SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended June 30, 2000
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) 732-1414
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 13 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 June 30, 2000, there was issued and outstanding 26,328,028 shares
of Common Stock held by non-affiliates (without admitting that any person
whose shares are not included in determining such value as 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-KSB
June 30, 2000
TABLE OF CONTENTS
Page
ITEM 1 - Business 3,4,5
ITEM 2 - Properties 5
ITEM 3 - Legal Proceedings 5,6
ITEM 4 - Submission of Matters to a Vote of Security Holders 6
ITEM 5 - Market for Registrant's Common Stock 7
ITEM 6 - Selected Financial Data 8
ITEM 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 8,9
ITEM 8 - Financial Statements 9
ITEM 9 - Disagreements on Accounting and Financial Disclosure 9
ITEM 10 - Directors, Executive Officers, Promoters, and
Control Persons of the Registrant 10,11
ITEM 11 - Executive Compensation 11
ITEM 12 - Security Ownership of Certain Beneficial
Owners and Management 12,13
ITEM 13 - Certain Relationships and Related Transactions 13
ITEM 14 - Exhibits, Financial Statement Schedules 14
-2-
<PAGE>
PART I
Item 1 - Business:
------------------
Global Gaming and Technology, Inc. (hereinafter referred to as the "Company")
has been engaged in the design, manufacture, and marketing of electronic
microprocessor-controlled gaming machines. The Company, which was incorporated
in the State of Delaware in 1973, maintains its principal offices at 2575
South Highland Drive, Las Vegas, NV 89109. During the past year, the Company
has not designed new equipment, nor is the design of any new equipment contem-
plated. However, in March, 2000, the state of California allowed Indian
casinos to develop Las Vegas "style" gaming and the Directors of the Company
have investigated the possibility of distributing gaming products to these
secondary markets.
General Development of Business
-------------------------------
The Company has been dormant for the past several years.
Licensing Activities
--------------------
During the fiscal year, the Company did not apply for any gaming licenses. The
largest primary markets have traditionally been Nevada and Atlantic City, New
Jersey, with smaller secondary markets occurring in Mississippi, Louisiana,
Detroit, etc. The procedure and cost of application, and investigation to
obtain licenses in these jurisdictions is extensive, and therefore the Direct-
ors have not pursued these markets. However, based upon the opportunities
which the Directors perceive to exist in the California Indian Tribal casinos,
in June, 2000, the Company registered with the California Department of Jus-
tice for a Determination of Suitability to do Business in California.
New Products; Research and Development
--------------------------------------
The Company has not developed any new products during the fiscal year ended
June 30, 2000, nor is the development of new products contemplated in the near
future. Since the electronic gaming device industry is constantly employing
new products, the Company is not competitive in any markets.
Products
--------
No new machines have been manufactured during the year ended June 30, 2000.
Marketing and Service
---------------------
The Company has not been successful in expanding its market or marketing its
products during the fiscal year ended June 30, 2000. The Company does not
contemplate any new material activities during the next year ending June 30,
2001 for new product development, but subject to required jurisdictional
approval and appropriate funding, the Company anticipates marketing quality
used and refurbished gaming equipment to Indian Tribal casinos in California,
for sale or lease.
- 3 -
<PAGE>
PART I (Continued)
Item 1 - Business (Continued):
------------------------------
Competition
-----------
The gaming machine industry is a highly competitive industry. Bally
Manufacturing Company ("Bally") and International Gaming Technology ("IGT")
are principal domestic competitors of the Company. Additionally, Asian
manufacturing and marketing companies have entered the American market and
have become a significant competitive factor. Additionally, new technology
has made certain products obsolete. The Company has lacked the financial
strength to compete in markets available for sales of new products and seeks
to redirect the emphasis of the Company into the marketing of quality used
equipment.
Manufacturing
-------------
Manufacture of the Company's products consists of the assembly of machines
from parts and components, some of which are standard and others of which
are made to the Company's specifications. These parts and components are
readily obtainable from several sources of supply and the Company does not
rely on any one vendor as a source for the parts and components. No new
machines were manufactured during the year ended June 30, 2000.
Employees
---------
As of June 30, 2000, the Company has one salaried employee, and in June, 2000
added one commissioned sales representative.
Patents
-------
The Company has held one United States Letters Patent issued in fiscal 1979,
relating to the design and operation of its products and their various
components. The Company is of the opinion that this Letters Patent has
competitive value in that it would require competitors to use non-infringing
designs to achieve the technological advances obtained by use of the designs
covered in the Letters Patent. However, the Company believes that player
appeal, cost of ownership and service, and prices are, and will be, of greater
significance in establishing and maintaining a competitive position in the
industry. United States Letters Patents have a duration of 17 years from the
date of issue and are not renewable. The above referenced patent is the sub-
ject of pending litigation. (See Legal Proceedings - Item 3).
Government Regulation
---------------------
Manufacturers and distributors of gaming devices in the State of Nevada and
in Atlantic City, New Jersey (the primary American markets) are subject to
licensure and extensive regulation. These licenses are issued after extensive
investigations into the moral reputation and financial background of the
individuals (and entities) applying for a gaming license. The licenses are
revocable, nontransferable and renewable.
- 4 -
<PAGE>
PART I (Continued)
ITEM 1 - Business (Continued):
------------------------------
Government Regulation (Continued)
---------------------------------
The investigative cost of licenses is borne by the person or company applying
for the license. The Nevada Gaming Commission may deny licenses to persons
who are engaged in gaming activities in other states. Because of the sub-
stantial investigative costs of obtaining gaming licenses in the States of
Nevada and New Jersey, the Company has deferred the decision to seek gaming
licenses in these states. Indian Tribal Commissions or Agencies operate in the
same manner as state regulating authorities. Each Indian tribe which operates
a casino has its own gaming regulating authority which governs the application
procedures for its tribe. These application procedures and investigation costs
may prove to be a limiting factor for the Company to meet the application
procedures in a timely manner to be competitive with other companies.
Item 2 - Properties:
--------------------
The Company does not own any real or personal property.
Item 3 - Legal Proceedings:
---------------------------
On or about May, 1994, the Company instituted litigation in the United States
District Court for the District of New Jersey for patent infringement against
Bally's Park Place, Inc., Trump Plaza Associates, Trump Taj Mahal Associates,
Trump Castle Associates, The Claridge Hotel and Casino Corporation, Resorts
International Hotel, Atlantic Showboat, Inc., and Greate Bay Hotel and Casino,
Inc. Global was seeking damages to adequately compensate for the past
infringement of the patent in suit by each of the defendants together with
interest and costs.
In this lawsuit, Global Gaming and Technology, Inc. contends that the
defendants infringed upon a patent owned in connection with the manufacture,
use or sale of slot machines driven by stepper motors.
As a result of this action, on June 30, 1994, the Company entered into a
license agreement with Bally Gaming, whereby the Company grants a non-
exclusive, personal, non-transferable right and paid-up license to make, have
made, use and sell, test, lease or otherwise dispose of licensed products
under claims of this license patent. The Company was to receive a non-
refundable net royalty payment in the amount of one million dollars
($1,000,000). The Company reported that Bally Gaming International, Inc.
("Bally") ceased making payments pursuant to the promissory note dated May 2,
1994. As a result, the Company initiated a breach of contract action in the
Circuit Court of Cook County located in Chicago, Illinois. In response to this
lawsuit, Bally asserted in a counterclaim that it was not obligated to make
any further payments and demanded a refund of all prior payments made.
On March 5, 1998 the Circuit Court in Global v. Bally entered a final judgment
in favor of
- 5 -
<PAGE>
PART I (Continued)
ITEM 3 - Legal Proceedings (Continued):
---------------------------------------
Global and against Bally in the amount of $1,282,131.55 (the "Judgment"). As
a result, on March 26, 1998, Bally filed a notice of appeal from the Judgment
in Global v. Bally in the Illinois Appellate Court for the First District. On
April 16, 1998, a settlement agreement was entered into between the Company
and Bally, whereas Bally agreed to pay Global $1,070,000.00 as full satisfac-
tion of the Judgment in exchange for the execution of "Satisfaction/Release of
Judgment" by Global to Bally. After payment by Bally, an Agreed Motion for
Entry of Orders Dismissing Appeal was filed by Bally in the Circuit Court.
On or about July 6, 1994, IGT North America, Universal Distributing of Nevada,
Inc. and Sigma Game, Inc. filed a civil complaint in the United States
District Court for the District of Nevada against the Company for declaratory
judgement of non-infringement, invalidity, unenforceability and laches. This
lawsuit arose as a result of the New Jersey litigation described above, and
was filed for the purpose of having Global's patent declared invalid. The
Company filed a counterclaim for infringement against IGT North America,
Universal Distributing of Nevada, Inc., and Sigma Game, Inc. The Company has
settled independently with Universal Distributing of Nevada, Inc. and Sigma
Game, Inc.
On February 18, 1997, the United States District Court for the District of
Nevada entered a Decision and Order regarding the Company's patent infringe-
ment claim, which was pending against IGT. In the Decision and Order, the
Court found that IGT's reel-type slot machines infringe the Company's patent,
but held that the patent was invalid under 35 U.S.C. Section 102(b) because
the invention disclosed therein was on sale more than one year prior to the
date on which the Company's patent application was filed. Global appealed the
determination. Additionally, IGT appealed the finding of infringement.
In August, 1999, the Federal Circuit Court of Appeals remanded the case to the
United States District Court for the District of Nevada for a determination
of whether Claim 18 is infringed and, if so, whether that claim is valid and
whether any of IGT's affirmative defenses would bar enforcement of the claim.
The Court of Appeals also affirmed the trial court's ruling that Claims 1 and
12 of Global's patent are invalid. Therefore, based on all available informa-
tion, it is not known how the District Court of Nevada will rule with respect
to Claim 18 or whether any meaningful damage award will be granted assuming
a finding of infringement and validity is entered.
The Company will be incurring legal costs regarding the prosecution of its
infringement claims. Per Counsel for the Company, at present it is difficult
to determine these future legal costs.
Item 4 - Submission of Matters to Vote of Security Holders:
-----------------------------------------------------------
No matter was submitted to the vote of security holders during the fiscal
year.
- 6 -
<PAGE>
PART II
Item 5 - Market for the Registrant's Common Stock and Related Security
Holder Matters:
---------------
The Common Stock of the Company is traded in the over-the-counter market.
The Company had 2,715 shareholders of record on June 30, 2000.
The following table indicates the range of high and low bid prices of the
Company's Common Stock for the quarterly periods starting September 30, 1996,
in the "Pink Sheets." No quotes are available from the National Association
of Securities Dealers through NASDAQ, its automated system for reporting
quotes:
High Low
Bid Ask Bid Ask
--- --- --- ---
Quarter Ending September 30, 1996 1/8 3/8 1/8 3/8
Quarter Ending December 31, 1996 1/8 3/8 1/8 3/8
Quarter Ending March 31, 1997 1/8 3/8 1/8 3/8
Quarter Ending June 30, 1997 1/8 3/8 1/8 3/8
Quarter Ending September 30, 1997 1/8 3/8 1/8 3/8
Quarter Ending December 31 1997 1/8 3/8 1/8 3/8
Quarter Ending March 31, 1998 1/8 3/8 1/8 3/8
Quarter Ending June 30, 1998 1/8 3/8 1/8 3/8
Quarter Ending September 30, 1998 1/8 3/8 1/8 3/8
Quarter Ending December 31, 1998 1/8 3/8 1/8 3/8
Quarter Ending March 31, 1999 1/8 3/8 1/8 3/8
Quarter Ending June 30, 1999 1/8 3/8 1/8 3/8
Quarter Ending September 30, 1999 1/8 3/8 1/8 3/8
Quarter Ending December 31, 1999 1/8 3/8 1/8 3/8
Quarter Ending March 31, 2000 1/8 3/8 1/8 3/8
Quarter Ending June 30, 2000 1/8 3/8 1/8 3/8
The foregoing over-the-counter market quotations reflect inter-dealer prices,
without retail mark-up, mark-down, or commission, and may not necessarily
represent actual transactions.
The Company has not paid any dividends during the foregoing periods, nor does
the Company anticipate paying dividends within the foreseeable future.
However, there are no restrictions on the ability of the Company to declare
dividends on its common stock.
- 7 -
<PAGE>
PART II (Continued)
Item 6 - Selected Financial Data:
---------------------------------
The following selected financial data of Global Gaming and Technology, Inc.
should be read in conjunction with the financial statements and related notes
appearing elsewhere in this Form 10-K.
<TABLE>
Year Ended June 30
<CAPTION>
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total Revenues -0- $ 1,000 $ 2,709 $ 20,601 $245,078
Net Income (Loss) (103,800) (135,100) (156,697) (202,091) 4,894
Income (Loss) per
Common Share (.004) (.005) (.006) (.008) .000
Cash Dividends per
Common Share -0- -0- -0- -0- -0-
Total Assets 20,100 55,000 119,980 604,275 758,084
Long-Term Debt -0- -0- -0- -0- -0-
</TABLE>
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations:
----------------------
Some of the principal shareholders of the Company have informally agreed to
participate in the contribution of shares to the Company, which the Company
will have available for acquisitions of assets of other businesses. With the
exception of the program to make acquisitions through use of these shares, the
Company has not yet formulated any specific financing arrangements.
The Company presently lacks financial resources. The lack of financial resour-
ces has prohibited the Company from expanding operations. The primary gaming
markets cannot be serviced unless the Company obtains gaming licenses in these
states. Because of the prohibitive costs of obtaining these licenses, the Com-
pany has no plans to seek licensing in these states, but is attempting to en-
ter a secondary market of Indian Tribal casinos operating in California, sub-
ject to gaining appropriate financial arrangements.
Total debt of the Company aggregated $860,900, (exclusive of accounts payable
and accrued interest and expenses) for the years ending June 30, 2000, 1999
and 1998, respectively. Of these amounts, $617,100 was owed to Michael Wichin-
sky as of June 30, 2000, 1999 and 1998 respectively. Total revenues aggregated
$0, $1,000, and $2,709
- 8 -
<PAGE>
PART II (Continued)
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued):
----------------------------------
for the years ended June 30, 2000, 1999, and 1998, respectively. As of June
30, 2000 and 1999, the Company has negative working capital of $2,036,100 and
$1,932,300, respectively.
The Company has been dormant for the past several years. The Company did not
manufacture any gaming devices during the fiscal years ended June 30, 2000,
1999 and 1998 and does not anticipate having the necessary resources for the
research, development and manufacture of gaming devices in the future. This
fact, combined with the Company's lack of licenses described above, is antic-
ipated to have a material adverse impact upon the Company's ability to gener-
ate revenues in the future.
Primary costs of the Company include interest and annual administrative costs
of $103,800, $111,600 and $159,400 for the years ended June 30, 2000, 1999
and 1998, respectively.
The rate of inflation has had no impact on the Company's operations because
the Company has been dormant for the last several years.
Item 8 - Financial Statements and Supplementary Data:
-----------------------------------------------------
See Index to Financial Statements.
Item 9 - Disagreements on Accounting and Financial Disclosures:
---------------------------------------------------------------
There have been no disagreements on accounting or financial disclosures with
accountants.
- 9 -
<PAGE>
PART III
Item 10 - Directors and Executive Officers of the Registrant:
Effective June 23, 2000, the following persons were appointed as directors and
officers of the corporation for a term of one year or until the next election
of Directors.
Name Age
Glenn E. Wichinsky, President, Secretary, and Treasurer 47
Claudia D. Wichinsky, Director 53
Constance L. Koplow, Director 60
Joann M. Vrbancic, Director 42
Glenn E. Wichinsky, 47, is a practicing attorney in Florida and Nevada with
with emphasis in Corporate, Business Law, Administrative Law and Gaming Law.
He brings experience in casino slot operation, gaming route operations and
equipment sales and distribution to corporate management. He is a General
Partner in Mardi Gras Casino in Las Vegas, NV, 1985 to present and a Director
and Officer in Westronics, Inc., 1979 to present.
Claudia D. Wichinsky, 53, has been President of Westronics, Inc., a Nevada
licensed distributor and operator of gaming equipment and serving that company
as an Officer and Director since 1979. As a second generation particpant in
the family business, Gamemasters (formerly known as Games of Nevada), 1971 to
the present, she became Operations Manager for manufacturing, distribution and
route operations in 1990. Ms. Wichinsky has operated non-gaming amusement
routes or arcades in New York, 1966-67 and Nevada 1978-83, and was a distrib-
utor of coin operated amusement games in Nevada, 1978-83.
Constance L. Koplow, 60, has owned and operated businesses in education, re-
tail ready to wear and the food service industry; served as an Administrator
at Community College of Southern Nevada and has nineteenn years experience in
the gaming industry.
Joan M. Vrbancic, 42, brings to management 14 years of restaurant operations
experience, 9 years of which were management, and 11 years of gaming exper-
ience as an account executive for sales of gaming tokens, slot machines and
gaming related equipment.
None of the foregoing directors have held directorships in companies with a
class of securities registered pursuant to Section 12 of the Exchange Act or
subject to the requirements of Section 15(d) of such Act or any company reg-
istered as an investment company under the Investment Company Act of 1940.
- 10 -
<PAGE>
PART III (Continued)
Item 10 - Directors and Executive Officers of the Registrant (Continued):
-------------------------------------------------------------------------
During the past five years, none of the foregoing officers or directors have
been (i) involved in any Federal Bankruptcy proceedings, (ii) convicted in a
criminal proceeding, (iii) the subject of a pending criminal proceeding, (iv)
the subject of any order, judgment, or decree not subsequently reversed,
suspended, or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining such person from, or otherwise limiting activities
as an investment advisor, underwriter, broker, or dealer in securities, or as
an affiliated person, director, or insurance company, or engaging in or con-
tinuing in any conduct or practice in connection with such activity, or from
engaging in any type of business practice or engaging in any activity in
connection with the purchase or sale of any security or in connection with
any violation of Federal or state securities laws.
Additionally, none of such persons were the subject of any order, judgment,
or decree, not subsequently reversed, suspended or vacated, or any Federal or
state authority barring, suspending, or otherwise limiting for more than sixty
(60) days the right of such person to engage in any activity referred to
above, or to be associated with any person engaged in any such activity, nor
was any such person found by a court of competent jurisdiction in a civil
action or by the Securities & Exchange Commission to have violated any Federal
or state securities law.
Item 11- Executive Compensation:
--------------------------------
The Company paid $19,500 to Constance Koplow in the fiscal year ended June
30, 2000. None of the officers or directors were indebted to the Company
during the fiscal year. The Company does not contemplate any increase in the
payment of salaries to officers or directors in the near future. During the
fiscal years ended June 30, 2000, 1999 and 1998, no Officer or Director of
the Company received cash remuneration in excess of $60,000. There are no
standard arrangements for the compensation of directors.
- 11 -
<PAGE>
PART III (Continued)
Item 12 - Security Ownership of Certain Beneficial Owners and Management:
-------------------------------------------------------------------------
The following table sets forth as of June 30, 2000, the number of shares of
common stock beneficially owned by each person known by the Company to own
more than 5% of the common stock and the percentage of common stock represent-
ed thereby.
<TABLE>
<CAPTION>
Name and Address of Title of Number of % of
Beneficial Owner Class Shares Owned Class
------------------ ------- ------------ -----
<S> <C> <C> <C>
Michael Wichinsky
2575 Highland Drive
Las Vegas, NV 89109 Common Stock 5,120,493* 19%
Estate of
W.T. O'Donnell, Sr.
144 Green Bay Road
Winnetka, IL 60093 Common Stock 4,470,275* 17%
Glenn E Wichinsky
2390 NW 38th Street
Boca Raton, FL 33431 Common Stock 2,964,647* 11%
Nessa Alice Mary Charlton
5 Crowe Street
Dundalk Company
Louth, Rep of Ireland Common Stock 1,459,214* 6%
Claudia Wichinsky
2900 Gilmary
Las Vegas, NV 89107 Common Stock 2,155,584 8%
CEDE & Co.
Box 20 Bowling Green Station
New York, NY 10004 Common Stock 5,359,407 20%
<FN>
- 12 -
<PAGE>
Part III (Continued)
Item 12 - Security Ownership of Certain Beneficial Owners and
Management (Continued):
-----------------------
* The foregoing shares include the following number of shares held by Michael
Wichinsky in trust on behalf of the persons named herein:
Michael Wichinsky 41.67% 3,129,411
Estate of W.T. O'Donnell, Sr. 38.22% 2,870,275
Nessa Alice Mary Charlton 8.33% 625,881
Glenn Wichinsky 11.78% 885,017
------- ---------
Total Shares in Trust 100.00% 7,510,584
======= =========
</TABLE>
Item 13 - Certain Relationships and Related Transactions:
---------------------------------------------------------
(A) Transactions with Management and Related Parties
------------------------------------------------
During the year ended June 30, 1998, Michael Wichinsky was repaid
$300,000 from the Company as interest and principal payments on his note
to the Company and the Estate of William T. O'Donnell, Sr. was repaid
$119,164 as interest and principal payments on his note to the Company.
The Company accrued interest on the loans to related parties totaling
$69,600, $69,400 and $89,756 during the years ended June 30, 2000, 1999
and 1998, respectively. No payments have been made to the above refer-
enced parties since the year ending June 30, 1998.
(B) Certain Business Relationships
------------------------------
The existing business and personal relationships between the Directors
and Officers are as follows:
Glenn E. Wichinsky was appointed as President, Secretary and Treasurer
effective June 23, 2000 until the next annual election of the Board
of Directors.
Claudia D. Wichinsky and Joann M. Vrbancic were appointed as Directors
effective June 23, 2000 until the next annual election of the Board of
Directors. Ms. Vrbancic has been granted an option to purchase 100,000
shares of Common Stock from the trust shares available for certain busi-
ness affiliations for the benefit of the Company. Purchase rights are
100,000 shares per year for five years beginning fiscal year July 2,
2000.
- 13 -
<PAGE>
PART IV
Item 14 - Financial Statement Schedule:
--------------------------------------------------
Net Operating Loss Carrfords to 2001
------------------------------------
Tax Year Expires
6/30 6/30
-------- -------
1986 $226,859 2001
1987 216,931 2002
1988 451,580 2003
1989 104,956 2004
1990 136,629 2005
1991 362,469 2006
1992 122,207 2007
1993 356,521 2008
1995 137,588 2010
1997 202,091 2012
1998 156,697 2013
1999 110,547 2019
2000 103,771 2020
-------
$2,688,846
- 14 -
<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.
GLOBAL GAMING & TECHNOLOGY, INC.
By: Glenn E. Wichinsky Date: September 20, 2000
------------------------------- ------------------
Glenn E. Wichinsky
President/Secretary/Treasurer
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.
By: Claudia Wichinsky Date: 9/20/00
------------------------------ -----------------
Claudia D. Wichinsky, Director
By: Constance Koplow Date: 9/20/00
------------------------------ ----------------
Constance Koplow, Director
<PAGE>
Global Gaming and Technology, Inc.
Report on Audits of Financial Statements
For the Years Ended June 30, 2000 and 1999
<PAGE>
GLOBAL GAMING AND TECHNOLOGY, INC.
FOR THE YEARS ENDED JUNE 30, 2000 and 1999
CONTENTS
PAGE
Independent auditors' report 1
Financial Statements
Balance sheets 2
Statements of operations 3
Statements of changes in stockholders' deficit 4
Statements of cash flows 5
Notes to financial statements 6-8
<PAGE>
Bradshaw, Smith & Co., LLP
CPAs, Business Advisors & Consultants
5851 W Charleston
Las Vegas, NV 89146
(702) 878-9788
INDEPENDENT AUTITOR'S REPORT
Board of Directors and Stockholders
Global Gaming and Technology, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheet of Global Gaming and Technol-
ogy, Inc. as of June 30, 2000 and 1999, and the related statements of opera-
tions, changes in stockholders' deficit, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's man-
agement. Our responsibility is to express an opinion on these financial state-
ments based on our audit.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates 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 position of Global Gaming and Technology,
Inc. as of June 30, 2000 and 1999 and the results of its operations and its
cash flows for the years then ended, 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 2 to the
financial statements, the Company is dormant and has negative working capital,
and no current operations or sources of revenue. Those conditions raise sub-
stantial doubt about its ability to continue as a going concern. Management's
plans regarding those matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
Las Vegas, Nevada Bradshaw, Smith & Co., LLP
August 28, 2000
- 1 -
<PAGE>
<TABLE>
GLOBAL GAMING AND TECHNOLOGY, INC.
BALANCE SHEETS
JUNE 30, 2000 and 1999
<CAPTION>
June 30, June 30,
2000 1999
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 15,800 $ 50,700
Inventories (Note 4) 4,000 4,000
----------- -----------
Total current assets 19,800 54,700
Other Assets 300 300
----------- -----------
TOTAL ASSETS $ 20,100 $ 55,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 10,000 $ 10,700
Accrued interest payable (Note 3) 1,185,000 1,115,400
Notes payable (Notes 3 and 6) 860,900 860,900
----------- -----------
Total current liabilities 2,055,900 1,987,000
----------- -----------
Commitment (Note 7) -- --
Stockholders' Deficit:
Preferred stock, $.01 par value,
1,000,000 shares authorized,
none issued. -- --
Common stock, $.01 par value,
27,000,000 shares authorized,
26,328,028 issued and outstanding 263,300 263,300
Additional paid-in-capital 3,395,600 3,395,600
Accumulated deficit (5,694,700) (5,590,900)
----------- -----------
Total stockholders' deficit (2,035,800) (1,932,000)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 20,100 $ 55,000
=========== ===========
<FN>
The Notes to Financial Statements are an integral part of these statements.
- 2 -
</TABLE>
<PAGE>
<TABLE>
GLOBAL GAMING AND TECHNOLOGY, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2000 and 1999
<CAPTION>
June 30, June 30,
2000 1999
----------- -----------
<S> <C> <C>
Other income (expense):
Interest income $ -- $ 1,000
Asset impairment (Note 4) -- (24,500)
----------- -----------
Total Revenue -- (23,500)
----------- -----------
Operating Expenses:
Interest (Note 3) 69,600 69,400
Salaries 19,500 19,500
Professional services 7,700 15,700
Transfer fees 4,300 3,000
Payroll tax expense 2,200 2,300
Maintenance and repairs -- 1,400
Office and other expenses 500 300
----------- -----------
Total operating expenses 103,800 111,600
----------- -----------
Net loss available to common
stockholders $ (103,800) $ (135,100)
=========== ===========
Net loss per common share $ (.004) $ (.005)
=========== ===========
Weighted average common
shares outstanding 26,328,028 26,328,028
=========== ===========
<FN>
The Notes to Financial Statements are an integral part of these statements.
- 3 -
</TABLE>
<PAGE>
<TABLE>
GLOBAL GAMING AND TECHNOLOGY, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
<CAPTION>
Total
Common stock Additional Accumulated stockholders'
shares Amount paid in capital deficit deficit
------------ ------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance,
June 30, 1998 26,328,028 $263,300 $3,395,600 $(5,455,800) $(1,796,900)
Net Loss -- -- -- (135,100) (135,100)
---------- -------- ---------- ----------- -----------
Balance,
June 30, 1999 26,328,028 263,300 3,395,600 (5,590,900) (1,932,000)
Net Loss -- -- -- (103,800) (103,800)
---------- -------- ---------- ----------- -----------
Balance,
June 30, 2000 26,328,028 $263,300 $3,395,600 $(5,694,700) $(2,035,800)
========== ======== ========== =========== ===========
<FN>
The Notes to Financial Statements are an integral part of these statements.
- 4 -
</TABLE>
<PAGE>
<TABLE>
GLOBAL GAMING AND TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
<CAPTION>
June 30, June 30,
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(103,800) $(135,100)
Asset impairment -- 24,500
Adjustments to reconcile net loss
to net cash used by operating
activities:
(Increase) decrease in:
Notes receivable -- 11,600
Increase (decrease) in:
Accounts payable (700) 700
Accrued interest payable 69,600 69,400
--------- ---------
Net cash used in operating activities (34,900) (28,900)
--------- ---------
Net decrease in cash (34,900) (28,900)
Cash at beginning of period 50,700 79,600
--------- ---------
Cash at end of period $ 15,800 $ 50,700
========= =========
The Notes to Financial Statements are an integral part of these statements.
- 5 -
</TABLE>
<PAGE>
GLOBAL GAMING AND TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
1. Summary of significant accounting policies:
Organization and nature of business:
Global Gaming and Technology, Inc. (the "Company") was incorporated in
the State of Delaware in 1973. The Company, although dormant for the
last several years, has been engaged in the research, development,
manufacture and marketing of electronic gaming devices and coinless
games of chance.
Use of estimates in preparation of financial statements:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Loss per share:
Loss per share was computed by dividing the net loss by the weighted ave-
rage number of shares outstanding during the period.
2. Organization's ability to continue as a going concern:
The Company has been dormant for the past several years and lacks the
resources to be competitive in the gaming industry at the present time.
As of June 30, 2000 the Company has negative working capital of
$2,036,100 and stockholders' deficit of $2,035,800.
The Company initiated a patent infringement case. The case is being
appealed by both parties. The manner in which litigation is resolved is
likely to have significant financial impact on the Company.
3. Related party transactions:
Notes payable at June 30, 2000 and 1999 consist of $841,500 and due to
stockholders bearing interest at 8% and 10% and are due on demand.
Accrued interest at June 30, 2000 and 1999 was $1,185,000 and $1,115,400
and the Company incurred interest expense of $69,600 and $69,400 during
the years then ended, respectively.
- 6 -
<PAGE>
GLOBAL GAMING AND TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
4. Inventories:
The Company has inventory consisting of ten (10) slot machines from a
settlement arising out of litigation with Universal Distributing of
Nevada, Inc. Pursuant to SFAS 121 "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of", the Company
evaluated the recoverability of the long-lived assets. Due to rapid
changes in gaming technology, the machines did not hold their value. The
estimated fair value was based on an offer to purchase the machines.
5. Income taxes:
The benefit for income taxes is different than the amount computed by
applying the statutory federal income tax rate to net loss before taxes.
A reconciliation of the net income tax benefit follows:
2000 1999
--------- --------
Computed tax benefit at federal statutory rate $ 35,300 $ 37,600
Expired net operating loss carryforwads 94,200 (79,600)
Changed in deferred income tax valuation allowance 58,900 42,000
--------- ---------
$ -- $ --
========= =========
The provision for federal and state income taxes consisted of the
following:
Year ended June 30,
2000 1999
--------- ---------
Current $ -- $ --
Deferred -- --
--------- ---------
$ -- $ --
========= =========
The deferred tax asset consisted of the following:
Net operating loss carryforwards $ 914,200 $ 973,100
Valuation allowance (914,200) (973,100)
--------- ---------
Net deferred tax asset $ -- $ --
========= =========
- 7 -
<PAGE>
GLOBAL GAMING AND TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
5. Income taxes (continued):
The Company has a net operating loss carryforward ("NOL") for federal
income tax reporting purposes at June 30, 2000 of approximately
$2,688,800. A portion of the NOL expires after each year.
6. Notes payable:
Notes payable at June 30, 2000 and 1999 consisted of the following:
<TABLE>
<CAPTION>
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Note payable to Michael Wichinsky,
a stockholder, bearing interest at 8%,
due on demand. $ 511,600 $ 511,600
Note payable to Michael Wichinsky,
a stockholder, bearing interest at 10%,
due on demand 105,500 105,500
Note payable to the estate of
William T O'Donnell, Sr., a
stockholder, bearing interest at
8%, due on demand. 224,400 224,400
Note payable to the State of New Jersey,
payable in monthly installments of $1,363
including interest. This note is in
arrears. 19,400 19,400
------------- -------------
$ 860,900 $ 860,900
============= =============
</TABLE>
The Company incurred interest expense totaling $69,600 and $69,400 on these
notes during the years ended June 30, 2000 and 1999, respectively.
7. Commitment:
During the year ended June 30, 2000, the Company entered into a verbal
agreement with an individual for sales and marketing. The individual's
compensation is on a commission basis and she has been granted an option
to purchase up to 100,000 shares each year for $.025 per share, for five
years, commencing July 1, 2000.
- 8 -
