
Liquidity and Capital Resources.
Net cash used in operating activities by the Company was
$143,390 for the six month period ended February 28, 1999 versus
$14,128 in the comparable prior year period.
Capital Expenditures.
No material capital expenditures were made during the quarter
ended on February 28, 1999.
Year 2000 Issue.
The Year 2000 issue arises because many computerized systems
use two digits rather than four to identify a year. Date sensitive
systems may recognize the year 2000 as 1900 or some other date,
resulting in errors when information using the year 2000 date is
processed. In addition, similar problems may arise in some systems
which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 issue may be experienced before,
on, or after January 1, 2000, and if not addressed, the impact on
operations and financial reporting may range from minor errors to
significant system failure which could affect the 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.
Forward Looking Statements.
The foregoing Management's Discussion and Analysis contains
"forward looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Act of 1934, as amended, and as contemplated under the
Private Securities Litigation Reform Act of 1995, including
statements regarding, among other items, the 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, among others, the following: reduced or lack
of increase in demand for the Company's products, competitive
pricing pressures, changes in the market price of ingredients used
in the Company's products and the level of expenses incurred in the
Company's operations. In light of these risks and uncertainties,
there can be no assurance that the forward-looking information
contained herein will in fact transpire or prove to be accurate.
The Company disclaims any intent or obligation to update "forward
looking statements".
PART II.
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by or
against the Company has been threatened.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's
stockholders during the first quarter of the fiscal year covered by
this report.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHBITS AND REPORTS ON FORM 8-K.
(a) Reports on Form 8-K. There are no reports on Form 8-K
filed during the second quarter of the fiscal year covered by this
report
(b) Exhibits included or incorporated by reference herein:
See Exhibit Index
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
eConnect (formerly known as
Betting, Inc.)
Dated: June 18, 1999 By: /s/ Thomas S. Hughes
Thomas S. Hughes, President
EXHIBIT INDEX
Exhibit No. Description
3.1 Leggoons, Inc. Articles of Incorporation and Amendments,
incorporated by reference to Exhibit 3.1 of Leggoons, Inc.
Registration Statement on Form S-1 filed on October 28, 1993.
3.2 Leggoons, Inc. Bylaws Amended, incorporated by reference to
Exhibit 3.2 of Leggoons, Inc. Registration Statement on Form S-1
filed on October 28, 1993.
4 Class A Warrant Agreement, incorporated by reference to
Exhibit 4.2 of Leggoons, Inc. Registration Statement on Form S-1
filed on October 28, 1993.
10.1 Agreement to License Assets (incorporated by reference to
Exhibit 10.16 to the Form 8-K filed on February 25, 1997).
10.2 Escrow Agreement (incorporated by reference to Exhibit 10.17
to the Form 8-K filed on February 25, 1997).
10.3 ET&T Host Processing Agreement (incorporated by reference to
Exhibit 10.3 of the Form 10-KSB for the period ending on August 31,
1998).
10.4 ET&T Licensing Agreement (incorporated by reference to Exhibit
10.4 of the Form 10-KSB for the period ending on August 31, 1998).
27 Financial Data Schedule (see below).