SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1997 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 $0.01 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
ITEM 1. BUSINESS
The Company has the exclusive United States license for the Trilogy scratch tab
game and is currently completing the
development of 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 2. SUMMARY OF OPERATIONS
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 and State Lottery sales of 38.8
billion dollars, up 12% over the previous year.
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 plans to market its Trilogy scratch tabs to Indian Gaming
enterprises. 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 20
tables a month from operations for a total of 460 Trilogy tables on line by the
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 second full 12
months of scratch tab sales from 4,750
machines to generate 255 million dollars in gross Trilogy revenues with pre-tax
operating earnings of 149 million dollars
to the Company.
The Company is presently in the final development stage of design of its Class
II designed electronic video visual ticket
display pull tab game dispensing machines. 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 1997.
The Company's 1 employee is the President of the Company, which is salary
approved but as of 12/31/97 he has elected
not to accept approved salary.
Registrant has announced its intention to provide supplemental information to
its stockholders and other
interested parties from time to time; and in all cases, the information
contained herein must be read in light of
subsequent information which may be issued, including but not limited to more
recent financial statements
herein contained are current as of their date, and are presumed to be "current"
for a period of six months after
their date, barring extraordinary circumstances. No inference can be drawn
that the financial condition of the
Registrant has not changed since the effective date of any financial statement
contained herein.
Registrant has 1 employee, the Company President.
ITEM 3. PROPERTIES
None.
ITEM 4. PARENTS AND
SUBSIDIARIES None
ITEM 6. DECEASE IN
AMOUNT OUTSTANDING OF SECURITIES OR INDEBTEDNESS 3,705,716
The Board of Directors and Mr. Wayne Mullins agreed to an amendment to the
original technology license
agreement effective date of July 9, 1993. This amendment reduced the initial
number of shares issued for the
license agreement from 5,000,000 common shares to 1,310,000. Therefore, the
original stock certificate #1066
dated May 6, 1996 in the amount of 5,000,000 common shares was canceled and
replaced with certificate
TG10003 in the amount of 1,310,000 common shares.
ITEM 7. CHANGES IN SECURITIES
& CHANGES IN SECURITY FOR REGISTERED SECURITIES
None.
ITEM 8. DEFAULTS UPON SENIOR
SECURITIES None.
ITEM 9. APPROXIMATE NUMBER OF
EQUITY SECURITY HOLDERS
Title of Class Number of Recordholders
Common Stock $0.001 Par Value 515 +/-
ITEM 10. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS None
ITEM 11. EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT
Wayne Mullins, CEO/President & Director Tom Burns, VP of Marketing
&Director
Jim Pugh, COO/Treasure & Director Mark Michalko, Director
Mike Maledon, CFO/Secretary & Director Jim Holmes, Director Bill
Seaton, Director
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
provides that a corporation may
indemnify any person who was or is a party or threatened to be made a party to
any threatened, pending or
completed actions, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an
action by or in the right of the corporation) by reason of the fact that such
person was or is a director, officer,
employee or agent of the corporation, or was serving at the request of the
corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise. Such indemnity
is to be against expenses, including attorney's fees, judgments, fines and
amounts paid in settlement, actually
and reasonably incurred by said person in connection with the action, suit or
proceeding. Such indemnification
is only allowed if the person acted in good faith and in a manner he reasonably
believed to be in or not opposed
to the best interest of the corporation, and with respect to any criminal
action or proceeding, when the person
had no reasonable cause to believe his conduct was unlawful. The termination
of any action, suit or proceeding
by adverse judgment, order, settlement, conviction or plea of nolo contender or
its equivalent does not create
a presumption that the person did not act in good faith or in a manner opposed
to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his
conduct was unlawful. A corporation, under Section 145 of the General
Corporation Law of the State of
Delaware, also has power to indemnify any person who was or is a party or
threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its
favor by reason of the fact that such person was a director, officer, employee,
or agent of such corporation or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation,
partnership, joint venture, trust or other enterprise. Such indemnification
shall be against expenses, including
attorney's fees, actually and reasonably incurred by such party in connection
with the defense or settlement of
such acts of suit. Again, the indemnification is only granted if the person
acted in good faith and in manner he
reasonably believed to be in or not opposed to the best interests of the
corporation. However, no indemnification
may be made with respect to any claims, issue or matter as to which such
person was adjudged to be liable for
negligence or misconduct in the performance of his duty to the corporation,
unless a court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability, such person is
fairly and reasonably entitled to indemnity.
Under Delaware law to the extent that a director, officer, employee or agent
of a corporation was successful
on the merits or otherwise in the defense of any action, suit or proceeding, or
in the defense of any claim, issue
or matter therein, he shall be indemnified against expenses, including
reasonable attorney's fees, actually and
reasonably incurred by him in connection therewith. Any indemnification
otherwise than previously mentioned
shall be made by the corporation only as authorized in the specific case upon
the determination by the Board
of Directors by a majority vote of a quorum consisting of directors who are not
parties to the action, suit or
proceeding, that the director, officer, employee or agent acted in good faith
and in a manner he reasonably
believed to be in or not opposed to the best interest of the corporation, and,
with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. If
a quorum of disinterested
directors is not obtainable or if such a quorum directs, indemnification may
only be had if independent legal
counsel in a written opinion indicates that the person to be indemnified acted
in good faith in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful. In addition to
the indemnification by vote of the Board of Directors, or by written opinion of
legal counsel, the stockholders
may also authorize indemnification.
Under Delaware Law, expenses incurred in defending a civil or criminal action,
suit or proceeding, may be paid
by the corporation in advance of the final disposition of the action, suit or
proceeding if authorized by the Board
of Directors upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay
such amount if it is ultimately determined the indemnification is not proper.
Delaware Law also provides that its provision shall not be deemed exclusive of
other rights granted under any
by-law, vote of stockholders or otherwise.
The Registrant's Articles of Incorporation substantially follow the above
provisions of Delaware Law. However,
the Articles of Incorporation of Registrant excepts indemnification in relation
to matters to which the party
claiming indemnification was adjudged in an action, suit or proceeding to be
liable for negligence or misconduct
in the performance of his duties. The Article also limit indemnification to
exclude amounts paid to the
corporation in settlement of an action, suit or proceeding unless court
approval is first obtained and also
excludes amounts, including attorney's fees, paid in defending such action,
suit or proceeding brought by or in
the right of the corporation which is settled without court approval. The
Articles of Incorporation adopt that
provision of the Delaware Law giving an absolute right to indemnification in
the event the person seeking the
indemnification is wholly successful on the merits or otherwise with respect to
any such claim, suit or
proceeding of any nature.
ITEM 13. FINANCIAL STATEMENTS AND EXHIBITS FILED
(A) Financial Statements.
(1) Report of Certified Public Accountants on Schedules as of
12/31/97.
(I) Audited Balance Sheet ending 12/31/97
(II) Audited Statement of Operations from 1/1/1989 to 12/31/97
(III) Audited Statement of Changes in Shareholders Equity as of
12/31/97
(1V) Audited Statement of Common Stock issued from 1/1/1989 ending
12/31/97
(V) Audited Statement of Cash Flows from 1/1/1989 ending 12/31/97
(VI) Notes to Financial Statements ending 12/31/97
(consisting of 12 Notes)
(VII) EXHIBIT A (Copy of Amended #4 License Agreement)
(B) No reports on Form 8-K have been filed during any quarter from
10-1-77 to 9-31-97.
ITEM 14. PRINCIPAL SECURITY HOLDERS AND SECURITY HOLDERS OF
MANAGEMENT
(A) Voting Securities owned of record or beneficially in excess
of five percent (10%) of the issued
and outstanding stock of Registrant.
(1) (2) (3) (4) (5)
Title of Class Name and Address Type of Amount Percent
Ownership Owned of Class
Common Voting Wayne Mullins Restrictive 1,265,000 54.7%
Stock Par Value 1717 E. Bell Rd, # 12
$0.01 Per share Phoenix, AZ 85022
(B) Equity Securities of the Registrant beneficially owned directly
or indirectly by all directors and
officers of the Registrant as a group.
(1) (2) (3)
Title of Class Amount Beneficially Owned Percent of Class
Common Voting Stock 1,375,260 59.5%
Par Value $0.01 Per share
ITEM 15. DIRECTORS OF THE REGISTRANT
WAYNE MULLINS, DIRECTOR age 61 From March 1966 to present, CEO and
President of Registrant.
From June 1993 to March 1996 served as CEO and President of Trilogy Gaming
Corporation, a Nevada
Corporation. From March 1989 to March 1993 served as President of International
Lottery Productions Ltd.,
a Delaware corporation. Snyder High School, Snyder, Texas 1953
JIM HOLMES, DIRECTOR, age 55 From July 1991 to the present Independent
state, foreign lottery
consultant and Indian Gaming Consultant. From April 1987 to July 1991, GAMMA
INTERNATIONAL, LTD.
100 Decker Court, Suite 280, Irving, Texas 75062. Executive Vice-President
of Marketing directing the
company's satellite network marketing program connection Indian Gaming
reservations "Mega-Bingo games"
played on Indian reservations.
Mr. Holmes consultants with lotteries world wide including lottery start-ups
and marketing lottery products to
state lotteries. Mr. Holmes consults with financial principals and Indian
tribal reservations relating to Indian
gaming on Indian lands. Bachelor of Science Degree West Point 1965 Master of
Science degree, M.F, Central
Missouri State University, Warrenburg, Missouri 1977
JIM PUGH, DIRECTOR age 42 Byron James International, Inc. 1993 to present,
Principal. Specializing in
management consulting, financial planing and tax accounting. Microtest, Inc.,
Director of Worldwide
Manufacturing from 1991 to 1993, Comptroller 1990 to 1993. Motorola, Inc.,
Central Operations Comptroller
from 1986 to 1990. AICPA Certified as CPA, State Of Arizona 1990. MBA,
University of Phoenix 1988. APICS
Certified as CPIM, 1983. BBA in Accounting, East Texas State University, 1978.
MICHAEL J. MALEDON DIRECTOR, age 47 MALEDON & ASSOCIATES INC., 1986 to
present,
Principal. Established in 1986 to provide part time controller and chief
financial officer services to companies
that do not wish to fill these positions on a full-time basis. MALEDON &
associates are business financial
consultants and not a CPA firm. Mr. Maledon has over fifteen years experience
in financial and business
management with an emphasis on manufacturing and service organizations. Prior
to forming Maledon &
Associates, Inc. Mr. Maledon held senior financial & controller management
positions with American Express,
American Hospital Supply Corporation, and Bally Manufacturing. B. B.-
Accounting,, Loyola University,
Chicago, Ill. 1974. CPA, 1980
TOM BURNS, DIRECTOR, age 58 Private consultant sales and marketing June
1995 to present. American
West Airlines, Phoenix, Arizona, April 1985 to June 1995, Senior Vice President
of marketing. Education
(degrees, school, and dates): St. Rita High School; Chicago, ILL., Harper
College, Palatine, ILL.
MARK MICHALKO, DIRECTOR age 43 GAMMA INTERNATIONAL, LTD. June, 1987 to
November, 1989, 100 Decker Court, Suite 280, Irving, Texas 75062.
President and CEO. Directing the
company's satellite network marketing program connection Indian Gaming
reservations "Mega-Bingo games"
played on Indian reservations. THE QUANTUM ORIGINATION INC., 2249 Del Mar
Scenic Pkwy, Del Mar,
CA 92014, December 1989 to present, CEO and President, Directing the
company's consultation to state
lotteries. International Lottery & Totalizator Systems Inc., 2131 Faraday
Avenue, Carlsbad, California, March
1994 to present, Executive Vice President and Director. :Jurist Doctor Law
degree, Cleveland-Marshall Collage
of Law, 1980: B. A. Degree, John Caroll University, 1976
BILL SEATON, DIRECTOR age 69 GAMMA INTERNATIONAL, LTD., July 1987 to
November 1989.
100 Decker Court, Suite 280, Irving, Texas 75062. Vice-President of
marketing for the company in its satellite
network marketing program connection Indian gaming reservations "Mega-Bingo
games" played on Indian
reservations. THE QUANTUM ORIGINATION Inc., 2249 Del Mar Scenic Pkwy, Del Mar,
CA 92014,
December 1989 to present, Vice President of marketing including consulting with
state lotteries, developing and
marketing of the company's proprietary TV interactive gaming concept. High
School, McKinley High School,
Cedar Rapids, Iowa 1946
At Registrants special meeting held on March 5, 1996, the above named Directors
were elected and shall hold
office until his successor shall have been elected and qualified.
ITEM 16. REMUNERATION OF DIRECTORS AND OFFICERS
Name of Capacity in which Aggregate direct
Individual remuneration received remuneration
Wayne Mullins President $22,000 +/-
Jim Pugh Chief Operating Officer $6,000 +/-
Amounts disbursed were for services rendered to the Company.
The Registrant has no annuity, pension or retirement benefits proposed to be
paid to any of its officers or
directors. There is no existing plan for the payment of such benefits.
ITEM 17. OPTIONS GRANTED TO MANAGEMENT TO PURCHASE SECURITIES. None
ITEM 18. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
(A) No Director, Officer or person holding an excess of ten percent (10%)
of the outstanding securities
of the Registrant, or any relative or spouse of any such persons or
relative or spouse of such person,
had any interest in any transactions or presently proposed transactions to
which the Registrant was
a party, except Registrants patent licensor Wayne Mullins (see exhibit A
attached hereto) who is a
Director and Officer of Registrant.
(B) No Director or Officer of the Registrant or associate of any such
Director or Officer has been
indebted to the Registrant from 12/ 31/ 1996 to 12/ 31/ 1997.
(C) There were no transactions since the beginning of the Registrant's
last fiscal year (December 31,
1996), and are presently no proposed transactions wherein any retirement,
saving or other similar
plan will be provided by the Registrant to any person.
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.
DATED this 15th day of September 1998.
Trilogy Gaming Corporation
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1997
TABLE OF CONTENTS
Page No.
INDEPENDENT AUDITORS' 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 -
12
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Trilogy Gaming Corporation
Phoenix, Arizona
We have audited the accompanying balance sheet of Trilogy Gaming Corporation (a
development stage company) as of
December 31, 1997, and the related statements of operations, changes in
shareholders' equity, common stock issued and
cash flows for the year then ended and for the period from January 1, 1989
(date of inception of development) to December
31, 1997. These financial statements are the responsibility of the company's
management. Our responsibility is to express
an opinion on the 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 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
Trilogy Gaming Corporation as of December 31, 1997, and the results of its
operations and its cash flows for the year then
ended and from January 1, 1989 (date of inception of development) to December
31, 1997, in conformity with generally
accepted accounting principles.
Moffitt & Company, P.C.
August 18, 1998
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1997
ASSETS
CURRENT ASSETS
Cash
$ 785
OTHER ASSETS
Deferred tax assets (Note 3)
0
TOTAL ASSETS $
785
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES $
0
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 - 0 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 2,309,527 shares
2,309
Paid in capital in excess of par value of stock
1,193,673
Retained earnings (deficit) ( 477,376)
Deficit accumulated during the development stage
( 717,858)
TOTAL SHAREHOLDERS' EQUITY
785
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $
785
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND
THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO DECEMBER 31, 1997
January 1, 1989
(Date of
Inception of
Year Ended
Development)
December
to December
31, 1997
31, 1997
REVENUE $ 0 $
0
DEVELOPMENT COSTS ( 74,748)
( 717,858)
NET (LOSS) $ ( 74,748) $
( 717,858)
NET LOSS PER COMMON SHARE
Basic $ 0.032
Diluted $ 0.012
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
Basic 2,299,177
Diluted 5,989,177
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997
Preferred Stock
(Convertible) Common
Stock
Shares Amount
Shares Amount
BALANCE, JULY 1, 1997 3,690 $ 37
2,288,327 $ 2,097
ISSUANCE OF COMMON
STOCK
For services rendered 0 0
6,200 62
For cash 0 0 15,000
150
NET (LOSS) FOR THE
YEAR ENDED
DECEMBER 31, 1997 0 0 0
0
3,690 $ 37
2,309,527 $ 2,309
Paid in Deficit
Capital Accumulated
in Excess Retained
During the
of Par Earnings
Development
Value of Stock (Deficit)
Stage
$ 1,151,135 $ ( 447,376) $
( 643,110)
7,688 0 0
34,850 0 0
0 0 ( 74,748)
$ 1,193,673 $ ( 477,376) $
( 717,858)
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF COMMON STOCK ISSUED
THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO DECEMBER 31, 1997
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
2,309,527
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND
THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO DECEMBER 31, 1997
January 1, 1989
(Date of
Inception of
Year Ended
Development)
December
to December
31, 1997
31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ ( 74,748)
$ ( 717,858)
NET CASH (USED) BY OPERATING
ACTIVITIES ( 74,748)
( 717,858)
CASH FLOWS FROM INVESTING ACTIVITIES:
Deferred start up costs 40,533
( 477,376)
NET CASH (USED) BY INVESTING
ACTIVITIES 40,533
( 477,376)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of company stock
35,000 1,196,019
NET CASH PROVIDED BY FINANCING
ACTIVITIES 35,000
1,196,019
NET INCREASE IN CASH 785
785
CASH BALANCE AT BEGINNING OF PERIOD 0 0
CASH BALANCE AT END OF PERIOD $ 785 $
785
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 $
7,750 $ 0
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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
DECEMBER 31, 1997
NOTE 2 DEVELOPMENT STAGE OPERATIONS
As of December 31, 1997, 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 $74,748 of development costs for the year ended December
31, 1997 and $717,858 from
January 1, 1989 (date of inception of development) to December 31,
1997.
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 $
345,000
Less valuation allowance
345,000
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
DECEMBER 31, 1997
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
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
DECEMBER 31, 1997
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 December 31, 1997, the company had not issued any
common stock with preferred share options.
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
December 31, 1997 or August 18, 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:
December 31, 1998 $ 3,978
December 31, 1999 4,776
December 31, 2000 4,776
December 31, 2001 792
$ 14,322
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 12 SUBSEQUENT EVENTS
From January 1, 1998 to August 18, 1998, the company
issued 174,000 shares of common stock for
$300,000 allocated as follows:
Common stock with warrants - 105,000 shares for $
210,000
Common stock with preferred shares - 69,000 shares
for 90,000
174,000 $
300,000
The company is contingently liable to redeem the
$90,000 of preferred stock from 25% of future pre-
tax earnings.
On March 16, 1998, the company issued a corporation
officer 50,000 shares of common stock, valued
at $1.25 per share, for prior services rendered.
By: ________________________________
Wayne Mullins, President
