UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

 

Date of Report  (Date of earliest event reported)

January 16, 2004

 

Gaming & Entertainment Group, Inc.  

(Exact name of Registrant as specified in charter)

 

Utah

(State or other jurisdiction of incorporation)

 

000-28399

 

59-1643698

(Commission File Number)

 

(IRS Employee Identification No.)

 

6094 S. Sandhill Rd., Suite 400

84020

(Address of principal executive offices)

(Zip Code)

 

Registrant's telephone number, including area code

(702) 932-2274

 

NorStar Group, Inc.

(Former name or former address, if changed since last report)

 

 

 

 

EXPLANATORY NOTE

 

      On February 3, 2004, Gaming & Entertainment Group, Inc., f/k/a NorStar Group, Inc., filed a Current Report on Form 8-K (the "Original Form 8-K") to report a Change in Control of Registrant and Acquisition or Disposition of Assets and report its Financial Statements and Pro Forma Financial Information.  Due to a technical error, the entire filing was not disseminated to the SEC. 

 

      This filing is intended to replace the partial filing and contains the additional information including the Independent Auditor's Report.  This report continues to be presented as of the date of the original filing, and the company has not updated the disclosure in this report to a later date.

 

 

Items 1 and 2. Change in Control of Registrant and Acquisition or Disposition of Assets.

 

            On January 16, 2004, NorStar Group, Inc., a Utah corporation (“Registrant”), acquired Gaming & Entertainment Group, Inc., a Nevada corporation (“G&EG”) in accordance with the terms of an Agreement and Plan of Reorganization among the Registrant, G&EG and the stockholders of G&EG (the "Acquisition Agreement").  The acquisition was consummated by the issuance of 14,600,000 shares of the Registrant's common stock to the stockholders of G&EG in exchange for all of the issued and outstanding capital stock of G&EG.  Prior to the acquisition, the Registrant effected a reverse split of its outstanding common stock.  Immediately after the acquisition, there were 16,000,000 shares of the Registrant's common stock issued and outstanding.

 

The Registrant has changed its legal name to Gaming & Entertainment Group, Inc.  Gaming & Entertainment Group, Inc. was formerly known as GET USA, Inc., with the name change occurring in June 2003. Gaming & Entertainment Group, Inc. will be effecting a mandatory stock certificate exchange with respect to all pre-reverse split common stock certificates of NorStar Group, Inc.

 

            Gaming & Entertainment Group, Inc. is a leading edge supplier of server-based gaming systems and networked interactive electronic bingo games for the Native American gaming market in the U.S. and the Canadian gaming market, as well as a distributor of multi-player station gaming devices in such markets. G&EG designs and develops gaming systems, software, game content and networks to offer a comprehensive gaming system.  In Europe, G&EG supplies its server-based gaming system and game content library to the Amusement With Prize (AWP) gaming market and to independent betting shops.  In addition, G&EG develops and licenses its comprehensive government accredited online gaming system to major land-based casino operators for utilization outside the United States.  Prior to its acquisition by the Registrant, G&EG was a closely held corporation.

 

            The Registrant was not actively engaged in business prior to the acquisition.  Upon consummation of the acquisition (a) all of the officers of the Registrant resigned and all of the directors of the Registrant, other than Jay Sanet, resigned, and (b) Gregory L. Hrncir was elected as a director and appointed as President of the Registrant, and Tibor N. Vertes was elected as a director and appointed as Chief Executive Officer of the Registrant.

 

            The following table sets forth certain information as of January 16, 2004 with respect to shares of the Registrant's common stock owned by (a) each director and executive officer of the Registrant and (b) each person known to the Registrant to own beneficially more than 5% of the Registrant's Common Stock (the only class of stock outstanding):

 

Name of

Beneficial Owner

Number of Shares

Beneficially Owned

Percent

of Class

Tibor N. Vertes(1)

6,658,183

41.61%

Gregory L. Hrncir(2)

1,588,567

9.93%

Kevin J. Burman(3)

523,005

3.27%

Jay Sanet(4)

-0-

0%

Zen Investments Pty Ltd. (5)

1,892,839

11.83%

Gaming & Entertainment Group, Ltd. (6)

1,221,975

7.64%

                                                

(1)  Mr. Vertes is Chief Executive Officer and a director of the Registrant.

(2)  Mr. Hrncir is President and a director of the Registrant.

(3)  Mr. Burman is Chief Operating Officer of the Registrant.

(4)  Mr. Sanet is a director of the Registrant.

(5)  Issued upon the formation of Gaming & Entertainment Group, Inc.

(6)  Gaming & Entertainment Group, Ltd. (“G&E Ltd.”) is an Australian corporation, and is publicly traded on the Australian Stock Exchange under the symbol “GAM.” G&E Ltd. was issued shares in 2001 in conjunction with a private placement.

 

            The basis upon which shares of G&EG common stock were exchanged for the shares of common stock of the Registrant was established through arm's length negotiations between the Registrant and G&EG. There was no relationship between G&EG or its stockholders, on the one hand, and the Registrant, on the other hand, prior to entering into the Acquisition Agreement.

 

 

 

Item 7.            Financial Statements, Pro Forma Financial Information and Exhibits.

 

(a)        Audited financial statements of Gaming & Entertainment Group, Inc., f/k/a GET USA, INC. as of December 31, 2002 and 2001, and the related statements of operations, balance sheet, stockholders’ equity and cash flows for the years then ended.

 

(b)        Unaudited pro forma consolidated financial statements of NorStar Group, Inc. and Gaming & Entertainment Group, Inc. for the nine months ended September 30, 2003, and the related statements of operations and balance sheet for such period.

 

(c)        Exhibits

 

2.1       Agreement and Plan of Reorganization dated September 18, 2003, among the Registrant, Gaming and Entertainment Group, Inc. and the stockholders of Gaming & Entertainment Group, Inc.

 

22.1     The Registrant's sole subsidiary is Gaming & Entertainment Technology Pty Ltd., an Australian corporation. Gaming & Entertainment Technology Pty Ltd. is a wholly owned subsidiary of G&EG.

 

 

 

SIGNATURES

 

            Pursuant to the requirements of the Securities Exchange Act of 1934, Gaming & Entertainment Group, Inc.  has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Dated:  February 03, 2004

Gaming & Entertainment Group, Inc.

 

By:  /s/ Gregory L. Hrncir                      

 

        Gregory L. Hrncir, President

 

 

 

 

GET USA, INC.

December 31, 2002, 2001, and 2000

 

TABLE OF CONTENTS

 

Page No.

INDEPENDENT AUDITOR'S REPORT

1

 

 

FINANCIAL STATEMENTS

 

Consolidated Balance Sheets

2

Consolidated and Combined Statements of Operations

3

Consolidated and Combined Statements of Stockholders' Equity

4

Consolidated and Combined Statements of Cash Flows

5

Notes to Consolidated and Combined Financial Statements

6-11

 

 

SUPPLEMENTAL SCHEDULES

 

Consolidated and Combined

 

Schedule of General and Administrative Expenses

 

 

 

 

 

 

Independent Auditor's Report

 

 

To the Stockholders of GET USA, Inc.

 

We have audited the accompanying consolidated balance sheets of GET USA, Inc. and subsidiaries as of December 31, 2002 and 2001 and the related consolidated and combined statements of operations, stockholders' equity and cash flows for the years ended December 31, 2002, 2001, and 2000.  These consolidated and combined financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated and combined financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated and combined financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated and combined financial statements referred to above present fairly, in all material respects, the financial position of GET USA, Inc. and subsidiaries as of December 31, 2002 and 2001 and the results of their operations and their cash flows for the years ended December 31, 2002, 2001 and 2000, in conformity with accounting principles generally accepted in the United States of America.

 

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole.  The supplemental schedule on page 12 for the years ended December 31, 2002, 2001 and 2000 is presented for the purpose of additional analysis and is not a required part of the basic financial statements.  Such information has been subjected to the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

 

Kafoury, Armstrong & Co.

 

Reno, Nevada

August 20, 2003

 

1

 

 

GET USA, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2002 AND 2001

 

 

 

 

ASSETS

 

 

 

 

 

2002

 

2001

Current Assets

 

 

 

  Cash

$    281,992 

 

$       2,037 

  Short-term investment

 

1,575,328 

  Accounts receivable

281,275 

 

  Note receivable

374,970 

 

158,000 

  Employee advances

 

9,988 

 

 

 

 

     Total current assets

938,237 

 

1,745,353 

 

 

 

 

Property Plant and Equipment, net

90,313 

 

116,940 

 

 

 

 

Other Assets

 

 

 

  Intellectual property

23,585 

 

21,747 

     Total assets

$1,052,135 

 

$1,884,040 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current Liabilities

 

 

 

  Accounts payable

$  130,268 

 

$    61,856 

  Accrued expenses

82,383 

 

135,367 

  Related party payable

 

689,470 

  Accrued income taxes

117,698 

 

78,376 

  Deposit

20,000 

 

  Short-term loan from stockholders

 

16,523 

 

 

 

 

     Total liabilities

350,349 

 

981,592 

Stockholders' Equity

 

 

 

  Common stock; authorized 50,000,000 shares;

   issued and outstanding 2002, 10,827,707 shares

   2001, 9,548,053 shares

10,828 

 

9,578 

  Preferred stock; authorized 10,000,000 shares;

   issued and outstanding 2002, 0 shares;

   2001, 130 shares

 

284 

  Additional paid-in capital

2,061,009 

 

1,668,656 

  Accumulated other comprehensive income

115,311 

 

39,091 

  Accumulated deficit

(1,485,362)

 

(815,161)

 

 

 

 

     Total stockholders' equity

701,786 

 

902,448 

     Total liabilities and stockholders' equity

$1,052,135 

 

$1,884,040 

 

 

 

 

See accompanying notes.

 

2

 

 

GET USA, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000

 

 

 

 

 

 

 

Consolidated

2002

 

Consolidated

2001

 

Combined

2000

 

 

 

Revenues

 

 

 

 

 

  Site development and license fees

$1,820,265 

 

$1,474,068 

 

$1,288,346 

  Sales, less returns and allowances

 

71,558 

 

346,300 

 

1,820,265 

 

1,545,626 

 

1,634,646 

Costs of sales

 

 

 

 

 

  Purchases

 

61,866 

 

285,587 

  Wages and benefits

982,646 

 

1,043,845 

 

705,345 

 

982,646 

 

1,105,711 

 

990,932 

    Gross Profit

837,619 

 

439,915 

 

643,714 

General and administrative expenses

1,619,634 

 

1,156,706 

 

976,565 

    Operating (loss)

(782,015)

 

(716,791)

 

(332,851)

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

  Gain (loss) on foreign currency exchange

48,685 

 

(60,316)

 

(408)

  Interest income/dividends

35,646 

 

90,119 

 

27,822 

  Loss on disposal of assets

 

(34,164)

 

  Miscellaneous income (expense)

3,394 

 

(2,060)

 

44,615 

 

 

 

 

 

 

    Total other income (expense), net

87,725 

 

(6,421)

 

72,029 

 

 

 

 

 

 

(Loss) before provision for income taxes

(694,290)

 

(723,212)

 

(260,822)

Provision for income taxes

24,224 

 

79,938 

 

3,836 

    Net (loss)

(718,514)

 

(803,150)

 

(264,658)

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

 

 

 

  Foreign currency translation adjustment

77,072 

 

40,049 

 

(21,195)

    Total comprehensive net (loss)

$  (641,442)

 

$  (763,101)

 

$  (285,853)

 

 

 

 

 

 

Weighted average number of shares outstanding

9,748,295 

 

56,344 

 

2,345 

 

 

 

 

 

 

(Loss) per share

$   (0.07)

 

$   (13.54)

 

$   (121.90)

 

 

 

 

 

 

See accompanying notes.

 

3

 

GET USA, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000

 

 

Common Stock

 

Preferred Stock

 

Additional

Paid-in Capital

 

Other Comprehensive Income (Loss)

 

Retained Earnings (Accumulated Deficit)

 

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

 

 

 

Total

Balance at December 31, 1999,

  Combined

 

1,230 

 

$  2,983 

 

 

$ - 

 

$ - 

 

$ - 

 

$   (1,065)

 

$1,918 

GET Holdings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale/issue of common stock;

  par value $2.31

 

1,230 

 

2,838 

 

 

 

 

 

 

2,838 

Other comprehensive (loss)

 

 

 

 

 

 

(2,616)

 

 

(2,616)

Net income

 

 

 

 

 

 

 

11,749 

 

11,749 

GET AU

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale/issue of common stock;

  par value $.56

 

1,000 

 

560 

 

 

 

 

 

 

560 

Contributed assets

 

 

 

 

 

44,792 

 

 

 

44,792 

Other comprehensive (loss)

 

 

 

 

 

 

(18,579)

 

 

(18,579)

Net (loss)

 

 

 

 

 

 

 

(276,407)

 

(276,407)

Balance at December 31, 2000,

  Combined

 

3,460 

 

6,381 

 

 

 

44,792 

 

(21,195)

 

(265,723)

 

(235,745)

GET USA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale/issue of common stock;

  par value $1

 

9,548,000 

 

9,548 

 

 

 

718,496 

 

 

 

728,044 

Other comprehensive income

 

 

 

 

 

 

38,239 

 

 

38,239 

Net (loss)

 

 

 

 

 

 

 

(766,848)

 

(766,848)

GET Holdings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale/issue of common stock;

  par value $2.19

 

288 

 

631 

 

 

 

950,189 

 

 

 

950,820 

Sale/issue of preferred stock;

  par value $2.18

 

 

 

130 

 

284 

 

950,190 

 

 

 

950,474 

Consolidation to GET USA

 

(2,748)

 

(6,452)

 

 

 

(950,189)

 

2,498 

 

(10,201)

 

(964,344)

Other comprehensive income

 

 

 

 

 

 

431 

 

 

431 

Net (loss)

 

 

 

 

 

 

 

(4,924)

 

(4,924)

GET AU

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale/issue of common stock;

  par value $.56

 

170 

 

95 

 

 

 

(95)

 

 

 

Consolidation to GET USA

 

(1,117)

 

(625)

 

 

 

(44,727)

 

17,739 

 

263,913 

 

236,300 

Other comprehensive income

 

 

 

 

 

 

1,379 

 

 

1,379 

Net (loss)

 

 

 

 

 

 

 

(31,378)

 

(31,378)

Balance at December 31, 2001,

  Consolidated

 

9,548,053 

 

9,578 

 

130 

 

284 

 

1,668,656 

 

39,091 

 

(815,161)

 

902,448 

GET USA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale/issue of common stock;

  par value $1

 

1,279,707 

 

1,280 

 

 

 

1,342,513 

 

 

 

1,343,793 

Other comprehensive income

 

 

 

 

 

 

77,072 

 

 

77,072 

Net (loss)

 

 

 

 

 

 

 

(718,514)

 

(718,514)

GET Holdings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidation to GET USA

 

 

 

(130)

 

(284)

 

(950,190)

 

(313)

 

4,441 

 

(946,346)

GET AU

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidation to GET USA

 

(53)

 

(30)

 

 

 

30 

 

(539)

 

43,872 

 

43,333 

Balance at December 31, 2002, Consolidated

 

10,827,707 

 

$ 10,828 

 

 

$ - 

 

$2,061,009 

 

$115,311 

 

$  (1,485,362)

 

$701,786 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

4

 

 

GET USA, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000

 

 

 

 

 

 

 

Consolidated

2002

 

Consolidated

2001

 

Combined

2000

 

 

 

Cash flows from operating activities

 

 

 

 

 

Net (Loss)

$ (718,514)

 

$ (803,150)

 

$ (264,658)

Adjustments to reconcile net (loss) to cash

  provided (used) by operating activities

 

 

 

 

 

Depreciation expense

49,955 

 

34,959 

 

21,710 

Expenses paid with issuance of debt

42,375 

 

 

Expenses paid with issuance of equity

45,000 

 

 

Loss on disposal of assets

 

34,164 

 

(Increase) decrease in:

 

 

 

 

 

Accounts receivable

(281,275)

 

 

Note receivable

(216,970)

 

(158,000)

 

Receivable from related party

 

325 

 

(325)

Employee advances

9,988 

 

(9,988)

 

Prepaid assets

 

22,082 

 

(22,082)

Unbilled receivables

 

 

1,307,380 

Increase (decrease) in:

 

 

 

 

 

Accounts payable

68,412 

 

20,169 

 

38,083 

Accrued expenses

(52,984)

 

(3,114)

 

138,481 

Related party payable

(406,220)

 

339,532 

 

349,938 

Accrued income taxes

39,322 

 

74,526 

 

3,850 

Deferred revenue

 

 

(1,304,289)

Deposits

20,000 

 

(1,013,675)

 

1,013,675 

 

 

 

 

 

 

Net cash provided (used) by operating activities

(1,400,911)

 

(1,462,170)

 

1,281,763 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Acquisition of property, plant and equipment

(22,611)

 

(79,730)

 

(83,494)

Payments for intellectual property

 

(20,156)

 

(1,591)

 

 

 

 

 

 

Net cash used for investing activities

(22,611)

 

(99,886)

 

(85,085)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Advances from stockholder

 

 

16,766 

Repayment of advances from stockholder

 

 

(606)

Proceeds from issuance of common stock

37,500 

 

950,820 

 

3,398 

Proceeds from issuance of preferred stock

 

950,474 

 

 

 

 

 

 

 

Net cash provided by financing activities

37,500 

 

1,901,294 

 

19,558 

 

 

 

 

 

 

Effect of exchange rate changes on cash

90,649 

 

40,049 

 

(21,195)

 

 

 

 

 

 

Net increase (decrease) in cash

(1,295,373)

 

379,287 

 

1,195,041 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

1,577,365 

 

1,198,078 

 

3,037 

 

 

 

 

 

 

Cash and cash equivalents, end of period

$281,992 

 

$1,577,365 

 

$1,198,078 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

Conversion of shareholder debt to equity

$358,280 

 

 

 

 

Contributed assets disposed

 

 

$41,120 

 

 

Contributed assets received

 

 

 

 

$44,792 

 

 

 

 

 

 

See accompanying notes.

 

5

 

GET USA, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

 

NOTE 1 - Summary of Significant Accounting Policies:

 

Company Activities:

 

GET USA Inc. ("GET USA") was incorporated in the State of Nevada on December 5, 2000. GET USA, through its wholly-owned and consolidated subsidiaries Gaming and Entertainment Technology Pty Ltd ("GET AU"), an Australian corporation, and GET Holdings, Ltd., a Malta corporation ("GET Holdings"), develop state-of-the-art Internet gaming systems for utilization in regulated jurisdictions around the world.  GET USA and its subsidiaries have developed comprehensive networked entertainment   in   the Internet and land-based gaming environment.

 

Principles of Consolidation:

 

On December 28, 2001, GET USA acquired 95% of the outstanding shares of GET AU and GET Holdings. On January 11, 2002 GET USA acquired the remaining 5% of the outstanding shares of GET AU and GET Holdings.   The consolidated and combined financial statements include the accounts of GET USA and its wholly owned subsidiaries, GET AU and GET Holdings hereinafter referred to as ("the Companies"). All significant intercompany accounts and transactions have been eliminated.

 

Cash and Cash Equivalents:

 

The Companies consider all financial instruments that are highly liquid and have original maturities of three months or less to be cash equivalents and for purposes of cash flow presentation this includes short-term investments.

 

Accounts Receivable:

 

The Companies extend credit to customers in the normal course of business and perform ongoing credit evaluations of customers, maintaining allowances for potential credit losses which, when realized, have been within management's expectations.

 

Property and Equipment:

 

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the asset, which vary from 3 to 5 years. Costs of major improvements are capitalized; costs of normal repairs and maintenance are charged to expense as incurred.

 

Revenue Recognition:

 

Revenue is recorded on the accrual basis at the time when the Companies have the contractual right to bill.

 

6

 

Advertising Costs:

 

The Companies policies are to expense advertising costs as incurred. No future benefit costs have been capitalized. Advertising costs were $35,609, $178,139 and $169,615 for the years ended December 31, 2002, 2001, and 2000, respectively.

 

Provision for Income Taxes:

 

The Companies have produced no operating income in the United States of America. To date, the primary activities of the Companies relate to foreign operations. All related tax liabilities have been included in the consolidated and combined financial statements. Based on the overall consolidated and combined operations, no significant book to tax differences was noted that might result in any material deferred tax calculation. As such, no provision for deferred taxes have been included in the financial statements for any year presented.

 

Concentration of Risk:

 

Financial instruments that potentially subject the Companies to significant concentrations of credit risk consist principally of cash and cash equivalents. The Companies deposit cash in two financial institutions. At times, such amounts may be in excess of insurance coverage. Sales to one of the Companies largest customers were approximately 31% of revenues in 2002. Accounts receivable for that customer at December 31, 2002 were $280,000.

 

Foreign Currency Transactions:

 

The functional currencies of the foreign subsidiaries are their respective local currencies. Accordingly, gains and losses from the translation of the financial statements of the foreign subsidiaries are reported as a separate component of accumulated other comprehensive income. Foreign currency transaction gains and losses are included in operations.

 

Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates based on management's knowledge and experience. Due to their prospective nature, actual results could differ from those estimates.

 

Software Development Costs:

 

In accordance with Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed," initial costs are charged to operations as research prior to the development of a detailed program design or a working model. Costs incurred subsequent to the product release and research development performed under contract are charged to operations.

 

7

 

Issuance of Stock:

 

Stock of the Companies is deemed to be issued once value is received for the stock; the stock subscription agreement has been signed by the purchaser and signed as accepted by the Companies. Any value received prior to the acceptance of the agreement is considered a liability of the Companies.

 

NOTE 2 - Note Receivable:

 

On December 18, 2001, GET USA entered into a Bridge Loan Agreement with Innovative Gaming Corporation of America, a Nevada corporation ("IGCA"). This loan agreement is for six months at an annual rate of 10%. GET USA has the irrevocable right to convert all or any portion of the principal balance into shares of common stock. As of December 31, 2001, GET USA had advanced $158,000 against this loan agreement. In 2002, an additional $216,970 was loaned as part of this agreement. At December 31, 2002 the outstanding receivable is $374,970.     As described in Note 7 a settlement agreement was signed by both parties.

 

NOTE 3 - Related Party Transactions:

 

The subsidiary, GET AU received assets totaling $44,792 in 2000 at the start up of operations from a company commonly owned who dissolved at the start up of GET AU.

 

In August 2000, Entertainment Media Ventures, LLC, a California limited liability company ("EMV"), purchased a 5% equity interest in GET AU and GET Holdings for $1,000,000. The equity securities were not issued until 2001. As such, the proceeds received were reported at December 31, 2000 as a deposit.   As detailed in Note 6, EMV transferred its equity ownership in GET AU and GET Holdings for shares of common stock in GET USA Inc.

 

Related party payables of $689,470 as of December 31, 2001, have been accrued for consulting services provided by a stockholder to the Companies. Related party payables in the amount of $339,000 were converted into equity at December 31, 2002 as described in Note 6.

 

Short-term loans outstanding from certain stockholders were $16,523 as of December 31, 2001. The loans were converted to equity at December 31, 2002 as described in Note 6.

 

8

 

NOTE 4 - Foreign Translation Adjustment:

 

As discussed in Note 1, the two subsidiaries have previously and/or currently conduct business in foreign countries. GET AU currently undertakes all research and development for GET USA in Sydney, Australia, while GET Holdings is scheduled to be legally dissolved in 2003 and currently has no business operations. Both companies use their local currency as their functional currency. Assets and liabilities denominated in foreign currencies are translated using the exchange rate on the balance sheet date. Revenues and expenses are translated using average exchange rates prevailing during the year. The translation adjustment resulting from this process is reflected in the balance sheet as a direct increase to stockholders' equity entitled "accumulated    other comprehensive income." For the years ended December 31, 2002, and 2001, the foreign currency translation gain amounted to $77,072 and $40,049, respectively.

 

NOTE 5 - Property, Plant and Equipment:

Property at December 31, 2002 and 2001 consisted of the following:

 

2002

2001

Building improvements

$    1,796 

$    1,626 

Equipments

165,183 

144,202 

Furniture and fixtures

23,005 

20,826 

 

189,982 

166,654 

 

 

 

Less: Accumulated depreciation

(99,669) 

(49,714)

 

 

 

Property, plant and equipment, net

$ 90,313 

$116,940 

 

Depreciation of property, plant and equipment was $49,955, $34,959 and $21,710 in 2002, 2001 and 2000, respectively.

 

NOTE 6 - Stockholders' Equity:

 

On December 28, 2001, GET USA entered into share transfer agreements with the majority shareholders of GET AU and GET Holdings whereby GET USA issued 9,548,000 fully paid, duly authorized and non-assessable shares of common stock to the shareholders in exchange for 95% or 1,117 fully paid, duly authorized and non-assessable ordinary shares of GET AU and 2,748 fully paid, duly authorized and non-assessable ordinary shares of GET Holdings.

 

On January 11, 2002, GET USA entered into share transfer agreements with the minority shareholder of GET AU and GET Holdings whereby GET USA issued 452,000 fully paid, duly authorized and non-assessable shares of common stock to the minority shareholder   in   exchange   for   all   53   fully   paid,   duly   authorized   and   non-assessable ordinary shares of GET AU and all 130 fully paid, duly authorized and non-assessable A Preference shares of GET Holdings.

 

9

 

On   September   6, 2002, GET USA entered into a consulting agreement for merchant banking services.  The agreement provides that 500,000 shares of common stock of GET USA will be issued to the consultant in consideration for the services provided.   The share price on that date was valued at $0.15 per share. On September 6, 2002, 100,000 shares of common stock were issued in accordance with the terms of the consulting agreement; another 200,000 shares were issued on December 6, 2002 and another 200,000 shares were issued on March 6, 2003.

 

GET USA issued a private placement memorandum (the "Memorandum") in October 2002. The Memorandum relates to the offer (the "Offering") by GET USA of up to 200 units ("Units") in an amount not to exceed $1,500,000, exclusive of GET USA's ten percent (10%) over-allotment ("the Over-Allotment").   Each unit is priced at $7,500 and consists of 10,000 shares of common stock, par value $.001 per share and a warrant to purchase 10,000 shares of common stock exercisable at $1.50 per share for a period of two years from the date of issuance, or the termination date of the Offering.   GET USA has sole discretion to exercise the Over-Allotment of up to 20 units, or $150,000. The Offering will terminate on the earlier of the sale of all units offered or September 1, 2003, subject to GET USA's right to extend the Offering.   A total of 115 units have been issued subsequent to December 31, 2002, totaling $860,000.

 

On   December   1, 2002, GET USA entered into a consulting agreement for strategic gaming advice, terminating on December 31, 2003. The terms of the agreement state that GET USA shall issue to the consultant an option to purchase 50,000 shares of common stock, at an exercise price of $0.75 per share. In addition, in consideration for certain matters of the agreement being met, the consultant shall be entitled to receive an option to purchase 25 shares of common stock for each gaming machine placed in service as a result of introductions made by the consultant.   The options are to be issued the last day of each fiscal quarter in which gaming machine placements are made, at an exercise price equal to 120% of the average closing bid price for each trading day of such fiscal quarter. All options are exercisable for a period of three years from the date of issuance.

 

At December 31, 2002 all related party debt with a stockholder, was converted to shares of common stock and warrants.    Short-term loans from stockholders and related party payables in the amount of $19,281 and $339,000, respectively, were converted to equity under the same terms as the private placement memorandum dated October 2002. As a result of the conversion, 477,707 shares of common stock were issued to a related party.    In addition, GET USA issued a warrant, to purchase 477,707 shares of common stock exercisable at $1.50 per share for a period of two years from the date of issuance, or the termination date of the Offering.

 

10

 

NOTE 7 - Subsequent Events:

 

On February 15, 2002, the Companies entered into an Agreement and Plan of Merger (the "GET Merger Agreement") with IGCA. In August 2002, the GET Merger Agreement was   unilaterally   terminated   by   IGCA.  A settlement agreement, with an effective date of February 25, 2003, was signed by both parties.  The agreement provides consideration to the Companies for the outstanding bridge loan in the original principal amount of $374,970, and effectively ends the outstanding litigation in Clark County, Nevada, commenced by the Companies against IGCA. In addition, a license agreement has been entered into between IGCA and GET USA in full   consideration   for   the outstanding development work and out-of-pocket expenses incurred by the Companies during the period prior to the termination of the merger. Specifically, the Companies received a non-exclusive, worldwide, perpetual, irrevocable license to IGCA's software, hardware, hardware   tools, mathematics and pay   tables   relating   to   three   titles and a multi-player poker game.

 

On February 24, 2003, a member of management assigned a promissory note, previously issued to him by IGCA in conjunction with a loan in the original principal amount of $125,000, to the Companies in the amount of $133,657 in consideration for the issuance by the Companies of a non-interest bearing promissory note to the member of management in a like amount, maturing on April 24, 2003.

 

In June 2003, GET USA changed its name to Gaming and Entertainment Group, Inc.

 

 

11

 

GAMING & ENTERTAINMENT GROUP, INC.

PRO FORMA CONDENSED COMBINED BALANCE SHEET

NINE MONTHS ENDED SEPTEMBER 30, 2003

(UNAUDITED)

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Historical

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming &

 

 

 

 

 

 

 

 

 

NorStar

 

Entertainment

 

 

 

Pro Forma

 

Pro Forma

 

 

 

Group, Inc.

 

Group, Inc.

 

Combined

 

Adjustments

 

Combined

Cash

 

 

$              - 

 

$           71,507 

 

$    71,507 

 

$            - 

 

$        71,507 

Short term investment

 

$             7,518 

 

 

 

Accounts receivable

 

1,559 

 

1,559 

 

 

1,559 

Note receivable

 

 

508,627 

 

508,627 

 

 

508,627 

Capitalized web site development

 

 

 

 

 

Employee advances

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Total Current Assets

 

589,211 

 

589,211 

 

 

589,211 

 

 

 

 

 

 

 

 

 

 

 

 

PROPERTY & EQUIPMENT NET

 

73,046 

 

73,046 

 

 

73,046 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

 

 

 

 

 

  Intellectual property

 

 

23,695 

 

23,695 

 

 

23,695 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

685,952 

 

685,952 

 

 

685,952 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES & STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

 

Accounts payable

 

27,190 

 

25,197 

 

52,387 

 

 

52,387 

Accrued expenses