As filed with the Securities and Exchange Commission on __________, 2005.
Registration No. 333-______
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Gaming & Entertainment Group, Inc.
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(Exact name of registrant as specified in charter)
Utah
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(State or other jurisdiction of incorporation or organization)
59-1643698
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(I.R.S. Employer Identification Number)
6757 Spencer St. Las Vegas, Nevada 89119 (702) 407-2471
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(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Gregory L. Hrncir, President
6757 Spencer St.
Las Vegas, Nevada 89119
(702) 407-2471
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(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Approximate date of proposed sale to public: As soon as practicable after the
effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box:[_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933,as amended, or the Securities Act, other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box:[X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registrations statement number of the earlier effective registration statement
for the same offering.[_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.[_]
CALCULATION OF REGISTRATION FEE
Proposed Proposed maximum Amount of
Title of each class of securities Amount to be maximum offering aggregate offering registration
to be registered registered price per unit(1) price(1) fee
--------------------------------- ------------ ------------------ ------------------ ------------
Common stock, $.01 par value 9,247,267 shares $1.12 $10,409,786 $1,225
(1) Calculated pursuant to Rule 457 under the Securities Act of 1933.
Draft: 03/03/2005 - 12:31 AM
SUBJECT TO COMPLETION, DATED __________, 2005
PROSPECTUS
5,051,144 SHARES OF COMMON STOCK ON BEHALF OF SELLING STOCKHOLDERS
4,196,123 SHARES OF COMMON STOCK ON BEHALF OF WARRANT HOLDERS
[GAMING & ENTERTAINMENT GROUP LOGO]
This prospectus relates to the registration of an aggregate of 9,247,267
shares of common stock of Gaming & Entertainment Group, Inc., consisting of
5,051,144 shares of common stock on behalf of selling stockholders and 4,196,123
shares of common stock on behalf of warrants holders. Selling stockholders and
warrant holders, upon exercise of their warrants, may from time to time offer to
sell their respective shares of common stock.
We are not selling any shares of common stock on behalf of selling
stockholders or warrant holders and will not receive any cash or other proceeds
in connection with the sale of shares by selling stockholders or warrant
holders. If all of the warrants held by warrant holders are exercised through
the payment of cash, we will receive proceeds of $6,256,684 from such exercises.
For a detailed discussion of selling stockholders, see the section
entitled "Selling Stockholders" beginning on page 15.
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The common stock of Gaming & Entertainment Group, Inc. is quoted on the
Over the Counter Bulletin Board under the symbol "GMEI." As of February 25,
2005, the last reported sale price of the common stock of Gaming & Entertainment
Group was $0.40.
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THESE SECURITIES ARE SPECULATIVE. INVESTING IN OUR COMMON STOCK INVOLVES A
HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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______________, 2005
The information in this preliminary prospectus is not complete and may be
changed without notice. The selling stockholders may not sell these securities
until the registration statement relating to these securities has been declared
effective by the Securities and Exchange Commission. This preliminary prospectus
is neither an offer to sell nor a solicitation of an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
[INSIDE FRONT COVER]
[This page will be blank in the final prospectus]
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PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. You should read the entire prospectus carefully, including "Risk
Factors" and our financial statements before making an investment decision.
OUR BUSINESS
Background
On or about January 12, 2004, NorStar Group, Inc., a publicly-held company
that was not conducting or developing any commercial operations, or NorStar,
consummated a series of transactions, including: (i) a 1-for-24.852732 reverse
split of its outstanding shares of common stock; (ii) the issuance of 14,600,000
post-split shares of common stock in exchange for all of the outstanding shares
of common stock of Gaming & Entertainment Group, Inc., a Nevada corporation, or
G&EG Nevada; (iii) the issuance of options and warrants to purchase 4,257,937
post-split shares of common stock in exchange for all of the outstanding options
and warrants to purchase shares of G&EG Nevada; and (iv) a change in the name of
NorStar to Gaming & Entertainment Group, Inc., or the Company. As a result of
the exchange, G&EG Nevada became a subsidiary of the Company, and the former
stockholders of G&EG Nevada became the holders of 91.25% of the then outstanding
shares of common stock of the combined companies. In addition, the former
directors and officers of G&EG Nevada became the controlling members of the
board of directors and management of the combined companies. Since G&EG Nevada
was the only operating company in the exchange and the former stockholders of
G&EG Nevada received a substantial majority of the voting securities of the
combined companies, the exchange was accounted for as a "reverse acquisition"
and, effectively, as a recapitalization, in which G&EG Nevada was the accounting
acquirer (and the legal acquiree) and NorStar was the accounting acquiree (and
the legal acquirer). Since the exchange was accounted for as a "reverse
acquisition," the consolidated financial statements included in the Company's
Annual Report on Form 10-KSB for the period ended December 31, 2004, reflect the
historical financial statements of G&EG Nevada, the accounting acquirer, as
adjusted for the effects of the exchange of shares on its equity accounts, the
inclusion of the net liabilities of the accounting acquiree as of January 12,
2004 on their historical basis and the inclusion of the accounting acquiree's
results of operations from that date.
Summary of Business
Since 1995, we have been a leading supplier of government-regulated
networked gaming technology. During this period, we have built a comprehensive
networked gaming platform that has passed multiple government prescribed
validations in Australia (Tasmania and Queensland), Republic of Vanuatu and
Great Britain (Alderney and the Isle of Man). We originally designed and
deployed our gaming platform in the Internet-based gaming market, as evidenced
by our agreements with traditional land-based gaming operators and numerous
Australia-based online operators. In 2000, our gaming platform went live with
its first customer, www.wrestpointcasino.com in Tasmania, Australia and for
points-play at GOCORP in Queensland, Australia. In 2002, we commenced live
operations of www.clubfiore.com, an online gaming site offered by Action Online,
Inc. through the Isle of Man. In 2002, we entered into an agreement with the
Venetian Interactive, LLC for the purpose of developing and providing an
Internet gaming site for the Venetian Hotel.
In 2003, we commenced the expansion of our product line to include gaming
systems and game content, ultimately for deployment in land-based casinos.
Specifically, we have developed, or are currently developing, a proprietary
central server gaming system and various games for the European gaming market
including fixed-odds betting terminals (roulette), amusement with prizes
machines (a suite of video poker games), and Section 16 roulette devices. The
amusement with prizes gaming machines are stand-alone gaming machines that do
-1-
not communicate with a server, while the fixed-odds betting terminals and the
Section 16 roulette machines are client-server devices. In addition, for the
North American gaming market, we have developed, or licensed, electronic bingo
games for the Class II gaming market (Class II games are simply bingo games, or
games similar to bingo that can be in paper or electronic form; this market
primarily consists of Native American casinos), video lottery terminals (video
slots) for the racino market (racinos is the term used for horse and greyhound
tracks that have implemented gaming at their facilities), and our
electro-mechanical virtual ball blower which is a digital version of the ball
draw used at bingo halls and for lotteries across the United States. We will
continue to seek a formal strategic relationship with a major gaming equipment
manufacturer principally for deployment of our central server gaming system. In
the meantime, we have established a turnkey manufacturing relationship with a
major Las Vegas, Nevada-based gaming machine supplier for products deployed in
the future in North America, and will use one or more turnkey sources in the
United Kingdom for gaming machines deployed in the future in Europe.
In September 2004, we entered into a series of agreements with GEG
Holdings, LLC, or GEG Holdings, an affiliate of Cantor Fitzgerald, L.P. GEG
Holdings loaned us the sum of $750,000 in the form of debt financing during the
period September 2004 through November 2004. Thereafter, on December 8, 2004,
Cantor G&W (Nevada), L.P., or Cantor, and the Company entered into a series of
definitive agreements to create a formal strategic partnership which provided
Cantor with, among other things, an exclusive perpetual worldwide license to our
Internet gaming software, and we would receive an additional $1,250,000 of
senior secured debt financing in multiple tranches. The promissory note relating
to the $750,000 loan of GEG Holdings was assigned to Cantor. As part of the
transaction, Cantor received the right to acquire majority control of us through
the exercise of various securities issued to them by the Company, as well as
certain of our stockholders. To this end, Cantor was issued a series of stock
purchase warrants which, upon full exercise by Cantor, would result in the
Company receiving up to $6,800,000 of equity financing, exclusive of the
aforementioned debt financing of $2,000,000. The executive officers and
directors of the Company, and certain other third parties, have granted Cantor
an option to purchase, collectively, up to 7,500,000 shares of common stock
(Option Shares) held by such parties. Through the exercise of the various stock
purchase warrants and Option Shares, Cantor may obtain majority control of the
Company.
As part of the transaction with Cantor, we have been engaged to develop
Cantor's online casino, which will be hosted in Alderney in the British Isles
and is anticipated to go live in 2005. Upon its successful deployment, it is
anticipated that we will develop additional online gaming sites for white-label
clients of Cantor as well as the Company. In each instance, we will receive
development fees and recurring royalties.
In sum our current business strategy involves:
o Further development and finalization of the Cantor online gaming
casino, including integration with Cantor's wireless hardware;
future development of Internet gaming sites for white-label clients
of Cantor and the Company
o Continued development of our central server gaming system and game
content and certification by independent gaming laboratories
o Partnering with a major gaming equipment manufacturer for land-based
gaming applications of our central server gaming platform
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o Further development of distribution partners for deployment of our
suite of proprietary games in North America and European gaming
markets
o Application of our products for emerging broadband technologies,
including digital TV, mobile phone, and WAP architectures.
For additional information with respect to Gaming & Entertainment Group,
Inc., our business and our products, please review the information provided in
the reports and other documents that we file with the Commission as described
under "Where You Can Find More Information" on page 25 of this prospectus.
-3-
THE OFFERING
Common stock offered by selling stockholders: 5,051,144 shares
Common stock offered by warrant holders: 4,196,123 shares
Common stock to be outstanding after the offering: 23,776,725 shares
Use of proceeds: We will use the proceeds
received from the cash
exercise of warrants, if
applicable, as described
in "Use of Proceeds."
Over The Counter Bulletin Board symbol: "GMEI"
The number of shares of common stock to be outstanding after the offering
is based on the number of shares outstanding as of the close of business on
February 25, 2005, and includes 4,196,123 shares of common stock underlying the
warrants held by warrant holders and the 563,250 penalty shares described below.
The number of shares of common stock to be outstanding after the offering does
not include (i) options to purchase 2,195,964 shares of common stock issued
pursuant to our 2004 Stock Option and Incentive Plan with a weighted average
exercise price of $0.78 per share and weighted remaining exercise period of 7.46
years, (ii) a warrant to purchase 50,000 shares of common stock, exercisable at
$0.75 per share through January 16, 2006, and (iii) the 11,703,704 warrants to
purchase common stock held by Cantor.
All of the shares are being offered by selling stockholders and warrant
holders and each must deliver a copy of this prospectus to persons who buy such
shares. Selling stockholders and warrant holders will probably sell the shares
at prevailing market prices through broker-dealers, although they are not
required to do so. Selling stockholders and warrant holders will retain all of
the proceeds of their sales, except for commissions they may pay to
broker-dealers. Although we will not receive any of the proceeds from the sale
of common stock by either selling stockholders or warrant holders, we will
receive the proceeds from the exercise of the warrants to the extent that
warrant holders exercise their respective warrants through the payment of cash
rather than through cashless exercise. We will receive a maximum of $6,256,684
from such exercises for cash.
Unless otherwise noted, all information contained in this prospectus
assumes that:
o All of the shares of common stock held by selling stockholders will
be sold in this offering.
o All of the warrants held by warrant holders will be immediately
exercised with cash and all of the resulting shares of common stock
will be sold in this offering.
o As applicable, share amounts reflect the 1.2219749:1 forward split
of all shares of common stock of G&EG Nevada, effected on January
12, 2004 as part of the transaction with NorStar.
o As applicable, share amounts reflect the 1:24.852732 reverse stock
split of all shares of NorStar, effected immediately prior to the
transaction with G&EG Nevada.
o Cantor holds a warrant to purchase $2,000,000 of our common stock.
If exercised, it will be exercised at $0.54 per share.
o 563,250 shares of common stock, which the Company is obligated to
issue, and is in the process of issuing, the investors in its
private placement of 2004 for its failure to file this registration
statement by July 15, 2004, are issued and outstanding.
-4-
RISK FACTORS
This offering involves a high degree of risk as we are considered to be in
unsound financial condition. You should carefully consider the risks described
below and the other information contained in this prospectus, including our
financial statements and the related notes, before you purchase any shares of
our common stock. The following risks, if any one or more occurs, could
materially harm our business, financial condition or future results of
operations. If that occurs, the trading price of our common stock could decline,
and you could lose all or part of your investment.
RISKS RELATED TO GAMING & ENTERTAINMENT GROUP, INC.
We have a history of significant operating losses, anticipate continued
operating losses and we may be unable to achieve profitability.
We have a history of significant operating losses. For the years ended
December 31, 2004 and 2003, we have incurred operating losses of $3,206,186 and
$2,001,292, respectively, and our operations have used $2,578,152 and $986,975
of cash, respectively. As of December 31, 2004 we had an accumulated deficit of
$6,692,840 and stockholders' deficiency of $54,531. We anticipate realizing
operating losses for the foreseeable future given the costs and expenses
associated with brand development, marketing and other promotional activities,
the continued development, upgrading and maintenance of our software
technologies, further commercialization of our software technologies including
licensing arrangements and development of strategic business relationships with
large companies in the land-based gaming sector.
Our ability to continue as a going concern and achieve profitability will
depend upon a number of factors, including, among other things, market
acceptance of our products, reliability of our products and services, customer
support and satisfaction, sufficient capital to fund ongoing research and
development and adequate capital to expand our business. There can be no
assurance that any of the foregoing will be accomplished or that we will achieve
profitability on an ongoing basis. In addition, we are subject to risks such as
uncertainty of revenues, markets, profitability and the need for additional
funding. All of these factors could have a material adverse effect on our
business, financial condition and results of operations.
Our capitalization is limited and we may need additional funds.
A limiting factor on our growth, including our ability to penetrate new
markets, attract new customers and deliver new products in a timely matter, is
our limited capitalization compared to other companies in the gaming industry.
We believe that currently available capital resources from Cantor will be
adequate to fund our operations and business objectives through 2005, however,
there can be no assurance that Cantor will exercise various warrants held by it
and provide additional funding beyond the $2,000,000 of debt financing.
Additional debt financing for gaming machines will likely be required in 2005 in
conjunction with our anticipated placement of gaming machines on a revenue
sharing basis. There can be no assurance, however, that such financing will be
available to us, and if so on reasonable terms. As a result, our business,
financial condition and results of operations may suffer.
There are significant uncertainties as to our proposed entrance into the
land-based gaming markets.
Historically, we have been involved in the development and provision of
government accredited and gaming laboratory certified online gaming systems. We
will continue to provide these products and services in the future, but
anticipate focusing on the following new products as well:
-5-
o Our central server gaming platform with applications in all major
gaming markets
o Amusement with prizes machines (video poker), fixed-odds betting
terminals and Section 16 roulette machines to arcades, licensed
betting shops and other gaming establishments across Europe
o Our electronic bingo, video poker and video lottery terminals to the
North American gaming market
As in any rapidly evolving industry, product demand and market acceptance
are subject to considerable uncertainty. While management believes each of the
aforementioned markets offers significant opportunities to us, no assurance can
be made that we will be successful in deploying any products or the accompanying
services into each, or any, of such markets. Additionally, the Company, as well
as its key personnel, will have to apply for and obtain all requisite government
licenses, registrations, findings of suitability, permits and approvals
necessary for us to operate in these gaming markets.
We face stiff competition from companies in the Internet and land-based
gaming sector that have substantially greater capital, research and development,
manufacturing and marketing resources than we possess.
While we have a formidable partner in Cantor with respect to our Internet
gaming initiatives. However, Cryptologic, Boss Media AB and Wagerworks, among
others, have similar product offerings and significant market penetration.
Additionally, while we believe that we are a pioneer in the emerging central
server gaming market for land-based casinos, and that there are very few
companies that offer the broad applications of our platform, potential
competitors consist in the form of all major gaming machine and providers of
software technology products to the gaming industry, including, but not limited
to, International Game Technology, Aristocrat Leisure, Williams Industries,
Alliance Gaming, Multimedia Games, GTECH, Scientific Games, Progressive Gaming
International and Cyberview. In terms of central server gaming, the intensely
competitive gaming machine industry has seen a number of these companies
recently announce the pending introduction of central server gaming platforms,
as well as the introduction of strategic alliances, licenses or the acquisition
of central server gaming platforms from third parties. This will likely continue
as most gaming experts believe central server gaming will be widely utilized in
2006 and beyond. Further, our competitors may be able to develop technologies
more effectively, have significantly more game content than us, may be able to
license their technologies on more favorable terms, and may be able to adopt
more aggressive pricing or licensing policies than us. Each of these companies
has longer operating histories, greater brand name recognition, larger customer
bases and significantly greater financial, technical and marketing resources. In
the event we do not partner with a major gaming equipment manufacturer regarding
our central server gaming platform, our business, operating results and
financial condition may be adversely affected.
Our inability to grow and to successfully manage growth may harm our
business.
To achieve our projected revenues and other targeted operating results, we
will be required to expand our systems, procedures, controls and employee base.
We do not, however, anticipate expansion of our facilities given our existing
office space. The success of the expansion plans will depend in part upon our
ability to continue to attract, retain and motivate key personnel. Failure to
make the required expansions and upgrades could have a material adverse effect
on our business, financial condition, results of operations and corporate
relationships. Our results of operations will also be adversely affected if
revenues do not increase sufficiently to compensate for the increase in
operating expenses resulting from any expansion and there can be no assurance
that any expansion will be profitable or will not further adversely affect our
results of operations.
-6-
Our success depends on our ability to prevent others from infringing on
our technologies.
Our success is heavily dependent upon proprietary technology. To protect
our proprietary technology, we rely principally upon copyright and trade secret
protection. All proprietary information that can be copyrighted is marked as
such. All employees and consultants are required to execute confidentiality
agreements with us. There can be no assurance that the steps taken by us in this
regard will be adequate to prevent misappropriation or independent third-party
development of our technology. Further, the laws of certain countries in which
we anticipate licensing our technologies and products do not protect software
and intellectual property rights to the same extent as the laws of the United
States. We generally do not include in our software any mechanism to prevent or
inhibit unauthorized use, but we generally require the execution of an agreement
that restricts unauthorized copying and use of our products. If unauthorized
copying or misuse of our products were to occur, our business and results of
operations could be materially adversely affected.
While the disclosure and use of our proprietary technology, know-how and
trade secrets are generally controlled under agreements with the parties
involved, there can be no assurance that all confidentiality agreements will be
honored, that others will not independently develop similar or superior
technology, that disputes will not arise concerning the ownership of
intellectual property, or that dissemination of our proprietary technology,
know-how and trade secrets will not occur. Further, if an infringement claim is
brought against us, litigation would be costly and time consuming, but may be
necessary to protect our proprietary rights and to defend ourselves. We could
incur substantial costs and diversion of management resources in the defense of
any claims relating to the proprietary rights of others or in asserting claims
against others.
Intellectual property claims against us can be costly and could impair our
business.
We believe that our products and technologies do not infringe patents or
other proprietary rights of third parties, however, there can be no assurance
that third parties will not claim that our current or future products infringe
their respective rights. Any such claim, with or without merit, could result in
costly litigation or require us to enter into royalty or licensing agreements in
order to obtain a license to continue to develop and market the affected
products. There can be no assurance that we would prevail in any such action or
that any license (including licenses proposed by third parties) would be made
available on commercially acceptable terms, if at all. If we become involved in
litigation over proprietary rights, it could consume a substantial portion of
our managerial and financial resources, which could have a material adverse
effect on our business, financial condition and results of operations.
Our future revenues are very difficult to predict given that a large
percentage of our future revenues will come from the license of our Internet
gaming platform to Cantor as well as gaming markets in which we have not
historically operated.
As our prior business operations have been limited to supplying our online
gaming platform to the regulated Internet gaming market on our own, it is not
feasible to predict, with any assurance, the timing or the amount of revenues
that we will receive from the license of our Internet gaming platform to Cantor,
as well as the initial introduction, by way of sale, license or revenue sharing,
of our land-based gaming products and services in the gaming markets of North
America and Europe. With respect to our Cantor relationship, it is unknown how
successful, if at all, the Cantor online casino will be. Further, it is very
difficult to predict how successful Cantor and us will be at soliciting white
label clients. Any substantial delay in the introduction of the Cantor online
casino, white-label casinos, as well as our land-based gaming products and
services could result in significant delays in revenues and the need to procure
additional capital through the issuance of equity or debt securities from Cantor
or otherwise, none of which can be assured. Any delay may allow competitors to
reach certain of such markets with products before us, or further entrench
themselves in such markets prior to our arrival. In view of the emerging nature
of the technology involved in certain of these markets, and the attendant
uncertainty as to whether our products will achieve meaningful commercial
acceptance, if at all, there can be no assurance that we will realize sufficient
revenues to achieve profitability.
-7-
We will have to establish distribution channels in each of the new
land-based gaming markets we anticipate entering into.
We have no tangible experience in establishing distribution channels for
the license, sale or revenue share of products in the new land-based gaming
markets we anticipate entering into. While we have entered into strategic
partnerships with an experienced gaming equipment provider in the United
Kingdom, we will need to retain the services of certain individuals with
experience in the placement of gaming products and most importantly align
ourselves with even larger distribution companies with significant reach in the
gaming marketplace throughout the world. In addition, we strongly believe our
future success in the land-based gaming markets is predicated on procuring a
partnership with a major gaming equipment manufacturer for deployment of our
various land-based gaming products and services, including our central server
downloadable gaming platform. This cannot be assured, and should we be
unsuccessful in establishing such distribution channels as well as recruiting,
managing and retaining experienced internal and external sales personnel, our
business, operating results and financial condition may be adversely affected.
We have and will continue to encounter legal and regulatory requirements
that will increase the cost of doing business and divert substantial management
time away from our operations, particularly once we commence offering our
products on a license, sale or revenue sharing basis in land-based gaming
markets.
Prior to entering into any contract for the license, sale or revenue
sharing of our products, we have to overcome significant regulatory hurdles. In
the Internet portion of our business, both the Company and our officers and
directors have submitted applications and been accepted by several
jurisdictions. This will continue in the future. Similarly, the manufacture and
distribution of gaming machines (including lottery products) and the conduct of
gaming operations, are subject to extensive federal, state, local and foreign
regulation by various gaming authorities. Although the laws and regulations of
the various jurisdictions in which we propose to operate vary in their technical
requirements and are subject to amendment from time to time, virtually all of
these jurisdictions require licenses, permits, documentation of the financial
qualifications of the applicant, including evidence of integrity and financial
stability, and other forms of approval. We, along with our key personnel, will
have to apply for and obtain all requisite government licenses, registrations,
findings of suitability, permits and approvals necessary for us to do business
in these new land-based gaming markets. There can be no assurance such licenses,
registrations, findings of suitability, permits, or approvals will be obtained.
Furthermore, assuming the foregoing is obtained, the suspension, revocation,
non-renewal or limitation of the foregoing would have a material adverse effect
on our business, financial condition and results of operations.
If we fail to obtain further strategic partnerships with key gaming
machine manufacturers and distributors, our various gaming initiatives may be
adversely affected.
We have entered into strategic alliances and licensing agreements,
including Cantor (regarding our online gaming system) and Electrocoin (regarding
product distribution in Europe). We have also had discussions with a few major
gaming machine manufacturers regarding licensing our central server gaming
platform. It is important for competitive reasons that we obtain a major gaming
equipment manufacturer as our partner for our land-based initiatives. If we are
unsuccessful in this endeavor, our overall business, financial condition and
results of operations will likely be materially adversely affected.
-8-
We are dependent on our key personnel, and the loss of any could adversely
affect our business.
We depend on the continued performance of the members of our management
team and our technology team. Tibor N. Vertes, our Chief Executive Officer and
Chairman, Gregory L. Hrncir, our President and a Director, Kevin J. Burman, our
Chief Operating Officer, and William Mc Master, our Chief Technology Officer,
have each contributed significantly to the growth of our business. If we lose
the services of any of the foregoing parties, and are unable to locate suitable
replacements for such persons in a timely manner, it could have a material
adverse effect on our business. In the future we may obtain key man life
insurance for each of these parties in an amount to be determined.
Worsening economic conditions may adversely affect our business.
The demand for entertainment and leisure activities tends to be highly
sensitive to the disposable incomes of consumers and thus a decline in general
economic conditions may lead to our end-users having less discretionary income
with which to wager. This applies to both our Internet and land-based
initiatives and could cause a reduction in our future revenues and a material
adverse effect on our operating results.
Currency rate fluctuations can have an adverse effect on our business
operations.
Our wholly-owned foreign operating subsidiaries include Gaming &
Entertainment Technology Pty Ltd, an Australian company utilizing Australian
dollars as its functional currency, and Gaming & Entertainment Ltd., or G&E
Ltd., a United Kingdom company utilizing pounds sterling as its functional
currency. In addition, we anticipate receiving payment for our various products
and services in Euros as relates to future placements of products and services
in European Union countries. Our financial results are reported in United States
dollars, which is subject to fluctuations in respect of the currencies of the
countries in which we anticipate operating. Accordingly, fluctuations in the
exchange rate of world currencies could have a positive or negative effect on
our reported results. Given the constantly changing currency exposures and the
substantial volatility of currency exchange rates, we cannot predict the effect
of exchange rate fluctuations upon future operating results. We do not currently
have a hedging program to mitigate currency risk, but we may implement such a
plan in the future. There can, however, be no assurance that we will not
experience currency losses in the future, which could have a material adverse
effect on our business, revenues, operating results and financial condition.
Although we have entered into confidentiality and non-compete agreements
with our employees and consultants, if we are unable to protect our proprietary
information against unauthorized use by others, our competitive position could
be harmed.
Our proprietary information is critically important to our competitive
position and is a significant aspect of the products and services we provide. If
we are unable to protect our proprietary information against unauthorized use by
others, our competitive position could be harmed. We generally enter into
confidentiality or non-compete agreements with most of our employees and
consultants, and control access to, and distribution of, our documentation and
other proprietary information. Despite these precautions, we cannot make
assurances that these strategies will be adequate to prevent misappropriation of
our proprietary information. Therefore, we could be required to expend
significant amounts to defend our rights to proprietary information in the
future if a breach were to occur.
-9-
We have an extremely concentrated customer base given that our current
revenues are generated from one key license.
All of our current revenues are derived from the exclusive license of our
Internet gaming system to Cantor. While it is not anticipated that this will be
our sole source of revenue in the future, as we anticipate entering the
land-based gaming markets in Europe and in the United States and abroad, should
the Cantor license terminate or fail to generate significant revenues for us,
our business, revenues, operating results and financial condition would likely
be adversely affected.
As we anticipate marketing our central server gaming system and suite of
electronic bingo, video poker and instant lottery games to the Native American
gaming market, enforcement of future contracts against Native American tribes
could be difficult.
Federally recognized Native American tribes are independent governments,
subordinate to the United States, with sovereign powers, except, as those powers
may have been limited by treaty or by the United States Congress. Native
American power to enact its own laws to regulate gaming is an exercise of Native
American sovereignty, as recognized by the IGRA. Native American tribes maintain
their own governmental systems and often their own judicial systems. Native
American tribes have the right to tax persons and enterprises conducting
business on Native American lands and also have the right to require licenses
and to impose other forms of regulations and regulatory fees on persons and
businesses operating on their lands.
Native American tribes, as sovereign nations, are generally subject only
to federal regulation. Although Congress may regulate Native American tribes,
states do not have the authority to regulate them unless Congress has
specifically granted such authority. State laws generally do not directly apply
to Native American tribes and activities taking place on Native American lands
unless the tribe has a specific agreement or compact with the state or federal
government allowing for the application of state law. In the absence of a
conflicting federal or properly authorized state law, Native American law
governs.
When we enter into contracts with Native American tribes in the future,
such contracts will likely provide that the law of the state in which a tribe is
located will be the governing law of those contracts. We cannot be sure,
however, that such choice of law clauses will be enforceable. Native American
tribes generally enjoy sovereign immunity from suit similar to that of the
states and the United States. In order to enforce a contract against a Native
American tribe (or an agency or instrumentality of a Native American tribe), the
Native American tribe must have effectively waived its sovereign immunity with
respect to the matter in dispute.
Contracts we enter into in the future with Native American tribes will
also likely include a limited waiver of each tribe's sovereign immunity and
provide that any dispute regarding interpretation, performance or enforcement
shall be submitted to, and resolved by, arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and that
any award, determination, order or relief resulting from such arbitration shall
be binding and may be entered in any court having jurisdiction. In the event
that such waiver of sovereign immunity is held to be ineffective, we could be
precluded from judicially enforcing any rights or remedies against a tribe.
These rights and remedies could potentially limit or restrict our right to enter
Native American lands to retrieve our property in the event of a breach of
contract by the contracting tribe.
If a Native American tribe has effectively waived its sovereign immunity,
there exists an issue as to the forum in which a lawsuit can be brought against
the tribe. Federal courts are courts of limited jurisdiction and generally do
not have jurisdiction to hear civil cases relating to Native Americans. Federal
courts may have jurisdiction if the suit raises a federal question, which is
unlikely in a typical contract dispute. Diversity of citizenship, another common
basis for federal court jurisdiction, is not generally present in a suit against
a tribe because a Native American tribe is not considered a citizen of any
state. Accordingly, in most commercial disputes with tribes, the jurisdiction of
the federal courts, which are courts of limited jurisdiction, may be difficult
or impossible to obtain. In addition, there can be no assurance that we could
effectively enforce any arbitration decision. If either of the foregoing occurs,
our financial condition and results of operations may be adversely affected.
-10-
RISKS RELATED TO OUR COMMON STOCK
Our stock price has been and may continue to be volatile and our trading
volume is extremely limited.
The market price of our common shares has experienced significant
fluctuations and may continue to fluctuate significantly due to various factors,
many of which are beyond our control, such as proposed Internet gaming
legislation or enforcement of existing laws, the announcement of new products or
product enhancements by us or our competitors, technological innovation by us or
our competitors, quarterly variations in our revenue and results of operations
or those of our competitors, speculation in the press or investment community
and general market conditions or market conditions specific to particular
industries, including the Internet and gaming. In addition, given the extremely
limited trading volume in our common stock, stockholders seeking to liquidate
all or some of their holdings may experience difficulty in doing so.
Our common stock is deemed to be "penny stock," which may make it more
difficult for our stockholders to resell their shares due to suitability
requirements.
Historically, our common stock has been deemed to be "penny stock" as that
term is defined in Rule 3a51-1 promulgated under the Exchange Act. Penny stock
may be more difficult for investors to resell. Penny stocks are stocks:
o Having a price of less than $5.00 per share
o Not traded on a "recognized" national exchange
o Not quoted on the Nasdaq automated quotation system (Nasdaq-listed
stock must still have a price of not less than $5.00 per share); or
o Of issuers with net tangible assets less than $2.0 million (if the
issuer has been in continuous operation for at least three years) or
$5.0 million (if in continuous operation for less than three years),
or with average revenues of less than $6.0 million for the last
three years.
The last reported sales price for our common stock on the OTC Bulletin
Board as of February 25, 2005 was $0.40.
Under the penny stock regulations, a broker-dealer selling penny stock to
anyone other than an established customer or "accredited investor," generally,
an individual with net worth in excess of US$1,000,000 or an annual income
exceeding US$200,000, or US$300,000 together with his or her spouse, must make a
special suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to sale, unless the
broker-dealer or the transaction is otherwise exempt. In addition, the penny
stock regulations require the broker-dealer to deliver, prior to any transaction
involving a penny stock, a disclosure schedule prepared by the Commission
relating to the penny stock market, unless the broker-dealer or the transaction
is otherwise exempt. A broker-dealer is also required to disclose commissions
payable to the broker-dealer and the registered representative and current
quotations for the securities. Finally, a broker-dealer is required to send
monthly statements disclosing recent price information with respect to the penny
stock held in a customer's account and information with respect to the limited
market in penny stocks.
-11-
In the event we become profitable, we do not anticipate issuing dividends
to stockholders and propose to use such earnings to finance the growth of our
business.
Our operations may not become profitable. If we do become profitable, we
anticipate using any earnings that may be generated to finance the growth of our
business. Any payment of future dividends will be at the discretion of our board
of directors and will depend on, among other things, our earnings, financial
condition, capital requirements, level of indebtedness, statutory and
contractual restrictions applying to the payment of dividends, and other
considerations that our board of directors deems relevant. Accordingly,
stockholders may have to sell some or all of their common stock in order to
generate cash flow from their investment. Stockholders may not realize a gain on
their investment, and they may lose all or a significant amount of their
investment when they sell their common stock.
We have a significant number of outstanding options and warrants that
could materially dilute existing shareholders.
As of February 25, 2005, there were outstanding options and warrants to
purchase an aggregate of up to 13,949,668 shares of our common stock at exercise
prices ranging from $0.54 to $1.50 per share, exclusive of the shares of common
stock underlying the warrants being registered in this registration statement.
Of this amount, Cantor holds warrants to purchase 11,703,704 shares of common
stock (exercisable through December 9, 2009 and assumes Cantor exercises its
warrant to purchase $2,000,000 of our common stock at $0.54 per share), there
are options outstanding to purchase 2,195,964 shares of common stock pursuant to
our 2004 Stock Option and Incentive Plan, and there are outstanding warrants to
purchase 50,000 shares of common stock held by a former consultant to the
Company. Of the foregoing, outstanding options and warrants to purchase
13,896,543 are immediately exercisable and the remaining 53,125 become
exercisable in increments over the next twelve months.
Shares eligible for sale in the near future may cause the market price for
our common stock to decline.
We have approximately 1,400,000 shares of common stock that are freely
tradable. In addition, once the Company's registration statement is declared
effective, there will be an additional 5,051,144 shares of common stock freely
tradable. Further, up to 4,196,123 shares underlying outstanding warrants are
being registered in this prospectus and potentially could be issued if
exercised. Thus, with up to an additional 9,247,267 shares of common stock
becoming freely tradable, it is quite possible that the mere perception that
these shares may be sold could depress the market price for our common stock. In
any event, the sale of a substantial number of shares of our common stock within
a short period of time would likely cause our stock price to decrease. The
foregoing could potentially affect the exercise price of certain warrants to
purchase common stock held by Cantor and could also impair our ability to raise
additional capital through the sale of equity securities in the future if Cantor
elects not to exercise its warrants.
-12-
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Some of the information in this prospectus contains forward-looking
statements within the meaning of the federal securities laws. These statements
include, among others, the following:
o the implementation of our operating and growth strategy; and
o our projected capital expenditures.
These statements may be found under "Prospectus Summary," "Risk Factors,"
"Use of Proceeds," "Determination of Offering Price," "Dividend Policy,"
"Selling Stockholders," "Plan of Distribution" and "Business." Forward-looking
statements typically are identified by use of terms such as "may," "will,"
"would," "expect," "anticipate," "estimate" and similar words, although some
forward-looking statements are expressed differently. You should be aware that
our actual results could differ materially from those contained in
forward-looking statements due to a number of factors, including:
o our ability to commercialize our Internet and land-based gaming
products effectively
o our ability to achieve and sustain profitability through the
realization of recurring revenue from our Internet and land-based
gaming products
o our ability to compete effectively in the highly competitive gaming
industry
o our ability to secure a strategic alliance with a major
international gaming machine provider for deployment of our central
server gaming platform both domestically and abroad in casinos
o our ability to satisfy the timelines and requirements of existing
and future strategic partners in the development and deployment of
Internet and land-based gaming products
o our ability to outsource the manufacture and assembly of our gaming
machines effectively
o our ability to successfully diversify into the land-based gaming
market, both domestically and internationally
o our ability to adequately protect our intellectual property
o our ability to continue to maintain and attract high-level software
and hardware engineers
o our ability to manage expansion and growth effectively
o general economic and business conditions in the gaming industry and
marketplace at large
You should also consider carefully the statements under "Risk Factors" and
other sections of this prospectus, which address additional factors that could
cause our actual results to differ from those set forth in the forward-looking
statements.
-13-
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of our
common stock by selling stockholders. To the extent that warrant holders elect
to exercise their warrants through the payment of cash instead of through a
cashless exercise procedure, we will receive maximum proceeds in the amount of
$6,256,684 from such exercises. There is no assurance that any of the warrants
held by option holders will be exercised or, if exercised, exercised through the
payment of cash. To the extent that all or a portion of the warrants are
exercised through the payment of cash, the proceeds received will be used for
general working capital purposes.
Although we have agreed to bear the expenses associated with the
registration of the shares of common stock listed in this registration
statement, we will not be responsible for any commissions and discounts of
agents or broker-dealers and transfer taxes, if any, incurred by selling
stockholders.
DETERMINATION OF OFFERING PRICE
Our common stock is quoted and traded on the Over The Counter Bulletin
Board under the trading symbol "GMEI". The following table sets forth the high
and low closing sale prices of our common stock during the periods indicated:
CALENDAR QUARTER ENDED LOW HIGH
----------------------------------------- -------- --------
March 31, 2004 $ 0.75 $ 1.75
June 30, 2004 $ 0.67 $ 1.30
September 30, 2004 $ 0.42 $ 0.90
December 31, 2004 $ 0.28 $ 0.60
March 31, 2005 (through February 25, 2005) $ 0.35 $ 0.50
-------- --------
The last reported sale price of our common stock on the Over The Counter
Bulletin Board as of February 25, 2005 was $0.40 per share. We are not aware of
any public market for our options or warrants.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. Our
board presently, and for the foreseeable future, intends to retain all of our
earnings, if any, for the development of our business. The declaration and
payment of cash dividends in the future will be at the discretion of our board
and will depend upon a number of factors, including, among others, our future
earnings, operations, funding requirements, our general financial condition and
any other factors that our board considers important. Investors should not
purchase our common stock with the expectation of receiving cash dividends.
-14-
SELLING STOCKHOLDERS AND WARRANT HOLDERS
Selling stockholders consist of investors who purchased shares of our
common stock through private placements consummated in 2003 and 2004. In
addition, selling stockholders include the underwriters of such private
placements as well several additional third parties who provided strategic
advisory, investment banking, and software and hardware documentation services
to us in 2004.
During the three years ended December 31, 2004, we made the following
issuances of our common stock which were not registered under the Act:
On October 10, 2003, we closed a private placement of units, or the 2003
Offering, consisting of up to 2,000,000 shares of common stock and warrants to
purchase 2,000,000 shares of common stock. In connection with the 2003 Offering,
we sold 748,300 shares of common stock, and issued warrants to purchase an equal
number of shares of common stock. We received gross proceeds totaling $598,750
and incurred transaction costs of $145,211 for net proceeds of $453,539. We also
issued 371,833 shares to underwriters, selected dealers and finders in the 2003
Offering.
The warrants issued in the 2003 Offering are freely transferable and
entitle the owner to purchase shares of common stock at an exercise price of
$1.50 through the close of business on October 10, 2005. A total of forty-nine
investors purchased units in the 2003 Offering. We had reasonable grounds to
believe forty-five were accredited investors and that the remaining four
investors were sophisticated non-accredited investors as a result of (i) their
business or financial experience, (ii) the business or financial experience of
their professional advisors who were unaffiliated with and not compensated by
the Company, any affiliate, or any underwriter or selected dealer of the Company
either directly or indirectly, and/or (iii) their pre-existing business
relationship with the Company or its officers, directors or controlling persons.
In addition, each of the investors (a) had access to business and financial
information concerning us, (b) represented that they were acquiring the
securities for investment purposes only and not with a view towards distribution
or resale except in compliance with applicable securities laws and (c) had such
knowledge and experience in business and financial matters that they were able
to evaluate the risks and merits of an investment in our common stock. The
certificates evidencing the securities issued in the 2003 Offering contain a
legend restricting their transferability absent registration under the Act or
the availability of an applicable exemption therefrom. The issuance of these
securities was made in reliance upon the exemptions from the registration
requirements of the Act pursuant to Section 4(2) of the Act and Rule 506 of
Regulation D promulgated thereunder.
On May 31, 2004, we closed a private placement of units, or the 2004
Offering, consisting of up to 4,000,000 shares of common stock and warrants to
purchase 4,000,000 shares of common stock. In connection with the 2004 Offering,
we sold 2,445,000 shares of common stock, and issued warrants to purchase an
identical number of shares of common stock, or the 2004 Warrants. The 2004
Warrants are freely transferable and entitle the owner to purchase shares of
common stock at an exercise price of $1.50 per share through the close of
business on May 31, 2005.
We received gross proceeds totaling $2,445,000 from the 2004 Offering and
incurred transaction costs of $301,758 for net proceeds of $2,143,242. The 2004
Offering was sold to 37 investors, each of whom we had reasonable grounds to
believe were accredited investors. Each of the investors (a) had access to
business and financial information concerning us, (b) represented that they were
acquiring the securities for investment purposes only and not with a view
towards distribution or resale except in compliance with applicable securities
laws and (c) had such knowledge and experience in business and financial matters
that they were able to evaluate the risks and merits of an investment in our
common stock. In addition, the certificates evidencing the shares and warrants
issued in the 2004 Offering contain a legend restricting their transferability
absent registration under the Act or the availability of an applicable exemption
therefrom.
-15-
We also issued our underwriter and selected dealers' warrants to purchase
an aggregate of 366,750 shares of common stock, or the Underwriter Warrants, in
consideration for the placement of securities in the 2004 Offering. The
Underwriter Warrants are exercisable at $1.50 per share commencing on May 31,
2005 and concluding on May 31, 2007. In addition, we issued 58,334 shares of
common stock, and a warrant to purchase an equal number of shares of common
stock at $1.50 per share, in exchange for gaming equipment valued at $58,334.
As of March 1, 2005, we will be obligated to issue investors in the 2004
Offering a total of 563,250 shares of common stock as a result of our failure to
file a registration statement to register the securities sold in the 2004
Offering by the prescribed date. We are obligated to register the 563,250 shares
as well. The original issuance of shares of common stock and warrants to
purchase shares of common stock in the 2004 Offering as well as the issuance of
the aforementioned 563,250 were made in reliance upon the exemptions from
securities registration provided by Section 4(2) of the Act and Rule 506 of
Regulation D promulgated thereunder.
In addition, in 2004 we issued 507,390 shares of our common stock, having
a fair value of $485,315 to non-related third parties in consideration for
strategic advisory services, investment banking services and software and
hardware documentation. Each of these stock issuances provided for registration
rights and were made in reliance upon the exemptions from registration provided
by Section 4(2) of the Act.
The selling shareholders may offer and sell, from time to time, any or all
of the common stock issued and the common stock issuable to them upon exercise
of the warrants. Because the selling shareholders may offer all or only some
portion of the 9,247,267 shares of common stock to be registered, no estimate
can be given as to the amount or percentage of these shares of common stock that
will be held by the selling shareholders upon termination of the offering.
None of the selling shareholders has any position, office or material
relationship with us other than the Vertes Family Trust, which is controlled by
Tibor N. Vertes, our Chief Executive Officer and Chairman. Except as otherwise,
indicated, all securities are owned directly by each selling shareholder.
The following table sets forth the name of each selling stockholder and
warrant holder. For each selling stockholder, the table provides the aggregate
number of shares of common stock beneficially owned by them as of the close of
business on February 25, 2005, the number of shares of common stock issuable to
them upon exercise of their respective warrants, the number of shares of common
stock issued to each of the investors in the 2004 Offering as a result of the
Company's failure to file a registration statement by July 15, 2004, the
aggregate number of shares of common stock that each selling stockholder may
offer and sell pursuant to this prospectus, the aggregate number of shares of
common stock beneficially owned after the offering and the percentage ownership
of the outstanding shares of our common stock for each selling stockholder after
the offering. The following table assumes all warrants will be exercised in the
Offering. Percentage ownership of less than 0.1% is indicated with an asterisk
(*).
The information with respect to beneficial ownership of common stock held
by each person is based upon record ownership data provided by our transfer
agent, Interwest Transfer Company, information as supplied or confirmed by
selling stockholders or warrant holders, or based upon our actual knowledge.
-16-
NUMBER OF NUMBER OF PENALTY NUMBER OF PERCENTAGE OF
SHARES WARRANTS SHARES(1) SHARES OUTSTANDING
NAME OF SELLING BENEFICIALLY BENEFICIALLY OFFERED SHARES AFTER
STOCKHOLDER/WARRANT HOLDER OWNED OWNED HEREBY OFFERING(2)
------------------------------------------------------------------------------------------------------------------------------------
Alexander D. Sanderson(3) 6,110 5,000 -- 11,110 *
Alfred T. Mannon, Jr.(3) 12,220 10,000 -- 22,220 *
Camden Securities, Inc.(8) 29,920 -- -- 29,920 *
Christopher Winkler(4) 500 -- -- 500 *
Dagmar Heinert(4) 35,691 -- -- 35,691 *
Dale R. Klingler(3) 24,439 20,000 -- 44,439 *
Daniel and Kelly Murphy(3) 12,220 10,000 -- 22,220 *
Dean and Joyce Fulton(3) 24,439 20,000 -- 44,439 *
Diane Hufferd(4) 10,998 -- -- 10,998 *
Edward E. Horst(3) 12,220 10,000 -- 22,220 *
Frank P. Andreou(3) 12,220 10,000 -- 22,220 *
Gadd Family Trust(3) 24,439 20,000 -- 44,439 *
Gary D. Wolf(3) 6,110 5,000 -- 11,110 *
Gerald P. Bolduc(3) 24,439 20,000 -- 44,439 *
Girard H. Erben Living Trust(3) 36,659 30,000 -- 66,659 *
Guy R. Lefebvre(3) 12,220 10,000 -- 22,220 *
Harry C. Swanstrom(3) 24,439 20,000 -- 44,439 *
James W. Dupree(3) 16,293 13,333 -- 29,626 *
Jay S. Mael(3) 24,439 20,000 -- 44,439 *
John C. Castro(3) 24,439 20,000 -- 44,439 *
John D. Wilcox(3) 12,220 10,000 -- 22,220 *
John D'Alessandro(3) 24,439 20,000 -- 44,439 *
John F. Cochran(3) 24,439 20,000 -- 44,439 *
Joseph Birnbaum(3) 16,293 13,333 -- 29,626 *
Kammerer Quayle Trust DTD 8/7/02(3) 12,220 10,000 -- 22,220 *
Lin Curtis and Susan Peterson(3) 12,220 10,000 -- 22,220 *
Lynette R. Waltner Revocable Trust
DTD12/14/94 Restated 5/7/98(3) 24,439 20,000 -- 44,439 *
Margaret McKay(3) 6,110 5,000 -- 11,110 *
---------------------------------
1 Represents shares of common stock issued to investors in the 2004 Offering as
a result of our failure to file this registration statement by July 15, 2004.
These shares have accrued at the rate of 3% per month, calculated on a pro rata
basis and based upon the number of shares purchased in the 2004 Offering, from
July 15, 2004 to the date of filing of this registration statement. In addition,
in the event this registration statement is not declared effective within 120
days of the date of filing, the investors in the 2004 Offering will be issued
shares of common stock equal to 2% of the common stock purchased in the 2004
Offering for each month, or portion thereof, that the registration statement is
not effective subsequent to the 120-day anniversary date of filing.
2 The information with respect to beneficial ownership of common stock held by
each person is based upon record ownership data provided by our transfer agent,
information as supplied or confirmed by selling stockholders or warrant holders
or based upon our actual knowledge. Percentage ownership of less than 0.01% is
indicated with an asterisk (*). Assumes 19,580,602 shares of common stock
outstanding and that all of the warrants will be exercised with cash.
3 Represents shares of common stock and warrants to purchase common stock issued
in the 2003 Offering.
4 Represents shares of common stock issued to NASD licensed broker-dealers,
registered brokers and finders, in conjunction with the 2003 Offering.
5 Represents, in part, the issuance of 583,746 shares of common stock and a
warrant to purchase 477,707 shares of common stock to the Vertes Family Trust on
December 31, 2002, in consideration for outstanding salary accruals in the
amount of $339,000 and outstanding loans totaling $19,281.
6 Represents shares of common stock and warrants to purchase common stock issued
in the 2004 Offering.
7 Represents shares of common stock and warrants to purchase common stock issued
in consideration for gaming machines.
8 Represents shares of common stock issued to non-related third parties in 2004
for strategic advisory services, software and hardware documentation and
investor relation services. Registration rights were provided with each of these
stock issuances.
9 Represents warrants to purchase common stock issued to our underwriter, and
selected dealers, in the 2004 Offering.
-17-
NUMBER OF NUMBER OF PENALTY NUMBER OF PERCENTAGE OF
SHARES WARRANTS SHARES(1) SHARES OUTSTANDING
NAME OF SELLING BENEFICIALLY BENEFICIALLY OFFERED SHARES AFTER
STOCKHOLDER/WARRANT HOLDER OWNED OWNED HEREBY OFFERING(2)
------------------------------------------------------------------------------------------------------------------------------------
Martin Hubert(3) 12,220 10,000 -- 22,220 *
Mary R. Davidson Living Trust(3) 24,439 20,000 -- 44,439 *
Maurice and Brian Baldwin(3) 24,439 20,000 -- 44,439 *
Maurice L Baldwin and Mary L
Baldwin Family Trust DTD 1/8/92(3) 24,439 20,000 -- 44,439 *
Melvin M. Grumbach(3) 24,439 20,000 -- 44,439 *
Michael Arnold(4) 3,112 -- -- 3,112 *
Michael D. Davis(3) 36,659 30,000 -- 66,659 *
Sterling Trust Company, Custodian
FBO Patricia A. Bergstrom(3) 16,293 13,333 -- 29,626 *
Paul C. Brooks(3) 12,220 10,000 -- 22,220 *
Paul E. Johnson(3) 12,220 10,000 -- 22,220 *
Clark Living Trust, Penny Clark,
Ashford Clark Trustees DTD 2/11/83(3) 36,659 30,000 -- 66,659 *
Richard Lang(4) 7,332 -- -- 7,332 *
Robert and Merry Kuhlman(3) 12,220 10,000 -- 22,220 *
Robert C. Schaible(3) 12,220 10,000 -- 22,220 *
Robert E. Hayner(3) 24,439 20,000 -- 44,439 *
Roy and Pauline Moritz(3) 24,439 20,000 -- 44,439 *
Russell A. Hagey(3) 24,439 20,000 -- 44,439 *
Sanguinetti Family Trust(3) 24,439 20,000 -- 44,439 *
Stephen C. Kircher(3) 36,659 30,000 -- 66,659 *
Stephen Martin(4) 225 -- -- 225 *
Sterling Trust Company, Custodian FBO
Gary Lee Van Patten(3) 24,439 20,000 -- 44,439 *
Steve Nelson(3) 36,659 30,000 -- 66,659 *
Thomas J. Faragher(3) 18,330 15,000 -- 33,330 *
Vertes Family Trust(5) 6,658,183 477,707 -- 1,061,453 23.54%
Wallace Family Revocable Trust(3) 30,549 25,000 -- 55,549 *
Wallace S. Dash(3) 12,220 10,000 -- 22,220 *
William M. Perry(3) 16,293 13,333 -- 29,626 *
William Eyler Living Trust 03/17/83,
William Eyler Trustee(3) 24,439 20,000 -- 44,439 *
Charles and Kathleen Delle Donne as
Joint Tenants(6) 30,000 30,000 6,750 66,750 *
HSBC Global Custody Nominee (UK)
Limited(6) 500,000 500,000 112,500 1,112,500 *
Frost National Bank, FBO Renaissance
Capital Growth and Income Fund III,
Inc.(6) 500,000 500,000 112,500 1,112,500 *
Frost National Bank, FBO Renaissance
US Growth Investment Trust PLC(6) 500,000 500,000 112,500 1,112,500 *
James F. Widener(6) 10,000 10,000 2,250 22,250 *
Martin J. and Ruth V. Cohen(6) 20,000 20,000 4,500 44,500 *
First Trust Corp, TTEE Frank R. Miller
SEP IRA(6) 10,000 10,000 2,250 22,250 *
Ira Gaines(6) 10,000 10,000 2,250 22,250 *
Robert W. Bellano(6) 10,000 10,000 2,250 22,250 *
Robert B. Greene(6) 10,000 10,000 2,250 22,250 *
Edward H. Price Inc. Profit Sharing Plan(6) 40,000 40,000 9,000 89,000 *
-18-
NUMBER OF NUMBER OF PENALTY NUMBER OF PERCENTAGE OF
SHARES WARRANTS SHARES(1) SHARES OUTSTANDING
NAME OF SELLING BENEFICIALLY BENEFICIALLY OFFERED SHARES AFTER
STOCKHOLDER/WARRANT HOLDER OWNED OWNED HEREBY OFFERING(2)
------------------------------------------------------------------------------------------------------------------------------------
Thomas A. Costantino(6) 5,000 5,000 1,125 11,125 *
Veonor Sotak(6) 10,000 10,000 2,250 22,250 *
Ben Aisenberg(6) 20,000 20,000 4,500 44,500 *
Susan C. Dihle STD IRA(6) 7,000 7,000 1,575 15,575 *
T. E. Jaeb(6) 10,000 10,000 2,250 22,250 *
Richard W. Lucas(6) 20,000 20,000 4,500 44,500 *
Fiserv Securities, Inc. A/C/F Thomas M.
Booth STD IRA(6) 40,000 40,000 9,000 89,000 *
Charles Wafer(6) 20,000 20,000 4,500 44,500 *
Barry L. Lindenbaum(6) 20,000 20,000 4,500 44,500 *
The Stephen G. Rustman Living Trust(6) 35,000 35,000 7,875 77,875 *
G. Harold Welch, Jr.(6) 20,000 20,000 4,500 44,500 *
Wayman Boyd Ballenger(6) 10,000 10,000 2,250 22,250 *
Agnes M. Norskog(6) 10,000 10,000 2,250 22,250 *
Altis Accredited Capital, L.P.(6) 208,000 208,000 46,800 462,800 *
Alva Terry Staples & Suzanne S. Staples JTWROS(6) 30,000 30,000 6,750 66,750 *
Staples Family Partnership LLP(6) 20,000 20,000 4,500 44,500 *
Stephen M. Markakis(6) 10,000 10,000 2,250 22,250 *
Camelot FLP(6) 10,000 10,000 2,250 22,250 *
Bernard James Rezac Jr.(6) 25,000 25,000 5,625 55,625 *
Paul Mohr and Jana Decker-Mohr(6) 50,000 50,000 11,250 111,250 *
David and Linda Gates(6) 100,000 100,000 22,500 222,500 *
William R. Cantrall II(6) 40,000 40,000 9,000 89,000 *
Michael E. Proctor(6) 25,000 25,000 5,625 55,625 *
Venkata S. Kollipara(6) 25,000 25,000 5,625 55,625 *
Robert E Dettle & Rosalie T Dettle
Living Trust DTD 2/29/80, Robert E
Dettle, Trustee(6) 25,000 25,000 5,625 55,625 *
Martin Hagenson(6) 10,000 10,000 2,250 22,250 *
Ruffler Bank Nominees Limited(7) 58,334 58,334 13,125 129,793 *
Fenway Advisory Group, Inc.(8) 34,000 -- -- 34,000 *
Anthony Diioia(8) 6,000 -- -- 6,000 *
UBS Financial Services CDN FBO
Robert W. Bellano(8) 30,500 -- -- 30,500 *
Prima Capital Group, Inc.(8) 57,000 -- -- 57,000 *
James Fallon(8) 4,800 -- -- 4,800 *
Kenneth D. Sgro(8) 115,200 -- -- 115,200 *
International Monetary Resources(8) 50,000 -- -- 50,000 *
International Monetary Resource Group
FBO Smallcapvoice.com(8) 15,000 -- -- 15,000 *
BSCO, Inc.(8) -- 50,000 -- 50,000 *
Bristol Investment Partners I(8) 25,000 -- -- 25,000 *
Spencer Edwards, Inc.(9) -- 237,950 -- 237,950 *
Balanced Financial Securities, Inc.(9) -- 84,000 -- 84,000 *
SAMCO Financial Services, Inc.(9) -- 24,000 -- 24,000 *
Altis Securities, Inc.(9) -- 20,800 -- 20,800 *
TOTAL 10,562,331 4,196,123 563,250 9,247,267
========== ========= ======= ========= ====
-19-
We intend to seek qualification for sale of the shares in those states
where the shares will be offered. That qualification is necessary to resell the
shares in the public market in the states in which the selling shareholders or
proposed purchasers reside. There is no assurance that the states in which we
seek qualification will approve re-sales of the shares.
Because each selling stockholder may offer all or a portion of the shares
of common stock offered by this prospectus at any time, and from time to time
after the date hereof, no estimate can be made of the number of shares that each
selling stockholder may retain upon completion of this offering. However, upon
the assumption that all of the shares offered by this prospectus are sold after
completion of this offering, the Vertes Family Trust is the only selling
stockholder who will beneficially own more than one percent of the shares of
common stock outstanding.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
WITH SELLING STOCKHOLDERS AND WARRANT HOLDERS
The following describes our relationships and related transactions with
certain selling stockholders, including our executive officers, our outside
directors and certain consultants.
TRANSACTIONS INVOLVING TIBOR N. VERTES
From our inception through June 30, 2002, Mr. Vertes, our Chairman and
Chief Executive Officer, was not paid a salary. On December 31, 2002, Mr. Vertes
converted his accrued salary, in the amount of $339,000, and short-term loans to
us, in the amount of $19,281, into 477,707 shares of our common stock and a
warrant to purchase 477,707 shares of common stock. The foregoing conversions
were made on terms identical to the securities sold in a private placement by us
in 2003. As part of our reorganization with NorStar, the 477,707 shares were
forward split, the result of which is 583,746 shares of our common stock.
On October 28, 2003, Robit Nominees Pty Ltd., an entity controlled by Mr.
Vertes, loaned $50,000 to us, as evidenced by a convertible promissory note. The
terms of the convertible promissory note provide for a $5,000 cash interest
payment upon maturity. In addition, Robit Nominees was issued a warrant to
purchase 50,000 shares of our common stock, exercisable for a period of one year
at an exercise price of $1.50 per share. The promissory note matured in February
2004 and has been paid in full. The warrant terminated on October 28, 2004 and
was not exercised.
On November 6, 2003, Daniel Vertes, our controller and the son of Tibor N.
Vertes, loaned us the sum of $25,000 Australian dollars ($17,729 as of such
date). The loan is evidenced by a promissory note bearing simple interest at the
rate of eight percent per annum. The promissory note matured on January 6, 2004
and has been paid in full.
On December 12, 2003, Mr. Vertes loaned $10,000 to us. The loan is
evidenced by a promissory note bearing simple interest at the rate of eight
percent per annum. The promissory note matured on January 31, 2004 and has been
paid in full.
TRANSACTIONS INVOLVING GREGORY L. HRNCIR
In March 2003, we purchased an outstanding loan made by Gregory L. Hrncir,
our President and a Director, to Innovative Gaming Corporation of America, or
IGCA, in the original principal amount of $125,000 in consideration for the
assignment by Mr. Hrncir of all rights as a secured creditor to certain assets
of IGCA. The purchase involved the issuance of a promissory note in favor of Mr.
Hrncir in the original principal amount of $133,657, the then outstanding
principal and interest on the original loan made by Mr. Hrncir to IGCA. The
original loan was made in contemplation of a Merger and Plan of Reorganization
Agreement entered into in February 2002 between the Company and IGCA. The note
has been repaid in full, however, during the year ended December 31, 2003,we
deemed the note receivable uncollectible and wrote-off the outstanding note
receivable balance of $133,657.
-20-
On December 1, 2003, Gregory L. Hrncir loaned $10,000 to us. The loan is
evidenced by a promissory note bearing simple interest at the rate of eight
percent per annum. The promissory note matured on January 31, 2004 and has been
repaid in full.
TRANSACTIONS INVOLVING GAMING & ENTERTAINMENT GROUP, LTD.
On October 28, 2003, Gaming & Entertainment Group, Ltd., an Australian
corporation that does not control, is not controlled by or under common control
with us, or GAM, loaned us $100,000 in the form of a convertible promissory
note. The convertible promissory note provided for a $10,000 interest payment,
payable in cash or in-kind. GAM had the right, at its sole election, to convert
the outstanding principal and accrued interest into common stock. In addition,
GAM was issued a warrant to purchase 100,000 shares of common stock, exercisable
for a period of one (1) year at $1.50 per share. The note matured in February
2004 and has been repaid in full. The warrant terminated on October 28, 2004 and
was not exercised.
On December 23, 2003, GAM loaned us $50,000 in the form of a convertible
promissory note. The convertible promissory note provided for a $5,000 interest
payment, payable in cash or in-kind. GAM had the right, at its sole election, to
convert the outstanding principal and accrued interest into common stock. In
addition, GAM was issued a warrant to purchase 50,000 shares of common stock,
exercisable for a period of one (1) year at $1.50 per share. The note matured in
February 2004 and has been repaid in full. The warrant terminated on December
23, 2004 and was not exercised.
-21-
PLAN OF DISTRIBUTION
We are registering the shares of common stock offered for sale by this
prospectus on behalf of selling stockholders and warrant holders. As used in
this section, "selling stockholders" and "warrant holders" include donees,
pledgees, distributees, transferees or other successors-in-interest, including,
without limitation, their respective affiliates and limited or general partners,
all of which are referred to collectively as transferees. Selling stockholders
and warrant holders will act independently of us in making decisions with
respect to the timing, manner and size of each sale.
We will pay all costs, expenses and fees in connection with the
registration of the shares. Selling stockholders and warrant holders will pay
all brokerage commissions, underwriting discounts, commissions, transfer taxes
and other similar selling expenses, if any, associated with the sale of the
shares of common stock by them. Shares of common stock may be sold by selling
stockholders or warrant holders, from time to time, in one or more types of
transactions (which may include block transactions) on the Over The Counter
Bulletin Board or on any other market on which our common stock may, from time
to time, be trading, in privately-negotiated transactions, through put or call
options transactions relating to the shares, through short sales of such shares,
or a combination of such methods of sale, at market prices prevailing at the
time of sale, fixed prices, varying prices determined at the time of sale or at
negotiated prices.
Selling stockholders and warrant holders will have the sole discretion not
to accept any purchase offer or make any sale of shares if they deem the
purchase price to be unsatisfactory at any particular time. Such transactions
may, or may not, involve brokers or dealers. To the best of our knowledge,
selling stockholders or warrant holders have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their securities, nor is there an underwriter or coordinating broker
acting in connection with the proposed sale of shares of common stock offered by
this prospectus; however, selling stockholders or warrant holders may enter into
agreements, understandings or arrangements with an underwriter or broker-dealer
regarding the sale of their shares in the future.
Selling stockholders and warrant holders may effect such transactions by
selling shares of common stock directly to purchasers or to or through
broker-dealers, which may act as agents or principals, or other agents. Such
broker-dealers or other agents may receive compensation in the form of
discounts, concessions, or commissions from selling stockholders and warrant
holders and/or the purchasers of shares of common stock for whom such
broker-dealers or other agents may act as agents or to whom they sell as
principal, or both (which compensation as to a particular broker-dealer or other
agent might be in excess of customary commissions). Market makers and block
purchasers purchasing the shares will do so for their own account and at their
own risk. It is possible that a selling stockholder or a warrant holder will
attempt to sell shares of common stock in block transactions to market makers or
other purchasers at a price per share which may be below the then market price.
There can be no assurance that all or any part of the shares offered hereby will
be sold by selling stockholders and warrant holders.
Selling stockholders and warrant holders may enter into hedging
transactions with broker-dealers or other financial institutions with respect to
the shares. In connection with these transactions, broker-dealers or other
financial institutions may engage in short sales of the shares in the course of
hedging the positions they assume with selling stockholders or warrant holders.
Selling stockholders and warrant holders may also sell the shares short and
redeliver the shares to close out the short positions. Selling stockholders and
warrant holders may also enter into option or other transactions with
broker-dealers or other financial institutions which require delivery of the
shares to the broker-dealer or other financial institutions. Selling
stockholders and warrant holders may also loan or pledge the shares to a
financial institution or a broker-dealer and the financial institution or the
broker-dealer may sell the shares loaned, or upon a default, the financial
institution or the broker-dealer may effect sales of the pledged shares. Selling
stockholders, warrant holders and any brokers, dealers or agents that
participate in connection with the sale of shares of common stock might be
deemed to be "underwriters" within the meaning of the Securities Act, and any
commissions received by such brokers, dealers or agents and any profit on the
resale of the shares sold by them, while acting as principals, might be deemed
to be underwriting discounts or commissions under the Securities Act.
-22-
We have agreed to indemnify selling stockholders against certain
liabilities arising under the Securities Act with respect to any untrue
statement, alleged untrue statement, omission or alleged omission of any
material fact contained in, or required to be contained in, the registration
statement for their shares or this prospectus. Selling stockholders and warrant
holders may agree to indemnify any agent, dealer, broker-dealer or underwriter
that participates in transactions involving sales of the shares of common stock
offered pursuant to this prospectus against certain liabilities, including
liabilities arising under the Securities Act. Because selling stockholders or
warrant holders may be deemed to be "underwriters" within the meaning of the
Securities Act, selling stockholders and warrant holders will be subject to the
prospectus delivery requirements of the Securities Act and the rules promulgated
thereunder and they may be subject to certain statutory liabilities under the
Securities Act, including, but not limited to, Sections 11, 12 and 17 of the
Securities Act and Rule 10b-5 under the Securities Exchange Act of 1934, as
amended, or the Exchange Act. In addition, selling stockholders, warrant holders
and any other person participating in the offering will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including Regulation M under the Exchange Act, which may limit the timing of
purchases and sales. These restrictions may affect the marketability of the
common stock and the ability of any person to engage in market-making activities
with respect to the common stock. Any shares of common stock covered by this
prospectus that may qualify for sale pursuant to Rule 144 under the Securities
Act may be sold under Rule 144 rather than under the terms of this prospectus.
In addition, subject to applicable state and foreign laws, selling stockholders
or warrant holders may sell their common stock outside the United States
pursuant to Rules 903 and 904 of Regulation S under the Securities Act.
To comply with the securities laws of certain jurisdictions, the shares of
common stock offered by this prospectus may need to be offered or sold only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions, the shares of common stock may not be offered or sold unless they
have been registered or qualified for sale or an exemption is available and
complied with. If a selling stockholder or a warrant holder notifies us that any
material arrangement has been entered into with a broker-dealer for the sale of
shares of common stock through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker, dealer or
underwriter, we will file a supplement to this prospectus, if required, pursuant
to Rule 424(b) under the Securities Act. In addition, to the extent required, we
will amend or supplement this prospectus to disclose other material arrangements
regarding the plan of distribution.
LEGAL MATTERS
Gregory L. Hrncir, Esq. will pass upon the validity of the shares of
common stock being registered under this prospectus.
EXPERTS
The consolidated financial statements of Gaming & Entertainment Group,
Inc. as of December 31, 2004 and for the years ended December 31, 2004 and 2003,
which are incorporated by reference in this prospectus from our Annual Report on
Form 10-KSB, have been audited by J.H. Cohn LLP, an independent registered
public accounting firm, as stated in their report which is dated January 29,
2005, and includes an explanatory paragraph relating to our ability to continue
as a going concern. Such financial statements have been incorporated herein in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
-23-
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to "incorporate by reference" the information we
file with it. This permits us to disclose important information to you by
referencing these filed documents. We incorporate by reference in this
prospectus the following documents that have been filed with the Commission:
o Our Current Report on Form 8-K, dated as of January 12, 2004, filed
with the Commission on February 4, 2004;
o Our Annual Report on Form 10-KSB for the fiscal year ended December
31, 2003, filed with the Commission on April 14, 2004;
o Our definitive Proxy Statement on Schedule 14A, relating to our
Annual Meeting of Stockholders held on June 14, 2004, filed with the
Commission on April 29, 2004;
o Form 12b-25, Notification of Late Filing, for the quarterly period
ended March 31, 2004, filed with the Commission on May 17, 2004;
o Our Quarterly Report on Form 10-QSB for the quarterly period ended
March 31, 2004, filed with the Commission on May 24, 2004;
o Our Quarterly Report on Form 10-QSB for the quarterly period ended
June 30, 2004, filed with the Commission on August 16, 2004;
o Our Current Report on Form 8-K, dated as of September 2, 2004, filed
with the Commission on September 9, 2004;
o Our Quarterly Report on Form 10-QSB for the quarterly period ended
September 30, 2004, filed with the Commission on November 15, 2004;
o Our Current Report on Form 8-K, dated as of December 8, 2004, filed
with the Commission on December 9, 2004;
o The description of our common stock can be found under the heading
"Description of Capital Stock."
o Our Annual Report on Form 10-KSB for the fiscal year ended December
31, 2004, filed with the Commission on March 3, 2005
We incorporate by reference all documents filed pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus and
before the termination of this offering.
-24-
We will provide promptly without charge to you, upon written request, a
copy of any document incorporated by reference in this prospectus, other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference in such documents. Requests should be directed as follows:
Gaming & Entertainment Group, Inc.
6757 Spencer St.
Las Vegas, NV 89119
Telephone: (702) 407-2471
Attention: Gregory L. Hrncir
You should request any such information at least five days in advance of
the date on which you expect to make your decision with respect to this offer.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, special reports and other information with the
Commission. These filings are available to the public from commercial document
retrieval services and at the Commission's web site at http://www.sec.gov. You
may also read and copy any document we file at the Commission's public reference
rooms at the Commission's Public Reference Rooms at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and in New York, New York and Chicago,
Illinois. You may obtain information on the operation of the Public Reference
Room by calling 1-800-SEC-0330. In addition, you can obtain information on us at
www.gaming-group.com or by contacting us directly at (702) 407-2471.
-25-
[INSIDE BACK COVER]
This page will be blank in the final prospectus.
===============================================================================
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is awful to do so. The information contained in
this prospectus is current only as of its date.
---------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUMMARY...........................................................1
RISK FACTORS.................................................................5
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION..........................13
USE OF PROCEEDS.............................................................14
DETERMINATION OF OFFERING PRICE.............................................14
DIVIDEND POLICY.............................................................14
SELLING STOCKHOLDERS AND WARRANT HOLDERS....................................15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................20
PLAN OF DISTRIBUTION........................................................22
LEGAL MATTERS...............................................................23
EXPERTS.....................................................................23
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE...................................................24
WHERE YOU CAN FIND
MORE INFORMATION.........................................................25
---------------
For as long as any of the shares covered by this registration statement
remain unsold, all dealers effecting transactions in these securities, whether
or not participating in this offering, may be required to deliver a prospectus.
This is in addition to a dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to an unsold allotment or subscription.
5,051,144 SHARES OF COMMON STOCK
ON BEHALF OF SELLING STOCKHOLDERS
4,196,123 SHARES OF COMMON STOCK
ON BEHALF OF WARRANT HOLDERS
GAMING & ENTERTAINMENT GROUP, INC.
[GAMING & ENTERTAINMENT GROUP LOGO]
_______, 2005
================================================================================
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Registrant in connection with
the sale of common stock being registered. All amounts are estimates except the
SEC registration fee.
SEC Registration Fee $ 1,225
Transfer Agent's Fees 5,000
Blue Sky Fees and Expenses 5,000
Accounting Fees and Expenses 10,000
Legal Fees and Expenses 5,000
Printing Fees 5,000
Miscellaneous 2,500
-------
Total $33,725
=======
We will pay substantially all costs and expenses associated with the
registration of the shares of common stock covered by this registration
statement. Selling stockholders are responsible for all underwriting discounts,
commissions, transfer taxes and other expenses associated with the sale of
common stock by them.
Item 15. Indemnification of Directors and Officers
Title 16, Chapters 10a-840 and 10a-841 of the Utah Revised Business
Corporations Act provides for the indemnification of officers, directors and
other corporate agents in terms sufficiently broad to indemnify such persons
under certain circumstances for liabilities (including reimbursement for
expenses incurred) arising under the Securities Act. Article XII of our amended
and restated bylaws provides for indemnification of our directors, officers,
employees and other agents to the fullest extent permitted under the Utah
Revised Business Corporations Act.
Even though indemnification for liabilities arising under the Securities
Act may be provided to certain directors and officers pursuant to the foregoing
provisions, we have been informed that in the opinion of the Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
Item 16. Exhibits
See exhibits listed on the Exhibit Index following the signature page of
this registration statement that is incorporated herein by reference.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act.
-26-
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement for the most
recent post-effective amendment thereof, which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement; provided, however, that paragraphs (a)(1)(i)
and (a)(1)(ii) do not apply if the registration statement is on Form
S-3, Form S-8 or Form F-3, and the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the
Commission pursuant to Section 13 or 15(d) of the Exchange Act that
are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered, and the offering of
the securities at that time shall be deemed to be the initial bona fide
offering.
(3) To remove from the registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the end of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, as amended, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered, and the offering
of such securities at that time shall be deemed to be the initial bona fide
offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
-27-
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Clark, State of Nevada, on March 4, 2005.
GAMING & ENTERTAINMENT GROUP, INC.
By: /s/ Gregory L. Hrncir
-------------------------------
Gregory L. Hrncir
Its: President and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Gregory L. Hrncir, as true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign the
registration statement filed herewith and any or all amendments to said
registration statement (including post-effective amendments and registration
statements filed pursuant to Rule 462 and otherwise), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Commission granting unto said attorney-in-fact and agent the full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the foregoing, as to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated below.
SIGNATURE TITLE DATE
/s/ Tibor N. Vertes Chief Executive Officer and Chairman March 4, 2005
------------------------
Tibor N. Vertes (Principal Executive Officer)
/s/ Gregory L. Hrncir President and Director March 4, 2005
------------------------
Gregory L. Hrncir (Principal Financial and Accounting Officer)
/s/ Kevin J. Burman Chief Operating Officer March 4, 2005
------------------------
Kevin J. Burman
/s/ Jay Sanet Director March 4, 2005
------------------------
Jay Sanet
-28-
EXHIBIT INDEX
EXHIBIT
NUMBER DOCUMENT NAME PAGE
------ ------------- ----
5.01 Opinion of Gregory L. Hrncir, regarding legality 30
23.01 Consent of Gregory L. Hrncir (included in
Exhibit 5.01 hereto) --
23.02 Consent of J.H. Cohn LLP 32
24.01 Power of Attorney (included as part of the
signature pages hereof) --
-29-