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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
FORM 6-K/A
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
dated January 22, 2003
WORLD GAMING PLC
----------------
(Exact Name as Specified in its Charter)
N/A
---
(Translation of Registrant's Name)
Station House, Station Road
Barnes Common
London, SW13 OHT, England
Tel: (44) 20-8342-2939 Fax: (44) 20-8392-1000
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(Address of principal executive offices) (Zip code)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
----- -----
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No X
----- -----
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): Not applicable.
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EXPLANATORY NOTE:
Attached hereto as an exhibit to this Form 6-K/A are the Registrant's unaudited
consolidated financial statements at and for the three and nine month periods
ended September 30, 2002, and related Management's Discussion and Analysis of
Financial Condition and Results of Operations. This Form 6-K/A is being filed to
amend note 3 to the unaudited consolidated financial statements.
The document set forth as an exhibit to this Form 6-K/A is incorporated herein
by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused the Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: February 14, 2003
WORLD GAMING PLC
By: /s/ Clare Roberts
--------------------
Name: Clare Roberts
Title: Chairman
2
EXHIBIT INDEX
Exhibit Description of Exhibit
1 Registrant's Financial Statements for the three and nine
months ended September 30, 2002 and related Management's
Discussion and Analysis of Financial Condition and Results of
Operations
3
EXHIBIT 1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
(All figures in thousands of US dollars, except per share data)
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We make certain forward-looking statements in this document within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The Private Securities
Litigation Reform Act of 1995 provides a safe harbour for forward-looking
statements. To comply with the terms of the safe harbour, we note that a variety
of factors could cause our actual results and experience to differ substantially
from the anticipated results or other expectations expressed in our
forward-looking statements. When words and expressions such as: "believes,"
"expects," "anticipates," "estimates," "plans," "intends," "objectives,"
"goals," "aims," "projects," "forecasts," "possible," "seeks," "may," "could,"
"should," "might," "likely," "enable" or similar words or expressions are used
in this document, as well as statements containing phrases such as "in our
view," "there can be no assurance," "although no assurance can be given" or
"there is no way to anticipate with certainty," forward-looking statements are
being made. These forward-looking statements speak as of the date of this
document.
The forward-looking statements are not guarantees of future performance
and involve risk and uncertainties. These risks and uncertainties may affect the
operation, performance, development and results of our business and could cause
future outcomes to differ materially from those set forth in our forward-looking
statements. These statements are based on our current beliefs as to the outcome
and timing of future events, and actual results may differ materially from those
projected or implied in the forward looking statements. Further, some
forward-looking statements are based upon assumptions of future events which may
not prove to be accurate. The forward-looking statements involve risks and
uncertainties including, without limitation, the risks and uncertainties
referred to in our filings with the Securities and Exchange Commission,
including our most recent Form 20-F.
We undertake no obligation to publicly update or revise any forward-looking
statements as a result of future developments, events and conditions outside of
our control. New risk factors emerge from time to time and it is not possible
for us to predict all such risk factors, nor can we assess the impact of all
such risk factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ significantly from
those forecast in any forward-looking statements. Given these risks and
uncertainties, investors should not overly rely or attach undue weight to our
forward-looking statements as an indication of our actual future results.
OVERVIEW
World Gaming Plc ("World Gaming" or the "Company") is a UK-based Internet gaming
software and e-business services company. The Company is an international
developer, licensor and provider of online gaming products, including casino,
sportsbook and pari-mutuel betting.
Starnet Systems International Inc., a subsidiary of the Company incorporated and
operating out of Antigua, licenses its gaming software to third parties for an
initial licensing fee and monthly royalties. Inphinity Interactive Inc., a
wholly-owned subsidiary of the Company incorporated and operating out of British
Columbia, Canada, develops gaming software and web pages. The Company's Internet
casino, which targets only customers outside North America, is operated by its
subsidiary, World Gaming Services, Inc., also incorporated and operating out of
Antigua.
1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
(All figures in thousands of US dollars, except per share data)
The following tables set out selected consolidated information from the
statements of operations for the three months and nine months ended September
30, 2002 and September 30, 2001 and the balance sheets as at September 30, 2002
and at December 31, 2001:
SELECTED STATEMENT OF OPERATIONS INFORMATION
For the three months For the nine months
ended September 30, ended September 30,
--------------------- ---------------------
2002 2001 2002 2001
-------- -------- -------- --------
Net Sales .................. $ 3,558 $ 3,300 $ 10,734 $ 11,669
Gross Profit ............... 3,217 2,495 9,483 8,111
Operating Expenses ......... 3,989 4,579 14,211 24,821
Net Loss ................... (903) (1,919) (4,754) (16,662)
SELECTED BALANCE SHEET INFORMATION
September 30, December 31,
2002 2001
-------- --------
Working Capital .................................. $ (5,782) $ (2,426)
Total Assets ..................................... 7,475 12,181
Long Term Debt (current and long-term portion) .. 1,330 1,083
Accumulated Deficit .............................. (26,117) (21,363)
Total Shareholders' Equity (Deficit) ............. (2,999) 1,686
Total revenues for the quarter ended September 30, 2002 were $3,558 compared to
$3,300 for the same period last year, representing an increase of 8 per cent.
Year-to date, revenues decreased 8 per cent to $10,734 compared to $11,669 for
the same period last year. Net loss for the quarter ended September 30, 2002 was
$903 or $0.03 per share compared to a net loss of $1,919 or $0.06 per share for
the corresponding period last year. Year-to-date, net loss was $4,754 or $0.14
per share compared to a net loss of $16,662 or $0.51 per share for the same
period last year.
The Company experienced a 25 per cent increase in royalty revenues during the
quarter and 5 per cent year-to-date largely due to an increase in wagering
activity experienced by our licensees. During the quarter, casino and sportsbook
wagering increased by 33 per cent to $774,000 from $581,000. The lower wagering
activity in the same period last year was partially as a result of the
cancellation of national sporting events at all levels across North America
during the month of September, typically the strongest month of the quarter as a
result of the events of September 11, 2001. Transaction processing related
revenues was down 71 per cent and 65 per cent for the quarter and nine months
ended September 30, 2002 to $174 and $862 from $601 and $2,478 as an increasing
number of licensees have assumed their own merchant processing responsibilities.
Licensing revenue increased 33 per cent for the quarter primarily as a result of
the launch of a new licensee. Year-to-date, licensing revenue increased 98 per
cent to $658 from $333 in the same period last year. The increase is primarily
due to gaming revenue generated from the Company's new gaming jurisdiction and
the launch of three new licensees.
2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
(All figures in thousands of US dollars, except per share data)
Gross margins were 90 per cent and 88 per cent respectively in the quarter and
year-to-date compared to 76 per cent and 70 per cent in the prior year,
reflecting a more profitable revenue mix. The reduction of revenues from
transaction processing and reselling of gaming licenses played a role in
improving our gross margins as these revenue sources have historically been low
margin revenue.
Operating expenses decreased 13 per cent to $3,989 during the quarter compared
to $4,579 for the same period last year and 25 per cent compared to the previous
quarter. Year-to-date, operating expenses decreased 43 per cent to $14,211
compared to $24,821 in the same period last year. The decrease in the Company's
expenses during the quarter is primarily due to the termination of the Company's
direct sales force as a result of a refocusing of the Company's resources on its
existing licensee base and product development. The Company believes that this
will result in enhanced growth in royalty revenue while significantly lowering
operating expenses. As well, during the quarter the Company began to realize on
cost savings resulting from its restructuring exercise in the previous quarters
primarily in the areas of corporate, and sales and marketing spending.
For the nine months ended September 30, 2001, the operating expenses included
year end adjustments for the fiscal year ended April 30, 2001. For additional
discussions related to these adjustments, please refer to the 20-F document for
the fiscal year ended April 30, 2001.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2002, the Company had $985 in cash and cash equivalents down
from $2,206 at December 31, 2001. The decrease was primarily due to the use of
cash in operations resulting from a year-to-date net cash loss. Cash was also
used to purchase new capital assets of $670 and make capital lease payments of
$422. In August 2002, the Company obtained debt financing of $1,500 of which
$1,250 had been advanced through September 30, 2002.
Working capital deficit at September 30, 2002 increased to $ (5,782) from $
(2,426) at December 31, 2001. Included in working capital is $1,200 related to
the anticipated settlement of the class action lawsuit. This is calculated as
the value of shares expected to be issued for settlement of the suit and no cash
is anticipated to be paid to cover this matter (See Note 3 to the Unaudited
Consolidated Financial Statements).
The Company also has reserves held by credit card processors totaling $747.
These funds are held as rolling reserves and are typically released to the
Company after six months. Accounts receivable decreased slightly from $2,591 at
December 31, 2001 to $2,297 at September 30, 2002. Accounts receivable is
comprised of royalty and transaction fees due from operating licensees that have
their own merchant accounts and from new licensees that were offered an
installment payment plan on the initial licensing fees. Royalty and transaction
fees due from operating licensees are usually collected prior to the end of the
following month. Licensing fees are usually collected in full prior to
recognition of the revenue. At September 30, 2002, accounts receivable consisted
primarily of royalty and transaction fees due from operating licensees.
Prepaid expenses and deposits decreased by $52 to $386 at September 30, 2002
compared to $438 at December 31, 2001. The decrease is primarily due to the
reduction in prepaid legal and insurance costs. Other current assets decreased
by $10 to $199 at September 30, 2002 as compared to $209 at December 31, 2001.
Year to date deferred financing costs of $180 were fully expensed as the
3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
(All figures in thousands of US dollars, except per share data)
Company's financing program was terminated in July 2002. This decrease was
offset by gaming license costs incurred during the year in the Company's new
gaming jurisdiction. Other current assets are comprised primarily of deferred
financing costs related to the Company's current financing effort and deferring
costs associated with establishing a new gaming jurisdiction.
Deferred revenue which relates to amounts collected from new licensees not yet
live at the end of the month, decreased to $131 at September 30, 2002 from $260
at December 31, 2001. At September 30, 2002, there were a number of new
licensees waiting to go live on our system from whom deposits were previously
collected. The decrease is consistent with the discussion on the increase in
licensing revenue.
Net cash used in investing activities for the nine months ended September 30,
2002 was $670 compared to $7,460 generated during the same period last year.
During the same period last year, the Canadian authorities released $7,630 of
funds previously seized from the Company.
Net cash provided by financing activities for the nine months ended September
30, 2002 was $1,497 compared to $258 in the same period last year. The increase
in the cash generated was due to $1,250 raised from the $1,500 debt financing
discussed above.
4
WORLD GAMING PLC AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 AND DECEMBER 31, 2001
5
WORLD GAMING PLC AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands of U.S. Dollars)
ASSETS
September 30, December 31,
2002 2001
(Unaudited)
----------- -----------
CURRENT ASSETS
Cash and cash equivalents ....................... $ 985 $ 2,206
Reserves and deposits with credit card processors 747 2,532
Accounts receivable, net ........................ 2,297 2,591
Employee loans and advances-current portion ..... 56 68
Prepaid expenses ................................ 386 438
Other current assets ............................ 199 209
------- -------
Total Current Assets .......................... 4,670 8,044
------- -------
Capital Assets, net ............................. 2,805 4,133
------- -------
OTHER ASSETS
Employee loans and advances-long term portion ... - 4
------- -------
Total Other Assets ............................. - 4
------- -------
TOTAL ASSETS .................................. $ 7,475 $12,181
======= =======
The accompanying notes are an integral part of these
consolidated financial statements.
6
WORLD GAMING PLC AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
(In Thousands of U.S. Dollars)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
September 30, December 31,
2002 2001
(Unaudited)
----------- -----------
CURRENT LIABILITIES
Accounts payable and accrued liabilities ........ $ 5,123 $ 5,911
Accrual for legal claims ........................ 1,200 1,200
Funds held on deposit ........................... 1,440 2,041
Deferred revenue ................................ 131 260
Notes payable ................................... 1,250 -
Current portion of capital lease obligation ..... 1,308 1,058
------- -------
Total Current Liabilities ..................... 10,452 10,470
------- -------
Capital lease obligations, less current maturities . 22 25
------- -------
Total Liabilities .............................. 10,474 10,495
------- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Capital stock authorized 100,000,000 ordinary
shares at $0.001 par value; 34,193,181 shares
issued and outstanding ........................ 24,188 24,188
Deferred compensation ........................... - (168)
Accumulated deficit ............................. (26,117) (21,363)
Accumulated other comprehensive loss ............ (1,070) (971)
------- -------
Total Stockholders' Equity (Deficit) ......... (2,999) 1,686
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) .................................... $ 7,475 $12,181
======= =======
The accompanying notes are an integral part of these
consolidated financial statements.
7
WORLD GAMING PLC AND SUBSIDIARIES
Consolidated Statements of Operations
(In Thousands of U.S. Dollars Except Per Share Data)
(Unaudited)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
REVENUE
Royalties and fees ............. $ 3,387 $ 3,175 $ 10,015 $ 11,225
Licensing ...................... 160 120 658 333
Other .......................... 11 5 61 111
----------- ----------- ----------- -----------
Total Revenue ................ 3,558 3,300 10,734 11,669
Cost of sales .................. 341 805 1,251 3,558
----------- ----------- ----------- -----------
Gross Profit ................. 3,217 2,495 9,483 8,111
----------- ----------- ----------- -----------
OPERATING EXPENSES
Development, selling, general,
and administrative ............ 3,263 3,973 12,128 22,917
Depreciation and amortization .. 692 580 1,998 1,878
Interest and bank charges ...... 34 26 85 26
----------- ----------- ----------- -----------
Total Operating Expenses ..... 3,989 4,579 14,211 24,821
----------- ----------- ----------- -----------
NET LOSS FROM OPERATIONS .......... (772) (2,084) (4,728) (16,710)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Other income (expense) ......... (131) 165 (26) 48
----------- ----------- ----------- -----------
Total Other Income (expense) . (131) 165 (26) 48
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAXES .......... (903) (1,919) (4,754) (16,662)
Income taxes ...................... - - - -
----------- ----------- ----------- -----------
NET LOSS .......................... (903) (1,919) (4,754) (16,662)
----------- ----------- ----------- -----------
OTHER COMPREHENSIVE LOSS
Foreign currency translation ... 150 (322) (99) (297)
----------- ----------- ----------- -----------
Total other comprehensive loss 150 (322) (99) (297)
----------- ----------- ----------- -----------
NET COMPREHENSIVE LOSS ............ $ (753) $ (2,241) $ (4,853) $ (16,959)
=========== =========== =========== ===========
BASIC LOSS PER SHARE .............. $ (0.03) $ (0.06) $ (0.14) $ (0.51)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING ............... 34,193,181 34,193,181 34,193,181 33,138,236
========== ========== ========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
8
WORLD GAMING PLC AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands of U.S. Dollars)
(Unaudited)
For the Nine Months Ended
September 30,
2002 2001
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss .................................................... $ (4,754) $(16,662)
Adjustment to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization ............................. 1,998 1,878
Option based compensation expense ......................... 168 -
Write-off of long-term receivable ......................... - 1,512
Changes in operating assets and liabilities:
(Increase) decrease in reserves with credit card processors 1,787 (640)
(Increase) in accounts receivable and employee advances ... 310 2,578
(Increase) decrease in prepaid expenses and deposits ...... 52 (278)
Decrease in other assets .................................. 10 614
Increase (decrease) in accounts payable and accrued
liabilities .............................................. (790) 3,073
Increase (decrease) in funds held on deposit .............. (601) 842
Increase (decrease) in deferred revenue ................... (129) 175
-------- --------
Net Cash Used For Operating Activities .................. (1,949) (6,908)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property and equipment ............ - -
Purchase of property and equipment .......................... (670) (170)
Transfer to restricted cash ................................. - 7,630
-------- --------
Net Cash Provided (Used) By Investing Activities ........ (670) 7,460
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment received on long-term receivable .................... - 84
Principle payments on capital lease obligations ............. (422) (522)
Proceeds from capital lease obligations and notes payable ... 1,919 46
Proceeds from stock subscriptions receivable ................ - 650
-------- --------
Net Cash Provided By Financing Activities ................. 1,497 258
-------- --------
Effects of exchange rate on cash .......................... $ (99) $ (297)
-------- --------
The accompanying notes are an integral part of these
consolidated financial statements.
9
WORLD GAMING PLC AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
(In Thousands of U.S. Dollars)
(Unaudited)
For the Nine Months Ended
September 30,
2002 2001
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............... $ (1,221) $ 513
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............... 2,206 2,484
-------- --------
CASH AND CASH EQUIVALENTS END OF PERIOD ........................ $ 985 $ 2,997
======== ========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
CASH PAID DURING THE PERIOD FOR
Interest .................................................... $ 48 $ 34
Income taxes ................................................ $ - $ -
The accompanying notes are an integral part of these
consolidated financial statements.
10
WORLD GAMING PLC AND SUBSIDIARIES
Notes to the Unaudited Consolidated Financial Statements
September 30, 2002 and December 31, 2001
NOTE 1 - ACCOUNTING POLICIES
The consolidated financial statements at September 30, 2002 and for the
three and nine months ended September 30, 2002 and 2001 are unaudited,
but include all adjustments (consisting only of normal recurring
adjustments) which in the opinion of management, are necessary to state
fairly the financial information set forth therein in accordance with
accounting principles generally accepted in the United States of
America.
NOTE 2 - UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been
prepared by the Company in accordance with accounting principles
generally accepted in the United States of America for interim
financial reporting and the instructions to Form 6-K. Accordingly,
certain information and footnote disclosures normally included in
financial statements prepared under accounting principles generally
accepted in the United States of America have been condensed or omitted
pursuant to such regulations. These consolidated financial statements
for the three and nine months ended September 30, 2002 should be read
in conjunction with the Company's annual report on Form 20-F for the
fiscal year ended December 31, 2001. The results of operations for the
nine months ended September 30, 2002, may not be indicative of the
results that may be expected for the year ending December 31, 2002.
NOTE 3 - MATERIAL EVENTS
On November 20, 2002, the Company entered into a formal employment
agreement with David Craven, its then Chief Executive Officer. The
Employment Agreement was for a period of 3 years commencing on July 15,
2002 and provided, among other things, an annual salary of 175 UK
Pounds Sterling (approximately $280 US), a monthly car allowance of 1
UK Pounds Sterling (approximately $1.6 US), 25 days annual vacation,
medical and life insurance benefits and pension benefits. In addition,
the Employment Agreement provided for 100,000 options with an exercise
price of $0.20 fully vested 60 days after the date of employment along
with an additional 750,000 options to be issued and vested in monthly
installments of 33,333 options beginning March 25, 2002 at varying
exercise prices. There was also a provision in the Employment Agreement
for additional bonus options to be earned based on various performance
criteria established by the board of directors. In January 2003, Mr.
Craven's employment ceased.
On September 9, 2002, an Order and Final Judgment was entered approving
the settlement of the class action lawsuit against the Company. Using
the formula specified by the Memorandum of Understanding and an
effective date of October 10, 2002, the Company is obligated to issue
6,588,226 ADR's (shares). These shares will be issued by the Company
pursuant to the instructions set forth in the Stipulation and Agreement
of Settlement. The Company has accrued for the full amount of the
settlement as well as additional amounts for administrative and legal
expenses.
11
WORLD GAMING PLC AND SUBSIDIARIES
Notes to the Unaudited Consolidated Financial Statements
September 30, 2002 and December 31, 2001
NOTE 3 - MATERIAL EVENTS (Continued)
During August 2002, the Company signed a loan agreement whereby the
Company could borrow up to $1,500. Pursuant the terms of the agreement,
the Company has received $1,250. The loan bears interest at the rate of
2% above LIBOR with interest accruing daily. The terms of the agreement
call for repayment of 75% of the loan no later than March 31, 2003,
with interest accrued to that date and full amount of the loan, and
accrued interest, repaid no later than September 30, 2003.
The Company signed an employment agreement with a new group finance
director in August 2002, providing for annual base compensation of 75
UK Pound Sterling (approximately $113 US) in addition to other normal
executive employment benefits. A share option package still remains to
be agreed upon by the Board of Directors.
In August 2002, the Company moved into new office space in London. The
new lease agreement is for a one-year period commencing August 12, 2002
and calls for quarterly lease payments of 5 UK Pound Sterling
(approximately $8 US). The agreement also provides the Company with an
option to extend for two terms of one year each until August 12, 2006
subject to annual increases in lease payments in line with the UK
Retail Price Index.
NOTE 4 - GOING CONCERN
The Company's consolidated financial statements are prepared using
generally accepted accounting principles applicable to a going concern
which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. However, the Company has
accumulated significant losses and has negative working capital. All of
these items raise substantial doubt about its ability to continue as a
going concern. The accompanying consolidated financial statements do
not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and
classification of liabilities that might result from the outcome of
this uncertainty.
The Company has implemented measures to greatly reduce operating costs.
Among these measures are efforts to eliminate non-value-added expenses
through the consolidation of operations at one primary location and a
significant reduction in the Company's work force. The Company is also
converting its sales staff from a direct sales force to a business
development group which will focus primarily on developing the
Company's existing client base. The Company expects that growth in
revenue from operations will continue to increase. In addition to these
measures, the Company intends to continue to seek out additional
financing. Accordingly, the Company believes that based on these
factors, it has the ability to sustain operations for the next twelve
months. However, there can be no assurance that these measures of
operating revenues will be sufficient to enable the Company to maintain
its operations. If the Company's plans are not successful, it will be
necessary for the Company to secure additional debt and equity
financing which also cannot be assured.
12