<PAGE 1>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal quarter ended August 31, 1997
Commission file number 0-17642
CREATIVE GAMING, INC.
(Name of small business issuer as specified in its charter)
New Jersey 22-2930106
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
150 Morris Avenue, Suite 205, Springfield, NJ, 07081
(Address of principal executive offices)
(201) 467-0266
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
As of November 4, 1997, 876,353 shares of the Common Stock
were outstanding.
<PAGE 2>
CREATIVE GAMING, INC. AND SUBSIDIARIES
Form 10-QSB Index
August 31, 1997
PART I
------
Page
Number
------
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheet at August 31, 1997 3
Consolidated Statements of Operations for the
quarters ended August 31, 1997 and 1996 5
Consolidated Statements of Cash Flows for the
quarters ended August 31, 1997 and 1996 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis or
Plan of Operations 10
PART II
-------
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 15
<PAGE 3>
CREATIVE GAMING, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
August 31, 1997
(Unaudited)
ASSETS
Current assets:
Cash $ 23,895
Accounts receivable - net of allowance for
doubtful accounts of $4,792 93,798
Inventories 55,975
Prepaid expenses and other current assets 242,939
---------
Total current assets 416,607
---------
Property and equipment:
Land 2,410,452
Gaming vessel 750,854
Furniture and equipment, net 21,023
---------
Net property and equipment 3,182,329
---------
Other assets:
Receivable from officer 182,364
Deferred consulting expenses 249,402
Intangibles, net of accumulated amortization
of $617,899 171,508
---------
Total other assets 603,274
---------
$4,202,210
=========
See Notes to Consolidated Financial Statements.
<PAGE 4>
CREATIVE GAMING, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
August 31, 1997
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1,001,157
Short-term loans 227,313
Accounts payable, accrued expenses and
other liabilities 819,203
Payable and accrued settlement expenses 362,450
Payable and accrued legal fees 569,509
-----------
Total current liabilities 2,979,632
-----------
Long-term liabilities:
Long-term debt net of current maturities
of $1,001,157 -
Collateralized settlement payable 45,844
-----------
Total long-term liabilities 45,844
-----------
Commitments and contingencies
Stockholders' equity:
Common stock, no par value; authorized:
3,333,333 shares; issued and outstanding:
876,353 shares 19,480,369
Additional paid-in capital 3,198,591
Accumulated deficit (21,206,382)
Unearned consulting and other expenses related
to issued and/or escrowed common stock (295,844)
------------
Total stockholders' equity 1,176,734
------------
$ 4,202,210
============
See Notes to Consolidated Financial Statements.
<PAGE 5>
CREATIVE GAMING, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Quarter Ended August 31,
1997 1996
---------- ----------
Net sales $ 43,348 $ 127,174
Cost of goods sold 6,821 57,291
---------- ----------
Gross profit 36,527 69,883
---------- ----------
Selling expenses 5,980 34,069
General and administrative expenses 456,085 493,057
Gaming projects expenses 75,432 55,785
Interest expense 31,080 27,758
---------- ----------
568,577 610,669
---------- ----------
Net loss $(532,050) $(540,786)
========== ==========
Net loss per share $ (.62) $ (1.18)
========== ==========
See Notes to Consolidated Financial Statements.
<PAGE 6>
CREATIVE GAMING, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Quarter Ended August 31,
1997 1996
---------- ----------
Cash flows from operating activities:
Net loss $(532,050) $(540,786)
---------- ----------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 27,554 61,375
Amortization of deferred consulting expenses 71,695 -
Gaming projects expenses 75,431 55,785
Changes to operating assets and liabilities:
Accounts receivable (65,854) 12,228
Inventories 193 (23,730)
Prepaid expenses and other current assets (83,461) (437,082)
Accounts payable and accrued expenses 62,575 (81,626)
Payable and accrued legal fees 159,991 (28,761)
---------- ----------
Total adjustments 248,124 (441,811)
---------- ----------
Net cash used in operating activities (283,926) (982,597)
---------- ----------
Cash flows from investing activities:
Increase in gaming projects (75,431) (159,351)
Purchases of property (16,363) -
---------- ----------
Net cash used in investing activities (91,794) (159,351)
---------- ----------
Cash flows from financing activities:
Proceeds from short-term borrowings 139,401 76,115
Repayment of short-term borrowings (8,050) (8,458)
Repayment of long-term debt - (46,956)
Proceeds from issuances of stock 146,400 1,250,000
---------- ----------
Net cash provided by financing activities 277,751 1,270,701
---------- ----------
Net increase (decrease) in cash (97,969) 128,753
Cash at beginning of the period 121,864 541,610
---------- ----------
Cash at end of the period $ 23,895 $ 670,363
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ - $ 53,405
========== ==========
Supplemental schedule of non-cash financing activities:
Debt and other liabilities converted to
Common Stock $ 198,138 $ 109,983
========== ==========
See Notes to Consolidated Financial Statements.
<PAGE 7>
CREATIVE GAMING, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
August 31, 1997
(Unaudited)
Note 1 - Basis of Presentation
Creative Gaming, Inc. (the "Company") was formed in August 1988
to provide management and administrative services to its wholly-
owned subsidiaries. The consolidated unaudited financial
statements include the accounts of the Company and its operating
subsidiaries, collectively referred to herein as "CGI".
Significant intercompany accounts and transactions have been
eliminated in consolidation.
CGI is in the process of converting to an entity offering
offshore gaming vessels, other gaming facilities, entertainment
and development of real estate. CGI sells their products,
consisting of educational videos, books, gaming related items and
children's paper products, through mail order and through
retailers, brokers and distributors.
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles. In the opinion of management of the
Company, all material adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
made. Results of operations for the quarter ended August 31, 1997
are not necessarily indicative of the results which may be
expected for any other interim period or for the year as a whole.
To facilitate comparison with the current period, certain amounts
in the prior period have been reclassified.
A one-for-thirty reverse stock split of common stock became
effective on October 31, 1997 after an Amendment to the Company's
Certificate of Incorporation was filed. Each outstanding share of
common stock became one-thirtieth of a share of the new common
stock. The Amendment, which was authorized by the Board of
Directors of the Company on September 29, 1997, reduced the
authorized shares from 100,000,000 to 3,333,333. There was no
change in the par value of the shares. The number of shares and
per share amounts in this Report have been adjusted to reflect
the reverse stock split.
It is suggested that the unaudited financial statements and
notes thereto in this Report be read in conjunction with the
financial statements and notes thereto in the Company's Annual
Report on Form 10-KSB for the fiscal year ended May 31, 1997 (the
"Form 10-KSB"), which was previously filed.
CGI's accompanying consolidated financial statements have been
prepared on a going concern basis. During the past several years,
CGI has experienced substantial recurring losses from operations
and has a working capital deficit. CGI has been dependent, in
part, on proceeds from sales of debt and equity securities and
the exercise of warrants and options. While management believes
its ability to raise additional capital will provide sufficient
cash for CGI to meet its operating requirements for the year
ending May 31, 1998 ("fiscal 1998") and manage its
<PAGE 8>
working capital deficit, there can be no assurances that CGI will
maintain its ability to continue as a going concern.
Note 2 - Gaming Projects and Other Activities
CGI purchased, on November 13, 1996, a vessel for the purpose
of converting it into an offshore gaming vessel. CGI plans to
utilize the vessel for gaming cruises originating in New York.
CGI is currently negotiating a site in New York where the vessel,
when operational, will be docked. CGI is in the initial stages of
refurbishing the vessel. The purchase and refurbishing costs
incurred through August 31, 1997 have been capitalized.
CGI owns 756 acres in Christian County, Missouri, along the
main highway between Springfield, Missouri and Branson, Missouri
(the "Christian County Site"). Management is of the opinion that
the Christian County Site can be used for a time sharing
facility, a hotel/convention center and/or other activities.
CGI and the Eastern Shawnee Tribe of Oklahoma (the "Tribe)
entered into a management agreement to develop and operate a
Class A/Class III gaming facility near Seneca, Missouri (the
"Seneca Facility"). Because of a federal circuit court decision
invalidating the statutory right of the Secretary of the Interior
to dedicate land in trust for Native American Indian tribes under
the Indian Reorganization Act, which opinion was reversed on
October 15, 1996, and a then pending battle for control of the
Tribe, with one of the issues being the management agreement with
CGI, CGI had suspended any further action by it with respect to
the Seneca Facility. Depending on developments, the Company will
review whether it will attempt to proceed with the Seneca
Facility.
CGI also continues to explore the possibility of opening and
operating other gaming facilities. Consulting and other related
gaming costs of approximately $75,000 have been charged to
operations for the quarter ended August 31, 1997.
Note 3 - Issuance of Short-term Debt
During July 1997, the Company entered into unsecured
installment loan agreements with two vendors in the aggregate net
principal amount of $72,401 at an average annual interest rate of
9.8%. The balances are due in aggregate monthly installments of
$8,376, including interest, through April 1998.
On July 15 and 23, 1997, the Company issued promissory notes to
two lenders for the principal amounts of proceeds of $25,000 and
$35,000, respectively, both at an annual interest rate of 12%,
due in one year, and secured by liens on the vessel owned by the
Company. As additional consideration for these loans, the Company
issued 1,666 and 2,333 shares of common stock, respectively, to
the two lenders.
Note 4 - Long-term Debt
On February 28, 1996, CGI, as part of its purchase of certain
property, was issued a 10% mortgage from the sellers in the
principal amount of $1,072,475, with payments of $50,000
(including interest) due every three months and a final payment
of principal and interest due at the end of two years. Effective
May 31, 1997 the payment terms of the mortgage were extended
<PAGE 9>
to a payment due June 1, 1998 for full principal balance and accrued
interest. As part of the agreement to extend the due date of the
mortgage, CGI issued 3,333 shares of common stock to the sellers
and placed a lien on adjacent property owned by CGI as collateral
for the mortgage.
Note 5 - Common Stock
Per share amounts are based upon the weighted average common
stock shares outstanding of 854,876 and 458,897 for the quarters
ended August 31, 1997 and 1996, respectively. Losses per share of
common stock were computed by dividing the corresponding loss for
each period by the weighted average number of shares of common
stock outstanding for each period. Common stock equivalents are
not included because the effect would be anti-dilutive. Fully
diluted computations are not shown because all potentially
dilutive securities would have an anti-dilutive effect on per
share amounts.
On June 5, 1997, the Company issued to an investor 6,666 shares
of common stock for gross proceeds of $30,000 and issued a common
stock purchase warrant expiring June 29, 2001 to purchase 6,666
shares of common stock at an exercise price of $7.50 per share,
commencing December 30, 1997.
On June 9, 1997 the Company entered into a consulting agreement
with an individual to perform financial and public relation
consulting services for a period of three months. The Company
issued 16,666 shares of common stock to the individual for these
services.
On June 12, 1997, an investor exercised its warrant expiring
January 2, 2000 to purchase 3,333 shares of common stock at $4.92
per share after the Company lowered the exercise price to $4.92
per share.
On July 2, 1997, an individual exercised his warrant expiring
August 6, 1999 to purchase 33,333 shares of common stock at an
exercise price of $3.00 per share after the Company lowered the
exercise price to $3.00 per share.
On July 29, 1997 CGI issued 3,333 shares of common stock each
to two individuals for services rendered and issued to each
individual a common stock purchase warrant expiring August 5,
2000 to purchase 3,333 shares of common stock at an exercise
price of $7.50 per share.
During the quarter ended August 31, 1997, the Company issued
420 shares of common stock for various services rendered. The
stock was valued at the value of the services rendered.
Note 6 - Subsequent Events
On September 29, 1997, the Company entered into an agreement
and an investor group purchased 100,000 shares of Series C 12%
Convertible Redeemable Preferred Stock, $1.00 par value (the
"Series C Preferred Stock") of the Company for $100,000. The
Company also issued to the group common stock purchase warrants
expiring September 29, 1999 to purchase 1,000,000 shares of
common stock at an exercise price of $.10 per share. The
agreement provides that each share of the Series C Preferred
Stock is convertible into 46.5 shares of common stock or an
aggregate of 4,650,000 shares.
<PAGE 10>
CREATIVE GAMING, INC. AND SUBSIDIARIES
Item 2.
Management's Discussion and Analysis or Plan of Operations
RESULTS OF OPERATIONS
---------------------
The following discussion relates to operations.
SALES
Sales for the quarter ended August 31, 1997 decreased by
$83,826 or 66% as compared with sales for the corresponding prior
year period. The decrease was principally due to lower sales
volume with a major customer and to a shift from marketing videos
and other products to emphasis on gaming projects which have not
as yet produced revenues.
GROSS PROFIT
Gross profit for the quarter ended August 31, 1997 decreased by
$33,356 or 48% as compared with gross profit for the
corresponding prior year period. Gross profit margins for the
quarter ended August 31, 1997 were 84% as compared with 55% for
the corresponding prior year period. The changes were principally
due to the decreases in sales during the periods which resulted
in changes in customer and product mix with higher gross margins.
SELLING EXPENSES
Selling expenses for the quarter ended August 31, 1997
decreased by $28,089 or 82% as compared with these expenses in
the corresponding prior year period. The decrease was principally
due to a shift in expenses from marketing videos and other
products to emphasis on potential gaming projects which have not
as yet produced revenues.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the quarter ended
August 31, 1997 decreased by $36,972 or 7% as compared with these
expenses in the corresponding prior year period. The decrease was
principally due to litigation costs incurred during the prior
period.
GAMING PROJECTS EXPENSES
Gaming projects expenses increased for the quarter ended August
31, 1997 by $19,647 or 35% as compared with this expense in the
corresponding prior year periods. The increase was principally
due to the expenses incurred for the offshore gaming vessel
project during the current period.
<PAGE 11>
INTEREST EXPENSE
Interest expense for the quarter ended August 31, 1997
increased by $3,322 or 11% as compared with interest expense for
the corresponding prior year period. The increase was principally
due to interest on a larger amount of short-term loans
outstanding during the current period.
NAFTA
The North American Free Trade Act does not have a significant
effect on the consolidated operations.
INFLATION
Inflation does not have an impact on the consolidated
operations.
LIQUIDITY AND CAPITAL RESOURCES
CGI's cash position was $23,895 as of August 31, 1997 as
compared with $121,864 as of May 31, 1997 or a decrease of
$97,969. Cash flows from operating activities during the three
months ended August 31, 1997 used cash of $283,926 due to the net
loss of $532,050 adjusted for depreciation and amortization of
$99,249, gaming projects expenses of $75,431, an increase in
current liabilities of $222,566, and offset by an increase in
current assets of $149,122.
During the three months ended August 31, 1997, CGI expended
$75,431 for gaming projects and $16,363 for the conversion of a
vessel into an offshore gaming vessel or an aggregate of $91,794
in net cash used in investing activities.
The net cash provided by financing activities during the three
months ended August 31, 1997 was $277,751, consisting of net
short-term borrowings of $131,351 and proceeds of $146,400 from
issuances of stock. These proceeds funded operational
requirements, gaming project costs and vessel purchase costs.
Operating liabilities of $198,138 were converted to common stock
during the three months ended August 31, 1997.
Management believes that, as a result of the cash flow from
operations and the proceeds of $280,000 received through November
4, 1997 in recent offerings of equity and debt financing and
potential sales of equity through private placements and
exercises of outstanding Common Stock purchase warrants, it will
raise sufficient funds to meet its cash requirements for at least
the balance of fiscal 1998 based on its current level of
commitments. The Company intends to file a registration statement
under the Securities Act that will register shares of the Common
Stock as soon as practicable after the filing of this Report. It
is management's position that the filing of the registration will
encourage the exercise of some of the underlying outstanding
Common Stock purchase warrants. There can be no assurance that
the Company will be able to raise this additional financing.
Should one of the proposed gaming projects require funds for
implementation, management believes, based on its discussions
with persons in the investment banking community, that any funds
required for such a project can be obtained. There can be no
assurances that the market price of the Common Stock will be
conducive to the exercise of Common Stock purchase warrants and
stock options, nor that funds can be obtained to finance a
specific project if required will be available and, if available,
on acceptable terms. See the
<PAGE 12>
sections "Gaming Vessel Project", "Branson Project" and "Other
Gaming Projects" in Item 1 to the Form 10-KSB.
As of August 31, 1997 and the date of this filing, there were
no commitments for material capital expenditures other than those
related to the Christian County Site (see the sections "Branson
Project", in Item 1 and the section "Liquidity and Capital
Resources" in Item 6 to the Form 10-KSB). However, the Company
currently estimates that it will require approximately
$25,000,000 to make the gaming vessel project operational (see
Note 2 to Unaudited Consolidated Financial Statements). The
Company has retained an investment banker to secure funding for
the gaming vessel project.
CGI expects that the proceeds from the planned sales of equity
securities during the next 12 months will provide adequate funds
to meet operating requirements. There can be no assurance,
however, that CGI will consummate such security sales to meet the
above.
PART II
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The following exhibits marked with a footnote reference were
filed with a periodic report filed by the Company pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended, or
a registration statement effective under the Securities Act of
1933, as amended (the "Securities Act"), and are incorporated
herein by this reference. If no footnote reference is made, the
exhibit is filed with this Report.
Number Exhibit
- ------ -------
1(a) Copy of Management Agreement dated as of October 20, 1995
between Eastern Shawnee Tribe of Oklahoma (the "Tribe")
and Creative Gaming International, Inc. ("CGII"). (1)
1(b) Copy of Option Agreement dated as of November 8, 1995
between the Tribe and CGI. (1)
<PAGE 13>
1(c) Copy of Letter dated December 13, 1995 extending the
option terms of Exhibit 1(b) hereto. (1)
1(d) Copy of Loan Agreement relating to Exhibit 1(a) hereto. (2)
2(a) Copy of Agreement dated February 28, 1996 between Cook
Hollow Company as Seller, and CGII and the Company as Buyer. (3)
2(a)(1) Copy of Promissory Note dated February 28, 1996 from CGII
to Cook Hollow Company is Exhibit B to Exhibit 2(a) hereto. (3)
2(a)(2) Copy of Future Advance Obligation Wraparound Deed of
Trust dated as of February 28, 1996 between CGII, Gary A.
Powell, as Trustee, and Cook Hollow Company is Exhibit C
to Exhibit 2(a) hereto. (3)
2(a)(3) Copy of Wraparound Mortgage Agreement effective February
28, 1996 between CGII as Borrower, and Cook Hollow
Company, as Lender, is Exhibit D to Exhibit 2(a) hereto. (3)
2(a)(4) Copy of Indemnity Agreement effective February 28, 1996
among CGII and the Company, as Indemnitors and Cook
Hollow Company, as Indemnitee, is Exhibit E to Exhibit
2(a) hereto. (3)
2(a)(5) Copy of Standstill Agreement effective June 22, 1997
between Cook Hollow Company, as Seller, and CGII, as
buyer. (4)
3(a) Copy of 10% Promissory Note due July 16, 1998.
3(b) Copy of 10% Promissory Note due July 23, 1998.
4 Copy of Consulting Agreement effective June 9, 1997
between Arthur Malone, Jr. and the Company. (6)
5 The Company's Common Stock purchase warrant expiring June
29, 2001 and the Common Stock purchase warrants expiring
August 5, 2000 are substantially identical to the form of
Common Stock purchase warrant expiring April 29, 1998
filed as Exhibit 10(d)(1) to the Company's Annual Report
on Form 10-KSB for the fiscal year ended May 31, 1996
except as to the name of the holder, the expiration date
and the exercise price and, accordingly, pursuant to
instruction 2 to Item 601 of Regulation S-K under the
Securities Act are not individually filed.
6(a) Copy of Purchase and Sale Agreement dated as of October
___, 1996 by and among Jerry Ward Cars, Inc., Edward
Lockel, Jim's Truck and Equipment, Inc. and Creative
Gaming International, Inc. (5)
6(b) Copy of Sale Agreement dated March 7, 1997 between CGII
and CGI Vessel, Inc. (4)
7 Copy of 12% Cumulative Convertible Redeemable Preferred
Stock, Series C, Purchase Agreement between the Company
and a group of investors dated September 29, 1997. (7)
8 Copy of Amendment to Certificate of Incorporation filed
on October 24, 1997.
<PAGE 14>
9 Copy of Certificate of Designations and Preferences of
the Series C Preferred Stock filed on October 24, 1997. (7)
_______________________
(1) Filed as an exhibit to the Company's Quarterly Report on
Form 10-QSB for the quarter ended November 30, 1995 and
incorporated herein by this reference.
(2) Filed as an exhibit to the Company's Annual Report on
Form 10-KSB for the fiscal year ended May 31, 1996 and
incorporated herein by this reference.
(3) Filed as an exhibit to the Company's Quarterly Report on
Form 10-QSB for the quarter ended February 29, 1996 and
incorporated herein by this reference.
(4) Filed as an exhibit to the Company's Annual Report on
Form 10-KSB for the fiscal year ended May 31, 1997 and
incorporated herein by this reference.
(5) Filed as an exhibit to the Company's Quarterly Report on
Form 10-QSB for the quarter ended February 28, 1997 and
incorporated herein by this reference.
(6) Filed as an exhibit to the Company's Registration
Statement on Form S-8 filed on June 23, 1997 and
incorporated herein by this reference.
(7) Filed as an exhibit to a Schedule 13D filed by Arthur L.
Malone, Jr. on October 9, 1997 and incorporated herein by
this reference.
(b) Reports on Form 8-K
None
<PAGE 15>
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.
Dated: November 4, 1997
CREATIVE GAMING, INC.
By: /s/ PETER J. JEGOU
---------------------
Peter J. Jegou
President and Chief Executive Officer
By: /s/ WALTER J. KRZANOWSKI
---------------------------
Walter J. Krzanowski
Treasurer and Chief Financial Officer
<PAGE E-1>
$25,000
CREATIVE GAMING, INC.
12% Promissory Note due July 16, 1998 or
earlier in the event of a specified transaction
Creative Gaming, Inc., a New Jersey corporation (herein
referred to as the "Maker"), for value received, hereby promises
to pay to Alyse A. Jegou or order (the "Payee"), on the first to
occur of July 16, 1998 or the receipt by the Maker of proceeds
from the sale of the vessel M/V Empire, currently owned by CGI
Vessel, Inc., a wholly-owned subsidiary of the Maker (the
"Vessel"), the principal amount of twenty-five thousand ($25,000)
Dollars, in such coin or currency of the United States of America
as at the time of payment shall be legal tender for public and
private debts, at the office or agency of the Maker at 150 Morris
Avenue in the City of Springfield, State of New Jersey, or at
such other place as the Maker may designate, and to pay interest
(computed on the basis of a 360-day year of twelve 30-day months)
at said office or agency, in like coin or currency, on the unpaid
portion of said principle amount from the date hereof, on July
16, 1998 at the rate of twelve percent (12%) per annum, unless
the date hereof is a date to which interest has been paid or duly
provided for, in which case interest shall be paid from the date
of this Promissory Note until payment of said principal amount
has been made or duly provided for.
As additional consideration for this Promissory Note, the
Maker has agreed to issue to the Payee 50,000 shares of Common
Stock, no par value, of the Maker.
As collateral for this Promissory Note, the Maker has agreed
to establish a lien on the Vessel on behalf of the Payee in the
form of a First Preferred Ship's Mortgage.
This Note may be prepaid in whole at any time or in part
from time to time without premium or penalty.
The Payee may, without notice and without releasing the
liability of any part hereto, grant extensions or renewals hereof
from time to time and for any term. The holder of this Note,
whether such person is the Payee or its successor, assignee or
indorsee (hereinafter referred to as the "Holder"), shall not be
liable for, or prejudiced by, the failure to collect or for lack
of diligence in bringing suit on this Note or any renewal or
extension hereof.
The Maker waives presentment, demand for payment, notice of
dishonor, notice of protest, and protest, and all other notices
and demands, in connection with the delivery, acceptance,
performance or default of this Note.
Any notice or demand required or permitted to be made or
given hereunder shall be deemed to be sufficiently given or made
if given by personal service or by certified or registered mail,
return receipt requested, addressed, if to the Maker, at the
Maker's address as first above written, or if to the Holder, at
the Holder's address as specified to the Maker by notice given in
accordance with this provision. Either party hereto may change
its address by like notice to the other party hereto.
<PAGE E-2>
This Note may be changed, modified, terminated, waived or
discharged orally, but only by an agreement in writing signed by
the party against whom the enforcement of any such change,
modification, termination, waiver or discharge is sought. This
Note shall be construed and enforced in accordance with the laws
of the State of New Jersey
IN WITNESS WHEREOF, the Maker has executed this Note as of
July 16, 1997.
ATTEST: CREATIVE GAMING, INC.
By: /s/ Linda A. Artale By: /s/ Walter J. Krzanowski
--------------------- --------------------------
Treasurer & CFO
<PAGE E-3>
$35,000
CREATIVE GAMING, INC.
12% Promissory Note due July 23, 1998 or
earlier in the event of a specified transaction
Creative Gaming, Inc., a New Jersey corporation (herein
referred to as the "Maker"), for value received, hereby
promises to pay to the Paul Kulina Trust or order (the
"Payee"), on the first to occur of July 23, 1998 or the
receipt by the Maker of proceeds from the sale of the vessel
M/V Empire, currently owned by CGI Vessel, Inc., a wholly-
owned subsidiary of the Maker (the "Vessel"), the principal
amount of thirty-five thousand ($35,000) Dollars, in such
coin or currency of the United States of America as at the
time of payment shall be legal tender for public and private
debts, at the office or agency of the Maker at 150 Morris
Avenue in the City of Springfield, State of New Jersey, or
at such other place as the Maker may designate, and to pay
interest (computed on the basis of a 360-day year of twelve
30-day months) at said office or agency, in like coin or
currency, on the unpaid portion of said principle amount
from the date hereof, on July 23, 1998 at the rate of twelve
percent (12%) per annum, unless the date hereof is a date to
which interest has been paid or duly provided for, in which
case interest shall be paid from the date of this Promissory
Note until payment of said principal amount has been made or
duly provided for.
As additional consideration for this Promissory Note,
the Maker has agreed to issue to the Payee 70,000 shares of
Common Stock, no par value, of the Maker.
As collateral for this Promissory Note, the Maker has
agreed to establish a lien on the Vessel on behalf of the
Payee in the form of a First Preferred Ship's Mortgage.
This Note may be prepaid in whole at any time or in
part from time to time without premium or penalty.
The Payee may, without notice and without releasing the
liability of any part hereto, grant extensions or renewals
hereof from time to time and for any term. The holder of
this Note, whether such person is the Payee or its
successor, assignee or indorsee (hereinafter referred to as
the "Holder"), shall not be liable for, or prejudiced by,
the failure to collect or for lack of diligence in bringing
suit on this Note or any renewal or extension hereof.
The Maker waives presentment, demand for payment,
notice of dishonor, notice of protest, and protest, and all
other notices and demands, in connection with the delivery,
acceptance, performance or default of this Note.
Any notice or demand required or permitted to be made
or given hereunder shall be deemed to be sufficiently given
or made if given by personal service or by certified or
registered mail, return receipt requested, addressed, if to
the Maker, at the Maker's address as first above written, or
if to the Holder, at the Holder's address as specified to
the Maker by notice given in accordance with this provision.
Either party hereto may change its address by like notice to
the other party hereto.
<PAGE E-4>
This Note may be changed, modified, terminated, waived
or discharged orally, but only by an agreement in writing
signed by the party against whom the enforcement of any such
change, modification, termination, waiver or discharge is
sought. This Note shall be construed and enforced in
accordance with the laws of the State of New Jersey
IN WITNESS WHEREOF, the Maker has executed this Note as
of July 23, 1997.
ATTEST: CREATIVE GAMING, INC.
By: /s/ Linda A. Artale By: /s/ Walter J. Krzanowski
--------------------- -------------------------
Treasurer & CFO
<PAGE E-5>
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CREATIVE GAMING, INC.
---------------------
To: The Secretary of State
State of New Jersey
Pursuant to the provisions of Section 14A:17.15.1(3) of
the Business Corporation Act of the State of New Jersey, the
undersigned corporation executes the following Certificate
of Amendment to its Amended and Restated Articles of
Incorporation:
1. The name of the Corporation is Creative Gaming, Inc.
2. The following is a copy of a resolution duly
adopted by the directors of the Corporation unanimously on
September 29, 1997:
RESOLVED, that the opening paragraph of Articles IV and
paragraph (a) thereto of the Amended and Restated Articles
of Incorporation (the "Articles of Incorporation") relating
to the Capital Stock of the Corporation be, and the same
hereby is, amended to read as follows:
ARTICLES IV: CAPITAL STOCK
The total number of shares of capital stock
authorized to be issued by the Corporation will be
Five Million Three Hundred Thirty-Three Thousand
Three Hundred Thirty-Three (5,333,333) shares,
divided into two classes, as follows:
(a) Three million three hundred thirty-
three thousand three hundred thirty-three
(3,333,333) shares of Common Stock, having no par
value per share (hereinafter sometimes referred to
as "Common Stock")
<PAGE E-6>
All remaining provisions of the Articles of
Incorporation shall remain in full force and
effect.
3. The Amendment to the Articles of Incorporation
will not adversely effect the rights or preferences of the
holders of outstanding shares of any class or series and
will not result in the percentage of authorized shares that
remain unissued after the combination exceeding the
percentage of authorized shares that was unissued before the
combination.
4. Each outstanding old share of the Common Stock, no
par value, of which there are 26,385,991 shares outstanding,
shall be reclassified and combined into one-thirtieth of a
new share of the Common Stock, no par value, and the
authorized shares of the Common Stock, no par value, shall
be reduced from 100,000,000 to 3,333,333.
5. The effective date of the combination shall be
October 30, 1997.
Dated this 17th day of October, 1997
CREATIVE GAMING, INC.
By: /s/ Peter J. Jegou
----------------------
Peter J. Jegou, President
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<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> AUG-31-1997
<CASH> 23,895
<SECURITIES> 0
<RECEIVABLES> 93,798
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0
0
<COMMON> 19,480,369
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<CGS> 6,821
<TOTAL-COSTS> 462,065
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