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, 1997
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, 1997, 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, 1997
TABLE OF CONTENTS
Page
PART I - Financial Information:
- --------------------------------
Item I - Financial Statements
Accountants Review Report 4
Balance Sheet 5
Statement of Operations and Deficit 6-7
Statement of Cash Flows 8
Summary of Significant Accounting Policies 9-10
Notes to Financial Statements 11-13
Item II - Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 14
PART II - Other Information: 15
- ----------------------------
Item 1 - Legal Proceedings.
Item 2 - Changes in Securities.
Item 3 - Defaults upon Senior Securities.
Item 4 - Submission of Matters to a vote of security holders.
Item 5 - Related Party Transactions.
Item 6 - Exhibits and Reports on Form 8-K.
- 2 -
<PAGE>
PART I
Global Gaming and Technology, Inc.
Financial Statements
March 31, 1997
(See Accountant's Review Report)
- 3 -
<PAGE>
Joseph F. Zerga, Ltd
Certified Public Accountants
2950 E Flamingo Rd, Ste L
Las Vegas, NV 89121
(702)732-2775
To the Board of Directors
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, 1997 and the related statements of
operations, deficit, and cash flows for the three months and nine months ended
March 31, 1997 and 1996, 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, 1996 were audited by us
and we expressed an unqualified opinion on them in our report dated September
11, 1996, but we have not performed any auditing procedures since that date.
Las Vegas, Nevada
May 8, 1997
- 4 -
<PAGE>
<TABLE>
Global Gaming and Technology, Inc.
Balance Sheet
March 31, 1997 and June 30, 1996
(See Accountant's Review Report)
<CAPTION>
Mar 31 June 30
1997 1996
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 46,420 $ 10,157
Note Receivable-Current (Note 1) 247,496 272,250
----------- -----------
Total Current Assets 293,916 282,407
----------- -----------
OTHER ASSETS
Note Receivable (Note 1) 298,044 475,377
Machine Inventory 28,500
Deposits 300 300
----------- -----------
Total Other Assets 326,844 475,677
----------- -----------
TOTAL ASSETS $ 620,760 $ 758,084
=========== ===========
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
CURRENT LIABILITIES
Payroll Taxes $ 1,378
Accounts Payable 8,000 $ 8,175
Accrued Interest 1,056,790 1,021,387
Notes Payable (Note 2) 1,155,352 1,166,668
----------- -----------
Total Current Liabilities 2,221,520 2,196,230
----------- -----------
LONG-TERM LIABILITIES
Notes Payable - Net of Current
Maturities (Note 2) -0- -0-
----------- -----------
STOCKHOLDER'S DEFICIENCY (Note 3)
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 ( 5,259,608) ( 5,096,994)
----------- -----------
Total Stockholder's Deficit ( 1,600,760) ( 1,438,146)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDER'S DEFICIENCY $ 620,760 $ 758,084
=========== ===========
<FN>
The Accompanying Summary of Significant Accounting Policies and
Notes are an integral part of these financial statements.
- 5 -
</TABLE>
<PAGE>
<TABLE>
Global Gaming and Technology, Inc.
Statement of Operations and Deficit
For the Three Months Ended March 31, 1997 and
the Nine Months Ended March 31, 1997
(See Accountant's Review Report)
(Unaudited)
<CAPTION>
3 Months Ended 9 Months Ended
March 31 March 31
1997 1997
<S> <C> <C>
REVENUE AND INCOME
Income from Settlement (Note 1) $ -0- $ -0-
Interest Income 15,309 20,601
----------- -----------
Total Income 15,309 20,601
----------- -----------
COSTS AND EXPENSES
Professional Services 45,508 102,429
Interest 22,345 68,600
Transfer Fees 500 2,250
Filing Fees -0- -0-
Telephone 306 619
Travel -0- 1,633
Office Expense 148 298
License and Taxes 340 368
Salaries Expense 3,250 3,250
Payroll Tax Expense 378 378
Miscellaneous 8 8
Bad Debt Expense 2,500 2,500
Advertising 446 882
----------- -----------
Total Costs and Expenses 75,729 183,215
----------- -----------
Net Income (Loss) ( 60,420) ( 162,614)
Deficit Beginning of Period ( 5,199,188) ( 5,096,994)
----------- -----------
Deficit End of Period ( 5,259,608) ( 5,259,608)
=========== ===========
Net Income (Loss) per Common
Share (Note 4) ($ .0023) ($ .0062)
=========== ===========
<FN>
The accompanying Summary of Significant Accounting Policies and
Notes are an integral part of these financial statements.
- 6 -
</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 Months Ended 9 Months Ended
March 31 March 31
1996 1996
<S> <C> <C>
REVENUE AND INCOME
Income from Settlement (Note 1) $ 157,500 $ 157,500
Interest Income 1,371 6,971
----------- -----------
Total Income $ 158,871 $ 164,471
----------- -----------
COSTS AND EXPENSES
Professional Services 26,385 79,467
Interest 23,087 69,261
Transfer Fees 750 2,250
Filing Fees -0- 275
Telephone 138 410
Travel 725 725
Office Expense -0- 135
License and Taxes -0- 25
Advertising -0- -0-
----------- -----------
Total Costs and Expenses 51,085 152,548
----------- -----------
Income (Loss) for the period 107,786 11,923
Deficit Beginning of Period ( 5,197,751) ( 5,101,888)
----------- -----------
Deficit End of Period ($ 5,089,965) ($ 5,089,965)
=========== ===========
Income per Common Share (Note 4) $ .0041 $ .0005
=========== ===========
<FN>
The accompanying Summary of Significant Accounting Policies and
Notes are an integral part of these financial statements.
- 7 -
</TABLE>
<PAGE>
<TABLE>
Global Gaming and Technology, Inc.
Statement of Cash Flows
For the Nine Months Ended March 31, 1997 and 1996
(See Accountant's Review Reports)
(Unaudited)
CAPTION Mar 31 Mar 31
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) ($ 162,614) $ 11,923
Changes in
Payroll Taxes 1,378
Accounts Payable ( 175) -0-
Accrued Interest Payable 35,403 54,261
Note Receivable 202,087 11,862
Machine Inventory ( 28,500) -0-
----------- -----------
NET OPERATING CASH 47,579 78,046
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditure -0- -0-
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of Notes Payable ( 11,316) -0-
----------- -----------
Net Increase (Decrease) in Cash 36,263 78,046
Cash Beginning of Period 10,157 24,081
----------- -----------
Cash End of Period $ 46,420 $ 102,127
=========== ===========
<FN>
The accompanying Summary of Significant Accounting Policies and
Notes are an integral part of these financial statements.
- 8 -
</TABLE>
<PAGE>
Global Gaming and Technology, Inc.
Summary of Significant Accounting Policies
and Notes to Financial Statements
March 31, 1997
THE COMPANY
-----------
The Company was incorporated in the State of Delaware in 1973 and has elected
June 30 as its year end. The Company has been engaged in the research, devel-
opment, manufacture, and marketing of electronic gaming devices and coinless
games of chance.
PROPERTY AND EQUIPMENT
----------------------
The Company does not own any real or personal property.
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.
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.
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 filed a counter-claim
for infringement against IGT North America, Universal Distributing of Nevada,
Inc. and Sigma Game, Inc.
- 9 -
<PAGE>
Global Gaming and Technology, Inc.
Summary of Significant Accounting Policies
and Notes to Financial Statements
March 31, 1997
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).
The Company has also settled independently with Sigma Game, Inc. and Universal
Distributing of Nevada, Inc. (See Note 1 for details).
On September 18, 1996, Global Gaming & Technology, Inc. completed its patent
infringement trial (U.S. Patent 4,099,722) against International Gaming
Technology (IGT) in the United States Federal District Court in Reno, Nevada.
The decision from the United States District Court for the District of Nevada
is as follows.
On February 18, 1997, the United States District Court for the District of
Nevada entered a Decision and Order regarding Global's patent infringement
claim which was pending against IGT. In the Decision and Order, the Court
found that IGT's reel-type slot machines infringe Global's patent, but held
that the patent was invalid because the invention disclosed therein was on
sale more than one year prior to the date on which Global's patent
application was filed. Subsequently, the United States District Court for
the State of Nevada agreed to entertain a motion for reconsideration of that
portion of the Decision which concerns whether Global's patent is invalid.
Global's request for reconsideration is currently pending with the Court.
The Court further indicated that no judgement order would be entered in this
case until Global's request for reconsideration is resolved.
- 10 -
<PAGE>
Global Gaming and Technology, Inc.
Summary of Significant Accounting Policies
and Notes to Financial Statements
March 31, 1997
NOTE 1 - Notes 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 was 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. The scheduled payments under this note have been discounted at 8%
to reflect the present value of the note.
Note Receivable - Current Portion $225,205
Note Receivable - Non-Current 286,470
--------
Balance as of March 31, 1997 $511,675
========
The amount of this royalty payment is secured by a note from Bally's Gaming.
Since June 30, 1994, the company has been receiving timely monthly
installment payments on this note. However, as of May 1997, Bally has ceased
making payments on the promissory note which it signed pending final resolu-
tion of the patent infringement litigation against IGT. Global disputes that
Bally has any right to suspend these payments and is currently pursuing a
resolution of the matter.
Also due is a Promissory Note from Sigma Game, Inc. from a settlement arising
out of litigation. The following is a schedule of payments made and to be
made to Global Gaming and Technology, Inc. and has been discounted at 8% to
reflect the present value of the remaining payments, (Current $22,291,
Non-Current $11,574):
February 7, 1996 $95,000
February 7, 1997 25,000
February 7, 1998 25,000
February 7, 1999 12,500
Settlement with UDN consisted of three payments of $19,513, final payment
received in July of 1996, and 10 slot machines (The Company's share valued at
$28,500) received during the first quarter of 1997.
- 11 -
<PAGE>
Global Gaming and Technology, Inc.
Summary of Significant Accounting Policies
and Notes to Financial Statements
March 31, 1997
<TABLE>
NOTE 2 - Notes Payable
- ----------------------
<CAPTION>
Current Non-Current
Maturities Maturities Total
<S> <C> <C> <C>
Michael Wichinsky
Payable upon demand.
Interest payable
quarterly at 8% $ 723,983 $ - 0 - $ 723,983
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% 306,436 - 0 - 306,436
State of New Jersey
Payable in monthly
installments of $1,363
including interest.
This note is in arrears. 19,443 - 0 - 19,443
---------- --------- ----------
TOTAL $1,155,352 - 0 - $1,155,352
========== ========= ==========
<FN>
Total accrued interest payable at 3/31/97 is $1,056,790. $9,833 of this
amount is owed to the Estate of William T. O'Donnell, Sr. and the balance
of $1,046,957 is owed to Michael Wichinsky.
</TABLE>
<TABLE>
NOTE 3 - 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, 1995 26,378,577 $263,786 $3,395,062 ($5,101,888)
Net Income
(Loss) For The
Year Ended
June 30, 1996 4,894
----------- -------- ---------- ------------
Balance at
June 30, 1996 26,378,577 $263,786 $3,395,062 ($5,096,994)
----------- -------- ---------- ------------
Net Income
(Loss) For The
Nine months
ended 3/31/97 ( 162,614)
----------- -------- ---------- ------------
Balance at
3/31/97 26,378,577 $263,786 $3,395,062 ($5,259,608)
=========== ======== ========== ============
</TABLE>
- 12 -
<PAGE>
Global Gaming and Technology, Inc.
Summary of Significant Accounting Policies
and Notes to Financial Statements
March 31, 1997
NOTE 4 - 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.
- 13 -
<PAGE>
ITEM II - Management's Discussion and
Analysis of Financial Condition
and Results of Operations
As of March 31, 1997, the Company had negative working capital of
$1,927,604. The Company has no commitments for capital expenditures.
As of March 31, 1997, the Company had negative stockholders' equity of
$1,600,760.
During the nine months ended March 31, 1997, the Company realized total
revenues of $20,601 and expenses of $183,215.
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,
1997. The Company has been dormant for the past several years.
Patents expired at the end of July, 1995 and are the subjects of current
litigation pending a ruling by the court.
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 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 one 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, 1997, the Company did
not achieve any sales.
- 14 -
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
- --------------------------
See Part I - Summary of Significant Accounting Policies - Litigation
(Page 9-10)
ITEM 2 - Changes in Securities
- ------------------------------
None.
ITEM 3 - Defaults Upon Senior Securities
- ----------------------------------------
None
ITEM 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
None
ITEM 5 - Related Party Transactions
- -----------------------------------
During the nine months ended March 31, 1997, Michael Wichinsky (19%
stockholder) was repaid $31,252 from the Company as interest and principal
payments on his note to the Company (Current balance $723,983, 8% interest,
payable upon demand). Michael Wichinsky has a second note to the Company
in the amount of $105,490 (10% interest, payable upon demand). The Estate
of William T. O'Donnell, Sr. (10% stockholder) was repaid $13,261 from the
Company as interest and principal payments on his note to the Company
(Current balance $306,436, 8% interest, payable upon demand). Accrued
Interest Payable on these notes as of March 31, 1997 amounts to $1,056,790,
$1,046,957 payable to Wichinsky and $9,833 payable to O'Donnell.
ITEM 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
Not Applicable
- 15 -
<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: 5/12/97
-------------------
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: 5/12/97
-----------------------
Mark Sarason
--------------------------
Mark Sarason
Secretary/Treasurer & Director
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Jun-30-1997
<PERIOD-START> Jul-01-1996
<PERIOD-END> Mar-31-1997
<CASH> 46420
<SECURITIES> 0
<RECEIVABLES> 247496
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 293916
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 620760
<CURRENT-LIABILITIES> 2221520
<BONDS> 0
<COMMON> 263786
0
0
<OTHER-SE> (1864546)
<TOTAL-LIABILITY-AND-EQUITY> 620760
<SALES> 0
<TOTAL-REVENUES> 20601
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 114615
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68600
<INCOME-PRETAX> (162614)
<INCOME-TAX> 0
<INCOME-CONTINUING> (162614)
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<NET-INCOME> (162614)
<EPS-PRIMARY> .006
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</TABLE>
