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CHAIRMANS STATEMENT
Introduction
I am pleased to report upon a year of solid progress for your company during which the controlled organic
growth of the business and the board's strategy of moving towards more stable markets were substantially
underpinned by two successful fund raising exercises. Accordingly, the company is now strongly placed to
achieve its aim of establishing a long - term and profitable presence in the global gaming market.
Overview of Results
Turnover, including the group's share of joint ventures, was 53.01m an increase of 9.2% compared with the
previous year (48.54m). More importantly, the mix of business changed substantially with the turnover from
Internet and pari - mutuel gaming accounting for 74% of group turnover compared with 18.5% in the previous
year. Customer accounts were 23,795 at the period end, an increase of 188% during the year.
Gross profit increased by 139% to 2.87m (2001 : 1.20m), representing 5.5% of turnover (2001 : 2.5%). The
gross margin on bets taken over the internet was 6.24% compared with 3.26% for bets taken via the call centre,
vindicating the board's decision to focus on the former.
After taking account of administration expenses, the companys share of the operating loss in its Euro Off-Track
joint venture, and interest, the deficit for the period reduced to 1.98m (2001 : loss of 2.32m). The basic and
diluted loss per share was 2.33p (2001 : loss of 2.96p).
Strategy
It remains the board's intention to selectively grow your company's presence in the global Internet and pari -
mutuel gaming markets and maintain its current level of activity in respect of its telephone operations. In this
way it aims to establish a less volatile income stream.
The board believes it inevitable that a process of consolidation will take place in the sector. Accordingly, the
company is actively seeking opportunities by way of acquisition or partnership which are consistent with its
overall strategic aims.
Regulation
As a result of the companys location in the Isle of Man it operates in a regulatory system which recognizes
the legitimacy of the Internet as a way of transacting business globally.
Unfortunately, the position is less clear - cut in other territories, including, importantly, the USA. In view of this
continuing uncertainty, the board took the decision to close all US fixed odds betting accounts during the year.
It still remains your board's view, however, that there will be an eventual move by the US authorities towards
the legalisation of gaming via the Internet. By operating in a transparent manner, within a well regulated
environment, your company is well placed to participate in that market when, and if, the opportunity arises.
Annual Report & Accounts
Page 3
CHAIRMANS STATEMENT (CONT.)
Corporate Matters
As mentioned above, by way of separate subscription and placing agreements, your company has raised
additional equity, net of expenses, of 3.7m. Of this amount, 800,000 was received after the period end and
a further 800,000 is due to be received in December 2002 subject to satisfying warranties contained in the
subscription agreement. Your company also declared a bonus issue of 1 warrant for every 4 shares held by
existing and subscription shareholders at the date of the subscription agreement. The warrants are listed on
AIM and may be exercised during a period of three years following their issue. At the time of the placing
agreement, WIlliams de Broe were issued with warrants over 312,500 ordinary shares at a price of 16p. These
warrants may be exercised at any time prior to May 2007.
Further details of warrants issued during the period and outstanding at 31 May 2002 are included in Note 12
on page 27.
We recently announced the resignation from the board of Pat Flanagan, Operations Director, and David
Craine, Finance Director. Pat and David both made significant contributions to the establishment and growth
of the company and I thank them for their efforts. I am delighted that David will continue to assist the company
as Company Secretary. Paul Doona replaces David as FInance Director and has a wealth of public company
experience including considerable exposure to the leisure and gaming sectors. Sean Graham, who joined the
company in April 2000, will have responsibility for Operations and Trading.
Your board was pleased to announce the appointments of WIlliams De Broe as nominated advisor and broker
to the company and KPMG Audit LLC as auditors. We look forward to a long and fruitful relationship with both
organisations and thank Capital International Ltd, Insinger English Trust and Deloitte & Touche for their
previous support.
Prospects
Your company entered the new financial year well funded and having achieved a number of its strategic
objectives. The Football World Cup held in June 2002 provided further impetus to both turnover and customer
accounts, a trend which has continued with the commencement of the new European Soccer Season.
I am confident therefore that the current financial year will see a continued improvement in turnover, margin
and cash generation.
Annual Report & Accounts
Page 4
OPERATIONAL REVIEW
INTRODUCTION
The twelve months ended 31 May 2002 represented a year of solid progress for betinternet. As with many of
our peers, we have yet to reach the holy grail of consistent monthly profit and positive cash flow; but we met
or exceeded all of our strategic objectives and improved upon our business Key Perfomance Indicators in all
areas. Accordingly we remain confident that by continuing to grow in a controlled manner whether by way of
organic growth, business combination, or an amalgam of the two, the company will, in the short-term, achieve
consistent profitability and cash generation.
Our business model has high operational gearing and we aim to benefit from the significant economies of
scale inherent in it.
REVIEW OF OPERATIONS
The key strategic objective achieved during the year was to grow the Internet sportsbook whilst managing a
reduction in emphasis on call centre operations; the latter being relatively more costly from an operational
point of view and contains far greater liability management issues.
Telephone betting tends to attract a more professional gambler, whilst the Internet is an attractive medium for
the fun gambler seeking to enhance his or her leisure experience.
The successful achievement of this objective can be illustrated by the increase in Internet turnover from
8.99m in 2001 to 38.67m in 2002 a 330% increase. At the same time, by positive management, we were
able to reduce telephone-betting turnover from 39.55m in 2001 to 13.95m in 2002 a 65% reduction.
Importantly, however, the margins from both operations improved. The Internet operation achieved a gross
margin percentage, after betting duty, of 6.24% compared with 4.83% in the previous year. This provided a
gross profit, after betting duty paid, of 2.41m compared with 0.43m in the previous year. The telephone
operation on the other hand, produced a reduced gross profit of 0.46m compared with 0.76m in the
previous year. Gross margin, after betting duty paid, increased, however, to 3.26% compared with 1.93% in
the previous year.
Internet Operations
In addition to the increase in turnover and margin mentioned above, other KPIs were also positive.
Customer accounts, which at the date of this report are 32,154, increased to 23,795 during the year under
review compared with 8,262 at the previous year-end. Of the new accounts opened, 4,900 came from Asia
and 3,100 from the U.K., the latter with minimal U.K. marketing.
The Far East continues to be betinternets strategically most important market with 69% of Internet turnover
coming from that region. The U.K. accounted for 6% of turnover and the rest of the world, predominantly
Europe, accounted for the balance of 25%. Our spread of business can be seen, however, by the fact that we
serve customers in around 140 countries.
Growth in turnover from the Far East has more than compensated for the loss in activity caused by the boards
decision to close all USA fixed odds betting accounts. Whilst, we consider that the USA market will eventually
move towards a regulated online regime, we believe that our decision to withdraw from that market was a
correct one. In the meantime, we believe that further growth will come from the markets we currently serve,
although we continually review the targeting and emphasis of our marketing in those markets which we believe
are under exploited.
Increased emphasis on the U.K. remains a medium-term possibility. We are currently unable to market directly
into the U.K. and our penetration is, therefore, limited. Marketing is the most important element in building
customer traffic and in order for betinternet to market into the U.K. we would need to establish a U.K. presence
and pay the U.K. betting duty on U.K. bets. The boards view is that currently the costs associated with such
a move outweigh the benefits, but the matter will be kept under review.
Our turnover growth has also been fuelled by our specialism in soccer betting and our flexibility in offering a
range of exotic bets to our target customer the young, low stakes gambler, seeking to enhance his or her
leisure experience.
Annual Report & Accounts
Page 5
OPERATIONAL REVIEW
Soccer now accounts for approximately 78% of Internet turnover, with the next most popular sports being
American Sports, which have a combined 19% of turnover. Tennis and Golf are the next most popular,
measured by size of turnover. In addition, the company regularly offers odds on up to 20 other sports.
Amongst the exotic bets on offer is Asian Handicaps a form of handicap betting on soccer matches, which
appeals to our customer base, not only in Asia, but also world-wide.
In addition to customer and turnover growth, other key performance indicators such as the cost of acquiring
customers and average revenue per customer have improved, as illustrated below:
Average Revenue Cost of Acquiring
per Customer Customers
2002 2001 2002 2001
Far East 4,500 1,800 33 88
Rest of the World 3,122 2,171 30 44
United Kingdom 1,305 n/a 16 n/a
2002 Soccer World Cup
A considerable amount of marketing effort was directed towards this event, the results of which will be felt in
the current financial period. Whilst the event proved to be a financial success for the company, its success will
also be measured by customer retention and improved brand awareness. In this regard, we have been
averaging 1,300 account openings per month in the current financial year.
Technology
Further development of our technical infrastructure was undertaken during the year, in particular during the
build up to the World Cup. This significantly increased our handling capacity for deposit transactions,
concurrent visitors to our site and bets per second. Indeed, the resilience of the system was demonstrated
by the fact that we handled more than 10,000 bets per day during the tournament. As well as growing our
systems vertically we invested substantially to increase the resilience of our systems. In this regard we were
able to deliver 99.9% availability of our platform to clients during the period. We also rolled out a major revamp
of our software in advance of the World Cup, which delivered further improvements for the customer in
functionality, navigation and transactability.
Enhancements to our on-line banking systems have delivered increased security and anti-fraud measures for
the company, and delivered a 6 second transaction processing time for our customers. The payment solutions
employed by the company have continued to prove their worth in a cost effective manner.
We remain committed to the use of leading edge technology as a means of strengthening customer
relationships and new product generation.
Telephone Operations
As reported elsewhere, the company has successfully managed a reduction in its call centre operations. We
now offer odds to a manageable core of customers, well known to us, from whom we are able to deliver a
satisfactory margin at considerably less cost than was previously the case.
We intend to continue with this fixed-odds operation at its current level of activity for the foreseeable future.
Annual Report & Accounts
Page 6
OPERATIONAL REVIEW
Euro Off-Track
This 50/50 partnership with US Off-Track Inc. has proved to be a technical success as we have demonstrated
our ability, through the use of the Amtote Spectrum Super Hub, to accept wagers from B2C customers and
then transmit these wagers to host tracks, thus allowing customers to participate in global totalisator pools.
We are also able to offer a similar service to B2B customers. In addition, we successfully trialled our ability to
transmit live pictures from Irish tracks into the United States during the Irish Greyhound Derby held in
September 2002. The potential of this offering is demonstrated by the hubs ability to handle 29 million bets
per hour and host up to 50 betting communities.
However, progress measured by customer account opening and activity, and the establishment of businessto-
business relationships has been slower.
Our current focus therefore is to exploit the potential afforded by our ability to co-mingle wagers into 54
thoroughbred, greyhound, harness and Jai Alai tracks in the USA and Ireland, 20 of which are on an exclusive
basis. We are concentrating our efforts on building up relationships both with content providers and with outlets
which have access to content, but which are unable to participate directly in host track pools.
An example of the former is our recent collaboration with Gaming Insight Plc who own GoBarkingMAD Ltd, a
greyhound information site that uses the Sky platform to offer live greyhound races to its viewers. Under this
short-term agreement, which we hope to extend and use as a model for further agreements with providers,
GoBarkingMAD viewers have had access to our exclusive Irish greyhound racing content from Shelbourne
Park and Harolds Cross. The aim is that viewers, who can currently participate in the host track pools via
Link Removed ( Old/Invalid) will, in due course, be able to participate directly into the same pools via the interactive
television platform and by telephone. In order to facilitate this we are developing a cash wagering interface into
the Euro Off-Track tote hub mentioned above which, in addition to the access it will give betinternets
customers to global pools, will provide all B2B partners with the ability to co-mingle wagers and participate
directly in the pools of host tracks.
An example of how we intend to use the hub technology to develop B2B relationships is our proposed venture
with Artax Gaming Consultants Inc of Oklahoma, by which Artax will forward wagers placed by its customers
to Euro Off-Track for onward transmission and participation in event pools.
Despite its slow progress, the board continues to see great potential for this operation, which offers access to
much larger pools and, therefore, dividends, to customers and a risk-free revenue stream to betinternet.
ANTI MONEY LAUNDERING
The company is located in a well-regulated jurisdiction, which supports the use of the Internet for business
transactions both locally and on a global basis.
We support our Governments efforts to ensure that customers can transact with Isle of Man based companies
with the utmost confidence. On our part, we aim to ensure that we will only transact with customers of integrity.
Accordingly, under the direction of Harley Corkill, one of our non-executive directors, and with external expert
support, we have committed to a programme of continuing education for all staff against the threat of money
laundering.
THE FUTURE
betinternets ambition is to establish itself as a respected, integrated, e-gaming company, operating on a
global basis. The board believes that the ingredients which will drive market growth are still in place and the
company has the management strength and experience to deliver that ambition.
The immediate aim is to achieve consistent monthly profit and cash generation. This will be achieved by
concentrating on growing the core Internet based sportsbook to achieve critical mass and by establishing a
small number of key relationships for our tote operations.
Growth can be achieved organically by the careful targeting of marketing spend, but could be aided by
opportunistic acquisitions or joint ventures.
The achievement of critical mass will allow expansion into new gaming activities and into new territories such
as Latin America, Australasia and Canada. We will continue to monitor and review our options in relation to
both the U.S.A. and U.K.
Annual Report & Accounts
Page 7
DIRECTORS REPORT
The directors present their report and the audited financial statements for the year ended 31 May 2002.
ACTIVITIES
The company holds a Betting Office Licence issued by the Isle of Man Government and has operated an
international telephone betting service since October 1998 and an on-line Internet betting service since 17
March 2000. In order to avail itself of the preferential rate of betting duty applicable to "international telephone
bets" the company undertook not to accept bets from persons resident either in the Isle of Man or the United
Kingdom. Following changes in the United Kingdom duty regime, these restrictions were relaxed from April
2001 onwards so that the company now accepts bets from persons resident in the United Kingdom, but still
cannot accept bets from Isle of Man residents. The companys licence is renewable annually with the next
renewal due at 31 May 2003.
RESULTS AND DIVIDENDS
The financial results are shown on pages 14 to 31. The directors do not propose the declaration of a dividend
(2001: nil). The loss for the year has been transferred to reserves.
POST BALANCE SHEET EVENTS
Under the terms of the subscription agreement referred to in note 12 on page 26, on 10 June 2002 8,000,000
new ordinary 1p shares were issued for a total cash consideration of 800,000. In addition, 2,000,000 bonus
warrants were issued to subscribe for 1 new ordinary 1p share at 12p per share.
Also under the subscription agreement, within 12 months of the EGM held on the 10 December 2001 and
conditional on there being no material breach of the warranties contained in the subscription agreement,
subscriptions will be made for a further 8,000,000 new ordinary 1p shares issued at 10p per share, for a
consideration of 800,000. At such time 2,000,000 bonus warrants will be issued to subscribe for 1 new
ordinary 1p share at 12p per share.
Annual Report & Accounts
Page 8
DIRECTORS REPORT
DIRECTORS
The present directors of the company are as set out on page 1. Changes to the board of directors since the
publication of the previous annual report are as follows:
Appointed Resigned
M.L. Child 10 December 2001
P.E. Doona 10 October 2002
D.P. Craine 30 August 2002
P. M. Flanagan 30 August 2002
As at 31 May 2002 the directors interests in the shares and share options of the company were as follows:
Ordinary shares Options over ordinary Bonus warrants over ordinary
of 1p each shares of 1p each shares of 1p each
2002 2001 2002 2001 2002 2001
No. No. No. No. No. No.
V.E. Caldwell 15,864,967 15,633,500 300,000 300,000 2,102,508 -
M.L. Child 1,150,000 N/A - N/A 287,500 -
S.P. Graham - - 500,000 500,000 - -
H. Corkill 21,600 21,600 100,000 100,000 5,400 -
W.D. Mummery - - 500,000 500,000 - -
D P Craine 200,000 200,000 100,000 100,000 50,000 -
(Resigned 30 August 2002)
P M Flanagan - - 1,000,000 1,000,000 - -
(Resigned 30 August 2002)
The exercise price of the options is 1.0p per share in respect of those held by W.D. Mummery and 23.15p in
respect of other directors.
No changes to directors' interests have occurred since 31 May 2002.
The directors had no beneficial interests in the shares of any of the companys subsidiaries.
P.E. Doona and M.L. Child were appointed to the board following the last annual general meeting and
accordingly stand for re-election.
In accordance with the Articles of Association, H. Corkill retires by rotation and, being eligible, offers himself
for re-appointment.
Directors Liability Insurance
The company does not maintain insurance cover for directors liability in relation to the group, however it is
proposed such cover will be obtained following the publication of this Report.
Annual Report & Accounts
Page 9
DIRECTORS REPORT
SUBSTANTIAL INTERESTS
In addition to directors interests, the company had been advised on 11 November 2002 of the following
notifiable shareholdings in excess of 3%:
Number of Ordinary
% Shares
Burnbrae Limited 16.10 17,500,000
Pershing Keen Nominees Limited a/c CACLT 13.81 15,015,068
Mill Properties Limited 12.23 13,293,500
Jennifer Caldwell 4.54 4,937,600
Diplomat Trust Company Limited 4.14 4,500,000
Jennifer Caldwell is a sister of a director of the company, V E Caldwell.
Shares held by Diplomat Trust Company Limited are held for the benefit of Caldwell family members and
trusts, whilst the shares held by Mill Properties Limited represent a family related shareholding of the Caldwell
family.
SUPPLIER PAYMENT POLICY
It is group policy to agree and clearly communicate the terms of payment as part of the commercial
arrangements negotiated with suppliers and then to pay according to those terms based upon the timely
receipt of an accurate invoice.
AUDITORS
KPMG were appointed as auditors by the directors during the year. Subsequent to the period-end KPMG have
indicated that a limited liability company, KPMG Audit LLC, is to assume responsibility for certain aspects of
their audit business. Accordingly, KPMG have resigned and the directors have appointed KPMG Audit LLC in
their place. KPMG Audit LLC being eligible, has expressed its willingness to continue in office in accordance
with Section 12(2) of the Isle of Man Companies Act 1982.
Approved by the board of Directors
and signed on behalf of the board D.P. Craine - Secretary 11 November 2002
Annual Report & Accounts
Page 10
CORPORATE GOVERNANCE
In June 1998 the Hampel Committee and the London Stock Exchange published the Combined Code on
corporate governance. This combines the Cadbury Code on corporate governance, the Greenbury Code on
directors remuneration and new requirements arising from the findings of the Hampel Committee. The
Combined Code contains recommendations for best practice focusing on control and reporting functions of
the board.
Although the companys securities have been admitted on to the Alternative Investment Market and the
company is not required to comply with the Combined Code, the board is committed to ensure that betinternet
complies with the principles of good corporate governance. In doing so the board monitors the companys
established procedures and continues, so far as possible, to comply with the Code to the extent that it is
appropriate for the size and stage of development of the company.
The board has established audit and remuneration committees and has recently established a nominations
committee comprising the chairman and the non - executive directors. The nominations committee will seek
to appoint a non executive chairman who is expected to be appointed to the audit and remuneration
committees. The appointment of a non executive chairman would allow for the separation of the role of
chairman and managing director.
The audit committee, at present comprises Mr H Corkill (Chairman) and Mr M.L. Child. The Finance Director
attends meetings at the invitation of the committee. The role of the committee is to assist the board in
discharging its responsibilities for accounting policies, internal controls and financial reporting.
The remuneration committee, presently comprising Mr M.L. Child (Chairman) and Mr H. Corkill, recommends
to the board terms and conditions, including annual remuneration, for executive directors and senior
management. Mr V.E. Caldwell attends meetings at the invitation of the committee, but does not participate in
the determination of his own remuneration which is set following discussion with the executive directors.
The company is incorporated in the Isle of Man and complies only with the requirements of that jurisdiction
regarding the disclosure of directors remuneration. Details of directors share options are included in the
directors report.
Annual Report & Accounts
Page 11
STATEMENT OF DIRECTORS RESPONSIBILITIES
Company law requires the directors to prepare financial statements for each financial period which give a true
and fair view of the state of affairs of the company and the group as at the end of the financial period and of
the profit or loss of the group for that period. In preparing those financial statements, the directors are required
to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable accounting standards have been followed, subject to any material departures
disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
company and the group will continue in business.
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy
at any time the financial position of the company and the group and to enable them to ensure that the financial
statements comply with the Companies Acts 1931 to 1993. They have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the company and the group and to prevent
and detect fraud and other irregularities.
Annual Report & Accounts
Page 12
REPORT OF THE INDEPENDENT AUDITORS, KPMG AUDIT LLC,
TO THE MEMBERS OF betinternet.com plc
We have audited the financial statements on pages 14 to 31.
Respective responsibilities of directors and auditors
The directors are responsible for preparing the Annual Report. As described on page 12, this includes
responsibility for preparing the financial statements in accordance with applicable Isle of Man law and United
Kingdom Accounting Standards. Our responsibilities, as independent auditors, are established in the Isle of
Man by statute, the Auditing Practices Board, and by our professions ethical guidance.
We report to you our opinion as to whether the financial statements give a true and fair view and are properly
prepared in accordance with the Companies Acts 1931 to 1993. We also report to you if, in our opinion, the
directors report is not consistent with the financial statements, if the group has not kept proper accounting
records, if we have not received all the information and explanations we require for our audit, or if information
specified by law regarding directors remuneration and transactions with the company is not disclosed.
We read the other information contained in the Annual Report and consider whether it is consistent with the
audited financial statements. We consider the implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the financial statements.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An
audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the
financial statements. It also includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the financial statements, and of whether the accounting policies are appropriate
to the Group's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered
necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or other irregularity or error. In
forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial
statements.
Going concern
In forming our opinion, we have considered the adequacy of the disclosures in note 1 to the financial
statements concerning the basis on which the financial statements have been prepared. Whilst we consider
that this matter should be drawn to your attention, our opinion is not qualified in this respect.
Opinion
In our opinion the financial statements give a true and fair view of the state of affairs of the company and of
the group as at 31 May 2002 and of the loss of the group for the year then ended and have been properly
prepared in accordance with the Companies Acts 1931 to 1993.
KPMG Audit LLC, Chartered Accountants 13 November 2002
Heritage Court, 41 Athol Street, Douglas, Isle of Man IM99 1HN.
Annual Report & Accounts
Page 13
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year Ended 31 May 2002
2002 2001
Note
Turnover including share of joint venture
Betting stakes received 2
Internet 38,672,608 8,985,227
Telephone 13,953,019 39,551,612
Pari Mutuel 384,776
53,010,403 48,536,839
Less share of joint venture turnover (384,776)
Total group turnover 52,625,627 48,536,839
Cost of sales
Winnings paid and bets laid off 2 (49,626,900) (47,194,317)
Betting duty paid 2 (130,841) (146,430)
Gross profit 2,867,886 1,196,092
Administration expenses (4,560,419) (3,579,270)
Group operating loss 3 (1,692,533) (2,383,178)
Share of operating loss in joint venture (306,178) (8,169)
Total operating loss including share of joint venture (1,998,711) (2,391,347)
Interest receivable and similar income 17,477 71,507
Interest payable and similar charges 6 (2,877) (384)
Loss on ordinary activities before
and after taxation and retained loss
for the year 4,14 (1,984,111) (2,320,224)
Basic and diluted loss per share (pence) 5 (2.33) (2.96)
The directors consider that all results derive from continuing operations for both the current and prior year. A statement of
total recognised gains and losses is not required as there were no recognised gains and losses other than the loss for the
current year. This was also the case for the prior year.
Annual Report & Accounts
Page 14
CONSOLIDATED BALANCE SHEET
31 May 2002
Note 2002 2002 2001 2001
FIXED ASSETS
Intangible assets 7 498,088 377,739
Tangible assets 8 480,237 226,692
Investments in joint ventures 9
- Share of gross assets 131,943
- Share of gross liabilities (130,943)
- Share of net assets 1,000
Investments in associates 9 116,802
978,325 722,233
CURRENT ASSETS
Debtors 10 822,607 833,880
Cash at bank and in hand 1,850,421 947,013
2,673,028 1,780,893
CREDITORS:
amounts falling due within one year 11 (2,463,218) (1,761,573)
NET CURRENT ASSETS 209,810 19,320
PROVISIONS FOR LIABILITIES AND CHARGES
Investments in joint ventures 9
- Share of gross assets 86,009
- Share of gross liabilities (391,187)
- Share of net liabilities (305,178)
NET ASSETS 882,957 741,553
CAPITAL AND RESERVES
Called up share capital 12 1,006,870 783,296
Share premium 12,13 5,519,720 3,617,779
Profit and loss account 13 (5,643,633) (3,659,522)
EQUITY SHAREHOLDERS FUNDS 14 882,957 741,553
These financial statements were approved by the board of directors on 11 November, 2002
Signed on behalf of the board of directors
V E Caldwell P E Doona
Director Director
Annual Report & Accounts
Page 15
COMPANY BALANCE SHEET
31 May 2002
2002 2001
Note
FIXED ASSETS
Tangible assets 8 61,828 50,148
Investments 9 1,005 217,807
62,833 267,955
CURRENT ASSETS
Debtors 10 1,680,483 1,240,355
Cash at bank and in hand 1,789,496 885,353
3,469,979 2,125,708
CREDITORS:
amounts falling due within one year 11 (2,449,924) (1,688,420)
NET CURRENT ASSETS 1,020,055 437,288
NET ASSETS 1,082,888 705,243
CAPITAL AND RESERVES
Called up share capital 12 1,006,870 783,296
Share premium 12,13 5,519,720 3,617,779
Profit and loss account 13 (5,443,702) (3,695,832)
EQUITY SHAREHOLDERS FUNDS 1,082,888 705,243
These financial statements were approved by the board of directors on 11 November, 2002
Signed on behalf of the board of directors
V E Caldwell P E Doona
Director Director
Annual Report & Accounts
Page 16
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 May 2002
2002 2001
Note
Net cash outflow from operating activities 15 (811,282) (2,163,802)
Returns on investments and servicing of finance 16 14,600 71,123
Capital expenditure and financial investment 16 (770,927) (278,176)
Cash outflow before use of liquid
resources and financing (1,567,609) (2,370,855)
Financing 16 2,475,515 2,695
Increase/(Decrease) in cash in the year 907,906 (2,368,160)
Reconciliation of net cash flow to movement in net funds
2002 2001
Note
Net funds at 1 June 925,919 3,294,079
Increase/(Decrease) in cash in the year 907,906 (2,368,160)
Cash inflow from net increase in debt (350,000)
Net funds at 31 May 17 1,483,825 925,919
Annual Report & Accounts
Page 17
NOTES TO THE ACCOUNTS
Year ended 31 May 2002
1. ACCOUNTING POLICIES
In the absence of accounting standards in the Isle of Man, the directors have chosen to apply United Kingdom
Accounting Standards published by the United Kingdoms Accounting Standards Board in the preparation of the
financial statements, provided that they are not inconsistent with the requirements of the Isle of Man Companies Acts
1931 to 1993.
The particular accounting policies adopted are described below.
Basis of preparation of the financial statements
The Group has incurred losses of 5,643,633 since the commencement of trading. As at 31 May 2002 the Group has
net assets of 882,957, cash balances of 1,850,421 and borrowings of 366,596. The directors continue to implement
a number of strategies designed to achieve profitability.
As described in note 23 on page 31, equity finance of 800,000 has been received subsequent to the year end, and
further equity funding of 800,000 is due to become available to the Group during the year ended 31 May 2003, subject
to satisfying warranties contained in the subscription agreement. These warranties are standard for an agreement of this
type and the directors are not aware of any reason why they are not capable of being satisfied.
The directors have considered the adequacy of the cash resources and working capital available to the Group for the
next 18 months and are satisfied that the Group has adequate resources to meet its obligations as they fall due. On this
basis the directors have concluded that it is appropriate to prepare these financial statements on a going concern basis.
Accounting convention
The financial statements are prepared under the historical cost convention.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the company and all of its subsidiaries,
joint ventures and associated undertakings.
Joint ventures are accounted for using the gross equity method.
Shares in associated undertakings are accounted for using the equity method. The consolidated profit and loss account
includes the groups share of pre-tax profits and attributable taxation of the associated undertakings based on the
audited financial statements for the financial year. In the consolidated balance sheet, the investment in associated
undertakings is shown at the groups share of the net assets of the associated undertakings.
Investments
Investments held as fixed assets are stated at cost less provision for impairment.
Betting stakes, free bets and winnings
Turnover represents the stakes received from customers less any void bets recorded.
Stakes received from customers less voids are recognised as income at the point the event to which they relate has
been completed. Winnings paid are reflected at the point the outcome of the event to which the bet relates becomes
known. Any stakes received prior to the balance sheet date, where the event to which they relate occurs after the
balance sheet date, are not recognised as income, but are reflected as deferred income in the balance sheet.
Where free bets are offered to customers as part of a promotional drive, the amount of the stakes given as free bets are
reflected as an expense disclosed within advertising / marketing expenses which is included within administrative
expenses in the profit and loss account. Where the free bet is a winning bet the winnings paid to the customer are
reflected as if the bet was a normal bet.
Prior to 1 January 2002 betting duty was payable to Customs and Excise at the rate of 0.3% of betting stakes received
on international bets and 2% of betting stakes received on UK bets. Effective 1 January 2002 the company is liable to
betting duty at 1.5% of net stake receipts in the case of international bets and 10% on net UK stake receipts. Net stakes
are betting stakes received less winnings and bets laid off.
Foreign currency
Foreign currency balances are translated to Sterling at the rate of exchange ruling on the last business day in the groups
financial year.
Foreign currency transactions are converted to Sterling at the rate of exchange ruling at the date of the transaction.
Profits and losses on foreign currency translations and conversions are included in the profit and loss account.
Notes to the Accounts
Page 18
Notes to the Accounts
Page 19
NOTES TO THE ACCOUNTS
Year ended 31 May 2002
1. ACCOUNTING POLICIES (CONT.)
Operating leases
Operating lease rentals are charged to the profit and loss account in equal annual amounts over the lease term.
Bank interest
Bank interest income is recognised in the profit and loss account on a receivable basis and accordingly amounts are
reflected in the balance sheet for interest receivable at the balance sheet date.
Tangible fixed assets
Depreciation is provided on cost in equal annual instalments over the estimated useful lives of the assets. The rates of
depreciation are as follows:
Computer equipment and software 33 1/3 %
Fixtures and fittings and office equipment 33 1/3 %
Motor vehicles 33 1/3 %
Intangible assets
Development costs for the group are capitalised where, in the opinion of the directors, there is a benefit that will be
derived from the expenditure incurred. The development costs are amortised on a straight-line basis over a 3 year
period.
Deferred taxation
Deferred taxation is provided on timing differences arising from different treatment of items for accounting and taxation
purposes, calculated at the rates at which it is anticipated that tax will arise.
Notes to the Accounts
Page 20
NOTES TO THE ACCOUNTS
Year ended 31 May 2002
2. SEGMENTAL ANALYSIS
The company provides an international telephone and on-line Internet betting service from the Isle of Man. The directors
are of the opinion that the markets to which its services are supplied do not differ substantially and accordingly may be
treated as one so no geographical analysis is provided. The analysis between telephone and Internet betting is as
detailed below:
Year ended 31 May 2002 Telephone Internet Total
Betting stakes received 13,953,019 38,672,608 52,625,627
Winnings paid and bets laid off (13,462,982) (36,163,918) (49,626,900)
Betting duty paid (34,691) (96,150) (130,841)
Gross profit 455,346 2,412,540 2,867,886
Margin 3.26% 6.24% 5.45%
Year ended 31 May 2001 Telephone Internet Total
Betting stakes received 39,551,612 8,985,227 48,536,839
Winnings paid and bets laid off (38,669,986) (8,524,331) (47,194,317)
Betting duty paid (119,322) (27,108) (146,430)
Gross profit 762,304 433,788 1,196,092
Margin 1.93% 4.83% 2.46%
3. OPERATING LOSS
Operating loss is stated after charging:
2002 2001
Depreciation on tangible fixed assets 155,828 121,691
Amortisation of intangible assets 241,205 126,528
Auditors' remuneration - audit fees 35,250 41,125
- other services - 38,775
Directors' fees 14,583 10,000
Operating lease rentals - other than plant and machinery 84,220 57,276
Under the provisions of the Isle of Man Companies Acts 1931 to 1993 there are no requirements to disclose any
additional information regarding staff costs, staff numbers, or information regarding the remuneration of directors.
Notes to the Accounts
Page 21
NOTES TO THE ACCOUNTS
Year ended 31 May 2002
4. TAX ON LOSS ON ORDINARY ACTIVITIES
No provision for tax is required for either the current or previous year, due to the level of losses incurred. Unprovided
deferred tax amounted to an asset of 505,988 which is the result of accumulated tax losses less accelerated capital
allowances.
5. LOSS PER SHARE
The basic loss per share is calculated by dividing the losses attributable to ordinary shareholders by the weighted
average number of ordinary shares during the year.
Calculation of loss per share is based on losses of 1,984,111 (2001 : 2,320,224 loss) and the weighted average
number of ordinary shares being the equivalent of 85,030,112 (2001 : 78,298,098) ordinary 1p shares.
The diluted loss per share is the same as the basic loss per share as the adjustment to assume conversion of dilutive
potential ordinary shares would decrease the loss per share. The comparative diluted loss per share has been restated
accordingly.
6. INTEREST PAYABLE
2002 2001
Bank overdraft interest - 384
Loan interest 2,877 -
2,877 384
Interest on loan relates to a short term loan, which was repaid subsequent to the year end.
7. INTANGIBLE ASSETS
Development Costs
Group
Cost
At 1 June 2001 547,033
Additions 361,554
At 31 May 2002 908,587
Accumulated amortisation
At 1 June 2001 169,294
Charge for the year 241,205
At 31 May 2002 410,499
Net book value
At 31 May 2002 498,088
At 31 May 2001 377,739
Notes to the Accounts
Page 22
NOTES TO THE ACCOUNTS
Year ended 31 May 2002
8. TANGIBLE ASSETS
Office
Computer equipment
equipment Motor fixtures
and software vehicle & fittings Total
Group
Cost
At 1 June 2001 310,916 16,050 86,031 412,997
Additions 371,646 - 37,727 409,373
At 31 May 2002 682,562 16,050 123,758 822,370
Accumulated depreciation
At 1 June 2001 161,065 4,012 21,228 186,305
Charge for the year 117,746 5,794 32,288 155,828
At 31 May 2002 278,811 9,806 53,516 342,133
Net book value
At 31 May 2002 403,751 6,244 70,242 480,237
At 31 May 2001 149,851 12,038 64,803 226,692
Office
Computer equipment
equipment Motor fixtures
and software vehicle & fittings Total
Company
Cost
At 1 June 2001 71,071 16,050 53,104 140,225
Additions 35,016 - 6,481 41,497
At 31 May 2002 106,087 16,050 59,585 181,722
Accumulated depreciation
At 1 June 2001 71,071 4,012 14,994 90,077
Charge for the year 5,562 5,794 18,461 29,817
At 31 May 2002 76,633 9,806 33,455 119,894
Net book value
At 31 May 2002 29,454 6,244 26,130 61,828
At 31 May 2001 - 12,038 38,110 50,148
Notes to the Accounts
Page 23
NOTES TO THE ACCOUNTS
Year ended 31 May 2001
9. INVESTMENTS
Investment Investment
in joint in
ventures associates
Group
At 1 June 2001 1,000 116,802
Investment in associate written off - (116,802)
Share of loss of joint ventures (306,178) -
At 31 May 2002 (305,178) -
In view of the above deficit, the investment in joint ventures, which in the previous report and accounts was classified
as a Fixed Asset, has been re-classified within provisions for liabilities and charges.
The Groups share of the assets and liabilities of the joint venture are as follows:
2002 2001
Assets
Fixed assets 47,620 131,943
Current assets 38,389 -
Liabilities
Liabilities due within one year (391,187) (130,943)
Share of net (liabilities)/assets (305,178) 1,000
2002 2001
Company
Technical Facilities & Services Limited 2 2
Downsview Limited - 2
betinternetUK.com Limited 1 1
betinternet.com (Holdings) Limited 100,000 100,000
Fettercairn Limited 2 2
Off-Track Worldwide Limited 1,000 1,000
Mobile Gaming Solutions Limited - 164,125
101,005 265,132
Provision against Downsview Limited - (2)
Provision against investment in Mobile Gaming Solutions Limited - (47,323)
Provision against betinternet.com (Holdings) Limited (100,000) -
1,005 217,807
Notes to the Accounts
Page 24
NOTES TO THE ACCOUNTS
Year ended 31 May 2002
9. INVESTMENTS (CONT.)
Subsidiaries Country of incorporation Activity Holding (%)
betinternetUK.com Limited England Holder of UK bookmakers permit 100
non trading
betinternet.com (Holdings) Limited Malta Holding company 100
Fettercairn Limited Isle of Man Holding company 100
Technical Facilities & Isle of Man Provision of Internet and telephone 100
Services Limited betting systems to group companies
During the year Downsview Limited, a wholly owned subsidiary, was dissolved.
Sub-subsidiaries
betinternet.com (Malta) Limited Malta Holder of Maltese betting licence - non trading 100
Fada International Limited Hong Kong Non-trading 100
betinternet.com (Holdings) Limited is wholly owned by betinternet.com plc. It in turn holds the entire issued share capital
of betinternet.com (Malta) Limited which holds a Maltese issued betting licence. The company has not traded.
Other investments joint venture
Off-Track Worldwide Limited Isle of Man Holding company 50
Euro Off-Track Limited Partnership Guernsey Design, development and operation of European 50
Internet and interactive wagering totaliser hub
Off-Track Worldwide Limited is a joint venture between betinternet.com plc and US Off-Track Inc. Off-Track Worldwide
Limited is the general partner in Euro Off-Track Limited Partnership, having a 1% interest, with the remaining 99% split
equally between betinternet.com plc and US Off-Track Inc. Under the terms of the agreement between the parties
covering the design, development and operation of the European internet and interactive wagering totaliser system, the
betinternet.com plc group is obligated to spend up to US$ 1,000,000 in relation to the establishment, installation and
operation of the system. At 31 May 2002 US$ 1,000,000 had been incurred by the Group under the agreement and this
amount will be recoverable in priority to any distribution to either Off-Track Worldwide Limited or US Off-Track Inc. This
investment is treated as a joint venture.
Notes to the Accounts
Page 25
NOTES TO THE ACCOUNTS
Year ended 31 May 2002
10. DEBTORS
The Group The Company
2002 2001 2002 2001
Trade debtors 256,097 490,006 251,258 490,006
Amount due from group undertakings - - 935,936 488,100
Sundry debtor due from joint venture 537,782 261,885 490,385 227,595
VAT recoverable 28,728 - - -
Prepayments - 81,989 2,904 34,654
822,607 833,880 1,680,483 1,240,355
The Group The Company
2002 2001 2002 2001
Due within one year 284,825 571,995 254,162 524,660
Due after more than one year 537,782 261,885 1,426,321 715,695
822,607 833,880 1,680,483 1,240,355
The sundry debtor represents amounts incurred by betinternet.com plc and a subsidiary in the establishment,
installation and operation of the European Internet and interactive wagering totaliser system as referred to in note 9. The
amount is recoverable under the terms of the agreement in priority to any distribution to the other parties of the joint
venture.
The amount due from group undertakings is due from a subsidiary company and is unsecured, interest free and
repayable on demand.
11. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
The Group The Company
2002 2001 2002 2001
Bank overdrafts 16,596 21,094 16,596 21,094
Trade creditors 1,203,410 903,370 1,282,140 929,268
Deferred income 78,729 222,051 78,729 222,051
Accruals and other creditors 814,483 441,764 722,459 350,882
Amount payable re investment
in a joint venture - 9,169 - 1,000
Loan 350,000 - 350,000 -
Amount payable re investment
in an associated company - 164,125 - 164,125
2,463,218 1,761,573 2,449,924 1,688,420
Included in accruals and other creditors for both the company and the group are amounts payable in respect of income
tax and national insurance of 55,994 (31 May 2001 : 44,807) relating to the payroll, and betting duty payable of 3,293
(31 May 2001 : 6,694).
The bank overdrafts carry variable interest rates and are repayable on demand.
The loan is unsecured, carries a fixed rate of interest and has been repaid since the year-end.
Notes to the Accounts
Page 26
NOTES TO THE ACCOUNTS
Year ended 31 May 2002
12. SHARE CAPITAL AND SHARE PREMIUM
2002 2001
Authorised
185,000,000 (2001 : 120,000,000) ordinary shares of 1p each 1,850,000 1,200,000
Issued and fully paid
100,687,027 (2001: 78,329,647) ordinary shares of 1p each 1,006,870 783,296
At the extraordinary general meeting of the company held on 10 December 2001, the authorised share capital of the
company was increased to 1,850,000 comprising 185,000,000 ordinary shares of 1p each. Movements in the issued
share capital and share premium account during the year ended 31 May 2002 are as follows:
Share Share
capital premium
No.
At 1 June 2001 1p ordinary shares 78,329,647 783,296 3,617,779
Allotted and issued 22,357,380 223,574 1,901,941
At 31 May 2002 1p ordinary shares 100,687,027 1,006,870 5,519,720
Nominal
Allotted during the year No. value Premiums Proceeds
Exercise of warrants 1,819,280 18,193 200,120 218,313
Exercise of options 80,000 800 - 800
Other issues 20,458,100 204,581 2,228,714 2,433,295
Costs of issue - (526,893) (526,893)
22,357,380 223,574 1,901,941 2,125,515
During the year ended 31 May 2002, there were the following changes in the share capital of the company:
Under the terms of a subscription and shareholders agreement (subscription agreement) dated 10 December 2001
investors agreed to subscribe for 30,000,000 new ordinary shares for a total consideration of 3,000,000. Upon
completion of the agreement, 14,000,000 new ordinary shares were issued for a total cash consideration of 1,400,000.
Of these shares, 1,150,000 new ordinary shares were issued to M.L. Child, a director of the company, for a consideration
of 115,000. In addition 2,500,000 new ordinary shares were issued to the Chairman and members of his family, or
companies nominated by them, for a consideration of 250,000. The consideration was settled by offset against a
250,000 loan payable by the company to those parties. A further 10,350,000 new ordinary shares were issued to other
investors for a total cash consideration of 1,035,000.
The balance of 1,600,000 due to be received under the subscription agreement is to be received in two tranches. Of
this amount 800,000 was received on 10 June 2002 and the final instalment of 800,000 is due to be received on 10
December 2002, subject to there being no material breach of the warranties contained in the subscription agreement
(see also note 23).
NOTES TO THE ACCOUNTS
Year ended 31 May 2002
12. SHARE CAPITAL AND SHARE PREMIUM (CONT.)
On the 20 May 2002, the Chairman exercised warrants over 1,805,867 ordinary shares of the company at 12p per share,
which raised 216,704 (gross) for the company. Of this total 1,354,400 ordinary shares formed part of the placing
referred to below. The remainder of the ordinary shares from the exercise of the Chairmans warrants, and which were
not placed, together with the share holdings then held by members of the Chairmans family, or companies related to
them, and the directors, are subject to a lock-in arrangement until 31 December 2002 under the terms of the placing
agreement and separate lock-in deeds.
Under the terms of a placing agreement dated 20 May 2002 (the Placing) 7,812,500 ordinary 1p shares were placed
for a total consideration of 1,250,000. The Placing comprised 6,458,100 new ordinary shares, which raised 1,033,296
(gross) for the company, and 1,354,400 existing issued ordinary shares derived from the exercise of certain warrants by
the Chairman, as referred to above.
During the year ended 31 May 2002 a further 13,413 ordinary 1p shares were issued for a total consideration of 1,609
pursuant to the exercise of warrants in respect of 53,652 shares.
During the year ended 31 May 2002 an aggregate of 80,000 ordinary 1p shares were issued for a total consideration of
800 pursuant to the exercise of options in respect of 80,000 shares.
Options
Movements in share options during the year ended 31 May 2002 were as follows:
No. Option Price
At June 1 2001 - 1p Ordinary Shares 3,065,600 1p to 23.15p
Options exercised (80,000) 1p
Options lapsed (48,000) 23.15p
At 31 May 2002 - 1p Ordinary Shares 2,937,600 1p to 23.15p
All options were satisfied by cash payment.
The remaining share options have an exercise price ranging from 1.0p to 23.15p and all are exercisable during the
period 10 years from the respective date of granting of the option. Options held by the directors of the company are
disclosed in the directors report.
Warrants
At an EGM of the company held on 10 December 2001, the company issued and allotted, by way of a bonus, an
aggregate of 23,082,412 registered warrants to subscribe for 1 new ordinary share at 12p per share. The warrants were
issued to all existing and new shareholders under the subscription agreement. Investors also have the right to receive
additional warrants on the same basis in respect of their subscriptions within 6 and 12 months of the EGM described
above. All warrants terminate 3 years from the date of the issue of the initial warrants.
The company also issued warrants over 312,500 ordinary shares to Williams de Broe plc with an exercise price of 16p,
to be exercised no later than 5 years from May 2002.
Warrants held by the directors of the company are disclosed in the directors report.
Summary: No of Subscription Maximum Latest date
ordinary shares price (p) Subscription () of exercise
(a) Warrants in respect of
subscription agreement
Issued to shareholders 23,082,412
Exercised during the year to 31 May 2002 (1,819,280)
Balance outstanding at 31 May 2002 21,263,132
Further subscription rights (see also note 23) 4,000,000
25,263,132 12 3,031,576 December 2004
(b) Warrants issued to Williams de Broe plc 312,500 16 50,000 May 2007
Notes to the Accounts
Page 27
NOTES TO THE ACCOUNTS
Year ended 31 May 2002
13. RESERVES
Group Share Profit and loss
Premium account
At 1 June 2001 3,617,779 (3,659,522)
Movement on share premium account
(See note 12) 1,901,941 -
Retained loss for the year - (1,984,111)
At 31 May 2002 5,519,720 (5,643,633)
Company Share Profit and loss
Premium account
At 1 June 2001 3,617,779 (3,695,832)
Movement on share premium account (See note 12) 1,901,941 -
Retained loss for the year - (1,747,870)
At 31 May 2002 5,519,720 (5,443,702)
14. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS FUNDS
At 31 May 2002 The Group The Company
2002 2001 2002 2001
Loss for the financial year (1,984,111) (2,320,224) (1,747,870) (2,383,863)
Increase in issued share capital
and share premium account 2,125,515 2,695 2,125,515 2,695
Net increase/(decrease) in
shareholders funds 141,404 (2,317,529) 377,645 (2,381,168)
Opening shareholders funds 741,553 3,059,082 705,243 3,086,411
Closing shareholders funds 882,957 741,553 1,082,888 705,243
Notes to the Accounts
Page 28
NOTES TO THE ACCOUNTS
Year ended 31 May 2002
15. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
2002 2001
Operating loss (1,692,533) (2,383,178)
Depreciation and amortisation charges 397,033 248,219
Loss on disposal of leasehold property - 1,541
Write (back) / down of associate (47,323) 47,323
Decrease / (increase) in debtors 11,273 (630,074)
Increase in creditors 520,268 552,367
Net cash outflow from operating activities (811,282) (2,163,802)
16. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
2002 2001
Returns on investments and servicing of finance
Interest received 17,477 71,507
Interest paid (2,877) (384)
14,600 71,123
Capital expenditure and financial investment
Payments to acquire tangible fixed assets 409,373 149,678
Payments on development expenditure 361,554 247,239
Receipts from sales of tangible fixed assets - (118,741)
770,927 278,176
Financing
Issue of shares, including share premium (see note 12) 2,125,515 2,695
New borrowings 350,000 -
2,475,515 2,695
17. ANALYSIS OF NET FUNDS
At 31 May Cash At 31 May
2001 Flow 2002
Cash in hand and at bank 947,013 903,408 1,850,421
Bank overdraft (21,094) 4,498 (16,596)
Other loans - (350,000) ( 350,000)
925,919 557,906 1,483,825
Notes to the Accounts
Page 29
NOTES TO THE ACCOUNTS
Year ended 31 May 2002
18. CONTINGENT LIABILITIES
By the nature of the business, a stake can be received from a customer in respect of some event happening in the
future, and hence the level of any actual liability to the group cannot be assessed until after that event has occurred,
although the maximum potential liability can be determined. As at the balance sheet date there were 78,729 (31 May
2001 : 222,051) of such stakes that had been received where the event to which they related was after the balance
sheet date. Accordingly 78,729 (31 May 2001 : 222,051) has been reflected as deferred income in the balance sheet
(see note 11).
19. CAPITAL COMMITMENTS
As at 31 May 2002 the group had no (31 May 2001: nil) capital commitments.
20. OPERATING LEASE COMMITMENTS
At 31 May 2002, the group was committed to making the following payments during the next year in respect of operating
leases:
2002 2001
Leases which expire after five years 84,220 72,737
21. RELATED PARTY TRANSACTIONS
During the year ended 31 May 2002 an amount totalling 29,510 (31 May 2001 : 91,059) has either been paid by the
group or reflected as payable, to a single supplier, Partingtons Limited. W D Mummery who is a director of
betinternet.com plc is a 50% shareholder of that supplier.
Amounts totalling 60,226 (2001 : 63,204) were paid, or are reflected as payable, to Binchys, a firm of solicitors. One
of the partners and a consultant of that firm are respectively a sister and brother of the Chairman of betinternet.com plc.
The consultant has, since the 31 May 2001, ceased to act as a consultant to Binchys.
During the year amounts of 53,175 and 45,000 were paid to two brothers of the Chairman for services provided to the
group in connection with consultancy services provided. For the prior year the amounts were 18,400 and 40,066. The
amounts exclude any expenses reimbursed.
During the year 46,794 (2001 : 30,307) has been paid to Browne Craine Associates Limited for the provision of
D.P. Craines services as Finance Director and Company Secretary. D. P. Craine is a director of Browne Craine
Associates Limited.
During the year ended 31 May 2002 amounts totalling 113,016 (2001 : Nil) were paid to iRegent Corporate Finance
Limited for services provided in acting as agent for the subscription of certain shares. M. L. Child who is a director of
betinternet.com plc is a director of iRegent Corporate Finance Limited.
A loan of 350,000 (2001 : Nil) was owed jointly to M.L. Child and Burnbrae Limited, a significant shareholder but not
a related party, at 31 May 2002. The loan was repaid subsequent to the year end following the receipt of the second
subscription from the subscription arrangements referred to in notes 12 and 23. M. L. Child is a director of the company.
Transactions in the companys share capital involving directors of the company are also referred to in note 12.
Notes to the Accounts
Page 30
NOTES TO THE ACCOUNTS
Year ended 31 May 2002
22. FINANCIAL INSTRUMENTS
The Groups financial instruments comprise cash balances, loans and liquid resources. The Group has no derivatives.
The main purpose of these financial instruments is to raise finance for the Groups operations. The disclosures below
exclude short term debtors and creditors. It is and has been, throughout the period under review, the Groups policy that
no trading in financial instruments should be undertaken.
The main risks arising from the Groups financial instruments are interest rate risk, liquidity risk, credit risk and foreign
currency risk.
Interest rate risk
The Group finances its operations mainly through capital with limited levels of borrowings. Cash at bank and in hand
earns interest at floating rates, based principally on short term inter bank rates. At the year end the Groups borrowings
were at fixed interest rates. During the year, the average rate for fixed interest borrowings was 7%.
Liquidity
The Groups objective is to maintain continuity of funding through trading and share issues but to also retain flexibility
through the use of short term loans.
Credit risk
The Groups policy is to control credit risk by only entering into financial instruments with counterparties after taking
account of their credit rating.
Foreign currency risk
The Group incurs foreign currency risk on stakes and winnings that are denominated in a currency other than sterling.
The Group ensures that whenever stakes are denominated in other currencies, corresponding winnings are also
denominated in those other currencies, thus limiting the foreign currency risk to the margin on these transactions.
Fair values
The fair value of financial assets and liabilities is equivalent to balance sheet values.
23. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE
Under the terms of the subscription agreement referred to in note 12, on 10 June 2002 8,000,000 new ordinary 1p shares
were issued for a total cash consideration of 800,000. In addition, 2,000,000 bonus warrants were issued to subscribe
for one ordinary 1p share at 12p per share.
Also under the subscription agreement, within 12 months of the EGM held on 10 December 2001 and conditional on
there being no material breach of the warranties contained in the subscription agreement, subscriptions will be made
for a further 8,000,000 new ordinary 1p shares, issued at 10p per share for a consideration of 800,000. At that time, a
further 2,000,000 bonus warrants to subscribe for one new ordinary share at 12p per share will be issued.
24. PENSION ARRANGEMENTS
The group does not operate any pension scheme for any of its directors or employees. Payments are, however, made
to certain directors to contribute to their own personal pension arrangements.
25. CONTROLLING PARTY AND ULTIMATE CONTROLLING PARTY
At 31 May 2002 the largest single shareholding in the company, which was held by V.E. Caldwell, represented 15.8% of
the issued share capital. Other interests of the Caldwell family are disclosed in the Directors Report on page 10.
As at 11 November 2002 the largest single shareholding in the company was held by Burnbrae Limited. This
represented 16.1% of the issued share capital.
The directors are of the opinion that there is no single ultimate controlling party.
Notes to the Accounts
Page 31
Annual Report & Accounts
Page 32
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Fourth Annual General Meeting of the above named
company will be held at The Claremont Hotel, 18/19 Loch Promenade, Douglas, Isle of Man,
on 9th December, 2002 at 2.00 pm for the purpose of transacting the following business:
ORDINARY BUSINESS
1. To receive and adopt the report of the directors and the accounts for the year ended 31 May, 2002.
2. To re-elect as a director Mr. H. Corkill who retires by rotation and, being eligible, offers himself for reelection
in accordance with the companys Articles of Association.
3. To elect as a director Mr. M.L. Child who was appointed since the date of the previous annual general
meeting and offers himself for election in accordance with the companys Articles of Association.
4. To elect as a director Mr. P.E. Doona who was appointed since the date of the previous annual general
meeting and offers himself for election in accordance with the companys Articles of Association.
5. To re-appoint KPMG Audit LLC as auditors and to authorise the directors to determine their remuneration.
SPECIAL BUSINESS
To consider and, if thought fit, to pass the following resolutions:
As a Special Resolution
6. The directors of the company be and they are hereby generally and unconditionally authorised in
accordance with Article 6(A) of the Articles of Association of the company (the Articles) to exercise all the
powers of the company to allot, grant options over, offer or otherwise deal with or dispose of any relevant
securities of the company (as defined in Article 6(G) of the Articles) up to an amount equal to but not
exceeding the authorised but unissued share capital of the company for the time being, provided that this
authority shall expire at the conclusion of the next Annual General Meeting of the company after the date
of passing of this resolution unless renewed, varied or revoked by the company in General Meeting. The
directors shall be entitled under such authority or under any renewal thereof to make at any time prior to
the expiry of such authority an offer or agreement which would or might require relevant securities to be
allotted, granted options over, offered or otherwise dealt with after such expiry and the directors may allot,
grant options over, offer or otherwise deal with relevant securities pursuant to such offer or agreement as
if the authority conferred hereby had not expired;
Annual Report & Accounts
Page 33
NOTICE OF ANNUAL GENERAL MEETING (CONTINUED)
As a Special Resolution
7. The directors of the company be and they are hereby empowered pursuant to Article 8 of the Articles of
Association of the company (the Articles) to allot equity securities (as defined in Article 7(H) of the Articles)
pursuant to the authority conferred on the directors to allot relevant securities by Resolution 6 above as if
paragraph A of Article 7 of the Articles did not apply to such allotment PROVIDED THAT this power shall
be limited to:
(i) the allotment of equity securities in connection with a rights issue in favour of ordinary shareholders
where the equity securities are issued proportionally (or as nearly as may be) to the respective number
of ordinary shares held by such shareholders (but subject to such exclusions or other arrangements
as the directors may deem necessary or expedient to deal with issues arising under the laws of any
territory or the requirements of any regulatory body or any stock exchange in any territory or the fixing
of exchange rates applicable to any such equity securities where such equity securities are to be
issued to shareholders in more than one territory, or legal or practical problems in respect of overseas
shareholders, fractional entitlements or otherwise howsoever);
(ii) the allotment of equity securities to holders of any options under any share option scheme of the
company for the time being in force, on the exercise by them of any such options; and
(iii) the allotment (otherwise than pursuant to paragraphs (i) or (ii) above) of equity securities up to a
maximum aggregate nominal value of 50,343.
The power hereby conferred shall expire at the conclusion of the next Annual General Meeting of the
company after the date of passing of this Resolution unless such power shall be renewed in accordance
with and subject to the provisions of the said Article 8, save that the company may before such expiry make
an offer or agreement which would or might require equity securities to be allotted after such expiry and
the directors may allot equity securities pursuant to such offer or agreement as if the power conferred
hereby had not expired.
To transact any other business which may be brought before the Meeting.
By order of the Board
David P. Craine
Secretary
Dated 11 November, 2002
Registered Office: Burleigh Manor, Peel Road, Douglas, Isle of Man IM1 5EP.
Notes:
1. A member of the company who is entitled to attend and vote at the above Meeting is entitled to appoint a proxy or
proxies to attend, speak and vote on his, her or its behalf. A proxy need not be a member of the company. Completion
of a proxy form does not preclude a member from attending the above Meeting and from speaking and voting thereat.
2. To be valid, proxy forms must be deposited with the companys Registrars, Northern Registrars Limited, Northern
House, Woodsome Park, Fenay Bridge, Huddersfield HD8 0LA not later than 12 noon on 6th December, 2002.
3. A copy of the contracts of service between each of the current directors of the company and the company will be
available for inspection at the Meeting from 15 minutes prior to and until the conclusion of the Meeting.
4. The register of directors interests and particulars of directors transactions in the share capital of the company and its
subsidiary companies will be available for inspection at the Meeting from 15 minutes prior to and until the conclusion of
the Meeting. Otherwise they will be open for inspection at the Registered Office of the company during normal business
hours on any week day (Saturdays and Isle of Man public holidays excluded) from the date of this notice until the date
of the Meeting.
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