Item 1 - Business:
Global Gaming and Technology, Inc. (hereinafter referred to as the "Company") was engaged in the design, manufacture, and marketing of electronic micro- processor-controlled gaming machines. The Company, which was incorporated in Delaware in 1973, maintains its principal offices at 2575 S Highland Drive, Las Vegas, NV 89109. During the past year, the Company has not designed new equipment, nor is the design of any new equipment contemplated.
General Development of Business ------------------------------- The Company has been dormant for the past several years.
Licensing Activities -------------------- During the fiscal year, the Company did not apply for any gaming licenses. The lack of gaming licenses in Nevada and New Jersy is a severe detriment to growth. In effect, sales are confined to much smaller and less lucrative markets.
New Products; Research and Development -------------------------------------- The Company has not developed any new products during the fiscal year ended June 30, 1997, nor is the development of new products contemplated in the future. Since the electronic gaming device industry is constantly employing new products, the Company is not competitive in any markets.
Products -------- No new machines have been manufactured during the year ended June 30, 1997.
Marketing and Service --------------------- The Company has not been successful in expanding its market or marketing its products during the fiscal year ended June 30, 1997. The Company does not contemplate any material marketing activities during the next year ended June 30, 1998.
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PART I (Continued)
Item 1 - Business: (Continued)
Competition ----------- The gaming machine industry is a highly competitive industry. Bally Manufacturing Company (Bally) and International Gaming Technology (IGT) are principal domestic competitors of the Company. Additionally, Japanese manufacturing and marketing companies have entered the American market and have become a significant competitive factor. Additionally, new technology has made certain products obsolete. Management believes that the success of a gaming device is based upon player appeal, reliability, product support and competitive factors. However, the Company lacks the financial strength to compete in markets available for sales.
Manufacturing ------------- Manufacture of the Company's products consists of the assembly of machines from parts and components, some of which are standard and others of which are made to the Company's specifications. These parts and components are readily obtainable from several sources of supply and the Company does not rely on any one vendor as a source for the parts and components. No new machines were manufactured during the year ended June 30, 1997.
Employees --------- As of June 30, 1997, the Company had one employee.
Patents ------- The Company holds one United States Letters Patent issued in fiscal 1979, relating to the design and operation of its products and their various components. The Company is of the opinion that this Letters Patent has competitive value in that it would require competitors to use non-infringing designs to achieve the technological advances obtained by use of the designs covered in the Letters Patent. However, the Company believes that player appeal, cost of ownership and service, and prices are, and will be, of greater significance in establishing and maintaining a competitive position in the industry. United States Letters Patents have a duration of 17 years from the date of issue and are not renewable. Patents are the subject of current litigation. (See Litigation - Item 3)
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PART I (Continued)
Item 1 - Business: (Continued)
Government Regulation --------------------- Manufacturers and distrubutors of gaming devices in the State of Nevada and in Atlantic City, New Jersey (the primary American markets) are subject to licensure and extensive regulation. These licenses are issued after extensive investigations into the moral reputation and financial background of the individuals (and entities) applying for a gaming license. The licenses are revocable, nontransferable and renewable.
The investigative cost of licenses is borne by the person or company applying for the license. The Nevada Gaming Commission may deny licenses to persons who are engaged in gaming activities in other states. Because of the sub- stantial investigative costs of obtaining gaming licenses in the States of Nevada and New Jersey, the Company has deferred the decision to seek gaming licenses in these states.
Item 2
Item 2 - Properties:
The Company does not own any real or personal property.
Item 3
Item 3 - Legal Proceedings:
On or about May, 1994, the Company instituted litigation in the United States District Court for the District of New Jersey for patent infringement against Bally's Park Place, Inc., Trump Plaza Associates, Trump Taj Mahal Associates, Trump Castle Associates, The Claridge Hotel and Casino Corporation, Resorts International Hotel, Atlantic Showboat, Inc., and Greate Bay Hotel and Casino, Inc. Global was seeking damages to adequately compensate for the past infringement of the patent in suit by each of the defendants together with interest and costs.
In this lawsuit, the Company contends that the defendants infringed upon a patent owned in connection with the manufacture, use or sale of slot machines driven by stepper motors.
As a result of this action, on June 30, 1994, the Company entered into a license agreement with Bally Gaming, whereby the Company grants a non- exclusive, personal, non-transferable right and paid-up license to make, have made, use and sell, test, lease or otherwise dispose of licensed products under claims of this license patent. The Company was to receive a non- refundable net royalty payment in the amount of one million dollars ($1,000,000). (See Note 2(1) for details).
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PART I (Continued)
Item 3 - Legal Proceedings: (Continued)
The Company reports that Bally Gaming International, Inc. ("Bally") has ceased making payments pursuant to the promissory note dated May 2, 1994. As a result, the Company has initiated a breach of contract action in the Circuit Court of Cook County located in Chicago, Illinois. In response to this lawsuit, Bally has asserted in a counterclaim that it is not obligated to make any further payments and demands a refund of all prior payments made. As a result of the financial position of the Company, the manner in which this matter is resolved is likely to have a significant financial impact on the company.
On or about July 6, 1994, IGT North America, Universal Distributing of Nevada, Inc. and Sigma Game, Inc. filed a civil complaint in the United States District Court for the District of Nevada against the Company for declaratory judgement of non-infringement, invalidity, unenforceability and laches. This lawsuit arose as a result of the New Jersey litigation described above, and was filed for the purpose of having Global's patent declared invalid. The Company filed a counterclaim for infringement against IGT North America, Universal Distributing of Nevada, Inc., and Sigma Game, Inc. The Company has settled independently with Universal Distributing of Nevada, Inc. and Sigma Game, Inc. (See Note 2 for details).
On February 18, 1997, the United States District Court for the District of Nevada entered a Decision and Order regarding the Company's patent infringe- ment claim which was pending against IGT. In the Decision and Order, the Court found that IGT's reel-type slot machines infringe the Company's patent, but held that the patent was invalid because the invention disclosed therein was on sale more than one year prior to the date on which the Company's patent application was filed. Subsequently, the United States District Court for the State of Nevada agreed to entertain a motion for reconsideration of that portion of the Decision which concerns whether the Company's patent is invalid. The Company's request for reconsideration is currently pending with the Court. The Court further indicated that no judgement order would be entered in this case until the Company's request for reconsideration is resolved.
With regards to the patent infringement litigation against IGT, the Company is currently pursuing an appeal of the trial court's order finding that the Company's Patent No. 4,099,722('722 Patent) is invalid as a result of the on-sale bar. This appeal will be heard by the United States Appellate Court for the Federal Circuit located in Washington D.C. The Company believes its appeal is meritorious and that it will ultimately prevail on the merits of the case, although it cautions investors that the outcome of litigation is difficult to predict. This appeal is in its initial stages and is expected to take at least one year to resolve.
The Company will be incurring legal costs regarding the prosecution of its infringement claims. Per Counsel for the Company, at present it is difficult to determine these future legal costs.
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PART I (Continued)
Item 4
Item 4 - Submission of Matters to Vote of Security Holders:
No matter was submitted to the vote of security holders during the fiscal year.
PART II
Item 5
Item 5 - Market for the Registrant's Common Stock and Related Security Holder Matters:
The Common Stock of the Company is traded in the over-the-counter market. The Company had 2,743 shareholders of record on June 30, 1997.
The following table indicates the range of high and low bid prices of the Company's Common Stock for the quarterly periods starting September 30, 1994, in the "Pink Sheets." No quotes are available from the National Association of Securities Dealers through NASDAQ, its automated system for reporting quotes:
High Low Bid Ask Bid Ask
Quarter Ending September 30, 1994 1/8 3/8 1/8 3/8 Quarter Ending December 31, 1994 1/8 3/8 1/8 3/8 Quarter Ending March 31, 1995 1/8 3/8 1/8 3/8 Quarter Ending June 30, 1995 1/8 3/8 1/8 3/8 Quarter Ending September 30, 1995 1/8 3/8 1/8 3/8 Quarter Ending December 31, 1995 1/8 3/8 1/8 3/8 Quarter Ending March 31, 1996 1/8 3/8 1/8 3/8 Quarter Ending June 30, 1996 1/8 3/8 1/8 3/8 Quarter Ending September 30, 1996 1/8 3/8 1/8 3/8 Quarter Ending December 31, 1996 1/8 3/8 1/8 3/8 Quarter Ending March 31, 1997 1/8 3/8 1/8 3/8 Quarter Ending June 30, 1997 1/8 3/8 1/8 3/8
The foregoing over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions.
The Company has not paid any dividends during the foregoing periods, nor does the Company anticipate paying dividends within the foreseeable future. However, there are no restrictions on the ability of the Company to declare dividends on its common stock.
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PART II (Continued)
Item 6
Item 6 - Selected Financial Data:
The following selected financial data of Global Gaming and Technology, Inc. should be read in conjunction with the financial statements and related notes appearing elsewhere in this Form 10-K.
Item 7
Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations:
Some of the principal shareholders of the Company have informally agreed to participate in the contribution of shares to the Company, which the Company will have available for acquisitions of assets of other businesses. With the exception of the program to make acquisitions through use of these shares, the Company has not yet formulated any specific financing arrangements.
The Company presently lacks financial resources and has no plans which would establish financial resources. The lack of financial resources has prohibited the Company from expanding operations. The primary markets of Nevada and New Jersey cannot be serviced unless the Company obtains gaming licenses in these states. Because of the prohibitive costs of obtaining these licenses, the Company has no plans to seek licensing in these states or any other.
Total debt of the Company aggregated $1,155,352, $1,166,668 and $1,173,785 (exclusive of accounts payable and accrued expenses) for the years ended June 30, 1997, 1996 and 1995, respectively. Of these amounts, $829,474, $837,414 and $841,879 was owed to Michael Wichinsky as of June 30, 1997, 1996 and 1995, respectively. Total revenues aggregated $20,601, $245,078 and $25,230 for the years ended June 1997, 1996 and 1995, respectively. Income in 1996 of $245,078 consisted of settlements of $149,505 from Sigma Game, Inc. and $87,039 from Universal Distributing of Nevada, Inc. This income is non-recurring. As of June 30, 1997 and 1996, the Company has negative working capital of $2,163,786 and $1,913,823, respectively. At the present time, the Company has not adopted any plan to resume operations.
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PART II (Continued)
Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued):
The Company has been dormant for the past several years. The Company did not manufacture any gaming devices during the fiscal years ended June 30, 1997 and 1996, and does not anticipate having the necessary resources to manu- facture devices in the future. This fact, combined with the Company's lack of licenses described above, is anticipated to have a material adverse impact upon the Company's ability to generate revenues in the future.
Primary costs of the Company include interest and annual administrative costs of $222,692, $240,184 and $211,260 for the years ended June 30, 1997, 1996 and 1995, respectively.
The rate of inflation has had no impact on the Company's operations because the Company has been dormant for the last several years.
Item 8
Item 8 - Financial Statements and Supplementary Data:
See Index to Financial Statements on page 17.
Item 9
Item 9 - Disagreements on Accounting and Financial Disclosures:
There have been no disagreements on accounting or financial disclosures with accountants.
PART III
Item 10
Item 10 - Directors and Executive Officers of the Registrant:
Effective June 2, 1997, the following persons were appointed as directors and officers of the corporation for a term of one year or until the next election of Directors.
Name Age ---- --- Mark Sarason: President, Secretary, Treasurer. 50
Wayne D. Umbertis: Director. 59
Constance Koplow: Director. 57
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PART III (Continued)
Item 10 - Directors and Executive Officers of the Registrant (Continued):
Mark Sarason has 26 years experience in the gaming industry, directed pri- marily to marketing and marketing operations. The last three years Mr. Sarason has acted as president of Casino Marketing Services, Ltd., a company specializing in marketing development programs for secondary gaming destin- ations. Prior to his activities with CMS, Mr. Sarason has held positions of Executive Director of Casino Marketing and Director of Customer Development for Harrah's, Atlantic City, NJ.
Wayne D. Umbertis has a Master's Degree in International Business Administra- tion. Prior to joining Games of Nevada, he was Vice President of Marketing at Advanced Telesystems. Since 1990, Wayne D. Umbertis has been acting as a Marketing Consultant in the communications industry. For the past three years, he has served as President of "U" Call, a Division of FonExpress, Inc., which markets prepaid phone cards and telecommunication promotional and mark- eting devises.
Constance Koplow has a Bachelor of Arts and Master of Education Administration degree from the University of Nevada Las Vegas. She has owned and operated two businesses, one in women's ready to wear retail and one in food service. She served as an administrator at the Community College of Southern Nevada for nine years and has sixteen years experience in the gaming industry.
None of the foregoing directors have held directorships in companies with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of such Act or any company reg- istered as an investment company under the Investment Company Act of 1940.
During the past five years, none of the foregoing officers or directors have been (i) involved in any Federal Bankruptcy proceedings, (ii) convicted in a criminal proceeding, (iii) the subject of a pending criminal proceeding, (iv) the subject of any order, judgment, or decree not subsequently reversed, sus- pended, or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining such person from, or otherwise limiting activities as an investment advisor, underwriter, broker, or dealer in securities, or as an affiliated person, director, or insurance company, or engaging in or contin- uing in any conduct or practice in connection with such activity, or from engaging in any type of business practice or engaging in any activity in connection with the purchase or sale of any security or in connection with any violation of Federal or state securities laws.
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PART III (Continued)
Item 10 - Directors and Executive Officers of the Registrant: (Continued)
Additionally, none of such persons were the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, or any Federal or state authority barring, suspending, or otherwise limiting for more than sixty (60) days the right of such person to engage in any activity referred to above, or to be associated with any person engaged in any such activity, nor was any such person found by a court of competent jurisdiction in a civil action or by the Securities & Exchange Commission to have violated any Federal or state securities law.
Item 11
Item 11 - Executive Compensation:
The Company paid $14,825 to Constance Koplow in the fiscal year ended June 30, 1997. None of the officers or directors were indebted to the Company during the fiscal year. The Company does not contemplate any increase in the payment of salaries to officers or directors in the near future. During the fiscal years ended June 30, 1997, 1996 and 1995, no Officer or Director of the Company received cash remuneration in excess of $60,000. There are no standard arrangements for the compensation of directors.
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PART III (Continued)
Item 12
Item 12 - Security Ownership of Certain Beneficial Owners and Management:
The following table sets forth as of June 30, 1997, the number of shares of common stock beneficially owned by each person known by the Company to own more than 5% of the common stock and the percentage of common stock represent- ed thereby.
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PART III (Continued)
Item 13
Item 13 - Certain Relationships and Related Transactions:
(A) Transactions with Management and Related Parties ------------------------------------------------ During the year ended June 30, 1997, Michael Wichinsky was repaid $31,252 from the Company as interest and principal payments on his note to the Company and the Estate of William T. O'Donnell, Sr. was repaid $13,261 as interest and principal payments on his note to the Company.
(B) Certain Business Relationships ------------------------------ The existing business and personal relationships between the Directors and Officers are as follows:
Mark Sarason was appointed as President, Secretary and Treasurer effective June 2, 1997 until the next annual election of the Board of Directors.
PART IV
Item 14
Item 14 - Exhibits, Financial Statement Schedules
Attached hereto as EXHIBIT A are the financial statements and additional financial statement schedules required by Item 8 of this form.
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SIGNATURES ----------
Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DATED: 09/12/97 -------------------- GLOBAL GAMING & TECHNOLOGY, INC.
By: Mark Sarason --------------------------- Mark Sarason President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons as a majority of the members of the Board of Directors of the registrant and in the capacities and on the dates indicated.
DATED: 09/12/97 -------------------- Mark Sarason -------------------------- Mark Sarason Chief Financial Officer
Mark Sarason -------------------------- Mark Sarason Secretary/Treasurer
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EXHIBIT A
FINANCIAL STATEMENTS
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Global Gaming and Technology, Inc. Financial Statements June 30, 1997, 1996 and 1995
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Global Gaming and Technology, Inc. Financial Statements June 30, 1997, 1996 and 1995
-----------------
PAGE ---- Accountant's Opinion 18
Balance Sheets 19
Statement of Operations and Deficit 20
Statement of Cash Flows 21
Summary of Significant Accounting Policies 22 - 23
Notes to Financial Statements 23 - 27
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JOSEPH F ZERGA, LTD CERTIFIED PUBLIC ACCOUNTANTS 2950 E FLAMINGO RD, STE L LAS VEGAS, NV 89121 (702) 732-2775
To the Board of Directors Global Gaming and Technology, Inc. Las Vegas, Nevada
INDEPENDENT AUDITOR'S REPORT ----------------------------
We have audited the accompanying balance sheets of Global Gaming and Tech- nology, Inc. as of June 30, 1997 and 1996 and the related statements of operations, retained earnings (deficit), and cash flows for each of the years in the three year period ended June 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing stan- dards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements indicated above present fairly in all material respects the financial position of Global Gaming and Technology, Inc. at June 30, 1997 and 1996, and the results of its operations and cash flows for each of the years in the three-year period ended June 30, 1997, in con- formity with generally accepted accounting principles.
Las Vegas, Nevada Joseph F. Zerga September 8, 1997
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Global Gaming and Technology, Inc. Summary of Significant Accounting Policies and Notes to Financial Statements June 30, 1997, 1996 and 1995
THE COMPANY ----------- The Company was incorporated in the State of Delaware in 1973 and has elected June 30 as its year end. The Company has been engaged in the research, development, manufacture and marketing of electronic gaming devices and coin- less games of chance. On April 27, 1995, it came to the Company's attention that it had failed to file its franchise tax reports for the State of Delaware for fiscal years 1987 through 1994 and, as a result, its corporate charter was revoked effective March 1, 1994. Effective May 15, 1995 the Company's corporate charter was reinstated by the State of Delaware retro- actively to February 28, 1994.
PROPERTY AND EQUIPMENT ---------------------- Property and equipment, including significant improvements thereto, are carried at cost, less accumulated depreciation. Expenditures for repairs and maintenance are charged to expenses as incurred. When assets are retired or disposed of, the cost and related accumulated depreciation are removed from the accounts. Gains and losses from the disposition of property are included in operations. Depreciation is provided using Straight-Line methods.
INCOME TAXES ------------ Because of a net operating loss carry forward from prior years, the Company does not have an income tax obligation.
LITIGATION ---------- See Item 3, Page 5 - 6.
ESTIMATES ---------
The preparation of financial statements in conformity with generally accepted accounting principals requires the use of management's estimates.
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Global Gaming and Technology, Inc. Summary of Significant Accounting Policies and Notes to Financial Statements June 30, 1997, 1996 and 1995
NET OPERATING LOSS CARRYFORWARDS TO 1998 ----------------------------------------
Expires ------- 1983 $ 1,184,519 1998 1984 455,313 1999 1985 276,972 2000 1986 226,859 2001 1987 216,931 2002 1988 451,580 2003 1989 104,956 2004 1990 136,629 2005 1991 362,469 2006 1992 122,207 2007 1993 356,521 2008 1995 137,588 2010 1997 202,091 2012 ----------- $ 4,234,635 ===========
NOTE 1 - Inventories
The Company has inventory consisting of ten (10) slot machines from a settle- ment arising out of litigation with Universal Distributing of Nevada, Inc. The Company's share of the slot machines is valued at $28,500 as of June 30, 1997. (See Note 2(3) for details).
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Global Gaming and Technology, Inc. Summary of Significant Accounting Policies and Notes to Financial Statements June 30, 1997, 1996 and 1995
Note 2 - Notes Receivable
(1) The total amount due pursuant to the promissory note from Bally's Gaming shall be paid in sixty consecutive installments, pursuant to the follow- ing schedule:
A. $10,166.66 per month shall be paid on the first day of each month, starting on July 1, 1994, and continuing through December 1, 1996.
B. $21,500.00 per month sall be paid on the first day of each month, starting on January 1, 1997, and continuing through June 1, 1999.
C. $147,000 was received during the year ended 6/30/97. The scheduled payments under this note have been discounted at 8% to reflect the present value of the note.
Note Receivable - Current Portion $ -0- Note Receivable - Long Term 511,675 --------- Note Balance as of June 30, 1997 $ 511,675 =========
The amount of this payment is secured by a note from Bally's Gaming. Since June 30, 1994, the Company had been receiving monthly install- ment payments on this note through April 1, 1997. This note is currently in default, and has been classified as a long term receiv- able. (See Item 3, Legal Proceedings).
(2) The promissory note due from Sigma Game, Inc. was from a settlement arising out of litigation. $25,000 was received during the year ended 6/30/97. The following scheduled payments have been discounted at 8% to reflect the present value on June 30, 1997 of the note of $33,865.
February 7, 1998 $ 25,000 February 7, 1999 12,500
(3) The note due from Universal Distributing of Nevada, Inc. was from a settlement arising out of litigation. Payments totaling $39,026 were received in the year ended June 30, 1996. The final payments due from this note consisted of $19,513 collected in July 1996 and ten (10) slot machines, received in August 1996, the Company's share valued at $28,500. Final payments due from this note were received in the year ended June 30, 1997.
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Global Gaming and Technology, Inc. Summary of Significant Accounting Policies and Notes to Financial Statements June 30, 1997, 1996 and 1995
Note 2 - Notes Receivable (Continued)
(4) $2,675 was due from a local company for the sale of all inventory. This note was considered uncollectible by management, and was written off in the year ended June 30, 1997.
NOTE 3 - Property and Equipment
The Company has no real or personal property as of June 30, 1997.
NOTE 4 - Notes Payable
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Global Gaming and Technology, Inc. Summary of Significant Accounting Policies and Notes to Financial Statements June 30, 1997, 1996 and 1995
NOTE 5 - Stockholders' Deficiency
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Global Gaming and Technology, Inc. Summary of Significant Accounting Policies and Notes to Financial Statements June 30, 1997, 1996 and 1995
NOTE 6 - Earnings (Loss) Per Share
Income (Loss) per share was computed by dividing the net income or loss by the weighted average number of shares outstanding during the period.
NOTE 7 - Prior-Period Adjustment - Income Taxes
At June 30, 1997, the Company has available a net Operating Loss carried forward from prior years in the amount of $4,234,635. The deficit at the beginning of the 1995 fiscal year has been adjusted to reflect alternative minimum tax liability for 1994. This tax liability was paid in full in the quarter ended September 30, 1994.
NOTE 8 - Other Income
Other Income for the year ended June 30, 1996 consists of settlements reached with Sigma Game, Inc. and Universal Distributing of Nevada in the amount of $149,505 and $87,039, respectively. The amount due from Sigma Game, Inc. has been discounted at 8% per annum.
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