UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly report under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the fiscal quarter ended: September 30, 2003
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Commission File No. 000-49723
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iGAMES ENTERTAINMENT, INC.
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(Exact Name of Small Business Issuer as Specified in its Charter)
Nevada 88-0501468
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(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5333 S. Arville, Suite 207, Las Vegas, NV 89118
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(Address of Principal Executive Offices) (Zip Code)
(800) 530-1558
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(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act 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
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As of October 27, 2003, the issuer had issued and outstanding
14,745,165 shares of its common stock, par value $0.001 per share.
IGAMES ENTERTAINMENT, INC.
QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003
INDEX TO FORM 10-QSB
PART I - FINANCIAL INFORMATION PAGE NO.
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Item 1 - Financial Statements
Balance Sheet at September 30, 2003 (unaudited)..............3
Statements of Operations for the three and six months ended
September 30, 2003 and 2002 (unaudited)....................4
Statements of Cash Flows for the six months ended
September 30, 2003 and 2002 (unaudited)....................5
Notes to Financial Statements.............................6-10
Item 2 - Management's Discussion and Analysis or
Plan of Operations.....................................10-13
Item 3 - Controls and Procedures..................................13-14
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings...........................................15
Item 2 - Changes in securities and use of proceeds...................15
Item 3 - Defaults upon senior securities.............................15
Item 4 - Submission of matters to a vote of security holders.........15
Item 5 - Other events................................................15
Item 6 - Exhibits and Reports on 8-K.................................15
Signatures...........................................................16
-2-
iGAMES ENTERTAINMENT, INC.
BALANCE SHEET
September 30, 2003
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ..................................... $ 13,994
Certificate of deposit - restricted ........................... 150,000
Accounts receivable ........................................... 31,113
Inventory ..................................................... 136,094
Prepaid expenses and other current assets ..................... 16,322
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TOTAL CURRENT ASSETS ........................................ 347,523
PROPERTY AND EQUIPMENT - net .................................... 8,457
INTANGIBLE ASSETS - net ......................................... 409,380
DEPOSITS ........................................................ 4,865
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TOTAL ASSETS ................................................ $ 770,225
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable .................................................. $ 43,500
Line of credit ................................................ 150,000
Accounts payable and accrued expenses ......................... 102,738
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TOTAL CURRENT LIABILITIES .................................. 296,238
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STOCKHOLDERS' EQUITY:
Preferred stock; no shares issued and outstanding ............. -
Common stock; $.001 par value, 50,000,000 shares authorized
14,000,000 shares issued and outstanding .................... 14,000
Additional paid-in capital .................................... 4,388,955
Accumulated deficit ........................................... (3,808,343)
Deferred compensation ......................................... (120,625)
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TOTAL STOCKHOLDERS' EQUITY .................................. 473,987
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................. $ 770,225
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See accompanying notes to financial statements
-3-
iGAMES ENTERTAINMENT, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
-------------------------- --------------------------
2003 2002 2003 2002
------------ ----------- ------------ -----------
REVENUE ................................... $ 157,020 $ 25,998 $ 158,760 $ 25,998
COST OF GOODS SOLD ........................ 29,799 8,236 30,038 8,236
------------ ----------- ------------ -----------
127,221 17,762 128,722 17,762
------------ ----------- ------------ -----------
OPERATING EXPENSES:
Salaries and benefits ................... 127,869 46,375 276,709 110,452
Noncash compensation .................... 267,425 103,830 357,175 418,830
Professional fees ....................... 12,833 87,591 23,333 108,842
Advertising ............................. 7,950 6,997 17,544 40,230
Research and development ................ 14,212 33,184 24,477 64,868
Travel and entertainment ................ 9,443 26,716 17,655 47,247
Rent .................................... 13,507 22,346 27,019 36,604
Other general and administrative ........ 185,109 64,332 317,232 116,629
------------ ----------- ------------ -----------
638,348 391,371 1,061,144 943,702
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LOSS FROM OPERATIONS ...................... (511,127) (373,609) (932,422) (925,940)
OTHER INCOME (EXPENSE):
Interest expense ........................ (4,331) (12,500) (8,060) (12,500)
Interest income ......................... - 463 87 523
------------ ----------- ------------ -----------
(4,331) (12,037) (7,973) (11,977)
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NET LOSS .................................. $ (515,458) $ (385,646) $ (940,395) $ (937,917)
============ =========== ============ ===========
NET LOSS PER COMMON SHARE-BASIC AND DILUTED $ (0.04) $ (0.04) $ (0.07) $ (0.10)
============ =========== ============ ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
-BASIC AND DILUTED ...................... 13,733,750 9,328,750 13,292,857 8,947,857
============ =========== ============ ===========
See accompanying notes to financial statements
-4-
iGAMES ENTERTAINMENT, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
September 30,
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2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................. $(940,395) $(937,917)
Adjustments to reconcile net loss to net cash
used in operations:
Common stock issued for services .................. 357,175 418,830
Depreciation and amortization ..................... 19,152 1,800
Changes in assets (increase) decrease:
Accounts receivable ................................ (26,360) (12,999)
Inventory .......................................... (116,463) (15,840)
Prepaid expenses ................................... 96,979 (37,232)
Deposits ........................................... 148 (1,813)
Changes in liabilities increase (decrease):
Accounts payable and accrued expenses .............. 62,755 53,980
Accounts payable related party ..................... (20,495) -
Deferred revenue ................................... - 42,611
Customer deposits .................................. (8,584) -
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NET CASH FLOWS USED IN OPERATING ACTIVITIES ........ (576,088) (488,580)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable .......................... (56,500) -
Purchase of certificate of deposit ................... (150,000) -
Net proceeds from line of credit ..................... 150,000 -
Proceeds from the sale of common stock and warrants .. 252,500 750,000
Offering costs ....................................... (15,000) (97,500)
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NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES .... 181,000 652,500
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NET (DECREASE) INCREASE IN CASH ........................ (395,088) 163,920
CASH AND CASH EQUIVALENTS - beginning of period ........ 409,082 436,972
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CASH AND CASH EQUIVALENTS- end of period ............... $ 13,994 $ 600,892
========= =========
See accompanying notes to financial statements
-5-
iGAMES ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2003
NOTE 1 - BASIS OF PRESENTATION
iGames Entertainment, Inc.(the "Company" or "iGames") was originally
incorporated in the State of Florida on May 9, 2001 under the name Alladin
Software, Inc. On June 25, 2001, the Company changed its name to iGames
Entertainment, Inc. On July 10, 2001, iGames Entertainment, Inc. was
incorporated in Nevada, and iGames Entertainment, Inc., a Florida corporation,
became a wholly-owned subsidiary. The acquisition was accounted for as a
purchase between commonly controlled entities and the financial statements have
been combined for all periods presented.
On February 15, 2002, the Company purchased the world-wide patents, trademarks
and rights thereto for a "slot anti-cheating device", known as the Protector,
which is marketed to slot and gaming machine companies and their customers. In
January of 2003, the Company purchased the world-wide patents, trademarks and
rights thereto for "Table-Slots", a new, exciting, and innovative table game.
The table game is marketed to casinos world-wide and is expected to provide
recurring revenue derived from leases with casinos. In addition, the Company is
currently researching and developing new products to extend its current product
offering for the gaming industry. The Company will continue to establish
strategic relationships within the gaming industry in order to continue
strengthening its position in the industry and broaden corporate visibility.
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). The accompanying financial statements for the interim
periods are unaudited and reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of the financial position and operating results for the
periods presented. These financial statements should be read in conjunction with
the financial statements and related footnotes for the period ended March 31,
2003 contained in the annual report on Form 10-KSB as filed with the Securities
and Exchange Commission. The results of operations for the six months ended
September 30, 2003 are not necessarily indicative of the results for the full
fiscal year ending March 31, 2004.
NOTE 2 - NOTES PAYABLE
On March 1, 2002, the Company received two convertible promissory notes from an
individual for $100,000 and $150,000, respectively. The notes bear interest at
10% per annum and were due on September 1, 2002. The notes are convertible, at
the option of the lender, into 200,000 and 300,000 common shares at $0.50 per
share. Additionally, upon conversion, warrants equal to the number of common
shares issued will be granted. These warrants shall be exercisable at $1.00 per
share and expire on December 31, 2005. In October 2002, the noteholder converted
the $150,000 note into 300,000 shares of the Company's common stock. The
remaining note of $43,500 continues to bear interest at 10% per annum and is due
upon demand. As of September 30, 2003, the Company has paid all interest
relating to this note.
-6-
iGAMES ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2003
NOTE 3 - LINE OF CREDIT
On April 4, 2002, the Company entered into a $150,000 one-year renewable line of
credit with a bank. This debt matures April 4, 2004 and bears interest at 6% per
annum, with interest payable monthly. This debt is collateralized by a $150,000
restricted certificate of deposit that matures on April 4, 2004 and pays
interest at 1.65% per annum. As of September 30, 2003, the balance of this line
of credit is $150,000.
NOTE 4 - STOCKHOLDERS' EQUITY
In July 2003, the Company issued 250,000 shares of its restricted common stock
to its Chief Executive Officer, pursuant to the terms of this executive's
employment contract. The Company valued these shares at $0.57 per share the fair
market value on the date of the grant.
In July 2003, the Company issued 100,000 shares of its restricted common stock
to a consultant for services provided. The Company valued these shares at $0.57
per share the fair market value on the date of the grant. This amount relating
to the sale of the Company's securities has been recorded as an offering cost
and charged against additional paid-in capital.
The amortization of deferred compensation resulted in a non-cash compensation
expense of $37,750 for the six months ended September 30, 2003.
Stock option and warrant activity for the six months ended September 30, 2003,
is summarized as follows:
Number of Weighted average
shares exercise price
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Outstanding at June 30, 2003 ........... 5,336,250 $ 1.08
Granted ............................ - -
Exercised .......................... - -
Canceled ........................... - -
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Outstanding at September 30, 2003 ...... 5,336,250 1.08
-7-
iGAMES ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2003
NOTE 4 - STOCKHOLDERS' EQUITY (continued)
The following table summarizes the Company's stock options outstanding at
September 30, 2003:
Options outstanding Options exercisable
---------------------------------- -------------------
Weighted Weighted Weighted
average average average
Range of remaining exercise exercise
exercise price Number life price Number price
-------------- --------- --------- -------- --------- -----
$ 1.00 4,728,250 3.30 1.00 4,728,250 $1.00
1.50 608,000 4.00 1.50 608,000 1.50
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5,336,250 5,336,250
========= =========
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at fair
value. The Company has chosen to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related Interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the estimated fair value of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock. The Company has
adopted the "disclosure only" alternative described in SFAS 123 and SFAS 148,
which require pro forma disclosures of net income and earnings per share as if
the fair value method of accounting had been applied.
NOTE 5 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has a net loss of $940,395
for the six months ended September 30, 2003, an accumulated deficit of
$3,808,343 at September 30, 2003, cash used in operations of $576,088 for the
six months ended September 30, 2003, and requires additional funds to implement
our business plan. These conditions raise substantial doubt about the Company's
ability to continue as a going concern.
Management is in the process of implementing its business plan and has begun to
generate revenues. Management believes that sales of its Protector and placement
of new table games will continue to contribute to its operating cash flows.
Additionally, management is actively seeking additional sources of capital, but
no assurance can be made that capital will be available on reasonable terms.
Management believes the actions it is taking allow the Company to continue as a
going concern. The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going concern.
-8-
iGAMES ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2003
NOTE 6 - RECENT ACCOUNTING PRONOUNCEMENTS
In April 2003, SFAS No. 149, "Amendment of Statement 133 on Derivative Financial
Instruments and Hedging Activities," was issued and is effective for contracts
entered into or modified after June 30, 2003, except as stated below and for
hedging relationships designated after June 30, 2003. The changes in this
Statement improves financial reporting by requiring that contracts with
comparable characteristics be accounted for similarly. In particular, this
Statement (1) clarifies under what circumstances a contract with an initial net
investment meets the characteristic of a derivative discussed in paragraph 6(b)
of Statement 133, (2) clarifies when a derivative contains a financing
component, (3) amends the definition of an underlying guarantee to conform it to
language used in FASB Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" and (4) amends certain other existing pronouncements.
The Company does not believe this Statement will have a material effect on its
results of operations or financial position.
In May 2003, SFAS No. 150, "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity," was issued and is effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003, except for mandatory redeemable financial instruments of nonpublic
entities. This Statement establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). Many of
those instruments were previously classified as equity. The Company does not
believe this Statement will have a material effect on its results of operations
or financial position.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" (FIN No. 46), which requires the consolidation of
variable interest entities. FIN No. 46 is applicable to financial statements
issued by us beginning with the second quarter of fiscal 2004. However,
disclosures are required if we expect to consolidate any variable interest
entities. The Company does not believe this Statement will have a material
effect on its results of operations or financial position.
NOTE 7 - SUBSEQUENT EVENTS
In October 2003, the Company sold in a private placement 100,000 shares and
200,000 warrants exercisable at $0.60 for proceeds of $25,000.
In October 2003, the Company issued 625,000 shares of its common stock to three
consultants for services rendered. The Company valued the shares at a
contemporaneous sales price on the date of issuance and recorded consulting
expense of $281,250.00 or $.45 per share.
-9-
iGAMES ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2003
On September 11, 2003 the Company announced that it entered into a Letter of
Intent to aquire Money Centers of America, Inc. and is now undergoing the
process of completing a definitive agreement. Money Centers of America has
approximately six million dollars in annual revenues and provides casinos with
cash access services (ATM, check cashing, credit card and debit card advances),
POS units, cage systems, and most notably the CreditPlus system. CreditPlus is a
credit guarantee and reporting solution that will revolutionize the current
systems in casinos today.
On September 16, 2003, The Company entered into an Offer to Purchase of Capital
Stock of Chex Services, a division of Equitex, Inc. A definitive stock purchase
agreement was signed on November 3, 2003. Chex Services, branded as FastFunds,
has a synergistic product line that compliments that of Money Centers of
America, with annual revenues in excess of $20 million. Chex's products are
ATM, Multi-function cash machines, electronic check conversion, full service
booth operations, collections, and credit card cash advances. We will
immediately have the ability to capitalize on the install base of Chex Services
and Money Centers of America and will pursue the sales, installation, and cross
marketing of new products.
In October 2003, the Company issued 55,165 options exercisable at $0.47 or at
fair market value to employees. Such options were then exercised utilizing
outstanding accrued salaries for in lieu of the exercise price.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion of the results of operations, financial condition and
liquidity should be read in conjunction with iGames Entertainment, Inc.
financial statements and notes thereto for the period ended March 31, 2003
appearing in our most recent annual report on Form 10-KSB as filed with the
Securities and Exchange Commission.
This report on Form 10-QSB contains forward-looking statements that are subject
to risks and uncertainties, which could cause actual results to differ
materially from those discussed in the forward-looking statements and from
historical results of operations. Among the risks and uncertainties which could
cause such a difference are those relating to our dependence upon certain key
personnel, our ability to manage our growth, our success in implementing the
business strategy, our success in arranging financing where required, and the
risk of economic and market factors affecting our customers. Many of such risks
are beyond the control of the Company and its management.
CRITICAL ACCOUNTING POLICIES
A summary of significant accounting policies is included in Note 2 to the
audited financial statements included in our Annual Report on Form 10-KSB for
the year ended March 31, 2003. We believe that the application of these policies
on a consistent basis enables us to provide useful and reliable financial
information about our operating results and financial condition.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates.
-10-
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS (Continued)
CRITICAL ACCOUNTING POLICIES (Continued)
Revenues from the sale or lease of products are recognized as earned when the
sale is completed, or over the lease term; as appropriate.
Revenues from the sale of the Company's table gaming units will be recognized as
the products are sold, any ongoing licensing revenues will be recognized on a
monthly ongoing basis. Additionally, revenues from any units that are leased
pursuant to operating leases will be recognized monthly as earned.
We account for intangible assets as follows: licensing and patent agreements are
stated at cost. The recoverability of the license and patent agreements is
evaluated each year based upon management's expectations relating to the life of
the technology and current competitive market conditions. Based upon
management's expectations they believe that no impairment of its license
agreement and patent exists at September 30, 2003.
We account for stock based compensation utilizing Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"), which encourages, but does not require, companies to record compensation
cost for stock-based employee compensation plans at fair value. We have chosen
to account for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", and related interpretations. Accordingly, compensation
cost for stock options is measured as the excess, if any, of the estimated fair
market value of our stock at the date of the grant over the amount an employee
must pay to acquire the stock. We have adopted the "disclosure only" alternative
described in SFAS 123 and SFAS 148 (See New Accounting Pronouncements), which
require pro forma disclosures of net income and earnings per share as if the
fair value method of accounting had been applied.
RESULTS OF OPERATIONS
For the six months ended September 30, 2003 we generated revenues of $158,760 as
compared to $25,998 for the comparable period ended in 2002. Cost of goods sold
for the six months September 30, 2003 was $30,038 generating a gross profit of
$128,722 (81%).
Salaries and benefits for the six months ended September 30, 2003 were $276,709
as compared to $110,452 for the six months ended September 30, 2002 an increase
of $166,257 or 151%. This increase was due to the hiring of personnel for sales
and administration purposes during the year ended March 31, 2003.
Non-cash compensation during six months ended September 30, 2003 was $357,175
and consisted of common stock issued to consultants for services rendered.
During the six months ended September 30, 2002, we incurred $418,830 in non-cash
compensation. The decrease of $61,655 was due to a decreased demand for outside
services that we utilized our stock as payment.
-11-
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
Professional fees were $23,333 for the six months ended September 30, 2003 as
compared to $108,842 for the six months ended September 30, 2002, a decrease of
$85,509 or 79%. This decrease was due to a reduction in our legal fees
associated with the costs of the registration of our patents and our licensing
agreements as well as the filing of our Form SB-2 and our other public filings.
Advertising expense for the six months ended September 30, 2003 was $17,544 as
compared to $40,230 for the six months ended September 30, 2002. The decrease in
advertising expenses was due to our efforts to conserve our working capital and
our desire to market our products in the most cost effective manner possible.
Research and development costs were $24,477 for the six months ended September
30, 2003 as compared to $64,868 for the six months ended September 30, 2002 a
decrease of $40,391 or 62%. The decrease is due to the completion of the
development of our Protector product as well as our table slots game during the
year ended March 31, 2003.
Travel and entertainment was $17,655 for the six months ended September 30, 2003
as compared to $47,247 for the six months ended September 30, 2002, a decrease
of $29,592 or 63%. The decrease in travel and entertainment is directly
attributable to our efforts to preserve working capital.
Rent for the six months ended September 30, 2003 was $27,019 as compared to
$36,604 for the six months ended September 30, 2002. The decrease was due to
consolidating our Boca Raton offices into one space during the year ended March
31, 2003.
Other general and administrative costs for the six months ended September 30,
2003 were $317,232 as compared to $116,629 for the six months ended September
30, 2002, an increase of $200,603 or 172%. The increase was due to further
execution of our business plan. These costs consist of primarily depreciation,
amortization of intangibles, insurance, office supplies and equipment, royalty
fees and printing.
We incurred interest expense of $8,060 for the six months ended September 30,
2003 relating to our financing in March 2002 consisting of notes payable of
$100,000. Additionally, we recorded $87 in interest income relating to our cash
balances during the current fiscal year.
We reported a net loss for the six months ended September 30, 2003 of $940,395
compared to a net loss for the six months ended September 30, 2002 of $937,917.
This translates to an overall per-share loss of $.07 for the six months ended
September 30, 2003 compared to a per share loss of $.10 for the six months ended
September 30, 2002.
-12-
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
Our available cash equivalent balance at September 30, 2003 was approximately
$164,000; and is approximately $155,000 at October 15, 2003. From inception
through March 31, 2003, we raised an aggregate of approximately $2.50 million in
capital through the sale of shares pursuant to a private placement made in
accordance with Rule 506 under the Securities Act of 1933. In addition, we
issued for $250,000 to a single investor, two 10% convertible promissory notes
due September 1, 2002; pursuant to the exemption afforded by Section 4 (2) of
the Securities Act of 1933. During October 2002, such investor converted a
$150,000 note into 300,000 shares of our common stock, and during July and
August 2003 repaid an additional $56,500 of this debt. At the present time the
investor has not indicated that the remaining note of $43,500 will be converted
into equity or called for payment.
During the six months ended September 30, 2003, the Company used net cash of
approximately $576,000 for operations. This consisted of a net loss of $940,395
and increases in our operating assets of $45,844 offset by non-cash compensation
from the issuance of common stock for services of $357,175, depreciation and
amortization expense of $19,152, and increases in our liabilities consisting of
accounts payable and accrued expenses and customer deposits of $33,676.
Additionally, the Company had net cash flows from financing activities of
$181,000. This consisted of $252,500 in gross proceeds from a sale of units of
our common stock and stock purchase warrants offset by offering costs of $15,000
and the proceeds from a line of credit of $150,000 offset by the purchase of a
certificate of deposit of $150,000 and repayments on a note payable of $56,500.
There are presently no plans to purchase a new facility or significant new
equipment. We are actively seeking additional sources of capital that will
enable us to achieve our long-term objectives of marketing our product lines.
However, we may not be able to obtain such capital on acceptable terms or
conditions, in such event we may have to modify our business plan.
ITEM 3. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer (collectively, the
"Certifying Officers") are responsible for establishing and maintaining
disclosure controls and procedures for us. Based upon such officers' evaluation
of these controls and procedures as of a date within 45 days of the filing of
this Quarterly Report, and subject to the limitations noted hereinafter, the
Certifying Officers have concluded that our disclosure controls and procedures
are effective to ensure that information required to be disclosed by us in this
Quarterly Report is accumulated and communicated to management, including our
principal executive officers as appropriate, to allow timely decisions regarding
required disclosure.
The Certifying Officers have also indicated that there were no significant
changes in our internal controls or other factors that could significantly
affect such controls subsequent to the date of their evaluation, and there were
no corrective actions with regard to significant deficiencies and material
weaknesses.
-13-
ITEM 3. CONTROLS AND PROCEDURES (Continued)
Our management, including each of the Certifying Officers, does not expect that
our disclosure controls or our internal controls will prevent all error and
fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. In addition, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within a company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people or by management
override of the control. The design of any systems of controls also is based in
part upon certain assumptions about the likelihood of future events, and their
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions. Over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of these inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.
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PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None.
Item 2 - Changes in Securities and Use of Proceeds
In July 2003, the Company issued 250,000 shares of its restricted common stock
to its Chief Executive Officer, pursuant to the terms of this executive's
employment contract. The Company valued these shares at $0.57 per share the fair
market value on the date of the grant.
In July 2003, the Company issued 100,000 shares of its restricted common stock
to a consultant for services provided. The Company valued these shares at $0.57
per share the fair market value on the date of the grant. This amount relating
to the sale of the Company's securities has been recorded as an offering cost
and charged against additional paid-in capital.
The amortization of deferred compensation resulted in a noncash compensation
expense of $37,750 for the six months ended September 30, 2003.
Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Submissions of Matters to a Vote of Security Holders
None.
Item 5 - Other Events
None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits required by item 601 of Regulation S-B
31.1 Certification by Chief Executive Officer Pursuant to Section 302
31.2 Certification by Chief Financial Officer Pursuant to Section 302
32.1 Certification by Chief Executive Officer Pursuant to Section 906
32.2 Certification by Chief Financial Officer Pursuant to Section 906
(b) Reports on Form 8-K
None
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereto
duly authorized.
iGAMES ENTERTAINMENT, INC.
Date: November 14, 2003 By: /s/ Jeremy Stein
-------------------
Jeremy Stein,
Chief Executive Officer,
President and Director
Date: November 14, 2003 By: /s/ Adam C. Wasserman
------------------------
Adam C. Wasserman,
Chief Financial Officer
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