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 If this Form is post- If this Form is post-
register additional effective amendment effective amendment
securities for an filed pursuant to filed pursuant to
offering pursuant to Rule 462(c)under the Rule 462(d)under the
Rule 462(b) under Securities Act, Securities Act,
the Securities Act, check the following check the following
please check the box box and list the box and list the
and list the Securities Act Securities Act
Securities Act registration registration
registration number statement number of statement number of
of the earlier the earlier the earlier
effective effective effective
registration registration registration
statement for the statement for the statement for the
same offering. same offering. same offering.
If the delivery of
the prospectus is
expected to be made
pursuant to Rule
434, check the
following box.
CALCULATION OF REGISTRATION FEE
Title of each
class of securities to
be registered 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 June 28, 1999, 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 Name of Amount and Nature Percent of
Class Beneficial of Beneficial Class
Owner (1) Owner (2)
Common James S. 1,700,000
Stock Clinton 11.15%
Common Thomas S. 750,000
Stock Hughes 4.92%
(1) Other than the Shares owned by Mr. Hughes, none of the
other officers or directors of the Company own any of the Shares.
(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 noncumulative 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
AutoRacing 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 sameas-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
reelection 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
SB2 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
posteffective 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
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