Ok Men,
more hallucinations,
OK,
you convinced me,
these guys have,
lots of contracts,
A cooperative,
mutually beneficial,
smooth sailing,
history,
lots of friends,
in high places....
add that to an
excellent income statement,
an excellent balance sheet...
i need some new dentures,
to go with my convertible...
source: edgar.com
======================
The Company's eLottery subsidiary (formerly named Unistar Gaming
Corp.) develops, provides and maintains Internet, intranet and
telephone communications, accounting, database and other
applications and services for use by the domestic and
international lottery market. eLottery's UniStar Entertainment
subsidiary has the exclusive right to design, develop and manage
the National Indian Lottery (NIL) of the Coeur d'Alene Tribe of
Idaho (CDA). The NIL was operational beginning in January 1998.
However, in response to an adverse legal opinion on December 17,
1998, eLottery and the CDA terminated the operations of the NIL
and the US Lottery telephone and Internet operations managed byeLottery.
Legal and Other RisksOn October 16, 1995, the CDA filed an action entitled Coeur
d'Alene Tribe v. AT&T Corp. in the Tribal Court, located in
Plummer, Idaho (Case No. C195-097): (i) requesting a ruling that
the NIL is legal under the federal Indian Gaming Regulatory Act
of 1988 ("IGRA"), that IGRA preempts state laws on the subject of
Indian gaming, that Section 1084 is inapplicable and that
therefore the states lack authority to issue Section 1084
notification letters to any long-distance carrier; and (ii)
seeking an injunction preventing AT&T from refusing to provide
telephone service to the NIL. The CDA took the position that all
NIL gaming activity was occurring on "Indian lands" as required
by IGRA. On February 28, 1996, the Tribal Court ruled: (i) that
all requirements of IGRA have been satisfied; (ii) that Section
1084 is inapplicable and the states lack jurisdiction to
interfere with the NIL; and (iii) that AT&T cannot refuse service
to the NIL. On July 2, 1997, the Tribal Appellate Court affirmed
the lower Tribal Court's
May 1, 1996 ruling and analysis upholding the CDA's right to
conduct the NIL telephone lottery. On 8
August 22, 1997, AT&T filed a complaint for declaratory judgment
against the CDA in the U. S. District Court for the District of
Idaho, to obtain a federal court ruling on the validity and
enforceability of the Tribal Court ruling. On December 17, 1998,
that Court issued an opinion and order denying the motions and
counter-claims of the CDA and granting declaratory judgment in
favor of AT&T upholding the position of AT&T and overruling the
decisions of the Tribal Courts. In response to that decision,
eLottery and the CDA terminated operations of the NIL and the US
Lottery in every state where it had been offered. The CDA has
filed a notice of appeal of the District Court decision; however,
eLottery will not participate in or fund any appeal of thisruling.
On September 14, 1998, the CDA, eLottery and representatives of
the U.S. Department of Justice had discussions regarding a
declaratory judgment to be sought jointly from the U.S. District
Court for the District of Idaho as to whether the operation of
the NIL is legal under 18 U.S.C. Sections 1952 and 1955. eLottery
was informed that the Department of Justice views such operation
to be in violation of such statutes. The Department of Justice
proposed that the parties file a joint stipulation of facts and
cross-motions for summary judgment in the declaratory judgment
action. On December 17, 1998, the Idaho Federal District Court
issued an opinion and order granting declaratory judgment in
favor of the action styled AT&T v. Coeur d' Alene Tribe. In
response to that decision, eLottery and the CDA terminated
operation of the NIL and the US Lottery. In light of the ruling
of the U.S. District Court of Idaho and the termination of the
NIL and the US Lottery, eLottery has requested confirmation from
the Department of Justice that no further action will be taken.
On May 28, 1997, the Attorney General of the State of Missouri
brought an action in the Circuit Court of Jackson County,
Missouri, against the CDA and UniStar Entertainment seeking to
enjoin the NIL games offered by the CDA over the Internet and
managed by UniStar Entertainment. The complaint also sought
civil penalties, attorneys fees and court costs. The complaint
alleged that the NIL violates Missouri anti-gambling laws and
that the marketing of the games violates the Missouri
Merchandising Practices Act. UniStar Entertainment and the CDA
removed the case to the U.S. District Court for the Western
District of Missouri, which denied the State's subsequent motion
to remand back to the state court. The court also subsequently
granted a motion to dismiss the CDA from this case based on
sovereign immunity. The court preliminarily denied a motion to
dismiss UniStar Entertainment based on sovereign immunity,
although the court indicated it might reconsider that decision.
UniStar Entertainment filed a motion for reconsideration of its
motion for dismissal. The State of Missouri has appealed the
dismissal of the CDA to the Eighth Circuit Court of Appeals.
On January 28, 1998, the State of Missouri sought to dismiss
voluntarily the existing federal case against UniStar
Entertainment and the next day filed a new action against
Executone, UniStar Entertainment and two tribal officials, with
essentially the same allegations, in state court. The State
obtained a temporary restraining order from a state judge against
Executone, UniStar Entertainment and two tribal officials
enjoining the marketing of the NIL Internet and telephone
lotteries in the State of Missouri. On February 5, 1998, the U.S.
District Court for the Eastern District of Missouri ruled that this
second case also should be heard in federal court, transferred the
second case to the Western District of Missouri where the original
case had been filed, and dissolved the state court's temporary
restraining order. A motion to dismiss the second case based on the
sovereign immunity of all the defendants and a motion to abstain
in favor of the jurisdiction of the Coeur d'Alene Tribal Court
are pending. The State of Missouri has appealed to the Eighth
Circuit the denial of its motion to remand the case to state
court or, in the alternative, to seek a preliminary injunction.
On January 6, 1999, the Eighth Circuit dismissed Missouri's
appeal from the Eastern District of Missouri. In the same
opinion, the Eight Circuit vacated the decisions from the WesternDistrict of
9
Missouri as to the CDA and remanded that case to the Western
District for a hearing on whether the Internet games of the NIL are
gaming activities "on Indian lands." The Eighth Circuit also held
valid Missouri's voluntary dismissal of UniStar Entertainment from
the Western District lawsuit. In light of the termination of the
NIL and the US Lottery, eLottery anticipates seeking dismissal of
the Missouri actions.
On September 15, 1997, the State of Wisconsin, by its Attorney
General, filed an action in the Wisconsin State Circuit Court for
Dane County against Executone, UniStar Entertainment and the CDA,
to permanently enjoin the NIL offered by the CDA on the Internet.
The complaint alleged that the offering of the NIL violates
Wisconsin anti-gambling laws and that legality of the NIL has
been misrepresented to Wisconsin residents in violation of state
law. In addition to an injunction, the suit sought restitution,
civil penalties, attorneys' fees and court costs. Executone,
UniStar Entertainment and the CDA have removed the case to the
U.S. District Court in Wisconsin. On February 18, 1998, the
District Court dismissed the CDA from the case based on sovereign
immunity and dismissed Executone based on the State's failure to
state a claim against Executone. The State of Wisconsin appealed
the dismissal of the CDA to the Seventh Circuit Court of Appeals.
A motion to dismiss the case against UniStar Entertainment on the
basis of sovereign immunity was denied. UniStar Entertainment
appealed the denial of its motion to dismiss to the Seventh
Circuit Court of Appeals. In light of the termination of the NIL
and the US Lottery, eLottery anticipates seeking dismissal ofthis action.
The Company's Convertible Subordinated Debentures are convertible
into approximately 1.5 million shares of common stock as of March
31, 1999. The shares issuable upon conversion of the Debentures
were not included in the computation of diluted earnings per
share because they would be antidilutive for each of the periods
presented. Incremental common shares assumed to be issued for
stock options totaling 540,000 and 61,000 shares as of March 31,
1999 and 1998, respectively, were not included in the computation
of diluted earnings per share due to the net losses for both
periods. Options to purchase 783,000 and 1.2 million shares of
common stock as of March 31, 1999 and 1998, respectively, were
not included in the computation of diluted earnings per share
because the exercise price was greater than the average market
price of the shares of common stock.
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