SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1999 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 x No
The Issuer^s Revenue for the most recent fiscal year was $ 00.00
As of March 31, 1999 there were 3,015,127 shares of Common Stock, .001 Par
Value issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
There is no annual report, proxy statement, or prospectus to incorporate by
reference.
PART I
ITEM 1. BUSINESS OF THE COMPANY
The name of the Company is Trilogy Gaming Corporation, incorporated in the
State of Delaware on 3/7/1972.
The Company's address is 1717 E. Bell Road, Suite 12, Phoenix, Arizona 85022
(602) 7885801.
The Company is a public Trading company. The Company^s trading symbol listed
with the National Association of Securities Dealers Automated Quotation
(^NASDAQ^) System , on the Bulletin Board, is ^TGGC^. As a reporting company,
the Company intends to furnish its shareholders with annual reports containing
financial statements and may distribute other information from time to time.
All outstanding Common Shares, excluding control persons holding 10% or more of
the common stock of the Company and all restricted shares, are eligible to be
sold in the open market. Sales of substantial amounts of common stock of the
Company in a public market, may have a depressive effect on the market price of
the common stock.
THE COMPANY'S AUTHORIZED CAPITAL
75,000,000 Common noncumulative voting shares, par value $0.001 per share,
5,000 Preferred noncumulative voting shares, par value $0.01 per share
5,000 Preferred noncumulative, nonvoting shares, par value $0.01 per share
Holders of common stock are entitled to one vote per share on all matters to be
voted upon by the shareholders. Holders of common stock are entitled to receive
such dividends as may be declared from time to time by the Board of Directors
out of funds legally available therefore after preferred dividend payments have
been paid to the Preferred shares.
BUSINESS OF THE COMPANY
The Company has from the patent owner, who is the CEO, President and majority
shareholder of the Company, the exclusive license for the United States to
patent # 5,158,293 (referred to in this document as the Trilogy progressive
jackpot tab/lotto type game) and patent #2,128,150 for the trade name ^Trilogy^
and the ^ Game with Multiple Incentives and Multiple Levels of Game Play and
combination Lottery Game^ With Time of Purchase Win Progressive Jackpot^ .
The Company has a contract for 100 Trilogy pull tab bingo game tables with the
St Regis Mohawk Tribe located in the State of New York. The contract provides
in part that: the Company shall begin to deliver the first 10 of 100 tables on
or before December 31, 1998. Beginning after the first 10 tables become
operational, the Company shall deliver 10 tables per month until all 100 tables
have been delivered. Prior to December 31, 1998, the Company begin delivering
the first ten tables and components pursuant to the Agreement. The Company
plans to market 30 additional tables per month to additional Indian gaming
locations until the Company^s first marketing goal of 440 tables are placed on
line by the end of the first twelve months of operation.
The first 100 tables will be given to the St Regis Indian Casino at no cost to
them. The Company will sell the tables to additional Indian Casinos that sign
future contracts with TGC.
The operations of the Company ending 03/31/1999 were financed by selling part
of the 98 Units for 480,000 common shares of the Company^s common stock for $2
per share, for $980,000. Each Unit is for $10,000 for 5,000 common shares for
$2 per share and (1) one non detachable series A warrant to purchase on or
before 6/31/99, 5,000 common shares for $3 per share and (1) one non detachable
series B warrant to purchase on or before 12/31/99, 5,000 common shares for $7
per share. As of 03/31/99 the Company had sold 227.5 said Units for $925,000.
The Units were sold by Private placement to accredited investors only. With
the successful placement of all 98 Units, the Company could finance the first
10 Trilogy pull tab bingo game tables for delivery and the on line game
communications operation system to the St Regis Mohawk Tribe pursuant to the St
Regis Mohawk 100 Trilogy table game Agreement.
The Company plans to finance 90 additional tables by offering a 20% Revenue
Share interest in the first 20 Trilogy pull tab bingo game tables for three
years for $1,150,000 by private placement to accredited investors only. The
final price and structure of the Unit has not been set by the Company as of
03/31/1999.
The Company also has a contract for 1,500 Trilogy pull tab video dispensers
with the St. Regis Mohawk Indian Tribe located in thew State of New York. That
agreement provides in part that the ^Company 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^. The Company plans to pursue final development
of its Trilogy video pull tab dispenser and seek classification sometime in
later 1999. No financing plan for the video dispensers has been finalized as of
this filing date of this report.
The Law firm of Snell & Wilmer of Phoenix, AZ has given its legal opinion to
the Company that the Trilogy multiple jackpot game is a Class II game pursuant
to the definitions set forth by the United States Congress to NIGC and has
submitted the Company^s Trilogy scratch tab game to the NIGC for Class II
classification or Class II use. The Company cannot state the length of NIGC
classification review process.
The Company plans to file with the St. Regis Tribe Gaming Commission on its
Gaming Enterprise Registration Application form, the Company^s Trilogy scratch
tab bingo game and table dispenser, communications, accounting and security
specifications as a Class II pull tab game pursuant to rules stated by NIGC.
The ST. Regis Tribal Gaming Commission has also provided the Company with its
Temporary Gaming Registration form regarding the Trilogy video pull tab
dispensers, 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 video pull tab dispensers to the St. Regis
Tribe from which the Tribe could be eligible to market Trilogy pull tab scratch
game on its reservation.
SUMMARY PATENT LICENSE AGREEMENTS
Wayne Mullins, the Company's CEO, President and Director, owns patent #
5,158,293 ^Lottery game and method for playing same" and Trilogy trademark
patent Reg. # 1,533,082. In 1993 Mr. Mullins granted the exclusive U. S.
licensee agreement to patent # 5,158,293 and Reg. # 1,533,082 to the Company,
which states in part that;
Licensee (the Company) will pay Licensor (Mr. Mullins): 1% Royalties payments
due and payable to Licensor by the end of each month for all royalties earned
by the end of the preceding month along with an accurate accounting of all
sales/revenues covered by the license agreement. Said minimum royalty payments
are due December 31 of each year of the license agreement and payable to
Licensor or his assigns on or before 30 days following each said minimum
royalty payment due date. (ii) 1,310,00 common voting shares of Trilogy Gaming
Corporation and (iii) 3,690 convertible non-voting preferred shares issued to
Licensor. Said preferred shares shall be increased or decreased in proportion
to the exact number of shares resulting from any and all stock splits of TGC or
its successors common stock until all said preferred shares and splits
therefrom have been issued to Licensor. For each 1,000 new common shares
issued by the Company, from time to time, Beginning March 1, 1998, said
Preferred shares are convertible at the rate of ^one Preferred share for 1,000
common shares^ until all said preferred shares have been converted. The
licensee Agreement renews annually providing the License is not in default.
Mr. Mullins is the inventor of the ^ Game with Multiple Incentives and multiple
Levels of Game Play and combination Lottery Game With Time of Purchase Win
Progressive Jackpot^ (patent pending) and referred to in this document as the
Trilogy 9-Jackpot tab/card table game. Mr. Mullins Licensed the Company the
Trilogy 9-Jackpot tab/card table game, which states in part that:
Licensee (the Company) will pay Licensor (Mr. Mullins): [i] a royalty of one
percent (1%) of the gross dollar amount, of all revenues generated from all
game plays (excluding revenues generated from patent # 5,158,293) and
progressive jackpot ^drops^ generated directly or indirectly by Licensee, its
agents and/or sub-licensees, who use any part of above stated invention to
generate game play and/or multiple progressive jackpot game plays, or the
annual minimum royalty payment of $50,000, whichever is greater. Royalties are
due and payable to Licensor by the end of each month for all royalties earned
by the end of the preceding month along with an accurate accounting of all
sales/revenues covered by the license agreement. Said minimum royalty payments
are due December 31 of each year of the license agreement and payable to
Licensor or his assigns on or before 30 days following each said minimum
royalty payment due date. and [ii] 3,500 convertible non-voting preferred
shares issued to Licensor. Said preferred shares shall be increased or
decreased in proportion to the exact number of shares resulting from any and
all stock splits of TGC or its successors common stock until all said preferred
shares and splits therefrom have been issued to Licensor. For each 1,000 new
common shares issued by the Company, from time to time, Beginning January 2,
2000, said Preferred shares are convertible at the rate of ^one Preferred share
for 1,000 common shares^ until all said preferred shares have been converted.
The licensee Agreement renews annually providing the License is not in default.
The license agreements further states that; the licensee agreement shall be in
default in the event Licensee fails to pay Licensor the consideration stated
above.
CONFLICTS OF INTEREST
Wayne Mullins, the Company's CEO, President and Director, owns the Company's
Trilogy game and Trilogy trademark patents. Mr. Mullins granted the Company the
exclusive U. S. licensee agreement to patent # 5,158,293 "lottery game and
method for playing same" and U. S. patent/Trademark Reg. # 1,533,082 for the
Trilogy mark and the Trilogy 9-Jackpot tab/card table game, patent pending.
Mr. Mullins as President, CEO and Director of the Company, will be in the
position to represent both the patent Licensor (Mr. Mullins) and the patent
Licensee (the Company) and his interest will most likely be first to himself as
the Licensor. In the event of a default of the patent license agreement by the
Company, Mr. Mullins will be in a position to make demand upon the Company to
cure the default pursuant to the provisions of the license Agreement and to
terminate the license agreement if the default is not cured pursuant to the
license agreement. Because of this disclosure by the Company regarding these
circumstances surrounding the Patent Licensor and the Patent Licensee, neither
the Company as Patent Licensee, or any of its shareholders, Officers or
Directors, shall have or make any claim or demand that a conflict of interest
existed anytime prior to, during or after any default demand or upon
termination of the patent license agreement in the event Mr. Mullins, as Patent
Licensor, enforced any default of the license agreement including, but not
limited to, termination of the license Agreement.
ITEM 2. PROPERTIES None
ITEM 3. LEGAL PROCEEDINGS None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED
SHAREHOLDER MATTERS.
DECEASE IN AMOUNT OUTSTANDING OF SECURITIES OR INDEBTEDNES None.
INCREASE IN AMOUNT OUTSTANDING OF SECURITIES OR INDEBTEDNES 394,500
The following table shows the high and low bid prices for the Company^s Common
Stock as reported by the NASD electronic bulletin board (Bulletin Board Symbol
- -- TGGC) for the year ended December 31,1998. The company started trading in
the fourth quarter of 1998.
1999 HIGH LOW
FIRST QUARTER MARCH 31,1999 4.500 3.250
SECOND QUARTER JUNE 30,1999
THIRD QUARTER SEPTEMBER 30,1999
FOURTH QUARTER DECEMBER 31, 1999
Approximate number of equity securities holders:
Title of Class
Approximate number of
Record Holders (as of
March 31, 1999
Common stock $.001 Par Value
525
Dividends:
The Company paid no dividends in the years ended December 31, 1997 nor 1998
Recent Sale of Unregistered Securities:
The Company began a $ 980,000 financing thru the placement of common
shares and warrants to be placed only by Qualified Investors. The Company
placed 322,000 units @ $2.00 each for a total of $ 645,000 for the year
ended 12/31/98. And an additional 165,000 shares for $330,000 in the first
quarter of 1999
ITEM 6. MANAGEMENTS PLAN OF OPERATION.
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, Charitable Gaming
revenues of 9.8 billion dollars and State Lottery sales of 38.8 billion
dollars. 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.
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
86 million dollars in gross revenues with pre-tax operating earnings of 48.3
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 and Revenues from Indian gaming casinos are targeted to
begin in 1999.
The Company does not plan to operate or manage any gaming enterprise marketing
Trilogy scratch tabs. The primary business of the Company is to sell its
Trilogy scratch tabs on consignment, administer the progressive jackpots and
communication system. Therefore, the Company^s work force should be relatively
small. Most of the Company^s work should be performed by experienced
contracted manufacturers, installers, dispenser hardware and software, tab
manufacturers, technicians, field consultants and commissioned sales
professionals.
The Company has two employees, the President and Chief Operating Officer of the
Company. They are salary approved but as of 12/31/98 they have elected to
defer the approved salary. See the attached Notes to Financial Statements for
further details
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.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS FILED
(A) Financial Statements.
(1) Report of Certified Public Accountants on Schedules as of 03/31/99.
(I) Audited Balance Sheet ending 03/31/99
(II) Audited Statement of Operations from 1/1/1989 to 12/31/97
(III) Compiled Statement of Changes in Shareholders Equity as of
03/31/99
(1V) Compiled Statement of Common Stock issued from 1/1/1989 ending 03/31/99
Compiled Statement of Cash Flows from 1/1/1989 ending 03/31/99
Notes to Financial Statements ending 12/31/98 (consisting of 12 Notes)
(B) No reports on Form 8-K have been filed during any quarter from 10-1-77
to 9-31-98.
ITEM 8. CHANGES IN AND DIAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE. None
PART III
ITEM 9. DIRECTORS OF THE REGISTRANT
Wayne Mullins age 62. CEO/President and Director. He is a former Insurance
Executive and inventor holding several patents. The United States Patent
Office granted Mr. Mullins the registered trademark Trilogy ( and a patent for
his Trilogy ^Lotto game and method for playing same^. Mr. Mullins has licensed
his patent, registered trademark and patent pending to the Company.
Mike Maledon, age 47. Chief Operating Officer, Secretary, Treasurer and
Director. He has held senior financial and controllership management positions
with American Express, American Hospital Supply Corp. and Bally Mfg.
Corporation.
Jim Holmes, Director. age 56. He is President of Multimedia Games Inc. MG
provides the communications network and its ^MegaMania^ bingo game played from
3,200 bingo machines at Tribal bingo/casinos located in multiple states. He
is former Executive Vice-President of Gamma International and directed the
company^s satellite network marketing program for its ^Million Dollar Mega
Bingo^ played in multiple Indian Gaming locations. He is the former Missouri
Lottery Director.
Tommy McLees, Director. age 34. He is President and Director of Phoenix
Gaming International (PGI) Las Vegas, Nevada since 1988. PGI business in the
United States and foreign countries is marketing and servicing of slot machines
to casinos, game, software and hardware designs, machine services, casino
operations setup, training and operate casinos. PGI developed technical
training courses to produce better-qualified casino personal and taught its
courses at the Clark County Comm. College for IGT, Bally and Sigma gaming
seminars. PGI is developing the Trilogy Game software/hardware and
communications network for TGC.
John Wertheim, Director. age 55. President and Director of Single Stick,
Inc., Phoenix, Arizona, SSI packages and markets individually packaged premium
and miniature cigars. He is the former President and CEO of J. W. &
Associates, a consulting firm specializing in providing financing capital to
small to medium size companies. He is a Founder of First Business Bank of
Arizona which begin operations in 1985. FBA was merged with Century Bank, the
name was changed to Caliber Bank in 1990. During Mr. Wertheim^s tenure as
President and CEO of Caliber Bank, CB grew to $250 million in assets with nine
branches. He is the former President and CEO of Valley Bank Corp., Inc. and
Valley Bank of Arizona, a full-service commercial and consumer bank service
Phoenix, Arizona
Thomas P. Burns, Director. age 59. Former Sr. Vice President of marketing of
America West Airlines. Former Director of International Sales of Continental
Airlines. Former Manager of Sales for UTA French Airlines.
Robert Rettig, age 70. Director. Former Executive Vice-President of Illinois
Tool Works, Inc. from 1983 to 1990. He is presently a TWI Director and
consultant. From 1976 to 1983 he was President of Packaging Systems and
Instrument Group.
At Registrants special meeting of the Shareholders of the Company held on
November 16, 1998, the above named Directors were elected and shall hold office
until his successor shall have been elected and qualified.
ITEM 10. EXECUTIVE COMPENSATION AND REMUNERATION
The following table shows the compensation of each executive officer and
significant employee during the fiscal years ended December 31,1996,1997, and
1998.
Name and Year Salary Bonus Restricted Securities All
Other
Principal Position Stock Underlying Compensatio
n
Award(s) Options
($) (#)
Wayne Mullins 1998 36,235
President CEO 1997 17,750
1996 22,276
Michael Maledon 1998 0 62,500 50,000
COO 1997 0
Secretary/Treasurer 1996 0
The Board of Directors approved the following options for common stock granted
to the Chief Operating Officer of the Company as of September 1, 1998 and
exercisable for a period of three years from 3/1/1999 for 150,000 common shares
at the price of $1.25 per share and three years from 3/1/2000 for 150,000
common shares at the price of $1.25 per share
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 11. 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 44.4%
Stock Par Value 1717 E. Bell Rd, # 12
$0.001 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 1,572,260 55.5%
Par Value $0.001 Per share
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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, who is a Director and
Officer of Registrant.
No Director or Officer of the Registrant or associate of any such Director or
Officer has been indebted to the Registrant from 12/ 31/ 1997 to 12/ 31/ 1998.
There were no transactions since the beginning of the Registrant^s last fiscal
year (December 31, 1997), and are presently no proposed transactions wherein
any retirement, saving or other similar plan will be provided by the Registrant
to any person.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
YEAR 2000 COMPLIANCE
EXHIBIT A
Letter From Phoenix Gaming International Inc. See Exhibit A
EXHIBIT B
Letter From Cyber Net Ventures Inc. See Exhibit B
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, thereunto duly authorized.
DATED this 13th day of May 1999.
TRILOGY GAMING CORPORATION
By: __________________________________________
Mike Maledon, Chief Operating Officer and Secretary
EXHIBIT A
February 3, 1999
Trilogy Gaming Corporation
Attn: Mike Maledon, COO,
1717 East Bell Road #12
Phoenix, AZ 85022
Re: Y2K Compliance
Mike;
As per your request the following information is submitted to you for your
records. Phoenix Gaming International Inc. has two subsections of the overall
Trilogy project that deals with the Y2K problem. Data Base Platform and the
MPU board that drives each table. The MPU boards are Y2K ready and are more
than capable of handling the current 133MHz processor up to a 266 MHz processor
of which both of these processors are OK. As you know we program each board
from the ground up. It isn^t just an off the shelf board as some people say it
could be.
The Data base platform is the most important of all. The Data base platform
for the Trilogy System is Oracle8 version 8.050. Oracle8 is the strongest data
base platform on the market and 8.050 is Y2K ready. As I have stated in the
above paragraph, Phoenix Gaming International Inc. literally programs the MPU
boards for each table but the data base is not programmed by us. Oracle8
provides the tools and support within their package to be configured and or
redesigned for almost any applications. In our case we have designed the data
base that will best fit the needs for Trilogy both present and future. Again,
within this data base the tools and applications used are Y2k ready. You can
contact Oracle on the web or by phone. Either way, simply mention that you are
utilizing Oracle8 version 8.050.
You will find along with this letter other documents for the PC^s, Routers, and
Hubs. If there is anything else I can do for you please let me know.
Sincerely,
Tommy P. McLees Jr.
Tommy P. McLees Jr.,
CEO
4535 West Sahara 105-13H, Las Vegas, Nevada 89102
Tele: (702) 597-8360 Fax: (702) 242-8928
EXHIBIT B
Computer MD. LTD.
6010 West Cheyenne #15
Las Vegas, Nevada 89108
Voice: (702) 645-1674 Fax: (702) 658-1110
February 4, 1999
Trilogy Gaming
1717 East Bell Road
Phoenix , Arizona
Re: Y2K Specifications
To whom it may concern:
All equipment sold to Trilogy Corporation to date meets the Y2K specifications.
If we can be of any further assistance, please contact Donald C. Mason, or
Heidi Foreman at (702) 645-1674.
Sincerely,
Donald C. Mason
Donald C. Mason
Owner / President
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
MARCH 31, 1999
TABLE OF CONTENTS
Page No.
ACCOUNTANTS= REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statements of Operations 3
Statement of Changes in Shareholders' Equity 4 - 6
Statement of Common Stock Issued 7 - 8
Statements of Cash Flows 9 - 10
Notes to Financial Statements 11 - 16
INDEPENDENT AUDITORS' 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, 1999, and the related statements of operations, changes in
shareholders= equity and cash flows for the three months then ended, 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.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As of March 31, 1999 , the company
was in the development stage of operations. It is imperative that the company
acquire additional financing to fulfill its requirements for its contract with
the St. Regis Mohawk Indian Tribe of New York. The financial statements do not
include any adjustments that might result if this additional financing is not
acquired.
Moffitt & Company, P.C.
May 11, 1999
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 62,002
Inventory of tickets, at cost 55,930
Prepaid expenses 3,101
TOTAL CURRENT ASSETS $ 121,033
PROPERTY AND EQUIPMENT
Construction in process for gaming tables and
computers 458,525
TOTAL PROPERTY AND EQUIPMENT 458,52
5
OTHER ASSETS
Equipment lease security deposits 12,506
TOTAL OTHER ASSETS 12,506
TOTAL ASSETS $ 592,064
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 48,653
Accrued officers= salaries and expenses 179,56
1
TOTAL CURRENT LIABILITIES $ 228,21
4
REDEEMABLE PREFERRED STOCK
Non-cumulative, non-voting shares
Par value $0.01 per share
Authorized 5,000,000 shares
Issued and outstanding - 6 shares
0
SHAREHOLDERS' EQUITY
Capital stock
Preferred stock, convertible, non-cumulative
Voting shares
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 - 3,015,127 shares
3,01
5
Paid in capital in excess of par value of stock
2,58
2,217
Advance on stock subscription 7,500
Retained earnings (deficit) ( 477,376)
Deficit accumulated during the development stage
(
1,751,543)
TOTAL SHAREHOLDERS' EQUITY
363,850
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 592,06
4
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND
FOR THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO MARCH 31, 1999
January 1, 1989
Three (Date of
Months Inception of
Ended Development)
March 31, to March 31,
1999 1999
REVENUE $ 0 $ 0
DEVELOPMENT COSTS 119,792 1,751,543
NET (LOSS) $ ( 119,792) $ ( 1,751,543)
NET (LOSS) PER COMMON SHARE
Basic and diluted $ ( .04)
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
Basic 2,995,752
Diluted 6,985,752
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION
OF DEVELOPMENT) TO MARCH 31, 1999
Preferred Stock
(Convertible) Common Stock
Shares Amount Shares Amount
BALANCE, JANUARY 1, 1989
(DATE OF INCEPTION OF
DEVELOPMENT) 0 $ 0 49,985,211 $
1,9
79
NET LOSS FOR THE YEAR
ENDED DECEMBER 31, 1989 0 0 0
0
BALANCE, DECEMBER 31, 1989 0 0 49,985,211
1,979
NET LOSS FOR THE YEAR
ENDED DECEMBER 31, 1990 0 0 0
0
BALANCE, DECEMBER 31, 1990 0 0 49,985,211
1,979
NET LOSS FOR THE YEAR
ENDED DECEMBER 31, 1991 0 0 0
0
BALANCE, DECEMBER 31, 1991 0 0 49,985,211
1,979
NET LOSS FOR THE YEAR
ENDED DECEMBER 31, 1992 0 0 0
0
BALANCE, DECEMBER 31, 1992 0 0 49,985,211
1,979
NET LOSS FOR THE YEAR
ENDED DECEMBER 31, 1993 0 0 0
0
BALANCE, DECEMBER 31, 1993 0 0 49,985,211
1,979
NET LOSS FOR THE YEAR
ENDED DECEMBER 31, 1994 0 0 0
0
BALANCE, DECEMBER 31, 1994 0 0 49,985,211
1,979
NET LOSS FOR THE YEAR
ENDED DECEMBER 31, 1995 0 0 0
0
BALANCE, DECEMBER 31, 1995 0 $ 0 49,985,211
$ 1,979
Paid in Deficit
Capital Accumulated
in Excess Advance Retained During the
of Par on Stock Earnings Development
Value of Stock Subscription (Deficit) Stage
$ 1,003,753 $ 0 $ ( 447,376) $ 0
0 0 0 ( 47,037)
1,003,753 0 ( 447,376) ( 47,037)
0 0 0 ( 160,296)
1,003,753 0 ( 447,376) ( 207,333)
0 0 0 ( 111,886)
1,003,753 0 ( 447,376) ( 319,219)
0 0 0 ( 37,250)
1,003,753 0 ( 447,376) ( 356,469)
0 0 0 ( 52,882)
1,003,753 0 ( 447,376) ( 409,351)
0 0 0 ( 39,250)
1,003,753 0 ( 447,376) ( 448,601)
0 0 0 ( 27,075)
$ 1,003,753 $ 0 $ ( 447,376) $ ( 475,676)
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (CONTINUED)
FOR THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION
OF DEVELOPMENT) TO MARCH 31, 1999
Preferred Stock
(Convertible) Common Stock
Shares Amount Shares Amount
BALANCE AFTER REVERSE
STOCK SPLIT -
MARCH 1, 1996 0 $ 0 494,684 $
0
MERGER OF INTERNATIONAL
LOTTERY PRODUCTIONS LTD. 0 0 1,596,893
0
ISSUANCE OF COMMON
STOCK FOR
Cash
0 0 118,000 118
Royalties 0 0 78,750 0
NET LOSS FOR THE YEAR
ENDED DECEMBER 31, 1996 0 0 0
0
BALANCE, DECEMBER 31, 1996 0 0 2,288,327
2,097
ISSUANCE OF PREFERRED
STOCK FOR CASH 3,690 37 0
0
ISSUANCE OF COMMON
STOCK FOR
Services rendered 0 0 6,200
62
Cash 0 0 15,000 150
NET LOSS FOR THE YEAR
ENDED DECEMBER 31, 1997 0 0 0
0
BALANCE, DECEMBER 31, 1997 3,690 $ 37 2,309,
527 $ 2,309
Paid in Deficit
Capital Accumulated
in Excess Advance Retained During the
of Par on Stock Earnings Development
Value of Stock Subscription (Deficit) Stage
$ 0 $ 0 $ 0 $ 0
0 0 0 0
147,382 0 0 0
0 0 0 0
0 0 0 ( 167,434)
1,151,135 0 ( 477,376) ( 643,110)
0 0 0 0
7,688 0 0 0
34,850 0 0 0
0 0 0 ( 74,748)
$ 1,193,673 $ 0 $ ( 477,376) $ ( 717,858)
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (CONTINUED)
FOR THE PERIOD FROM JANUARY 1, 1989 (DATE OF INCEPTION
OF DEVELOPMENT) TO MARCH 31, 1999
Preferred Stock
(Convertible) Common Stock
Shares Amount Shares Amount
ISSUANCE OF COMMON STOCK
FOR
Cash, net of commission paid 0 $ 0 386,50
0 $ 387
Services rendered 0 0 50,000
50
Directors= fee 0 0 105,000
105
CORRECTION OF ISSUED
SHARES 0 0 ( 900) ( 1)
OUTSTANDING STOCK
OPTIONS 0 0 0 0
ADVANCE ON STOCK
SUBSCRIPTION 0 0 0 0
NET LOSS FOR THE YEAR
ENDED DECEMBER 31, 1998 0 0 0
0
BALANCE, DECEMBER 31, 1998 3,690 37 2,850,
127 2,850
ISSUANCE OF COMMON
STOCK FOR CASH, NET OF
COMMISSIONS PAID 0 0 165,000
165
NET LOSS FOR THE THREE
MONTHS ENDED MARCH
31, 1999 0 0 0 0
BALANCE, MARCH 31, 1999 3,690 $ 37 3,015,127
$
3,015
Paid in Deficit
Capital Accumulated
in Excess Advance Retained During the
of Par on Stock Earnings Development
Value of Stock Subscription (Deficit) Stage
$ 627,464 $ 0 $ 0 $ 0
62,450 0 0 0
209,895 0 0 0
0 0 0 0
225,000 0 0 0
0 7,500 0 0
0 0 0 ( 913,893)
2,318,482 7,500 ( 477,376) (
1,631,751)
263,735 0 0 0
0 0 0 ( 119,792)
$ 2,582,217 $ 7,500 $ ( 477,376) $ (
1,751,543)
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF COMMON STOCK ISSUED
FOR THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO MARCH 31, 1999
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
03/01/96 493,784 Balance after reverse stock
split
05/05/96 1,596,893 Merger of International
Lottery Productions LTD.
03/27/96 40,000 Cash $ 1.25 $
50,00
0
04/04/96 8,000 Cash 1.25
10,00
0
07/08/96 10,000 Cash 1.25
12,50
0
08/12/96 78,750 Royalties -
-
08/16/96 16,000 Cash 1.25
20,00
0
11/08/96 12,000 Cash 1.25
15,00
0
11/14/96 4,000 Cash 1.25
5,000
11/18/96 8,000 Cash 1.25
10,00
0
12/02/96 20,000 Cash 1.25
25,00
0
03/10/97 8,000 Cash 1.25
10,00
0
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
15,00
0
11/06/97 4,000 Cash 2.50
10,00
0
01/08/98 8,000 Cash 1.25
10,00
0
03/01/98 50,000 Services 1.25
62,5
00
03/24/98 40,000 Cash 1.25
50,00
0
05/06/98 16,000 Cash 1.25
20,00
0
05/12/98 5,000 Cash 2.00
10,00
0
05/13/98 20,000 Cash 2.00
40,00
0
05/14/98 20,000 Cash 2.00
40,00
0
05/15/98 5,000 Cash 2.00
10,00
0
05/26/98 5,000 Cash 2.00
10,00
0
06/10/98 5,000 Cash 2.00
10,00
0
07/01/98 5,000 Cash 2.00
10,00
0
07/09/98 5,000 Cash 2.00
10,00
0
07/21/98 5,000 Cash 2.00
10,00
0
07/23/98 20,000 Cash 2.00
40,00
0
07/27/98 5,000 Cash 2.00
10,00
0
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF COMMON STOCK ISSUED (CONTINUED)
FOR THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO MARCH 31, 1999
Date Number
Shares of Shares Price
Total
Issued Issued Consideration Per Share
Consideration
07/30/98 5,000 Cash $ 2.00 $
10,00
0
08/18/98 5,000 Cash 2.00
10,00
0
08/21/98 5,000 Cash 2.00
10,00
0
10/12/98 5,000 Cash 2.00
10,00
0
10/20/98 10,000 Cash 2.00
20,00
0
10/23/98 5,000 Cash 2.00
10,00
0
10/28/98 1 5,000 Cash 2.00
30,00
0
11/04/98 10,000 Cash 2.00
20,00
0
11/05/98 7,500 Cash 2.00
15,00
0
11/06/98 5,000 Cash 2.00
10,00
0
11/26/98 10,000 Cash 2.00
20,00
0
11/27/98 10,000 Cash 2.00
20,00
0
12/03/98 5,000 Cash 2.00
10,00
0
12/07/98 45,000 Cash 2.00
90,00
0
12/09/98 10,000 Cash 2.00
20,00
0
12/11/98 20,000 Cash 2.00
40,00
0
12/14/98 25,000 Cash 2.00
50,00
0
12/17/98 10,000 Cash 2.00
20,00
0
12/22/98 5,000 Cash 2.00
10,00
0
12/28/98 10,000 Cash 2.00
20,00
0
12/28/98 105,000 Directors= fees 2.00
210,000
01/14/99 5,000 Cash 2.00
10,00
0
01/26/99 65,000 Cash 2.00
130,0
00
01/27/99 5,000 Cash 2.00
10,00
0
02/02/99 15,000 Cash 2.00
30,00
0
02/11/99 7,500 Cash 2.00
15,00
0
02/19/99 25,000 Cash 2.00
50,00
0
02/22/99 5,000 Cash 2.00
10,00
0
02/24/99 10,000 Cash 2.00
20,00
0
03/05/99 12,500 Cash 2.00
25,00
0
03/09/99 5,000 Cash 2.00
10,00
0
03/12/99 5,000 Cash 2.00
10,00
0
03/28/99 5,000 Cash 2.00
10,00
0
3,015,127
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND
FOR THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO MARCH 31, 1999
January 1, 1989
Three (Date of
Months Inception of
Ended Development)
March 31, to March 31,
1999 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ ( 119,792) $ ( 1,751,543)
Adjustments to reconcile net (loss) to net cash
(used) by operating activities:
Capital and stock issued for expenses and services 0
50
5,250
Merger of International Lottery Productions Ltd. 0
52
7,608
Increases (decreases) in:
Inventory of tickets ( 55,930) ( 55,930)
Prepaid expenses 4,249 ( 3,101)
Accounts payable 14,803 48,653
Accrued officers= salaries and expenses 36,463
179,
561
NET CASH (USED) BY OPERATING
ACTIVITIES ( 120,207) ( 549,502)
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction in process for gaming tables
and computers ( 158,628) ( 458,525)
NET CASH (USED) BY INVESTING
ACTIVITIES ( 158,628) ( 458,525)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of company stock,
net of commissions paid 263,900 1,074,250
Equipment lease security deposits 0 ( 12,506)
Advance on stock subscription 0 7,500
NET CASH PROVIDED BY FINANCING
ACTIVITIES 263,900 1,069,244
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ ( 14,935) $ 61,217
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND
FOR THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO MARCH 31, 1999
January 1, 1989
Three (Date of
Months Inception of
Ended Development)
March 31, to March 31,
1999 1999
CASH AND CASH EQUIVALENTS BALANCE AT
BEGINNING OF PERIOD $ 76,937 $ 785
CASH AND CASH EQUIVALENTS BALANCE AT
END OF PERIOD $ 62,002 $ 62,002
SUPPLEMENTARY DISCLOSURE OF
CASH FLOW INFORMATION
Interest paid $ 0 $ 0
Taxes paid $ 0 $ 0
NON CASH INVESTING AND FINANCING
ACTIVITIES
Issuance of company stock for expenses and
services $ 505,250
Issuance of company stock for merger of
International Lottery Productions Ltd. $ 527,60
8
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
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
Provisions for income taxes are based on taxes payable or refundable for the
current year and deferred taxes on temporary differences between the amount of
taxable income and pretax financial income and between the tax bases of assets
and liabilities and their reported amounts in the financial statements.
Deferred tax assets and liabilities are included in the financial statements at
currently enacted income tax rates applicable to the period in which the
deferred tax assets and liabilities are expected to be realized or settled as
prescribed in FASB Statement No. 109, Accounting for Income Taxes. As changes
in tax laws or rate are enacted, deferred tax assets and liabilities are
adjusted through the provision for income taxes.
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. In accordance with
FASB 128, potentially dilutive warrants and options that would have an
anti-dilutive effect on net loss per share are excluded.
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 2 DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN
As of March 31, 1999, 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 $119,792 of development costs for the three
months ended March 31, 1999 and $1,751,543 from January 1, 1989 (date of
inception of development) to March 31, 1999.
The ability of the company to continue as a going concern is dependent on
obtaining additional capital and financing to acquire gaming tables, computers
and equipment. The financial statements do not include any adjustments that
might be necessary if the company is unable to continue as a going concern.
The company began operations at the St. Regis Mohawk Casino on May 4, 1999.
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 from development costs $ 756,000
Less valuation allowance 756,000
Net deferred tax asset $ 0
NOTE 4 LICENSING AGREEMENT WITH RELATED PARTY
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, 1999
NOTE 5 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 6 CONVERTIBLE PREFERRED STOCK
As part of the licensing agreement described in footnote number 4, 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 7 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, 1999, the company was contingently liable to redeem $60,000 of
preferred stock from 25% of pre-tax earnings.
NOTE 8 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 granted the chief operating officer the following options:
Three year option for 150,000 shares of common stock from March 1, 1999.
Three year option for 150,000 shares of common stock from March 1, 2000.
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 8 INCENTIVE QUALIFIED EMPLOYEE STOCK OPTION PLAN (CONTINUED)
A summary of the stock options is as follows:
Option Price
Shares Per Share
Outstanding at January 1, 1999 300,000 1.25
Granted during the year 0 0
Outstanding at March 31, 1999 300,000 $ 1.25
The company has reserved 1,500,000 shares from its authorized common stock
under its Incentive Qualified Employee stock option plan.
Information regarding stock options outstanding as of March 31, 1999 is as
follows:
Options Outstanding
Weighted
Weighted Average
Average Remaining
Price Exercise Contractual
Range Shares Price Life
$ 1.25 300,000 $ 1.25 3 years, 5months
Options Exercisable
Weighted
Average
Price Exercise
Range Shares Price
$ 1.25 0 N/A
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 9 EXECUTIVE EMPLOYMENT AGREEMENTS
The company has entered into employment contracts with the Chief Executive
Officer and Chief Operating Officer. The terms for each agreement are as
follows:
A. Annual base salary of $104,000
B. $600 monthly automobile allowance
C. Medical insurance coverage
D. Annual bonus of $10,000 for each $1,000,000 pre tax earnings
E. Seven year term for the Chief Executive Officer and five year term for the
Chief Operating Officer
NOTE 10 DIRECTORS= COMPENSATION
The stockholders approved the following compensation for the Directors of the
company:
A. Issuance of common stock
5,000 shares to each director for each full year of service from November 1,
1995 to November 1, 1998 and 10,000 shares for each full year from November 16,
1998.
and
B. Bonus
An annual director bonus of up to 1,000 common shares for each $1,000,000 of
pre tax earnings generated to the company during each of the company=s fiscal
year the director served on the Board of Directors of the Company.
NOTE 11 PUBLIC OFFERING
The Board of Directors have the authority, prior to November 1, 1999, to
register with the Securities and Exchange Commission a public offering for up
to 10,000,000 common shares of the company=s common stock.
NOTE 12 TRIBAL GAMING CONTRACT
On September 22, 1998, the company entered into a Trilogy Gaming contract with
the St. Regis Mohawk Indian Tribe of New York. The company began operation at
this casino on May 4, 1999.
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 13 EXECUTIVE BONUSES
Eight corporation officers have been granted an Executive Bonus program whereby
they will receive, for each full year as a full time employee and officer of
the company, 10,000 common shares of the company for each $1,000,000 of pre tax
earnings generated to the company during the company=s fiscal year.
NOTE 14 ROYALTY TO PHOENIX GAMING CORP
The company has agreed to pay a 2 2 % royalty to Phoenix Gaming Corp. The
royalty will be computed on the company=s gross receipts from the first twenty
gaming tables placed with the St. Regis Mohawk Indian Tribe of New York.
NOTE 15 EQUIPMENT LEASE
On October 14, 1998, the company entered into a twenty-four month lease for
telecommunication equipment. The monthly lease rentals are predicated upon the
number of communication lines connected and it is estimated that the lease
rentals will approximate $10,762 per month.
The future minimum annual payments on the lease are:
March 31, 1999 $ 129,132
March 31, 2000 75,334
$ 204,466
The equipment lease expense for the three months ended March 31, 1999 is
$32,286.
NOTE 16 RENT
The company rents its office space on a month-to-month basis. The rent expense
for the three months ended March 31, 1999 is $2,520.
NOTE 17 CONCENTRATION OF RISK
Concentration of risk arises since the company has only one gaming contract and
the contract is only in the State of New York.
NOTE 18 STOCK SPLIT
The Board of Directors are authorized to split the company=s outstanding common
shares up to a total of five for one. This authorization expires on December
31, 1999.
