SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Nine Months Ended March 31, 1996
Commission File Number: 0-9047
GLOBAL GAMING AND TECHNOLOGY, INC.
(Exact Name of Registrant as specified in its charter)
Delaware 02-0314487
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
2575 South Highland Drive, Las Vegas, Nevada 89109
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code: 702/794-0336
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 12 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
X YES NO
As of March 31, 1996, there was issued and outstanding 26,378,577 shares
of Common Stock of Registrant. The aggregate market value of the shares of
Common Stock held by non-affiliates (without admitting that any person whose
shares are not included in determining such value is an affiliate) was not
available because the prices for such shares are not quoted by the National
Association of Securities Dealers through NASDAQ, its automated system for
reporting quotes.
<PAGE>
Global Gaming and Technology, Inc.
Form 10-Q
Quarter Ended March 31, 1996
TABLE OF CONTENTS
PART I - Financial Information
Item I - Financial Statements
Item II - Management's Discussion and Analysis
of Financial Condition and Results of
Operations
PART II - Other Information
<PAGE>
PART I
<PAGE>
Global Gaming and Technology, Inc.
Financial Statements
March 31, 1996
(See Accountant's Review Report)
<PAGE>
Global Gaming and Technology, Inc.
Financial Statements
March 31, 1996
(See Accountant's Review Report)
TABLE OF CONTENTS
Page
Accountant's Review Report 1
Balance Sheet 2
Statement of Operations and Deficit 3 - 4
Statement of Cash Flows 5
Summary of Significant Accounting Policies 6 - 7
Notes to Financial Statements 8 - 10
<PAGE>
To the Board of Directors
and Stockholders of
Global Gaming and Technology, Inc.
We have reviewed the accompanying balance sheet of Global Gaming and
Technology, Inc. as of March 31, 1996 and the related statements of
operations, deficit, and cash flows for the three months and nine months
ended March 31, 1996 and 1995, in accordance with Statements on Standards
for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. All information included in these financial
statements is the representation of the management of Global Gaming and
Technology, Inc.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than
an examination in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statement taken as a whole. Accordingly, we do not express such an opinion.
Based on our review and subject to the preceding paragraph, we are not aware
of any material modifications that should be made to the accompanying
comparative financial statements in order for them to be in conformity with
generally accepted accounting principles.
The financial statements for the year ended June 30, 1995 were audited by us
and we expressed an unqualified opinion on them in our report dated September
11, 1995, but we have not performed any auditing procedures since that date.
Las Vegas, Nevada
May 10, 1996
- 1 -
<PAGE>
<TABLE>
Global Gaming and Technology, Inc.
Balance Sheet
March 31, 1996 and June 30, 1995
(See Accountant's Review Report)
<CAPTION>
March 31 June 30
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 102,127 $ 24,081
Note Receivable-Current (Note 1) 169,393 106,345
----------- -----------
271,520 130,426
----------- -----------
PROPERTY AND EQUIPMENT - At Cost
Net of Accum Depreciation -0- -0-
----------- -----------
OTHER ASSETS
Note Receivable (Note 1) 567,153 642,063
Deposits 300 300
----------- -----------
567,453 642,363
----------- -----------
Total Assets $ 838,973 $ 772,789
=========== ===========
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
CURRENT LIABILITIES
Accounts Payable & Accrued Exp 1,096,305 1,042,044
Notes Payable (Note 3) 1,173,785 1,173,785
----------- -----------
2,270,090 2,215,829
LONG-TERM LIABILITIES
Notes Payable - Net of Current
Maturities (Note 3) -0- -0-
----------- -----------
STOCKHOLDER'S DEFICIENCY (Note 4)
Preferred Stock, $.01 par value,
1,000,000 shares authorized,
none issued. -0- -0-
Common Stock, $.01 par Value,
27,000,000 Shares Authorized,
26,378,577 shares issued
(Including 51,382 held in the
company name at no cost). 263,786 263,786
Paid in Capital in excess of
par value 3,395,062 3,395,062
Deficit ( 5,089,965) ( 5,101,888)
----------- -----------
( 1,431,117) ( 1,443,040)
----------- -----------
Total Liabilities and
Stockholders' Deficiency $ 838,973 $ 772,789
=========== ===========
<FN>
The Accompanying Summary of Significant Accounting Policies and
Notes are an integral part of these financial statements.
- 2 -
</TABLE>
<PAGE>
<TABLE>
Global Gaming and Technology, Inc.
Statement of Operations and Deficit
For the Three Months Ended March 31, 1996 and
the Nine Months Ended March 31, 1996
(See Accountant's Review Report)
(Unaudited)
<CAPTION>
3 Mnths Ended 9 Mnths Ended
March 31 March 31
1996 1996
<S> <C> <C>
REVENUE AND INCOME
Income from Settlement (Note 6) $ 157,500 $ 157,500
Royalty & Interest Income 1,371 6,971
----------- -----------
Total Income 158,871 164,471
----------- -----------
COSTS AND EXPENSES
Professional Services 21,886 74,968
Interest 23,087 69,261
Other General & Administrative 6,112 8,319
----------- -----------
Costs and Expenses 51,085 152,548
----------- -----------
Loss from Operations before
Extraordinary Item 107,786 11,923
Extraordinary Item -0- -0-
----------- -----------
Net Income (Loss) 107,786 11,923
----------- -----------
Deficit Beginning of Period
as Previously Reported ( 5,197,751) ( 5,101,888)
Prior Period Adj -0- -0-
----------- -----------
Deficit Beinning of Period
as Restated ( 5,197,751) ( 5,101,888)
----------- -----------
Deficit End of Period ( 5,089,965) ( 5,089,965)
=========== ===========
Net Income (Loss) per Common
Share (Note 5) $ .0041 $ .0005
=========== ===========
<FN>
The accompanying Summary of Significant Accounting Policies and
Notes are an integral part of these financial statements.
- 3 -
</TABLE>
<PAGE>
<TABLE>
Global Gaming and Technology, Inc.
Statement of Operations and Deficit
For the Three Months Ended March 31, 1995 and
the Nine Months Ended March 31, 1995
(See Accountant,s Review Report)
(Unaudited)
<CAPTION>
3 Mnths Ended 9 Mnths Ended
March 31 March 31
1995 1995
<C> <C>
<S>
REVENUE AND INCOME
Royalty & Interest Income $ 4,149 $ 18,952
----------- -----------
COSTS AND EXPENSES
Professional Services 24,653 53,872
Interest 27,891 85,089
Other General & Administrative 117 4,752
----------- -----------
Costs and Expenses 52,661 143,713
----------- -----------
Loss from Operations before
Extraordinary Item ( 48,512) ( 124,761)
Extraordinary Item - Gain on
Extinguishment of Debt -0- 48,397
----------- -----------
Loss for the period ( 48,512) ( 76,364)
----------- -----------
Deficit Beginning of Period
as Previously Reported ( 4,992,107) ( 4,954,519)
Prior-Period Adjustment
Income Taxes -0- ( 9,736)
----------- -----------
Deficit Beginning of Period
as Restated ( 4,992,107) ( 4,964,255)
----------- -----------
Deficit End of the Period ($5,040,619) ($5,040,619)
=========== ===========
Loss per Common Share (Note 5) ($ .002) ($ .003)
=========== ===========
<FN>
The accompanying Summary of Significant Accounting Policies and
Notes are an integral part of these financial statements.
- 4 -
</TABLE>
<PAGE>
<TABLE>
Global Gaming and Technology, Inc.
Statement of Cash Flows
For the Nine Months Ended March 31, 1996 and 1995
(See Accountant's Review Report)
(Unaudited)
<CAPTION>
March 31 March 31
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 11,923 ($ 76,364)
Non-Cash Items Included in
Net Income Depreciation -0- -0-
Changes in
Accounts Payable 54,261 51,937
Note Receivable 11,862 135,835
Loan to Officer -0- ( 5,000)
Prior-Period Adjustment
Income Taxes -0- ( 9,736)
----------- -----------
78,046 96,672
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditure -0- -0-
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of Notes Payable -0- ( 75,377)
----------- -----------
Net Increase (Decrease) in Cash $ 78,046 $ 21,295
=========== ===========
<FN>
The accompanying Summary of Significant Accounting Policies and
Notes are an integral part of these financial statements.
- 5 -
</TABLE>
<PAGE>
Global Gaming and Technology, Inc.
Summary of Significant Accounting Policies
and Notes to Financial Statements
March 31, 1996
THE COMPANY
The Company was incorporated in the State of Delaware in 1973 and has elected
June 30 as its year end. The Company has ben engaged in the research, devel-
opment, manufacture, and marketing of electronic gaming devices and coinless
games of chance.
PROPERTY AND EQUIPMENT
Property and equipment, including significant improvements thereto, are
carried at cost, less accumulated depreciation. Expenditures for repairs and
maintenance are charged to expenses as incurred. When assets are retired or
disposed of, the cost and related accumulated depreciation are removed from
the accounts. Gains and losses from the disposition of property are included
in operations. Depreciation is provided using Straight-Line methods.
INCOME TAXES
Because of a net operating loss carry forward from prior years, the Company
does not have an income tax obligation.
LITIGATION
On or about May, 1994, the Company instituted litigation in the United States
District Court for the District of New Jersey for patent infringement against
Bally's Park Place, Inc., Trump Plaza Associates, Trump Taj Mahal Associates,
Trump Castle Associates, The Claridge Hotel and Casino Corporation, Resorts
International Hotel, Atlantic Showboat Inc., and Greate Bay Hotel and Casino,
Inc. Global was seeking damages to adequately compensate for the past
infringement of the patent in suit by each of the defendants together with
interest and cost.
As a result of this action, on June 30, 1994 the Company entered into a
license agreement with Bally Gaming, whereby the Company grants a non
exclusive, personal, non-transferable right and paid-up license to make, have
made, use and sell, test, lease or otherwise dispose of licensed products
under claims of this license patent. The Company will receive a non-
refundable net royalty payment in the amount of one million dollars
($1,000,000). (See Note 1 for details)
- 6 -
<PAGE>
Global Gaming and Technology, Inc.
Summary of Significant Accounting Policies
and Notes to Financial Statements
March 31, 1996
LITIGATION - (Continued)
In this law suit, Global Gaming and Technology, Inc. contends that the
defendants named in the complaint infringed upon a patent owned in connection
with the manufacture, use or sale of slot machines driven by stepper motors.
This case is in its early stage, and the Company intends to prosecute the
matter fully until such time as the case is either tried or settled to the
Company's satisfaction.
On or about July 6, 1994, IGT North America, Universal Distributing of Nevada,
Inc. and Sigma Game, Inc. filed a civil complaint in the United States
District Court for the District of Nevada against Global Gaming and
Technology, Inc. for declaratory judgment of non-infringement, invalidity,
unenforceability and laches.
This lawsuit arose as a result of the New Jersey litigation (see above
paragraph), and was filed for the purpose of having Global's patent declared
invalid. The Company is vigorously contesting the allegations alleged in the
complaint and has filed a counter-claim for infringement against IGT North
America, Universal Distributing of Nevada, Inc. and Sigma Game, Inc. This
case is in its early stages and its counsel cannot, yet, render a more
definite opinion with respect to this case.
As a result of this action, on February 7, 1996, Sigma Game, Inc. agreed to
pay a total of $325,000 to Global Gaming and Technology, Inc., one-half of
which will be paid to legal counsel (see Note 1 and Note 6). Both parties
agreed to release and absolutely discharge the other from any and all causes
of action arising out of any matter existing at the time of the agreement.
At this time, the Company believes that its only financial exposure in this
case is (i) the financial impact of having its patent declared invalid (which
patent expired at the end of July 1995) and (ii) the payment of any fees and
costs that may be awarded by the court, if IGT and Universal prevail on their
claims, the amount of which exposure is difficult to predict at present.
The Company will be incurring legal costs regarding the prosecution of its
infringement claims. Per counsel of the Company, at present it is very
difficult to determine these future legal costs.
On September 11, 1995, the Court ordered that discovery in this case will
close on May 1, 1996 and set a trial date of September 9, 1996. In
connection with this ruling, the Court also denied IGT's, Sigma Game's and
Universal Distributing's motion to bifurcate the damages and liability phases
of this case.
- 7 -
<PAGE>
Global Gaming and Technology, Inc.
Summary of Significant Accounting Policies
and Notes to Financial Statements
March 31, 1996
NOTE 1 - Note Receivable
The total amount due pursuant to the promissory note from Ballys Gaming shall
be paid in sixty consecutive installments, pursuant to the following schedule:
A. $10,166.66 per month shall be paid on the first day of each month,
starting on July 1, 1994, and continuing through December 1, 1996.
B. $21,500.00 per month shall be paid on the first day of each month,
starting on January 1, 1997, and continuing through June 1, 1999.
C. $50,000 was received by the Company on July 1, 1994. An additional
$112,717 was received during the year ended 6/30/95. $101,500 was
received in the nine months ended 03/31/96. The scheduled payments
under this note have been discounted at 8% to reflect the present
value of the note.
Note Receivable - Current Portion $141,718
Note Receivable - Long Term 529,653
--------
Total as of March 31, 1996 $671,371
========
The amount of this royalty payment is secured by a note from Bally's Gaming
and the collectability of this note is not doubtful. Since June 30, 1994, the
company has been receiving timely monthly installment payments on this note.
Also due is a Promissory Note from Sigma Game, Inc. from a settlement arising
out of litigation. Collection is not doubtful. Payment schedule to Global
Gaming and Technology, Inc. is as follows:
February 7, 1997 $25,000
February 7, 1998 25,000
February 7, 1999 12,500
-------
Total $62,500
=======
Also included in Note Receivable - Current Portion is a Note for $2,675 due
from a local firm for the sale of all inventory.
NOTE 2 - Property and Equipment
Furniture and Equipment $60,843
Less: Accumulated Depreciation ( 60,843)
--------
$ - 0 -
========
- 8 -
<PAGE>
Global Gaming and Technology, Inc.
Summary of Significant Accounting Policies
and Notes to Financial Statements
March 31, 1996
<TABLE>
NOTE 3 - Note Payable
<CAPTION>
Current Non-Current
Maturities Maturities Total
<S> <C> <C> <C>
Michael Wichinsky
Payable upon demand.
Interest payable
quarterly at 8% $ 736,389 $ - 0 - $ 736,389
Michael Wichinsky
Payable upon demand.
Interest payable
quarterly at 10% 105,490 - 0 - 105,490
William T. O'Donnel, Sr.
Payable upon demand.
Interest payable
quarterly at 8% 312,463 - 0 - 312,463
State of New Jersey
Payable in monthly
installments of $1,363
including interest.
This note is in arrears. 19,443 - 0 - 19,443
---------- --------- ----------
$1,173,785 - 0 - $1,173,785
========== ========= ==========
<FN>
Interest is accrued on these notes at 8%. Accrued interest payable at
03/31/96 is $1,088,130.
</TABLE>
<TABLE>
NOTE 4 - Stockholders' Deficiency
<CAPTION>
Paid in
Capital in
Number of $.01 Par Excess of
Shares Value Par Value (Deficit)
----------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Balance at
June 30, 1994 26,378,577 $263,786 $3,395,062 ($4,954,519)
Net Income
(Loss) For The
Year Ended
June 30, 1995 ( 186,030)
Extraordinary
Item - Gain 48,397
Prior Period
Adjustment ( 9,736)
----------- -------- ---------- ------------
Balance at
June 30, 1995 26,378,577 $263,786 $3,395,062 ($5,101,888)
----------- -------- ---------- ------------
Net Income (Loss)
For the nine months
ended 03/31/96 11,923
----------- -------- ---------- ------------
Balance at
03/31/96 26,378,577 $263,786 $3,395,062 ($5,089,965)
=========== ======== ========== ============
</TABLE>
- 9 -
<PAGE>
Global Gaming and Technology, Inc.
Summary of Significant Accounting Policies
and Notes to Financial Statements
March 31, 1996
NOTE 5 - Earnings (Loss) Per Share
Income (Loss) per share was computed by dividing the net income or loss by
the weighted average number of shares outstanding during the period.
NOTE 6 - Income from Settlement.
On February 7, 1996 Global Gaming and Technology, Inc. received $95,000 and
a Promissory Note for $62,500 (Note 1) as its share of a settlement with
Sigma Game, Inc.
- 10 -
<PAGE>
ITEM II - Management's Discussion and
Analysis of Financial Condition
and Results of Operations
As of March 31, 1996, the Company had negative working capital of
$1,998,570. The Company has no commitments for capital expenditures.
As of March 31, 1996, the Company had negative stockholders' equity of
$1,431,117.
During the nine months ended March 31, 1996, the Company realized total
revenues of $164,471, including $157,500 arising out of litigation, and
expenses of $152,548.
GLOBAL GAMING AND TECHNOLOGY, INC. has been engaged in the design,
manufacture, and marketing of electronic microprocessor-controlled gaming
machines. The Company, which was incorporated in Delaware in 1973, maintains
its principal offices at 2575 South Highland Drive, Las Vegas, Nevada 89109.
No machines have been manufactured during the nine months ended March 31,
1996. The Company has been dormant during the nine months ended March 31,
1996.
The Company does not anticipate any shortage of raw materials or parts.
Patents are the subjects of current litigation.
The Company is not subject to seasonal variation in sales.
Primary North American markets for gaming devices are Las Vegas, Nevada, and
Atlantic City, New Jersey. Because of the high cost of obtaining gaming
licenses in Nevada and New Jersey, the Company does not sell its machines in
these states. Compared to Nevada and New Jersey, other markets are
relatively immaterial, but growing. The Company does not have the resources
to apply for licenses in Nevada and New Jersey at the present time.
The Company will be incurring legal costs regarding the prosecution of its
infringement claims. Per counsel of the Company, at present it is very
difficult to determine these future legal costs.
The gaming industry is highly competitive, and the Company is at a severe
competitive disadvantage because of its size and lack of resources. The
Company has not generated any sales in the last three months and does not
anticipate sales in the foreseeable future.
The Company employs approximately 1 person on a part-time basis.
The lack of gaming licenses in Nevada and New Jersey is a severe detriment to
growth. In effect, sales are confined to much smaller and less lucrative
markets. During the nine months ended March 31, 1996, the Company was
unable to achieve any sales.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
On or about May, 1994, the Company instituted litigation for patent
infringement against Bally's Park Place, Inc. and several other New Jersey
hotels and casinos. Global was seeking damages to adequately compensate for
the past infringement of the patent in suit by each of the defendants
together with interest and costs. As a result of this action, the Company
entered into a license agreement with Bally Gaming on June 30, 1994 whereby
the Company grants a non exclusive, personal, non-transferable right and
paid-up license to make, have made, use and sell, test, lease or otherwise
disopose of lecensed products under claims of this license patent. The
Company is receiving a non-refundable net royalty payment in the amount of
one million dollars ($1,000,000) in periodic installments.
In this lawsuit, Global Gaming and Technology, Inc. contends that the
defendants named in the complaint infringed upon a patent owned in connection
with the manufacture, use or sale of slot machines driven by stepper motors.
On or about July 6, 1994, IGT, Universal Distributing of Nevada, Inc. and
Sigma Game, Inc. filed a civil complaint against Global Gaming and
Technology, Inc. for declaratory judgment of non-infringement, invalidity,
unenforceability and laches. The Company is receiving one-half of $325,000
as an independent settlement with Sigma Game, Inc.
This Nevada lawsuit arose as a result of the New Jersey litigation (see above
paragraph), and was filed for the purpose of having Global's patent declared
invalid. The Company is vigorously contesting the allegations alleged in the
complaint and have, in fact, filed a counter-claim for infringement against
these defendants. It is expected by Global, that the pretrial process will
continue through fiscal year 1995, with trial following no earlier than
fiscal year 1996. At present the New Jersey lawsuit has been stayed in
deference to the Nevada case which is presently proceeding. Per counsel of
the Company, presently it is too early in the discovery process to render a
more definitive opinion regarding the ultimate outcome of these lawsuits.
ITEM 2 - Changes in Securities
None.
ITEM 3 - Defaults Upon Senior Securities
Non-Applicable
ITEM 4 - Submission of Matters to a Vote to Security Holders
Non-applicable
<PAGE>
PART II - OTHER INFORMATION
(Continued)
ITEM 5 - Related Party Transactions
The Debt amount of $1,048,852 has been restructured by agreement between
Michael Wichinsky (a 30% stockholder of the Company) and William T.
O'Donnell, Sr. (a 22% stockholder of the Company), whereby the Company owes
Michael Wichinsky the amount of $736,389 and owes William T. O'Donnell, Sr.
the amount of $312,463 under the same terms and conditions agreed upon for
the original advancement of funds. These notes are payable upon demand and
interest is payable quarterly at 8% per annum. These funds were used for
Working Capital and were in addition to the amounts evidenced by formal notes
payable (See Note 3 to financial statements). Additionally, the Company owes
$105,490 to Michael Wichinsky (See Note 3 to the Financial statements).
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
DATED: 5/10/96
-------------------
GLOBAL GAMING & TECHNOLOGY, INC.
BY: Mark Sarason
--------------------------
Mark Sarason
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons as a majority of the
members of the Board of Directors of the registrant and in the capacities
and on the dates indicated.
DATED: 5/10/96
-----------------------
Mark Sarason
--------------------------
Mark Sarason
Secretary/Treasurer & Director
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Jun-30-1996
<PERIOD-START> Jul-01-1995
<PERIOD-END> Mar-31-1996
<CASH> 102127
<SECURITIES> 0
<RECEIVABLES> 169393
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 271520
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 838973
<CURRENT-LIABILITIES> 2270090
<BONDS> 0
<COMMON> 263786
0
0
<OTHER-SE> (1694903)
<TOTAL-LIABILITY-AND-EQUITY> 838973
<SALES> 0
<TOTAL-REVENUES> 164471
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 152548
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69261
<INCOME-PRETAX> 11923
<INCOME-TAX> 0
<INCOME-CONTINUING> 11923
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11923
<EPS-PRIMARY> .001
<EPS-DILUTED> .001
</TABLE>
