SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from:______________ to _________________
Commission File No. 33-25817
GLOBAL GAMES CORPORATION
(Exact Name of Small Business Issuer as Specified in Charter)
NEVADA 13-3500-677_
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification number)
400 SOUTH FOURTH STREET SUITE 720
MINNEAPOLIS, MINNESOTA 55415___________
(Address of Principal Executive Offices, Including Zip Code)
(612) 672-0834
(Registrant's Telephone Number, Including Area Code)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file
such reports; and (2) has been subject to such filing repuirements for the past
90 days. YES No
As of Novermber 23, 1999, the registrant had 79,378,291 shares of $.01 par value
Common Stock outstanding.
<PAGE>
GLOBAL GAMES CORPORATION
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report...............................................F-2
Balance Sheet..............................................................F-3
Statements of Operations...................................................F-4
Statement of Stockholders' Deficit.........................................F-5
Statements of Cash Flows...................................................F-6
Notes to Financial Statements.......................................F-7 - F-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Global Games Corporation
Minneapolis, Minnesota
We have audited the accompanying balance sheet of Global Games
Corporation as of March 31, 1999 and the related statements of operations,
changes in stockholders' deficit and cash flows for the years ended March 31,
1999 and 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit also includes examining on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects the financial position of Global Games
Corporation as of March 31, 1999 and the results of its operations and cash
flows for the years ended March 31, 1999 and 1998 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2 to the financial statements, the Company incurred significant losses of
$645,000 and $1,650,000 in 1999 and 1998, respectively. Additionally, the
Company had working capital and total capital deficiencies in excess of
$3,600,000 each at March 31, 1999. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
with respect to these matters are also described in Note 2 to the financial
statements. The accompanying financial statements do not include any adjustments
that might result should the Company be unable to continue as a going concern.
/s/ Feldman Sherb Horowitz & Co. P.C.
Certified Public Accountants
November 15, 1999
New York, New York
F-2
<PAGE>
GLOBAL GAMES CORPORATION
BALANCE SHEET
SEPTEMBER 30, 1999
(Unaudited)
ASSETS
CURRENT ASSETS - CASH ........................................ $ 889
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable ........................................... $ 2,416,435
Accounts payable ........................................ 758,557
Accrued expenses ........................................ 491,568
Note payable - officer .................................. 162,639
-----------
TOTAL CURRENT LIABILITIES ................................... 3,829,199
-----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Common stock, $.01 par value, 100,000,000 shares
authorized; 65,064,063 shares issued and outstanding .. 650,640
Additional paid-in capital .............................. 5,224,084
Accumulated deficit ..................................... (9,654,982)
Subscriptions receivable (4,800,000 shares) ............. (48,052)
-----------
TOTAL STOCKHOLDERS' DEFICIT ................................. (3,828,310)
-----------
$ 889
===========
See notes to financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
GLOBAL GAMES CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
------------------------------------------------------------
September 30, September 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C>
REVENUES ................................. $ -- $ -- $ -- --
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
General and administrative ............ 26,670 62,840 48,651 103,348
Interest .............................. 74,000 78,160 147,000 151,160
Software development costs ............ 6,800 22,100 6,800 34,100
------------ ------------ ------------ ------------
TOTAL COSTS AND EXPENSES .. (107,470) (163,100) (202,451) (288,608)
------------ ------------ ------------ ------------
NET LOSS ................................. $ (107,470) $ (163,100) $ (202,451) $ (288,608)
============ ============ ============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE .. $ (0.00) $ (0.00) $ (0.00) $ (0.00)
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 65,064,063 60,258,813 65,064,063 60,258,813
============ ============ ============ ============
</TABLE>
See notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
GLOBAL GAMES CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended September 30,
----------------------------
1999 1998
----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss ............................................ $(202,451) $ (288,608)
Adjustments to reconcile net loss to net cash
used in operations:
Increase in accounts payable and accrued expenses 164,211 259,957
--------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes and loans payable - officer ....... 38,240 28,947
--------- ---------------
NET INCREASE IN CASH ..................................... -- 296
CASH - beginning of period ............................... 889 593
--------- ---------------
CASH - end of period ..................................... $ 889 $ 889
========= ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash payments made:
Income taxes ............................................. $ -- $ --
========= ===============
Interest ................................................. $ -- $ --
========= ===============
========= ===============
</TABLE>
See notes to financial statements.
F-4
<PAGE>
GLOBAL GAMES CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements reflect all
adjustments which, in the opinion of management, are necessary for a
fair representation of the financial position and the results of
operations for the interim periods presented.
The results of operations for any interim period are not necessarily
indicative of the results attainable for a full fiscal year.
The financial statements have been prepared on the basis that the
Company will continue as a going concern. The ongoing losses and working capital
deficiency raise substantial doubt about the Company's ability to raise
additional equity capital or debt financing, neither of which can be assured.
The accompanying financial statements do not include any adjustments that might
be necessary should the Company be unable to continue as a going concern.
These statements have been prepared by the Company and are unaudited.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. As such, these financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's Annual Report on Form 10K-SB for the year ended March 31, 1999.
2. NOTES PAYABLE
The notes are payable on demand to unsecured lenders, with
interest, at twelve percent per annum.
As of November 15, 1999, substantially all the note holders
had agreed to accept common stock and warrants in payment of a balance
owed at March 31, 1999 of $2,493,000 of outstanding principal and
interest. The Company has placed 14,314,228 common shares and 3,578,557
warrants in escrow pending completion of the conversion of debt.
The warrant holders are entitled to purchase shares at $0.25
per share for a period of three years commencing with the closing of
the transaction. The completion of the transaction is subject to the
approval of the Securities Division of the Minnesota Attorney General's
office.
F-7
<PAGE>
NOTES PAYABLE (CONTINUED)
The following condensed pro forma balance sheet assumes that
the prospective conversion of debt to equity occurred as of March 31,
1999. Notes payable of $2,493,000 were converted to 14,314,228 shares
of the Company's common stock.
BALANCE SHEET MARCH 31, 1999
HISTORICAL PRO FORMA
CURRENT ASSETS $ 889 $ 889
========= =========
CURRENT LIABILITIES $ 3,626,748 $1,133,748
---------- ---------
Common Stock 650,640 793,782
Additional Paid-In Capital 5,176,032 7,525,890
DEFICIT (9,452,531) (9,452,531)
---------- ----------
TOTAL STOCKHOLDERS' DEFICIT (3,625,859) (1,132,859)
---------- ----------
$ 889 $ 889
============== ===============
3. CONTINGENCIES
The Company is a defendant in an action brought in the
Wisconsin Circuit Court. The plaintiff alleges that a former officer
borrowed funds and secured such borrowings with the Company's stock and
that the Company illegally interfered with efforts to acquire such
stock. Legal counsel considers it unlikely that a loss will be incurred
and, accordingly, no provision for liability has been made in the
financial statements.
The Company is a defendant in a lawsuit brought in Nevada.
This suit relates to a disputed merger transaction and names former
officers of the Company as co-defendants. Management is of the opinion
that the action is without merit and, accordingly, no provision for
potential loss, if any, has been made in the financial statements.
In 1996, the Company's former officers sold unregistered
securities to Minnesota residents without approval from Minnesota's
office of securities regulation. Such action resulted in the state's
issuance of a "cease and desist" order in February 1999 causing the
Company to be effectively prohibited from selling shares to Minnesota
residents. The Company is permitted, subject to state approval, to
issue shares to creditors in exchange for the extinguishment of agreed
upon liabilities.
F-8
<PAGE>
Item 2.
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS.
Global has been in a restructuring mode in the last two years and will
continue to develop additional relationships and expand its licensees and
software development.
The Company has generated no revenue during this time therefore no
comparative figures are presented herein.
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1999, the Company had current assets of $889, current
liabilities of $3,829,199, and working capital deficit of $3,828,310.
The Company intends to restructure its existing debt and raise additional
capital through future issuances of stock and debentures and ultimately to
develop a viable business.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
LEGAL PROCEEDINGS
FROM TIME TO TIME THE COMPANY MAY BE INVOLVED IN LITIGATION IN THE ORDINARY
COURSE OF BUSINESS. IN THE OPINION OF MANAGEMENT, THERE ARE NO ACTIONS, SUITS,
PROCEEDINGS OR GOVERNMENTAL INVESTIGATIONS PENDING, OR TO THEIR KNOWLEDGE,
THREATENED AGAINST GLOBAL OR ANY OF ITS SUBSIDIARIES WHICH, EITHER SINGLY, OR
IN THE AGGREGATE, WILL HAVE A MATERIAL EFFECT ON THE COMPANY.
THE COMPANY IS CURRENTLY THE DEFENDANT IN AN ACTION BROUGHT BY DAVID
STUFFACHER IN THE STATE OF WISCONSIN CIRCUIT COURT FOR DANE COUNTY, CASE NO.
98-CV-1677. IN THIS ACTION, THE PLAINTIFF ALLEGES THAT GARY JAMIESON BORROWED
FUNDS FROM THE PLAINTIFF, AND SECURED SUCH BORROWING WITH A PLEDGE OF STOCK OF
THE COMPANY. PLAINTIFF ALLEGES THAT THE COMPANY INTERFERED WITH HIS EFFORTS TO
EXERCISE HIS RIGHTS IN SUCH COLLATERAL STOCK. IT IS THE COMPANY'S POSITION
THAT THE STOCK THAT WAS PLEDGED WAS NOT VALIDLY ISSUED. THE COMPANY INTENDS TO
CONTEST THE CASE VIGOROUSLY. IT IS THE EVALUATION OF THE COMPANY'S ATTORNEYS
THAT THERE IS NOT A SUBSTANTIAL LIKELIHOOD OF AN UNFAVORABLE OUTCOME. HOWEVER,
THERE CAN BE NO ASSURANCE THAT THERE WILL NOT BE AN UNFAVORABLE OUTCOME, AND
COUNSEL FOR THE COMPANY IS UNABLE TO ESTIMATE THE LIKELY RANGE OF THE
POTENTIAL LOSS.
THE COMPANY IS THE SUBJECT OF A CONSENT CEASE AND DESIST ORDER, ISSUED BY THE
STATE OF MINNESOTA, COMMISSIONER OF COMMERCE, IN RESPONSE TO FORMAL ACTION
INSTITUTED AGAINST THE COMPANY BY THE STATE OF MINNESOTA, WHICH ALLEGED THAT
THE COMPANY, THROUGH ITS FORMER OFFICES, HAD SOLD SHARES OF ITS COMMON STOCK
TO INVESTORS IN THE STATE OF MINNESOTA WITHOUT REGISTRATION AS REQUIRED BY
MINN STAT SECTION 80A.08, AND WITHOUT AN APPLICABLE EXEMPTION FROM
REGISTRATION. THE CONSENT ORDER, AGREED TO BY THE COMPANY AND ITS OFFICERS,
PROVIDES THAT THE COMPANY SHALL CEASE AND DESIST FROM OFFERING OR SELLING ITS
SECURITIES IN THE STATE OF MINNESOTA UNLESS IT COMPLIES WITH MINN. STATUTE
CHAPTER 80A (1998), WITH THE EXCEPTION THAT IT WAS ALLOWED TO ISSUE SHARES OF
STOCK TO ITS EXISTING CREDITORS IN AN ATTEMPT TO RETIRE CORPORATE DEBT.
THE CONSENT ORDER WAS ISSUED IN MARCH, 1999.
THE COMPANY IS A DEFENDANT IN A LAWSUIT IN NEVADA, ENTITLED JOSEPH GOULD V.
GLOBAL GAMES, CLARK COUNTY DISTRICT COURT CASE NO. A 362348, WHICH RELATES TO
A DISPUTED MERGER TRANSACTION AND WHICH NAMES FORMER OFFICERS OF THE COMPANY
AS CO-DEFENDANTS. MANAGEMENT IS OF THE OPINION THAT THE ACTION IS WITHOUT
MERIT, AND IS VIGOROUSLY DEFENDING THE COMPANY.
ITEM 5. OTHER INFORMATION.
NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A) EXHIBITS.
No exhibits are submitted.
B) FORM 8-K
No reports on form 8-K are submitted.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GLOBAL GAMES CORPORATION
(the "Registrant" or "Company")
DATED:12/01/1999 /S/ GARY L. BORGLUND
President/CEO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000843520
<NAME> GLOBAL GAMES CORP.
<MULTIPLIER> 1
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
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0
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