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Betinternet 2002 Annual Report

Discussion in 'Casino Industry Discussion' started by mary, Nov 29, 2002.

  1. mary

    mary Dormant account

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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
    You must register/login in order to see the link. 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.
    CORPORATE INFORMATION WEBSITE
    You must register/login in order to see the link.
     
  2. spearmaster

    spearmaster RIP Ted

    The key points for me - but should be of interest to all:

    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.


    BetInternet (BI) does not do heavy advertising in Asia - for that matter, I don't recall seeing very much advertising period.

    Despite this, BI claims that 69% - SIXTY-NINE percent! of their turnover comes from Asia. Without significant advertising.

    If anyone didn't believe me then, this should be proof in the pudding.

    From a general perspective, this shows two things - one, that despite the strange regulations in this region, sports betting is very healthy and alive, even on the Net.

    Two, for the most part this proves that there is not a significant problem with payment solutions - perhaps they can't use their credit cards in HK or Singapore but they surely walk to the bank and send wires, or WU, or whatever.

    Three - BI have closed US accounts - and proven that an operation can be strong - or stronger - even without the supposedly betting-mad Americans - though one must remember that BI is an IoM book and the Americans prefer to play at the offshores. Still, this is a stunning achievement by any standards.

    Also look at the average revenue per customer (in pounds Sterling):
    Far East 4,500
    Rest of the World 3,122
    United Kingdom 1,305

    Part of this will undoubtedly be due to the World Cup - but there is a huge, huge difference between the Far East and everyone else - and the UK bettors by comparison are very tame.

    Now I think I am going to press for an introduction after all - someone has offered twice before and I didn't pursue those opportunities.
     

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