-----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, S6ahOwTA3xIA5upM4sAfk854S1S5rzlEkD1eL7LF2r96/jKrjOZZbFpRdQnyyXDR lT1OFSU+FtEChsa7x8FY+w== /in/edgar/work/20000821/0000921895-00-000582/0000921895-00-000582.txt : 20000922 0000921895-00-000582.hdr.sgml : 20000922 ACCESSION NUMBER: 0000921895-00-000582 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000821 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ONLINE GAMING SYSTEMS INC CENTRAL INDEX KEY: 0001003739 STANDARD INDUSTRIAL CLASSIFICATION: [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: 707034 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 0001.txt QUARTERLY REPORT 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 June 30, 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 August 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 - June 30, 2000 (Unaudited)........ 3-4 Consolidated Statement of Income and Comprehensive Income (Unaudited)............................................ 5 Consolidated Statement of Cash Flows - Three Months ended June 30, 2000 (Unaudited) .................................... 6-7 Consolidated Statement of Cash Flows - Six Months ended June 30, 2000 (Unaudited)..................................... 8-9 Notes to Consolidated Financial Statements (Unaudited)........ 10-12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 13-14 PART II. - OTHER INFORMATION Item 1. Legal Proceedings............................................. 15 Item 2. Changes In Securities......................................... 15 Item 3. Defaults Upon Senior Securities............................... 15 Item 4. Submission of Matters to a Vote of Securities Holders ........ 15 Item 5. Other Information ............................................ 15 Item 6. Exhibits and Reports on Form 8-K.............................. 15 Signatures.................................................... 16 PART 1 Item 1. Financial Statements The following unaudited financial Statements for the period ended June 30, 2000, have been prepared by Online Gaming Systems, Ltd. (the "Company") and Subsidiaries. ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES Financial Statements June 30, 2000 Page 2 of 18 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (UNAUDITED) AS OF JUNE 30, 2000 Assets: Current Assets: Cash $ 84,549 Investments 530,000 Prepaid Expenses 8,757 Other Current Assets 33,610 ---------- Total Current Assets 656,916 ---------- Property and Equipment - Net 318,956 ---------- Equipment under Capitalized Lease - Net 185,285 ---------- Other Assets Other Assets 201,908 Investment 1,300,000 ---------- Total Other Assets 1,501,908 ---------- Total Assets $2,663,065 ========== The Accompanying Notes are an Integral Part of these Consolidated Financial Statements. Page 3 of 18 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (UNAUDITED) AS OF JUNE 30, 2000 Liabilities and Stockholders' Equity: Current Liabilities: Accounts Payable and Accrued Expenses $ 823,352 Notes Payable - Officers 112,350 Note Payable and Advances 1,082,868 Current Portion of Capital Lease Obligations 83,484 ------------ Total Current Liabilities 2,102,054 Capital Lease Obligations 108,281 ------------ 2,210,335 Stockholders' Equity: Convertible Preferred Stock - Par Value $.001 Per Share; Authorized 10,000,000 Shares, Issued and Outstanding, 10,610 shares [Liquidation Preference $ 1,061,000] 11 Common Stock - Par Value $.001 Per Share; Authorized 100,000,000 Shares, Issued - 14,298,180 Shares 14,298 Additional Paid-in Capital 14,113,400 Treasury Stock, 968,767 Common Shares - At Cost (1,744,547) Accumulated Comprehensive Loss (1,607,000) Accumulated [Deficit] (9,923,432) Deferred Acquisition Costs (400,000) ------------ Total Stockholders' Equity 452,730 ------------ Total Liabilities and Stockholders' Equity $ 2,663,065 ============ The Accompanying Notes are an Integral Part of these Consolidated Financial Statements. Page 4 of 18 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
Three Months ended Six Months ended ------------------ ---------------- June 30, June 30, -------- ------- 2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9 ------- ------- ------- ------- Revenue $ 611,956 $ 469,500 $ 1,927,085 $ 498,500 Cost of Sales 37,162 222,327 145,985 549,688 ------------ ------------ ------------ ------------ Gross Profit [Loss] 574,794 247,173 1,781,100 (51,188) ------------ ------------ ------------ ------------ Operating Expenses: General and Administrative 949,236 1,520,377 2,245,522 2,624,251 Provision for Doubtful Accounts and Notes -- 896,820 -- 1,222,155 Depreciation and Amortization 58,763 43,988 95,281 75,427 ------------ ------------ ------------ ------------ Total Operating Expenses 1,007,999 2,461,185 2,340,803 3,921,833 ------------ ------------ ------------ ------------ [Loss] Income from Operations (433,205) (2,214,012) (559,703) (3,973,021) ------------ ------------ ------------ ------------ Other [Expenses] Income: Interest Income -- 22,766 -- 30,876 Interest Expense (12,140) (6,503) (21,491) (22,632) Other Income [Expense] (1,200,000) (25,046) (1,200,000) 1,398,397 ------------ ------------ ------------ ------------ Other [Expenses] Income - Net (1,212,140) (8,783) (1,221,491) 1,406,641 ------------ ------------ ------------ ------------ [Loss] from Continuing Operations Before Income Tax [Benefit] Expense (1,645,345) (2,222,795) (1,781,194) (2,566,380) Income Tax [Benefit] Expense -- -- -- (123,691) ------------ ------------ ------------ ------------ [Loss] Income from Continuing Operations (1,645,345) (2,222,795) (1,781,194) (2,442,689) Discontinued Operations: [Loss] from Operations of Discontinued Business Segment [Net of Income Tax [Benefit] of ($0) and $(30,521), for the six months ended June 30, 2000 and 1999, Respectively -- -- -- (54,261) ------------ ------------ ------------ ------------ Net [Loss] (1,645,345) (2,222,795) (1,781,194) (2,496,950) Comprehensive Gain: Unrealized Holding [Loss] Gain arising during period (132,500) (692,074) (132,500) 52,169 ------------ ------------ ------------ ------------ Total Comprehensive [Loss] $ (1,778,845) $ (2,914,869) $ (1,913,694) $ (2,444,781) ============ ============ ------------ ------------ Net [Loss] $ (1,645,345) $ (2,222,795) $ (1,781,194) $ (2,496,950) Preferred Stock Dividend in Arrears 12,500 7,125 25,000 19,625 ------------ ------------ ------------ ------------ Net [Loss] Available to Common Stockholders $ (1,657,845) $ (2,229,920) $ (1,806,194) $ (2,516,575) ------------ ------------ ------------ ------------ [Loss] Per Common Share: Continuing Operations $ (0.12) $ (0.17) $ (0.13) $ (0.20) Basic and Diluted Net [Loss] Income Per Share of Common Stock $ (0.12) $ (0.17) $ (0.13) $ (0.20) Weighted Average Shares of Common Stock Outstanding 14,096,360 12,984,561 14,003,112 12,784,845
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements. Page 5 of 18 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended June 30, 2 0 0 0 1 9 9 9 ------- ------- Operating Activities: [Loss] Income from Continuing Operations $(1,645,345) $(2,222,795) Adjustments to Reconcile Net [Loss] Income to Net Cash [Used for] Operating Activities: Depreciation and Amortization 58,763 264,830 Provision for Doubtful Accounts -- 896,820 Regulated Loss on Carrying Value of Investments 1,200,000 324 Loss on Sale of Subsidiary -- 24,722 Changes in Assets and Liabilities: [Increase] Decrease in: Accounts Receivable -- 11,801 Prepaid Expenses (644) 25,627 Notes Receivable -- (106,765) Restricted Cash -- (10,165) Other Assets (12,231) -- Increase [Decrease] in: Accounts Payable and Accrued Expenses (43,263) 134,760 ----------- ----------- Net Cash - Continuing Operations (442,720) (980,841) ----------- ----------- Investing Activities - Continuing Operations: Purchase of Investments -- (200,000) Purchase of Property, Equipment, and Capitalized Software -- (24,012) Sale of Investments -- 69,236 ----------- ----------- Net Cash - Investing Activities - Forward $ -- $ (154,776)
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements. Page 6 of 18 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended June 30, -------- 2 0 0 0 1 9 9 9 ------- ------- Net Cash - Operating Activities - Forwarded $ (442,720) $ (980,841) ----------- ----------- Net Cash - Investing Activities - Continuing Operations - Forwarded -- (154,776) ----------- ----------- Financing Activities - Continued Operations: Purchase of Treasury Stock -- (9,250) Proceeds from Issuance of Common Stock -- 217,369 Proceeds from Issuance of Preferred Stock -- 569,943 Increase in Loan Payable to Officer 16,000 263,750 Proceeds from Short Term Borrowings 450,000 110,000 Payment of Lease Payable (20,118) (13,130) Decrease in Loan Receivable -- (49,524) ----------- ----------- Net Cash - Financing Activities 445,882 1,089,158 ----------- ----------- [Decrease] Increase in Cash and Cash Equivalents 3,162 (46,459) Cash and Cash Equivalents - Beginning of Period 81,387 9,102 ----------- ----------- Cash and Cash Equivalents - End of Period $ 84,549 $ (37,357) =========== =========== Supplemental Disclosures of Cash Flow Information: Cash paid during the years for: Interest $ 12,141 $ 17,214 Supplemental Schedule of Non-Cash Investing and Financing Activities: Purchase of Assets under Capital Lease Financing $ -- $ 67,778
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements Page 7 of 18 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, 2 0 0 0 1 9 9 9 ------- ------- Operating Activities: [Loss] Income from Continuing Operations $(1,781,194) $(2,442,689) Adjustments to Reconcile Net [Loss] Income to Net Cash [Used for] Operating Activities: Depreciation and Amortization 95,281 516,217 Deferred Tax Asset -- (123,691) Provision for Doubtful Accounts -- 1,222,155 Loss on Sale of Assets -- 3,100 Realized Loss on Carrying Value of Investments 1,200,000 648 Gain on Sale of Subsidiary -- (1,231,750) Changes in Assets and Liabilities: [Increase] Decrease in: Accounts Receivable -- 13,715 Prepaid Expenses 5,190 1,250 Notes Receivable -- (21,790) Other Assets (18,116) 66,650 Increase [Decrease] in: Accounts Payable and Accrued Expenses 14,959 (106,364) ----------- ----------- Net Cash - Continuing Operations (483,880) (2,102,549) ----------- ----------- 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 -- 238,577 ----------- ----------- Net Cash - Discontinued Operations -- 241,451 ----------- ----------- Net Cash - Operating Activities - Forward (483,880) (1,861,098) ----------- ----------- Investing Activities - Continuing Operations: Increase in Due from Related Parties -- (828) Purchase of Investments -- (318,429) Purchase of Property, Equipment, and Capitalized Software (22,338) (66,222) Sale of Investments -- 2,557,770 ----------- ----------- Net Cash - Investing Activities - Continuing Operations - Forward $ (22,338) $ 2,172,291
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements Page 8 of 18 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, -------- 2 0 0 0 1 9 9 9 ----------- ----------- Net Cash - Operating Activities - Forwarded $ (483,880) $(1,861,098) ----------- ----------- Net Cash - Investing Activities - Continuing Operations - Forwarded (22,338) 2,172,291 ----------- ----------- Investing Activities - Discontinued Operations: Purchase of Property and Equipment -- (29,715) Disposition Gain on Sale of Discontinued Operations -- -- ----------- ----------- Net Cash Investing Activities - Discontinued Operations -- (29,715) Financing Activities - Continuing Operations: Proceeds from Issuance of Common Stock 250,000 217,312 Proceeds from Issuance of Preferred Stock -- 570,000 Purchase of Treasury Stock -- (975,293) [Decrease] Increase in Loan Payable to Officer 112,350 133,750 Payment of Notes Payable (5,850) (100,000) Payment of Lease Payable (41,858) (20,584) Decrease in Loan Receivable -- (324,286) Proceeds from Short Term Borrowings 450,000 110,000 ----------- ----------- Net Cash - Financing Activities 764,642 (389,101) ----------- ----------- 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 258,424 (104,892) Cash and Cash Equivalents - Beginning of Years (173,875) 67,535 ----------- ----------- Cash and Cash Equivalents - End of Years $ 84,549 $ (37,357) =========== =========== Supplemental Disclosures of Cash Flow Information: Cash paid during the years for: Interest $ 21,491 $ 24,719 Supplemental Schedule of Non-Cash Investing and Financing Activities: Conversion of Preferred Stock into Common Stock $ 455 $ 649 Purchase of Assets under Capital Lease Financing $ -- $ 73,989 Sale of Subsidiary for Note Receivable $ -- $ 2,400,000
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements Page 9 of 18 ONLINE GAMIING SYSTEMS, LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) June 30, 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 six-month period ended June 30, 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. The sale resulted in a gain of $1,231,751 which is reflected in other income in 1999. The transaction resulted in the Eminet Domain, Inc being treated as a discontinued operation. The investment in the preferred stock has subsequently being written down, the resulting write down of $1,200,000 is reflected in other (Expense). Note 3 - Major Customers --------------- Income fees derived from major customers are tabulated as follow:
Three Months Ended Six Months Ended June 30 June 30 2000 1999 2000 1999 Customer A (Software System) 150,000 -- 425,000 -- Customer B (Software System) 150,000 -- 225,000 -- Customer C (Software System) 150,000 -- 210,000 -- Customer D (Software System) -- -- 325,000 -- Customer E (Software System) -- -- 120,000 -- Customer F (Software System) -- 247,500 -- 247,500 Customer G (Software System) -- 60,000 -- 60,000 Customer H (Software System) -- 130,000 -- 130,000
ONLINE GAMIING SYSTEMS, LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited)(Continued) June 30, 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 Investments, 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. 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 ONLINE GAMIING SYSTEMS, LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited)(Continued) June 30, 2000 Page 11 of 18 ONLINE GAMIING SYSTEMS, LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited)(Continued) June 30, 2000 Note 4 - Capital Stock [Continued] ------------------------- 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 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 April 6, 1999 the Company signed an agreement to purchase the patent rights, inventions and know-how of Excel Communications, Inc. The major product expected to be produced is a multi-function portable gaming device. In consideration the Company issued seventy five thousand (75,000) shares of common stock of the Company. The Company also entered into an agreement to compensate a third party for termination of an exclusive manufacturing, licensing, marketing and distribution of the invention with the seller. The third party received two hundred thousand dollars ($200,000) plus a stock option to purchase 50,000 shares of the common stock of the company. In addition, the Company entered into employment agreements with three of the key employees of Excel Communications, Inc. and granted those individuals options to purchase Company stock. 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. Page 12 of 18 ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and -------------------------------------------------------------------- Results of Operations --------------------- Result of Operations -------------------- Three Months Ended June 30, 2000 and 1999 ----------------------------------------- Net Revenues. The Company's revenues increased approximately 30% in 2000 over the same period in 1999. Revenues from operations in the first quarter 2000 were $ 611,956, as compared with $ 469,500 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 increased 83% in 2000 over the same period in 1999. The decrease resulted from the decrease in amortization of capitalized software development costs, which is reflected in cost of revenues. Operating Expenses. Operating expenses decreased by 36% or $ 556,366 in the second quarter 2000 over the same period in 1999. The decrease was largely due to cost cutting efforts, expenses related to product development and decreased support staffing. Provision for Doubtful Accounts. Provision for doubtful accounts in the second quarter 2000 were $ 0 as compared with $ 896,820 for the same period in 1999. The decrease resulted from management only recording revenues when monies have been received from a sale. Other Expense. Other expense increased by $1,200,000 in 2000 over the same period in 1999. This resulted from a write down of an investment of convertible preferred stock in the Company's formally wholly owned subsidiary. Six Months Ended June 30, 2000 and 1999 --------------------------------------- Net Revenues. The Company's revenues increased approximately 287% in 2000 over the same period in 1999. Revenues from operations for the six months ended June 30, 2000 were $ 1,927,085, as compared with $ 498,500 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 73% for the six months ended June 30, 2000 over the same period in 1999. The decrease resulted from the decrease in amortization of capitalized software development costs, which is reflected in cost of revenues. Page 13 of 18 Operating Expenses. Operating expenses decreased by 16% or $ 358,875 for the six months ended June 30, 2000 over the same period in 1999. The decrease was largely due to cost cutting efforts, expenses related to product development and decreased support staffing. Provision for Doubtful Accounts. Provision for doubtful accounts for the six months ended June 30, 2000 were $ -0- as compared with $ 1,222,155 for the same period in 1999. The decrease resulted from management only recording revenues when monies have been received from a sale. ONLINE GAMING SYSTEMS, LTD. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and -------------------------------------------------------------------- Results of Operations --------------------- Result of Operations - Continued -------------------------------- Six Months Ended June 30, 2000 and 1999 --------------------------------------- Other Income. Other income decreased by approximately $1,133,853 in 2000 over the same period in 1999. A gain on sale of $1,231,751 resulted from a percentage interest sold of the Company's wholly owned subsidiary in 1999. A $ 170,000 gain was recognized in a full and final settlement of a payable. A loss of sale on trading stock for $221,636 was realized. Other Expense. Other expense increased by $1,200,000 in 2000 over the same period in 1999. This resulted from a write down of an investment of convertible preferred stock in the Company's formally wholly owned subsidiary. Liquidity and Capital Resources ------------------------------- Cash, cash equivalents and marketable securities, which consist primarily of high risk, priced securities totaled $614,549 at June 30, 2000 compared to $2,575,437 at June 30, 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. Management believes that cash generated from future operations as well as a firm commitment from an affiliated company and significant stockholder to fund future operations will be sufficient to satisfy the Company's current anticipated cash requirements. Page 14 of 18 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 litigaiton willnot 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 This Item is no applicable to the Company. 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 (b) Form 8-K - July 7, 1999 27 Financial Data Schedule Page 15 of 18 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. Date: August 21, 2000 Online Gaming Systems, Ltd. By: /s/ Gary Ramos ------------------------------------- (Signature) Gary Ramos/Chief Executive Officer By: /s/ Peter Lawson ------------------------------------- (Signature) Peter Lawson, President/ Chief Financial Officer EX-27 2 0002.txt ARTICLES FDS FOR 10-QSB
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ONLINE GAMING SYSTEMS, LTD.'S FINANCIAL STATEMENTS AS OF JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-2000 JUN-30-2000 84,549 530,000 0 0 0 656,916 608,848 (289,892) 2,663,065 2,102,054 0 14,298 0 11 438,421 2,663,065 1,927,085 1,927,085 145,985 2,340,803 (1,221,491) 0 21,491 (1,781,194) 0 (1,781,194) 0 0 0 (1,781,194) (0.13) (0.13)
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