SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1998 Commission File No. 0-6518
Trilogy Gaming Corporation
State of Incorporation I.R.S. Employer Identification No.
Delaware 87-0280129
1717 E. Bell Road, Suite 12
Phoenix, Arizona 85022
Telephone: (602) 788-5801
Securities Registered Pursuant to Section 12 (b) of this Act:
Title of Each Class Name of Each Exchange on Which Registered
None None
Securities Registered Pursuant to Section 12 (g) of this Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Voting Stock, None
Par Value $0.001 Per Share
Indicate by check mark whether the Registrant (1) has filed all annual,
quarterly and other reports
required to be filed with the Commission, and (2) has been subject to the
filing requirements for at
least the past ninety days.
Yes No
BUSINESS
The Company has the exclusive United States license for the Trilogy scratch tab
game and is currently in development
its scratch tab. The Trilogy game shall be introduced with free promotional
plays on the $2 and $5 Trilogy scratch tabs
to stimulate sales for maximum performance and player appeal. The TRILOGY
scratch tab game combines on the same
Trilogy scratch tab (ticket), the two most familiar and popular state lottery
games, the scratch ticket game and Lotto
numbers game, hence the education process is minimized and the public should
learn quickly, that with TRILOGY they
could get more "bang for the buck".
The Company plans to market its Trilogy scratch tab game for added player
promotion to Indian Gaming casinos, Indian
gaming bingo halls, Charity gaming organizations and State Lotteries and
anticipates to earn 7 % +/- of the Trilogy
scratch tab sales. Marketing will be pursued with commissioned representatives
experienced in Indian, Charity and/or
Lottery gaming. The Company and its marketing agents may be required to have
gaming license.
ITEM 1. THE NATURE OF BUSINESS, PRODUCTS AND SERVICES
The Company is in the business of marketing its products to Indian gaming
enterprises, Charitable gaming entities and
State Lotteries in the United States. Gaming & Wagering magazine reported in
1995 in the United States: Indian
Reservation Gaming Revenues of 49 billion dollars, up 9.4% over the previous
year, Charitable Gaming revenues of
9.8 billion dollars, up 9% over the previous year 1996 and State Lottery sales
of 38.8 billion dollars, up 12% over the
previous year 1996. Most Indian Gaming enterprises market bingo, pull-tabs,
and video slot games. There are
Charitable Gaming enterprises that market bingo, raffle and pull-tabs games.
State lotteries market on-line lottery
drawings, or numbers type games, scratch or instant type scratchier tickets
games.
In July of 1996, the Company begun to take commitments for orders. The Company
entered into an agreement with the
St. Regis Mohawk Indian Tribe of NY for 1,500 Trilogy dispensers and also has a
"Location Agreement of Intent"
signed 7/25/1996 with Indian Tribal Authority for 1,000 Trilogy scratch tab
dispensers
The Company entered into an agreement with the St. Regis Mohawk Indian Tribe of
NY for 1,500 Trilogy dispensers
and also has a "Location Agreement of Intent" signed 7/25/1996 with the St.
Regis Mohawk Indian tribe located within
the state of NY. The agreement provides in part that the "Company and or its
authorized Distributor shall begin to
deliver on or before 120 days after receipt of Class II classification from
either the State of New York or National Indian
Gaming Commission three hundred (300) Trilogy tab dispensers to the TRIBE and
from said dispensers, the TRIBE
shall market TNAG's Trilogy scratch tabs on consignment from the Tribes Indian
Reservation within the State of New
York and 60 days after said 300 dispensers have been delivered, TGC shall
deliver two hundred fifty (250) additional
Trilogy dispensers per month until a total of one thousand five hundred (1,500)
Trilogy dispensers have been delivered".
No financing plan for the dispensers has been finalized as of this filing date
of this report.
The Company plans to file with the St. Regis Tribe Gaming Commission on its
Gaming Enterprise Registration
Application form, the Company, its Distributor, if any, the Company's Trilogy
scratch tab game, dispenser,
communications, accounting and security specifications. The Tribal Gaming
Commission has provided the Company
with its Temporary Gaming Registration form which states that the application
is granted providing the application is
complete and that the gaming application submitted to the St. Regis Gaming
Commission is contracted to the New York
State Racing and Wagering Board, Gaming Unit to process such applications.
Thereafter, the Company could be
eligible to market its Trilogy dispensers and/or Trilogy tabs to the St. Regis
Tribe and the Tribe could be eligible to
market Trilogy scratch tab on its reservation.
Upon St. Regis Tribal casinos marketing Trilogy scratch tabs from 100 Trilogy
Table Games and the Company adding
50 dispensers a month from operations for a total of 460 Trilogy Table games on
line by end of 12 months, the Company
anticipates The first full 12 months of TRILOGY scratch tab sales to generate
84.1 million dollars in gross revenues with
pre-tax operating earnings of 58.5 million dollars to the Company.
The Company is presently in the final development stage of design of its Class
II designed Table game with video
visual display The Company's initial plans are to market its Patented/Licensed
Trilogy pull tab Progressive Mega Cash
jackpot scratch tabs to Indian gaming casinos. Sales to Indian gaming casinos
are targeted to begin in the later part of
1998.
The Company's 1 employee is the President of the Company, which is salary
approved but as of 9/30/97 he has elected
not to accept approved salary.
ITEM 2. LEGAL
PROCEEDINGS None.
ITEM 3. CHANGES IN
SECURITIES None
ITEM 4. CHANGES IN
SECURITY FOR REGISTERED SECURITIES None.
ITEM 5. DEFAULTS UPON
SENIOR SECURITIES None.
ITEM 6. DECEASE IN
AMOUNT OUTSTANDING OF SECURITIES OR INDEBTEDNESS None
ITEM 7. INCREASES IN
AMOUNT OUTSTANDING OF SECURITIES OR INDEBTEDNESS
Name # of Common # of Preferred Date Consideration
Mike Maledon 7,300 00 1/8/98 Executive Services
Ron Brownell 8,000 00 1/8/98 $1.25 per share
SHG Holding Inc. 50,000 50 1/8/98 $1.25 per share
Robert Rettig 8,000 10 3/26/98 $1.25 per share
Andrew Alex 3,120 00 3/16/98 Legal services
John Doherty 1,120 00 3/16/98 Office Rent
Phyllis Albrecgt 5,000 00 3/16/98 Management services
Mike Maledon 50,000 00 3/16/98 Executive services
William Daniels 2,500 00 3/16/98 Consulting fee
Total 135,040 60
(See Notes to Financial Statements Equity section.). These securities were
issued by the Company pursuant to a Private
placement agreement as having been issued to persons who had access to the
books and records of the Company and
who took the Company's securities for investment only and assurance to the
Company that investor had no present
intention of selling or otherwise disposing of said securities, except in
compliance with the Securities Act of 1933, as
amended. These shares were issued by the Company in reliance upon exemption
provided in Section 4(2) of the
Securities Act of 1993, as amended,
ITEM 8. SUMMATION OF
MATTERS TO A VOTE OF SECURITY HOLDERS None.
ITEM 9. OTHER
MATERIALLY IMPORTANT EVENTS
The Company appointed Executive Registrar & Transfer Agency, Inc, 3145 W. Lewis
Ave. Suite 200,
Phoenix, Arizona 85009 as the designated transfer agent for the Company.
ITEM 10. EXHIBITS AND
REPORTS ON FORM 10-Q
Independent Auditors Compilation Report
(I) Balance Sheet 3/31/1998
(II) Statement of Cash Receipts and Disbursements for the 3
months ended 3/31/98
(III) Schedule Of Common Stock as of 3/31/1998
(IV) Notes To Financial Statements
No reports on Form 8-K have been filed during any quarter from 01/1/77 to
3/31/1998
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, hereunto duly
authorized
This report is dated this 15th day of September, 1998.
Trilogy Gaming Corporation by _____________________________ Wayne Mullins, as
its President
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
MARCH 31, 1998
TABLE OF CONTENTS
Page No.
ACCOUNTANTS' REPORT . . . . . . . . . . . . . . . . . . . . . 1
FINANCIAL STATEMENTS
Balance Sheet . . . . . . . . . . . . . . . . . . . . . 2
Statement of Operations . . . . . . . . . . . . . . . . 3
. . . . . .
Statement of Changes in Shareholders' Equity. . . . . . 4
Statement of Common Stock Issued. . . . . . . . . . . . 5
Statement of Cash Flows . . . . . . . . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . . . . . . 7 -
11
ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders
Trilogy Gaming Corporation
Phoenix, Arizona
We have compiled the accompanying balance sheet of Trilogy Gaming Corporation
as of March 31, 1998, and the related statements
of operations, changes in shareholders' equity, common stock issued and cash
flows for the three months then ended and for the period
from January 1, 1989 (date of inception of development) to March 31, 1998, in
accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We
have not audited or reviewed the accompanying financial statements and,
accordingly, do not express an opinion or any other form of
assurance on them.
Moffitt & Company, P.C.
September 1, 1998
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 1998
ASSETS
CURRENT ASSETS
Cash
$ 49,375
OTHER ASSETS
Deferred tax assets (Note 3)
0
TOTAL ASSETS $
49,375
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Deposit on stock $
4,000
REDEEMABLE PREFERRED STOCK (NOTE 8)
0
Non-cumulative, non-voting shares
Par value $0.01 per share
Authorized 5,000,000 shares
Issued and outstanding - 6 shares
SHAREHOLDERS' EQUITY
Capital stock
Preferred stock, convertible, non-cumulative voting shares
(Note 7)
Par value $0.01 per share
Authorized 5,000,000 shares
Issued and outstanding - 3,690 shares $
37
Common stock, par value $0.001 per share
Authorized 75,000,000 non-cumulative voting shares
Issued and outstanding 2,407,527 shares
2,407
Paid in capital in excess of par value of stock
1,304,076
Retained earnings (deficit) ( 477,376)
Deficit accumulated during the development stage
( 783,769)
TOTAL SHAREHOLDERS' EQUITY
45,375
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $
49,375
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND
THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO MARCH 31, 1998
January 1, 1989
(Date of
Three
Inception of
Months Ended
Development)
March
to March
31, 1998
31, 1998
REVENUE $ 0 $
0
DEVELOPMENT COSTS ( 65,911)
( 783,769)
NET (LOSS) $ ( 65,911) $
( 783,769)
NET LOSS PER COMMON SHARE
Basic $ 0.018
Diluted $ 0.011
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
Basic 3,690,000
Diluted 6,049,194
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS MARCH 31, 1998
Preferred Stock
(Convertible) Common
Stock
Shares Amount
Shares Amount
BALANCE, JANUARY 1, 1998 3,690 $ 37
2,309,527 $ 2,309
ISSUANCE OF COMMON
STOCK
For services rendered 0 0
50,000 50
For cash 0 0
48,000 48
Less commission paid 0 0
0 0
NET (LOSS) FOR THE THREE
MONTHS ENDED
MARCH 31, 1998 0 0 0
0
3,690 $ 37
2,407,527 $ 2,407
Paid in Deficit
Capital Accumulated
in Excess Retained
During the
of Par Earnings
Development
Value of Stock (Deficit)
Stage
$ 1,193,673 $ ( 447,376) $
( 717,858)
62,450 0 0
59,953 0 0
( 12,000) 0
0
0 0 ( 65,911)
$ 1,304,076 $ ( 477,376) $
( 783,769)
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF COMMON STOCK ISSUED
THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO MARCH 31, 1998
Date Number
Shares of Shares Price
Total
Issued Issued Consideration
Per Share Consideration
01/01/89 49,985,211 Balance at date of inception
of development
03/01/96 494,684 Balance after 100-1
reverse stock split
05/05/96 1,596,893 Merger of International
Lottery Productions LTD.
03/27/96 40,000 Cash $
1.25 $ 50,000
04/04/96 8,000 Cash
1.25 10,000
07/08/96 10,000 Cash
1.25 12,500
08/12/96 78,750 Royalties
08/16/96 16,000 Cash
1.25 20,000
11/08/96 12,000 Cash
1.25 15,000
11/14/96 4,000 Cash
1.25 5,000
11/18/96 8,000 Cash
1.25 10,000
12/02/96 20,000 Cash
1.25 25,000
03/10/97 8,000 Cash
1.25 10,000
06/18/97 3,600 Commission
1.25 4,500
06/18/97 2,000 Office rent
1.25 2,500
06/18/97 600 Legal fees
1.25 750
09/18/97 3,000 Cash
5.00 15,000
11/06/97 4,000 Cash
2.50 10,000
01/08/98 8,000 Cash
1.25 10,000
03/01/98 50,000 Services
1.25 62,500
03/24/98 40,000 Cash
1.25 50,000
2,407,527
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND
THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO MARCH 31, 1998
January 1, 1989
(Date of
Three
Inception of
Months Ended
Development)
March
to March
31, 1998
31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ ( 65,911) $
( 783,769)
NET CASH (USED) BY OPERATING
ACTIVITIES ( 65,911)
( 783,769)
CASH FLOWS FROM INVESTING ACTIVITIES:
Deferred start up costs 0
( 513,376)
NET CASH (USED) BY INVESTING
ACTIVITIES 0
( 513,376)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of company stock
110,501 1,306,520
Deposit on stock 4,000
4,000
NET CASH PROVIDED BY FINANCING
ACTIVITIES 114,501
1,346,520
NET INCREASE IN CASH 48,590
49,375
CASH BALANCE AT BEGINNING OF PERIOD 785
0
CASH BALANCE AT END OF PERIOD $ 49,375 $
49,375
SUPPLEMENTARY DISCLOSURE OF
CASH FLOW
Interest paid $ 0 $
0
Taxes paid 0
0
NON CASH INVESTING AND FINANCING
ACTIVITIES
Issuance of company stock for services $
62,500 $ 70,250
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Nature of Business
Trilogy Gaming Corporation was incorporated in the
State of Delaware for the primary business purpose of
selling its Trilogy scratch tab/lotto type tickets on consignment
and administering the progressive jackpots and
communication systems.
Accounting Estimates
Management uses estimates and assumptions in
preparing financial statements in accordance with generally
accepted accounting principles. Those estimates and assumptions
affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities,
and the reported revenues and expenses. Actual
results could vary from the estimates that were used.
Cash Equivalents
For purposes of the statement of cash flows, the
company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
Income Taxes
The company accounts for income taxes on an asset and
liability approach to financial accounting. Deferred
income taxes and liabilities are computed annually for the
difference between the financial statements and tax
basis of assets and liabilities that will result in taxable or
deductible amounts in the future, based on enacted
tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to
be realized. Income tax expense is the tax payable or refundable
for the period, plus or minus the change during
the period in deferred tax assets and liabilities.
Net Loss Per Share
Net loss per common share is computed by dividing net
loss by the weighted average number of shares
outstanding during the period.
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 2 DEVELOPMENT STAGE OPERATIONS
As of March 31, 1998, the company was in the
development stage of operations. According to the Financial
Accounting Standards Board of the Financial Accounting Foundation,
a development stage company is defined
as a company that devotes most of its activities to establishing a
new business activity. In addition, planned
principle activities have not commenced, or have commenced and
have not yet produced significant revenue.
FAS-7 requires that all development costs be expensed
during the development period. The company expensed
$65,911 of development costs for the three months ended March 31,
1998 and $783,769 from January 1, 1989
(date of inception of development) to March 31, 1998.
NOTE 3 DEFERRED TAX ASSET
The deferred tax asset arises from the difference
between the accounting for development stage costs. For
financial statement purposes, development stage costs are expensed
as incurred. For tax purposes, these
expenses are capitalized and will be amortized over 60 months once
operations begin.
The components of the deferred tax asset are as
follows:
Deferred tax asset $
370,000
Less valuation allowance
370,000
Net deferred asset $
0
NOTE 4 PRIVATE PLACEMENT OFFERING
In 1997, the company conducted a private placement
through qualified investors. The total proceeds received
relating to the offering were $35,000.
In 1998, the company conducted an additional private
placement through qualified investors. The private
placement was for 98 units, priced at $10,000 per unit. Each unit
is for:
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 4 PRIVATE PLACEMENT OFFERING (CONTINUED)
5,000 common voting shares and either:
a. 1
Series A warrant to purchase on or before June 30, 1999, 5,000 common voting
shares for
the price of $3.00 per share and
1 Series B warrant to purchase on
or before December 31, 1999, 5,000 common voting share
for the price of $7.00 per share or
b. 1
redeemable preferred non-voting share
The net proceeds from this offering at March 31, 1998
is $48,000.
Generally Accepted Accounting Principles require that
the proceeds from the sale of common stock with
warrants and or preferred redemption rights should be allocated to
the common stock, warrants and preferred
stock based upon the fair market value of each financial
instrument. Since the company is in the development
stage, management believes that only the common stock has a market
value and has allocated all of the sales
proceeds to the common stock.
NOTE 5 LICENSING AGREEMENT
The company has a licensing agreement with the
company's Chief Executive Officer for the exclusive right to
use the officer's patents and trade marks for the Trilogy lotto
game.
The agreement provides that the Chief Executive
Officer will receive the following:
A. 1,310,000 common voting shares of
stock
B. 3,690 shares of convertible preferred
shares
C. Minimum royalty payments of $100,000
beginning in the year 1999
The term of the agreement is for one year plus
renewable one year options.
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 6 BEARER ROYALTY CERTIFICATES
The company has issued 61 five year Trilogy Lotto
royalty interests. The royalty units will receive a 6%
minimum royalty payment for two years plus a five year royalty of
.01% of pre tax income. Payments begin
the first year the company receives gross profits and royalty
earnings payments from each state lottery
marketing the Trilogy Lotto game.
NOTE 7 CONVERTIBLE PREFERRED STOCK
As part of the licensing agreement described in
footnote number 5, the Chief Executive Officer received 3,690
shares of convertible, non-cumulative voting preferred shares of
stock. These shares are convertible at the rate
of one preferred share for 1,000 common shares for a total of
3,690,000 common shares. There is no expiration
date on this option.
NOTE 8 REDEEMABLE PREFERRED STOCK
Regulation S-X of the Securities and Exchange
Commission states that preferred stock subject to mandatory
redemption requirements must be presented separately in the
balance sheet and not be included in the
shareholders' equity section. The non-cumulative, non-voting
shares have a redemption value of $10,000
payable from 25% of the company's quarterly pre-tax earnings as a
preferred stock dividend. When the
preferred stock dividends paid under this formula equals $10,000
per unit, the preferred unit shares will be
terminated on the books of the company.
At March 31, 1998, the company was contingently
liable to redeem $60,000 of preferred stock from 25% of
pre-tax earnings.
NOTE 9 INCENTIVE QUALIFIED EMPLOYEE STOCK OPTION PLAN
The company has adopted an incentive qualified
employee stock option plan. The plan is designed for key
employees and will be administered by the Compensation Committee
of the Board of Directors and/or the
company's Chief Executive officer. The plan will provide that
employee options granted by the company are
vested in the employee after services have been performed or
after one year of full time employment and may
be exercised after the options are vested and prior to the
termination date of the vested option. The options are
exercisable for $1.25 per share and each option shall be vested
for services performed for the company or after
one year as a full time employee of the company.
The company has not granted any options as of March
31, 1998 or September 1, 1998.
NOTE 10 EXECUTIVE EMPLOYMENT AGREEMENTS
On May 1, 1998, the company entered into two
employment agreements with the Chief Executive Officer and
the President. The terms of the agreements commence on May 1,
1998 and end on December 31, 1998. The
agreements automatically renew annually on December 31 of each
year, unless canceled by the Board of
Directors.
The annual salary of each executive is $104,000.
However, the Board of Directors has the discretion to defer
this salary until operating earnings are adequate.
NOTE 11 AUTOMOBILE OPERATING LEASE
The company has leased a 1998 Jeep Grand Cherokee.
The lease began on March 31, 1998 and terminates on
March 30, 2001. The monthly lease payments are $398 plus Arizona
sales tax.
Future minimum lease payments are as follows:
March 31, 1999 $ 4,776
March 31, 2000 4,776
March 31, 2001 3,576
$ 13,128
