-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VMzRpxBBWcLztED7d6P5DC/SmJt2LpQk+uphRts651jmaODzwRAfU8P7jkXatwcS SbjBFpq1NO+l01EtE610gw== 0000921895-00-000410.txt : 20000518 0000921895-00-000410.hdr.sgml : 20000518 ACCESSION NUMBER: 0000921895-00-000410 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ONLINE GAMING SYSTEMS INC CENTRAL INDEX KEY: 0001003739 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 133858917 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-27256 FILM NUMBER: 638241 BUSINESS ADDRESS: STREET 1: 200 E PALMETTO PARK RD, STE 200 CITY: BOCA RATON STATE: FL ZIP: 33432 BUSINESS PHONE: 5613936685 MAIL ADDRESS: STREET 1: 200 E PALMETTO PARK RD STE 200 CITY: BOCA RATON STATE: FL ZIP: 33432 FORMER COMPANY: FORMER CONFORMED NAME: ATLANTIC INTERNATIONAL ENTERTAINMENT LTD DATE OF NAME CHANGE: 19961203 FORMER COMPANY: FORMER CONFORMED NAME: CEEE GROUP CORP DATE OF NAME CHANGE: 19951120 10QSB 1 FORM 10QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( d ) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _______________. Commission File Number: 0-27256 ------- ONLINE GAMING SYSTEMS, LTD. (Exact name of small business issuer as specified in its charter) DELAWARE 65-0512785 (State or other jurisdiction of (I.R.S. Employer Identification number) incorporation or organization) 200 East Palmetto Park Road, Suite 200, Boca Raton, Florida 33432 (Address of principal executive offices) Registrant's telephone no., including area code: (561) 393-6685 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ X ] NO [ ] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Class Outstanding as of May 15, 2000 - ------------------------------------- ------------------------------ Common Stock, $.001 par value 14,669,180 TABLE OF CONTENTS Heading Page PART 1. - FINANCIAL INFORMATION Item 1. Financial Statements ...............................................2 Consolidated Balance Sheet - March 31, 2000 (Unaudited)...... 3-4 Consolidated Statement of Income and Comprehensive Income (Unaudited) ...............................................5-6 Consolidated Statement of Cash Flows - Three Months ended March 31, 2000 (Unaudited) .................................... 7-8 Notes to Consolidated Financial Statements (Unaudited) ......... 9-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .........................................12 PART II. - OTHER INFORMATION Item 1. Legal Proceedings ................................................13 Item 2. Changes In Securities ............................................ 13 Item 3. Defaults Upon Senior Securities.................................. 13 Item 4. Submission of Matters to a Vote of Securities Holders ........... 13 Item 5. Other Information .................................................13 Item 6. Exhibits and Reports on Form 8-K................................. 13 Signatures ........................................................14 PART 1 Item 1. Financial Statements The following unaudited Financial Statements for the period ended March 31, 2000, have been prepared by Online Gaming Systems, Ltd. (the "Company") and Subsidiaries. ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES Financial Statements March 31, 2000 2 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (UNAUDITED) AS OF MARCH 31, 2000 Assets: Current Assets: Cash and Cash Equivalents $ 81,387 Accounts Receivable 1,137,120 Investments 662,500 Deferred Tax Asset 123,691 Prepaid Expenses 8,756 Other Current Assets 32,306 ------------- Total Current Assets 2,045,760 ------------- Property and Equipment - Net 350,288 ------------- Equipment under Capitalized Lease - Net 207,556 ------------- Other Assets: Due from Related Parties 56,069 Other Assets 520,301 Investments 2,500,197 ------------- Total Other Assets 3,076,567 ------------- Total Assets $ 5,680,171 ============= The Accompanying Notes are an Integral Part of these Consolidated Financial Statements. 3 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (UNAUDITED) AS OF MARCH 31, 2000
Liabilities and Stockholders' Equity: Current Liabilities: Accounts Payable and Accrued Expenses $ 1,286,859 Notes Payable - Officers 16,100 Current Portion of Long Term Debt 218,768 Current Portion of Capital Lease Obligations 99,473 ------------- Total Current Liabilities 1,621,200 Capital Lease Obligations 112,410 ------------- Total Liabilities 1,733,610 ------------- Stockholders' Equity: Convertible Preferred Stock - Par Value $.001 Per Share; Authorized 10,000,000 Shares, Issued and Outstanding, 9,000 shares [Liquidation Preference $9,000,000] 90 Common Stock - Par Value $.001 Per Share; Authorized 100,000,000 Shares, Issued - 14,294,180 Shares 14,294 Additional Paid-in Capital 14,613,325 Treasury Stock, 968,767 Common Shares - At Cost (1,744,547) Accumulated Comprehensive (Loss) (1,474,500) Accumulated [Deficit] (7,062,101) Deferred Acquisition Costs (400,000) ------------- Total Stockholders' Equity 3,946,561 ------------- Total Liabilities and Stockholders' Equity $ 5,680,171 =============
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements. 4 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months ended March 31, --------- 2 0 0 0 1 9 9 9 ------- ------- Revenue $ 2,023,733 $ 29,000 Cost of Sales 106,192 268,848 ----------- ----------- Gross [Loss] Profit 1,917,541 (239,848) ----------- ----------- Operating Expenses: Research and Development -- 58,513 General and Administrative 1,296,295 1,103,874 Provision for Doubtful Accounts and Notes -- 325,335 Depreciation and Amortization 61,518 31,439 ----------- ----------- Total Operating Expenses 1,357,813 1,519,161 ----------- ----------- Income [Loss] from Operations 559,728 (1,759,009) ----------- ----------- Other [Expenses] Income: Interest Income -- 8,110 Interest Expense (9,351) (16,129) Other Income [Expense] 1,423,443 ----------- ----------- Other [Expenses] Income - Net (9,351) 1,415,424 ----------- ----------- [Loss] Income from Continuing Operations Before Income Tax [Benefit] Expense 550,377 (343,585) Income Tax [Benefit] Expense -- (123,691) ----------- ----------- Income [Loss] from Continuing Operations 550,377 (219,894) Discontinued Operations: [Loss] from Operations of Discontinued Business Segment [Net of Income Tax [Benefit] of ($0) and ($30,521), for the three months ended March 31, 2000 and 1999, Respectively] -- (54,261) ----------- ----------- Net [Loss] Income 550,377 (274,155) Comprehensive (Loss): Unrealized Holding (Loss) arising during period 397,500 744,243 ----------- ----------- Total Comprehensive Income $ 152,877 $ 470,088 =========== ===========
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements. 5 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months ended March 31, --------- 2 0 0 0 1 9 9 9 ------- ------- Net [Loss] Income $ 550,377 $ (274,155) Preferred Stock Dividend in Arrears 12,500 12,500 ------------ ------------- Net Income [Loss] Available to Common Stockholders $ 537,877 $ (286,655) ============ ============= [Loss] Income Per Common Share: Continuing Operations $ 0.04 $ (0.02) ------------ ------------- Basic and Diluted Net [Loss] Income Per Share of Common Stock $ 0.04 $ (0.02) ============= ============= Weighed Average Shares of Common Stock Outstanding 13,484,670 12,559,208 ============ =============
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements. 6 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months ended March 31, --------- 2 0 0 0 1 9 9 9 ------- ------- Operating Activities: Income [Loss] from Continuing Operations $ 550,377 $ (219,894) Adjustments to Reconcile Net [Loss] Income to Net Cash [Used for] Operating Activities: Depreciation and Amortization 61,518 251,387 Deferred Tax Asset -- (154,212) Provision for Doubtful Accounts -- 325,335 Loss on Sale of Assets -- 3,100 Realized Loss on Carrying Value of Investments -- 324 Gain on Sale of Subsidiary -- (1,256,473) Changes in Assets and Liabilities: [Increase] Decrease in: Accounts Receivable (1,137,120) 1,914 Prepaid Expenses 4,992 (24,377) Notes Receivable -- 84,975 Other Assets (5,043) 76,815 Increase [Decrease] in: Accounts Payable and Accrued Expenses 464,366 (241,124) ------------ ----------- Net Cash - Continuing Operations (60,910) (1,152,230) ------------ ----------- Discontinued Operations: [Loss] from Discontinued Operations -- (54,261) Adjustments to Reconcile Net [Loss] to Net Cash Operations: Depreciation and Amortization -- 38,220 Provision for Doubtful Accounts -- 18,915 Changes in Net Assets and Liabilities -- 260,011 ------------ ----------- Net Cash - Discontinued Operations -- 262,885 ------------ ----------- Net Cash - Operating Activities - Forward (60,910) (889,345) ------------ ----------- Investing Activities - Continuing Operations: Increase in Due from Related Parties -- (828) Purchase of Investments -- (187,664) Purchase of Property, Equipment, and Capitalized Software (22,338) (42,212) Sale of Investments -- 2,566,858 ------------ ----------- Net Cash - Investing Activities - Continuing Operations - Forward $ (22,338) $ 2,336,154
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements. 7 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, --------- 2 0 0 0 1 9 9 9 ------- ------- Net Cash - Operating Activities - Forwarded $ (60,910) $ (889,345) ------------- ------------ Net Cash - Investing Activities - Continuing Operations - Forwarded (22,338) 2,336,154 -------------- ------------ Investing Activities - Discontinued Operations: Purchase of Property and Equipment -- (29,715) ------------- ------------ Net Cash Investing Activities - Discontinued Operations -- (29,715) ------------- ------------- Financing Activities - Continuing Operations: Proceeds from Issuance of Common Stock 250,000 -- Purchase of Treasury Stock -- (966,043) Increase [Decrease] in Loan Payable to Shareholder 16,100 (130,000) Proceeds from Note Payable 100,000 -- Payment of Notes Payable (5,850) (100,000) Payment of Lease Payable (21,740) (7,453) Decrease in Loan Receivable -- (274,762) ------------- ------------- Net Cash - Financing Activities - Continuing Operations 338,510 (1,478,258) ------------- ------------- Financing Activities - Discontinued Operations: Proceeds from Long-Term Debt -- 50,000 Payment of Note Payable -- (41,500) Payment of Lease Payable -- (5,769) ------------- ------------ Net Cash Financing Activities Discontinued Operations -- 2,731 ------------- ------------ Net Increase [Decrease] in Cash and Cash Equivalents 255,262 (58,433) Cash and Cash Equivalents - Beginning of Years (173,875) 67,535 -------------- ------------ Cash and Cash Equivalents - End of Years $ 81,387 $ 9,102 ============= ============ Supplemental Disclosures of Cash Flow Information: Cash paid during the years for: Interest $ 8,751 $ 16,128 Supplemental Schedule of Non-Cash Investing and Financing Activities: Conversion of Preferred Stock into Common Stock $ 455 $ 396 Purchase of Assets under Capital Lease Financing $ -- $ 6,210
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements 8 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Uunaudited) March 31, 2000 Note 1 - Basis of Preparation The accompanying unaudited interim financial statements include all adjustments (consisting only of those of a normal recurring nature) necessary for a fair statement of the results for the interim periods. The results of operations for the three-month period ended March 31, 2000, are not necessarily indicative of the results of operations to be reported for the full year ending December 31, 2000. Note 2 - Sale of Subsidiary On March 31, 1999 the Company sold 81% of its interest in its wholly owned subsidiary, the Eminet Domain, Inc. to Centerline Associates, Inc., a shareholder of the Company. The sale price was $2,500,000 paid as follows: (i) $10,000 at sale date, (ii) $90,000 in cash payable at the rate of $14,000 per month commencing on April 15, 1999 and (iii) $2,400,000 by the delivery of a promissory note collateralized by shares of the Company's stock with interest at the annual rate of six percent (6%) and payable two years from the closing date. However, on December 10, 1999 the parties reformed the agreement to provide the sale of the company's entire interest in Eminet Domain in exchange for $2,500,000 in convertible preferred stock in Atlantic Internet Holdings, Inc. a Florida holding company which it has as one of its subsidiaries, The Eminet Domain. The sale resulted in a gain of $1,256,743 which is reflected in other income. The transaction resulted in the Eminet Domain, Inc being treated as a discontinued operation. Note 3 - Major Customers Income fees derived from major customers are tabulated as follow: Three Months Ended March 31, 2000 1999 (Unaudited) Customer A (Software System) 425,000 -- Customer B (Software System) 225,000 -- Customer C (Software System) 210,000 -- Customer D (Software System) 325,000 -- Customer E (Software System) 120,000 -- Customer F (Software System) 375,000 -- 9 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Uunaudited) (Continued) March 31, 2000 Note 4 - Capital Stock ------------- During the first quarter of 1999, 5,000 shares of convertible preferred stock valued at $500,000 was converted into 395,823 shares of common stock by virtue of a formula contained in the purchase agreement which results to the average price per share of common stock within the conversion period. During the second quarter of 1999, 2,260 shares of convertible preferred stock valued at $226,000 was converted into 253,933 shares of common stock by virtue of a formula contained in the purchase agreement which results to the average price per share of common stock within the conversion period. In the second quarter of 1999, 5,700 shares of 5% Convertible Preferred Stock, $.001 par value, were issued to the Shaar Fund for $570,000 Each share is convertible into common stock by virtue of a formula contained in the Purchase Agreement which is 78% of the three day average closing bid price for the corporations common stock for the twenty five (25) trading days prior to the delivery of the notice of redemption. The amount of such non-cash discounts which is analogous to a dividend is $53,451 holders of the above preferred stock are entitled to; (i) quarterly cumulative dividends at the rate of 5% per annum of the original issue price of the preferred stock, (ii) a liquidation preference equal to the sum of $100 for each outstanding share of the preferred stock. On April 6, 1999 certain individual employees were issued 110,000 shares of common stock of the company as a signing bonus pertaining to employment agreements between the company and the individuals. In the second quarter of 1999, 75,000 shares of the company's common stock were issued to a consultant for services performed. On July 1, 1999, the Company's largest institutional stockholder, Hosken Consolidated Industries, a South African corporation (the investment company for the Mine Workers Union and South African Clothing Workers Union), consummated its purchase of approximately 1,100,000 shares of the Company's common stock from Norman J. Hoskin, the Company's Chairman of the Board of Directors, which represents substantially all of Mr. Hoskin's holdings in the Company. Mr. Hoskin has resigned his positions as Chairman and Secretary/Treasurer and will limit his activities as a consultant to the Company due to his health. With its purchase, HCI share holdings increases to 2,361,935 shares or approximately 19% of total shares outstanding. In the third quarter of 1999, 52,500 shares of the Common Stock were issued in lieu of expenses paid on behalf of the Company. 10 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Uunaudited) (Continued) March 31, 2000 Note 4 - Capital Stock - Continued ------------------------- In the fourth quarter of 1999, 9,300 shares of 5% Convertible Preferred Stock, $.001 par value, were issued to the Shaar Fund for $930,000 Each share is convertible into common stock by virtue of a formula contained in the Purchase Agreement which is 78% of the three day average closing bid price for the corporations common stock for the twenty five (25) trading days prior to the delivery of the notice of redemption. The amount of such non-cash discounts which is analogous to a dividend is $105,430 holders of the above preferred stock are entitled to; (i) quarterly cumulative dividends at the rate of 5% per annum of the original issue price of the preferred stock, (ii) a liquidation preference equal to the sum of $100 for each outstanding share of the preferred stock. In the first quarter of 2000, 250,000 share of common stock of the company were issued to investors. Note 5 - Per Share Data -------------- Per share data are based on the weighted average number of common shares outstanding during the respective periods. The diluted net income per share is based upon the options issued and outstanding as well as the assumed conversion of the Company's issued and outstanding preferred stock. Note 6 - Business Agreements ------------------- On January 2000, the Company entered into an exclusive agreement with Inter Global Fund for the worldwide rights for the sale of its products to Internet based casinos not attached to a land based casino. 11 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Recent Developments Result of Operations --------------------- Three Months Ended March 31, 2000 and 1999 ------------------------------------------ Net Revenues. The Company's revenues increased approximately 98% in 2000 over the same period in 1999. Revenues from operations in the first quarter 2000 were $ 2,023,733 as compared with $ 29,000 for the same period in 1999. The increase in revenues was the result of the enhancement and upgrading of its product as well as global expansion of the company's products. The Company's overseas distribution outlets namely Australia began generating substantial revenues. The large resources allocated to sales and marketing in 1999 contributed to the revenue growth in the first quarter 2000. Cost of Revenues. Cost of revenues decreased 60% in 2000 over the same period in 1999. The decrease resulted from capitalized software development costs, being written off in 1999. The Company expects amortization of development costs to be consistent going forward. Operating Expenses. Operating expenses increased by 17% or $ 192,621 in the first quarter 2000 over the same period in 1999. The increase was largely due to global expansion efforts and increased support staffing. Provision for Doubtful Accounts. Provision for doubtful accounts in the first quarter 2000 were $ -0- as compared with $ 325,335 for the same period in 1999. The decrease resulted from management only recording revenues when more than 50% of monies have been received from a sale. Other Income. Other income decreased by approximately $1,400,000 in 2000 over the same period in 1999. In 1999 a gain on sale of $1,256,743 resulted from a percentage interest sold of the Company's wholly owned subsidiary. A $170,000 gain was recognized in a full and final settlement of a payable in 1999 as well. Liquidity and Capital Resources ------------------------------- Cash, cash equivalents and marketable securities, which consist primarily of high risk, priced securities totaled $743,887 at March 31, 2000 compared to $3,384,029 at March 31, 1999. The decrease in cash, cash equivalents and marketable securities was due primarily to high risk priced securities decreasing in value and negative cash flow from operations in 1999. Management believes that cash generated from current and future operations will be sufficient to satisfy the Company's currently anticipated cash requirements. 12 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES PART II Item 1. Legal Proceedings Litigation - The Company is party to litigation arising from the normal course of business. In management's' opinion, this litigation will not materially affect the Company's financial position, results of operations or cash flows. Item 2. Changes in Securities This Item is not applicable to the Company. Item 3. Defaults upon Senior Securities There are not defaults. Item 4. Submission of Matters to a Vote of Security Holders This Item is not applicable to the Company. Item 5. Other Information This Item is not applicable to the Company. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule 13 In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Online Gaming Systems, Ltd. Date: May 16, 2000 By: /s/ Richard A. Iamunno ------------------------------------------ (Signature) Richard A. Iamunno, President And Chief Executive Officer Date: May 16, 2000 By: /s/ Peter Lawson ----------------------------------------- (Signature) Peter Lawson, Chief Financial Officer And Chief Operating Officer 14 EX-27 2 ARTICLES FDS FOR 10-QSB
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ONLINE GAMING SYSTEMS, LTD.'S FINANCIAL STATEMENTS AS OF MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-2000 MAR-31-2000 81,387 662,500 1,137,120 0 0 2,045,760 608,848 (258,560) 5,680,171 1,621,200 0 14,294 0 90 3,932,177 5,680,171 2,023,733 2,023,733 106,192 1,357,813 0 0 9,351 550,577 0 550,377 0 0 0 550,377 0.04 0.04
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