<PAGE> 2
FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] 15, ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]For the fiscal year ended: 10/31/96
OR
[ ] 15, TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
Commission file number: 33-79678
GAMING VENTURE CORP., U.S.A.
(Exact name of registrant as specified in charter)
NEVADA 22-3378922
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
177 Main Street, Suite 312, Fort Lee, NJ 07024
(Address of principal executive offices) (Zip Code)
(201) 947-4642
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
1preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for at least the past 90 days. Yes __x__ No ____
<PAGE> 3
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference to Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X].
The Corporation's revenues for its most recent fiscal year were $356,527.
As of October 31, 1996, nine market makers maintained bids in the Company's
securities. The current market value of the registrant's voting $.001 par
value common stock held by non-affiliates of the Registrant is approximately
$4,084,211.
The number of shares outstanding of registrant's only class of common stock,
as of October 31, 1996 was 1,591,834 and at December 31, 1996 was 1,591,834
shares of its $.001 par value common stock. No documents are incorporated
into the text by reference. Transitional Small Business Disclosure Format
(check one):
Yes No x
--------- ---------
Exhibit Index is located on Page 23.
<PAGE> 4
PART I
ITEM 1. DESCRIPTION OF BUSINESS (A) BUSINESS DEVELOPMENT. The
Company
was incorporated in Nevada on June 1, 1995. The Company is authorized to
issue Fifty Million (50,000,000) Common Shares, $.001 par value. The Board
of Directors of the Company have authorized a dividend distribution of 100,000
"A" Warrants on a pro rata basis to the shareholders of record as of June 4,
1995. The "A" Warrants shall be exercisable for a period of two years from
issuance. The "A" Warrants shall be exercisable into Common Shares of the
Company at the exercise price of $4.00 per Common Share. The Board of
Directors of the Company have also authorized a dividend distribution of
100,000 "B" Warrants on a pro rata basis to the shareholders of record as of
June 4, 1995. The "B" Warrants shall be exercisable for a period of two
years from issuance. The "B" Warrants shall be exercisable into Common
Shares of the Company at the exercise price of $6.00 per Common Share. There
are currently 99,333 Class "A" Warrants and 99,333 Class "B" Warrants issued
and outstanding.
BUSINESS OBJECTIVE. The operations and objectives of the Company are to
provide a daily 900 number hotline information service and weekly newsletter
regarding all aspects of the gaming industry.
The Company also provides consulting services. The consulting services shall
include information services described above, consulting regarding day to day
operations of gaming enterprises and consulting regarding investor relations
and corporate communications for gaming enterprises.
No independent organization has conducted market research providing management
with independent assurance from which to estimate potential demand for the
Company's business operations. Even in the event market demand is
independently identified, there is no assurance the Company will be
successful.
EMPLOYEES. As of the date of this Prospectus, the Company has two full time
employees (the Company's current officers) and two part time employees. The
officers conduct all of the business of the Company. See "Risk Factors."
The Company will, as operations demand, sub-contract the balance of its
personnel through independent contractors or hire additional employees.
CONSULTING AGREEMENT. During June, 1995, the Company entered into a
consulting agreement with Pratt, Wylce & Lords, Ltd. ("Pratt") to assist the
Company in its capitalization and the obtainment of additional financing. To
date, Pratt has provided consulting services to the Company regarding capital
structuring, initial equity financing, and preparation of a registration
statement. As partial payment for consulting services, the Company issued
250,000 of its Common Shares to Pratt, of which 65,000 Common Shares were
registered and distributed to Pratt shareholders and 65,000 Common Shares to a
nominee of Pratt. In addition, Pratt received total cash compensation of
$60,000.
Pratt and the Company believed that the distribution to Pratt's shareholders,
which resulted in an increased shareholder base of the Company, will be an
advantage to the Company at such time as the Company may require additional
capital and/or make application to NASDAQ. As a result, the Company paid for
the registration costs of the distribution along with the registration of
common stock on behalf of selling shareholders.
COMPETITION. There is significant competition in the gaming industry. The
Company will be competing with established companies and other entities (many
of which may possess substantially greater resources than the Company).
Almost all of the companies with which the Company competes are substantially
larger, have more substantial histories, backgrounds, experience and records
of successful operations, greater financial, technical, marketing and other
resources, more employees and more extensive facilities than the Company now
has, or will have in the foreseeable future. It is also likely that other
competitors will emerge in the near future. There is no assurance that the
Company will continue to compete successfully with other established gaming
news enterprises. The Company shall compete on the basis of quality and on
public taste in addition to a price basis. Inability to compete successfully
might result in increased costs, reduced yields and additional risks to the
investors herein.
BUSINESS DEVELOPMENT COMPANY. As the Company obtains equity interests in
gaming companies who desire to become public, the Company may become subject
to the provisions of the Investment Company Act of 1940. It is possible that
the Company may choose to elect to be treated as a Business Development
Company ("BDC") pursuant to Section 54 of the Investment Company Act of 1940
(the "1940 Act"). On October 21, 1980, the 1940 Act was amended by a series
of amendments which added sections 59 through 65. These sections comprise
the Small Business Investment Incentive Act of 1980 (the "SMIIA"). For
purposes of the SMIIA, a business development company is defined as a domestic
closed-end company which is operated for the purpose of making certain types
of investments and which makes available significant managerial assistance to
the companies in which it invests. Generally, a company which elects to be
treated as a business development company, or intends within 90 days to so
elect, is exempt from certain provisions of sections 1 through 53 of the 1940
Act.
<PAGE> 4
To take advantage of these special regulatory provisions, a BDC must comply
with sections 59 through 65 of the 1940 Act, which require, among other
things, that:
a. a majority of the BDC's directors must not be "interested persons"
as defined in section 2(a)(19) of the 1940 Act;
b. A BDC is restricted in the kind of investments it can make, i.e.,
at least seventy percent of the BDC's assets (excluding assets necessary to
maintain the business, such as office furniture) must consist of securities of
small, developing business or financially troubled businesses and such liquid
assets as cash or cash items, Government securities or short-term, high
quality debt securities;
c. A BDC must annually furnish to its shareholders a statement, in
such form and manner as the Securities and Exchange Commission may prescribe,
about the risks involved in investing in a BDC due to the nature of its
portfolio, and;
d. A BDC must have a class of equity securities registered under the
1934 Act or have filed a registration statement under that section and must
comply with the periodic reporting requirements under the 1934 Act, including
annual reports, quarterly reports and reports of certain material changes,
rather than with those in section 30 of the 1940 Act.
SEASONAL NATURE OF BUSINESS ACTIVITIES. The Company's business
activities are not seasonal.
(B) BUSINESS OF ISSUER.
GENERAL. The Company provides the following products and services.
Information Center: The Company's Information Center division covers
all types of gaming. Information concerning all aspects of the gaming
industry shall be provided, including riverboat and land based gambling,
lotteries, paramutuals, charitable gaming and Indian gaming. The Company
shall also provide very limited information on Internet gaming which is
currently unregulated. The Company provides The Gaming Industry Daily Report
Hotline, a 900 number hotline at $.95 per minute with the average length of
the call being 4.5 minutes. The Gaming Industry Daily Report has four
selections which include a daily update, a weekly update, a model portfolio
and CEO interviews. The Company also distributes The Gaming Industry Weekly
Report, which includes news, editorial commentary, insider transactions and a
rumor section. The Gaming Industry Weekly Report charges $75 for 13 weeks
and $250 for 52 weeks by mail. The fax subscription is $125 for 13 weeks and
$400 for 52 weeks. There is also a combination plan where a subscriber
receives the weekly report and the hotline without any 900# charges for $99
per month, payable three months in advance. The subscriber dials a toll
number and enters a code to hear The Gaming Industry Daily Report.
In September, 1995, the Company launched the Gaming Industry Daily Report
newsletter that is only available by E-mail or fax. The subscription price
is $79 for 13 weeks and $270 for 52 weeks. The Company also offers a
combination plan for both Daily and Weekly newsletter for $169 for 13 weeks
and $530 for a year subscription.
Mr. Woinski is the only principal who has experience in preparing published
reports relating to the gaming industry ( since March, 1993).
The Company intends to expand the information center to include daily fax
updates on the events in the industry and in the financial markets, a wire
service to disseminate the information to the uniformed public and joint
ventures with other industry publications. The Company has expanded its
Information Center with the launching of Gaming Stock Investor Forum on its
web site at http://gamingven.com. The Company intends to expand this in the
future to become a Central Information Center for the gaming industry
including a wire service, corporate profiles and provide 24 hour information
on the gaming industry. The Forum is free to the public and is being
frequented by people all over the world.
There is currently very limited information available regarding the gaming
industry. The Company's information services are targeted at industry
personnel plus consumers of and investors in the industry. The Company
targets areas that have legalized casinos since that is where most of the
employees and management reside and work. These areas include Nevada,
Mississippi, Iowa, New Jersey, Missouri, Minnesota, Louisiana, Colorado,
Indiana and Connecticut. Additionally, the Company targets states where
Indian casinos are located and in Canada. The Company will target Mexico
and other South America countries as legalization of casinos occurs in those
areas.
The information provided by the Company includes reporting and analysis of
news releases by gaming companies, Dow Jones Federal Filings new reports and
reports on political decisions affecting the gaming industry and employee
changes in the industry. Dow Jones Federal Filings is a service of Dow Jones
and Co. It includes excerpts from Form 10-Ks, 10-Qs,, and 8-Ks filed by
reporting companies. It also lists insider transactions as they are reported
to the Securities and Exchange Commission. The Company uses these services
from Dow Jones, company press releases, newspaper articles from around the
world and management's contacts in the industry to summarize and disseminate
information to investors and industry personnel who do not have the time,
access to, or desire to get the information themselves.
<PAGE> 5
Letter of Intent: On October 7, 1996, the Company entered into a letter
of intent with Manhattan Gaming, Inc. to explore the openings and
operations of future Manhattan Gaming retail locations across the United
States. Manhattan Gaming is a retail gaming superstore which sells
products that include a full range of gaming memorabilia including vintage
slot machines, commemorative tokens and casino chips, personalized
playing cards and poker chips, poker tables as well as chess, backgammon
and other games of change and skill. The location also stocks a full library
of gaming books and videos. Gaming lessons in craps and blackjack are
also given on full tables and siminars are held regularly on topics including
gaming stocks, sports wagering and all casino games. Products also
include an array of shirts, hats and other assorted casino gifts. The existing
location in New York City is not part of this letter of intent, however,
discussions are underway for the Company to have an opportunity to
receive an option to purchase an interest in the existing location with a
definitive agreement is signed. The letter of intent calls for the nationwide
expansion of Manhattan Gaming and, upon completion, the letter of intent
calls for Manhattan Gaming and the Companyu to particiate equally in the
equity of the new venture.
Consulting Services: The Company provides consulting services to gaming
companies who are involved in all types of gaming activities. These services
include overseeing operations, public relations, investor relations, and
acting as liaisons in joint ventures, financing, lease negotiations, etc.
The Company's fees for its consulting services range from $1,000 per month to
$20,000 per month depending on the duties to be performed. The majority of
this business has developed directly from subscribers to The Gaming Industry
Weekly Report as well as Mr. Woinski's public speaking engagements and
various articles about and by Mr. Woinski in trade publications. From
December 1992 to August 1995, Mr. Woinski was President of Lucky Management
Corp, an investment advisory firm which also held interests in other
businesses including printing, real estate, etc. Mr. Woinski served as an
advisor for the Monitrend Gaming and Leisure Mutual Fund from October 1993 to
December 1994 and was Portfolio Manager of the High Rollers Investment
Partnership from December 1992 to October 1993. Mrs. Woinski was Vice
President of Lucky Management Corp., an investment advisory firm which also
held interests in other businesses including printing, real estate, etc. from
December 1992 to August 1995. The Company shall target the same areas
described above under "Information Center".
On December 20, 1995, the Company entered into a consulting agreement with
Players Network, a Nevada corporation. The Company agreed to assist Players
Network in any requested aspects of fund-raising and operations. Players
paid the Company a one time equity fee of 120,000 common shares plus 24,000
2-year warrants to purchase common shares of Players at $2.50 per common
share.
On July 8, 1996, the Company entered into a consulting agreement with
Casinovations Incorporated, a Washington corporation. The Company agreed to
assist Casinovations Incorporated in any requested aspects of fund-raising and
operations. Casinovations paid the Company a one time equity fee of 100,000
common shares and options to purchase 50,000 Common Shares at the option price
of $1.50 per Common Share. The option period is two years.
Mr. Woinski writes the newsletter and gathers the information for the
newsletter. Mr. Woinski will perform most of the actual consulting services.
Mrs. Woinski is in charge of customer relations, in house accounting and
marketing of the Company's newsletter and other services.
The following is a summary of segment information for the period ended October
31, 1995 and for the year ended October 31, 1996:
<TABLE>
<CAPTION>
For year For period
ended ended
10/31/96 10/31/95
<S> <C> <C>
Sales to unaffiliated customers:
Subscription sales $ 91,770 $ 12,121
Consulting Fees 259,422 $ 22,100
Hotline Income 5,335 -
------------- -------------
$ 356,527 $ 34,221
Income (Loss) from operations:
Subscription sales $ 91,770 $ 12,121
Consulting fees 259,422 $ 22,100
Hotline Income 5,335 -
------------- -------------
Other income 66,744 9,372
General corporate expenses (186,375) (531,732)
----------- -----------
$ 236,896 $ (488,139)
============ ============
Identifiable assets:
General corporate $ 1,260,719 $ 808,601
============ ============
Capital expenditures:
General corporate $ 8,278 $ 1,920
============ ============
Depreciation:
General corporate $ 2,711 $ 794
============ ============
Amortization:
General corporate $ 638 $ 320
============ ============
</TABLE>
Income from operations represents the net sales from each segment, and
excludes general corporate expenses and other income of a general corporate
nature. General corporate assets consists principally of cash and trading
securities.
<PAGE> 6
During the year ended October 31, 1996 consulting fees were received
from Players Network ($90,000), Casino0vations ($37,500) Hilton Hotels
Corporation ($4,625) Europa Cruises ($31,190), Champps
Entertainment ($4,000), Game Financial Corp. ($12,000), Royal Casino
Group, Inc. ($37,000), Vodavi Technology ($16,000), American
Wagering, Inc. ($11,145) and New Horizon Kids Quest ($4,400).
During the period ended October 31, 1995 consulting fees were received from
Europa Cruises, Champps Entertainment and Game Financial Corp. amounted to
$12,205, $4,000 and $4,000 respectively.
ITEM 2. DESCRIPTION OF PROPERTY
The Company owns no real property and leases all of its facilities. The
Company's executive offices are located at 400 Park Place, #2C, Fort Lee, New
Jersey 07024 and its mailing address is 177 Main Street, Suite 312, Fort Lee,
New Jersey 07024. Telephone No. (201) 947 - 4642. These offices consist of
1,300 square feet on a five year lease commencing November 1, 1995 for $1,500
per month.
ITEM 3. LEGAL PROCEEDINGS
The Company knows of no material pending or threatened legal proceedings to
which the Company and its subsidiary is a party or of which any of its
properties is subject, and no such proceedings are known to the Company to be
contemplated by governmental authorities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year ended October 31, 1996, no
matters were submitted to a vote of the Company's security holders,
through the solicitation of proxies.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded on the OTC Bulletin Board under the
symbol "GVCU".
The following table sets forth the range of high and low bid quotations for
the Company's common stock for each quarter of the last two fiscal years, as
reported by the OTC Bulletin Board. The Company's market makers are Olsen,
Payne; Paragon Securities, Frankel Securities, Barren Chase Securities, Wien
Securities; Hill, Thompson; Alex Brown; M.H. Myerson; Knight Securities and
Ross Securities. The quotations represent inter-dealer prices without retail
markup, markdown or commission, and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
Quarter Ended High Bid Low Bid
<S> <C> <C>
1/31/95 * *
4/30/95 * *
7/31/95 * *
10/31/95 * *
1/31/96 * *
4/30/96 * *
7/31/96 3 5/8 2 7/8
10/31/96 4 1/2 3 1/8
</TABLE>
The Company's common stock commenced trading on the over-the-counter market in
July, 1996. Prior to that time, there was no market for the securities of
the Company.
Holders. The approximate number of holders of record of the Company's
$.001 par value common stock, as of October 31, 1996, was 905. Currently, as
of January 15, 1997, there are 905 holders of record.
Dividends. Holders of the Company's common stock are entitled to receive
such dividends as may be declared by its Board of Directors. Other than the
distribution of warrants pursuant to the "Joint Action by Unanimous Consent of
the Board of Directors and Shareholders" dated March 25, 1994, since inception
no dividends on the Company's common stock have ever been paid, and the
Company does not anticipate that dividends will be paid on its common stock in
the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Trends and Uncertainties. Inasmuch as a major portion of the Company's
activities is the development and operation of a daily 900 number hotline
information service, a daily and a weekly newsletter regarding the gaming
industry and providing consulting services, the Company's business operations
may be adversely affected by competitors and prolonged recessionary periods.
<PAGE> 7
In addition, the future exercise of any of the outstanding Warrants is
uncertain based on the current financial condition of the Company. The lack
of future exercise of the Class A or Class B Warrants would negatively impact
the Company's ability to successfully expand operations.
During the year ended October 31, 1996 consulting fees were received from
Hilton Hotels Corporation ($4,625) Europa Cruises ($31,190), Champps
Entertainment ($4,000), Game Financial Corp. ($12,000), Royal Casino Group,
Inc. ($37,000), Vodavi Technology ($16,000), American Wagering, Inc. ($11,145)
and New Horizon Kids Quest ($4,400). There can be no certainty that this
limited number of consulting service customers will continue to utilize the
Company's services or that the Company can replace or add to these consulting
customers.
During the period ended October 31, 1995 consulting fees were received from
Europa Cruises, Champps Entertainment and Game Financial Corp. amounted to
$12,205, $4,000 and $4,000 respectively.
Capital and Source of Liquidity. The Company signed a lease to rent 700
square feet of office space through December 31, 2000. The Company exercised
its option to rent an additional six hundred square feet of space commencing
November 1, 1995. Total lease payments per month increased from $700 per
month to $1,500. This may have a negative impact on the cash flow of the
Company. The landlord is Lucky Management Corp. Other than the lease, the
Company has no material commitments for capital expenditures.
For the year ended October 31, 1996, the Company had an increase of a note
receivable of $18,000. The Company advanced an unrelated entity $18,000 in
exchange for a profit sharing arrangement with two of the entity's retail
locations in New York City. The financing was provided interest free for the
months of November and December, 1996 in return for the following profit
participation: On the first $10,000 of net pre-tax cash flows from these
locations, the Company will receive $10,000. On the next $10,000 of net
pre-tax cash flows, the Company will receive $5,000. On the next $10,000 of
net pre-tax cash flows, the Company will receive $4,000. On the fourth
$10,000 of net pre-tax cash flows, the Company will receive $3,000 and on any
net pre-tax cash flows above $40,000, the Company will receive 20% of the
excess. In the event that the profit participation arrangement is in
sufficient to repay the $18,000 investment, it will convert into a loan
arrangement as follows: If the Company has received at least $20,000 of net
pre-tax cash flows, no additional payment will be due. In the event that
less than $20,000 has been received, the Company will permit the borrower
until February 28, 1997 to repay the difference between $15,000 and whatever
payment has been made to the Company from net pre-tax cash. Should repayment
in full not be made by February 28, 1997, the unpaid balance will convert to a
one year term loan with interest at 8.25%.
For the period ended October 31, 1995, the Company purchased fixed assets for
$1,920 and incurred organization costs of $3,191. This resulted in net cash
used in investing activities of $5,111 for the period ended October, 1995.
For the year ended October 31, 1996, the Company received proceeds from the
sale of marketable securities of $54,129 and acquired securities valued at
$56,941. The Company also acquired property and equipment of $8,278. As a
result, the Company had net cash used in investing activities of $29,090 for
the year ended October 31, 1996.
For the period ended October 31, 1995, the Company received $842,151 from the
sale of its common stock and received a loan from Mr. Woinski, an officer, net
of a repayment of $515. As a result, the Company had net cash provided by
financing activities of $842,666 for the period ended October 31, 1995.
For the year ended October 31, 1996, the Company pursued no financing
activities.
On a long term basis, liquidity is dependent on increased revenues from
operations, additional infusions of capital and debt financing. The Company
believes that additional capital and debt financing in the short term
will allow the Company to increase its marketing and sales efforts and
thereafter result in increased revenue and greater liquidity in the long term.
However, there can be no assurance that the Company will be able to obtain
additional equity or debt financing in the future, if at all.
Results of Operations.
The Company had net operating income of $170,152 for the year ended October
31, 1996. General and administrative expenses for the year ended
October 31, 1996 were $186,375 and consisted principally of officer's salaries
of $92,750, rent of $18,312, telephone of $13,556 and miscellaneous general
and administrative expenses of $61,757. The Company had an increase in
accounts receivable of $27,470 due to increased operations. Deferred
revenue increased $228,302 from the sale of its newsletter subscriptions and
prepaid consulting revenue. The Company acquired common stock and options as
non-cash consideration valued at $330,000 as partial payment of its consulting
services. The Company realized gain on the sale of securities of $27,440 and
had amortization and depreciation of $638 and $2,711 for the year ended
October 31, 1996. The Company had an increase in prepaid expenses of $2,390
due to increased operations and had a slight increase in accounts payable of
$422. Net cash provided by operations for the year ended October 31, 1996
was $81,669.
<PAGE> 8
The Company experienced net operating loss of $488,139 for the period ended
October 31, 1995. General and administrative expenses for the period ended
October 31, 1995 were $531,732 and consisted of principally common stock
issued for services of $427,945 and miscellaneous general and administrative
expenses of $103,787. Depreciation and amortization totaled $794 and $320
respectively for the period ended October 31, 1995. The Company had an
increase in accounts receivable of $4,829, accounts payable of $2,234 due to
commencement of operations. The Company had deferred revenue of $16,397 from
the sale of its newsletter subscriptions and unrealized gain on trading
securities of $2,500 for the period ended October 31, 1995. The Company also
purchased trading securities of $30,000. The material factor in the large
net operating loss of the Company resulted from the issuance of common stock
and options for non-cash consideration of $427,945. Net cash used in
operations for the period ended October 31, 1995 was $77,778.
The Company is seeking to lower its operating expenses while expanding
operations and increasing its customer base and operating revenues. The
Company is focusing on decreasing administrative costs. However,
increased marketing expenses will probably occur in future periods as the
Company attempts to further increase its marketing and sales efforts.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements The response to this item is being submitted as a
separate section of this report beginning on page 25.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Neither during the twenty-four months prior to the date of the Company's
financial statements included herein nor in any subsequent period thereafter
did the Company file a Form 8-K with the Securities and Exchange Commission
reporting a change of accountants involving a disagreement of any matter of
accounting principles or practices of financial statement disclosure.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Identification of Directors and Executive Officers of the CompanyThe following
table sets forth the names and ages of all directors and executive officers of
the Company and all persons nominated or chosen to become a director,
indicating all positions and offices with the Company held by each such person
and the period during which he has served as a director:
<TABLE>
<CAPTION>
Name Position Term(s) of Office
<S> <C> <C>
Alan Woinski, age 32 President Inception to
and Director present
Kim Santangelo-Woinski, Vice President, Secretary, Inception to
age 32 Treasurer and Director present
Louis Dachis, age 27 Director Inception to present
</TABLE>
Alan Woinski - Mr. Woinski is currently President and a Director of the
Company. Mr. Woinski founded The Gaming Industry Daily Report in March, 1993
and has been its editor since August 1993. Mr. Woinski was Vice President of
A & E Printing, Inc. from January 1988 to December 1994. From January 1995 to
July, 1996, Mr. Woinski was President of A & E Printing, Inc., a commercial
printing company. As Vice-President, Mr. Woinski was in charge of sales,
marketing and production. As president, Mr. Woinski's duties were expanded to
hiring and firing personnel, inventory control and overseeing all operations
of the company. From December 1992 to August 1995, Mr. Woinski was also
President of Lucky Management Corp, an investment advisory firm which also
held interests in other businesses including printing, real estate, etc. As
president, Mr. Woinski handled all investment advisory accounts including
being the advisor to the Monitrend Gaming and Leisure fund. Mr. Woinski
served as an advisor for the Monitrend Gaming and Leisure Mutual Fund from
October 1993 to December 1994 and was Portfolio Manager of the High Rollers
Investment Partnership from December 1992 to October 1993. Duties as advisor
and portfolio manager included updates on the gaming industry including trend
analysis, technical analysis on securities on companies in the gaming
industry, buy and sell recommendations, etc. Mr. Woinski graduated from
Hofstra University in 1986.
Kim Santangelo-Woinski - Mrs. Woinski is currently Vice President,
Secretary/Treasurer and a Director of the Company. Mrs. Woinski was Vice
President of Lucky Management Corp., an investment advisory firm which also
held interests in other businesses including printing, real estate, etc. from
December 1992 to August 1995. Mrs. Woinski was vice president in charge of
all in-house accounting and customer relations as well as running the entire
<PAGE> 9
office including ordering supplies, equipment, etc. From January 1992 to
January 1994, Mrs. Woinski worked as operations manager/personal assistant to
the President of Tee Dee's, Inc., a women's clothing manufacturer. Mrs.
Woinski's duties included office management and personnel supervision. From
1990 to 1992, Mrs. Woinski was beverage manager of Waypointe, Inc., and
served as beverage manager of Treadway Inn Hotel from 1989 to 1991. Her
duties as beverage manager included hiring staff, inventory and overseeing
and filing reports for the parent company.
Louis Dachis - Mr. Dachis is currently a Director of the Company. Mr. Dachis
was self-employed as a freelance graphic artist from May 1991 to February
1994. From April 1994 to the present, Mr. Dachis has been the marketing
director for Game Financial Corporation, a credit card cash machine company.
In August 1996, he became vice president of Marketing for Game Financial
Corporation. Mr. Dachis is in charge of marketing and investor relations for
the company. Mr. Dachis attended the California Institute of The Arts from
1989 to 1993.
Note - Due to a change in the policy of the firm in which he is employed
regarding outside directorships, Mr. Lawrence Zipkin, who had been a director
since inception, resigned his position of Director in the fourth quarter of
1995. Mr. Zipkin also returned to treasury all of his common shares,
warrants and options previously issued by the Company.
CONFLICTS OF INTEREST POLICY. The Company has adopted a policy that any
transactions with directors, officers or entities of which they are also
officers or directors or in which they have a financial interest, will only be
on terms consistent with industry standards and approved by a majority of the
disinterested directors of the Company's Board of Directors. The Board of
Directors resolved that the Bylaws of the Company shall be amended to provide
that no such transactions by the Company shall be either void or voidable
solely because of such relationship or interest of directors or officers or
solely because such directors are present at the meeting of the Board of
Directors of the Company or a committee thereof which approves such
transactions, or solely because their votes are counted for such purpose if:
(i) the fact of such common directorship or financial interest is disclosed or
known by the Board of Directors or committee and noted in the minutes, and the
Board or committee authorizes, approves or ratifies the contract or
transaction in good faith by a vote for that purpose without counting the vote
or votes of such interested directors; or (ii) the fact of such common
directorship or financial interest is disclosed to or known by the
shareholders entitled to vote and they approve or ratify the contract or
transaction in good faith by a majority vote or written consent of
shareholders holding a majority of the Common Shares entitled to vote (the
votes of the common or interested directors or officers shall be counted in
any such vote of shareholders), or (iii) the contract or transaction is fair
and reasonable to the Company at the time it is authorized or approved. In
addition, interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors of the Company or a committee
thereof which approves such transactions.
INDEMNIFICATION. The Corporation shall indemnify to the fullest extent
permitted by, and in the manner permissible under the laws of the State of
Nevada, any person made, or threatened to be made, a party to an action or
proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he is or was a director or officer of the Corporation,
or served any other enterprise as director, officer or employee at the request
of the Corporation. The Board of Directors, in its discretion, shall have the
power on behalf of the Corporation to indemnify any person, other than a
director or officer, made a party to any action, suit or proceeding by reason
of the fact that he/she is or was an employee of the Corporation.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Corporation,
the Corporation has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Corporation of expenses incurred or paid by a director, officer or controlling
person of the Corporation in the successful defense of any action, suit or
proceedings) is asserted by such director, officer, or controlling person in
connection with any securities being registered, the Corporation will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issues.
INDEMNIFICATION OF OFFICERS OR PERSONS CONTROLLING THE CORPORATION FOR
LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, IS HELD TO BE
AGAINST PUBLIC POLICY BY THE SECURITIES AND EXCHANGE COMMISSION AND IS
THEREFORE UNENFORCEABLE.
ITEM 10. EXECUTIVE COMPENSATIONDuring fiscal 1996, and as of the date of
filing this report, no compensation has been paid, nor have there been
compensation arrangements or plans, other than what has been indicated below.
Remuneration. Since inception, no cash compensation has been paid by the
Corporation to its officers and directors, during which there were two (2)
officers and four (4) directors:
<PAGE> 10
The Company has not entered into Employment Agreements with its officers.
The Board of Directors and shareholders have approved a Non-Statutory Stock
Option Plan to attract and retain persons of experience and ability and whose
services are considered valuable and to encourage the sense of proprietorship
in such persons and to stimulate the active interest of such persons in the
development and success of the Corporation.
1. Persons Eligible to Participate in Non-Statutory Stock Option Plan.
The persons eligible for participation in the Plan as recipients of
Non-statutory Stock Options ("NSOs") shall include full-time and part-time
employees (as determined by the Committee) and officers of the Company or of
an Affiliated Corporation. In addition, directors of the Company or any
Affiliated Corporation who are not employees of the Company or an Affiliated
Corporation and any attorney, consultant or other adviser to the Company or
any Affiliated Corporation shall be eligible to participate in the Plan. For
all purposes of the Plan, any director who is not also a common law employee
and is granted an option under the Plan shall be considered an "employee"
until the effective date of the director's resignation or removal from the
Board of Directors, including removal due to death or disability. The
Committee shall have full power to designate, from among eligible individuals,
the persons to whom NSOs may be granted. A person who has been granted an NSO
may be granted an additional NSO or NSOs, if the Committee shall so determine.
The granting of an NSO shall not be construed as a contract of employment or
as entitling the recipient thereof to any rights of continued employment.
2. Stock Reserved for the Plan. Subject to adjustment, a total of
750,000 shares of Common Stock, $.001 par value per share ("Stock"), of the
Company shall be subject to the Plan. The Stock subject to the Plan shall
consist of unissued shares or previously issued shares reacquired and held by
the Company or any Affiliated Corporation, and such amount of shares shall be
and is hereby reserved for sale for such purpose. Any of such shares which
may remain unsold and which are not subject to outstanding NSOs at the
termination of the Plan shall cease to be reserved for the purpose of the
Plan, but until termination of the Plan, the Company shall at all times
reserve a sufficient number of shares to meet the requirements of the Plan.
Should any NSO expire or be canceled prior to its exercise in full, the
unexercised shares theretofore subject to such NSO may again be subjected to
an NSO under the Plan.
3. Option Price. The purchase price of each share of Stock placed under
NSO shall not be less than Eighty Five percent (85%) of the fair market value
of such share on the date the NSO is granted. The fair market value of a
share on a particular date shall be deemed to be the average of either (i) the
highest and lowest prices at which shares were sold on the date of grant, if
traded on a national securities exchange, (ii) the high and low prices
reported in the consolidated reporting system, if traded on a "last sale
reported" system, such as NASDAQ, for over the counter securities, or (iii)
the high bid and high asked price for other over-the-counter securities. If
no transactions in the Stock occur on the date of grant, the fair market value
shall be determined as of the next earliest day for which reports or
quotations are available. If the common shares are not then quoted on any
exchange or in any quotation medium at the time the option is granted, then
the Board of Directors or Committee will use its discretion in selecting a
good faith value believed to represent fair market value based on factors then
known to them. The cash proceeds from the sale of Stock are to be added to
the general funds of the Company.
4. Exercise Period. (a) The NSO exercise period shall be a term of
not more than ten (10) years from the date of granting of each NSO and shall
automatically terminate:
(i) Upon termination of the optionee's employment with the Company
for cause;
(ii) At the expiration of twelve (12) months from the date of
termination of the optionee's employment with the Company for any reason other
than death, without cause; provided, that if the optionee dies within such
nine-month period, subclause (iii) below shall apply; or
(iii) At the expiration of fifteen (15) months after the date of
death of the optionee.
(b) "Employment with the Company" as used in the Plan shall include
employment with any Affiliated Corporation, and NSOs granted under the Plan
shall not be affected by an employee's transfer of employment among the
Company and any Parent or Subsidiary thereof. An optionee's employment with
the Company shall not be deemed interrupted or terminated by a bona fide leave
of absence (such as sabbatical leave or employment by the Government) duly
approved, military leave or sick leave.
Pursuant to the Non-Statutory Stock Option Plan, the Board of Directors has
granted stock options to each of the directors to purchase 10,000 Common
Shares of the Company (for an aggregate of 30,000 Common Shares). The option
price shall be $.01 per Common Share. The exercise period of the options is
three years. In the fourth quarter of fiscal 1996, the Board of Directors
also granted each of the directors stock options to purchase 15,000 Common
Shares of the Company (for an aggregate of 45,000 Common Shares). The option
price shall be $1.50. The exercise period of the options is three years.
<PAGE> 11
Board of Directors Compensation. Members of the Board of Directors may
receive an amount yet to be determined annually for their participation and
will be required to attend a minimum of four meetings per fiscal year. All
expenses for meeting attendance or out of pocket expenses connected directly
with their Board representation will be reimbursed by the Corporation.
Director liability insurance may be provided to all members of the Board of
Directors. No differentiation is made in the compensation of "outside
directors" and those officers of the Corporation serving in that capacity.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
There are currently 1,591,834 Common Shares outstanding. The following
tabulates holdings of shares of the Corporation by each person who, subject to
the above, at the date of this Memorandum, holds of record or is known by
Management to own beneficially more than 5.0% of the Common Shares and, in
addition, by all directors and officers of the Corporation individually and as
a group.
Shareholdings at Date of
This Memorandum
<TABLE>
<CAPTION>
Amount
Name and Address of of Common Shares
Beneficial Owner Currently Owned Percent
<S> <C> <C>
Alan Woinski 727,000(1)(2)(3) 45.67%
177 Main Street
Suite 312
Fort Lee, NJ 07024
Lucky Management Corp. 727,000(1)(2)(3) 45.67%
177 Main Street
Suite 374
Fort Lee, NJ 07024
Kim Santangelo-Woinski 727,000(1)(2)(3) 45.67%
177 Main Street
Suite 312
Fort Lee, NJ 07024
Louis Dachis 5,000 .31%
13705 1st Avenue North
Minneapolis, MN 55441
All Directors & Officers
as a group (3 persons) 732,000 45.98%
</TABLE>
(1)pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared voting
power (including the power to vote or direct the voting) and/or sole or shared
investment power (including the power to dispose or direct the disposition)
with respect to a security whether through a contract, arrangement,
understanding, relationship or otherwise. Unless otherwise indicated, each
person indicated above has sole power to vote, or dispose or direct the
disposition of all shares beneficially owned, subject to applicable community
property laws.
(2)Includes Lucky Management Corp., Alan Woinski, the principal shareholder
thereof, and Kim Santangelo-Woinski, who is married to Mr. Woinski, who
together constitute a "group," as that term is defined in Section 13D of the
Securities Exchange Act of 1934, as amended.
(3)The above disclosure does not include common shares which may be issued
upon the exercise of the Class A or Class B Warrants. Assuming exercise of
the Class A and Class B Warrants, Alan Woinski, Kim Santangelo-Woinski and
Lucky Management shall beneficially own a total of 947,332 common shares.
There are currently 99,333 Class A Warrants outstanding. The following
tabulates holdings of Class A Warrants of the Company by each person who,
subject to the above, at the date of this Prospectus, holds of record or is
known by Management to own beneficially more than 5.0% of the Common Shares
and, in addition, by all directors and officers of the Company individually
and as a group.
<TABLE>
<CAPTION>
<S> <C> <C>
Name Total Number of Percentage
Class A Warrants Owned
Alan Woinski(1) 98,666 99.33%
Kim Santangelo-Woinski(1) 98,666 99.33%
Lucky Management Corp.(1) 98,666 99.33%
Louis Dachis 667 .0067%
All Officers and Directors -3 99,333 100.00%
</TABLE>
<PAGE> 12
(1)pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared voting
power (including the power to vote or direct the voting) and/or sole or shared
investment power (including the power to dispose or direct the disposition)
with respect to a security whether through a contract, arrangement,
understanding, relationship or otherwise. Unless otherwise indicated, each
person indicated above has sole power to vote, or dispose or direct the
disposition of all shares beneficially owned, subject to applicable community
property laws.
(2)Includes Lucky Management Corp., Alan Woinski, the principal shareholder
thereof, and Kim Santangelo-Woinski, who is married to Mr. Woinski, who
together constitute a "group," as that term is defined in Section 13D of the
Securities Exchange Act of 1934, as amended.
There are currently 99,333 Class B Warrants outstanding. The following
tabulates holdings of Class B Warrants of the Company by each person who,
subject to the above, at the date of this Prospectus, holds of record or is
known by Management to own beneficially more than 5.0% of the Common Shares
and, in addition, by all directors and officers of the Company individually
and as a group.
<TABLE>
<CAPTION>
<S> <C> <C>
Name Total Number of Percentage
Class B Warrants Owned
Alan Woinski(1) 98,666 99.33%
Kim Santangelo-Woinski(1) 98,666 99.33%
Louis Dachis 667 .0067%
Lucky Management Corp.(1) 98,666 99.33%
All Officers and Directors - 3 99,333 100.00%
</TABLE>
(1)pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared voting
power (including the power to vote or direct the voting) and/or sole or shared
investment power (including the power to dispose or direct the disposition)
with respect to a security whether through a contract, arrangement,
understanding, relationship or otherwise. Unless otherwise indicated, each
person indicated above has sole power to vote, or dispose or direct the
disposition of all shares beneficially owned, subject to applicable community
property laws.
(2)Includes Lucky Management Corp., Alan Woinski, the principal shareholder
thereof, and Kim Santangelo-Woinski, who is married to Mr. Woinski, who
together constitute a "group," as that term is defined in Section 13D of the
Securities Exchange Act of 1934, as amended.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATED PARTY TRANSACTIONS. During the period ended October 31, 1995, Mr.
Alan Woinski, an officer of the Company, lent the Company $1,100. The loan
was payable upon demand. Based on the fact that there is no annual interest
rate for the loan and the fact that Mr. Woinski is a principal in the Company
and is aware of the current financial situation of the Company, the Company is
of the opinion that the terms are as or more favorable as those which could
have been obtained by nonaffiliates. The Company repaid $585 in July, 1995.
During June, 1995, affiliates of the Company exchanged office equipment with a
historical cost basis of $7,498 for common stock of the Company.
During November, 1995 the Company entered into a lease for its office
facilities with a related party expiring during November 2000. The rent
pursuant to the lease approximates fair market. Minimum annual rent payment
due under the lease totals $18,000 for each year ended October 31, 1996
through 2000.
DISTRIBUTION OF SECURITIES. On June 4, 1995, the Board of Directors
authorized the distribution of 100,000 each of A and B stock purchase warrants
exercisable as follows:
$4.00 plus one A warrant for each share of common stock; and
$6.00 plus one B warrant for each share of common stock.
The warrants are exercisable for a period of two years from the date of issue
and are callable with 30 days notice at a price of $.001 per warrant.
Upon the resignation of a director, 667 of the Class "A" and Class "B"
Warrants were retired.
The Class A and Class B Warrants and the common stock underlying said Class A
and Class B Warrants are being registered in this Offering.
LOCKUP AGREEMENT. Pursuant to a written agreement in October, 1995, the
principal shareholders and officers and directors (Alan Woinski, Kim
Santangelo-Woinski, Lucky Management Corp., Louis Dachis who received warrants
issued them pursuant to the Special Meeting of the Board of Directors held on
June 4, 1995 have agreed as follows:
<PAGE> 13
In the event the shareholder exercises any warrants, the stock issued to the
shareholder pursuant to the exercise shall be locked in and restricted from
trading for a period of two years. A notice is to be placed on the face of
each stock certificate covered by the terms of the Agreement stating that the
transfer of the stock evidenced by the certificate is restricted until
twenty-four (24) months from the date of issuance. The shareholder also
agrees not to sell or otherwise transfer their interest in the warrants except
to an underwriter or other market makers in the stock once a market is
established. The shareholder further agrees that the total value in cash, or
other consideration, paid by the buyer to the seller shall not exceed $.01 per
warrant.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(A) FINANCIAL STATEMENTS AND SCHEDULES
The following financial statements and schedules are filed as part of
this report:
Report of Independent Public Auditors............................ 14
Consolidated Balance Sheets.......................................... 15
Consolidated Statement of Operations............................... 16
Consolidated Statement of Stockholder's Equity....................... 17
Statement of Cash Flows........................................... 18
Notes to Financial Statements..................................... 19
Schedules Omitted: All schedules other than those shown have been
omitted because they are not applicable, not required, or the required
information is shown in the financial statements or notes thereto.
(b) List of Exhibits
The following of exhibits are filed with this report:
(3) Articles of Incorporation and Bylaws incorporated by reference to
Form S-1, file number 33-98184
(4) Specimen certificate for Common Stock incorporated by reference to
Form S-1, file number 33-98184- to be filed by amendment
(10.1) Consulting Agreement with Europa Cruises incorporated by reference
to Form S-1, file number 33-98184
(10.2) Consulting Agreement with Game Financial Corp. to be filed by
Amendment
(10.3) Consulting Agreement with Players Network incorporated by
reference to Form S-1, file number 33-98184
(10.4) Consulting Agreement with Casinovations Incorporated
(99) Consulting Agreement with Pratt, Wylce & Lords, Ltd.
incorporated by reference to Form S-1, file number 33-98184
REPORTS FILED ON FORM 8-K. The Company filed no reports on Form 8-K during
the fourth quarter of the Company's fiscal year ended October 31, 1996.
<page. 14
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Gaming Venture Corp., U.S.A.
We have audited the accompanying balance sheets of Gaming Venture Corp.,
U.S.A. as of October 31, 1996 and 1995, and the related statements of
operations, stockholders' equity, and cash flows for the year ended October
31, 1996, and the period from inception (June 1, 1995) to October 31, 1995.
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 audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 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 referred to above present fairly,
in all material respects, the financial position of Gaming Venture Corp.,
U.S.A. as of October 31, 1996 and 1995, and the results of its operations,
and its cash flows for the year ended October 31, 1996, and for the period
from inception (June 1, 1995) to October 31, 1995 in conformity with
generally accepted accounting principles.
Winter, Scheifley & Associates, P.C.
Certified Public Accountants
Denver, Colorado
January 10, 1997
<PAGE> 15
Gaming Venture Corp., U.S.A.
Balance Sheets
October 31,
<TABLE>
<CAPTION>
1996 1995
ASSETS -------- --------
<S> <C> <C>
Current assets:
Cash $812,356 $759,777
Accounts receivable 32,299 4,829
Note Receivable 18,000 -
Prepaid Expenses 2,390 -
Marketable Securities 49,250 32,500
--------- ---------
914,295 797,106
Property, plant and equipment, at cost:
Furniture and office equipment 17,696 9,418
Less: accumulated depreciation 3,505 794
--------- ---------
14,191 8,624
Organization costs net of accumulated
amortization of $958 and $320 2,233 2,871
Investments 330,000 -
--------- ---------
$ 1,260,719 $808,601
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
and accrued expenses $2,656 $2,234
Deferred revenue 244,699 16,397
Due to affiliates 515 515
--------- ---------
247,870 19,146
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value,
50,000,000 shares authorized,
1,591,834 shares issued and
outstanding 1,592 1,592
Paid in capital 1,276,002 1,276,002
Unrealized holding
loss on securities (13,502) -
Accumulated deficit (251,243) (488,139)
---------- ----------
1,012,849 789,455
---------- ----------
$ 1,260,719 $808,601
========== ==========
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
Gaming Venture Corp., U.S.A.
Statement of Operations
For the Year Ended October 31, 1996
and the Period From Inception (June 1, 1995) to October 31, 1995
<S> <C> <C>
1996 1995
------ ------
Revenue $356,527 $34,221
Costs and expenses:
General and administrative 168,063 528,620
General and administrative-related party 18,312 3,112
---------- ----------
186,375 531,732
---------- ----------
Net income(loss) from operations 170,152 (497,511)
Other income:
Gain on sale of marketable securities 27,440 -
Unrealized gain on trading securities - 2,500
Interest income 39,304 6,872
---------- ----------
66,744 9,372
---------- ----------
Net income(loss) $236,896 $(488,139)
========== ==========
Per share information:
Weighted average number of common
shares outstanding 1,591,834 1,436,734
========== ==========
Net income(loss) per share $.15 (.34)
========== ==========
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
Gaming Venture Corp., U.S.A.
Statement of Changes in Stockholders' Equity
For the Period From Inception (June 1, 1995) to October 31, 1996
Common Stock Paid In Accumulated Total
Shares Amount Capital Deficit
<S> <C> <C> <C> <C> <C>
Shares issued for services,
office equipment and cash
to affiliates at $.01 per
share (June, 1995) 745,000 $745 $7,498 $ - $ 8,243
Shares issued for services
at $1.50 per share
(June, 1995) 255,000 255 382,245 - 382,500
Shares issued for cash at
$1.50 per share pursuant to
a private placement
(July to October, 1995) 591,834 592 887,159 - 887,751
Costs of private placement - - (45,600) - (45,600)
Compensation expense
related to options
exercisable at a price
less than market, issued
to affiliates - - 44,700 - 44,700
Net loss for the period - - - (488,139) (488,139)
Balance October 31, 1995 1,591,834 1,592 1,276,002 (488,139) 789,455
Net income for the year - - - 236,896 236,896
Balance October 31, 1996 1,591,834 $1,592 $1,276,002 $(251,243) $1,026,351
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
Gaming Venture Corp., U.S.A
Statement of Cash Flows
For the Year Ended October 31, 1996
and the Period From Inception (June 1, 1995) to October 31, 1995
<S> <C> <C>
1996 1995
Cash Flows From Operating Activities: ----- -----
Net income(loss) $236,896 $(488,139)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Amortization 638 320
Depreciation 2,711 794
Realized gain on sale of securities (27,440) -
Unrealized gain on trading securities - (2,500)
Common stock and options (acquired)
issued for non-cash consideration (330,000) 427,945
Increase in accounts receivable (27,470) (4,829)
Purchase of trading securities - (30,000)
Increase in prepaid expenses (2,390) -
Increase in deferred revenue 228,302 16,397
Increase in accounts payable 422 2,234
Total adjustments (155,227) 410,361
Net cash provided by (used in)
operations 81,669 (77,778)
Cash flows from investing activities:
Increase in note receivable (18,000) -
Proceeds from sale of securities 54,129 -
Acquisition of securities (56,941) -
Increase in organization costs - (3,191)
Acquisition of property and equipment (8,278) (1,920)
Net cash provided by (used in) --------- ---------
investing activities (29,090) (5,111)
Cash Flows From Financing activities:
Increase in due to affiliates - 515
Proceeds from the issuance of common stock - 842,151
Net cash provided by (used in) --------- ---------
financing activities - 842,666
Net increase (decrease) in cash and
cash equivalents 52,579 759,777
Beginning cash and cash equivalents 759,777 -
Ending cash and cash equivalents $812,356 $759,777
Non-cash investing and financing activities:
Common stock issued to affiliates for
equipment $ - $ 7,498
Supplemental cash flow information:
Cash paid for: Income taxes $ 200 $ -
Interest $ - $ -
</TABLE>
<TABLE>
<CAPTION>
Corporation Number of Shares Held Fair Value
----------- --------------------- --------------
<S> <C> <C> <C>
Casinovations 100,000 $150,000
Players Network 120,000 $180,000
</TABLE>
<PAGE> 19
Gaming Venture Corp., U.S.A.
Notes to Financial Statements
October 31, 1996
Note 1. ORGANIZATION
The Company was incorporated on June 1, 1995, in the State of Nevada The
operations and objectives of the Company are to provide daily hotline
information and a weekly newsletter regarding the gaming industry. The
Company also provides consulting services. The Company has chosen
October 31, as a year end.
SIGNIFICANT ACCOUNTING POLICIES
Estimates
Management of the Company uses estimates and assumptions in preparing
financial statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses. Actual results
could vary from the estimates that management uses.
Revenue recognition
The Company recognizes revenue from its services as follows:
Consulting fees - upon the completion of its services
Hotline - upon usage by the customer
Newsletter - prorated over the life of the subscription
Fixed assets
The Company depreciates its office equipment utilizing the straight line
method over a period of five years. Depreciation charged to operations
was $2,711 and $794 for the periods ended October 31, 1996 and 1995,
respectively.
Net income(loss) per share
The net income(loss) per share is computed by dividing the net
income(loss) for the period by the weighted average number of common
shares outstanding for the period. Common stock equivalents are
excluded from the computation as their effect would be anti-dillutive.
Organization costs
The Company amortizes its organization costs over a period of 5 years
using the straight line method. Amortization charged to operations was
$638 and $320 for the periods ended October 31, 1996 and 1995,
respectively.
Cash and cash equivalents
Cash and cash equivalents consist of cash and other highly liquid debt
instruments with an original maturity of less than three months.
Financial Instruments
The Company's short-term financial instruments consist of cash and cash
equivalents, accounts and loans receivable, and payables and accruals.
The carrying amounts of these financial instruments approximates fair
value because of their short-term maturities.
Advertising Costs
Advertising Costs are expensed as the advertisement is shown. Advertising
expense was $4,562 for the year ended October 31, 1996. There were no
advertising costs for the period ended October 31, 1995. Included as an
asset are $950 of prepaid advertising costs at October 31, 1996.
Note 2. COMMON STOCK
At inception, the Company issued 745,000 shares of its $.001 par value
common stock to affiliates in exchange for cash of $745 and office
equipment valued at $7,498.
During June, 1995 the Company began offering 600,000 shares of its common
stock at $1.50 per share pursuant to a private placement. Pursuant to this
private placement the Company issued 591,834 shares of common stock for
cash aggregating $887,751 through October 31, 1995 and incurred expenses
related to the sale of these shares aggregating $45,600.
During June, 1995 the Company issued shares of its $.001 par value common
stock to non-affiliates for services as follows:
250,000 shares pursuant to a consulting agreement valued at $375,000
(See Note 10) and
5,000 shares for consulting services valued at $7,500
<PAGE> 20
During June, 1995, the Company authorized a distribution to shareholders
of 100,000 each of A, and B stock purchase warrants exercisable as
follows:
$ 4.00 plus one A warrant for each share of common stock
$ 6.00 plus one B warrant for each share of common stock
The warrants are exercisable for a period of 24 months from the date of
issue and are callable with 30 days notice at a price of $.001 per
warrant.
During the period covered by these financial statements the Company issued
shares of its common stock without registration under the Securities Act
of 1933. Although the Company believes that the sales did not involve a
public offering of its securities and that it did comply with the "safe
harbor" exemptions from registration under section 4(2), it could be
liable for recission of the sales if such exemptions were found not to
apply.
During June, 1995 the Company approved a Stock Option Plan. Eligible to
participate in the plan are employees, officers and directors. The plan
will be administered by the Company's Board of Directors. The Company has
reserved 750,000 shares of $.001 par value common stock for the plan. The
option price shall not be less than 85% of the fair market value of the
stock on the date the option is granted and shall be for a term of not
more than 10 years. On June 1, 1995 the Company granted 30,000 options to
its directors at an exercise price of $.01 per share for a period of 3
years. Compensation expense has been recorded for the difference between
the exercise price of the options and the fair value of the common stock
of $1.50 per share ($44,700).
During October, 1995 the Company filed a registration statement with the
Securities and Exchange Commission on Form S-1 to register 100,000 Class A
warrants, 100,000 Class B warrants, and 1,196,834 shares of common stock
(including the 200,000 common shares underlying the A and B warrants).
The registration became effective during July, 1996.
Note 3. NOTE RECEIVABLE
During October, 1996 the Company advanced an unrelated entity $18,000 in
exchange for a profit sharing arrangement with the two of the entity's
retail locations in New York City.
The financing was provided interest free for the months of November and
December, 1996 in return for the following profit participation:
On the first $10,000 of net pre-tax cash flows from these
locations, the Company will receive $10,000.
On the next $10,000 of net pre-tax cash flows, the Company will
receive $ 5,000.
On the third $10,000 of net pre-tax cash flows, the Company will
receive $4,000.
On the fourth $10,000 of net pre-tax cash flows, the Company will
receive $3,000.
On any net pre-tax cash flows above $40,000, the Company will
receive 20% of the excess.
In the event that the profit participation arrangement is insufficient to
repay the $18,000 investment, it will convert into a loan arrangement as
follows:
If the Company has received at least $20,000 of net pre-tax cash
flows, no additional payment will be due.
In the event that less than $20,000 has been received, the Company
will permit the borrower until February 28, 1997 to repay the
difference between $15,000 and whatever payment has been made to
the Company from net pre-tax cash.
Should repayment in full not be made by February 28, 1997 the
unpaid balance will convert to a one year term loan with interest
at 8.25%.
Note 4. MARKETABLE SECURITIES
The Company's securities that were bought and held principally for the
purpose of selling them in the near term were classified as trading
securities at October 31, 1995. Trading securities are recorded at fair
value as a current asset with the change in fair value during the period
included in earnings. Effective November 1, 1995 these securities have
been classified as available for sale, recorded at fair value as a current
asset, with the change in fair value during the period included as a
separate component of stockholders' equity.
<PAGE> 21
At October 31, 1996 the Company held equity securities with a fair value
of $49,250 and a cost of $60,252. The unrealized holding loss for the
period of $13,502 is shown as a separate component of stockholders'
equity. During the year ended October 31, 1996 the Company had sales
proceeds of $54,129 from available for sale securities. Cost is
determined by the specific identification method for computing realized
gains or losses on securities sales.
At October 31, 1995 the Company held equity securities with a fair value
of $32,500 and a cost of $30,000. The unrealized gain included in earnings
was $2,500. The Company had no sales proceeds from trading securities
during the period ended October 31, 1995.
Note 5. INVESTMENTS
The Company is holding shares of common stock in the following privately
held corporations as of October 31, 1996:
Corporation Number of Shares Held Fair Value
----------- --------------------- --------------
Casinovations 100,000 $150,000
Players Network 120,000 $180,000
The shares were acquired by the Company in exchange for consulting
services provided to Casinovations and Players Network during the year
ended October 31, 1996 and for future consulting serivices to be rendered
during the year ending October 31, 1997. The Company has $202,500 of
deferred income included on the balance sheet at October 31, 1996 with
respect to these future consulting services.
The fair value fair for the shares of stock has been determined based on
the proceeds of private placement offerings for Casinovations (completed
in December, 1996) and Players Network (completed in July, 1996).
Note 6. INCOME TAXES
The Company provides for income taxes pursuant to Financial Accounting
Standards Board Statement No. 109 "Accounting for Income Taxes". No
provision for income taxes has been provided for during the periods ended
October 31, 1996 and 1995, respectively because of the availability of net
operating loss carryforwards. At October 31, 1996 the Company has
available a net operating loss carryforward of approximately $250,000
which may be used through 2010 to offset future income. The Company is
unable to predict future taxable income that would enable it to utilize
any deferred tax asset and therefore the deferred tax asset of
approximately $85,000 has been fully reserved.
The difference between the federal statutory tax rate and the effective
tax rate is reconciled as follows for the year ended October 31, 1996:
Income tax provision at statutory rate $ 75,290 32%
Utilization of net operating
loss carryforward (75,290) (32)
--------- -----
Income tax provision at effective tax rate $ - -%
========= =====
Note 7. RELATED PARTY TRANSACTIONS
During the June, 1995 an officer of the Company advanced $1,100 to the
Company. During July, 1995 $585 of this advance was repaid. The Company
has not imputed interest related to this advance as the amount would not
be material to the financial statements. The remaining balance of $515
was repaid by the Company in November, 1996.
During June, 1995 affiliates of the Company contributed office equipment
with a historical cost basis of $7,498 to the capital of the Company.
During November, 1995 the Company entered into a lease for its office
facilities with a related party expiring during December, 2000. The rent
pursuant to the lease approximates fair market. Minimum annual rent
payments due under the lease are as follows:
Year ended October 31,
1997: $18,000
1998: $18,000
1999: $18,000
2000: $18,000
Rent expense charged to operations was $18,312 and $3,112 for the
periods ended October 31, 1996 and 1995, respectively
Note 8. BUSINESS SEGMENTS
The Company currently provides services in two industry segments
consisting of newsletter subscription sales and providing consulting
services. Following is a summary of segment information for the periods
ended October 31, 1996 and 1995:
<PAGE> 21
1996 1995
Sales to unaffiliated customers: ------- -------
Subscription sales $ 91,770 $ 12,121
Consulting fees 259,422 22,100
Hotline Income 5,335 -
------- -------
$ 356,527 $ 34,221
======= =======
Income from operations:
Subscription sales $ 91,770 $ 12,121
Consulting fees 259,422 22,100
Hotline Income 5,335 -
------- -------
356,527 34,221
Other income 66,744 9,372
General corporate expenses (186,375) (531,732)
------- -------
$ 236,896 $(488,139)
======= =======
Identifiable assets:
General corporate $ 1,260,719 $ 808,601
========= =======
Capital expenditures:
General corporate $ 8,278 $ 1,920
======= =======
Depreciation:
General corporate $ 2,711 $ 794
======= =======
Amortization:
General corporate $ 638 $ 320
======= =======
Income from operations represents the net sales from each segment, and
excludes general corporate expenses and other income of a general
corporate nature. General corporate assets consist principally of cash
and marketable securities.
During the year ended October 31, 1996 consulting fees earned from
Players Network and Casinovations amounted to $90,000 and $37,500,
respectively. These fees represented 25.2% and 10.5% of total revenue,
respectively.
During the period ended October 31, 1995 consulting fees earned from
Europa Cruises, Champps Entertainment and Game Financial Corp. amounted
to $12,205, $4,000 and $4,000 respectively. These fees represented
35.7%, 11.7% and 11.7% of total revenue, respectively.
Note 9. CONCENTRATION OF CREDIT RISK
The Company currently has $719,730 bearing interest at 5.50% per annum
at October 31, 1996 on deposit in a money market fund at a single
broker. The amount of SIPC insurance on this fund is limited to
$100,000.
Note 10. COMMITMENTS
During June, 1995 the Company entered into a consulting agreement with
an unrelated entity which would assist the Company in its capitalization.
As payment for these services the Company issued 250,000 shares of its $.001 par
value common stock to this entity or its nominee and agreed to pay cash
aggregating $60,000.
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report
to be signed on its behalf by the undersigned duly authorized person.
Date: January 27, 1997
GAMING VENTURE CORP., U.S.A.
/s/ Alan Woinski
--------------------------------
By: Alan Woinski, President
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
/s/ Alan Woinski 1/27/97
- ---------------------- Chief Executive Officer, ----------
Alan Woinski Chief Operating Officer
and Director
/s/ Kim Santangelo-Woinski 1/27/97
- ---------------------- Chief Financial Officer/Controller ----------
Kim Santangelo-Woinski and Director
/s/ Louis Dachis 1/27/97
- ---------------------- Director ----------
Louis Dachis
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 812,356
<SECURITIES> 49,250
<RECEIVABLES> 50,299
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 914,295
<PP&E> 17,696
<DEPRECIATION> 3,505
<TOTAL-ASSETS> 1,260,719
<CURRENT-LIABILITIES> 247,870
<BONDS> 0
<COMMON> 1,592
0
0
<OTHER-SE> 1,011,257
<TOTAL-LIABILITY-AND-EQUITY> 1,260,719
<SALES> 0
<TOTAL-REVENUES> 356,527
<CGS> 0
<TOTAL-COSTS> 186,375
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 236,896
<INCOME-TAX> 236,896
<INCOME-CONTINUING> 170,152
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 236,896
<EPS-PRIMARY> .15
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