SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For the Fiscal Year Ended December 31,1999 Commission File No. 0-6518
TELnet go 2000, Inc.
2937 East Nisbet Ct.
Phoenix, Arizona 85032
Telephone: (602) 788-5801
State of Incorporation I.R.S. Employer Identification No.
Delaware 87-0280129
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
Common Voting Stock, on Which Registered
Par Value $0.01 Per Share None
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 $0.00
December 31, 1999, there were 3,425,272 shares of common
stock, .001 par value issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Exhibit A. 1999 Annual Report to the Shareholders of Trilogy Gaming
Corporation
Exhibit B. Notice of the Annual Meeting of the Shareholders of Trilogy
Gaming Corporation
Exhibit C. Financial Data Schedule (for the Year Ending December
31, 1999
Transitional Small Business Disclosure Format YES X
NO
PART 1.
ITEM 1. DESCRIPTION OF BUSINESS
The name of the Company is TELnet go 2000, Inc, incorporated in the
State of Delaware on 3/6/1972.
The name of the Company was changed from Trilogy Gaming Corporation
to TELnet go 2000, Inc effective 1-1-00.
The Company has no Parents or Subsidiaries. The Company's address is 2937 E.
Nisbet Ct., Phoenix, Arizona 85032
(602) 788-5801.
The Company is a public Trading company listed with the National Association
of Securities Dealers Automated
Quotation ("NASDAQ") System on the Bulletin Board, as "TELnet go 2000, Inc"
with the trading symbol TNET,
and formally listed as "Trilogy Gaming Corporation" with the trading symbol
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 non-cumulative voting shares, par value $0.001 per share,
5,000 Preferred non-cumulative voting shares, par value $0.01 per share
5,000 Preferred non-cumulative, non-voting 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.
THE BUSINESS OF THE COMPANY
SUMMARY OF PATENT LICENSE AGREEMENTS
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, patent
#2,128,150 for the trade name "Trilogy" collective
referred to as the Trilogy tab/lotto type game and the TELnet World Lotto
Sweepstakes game. Mr. Mullins granted
the exclusive U. S. licensee agreement to the above to the Company, which
licensee states in part that; Pursuant to the
License Agreement, the Company is required to pay Mr. Mullins the following:
1% Royalties payments due and
payable to Mr. Mullins 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 Mr.
Mullins 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 there
from 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 Entry to Win Progressive Jackpot" (patent pending)
Mr. Mullins licensed to the Company
the game to the Company, which states in part that:
Pursuant to the License Agreement, the Company is required to pay Mr. Mullins
the following: [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 Mr. Mullins 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 Mr. Mullins. 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
there from 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.
Both Agreements state:
The Agreement is not a conveyance, assignment or Transfer of any right, title
or interest in or to the invention stated
hereto, or Licensors patent rights stated herein. This License is only a grant
of the exclusive limited right to develop,
exploit and market the invention stated herein only to state lotteries, Indian
and Charity gaming entities and no other
rights exists whatsoever that are not stated herein
Licensee (the Company) is an independent contractor and that it is not an agent
of, nor acting in behalf of Licensor
(Mullins) for any purpose or in any manner whatsoever in the operation of its
business during or after the expiration
of this agreement. furthermore, Licensee is not acting under any marketing
direction of Licensor and will formulate
its own marketing plan to best meet its business objectives, subject only to
the faithful observance of the provisions of
this agreement. Licensee agrees to indemnify and save harmless Licensor from
and against all claims, demands,
damages, actions, and causes of actions, liability, expenses or cost arising
out of any transaction participated in, or any
committed act or omission to act by this License.
The fact licensor is or may be in control of licensee business shall not be
construed as a conflict of interest to this
agreement If such a conflict exists or is implied, Licensee hereby waives any
claims of conflict, and hereby consents
to any such conflicts. Licensor shall use its best efforts representing
Licensee. However, Licensee understands and
unconditionally agrees that at all times in the enforcement of this agreement,
Licensor will first represent the best
interest of Licensor and Licensors patents including all other patent rights
and interest thereto at all times.
If the above stated consideration is not paid by the Company, the Company shall
be deemed in default of the License
Agreement and Mr. Mullins may terminate the License. There is no expiration
date on the 7,190 preferred convertible
shares.
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
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. n 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.
INDIAN GAMING ACTIVITIES
The primary operations of the Company ending 12/31/1999 were financed by
selling 100 Units for 500,000 common
shares of the Company's common stock for $2 per share, for $1,000,000. 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 6/31/2000, 5,000 common
shares for $3 per share and (1) one non detachable series B warrant to purchase
on or before 12/31/2000, 5,000
common shares for $7 per share. The Units were sold by private placement to
accredited investors only. From the
placement of the 100 Units, the Company financed administration, and the on
line game communications operation
systems development and manufacturing of its Trilogy pull tab bingo game tables
for the St Regis Mohawk Tribe
pursuant to the St Regis Mohawk 100 Trilogy table game Agreement.
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 entered into an agreement with St Regis Indian Mohawk Tribe for
100 Trilogy Table games that
allowed the Company to market its Trilogy game to the St. Regis license until
the NIGC Class II classification could
be obtained by the Company. The St. Regis Tribe was the only operating casino
that would take this risk,
contemplating that the game and the devise would eventually be classified as a
class II operation.
The Casino Dealer for each Table would handle all the cash including the
payment for the ticket and the use of Casino
chips for the payment of certain winning tickets. The use of the table to
dispense the Trilogy progressive ticket also
created many new equipment communication requirements that had not been tested
as of that time. An electronic
BINGO scratcher game was designed on paper and Phoenix Gaming International
Inc. of Las Vegas was assigned the
task of creating the table from scratch. The use of the electronic buttons to
the design of the specialty dispensers were
all fabricated as the table was being developed. The actual production of the
table and the bases was a difficult, time
consuming and costly process. The table with the eye catching blue felt and
blinking BINGO lamps was very well
received especially at the April, 1999 Indian Gaming show in Tucson, Arizona.
However, the real obstacle to the
game design was the creation and implementation of the communication systems
required to run the game individually
and collectively. Each table was really eight stations, each station had to
talk to each other and each table needed to
talk to each other and each casino needed to talk to each other. This
communication system although easily drawn on
paper was not a easy task in the field. A communications company, Cybernet
Ventures of Las Vegas, recommended
by Phoenix Gaming to create and install the required computers, hubs, routers
and T-1 communication lines was
woefully unqualified to complete the communication system. This not only cost
a lot of lost time but was also very
costly financially. The Company made all efforts to make the Trilogy bingo
game operational at the St Regis.
During this time, early 1999, the weather in upper New York was the worst it
has been in five years. The snowfall
crippled the area causing extensive delays in the implementation. The
implementation at the St. Regis Bingo Palace
was laden with extensive delays due to faulty electric supply and general labor
to complete the required tasks. The
implementation was originally scheduled to be completed by the end of February,
1999. The actual first date that the
game was ready to be kicked off was the end of April, 1999 but this only
included four tables, this change was the
result of the extensive difficulties with the Company's vendors completely
building, testing, and delivering ten
commercially working Trilogy Bingo tables with complete produced and tested
commercially working on site and off
site Trilogy game communication systems.
After much time and expense, it became obvious to the Company that the St.
Regis Mohawk Bingo Place was not ready
or familiar with the operating requirements of casino style table games in a
bingo hall environment. Trilogy trained
potential dealers and pit crew personnel including extensive internal controls
for both the game operation and money
control. Trilogy even paid for the first two weeks of this training and
potential implementation. In short, the
implementation took an extremely long time and caused great concern for the St.
Regis Tribe.
PGI produced, in part, 9 of the first 11 Trilogy game tables ordered out of
the total 30 tables ordered by the Company
of which 9 were sent to the St Regis Reservation in NY for assembly by PGI.
Eight were placed on the floor of the
Mohawk bingo Palace of which PGI, after a considerable amount of time and
expense to TGC, PGI made only 4 of the
8 tables operational in part to dispense Trilogy game tickets and play the
Trilogy tab/bingo game, but without the wide
area communications system which controls the security of the game and
progressive jackpot as specified and paid for
by TGC.
During the later stages of the implementation, the St. Regis Tribal Council
changed. The new Tribal Council begin
to concentrate on class III gambling and because of all the delays and alleged
confusion, canceled the Trilogy table
contract and removed the tables from the Mohawk Bingo Palace in violation of
the Agreement between St Regis and
the Company. The Company was informed of this decision after the tables were
removed and placed in a storage
facility on the reservation. Thus today the Company has received 9
non-commercially working tables, of which 7 are
in storage on the reservation. Two are in storage in Phoenix, Arizona. PGI
has represented to the Company that
certain parts have been ordered from which there are 20 additional tables in
various early stages of assembly.
The Company believes that, because Phoenix Gaming International Inc., (PGI)
including its software programers, sub
contractors, and other vendors ( including Industrial Power Coating Inc.)
failed to completely produce and deliver as
promised: (a) fully developed, commercially debug and deliver to the Company,
the working Trilogy bingo game
software, in-house game communications software and the wide-area communication
software necessary to
commercially operate the Trilogy bingo table game with multiply tables on-line
within a location and on-line from
multiply locations to the office of the Company. (b) failed to produce to the
Company as contracted and paid for, 11
fully competed, commercially working Trilogy bingo pull tab table dispensing
devices that store, dispense the game
tickets, reads the game ticket dispensed and electronically plays the game on
the tables, monitor the game via in-house
and wide-area encrypted communications software over telephone lines to various
telephone switching hubs and T-lines
to the office of the Company. (C) after many months of field game, table and
software designing and installation by
PGI and significant dollars expended by the Company, PGI was able to only get
the game to work on 4 of the 9 tables
to work in part, but without the wide-area communication network software
controlling the game and game security
from the site location to the offices of the Company which is where the control
of the game and accounting would rest.
As a result thereof, the Company believes that PGI, directly and indirectly,
caused the Company great financial loss,
harm and damages. The Company plans to take legal action against PGI, its sub
contractors and associate contractors
and seek recovery of money paid for software, components, T-1
lines./communications, installations, etc and damages.
Excluding the St Regis Indian Mohawk Tribe, the Company may not get another
commitment from an Indian Gaming
entity to market the Trilogy bingo game from tables until the Trilogy bingo
table game is classified by NIGC (National
Indian Gaming Commission) as a Class II game.
Beginning 2000, the Company will not focus marketing its patented game to the
Indian gaming market but will focus
its patented game as a Sweepstakes Game over the Internet.
ITEM 2. DESCRIPTION OF PROPERTIES None
ITEM 3 . LEGAL PROCEEDING None
However, On May 6, 1999, The Company was provided with a draft of a threatened
Complaint which alleges that
six proposed plaintiffs were investors in International Lottery Productions,
Ltd. "ILP" (which had 22 total
shareholders), a predecessor company to Trilogy. The threatened complaint
further alleges that ILP (incorporated
in 1989, went out of business in 1993, resurrected and merged into Trilogy
Gaming Corporation on March 7, 1996)
and certain of its officers and directors made misrepresentations to the
plaintiffs in connection with their investments
in ILP. The threatened complaint also alleges that certain of the officers and
directors of ILP and Trilogy breached
their fiduciary duties to the shareholders of the respective corporations. The
threatened complaint seeks compensatory
and punitive damages, and further seeks to establish a constructive trust over
the lottery game operated by Trilogy
and all revenues it generates, in favor of the plaintiffs.
It appears that the main thrust of the allegations of the threatened complaint
are dependent upon the claims that in
1997-8, the 6 incorporators of ILP were induced to and paid $10,000 each to
Wayne Mullins personally for his
personal benefit, for a interest in his patent and for 40,000 common shares of
ILP, when in fact, they each signed and
initialed each page of the "Pre-Organizational Agreement" and the
"Organizational Meeting". Both documents set
forth all their rights and risks involved in investing into and forming a new
corporation as the promoters. Each of
their $10,000 Capital contributions to form the company (ILP) were made in
payments over a period of time and each
payment was made payable to ILP.
Following our receipt of the Draft Complaint, the Company's legal counsel has
had several conversations with
counsel for the potential plaintiffs. It is uncertain whether the potential
plaintiffs will, in fact, file the threatened
Complaint. The Company has entered into a tolling agreement with the
plaintiffs in order to resolve the alleged
allegations. The Company has been advised that good arguments exist that some
or all of proposed plaintiff's
threatened claims may contain false and misleading statements and fail to state
a cause of action and, therefore, may
be subject to dismissal. At this early stage, however, we are unable to
predict what the ultimate outcome of this matter
will be.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS YES
ANNUAL SHAREHOLDERS MEETING
of
Trilogy Gaming Corporation
a Delaware corporation.
The Annual Shareholders Meeting of Trilogy Gaming Corporation was held on the
17th day of December, 1999 at the
Red Lyon Doubletree Inn, Scottsdale, Arizona.
The Chairman of the Board of Directors (Wayne Mullins) called the meeting to
order pursuant to the Articles and By
Laws of the Company and Delaware corporate law.
The Chairman introduced Mr. Tom Burns the Secretary and Director of the Company.
The Chairman passed out copies of the 1998 Annual shareholders meeting and held
discussion on those minutes. .
The Chairman then begin discussing the 1999 Report to the Shareholders that was
attached with the Shareholders
Notice calling for the 1999 Annual Shareholders meeting. Several questions
were asked regarding certain statements
contained in the report. All questions presented were addressed and answered.
The next order of business was discussion of the resolutions contained in the
shareholders notice. After discussion was
held, the Chairman stated that voting at the meeting would be held by written
ballot which contained the proposal #
of the resolutions to be presented to the shareholders for vote thereon. The
voting ballots were then passed out to each
shareholder present at the meeting. The Secretary instructed the shareholders
to vote on each resolution after the
reading of the proposal by the Secretary, followed by discussion, if any. The
Secretary then read the discussion and
each proposal # (resolution) printed on the ballot given to the shareholders
as follows:
1. RESOLVED, The action of the Board of Directors dated November 22, 1999
to change the name of the Company
From Trilogy Gaming corporation to TelNETgo2000, Inc is hereby ratified
and approved. The CEO and Secretary
shall file the necessary documents on behalf of the Company with the
appropriate state regulatory agency's to
effect the name-approved change.
2. RESOLVED, the Company is authorized, retroactive from November 1, 1999,
to offer by private placement,
exemption or registration on or before November 1, 2000:
[a] up to 10,000,000 restricted common shares of the Company's common
stock and/or
[b] up to 15,000 restricted Series A through Series F Preferred voting
shares and/or
[c] up to 5,000 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 E through Series P Warrants. Each Series E through Series
P Warrant shall be for the right to
purchase stated number of common shares of the Company common stock at a
stated price by a designated time
which shall be determined by the CEO or the Secretary of the Company. The
common shares stated on each Series
E through Series P 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
there from, until the Warrant is
exercised.
3. RESOLVED. Wayne Mullins, Mike Maledon, Tom Burns, 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).
4. RESOLVED. The Board of Directors are authorized and instructed to
re-elect Wayne Mullins as the CEO and
President of the Company. The 7 year employee contract for Wayne Mullins and
the 5 year employee contract for
Mike Maledon that were approved at the 1998 annual shareholders meeting is
hereby rescinded, and
Further Resolved that, the Company shall enter into a annual employment
agreement with Wayne Mullins and
the employment agreement shall provide in part that in the performance with
his duties as an officer, director or
consultant of the Company; [i] all expenses incurred by Mullins shall be
paid by or reimbursed by the Company,
[ii] a vehicle with full insurance coverage or up to $800 monthly auto and
insurance allowance, [iii] reasonable
medical and dental plan/benefits or full reimbursement thereof until such a
plan is in place, and
Further Resolved that, beginning upon the Company having $1,000,000 capital
on hand or the Company begins
to generate monthly sales of $25,000, whichever occur first, Mr. Mullins one
year employee agreement shall then
be for a seven year term with an annual base salary of $104,000 together with
an annual bonus of $10,000 for each
$1,000,000 pre tax earnings generated to the Company during a calendar year
during the term of the employment
agreement. Any increase in the base salary or bonus, 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 shareholder
(M. Mullins abstained voting on this resolution).
5. RESOLVED. The shareholders approve and instruct the Directors to
approve and authorizes the CEO to hire,
terminate and set all salary compensations (excluding the CEO compensations)
not exceeding 12 month. The
CEO may at his discretion from time to time, increase or decrease any such
salary's
bonuses and/or option not earned. (Mr Mullins abstained voting on this
resolution).
6. RESOLVED. The shareholders approve and instruct the Directors to
approve that, beginning upon the Company
having $1,000,000 capital on hand or the Company begins to generate
monthly sales of $25,000, whichever occur
first, the Company's CEO may enter into employment contracts of
more than one year but not exceeding five
years. Each employment agreement shall provide in part that, [I]
the annual base salary not exceed $104,000
without Board of Director approval. 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 in the performance with the duties as an officer,
employees, consultant and director of the
Company may be paid or reimbursed by the Company, [iii] the
employee may be provided with a vehicle with full
insurance coverage or up to $600 monthly auto and insurance
allowance, [iv] may be provided reasonable medical
and dental plan/benefits or may be reimbursed thereof until such a
plan is in place, [v] may receive executive
employee annual bonus of up to $5,000 for each $1,000,000 pre tax
earnings generated to the Company during
each calendar year of employment, [vi] may receive employee and
consultant options for common stock, not
exceeding 100,000 restricted common shares to any one person,
exercisable over a period of three years from the
grant date of the option, at the price per share of [a] prior to
the end of the 1st year, 30% of the market value of
the shares or $5.00 per share, whichever is greater, or [b] prior
to the end of the 2nd year, 40% of the market
value of the shares or $10.00 per share, whichever is greater, or
[c] prior to the end of the 3rdt year, 50% of the
market value of the shares or $20.00 per share, whichever is greater
7. RESOLVED. The Company hereby authorizes the Board of Director
through the management of the Company
that anytime prior to November 31, 2000 and at the discretion of the CEO 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.
8. RESOLVED, The Company hereby authorizes the Board of Director
through the management of the Company
that anytime prior to November 31, 2000 and at the discretion of the CEO 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 along
with warrants, if any, at the price per common share and warrant exercise
time and price per share to be
determined by and at the discretion of the CEO and Secretary of the Company.
All outstanding common and
preferred shares, warrants and options of the Company shall be included in
said registration.
9. 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 salaried employee and officer of the Company, shall each
receive an annual bonus (of 10,000
common shares approved by shareholders on the November 16, 1998 shareholders
meeting, shall now state) of
up to 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
10 RESOLVED. The Series A Warrants are hereby extended from 12/31/1999
to 6/30/2000 and the Series B
Warrants are extended from 6/30/2000 to 12/31/2000.
11. 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.
The Chairman called for a recess while the ballots were tabulated. After
several minutes the meeting was called back
to order. The Chairman then asked the Secretary to give the total vote for
each ballot #.
The Secretary stated to the shareholders that, there were a total of 26
shareholders present at the annual shareholders
meeting and 26 shareholders that voted by ballot, representing by ballot a
total of 2,254,234 common shares. The
shareholder voting for the 11 proposals stated on the voting ballots are as
follows:
Proposal Shares Voted Shares Voted Shares that
Proposal
Number FOR AGAINST Abstained Results
#1 2,088,734 160,500 0 Approved by 92.66% of the vote.
#2 1,879,624 369,610 0 Approved by 83.38% of the vote.
#3 1,877,074 369,610 0 Approved by 83.27% of the vote.
#4 602,073 379,161 1,265,000 Approved by 92.66% of the vote.
#5 540,075 44,161 1,265,000 Approved by 54.60% of the vote.
#6 1,698,073 448,461 0 Approved by 79.76% of the vote.
#7 2,188,234 128,000 0 Approved by 93.97% of the vote.
#8 2,080,734 165,500 0 Approved by 92.30% of the vote.
#9 1,871,624 374,610 0 Approved by 83.03% of the vote.
#10 2,202,784 43,450 0 Approved by 97.72% of the vote.
#11 1,817,074 429,610 0 Approved by 80.61% of the vote.
The Secretary stated that with all balloting cast and tabulated, all 11
proposals carried and are hereby approved by
the shareholders of the Company on this 17 day of December, 1999, and the
"Notice of the Annual Meeting" "Report
to the Shareholders" and all "Voting Ballots cast" at this meeting are
attached to these minutes as Exhibit A, B and
C respectfully.
There being no other business to come before the meeting the Chairman called
for a motion to end the meeting. A
motion to end the meeting was made by Jim Pugh and seconded by Todd Mullins.
The Chairman put the motion to
the shareholders, all shareholders signified in favor of the motion to end the
annual shareholders, the meeting was
then declared ended.
ATTEST: By ____________________________
Tom Burns as the Secretary of the Company
this 17th day of December, 1999.
End of Trilogy Gaming Corporation Annual Shareholders Meeting
PART II
ITEM 5. MARKET FOR COMMON EQUITY and RELATED SHAREHOLDERS MATTERS.
DECEASE IN AMOUNT OUTSTANDING OF SECURITIES OR INDEBTEDNESS None.
INCREASE IN AMOUNT OUTSTANDING OF SECURITIES OR INDEBTEDNESS 285,000
The following table shows the high and low bid prices for the company's common
stock as reported by the NASDAQ
electronic bulletin board (bulletin board Trilogy Gaming Corporation Ticker
Symbol TGGC) for the year ended
December 31,1999. The Company started trading in the fourth quarter of 1998.
HIGH LOW
FIRST QUARTER MARCH 31,1999 7.00 4.00
SECOND QUARTER JUNE 30,1999 4.75 2.00
THIRD QUARTER SEPTEMBER 30,1999 3.25 0.36
FOURTH QUARTER DECEMBER 31,1999 2.25 0.37
Pursuant to the December 17, 1999 annual shareholders meeting, the name of the
Company was changed effective
January 1, 1999, to telNetgo2000 Inc,. The Company's new Ticker Symbol is
TNET.
Approximate number of equity securities holders as of December 31, 1999 567
DIVIDENDS: The Company paid no dividends in the years ended December 31,
1997, 1998, 1999.
RECENT SALE OF UNREGISTERED SECURITIES:
The operations of the Company ending 12/31/1999 were financed by selling 100
Units for 500,000 common shares
of the Company's common stock for $2 per share, for $1,000,000. 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 6/31/2000, 5,000 common shares
for $3 per share and (1) one non detachable series B warrant to purchase on or
before 12/31/2000, 5,000 common
shares for $7 per share. The Company placed 317,500 shares @ $2.00 each for a
total of $ 635,000 for the year ended
12/31/98, 185,500 shares for $365,000 in the first half of 1999, 12,500
shares for $20,000 and 70,000 shares for
$35,000 during the third quarter ending September 30, 1999. The Units were
sold by private placement to accredited
investors only.
The Company has or may issue the following Warrants to acquire Common Stock of
the Company:
Series Number of Price per Warrant
Shares Common Share Expiration date
A 505,000 $3 June 31, 2000
B 505,000 $7 December 31, 2000
C 12,500 $3 January 31, 1999
D 12,500 $7 July 31, 2000
E 100,000 $1 June 30, 2000
F 70,000 $1 June 30, 2000
Options. As of December 31, 1999, the Company has option outstanding to
purchase a total of 300,000 shares of
common stock at $1.25 per share
ITEM 6. MANAGEMENTS DISCUSSIONS AND ANALYSIS or PLAN OF OPERATIONS.
SUMMARY OF OPERATIONS FOR 2000
MISSION STATEMENT: To Launch the 1st "charity driven" Internet Lottery
Sweepstakes Game, that could
build to a $100,000,000 progressive jackpot, played and instantly won on home
computers word-wide, day and
night, 365 days a year.
SWEEPSTAKES were popularized in the 1960s by magazine publishing companies to
promote magazine subscription
sales. Since then, other kinds of companies, including stores, fast food
restaurants, time-share resorts, and even
Charitable Organizations, have used them to promote sales or encourage
donations.
CHARITY SWEEPSTAKES organizations sometimes offer sweepstakes in the hope of
offering potential donors an
extra incentive to give and thereby increasing funds raised. Charity
sweepstakes operate the same way other
sweepstakes do.
PRIZES offered in a sweepstakes often include a first or grand prize and one
or more second, third, fourth, etc., prizes,
with decreasing values. Sweepstakes winners may or may not be pre-selected.
SWEEPSTAKES. The two ingredients of a sweepstakes are the element of chance
(such as in a drawing) and a prize.
"Gambling" on the other hand, has the additional requirement of consideration,
or purchase. You are not required to
pay money or purchase anything to enter a sweepstakes. However, a donation to a
worthy cause and be entered into
a sweepstakes, not only makes you feel good inside knowing your donation will
benefit others, there's that inter voice
inside each of us that says unselfishly, its the right thing to do.
BUSINESS STRATEGY:
TELnet go 2000, Inc, (the new name of Trilogy Gaming Corporation) a development
stage company incorporated in the
State of Delaware, is a public trading company (bulletin board) present ticker
symbol is TNET.
OUR PRODUCT "TELnet Lotto Sweepstakes Game" is Patented.
THE MARKET Gaming revenues for 1997 (US only) exceeded 638 Billion Dollars.
(source, International Gaming
& Wagering Business).
THE INTERNET (US only) 100 MILLION PEOPLE, about half of all adult Americans
are using the internet, which
is double from 2 years ago.
GENERATING OUR INTERNET MEMBER BASE. Our objective, in addition to word of
mouth, promotions and
advertising, is to partner with Internet Publishers that market banner adds
over the internet who have collectively 8,000
web partners, with each generating to "TELnetgo2000.com" web site, an average
of 36 hits per day, 7 days a week,
and with only 15% (5.4 people) per day that become members and donate $10 to
the Charity of their choice and receive
40 FREE sweepstakes play lines playable on their home computer for a chance to
win "instantly" up to $100, jackpots
of $500, $1,000, $5,000 or a multi million dollar sweepstakes Progressive
Jackpot.
OUR OBJECTIVE INTERNET MEMBER BASE could build our TELnet Lotto Sweepstake
(unless earlier hit) to
$100,000,000 in the 15th week of our internet sweepstakes operations and
(unless earlier hit) rebuild it to a
$100,000,000 jackpot every 4 to 6 weeks thereafter. (The size of projected
sweepstakes progressive jackpots are
dependent on the number of $10 charity contributions made, which may vary from
week to week, and whether or not
the progressive jackpot has been hit during any such week).
1st 12 MONTHS of our objective member base internet sweepstakes operations,
could generate $400,000,000 to our
charity partners.
THE 3rd QUARTER of 2000 is our anticipated TELnet World Lotto Sweepstakes game
internet launch date.
TO LAUNCH OUR INTERNET SWEEPSTAKES, the Company will offer one thousand (1,000)
UNITS for
$5,000 per UNIT for $5,000,000. Each Unit is for one (1) Series A Preferred
Voting Share with revenue sharing
rights and convertible rights.
REVENUE SHARING. Series A Preferred Share shall receive: 25% of the Quarterly
earnings of the Company
divided by 5,000 (the maximum number of UNITS) and 1/5,000th shall then be paid
to each issued and outstanding
Series A Preferred Share holder of record pursuant to the payment schedule
stated in the Convertible Rights schedule.
CONVERTIBLE RIGHTS. For each Series A Preferred Share that receives the
Revenue Sharing Payment stated
below, shall (except for $15,000 below) at the option of the Preferred share
holder of record, have the right to convert
each such Preferred share for the number of common shares stated opposite the
revenue sharing payment, as follows:
Preferred Revenue Convertible for net share
Series Payment Common Shares cost
A-1 100 Units $0.00 5,000 $1
A-2 100 Units $0.00 2,500 $2
A-3 800 Units $0.00 1,250 $4
A-1, A-2, A-3 $1,000 667 $6
A-1, A-2, A-3 $2,000 300 $10
A-1, A-2, A-3 $5,000 150 $00
A-1, A-2, A-3 $10,000 100 $00
A-1, A-2, A- 3 $15,000 50 $00
The Company, prior to accepting in writing a subscription agreement for the
UNITS offered, may at its option at
any time, change the price of the UNITS to the public, change the conversion
ratio of the Preferred shares for
common shares, oversubscribe the offering term or withdrew the offering, with
or without notice.
SHARES OUTSTANDING. Immediately prior to the Offering there were 3,425,272
shares of common stock.
REGISTRATION RIGHTS. Purchasers of Units may "piggy back" on all registration
statements filed by the
Company ending 12-31-2003
SUBSCRIPTIONS will be accepted from "accredited investors" only, as defined
under the 1933 Securities Act.
OPERATING BUDGET for 6 months from the sale of 1,000 UNITS:
Operating $500,000
Offering exp. $750,000
Web site, game communication, software, hardware, Etc $400,000
Legal & Accounting $100,000
Debt reduction $100,000
Web Site advertising and Jackpot Seed 3,000,000, Unassigned
$150,000
Total $5,000,000
1st 12 MONTH PROJECTIONS of telNETgo2000.com Internet Sweepstakes operations
are:
Gross Revenues $413,000,000.
Operating Expenses (including advertising) $88,000,000.
Operating Earnings $325,000,000.
Primary ESP (@ 6.5 Million shares) $5.
Share Value (@ PEPS of 5) $250.
UNIT EXIT STRATEGY:
1ST QUARTER PROJECTIONS of our internet operations are $27,000,000 from which
the Company could pay
each $5,000 Unit $15,000. Each Unit holder would exit with 300% gain plus 50
common share bonus or, prior to
receiving a revenue sharing payment, or each Preferred A-1 share could convert
for 5,000 common shares, and each
Preferred A-2 for 2,500 common shares and each Preferred A-3 for 1,250 common
shares and each participate in the
earning and growth of the Company .
(There is no promises made that the Company will succeed in selling said 1,000
Units or projections will occur or are realistic)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS FILED
(A) Financial Statements containing:
* Report of Certified Public Accountants on Schedules as of
12/31/99
* Audited Balance Sheet ending 12/31/99
Statement of Operations from 12/31/1989 to 12/31/99
* Audited Statement of Changes in Shareholders Equity as of
12/31/99
* Audited Statement of Common Stock issued from 1/1/1989 ending
12/31/99
* Audited Statement of Cash Flows from 1/1/1989 ending 12/31/99
* Notes to Financial Statements ending 12/31/99 (consisting of 16 Notes)
(B) No reports on Form 8-K have been filed during any quarter from 10-1-1977
to 12-31-1999.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. None
PART III
ITEM 9. DIRECTORS, EXECUTIVES OFFICERS, PROMOTERS AND CONTROL PERSONS.
At the special 9-22-99 Board of Directors meeting, certain directors demanded
Mr. Mullins, as the majority
shareholder, turn over control of the Company to them, Mr. Mullins rejected
their demands. The following Director
resignations were rendered citing personal reasons and/or differences of
opinion with the majority shareholder Mr.
Mullins.
Joseph Imhoff September 25, 1999 Jim Holmes October 07, 1999 Mike
Maledon Dec. 13, 1999
Robert Rettig September 29, 1999 John Wertheim October 19, 1999
At the Annual Meeting of the Shareholders of the Company held on 12- 17- 1999,
the following named Directors were
elected and accepted the nominations and shall hold office until his successor
shall have been elected and qualified.
Wayne Mullins age 63. 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.
Tomas L, Burns age 59, Vice President of marketing and Director. He is a
former: Vice President of Operations of
MicroAge, Senior Vice President of Marketing of America West Airlines,
Director of International Sales of
Continental Airlines, Manager of Sales for UTA French Airlines .
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, 1998, and December 31, 1999.
Name and year salary, Bonus, Restricted Securities all other Principal
Position Stock Underlying Compensation
YEAR Salary Award(s) Options or other Compensation
Wayne Mullins, President\ CEO 1999 0 $29,000
Royalties
1998 0 $39,000 Royalties
1979 0 $17,750 Royalties
1996 0 $22,276 Royalties
1999 0
Michael Maledon, COO\Secretary 1998 0 62,500
50,000
Secretary\Treasurer 1997 0
Secretary\Treasurer 1996 0
Pursuant to the representations made at the Annual Shareholders Meeting and
Board of Directors Meeting held on
November 16, 1998 by the Mike Maledon the Company's COO and Tommy McLeese,
that during the first quarter of
1999, the COO and Tommy McLeese would have the Trilogy bingo table game fully
developed, produced, tested and
commercially operational at the St Regis Mohawk Bingo Place in the State of NY,
as a result of such statements, the
shareholders were induced and approved the Board of Directors to approve the
following options for common stock
to be granted to Mike Maledon, the Chief Operating Officer (COO) of the Company
with the option date as of
September 1, 1998. Option for: 150,000 common shares at the price of $1.25
per share exercisable for a period of
three years from 3/1/1999 and 150,000 common shares at the price of $1.25 per
share exercisable for a period of three
years from 3/1/2000.
The Trilogy Bingo Table Game were not fully developed, produced, tested and
commercially operational at the St Regis
Mohawk Bingo Place in the State of NY as pursuant to representations made by
the COO and Tommy McLeese, which
was the inducement to grant the 300,000 share option to the COO. Therefore, the
Board of Directors plan to rescind
the 300,000 share stock option to Mr. Maledon the former COO and Director of
the Company.
The Registrant has no annuity, pension or retirement benefits proposed to be
paid to any of its officers or directors.
There is no existing plan for the payment of such benefits.
ITEM 11. PRINCIPAL SECURITY HOLDERS AND SECURITY HOLDERS OF MANAGEMENT
Voting Securities owned of record or beneficially in excess of ten percent
(10%) of the issued and outstanding stock
of Registrant. Unless indicated otherwise below, the address for each listed
director and officer is PO BOX 30310,
Phoenix, Arizona 85046. Except as indicated by footnote, the persons named in
the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them. The number of
shares of common stock outstanding used in calculating the percentage for each
listed person includes the shares of
common stock underlying options held by that person that are exercisable within
60 days of December 31, 1999 but
excludes shares of common stock underlying options held by any other person.
Percentage of beneficial ownership is
based on 3,425,272 shares of common stock outstanding as of December 31, 1999.
Name of Shares of Percentage If 1,000 units convert
@avg.$4 Percentage
Beneficial common Stock beneficially per share for
1,250,000 shares beneficially
Owner beneficially owned owned then shares
beneficially owned owned
Wayne Mullins (1) 1,265,000 36.9% (3) 3,504,625 50.5%
Tom Burns (2) 7,500 .024% (2) 7,500 .001%
All executive officers as
a group (2 persons) 1,272,500 37.1% 3,512,125 50.6%
(1) More than ten percent (2) Less than 1 percent. (3) Includes 7,190
shares of Preferred shares which are convertible
into 7,190,000 shares of Common Stock at the rate of one share for each one new
share issues by the Company.
INSIDER SALE OF STOCK. In September of 1998 Wayne Mullins, President of the
Company, decided he might want
at some time in the near future sell 5% of the shares he owns in the Company
and placed 50,000 of his 1,265,000 shares
for sale pursuant to Rule 144, Broker Transaction sale of his securities. As
of March 13, 2000, Mr. Mullins has not
sold any of the 50,000 shares placed into his broker account at US Bancorp/
Piper Jaffray.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(A). No Director, Officer or person holding an excess of ten percent (10%) of
the outstanding securities of the
Registrant, or any relative or spouse of any such persons or relative or spouse
of such person, had any interest in any
transactions or presently proposed transactions to which the Registrant was a
party, except Registrants patent licensor
Wayne Mullins, who is a Director and Officer of Registrant.
(B). No Director or Officer of the Registrant or associate of any such Director
or Officer has been indebted to the
Registrant from 12/ 31/ 1997 to 12/31/ 1999.
(C). There were no transactions since the beginning of the Registrant's last
fiscal year (December 31, 1998), 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. YEAR 2000 COMPLIANCE
The Company's internal systems are believed to be Y-2000 compliance. The
Company's designed Trilogy game
Internet Hardware /Software will be specified Y-2000 compliance. However, the
failure of our internal systems or
material third-party systems to be Year 2000 compliant would significantly harm
our business. The Company may be
affected by Year 2000 issues related to non-compliant information technology
systems or non-information technology
systems operated by us or by third parties. As a result, the Company could
suffer a significant number of business
disruptions and inefficiencies for us, our service and providers and our
anticipated internet members and users that may
divert our time and attention and financial and human resources from our
ordinary business activities.
In addition, the Company cannot be certain that governmental agencies, utility
companies, Internet access companies,
third-party service providers and others outside of our control will be Year
2000 compliant. The failure by these entities
to be Year 2000 compliant could result in a systemic failure beyond our
control, such as a prolonged Internet,
telecommunications or electrical failure, that could also prevent the Company
from delivering our anticipated internet
services to our customers, decrease the use of the Internet or prevent users
from accessing our Web site which would
lead to a decline in our anticipated revenues.
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-Q None
At the annual shareholders meeting and Directors held on December 17, 1999, the
shareholders and Directors approved
to change the name of the corporation from Trilogy Gaming Corporation to
TELnet go 2000, Inc effective 1-1-2000.
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, hereunto duly
authorized.
Dated this 24th Day of March, 2000.
TELnet go 2000, Inc.
BY
________________________
W. Mullins , President
TELNETGO2000, INC.
FORMERLY KNOWN AS
TRILOGY GAMING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
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
Statements of Cash Flows. . . . . . . . . . . . . . . . .
7 - 8
Notes to Financial Statements . . . . . . . . . . . . . .
9 - 18
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
telNETgo2000, Inc.
Formerly Known As
Trilogy Gaming Corporation
Phoenix, Arizona
We have audited the accompanying balance sheets of telNETgo2000, Inc. (a
development
stage company) as of December 31, 1999 and 1998, and the related statements of
operations, changes in shareholders' equity, and cash flows for the years then
ended and for
the period from January 1, 1989 (date of inception of development) to December
31, 1999.
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 audits in accordance with generally accepted auditing
standards. Those
standards require that we plan and perform the audits 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 audits 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 telNETgo2000, Inc. as of December 31, 1999
and 1998,
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, 1999, 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 discussed in Note 2 to the financial
statements, the company
has incurred $2,346,116 of development costs and has not received any contracts
for the
products it is developing. These conditions raise substantial doubt about its
ability to
continue as a going concern. Management's plans regarding this matter also are
described
in Note 15. The financial statements do not include any adjustments that might
result from
the outcome of this uncertainty.
Moffitt & Company, P.C.
Scottsdale, Arizona
February 23, 1999
TELNETGO2000, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
1999
1998
CURRENT ASSETS
Cash and cash equivalents $ 23,256 $ 76,937
Prepaid insurance 0
7,350
TOTAL CURRENT ASSETS 23,256
84,287
PROPERTY AND EQUIPMENT
Construction in process for gaming tables and
computers 0
299,897
TOTAL PROPERTY AND EQUIPMENT 0 299,897
OTHER ASSETS
Equipment lease security deposits
0 12,506
TOTAL OTHER ASSETS ____________0 12,506
TOTAL ASSETS $ 23,256
$ 396,690
LIABILITIES AND SHAREHOLDERS' EQUITY
1999 1998
CURRENT LIABILITIES
Accounts payable $ 80,395 $ 33,850
Royalty payable, Wayne Mullins 71,000 0
Accrued officers' salaries and expenses 0
143,098
TOTAL CURRENT LIABILITIES S151,395 176,948
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
CONTINGENCIES AND UNCERTAINTIES 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
1999 - 7,190 shares 72
0
1998 - 3,690 shares 0
37
Common stock
Par value $0.001 per share
Authorized 75,000,000 non-cumulative voting shares
Issued and outstanding
1999 - 3,425,272 shares 3,425 0
1998 - 2,850,127 shares 0 2,850
Paid in capital in excess of par value of stock 2,694,356
2,318,482
Advance on stock subscription ( 2,500) 7,500
Retained earnings (deficit) ( 477,376) ( 477,376)
Deficit accumulated during the development stage ( 2,346,116) (
1,631,751)
TOTAL SHAREHOLDERS' EQUITY ( 128,139) 219,742
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 23,256
$ 396,690
TELNETGO2000, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 AND
FOR THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO DECEMBER 31, 1999
January 1, 1989
(Date of
Inception of
Development)
Years Ended December 31,
to December
1999 1998
31, 1999
REVENUE $ 0 $ 0
$ __ 0
COSTS AND EXPENSES
Development costs 130,116
913,893 1,761,867
Abandonment of assets 584,249
0 584,249
TOTAL COSTS AND EXPENSES 714,365
913,893 2,346,116
NET (LOSS) $ ( 714,365) $ (
913,893) $ ( 2,346,116)
NET (LOSS) PER COMMON SHARE
Basic and diluted $ ( 0.21) $ ( 0.37)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic 3,415,272
2,482,357
Diluted 4,099,625
6,272,357
3
TELNETGO2000, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION
OF DEVELOPMENT) TO DECEMBER 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 $ 1,979
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
Capita
Accumulated
in Excess Advance Stock Retained
During the
of Par on Stock Subscription Earnings
Development
Value of Stock Subscription Receivable (Deficit)
Stage
$ 1,003,753 $ 0 $ 0
$ ( 447,376) $ 0
0 0 0 0
( 47,037)
1,003,753 0 0 (
447,376) ( 47,037)
0 0 0
0 (160,296)
1,003,753 0 0 ( 447,376)
( 207,333)
0 0 0 0
( 111,886)
1,003,753 0 0 ( 447,376)
( 319,219)
0 0 0 0 (
37,250)
1,003,753 0 0
( 447,376) ( 356,469)
0 0 0 0
( 52,882)
1,003,753 0 0 ( 447,376) (
409,351)
0 0 0 0 (
39,250)
1,003,753 0 0 ( 447,376)
( 448,601)
0 0 0 0 ( 27,075)
$ 1,003,753 $ 0 $ 0 $
( 447,376) $ ( 475,676)
TELNETGO2000, INC.
(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, 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 Stock Retained During the
of Par on Stock Subscription Earnings Development
Value of Stock Subscription Receivable (Deficit) Stage
$ 0 $ 0 $ 0 $ 0
$ 0
0 0 0 0
0
147,382 0 0 0
0
0 0 0 0
0
0 0 0 0 (
167,434)
1,151,135 0 0 ( 477,376)
( 643,110)
0 0 0 0
0
7,688 0 0
0 0
34,850 0 0
0 0
0 0 0 0 (
74,748)
$ 1,193,673 $ 0 $ 0
0 $ ( 477,376) $ ( 717,858)
TELNETGO2000, INC.
(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, 1999
Preferred Stock
(Convertible)
Common Stock
Shares Amount
Shares Amount
ISSUANCE OF COMMON
STOCK FOR
Cash, net of commission paid 0 $ 0
386,500 $ 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
CORRECTION OF ISSUED
SHARES 0 0
( 355) 0
ISSUANCE OF PREFERRED
STOCK FOR PENDING
PATENT 3,500 35
0 0
ISSUANCE OF COMMON
STOCK FOR CASH, NET OF
COMMISSIONS PAID 0 0
452,500 452
ISSUANCE OF COMMON STOCK
FOR ADVANCE ON STOCK
SUBSCRIPTION 0 0
8,000 8
ISSUANCE OF COMMON
STOCK FOR DIRECTORS' FEE 0 0
115,000 115
NET LOSS FOR THE YEAR
ENDED DECEMBER 31, 1999 0 0
0 0
BALANCE, DECEMBER 31, 1999 7,190 $ 72
3,425,272 $ 3,425
Paid in Deficit
Capital Accumulated
in Excess Advance Stock Retained
During the
of Par on Stock Subscription Earnings
Development
Value of Stock Subscription Receivable
(Deficit) Stage
$ 627,464 $ 0
$ 0 $ 0 $ 0
62,450 0 0 0
0
209,895 0 0 0
0
0 0 0 0
0
225,000 0 0 0
0
0 7,500 0 0
0
0 0 0 0
(913,893)
2,318,482 7,500 0 ( 477,376)
(1,631,751)
0 0 0 0
0
0 0 0 0
0
367,348 0 0 0
0
7,492 ( 7,500) ( 2,500) 0
0
1,034 0 0 0
0
0 0 0 0 (
714,365)
$ 2,694,356 $ 0 $
(2,500) $ (477,376) $ (2,346,116)
TELNETGO2000, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 AND
FOR THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO DECEMBER 31, 1999
January 1, 1989
(Date of
Inception of
Development)
Years Ended December 31, to December
1999 1998 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ ( 714,365) $ ( 913,893)
$ ( 2,346,116)
Adjustments to reconcile net (loss) to net cash
(used) by operating activities:
Capital and stock issued for expenses and services 1,184
497,500 506,434
Merger of International Lottery Productions Ltd. 0
0 527,608
Abandonment of property and equipment and
equipment lease security deposits 584,249 0
584,249
Changes in operating assets and liabilities:
Prepaid insurance 7,350 ( 7,350)
0
Accounts payable 46,545 33,850
80,395
Royalty payable, Wayne Mullins 71,000 0
71,000
Accrued officers' salaries and expenses ( 143,098) 143,098
0
NET CASH (USED) BY OPERATING
ACTIVITIES ( 147,135) ( 246,795)
( 576,430)
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction in process for gaming tables
and computers ( 271,846) ( 299,897)
( 571,743)
NET CASH (USED) BY INVESTING
ACTIVITIES 0 ( 299,897)
( 571,743)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of company stock 365,300 627,850
1,175,650
Equipment lease security deposits 0 ( 12,506)
( 12,506)
Advance on stock subscription 0 7,500
7,500
NET CASH PROVIDED BY FINANCING
ACTIVITIES 365,300 622,844
1,170,644
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ ( 53,681) $ 76,152
$ 22,471
TELNETGO2000, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 AND
FOR THE PERIOD JANUARY 1, 1989 (DATE OF INCEPTION OF DEVELOPMENT)
TO DECEMBER 31, 1999
January 1, 1989
(Date of
Inception of
Development)
Years Ended December 31, to December
1999 1998 31, 1999
CASH AND CASH EQUIVALENTS BALANCE AT
BEGINNING OF PERIOD $76,937 $ 785
$ 785
CASH AND CASH EQUIVALENTS BALANCE AT
END OF PERIOD $ 23,256 $ 76,937
$ 23,25
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 $1,184 $ 497,500
$ 506,434
Issuance of company stock for merger of
International Lottery Productions Ltd. $ 0 0
$ 527,608
TELNETGO2000, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Nature of Business
telNetgo2000, Inc. 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. In 1999, the company began developing products to
sell electronic sweepstake
tickets over the internet.
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 and 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.
Long Lived Assets
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," requires that long-lived
assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carry amount of the asset in
question may not be recoverable.
TELNETGO2000, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
Long Lived Assets (Continued)
Accordingly, the following assets were expensed for the year ended December
31, 1999:
Gaming tables $ 571,239
Cybernet lease 12,506
Office equipment 504
$ 584,249
NOTE 2 DEVELOPMENT STAGE OPERATIONS
As of December 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 $714,365 of development costs for the year ended December 31, 1999
and $2,346,116
from January 1, 1989 (date of inception of development) to December 31, 1999.
NOTE 3 TRIBAL GAMING CONTRACT
The company's contract with the St. Regis Mohawk Indian Tribe of New York was
canceled by the
Indian Counsel. The company expensed the gaming table, Cybernet lease and
tickets as worthless as
of December 31, 1999. (See Note 1)
NOTE 4 INCOME TAXES
(Loss) before income taxes $( 714,365)
The provision for income taxes is estimated as follows:
Currently payable $ 0
Deferred $ 0
A reconciliation of the provision for income taxes
compared with the amounts at the U.S. Federal
Statutory rates is as follows:
Tax at U.S. Federal Statutory income tax rate $ 0
TELNETGO2000, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 4 INCOME TAXES (CONTINUED)
Deferred income tax assets and liabilities reflect the
impact of temporary differences between amounts
of assets and liabilities for financial reporting
purposes and the basis of such assets and liabilities
as measured by tax laws. The net deferred tax assets is $ 0
Temporary differences and carry forwards that gave rise to
deferred tax assets and liabilities included the following:
Deferred Tax Asset
1999 1998
Deferred tax from development costs $ 812,363$ 569,479
Valuation allowance 812,363 569,479
Total deferred taxes $ 0 $
0
A reconciliation of the valuation allowance is as follows:
Balance at beginning of year $ 569,479 $
258,755
Addition for the year 242,884 310,724
Balance at end of year $ 812,363 $
569,479
NOTE 5 LICENSING AGREEMENT WITH RELATED PARTY
The company has two licensing agreements 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 and the
Electronic Sweepstake tickets.
The first agreement provides:
A.1,310,000 common voting shares of stock
B.3,690 shares of convertible preferred shares, convertible at the rate of 1
convertible preferred
share for 1,000 common shares beginning March 1, 1998 for each 1,000 new
shares issued by the
company. The shares eligible for conversion at December 31, 1999 is computed
as follows:
Shares outstanding at March 1, 1998 2,478,647
Shares outstanding at December 31, 1999 3,425,272
Shares eligible for conversion 946,625
C. 1 % royalty with minimum payments of $50,000.
TELNETGO2000, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 5 LICENSING AGREEMENT WITH RELATED PARTY (CONTINUED)
The second agreement provides:
A. 3,500 shares of convertible preferred shares, convertible at the rate
of 1 convertible
preferred share for 1,000 common shares beginning January 2, 2000 for
each 1,000
new shares issued by the company.
B. 1 % royalty with minimum payments of $50,000.
NOTE 6 BEARER ROYALTY CERTIFICATES
The company has issued 61 five year Trilogy Lotto royalty interests. The
royalty units will receive
a 6% minimum royalty payment for two years plus a five year royalty of .01%
of pre tax income.
Payments begin the first year the company receives gross profits and royalty
earnings payments
from each state lottery marketing the Trilogy Lotto game.
NOTE 7 CONVERTIBLE PREFERRED STOCK
As part of the licensing agreements described in footnote number 5, the Chief
Executive Officer
received 7,190 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
7,190,000 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 each 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, 1999, 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.
TELNETGO2000, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 9 INCENTIVE QUALIFIED EMPLOYEE STOCK OPTION PLAN (CONTINUED)
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.
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 December 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 December 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 2 years, 11
months
Options Exercisable
Weighted
Average
Price Exercise
Range Shares Price
$ 1.25 0 N/A
TELNETGO2000, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 10 EXECUTIVE EMPLOYMENT AGREEMENTS
In 1998, the stockholders authorized the Board of Directors to enter into the
following employment
contracts with the Chief Executive Officer and the Chief Operating Officer.
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
These contracts were never formalized and on December 17, 1999, the
stockholders retroactively
rescinded the contracts and authorized the Board of Directors to enter an
annual employment
agreement with Wayne Mullins with the following terms:
A. Reimburse Wayne Mullins for all corporation expenses paid by him
personally.
B. Provide a company vehicle and insurance with a monthly cost not
exceeding $800
per month.
C. Medical insurance coverage.
D. When the company has $1,000,000 capital on hand or the company begins
to
generate monthly sales of $25,000, whichever occur first, Mr. Mullins'
one year
employee agreement shall then be for a seven year term with an annual
base salary
of $104,000 together with an annual bonus of $10,000 for each
$1,000,000 pre
tax earnings generated to the company during a calendar year during
the term of the
employment agreement. Any increase in the base salary or bonus, 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.
The shareholders approve and instruct the directors to approve that,
beginning upon
the company having $1,000,000 capital on hand or the company begins to
generate
monthly sales of $25,000, whichever occur first, the company's Chief
Executive
Officer may enter into employment contracts of more than one year but not
exceeding five years. Each employment agreement shall provide in part
that, the
annual base salary not exceed $104,000 without Board of Director approval.
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 Chief Executive Officer or the
company's management committee. All expenses incurred in the performance
with
the duties as an officer, employee, consultant and director of the company
may be
paid or reimbursed by the company. The employee may be provided with a
vehicle
with full insurance coverage or up to $600 monthly auto and insurance
allowance,
and reasonable medical and dental plan/benefits. The employee may receive
annual
bonus of up to $5,000
TELNETGO2000, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 10 EXECUTIVE EMPLOYMENT AGREEMENTS (CONTINUED)
for each $1,000,000 pre tax earnings generated to the company during each
calendar year
of employment and options for common stock, not exceeding 100,000
restricted common
shares to any one person, exercisable over a period of three years from the
grant date of the
option, at the price per share of (a) prior to the end of the 1st year, 30%
of the market value
of the shares or $5.00 per share, whichever is greater, or (b) prior to the
end of the 2nd
year, 40% of the market value of the shares or $10.00 per share, whichever
is greater, or
(c) prior to the end of the 3rd year, 50% of the market value of the shares
of $20.00 per
share, whichever is greater.
NOTE 11 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 12 PUBLIC OFFERING
The Board of Directors have the authority, prior to November 30, 2000, 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 and warrants at a price per share to
be determined
by and at the discretion of the Chief Executive Officer and Secretary of
the company.
NOTE 13 EXECUTIVE BONUSES
The shareholders approve that, the Board of Directors and the Chief
Executive Officer and
Secretary of the company are authorized and instructed that; The Chief
Executive Officer,
Chief Operating Officer, Chief Financial Officer, Vice Presidents of
Marketing, Vice
President of Communications, Vice President of Administration and Vice
President of
Communication Systems for each full year as a full time salaried employee
and officer of the
company, shall each receive an annual bonus of up to 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.
TELNETGO2000, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 14 WARRANTS TO ACQUIRE COMMON STOCK
The company has issued the following warrants:
Number Price Per
Expiratio
n
of Shares Shares Date
Series A warrants 505,000 $ 3.00 June 30,
2000
Series B warrants 505,000 7.00 December
31, 2000
Series C warrants 12,500 3.00 June 30,
2000
Series D warrants 12,500 7.00 December
31, 2000
Series E warrants 100,000 1.00 June 30,
2000
Series F warrants 70,000 1.00 June 30,
2000
NOTE 15 GOING CONCERN
These financial statements are presented on the basis that the company is a
going
concern. Going concern contemplates the realization of assets and the
satisfaction
of liabilities in the normal course of business over a reasonable length of
time. The
accompanying financial statement shows that current liabilities exceed
current assets
by $128,139, a shareholders' deficiency of $128,139, and the company has no
contracts for the sale of its products.
The company is developing a new product and is seeking additional financing
to fund
this project.
NOTE 16 CONTINGENCIES AND UNCERTAINTIES
Phoenix Gaming International, Inc. (PGI)
PGI is owned by a former director of the company. PGI issued a purchase
order to
the company for 30 gaming tables for the company's contract with the St.
Regis
Mohawk Indian Tribe of New York. The company paid approximately $280,000 of
the $300,000 contract. Nine of eleven initially ordered tables were
received of which
four were partially operational to dispense lotto tickets, but without
software
completely written, tested, and commercially working for the Trilogy game
on-site
and off-site communication systems. Twenty additional tables have not been
completely manufactured and delivered to the company.
PGI stated that the company owes them $186,000 plus another $350,000 to
subcontractors.
TELNETGO2000, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 16 CONTINGENCIES AND UNCERTAINTIES (CONTINUED)
Phoenix Gaming International, Inc. (PGI) (Continued)
The company believes that PGI and its software programers, subcontractors
and
other vendors including Industrial Power Coating, Inc, which is owned by a
former
director of the company, failed to completely produce and deliver the fully
developed
and commercially acceptable commercially working Trilogy Bingo Game tables
and
software. As a result, the company believes that PGI, directly and
indirectly, caused
the company great financial loss, harm and damages. The company's position
is that
it overpaid the vendors and will not pay any of the alleged payables. The
company
plans to take legal action against PGI, its subcontractors and associate
contractors
and seek recovery of money paid for software, components, T-1
lines/communications, installations, etc and damages.
Employment Contract to Michael Maledon
In 1998, the stockholders approved an employment contract for Michael
Maledon.
The contract was never consummated or signed. (Delaware law requires that
all
employment contracts in excess of one year must be in writing). In 1999,
the
stockholders retroactively rescinded the 1998 agreement. Michael Maledon
states
that the company owes him $197,283 of salary and expenses. The company's
position is that a contract was never entered into and no funds are due.
The company has not accrued any liabilities for these contingencies and
uncertainties.
Threatened Litigation
On May 6, 1999, the company was provided with a draft of a threatened
complaint
which alleges that the proposed plaintiffs were investors in International
Lottery
Productions, Ltd. ("ILP"), a predecessor company to Trilogy. The threatened
complaint further alleges that ILP (incorporated in 1989, went out of
business in
1993, resurrected and merged into Trilogy Gaming Corporation on March 7,
1996)
and certain of its officers and directors made misrepresentations to the
plaintiffs in
connection with their investments in ILP. The threatened complaint also
alleges that
certain of the officers and directors of ILP and Trilogy breached their
fiduciary duties
to the shareholders of the respective corporations. The threatened
complaint seeks
compensatory and punitive damages, and further seeks to establish a
constructive
trust over the lottery game operated by Trilogy and all revenues it
generates, in favor
of the plaintiffs.
It appears that the main thrust of the allegations of the threatened
complaint are
dependent upon the claims that in 1997-8 the six incorporators of ILP were
induced
to and paid
TELNETGO2000, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 16 CONTINGENCIES AND UNCERTAINTIES (CONTINUED)
Threatened Litigation (Continued)
$10,000 each to Wayne Mullins personally for his personal benefit, for a
interest in
his patent and for 40,000 common shares of ILP, when in fact, they each
signed and
initialed each page of the"Pre-Organizational Agreement" and the
"Organizational
Meeting". Both documents set forth all their rights and risks involved in
investing
into and forming a new corporation as the promoters. Each of their $10,000
capital
contributions to form the company (ILP) were made over a period of time and
each
payment was made payable to ILP.
Following receipt of the Draft complaint, the company's legal counsel has
had several
conversations with counsel for the potential plaintiffs. It is uncertain
whether the
potential plaintiffs will, in fact, file the threatened complaint. The
company has
entered into a tolling agreement with the plaintiffs in order to resolve
the alleged
allegations. The company has been advised that good arguments exist that
some or
all of proposed plaintiffs' threatened claims may contain false and
misleading
statements and fail to state a course of action and, therefore, may be
subject to
dismissal. At this early stage, however, it is impossible to predict what
the ultimate
outcome of this matter will be.
End of Financial Statements
1999 ANNUAL EXHIBIT A
REPORT TO THE SHAREHOLDERS
Of
Trilogy Gaming Corporation
Attached to this Report is DRAFT of a cover page outlining the Company's
proposed 500 Unit Private
Placement and the marketing plan for the Company's new World Wide Web (Internet)
TelNETgo2000.com progressive jackpot FREE Sweepstakes game. This plan is
predicated upon
sufficient capital infusion to implement the product for its intended market.
For a better understanding
about the direction and goals of the Company, please review these marketing
materials.
The Company has also designed the Trilogy game for marketing to State Lotteries
using the lotteries current
ITVM's (Instant Ticket Vending Machines) as the distribution system for the
Trilogy scratchier ticket
progressive jackpot game. Recent contact with certain state Lottery officials
has been very encouraging. The
company has sent information, per their request, and currently await the
opportunity to demonstrate the game
and the process for distribution to each of the states. The further
advancement of this market will require a
major infusion of capital and could take a considerable amount of time and
expense before the Company could
land a contract with a State lottery.
The following report includes the activities and events covering 1998 through
September 30,1999. This
overlap is to assure that all the new shareholders are informed of all previous
activity as well as the current
events of the company.
The Company, incorporated in the State of Delaware, is a public reporting
company with 500 +/-
shareholders. The Company trade symbol is "TGGC".
American Securities Transfer & Trust, 938 Quail Street, Suite 101, Lakewood, CO
80215 is the Company stock transfer
agent.
For the past several years the Company has been in the stage of product
development, software/hardware and network
communication design of its Trilogy progressive jackpot game.
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".
On April 30, 1998 the Company entered into an Agreement of Merger with Shared
Use Network Services, Inc (SUNS).
A dispute arose regarding the consideration under the agreement including the
seven million dollar valuation of SUNS
assets that were to be acquired by TGC upon the merger. Upon advice of the
Company's corporate counsel, SUNS was
notified on October 7, 1998 that the Board of Directors of TGC had voted to
terminate, rescind and abandon the
proposed merger. At the November 16, 1998 annual shareholders meeting, by
resolution, the shareholders unanimously
approved to ratify and approve the action of the board of directors rescinding
the proposed SUNS merger. Certain
investors purchased shares of TGC's common stock through a private placement
memorandum that made references,
including financial information regarding the SUNS proposed merger. After the
proposed merger was rescinded, TGC
made a recession offer to all shareholders that had purchased shares through
the private placement that referenced
SUNS. The recession offer was to Return the shares for a full refund plus 6%
or Retain the shares and sign a new private
placement agreement and letter of investment intent. 100% elected to Retain
their shares.
At the November 16, 1998 annual Shareholders Meeting, Mr. Maledon gave a
progress report to the Shareholders
regarding the game tables manufacture, software, hardware and communications
company that he had been working
with to produced the Trilogy table game under his direction. The Shareholders
acknowledged and affirmed that Mr.
Maledon was the officer of the Company designated by the CEO with full
authority over the Trilogy table game
development, manufacturing, communications, etc. The shareholders by
resolution approved and instructed the Board
of Directors to elect Mr. Maledon as the Chief Operating Officer (COO) of the
Company and that he shall continue his
duties with full authority over the Trilogy table game development,
manufacturing, communications, etc.
Mr. Tommy McLeese President of Phoenix Gaming International Inc. (PGI) of Las
Vegas, Nevada was recognized by
the shareholders at the Annual Shareholders Meeting held on November 16, 1998
as the Primary contractor for the
Company to design and develop the game software/hardware, electronics for the
tables, the table tops, installation and
on site training of Tribal personal. Mr. McLeese was elected to the Board of
Directors at the Annual Shareholders
Meeting.
Mr. Mike Maledon, the Company's COO, Secretary and Director disclosed at the
Annual shareholders and Directors
meeting that he was a partner of Industrial Power Coating Inc. It was
recognized by the shareholders and directors that
Phoenix Power Coating Inc. of Phoenix, Arizona was the contractor to produce
the metal base for the tables in
coordination with Phoenix Gaming International, Inc and the COO.
At the November 16, 1998 Board of Directors Meeting, Mr. Maledon and Mr.
McLeese gave a progress report to the
Board of Directors regarding producing the game tables, software, hardware and
communications. The Board of
directors acknowledged and affirmed that Mr. Maledon was the Officer of the
Company designated by the shareholders
with full authority over the Trilogy table game development, manufacturing,
communications, installation, ticket
printing, etc and that Mr. Maledon continue his duties and the newly elected
Director Tommy McLeese continue
development and manufacturing of the Trilogy table game and acknowledged that
they were doing a good job for the
Company.
The Law firm of Snell & Wilmer of Phoenix, AZ has given its legal opinion to
the Company that the Trilogy tab/card
multiple jackpot game is a Class II game pursuant to the definitions set forth
by the United States Congress to NIGC.
On September 15, 1998 the Company submitted the Trilogy scratch tab/card game
to the NIGC for Class II classification
or opinion.
In 1996 Trilogy Gaming Corporation signed an agreement with the St. Regis
Mohawk Indian Tribe for up to 1000 stand
alone machines that would dispense and play the Trilogy Progressive pull tab
game. This contract was subject to the
receipt of class II license for the Trilogy game. The Arizona Department of
Gaming reviewed the game during this time
and advised that the game itself is very certain to be classified as a class II
game, but the device is just too similar to a
slot machine and certain other arrangements must be made. Trilogy went back to
the St. Regis Mohawk Tribe with a
new design in the form of a Table Game that also dispensed and played the
Trilogy Progressive game.
During this time the National Indian Gaming Commission (NIGC), the commission
that issues class II licenses, put a
hold on all new issuances until certain legal issues with other companies that
were and are still pending are resolved.
In 1998, the St. Regis Tribal Council in an effort to obtain the Trilogy
progressive Class II game, issued an agreement
for 100 Trilogy Table games that allowed Trilogy to use the St. Regis license
until the official classification could be
obtained. The St. Regis Tribe was the only operating casino that would take
this risk, contemplating that the game and
the devise would eventually be classified as a class II operation.
The use of the Table to dispense the ticket, satisfied several of the NIGC
requirements that were missing in the slot
machine look alike. The Casino Dealer for each Table handles all the cash
including the payment for the ticket and the
use of Casino chips for the payment of certain winning tickets. The use of the
table to dispense the Trilogy progressive
ticket also created many new equipment communication requirements that had not
been tested as of that time.
The table game that was presented at the previous shareholders meeting in
November of 1998, a nine jackpot game with
the use of playing cards imprinted on the back of the scratch ticket, was
scrapped because it was deemed, by Trilogy
Management, to be to complicated as the first game to be introduced by the
Company and the possibility that it would
not be classified as a Class II device. An electronic BINGO scratcher game was
designed on paper and Phoenix Gaming
International Inc. of Las Vegas was assigned the task of creating the table
from scratch. The use of the electronic buttons
to the design of the specialty dispensers were all fabricated as the table was
being developed. The actual production of
the table and the bases was a difficult, time consuming and costly process.
The table with the eye catching blue felt and
blinking BINGO lamps was very well received especially at the April Indian
Gaming show in Tucson, Arizona.
However, the real obstacle to the game design was the creation and
implementation of the communication systems
required to run the game individually and collectively. Each table was really
eight stations, each station had to talk to
each other and each table needed to talk to each other and each casino needed
to talk to each other. This communication
system although easily drawn on paper was not a easy task in the field. A
communications company, Cybernet Ventures
of Las Vegas, recommended by Phoenix Gaming to create and install the required
computers, hubs, routers and T-1
communication lines was woefully unqualified to complete the communication
system. This not only cost a lot of lost
time but was also very costly financially. The Company was determined to
complete the implementation, if only at the
one Casino.
During this time, early 1999, the weather in upper New York was the worst it
has been in five years. The snowfall
crippled the area causing extensive delays in the implementation. The
implementation at the St. Regis Bingo Palace
was laden with extensive delays due to faulty electric supply and general labor
to complete the required tasks. The
implementation was originally scheduled to be completed by the end of February,
1999. The actual first date that the
game was ready to be kicked off was the end of April, 1999 but this only
included four tables, again this change was the
result of the extensive difficulties with the communication systems.
The St. Regis also was not ready or familiar with the operating requirements of
real table games in a Casino. Trilogy
trained potential dealers and pit crew personnel including extensive internal
controls for both the game operation and
money control. Trilogy even paid for the first two weeks of this training and
potential implementation. In short, the
implementation took an extremely long time and caused great concern for the St.
Regis Tribe.
During the later stages of the implementation, the St. Regis Tribal Council
changed and the new control group decided
that they wanted to concentrate on class III gambling and used all the delays
and alleged confusion as an excuse to cancel
the table contract and to remove the tables from the bingo palace. Trilogy was
informed of this decision after the tables
were removed and placed in a storage facility on the reservation. Thus today
Trilogy owns 10 tables, in storage, and 20
additional tables in various stages of completion, that are not class II
approved and not likely to be approved by NIGC
in the near future. Via positive conversations with NIGC committee members at
the St. Regis while the tables were
being tested, it is very likely that when new licenses are awarded that this
game and table devise will meet all the
requirements of current class II criteria. The end result is that after many
months of in the field designing a game from
scratch and significant dollars expended to accomplish this result, the game
and the tables work at least in one location,
but now there is no willing casino to take a chance on this equipment until
there classified as class II.
PGI produced 10 of the 30 tables ordered by the Company of which 9 were sent to
the St Regis Reservation in NY for
assembly by PGI. 8 were placed on the floor of the Mohawk bingo Palace of
which PGI, after a considerable amount
of time and expense to TGC, made only 4 of the 8 tables operational to dispense
and play the Trilogy tab/bingo game
without the wide area communications system functioning as specified and paid
for by TGC.
Tommy McLeese resigned as a Director of TGC on May 27, 1999.
The Company believes Phoenix Gaming International (PGI) was negligent and
unprofessional in its:
(A) Design of the Trilogy table game software, hardware, software
programmers, hardware suppliers, and T-1 line
communications, needs, requirements and supplier. Not adequately testing all
such items prior to shipping Trilogy
game tables to the St Regis Reservation for delivery to the Tribes Mohawk
Bingo Palace.
(B) Design and manufacturing of the Trilogy game tables, the game software
to operate the game at the tables, the
software to communicate the game information at and between the game tables
to the location host computer and
the communications system governing the whole system for the Trilogy
progressive jackpot wide area net work
game.
(C) Prior to shipping Trilogy Tables and game hardware, on-site inspection
and preparation of the St Regis Tribes
Mohawk Bingo Palace for Trilogy table dedicated floor space, required
structural floor space, electrical wiring, table
pay video security, Trilogy Tab room vault receiving game ticket.
(D) Installation of the table, on sight training of certain personal
required to operate the Trilogy game.
The Company believes PGI exceeded its manufacturing quotes to TGC to produce 30
Trilogy game tables with software
and hardware which PGI claims were additional cost incurred by PGI for on-site
cost and expense for PGI, certain of
its employees and software programmers incurred getting St Regis Mohawk Bingo
Palace ready to accept the Trilogy
tables, hardware and game tickets and to get the Trilogy game software to
operate to run the Trilogy table game and
setting up the St Regis Mohawk Bingo Palace for marketing the Trilogy game.
Tommy McLeese President of PGI (and as a Director of TGC) assured the Company
that he would deliver all the
software to the Company's COO Mr. Maledon when the software produced by PGI was
completed and tested. Mr.
Maledon has requested on several occasions that PGI make available and deliver
to him the Trilogy game software that
TGC has paid PGI for. PGI has refused to provide to the Company or allow the
Company's COO to obtain the Trilogy
game software. The Company plans to seek legal action to resolve this issue as
well as any other damages that the
Company may have sub stained as a result of PGI's negligence.
A detailed analysis of the amounts spent on this project are included in the
financial summary included with this report.
During the period of May 1999 to current, Trilogy investigated the Charity
market with the hope of placing qualified
equipment in various charity locations and implementing a modified version of
the class II game in the form of an
electronic raffle. The VFW, a qualified charity located in Phoenix, Arizona
were very eager to proceed with this type
of fund raising activity, pending the formal indication, via independent legal
opinion that the process in total is lawful.
The legal opinion is still pending, but inadequate company funds have put the
opinion on hold.
During this charity research, the Trilogy contacted The Infinity Group, Inc
which is the only company that owns NIGC
class II approved machines and tickets and discovered it was looking for a wide
area progressive game that would fit
their current equipment and allow for a greater return on the equipment.
On Tuesday September 21, 1999, Mr. Mullins and Mr. Maledon met with the
principals of the Infinity Group in
Albuquerque, New Mexico to discus such a proposal. Infinity had several
hundred class II NIGC approved machines
on hand that TGC, by very favorable lease arrangements, could through Infinity,
have the Trilogy game marketed on
Infinity machines under Infinity's Class II approval. It appeared there could
be a beneficial business arrangement that
could be worked out satisfactory to both parties. A marketing plan was
prepared for a method to have access to 600 +/-
Infinity machines, provide $450,000 +/- operating capital to TGC with the
potential to earn $6,000,000 to TGC the first
12 months of operations. Mr. Mullins and Mr. Maledon presented the proposal to
Mr. Daniels (Mr. Daniels sold the
majority of the company's 98 Unit Private placement) on the morning of
Wednesday, September 22, 1999. Mr. Daniels
represented that he had the investors that would fund the 600 +/- machine lease
package for a participation interest.
The Infinity plan was presented that afternoon to the special meeting of the
Board of Directors of the
Company for consideration and action thereon. The board approved management to
proceed with the Infinity Group
to consummate the deal as presented.
At the special Board of Directors meeting, certain Directors demanded Mr.
Mullins, as the majority shareholder, turn
over control of the Company to them, Mr. Mullins rejected their demands. The
following Director resignations were
rendered citing personal reasons and differences of opinion with the majority
shareholder Mr. Mullins.
Joseph Imhoff September 25, 1999 Jim Holmes
October 07, 1999
Robert Rettig September 29, 1999 John Wertheim
October 19, 1999
It appears that after certain Directors resigned from the Board that Mr.
Daniels and others closely related to the
Company may have circumvented the Company and went directly to the Infinity
Group and cut their own deal to
purchase pull tab machines and game tickets under similar favorable arrangement
that they received from TGC as
proprietary information and trade secrets. Because of these actions, the
Company was not successful in making any
business arrangements with the Infinity Group. The Company believes there
exists possible conflicts and corporate gain
to unjustly enrich certain individuals. The Company believes it has been
damaged by such actions and plans to seek
legal action against those involved.
The Present Board of Directors of the Company are, :Wayne Mullins Michael
Maledon Tom Burns.
During May of 1999 the Company's law firm of Snell & Wilmer received and
delivered to the Company a draft of a
law suite with the threat that it may be filed on behalf of the former ILP
Delaware secretary and six (6) of the ten (10)
original organizers who were minority shareholders of International Lottery
Productions, Ltd., (ILP) a Delaware
company incorporated on March 16, 1989. ILP had 10 Founder A Incorporators and
12 founder B shareholders for a
total of 22 shareholders. The main thrust of the allegations are dependent
upon the claims that the 6 incorporators were
induced to and paid $10,000 each to Wayne Mullins personally for his personal
benefit, for a interest in his patent and
for 40,000 common shares of ILP, when in fact, they each signed and initialed
each page of the "Pre-Organizational
Agreement" and the "Organizational Meeting". Both documents set forth all
their rights and risks involved in investing
into and forming a new corporation as the promoters. Each of their $10,000
Capital contributions to form the company
(ILP) were made over a period of time and each payment was made payable to
ILP.
During early 1999, the former Secretary of ILP, Rick Burris called Mr. Mullins
to meet at the Sliver Spur Restaurant
at 16th street and Bell, PHX, AZ with Burris, Will Rogers and Steve Rogers to
discus the ILP March 7, 1996 merger into
TGC. At this meeting, Will Rogers, Steve Rogers and Rick Burris demanded that
their group of 6 closely related friends
and relatives receive 340,000 TGC shares instead of the 15,000 shares that was
approved by the merger of ILP into
TGC. They threatened Mr. Mullins that, if their group did not each get the
same number of 40,000 ILP shares in TGC,
they would file a law suite and drive the company into ruin and bankruptcy.
They even bragged that they had an
attorney who would represent them on consignment and the best thing TGC and/or
Mr. Mullins could do was to issue
them 340,000 TGC shares instead of the 15,000 TGC shares approved by the
merger. (TGC shares at the time of this
meeting were trading around $6 or $7 thereby making their extortion attempt
valued at 340,000 shares times $6 for
$2,000,000+/-) As the patent owner and majority shareholder of ILP, Mr.
Mullins believes that the 6 disgruntled ILP
shareholders will not prevail with their claim that they have an ownership
right in Mr. Mullins Trilogy game patent,
without which, all of their other allegations most likely become feverous and
without merit. In the event this group of
6 file their threatened action, the Company and Mr. Mullins (severely) will
defend and counter sue all parties thereto.
10 years after ILP was incorporated and 7 years after ILP went out of business,
TGC begin contacting the TGC/ILP
shareholders. 3 of the ILP founder B shareholders cannot be located, 1 has not
been contacted including the 6 Founder
A shareholders of which 1 of the 6 has already agreed to the license by
"written voting ballot" pursuant to the
shareholder meeting approving the merger of ILP into TGC and another 1 of the 6
has already approved Mr. Mullins
license by "written voting ballot" at the November 16, 1998 shareholders
meeting of TGC.
The remaining 4 Founder A and 8 Founder B Shareholders have acknowledged in
writing that; if a discrepancy may
of existed anytime as to whether ILP may have owned the patent or the patent
was a license to ILP is agreed to and
affirmed to by the fact that, all 10 incorporators (including the six
disgruntled shareholders) did in fact sign the Pre-
incorporation agreement, the Organizational Meeting of the Incorporators
whereby ILP entered into a license agreement
with Mr. Mullins, the Secretary of ILP signed the licensee for ILP, that the
license was not a conveyance, that Mr.
Mullins had the right to terminate the license, that Mr. Mullins gave proper
notice along with an accounting to
terminate the license agreement, that proper notice of the merger of ILP into
TGC was given and that the merger was
legally concluded.
A copy of letter from the Company's law firm directed to Mr. Galbraith dated
May 12, 1998 is attached to this report.
The parties have entered into a Tolling Agreement for the purpose of attempting
to resolve the alleged allegations.
WARRANTS AND REGISTRATION
In the process of issuing common stock via the private placement to qualified
investor, warrants for the additional sale
of common stock were also issued. The original exercise date for the series A
warrants was set at June 30, 1999 at an
exercise price of $3.00 per share and Series B warrants with an exercise price
of $7.00. Both warrants were amended
and extended as follows:
Each Unit is for 5,000 common voting shares and
1 Series A Warrant (non detachable) to purchase for the price of $3.00 per
share: 5,000 restricted common shares on
or before 12/31/1999 or 5,000 non-restricted common shares on or before sixty
(60) days after the Company has given
written notice to the Unit holder of record on the books of the Company
(whichever occurs first) that, the Company has
registered with the SEC; (a) the common shares pursuant to this Agreement
(providing said shares have been
outstanding less than the required SEC 12 month holding period for restricted
stock) that are coupled to the Series A
and B warrants and (b) to sell to the Company's Series A and B Warrant
holders of record, the number of new common
shares of the Company stock at the price stated on the Series A and Series B
Warrant(s), and
1 Series B Warrant (non detachable) to purchase for the price of $7.00 per
share: 5,000 restricted common shares on
or before 6/30/2000 or 5,000 non-restricted common shares one hundred eighty
(180) days after the above said written
notice is given by the Company to the Unit holder, whichever occurs first.
The company also planned to register all outstanding issues and prepare for a
second public offering at the same
registration. At the advise of council the company has not opted to register
the common share until such time that it
is financially feasible.
The Company's new mailing address is Trilogy Gaming Corporation PO Box
30310 Phoenix, Arizona 85046
FINANCIAL SUMMARY
During the 9 months ended September 30, 1999 the Company completed the sale for
the Private Placement to Qualified
investors with receipts totaling $395,000. Total cash disbursements for the
same period were $467,246. For a reduction
in cash of $72,246.
The major disbursements for this period were:
Costs to complete the tables in New York $268,280
Commissions paid on sale of stock $79,200
Royalty payments to Wayne Mullins, CEO $23,000
Legal fees Snell & Wilmer $16,079
Office supplies $15,565
Web site production $8,300
Auto lease and insurance $7,277
Indian Trade Show Tucson, AZ $6,588
Accounting Audit fees $6,075
Stock Transfer Agent fees $6,436
Office Rent $6,717
Insurance D&O $4,855
Utilities and Telephone $4,484
Travel expenses for M. Maledon to New York $3,000
All other $11,400
Over 75%, $347,480 of the funds disbursed were for the completion of the table
games in New York and for
commissions paid for the placing of the private placement.
The following summary is for the 21 months from January 1, 1998 thru September
30, 1999.
Total receipts from Private Placements $1,102,000
Total disbursements by major category and % of total disbursements
Capital expenditures $607,803 54.5%
Commissions & bonuses paid $213,958 19.2%
Royalty payments paid to Mr. Mullins $62,064 5.6%
Office supplies/printing $54,002 4.8%
Legal Fees $31,831 2.9%
Auto leases and insurance $21,760 2.0%
Insurance D&O/Prop $26,111 2.3%
Accounting audit fees $21,370 1.9%
Office rent $16,500 1.5%
Transfer agencies $10,213 0.9%
Suns acquisition costs $10,161 0.9%
Advertising/Web Production $10,091 0.9%
Telephone $9,604 0.9%
All other expenses $24,596 2.2%
Total disbursements $1,120,065 100.0%
ACCOUNTS PAYABLE
The company, as of September 30, 1999, has normal trade accounts payable of
approximately $111,000. The major
categories are as follows:
Current 30days +
Legal fees $2,000 $10,575
Accounting/audit $2,175 $6,515
Insurance D&O $2,437 $9,215
Insurance Prop/Casualty $1,700 $8,000
Office rent $840 $840
Stock transfer agent $442 $480
Utilities $471 $475
Office max supplies $4,238
MicroAge of Montreal, Canada $3,000
Michael Maledon Travel $9,500
Industrial Powder Coating cash advance $24,000
Industrial Powder Coating table bases $22,500
Other suppliers $1,550
Total $15,853 $95,100
Insurance coverage for both D&O and the Property & Casualty was cancelled in
October, 1999, for lack of payment.
The law firm of Snell & Wilmer resigned as Corporate Council effective October
2, 1999, citing a lack of payment and
a conflict of interest.
The Company is in the process of selecting another law firm to represent the
Company.
The following are summaries of the Audited Financial Statements for the Year
Ended 12/31/98 and the management
generated Financial Statements for the 9 Months Ended 09/31/99.
TRILOGY GAMING CORPORATION BALANCE SHEET
ASSETS 12/31/98 6/30/99
Cash $785 $25
Property and Equipment $395,905 0
TOTAL ASSETS $396,690 $25
LIABILITIES AND SHAREHOLDERS EQUITY
Liabilities $176,948 356,000
PREFERRED STOCK (par value $0.01 3690 shares outstanding) $37
$37
COMMON STOCK (par value $0.001 5,060,00 shares outstanding)
$2,850 $3,060
Paid in Capital $2,318,482 $2,279,378
Advance on stock $7,500 0
RETAINED EARNINGS (defect) ($477,376) ($477,376)
DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE ($1,631,751)($2,279,378)
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $396,680 $25
TRILOGY GAMING CORPORATION
(A DEVELOPMENT COMPANY)
STATEMENTS OF OPERATIONS
(see page 6 for cash disbursements by category)
Full reviewed statements for the 3rd quarter (period ended 9-30-99) were
unavailable at the time of this report.
1998 audited financial statements and the 1st, 2nd & 3rd quarter 1999
un-audited financial statements will be available for review
at the annual shareholders meeting.
_______________________________________
END OF SHAREHOLDERS REPORT
Wayne Mullins, CEO &President of the Company
this 27th day of November, 1999
NOTICE OF ANNUAL MEETING EXHIBIT B
OF THE SHAREHOLDERS
of
Trilogy Gaming Corporation
a Delaware corporation.
Pursuant to the Company's Article of Incorporation, Article IX
NOTICE IS HEREBY GIVEN, that, the Annual Meeting of the Shareholders of Trilogy
Gaming Corporation will be
held at 9:00 A. M. on the 17th day of December, 1998 at the Double Tree La
Posada Resort, (in the Hayden Room),
4949 E. Lincoln Drive, Scottsdale, AZ and at this meeting the following
resolutions will be discussed and submitted,
along with any other business that may be presented for a resolution, to the
shareholders of record on the books of the
Company for vote thereon:
Discuession will be held regarding the Company's marketing of its Trilogy game
product which include the following:
Marketing our product with walls and boundaries. Indian Gaming, Charity Gaming
and State Lotteries are lucrative
markets that SELL tickets or game plays which is regulated gaming requiring
gaming licensee and machine
classification approvals which take a considerable amount of time, cost and
expense. Gaming machines are a large
startup cost to launch any regulated game. These markets are restricted to
size and locations, subject to traffic, which
relates to game play that determines profits. The Company plans at a later
time to market its Trilogy game to these
markets.
Marketing our product without walls, boundaries, gaming license or machines.
The Company has elected not to
SELL its game tickets. Instead it has elected to launch its Patented Trilogy
Game as a Charity driven World FREE
Sweepstakes Lottery Multi-Jackpot game via the World Wide Web (Internet)
distributed from the www
TelNETgo2000.com web site. The Company plans this launch between the 1stth or
2nd quarter of 2000.
The Company's plans to change its name from Trilogy Gaming Corporation to
TelNETgo2000 Inc. Management feels
that the name TelNETgo2000 better reflects the Company's business strategy the
enter the new millennium e-commerce
business, partnering with various Charities and offer its patented Trilogy game
product to a world wide market as a
FREE Sweepstakes Game play to promote and encourage initial and ongoing Charity
contributions.
TelNETgo2000 primary business is to partner with various qualified Charity
organizations as their charity fundraiser
and solicit charity contributions worldwide for the benefit of the
participating charities. To encourage the anticipated
large volume of $10 charity contributions and further encourage those
contributors to continue their pledge of $10 a week
to the charity of their choice, TelNETgo2000 will give him/her 1 Sweepstake
electronic ticket game Play FREE with
every $1 charity contribution made. The objective of TelNETgo2000 is to
establish a minimum annual contribution of
$520 per member at the rate of $10 per week coupled with the opportunity to win
a multi million dollar Sweepstake
jackpot. The Company will earn its revenues from its portion of gross charity
proceeds generated by the Company as
the Charity organizations Fundraiser.
The Company will solicit charity contributions over the Internet and administer
the World Trilogy Lottery Sweepstakes
progressive jackpots. Therefore, the Company's work force should be relatively
small. Most of the Company's work
should be performed by experienced contracted computer programmers, computer
hardware and software manufacturers
and suppliers, technicians, field consultants and commissioned sales
professionals.
The Company's objective is to partner with one or more Internet Publishers that
market banner adds over the internet
with collectively 8,000 web partners, each generating an average of 50 hits per
day to TelNETgo2000 totaling 400,000
hits per day (5 day Wk) of which an average of 15% (7.5 people) per day become
Members and donate $10 to the
Charity of their choice and receive 10 FREE sweepstakes ticket plays on their
home computer for a chance to win a
multi million dollar sweepstakes jackpot.
(a) RESOLVED, The action of the Board of Directors dated November 22,
1999 to change the name of the
Company From Trilogy Gaming corporation to TelNETgo2000, Inc is hereby
ratified and approved. The CEO
and Secretary shall file the necessary documents on behalf of the Company
with the appropriate state regulatory
agency's to effect the name-approved change.
(b) RESOLVED, the Company is authorized, retroactive from November 1,
1999, to offer by private placement,
exemption or registration on or before November 1, 2000:
[a] up to 10,000,000 restricted common shares of the Company's common stock
and/or
[b] up to 15,000 restricted Series A through Series F Preferred voting
shares and/or
[c] up to 5,000 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 E through Series P Warrants. Each Series E through Series
P Warrant shall be for the right to
purchase stated number of common shares of the Company common stock at a
stated price by a designated time
which shall be determined by the CEO or the Secretary of the Company. The
common shares stated on each Series
E through Series P 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.
(c) RESOLVED. Wayne Mullins, Mike Maledon, Tom Burns, 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).
(d) RESOLVED. The Board of Directors are authorized and instructed to
re-elect Wayne Mullins as the CEO and
President of the Company. The 7 year employee contract for Wayne Mullins
and the 5 year employee contract
for Mike Maledon that were approved at the 1998 annual shareholders
meeting is hereby rescinded, and
Further Resolved that, the Company shall enter into a annual employment
agreement with Wayne Mullins and
the employment agreement shall provide in part that in the performance with
his duties as an officer, director or
consultant of the Company; [i] all expenses incurred by Mullins shall be
paid by or reimbursed by the Company,
[ii] a vehicle with full insurance coverage or up to $800 monthly auto and
insurance allowance, [iii] reasonable
medical and dental plan/benefits or full reimbursement thereof until such a
plan is in place, and
Further Resolved that, beginning upon the Company having $1,000,000 capital
on hand or the Company begins
to generate monthly sales of $25,000, whichever occur first, Mr. Mullins one
year employee agreement shall then
be for a seven year term with an annual base salary of $104,000 together
with an annual bonus of $10,000 for each
$1,000,000 pre tax earnings generated to the Company during a calendar year
during the term of the employment
agreement. Any increase in the base salary or bonus, 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 shareholder
. (MR Mullins abstained voting on this resolution).
(e) RESOLVED. The shareholders approve and instruct the Directors to
approve and authorizes the CEO to hire,
terminate and set all salary compensations (excluding the CEO
compensations) not exceeding 12 month. The
CEO may at his discretion from time to time, increase or decrease any such
salary's bonus's and/or option not
earned. (MR Mullins abstained voting on this resolution).
(f) RESOLVED. The shareholders approve and instruct the Directors to
approve that, beginning upon the
Company having $1,000,000 capital on hand or the Company begins to
generate monthly sales of $25,000,
whichever occur first, the Company's CEO may enter into employment
contracts of more than one year but
not exceeding five years. Each employment agreement shall provide in part
that, [I] the annual base salary
not exceed $104,000 without Board of Director approval. 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 in the performance with
the duties as an officer, employees,
consultant and director of the Company may be paid or reimbursed by the
Company, [iii] the employee may
be provided with a vehicle with full insurance coverage or up to $600
monthly auto and insurance allowance,
[iv] may be provided reasonable medical and dental plan/benefits or may be
reimbursed thereof until such a
plan is in place, [v] may receive executive employee annual bonus of up to
$5,000 for each $1,000,000 pre tax
earnings generated to the Company during each calendar year of employment,
[vi] may receive employee and
consultant options for common stock, not exceeding 100,000 restricted
common shares to any one person,
exercisable over a period of three years from the grant date of the
option, at the price per share of [a] prior to
the end of the 1st year, 30% of the market value of the shares or $5.00
per share, whichever is greater, or [b]
prior to the end of the 2nd year, 40% of the market value of the shares
or $10.00 per share, whichever is
greater, or [c] prior to the end of the 3rdt year, 50% of the market
value of the shares or $20.00 per share,
whichever is greater.
(g) RESOLVED. The Company hereby authorizes the Board of Director
through the management of the Company
that anytime prior to November 31, 2000 and at the discretion of the CEO
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.
(h) RESOLVED, The Company hereby authorizes the Board of Director
through the management of the Company
that anytime prior to November 31, 2000 and at the discretion of the CEO
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
along with warrants, if any, at the price per common share and warrant
exercise time and price per share to
be determined by and at the discretion of the CEO and Secretary of the
Company. All outstanding common
and preferred shares, warrants and options of the Company shall be
included in said registration.
(i) 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 salaried employee and
officer of the Company, shall each
receive an annual bonus (of 10,000 common shares approved by shareholders
on the November 16, 1998
shareholders meeting, shall now state) of up to 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.
(j) RESOLVED. The Series A Warrants are hereby extended from
12/31/1999 to 6/30/2000 and the Series B
Warrants are extended from 6/30/2000 to 12/31/2000.
(k) 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.
The close of business on November 22, 1999, shall be the "record date" for
the determination of shareholders of
record with the Company's transfer agent entitled to notice of and to vote
at the meeting or any adjournment(s)
thereof (the "record date"). Shares of common stock and preferred stock can
be voted at the meeting only if the
holder is present at the meeting in person or by voting ballot or by a
valid proxy. Neither the Board of Directors
or Management of the Company are soliciting proxies in connection with this
Annual Shareholders Meeting. You
are encouraged to attend the meeting.
This Annual notice of the Annual Shareholders Meeting of TGC is given this
27th day of November, 1999 and
is called pursuant to the Articles of the Company and Delaware corporate law.
_________________________________________
Wayne Mullins as President of the Company.
Trilogy Gaming Corporation P.O. Box 30310 Phoenix, Arizona 85046
(602) 788-5801 FAX (602) 788-5444
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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