SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 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 $0.01 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 December 31, 1998 there were 2,850,127 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 12/31/1998 was 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 12/31/98 the Company had sold 62.5 said Units for $625,000. 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
12/31/1998.
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
At Annual Meeting of the Shareholders held on the 16th day of November, 1998,
the following Resolutions were submitted to the shareholders for vote by ballot
thereon:
1. RESOLVED. That instead of the Corporation deleting the shareholders
holding less than 25 of the Corporation^s common stock at the completion of the
Corporation^s merger in March 1996 from the Corporation^s shareholders records,
as was indicated in the Corporation^s Notice To Shareholders in February 1996
and approved by the Corporation^s shareholders in March 1996, the Corporation
shall pay all shareholders of less than 25 common shares the sum of cash equal
to $0.01 per share.
Further Resolved, that the Corporation^s shareholders who are eligible to
receive the payment for their shares described in the resolution immediately
proceeding this resolution, shall be advised that they have the right to
dissent from the mergers consummated in March 1996 by the Corporation and to be
paid the appraised value of their shares at the time, all according to Delaware
statute section 262 (a copy of which statute shall be sent to such shareholder).
Further Resolved, that the appropriate officers of the Corporation shall
coordinate with the Corporation^s stock transfer agent, and bank or third party
trustee to arrange for the most expeditious and efficient manner to accomplish
the proceeding resolutions, and the appropriate officers should be able to
complete the process of making the payments to the Corporation^s shareholders
who own less than 25 shares on or before December 31, 1999.
Results of Shareholder Vote:
For 1,979,627 Against 0 Abstain 0
RESOLVED. The Board of Directors are authorized, and at their discretion from
time to time prior to 12/31/1999, to split the Company^s outstanding common
shares up to a total of 5 for one. All such stock splits shall include all
Warrants, rights, options and Qualified employee benefit plan granted by the
Company prior to each such stock split.
Results of Shareholder Vote:
For 1,979,627 Against 0 Abstain 0
RESOLVED, the purchase of $1,000,000.00 Director & Officer liability insurance
coverage effective as of May, 1998 is hereby ratified and approved.
Results of Shareholder Vote:
For 1,979,627 Against 0 Abstain 0
4. RESOLVED, the Chief Executive Officer or President and Secretary of
the Company are authorized to open banking, saving and loan, and other
financial accounts anywhere within or without the state Delaware. The CEO of
the Company is the authorized signature required on all Company^s bank
account(s) to transact any corporate business on said accounts, and
FURTHER RESOLVED, The CEO of the Company is authorized at his discretion from
time to time, to appoint additional signatures to any of the corporations bank
and financial accounts. The CEO and the Secretary of the Company shall submit
to such designated banks or other financial institutions, written instructions
stating such person(s) name as an authorized signer on such account with check
writing limitations and restrictions, if any, and
FURTHER RESOLVED, Anyone appointed by the CEO as a signature on the bank
account(s) or any financial accounts of the Company may, with or without cause,
be terminated by the CEO. At the election of the CEO, each person authorized
by the CEO as an authorized signature on the Company^s bank account shall be
bonded by a reputable bonding company, and the expense of the cost of the bond
shall be born by the Company. Any person appointed that is disqualified,
denied or has their bond withdrawn by the bonding company, their banking,
savings and loan or other financial account signature authority shall be
immediately withdrawn and that person or persons shall no longer be authorized
as a signature on any of this corporation^s financial account(s), and
FURTHER RESOLVED. The financial institution(s) shall remove any such person(s)
immediately upon being notified in writing from the CEO, President or Secretary
of the Company that, the CEO has terminated a persons authorization as a
signature on such accounts or that such persons bond has been denied or
withdrawn for any reason.
Results of Shareholder Vote:
For 1,979,627 Against 0 Abstain 0
RESOLVED, The license agreement between the Company (Licensee) and Wayne
Mullins (Licensor) dated on July 9, 1993 for the Trilogy game patent #
5,158,293 and Trademark patents which provided license fee payment to Mullins
of 100 common shares (which was split 50,000 to 1 and became 5,000,000 common
shares) $50,000 license fee, 1% royalty of gross sales with a $100,000 minimum
annual royalty payment beginning in 1994 has been amended 4 times to
accommodate the Company^s financial obligations and stock structure. The 5th
amendment of the licensee agreement provides to Licensor the license fee
payment of 1% of gross sales with the minimum royalty payments of $50,000
beginning 1/1/1999 and due on 1/15/2000, and 1,360,000 common voting shares and
3,690 convertible preferred non voting shares of TGC which convert at the rate
of 1 convertible preferred share for 1,000 TGC common shares beginning 3-1-1998
for each 1,000 new shares issued by the Company. Said 3,690 preferred non
voting shares shall be increased or decreased in proportion to the exact number
of shares resulting from any and all stock splits of Licensee or its successors
common stock until all said 3,690 preferred non voting shares and splits
therefrom have been issued to Licensor.
Results of Shareholder Vote:
For 1,979,627 Against 0 Abstain 0
RESOLVED, The license agreement between the Company (Licensee) and Wayne
Mullins (Licensor) dated September 1, 1998 regarding Licensor^s new game
invention ^Patent Pending^ referred to by TGC to as the ^Trilogy 9 Jackpot
Tab/Card Table Game^ provides for the license fee payment of 1% of gross
revenues generated from all game play (excluding revenues generated from patent
# 5,158,293) with the minimum royalty payments of $50,000 beginning on January
1, 1999 and due on January 15, 2000 and 3,500 convertible preferred non voting
shares of TGC which convert at the rate of 1 convertible preferred share for
1,000 TGC common shares for each 1,000 new shares issued by the Company
beginning on 1/2/2000. Said 3,500 preferred non voting shares shall be
increased or decreased in proportion to the exact number of shares resulting
from any and all stock splits of Licensee or its successors common stock until
all said 3,500 preferred non voting shares and splits therefrom have been
issued to Licensor.
Results of Shareholder Vote:
For 1,951,027 Against 28,600 Abstain 0
7. RESOLVED, the Company is authorized, retroactive from April 1,
1996, to offer by private placement or exemption on or before November 1, 1999
for up to 2,000,000 restricted common shares of the Company^s common stock and
up to 15,000 restricted preferred voting shares and up to 15,000 restricted
preferred non voting shares of the Company^s preferred stock at the price per
share that is determined by the CEO or the COO and Secretary of the Company. and
FURTHER RESOLVED, in conjunction with above said common share offer, the
Company is authorized to offer various amounts of Series A through Series N
Warrants. Each Series A through Series N Warrant shall be for the right to
purchase 1,000 common shares of the Company common stock at a stated price by a
designated time determined by the CEO or the COO and Secretary of the Company.
The common shares stated on each Series A through Series N Warrant shall be
increased or decreased in proportion to the exact number of shares resulting
from any and all stock splits of the Company or its successors common stock
therefrom, until the Warrant is exercised.
Results of Shareholder Vote:
For 1,979,627 Against 0 Abstain 0
RESOLVED, the 75,000 restricted common shares issued to members of the Board
of Directors and Management of the Company for services rendered through
11/1/1995 is hereby ratify and approve.
Results of Shareholder Vote:
For 1,979,627 Against 0 Abstain 0
RESOLVED, The shareholders hereby approve that, all Directors of the Company
shall be compensated for serving on the Board of Directors and the CEO or COO
and the Secretary are hereby authorized and instructed to [a] issue or
instruct the Company^s transfer agent to issue 5,000 common shares of the
Company^s common stock to each Director for each full year of service from
11/1/1995 to 11/1/98 and 10,000 shares to each Director for each full year as a
Director beginning 11/16/98 and [b] a annual Directors 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. The approved Directors fee and Directors bonus shall
be increased or decreased in proportion to the exact number of shares resulting
from any and all stock splits of the Company or its successors common stock.
Results of Shareholder Vote:
For 1,979,627 Against 0 Abstain 0
RESOLVED. Wayne Mullins, Mike Maledon, Tom Burns, Jim Holmes, Robert Rettig
and Tommy McLees are hereby elected to the Board of Directors of the Company.
Each Director elected shall hold office until his successor shall have been
elected and qualified. (one additional individual will be submitted for
nomination to the Board of Directors at this shareholders meeting).
Results of Shareholder Vote:
For 1,979,627 Against 0 Abstain 0
RESOLVED. The Board of Directors are authorized and instructed to re-elect
Wayne Mullins as the CEO and President of the Company and through the Company^s
Secretary, to enter into a seven year employment contract, retaining MR.
Mullins as the CEO and President of the Company. The employment agreement
shall provide in part for: [I] the annual base salary of $104,000 of which all
or part can be deferred until the Company generates sufficient operating
earnings to pay the base salary without financial harm the Company. Any
increase in the base salary, if any, after the first year will be determined by
the Company^s Board of Directors or the Company^s management committee or by a
majority vote of the shareholders. [ii] all expenses incurred by Mullins in the
performance with his duties as senior officer and director of the Company shall
be paid or reimbursed by the Company, [iii] a vehicle with full insurance
coverage or up to $600 monthly auto and insurance allowance, [iv] reasonable
medical and dental plan/benefits or full reimbursement thereof until such a
plan is in place and [v] a Senior Executive Employee Annual Bonus of $10,000
for each $1,000,000 pre tax earnings generated to the Company during a calendar
year of employment. Sub section [11] through [iv] shall be retroactive from
March 7, 1996. (MR Mullins abstained voting on this resolution).
Results of Shareholder Vote:
For 714,627 Against 0 Abstain 1,265,000
RESOLVED. The Board of Directors are authorized and instructed to re-elect
Mike Maledon as the Secretary of the Company and through the Company^s CEO, to
enter into a five year employment contract, retaining Mike. Maledon as the COO
and Secretary of the Company. The employment agreement shall provide in part
for: [I] the annual base salary of $104,000 of which all or part can be
deferred until the Company generates sufficient operating earnings to pay the
base salary without financial harm the Company. Any increase in the base
salary, if any, after the first year will be determined by the Company^s Board
of Directors or the Company^s CEO or the Company^s management committee. [ii]
all expenses incurred by Maledon in the performance with his duties as a senior
officer and director of the Company shall be paid or reimbursed by the Company,
[iii] a vehicle with full insurance coverage or up to $600 monthly auto and
insurance allowance, [iv] reasonable medical and dental plan/benefits or
reimbursement thereof until such a plan is in place, [v] a Senior Executive
Employee Annual Bonus of $10,000 for each $1,000,000 pre tax earnings generated
to the Company during each calendar year of employment, [vi] Subject to the
Board of Directors approval the following options for common stock are 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 (MR Maledon abstained voting on
this resolution).
Results of Shareholder Vote:
For 1,864,367 Against 0 Abstain 115,260
RESOLVED. The Company hereby authorizes the Board of Director through the
management of the Company that anytime prior to November 1, 1999 and at the
discretion of the CEO, COO and Secretary of the Company, to register with the
SEC all outstanding common and preferred shares, warrants and options for
common shares of the Company.
Results of Shareholder Vote:
For 1,979,627 Against 0 Abstain 0
RESOLVED, The Company hereby authorizes the Board of Director through the
management of the Company that anytime prior to November 1, 1999 and at the
discretion of the CEO, COO and Secretary of the Company, to register with the
SEC a public offering of up to 10,000,000 common shares of the Company^s common
stock at the price per share to be determined by and at the discretion of the
CEO, COO and Secretary of the Company. All outstanding common and preferred
shares, along with all warrants, options, Director, Officer, Broker,
Intermediary fees and the Company^s Qualified employee benefit plan, if any, of
the Company shall be included in said registration.
Results of Shareholder Vote:
For 1,979,627 Against 0 Abstain 0
RESOLVED. The shareholders hereby approve that, the Board of Directors and the
CEO and Secretary of the Company are authorized and instructed that the Chief
Executive Officer (CEO), Chief Operating Officer (COO), Chief Financial Officer
(CFO), Vice Presidents of Marketing (VPM), Vice President of Communications
(VPC), Vice President of Administration (CAO) and Vice President of
Communication Systems (VPCS) for each full year as a full time employee and
officer of the Company, shall each receive an annual bonus of 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.
Results of Shareholder Vote:
For 1,951,027 Against 28,600 Abstain 0
RESOLVED. The CEO is authorized to appoint and remove members of the Company^s
compensation committee. The committee shall consist of two or more members who
need not be officers, directors or shareholders of the Company. The
compensation committee shall determine the performance of specific calculations
based on attainment of overall Company objectives and individual goal
attainment and report such findings and compensation recommendations to the
Company^ s CEO. The CEO may use such recommendations and grant such awards and
compensation.
Results of Shareholder Vote:
For 1,979,627 Against 0 Abstain 0
RESOLVED. [a] The merger agreement between the Company and Shared Use Network
Services, Inc (SUNS) of April 30, 1998; [b] also TGC^s legal council Snell &
Wilmer^s legal opinion and advice to the Board of Directors of TGC to
terminate, resend and abandon the proposed merger and [c] the Company^s
management notice to SUNS terminating the agreement, is hereby ratified and
approved.
Results of Shareholder Vote:
For 1,979,627 Against 0 Abstain 0
RESOLVED, that the Corporation authorize its Officers to do or cause to be
done, all such acts and things to make, execute and deliver, or cause to be
delivered, in the name and on behalf of the Corporation, all such agreement,
instruments and certificates as such officer or officers may deem necessary,
advisable or appropriate to effectuate or carry out the purpose and intent of
the foregoing resolutions and to perform the obligations of the Corporation
thereunder, such officer of officers^ execution of the same to be conclusive
evidence of the exercise of the discretionary authority therein conferred.
Results of Shareholder Vote:
For 1,979,627 Against 0 Abstain 0
RESOLVED, all acts and actions of the Officers and Directors of the Corporation
and their general conduct relating to this corporation, effected to the date
hereof, be, and they are, authorized, adopted, ratified and approved.
Results of Shareholder Vote:
For 1,979,627 Against 0 Abstain 0
The Secretary then called for tabulation of all the voting ballots from the
shareholders.
The Secretary stated that there were a total of 21 shareholders present at the
meeting representing by ballot a total of 1,979,627 common shares. Of the 19
proposals stated on the voting ballots to the 21 shareholder present at the
meeting: 15 ballots approved all 19 proposals, 2 ballots approved 18 of the
19 proposals and 1 ballot approved 17 of the 19 proposals. The Secretary
stated that with all balloting cast and tabulated, all 19 proposals carried and
are here are hereby approved by the shareholders of the Company on 16 day of
November, 1998.
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.
1998 HIGH LOW
FIRST QUARTER MARCH 31,1998 0 0
SECOND QUARTER JUNE 30,1998 0 0
THIRD QUARTER SEPTEMBER 30,1998 0 0
FOURTH QUARTER DECEMBER 31, 1998 7 4
Approximate number of equity securities holders:
Title of Class
Approximate number of
Record Holders (as of
December 31, 1998
Common stock $.001 Par Value
515
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.
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 12/31/98.
(I) Audited Balance Sheet ending 12/31/98
(II) Audited Statement of Operations from 1/1/1989 to 12/31/97
(III) Audited Statement of Changes in Shareholders Equity as of 12/31/98
(1V) Audited Statement of Common Stock issued from 1/1/1989 ending 12/31/98
Audited Statement of Cash Flows from 1/1/1989 ending 12/31/98
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 $250 million in assets with nine
branches. He is the former President and CEO of Valley Bank Corp., Inc. and
Valley Bank of Arizona, a full-service commercial and consumer bank service
Phoenix, Arizona
Thomas P. Burns, Director. age 59. Former Sr. Vice President of marketing of
America West Airlines. Former Director of International Sales of Continental
Airlines. Former Manager of Sales for UTA French Airlines.
Robert Rettig, age 70. Director. Former Executive Vice-President of Illinois
Tool Works, Inc. from 1983 to 1990. He is presently a TWI Director and
consultant. From 1976 to 1983 he was President of Packaging Systems and
Instrument Group.
At Registrants special meeting of the Shareholders of the Company held on
November 16, 1998, the above named Directors were elected and shall hold office
until his successor shall have been elected and qualified.
ITEM 10. EXECUTIVE COMPENSATION AND REMUNERATION
The following table shows the compensation of each executive officer and
significant employee during the fiscal years ended December 31,1994,1997, and
1998.
Name and Year Salary Bonus Restricted Securities All
Other
Principal Position Stock Underlying Compensatio
n
Award(s) Options
($) (#)
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 15th day of March 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
DECEMBER 31, 1998 AND 1997
TABLE OF CONTENTS
Page No.
INDEPENDENT AUDITORS^ REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 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 ^ 18
INDEPENDENT AUDITORS^ REPORT
To the Board of Directors and Shareholders
Trilogy Gaming Corporation
Phoenix, Arizona
We have audited the accompanying balance sheets of Trilogy Gaming Corporation
(a development stage company) as of December 31, 1998 and 1997, and the related
statements of operations, changes in shareholders^ equity, common stock issued
and cash flows for the years then ended and for the period from January 1, 1989
(date of inception of development) to December 31, 1998. 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, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended and from January 1, 1989 (date of inception of
development) to December 31, 1998, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As of December 31, 1998, 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.
February 23, 1999
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
1997
CURRENT ASSETS
Cash and cash equivalents $ 76,937 $
785
Prepaid insurance 7,350 0
TOTAL CURRENT ASSETS 84,287 785
PROPERTY AND EQUIPMENT
Construction in process for gaming tables and
computers 299,897 0
TOTAL PROPERTY AND EQUIPMENT 299,897
0
OTHER ASSETS
Equipment lease security deposits 12,506
0
TOTAL OTHER ASSETS 12,506 0
TOTAL ASSETS $ 396,690 $ 785
LIABILITIES AND SHAREHOLDERS^ EQUITY
1997
CURRENT LIABILITIES
Accounts payable $ 33,850 $ 0
Accrued officers^ salaries and expenses 143,09
8 0
TOTAL CURRENT LIABILITIES 176,948
0
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 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
37
Common stock
Par value $0.001 per share
Authorized 75,000,000 non-cumulative voting shares
Issued and outstanding
1998 ^ 2,850,127 shares 2,850
1997 ^ 2,309,527 shares
2,309
Paid in capital in excess of par value of stock
2,31
8,482 1,193,673
Advance on stock subscription 7,500
0
Retained earnings (deficit) ( 477,376)
(
477,376)
Deficit accumulated during the development stage
(
1,631,751) ( 717,858)
TOTAL SHAREHOLDERS^ EQUITY 219,742
785
TOTAL LIABILITIES AND SHAREHOLDERS^
EQUITY $ 396,690 $
785
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
FOR THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO DECEMBER 31, 1998
January 1, 1989
(Date of
Inception of
Development)
Years Ended December 31, to December
1998 1997 31, 1998
REVENUE $ 0 $ 0 $ 0
DEVELOPMENT COSTS 913,893 74,748 1,631,751
NET (LOSS) $ ( 913,893) $ ( 74,748) $
(
1,631,751)
NET (LOSS) PER COMMON SHARE
Basic and diluted $ ( 0.37) $ ( 0.32)
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
Basic 2,482,357 2,299,177
Diluted 6,272,357 5,989,177
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 DECEMBER 31, 1998
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 DECEMBER 31, 1998
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 DECEMBER 31, 1998
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
Director^s 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
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)
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF COMMON STOCK ISSUED
FOR THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO DECEMBER 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
03/01/96 493,784 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 DECEMBER 31, 1998
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
2,850,127
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND 1997AND
FOR THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO DECEMBER 31, 1998
January 1, 1989
(Date of
Inception of
Development)
Years Ended December 31, to December
1998 1997 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ ( 913,893) $ ( 74,748) $
(
1,631,751)
Adjustments to reconcile net (loss) to net cash
(used) by operating activities:
Capital and stock issued for expenses and services 497,50
0 7,750 505,250
Merger of International Lottery Productions Ltd. 0
32
,783 527,608
Increases (decreases) in:
Prepaid insurance ( 7,350) 0 (
7,350)
Accounts payable 33,850 0 33,850
Accrued officers^ salaries and expenses 143,098
0
143,098
NET CASH (USED) BY OPERATING
ACTIVITIES ( 246,795) ( 34,215)
(
429,295)
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction in process for gaming tables
and computers ( 299,897) 0 (
299,897)
NET CASH (USED) BY INVESTING
ACTIVITIES ( 299,897) 0 (
299,897)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of company stock 627,850
35,00
0 810,350
Equipment lease security deposits ( 12,506) 0
(
12,506)
Advance on stock subscription 7,500 0
7,50
0
NET CASH PROVIDED BY FINANCING
ACTIVITIES 622,844 35,000
805,3
44
NET INCREASE IN CASH AND CASH
EQUIVALENTS $ 76,152 $ 785 $ 76,152
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND 1997 AND
FOR THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO DECEMBER 31, 1998
January 1, 1989
(Date of
Inception of
Development)
Years Ended December 31, to December
1998 1997 31, 1998
CASH AND CASH EQUIVALENTS BALANCE AT
BEGINNING OF PERIOD $ 785 $ 0 $ 0
CASH AND CASH EQUIVALENTS BALANCE AT
END OF PERIOD $ 76,937 $ 785 $ 76,152
SUPPLEMENTARY DISCLOSURE OF
CASH FLOW INFORMATION
Interest paid $ 0 $ 0 $ 0
Taxes paid $ 0 0 0
NON CASH INVESTING AND FINANCING
ACTIVITIES
Issuance of company stock for expenses and
services $ 497,500 $ 7,750 $
505,2
50
Issuance of company stock for merger of
International Lottery Productions Ltd. $ 0 32,783
$ 527,608
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 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
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
DECEMBER 31, 1998 AND 1997
NOTE 2 DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN
As of December 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 $913,893 of development costs for the year ended
December 31, 1998 and $1,631,751 from January 1, 1989 (date of inception of
development) to December 31, 1998.
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 (see
footnote 18).
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:
1997
Deferred tax asset from development costs $ 696,000 $ 345,00
0
Less valuation allowance 696,000 345,000
Net deferred tax asset $ 0 $ 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, 1998 AND 1997
NOTE 4 PRIVATE PLACEMENT OFFERING (CONTINUED)
5,000 common voting shares and either:
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
1 redeemable preferred non-voting share
The total proceeds received, net of commissions paid was $62,785.
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 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:
1,310,000 common voting shares of stock
3,690 shares of convertible preferred shares
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.
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.
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
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, 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 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.
The company applied APB Opinion 25 and related interpretations in accounting
for this stock option plan. The compensation charge that has been charged
against income for the plan was $225,000. Had compensation costs for the
company^s plan been determined based on the fair value at the grant date
consistent with the method of FASB Statement 123, the company^s net income and
earnings per share would have been reduced to the pro forma amounts indicated
below:
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 9 INCENTIVE QUALIFIED EMPLOYEE STOCK OPTION PLAN (CONTINUED)
As Reported Pro Forma
Net (loss) $ 913,893 $ 874,893
Primary (loss) per share $ ( 0.37) $ ( 0.35)
The fair value of the option granted is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions: (1)
dividend yield of 0%, (2) expected volatility of 30%, (3) risk-free interest
rate of 7.50%, and (4) expected life of 6 years.
A summary of the stock options is as follows:
Option Price
Shares Per Share
Outstanding at December 31, 1997 0 $ -
Granted during the year 300,000 1.25
Outstanding at December 31, 1998 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 December 31, 1998 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, 8 months
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
DECEMBER 31, 1998 AND 1997
NOTE 10 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:
Annual base salary of $104,000
$600 monthly automobile allowance
Medical insurance coverage
Annual bonus of $10,000 for each $1,000,000 pre tax earnings
Seven year term for the Chief Executive Officer and five year term for the
Chief Operating Officer
NOTE 11 DIRECTORS^ COMPENSATION
The stockholders approved the following compensation for the Directors of the
company:
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
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 12 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 13 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.
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 14 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 15 ROYALTY TO PHOENIX GAMING CORP
The company has agreed to pay a 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 16 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:
December 31, 1999 $ 129,132
December 31, 2000 107,620
$ 236,752
The equipment lease expense for 1998 is $21,524.
NOTE 17 RENT
The company rents its office space on a month-to-month basis. The rent expense
for 1998 and 1997 was $9,800.
NOTE 18 SUBSEQUENT EVENTS
From January 1, 1999 to February 23, 1999, the company generated $240,950, net
of commission, from the issuance of 135,000 shares of common stock with
warrants.
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 19 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 20 STOCK SPLIT
The Board of Directors are authorized to split the company^s outstanding common
