FIRST ENTERTAINMENT, INC.
1999 Broadway, Suite 3135
Denver, Colorado 80202
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 9, 1997
INTRODUCTORY STATEMENT
This Proxy Statement and accompanying Proxy are furnished in connection with
a solicitation of Proxies by the Board of First Entertainment, Inc. (the
Company) for use at the Special Meeting of Shareholders of the Company, to
be held at the Comedy Works, 1226 15th Street, Denver, Colorado, on October
9, 1997, at 10:00 a.m., local time, for the purposes set forth in the
accompanying Notice of Special Meeting of Shareholders.
Shareholders of record at the close of business on September 1, 1997 will be
entitled to receive notice of and to vote at the meeting. Each share of
common stock is entitled to one vote for each matter submitted to a vote at
the meeting. Shares represented by executed and unrevoked Proxies will be
voted in accordance with the specifications made thereon. If the enclosed
form of Proxy is executed and returned, it nevertheless may be revoked by
giving another Proxy or by letter or telegram directed to the Company. Any
such revocation must show the shareholder's name and must be received prior
to the commencement of the meeting in order to be effective. Additionally,
any shareholder attending the meeting in person, who wishes to do so, may
vote by ballot at the meeting, thereby canceling any Proxy previously given.
Where no instructions are indicated, Proxies will be voted "FOR" the
nominees for directors indicated below and "FOR" the proposals to be
considered at the Special Meeting or any adjournment thereof. Proxy
materials will be mailed to shareholders of record on or about September 5,
1997.
VOTING SECURITIES, PRINCIPAL HOLDERS AND SECURITY
OWNERSHIP OF MANAGEMENT
The approval of each of the proposals set forth in this Proxy Statement
requires the affirmative vote of a majority of the shares actually voted on
such proposal, except that the amendment to the Company's Articles of
Incorporation requires the affirmative vote of a majority of all outstanding
shares entitled to be voted at the Meeting.
All voting rights are vested exclusively in the holders of the Company's
$.008 par value common stock, with each share entitled to one vote. Only
shareholders of record at the close of business on September 1, 1997 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
As of March 30, 1997, the Company had 5,879,213 shares of common stock
outstanding.
The following sets forth the number of shares of the Registrant's $0.008 par
value common stock beneficially owned by (I) each person who, as of March 30,
1997, was known by the Company to own beneficially more than five percent
(5%) of its common stock, (ii) the individual Directors of the Registrant,
and (iii) the Officers and Directors of the Registrant as a group.
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership(1)(2) Class
Balzac, Inc. 1,100,000 18.7%
200 Fifth Ave. Suite 617
New York, N.Y. 10010
A. B. Goldberg (3) 29,213 .5%
1380 Lawrence Street, Suite 1400
Denver, CO 80204
Cindy Jones 2,500 .1%
1380 Lawrence Street, Suite 1400
Denver, CO 80204
Nick Catalano 5,000 .1%
189-32 44th Avenue
Flushing, NY 11358
Dr. Theodore Jacobs 69,739 1.2%
1380 Lawrence Street, Suite 1400
Denver, CO 80204
Burt Katz (4)195,089 3.4%
1380 Lawrence Street, Suite 1400
Denver, CO 80204
Officers and Directors 301,541 5.2%
as a Group (6 persons)
(1) All ownership is beneficial and of record except as
specifically indicated otherwise.
(2) Beneficial owners listed above have sole voting and investment
power with respect to the shares shown unless otherwise
indicated.
(3) Include shares owned by Nannette Goldberg, wife of A.B. Goldberg, a
Director of the Company, and shares owned by his mother and two children.
There are no stock options issued or outstanding to A. B. Goldberg.
(4) Includes shares owned by the wife and children of Burt Katz.
INFORMATION REGARDING THE COMPANY AND INCORPORATION BY REFERENCE
This proxy statement is accompanied by a copy of its latest Annual Report and
Form 10-QSB as amended, for the quarters ended March 31, 1997 and June 30,
1997. The Company hereby incorporates by reference its latest annual report
on Form 10-KSB and all other reports since the end of the Company's fiscal
year filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934, as amended.
ACTION TO BE TAKEN UNDER THE PROXY
Proxies in the accompanying form that are properly executed and returned will
be voted at the Special Meeting in accordance with the instructions thereon.
Any proxy upon which no instructions have been indicated with respect to a
specific matter will be voted as follows with respect to such matter: (a)
FOR the election of the three (3) persons named in this Proxy Statement as
Management's nominees for election to the Board of Directors; (b) "FOR" the
ratification and approval of the Company's prior acquisition of Global
Internet Corporation, a Delaware corporation; (c) FOR amendment to the
Company's Articles of Incorporation to increase the number of authorized
common shares from 6,250,000 shares at $.008 par value to 50,000,000 shares
at $.008 par value; (d) "FOR" the ratification of BDO Seidman, LLP as the
Company's independent public accountants; and (e) FOR the transaction of
any other business to come before the Meeting, in the discretion of the
holders of such Proxies.
If the shareholders reject either or both proposals for the ratification and
approval of the Company's prior acquisition of Global Internet Corporation
Delaware corporation and amendment to the Company's Article of Incorporation
to increase the number of authorized common shares from 6,250,000 at $.008
par value to 50,000,000 shares at $.008 pat value, then the acquisition of
Global Internet Corporation will not take place. The Company believes that a
vote in favor of ratifying the acquisition precludes a shareholder from
bringing suit against the Company for entering into a transaction prior to
obtaining shareholder approval.
Management knows of no other matters, other than those stated above, to be
presented for consideration at the Meeting. If, however, any other matters
properly come before the Meeting, the persons named in the enclosed proxy
intend to vote such proxy in accordance with their judgement on such matters.
The persons named in the enclosed proxy may also, if they deem it advisable,
vote such proxy to adjourn the Meeting from time to time.
ELECTION OF DIRECTORS
It is proposed that three (3) Directors be elected to the Board of Directors
of the Company, each such Director to hold office until the next annual
meeting of shareholders or until their successors are elected and qualified.
All three of the nominees are current directors. The nominees for the Board
of Directors are as follows:
Abraham "A.B." Goldberg has been employed by First Films as Executive
Producer and Financial Consultant since January 1987. Mr. Goldberg served as
Executive Producer for "Almost Blue" and "The Amityville Curse." In
addition, he served as Executive Producer for "Mind Killer," "Night Vision"
and "Lone Wolf." Mr. Goldberg has been an independent consultant and has
advised several film companies, beginning in 1977 with Innovations/ECA, which
produced "The Buddy Holly Story" starring Gary Busey and "Under The Rainbow"
starring Chevy Chase and Carrie Fisher. He also advised Robert Halmi
Productions, a New York-based production company which was merged with Hal
Roach Studios and later acquired by Quintex Entertainment. Mr. Goldberg
served as President of Harvard Financial Group, an independent investment
consulting firm, from November 1976 through April 1982. Since April 1982,
Mr. Goldberg has consulted with a variety of businesses, including First
Films. Mr. Goldberg earned a Bachelor's Degree in Finance from the
University of Colorado, Boulder, Colorado in 1969 and attended the University
of Denver College of Law. Mr. Goldberg was elected President and Chief
Executive Officer in February 1995.
Dr. Nick Catalano is presently serving in his twenty-fourth year as professor
of English Literature, Communications and music at Pace University, New York
City. He is also the University's director for the Performing Arts. Over
the past several years, he has been a writer/producer for several television
network shows, including The Bill Cosby Show, PBS documentaries, Doug
Hennings' The World of Illusion, and TV specials for Richard Belzer on HBO.
Dr. Catalano has produced travelogue videos for Video Trips on Greece, the
Greek Islands, Utah, St. Martin and is currently completing the Hamptons. In
addition, he is the founder of "The Big Apple Comedy Showcase" at Pace
University, now in its 18th year. It is the oldest college comedy series in
the country.
Dr. Theodore Jacobs, M.D. graduated from New York Medical College in 1955
where he was honored by achieving the highest award to a graduating medical
student. Dr. Jacobs was Board Certified in Internal Medicine in 1962 and Re-
Certified in 1977. Since 1963, Dr. Jacobs has worked in private practice in
Internal Medicine in an office in Las Vegas, Nevada. Dr. Jacobs has served
as a member of the Nevada State Board of Medical Examiners, serving for
fifteen years as president from 1980 to 1995. Dr. Jacobs is currently a
Clinical Professor of Medicine, University of Nevada School of Medicine and
Member, Advisory Board to the Dean of the School of Medical Sciences,
University of Nevada/Reno. Dr. Jacobs is a member of the Board of Directors
of Nevada Dance Theater, Las Vegas Symphonic and Chamber Music Society and
the Nevada Opera Theater. Dr. Jacobs has received numerous awards for
outstanding achievement and contributions to his profession and community.
Dr. Jacobs was a member of the Board of Directors of Power Media
Communications International, Inc.
It is the intention of the persons named in the accompanying form of Proxy to
vote such Proxy for the election of the persons listed below, unless
shareholders specifically indicate in their Proxies that they desire to
abstain from voting for the electing of certain Directors to office. The
Board of Directors does not contemplate that any nominee will be unable to
serve as a Director for any reason, but if that should occur prior to the
meeting, the Board of Directors reserves the right to substitute another
person(s) of their choice as nominee(s). Each nominee must be approved by an
affirmative vote of a majority of the quorum of the shares present and
entitled to vote at the Special Meeting of Shareholders. The Board of
Directors recommends that shareholders vote FOR the election of each nominee.
VOTING
Pursuant to the terms of the Company's Articles of Incorporation every
shareholder voting for the election of directors is entitled to one vote for
each share. A shareholder may vote each share once for one nominee to each
of the director positions being filled. A shareholder may not accumulate
votes.
The Board of Directors intends to vote the Proxies solicited by it (other
than Proxies in which the vote is withheld as to one or more nominees) for
the three candidates standing for election as directors nominated by the
Board of Directors. If any nominee is unable to serve, the shares
represented by all valid Proxies will be voted for the election of such
substitute as the Board of Directors may recommend. At this time the Board
of Directors knows of no reason why any nominee might be unavailable to
serve.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
With the exception of the Compensation Committees established solely to
administer its compensation plan to third parties (which does not include
Company executives) under its Forms S-8 registration, the Company has no
committees of the Board of Directors. All members of the Board of Directors
of the Company acted as the Executive Compensation Committee, participated in
deliberations and made decisions concerning executive officer compensation
during the course regular Board Meetings. This Compensation Committee, which
is composed of all of the members of the Board of Directors, had fourteen
meetings or consents in lieu of meetings during the fiscal year ended
December 31, 1996. No incumbent director of the Company attended fewer then
seventy-five percent (75%) of total meetings of the Board of Directors. The
Board of Directors conducted fourteen meetings during the fiscal year ended
December 31, 1996.
The Directors and Executive Officers of the Company, their ages and present
positions held in the Company are as follows:
Name Age Position Held
A. B. Goldberg 50 Director April 1993 to present
President and Commencing February 1995
Chief Executive
Officer
Dr. Theodore Jacobs 66 Director November 1996 to present
Dr. Nick Catalano 56 Director March 1992 to present
Burt Katz 72 Director December 1994 to June
1997
Cindy Jones 42 Secretary and April 1994 to present
Treasurer
The Company's Directors will serve in such capacity until the next annual
meeting of the Company's shareholders and until their successors have been
elected and qualified. The officers serve at the discretion of the Company's
Directors. There are no familial relationships among the Company's officers
and directors, nor are there any arrangements or understanding between any of
the directors or officers of the Company or any other person pursuant to
which any officer or director was or is to be selected as an officer or
director.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 (the "34 Act") requires
the Company's officers and directors and persons owning more than ten percent
of the Company's Common Stock, to file initial reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC").
Additionally, Item 405 of Regulation S-K under the 34 Act requires the
Company to identify in its Form 10-KSB and proxy statement those individuals
for whom one of the above referenced reports was not filed on a timely basis
during the most recent fiscal year or prior fiscal years. Given these
requirements, the Company has the following report to make under this
section: None of the current officers and directors who were required to file
Forms 3,4, or 5 during the last fiscal year filed such forms on a timely
basis. All such persons have now filed the appropriate forms and have been
counseled as to their responsibilities for such filings. The Company has
implemented a program to ensure timely future filing of such forms.
EXECUTIVE ENUMERATION
Summary Compensation Table
Only one executive officer received cash compensation in excess of $100,000
during the fiscal year ended December 31, 1996 and 1995. Compensation does
not include minor business-related and other expenses paid by the Company for
its officers during fiscal year 1996 and 1995, nor the personal usage of a
Company automobile. Such amounts in the aggregate do not exceed $10,000.
The following table shows all cash compensation paid or to be paid by the
Company or any of its subsidiaries, as well as other compensation paid or
accrued during the fiscal years indicated to the Chief Executive Officer.
There are no other executive officers of the Company.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term
Compensation
Name and Other Annual Restricted Options/ All Other
Pricipal
Position Year Salary Bonus Compensation Stock Awards SAR's
Compensation
<S> <C> <C> <C> <C> <C> <C> <C>
A.B. Goldberg 1996 $96,000 - - - - -
President and 1995 $53,800 - - - - -
Chief Executive 1994 $16,100 - - - - -
</TABLE>
From time to time, the Company has granted shares of its common stock as
additional compensation to its offices and key employees for their services,
as determined by the Company's Board of Directors. During 1996 and 1995, no
shares were granted to officers or key employees.
As of December 31, 1996, the Company had no group life, health,
hospitalization, medical reimbursement or relocation plans in effect which
discriminates, in scope, terms, or operation, in favor of officers or
directors of the Company and that are not generally available to all salaried
employees. Further, the Company has no pension plans or plans or agreements
which provide compensation on the event of termination of employment or
change in control of the Company.
The Company does not pay members of its board of Directors any fees for
attendance or similar remuneration, but reimburses them for any out-of-pocket
expenses incurred by them in connection with Company business.
SHAREHOLDER RATIFICATION AND APPROVAL OF ACQUISITION
Summary of the Acquisition
The following is a brief summary of certain information concerning the
Acquisition. If the shareholders reject either or both proposals for the
ratification and approval of the Company's prior acquisition of Global
Internet Corporation, a Delaware corporation and amendment to the Company's
Article of Incorporation to increase the number of authorized common shares
from 6,250,000 at $.008 par value to 50,000,000 shares at $.008 pat value,
then the acquisition of Global Internet Corporation will not take place. The
Company believes that a vote in favor of ratifying the acquisition precludes
a shareholder from bringing suit against the Company for entering into a
transaction prior to obtaining shareholder approval.
The Parties.
First Entertainment, Inc., a Colorado corporation (the Company), and Global
Internet Corporation., a Delaware corporation (Internet), and its principal
shareholder, Global Casinos, Inc., a public Utah corporation, are the
parties to the transaction. Internet principal offices are located at 295
Clayton Street, Suite 208, Denver, Colorado 80206. The phone number is (303)-
377-2278.
The Terms.
This transaction was planned as a purchase such that Internet became a
subsidiary of the Company and the former shareholders of Internet would
thereby own approximately 4.7%of the Company. This transaction has been
accounted for as a purchase. At the present time, approximately 50% of the
shares of Internet has been exchanged for approximately 30,000 shares of
Class B Convertible Preferred stock of the Company that is convertible into
375,000 common shares. This percentage will be the total ownership of the
Company in Global and will require the authorization of approximatley 350,000
additional common shares by the shareholders to complete the transaction.
The present exchange has given the Company effective control of Internet, and
the current control shareholders of Internet are now affiliates of the
Company.
The Company has decided to engage in the transaction with Internet to broaden
the asset base and increase the value of the Company's shares as a result of
acquiring a potentially profitable business. At the present time, Global, as
well as the Company, has a going concern qualification to its financial
statements. In addition, Global will need substantial capital and must
overcome potentially significant regulatory hurdles to begin business.
However, the Company believes that the synergy between the two companies will
provide a basis to raise additional capital to carry out the Global business
plan.
None of the rights of any securities holders will be affected by this
transaction. The securities of the Company which have been issued in this
transaction are Class B preferred shares. It is probable that the Class B
shareholders will elect to convert their shares into common shares of the
Company, which will have the same rights and privileges as all other common
shares but will be restricted securities under the Securities Act of 1933, as
amended. To obtain conversion of the Class B preferred shares into common
shares, the Company must obtain the approval of the shareholders to increase
its authorized common shares and must file Articles of Amendment with the
Secretary of State of Colorado. While the Class B preferred shares have been
issued, the filing for additional common shares must await the approval of
the shareholders to the increase in authorized common shares. Representatives
of the Company's accounting firm for the most recent fiscal year are expected
to be present at the shareholders' meeting, will have the opportunity to make
a statement if they so desire, and are expected to be available to respond to
appropriate questions.
As far as the Company's common share are concerned, both the high and low bid
prices as of the date preceding public announcement of the transaction were
$1.06.
Global Internet Corporation
Global Internet Corporation (Internet) was incorporated in June 1996, for the
purpose of developing a virtual casino to provide gambling on the Internet.
Internet's operations will eventually be based offshore and Internet will
focus its attention on creating a worldwide market.
Narrative Description of the Business
In June 1996, Internet entered into a Web Site Development and Maintenance
Agreement with DDB Needham Interactive Communications ("DDB"), whereby DDB,
with the assistance of Electronic Data Systems Corporation ("EDS") as a
subcontractor, agreed to develop a Virtual Internet Casino. As of March
1997, the June Agreement was superseded with a new agreement.
The agreement outlines a two-phase Web Site development program. Under Phase
1, the agreement calls for the development of five gaming sites: black jack,
poker, roulette, slot machines and keno. At these sites, players would be
able to use money to play against the house or to enter tournaments in which
top place finishers would win prizes. The purpose of Phase 1 is to have a
fully operational site where the application can gain acceptance while a
customer base is being developed. In Phase 2, Internet intends to expand
the complexity of the games to include multi-player games site that will
generate additional revenue as a percentage of the money gambled.
Internet has to date paid DDB a total of $282,509 for the work which has
already been completed. The new agreement provides that DDB will resume work
on Phase 1 once Internet places the remaining balance due of $1,143,824.80
into escrow.
The Company intends to do an equity financing raising approximately $2.2
million exclusive of commissions and expenses to complete the funding
obligation to DDB and ongoing expenses necessary for the operations of
Internet through 1998. DDB has agreed to extend the escrow requirement until
financing is completed.
Under Phase 1, there will be development of a virtual Internet casino.
Internet intends to engage in Internet commerce in countries other than the
USA, and therefore is not required to have any federal, state or local
permits. The Company is of the opinion that until gaming becomes a regulated
industry in the USA that the risk is not worth the effort. Internet
intends to obtain Licenses to operate in countries where Internet gaming is
regulated and legal and has made application for a license to operate a
virtual casino on the island of Dominica. Internet expects to be granted such
license within 30 days. As part of the licensing requirement, Internet has
agreed to pay the government of Dominica 5% of the net win/loss wagered. In
addition Internet has agreed to hire a minimum of six persons at a rate of not
less than $3.00 per hour to assist in the operation of the business in
Dominica. Internet will conform fully with all the laws and regulations of
Dominica.
Internet intends to exclude U.S. Residents from being able to play
commercially on its virtual casino system by using origin of funds as the
determinant of eligibility. In addition to posting a warning on the site
that Persons Resident in the USA are not eligible to play on the site, Internet
intends to verify origin of funds. If the funds originate from a banking
source located in the Continental U.S. or U.S. administered territory the
transaction will not be completed. In case of electronically transferred
funds such as Visa or Mastercard, Internet will check Country of Origin as part
of the initial funds verification. If the source comes back USA, the
transaction will be denied. In cases where funds are transferred by wire or
remitted by check, if found to be originating in the USA, will be returned to
the sender on receipt.
In addition, as the software is more fully developed, Internet hopes to have
technical elements attached that may be able to identify the origination of
the call, very much like Caller I.D.
During this Phase, the user will be playing directly against the dealer. The
Web Site will be very visual and will simulate as many aspects associated
with a live casino experience as possible. Once the user is connected to the
Game Server, the Game Server will tell the user which card, number and suit,
or symbol to display. Based on this interplay, the user will win, lose or
draw.
Phase 1 will require DDB to develop a proprietary connection on the Internet.
This will enable players to have a continuous interactive connection with the
Server. The rapid response time and percentage decrease in inadvertent
disconnections between the User and the Server will be a deciding factor in
the success of this Phase.
Phase 1 will be hosted in the Plano WebRANCH (an existing high visibility web
site) for four (4) months to do BETA testing of the games. During this time
Internet will allow players to "gamble" with "fun money." Internet
plans to promote the Web Site to advertisers based on the number of hits at
the Web Site. During this period, Internet plans to conduct tournaments
that will offer prizes from advertisers based on criteria such as highest
number of points, top fifty players, or most wins. Because an advertiser is
interested in capturing demographic information about the user and certain
users are unwilling to enter this information, it is anticipated that the
games will be run under two different levels in Phase 1. Level one will
allow anybody to play for free and will not require the user to enter any
demographic information. Level 2 will allow players to compete in
"tournaments" and against the house. This Phase will require the user to
enter all the appropriate demographic information. Internet will focus
its attention on gaining a customer base in Europe and Asia and believes that
by offering this multi-level virtual casino experience it will be able to
gain a better penetration into the marketplace.
Phase 2 will include the development of multi-player games. Under Phase 2
it will be possible for players to reserve a table and play against the
dealer with their own friends. Internet's revenue for multi-player games
will be a percentage of the actual money gambled. In addition, Internet
will seek advertising revenue by selling the demographic information obtained
from its players or by offering advertising space on the Web Site. Internet
envisions designing advertising space that would be similar to the
shops at the forum at Caesar's Palace Hotel and Casino.
The agreement with DDB provides that Internet will own all proprietary
rights to the software and the underlying technology.
Prior to the virtual casino site becoming operational, Internet expects to
incur the following costs.
* As previously stated, a payment to DDB in the amount of $1,143,825 due
under the terms of the Web Site Development and Maintenance Agreement is to
be paid into escrow for DDB to resume work on Phase 1.
* Executive Salaries of $17,000 per month.
* Consulting fees of $14,000 per month
* Other general and administrative expenses such as rent, telephone,
marketing, travel and entertainment, office supplies estimated to be
approximately $9,000 per month.
Backlog
At March 31, 1997, Internet had no backlogs.
Employees
Internet has two employess. They are Anthony Kay, President, CEO and
Treasurer and Steven E. Bright Vice-President and Secretary.Internet's
employees are not represented by any unioin or collective bargaining group,
and there is no history of any labor problems, or disputes. Internet has the
human resources at present time to fulfill it current business plan but
expects to hire additional emplyees in the future for expansion of its
operations in the ordinary course of business.
Mr. Kay has served as President, CEO and Treasurer of Global since September,
1996. From December 1978 to September 1996, Mr. Kay served as President and
CEO of Secutron Corp. where he was successful in leading the Company from a
one man operation to a corporation with 40 employees and annual revenues in
excess of $5 million. Utilizing the technical training offered by IBM,
including IBM's campus program at the University of Pennsylvania's Wharton
School, he became a recognized expert in the design and development of
software systems for the securities industry. In addition, he designed and
built systems for the manufacturing and distribution, oil and gas and
trucking industries.
Mr. Kay is a founding member and former treasurer of the Colorado Software
Association. Mr. Kay also founded Midrange Solutions Corporation, a wholly
owned subsidiary of Secutron Corp., which specializes as a systems integrator
and third party solution provider. Midrange became on of the regions largest
resellers of IBM's equipment and has won IBM's business partner of the year
award. Midrange was also selected by JD Edwards Company to market and sell
its newly announced Genesis Product in a six state area.
Mr. Steven Bright has served as President and Director of Global since its
inception until September 1996 when he resigned as President and became Vice
President. Mr. Bright is engaged full time in the practice of law and
currently serves as an officer, director and principal shareholder of Graham,
Bright & Smith, P.C. in Dallas, Texas. Mr. Bright's practice emphasizes
international law, commercial, financial and business planning. Mr. Bright
attended the University of Texas and received his Juris Doctorate Degree Cum
Laude from Baylor School of Law in 1975.
Internet has not been subject to any bankruptcy, receivership or similair
proceedings.
Financial Statements, Global Internet
Enclosed are the audited financial statements of Global Internet Corporation
for the period ended December 31, 1996 and unaudited financial statements for
the four months ended April 30, 1997.
To the Board of Directors
Golbal Internet Corporation
Denver, Colorado
Independent Auditor's Report
I have audited the accompanying balance sheet of Global Internet Corporation
(A Development Stage Company) as of December 31, 1996, and the related
statements of operations, changes in stockholders deficiency, and cash flows
for the period June 4, 1996 (Inception) through December 31, 1996. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based
on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Global Internet Corporation
(A Development Stage Company) as of December 31, 1996, and the results of its
operations and its cash flow for the period June 4, 1996 (inception) through
December 31, 1996 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 1 to the
financial statements, the Company has suffered losses from operations and has
a net capital deficiency, which raise substantial doubt about its ability to
continue as a going concern. Additionally, the Company has entered into a
Web Site and Development and Maintenance Agreement with an unaffiliated third
party which requires the Company to place into escrow approximately
$1,040,000 to fund the development of the software necessary for the Company
to commence its business plan.
As further discussed in Note 1, the financial statement, the Company's
business plan encompasses creating software aimed at developing a virtual
casino to provide gambling on the Internet. There are no assurances that the
Company will receive the necessary permits and or licenses form the various
federal, state, local or international authorities that will allow the
Company to commence and implement its business plan. Management's plans
regarding these matters also are described in Note 1. The finaciail
statements do not include any adjustments that might result from the outcome
of these uncertainties.
Gerald R. Hendricks & Company. P.C.
May 21, 1997
Westminster, Colorado
<TABLE>
<CAPTION>
GOBAL INTERNET COPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
December 31, April 30,
1996 1997
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 68,918 $ 4
Total current assets 68,918 4
- --------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, net 607 2,670
$ 69,525 $ 2,674
============================================================================
LIABILITIES AND STOCKHOLDERS DEFICIENCY
CURRENT LIABILITIES:
Convertible note-related party $ 325,000 $357,000
Accounts payable-
Third part 83,648 5,383
Related party 48,849 40,056
Accrued expenses-related parties
Salaries 68,000 136,000
Interest 6,000 17,000
- ---------------------------------------------------------------------------
Total current liabilities 531,497 555,439
COMMITMENT AND CONTINGENCY
STOCKHOLDERS DEFICIENCY:
Preferred stock, $.01 par value,
5,000,000 shares authorized, none is
Common stock, $.001 par value,
10,000,000 shares authorized, 2,985,000
issued and outstanding 2,985 2,985
Additional paid-in capital 11,940 11,940
Deficit accumulated during the
development stage (476,897) (567,690)
- ----------------------------------------------------------------------------
(461,972) (552,765)
- ----------------------------------------------------------------------------
$ 69,525 $ 2,674
============================================================================
<CAPTION>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
GOBAL INTERNET COPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Cumulative
Inception
Inception For the Four (June 4, 1996)
(June 4, 1996) To Months Ended To
December 31, April 30, April 30,
1996 1997 1997
(Unaudited) (Unaudited)
<S> <C> <C> <C>
INTEREST INCOME $ 1,132 $ 90 $ 1,222
- --------------------------------------------------------------------------
OPERATING EXPENSES:
Research and development 292,507 292,507
Professional fees-
Third party 860 860
Related parties 96,103 688 96,791
Salaries - related
parties 68,000 68,000 136,000
Interest - related
parties 6,000 11,000 17,000
Marketing 4,030 75 4,105
Travel and entertainment 3,983 2,437 6,420
Telephone and
communications 2,935 2,755 5,690
Deprecation 250 250
Other 3,611 5,678 9,289
- --------------------------------------------------------------------------
478,029 90,883 568,912
- --------------------------------------------------------------------------
NET LOSS $ (476,897) $ (90,793) $ (567,690)
===========================================================================
NET LOSS PER COMMON
SHARE $ (.16) $ (.03) $ (.19)
==========================================================================
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 2,985,000 2,985,000 2,985,000
==========================================================================
</TABLE>
[CAPTION]
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
GOBAL INTERNET COPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS DEFICIENCY
Deficit
Accumulated
Additional During the
Class A Common Stock Paid-in Development
Shares Amount Capital Stage Total
<S> <C> <C> <C> <C> <C>
BALANCE, June 4,
1996, (Inception) $ $ $ $
Shares issued for
cash at $.005 per
share 2,985,000 2,985 11,940 14,925
Net loss for
the period - (476,897) (476,897)
- -----------------------------------------------------------------------------
BALANCE, December
31, 1996 2,985,000 2,985 11,940 (476,897) (461,972)
Net loss for
the period (90,793) (90,793)
- ------------------------------------------------------------------------------
BALANCE, April
30, 1997
(Unaudited) 2,985,000 $ 2,985 $ 11,940 $ (567,690) $(552,765)
==============================================================================
<CAPTION>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
GOBAL INTERNET COPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Cumulative
For the Four Inception
Inception Months (June 4, 1997)
(June 4, 1996) to Ended To
December 31, April 30, April 30,
1996 1997 1997
(Unaudited) (Unaudited)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING
ACTIVITIES:
Net loss $ (476,897) $ (90,793) $ (567,690)
- -----------------------------------------------------------------------------
Adjustments to reconcile
net loss to net cash
used in
operating activities:
Deprecation - 250 250
Change in liabilities:
Increase (decrease)
in accounts payable 132,497 (87,058) 45,439
Increase in accrued
expenses 74,000 79,000 153,000
- -----------------------------------------------------------------------------
206,497 (7,808) 198,689
- -----------------------------------------------------------------------------
NET CASH USED IN OPERATING
ACTIVITIES (270,400) (98,601) (369,001)
- -----------------------------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property
and equipment (607) (2,313) (2,920)
- -----------------------------------------------------------------------------
NET CASH USED IN
INVESTING ACTIVITIES (607) (2,313) (2,920)
- -----------------------------------------------------------------------------
CASH FLOW FROM FINANCING
ACTIVITIES:
Proceeds from
convertible note 325,000 32,000 357,000
Issuance of common
stock for cash 14,925 14,925
NET CASH PROVIDED BY
FINANCING ACTIVITIES 339,925 32,000 371,925
- -----------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN CASH 68,918 (68,914) 4
CASH AND CASH EQUIVALENTS,
Beginning - 68,918 -
- -----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
Ending $ 68,918 $ 4 $ 4
=============================================================================
<CAPTION>
The accompanying notes are an integral part of these financial statements.
</TABLE>
[CAPTION]
GLOBAL INTERNET CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(Financial data at April 30, 1997 and for the four month
period ended April 30, 1997 is unaudited)
1. Organization and Business Activity
The Company
Global Internet Corporation (the Company) was incorporated in the State
of Delaware on June 4, 1996. The Company is in the development stage and
development stage activities have consisted of raising equity and debt
capital and research and development activities aimed at developing a virtual
casino to provide gambling on the Internet. Global Casinos, Inc. (Global)
owns 58.6% of the Company's outstanding common stock.
During the period ended December 31, 1996, the Company received $14,925 of
equity financing in cash and $325,000 in debt financing from Global through
the issuance of a 10% note, due October, 1997. In February 1997, the Company
received an additional $32,000 in debt financing from Global. The Company is
attempting to raise additional equity capital. As further discussed in Note
6, the Company has entered into a Web Site Development and Maintenance
Agreement with an unaffiliated third party which requires the Company to
place into escrow approximately $1,040,000 to fund the development of the
software necessary for the Company to commence its business plan. Should the
Company be unsuccessful in obtaining the funds necessary to meet the escrow
requirements by September 15, 1997, the Web Site Development and Maintenance
Agreement shall terminate and the contractural relationship between the
parties will end. Accordingly, the Company would have to explore other
avenues of developing its business plan.
The Company's business plan encompasses creating software aimed at
developing a virtual casino to provide gambling on the Internet. There are
no assurances that the Company will receive the necessary permits and or
licenses from the various federal, state, local or international authorities
that will allow the Company to commence and implement its business plan.
(See Note 9)
There can be no assurance that the Company's business will develop as
anticipated by management or that additional financing will be available.
Management is attempting to raise additional equity capital to meet the
requirements of the Web Site Development and Maintenance Agreement, and to
provide working capital. Additionally, the Company is attempting to identify
and comply with necessary permits and licenses necessary to develop and
implement a virtual casino to provide gambling on the Internet. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts
and classification of liabilities that might result if the Company is unable
to continue as a going concern.
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments purchased with a maturity of three months or less
to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost and are depreciated using the
straight line method over the estimated useful lives of five years.
Expenditures for maintenance and repairs are charged directly to the
appropriate operating account at the time the expense is incurred.
Expenditures determined to represent additions and betterments are
capitalized.
Capitalized Software Costs
Pursuant to Statement of Financial Accounting Standards No. 86, Accounting
for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed, issued by the Financial Accounting Standards Board, the Company
is required to capitalized certain software development and production costs
once technological feasibility has been achieved; that is, when the product
design and a working model of the software have been completed and the
working model and its consistency with the product design have been confirmed
by testing. The cost of purchased software is capitalized when related to a
product which has achieved technological feasibility or that has an
alternative future use. The Company records all costs incurred to establish
the technological feasibility of computer software to be sold, leased or
otherwise marketed as research and development costs. For the periods ended
December 31, 1996 and April 30, 1997, the Company did not capitalized any
software development costs.
Impairment of Long-Lived Assets
Management of the Company periodically reviews the carrying value of long-
lived assets for potential impairment by comparing the carrying value of
those assets with their related, expected future net cash flows. Should the
sum of the related, expected future net cash flows be less than the carrying
value, management would determine whether an impairment loss should be
recognized. An impairment loss would be measured by the amount by which the
carrying value of the asset exceeds the future discounted cash flows.
Income Taxes
Deferred income taxes are reported using the liability method. Deferred tax
assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.
Net Loss Per Common Share
The net loss per common share is based on the weighed average number of
common shares outstanding during the periods, including the common stock
equivalents resulting from dilutive stock options. No common stock
equivalents are included in the computation of net loss per share as these
equivalents are antidilutive.
Stock Options
In October 1995 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. This new standard defines a fair value based method for
accounting for an employee stock option or similar equity instrument. This
statement gives entities a choice of recognizing related compensation expense
by adopting the new fair value method or to continue to measure compensation
using the intrinsic value approach under Accounting Principles Board (APB)
Opinion No. 25, the former standard. If the former standard for measurement
is elected, SFAS No. 123 requires supplemental disclosure to show the effects
of using the new measurement criteria. The Company intends to use the
measurement prescribed by APB Opinion No. 25, and accordingly, this
pronouncement will not affect the Company's financial position or results of
operations.
Use of Estimates in the 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.
Fair Value of Financial Statements
The carrying amounts of financial instruments, consisting of cash and cash
equivalents, approximates fair value as of December 31, 1996 and April 30,
1997, because of the relatively short maturity of these instruments. The
carrying value of the convertible note payable approximates fair value as of
December 31, 1996 and April 30, 1997, based upon market prices for the same
or similar debt issues.
3. Property and Equipment
Property and equipment, consisting solely of office equipment, had a net
book value of $607 and $2,670 at December 31, 1996 and April 30, 1997,
respectively.
Depreciation expense for the periods ended December 31, 1996 and April 30,
1997 was $0 and $250, respectively.
4. Convertible Note
During the period ended December 31, 1996, the Company received, from time
to time, advances from Global amounting to $325,000. Subsequently in
February 1997, the Company executed a Convertible Promissory Note (the
Convertible Note) with Global. The Convertible Note bears interest at
10%, is due October 31, 1997 and is without collateral. Global can elect to
convert the principal and any accrued and unpaid interest into common stock
of the Company at the greater of the current market price of the Company's
stock or $.25.
In February 1997, the Company received an additional $32,000 from Global and
added this amount to the outstanding balance of the convertible note with the
same terms and conditions.
Interest expense charged to operations for the periods ended December 31,
1996 and April 30, 1997, was $6,000 and $11,000, respectively.
5. Related Parties
During the period ended December 31, 1996, the Company paid $6,125 in
consulting fees to an entity in which an officer, director and stockholder is
a principal.
During the periods ended December 31, 1996 and April 30, 1997, the Company
incurred legal fees to two individuals, one who is a stockholder and or who
is an officer and stockholder totaling $89,978 and $688, respectively.
The Company has entered into employment agreements with two individuals one
who is an officer, director and stockholder and one who is an officer and
stockholder. The employment agreement with the President and Chief Executive
Officer is for a period of ten years from September 1, 1996, and calls for
monthly payments in the amount of $10,000 until the Company achieves
profitability, at which point his compensation shall be increased to $15,000.
In the event that his salary is deferred, he is entitled to receive
additional compensation equal to 5% interest on the deferred amount. In
connection with the execution of this agreement, this individual received
50,000 stock options to acquire shares of the Company's common stock at an
exercise price of $.25 per share.
The other employment agreement with the Vice President and Secretary is for
a period of three years from September 1, 1996, and calls for monthly
payments in the amount of $7,000. In the event that his salary is deferred,
he is entitled to receive additional compensation equal to 5% interest on the
deferred amount. In connection with the execution of this agreement, this
individual received 50,000 stock options to acquire shares of the Company's
common stock at an exercise price of $.25 per share.
The Company has not paid any amounts to these individuals pursuant to their
employment contracts. At December 31, 1996 and April 30, 1997, the Company
recorded salary expense, and a corresponding liability totaling, $68,000 and
$136,000, respectively.
Commitment and Contingency
Commitment
The Company has entered into a Web Site Development and Maintenance
Agreement with an unaffiliated third party to develop a virtual Internet
casino. The Web Site Development and Maintenance Agreement was amended in
November 1996 and subsequently in March 1997.
The March 1997 amendment requires escrow payments to be made in the amount
of $1,039,840 payable as follows: $346,613 at the execution of the March
1997 amendment, $346,613 upon the commencement of work as evidenced by
written notice from the unaffiliated third party that work has commenced;
and, $346,613 at the completion of the initial phase. If the escrow is
funded after March 25, 1997 but before June 16, 1997, the cost of the initial
phase will be increased 5%. If the escrow is funded after June 16, 1997 but
before September 15, 1997, the cost of the initial phase will be increased
10%. If the escrow is not funded on or before September 15, 1997, the Web
Site Development and Maintenance Agreement shall terminate and the
contractual relationship between the parties will end.
Contingency
During 1995 and 1996, Global and certain officers and directors of Global
received requests for information from the U.S. Securities and Exchange
Commission (SEC) related to an investigation begun by the SEC during 1994
into various matters, including certain transactions in securities by Global
and one of its officers and directors. On January 13, 1997, Global was
notified that the SEC staff intends to recommend that the Commission bring an
action against Global and two of its former officers and directors for
alleged violations of securities laws. Global has begun informal
negotiations with the SEC staff but there can be no assurance as to the final
outcome of the investigation or the impact, if any, on the operations of the
Company.
7. Stockholders Deficiency
Preferred stock
The Company is authorized to issue 5,000,000 shares of its $.01 par value
preferred stock. The shares may be issued in such series and with such
preferences as may be determined by the Board of Directors. No preferred
shares have been issued by the Company.
Common stock
During the period ended December 31, 1996, the Company received $14,925 in
cash and issued 2,985,000 shares ($.005 per share) of its common stock.
Stock Option Plan
The Company established the 1996 Stock Option Plan (the Plan) and
reserved up to 750,000 shares to be issued pursuant to the Plan. Under the
Plan, stock option can be granted at prices not less than 100% of the fair
market value of the Company's stock at the date of grant. Options are
exercisable for a period of five years.
Stockholders Deficiency, continued
Stock Option Plan, continued
Option information is as follows:
<TABLE>
<S> <C>
Options outstanding, June 4, 1996 (inception) -
Granted 450,000
Options outstanding, December 31, 1996
and April 30, 1997 450,000
===========================================================
Option exercise prices $ .25
===========================================================
Exercisable options 450,000
===========================================================
Weighted average exercise price $ .25
===========================================================
Options available for future grant 300,000
============================================================
</TABLE>
8. Income Taxes
At April 30, 1997, the Company has net operating loss carryforwards, for
federal income tax purposes of approximately $432,000 expiring in 2012.
When more than a 50% change in ownership occurs, over a three year period, as
defined, the Tax Reform Act of 1986 limits the utilization of net operating
loss (NOL) carryforwards in the year following the change in ownership.
Therefore, it is possible that the Company's utilization of its NOL
carryforwards may be partially reduced as a result of future changes in stock
ownership due to the proposed Agreement and Plan of Reorganization discussed
in Note 9. No determination has been made as of April 30, 1997 as to what
implications, if any, there will be in net operating loss carryforwards of
the Company.
9. Subsequent Event
In May 1997, Global entered into an Agreement and Plan of Reorganization with
First Entertainment whereby Global would exchange 1,500,000 (86%) shares of
the Company's commons stock that it owns and the $357,000 convertible note
that Global holds for 30,000 shares of First Entertainment Class B
Convertible Preferred Stock and 1,500,000 warrants. The warrants shall be
for a period of five years from the date of issuance and will be exercisable
at $1.25 per share.
The Agreement and Plan of Reorganization allows other stockholders of the
Company to exchange their shares at a different exchange rate. Each share
tendered by stockholders other than Global, shall be exchanged for one
warrant that is exerciable for a five year period at $1.25 per share.
The Agreement and Plan of Reorganization is subject to the approval of the
stockholders of the Company and First Entertainment.
Management's Discussion and Analysis or Plan of Operation
Internet incurred a loss of $477,000 for the period ended December 31, 1996
whose activities consisted of raising debt and equity financing and research
and development activities aimed at developing a virtual casino to provide
gambling on the Internet. Internet's activities in 1997 are limited due to
the lack of working capital and consist primarily of capital raising
activities.
Internet had essentially no revenues, deriving interest income of $1,100 from
the investment of idle cash. Total costs and expenses were $478,000 of which
$292,000 represented research and development costs, $97,000 in legal fees,
$68,000 in accrued salaries and other general and administrative expenses of
$21,000. Internet accrues salaries of $17,000 a month for its president and
vice-president under the terms of employment agreements which commenced
September, 1996. Internet has not paid any amounts to these individuals
pursuant to their employment contracts.
Of the total of $292,000 in research and development costs, $283,000
represents payments to DDB Needham Interactive Communications to develop a
virtual internet casino.
At December 31, 1996 Internet had a working capital deficit of $462,000 and
at April 30, 1997 the working capital deficit increased to $555,000. The
accompanying financial statements have been prepared assuming Internet will
continue as a going concern. As discussed in Note 1 to the financial
statements Internet has incurred losses form operations, has a working
capital deficit. Internet has a Web Site Development and Maintenance
Agreement with an unaffiliated third party which requires the payment of
$1,040,000. Further software development is on hold until such time as the
payment is made under the Agreement. Once the monies have been escrowed
Internet expects the software to be completed 140 days after commencement.
It is imperative that Internet raise the financing required, approximately
$2.2 million, to develop the internet gaming site and to provide working
capital through the end of 1998. There can be no assurance that Internet will
be successful in raising the financing necessary. If Internet is unsuccessful
it will have to explore other avenues of developing its business plan.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Consolidated Financial Statements of the
Company are based on the Consolidated Financial Statements of the Company
included elsewhere in this Proxy, adjusted to give effect of the acquisition
of Global Internet Corporation
The unaudited pro forma combined balance sheet at December 31, 1996 presents
adjustments for the acquisition of Global Internet Corporation as if the
transaction had occurred on December 31, 1996.
The unaudited pro forma combined statement of operations data for the year
ended December 31, 1996 presents adjustments for the acquisition of Global
Internet Corporation as if the transaction had occurred on January 1, 1996.
In the opinion of management, all adjustments have been made that are
necessary to present fairly the pro forma data.
The unaudited pro forma combined financial statements should be read in
conjunction with the Company's Consolidated Financial Statements and the
Notes thereto, and the Financial Statements and Notes thereto of Global
Internet Corporation. The unaudited pro forma combined financial statements
of operations data are not necessarily indicative of the results that would
have been reported had such events actually occurred on the date specified,
nor are they indicative of the Company's future results. There can be no
assurance that the pending acquisition of Global Internet Company will be
consummated.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
December 31, 1996
Company
Company Global Pro Forma Pro Forma
As Reported As Reported Adjustments Combined
<S> <C> <C> <C> <C>
Assets
Current assets $ 465,681 $ 68,918 $ 325,000 (1) $ 534,599
(325,000)(2)
Property and
equipment, net 625,475 607 626,082
License, net of
Amortization 829,921 829,921
License held for
sale, net 800,000 800,000
Goodwill, net 511,712 32,000 (1) 1,005,684
461,973 (3)
Total assets $ 3,232,789 $ 69,525 $ 3,796,287
Liabilities and
Stockholders
Equity
Current portion
of long term
debt $ 861,392 325,000 (325,000)(2) $ 861,392
Other current
Liabilities 865,033 206,497 1,071,530
Total current
Liabilities 1,726,425 531,497 1,932,922
Long term debt 199,484 199,484
Minority interest 163,787 163,787
Preferred stock 135 30 (1) 165
Common stock 42,338 2,985 (2,985)(3) 42,338
Additional paid
in capital 13,460,958 11,940 (11,940)(3) 13,817,928
356,970 (1)
Accumulated deficit (11,829,706) (476,897) 476,897 (3)(11,829,706)
Deferred
Compensation (45,807) (45,807)
Treasury stock (484,824) (484,824)
Stockholders'
equity (deficit) 1,143,093 (461,972) 1,500,094
Total Liabilities
and Stockholders'
Equity $ 3,232,789 $ 69,525 $ 3,796,287
</TABLE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(1) Reflects the issuance of 30,000 shares of the Company's convertible
preferred stock to acquire 1,500,000 shares of Global Internet Corporation
and a convertible note receivable from Global Casinos Inc. on December 31,
1996.
(2) Consolidation elimination entry to eliminate the convertible note
receivable against the convertible note payable.
(3) Consolidation elimination entry to eliminate the stockholders equity of
Global Internet Corporation (the acquiree) and to record the excess of
purchase price over net assets acquired as goodwill.
<TABLE>
<CAPTION>
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1996
Company
Company Global Pro Forma Pro Forma
As Reported As Reported(1) Adjustments Combined
<S> <C> <C> <C> <C>
Revenues $ 2,139,451 $2,139,451
Cost of goods sold 1,617,365 1,617,365
Depreciation and
amortization 326,522 49,400(2) 375,922
Management fees,
Affiliate 408,000 408,000
Selling, general and
Administrative 1,394,683 472,029 1,866,712
Total cost and expenses 3,746,570 472,029 4,267,999
Operating loss from
continuing operations (1,607,119) (472,029) (2,128,548)
Other Income (Expense)
Interest expense (102,791) (6,000) 6,000(3) (102,791)
Interest income 1,132 1,132
Other, net 22,961 22,961
Loss from continuing
operations before
minority
interest (1,686,949) (476,897) (2,207,246)
Minority interest
in net loss
of subsidiary 39,665 39,665
Loss from continuing (1,647,294) (476,897) (2,167,581)
Discontinued operations 385,134 385,134
Net loss $(1,262,160) $(476,897) $(1,782,447)
</TABLE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(1) Reflects the historical operating results of Global Internet Corporation
as though the acquisition had been consummated on January 1, 1996.
(2) Reflects the amortization of the goodwill over ten years.
(3) Consolidation elimination entry to eliminated related party interest
income with related party interest expense.
Closing of the Transaction.
The transaction was closed on May 3, 1997, with the approval of the Boards of
Directors of both the Company and Internet. The Board of the Company has
submitted this transaction to the shareholders of the Company for
ratification and approval of the completed transaction.
Votes Required.
The Board of Directors of the Company is proposing that the shareholders of
the Company ratify and approve the transaction which closed on May 3, 1997.
This vote must be approved by the affirmative vote of the record holders of a
majority of the outstanding shares of the Company's quorum present in person
or by proxy at the Meeting. All common shareholders of record as of
September 1, 1997, which does not include the new shareholders from the
acquisition, will be authorized to vote. The Acquisition has been approved by
the holders of a majority of the outstanding capital shares of Internet.
Board of Director Recommendations.
The Board of Directors of the Company has unanimously approved the Agreement,
and believes that the Acquisition is in the best interests of the Company's
shareholders and unanimously recommends that the shareholders vote to ratify
and approve the Acquisition.
INCREASE IN AUTHORIZED COMMON SHARES
The Company proposes to amend its Articles of Incorporation to authorize the
issuance of up to 50,000,000 Common Shares, all with $0.008 par value. This
amendment is required to have enough shares available for the shareholders of
Internet to convert their Class B preferred shares, if they so chose, under
the definitive agreement of May 3, 1997.
The present Articles of Incorporation of the Company only provide for the
issuance of up to 6,250,000 Common Shares. No specific classes or preferences
of the Common Shares are authorized nor are any contemplated by this proposed
amendment. All newly authorized Common Shares will be of the same class as
the present Common Shares. This Amendment will have no effect on the number
of authorized Preferred Shares, which will remain the same under the
Company's Articles of Incorporation. The issuance of these Common Shares
could be used as an anti-takeover measure and could have the effect of
preventing those who will not control the Company from mounting an effort to
do so. Although the issuance of Common Shares could be used for this purpose,
this is not the intention of the Company in proposing the authorization of
Common Shares.
At the present time, the Company's primary purpose to authorize the increase
in the number of Common Shares is to have additional securities for equity
offerings or acquisitions. As the Company expands, there will be need for
additional capital, and the management of the Company believes that it is in
the best interests of the Company and its shareholders to have the option to
issue additional Common Shares as an added avenue to raise capital. The
Company has an ongoing need for additional capital and wants to have as much
flexibility as possible in creating programs for raising such capital. The
Company's management believes that the additional Common Shares will be an
important step in developing that flexibility. This is an added but only
secondary reason for the proposal to authorize an increase in the number of
Common Shares to 50,000,000 shares. In addition, the Company would have
common shares available for potential acquisitions. This resolution requires
the affirmative vote of a majority of the issued and outstanding shares of
the Company. The Board of Directors recommends that shareholders vote FOR the
resolution.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Company has appointed the Company's present independent public
accountants, BDO Seidman, LLP for the fiscal year ended December 31, 1997.
This appointment will be submitted to the shareholders for ratification at
the Meeting.
The submission of the appointment of BDO Seidman, LLP is not required by law
or the bylaws of the Company. The Board of Directors is nevertheless
submitting it to the shareholders to ascertain their views. If the
shareholders do not ratify the appointment, the selection of other
independent public accountants will be considered by the Board of Directors.
To be adopted, the resolution requires the affirmative vote of a majority of
the shares voting at the meeting. The Board of Directors recommends a vote
FOR the resolution.
OTHER MATTERS
As of the date of this Proxy Statement, the Company's management has no
knowledge of any business, other than previously described herein, which
should be presented for consideration at the meeting. In the event that any
other business is presented at the meeting, it is intended that the persons
named in the enclosed Proxy will have authority to vote such Proxy in
accordance with their best judgment on such business.
SHAREHOLDER PROPOSALS
According to Rule 14a-8 under the Securities Exchange Act of 1934, a
shareholder may require that certain proposals suggested by shareholders be
voted on at a shareholders meeting. Information concerning such proposals
must be submitted to the Company for inclusion in its proxy statement. Such
proposals for inclusion in the Company's proxy materials relating to the next
Annual Meeting of the Company must be received by the Company not later than
December 31, 1997.
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders, including financial statements,
has been mailed with these materials to all shareholders of record. Any
shareholder who has not received a copy of such Annual Report may obtain a
copy by writing to the Company. Such Annual Report is not to be treated as
part of the proxy solicitation material, nor as having been incorporated by
reference.
SOLICITATION OF PROXIES
The cost of solicitation will be borne by the Company. The Company will
reimburse brokerage firms and other custodians, nominees, and fiduciaries for
reasonable expenses incurred by them in sending proxy material to the
beneficial owners of common stock. In addition to solicitation by mail,
directors, officers, and regular employees of the Company may solicit Proxies
personally or by telegraph or telephone, without additional compensation.
NOTICE TO BANKS, BROKERS/DEALERS, VOTING TRUSTEES, AND THEIR NOMINEES
Please advise the Company, in care of its corporate address, whether any
other persons are the beneficial owners of the shares of common stock for
which Proxies are being solicited from you, and, if so, the number of copies
of the Proxy Statement, and other soliciting materials, you wish to receive
in order to supply copies to the beneficial owners of shares.
FIRST ENTERTAINMENT, INC.
By: A.B. Goldberg
President
Dated: September 5, 1997
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
May 1, 1997
FIRST ENTERTAINMENT, INCORPORATED.
ACQUISITION OF
GLOBAL INTERNET, INC.
AGREEMENT AND PLAN OF REORGANIZATION
THIS Agreement and Plan of Reorganization is entered into this 1st day
of May, 1997, by and between FIRST ENTERTAINMENT, INCORPORATED, a Colorado
corporation, (hereinafter "Acquiror"); GLOBAL INTERNET, INC. a Delaware
corporation; (hereinafter referred to as "Acquiree"); and GLOBAL CASINOS,
INC. the majority stockholder of Acquiree, (hereinafter referred to as
"Stockholder).
RECITALS
Stockholder of Acquiree owns 1,750,000 of the issued and outstanding
common stock of Acquiree and a Note Receivable in the amount of $375,000.
Acquiror desires to acquire 1,500,000 of Stockholder shares of Acquiree, as
well as the Note Receivable, making Acquiree a subsidiary of Acquiror, and
Stockholder desire to make an exchange of its shares in Acquiree for shares
of Acquirer's Class B Convertible Preferred Stock and warrants to be
exchanged as set out herein with said Stockholder.
NOW, THEREFORE, for the mutual consideration set out herein, the parties
agree as follows:
AGREEMENT
1. Plan of Reorganization. Stockholder of Acquiree is the owner of
1,750,000 shares of the issued and outstanding common stock of said Acquiree.
It is the intention of the parties hereto that 1,500,000 of the issued and
outstanding common shares of Acquiree and the Note Receivable shall be
acquired by Acquiror in exchange solely for Acquirer's Class B Convertible
Preferred Stock and warrants.
2. Exchange of Securities. Acquiror and Stockholder agree that 1,500,000 of
the issued and outstanding shares of common stock of Acquiree and a Note
Receivable in the amount of $375,000 shall be exchanged with Acquiror for a
total of 30,000 shares of Class B Convertible Preferred Stock of Acquiror,
and 1,500,000 warrants of Acquirer's stock.
The Acquirer further agrees to exchange one warrant to purchase common
shares of the Acquiror for every additional share of Acquiree stock offered
to Acquiror by any of its stockholders. The warrants shall be for a period
of five years from the date of issuance and will be exercisable at $1.25 per
share.
It is agreed and understood by the parties hereto that the
Acquiror currently does not have enough authorized shares reserved to
issue upon exercise any of the aforementioned warrants and Convertible
Preferred Shares. Acquiror agrees to call a shareholder's meeting to
increase the number of common shares at least sufficient to permit the
reservation of authorized common stock issuable upon exercise of the
said warrants.
The Acquiror shares will, on the Closing Date, as hereafter defined, be
delivered to the Stockholder in exchange for their shares in Acquiree.
Stockholder represents and warrants that he will hold such shares of Acquiror
for investment purposes and not for further public distribution.
Global Casino, Inc. agrees to use its best efforts in assisting Global
Internet in securing an Internet Casino Gaming License in one of the venues
it operates outside of the United States.
3.Terms of Class B Convertible Preferred Shares. The Class B Preferred Stock
(Preferred Stock) of Acquiror is to be issued to Stockholder hereunder
shall be issued at a face value of $12.50 per share. The face value of
the Preferred Stock shall be convertible at the option of the holder, into
shares of the Acquiror's common stock at a conversion value of $1.25 per
share, subject to adjustment under certain circumstances. At any regular
or special meeting of Acquiror's shareholders, holders of Preferred Stock
shall be entitled to 12.5 votes for every share of Preferred Stock owned
on the record date of such meeting. Holders of Preferred Stock shall be
entitled to preferences in the event Acquiror declares a dividend or
undertakes a corporate liquidation which preference shall be senior to all
other equity holders of Acquiror except for holders of Class A Preferred
Stock.
Acquiror agrees to file an amendment to its currently contemplated S-3
registration statement, ninety days after its effective date, registering
the Preferred Stock's underlying common shares. Stockholder agrees to
enter into a lock-up agreement with Acquiror for one year from the
Preferred Stock's issuance date.
4.Terms of Warrants. Each of the 1,500,000 warrants issuable to Stockholder
shall be exercisable by the holder thereof to purchase one share of
Acquiror's common stock at an exercise price of $1.25 per share. However,
in the event a Registration Statement registering for sale under the
Securities Act (i) the re-offer of the warrants and (ii) the issuance of
the common stock of Acquiror upon exercise of the warrant is not effective
(the Warrant Stock) within 12 months from the date of issue, the
exercise price shall be reduced to $1.00 per share. Stockholder agrees to
pay for the costs of listing the warrants on the NASDAQ small cap
exchange, as well as legal fees and offering costs of up to $10,000.
After twelve months from the date of issuance of warrants, if Acquiror's
stock trades above $3.00 for at least 30 days, Acquiror shall have the
right, with a thirty day notice, to call said warrants for $.05 a share.
5.Nasdaq Listing. For so long as there is outstanding any shares of
Preferred Stock and unexercised warrants which have not otherwise expired,
Acquiror shall use its best efforts to maintain the listing of its common
stock and warrants on the Nasdaq Stock Market and shall take all action
necessary or advisable to maintain such listing.
6. Delivery of Shares. On or before the Closing Date, Stockholder will
deliver certificates for the shares of Acquiree duly endorsed so as to
make Acquiror the holder thereof; free and clear of all claims and
encumbrances; and on such Closing Date, delivery of the Acquiror shares,
which will have certain restrictions as to transfer, will be made to the
Stockholder as set forth herein. A list of the shares of Acquiree, the
owner thereof, and shares of Acquiror to be received by said Stockholder
is attached hereto as Exhibit "A" and by this reference is incorporated
herein.
7. Representations of Stockholder and Acquiree. The Stockholder and
Acquiree, hereby represent and warrant that, with respect to his own shares
and as to the Acquiree, effective this date and the Closing Date, the
representations listed below are true and correct. Said representations are
meant and intended by all parties to apply to the Acquiree.
(a) The outstanding shares of common stock of Acquiree; are free from claims,
liens, or other encumbrances; and Stockholder has the unqualified right to
transfer and dispose of such shares.
(b) The shares constitute validly issued shares of Acquiree fully-paid and
nonassessable.
(c) To deliver audited financial statements of Global Internet, Inc. prior to
May 15, 1997.
8. Representations of Acquiring Corporation. Acquiror hereby represents and
warrants as follows:
(a) As of the Closing Date, the Acquiror shares to be delivered to the
Stockholder will constitute valid and legally issued shares of Acquiror,
fully-paid and nonassessable, and will be legally equivalent in all respects
to the Acquirer's Class B Convertible Preferred Stock of Acquiror issued and
outstanding as of the date thereof.
(b) The officers of Acquiror are duly authorized to execute this Agreement
and have taken all actions required by law and agreements, charters, and
bylaws, to properly and legally execute this Agreement.
(c) Acquiror has delivered to Acquiree current unaudited financial statements
and at Closing shall deliver all of its financial records, which shall be
true, complete and accurate; there are and shall be no substantial
liabilities, either fixed or contingent, not reflected in such financial
statements and records or to which the Acquiree has not been made aware. Said
financial statements fairly and accurately reflect the financial condition of
the Acquiror as of the date thereof and the results of operations for the
period reflected therein. Such statements shall have been prepared in
accordance with generally accepted accounting principles, consistently
applied, except as otherwise stated therein.
(d) Since the date of the financial statements there will have been, but as
of the Closing Date there will not be, any material changes in the financial
position of Acquiror, except changes arising in the ordinary course of
business, which changes will in no event adversely affect the financial
condition of the Company.
(e) Acquiror is not involved in any pending litigation, claims, not reflected
in such financial statements or otherwise disclosed in writing to the
Stockholder and there are no lawsuits, claims, assessments, or similar
matters, to the best knowledge of management, threatened or contemplated
against Acquiror, its management or properties.
(f) As of the Closing Date and date hereof Acquiror is duly organized,
validly existing and in good standing under the laws of the State of
Colorado; it has the corporate power to own its property and to carry on its
business as now being conducted and is duly qualified to do business in any
jurisdiction where so required.
(g) Acquiror has filed all federal, state, county and local income, excise,
property and other tax returns, forms, or reports, which are due or required
to be filed by it prior to the date hereof and has paid or made adequate
provision for the payment of all taxes, fees, or assessments which have or
may become due pursuant to such returns or pursuant to any assessments
received.
(h) Acquiror has not breached, nor is there any pending or threatened claims
or any legal basis for a claim that Acquiror has breached, any of the terms
or conditions of any agreements, contracts or commitments to which it is a
party or is bound and the execution and performance hereof will not violate
any provisions of applicable law of any agreement to which Acquiror is
subject. (i) The present capitalization of Acquiror comprises authorized
common stock of 6,250,000 shares, $.008 par value, of which approximately
6,000,000 shares are issued and outstanding as of the date hereof. The
Acquiror has 5,000,000 authorized preferred shares, $0.001 par value, to have
such preferences as the Board of Directors may determine from time to time.
As of the Date hereof, the Acquiror has issued and outstanding a total of
10,869 Class A Preferred convertible into one share of common shares; no
shares of Class B Preferred; and 275,000 shares of Class C Preferred. All
outstanding shares, have been duly authorized, validly issued, and fully
paid, and there are no outstanding or presently authorized securities,
warrants, options or related commitments of any nature not reflected in the
current financial statements of Acquiror or otherwise known to Acquiree.
(j) The shares of Class B voting preferred stock of Acquiror to be issued to
Stockholder at Closing will be validly issued, nonassessable and fully-paid
under Colorado corporation law and will be issued in a non-public offering
and exempted transaction under federal and state securities laws.
(k) At the date of this Agreement Acquiror has, and at the Closing Date it
will have, disclosed all events, conditions and facts materially affecting
the business and prospects of Acquiror. Acquiror has not now and will not
have, at the Closing Date, withheld disclosure of any such events,
conditions, and facts which it, through management has knowledge of, or has
reasonable grounds to know, may materially affect the business and prospects
of Acquiror.
9. Closing Date. The Closing Date herein referred to shall be upon such date
as the parties hereto may mutually agree upon but is expected to be on or
about May 1, 1997. This Agreement is executed by the parties as of the date
hereof subject only to ratification by the Acquiror Board of Directors. As
of the said ratification, the Stockholder will be deemed to have accepted
delivery of the certificates of stock to be issued in their respective names,
and in connection therewith will make delivery of their stock in Acquiree to
Acquiror. Certain exhibits, etc. may be delivered subsequent to the Closing
Date upon the mutual agreement of the parties hereto.
10. Conditions Precedent to the Obligations of Acquiree. All obligations of
Acquiree and Stockholder under this Agreement are subject to the fulfillment,
prior to or as of the Closing Date, of each of the following conditions:
(a) The representations and warranties by or on behalf of Acquiror contained
in this Agreement or in any certificate or document delivered to Acquiree
pursuant to the provisions hereof shall be true in all material respects at
and as of the time of Closing as though such representations and warranties
were made at and as of such time.
(b) Acquiror shall have performed and complied with all covenants,
agreements, and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing on the Closing Date.
(c) The Directors of Acquiror shall have approved this transaction and such
other reasonable matters as requested by Acquiree as pertaining to this
transaction.
(d) All instruments and documents delivered to Stockholder pursuant to the
provisions hereof shall be reasonably satisfactory to Stockholder.
8. Conditions Precedent to the Obligations of Acquiror. All obligations of
the Acquiror under this Agreement are subject to the fulfillment, prior to or
at the Closing on the Closing Date, of each of the following conditions:
(a) The representations and warranties by Acquiree and Stockholder contained
in this Agreement or in any certificate or document delivered to Acquiror
pursuant to the provisions hereof shall be true at and as of the time of
Closing as though such representations and warranties were made at and as of
such time.
(b) Acquiree and Stockholder shall have performed and complied with all
covenants, agreements, and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing; including the
delivery of all of the outstanding stock of Acquiree.
(c) Stockholder shall deliver to Acquiror a letter commonly known as an
"investment letter" agreeing that the shares of stock in Acquiror are being
acquired for investment purposes, and not with a view to resale.
(d) Stockholder hereby states that the materials, including, current
financial statements, prepared and delivered by Acquiror to Stockholder, have
been read and understood by Stockholder, that he is familiar with the
business of Acquiror, that the shares are subject to such restrictions as may
be required under said Act and may not be resold, except in reliance on an
exemption under the Act, and that the Stockholder will thereby be taking
control of Acquiror.
11. Indemnification. Within the period provided in paragraph 10 herein and in
accordance with the terms of that paragraph, each party to this Agreement,
shall indemnify and hold harmless each other party at all times after the
date of this Agreement against and in respect of any liability, damage or
deficiency, all actions, suits, proceedings, demands, assessments, judgments,
costs and expenses including attorney's fees incident to any of the
foregoing, resulting from any misrepresentations, breach of covenant or
warranty or non-fulfillment of any agreement on the part of such party under
this Agreement or from any misrepresentation in or omission from any
certificate furnished or to be furnished to a party hereunder. Subject to the
terms of this Agreement, the defaulting party shall reimburse the other party
or parties on demand, for any reasonable payment made by said parties at any
time after the Closing, in respect of any liability or claim to which the
foregoing indemnity relates, if such payment is made after reasonable notice
to the other party to defend or satisfy the same and such party failed to
defend or satisfy the same.
12. Nature and Survival of Representations. All representations, warranties
and covenants made by any party in this Agreement shall survive the Closing
hereunder and the consummation of the transactions contemplated hereby for
three years from the date hereof. All of the parties hereto are executing and
carrying out the provisions of this Agreement in reliance solely on the
representations, warranties and covenants and agreements contained in this
Agreement or at the Closing of the transactions herein provided for and not
upon any investigation upon which it might have made or any representations,
warranty, agreement, promise or information, written or oral, made by the
other party or any other person other than as specifically set forth herein.
13. Documents at Closing. Between the date hereof and the date of
ratification by the shareholders of Acquiror, the following transactions
shalloccur, all of such transactions being deemed to occur simultaneously:
(a) Stockholder will deliver, or cause to be delivered, to Acquiror the
following:
(1) stock certificates for the stock of Acquiree being tendered
hereunder, duly endorsed in blank,
(2) all corporate records of Acquiree, including without limitation
corporate minute books (which shall contain copies of the Articles of
Incorporation and Bylaws, as amended to the Closing), stock books,
stock transfer books, corporate seals, and such other corporate books
and records as may reasonably requested for review by Acquiror and its
counsel;
(3) a certificate executed by Stockholder to the effect that all
representations and warranties made by Acquiree under this Agreement
are true and correct as of the Closing, the same as though originally
given to Acquiror on said date;
(4) such other instruments, documents and certificates, if any, as are
required to be delivered pursuant to the provisions of this Agreement
or which may be reasonably requested in furtherance of the provisions
of this Agreement;
(b) Acquiror will deliver or cause to be delivered to Stockholder and
Acquiree:
( 1 ) stock certificates for Class B Convertible Preferred Stock to be
issued as a part of the exchange as listed on Exhibit "A";
(2) certificates representing 1,500,000 warrants
(3) a certificate of the President and Secretary of Acquiror to the
effect that all representations and warranties of Acquiror made under
this Agreement are reaffirmed on the Closing Date, the same as though
originally given to Stockholder on said date;
(4) certified copies of resolutions by Acquirer's Board of Directors
authorizing this transaction;
(5) such other instruments and documents as are required to be
delivered pursuant to the provisions of this Agreement.
14. Miscellaneous .
(a) Further Assurances. At any time, and from time to time, after the
effective date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement.
(b) Waiver. Any failure on the part of any party hereto to comply with any
of its obligations, agreements or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
(c) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent
by prepaid first class registered or certified mail, return receipt
requested.
(d) Headings. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(e) Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(f) Governing Law. This Agreement was negotiated and is being contracted for
in the State of Colorado, and shall be governed by the laws of the State of
Colorado, and the securities being issued herein are being issued and
delivered in the State of Colorado in accordance with the isolated
transaction and non public offering exemption.
(g) Binding Effect. This Agreement shall be binding upon the parties hereto
and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns.
(h) Entire Agreement. This Agreement is the entire agreement of the parties
covering everything agreed upon or understood in the transaction. There are
no oral promises, conditions, representations, understandings,
interpretations or terms of any kind of condition or inducements to the
execution hereof.
(i) Time. Time is of the essence.
(j) Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full force and
effect.
(k) Default Costs. In the event any party hereto has to resort to legal
action to enforce any of the terms hereof, such party shall be entitled to
collect attorneys fees and other costs from the party in default.
IN WlTNESS WHEREOF, the parties have executed this Agreement the day and year
first above written.
FIRST ENTERTAINMENT, INCORPORATED.
By: A.B. Goldberg
President
GLOBAL CASINO, INC. SHAREHOLDER
By: Tony Kay
President
FIRST ENTERTAINMENT, INCORPORATED.
OFFICER'S CERTIFICATE
The undersigned, President and Secretary of FIRST ENTERTAINMENT,
INCORPORATED. ("Acquiror"), do hereby certify that they are duly elected,
qualified and acting officers of Acquiror, a Colorado corporation, and as
such are familiar with the business affairs of said corporation, and are
familiar with and have read that certain Agreement and Plan of Reorganization
between Acquiror and Acquiree, dated May 1, 1997.
The undersigned do hereby state that the representations and warranties
made by Acquiror contained in said Agreement, to the best of their knowledge,
are true and correct at and as of the time of closing. In addition, the
undersigned hereby state that to the best of their knowledge, Acquiror has
performed and complied with all covenants, agreements and conditions required
by the Agreement to be performed or complied with by Acquiror prior to or at
the closing on the closing date.
IN WITNESS WHEREOF, the undersigned, has hereunto duly executed this
certificate this first day of May, 1997.
FIRST ENTERTAINMENT, INCORPORATED
By: A.B. Goldberg
President
By: Cynthia Jones
Secretary
FIRST ENTERTAINMENT, INC.
1380 Lawrence Street, Suite 1400
Denver, Colorado 80204
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON October 9, 1997
TO OUR SHAREHOLDERS:
Notice is hereby given that a Special Meeting of Shareholders (the
Meeting) of FIRST ENTERTAINMENT, INC. (the Company), a Colorado
corporation, will be held at the Comedy Works, 1226 15th Street, Denver,
Colorado, on October 9, 1997, at 10:00 a.m., local time, for the purposes
set forth herein. A Proxy Card and a Proxy Statement for the Meeting are
enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The election of three (3) directors to the Board of Directors of the
Company, to serve until their resignation or removal from office, or until
their respective successors are elected and qualified;
2. The ratification and approval of the Company's prior acquisition of
Global Internet Corporation, a Delaware corporation;
3. Approval to amend the Company's Articles of Incorporation to increase the
number of authorized common shares from 6,250,000 shares at $.008 par value
to 50,000,000 shares at $.008 par value
4. The ratification of BDO Seidman, LLP as the Company's auditors for the
fiscal year ended December 31, 1997; and
5. Consideration of any matters which may properly come before the Meeting,
or any adjournment thereof. At this time, the Board of Directors is not
aware of any other business to come before the Meeting.
Any action may be taken on any one of the foregoing proposals at the Meeting
on the date specified above or on any date or dates to which the Meeting may
be adjourned. Only shareholders of record as of the close of business on
September 1, 1997 are entitled to notice of and to vote at the Meeting. The
stock transfer books of the Company will remain open. There is printed on the
following pages a Proxy Statement to which your attention is invited. Please
read it carefully.
You are requested to fill in and sign the enclosed form of Proxy which is
solicited by the Board of Directors and to mail it promptly in the enclosed
envelope. The Proxy will not be used if you attend and vote at the Meeting in
person.
By Order of the Board of Directors
A.B. Goldberg
President
Denver, Colorado
September 5, 1997
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF
YOU PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY PROMPTLY IN THE ENCLOSED POSTAGE PREPAID, ADDRESSED ENVELOPE.
IF YOU ATTEND THIS MEETING, YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY.
ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME
PRIOR TO THE EXERCISE THEREOF.
PROXY
FIRST ENTERTAINMENT, INC.
1380 Lawrence Street, Suite 1400
Denver, Colorado 80204
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
OF FIRST ENTERTAINMENT, INC.
THE UNDERSIGNED hereby appoints and constitutes A.B. Goldberg as his true and
lawful agents and proxy, with full power of substitution and revocation, to
attend, represent and to vote the shares of common stock of the undersigned
at the Special Meeting of Shareholders, to be held at the Comedy Works, 1226
15th Street, Denver, Colorado, on October 9, 1997, at 10:00 a.m., local
time, for the purposes set forth in the accompanying Notice of Special
Meeting of Shareholders and at any adjournment thereof, and on all matters
coming before said meeting.
Management recommends a vote FOR items 1, 2, 3, 4, and 5, and SHARES WILL BE
SO VOTED UNLESS YOU INDICATE OTHERWISE:
1. Approval of the following individuals to serve on the Board of Directors:
A.B. Goldberg FOR AGAINST ABSTAIN
Dr. Nick Catalano FOR AGAINST ABSTAIN
Dr. Theodore Jacobs, M.D. FOR AGAINST ABSTAIN
2. The ratification and approval of the Company's prior acquisition of Global
Internet Corporation, a Delaware corporation;
FOR AGAINST ABSTAIN
3. Approval to amend the Company's Articles of Incorporation to increase the
number of authorized common shares from 6,250,000 shares at $.008 par value
to 50,000,000 shares at $.008 par value
FOR AGAINST ABSTAIN
4. The ratification of BDO Seidman, LLP as the Company's auditors for the
fiscal year ended December 31, 1997; and
FOR AGAINST ABSTAIN
5. Consideration of any matters which may properly come before the Meeting,
or any adjournment thereof. At this time, the Board of Directors is not
aware of any other business to come before the Meeting.
FOR AGAINST ABSTAIN
Dated: , 1997
(Printed Name of Shareholder)
(Signature of Shareholder)
This Proxy Must Be Signed Exactly As Your Name Appears On Your Stock
Certificate. Executors, Administrators, Trustees, Etc., Should Give Full
Title As Such. If The Signer Is A Corporation, Please Sign Full Corporate
Name By Duly Authorized Officer.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY. THE FAILURE TO CHECK
A BLOCK WILL BE TAKEN AS A VOTE FOR THE PROPOSITION.
