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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
LAS VEGAS GAMING, INC.
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(Exact name of Company as specified in its charter)
NEVADA 88-0392994
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6767 W. Tropicana Avenue, Suite 220
Las Vegas, NV 89103
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(Address of principal executive offices)
Registrant's telephone number, including area code 702-248-1049
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Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
Securities to be registered pursuant to Section 12(g) of the Act:
25,000,000 Authorized Shares of Common Stock
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(Title of class)
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TABLE OF CONTENTS
Page
COVER PAGE ..................................................... 1
TABLE OF CONTENTS ............................................. 2
PART I ........................................................ 3
DESCRIPTION OF BUSINESS ....................................... 3
DESCRIPTION OF PROPERTY ....................................... 25
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES ....... 25
REMUNERATION OF DIRECTORS AND OFFICERS ........................ 27
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS .. 28
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS ..... 29
SECURITIES BEING REGISTERED ................................... 32
PART II ....................................................... 33
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER STOCKHOLDER MATTERS ........................ 33
LEGAL PROCEEDINGS ............................................. 33
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ................. 33
RECENT SALES OF UNREGISTERED SECURITIES ....................... 33
INDEMNIFICATION OF DIRECTORS AND OFFICERS ..................... 34
PART F/S ...................................................... 36
FINANCIAL STATEMENTS .......................................... 36
PART III ...................................................... 37
INDEX TO EXHIBITS ............................................. 37
SIGNATURES .................................................... 38
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PART I
The issuer has elected to follow Form 10-SB, Disclosure
Alternative 2.
Item 6. Description of Business
Las Vegas Gaming, Inc. (the "Company") is in the business of
developing, marketing and distributing casino games and related
supplies. Currently, the Company owns the rights to a number of
games, including, among others, "Nevada Numbers", "Las Vegas
Numbers", and "4-Play Amore". In addition, the Company has
purchased the assets of Back to Back Gaming, Inc. ("B2B"), which
included the rights to "B2B Roulette".
The Company currently intends to focus its efforts on the
development and operation of its keno games and routes in Nevada.
A "route", as the term is typically used by the gaming industry,
generally refers to the situation where a company owns, operates
and services a game or games at various third-party venues
(generally casinos). In such a route, the Company would act as
the "bank" (money handler), in that it would collect the wagers
and pay out winners, and, in exchange for the use of the location
where the game is run, would pay rent to the casino and/or a
percentage of the game's revenues.
In order to be able to share in any revenues from gaming through a
route or otherwise, a person or entity must be licensed by the
state where the game is operated. The Company is currently in the
process of applying for its gaming license with the state of
Nevada. Such an application is a complicated process that will
involve an extensive review of the backgrounds of the officers,
directors and large shareholders of the Company as well as other
matters relating to its operations. No assurance therefore can be
given that the Company will be able to obtain such a license and
thus while it would continue to be able to offer its games, it
would not be able to share in the revenues and operate its planned
Nevada keno route.
CORPORATE ORGANIZATION
Incorporation
The Company was incorporated pursuant to the laws of the State of
Nevada on April 28, 1998.
Subsidiaries
The Company does not have any subsidiaries.
GAMES
1. Nevada Numbers
Nevada Numbers is a variation on the game of keno, commonly played
in Nevada casinos. Keno is a game in which bets are made and
recorded on a keno ticket. This ticket contains eighty numbered
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squares which correspond exactly to the 80 numbered balls in a
casino cage. A player may typically choose to play between three
and twenty different numbers. The player marks on the ticket
which numbers he has chosen, usually with an "X". Twenty out of
the eighty numbers are then drawn by the keno operator each game,
and those numbers are displayed on a keno board. After all the
numbers have been drawn, a player compares the numbers chosen on
his keno ticket with the numbers on the keno board. The more
numbers that match, the more money the player wins. Payouts may
vary from casino to casino and players must check the applicable
payoff chart to determine their winnings, if any. The money
wagered, the total amount of numbers selected, and the total
quantity of matching numbers determine the size of a player's
payoff, if any.
Nevada Numbers differs from this classic form of keno in that
fewer numbers (typically four or five, rather than twenty) are
drawn by the operator. In addition, as the Company plans to play
the game, it may have a "linked" and "progressive" feature at
certain casinos. Linking is the process of tying together
otherwise separate games held at different unassociated casinos
(locations not under common ownership) into one. In other words,
players at several different locations all choose numbers which
are matched to the same five number draw. A game is "progressive"
when the jackpot grows in amount each time there is no winner. In
order to create a progressively growing jackpot, the ticket price
(bet) is made slightly higher for each game played, with the extra
amount going to the added pot. After a progressive jackpot is won,
the winning player may be paid the jackpot in the form of an
annuity for twenty years or a present-value lump sum amount. The
jackpot resets to a minimum amount from which it will increase
until it is won again.
The process of linking games and creating a progressive pot
provides an enticement to players of larger winnings. Until the
Company is properly licensed, it is only able to link and offer
progressive games among "associated" casinos or properties (a
process referred to as "Satelliting," see below), and it cannot
share in the profits of the games - it can only charge a flat
royalty or rental fee for the licensing of the game and equipment.
As a result, participating casinos, rather than the Company, are
responsible for making reports to the Nevada Game Control Board
and for complying with all gaming laws and regulations in the
conduct of the game.
The following is a sample anticipated payout table for a winning
ticket in Nevada Numbers:
Price per five pick ticket $2.00 - $2.50
Match Ticket Pays
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5 $2,000,000 (without progressive jackpot)
4 $50,000
3 $100
2 $5
1 None
Drawings are planned to be held at least daily.
The Company currently does not have any contracts with any casinos
for the offering of this game.
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a. Nevada Bonus Numbers
Nevada Bonus Numbers works in exactly the same manner as Nevada
Numbers, except that it is planned to be linked and progressive at
"unassociated" properties (locations owned by different entities
or individuals) and run as a route by the Company. It would also
only involve one number draw per day. Because of the licensing
requirement mentioned above, the game in this format can only be
offered by the Company once it obtains a gaming license in the
state of Nevada.
The following is a sample anticipated payout table for a winning
ticket in Nevada Bonus Numbers:
Price per five pick ticket $2.50
Match Ticket Pays
- ----- -----------
5 $2,000,000 (plus progressive jackpot)
4 $10,000
3 $100
2 $3
1 None
The Company currently does not have any contracts with any casinos
for the offering of this game.
b. Las Vegas Numbers/The American Lottery
The "American Lottery" is the name for another keno based game
which is virtually identical to Nevada Numbers. The only
difference is that it is planned to be offered exclusively in
Native American casinos across the United States, in a linked and
progressive manner. The term "lottery" is used to convey to
potential players that the game has substantial progressive
jackpots not found in ordinary Keno games. As in Nevada Numbers,
players can win with as few as two out of five numbers correct,
payouts increase as a player chooses more correct numbers and
players who have selected five out of five numbers correctly win
$2,000,000 plus the progressive jackpot. As this game is
currently under development, however, it is possible the final
version of this game could vary substantially from this
description. Specifically, the Company has not finalized the
amount of winning numbers that will be chosen.
A version of this game is being planned for the non-tribal gaming
market in Nevada. The current working name for this game in
Nevada is "Las Vegas Numbers," which will likely be similar to the
American Lottery in all material respects.
The following is a sample anticipated payout table for a winning
ticket in the American Lottery:
Price per five pick ticket $2.00 -$2.50
Match Ticket Pays
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5 $2,000,000 (plus progressive jackpot)
4 $20,000
3 $100
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2 $3
1 None
There are currently no contracts with casinos for this game;
negotiations, however, are pending with several casinos.
d. 4-Play Amore
4-Play Amore is also a form of keno, only in the case of this game
four numbers are chosen by the game operator rather than 20 or 5.
If a player matches all four numbers correctly, that player wins a
fixed jackpot. As with Nevada Numbers and Nevada Bonus Numbers,
this game can be played with a progressive feature or not.
The following is the sample anticipated payout table for a winning
ticket in 4-Play Amore:
Wager 1 Out of 4 2 Out of 4 3 Out of 4 4 Out of 4
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$2.00 No Winner $100.00 $1,000 $150,000
(non-Progressive)
$2.50 No Winner $100.00 $1,000 $150,000 +
Progressive Jackpot
Currently, the Company has licensed the operation of this game to
the Lady Luck Casino in Las Vegas, Nevada.
2. BonusKeno or Quick-Pic Keno
"BonusKeno" or Quick-Pic Keno is another variation on the game of
keno. The key difference in this game is that the winning numbers
(20 of them out of 80) have all been pre-picked before the game is
played and the player receives a pre-marked ("swiped") card. The
player can buy a card with 4, 5, 6 or 8 numbers already swiped.
All BonusKeno cards are sealed so that no one will know the
numbers on the cards until they are opened. Once a player has
unsealed the card, he can compare his ticket to the pre-picked
winning numbers on the BonusKeno monitor to determine if he is a
winner.
For security purposes, the cards used in the BonusKeno game are
prepared using a process called "micro-printing", which is an
encrypted bar code. A random swipe generator produces the card.
Neither the manufacturer nor the casino knows what swipes are on
the inside of any one card. These cards are then sold and
verified using a point-of-sale system. The reverse side of each
ticket bears the payout for that particular game.
BonusKeno cards are valid for the entire Keno session, usually two
hours. The pre-marked BonusKeno cards allow Keno players the
ability to keep playing. Standard Keno requires players to wait
for a game to close and new numbers to be drawn before they can
play again. BonusKeno gives players the opportunity to purchase a
card, open it and then play again with the BonusKeno numbers
already posted. Winning cards can then be immediately redeemed.
The faster turnaround encourages players to play more. Prices for
tickets are expected to be $1 each.
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The Company is focusing on third world countries in marketing this
game. Efforts are currently underway to start the game in Nigeria
and Costa Rico.
3. Back to Back (B2B) Roulette
B2B Roulette is an enhancement on the existing game of roulette.
In the regular American version of Roulette ("Roulette"), there is
a layout on a table of 38 numbers (1 through 36, plus 0 (zero) and
00 (double-zero). Each of these numbers corresponds to a matching
number on a Roulette Wheel (the European version is identical with
the exception that there is no double-zero). In Roulette, a
player can place eleven (11) types of wagers, with each wager
having different payouts. As a general rule, a player's wager is
reflected by where he places his chip(s) and what it touches on
the layout. Chips represent various denominations of currency,
typically 50 cents, $1, $5, $25, $100, and so forth. The Roulette
Dealer (the "Dealer"), an employee of the casino, spins the
Roulette Wheel in one direction and a small ball in the opposite
direction. Bets may be placed until the Dealer announces: "No
more bets." When the ball comes to rest in a given slot on the
Roulette Wheel, winning bets are paid according to their
respective payouts and losing bets are removed and kept by the
casino. If, for example, the ball lands in the slot marked "12",
any player whose bet related to the number 12 on the layout would
be considered a winner.
B2B Roulette provides a player with the ability to place a side
bet on this traditional game format. After a player has made his
normal Roulette bet, the player has the opportunity to give the
Dealer at least one of his $1 chips (the chip denomination is
subject to change according to the policy of each casino) and call
out a number as a "B2B side bet". All B2B side bets are $1
regardless of the amount of the original bet. A player may make
as many B2B side bets as he chooses, but only one chip is allowed
per number per player. If the player wins the first time, the bet
rides (the bet remains in play and the player is not allowed to
remove the bet). At that point, new players are prevented from
wagering on that particular number. If the number selected by the
player then comes up on the immediately succeeding spin (i.e.,
twice in a row) the player wins a bonus payout of $1,000 based on
the $1 bet. If the number comes up on a third successive spin,
the player wins either a larger fixed payout ($10,000) (the "Fixed
Jackpot") or a progressive jackpot (the "Progressive Jackpot"),
depending on how the game is set up at the particular casino.
There are approximately four (4) Fixed Jackpot versions of B2B
Roulette installed in two casinos in Nevada and Mississippi. The
Company has been approved to sell the Progressive Jackpot version
in Nevada, but, until properly licensed, may not share in the
game's profits.
The Progressive Jackpot is won via the same B2B side bet as in the
fixed version. However, a portion of this B2B side bet goes to a
side meter reflecting the current progressive jackpot amount. A
computer sensor board senses the amount of the wager and performs
the calculations to adjust the progressive jackpot meter.
The Company believes that B2B Roulette will encourage current
roulette players to play with greater frequency and for longer
periods of time and will attract new roulette players who are
typically less attracted to standard table games. Individual
progressive versions of B2B Roulette
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can be linked together between associated properties (Satellited)
as well as among tables at the same location.
The Company has entered into a marketing arrangement with
Technical Casino Supplies, Ltd. ("TCS"), a major international
supplier of roulette products and gaming supplies, to distribute
the Fixed Jackpot game outside the United States to hotel-casinos
throughout the world. The Company is currently negotiating a
similar deal with TCS for the progressive version as well as to
handle all distribution and sales within the US for all B2B
Roulette versions.
The tracking control system the Company presently uses in B2B
Roulette will be supplied exclusively by TCS in an agreement that
will be finalized later. If necessary, the Company believes that
it could identify alternative sources of supply; however, there
can be no assurance that the Company would be able to procure,
substitute or produce such components without a significant
interruption and cost in its assembly process in the event that
TCS is unable or unwilling to provide these components.
Due to gaming licensing laws in Nevada, the Company is currently
unable to share with casinos in the profits garnered through the
game. The Company is, however, permitted to lease or license the
rights to the games and earn revenues thereby.
SOFTWARE DEVELOPMENT
The software for the keno games described herein (except for
BonusKeno) have been, or are being, developed by Imagineering
Systems, Inc. ("Imagineering"). The Company has agreed to pay
Imagineering a fixed amount (4 cents) per game ticket sold in
exchange for developing a game's software. The Company owns the
proprietary rights to the software developed by Imagineering and
Imagineering is precluded from developing, or participating in the
development of, any similar game that would be offered to the
public. Imagineering's role is essentially a work-for-hire
arrangement to write the software and upgrade the games as desired
by the Company.
On November 18, 1999, the Company obtained an option to acquire
all of the shares of Imagineering owned by Bill Williams, its
President, in a private sale. Mr. Williams is also currently a
Director of Las Vegas Gaming. This option was obtained in exchange
for a loan to Mr. Williams from the Company in the amount of
$25,000 and the promise to deliver to Mr. Williams 150,000 shares
of Las Vegas Gaming Common Stock in the event the option is
exercised. In the event the option is not exercised within 6
months, Mr. Williams is required to re-pay this loan at 8%
interest over a five year period in semi-annual payments.
LICENSES AND RIGHTS
1. Keno in Puerto Rico
The Company has obtained the right to sell or lease keno games and
equipment and provide software and hardware support to casinos in
the island of Puerto Rico. Puerto Rico has approximately 17
licensed casinos. Currently, The Company holds the only license to
sell or lease
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Keno games and equipment in the Commonwealth of Puerto Rico, but
has not, as yet, set up a Keno operation. In Puerto Rico, the
Company is not allowed to "bank" a game, and thus any licensed
casino the Company contracts with will be required to handle the
wagers and winnings.
Puerto Rico Keno will require at least $75,000 for equipment,
marketing, administrative costs and $100,000 in reserve capital
for jackpot payoffs before it can be offered.
2. Nevada Keno Route:
The Company has applied for a license to operate a Keno route in
the State of Nevada. Currently, the Company does not operate any
Keno games in the State of Nevada and will not before it becomes
licensed. The licensing process is expected to cost approximately
$100,000.00 and take approximately six months to complete.
The process involves a formal application to the Nevada Gaming
Control Board, followed by several months of investigation into
the background of all the principals involved in the operation of
the Company, including any 10% shareholders. The results of these
investigations are then discussed in meetings with the Gaming
Control Board staff and eventually a full hearing is held before
the Nevada Gaming Control Commission to determine whether a
license will be granted. As this process is quite extensive and
involves individual examinations of officers, directors and
shareholders, there can be no assurance that the Company will be
able to obtain such a license, or that, if it is obtained, it will
be completed within the timeframes expected or desirable for the
Company's business plans.
The Nevada Keno Route will require at least $75,000 for equipment,
marketing and administrative costs.
BUSINESS DEVELOPMENT STRATEGY AND PLAN OF OPERATIONS
The Company's business plan is to develop and offer enhanced
versions of existing casino games. The Company believes that
offering players a more entertaining and engaging experience will
entice them to play its games. The Company does not intend, at
this time, to manufacture games or operate casinos. Rather, the
Company plans to contract with third-parties to develop and
manufacture its games, and then to sell, license or make other
arrangements with casino operators to have its games played in
their casinos.
While the Company will continue to consider various opportunities
for marketing its various games and rights, it's current plan is
to focus it's efforts on obtaining a gaming license in the state
of Nevada so that it can share in the profits of its games and
offer a keno route in the state. This route is expected to focus
around a linked and progressive version of Nevada Bonus Numbers.
Linking and Satelliting of Games
A fundamental trait of all progressive games is that they are
connected to other machines in a way that a portion of every bet
made at each linked game is funneled electronically to the
progressive
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jackpot. The Company can connect, or has plans to connect, its
games in one of two ways: linking or satelliting.
"Linking" refers to the process of connecting games at different
locations so that they are playing the same game. These machines
may be located at unrelated properties (i.e., gaming properties
without any financial, management, or other ties to each other) or
at associated ones. For Keno-based games, numbers could be chosen
from any approved location, whether it be the Company's offices or
in a casino. The results of the number draw are transmitted
electronically to all linked properties, immediately and
simultaneously.
The Company does not currently have the proper license link its
games at unrelated properties, but is currently working with
Imagineering to achieve this capability.
Keno can also be "satellited". This means a game is connected but
only among associated properties (i.e., properties under the same
ownership or management group). Satellite keno is one game, run
by a master computer with several ticket outlets in other
locations, connected by a telephone line. A master computer,
"ball draw" equipment and printers are installed at the host
casino. The master computer runs the game. The results of the
game are communicated through the dedicated telephone lines to the
satellite computers located at the associated properties. Each
casino is responsible for the results of the tickets they sell.
The Company currently possesses the means to satellite its
progressive jackpot games at associated properties.
Manufacture, Installation, Training and Maintenance of Games
All games owned by the Company are manufactured by outside
companies.
The responsibility for installing and maintaining games depends on
the type of game and the individual arrangement reached with the
participating casino. The Company provides initial training of
casino personnel on the game. For Keno games, the Company
provides all the necessary hardware, software, signage, training
and maintenance support through an independent company.
Casinos can have Nevada Numbers and/or Nevada Bonus Numbers
installed on their existing keno machines if they are currently
using the Imageplus, Imagineering Keno System. A progressive
server would, however, need to be installed, but takes up little
counter space.
Casinos without Imageplus can be provided with a Netstar Mega 2000
System. This system is independent and requires a small amount of
counter space. System components include a master computer, sign
computer, printer, wedge computer and a ticket printer. A site
survey is required prior to the installation of such a system.
The site survey typically takes several hours and installation
will usually take one full day.
Marketing
The Company sells its games directly to Casinos through sales
people. Initial contact is made either from mailing of marketing
materials or referrals to keno or casino managers. The Company
will not
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directly market its games to the general public.
Instead, the staff at the Company plans to work with the marketing
department of the casinos that offer its games to tailor a
marketing plan for that particular casino. The Company
anticipates that a portion of each keno ticket sold will be used
to promote the game, with the casinos themselves putting up any
initial funding for the marketing efforts prior to actual sales.
Advertising within a casino property may include table tents,
flyers, slot toppers and show cards to stimulate curiosity and
game play.
After getting its license, the Company plans to aggressively
market and advertise the game Nevada Bonus Numbers throughout the
state of Nevada via billboards, radio, and television
advertisements. It is anticipated that 24 cents out of every
ticket purchased will be spent on advertising Nevada Bonus Numbers
and the casinos offering the game. All participating casinos are
expected to be part of these advertising campaigns.
Competition
Competition among gaming equipment suppliers and among individual
games is strong and presents a significant barrier to entry as
well as growth. The most direct competition to the Company's
games is the traditional game of keno which is already well
established in casinos throughout Nevada. Additional competition
will also be faced from several relatively new progressive slot
and table games, including Mega Bucks, Quarter Mania, Nevada
Nickels and Caribbean Stud which provide the growing pot
excitement targeted by the Company's progressive keno games.
In recent years, the market has not been dominated by any single
entity. The Company's existing competitors, as well as many
potential new competitors, have significantly greater financial
and technical resources, more established customer bases and more
established distribution channels than the Company. Moreover,
because the Company is a start-up operation, it is more sensitive
than an established business to the impact of competition.
Additionally, as more of these competitors enter into the
marketplace, it is likely that the industry and the Company will
experience a decrease in sales prices, reduced operating margins
and a loss of market share at a later date.
In addition, it is a reasonable possibility that existing or new
competitors could develop games that prove more attractive to
casino operators and the gaming public. If these factors occur,
they would have a significant impact on the future financial
operating results of the Company.
Any one or a combination of the events or other setbacks to the
Company's business could cause the Company to fail and an investor
to lose his or her entire investment. There can be no assurance
that the Company will be a successful competitor in the gaming
industry.
B2B ASSET PURCHASE AGREEMENT
On July 10, 1998, the Company entered into an asset purchase
agreement with B2B (the "Asset Purchase Agreement") to acquire all
of its assets (collectively, the "B2B Assets"). Upon
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consummation of this transaction, the Company paid $375,000 and
executed a promissory note to B2B in the amount of $125,000. The
promissory note is amortized over a fifteen-year period with monthly
payments of principal and interest at a rate of 8% per annum. The
note is due and payable in full on its fifth anniversary in the year
2003. In addition, the Company has issued 75,000 restricted shares of
its common stock to B2B shareholders as part of the consideration
for the sale.
Originally as part of this Asset Purchase Agreement, the Company
agreed to use its best efforts to register its common stock with
the Securities and Exchange Commission and to have it trading in
the over-the-counter market within one year. This provision was
later waived by the mutual agreement of the parties.
The Company currently does not plan to market this game, but
instead is engaging in discussions with TCS to license the game in
exchange for a royalty or licensing fee .
DISTINCTIVE CHARACTERISTICS OF THE BUSINESS THAT MAY HAVE A
MATERIAL IMPACT ON FUTURE FINANCIAL PERFORMANCE
A number of factors distinctive to the Company's business may have
a material impact on future financial performance, including:
1. Competition. As noted above, competition among gaming
equipment suppliers and games is strong and presents a significant
barrier to entry. Getting a game offered in a casino with
typically limited floor and operating space is a difficult task
with a high likelihood of failure. The failure to pass this
barrier will have a significant negative impact on the future
financial results of the Company.
2. Marketing. The Company's marketing plan is dependent upon the
needs and acceptance of the Company's games by casino operators.
Many of the Company's products are proprietary in nature and
casino operators are reluctant to place gaming equipment in their
casino from which they will have to share revenue and which may
deplete revenues of other games for which they do not need to
share revenue. The failure to attract enough demand from casinos
will have a significant negative impact on the future financial
results of the Company.
3. Products. The replacement cycle for many games provided by
gaming equipment suppliers appears to be accelerating. There is
mounting pressure in the industry to put out the next widely
successful game. This gives the Company's games less time to be
accepted by the gaming public and forces the Company to
continually develop new games or be left behind in the
marketplace. Development of new games is costly with uncertain
rewards. The failure to attract enough demand from casinos and
players alike will have a significant negative impact on the
future financial results of the Company.
EMPLOYEES
As of January 31, 2000, the Company had 3 employees who are the
officers of the Company. The Company does not plan to hire any
additional employees in the foreseeable future.
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The Company's three officers are Mr. Russell R. Roth, President,
CEO, CFO, and Chairman, Mr. Gary G. Baldwin, Executive Vice
President and Treasurer, and Mr. Mark F. Valenti, Executive Vice
President and Secretary. All Company officers are also directors
of the Company.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
A patent application for the Company's progressive keno games was
made by Mr. Mark Valenti as inventor/applicant. Mr. Valenti
assigned his rights in this application to the Company. This
application seeks to obtain exclusive rights to conduct the keno
style games described hereinabove. Currently, this patent
application has the status of "Patent Pending" with the US Patent
and Trademark Office. No assurance, however, can be given that
any such a patent will ever be issued or, if issued, will
withstand a challenge as to their validity. The Company has also
applied for, and received, certain trademarks and copyrights for
these games and their names.
Through the purchase of B2B, the Company obtained the intellectual
property rights for B2B Roulette. A patent for B2B Roulette was
recently issued.
The Company also has ownership rights to several trademarks and
copyrights filed with the State of Nevada and US Patent and
Trademark Office.
The Company intends to protect any future products it develops
through a combination of patents, trademarks and copyrights.
RESEARCH AND DEVELOPMENT EXPENDITURES
The Company has not expended any funds for Research and
Development and does not currently expect to expend any in the
near future. New games have been and are generally purchased from
persons or entities that have developed them in exchange for
stock, cash or some combination of the two, and software or other
technology development is provided by independent contractors in
exchange for stock or royalty payments. In the case of the
Company's keno games, with the exception of BonusKeno, the Company
has agreed to pay Imagineering Systems, Inc. four (4) cents per
keno ticket sold for the development of the software to be used in
playing the games.
INDUSTRY BACKGROUND
Although the casino industry, and the gaming industry in general,
has experienced substantial growth in the 1990's, that growth has
slowed in recent years. Nevertheless, in the last ten years,
Arizona, California, Colorado, Connecticut, Delaware, Florida,
Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Michigan,
Minnesota, Mississippi, Missouri, Montana, Nebraska, New Mexico,
New York, North Dakota, Oregon, South Dakota, Texas, Washington,
Wisconsin and several provinces in Canada have joined Nevada and
New Jersey in legalizing or expanding the legalization of various
forms of casino gaming. In Canada, growth in these jurisdictions
has occurred in both land-based casinos and riverboat/dockside
casinos, which were first legalized in Iowa in 1989 and are now
authorized in six states. In addition, the Indian Gaming
Regulatory Act of 1988 has led to
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the development to date of more than 160 tribal casinos in Arizona,
California, Colorado, Connecticut, Florida, Idaho, Iowa, Kansas,
Louisiana, Michigan, Minnesota, Mississippi, Montana, Nebraska, Nevada,
New Mexico, New York, North Carolina, North Dakota, Oregon, South Dakota,
Texas, Washington, and Wisconsin.
GOVERNMENT REGULATION
1. Potential Legal, Regulatory and/or Compliance Risk
The Company will be required to obtain licenses, approvals, and
findings of suitability and Product approvals in all jurisdictions
in which it intends to distribute its gaming products. The
licensing and approval process will generally involve extensive
investigations into: (1) the gaming products produced, (2) the
Company itself, and (3) the Company's officers, directors,
employees and principal shareholders, and can require significant
expenditures of time and resources. In addition, gaming regulatory
authorities have broad discretionary powers and may deny
applications or revoke approvals on any basis they deem
reasonable. There is no guarantee that the Company, its products
or its personnel will receive or be able to maintain any required
approvals.
The Company has received approval to distribute its Fixed Jackpot
and Progressive Jackpot version of B2B Roulette in Nevada, and
only the fixed version in Mississippi and Iowa. The Company has
also received approval to distribute its Nevada Numbers games in
Nevada. These approvals and the underlying gaming regulations,
however, are subject to change. The Company cannot predict the
nature of any such changes or their impact on the Company in the
future. Notwithstanding these approvals, the Company continues to
be unlicensed in Nevada and therefore may not share in the profits
of any gaming activities in the state.
Potential shareholders should note that any beneficial holder of
an equity interest in the Company may be subject to investigation
by any gaming authority in any or all jurisdictions in which the
Company does business, if such authorities have reason to believe
that such ownership may be inconsistent with the state's gaming
policies. Persons who acquire beneficial ownership of more than a
certain designated percentage of the Company's common shares, may
be subject to certain reporting and qualification procedures. In
addition, changes in control of the Company and certain other
corporate transactions may not be effectuated without the prior
approval of the gaming authorities in those jurisdictions, in
which the Company does or anticipates doing business. Such
regulatory provisions could adversely affect the marketability, if
any develops, of the common shares and could prevent certain
corporate transactions, including mergers or other business
combinations.
2. Gaming Regulations and Licensing
In General
The Company and its products are subject to strict governmental
regulations in most jurisdictions in which its products are sold
or are used by persons or entities licensed to conduct gaming
activities. Such gaming regulations vary from jurisdiction to
jurisdiction and the classification and level of the
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regulatory licensing, approvals and compliance to which the Company
and its products must conform also vary by jurisdiction.
In certain jurisdictions, the Company may be operating pursuant to
temporary waivers or approvals. There can be no assurance that
such temporary waivers or approvals will be maintained or become
permanent. Failure by the Company to obtain, or the loss or
suspension of, any necessary licenses, approvals or suitability
findings would prevent or restrict the Company from operating,
selling or distributing its products in the applicable
jurisdictions. Such failure or loss could have a material adverse
effect on the Company.
In the event gaming authorities determine that an officer,
director, key employee, stockholder or other person of the Company
is unsuitable to act in such a capacity, the Company will be
required to terminate its relationship with such person or lose
its operating rights and privileges in that jurisdiction. In
either case, this will likely have a material adverse effect on
the Company. Such a finding of unsuitability could have a
material adverse effect on the Company. There can be no assurance
that the Company or its subsidiaries will obtain all the necessary
licenses and approvals or that its officers, directors, key
employees, their affiliates and certain other stockholders will
satisfy the suitability requirements in each jurisdiction in which
its products are sold or used by persons licensed to conduct
gaming activities. The failure to obtain such licenses and
approvals in one jurisdiction may affect the Company's licensure
and/or approvals in other jurisdictions. In addition, a
significant delay in obtaining such licenses and approvals could
have a material adverse effect on the business prospects of the
Company.
The Company's products, B2B Roulette and Nevada Numbers, are
generally classified as "associated equipment." Associated
equipment is equipment that is not classified as a "gaming
device," but which has such an integral relationship to the
conduct of licensed gaming that regulatory authorities have
discretion to require suppliers of such systems to meet licensing
suitability requirements prior to or concurrent with the use of
such equipment in the respective jurisdiction. Regulatory
authorities generally must approve associated equipment in
advance.
The Company, or its distributor, has complied in all material
respects with the associated equipment approval process in each
jurisdiction in which it has sold B2B Roulette and Nevada Numbers.
Although the Progressive Jackpot version of B2B Roulette is
generally classified as "associated equipment," the proposed
participation by the Company in the revenues of the Progressive
Jackpot version of B2B Roulette will require the licensure of the
Company and its officers, directors and key employees. The Company
has not as yet obtained such a license.
Nevada Regulatory Issues
The Company is subject to the Nevada Gaming Control Act (the
"Nevada Act"), and to the licensing and regulatory control of the
Nevada State Gaming Control Board (the "Nevada Board"), the Nevada
Gaming Commission (the "Nevada Commission"), and various local,
city and county regulatory agencies (collectively, the "Nevada
Gaming Authorities").
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The laws, regulations and supervisory procedures of the Nevada
Gaming Authorities are based upon declarations of public policy
which are concerned with, among other things: (1) the character of
persons having any direct or indirect involvement with gaming to
prevent unsavory or unsuitable persons from having a direct or
indirect involvement with gaming at any time or in any capacity;
(2) application of appropriate accounting practices and
procedures; (3) maintenance of effective control over the
financial practices and financial stability of licensees,
including procedures for internal fiscal affairs and the
safeguarding of assets and revenues; (4) record-keeping and
reporting to the Nevada Gaming Authorities; (5) fair operation of
games; and (6) the raising of revenues through taxation and
licensing fees.
Officers, directors and certain key employees of the Company may
be required to be licensed by the Nevada Commission, and employees
associated with gaming must obtain work permits which are subject
to immediate suspension under certain circumstances. An
application for licensure may be denied for any cause deemed
reasonable by the issuing agency. Changes in licensed positions
must be reported to the issuing agency. In addition to its
authority to deny an application for a license, the Nevada
Commission has jurisdiction to disapprove a change in position by
such officer, director or key employee. The Nevada Commission has
the power to require licensed gaming subsidiaries to suspend or
dismiss officers, directors or other key employees and to sever
relationships with other persons who refuse to file appropriate
applications or whom the authorities find unsuitable to act in
such capacities.
The Nevada Commission may also require anyone having a material
relationship or involvement with the Company to be found suitable
or licensed, in which case those persons are required to pay the
costs and fees of the Nevada Board in connection with the
investigation. Any person who acquires more than 5% of the
Company's voting securities must report the acquisition to the
Nevada Commission; any person who becomes a beneficial owner of
10% or more of the Company's voting securities will be required to
apply for a finding of suitability. Under certain circumstances,
an "Institutional Investor," as such term is defined in the
regulations of the Nevada Commission, which acquires more than 10%
but not more than 15% of the Company's voting securities, may
apply to the Nevada Commission for a waiver of such finding of
suitability requirements, provided the institutional investor
holds the voting securities for investment purposes only.
Any person who fails or refuses to apply for a finding of
suitability or a license within 30 days after being ordered to do
so by the Nevada Commission may be found unsuitable. The same
restrictions apply to a beneficial owner if the record owner,
after request, fails to identify the beneficial owner. Any
security holder found unsuitable and who holds, directly or
indirectly, any beneficial ownership of the Common Stock beyond
such period of time as may be prescribed by the Nevada Commission
may be guilty of a gross misdemeanor. The Company is subject to
disciplinary action if, after it receives notice that a person is
unsuitable to be a security holder or to have any other
relationship with the Company, the Company: (1) pays that person
any dividend or interest upon voting securities of the Company;
(2) allows that person to exercise, directly or indirectly, any
voting right conferred through securities held by that person; or
(3) gives remuneration in any form to that person. If a security
holder is found unsuitable, the Company may itself be found
unsuitable if it fails to pursue all lawful efforts to require
such unsuitable person to relinquish his or her voting securities
for cash at fair market value. Additionally, the Clark County
authorities have taken the
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position that they have the authority to approve all persons
owning or controlling the stock of any corporation controlling
a gaming license.
The Nevada Commission may, in its discretion, require holders of a
debt or equity security of a corporation registered under the
Nevada Act to file applications, be investigated and be found
suitable to own the debt or equity security of a registered
corporation. The applicant security holder is required to pay all
costs of such investigation. If the Nevada Commission determines
that a person is unsuitable to own such security, then pursuant to
the regulations of the Nevada Commission, the registered
corporation may be sanctioned, including the loss of its
approvals, if, without the prior approval of the Nevada
Commission, it: (1) pays to the unsuitable person any dividends,
interest or any distribution whatsoever; (2) recognizes any voting
right by such unsuitable person in connection with such
securities; (3) pays the unsuitable person remuneration in any
form; or (4) makes any payment to the unsuitable person by way of
principal, redemption, conversion, exchange, liquidation or
similar transaction.
The Company is required to maintain a current stock ledger in
Nevada which may be examined by the Nevada Commission at any time,
and to file with the Nevada Commission, at least annually, a list
of its stockholders. If any securities are held in trust by an
agent or by a nominee, the record holder may be required to
disclose the identity of the beneficial owner to the Nevada
Commission. A failure to make such disclosure may be grounds for
finding the record holder unsuitable. The Company will also be
required to render maximum assistance in determining the identity
of the beneficial owner. The Nevada Commission has the power to
require the Company's stock certificates to bear a legend
indicating that the securities are subject to the Nevada Act and
the regulations of the Nevada Commission. However, to date, the
Nevada Commission has not imposed such a requirement on the
Company.
The Company may not make a public offering of its securities
without the prior approval of the Nevada Commission if the
securities or proceeds therefrom are intended to be used to
construct, acquire or finance gaming facilities in Nevada, or
retire or extend obligations incurred for such purposes. Also,
changes in control of the Company through merger, consolidation,
acquisition of assets, management or consulting agreements or any
form of takeover cannot occur without prior investigation by the
Nevada Board and approval of the Nevada Commission.
Pursuant to Nevada law, the Company and its affiliates, including
any subsidiaries, may engage in gaming activities outside Nevada
("foreign gaming") without seeking the approval of the Nevada
Commission provided that such activities are lawful in the
jurisdiction where they are to be conducted and that certain
information regarding the foreign operation is provided to the
Nevada Board on a periodic basis. The Company may be disciplined
by the Nevada Commission if it knowingly violates any laws of the
foreign jurisdiction pertaining to the foreign gaming operation,
fails to conduct the foreign operation in accordance with the
standards of honesty and integrity required by Nevada gaming
regulations, engages in activities that are harmful to the State
of Nevada or its ability to collect gaming taxes and fees, or
employs a person in the foreign operation who has been denied a
license or finding of suitability in Nevada on the ground of
unsuitability.
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Other Jurisdictions
Although the regulatory schemes in other jurisdictions are not
identical, their material attributes are substantially similar, as
described below.
The manufacture, sale and distribution of gaming devices and the
ownership and operation of gaming facilities in each jurisdiction
are subject to various provincial, state, county and/or municipal
laws, regulations and ordinances, which are administered by the
relevant regulatory agency or agencies in that jurisdiction (the
"Gaming Regulators"). These laws, regulations and ordinances
primarily concern the responsibility, financial stability and
character of gaming equipment manufacturers, distributors and
operators, as well as persons financially interested or involved
in gaming or liquor operations.
In many jurisdictions, manufacturing or distributing gaming
supplies may not be conducted unless proper licenses are first
obtained. An application for a license may be denied for any
cause, which the Gaming Regulators deem reasonable. In order to
ensure the integrity of manufacturers and suppliers of gaming
supplies, most jurisdictions have the authority to conduct
background investigations of the Company, its key personnel and
significant stockholders. The Gaming Regulators may at any time
revoke, suspend, condition, limit or restrict a license for any
cause deemed reasonable by the Gaming Regulators. Fines for
violation of gaming laws or regulations may be levied against the
holder of a license and persons involved.
Federal Regulation
The Federal Gambling Devices Act of 1962 (the "Johnson Act") makes
it unlawful, in general, for a person to manufacture, deliver, or
receive gaming machines, gaming machine type devices and
components across state lines or to operate gaming machines unless
that person has first registered with the Attorney General of the
United States.
The Company has complied with such registration requirements. In
addition, the Johnson Act imposes various record keeping equipment
identification requirements. Violation of the Johnson Act may
result in seizure and forfeiture of the equipment, as well as
other penalties.
The Company is required to renew its registration annually.
Native American Gaming Regulation
Gaming on Native American lands, including the terms and
conditions under which gaming equipment can be sold or leased to
Native American tribes, is or may be subject to regulation under
tribal ordinances, the terms of compacts between the tribe and the
host state, the Indian Gaming Regulatory Act of 1988 ("IGRA"),
which is administered by the National Indian Gaming Commission
(the "NIGC") and the Secretary of the U.S. Department of the
Interior (the "Secretary"), and also may be subject to the
provisions of certain statutes relating to contracts with Native
American tribes, which are administered by the Secretary. The
regulations and guidelines under which the NIGC and the Secretary
will administer IGRA are incomplete and evolving. IGRA
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also is subject to interpretation by the NIGC and the Secretary, and
may be subject to judicial and legislative clarification or amendment.
IGRA prohibits substantially all forms of commercial gaming on
Native American lands, including gaming involving slot machines
and gaming devices, unless: (1) the tribe on whose lands the
gaming will take place has adopted an ordinance which has been
approved by the NIGC authorizing and regulating such gaming, and
(2) the state in which the gaming will take place permits such
gaming by any person for any purpose. If the commercial gaming
involves slot machines and gaming devices, IGRA also requires that
the tribe and the state have entered into a written agreement (a
"tribal-state compact") that specifically authorizes such types of
commercial gaming, and that has been approved by the Secretary,
with notice of such approval published in the Federal Register.
Tribal-state compacts vary from state to state. Many require that
equipment suppliers meet ongoing registration and licensing
requirements of the state and/or the tribe, some establish
equipment standards that may limit or prohibit the placement of
progressive games on Indian lands, and some impose background
check requirements on the officers, directors, and shareholders of
gaming equipment suppliers.
In addition to federal and state governmental requirements
pertaining to gaming on Native American lands, Native American
tribes are sovereign nations with their own courts and
governmental systems. Under IGRA, tribes are required to regulate
all commercial gaming under ordinances approved by the NIGC. Such
ordinances may impose standards and technical requirements on
gaming hardware and software, and may impose registration,
licensing, and background check requirements on gaming equipment
suppliers and their officers, directors, and shareholders.
Because of their sovereign status, Native American tribes possess
sovereign immunity from suit. The Company intends to seek waivers
of such immunity, where appropriate, from tribes with whom the
Company does business, but there can be no assurance that such
waivers will be obtained. If they are not, the extent of the
Company's ability to enforce its agreements with Native American
tribes will be severely circumscribed.
Under doctrines enunciated by the Supreme Court of the United
States, federal and state courts are obliged, as a matter of law,
to defer to the jurisdiction of tribal courts in litigation where
tribal interests are substantially involved and where tribal
courts may have jurisdiction. In such instances, if a tribal court
hears the litigation, its determinations likely will be entitled
to great deference in any state or federal court that later might
be asked to hear the matter. These facts may affect the ability of
the Company to effectively enforce its agreements with Native
American tribes.
In addition to the foregoing, two federal statutes may have
applicability to commercial gaming contracts with Native American
tribes:
(a) Title 25, Section 81, of the United States Code states that
"no agreement shall be made by any person with any tribe of
Indians, or individual Indians not citizens of the United States,
for the
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payment or delivery of any money or other thing of value .
. . in consideration of services for said Indians relative to
their lands... unless such contract or agreement be executed and
approved" by the Secretary or his or her designee. Agreements for
services relative to Native American lands which fail to conform
with the requirements of this section will be void and
unenforceable, and all money or other things of value paid under
such void agreements is subject to judicial forfeiture in
litigation, which can be brought by any person, in the name of the
United States of America. The Company believes that sales of its
B2B and Nevada Numbers systems are not "relative to Native
American lands" because, although the Company's products
ultimately may be used on Native American lands, the products
themselves are not related to such lands, and give the Company no
control over such lands. To date, the Secretary has not asserted
that agreements for the sale of goods to Indian tribes require his
approval under Title 25, Section 81, United States Code.
(b) Title 25, Sections 261-264, United States Code (the "Indian
Trader Licensing Act" or "ITLA") creates a licensing requirement,
and states that "any person other than an Indian of the full blood
who shall attempt to reside in the Indian country, or on any
Indian reservation, as a trader, or to introduce goods, or to
trade therein, without such license, shall forfeit all merchandise
offered for sale to the Indians or found in his possession, and
shall moreover be liable to a Penalty of $500 . . ." The
applicability of ITLA to the Company's sale of systems on Native
American reservations is unclear.
Application of Future or Additional Regulatory Requirements
The Company intends to seek the necessary registrations, licenses,
approvals and findings of suitability for the Company, its
products and its personnel in other jurisdictions throughout the
world where significant sales are anticipated to be made. However,
there can be no assurance that such registrations, licenses,
approvals or findings of suitability will be obtained or will not
be revoked, suspended or conditioned or that the Company will be
able to obtain the necessary approvals for its future products as
they are developed in a timely manner, or at all. If a
registration, license, approval or finding of suitability is
required by a regulatory authority and the Company fails to seek
or does not receive the necessary registration, license, approval
or finding of suitability, the Company may be prohibited from
selling its products for use in the respective jurisdiction or may
be required to sell its products through other licensed entities
at a reduced profit to the Company.
RISK FACTORS
The Company faces risks in executing its business plan and
achieving revenues. The following risks are material risks which
the Company faces. If any of the following risks occur, the
business of the Company and its operating results and financial
condition could be seriously harmed.
1. The Company's Short Operating History makes its business
difficult to evaluate
The Company was incorporated on April 28, 1998 and it has no
operating history or experience in developing, manufacturing,
marketing or distributing casino games or related supplies upon
which
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to base any projection as to the likelihood that the Company
will prove successful. Thus, there can be no assurance that the
Company will achieve profitable operations or even generate any
operating revenues.
Potential investors should be aware that there is a substantial
risk of failure associated with new businesses as a result of
problems encountered in connection with their formation and
commencement. These include, but are not limited to,
unanticipated problems relating to the marketing and sale of a new
service in the marketplace, the entry of new competition and
unknown or unexpected additional costs and expenses that may
exceed current estimates.
Accordingly, the Company's business and prospects must be
considered in light of the risks, expenses and difficulties
frequently encountered by companies in their early stage of
development, particularly companies in rapidly evolving markets
such as gaming equipment. To address these risks, the Company must
successfully implement its business plan and marketing strategies.
The Company may not successfully implement all or any of its
business strategies or successfully address the risks and
uncertainties that it encounters.
2. Market risks
Any time a new product or service is introduced into a market, as
in the case of the gaming products being offered by the Company,
there is a substantial risk that sales will not meet expectations
or even cover the cost of operations. General market conditions
might be such that sales will be slow or even non-existent, and/or
the product itself might not fit the needs of buyers enough to
induce sales. While the Company anticipates the ability to sell
its games to casinos, there is no way to predict the volume of
sales that will occur or even if sales will be sufficient to
support the future operations of the Company. Numerous factors
beyond the control of the Company may affect the marketability of
its gaming products. These factors include consumer demand, market
fluctuations, the proximity and capacity of suppliers and
government regulations, including regulations relating to gaming,
taxes, royalties, insurance, and other controls. The exact effect
of these factors cannot be accurately predicted, but it is
possible they may result in the Company not receiving an adequate
return on its invested capital.
To achieve commercial success, the Company's products must be
accepted by both casino operators and gaming patrons. To date, the
Company through arrangements with Imagineering is completing the
development and production of Nevada Numbers. With respect to B2B
Roulette, the Company has installed a number of the Fixed Jackpot
version of B2B Roulette in two different casinos in Nevada and
Mississippi. Because acceptance of the game by casino operators
will ultimately depend on revenue per table, the game's success
will depend on player acceptance. There can be no assurance that
casino patrons will accept the games sold by the Company. With
respect to Nevada Numbers, although it is a variation of keno, a
long-standing casino game, there can be no assurance that casino
patrons will accept Nevada Numbers.
In addition, there is a market risk specific to sellers of
proprietary games offered to casino operators, like those that the
Company intends to offer. Proprietary games are games where the
equipment supplier retains ownership of the gaming equipment and
leases or co-ventures the game
21
itself to the casino. Casino operators have been careful about
adding proprietary games to their floors since they are required
by contract to pay a portion of their revenues to the equipment
suppliers. To compensate for sharing their revenue, casino operators
generally will not install proprietary games unless those games have
the ability to generate substantially more than the average game of
its type in that casino. The additional revenue offered by proprietary
games must at least offset the payments to the equipment suppliers.
Still, casino operators prefer to own game equipment fearing that the
proprietary games are just taking revenue away from casino-owned
games, rather than increasing overall revenue.
3. Jackpot Risk
There is a risk that a person may win a jackpot on one of the
Company's games before sufficient revenue is generated to
compensate for the payment. In order to insure for this risk, the
Company has developed an on-going working relationship with SCA
Promotions Inc. ("SCA"), the largest mega jackpot broker in the
United States. SCA has arranged for New Hampshire Life Insurance
Company to insure casinos for the $2 million jackpot offered in
Nevada Numbers. The $2 million jackpot is payable in twenty equal
annual installments of $100,000 each. No interest is paid to the
player. Casinos may also choose to self-insure their major
jackpot risk.
4. The Company has limited revenues
To date, the Company has derived only a limited amount of revenues
from the offering of its games. Future revenues will depend on
the Company's ability to successfully market existing products and
to develop new products.
The Company plans to derive some of its revenue through revenue
participation with casinos. Gross revenues are subject to
substantial reduction due to the Company's sharing commitments.
For example, revenue from keno ticket sales from the Company's
progressive keno games must be divided among the casino,
insurance, the progressive jackpot, marketing/advertising, and
player winnings. Royalties per ticket sold must also be paid to
Imagineering for software it has developed for the Company.
5. Operating results are difficult to predict
The Company's future financial results are uncertain due to a
number of factors, many of which are outside the Company's
control. These factors include:
a) The uncertainty over whether the Company will reach
agreements to place its equipment in various casinos and upon
what terms;
b) The amount and timing of costs relating to development of the
Company's products;
c) The announcement or introduction of competing products of
competitors;
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d) The uncertainty associated with obtaining a license in the
state of Nevada and any other state it later sells its'
games; and
e) General economic conditions and economic conditions specific
to the gaming industry.
6. The Need for Additional Financing
The Company may require additional financing in order to complete
its business plan. The Company has no agreements for additional
financing and there can be no assurance that additional funding
will be available to the Company on acceptable terms if necessary.
If funding is not made available as and when necessary, the
Company will not be able to continue operations.
7. The Company depends on its key employees
The operation of the Company depends to a significant degree on
the efforts of its officers and directors, particularly the
efforts of Russell Roth, Gary Baldwin, Mark Valenti and Bill
Williams. The Company's officers and employees are bound by non-
competition agreements and/or have significant ownership interests
in the Company beyond their employment. Even so, there is no
assurance that officers and employees will not leave the Company
or compete against the Company in the future. The Company's
failure to attract additional qualified employees or to retain the
services of key personnel could have a material adverse effect on
the Company's operating results and financial condition.
8. Limited Protection of Intellectual Property Rights and the Risk
of Litigation
The Company's gaming products are proprietary in nature and the
Company relies primarily on a combination of patent, trademark,
copyright and trade secret laws as well as
confidentiality/nondisclosure agreements to protect its
proprietary rights in these products. The inventors of Nevada
Numbers (and related keno games) and B2B Roulette have applied for
a United States patent with respect to the method of play and
apparatus of these games, and such applications have been assigned
to the Company. Even though applications have been made, there can
be no assurance that such patents will be issued or, if issued,
that such patents will not be challenged. Further, the protections
offered by patent, trademark, copyright and trade secret laws
might not prevent a competitor from designing games that have an
appearance and functionality that closely resembles B2B Roulette
or Nevada Numbers. Also, the defense of intellectual property
rights can be difficult and costly. There can thus be no assurance
that the Company will be able to protect effectively its
intellectual property rights from misappropriation by competitors.
In addition, as the number of software products in the gaming
industry increases and the functionality of these products further
overlaps, software developers and publishers may increasingly
become subject to infringement claims. The Company may also become
subject to such infringement claims, regardless of merit, that are
brought by competitors or others. Although the Company is not
currently aware of any infringement claim against it, there can be
no assurance that the Company will not face such claims in the
future. Any such infringement claim, litigation arising from such
infringement claim and/or the eventual resolution of such
infringement claim -
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particularly if adverse to the Company - would be costly and result
in a diversion of management's attention from the Company's operations,
and may have a material adverse effect on the Company's business and
financial condition.
9. Limited Manufacturing Experience
In order for the Company to be successful, the Company's products
must be manufactured to meet high quality standards, in commercial
quantities, at competitive prices. The commercial manufacturing of
the Company's games by its' contract manufacturers involves
various risks and uncertainties including unforeseen costs or
assembly difficulties and the possibility that anticipated
efficiencies or economies of scale will fail to materialize. There
is no assurance that the Company will successfully manage this
process, which may result in a material adverse effect on the
Company's business, operating results and financial condition.
10. Dependence on Single-Source Suppliers
The Company currently intends to obtain certain components of its
B2B Roulette game from one supplier. In particular, Technical
Casino Supplies, Ltd. (TCS) of London, England will be supplying
the tracking control system the Company presently intends to use
in B2B Roulette. The Company has also entered into an agreement
with Imagineering Systems, Inc. to supply equipment and
programming skills for its Nevada Numbers games. The failure by
any supplier to furnish the Company with any such components
meeting the Company's performance specifications, quality
standards or delivery schedules could have a material adverse
effect on the Company's business, financial condition and results
of operation.
11. Possible Slowing in Trend to Legalize Gaming
The opening of new casinos, including casinos in jurisdictions
where gaming has recently been legalized, historically has driven
growth in demand for roulette and Keno games. There can be no
assurance that the recent trend among U.S. jurisdictions to
legalize casino gaming will continue and that the current prospect
of new jurisdictions legalizing gaming will not be reduced. A
reduction in the growth of the gaming industry in terms of new
casino openings, and casino expansions in existing and emerging
legalized gaming jurisdictions would have a material adverse
effect on the Company's business, financial condition and results
of operation.
In addition, a stagnation or downturn in the economy of Nevada, or
any jurisdiction in which the Company operates, or even the United
States as a whole, could significantly depress the Company's
revenues and have a material adverse effect upon the Company. As
a non-diversified, start-up entity, the Company is particularly
vulnerable to adverse economic conditions. As a result of any
stagnation or a downturn in the economy, the Company could fail
and an investor could lose his or her entire investment.
24
<PAGE>
12. Management of Growth
The Company's development to date has required and is expected to
continue to require, the full utilization of the Company's
management, financial, and other resources, which to date has
occurred without adequate working capital. The Company's ability
to manage growth effectively will depend on its ability to improve
and expand its operations, including its financial and management
information systems, and to recruit, train and manage executive
staff and employees. There can be no assurance that management
will be able to manage growth effectively, and the failure to
effectively manage growth may have a material adverse effect on
the Company's results of operations.
13. Active Public Market May Not Develop; Possible Volatility of
Stock Price
Currently, there is no public market for the Company's common
stock, and there can be no assurance that an active public market
for this stock will develop or sustained. Moreover, the trading
price of the Company's common stock, assuming the common stock is
accepted for trading in the future, could be subject to wide
fluctuations in response to quarterly variations in operating
results, announcements of technological innovations or new
products by the Company or its competitors and other events or
factors. In addition, in recent years the stock market has
experienced extreme price and volume fluctuations that have had a
substantial effect on the market prices for many emerging
companies which may be unrelated to the operating performance of
the specific companies.
Item 7. Description of Property
The Company rents office space on a month to month basis at 6767
W. Tropicana Ave., Suite 220, Las Vegas, Nevada, 89103. The
Company also owns certain general office and gaming equipment and
its software rights described herein.
Item 8. Directors, Executive Officers and Significant Employees
The following information sets forth the names of the officers and
directors of the Company, their present positions with the
Company, and some brief information about their background. The
Company does not have a written employment agreement with any of
its officers or directors.
Name Age Office(s) Held
- ---- --- --------------
Russell R. Roth 53 President, Director
25
<PAGE>
Gary G. Baldwin 48 Treasurer, Director
Mark F. Valenti 36 Secretary, Director
Bill R. Williams 65 Director
Russell R. Roth. Mr. Roth has been President, Chief Executive
Officer, Chief Financial Officer and Chairman of the Company since
April 1998. Since January 1995, Mr. Roth has been the feature
writer, editor and co-owner of the Las Vegas Investment Report and
has managed portfolios for a few select individuals. From
September 1994 to April 1996, Mr. Roth served as President of
National Investment & Tax Managers, Inc. From January 1987 to
April 1993, Mr. Roth served as Chief Financial Officer of
Sotheby's Holdings, Inc., an art auction company. At Sotheby's
Holdings, Inc., Mr. Roth spearheaded the Company's initial public
offering in 1988. From 1983 to 1986, Mr. Roth served as Chief
Financial Officer of Cessna Aircraft Company where Mr. Roth
coordinated a successful merger of the Company with General
Dynamics Corp. From 1974 to 1983, Mr. Roth served in various
financial capacities for Rockwell International and the Bendix
Corporation. Mr. Roth received his Bachelors of Science in
Economics from the University of Kansas in 1968 and his Masters of
Business Administration from the University of Michigan in 1973.
Gary G. Baldwin. Mr. Baldwin has served as Executive Vice
President and Director of the Company since April 1998. On August
13, 1999, he was voted into the position of Treasurer by the board
of directors. Since April 1997, Mr. Baldwin has served as General
Manager of TJ Wholesale. From 1995 to 1996, Mr. Baldwin served as
General Manager of the Old Chicago Casino in Cripple Creek,
Colorado. From 1993 to 1995, Mr. Baldwin served as General Manager
of the St. Charles Riverfront Station in St. Charles, Missouri,
and a casino property owned by Station Casinos, Inc. From 1989 to
1993, Mr. Baldwin served as Assistant General Manager of the
Imperial Palace Hotel and Casino in Las Vegas, Nevada. From 1985
to 1989, Mr. Baldwin was co-owner of Norquist Construction
Company. From 1984 to 1985, Mr. Baldwin served as General Manager
of the Nevada Palace where he was licensed to participate in the
profits of the hotel-casino. From 1978 to 1984, Mr. Baldwin was
co-owner and served as General Manager/Casino Manager of the
Landmark Hotel and Casino in Las Vegas, Nevada. From 1975 to 1978,
Mr. Baldwin worked for the Nevada State Gaming Control Board as a
Senior Financial Investigative Agent. In this capacity, Mr.
Baldwin conducted and supervised major investigations throughout
the United States and Europe on behalf of the Nevada State Gaming
Control Board and worked with various federal, state and local
agencies, such as the Federal Bureau of Investigations, the Bureau
of Alcohol, Tobacco and Firearms, and state and local police
departments.
Over the past twenty years, Mr. Baldwin has been active in the
hotel-casino industry. Mr. Baldwin has been licensed on four
separate occasions by the Nevada Gaming Commission and on one
occasion by the Colorado gaming authorities. In addition, Mr.
Baldwin has also served as a gaming consultant to several Native
American Tribes, such as the Sault Ste. Marie Tribe of Chippewa
Indians, for the past fifteen years. Mr. Baldwin received his
bachelors of Arts in Business Management from Biscayne College in
Miami, Florida. Mr. Baldwin also received his Bachelors
26
<PAGE>
of Science in Accounting and his Masters of Business Administration
from the University of Nevada-Las Vegas in 1974 and 1976, respectively.
Mark F. Valenti. Mr. Valenti has served as Executive Vice
President and Director of the Company since April 1998. Since
October 1997, Mr. Valenti has served as Vice President of Business
Development of B2B where he developed B2B Roulette and
successfully secured test sites and approvals for B2B Roulette.
From June 1994 to November 1997, Mr. Valenti served as Director of
Business Development for Hospitality Network, Inc. in Las Vegas,
Nevada. From April 1991 to June 1994, Mr. Valenti served as
General Manager of the Hampton Inn at Overland Park, Kansas. From
January 1991 to April 1991, Mr. Valenti served as Assistant
General Manager of the Holiday Inn at Syracuse, New York. From
August 1989 to January 1991, Mr. Valenti served as General Manager
of the Holiday Inn at Westwood-Los Angeles, California. From 1986
to 1989, Mr. Valenti worked in the hotel- hospitality industry in
management-related capacities for various hotel properties. Mr.
Valenti received his Bachelors of Science in Hotel Administration
from the University of Nevada-Las Vegas in 1985 and his Bachelors
of Science in Economics from the University of Nevada-Las Vegas in
1986.
Bill R. Williams. Mr. Williams was elected to the Board of
Directors on November 2, 1999 at the Company's Annual Meeting.
Mr. Williams is President of Imagineering Systems, Inc., a keno
manufacturing and marketing company. Mr. Williams originally
founded Imagineering's partnership in 1970, and then sold the
company in 1978 to Advanced Media Technology, who then sold the
company to Intermark Imagineering, Inc. in 1986. Mr. Williams
retired in 1988. Since 1992, when Mr. Williams re-purchased the
company and incorporated Imagineering Systems, Inc., he has been
responsible for the day to day operations of this business. Mr.
Williams is also President of Keno International, which is based
in Reno, Nevada.
The Company does not have any written employment agreements with
its officers or directors.
Terms of Office
Directors of the Company are appointed for one year terms to hold
office until the next annual general meeting of the shareholders
or until removed from office in accordance with the Company's by-
laws. Officers of the Company are appointed by the Company's
board of directors and hold office until removed by the board.
Item 9. Remuneration of Directors and Officers
The following table sets forth certain information as to the
Company's three highest paid officers and directors for its last
fiscal year ended December 31, 1999. No other compensation was
paid to any such officers or directors during this time period.
27
<PAGE>
Summary Compensation Table
Name of Individual or Capacities in which Aggregate
Identity of Group Remuneration was Received Remuneration
- --------------------- ------------------------- ------------
Russell R. Roth Director and President $ 0.00
Gary G. Baldwin Director and Treasurer $ 41,000.00
Mark Valenti Director and Secretary $ 38,500.00
Bill R. Williams Director $ 0.00
Officers and Directors Directors and Officers $ 79,500.00
of the Company as a Group
- -----------------------------------------------------------------------
Item 10. Security Ownership of Management and Certain Security
Holders
The following table sets forth, as of December 31, 1999, the
beneficial ownership of the Company's common stock by each person
known by the Company to beneficially own more than 10% of the
Company's common stock outstanding as of such date and by the
officers and directors of the Company as a group. Except as
otherwise indicated, all shares are owned directly.
Name and address Amount of Percent
Title of class of beneficial owner beneficial ownership of class(1)
- -------------- ------------------- -------------------- -----------
Common Russell R. Roth 600,000(2) 14.26%
6767 W. Tropicana Ave.
Suite 220
Las Vegas, Nevada 89103
Common Gary G. Baldwin 500,100(3) 11.89%
6767 W. Tropicana Ave.
Suite 220
Las Vegas, Nevada 89103
Common Mark Valenti 490,177(4) 11.65%
6767 W. Tropicana Ave.
Suite 220
Las Vegas, Nevada 89103
Common Bill R. Williams 0 0%
6767 W. Tropicana Ave.
Suite 220
Las Vegas, Nevada 89103
28
<PAGE>
Total of all officers and directors 1,590,277 37.80%
- -----------------------------------------------------------------------
(1) Based on 2,606,800 shares of common stock issued and
outstanding on 12-31-99, plus 1,600,000 issued options which
are immediately exercisable.
(2) This includes options to purchase 330,000 shares of the
Company's common stock on 12-31-99 at prices between $0.50
and $1.00 per share.
(3) This includes options to purchase 300,000 shares of the
Company's common stock on 12-31-99 at prices between $0.50
and $1.00 per share.
(4) This includes options to purchase 290,000 shares of the
Company's common stock on 12-31-99 at prices between $0.50
and $1.00 per share.
In addition, Mr. Williams was issued 32,000 shares of common stock
(marked "restricted") on February 3, 2000 for the sale of his
interest in BonusKeno, and Mr. Roth, Mr. Baldwin and Mr. Valenti
received additional options to purchase shares of the Company's
common stock at a price of $3.00 per share in the following
amounts:
Russell R. Roth 21,500
Gary G. Baldwin 4,400
Mark Valenti 4,400
Share Purchase Warrants
There are outstanding warrants to purchase 38,000 shares of common
stock at a price of $2 per share.
Options
The Company establish a stock option plan in April of 1998 under
which it issued options to purchase 1,600,000 shares of the
Company's common stock at prices ranging between $0.50 to $1.00
per share. This 1998 stock option plan was discontinued by the
Board of Directors in December 1999. In January 2000, the Board
of Directors approved a new Stock Options Plan under which it
issued options to purchase 42,550 shares of the Company's common
stock at a price of $3.00 per share.
Convertible Securities
The Company has not issued and does not have outstanding any
securities convertible into shares of common stock or any rights
convertible or exchangeable into shares of common stock
Item 11. Interest of Management and Others in Certain
Transactions
Except as disclosed below, none of the following persons has any
direct or indirect material interest in any transaction to which
the Company is a party since the incorporation of the Company on
April 28, 1998 or in any proposed transaction to which the Company
is proposed to be a party:
29
<PAGE>
(A) Any director or officer of the Company;
(B) Any proposed nominee for election as a director of the
Company;
(C) Any person who beneficially owns, directly or
indirectly, shares carrying more than 10% of the voting
rights attached to the Company's Common Stock; or
(D) Any relative or spouse of any of the foregoing persons,
or any relative of such spouse, who has the same house
as such person or who is a director or officer of any
parent or subsidiary of the Company.
1. Option rights issued to the officers and directors under the
1998 and 2000 Stock Option Plans, including options to purchase
920,000 shares under the Company's 1998 stock option plan at a
price of between $0.50 to $1.00 per share, and, more recently,
options to purchase 30,300 shares of common stock under the
current 2000 stock option plan at a price of $3.00 per share.
2. In April 1998, Mr. Mark Valenti, a director and officer of
the Company, received 200,000 shares of the Company's common stock
in exchange for his intellectual property rights in the Nevada
Numbers Keno games valued by the Company at $12,500 and the
payment of $1,000. Mr. Valenti was also one of the shareholders
and an officer of Back To Back Gaming, Inc. and a party in that
company's sale of its Back to Back Roulette to Las Vegas Gaming.
3. In April 1998, Mr. Gary Baldwin, a director and officer of
the Company, received 200,000 shares of the Company's common stock
in exchange for his intellectual property rights in the names
"World Series of Video Poker" and "World Championship of Video
Poker" valued by the Company at $11,500 and the payment of $2,000.
4. In April 1998, Mr. Russ Roth and Mr. Ken Maul, both directors
and officers of the Company at the time, received 200,000 shares
of the Company's common stock each in exchange for the payment of
$13,500.
5. Mr. Russ Roth, the President and a director of the Company:
(a) In November of 1998, loaned the Company $25,000 for which
he received 50,000 shares of the Company's common stock as
repayment in February of 1999 when the Company did not repay the
amount due.
(b) In March of 2000, loaned the Company $100,000 which is
due and payable on or before April 30, 2000. In the event this
loan is not re-paid by this due date, Mr. Roth has the option to
require the Company to repay this debt by issuing 50,000 shares
of common stock and 25,000 warrants exercisable at a price of
$2/share for a period of one year.
6. Mr. Bill Williams, a director of the Company, is also a
director and the President of Imagineering Systems, Inc.. The
Company currently contracts with Imagineering to provide,
30
develop and maintenance services for its keno software and equipment.
In addition, the Company has entered into the following arrangements
with Mr. Williams and/or Imagineering Systems:
(a) On August 12, 1999, the Company entered into an agreement for
the assignment of rights to install, operate, sell and lease
electronic Keno systems in Puerto Rico with Keno International,
Inc., a company in which Mr. Williams is an officer, director and
controlling shareholder. Under this agreement, the Company
promised that in exchange for the assignment of Keno
International's license and upon the activation of the first keno
game authorized under the license in Puerto Rico, it would:
a. distribute to Keno International 50,000 shares of its common
stock. Such stock will be marked restricted;
b. nominate Bill Williams to its board of directors, if he was
not already appointed;
c. pay a royalty fee of $5,000 per month until the trading
value of the common stock issued under item "a" equaled or
exceeded $2,000,000 and the stock could be traded under some
exemption or registration under the US securities' laws, or
keno ceased to be played under the license (whichever came
first).
This agreement further provided that at the point in time when the
operation of the keno games under the license had obtained net
earnings of $1 million, the Company would distribute to Keno
International an additional 150,000 shares of its common stock.
Mr. Williams signed the assignment of the license rights to the
Company on behalf of Keno International, and has since been
appointed to the Company's board of directors.
The first keno game in Puerto Rico has not as yet been
authorized and therefore the Company's obligation to pay
the shares and fees described above has not become effective.
(b) On August 12, 1999, the Company also entered into an agreement
for the set up and operation of a keno route in Nevada with Mr.
Williams and Carl Conti. Under this agreement, the Company
promised that in exchange for Mr. Williams' and Mr. Conti's
agreement to set up and operate a keno route in Nevada with at
least five linked keno games and assign any rights they had to
contracts with casinos in Nevada, they would:
a. distribute to them 50,000 shares of its common stock. Such
stock will be marked restricted;
b. nominate Bill Williams to its board of directors, if he was
not already appointed;
c. pay a royalty fee of $5,000 per month until the trading value
of the common stock issued under item "a" equaled or exceeded
$2,000,000 and the stock could be traded under some exemption
or registration under the US securities' laws, or the route
ceased to be operated (whichever came first).
This agreement further provided that at the point in time when the
operation of the Nevada route had obtained net earnings of $1
million, the Company would distribute to Mr. Williams and Mr.
Conti an additional 150,000 shares of its common stock.
The required keno route in Nevada has not as yet been
set up and therefore the Company's obligation to pay
the shares and fees described above has not become effective.
(c) On November 18, 1999, the Company obtained an option to
acquire all of the shares of Imagineering owned by Mr. Williams
(which comprise approximately 54% of Imagineering's issued
shares). This option was obtained in exchange for a loan to Mr.
Williams from the Company
31
<PAGE>
in the amount of $25,000 and the promise to deliver to Mr. Williams
150,000 shares of Las Vegas Gaming Common Stock in the event the
option is exercised. In the event the option is not exercised within
6 months, Mr. Williams is required to re-pay this loan at 8% interest
over a five year period in semi-annual payments.
(d) On January 6, 2000, the Company entered into an agreement with
Mr. Williams and others to purchase all of their rights and
interest in the Bonus Keno game, including but not limited to
certain hardware as well as software, trademark and logo rights.
These rights and items were obtained in exchange for 32,000 shares
of the Company's common stock.
Item 12. Securities Being Registered
The securities being registered are the shares of the Company's
common stock, par value $0.001 per share. Under the Company's
Articles of Incorporation, the total number of shares of all
classes of stock that the Company shall have authority to issue is
25,000,000 shares of common stock, par value $0.001 per share (the
"Common Stock"). As of December 31, 1999, a total of 2,606,800
shares of Common Stock were issued and outstanding.
Common Stock
Holders of Common Stock have the right to cast one vote for each
share held of record on all matters submitted to a vote of holders
of Common Stock, including the election of directors. Holders of
Common Stock do not have cumulative voting rights in the election
of directors. Holders of a majority of the voting power of the
capital stock issued and outstanding and entitled to vote,
represented in person or by proxy, are necessary to constitute a
quorum at any meeting of the Company's stockholders, and the vote
by the holders of a majority of such outstanding shares is
required to effect certain fundamental corporate changes such as
liquidation, merger or amendment of the Company's Articles of
Incorporation.
Holders of Common Stock are entitled to receive dividends pro rata
based on the number of shares held, when, as and if declared by
the Board of Directors, from funds legally available therefor. In
the event of the liquidation, dissolution or winding up of the
affairs of the Company, all assets and funds of the Company
remaining after the payment of all debts and other liabilities
shall be distributed, pro rata, among the holders of the Common
Stock. Holders of Common Stock are not entitled to pre-emptive or
subscription or conversion rights, and there are no redemption or
sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and non-
assessable.
Transfer Agent
Pacific Stock Transfer Company is the transfer agent for the
Shares. Pacific Stock Transfer Company is located at 5844 South
Pecos Road, Suite D, Las Vegas, Nevada 89120.
32
<PAGE>
PART II
Item 1. Market Price of and Dividends on the Registrant's Common
Equity and Other Stockholder Matters
There is no present public market for the Company's Common Stock.
The Company anticipates applying to have the Common Stock traded
on the OTC Bulletin Board upon effectiveness of this registration
statement. There is no assurance that a public market will
materialize.
As of the date of this registration statement, there were one
hundred and seventy five (175) registered shareholders in the
Company.
None of the holders of the Company's Common Stock have any right
to require the Company to register any shares of the Company's
Common Stock pursuant to the Securities Act of 1933 (the "1933
Act").
The Company has not declared any dividends on its Common Stock
since its inception in April, 1998. There are no dividend
restrictions that limit the Company's ability to pay dividends on
Common Stock. Payment of dividends on the Common Stock is within
the discretion of the Board of Directors and will depend upon the
Company's future earnings, its capital requirements, financial
condition and other relevant factors. It should be noted that the
Company currently has no plan to declare any dividends in the
foreseeable future.
No common equity is subject to outstanding options or warrants to
purchase, or securities convertible into, common equity of the
Company.
Item 2. Legal Proceedings
The Company is not a party to any material legal proceedings, and
to the Company's knowledge no such proceedings are threatened or
contemplated.
Item 3. Changes in and Disagreements with Accountants
The Company has had no changes in or disagreements with its
accountants since its incorporation in April, 1998.
Item 4. Recent Sales of Unregistered Securities
On April 28, 1998, the Company completed the sale of 800,000
shares of its Common Stock to its four (4) initial officers and
directors under section 4(2) of the Securities Act in exchange for
a combination of cash and intellectual property rights. These
shares have been marked "restricted". See Item 11. Interest of
Management and Others in Certain Transactions.
33
<PAGE>
On July 21, 1998, the Company completed the sale of 1,364,000
shares of Common Stock to 20 investors for $.50 per share pursuant
to Rule 504 of Regulation D of the Securities Act. The offering
was completed to persons known to the officers and directors of
the Company.
On August 12, 1998, the Company and Back to Back Gaming, Inc.
entered into an asset purchase agreement in order to acquire all
of the assets of B2B. The Company purchased these assets, in part,
for 75,000 shares of its Common Stock at a deemed value of $0.50
per share. These shares were issued pursuant to Section 4(2) of
the 1933 Act and have been marked "restricted".
In February 1999, the Company issued out 50,000 shares of common
stock to Russell Roth, the Company's President and a member of its
board of directors, in exchange for the cancellation of a $25,000
debt. These shares were issued pursuant to Section 4(2) of the 1933
Act and have been marked "restricted".
On April 6, 1999, the Company completed the sale of 146,500 shares
of Common Stock to 24 investors for $1.00 per share pursuant to
Rule 504 of Regulation D of the Securities Act. The offering was
completed to persons known to the officers and directors of the
Company.
On August 2, 1999, the Company completed the sale of 98,500 shares
of Common Stock to 18 investors for $1.00 per share pursuant to
Rule 504 of Regulation D of the Securities Act. The offering was
completed to persons known to the officers and directors of the
Company.
On November 29, 1999, the Company completed the sale of 28,500
shares of Common Stock to 4 investors for $2.00 per share pursuant
to Rule 504 of Regulation D of the Securities Act. The offering was
completed to persons known to the officers and directors of the Company.
On December 13, 1999, the Company issued 2,700 shares of Common Stock
to 21 individuals as part of a prize at a golf tournament promotion.
The offering was completed to persons known to the officers and directors
of the Company. These shares were issued pursuant to Section 4(2) of the
1933 Act and have been marked "restricted".
On March 30, 2000, the Company completed the sale of 54,750
shares of Common Stock to 22 investors for $3.00 per share
pursuant to Rule 504 of Regulation D of the Act. The offering was
completed to persons known to the officers and directors of the
Company.
Item 5. Indemnification of Directors and Officers
The officers and directors of the Company are indemnified as
provided under the Nevada Revised Statutes and the Bylaws of the
Company.
Under the NRS, director immunity from liability to a corporation
or its shareholders for monetary liabilities applies automatically
unless it is specifically limited by a corporation's articles of
incorporation (which is not the case with the Company's Articles
of Incorporation). Excepted from that immunity are: (i) a willful
failure to deal fairly with the corporation or its shareholders in
connection with a matter in which the director has a material
conflict of interest; (ii) a violation of criminal law (unless the
director had reasonable cause to believe that his or her conduct
was lawful or no reasonable cause to believe that his or her
conduct was unlawful); (iii) a transaction from which the director
derived an improper personal profit; and (iv) willful misconduct.
<PAGE>
The Bylaws provide that the Company shall indemnify any person
made a party to an action by or in the right of the Company to
procure a judgment in its favor by reason of the fact that he, his
testator or intestate, is or was a director, officer, or employee
of the Corporation, against the reasonable expenses, including
attorneys' fees, actually and necessarily incurred by him in
connection with the defense of such action, or in connection with
an appeal therein, except in relation to matters as to which such
person is adjudged to have breached his duty to the Company. The
Company will indemnify any person made a party to an action
against judgments, fines, amounts paid in settlement and
reasonable expenses, including attorneys' fees actually and
necessarily incurred as a result of such action, if such person
acted in good faith, for a purpose which he reasonably believed to
be in the best interests of the Company, and, in criminal actions,
had no reasonable cause to believe that his conduct was unlawful.
Such rights of indemnification do not exclude other rights to
which such person may be entitled.
Any indemnification shall be made by the Company only as
authorized in the specific case upon a determination that
indemnification of the Director, Officer, employee, or agent is
proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the above paragraphs.
35
<PAGE>
PART F/S
FINANCIAL STATEMENTS
The Company's audited Financial Statements, as described below,
are attached hereto.
1. Audited financial statements for the period from inception
(April 28, 1998) to December 31,1999, including:
(a) Balance Sheet;
(b) Statement of Operations;
(c) Statement of Stockholders' Equity;
(d) Statement of Cash Flows;
(e) Notes to Financial Statements.
36
<PAGE>
LAS VEGAS
GAMING, INC.
(A Development
Stage
Enterprise)
FINANCIAL
STATEMENTS
FOR THE PERIOD
FROM INCEPTION
(APRIL 28,
1998) TO
DECEMBER 31,
1999
<PAGE>
LAS VEGAS GAMING, INC.
(A Development Stage Enterprise)
FOR THE PERIOD FROM INCEPTION (APRIL 28, 1998) TO DECEMBER 31, 1999
CONTENTS
PAGE
Independent auditors' report 1
Financial statements:
Balance sheet 2
Statements of operations 3
Statement of stockholders' equity 4
Statements of cash flows 5
Notes to financial statements 6-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Las Vegas Gaming, Inc.
Las Vegas, Nevada
We have audited the balance
sheet of Las Vegas Gaming,
Inc. (a development stage
enterprise) as of December 31,
1999, and the related
statements of operations,
stockholders' equity and cash
flows for the year then ended
and for the period from
inception (April 28, 1998) to
December 31, 1998. 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 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 audit provides a
reasonable basis for our
opinion.
In our opinion, the financial
statements referred to above
present fairly, in all
material respects, the
financial positions of Las
Vegas Gaming, Inc. as of
December 31, 1999, its results
of development stage
operations and its cash flows
for the periods presented in
conformity with generally
accepted accounting
principles.
The accompanying financial
statements have been prepared
assuming that the Company will
continue as a going concern.
As discussed in Note 8, the
Company's ability to commence
full operations is dependent
upon the successful completion
of its public offering and
obtaining other sources of
capital to fund the
development and marketing of
its products. This condition
raises substantial doubt as to
the Company's ability to
continue as a going concern.
Management's plans in regard
to this matter are also
described in Note 8. The
financial statements do not
include any adjustments that
might result from the outcome
of this uncertainty.
/s/ Piercy, Bowler, Taylor & Kern
January 28, 2000
1
<PAGE>
LAS VEGAS GAMING, INC.
(A Development Stage Enterprise)
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Current assets:
Cash $ 19,545
Accounts receivable 1,741
------------
21,286
------------
Equipment and software,
less accumulated depreciation of $112,731 173,446
------------
OTHER ASSETS:
Patents and other intangibles, net 196,778
Loan receivable 25,000
Deposits 1,242
------------
223,020
------------
$ 417,752
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 32,545
Account payable 75,483
-----------
108,028
-----------
Long-term debt, less current maturities 54,937
-----------
Stockholders' equity:
Common stock, $.001 par, 25,000,000 shares authorized,
2,619,300 shares issued 2,619
Additional paid-in capital 1,103,013
Deficit accumulated during development stage (850,845)
-----------
254,787
-----------
$ 417,752
===========
See notes to financial statements.
2
<PAGE>
LAS VEGAS GAMING, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE PERIOD FROM
INCEPTION (APRIL 28, 1998) TO DECEMBER 31, 1998
From
Inception
December 31,
1999 1998
-------------- --------------
Sales $ 33,788 $ 31,952
General and Administrative expenses (377,148) (350,982)
Write-down of patents and intangibles (120,000)
Write-off of purchase option (75,000)
Interest Income 640 5,905
-------------- --------------
Net Loss $ (342,720) $ (508,125)
============== ==============
See notes to financial statements.
3
<PAGE>
LAS VEGAS GAMING, INC.
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE PERIOD FROM
INCEPTION (APRIL 28, 1998) TO DECEMBER 31, 1998
Deficit
accumulated
Add- during
itional develop-
Common Stock Paid-in ment
Shares Par Value Capital stage Total
---------- ---------- ---------- ------------ ----------
Common shares sold
in 1998 to:
Officers and
Directors 1,000,177 $ 1,000 $ 153,000 $ 154,000
Others 1,243,823 1,244 620,756 622,000
Offering costs (29,248)
Net loss (508,125) (508,125)
---------- ---------- ---------- ------------ ----------
Balances,
December 31, 1998 2,244,000 2,244 744,508 (508,125) 238,627
Common shares sold
in 1999 to:
Officers and
Directors 50,100 50 25,250 25,300
Others 325,200 325 413,875 414,200
Offering costs (80,620) (80,620)
Net loss (342,720) (342,720)
Balances,
December 31, 1999 2,619,300 $ 2,619 $1,103,013 $(850,845) $ 254,787
========== ========== ========== ============ =========
See notes to financial statements.
4
<PAGE>
LAS VEGAS GAMING, INC.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE PERIOD FROM
INCEPTION (APRIL 28, 1998) TO DECEMBER 31, 1998
From
Inception to
December 31,
1999 1998
------------ ------------
Operating activities:
Net Loss ($342,720) (508,125)
Adjustments to reconcile net loss to net
Cash used in operating activities
Depreciation and amortization 163,212 66,741
Write-down of patents and intangibles
and write-off of purchase option 195,000
Compensation for services with
common stock 19,000 2,500
Change in operating assets (increase)
and liabilities (decrease):
Accounts and note receivable 20,233 (21,974)
Deposits 3,346 (4,588)
Accounts payable (23,328) 38,811
------------ ------------
Net cash used in operating activities (160,257) (231,635)
------------ ------------
Investing activities:
Deferred offering costs (80,620) (29,248)
Purchase of equipment (62,662) (51,864)
Purchase of intangible assets (10,000) (340,000)
Purchase option acquisition (75,000)
------------ ------------
Net cash used in investing activities (153,282) (496,112)
------------ ------------
Financing activities:
Proceeds from sale of common stock 395,500 712,000
Repayment of borrowings (46,669)
Loan to seller of purchase option (25,000)
Borrowing form stockholder 25,000
------------ ------------
Net cash provided by financing activities 323,831 737,000
------------ ------------
Increase (decrease) in cash 10,292 9,253
Balance, beginning of period 9,253
------------ ------------
Balance, end of period $19,545 $9,253
============ ============
Supplemental disclosure of non-cash
financing and investing activities:
Common stock issued for services $19,000 $2,500
============ ============
Shareholder loan repaid with common
Stock $25,000 $24,000
============ ============
Equipment purchased with notes payable $134,151
============
Equipment purchased with common stock $37,500
============
Intangible assets purchased with rights
to common stock $60,000
============
See notes to financial statements.
5
<PAGE>
LAS VEGAS GAMING, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
1. Summary of significant
accounting policies:
Nature of business. The Company
is a development stage enterprise
and, therefore, as of December
31, 1999, has not commenced full
business operations. The Company
is in the process of acquiring
and developing casino games to be
marketed to the gaming industry.
The Company's future operations
could be affected by adverse
changes in local and regional
economic conditions in Nevada and
in various other gaming
jurisdictions.
Offering costs. The Company has
offered its unregistered common
stock to the public to raise a
maximum of $1,000,000 annually on
a "best efforts" basis; and, it
used one of its
officers/directors who is a
licensed security broker to sell
the common stock. The offerings
are intended to be exempt from
registration with the United
States Securities and Exchange
Commission under the Securities
Act of 1933 pursuant to Rule 504
promulgated there under. The
costs of the offerings have been
offset against the proceeds to
date.
Use of estimates. Timely
preparation of financial
statements in conformity with
generally accepted accounting
principles requires management to
make estimates and assumptions
that affect reported amounts and
disclosures, some of which may
require revision in future
periods.
Equipment and software.
Equipment and software are stated
at cost. Depreciation is
provided by the straight-line
method over the estimated useful
lives for the assets.
Advertising costs: Costs for
advertising are expensed in
current period and totaled
$35,107 and $29,304 for 1999 and
1998 respectively.
Research and development. The
Company incurs no research and
development costs and, instead,
contracts with technical resource
companies on a revenue sharing
basis to develop needed
components for its casino games.
Patents and other intangibles.
Patents and patents pending and
other intangibles are amortized
over 3 years.
Stock compensation awards. The
Company has adopted Financial
Accounting Standard Board
Statement No. 123, Accounting for
Stock-Based Compensation, for
valuing compensatory stock and
option awards.
2. Equipment and software:
Equipment and software at
December 31, 1999 consists of:
Equipment $ 161,177
Software 125,000
------------
286,177
Less Accumulated Depreciation (112,731)
------------
$ 173,446
============
3. Acquisitions:
Option to purchase T.J.
Wholesale. The Company entered
an option agreement on July 10,
1998, to purchase the stock of
T.J. Wholesale. The agreement
was terminated in March 1999,
therefore, the related option
payments totaling $75,000 have
been written off as of December
31, 1998.
Purchase of "4-Play" games.
During 1998, the Company
purchased the rights to games
known as "4-Play," referred to by
the Company as "Nevada Numbers,"
"World Series of Video Poker" and
"World Championship of Video
Poker," from officers/directors
(Note 4). "4-Play," a variation
of keno, encompasses a game that
stems from the selection of 4
numbers instead of 20 numbers, as
played in a regular game of keno.
The Company has entered into an
agreement with Imagineering
Systems, Inc. for the development
of software for the operation of
the "4-Play" game in exchange for
$.04 per ticket issued which
would be paid to Imagineering
Systems, Inc. (Note 7).
Purchase of "B2B" game. The
Company entered into an agreement
on June 21, 1998 to purchase a
roulette game known as "Back to
Back" (B2B) from Back to Back
Gaming, Inc. The terms of the
agreement provided for a purchase
price of $515,000, plus the
issuance of 75,000 common shares
valued at $.50 per share or
$37,500, with a $15,000 cash
deposit (paid on April 28, 1998),
which was applied to the purchase
price. On August 12, 1998, the
agreement was amended, and the
Company paid $375,000 in cash and
issued a promissory note in the
amount of $125,000, payable in
monthly installments with
principal and interest at 8%,
with the balance due July 2002
(Note 6). The 75,000 common
shares were also issued to the
seller. In addition, the seller
received options to purchase
200,000 additional shares of
common stock at $.50 per share.
No value was assigned to these
options for accounting purposes.
Subsequent to the purchase,
management has determined that
the non-progressive version of
the B2B game has no
6
<PAGE>
LAS VEGAS GAMING, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
continuing value, therefore,
has written down $120,000 of
the original purchase price.
The remaining costs were
allocated to related assets as
follows:
Equipment and software $ 212,500
Property rights, including
patents 109,000
Non-compete agreements 111,000
-----------
Adjusted cost, before
amortization and
depreciation $ 432,500
===========
The Company is negotiating a
revenue sharing agreement with a
technical services provider for
the development of the tracking
control system for the
progressive B2B games (Note 7).
Purchase of Bonus Keno game.
During 1999, the company
purchased 50% the rights to the
game "Bonus Keno" for $70,000,
$10,000 in cash and an agreement
to issue 20,000 shares of common
stock. In 2000, the Company
purchased an additional 30% of
the rights for 48,000 shares of
common stock.
Option to purchase Imagineering
Systems, Inc. The Company loaned
$25,000 to the owner of
Imagineering Systems, Inc. in
exchange for an option to buy
100% of his 54% interest in
Imagineering Systems, Inc. for
150,000 shares of the Company's
common stock plus forgiveness of
the loan. If the Company does
not exercise its option by May
18, 2000, the owner agrees to
repay the loan in semi-annual
payments over five years plus
interest at 8%. The option
period can be extended for six
months at the sole discretion of
the Company at no additional
cost. The Company currently
intends to exercise its option,
and will be required to obtain a
Nevada gaming license before the
purchase can be completed (Note
5).
4. Related party transactions:
Common stock issued to
officers/directors. During 1998,
common stock issued to the
Company's officers/directors
included 400,000 shares at $.0675
per share, 200,000 shares at $.50
per share, 200,000 shares at
$.005 per share plus the "Nevada
Numbers" game (valued at $12,500,
which computes to $.06258 per
share), and 200,000 shares, at
$.01 per share plus the "World
Series of Video Poker" and "World
Championship of Video Poker"
games (valued at $11,500, which
computes to $.0575 per share).
Stockholders loan. During 1999,
the Company issued 50,000 shares
of common stock in repayment of a
$25,000 loan received from a
stockholder/officer/director in
November 1998.
Stock option plan. Under a stock
option plan (the Plan), the
officers and directors have been
granted options to purchase up to
600,000 shares in the aggregate
at $.50 per share and 330,000
shares in the aggregate at $1.00
per share, the estimated fair
value of the shares at the time
of the grants. Accordingly, no
compensation has been recorded
for these grants. The options
are fully vested and expire on
April 28, 2008. Under the Plan,
an additional 1,000,000 shares
may be granted.
5. Gaming regulations and
licensing:
The Company is currently not
subject to regulation in
jurisdictions in which its
products are leased or used by
persons or entities licensed to
conduct gaming activities.
However, the Company is seeking
licensure in several gaming
jurisdictions including Nevada,
among others, so that the Company
may participate in the gaming
revenues produced by its
products. Failure to obtain and
retain the necessary licenses
would prevent the Company from
fully implementing its business
plans and have a material adverse
effect on the Company.
On January 28, 2000, the Company
submitted an application for
licensure in Nevada and deposited
$50,000 with the State of Nevada,
50% of the estimated cost of the
investigation.
6. Long-term debt:
Long-term debt consists of an
unsecured note payable, due
$3,195 per month, including
interest at 8%, through July
2002.
Annual maturities are as follows:
2000 $ 32,545
2001 35,246
2002 19,691
---------
$ 87,482
=========
7. Dependence on single-source
suppliers:
The Company depends on single-
source suppliers for components
for certain of its games. The
failure by any single-source
supplier to furnish the Company
with components meeting its
performance specifications,
quality standards or delivery
schedules could have a material
adverse
7
<PAGE>
LAS VEGAS GAMING, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
effect on the Company's
business, financial condition and
results of operation.
8. Management's plans:
To become fully operational, the
Company must raise additional
capital. In this regard,
management expects to complete an
exempt offering of 200,000 shares
at $3.00 per share ($600,000 less
expected offering costs of
approximately $50,000) and raise
additional capital through
private equity placement and/or
debt financing. The Company's
plans also include completing a
Form 10 registration with the
Securities and Exchange
Commission that could provide
additional means for raising
capital. Once operational,
management believes, but there is
no assurance, that future
placements of its products will
result in profitable operations
and positive cash flows.
The Company's inability to
complete the exempt public
offering, and obtain additional
capital necessary to acquire,
develop and expand its products,
could prevent the Company from
commencing and maintaining
profitable operations and
continuing as a going concern.
The financial statements,
however, have been prepared
assuming the Company will
continue as a going concern, and
reflect no adjustments that might
result from the outcome of these
uncertainties. Because of these
uncertainties, however, no effect
has been given in the financial
statements to any future income
tax benefit of the loss recorded
to date.
8
<PAGE>
PART III
INDEX TO EXHIBITS
Exhibit 3.1: Articles of Incorporation
Exhibit 3.2: Bylaws of the Company
Exhibit 6.1: Agreement for Set Up and Operation of Keno
Route with Bill Williams and Carl Conti
Exhibit 6.2: Agreement for Assignment of Rights with Keno
International, Inc.
37
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized.
Date: April 14, 2000
LAS VEGAS GAMING, INC.
By: /s/ Russell Roth
_______________________________
RUSSELL ROTH
Director, President and Chief
Executive Officer
38
<PAGE>
FILED ARTICLES OF INCORPORATION
IN THE OFFICE OF THE OF
SECRETARY OF STATE OF THE
STATE OF NEVADA LAS VEGAS GAMING, INC.
APR 28 1998
No C9719-98
DEAN HELLER SECRETARY OF STATE
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, being at least eighteen (18) years of age and
acting as the incorporator of the
Corporation hereby being formed under and pursuant to the laws of the State
of Nevada, does hereby certify that:
Article I - NAME
The exact name of this corporation is:
LAS VEGAS GAMING, INC.
Article II- REGISTERED OFFICE AND RESIDENT AGENT
The registered office and place of business in the State of
Nevada of this corporation shall be located at 1850 E. Flamingo
Rd., Suite 111, Las Vegas, Nevada. The resident agent of the
corporation is DONALD J. STOECKLEIN, whose address is 1850 E.
Flamingo Rd., Suite 111, Las Vegas, Nevada 89119.
Article III - DURATION
The Corporation shall have perpetual existence.
Article IV - PURPOSES
The purpose, object and nature of the business for which this
corporation is organized are:
(a) To engage in any lawful activity, (b) To carry on such
business as may be necessary, convenient, or desirable to accomplish
the above purposes, and to do all other
<PAGE>
things incidental thereto which are not forbidden by law or by these
Articles of Incorporation.
Article V - POWERS
This Corporation is formed pursuant to Chapter 78 of the Nevada
Revised Statutes. The powers of the Corporation shall be those
powers granted by 78.060 and 78.070 of the Nevada Revised Statutes
under which this corporation is formed. In addition, the corporation
shall have the following specific powers:
(a) To elect or appoint officers and agents of the corporation
and to fix their compensation; (b) To act as an agent for any individual,
association, partnership, corporation or other legal entity; (c) To
receive, acquire, hold, exercise rights arising out of the ownership-or
possession thereof, sell, or otherwise dispose of, shares or other
interests in, or obligations of, individuals, association, partnerships,
corporations, or governments; (d) To receive, acquire, hold, pledge,
transfer, or otherwise dispose of shares of the corporation, but such
shares may only be purchased, directly or indirectly, out of earned
surplus; (e) To make gifts or contributions for the public welfare
or for charitable, scientific or educational purposes.
Article VI - CAPITAL STOCK
Section 1. Authorized Shares. The total number of shares which
this corporation is authorized to issue is 25,000,000 shares of Common
Stock of $.001 par value.
Section 2. Voting Rights of Stockholders. Each holder of the
Common Stock shall be entitled to one vote for each share of stock
standing in his name on the books of the corporation.
Section 3. Consideration for Shares. The Common Stock shall be
issued for such
2
<PAGE>
consideration, as shall be fixed from time to time by the Board of
Directors. In the absence of fraud, the judgment of the Directors as
to the value of any property or services received in full or partial
payment for shares shall be conclusive. When shares are issued upon
payment of the consideration fixed by the Board of Directors, such
shares shall be taken to be fully paid stock and shall be non-assessable.
The Articles shall not be amended in this particular.
Section 4. Stock Rights and Options. The corporation shall have
the power to create and issue rights, warrants, or options entitling
the holders thereof to purchase from the corporation any shares of
its capital stock of any class or classes, upon such terms and
conditions and at such times and prices as the Board of Directors
may provide, which terms and conditions shall be incorporated in
an instrument or instruments evidencing such rights. In the absence
of fraud, the judgment of the Directors as to the adequacy of
consideration for the issuance of such rights or options and the
sufficiency thereof shall be conclusive.
Article VII - MANAGEMENT
For the management of the business, and for the conduct of the affairs
of the corporation, and for the future definition, limitation, and
regulation of the powers of the corporation and its directors and
stockholders, it is further provided:
Section 1. Size of Board. The initial number of the Board of
Directors shall be three (3). Thereafter, the number of directors
shall be as specified in the Bylaws of the corporation, and such
number may from time to time be increased or decreased in such
manner as prescribed by the Bylaws. Directors need not be
stockholders.
Section 2. Powers of Board. In furtherance and not in limitation
of the powers conferred by the laws of the State of Nevada, the
Board of Directors is expressly authorized
3
<PAGE>
and empowered:
(a) To make, alter, amend, and repeal the Bylaws subject to the power
of the stockholders to alter or repeal the Bylaws made by the Board of
Directors;
(b) Subject to the applicable provisions of the Bylaws then in effect,
to determine, from time to time, whether and to what extent, and at what
times and places, and under what conditions and regulations, the accounts
and books of the corporation, or any of them, shall be open to stockholder
inspection. No stockholder shall have any right to inspect any of the
accounts, books or documents of the corporation, except as permitted by
law, unless and until authorized to do so by resolution of the Board of
Directors or of the stockholders of the Corporation;
(c) To authorize and issue, without stockholder consent, obligations
of the Corporation, secured and unsecured, under such terms and
conditions as the Board, in its sole discretion, may determine, and to
pledge or mortgage, as security therefore, any real or personal property
of the corporation, including after-acquired property;
(d) To determine whether any and, if so, what part of the earned
surplus of the corporation shall be paid in dividends to the
stockholders, and to direct and determine other use and disposition
of any such earned surplus;
(e) To fix, from time to time, the amount of the profits of the
corporation to be reserved as working capital or for any other lawful
purpose;
(f) To establish bonus, profit-sharing, stock option, or other types
of incentive compensation plans for the employees, including officers
and directors, of the corporation, and to fix the amount of profits
to be shared or distributed, and to determine the persons to participate
in any such plans and the amount of their respective participations.
4
<PAGE>
(g) To designate, by resolution or resolutions passed by a majority of
the whole Board, one or more committees, each consisting of two or more
directors, which, to the extent permitted by law and authorized by the
resolution or the Bylaws, shall have and may exercise the powers of the
Board;
(h) To provide for the reasonable compensation of its own members by
Bylaw, and to fix the terms and conditions upon which such compensation
will be paid;
(i) In addition to the powers and authority hereinbefore, or by
statute, expressly conferred upon it, the Board of Directors may
exercise all such powers and do all such acts and things as may be
exercised or done by the corporation, subject, nevertheless, to the
provisions of the laws of the State of Nevada, of these Articles of
Incorporation, and of the Bylaws of the corporation.
Section 3. Interested Directors. No contract or transaction between
this corporation and any of its directors, or between this corporation
and any other corporation, firm, association, or other legal entity
shall be invalidated by reason of the fact that the director of the
corporation has a direct or indirect interest, pecuniary or otherwise,
in such corporation, firm, association, or legal entity, or because the
interested director was present at the meeting of the Board of Directors
which acted upon or in reference to such contract or transaction, or
because he participated in such action, provided that: (1) the interest
of each such director shall have been disclosed to or known by the Board
and a disinterested majority of the Board shall have, nonetheless,
ratified and approved such contract or transaction (such interested
director or directors may be counted in determining whether a quorum
is present for the meeting at which such ratification or approval is
given); or (2) the conditions of N.R.S. 78.140 are met.
5
<PAGE>
Section 4. Names and Addresses. The name and post office address of
the first Board of Directors which shall consist of three (3) persons
who shall hold office until their successors are duly elected and
qualified, are as follows:
NAME ADDRESS
MARK VALENTI 1616 Sun Ridge Drive
Las Vegas, Nevada 89117
KENNETH MAUL 1616 Sun Ridge Drive
Las Vegas, Nevada 89117
RUSSELL ROTH 1616 Sun Ridge Drive
Las Vegas, Nevada 89117
Article VIII - PLACE OF MEETING; CORPORATE BOOKS
Subject to the laws of the State of Nevada, the stockholders and the
directors shall have power to hold their meetings, and the directors
shall have power to have an office or offices and to maintain the books
of the Corporation outside the State of Nevada, at such place or places
as may from time to time be designated in the Bylaws or by appropriate
resolution.
Article IX - AMENDMENT OF ARTICLES
The provisions of these Articles of Incorporation may be amended,
altered or repealed from time to time to the extent and in the manner
prescribed by the laws of the State of Nevada, and additional provisions
authorized by such laws as are then in force may be added. All rights
herein conferred on the directors, officers and stockholders are granted
subject to this reservation.
Article X - INCORPORATOR
The name and address of the incorporator signing these Articles of
Incorporation are as follows:
6
<PAGE>
NAME POST OFFICE ADDRESS
KENNETH MAUL 1616 Sun Ridge Drive
Las Vegas, Nevada 89117
Article XI - LIMITED LIABILITY OF OFFICERS AND DIRECTORS
Except as hereinafter provided, the officers and directors of the
corporation shall not be personally liable to the corporation or
its stockholders for damages for breach of fiduciary duty as a
director or officer. This limitation on personal liability shall
not apply to acts or omissions which involve intentional misconduct,
fraud, knowing violation of law, or unlawful distributions prohibited
by Nevada Revised Statutes Section 78.300.
IN WITNESS WHEREOF, the undersigned incorporator has executed
these Articles of Incorporation this 28th day of April, 1998.
/s/ Kenneth Maul
___________________________________
KENNETH MAUL
STATE OF NEVADA )
) ss:
COUNTY OF CLARK )
On April 28, 1998, personally appeared before me, a Notary Public,
KENNETH MAUL, who acknowledged to me that he executed the foregoing
Articles of Incorporation.
/s/ Debra K. Amigone
___________________________________
NOTARY PUBLIC
NOTARY PUBLIC
STATE OF NEVADA
County of Clark
DEBRA K AMIGONE
MY Appointment Expires N0V. 3, 2001
7
<PAGE>
BY-LAWS
OF
LAS VEGAS GAMING, INC.
ARTICLE 1. SHAREHOLDERS'MEETING
-------------------------------
Section 1. Annual Meeting
- -------------------------
The annual meeting of the shareholders shall be held within five
months after the close of the fiscal year of the Corporation, for the
purpose of electing directors, and transacting such other business as may
properly come before the meetings.
Section 2. Agenda at the Shareholders' Annual Meeting.
- ------------------------------------------------------
(a) Calling the meeting to order;
(b) Roll call;
(c) Reading of the minutes of the last meeting:
(d) Reports of the Officers;
(e) Reports of the Committees;
(f) Election of the Directors;
(g) Adjournment
Section 3. Special Meetings.
- ----------------------------
Special meetings of the shareholders may be called at any time by the Board
of Directors or by the President or the Secretary at the written request of
the holders of fifty percent (50%) of the shares then outstanding and
entitled to vote thereat, or as otherwise required under the provisions of
the Business Corporation Law.
Section 4. Place of Meetings.
- -----------------------------
All meetings of shareholders shall be held at the principal
office of the Corporation, or at such other places within or without the
State of Nevada as shall be designated in the notices or waivers of notices
of such meetings.
1
By-Laws
<PAGE>
Section 5. Notice of Meetings.
- ------------------------------
(a) Written notice of each meeting of shareholders,
whether annual or special, stating the time when and place it is to
be held, shall be served either personally or by mail, not less than
ten or more than fifty days before the meeting, upon each
shareholder of record entitled to vote at such meeting, and to any
other shareholder to whom the giving of notice may be required by
law. Notice of a special meeting shall also state the purpose or
purposes for which the meeting is called, and shall indicate that it
is being issued by, or at the direction of, the person or persons
calling the meeting. If, at any meeting, action is proposed to be
taken that would, if taken, entitle shareholders to receive payment
for their shares pursuant to the Business Corporation Law, the
notice of such meeting shall include a statement of that purpose and
to that effect. If mailed, such notice shall be directed to each
such shareholder at his address, as it appears on the records of the
shareholders of the Corporation, unless he shall have previously
filed with the Secretary of the corporation a written request that
notices intended for him be mailed to some other address, in which
such case, if shall be mailed to the address designated in
(b) Notice of any meeting need not be given to any
person who may become a shareholder of record after the mailing of
such notice and prior to the meeting, or to any shareholder who
attends such meeting, in person or by proxy, or to any shareholder
who, in person or by proxy, submits a signed waiver of notice either
before or after such meeting. Notice of any adjourned meeting of
shareholders need not be given, unless otherwise required by
statute.
Section 6. Quorum of Shareholders
- ---------------------------------
(a) Except as otherwise provided herein, or by
statute, or in the Certificate of Incorporation (such
Certificate and any amendments thereof being hereinafter
collectively referred to as the "Certificate of Incorporation"), at
all meetings of shareholders of the Corporation, the presence at
the commencement of such meetings in person or by proxy of
shareholders holding of record a majority of the total number of
shares of the Corporation then issued and outstanding and entitled
to vote, shall be necessary and sufficient to constitute a quorum
for the transaction of any business. The withdrawal of any
shareholder after the commencement of a meeting shall have no
effect on the existence of a quorum, after a quorum has been
established at such meeting.
(b) Despite the absence of a quorum at any annual or
special meeting of shareholders, the shareholders, by a majority of
the votes cast by the holders of shares entitled to vote thereon,
may adjourn the meeting. At any such adjourned meeting at which a
quorum is present, any business may be transacted which might have
been transacted at the meeting as originally called if a quorum had
been present. However, if after the adjournment, the Board of
Directors fixes a new record date for the adjourned meeting, a
notice of the adjourned meeting shall be given to each shareholder
of record on the new record date.
2
By-Laws
<PAGE>
Section 7. Voting
- -----------------
(a) Except as otherwise provided by statute or by the
Certificate of Incorporation, any corporate action, other than the election
of directors to be taken by vote of the shareholders, shall be authorized
by a majority of votes cast at a meeting of the shareholders by the holders
of shares entitled to vote thereon. Election of directors shall be
accomplished by a candidate receiving a plurality of the votes cast at a
shareholder's meeting by the shareholders entitled to vote in the election.
(b) Except as otherwise provided by statute or by the
Certificate of Incorporation, at each meeting of shareholders, each holder
of record of stock of the Corporation entitled to vote thereat, shall be
entitled to one vote for each share of stock registered in his name on the
books of the Corporation. Upon demand of the shareholders holding ten
percent (10%) in interest of the shares, present in person or by proxy, and
entitled to vote, and voting shall be by ballot.
Section 8. Proxies.
- -------------------
Each shareholder entitled to vote or to express consent or
dissent without a meeting may do so by proxy; provided, however, that the
instrument authorizing such proxy to act shall have been executed in
writing by the shareholder himself, or by his attorney- i n- fact thereunto
duly authorized in writing. No proxy shall be valid after the expiration of
eleven months from the date of its execution, unless the persons executing
it shall have specified therein the length of time it is to continue in
force. Such instrument shall be exhibited to the Secretary at the meeting
and shall be filed with the records of the Corporation.
Section 9. Action Without Meeting.
- ----------------------------------
Any resolution in writing, signed by all of the shareholders
entitled to vote thereon, shall constitute action by such shareholders to
the effect therein expressed, with the same force and effect as if the same
had been duly passed by unanimous vote at a duly called meeting of
shareholders, and such resolutions so signed shall be inserted in the
minute book of the Corporation under its proper date.
By-Laws 3
<PAGE>
ARTICLE II. DIRECTORS
---------------------
Section 1. Number.
- ------------------
The affairs and the business of the Corporation, except
as otherwise provided in the Certificate of Incorporation, shall be
managed by the Board of Directors. The number of the directors of
the Corporation shall be five (5) unless and until otherwise
determined by vote of a majority of the entire Board of Directors.
The "entire Board" as used in this Article shall mean the total
number of directors, which the Corporation would have, if there were
no vacancies. The number of directors shall not be less than three,
unless all of the outstanding shares are owned beneficially and of
record by less than three shareholders, in which event the number of
directors shall not be less than the number of shareholders.
Section 2. How Elected.
- -----------------------
At the annual meeting of shareholders, the persons duly
elected by the votes cast at the election held thereat shall become
the directors for the ensuing year.
Section 3. Term of Office and Oualifications.
- ---------------------------------------------
The term of office of each of the directors shall be
until the next annual meeting of shareholders and thereafter until a
successor has been elected and qualified. Each director shall be at
least eighteen years of age.
Section 4. Duties of Directors.
- -------------------------------
The Board of Directors shall have the control and
general management of the affairs and business of the Corporation
unless otherwise provided in the certificate of Incorporation. Such
directors shall in all cases act as a Board regularly convened by a
majority, and they may adopt such rules and regulations for the
conduct of their meetings, and the management and business of the
Corporation as they may deem proper, not inconsistent with these
by-laws and the Laws of the State of Nevada.
Section 5. Directors' Meetings.
- -------------------------------
Regular meetings of the Board of Directors shall be
held immediately following the annual me tings of the shareholders,
and at such other times as the Board of Directors may determine.
Special meetings of the Board of Directors may be called by tile
President at any time and must be called by the President of the
Secretary upon the written request of two directors. All meetings,
both regular and special, shall be held at the principal office of
the Corporation or at such other location, within or without the
State of Nevada, as the Board of the Directors may from time to time
determine.
By-Laws 4
<PAGE>
Section 6. Notice of Meetings.
- ------------------------------
Notice of the place, day and hour of every regular and special
meeting shall be given to each director by delivering the same to him
personally or sending the same to him to telegraph or leaving the same at
his residence or usual place of business, at least one (1) day before the
meeting, or shall be mailed to each director, postage prepaid and addressed
to him at tile last known Post Office address according to the records of
the Corporation, at least three (3) days before the meeting. No notice of
any adjourned meeting of the Board of Directors needs to be given other
than by announcement at the meeting, subject to the provisions of Section 7
of this Article.
Section 7. Quorum of Directors.
- -------------------------------
At any meeting of the Board of Directors, except as otherwise
provided by the Certificate of Incorporation, or by these by-laws, a
majority of the Board of Directors shall constitute a quorum for meeting
until a quorum shall be present or represented.
Section 8. Director and Committee Action by Conference Telephone.
- -----------------------------------------------------------------
Any one or more members of the Board of Directors, or of any
committee thereof, may participate in a meeting of such Board or committee
by means of conference telephone or similar equipment which allows all
persons participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at such a
meeting.
Section 9. Voting.
- ------------------
Except as otherwise provided by statute, or by the Certificate
of Incorporation, or by these by-laws, the affirmative vote of a majority
of the Directors present at any meeting of the Board of Directors at which
a quorum is present shall be necessary for the transaction of any item of
business thereat. Any resolution in writing, signed by all of the directors
entitled to vote thereon, shall constitute action by such directors to the
effect therein expressed, with the same force and effect as if the same had
been duly passed by unanimous vote at a duly called meeting of directors
and such resolution so signed shall be inserted in the minute book of the
Corporation under its proper date.
Section 10. Vacancies.
- ----------------------
Unless otherwise provided in the Certificate of Incorporation,
vacancies in the Board of Directors occurring between annual meetings of
the shareholders, other than vacancies due to the removal of directors
without cause, shall be filled for the unexpired portion of the term by a
majority vote of the remaining directors, even though less than a quorum
exists. Vacancies occurring in the Board by reason of the removal of
directors without cause may be filled only by vote of the shareholders. A
director so elected shall hold office for the unexpired term of his
predecessor, and until his successor has been elected and qualified.
Section 11. Removal of Directors.
- ---------------------------------
Any or all of the directors may be removed, either with or
without cause at any time by a vote of the shareholders at any meeting
called for such purpose, and another director, or more than one may be
elected by such shareholders in the place of the director(s) so removed, to
serve for the remainder of the term.
By-Laws 5
<PAGE>
Section 12. Resignation.
- ------------------------
Any director may resign at any time by giving written notice to
the Board of Directors, the President or the Secretary of the Corporation.
Unless otherwise specified in such written notice, such resignation shall
take effect upon receipt thereof by the Board of Directors or such officer,
and the acceptance of such resignation shall not be necessary to make it
effective. However, such resignation will not be effective to discharge any
accrue obligations or duties of a director.
Section 13. Salary.
- -------------------
No stated salary shall be paid to directors, as such, for their
services, but by resolution of the Board of Directors a fixed sum and
expenses of attendance, if any, may be allowed for attendance at each
regular or special meeting of the Board, provided, that nothing herein
contained shall be construed to prevent any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 14. Contracts.
- ----------------------
(a) No contract or other transaction between this Corporation
and any other Corporation shall be impaired, affected or invalidated, nor
shall any director be liable in any way by reason of the fact that any one
or more of the directors of this Corporation is or are interested in, or is
a director or officer, or are directors or officers of such other
Corporation, provided that such facts are disclosed or made known to the
Board of Directors.
(b) Any director, personally and individually, may be interested
in any contract or transaction of this Corporation, and no director shall
be liable in any way by reason of such interest, provided that the fact of
such interest be disclosed or made known to the Board of Directors, and
provided that the Board of Directors shall authorize, approve or ratify
such contract or transaction by the vote (not counting the vote of any such
director) of a majority of a quorum, notwithstanding the presence of any
such director at the meeting at which such action is taken. Such director
or directors may be counted in determining the presence of a quorum at such
meeting. This Section shall not be construed to impair or invalidate or in
any way affect any contract or other transaction which would otherwise be
valid under the law (common, statutory or otherwise) applicable thereto.
(c) However, if there was no such disclosure or knowledge, or if
the vote of such interested director was necessary for the approval of such
contract or transaction at a meeting of the Board or committee at which it
was approved, the Corporation may avoid the contract or transaction, unless
the party or parties thereto shall establish affirmatively that the
contract or transaction was fair and reasonable as to the Corporation, at
the time it was approved by the Board, a committee or the shareholders.
Section 15. Committees.
- -----------------------
The Board of Directors, by resolution adopted by a majority of
the entire Board, may designate from among its members an executive
committee and such other committees, and alternate members thereof, as they
deem desirable, each consisting of three or more members, with such powers
and authority (to the extent permitted by law) as may be provided in such
resolution. Each such committee shall serve at the pleasure of-the Board of
Directors.
By-Laws 6
<PAGE>
ARTICLE 111. OFFICERS
Section 1. Number of Officers.
- ------------------------------
The officers of the Corporation shall consist of a President, a
Secretary, a Treasurer, and such other officers, including a Chairman of
the Board of Directors, and one or more Vice Presidents, as the Board of
Directors may from time to time deem advisable. Any officer other than tile
Chairman of the Board of Directors may be, but is not required to be,
Director of the Corporation. Any officer may hold more than one office
except the same person may not hold the office of President and Secretary.
Section 2. Election of Officers.
- --------------------------------
Officers of the Corporation shall be elected at tile first
meeting of tile Board of Directors. Thereafter,
and unless otherwise provided in the Certificate of Incorporation, the
officers of the Corporation shall be elected annually by the Board of
Directors at its meeting held immediately after the annual meeting of
shareholders and shall hold office for one year and until their successors
have been duly elected and qualified.
Section 3. Removal of Officers.
- -------------------------------
Any officer elected by the Board of Directors may be removed,
with or without cause, and a successor elected, by a vote of the Board of
Directors. Any officer elected by the shareholders may be removed, with or
without cause, and a successor elected, only by a vote of the shareholders.
Additionally, an officer elected by the shareholders may have his authority
suspended, for cause, by the Board of Directors.
Section 4. President.
- ---------------------
The President shall be the chief executive officer of the
Corporation and shall have general charge of business, affairs and property
thereof, subject to direction of the Board of Directors, and shall have
general supervision over its officers and agents. He shall, if present,
preside at all meetings of the Board of Directors in the absence of a
Chairman of the Board and at all meetings of shareholders. He may do and
perform all acts incident to the office of President.
Section 5. Vice President.
- --------------------------
In the absence of or inability of the President to act, the Vice
President shall perform the duties and exercise tile powers of the
President and shall perform such other functions as the Board of Directors
may from time to time prescribe.
By-Laws 7
<PAGE>
Section 6. Secretary.
- ---------------------
The Secretary shall:
(a) Keep tile minutes of the meetings of the Board of Directors
and of the shareholders in appropriate books.
(b) Give and serve all notice of all meetings of the
Corporation.
(c) Be custodian of the records and of the seal of the
Corporation and affix the latter to such instruments or documents as may be
authorized by the Board of Directors.
(d) Keep the shareholder records in such a manner as to show at
any time the amount of shares, the manner and the time the same was paid
for, the names of the owners thereof alphabetically arranged and their
respective places of residence, or their Post Office addresses, the number
of shares owned by each of them and the time at which each person became an
owner, and keep such shareholder records available daily during the usual
business hours at the office of the Corporation subject to the inspection
of any person duly authorized, as prescribed by law.
(e) Do and perform all other duties incident to the office of
Secretary.
Section 7. Treasurer.
- ---------------------
The Treasurer shall:
(a) Have the care and custody of and be responsible for all of
the funds and securities of the Corporation and deposit such funds in the
name and to tile credit of the Corporation in such a bank and safe deposit
vaults- as tile directors may designate.
(b) Exhibit at all reasonable times his books and accounts to
any director or shareholder of the Corporation upon application at the
office of the Corporation during business hours.
(c) Render a statement of the condition of the finances of the
Corporation at each stated meeting of the Board of Directors if called upon
to do so, and a full report at the annual meeting of shareholders. He shall
keep at the office of the Corporation correct books of account of all of
its business and transactions and such books of account as the Board of
Directors may require. He shall do and perform all other duties incident to
the office of Treasurer.
(d) Give the Corporation security for the faithful performance
of his duties in such sum and with such surety as the Board of Directors
may require.
Section 8. Duties of Officers May be Delegated.
- -----------------------------------------------
In the case of the absence of any officer of the Corporation,
or for any reason the Board may deem sufficient, the Board may, except as
otherwise provided in these by-laws, delegate the powers of such officers
to any other officer or any. Director for the time being provided a
majority of the entire Board concurs therein.
By-Laws 8
<PAGE>
Section 9. Vacancies - How Filled.
- ----------------------------------
Should any vacancy in any office occur by death, resignation or
otherwise, the Board of Directors may appoint any qualified person to fill
such vacancy, without undue delay, at its next regular meeting or at a
special meeting called for that purpose, except as otherwise provided in
the Certificate of Incorporation.
Section 10. Compensation of Officers.
- -------------------------------------
The officers shall receive such salary or compensation as may be
fixed and determined by the Board of Directors, except as otherwise
provided in the Certificate of Incorporation. No officer shall be precluded
from receiving any compensation by reason of the fact that he is also
director of the Corporation.
By-Laws 9
<PAGE>
ARTICLE IV. CERTIFICATES REPRESENTING SHARES
--------------------------------------------
Section 1. Issue of Certificates Representing Shares
- ----------------------------------------------------
The President shall cause to be issued to each shareholder one
or more certificates, under the seal of the Corporation, signed by the
President (or Vice-President) and the Treasurer (or Secretary) certifying
the number of shares owned by him in the Corporation. Each certificate
shall state upon the face thereof. (1) that the Corporation is formed under
the laws of this state. (2) The name of the person or persons to whom
issued. (3) The number and class of shares, and the designation of the
series, if any, which such certificate represents. Any restrictions upon
transfers imposed by the Corporation should be conspicuously noted on the
certificate.
Section 2. Lost. Destroyed and Stolen Share Certificates.
- ---------------------------------------------------------
The holder of any certificate representing shares of the
Corporation shall immediately notify the Corporation of any loss,
destruction or wrongful taking of the certificate representing the same.
The Corporation may issue a new certificate in the place of any certificate
thereto issued by it, alleged to have been lost, destroyed or wrongfully
taken. On production of such evidence of loss as the board of Directors in
its discretion may require, the Board of Directors may require the owner of
the missing certificate, or his legal representatives, to give the
Corporation a bond in such sum as the Board may direct, and with such
surety or sureties as may be satisfactory to the Board, to indemnify the
Corporation against any claims, loss, liability or damage it may suffer oil
account of the issuance of the new certificate. A new certificate may be
issued without requiring any such evidence or bond when, in the judgment of
the Board of Directors, it is proper to do so.
Section 3. Transfers of Shares.
- -------------------------------
(a) Transfers of shares of the Corporation shall be made oil the
shares of the records of the Corporation only by the holder of record
thereof, in person or by his duly authorized attorney, upon surrender for
cancellation of the certificate or certificates representing such shares,
with an assignment or power of transfer endorsed thereon or delivered
therewith, duly executed, with such proof of the authenticity of the
signature and of authority to transfer and of payment of transfer taxes as
the Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of
record of any share or shares as the absolute owner thereof for all
purposes and, accordingly, shall not be bound to recognize any legal,
equitable or other claim to, or interest in, such share or shares on the
part of any other person, whether or not it shall have express or other
notice thereof, excepts as otherwise expressly provided by law.
By-Laws 10
<PAGE>
ARTICLE V. SEAL
---------------
The seal of the Corporation shall be as follows:
ARTICLE V1. INDEMNIFICATION.
----------------------------
The Corporation shall indemnify any person, made
a party to an action by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he, his testator or
intestate, is or was director, officer, or employee of the Corporation,
against the reasonable expenses, including attorneys' fees, actually and
necessarily incurred by him in connection with the defense of such action,
or in connection with an appeal therein, except in relation to matters as
to which such person is adjudged to have breached his duty to the
Corporation. The Corporation shall indemnify any person made a party to an
action against judgments, fines, amounts paid in settlement and reasonable
expenses, including attorneys' fees actually and necessarily incurred as a
result of such action, if such person acted in good faith, for a purpose
which he reasonably believed to be in the best interests of the
Corporation, and, in criminal actions, had no reasonable cause to believe
that his conduct was unlawful. Such rights of indemnification shall not
exclude other rights to which such person may be entitled.
ARTICLE V11. DIVIDENDS OR OTHER DISTRIBUTIONS
---------------------------------------------
The Corporation, by vote of the Board of Directors, may declare
and pay dividends or make other distributions in cash or its bonds or its
property on its outstanding shares to the extent as provided and permitted
by law, unless contrary to any restriction contained in the Certificate of
Incorporation.
ARTICLE V111. NEGOTIABLE INSTRUMENTS
------------------------------------
All checks, notes or other negotiable instruments shall be
signed on behalf of this Corporation by such of the officers, agents and
employees as the Board of Directors may from time to time designate, except
as otherwise provided in the Certificate of Incorporation.
ARTICLE X1. FISCAL YEAR
-----------------------
The fiscal year of the Corporation shall be determined by
resolution of the Board of Directors.
By-Laws 11
<PAGE>
ARTICLE X. AMENDMENTS
---------------------
Section 1. By Shareholders
- --------------------------
All by-laws of the Corporation shall be subject to alteration or
repeal, and new by-laws may be made, by a majority vote of the shareholders
at the time entitled to vote in the election of directors.
Section 2. By Directors.
- ------------------------
The Board of Directors shall have power to make, adopt, alter,
amend and repeal, from time to time, the by-laws of the Corporation;
provided, however, that the shareholders entitled to vote with respect
thereto, as in this Article X above provided, may alter, amend or repeal
by-laws made by the Board of Directors; except that the Board of Directors
shall have no power to change the quorum for meetings of shareholders or of
the Board of Directors, or to change any provisions of the by-laws with
respect to the removal of directors or the filling of vacancies in the
Board resulting from the removal by the shareholders. If any by-law
regulating an impending election of directors is adopted, amended or
repealed by the Board of Directors, there shall be set forth in the notice
of the next meeting of the shareholders for the election of directors, the
by-law so adopted, amended or repealed, together with a concise statement
of the changes made therein.
ARTICLE X1. OFFICES
-------------------
The offices of the Corporation shall be located in the City,
County and State designated in the Certificate of Incorporation. The
Corporation may also maintain offices at such other places within or
without the United States as the Board of Directors may, from time to time,
determine.
The undersigned Incorporator certifies that lie has adopted the
foregoing by-laws as the first by-laws of the Corporation, in accordance
with the requirements of the Business Corporation Law.
Dated:
April 28, 1998
- --------------
/s/ Russell Roth
_________________________________
Shareholder
/s/ Kenneth Maul
_________________________________
Shareholder
/s/ Mark Valenti
_________________________________
Shareholder
By-Laws 12
<PAGE>
AGREEMENT FOR SET UP AND OPERATION OF KENO ROUTE
BETWEEN
BILL WILLIAMS AND CARL CONTI (collectively "Operators")
AND
LAS VEGAS GAMING, INC., a Nevada Corporation ("Las Vegas Gaming")
__________________________________________________________________
Operators hereby agree to set up and operate a Nevada based keno
route and assign any rights, interests or agreements they may have
with casinos or others to run such a route to Las Vegas Gaming.
Las Vegas Gaming, in consideration for this agreement and
assignment agrees as follows:
1. Upon the establishment of the route in Nevada with at least
five linked keno games, Las Vegas Gaming will:
a. distribute to Operators 50,000 shares of its common stock.
Such stock shall be marked restricted;
b. nominate Bill Williams to its board of directors, if he has
not already been so appointed;
c. pay a fee of $5,000 per month to Operators until the trading
value of the common stock issued under item "a" equals or
exceeds $2,000,000 and the stock can be traded under some
exemption or registration under the US securities' laws, or
the route ceases to operate (whichever comes first).
2. At the point in time when the operation of the Nevada route
has obtained net earnings of $1 million, Las Vegas Gaming shall
distribute to the Operators an additional 150,000 shares of its
common stock. Such stock shall be marked restricted
3. This agreement shall expire on December 31, 2004 if Operators
have not activated a keno route with at least five linked
properties in Nevada by that time.
Dated: August 12, 1999.
/s/ Bill Williams /s/ Russell R. Roth
_____________________________ _____________________________
Bill Williams Las Vegas Gaming, Inc.
By: Russell R. Roth
Its: President
/s/ Carl Conti
_____________________________
Carl Conti
<PAGE>
AGREEMENT FOR ASSIGNMENT OF RIGHTS
BETWEEN
KENO INTERNATIONAL, INC., a Nevada Corporation ("Keno
International")
AND
LAS VEGAS GAMING, INC., a Nevada Corporation ("Las Vegas Gaming")
__________________________________________________________________
Las Vegas Gaming, in consideration for the assignment by Keno
International of its Keno license agreement in Puerto Rico (the
"license") dated December 16, 1996 (attached hereto), agrees as
follows:
1. Upon the activation of play of the first keno game authorized
under the license in Puerto Rico, Las Vegas Gaming will:
a. distribute to Keno International 50,000 shares of its common
stock. Such stock shall be marked restricted;
b. nominate Bill Williams to its board of directors, if he has
not already been so appointed;
c. pay a royalty fee of $5,000 per month until the trading
value of the common stock issued under item "a" equals or
exceeds $2,000,000 and the stock can be traded under some
exemption or registration under the US securities' laws, or
keno ceases to be played under the license (whichever comes
first).
2. At the point in time when the operation of the keno games
under the license has obtained net earnings of $1 million, Las
Vegas Gaming shall distribute to Keno International an additional
150,000 shares of its common stock. Such stock shall be marked
restricted
3. This agreement shall expire on December 31, 2001, if Las Vegas
Gaming has not activated a keno game in Puerto Rico under the
license.
Dated: August 12, 1999.
/s/ Bill Williams
_____________________________
Keno International, Inc.
By: Bill Williams
Its: President
/s/ Russell R. Roth
_____________________________
Las Vegas Gaming, Inc.
By: Russell R. Roth
Its: President
