mainbody.htm
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): February 10,
2009
Secured Diversified
Investment, Ltd.
(Exact
name of registrant as specified in its charter)
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Nevada
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000-30653
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80-0068489
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(I.R.S.
Employer Identification No.)
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6980 O’Bannon Drive,
Las Vegas, NV
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89117
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (702)
939-3254
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3416 Via Lido, Suite F
Newport Beach, CA 92263
(Former
name or former address, if changed since last
report)
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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[
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Written
communications pursuant to Rule 425 under the Securities Act (17CFR
230.425)
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[
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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[
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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[
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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CURRENT
REPORT ON FORM 8-K
Secured
Diversified Investment, Ltd.
The
Share Exchange Agreement and Plan of Reorganization
Since
June 16, 2008, we have operated our business under the protection of Chapter 11
of the United States Bankruptcy Code. Our chapter 11 bankruptcy case
has been pending in the U.S. Bankruptcy Court for the District of Nevada (the
“Court”) as Case No. BK-S-08-16332-LBR. By order entered January 27,
2009, the Court confirmed our Plan of Reorganization (the
“Plan”). The Effective Date of the Plan, as defined therein, was
February 6, 2009.
On
February 10, 2009, pursuant to the terms of the Plan, we entered into a Share
Exchange Agreement with Galaxy Gaming, Inc., a privately held Nevada Corporation
(“Galaxy”). In connection with the closing of the Share Exchange Agreement, we
obtained 100% of the issued and outstanding shares of Galaxy, and Galaxy became
our wholly-owned subsidiary (the “Share Exchange”). Also pursuant to
the terms of the Plan, all of our outstanding debt obligations (other than
administrative expenses related to chapter 11 case) have been discharged in
exchange for our issuance of new common stock on a pro rata basis to our
creditors.
Pursuant
to the terms and conditions of the Share Exchange Agreement:
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§
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We
issued 25,000,000 shares of our common stock pro-rata to the former
shareholders of Galaxy in exchange for obtaining ownership of 100% of the
issued and outstanding shares of Galaxy;
and
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|
§
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Our
sole officer and director, Munjit Johal has resigned from all named
executive officer positions. Mr. Robert Saucier, the President
of Galaxy, has been appointed our President, Chief Executive
Officer, Chief Financial Officer and sole director. Mr.
William O’Hara has been appointed our Chief Operations
Officer.
|
In
addition, pursuant to the terms of the Plan:
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§
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We
issued 4,000,000 shares of new common stock on a pro rata basis to our
creditors in exchange for the discharge of our outstanding debts under
chapter 11 of the U.S. Bankruptcy
Code;
|
|
§
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All
of our pre-Share Exchange issued and outstanding equity interests were
extinguished and rendered null and void;
and
|
|
§
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As
a result, following these events, there are currently 29,000,000 shares of
our common stock issued and
outstanding.
|
The
foregoing description of the Share Exchange Agreement and the Plan of
Reorganization does not purport to be complete and is qualified in its entirety
by reference to the complete text of the Share Exchange Agreement, which is
filed as Exhibit 2.2 hereto and incorporated herein by reference, and the
complete text of the Plan of Reorganization, which is filed as Exhibit 2.1
hereto and incorporated herein by reference.
The
information set forth in Items 1.01 and 2.01 of this Current Report on Form 8-K
that relates to the confirmation of the company’s Plan of Reorganization is
incorporated by reference into this Item 1.03. The Plan was confirmed
by order of the U.S. Bankruptcy Court for the District of Nevada entered January
27, 2009. The complete text of the Plan of Reorganization and the
court Order confirming the Plan is filed as Exhibit 2.1 hereto and incorporated
herein by reference.
The
information set forth in Item 1.01 of this Current Report on Form 8-K that
relates to the completion of the Share Exchange is incorporated by reference
into this Item 2.01.
As used
in this Current Report on Form 8-K, all references to the “Company,” “SDI,”
“we,” “our” and “us” or similar terms, refer to Secured Diversified Investment,
Ltd., including its predecessors and its subsidiaries, except where the context
makes clear that the reference is only to Galaxy. Information about the Company
and the principal terms of the Share Exchange are set forth below.
The Share Exchange. The
25,000,000 shares of our common stock issued pro rata to former shareholders of
Galaxy in connection with the Share Exchange Agreement were not registered under
the Securities Act of 1933, as amended (the “Securities Act”), but were issued
in reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act and/or Regulation D promulgated under that section. These
provisions exempt transactions by an issuer not involving any public offering.
These securities may not be offered or sold in the United States absent
registration or an applicable exemption from the registration requirements.
Certificates representing these shares contain a legend stating the
same.
Prior to
the Share Exchange, there were no material relationships between us and Galaxy,
or any of their respective affiliates, directors or officers, or any associates
of their respective officers or directors.
The pro
rata issuance of 4,000,000 shares of our common stock to our former creditors
pursuant to the terms of the Plan was a public offering exempt from the
requirements of section 5 of the Securities Act of 1933 under the terms of the
U.S. Bankruptcy Code, 11 U.S.C. §1145(a)(1).
Following
the effectiveness of the Plan and the Share Exchange, there were 29,000,000
shares of common stock outstanding, including:
| Shares |
Held by |
| 25,000,000 |
Galaxy
shareholders |
| 4,000,000 |
former SDI
creditors |
General Changes Resulting from the
Share Exchange. We intend to carry on the business of our wholly-owned
subsidiary, Galaxy, as our primary line of business. Our intention is to cease
all business operations associated with our prior business. We have relocated
our principal executive offices to 6980 O’Bannon Drive, Las Vegas, NV 89117, and
our phone number is 702-939-3254.
The Share
Exchange and its related transactions were unanimously approved by the holders
of Galaxy’s common stock by written consent in lieu of a
meeting. Pursuant to Nev. Rev. Stat. §78.622, no further action of
SDI’s directors or shareholders was required to carry out the Share Exchange
following confirmation of the Plan by the Court.
Changes to the Board of
Directors. In connection with the Share Exchange, our sole officer and
director, Munjit Johal has resigned from all positions. Mr. Robert
Saucier, the President of Galaxy, has been appointed our President, CEO, CFO and
sole director.
All
directors hold office for one-year terms until the election and qualification of
their successors. Officers are elected by the board of directors and serve at
the discretion of the board.
Accounting Treatment; Change of
Control. Galaxy is deemed to be the accounting acquirer in the Share
Exchange. Consequently, the assets and liabilities and the historical operations
of Galaxy prior to the Share Exchange will be reflected in the financial
statements and will be recorded at the historical cost basis of Galaxy. Our
financial statements after completion of the Share Exchange will include the
assets and liabilities of both companies, the historical operations of Galaxy,
and our operations from the closing date of the Share Exchange. As a result of
the issuance of the shares of our common stock pursuant to the Share Exchange, a
change in control of the Company occurred on the date of the consummation of the
Share Exchange. Except as described herein, no arrangements or understandings
exist among present or former controlling stockholders with respect to the
election of members of our board of directors and, to our knowledge, no other
arrangements exist that might result in a future change of control of the
Company. We will continue to be a “small business issuer,” as defined under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), following the
Share Exchange.
Company
Overview
We were
initially formed under the laws of the State of Utah on November 22, 1978 to
pursue a position in the entertainment industry focusing on transactions
involving the purchase and sale of literary property rights in connection with
all types of theatrical pictures, plays, television films, music publications
and other forms of entertainment. Ultimately, our efforts in the entertainment
industry were unsuccessful, so we decided to search out other business
opportunities. On July 23, 2002, our shareholders voted to change the direction
of our business and pursue ownerships interests in a portfolio of real
properties. To further our new objective, we moved our domicile to Nevada and
changed our name from “Book Corporation of America” to “Secured Diversified
Investment Ltd.” Since pursuing this strategy, we have been unsuccessful in
generating revenues or profits from our investment properties. The majority of
our real estate assets became impaired, were liquidated or lost through
foreclosure.
On June
26, 2008, we were served with an involuntary petition for relief under Chapter
11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United
States Bankruptcy Court for the District of Nevada (the “Bankruptcy Court”),
Case No. 08-16332. The bankruptcy court’s Order for Relief was
entered on July 30, 2008. During the pendency of our chapter 11
bankruptcy case, we continued to operate our business as a
“debtor-in-possession” under the jurisdiction of the Bankruptcy Court and in
accordance with the applicable provisions of the Bankruptcy Code and orders of
the Bankruptcy Court.
Following
confirmation of the Plan and the consummation of the Share Exchange, we are now
pursuing the business plan of Galaxy through Galaxy, our wholly-owned
subsidiary.
Business
of Company
We are
engaged in the business of developing proprietary table games and other gaming
products, and licensing those games and products to casinos in the United States
and internationally. We are also seeking to acquire other companies who compete
in the same industry.
Our plan
is to grow by developing new game content, enhancing our product portfolio with
electronics, expanding our global distribution network, increasing the
performance of our sales force, and acquiring available
competitors.
Robert
Saucier is our President, Chief Executive Officer, Chief Financial Officer
and sole director. William O’Hara is our Chief Operating
Officer.
Proprietary
Table Games
Up until
approximately twenty years ago, casino operated table games consisted mainly of
public domain games such as Blackjack, Craps, and Roulette. That began to
change, however, in 1988 when a game called Caribbean Stud was invented and
first played in an Aruban casino. The game, a variation of stud poker, was
designed to be house-banked in a casino and played directly against a dealer,
rather than the player vs. player style of traditional poker games. Caribbean
Stud features an optional side wager whereby, for one dollar, players have the
chance to win a progressive jackpot, which can reach as high as several hundred
thousand dollars.
The
inventors applied for and obtained various US and international patents. They
then leased their game and its associated intellectual property to other
casinos. The game quickly proved its popularity in U.S. and foreign markets. The
popularity and financial success of Caribbean Stud led to the birth of the
proprietary table game industry.
Numerous
other proprietary table games and side bets have been invented by other
individuals during the last twenty years as the industry has grown. The low
overhead costs and steady revenue stream associated with maintaining successful
proprietary table games has spurred the industry.
Gaming in
general continues to expand both domestically and internationally. In certain
jurisdictions (most notably Asia), the table game segment continues to increase
in proportion to other forms of gaming. In other markets, such as North America,
the ratio between table games and other segments of gaming appears to have
stabilized. However, universally the ratio between proprietary table games and
those table games found in the public domain has been steadily increasing in
favor of proprietary games. Current estimates of the international live table
game market are depicted in the following table:
|
Live
Table Games
|
The
Americas
|
Europe
& Africa
|
Asia
Pacific
|
Total
|
|
Public
Domain Games
|
16,335
|
6,235
|
8,895
|
31,465
|
|
Proprietary
Card Games
|
7,690
|
530
|
450
|
8,670
|
|
Dice
Games
|
1,100
|
75
|
330
|
1,505
|
|
Roulette
Games
|
2,470
|
5,380
|
900
|
8,750
|
|
Total
Table Games
|
27,595
|
12,220
|
10,575
|
50,390
|
Growth in
the gaming sector is forecasted to continue for at least the next several
decades. Recently, more and more jurisdictions both domestically and
internationally have reported that they intend to allow gaming or expanded forms
of gaming. Most visibly, numerous casino mega-resort projects have been
announced or are under construction along the Las Vegas Strip, the Cotai Strip
(Macau), the Ho Tram Strip (Vietnam), and in Singapore. In addition to these
multi-billion dollar projects, it is estimated that at least one hundred
additional casinos will be built in the next five years. With this anticipated
growth, we expect the number of table games in five years to be as
follows:
|
Live
Table Games
|
The
Americas
|
Europe
& Africa
|
Asia
Pacific
|
Total
|
|
Public
Domain Games
|
19,365
|
6,770
|
16,975
|
43,110
|
|
Proprietary
Card Games
|
10,430
|
730
|
1,650
|
12,810
|
|
Dice
Games
|
1,150
|
95
|
390
|
1,635
|
|
Roulette
Games
|
3,255
|
5,965
|
2,300
|
11,520
|
|
Total
Table Games
|
34,200
|
13,560
|
21,315
|
69,075
|
History
and Development of Galaxy
In 1997,
Galaxy’s founder and president, Robert Saucier, was an investor in a small
casino in Washington State. The casino had ten table games, primarily blackjack.
During his tenure there, Mr. Saucier invented a side bet for blackjack known as
“Horseshoe Blackjack.” The side bet became very popular and the casino’s win
from the games increased significantly. On October 7, 1997, a
predecessor company, Galaxy Gaming Corporation, was formed and Mr. Saucier
exchanged all of his rights, title and interest in his invention for stock in
the corporation. Other Washington casinos recognized the popularity
and profitability of this side bet and requested licenses to play Horseshoe
Blackjack side bets at their casinos. The side bet was modified and its name was
later changed to “Lucky Ladies.”
Lucky
Ladies remained Galaxy’s only product until late 2002 when we debuted a new
casino poker game called “Texas Shootout”. This game quickly became popular with
casinos and their customers. At this time, Galaxy also increased its sales force
and expanded distribution into new jurisdictions. Since then, Galaxy has grown
methodically and intentionally by reinvesting retained earnings and introducing
new products at a regular pace.
Galaxy
has grown to become the second largest provider of casino table games (1,500+
tables) in the world behind industry giant Shuffle Master Gaming (4,000±
tables). A significant portion of Shuffle Master’s growth has been through
acquisitions of competitive companies and products. Galaxy has previously been
unable to compete for these acquisitions due to a limited capital structure.
Accordingly, most of its growth has been through direct sales leading to
placements of its installed base of games.
In early
2008, Galaxy released Emperor’s Challenge® – which is generating additional
revenues for us. In the fourth quarter of 2008, we introduced Lucky 8 Baccarat –
which is also generating additional revenues for us
Our
Products
Currently,
we have an installed base of products on over 1,500 gaming tables. Our games are
briefly described below. Additional information regarding our games may be found
on our wholly-owned subsidiary’s web site, www.galaxygaming.com. Information
found on the web site should not be considered part of this report.
Side
Bets
Our
current line-up of table game products includes four side-bets to the game of
blackjack and one to the game of baccarat, as described below:
Lucky Ladies is an optional
bonus side bet for blackjack that considers the first two cards the player
receives. If the cards are equal to a point value of twenty, the player wins.
The amount the player wins varies upon the construction of the hands (e.g. both
cards of same suit, two Queen of Hearts, etc.) and ranges
from 4 to 1 of their wager up to 1,000 to 1. Lucky Ladies was our first product
and has grown to become the number one side bet in the world in terms of the
number of tables in play.
Bonus Blackjack is an
optional bonus side bet for blackjack that considers the first two cards the
player receives and/or the first two cards the dealer receives. If the cards in
either the player’s hand or the dealer’s hand are equal to a point value of
twenty-one (aka “Blackjack”), the player wins, provided that they placed a wager
on the corresponding triggering event. The game also has a progressive jackpot.
If a player places a wager on both the dealer and player indicia and they
receive an Ace and Jack of Spades, the player wins the progressive
jackpot.
Suited Royals is an optional
bonus side bet for blackjack that considers the first two cards the player
receives. If the cards are of the same suit, the player wins and is paid odds
according to a posted pay schedule. Higher odds are paid if the cards contain
certain combinations such as two suited face cards, a King and Queen in suit, or
a King and Queen of Diamonds – the highest triggering event, which results in
the player being awarded odds of 100 to 1 of their wager.
Super Pairs is an optional
bonus side bet for blackjack that considers the first two cards the player
receives. If the first two cards are a pair, the player wins and is paid odds.
Higher odds (up to 50 to 1) are paid if the cards are of a certain suit such as
diamonds.
Lucky 8 Baccarat is an
optional bonus side bet for the game of baccarat that considers the point total
of either the player’s hand, the banker’s hand, or both. Players are
afforded the opportunity to wager on whether or not the selected hand contains
the point value of eight. Typically, players may win either odds from
three to one up to 1,000 to one, or a bonus jackpot, depending upon the nature
of the configuration of the corresponding hand and, at times, the opposing
hand.
Premium
Games
We also
offer several stand-alone proprietary games. Typically these games generate more
revenue per unit than the side bet games listed above. These games
include:
Texas Shootout is a unique
version of the popular game of Texas Hold’em. Whereas traditional poker is
played against other players, in Texas Shootout each player competes against the
casino dealer. The game is played with six decks of cards and the players
receive four cards each. Players then select which two cards to play and discard
the remaining two. Alternatively, players may split their four cards into two –
two card hands and increase their wager. The dealer selects two of his four
cards, then deals five community cards face-up on the table. The players and
dealer each combine their two cards with the five community cards to form the
best five card poker hand possible. The player wins if his hand has a greater
value than the dealer’s hand. There is also a popular bonus side bet that pays
each player at odds in the event their hand matches one of the qualifying events
listed on the posted pay schedule. Players may be awarded up to 5,000 to 1 on
this bonus side bet.
Emperor’s Challenge is a
variation of the game Pai Gow Poker. Although Pai Gow Poker is an extremely
popular casino game among players, casinos earn less money with the game because
approximately 42% of all hands result in a push or tie. Emperor’s Challenge Pai
Gow Poker offers two side bets and an opportunity for the player to engage in a
tie-breaking system which increases the casino’s potential earnings. Players may
be awarded up to 8,000 to 1 on one of the bonus side bets known as the
“Emperor’s Treasure” bet. The other side bet is known as “Pai Gow Insurance” and
provides the player an opportunity to protect against the outcome when receiving
a poor hand.
Three Card Split. Players
place up to four wagers and receive three cards each. Players then “split” their
three card hand into a one card sub-hand and a two card sub-hand. The dealer
also receives three cards and likewise, splits his hand into two sub-hands. As a
result, the dealer and the players each have three sub-hands consisting of one,
two and three cards each. If any of the players’ sub-hands are greater than the
dealer’s, the player wins that corresponding wager. In addition, the game
contains an optional bonus side bet whereby the player’s three cards are
combined with a single community card to form a four card hand. The player’s
four card hand is compared to a posted pay schedule and the player is paid at
odds in the event he has a qualifying hand.
Competition
We face
significant competition in the table game industry. Gaming is a dynamic,
high-growth market. Our competition for casino placement and players comes from
a variety of sources, including companies that design and market traditional
table games, proprietary table games, proprietary side bets, slot machines, and
other gaming products.
Many of
our competitors have longer operating histories, significantly greater
resources, greater brand recognition and more firmly established supply
relationships. Moreover, we expect additional competitors to emerge in the
future. We believe that the principal competitive factors in our market include
products that appeal to casinos and players, and a well-developed sales and
distribution network. Although we plan to compete effectively in this market, we
recognize that this market is relatively new and is evolving rapidly, and,
accordingly, there can be no assurance that we will be able to compete
effectively in this marketplace.
As is
common with most new industries as they mature, there has been significant
consolidation of competitors in the proprietary table game industry. During the
past decade our leading competitor, Shuffle Master Gaming, has actively pursued
and consummated the acquisition of smaller companies. As a result, the number of
significant competitors has dwindled, and in the process, Shuffle Master has
become the dominant company.
Recently,
new competition in the traditional table game space has been introduced by
electronic table game providers. Although not yet a significant factor in
directly competitive markets, their popularity is growing and it is anticipated
that these new fully automated and hybrid electronic table games will
increasingly become a competitive factor. Companies now competing for this
market include Shuffle Master, DigiDeal, Poker Tek and Table Max. In May of 2008, we entered
into a letter of intent with Table Max to license its game content under a
royalty agreement.
The
following table is our estimate of the most significant competitors in our
industry, and their prominent proprietary games and side bets. For comparative
purposes, we have included our statistics in the table as well:
|
Company
|
Proprietary
Games
|
Side
Bets
|
|
Shuffle
Master Gaming
|
3
Card Poker; 4 Card Poker; Play Four Poker; Caribbean Stud; Let-it-Ride;
Ultimate Texas Hold 'em; Texas Hold 'em Bonus; Casino War
|
Bet-the-Set;
Fortune Pai Gow Poker; Royal March; Dragon Bonus
|
|
Galaxy
Gaming
|
Texas
Shootout; Three Card Split; Emperor's Challenge
|
Lucky
Ladies; Bonus Blackjack; Super Pairs; Suited Royals
|
|
TCS
/ John Huxley
|
Casino
Hold 'em
|
Perfect
Pairs
|
|
Masque
Publishing
|
Spanish
21
|
Match
the Dealer
|
|
Prime
Table Games
|
3
Card Poker; Two Way Hold 'em
|
21+3
|
|
Hop
Bet
|
|
Fire
Bet (Craps)
|
|
Gaming
Entertainment
|
Pai
Gow Plus; 3-5-7; Mini Pai Gow Poker
|
|
|
Canadian
21 Stook
|
|
Lucky
Lucky
|
|
Paltronics
/ AC Coin
|
|
Wheel
of Madness; 21 Madness
|
We
believe that our success will depend upon our ability to remain competitive in
our field. We compete with others in efforts to obtain financing, acquire other
gaming companies, and license and distribute products. The failure to compete
successfully in the market for proprietary table games and side bets and for
resources could have a material adverse effect on our business.
Strategy
Our
company’s new long-term business strategy is designed to capitalize on the
current opportunity we perceive within the gaming industry. Our goal is to grow
our company by expanding the products we offer, by increasing our sales and
distribution network, and by purchasing other companies who compete successfully
in our market.
Intellectual
Property
We invent
and fully develop proprietary casino table games. These game concepts and the
intellectual property associated with them are typically protected by domestic
and international patents, trademarks and copyrights.
There can
be no assurance that the steps we and our subsidiary have taken to protect our
intellectual property will be sufficient. In addition, the laws of some foreign
countries do not protect intellectual property to the same extent as the laws of
the United States, which could increase the likelihood of misappropriation.
Furthermore, other companies could develop similar or superior trademarks
without violating our intellectual property rights. If we resort to legal
proceedings to enforce our intellectual property rights, the proceedings could
be burdensome, disruptive and expensive, and distract the attention of
management, and there can be no assurance that we would prevail.
Government
Regulation
Galaxy is
subject to a wide range of complex gaming laws and regulations in over 200
jurisdictions, both foreign and domestic, in which Galaxy may be licensed or
have applications pending. Jurisdictions may require Galaxy to be licensed, its
key personnel to be found suitable, qualified or licensed, and its products to
be reviewed and approved before placement. Additionally, gaming laws and
regulations of most jurisdictions provide that beneficial owners of 5% or more
of Galaxy’s common stock are subject to reporting procedures and may be subject
to licensure that includes suitability investigations and submission of personal
and financial information as required. Furthermore, most jurisdictions have
ongoing reporting requirements for certain transactions and are concerned with
Galaxy’s accounting practices, internal controls, business relationships, and
the fair operation of its products. Gaming regulatory requirements vary from
jurisdiction to jurisdiction and licensing, approval, and processes related to
findings of suitability, qualifications or licensure of the Company, its
products, key personnel, and certain shareholders can be lengthy and
expensive.
General
Regulatory Licensing and Approvals. Galaxy intends
to maintain its existing licenses and to seek the necessary licenses, approvals,
qualifications and findings of suitability for the company, its products and its
management personnel in new jurisdictions where Galaxy anticipates sales
opportunities.
Native American
Gaming Regulation. Gaming on Native American lands
within the United States is governed by the Federal Indian Gaming Regulatory Act
of 1988 ("IGRA") and specific tribal ordinances and regulations. Class III
gaming, as defined under IGRA, also requires a Tribal-State Compact, which is a
written agreement between a specific tribe and the respective state. This
compact authorizes the type of Class III gaming activity and the standards,
procedures and controls under which the Class III gaming activity must be
conducted. The National Indian Gaming Commission ("NIGC") has oversight
authority over gaming on Native American lands and generally monitors tribal
gaming including the establishment and enforcement of required minimum internal
control standards. Each Tribe is sovereign and must have a tribal gaming
commission or office established to regulate tribal gaming activity to ensure
compliance with IGRA, NIGC, and its Tribal-State Compact. Galaxy has complied
with each of the numerous vendors licensing and specific product approval and
shipping notification requirements imposed by Tribal-State Compacts and enforced
by tribal and/or state gaming agencies under IGRA in the Native American lands
in which Galaxy does business.
Other
Jurisdictions. Galaxy has obtained or expects to
obtain all licenses/registrations required by jurisdictions having legalized
gaming. In general, such requirements vary from jurisdiction to jurisdiction and
company approvals as well as individual and/or product approvals may be
required.
Application of
Future or Additional Regulatory Requirements. In the future,
we intend to seek the necessary registrations, licenses, approvals, and findings
of suitability for us, our products, and our personnel in other jurisdictions
throughout the world where significant sales of our products are expected to be
made. However, we may be unable to obtain these registrations, licenses,
approvals, or findings of suitability, which if obtained may be revoked,
suspended, or conditioned. In addition, we may be unable to obtain on a timely
basis, or to obtain at all, the necessary approvals of our future products as
they are developed, even in those jurisdictions in which we already have
existing products licensed or approved. If a registration, license, approval or
finding of suitability is required by a regulatory authority and we fail to seek
or do not receive the necessary registration, license, approval or finding of
suitability, we may be prohibited from selling our products for use in that
jurisdiction or may be required to sell our products through other licensed
entities at a reduced profit.
Employees
We have
eleven employees, including executive officers, management personnel, accounting
personnel, office staff, and sales staff. Our employees are
co-employed by Advantstaff, Inc. a professional employer organization used by us
to provide payroll and HR services. As needed from time to time, we
also pay for the services of independent contractors.
Research
and Development Expenditures
We have
incurred approximately $80,000 in research and development expenditures in the
year ended December 31, 2007. These costs were incurred primarily in the
development of new proprietary table games and side bets.
Subsidiaries
We
currently have one wholly-owned subsidiary, Galaxy. Galaxy, in turn, currently
holds 10 wholly-owned subsidiaries, which have been utilized to divide its
business operations into geographic regions. We are currently in the process of
transferring all assets and operations from these subsidiaries to Galaxy. When
this process is complete, Galaxy’s 10 subsidiaries will be dissolved. All 10
subsidiaries are limited liability companies, and include:
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Galaxy
Gaming of Arizona, LLC
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Galaxy
Gaming of British Columbia, LLC
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Galaxy
Gaming of California, LLC
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Galaxy
Gaming of Manitoba, LLC
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Galaxy
Gaming of Nova Scotia, LLC
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Galaxy
Gaming of Oklahoma, LLC
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Galaxy
Gaming of Ontario, LLC
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Galaxy
Gaming of Oregon, LLC
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Galaxy
Gaming of South Dakota, LLC
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Galaxy
Gaming of Washington, LLC
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Description
of Property
We do not
own any real property. We maintain our corporate office at 6980 O’Bannon Drive,
Las Vegas, NV. We pay $17,500 per month to Abyss Group, LLC as a result of an
assumption of a prior lease between Abyss Group, LLC and Galaxy Gaming,
LLC. Galaxy Gaming LLC’s members are our President, Robert Saucier,
and the Alix Saucier Regulatory Trust, Jeffrey Whitehead, Esquire, Trustee. The
lease is set to expire in August of 2010. We expect that our present corporate
office provides facilities suited to our current operations. As our business
operations grow, it may be necessary for us to seek additional office
space.
Forward-Looking
Statements
This
Current Report on Form 8-K contains forward-looking statements, as defined in
the Private Securities Litigation Reform Act of 1995. To the extent that any
statements made in this Report contain information that is not historical, these
statements are essentially forward-looking. Forward-looking statements can be
identified by the use of words such as “expects,” “plans,” “will,” “may,”
“anticipates,” believes,” “should,” “intends,” “estimates,” and other words of
similar meaning. These statements are subject to risks and uncertainties that
cannot be predicted or quantified and, consequently, actual results may differ
materially from those expressed or implied by such forward-looking statements.
Such risks and uncertainties are outlined in “Risk Factors” and include, without
limitation:
· Our
limited and unprofitable operating history;
· the
ability to raise additional capital to finance our activities;
· legal and
regulatory risks associated with the Merger;
· the
future trading of our common stock;
· our
ability to operate as a public company;
· general
economic and business conditions;
· the
volatility of our operating results and financial condition; and
·
our
ability to attract or retain qualified senior scientific and management
personnel.
The
foregoing factors should not be construed as exhaustive and should be read in
conjunction with the other cautionary statements that are included in this
Current Report on Form 8-K.
Information
regarding market and industry statistics contained in this Report is included
based on information available to us that we believe is accurate. It is
generally based on industry and other publications that are not produced for
purposes of securities offerings or economic analysis. We have not reviewed or
included data from all sources, and cannot assure investors of the accuracy or
completeness of the data included in this Report. Forecasts and other
forward-looking information obtained from these sources are subject to the same
qualifications and the additional uncertainties accompanying any estimates of
future market size, revenue and market acceptance of products and services. We
do not undertake any obligation to publicly update any forward-looking
statements. As a result, investors should not place undue reliance on these
forward-looking statements.
Management’s
Discussion and Analysis or Plan of Operation
THE
FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH THE INFORMATION CONTAINED IN
THE FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS CURRENT
REPORT ON FORM 8-K.
The
following discussion reflects our plan of operation. This discussion should be
read in conjunction with our audited financial statements and the audited
financial statements of Galaxy for the fiscal years ended December 31, 2007 and
December 31, 2008. This discussion contains forward-looking statements, within
the meaning of Section 27A of the Securities Act of 1933, as amended, Section
21E of the Securities Exchange Act of 1934, as amended, and the Private
Securities Litigation Reform Act of 1995, including statements regarding our
expected financial position, business and financing plans. These statements
involve risks and uncertainties. Our actual results could differ materially from
the results described in or implied by these forward-looking statements as a
result of various factors, including those discussed below and elsewhere in this
Current Report on Form 8-K, particularly under the headings “Forward Looking
Statements” and “Risk Factors.”
We are
currently seeking to expand our business. As noted previously, we are currently
the second largest company in the proprietary table games industry. We intend to
expand our installed base of table games, which will increase our recurring
revenues, by employing the following strategies:
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Develop
new game content.
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Enhance
our portfolio with electronics.
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Expand
our distribution network.
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Increase
the performance of our sales force.
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Acquire
available competitors.
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Develop
New Game Content
During
2008, Galaxy introduced two new table game products, Emperor’s Challenge and
Lucky 8 Baccarat which are contributing to our current growth trend. We hope
other products scheduled to be released in 2009 will positively
impact our revenues.
We are
currently at a disadvantage to our leading competitor, Shuffle Master, in terms
of the number and variety of products offered. Due to the numerous game titles
in their possession, they have the ability to control 100% of the proprietary
table mix in many casinos. The solution for us is to quickly increase the number
of table games in our portfolio. We have numerous new games in various stages of
development which, when fully released, we believe will overcome this
disadvantage.
Currently,
the majority of our product development is performed by our founder and CEO, Mr.
Saucier. Our future growth plans include the creation of a research and
development team to lessen our dependency on our CEO for this important
element.
Enhance
Our Portfolio with Electronics
The games
Caribbean Stud and Let it Ride benefitted from electronic enhancements. With the
exception of Bonus Blackjack, none of our products currently utilize
electronics. We are currently developing electronic enhancements for table games
and expect them to be released and generating revenues in 2009.
Expand
Our Distribution Network
We intend
to increase our recurring revenues and market share not only in North America,
but throughout all available international markets. Expanding our distribution
network requires that we first seek and obtain registration or licensing in most
additional gaming jurisdictions. In regulated gaming jurisdictions, this is not
a simple task. A collaborative effort between our inside legal counsel and/or
compliance officer and outside specialized local gaming attorneys will be
required to expand our reach. We do not currently have the necessary skilled
specialist in house to accomplish this in an expedited manner. Recruiting such a
professional will be vital to our gaming jurisdiction expansion
plans.
Increase
Sales Force Performance
We
recognize that the quality and performance of our sales team is integral to our
expansion and success. We intend to recruit, train, monitor and reward a group
of highly motivated sales professionals. We also intend to implement a
comprehensive sales training program for the purpose of continually increasing
our sales executives’ performance.
Currently,
our sales team’s progress is monitored and tracked by a highly sophisticated,
custom sales force automation / client relationship management system. We have
spent considerable capital and human resources to develop this system and
believe it is a significant factor in the past and future success of our sales
force. This system is under constant development and improvement by
us.
Because
of the high margin, recurring revenue nature of our products, we believe that
significant expenditures on improving our sales and client retention efforts are
justified. Accordingly, we intend to provide significant incentives and rewards
to our sales executives based upon their performance.
Acquire
Available Competitors
We feel
that our growth may be enhanced through the acquisition of competing gaming
companies and/or products. We believe that there are opportunities for
consolidation and resulting synergistic economies of scale through acquisition.
Many of the companies we intend to target have solid streams of mid to high
margin recurring revenue, yet they operate at a loss because they are burdened
by excessive overhead and inefficient cost management. This presents us with an
opportunity to add these royalties to our revenues and manage the products
through our existing organizational structure, thus increasing our revenue
stream without adding significantly to our recurring expenses.
Financing
In
anticipation of our current aggressive growth plans and acquisition strategy, as
well as the investments in our infrastructure necessitated by our strategy, we
require additional funding. Because we will be unable to adequately fund the
growth initiatives outlined herein without new sources of investor financing, we
are currently attempting to raise funds through the sale of our Common Stock. If
we fail to raise capital, we will still pursue acquisitions and growth, however,
our acquisition opportunities will be limited and our growth strategy will be
negatively impacted.
Off
Balance Sheet Transactions
We have
had no off balance sheet transactions.
Significant
Equipment
We do not
intend to purchase any significant equipment for the next twelve
months.
Results
of Operations of Galaxy for the Years Ended December 31, 2006 and
2007
For the
years ended December 31, 2006 and 2007, we generated gross revenues of
$2,106,013 and $1,969,680, respectively. Our Cost of Goods Sold was $124,791,
our Operating Expenses were $2,093,988, our Other Expenses were $37,739, and our
Provision for Income Taxes was $29,778 for the year ended December 31, 2006. Our
Cost of Goods Sold was $230,467 and our Operating Expenses were $1,822,866 for
the year ended December 31, 2007. Therefore, our Net Loss for the years ended
December 31, 2006 and 2007 were $180,283and $83,653, respectively.
Results
of Operations of Galaxy for the Three and Nine Months Ended September 30,
2008
For the
three months ended September 30, 2008, we generated gross revenues of
$552,301. Our Cost of Goods Sold was $21,269, our Operating Expenses
were $562,512, and our Other Expenses were $32,267 for the three months ended
September 30, 2008. Our Net Loss for the third quarter of 2008 was
therefore $63,747. For the nine month period ended September 30,
2008, we generated gross revenues of $1,690,413. Our Cost of Goods
Sold was $96,852, our Operating Expenses were $1,743,813, and our Other Expenses
were $83,806 for the nine months ended September 30, 2008. Our Net
Loss for the nine month period ended September 30, 2008 was therefore
$234,058.
Liquidity
and Capital Resources
As of
September 30, 2008, Galaxy had total current assets of $438,708 and total assets
in the amount of $1,112,763. Our total current liabilities as of September 30,
2008 were $764,978. Galaxy, therefore, had a working capital deficit
of $326,270 as of September 30, 2008.
Galaxy’s
operating activities used $205,764 in cash for the nine months ended September
30, 2008 and $156,750 in cash for the year ended December 31, 2007. The primary
components of our negative operating cash flow for the nine months ended
September 30, 2008 were our Net Loss of $234,058 along with a decrease of
$149,615 in Unearned Income offset by a $137,782 increase in Accounts Payable
and a $32,906 increase in Accrued Expenses and Taxes. Cash flows provided by
financing activities during the year ended December 31, 2008 were $191,298
consisting of an increase in Debt Due to Related Parties of $206,327 offset by
Payments on Long Term Debt of $15,029. Investing Activities generated $31,616 in
cash during the nine months ended September 30, 2008.
Based
upon our current financial condition, we do not have sufficient cash to operate
our business at the current level for the next twelve months. We intend to fund
operations through increased sales and debt and/or equity financing
arrangements, which may be insufficient to fund expenditures or other cash
requirements. We plan to seek additional financing in a private equity offering
to secure funding for operations. There can be no assurance that we will be
successful in raising additional funding. If we are not able to secure
additional funding, the implementation of our business plan will be impaired.
There can be no assurance that such additional financing will be available to us
on acceptable terms or at all. In addition, we expect to incur higher capital
expenditures in the future to expand our operations. We will from time to time
acquire products and businesses complementary to our business. As a public
entity, we may issue shares of our common stock and preferred stock in private
or public offerings to obtain financing, capital or to acquire other businesses
that can improve our performance and growth. To the extent that we seek to
acquire other businesses in exchange for our common stock, fluctuations in our
stock price could have a material adverse effect on our ability to complete
acquisitions.
The
following are certain identifiable risk factors for our business operations
through our wholly-owned subsidiary, Galaxy. Risk factors related to
our former business operations have been excluded but can be found in prior
filings with the Securities and Exchange Commission.
Because
we have a limited operating history related to our current business strategy, we
are subject to the risks of failure associated with any new business
ventures.
We have
not incorporated our strategy of the acquisition of competitors and have a
limited operating history in this area on which potential investors can assess
our performance and prospects. Potential investors should be aware that there is
a substantial risk of failure associated with any new business strategy as a
result of problems encountered in connection with their commencement of new
operations. These include, but are not limited to, the entry of new competition,
unknown or unexpected additional costs, and expenses that may exceed
estimates.
If
we are unsuccessful in acquiring products and operations from other companies in
the gaming industry, our growth strategy will be negatively
impacted.
Our plan
of operations includes the acquisition of products from competing companies or
the acquisition of competing companies themselves. Our ability to acquire these
companies and/or their products will be dependent upon raising sufficient funds
to do so through equity offerings and/or through other methods of financing in a
timely fashion. If we are unable to timely raise the funds to make
these acquisitions, our planned growth will likely occur at a significantly
slower pace.
Because
the payment of dividends is at the discretion of the Board of Directors,
investors may not realize cash dividends at the frequency or in the amounts they
anticipate.
We have
never declared or paid any cash dividends on our Common Stock. Our payment of
any future dividends will be at the discretion of our board of directors after
taking into account various factors, including but not limited to our financial
condition, operating results, cash needs, growth plans and the terms of any
credit agreements that we may be a party to at the time. Distributions to our
stockholders are subordinate to the payment of our debts and obligations. If we
have insufficient funds to pay our debts and obligations, distributions to
stockholders will be suspended pending the payment of such debts and
obligations. Accordingly, investors must rely on sales of their own Common Stock
after price appreciation, which may never occur, as the only way to recover
their initial investment. Additionally, because of significant restrictions on
the resale of the Shares being offered in this Memorandum, investors may be
unable to sell their Shares should they desire to do so.
Forward
looking assessments have been prepared by the current management of the Company
based on numerous assumptions, which may eventually prove to be
incorrect.
Our
ability to accomplish our objectives and whether or not we will be financially
successful is dependent upon numerous factors, each of which could have a
material effect on the results obtained. Some of these factors are within the
discretion and control of management and others are beyond management’s control.
The assumptions and hypothesis used in preparing any forward-looking assessments
of profitability contained herein are considered reasonable by management. There
can be no assurance, however, that any projections or assessments contained
herein or otherwise made by management will be realized or achieved at any
level.
The
Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements made by us or on our behalf. Except for the
historical information, this offering contains various forward-looking
statements which represent our expectations or beliefs concerning future events,
including the future levels of cash flow from operations. Management believes
that all statements that express expectations and projections with respect to
future matters; our ability to negotiate contracts having favorable terms; and
the availability of capital resources; are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act. We caution that these
forward-looking statements involve a number of risks and uncertainties and are
subject to many variables which could impact our financial performance. These
statements are made on the basis of management’s views and assumptions, as of
the time the statements are made, regarding future events and business
performance. There can be no assurance, however, that management’s expectations
will necessarily come to pass.
A wide
range of factors could materially affect future developments and performance,
including:
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the
impact of general economic and political conditions in the U.S. and in
other countries in which we currently do business, including those
resulting from recessions, political events and acts or threats of
terrorism or military conflicts;
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the
impact of the geopolitical
environment;
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our
ability to integrate the operations of recently acquired
companies;
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shifts
in population and other
demographics;
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industry
conditions, including competition;
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fluctuations
in operating costs;
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technological
changes and innovations;
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changes
in labor conditions;
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fluctuations
in exchange rates and currency
values;
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capital
expenditure requirements;
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the
outcome of pending and future litigation
settlements;
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legislative
or regulatory requirements;
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the
effect of leverage on our financial position and
earnings;
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access
to capital markets; and
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certain
other factors set forth in our filings with the Securities and Exchange
Commission.
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If our
business is unsuccessful, our shareholders may lose their entire
investment.
Although
shareholders will not be bound by or be personally liable for our expenses,
liabilities or obligations beyond their total original capital contributions,
should we suffer a deficiency in funds with which to meet our obligations, the
shareholders as a whole may lose their entire investment in the
Company.
The
capital requirements necessary to implement our strategic initiatives could pose
additional risks to our business
The
purchase price of possible acquisitions, share repurchases, special dividends
and/or other strategic initiatives could require additional debt or equity
financing on our part. Since the terms and availability of this financing depend
to a large degree upon general economic conditions and third parties over which
we have no control, we can give no assurance that we will obtain the needed
financing or that we will obtain such financing on attractive terms. In
addition, our ability to obtain financing depends on a number of other factors,
many of which are also beyond our control, such as interest rates and national
and local business conditions. If the cost of obtaining needed financing is too
high or the terms of such financing are otherwise unacceptable in relation to
the strategic opportunity we are presented with, we may decide to forego that
opportunity. Additional indebtedness could increase our leverage and make us
more vulnerable to economic downturns and may limit our ability to withstand
competitive pressures. Additional equity financing could result in dilution to
our shareholders.
If
Sherron is successful in its attempt to execute against certain of our
intellectual property, our financial condition will be materially adversely
impacted.
As noted
herein, a judgment was issued in Washington against Mr. Saucier in 1998.
Although, we and Mr. Saucier believe that it is no longer valid, Sherron claims
to be the assignee of that judgment. Sherron is currently suing in Washington
claiming that Galaxy is the alter-ego of Robert Saucier. Sherron
is also currently attempting to execute against certain intellectual
property of Galaxy, claiming the property belongs to Mr. Saucier. In the event
that Sherron prevails in any of its attempts, we may be liable for damages in an
amount up to two million dollars, and we would experience difficulty in paying
or obtaining the financing to pay a properly adjudicated liability to Sherron.
We may also be required to pay a licensing fee to Sherron to continue using the
intellectual property upon which some of our games are based. There is no
guarantee that if this became necessary, that we would be able to negotiate a
viable licensing fee with Sherron or that we would be able to negotiate a
licensing deal with Sherron at all. Should Sherron prevail in its litigation
against Galaxy, our revenues and expenses, would be adversely materially
impacted, and our business may ultimately fail.
If
we are unable to integrate effectively and efficiently any businesses and
operation we may acquire in the future, our business may ultimately
fail.
Part of
our strategy includes acquiring additional businesses and facilities that
compete in our industry. Our capitalization and results of operations may change
significantly as a result of future acquisitions, and stockholders will not have
the opportunity to evaluate the economic, financial and other relevant
information that we will consider in connection with any future acquisitions.
Unexpected costs or challenges may arise whenever businesses with different
operations and management are combined. Inefficiencies and difficulties may
arise because of unfamiliarity with new assets and new geographic areas of any
acquired businesses. Successful business combinations will require our
management and other personnel to devote significant amounts of time to
integrating the acquired businesses with any pre-existing operations. These
efforts may temporarily distract their attention from day-to-day business, the
development or acquisition of new properties and other business opportunities.
In addition, the management of the acquired business may not join our management
team. Any change in management may make it more difficult to integrate an
acquired business with our existing operations. Following an acquisition, we may
discover previously unknown liabilities associated with the acquired business
for which we have no recourse under applicable indemnification
provisions.
If
our intellectual property is infringed, misappropriated or subjected to claims
of infringement or invalidity, our business may be negatively
impacted.
We
endeavor to protect our intellectual property rights through a combination of
patent, trademark, copyright and trade secret laws, as well as licensing
agreements and third-party nondisclosure and assignment agreements. Because of
the differences in foreign patent, trademark and other laws concerning
proprietary rights, our intellectual property frequently does not receive the
same degree of protection in foreign countries as it would in the United States.
Our failure to obtain or maintain adequate protection of our intellectual
property rights for any reason could have a material adverse effect on our
business, results of operations and financial condition.
We have
numerous patents and trademarks, and utilize patent protection in the United
States relating to certain existing and proposed processes and products. We
cannot provide assurance that all of our existing patents are valid or will
continue to be valid, or that any pending patent applications will be approved.
Our competitors may in the future challenge the validity or enforceability of
our patents. The patents we own could be challenged, invalidated or
circumvented by others and may not be of sufficient scope or strength to provide
us with any meaningful protection or commercial advantage. We cannot provide
assurance that competitors will not infringe on any of our patents or that we
will have adequate resources or other allocation of resources to enforce our
patents.
We also
rely on unpatented proprietary technology. It is possible that others will
independently develop the same or similar technology or otherwise obtain access
to our unpatented technology. To protect our trade secrets and other proprietary
information, we generally require employees, consultants, advisors and
collaborators to enter into confidentiality agreements. We cannot provide
assurance that these agreements will provide meaningful protection for our trade
secrets, know-how or other proprietary information in the event of any
unauthorized use, misappropriation or disclosure of such trade secrets, know-how
or other proprietary information. If we are unable to maintain the proprietary
nature of our technologies, it could have a material adverse effect on our
business.
We rely
on our trademarks, trade names and brand names to distinguish our products from
the products of our competitors, and have registered or applied to register many
of these trademarks. We cannot provide assurance that our trademark applications
will be approved. Third parties may oppose our trademark applications or
challenge our use of the trademarks. In the event that our trademarks are
successfully challenged, we could be forced to rebrand our products, which could
result in loss of brand recognition and could require us to devote resources
towards advertising and marketing new brands. Further, we cannot provide
assurance that competitors will not infringe our trademarks or that we will have
adequate resources to enforce our trademarks.
We also
face the risk that we may have infringed or could in the future infringe third
parties' intellectual property rights. We have many competitors in both the
United States and foreign countries, some of which have substantially greater
resources and have made substantial investments in competing technologies. Some
competitors have applied for and obtained, and may in the future apply for and
obtain, patents that may prevent, limit or otherwise interfere with our ability
to make and sell our products.
Significant
litigation regarding intellectual property rights exists in our industry. We
have in the past made, are currently making, and/or may in the future make,
enforcement claims against third parties, and third parties have in the past
made, are currently making, and may in the future make, claims of infringement
against us or against our licensees or manufacturers in connection with their
use of our technology. Any claims, even those which are without merit,
could:
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be
expensive and time consuming to
defend;
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cause
one or more of our patents to be ruled or rendered unenforceable or
invalid;
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cause
us to cease making, licensing or using products that incorporate the
challenged intellectual property;
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require
us to redesign, reengineer or rebrand our
products;
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divert
management's attention and
resources;
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require
us to pay significant amounts in
damages;
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require
us to enter into royalty or licensing agreements in order to obtain the
right to use a necessary product, process or component;
or
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limit
our ability to bring new products to the market in the
future.
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Any
royalty or licensing agreements, if required, may not be available to us on
acceptable terms or at all. A successful challenge to or invalidation of one of
our patents or trademarks or a successful claim of infringement against us or
one of our licensees in connection with its use of our technology, could
adversely affect our business.
In
addition, the gaming industry is characterized by the rapid development of new
technologies, which requires us to continuously introduce new products using
these technologies and innovations, as well as to expand into new markets that
may be created. Therefore, our success depends in part on our ability to
continually adapt our products and systems to incorporate new technologies and
to expand into markets that may be created by new technologies. However, to the
extent technologies are protected by the intellectual property rights of others,
including our competitors, we may be prevented from introducing products based
on these technologies or expanding into markets created by these technologies.
If the intellectual property rights of others prevent us from taking advantage
of innovative technologies, our financial condition, operating results or
prospects may be harmed.
Because
the gaming industry is highly regulated, we must adhere to various regulations
and maintain our licenses to continue our operations.
Our
products are subject to extensive regulation under the laws, rules and
regulations of the jurisdictions in which they are used. We will also become
subject to regulation in any other jurisdiction where our customers operate in
the future. These laws, rules and regulations generally concern the
responsibility, financial stability and character of the owners, managers and
persons with financial interests in gaming operations, including makers of
gaming equipment such as ourselves. Some jurisdictions, however, empower their
regulators to investigate participation by licensees in gaming outside their
jurisdiction and require access to and periodic reports concerning gaming
activities. Violations of laws in one jurisdiction could result in disciplinary
action in other jurisdictions.
In
addition, legislative and regulatory changes may affect demand for our products.
Such changes could affect us in a variety of ways. Legislation or regulation may
introduce limitations on our products or opportunities for the use of our
products, and could foster competitive games or technologies at our or our
customers' expense. For example, current regulations in a number of
jurisdictions where our customers operate limit the amount of space allocable to
our products and substantial changes in those regulations may adversely affect
demand for our products. Our business will also suffer if our products became
obsolete due to changes in laws or regulations or the regulatory
framework.
Legislative
or regulatory changes negatively impacting the gaming industry as a whole or our
customers in particular could also decrease their demand for our products.
Opposition to gaming could result in restrictions or even prohibitions of gaming
operations in any jurisdiction or could result in increased taxes on gaming
revenues. Tax matters, including changes is state, federal or foreign state tax
legislation or assessments by tax authorities could have a negative impact on
our business. A reduction in growth of the gaming industry or in the number of
gaming jurisdictions or delays in the opening of new or expanded casinos could
reduce demand for our products. We cannot provide assurance that changes in
current or future laws or regulations or future judicial intervention in any
particular jurisdiction would not have a material adverse effect on our existing
and proposed foreign and domestic operations.
If
our products currently in development do not achieve commercial success, our
business will be negatively impacted.
We have a
number of products in various stages of development. We believe that our future
success will depend in large part upon our ability to enhance our existing
products and to develop, introduce and market new products and improvements to
our existing products. As a result, we expect, as needed, to continue to make
significant investments in product development. Our development of products is
dependent on factors such as reaching definitive agreements with third parties
and obtaining requisite governmental approvals.
Future
technological advances in the gaming products industry may result in the
availability of new products or increase the efficiency of existing products. We
may not be able to access or finance capital expenditures for new technologies
that are more cost-effective or create superior products. We cannot provide
assurance that existing, proposed or as yet undeveloped technologies will not
render our technology less profitable or less viable, or that we will have
available the financial and other resources to compete effectively against
companies possessing such technologies.
While we
are pursuing and will continue to pursue product development opportunities,
there can be no assurance that such products will come to fruition or become
successful. Furthermore, while a number of those products are being tested, we
cannot provide any definite date by which they will be commercially available.
We cannot provide assurance that these products will prove to be commercially
viable, or that we will be able to obtain the various gaming licenses necessary
to distribute them to our customers. We may experience operational problems with
such products after commercial introduction that could delay or defeat the
ability of such products to generate revenue or operating profits. Future
operational problems
could
increase our costs, delay our plans or adversely affect our reputation or our
sales of other products which, in turn, could have a material adverse effect on
our success and our ability to satisfy our obligations. We cannot predict which
of the many possible future products will meet evolving industry standards and
consumer demands. We cannot provide assurance that we will be able to adapt to
such technological changes, offer such products on a timely basis or establish
or maintain a competitive position.
Because
we compete in a single industry, and our business would suffer if our products
become obsolete or demand for them decreases.
We derive
substantially all of our revenues from leasing, licensing, selling and other
financing arrangements of products for the gaming industry. Our business would
suffer if the gaming industry, in general, and table games in particular,
suffered a downturn or loss in popularity, if our products became obsolete or if
use of our products decreased. Our operating license agreements with our
customers are typically month-to-month. Accordingly, consistent demand for and
satisfaction with our products by our customers is critical to our financial
condition and future success, and problems, defects or dissatisfaction with our
products could cause us to lose customers or revenues from leases with minimal
notice. Additionally, our success depends on our ability to keep pace with
technological changes and advances in our industry and to adapt and improve our
products in response to evolving customer needs and industry trends. If demand
for our products weakens due to lack of market acceptance, technological change,
competition or other factors, it could have a material adverse effect on our
business, financial condition and results of operations and our ability to
achieve sufficient cash flow to run our operations and service our
indebtedness.
If our new products do not receive regulatory approval,
our revenue and business prospects will be adversely
affected.
We may be
required to seek regulatory approval of any new gaming product that we
develop. The future success of our business plan is thus directly dependent on
our obtaining and maintaining this requisite government approval. Each of these
products may require separate regulatory approval in each market in which we do
business, and this regulatory approval may either not be granted or not be
granted in a timely manner, for reasons primarily outside of our control. A lack
of regulatory approval for these and our other products and technologies, or new
versions of our existing games or other products and technologies, or delays in
obtaining necessary regulatory approvals, will adversely affect our revenues and
business prospects.
We can
provide no assurance that we will receive the necessary approvals in all of the
jurisdictions we have been, or will be, seeking approval, nor can we provide
assurance that there will not be any production delays in developing and
distributing these products and technologies. Any delay in production or in the
regulatory process, or a denial of regulatory approval altogether, for any one
of these new product lines will adversely impact our revenues and
business.
Because
we require regulatory licenses to operate our business, the loss or suspension
of our licenses would be extremely detrimental to our business and results of
operations.
The
distribution of gaming products and conduct of gaming operations are extensively
regulated by various domestic and foreign gaming authorities. Although the laws
of different jurisdictions vary in their technical requirements and are amended
from time-to-time, virtually all jurisdictions in which we operate require
registrations, licenses, findings of suitability, permits and other approvals,
as well as documentation of qualifications, including evidence of the integrity,
financial stability and responsibility of our officers, directors, major
stockholders and key personnel. Our current and future operations are therefore
dependent upon receipt and maintenance of these regulatory licenses, permits,
approvals, registrations, findings of suitability, orders and authorizations
issued by government regulators in the gaming industry.
Nevada
regulatory authorities in particular have broad powers to request detailed
financial and other information, to limit, condition, suspend or revoke a
registration, gaming license or related approval and to approve changes in our
operations. Substantial fines or forfeiture of assets for violations
of gaming laws or regulations may be levied. The suspension or
revocation of any license we may be granted or the levy of substantial fines or
forfeiture of assets could significantly harm our business, financial condition
and results of operations. Furthermore, compliance costs associated
with gaming laws, regulations and licenses are significant. Any
change in the laws, regulations or licenses applicable to our business or a
violation of any current or future laws or regulations applicable to our
business or gaming license could require us to make substantial expenditures or
could otherwise negatively affect our gaming operations.
Because
of various state gaming regulations, holders of our common stock are
individually subject to various requirements of the gaming laws of each
jurisdiction in which we are licensed.
Pursuant
to applicable laws, gaming regulatory authorities in most jurisdictions in which
we are subject to regulation may, in their discretion, require a holder of any
of our securities to provide information, respond to questions, make filings, be
investigated, licensed, qualified or found suitable to own our securities.
Moreover, the holder of the securities making any such required application is
generally required to pay all costs of the investigation, licensure,
qualification or finding of suitability.
If any
holder of our securities fails to comply with the requirements of any gaming
authority, we have the right, at our option, to require such holder to dispose
of such holder’s securities within the period specified by the applicable gaming
law or to redeem the securities to the extent required to comply with the
requirements of the applicable gaming law.
Additionally,
if a gaming authority determines that a holder is unsuitable to own our
securities, such holder will have no further right to vote, receive dividends,
distributions or other economic benefit, rights or payments with respect to the
securities or to continue any ownership or other economic interest in our
business. We can be sanctioned if we permit any of the foregoing to occur, which
may include the loss of our licenses.
If future authorizations or
regulatory approvals are not granted in a timely manner or at all, our results
of operation would be adversely affected.
We will
be subject to regulation in any other jurisdiction where our customers may
operate in the future. Future authorizations or approvals required by domestic
and foreign gaming authorities may not be granted at all or as timely as we
would like, and current or future authorizations may not be renewed. In
addition, we may be unable to obtain the authorizations necessary to license new
products or new technologies or to license our current products or technologies
in new markets. If we are not able to obtain requisite approvals, our ability to
generate revenue may be significantly impaired. In either case, our results of
operations would likely be adversely affected. Gaming authorities can also place
burdensome conditions and limits on future authorizations and approvals. If we
fail to maintain or obtain a necessary registration, license, approval or
finding of suitability, we may be prohibited from selling our products or
technologies for use in the jurisdiction, or we may be required to sell them
through other licensed entities at a reduced profit.
The
continued growth of markets for our products and technologies is contingent upon
regulatory approvals by various federal, state, local and foreign gaming
authorities. We cannot predict which new jurisdictions or markets, if any, will
accept and which authorities will approve the operation of our gaming products
and technologies, or the timing of any such approvals.
Because
Native American tribes maintain sovereign immunity, enforcement of our rights
against Native American tribes could be difficult.
We
currently deal and intend to expand our dealings with a number of Native
American tribes. Native American Tribes are subject to sovereign
immunity and tribal jurisdiction. Native American tribes generally enjoy
sovereign immunity from suit similar to that enjoyed by individual states and
the United States. In order to sue a Native American tribe or an agency or
instrumentality of a Native American tribe, the tribe must have effectively
waived its sovereign immunity with respect to the matter in dispute. Moreover,
even if a Native American tribe were to waive sovereign immunity, such waiver
may not be valid. In the absence of an effective waiver of sovereign
immunity by a Native American tribe, we could be precluded from judicially
enforcing any rights or remedies against that tribe. Consequently, if a dispute
arises with respect to any of our existing or proposed agreements with a Native
American Tribe, it could be difficult for us to enforce our
rights.
If there is a decline in the public’s
acceptance or opinion of gaming, our future performance and results of
operation may be negatively affected.
In the
event that there is a decline in public acceptance of gaming, this may affect
our ability to do business in some markets, either through unfavorable
legislation affecting the introduction of gaming into emerging markets, or
through legislative and regulatory changes in existing gaming markets which may
adversely affect our ability to continue to lease and license our games in those
jurisdictions, or through resulting reduced casino patronage. We can provide no
assurance that the level of support for legalized gaming or the public use of
leisure money in gaming activities will not decline.
Because
we are dependent on the success of our customers, we are subject to industry
fluctuations and risks that impact our customers may impact us.
Our
success depends on our customers using our products to expand their existing
operations, to replace existing products, or to equip a new casino. Any slowdown
in the replacement cycle or delays in expansions or new openings may negatively
impact our operations.
Casino
operators in the gaming industry are undergoing a period of consolidation. The
result of this trend is that a smaller number of companies control a larger
percentage of our current and potential customer base. Consolidation may also
give our customers additional leverage with respect to the prices of our
products. Because a significant portion of our sales come from repeat customers,
to the extent one of our customers is sold to or merges with an entity that
utilizes more of one of our competitors' products and services, or that reduces
spending on our products, our business could be negatively impacted.
Additionally, to the extent the new owner allocates capital to expenditures
other than gaming machines, such as hotel furnishings, restaurants and other
improvements, or generally reduces expenditures, our business could be
negatively impacted.
If fewer
players visit our customers' facilities, if such players have less disposable
income to spend at our customers' facilities or if our customers are unable to
devote resources to purchasing and leasing our products, there could be an
adverse affect on our business. Such risks that affect our customers
include:
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global
geopolitical events such as terrorist attacks and other acts of war or
hostility;
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natural
disasters such as major fires, floods, hurricanes and
earthquakes;
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adverse
economic and market conditions in gaming markets, including recession,
economic slowdown, higher interest rates, higher airfares and higher
energy and gasoline prices; and
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concerns
about SARS, Avian flu or other influenza or contagious
illnesses.
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If
certain market risks are realized, our business, results of operations and
prospects may be negatively impacted.
In the
normal course of our business, we are routinely subjected to a variety of market
risks, examples of which include, but are not limited to, interest rate
movements, collectability of receivables and recoverability of residual values
on leased assets such as those in certain international markets. Further, some
of our customers may experience financial difficulties, or may otherwise not pay
accounts receivable when due, resulting in increased write-offs. Although we do
not anticipate any material losses in these risk areas, no assurances can be
made that material losses will not be incurred in these areas in the future.
If
we do not retain our key personnel, including our President, Robert Saucier, and
attract and retain other highly skilled employees, our business may
suffer.
If we
fail to retain, recruit, and motivate the necessary personnel, our business and
our ability to obtain new customers, develop new products, and provide
acceptable levels of customer service could suffer. The success of our business
is heavily dependent on the leadership of our key management personnel and on
our key employees. We are particularly dependent upon our President, Robert
Saucier, whose thorough knowledge of our operations and creative drive in
developing new games are vital to our success.
Our
employment contracts with our corporate officers and certain other key employees
are primarily "at will" employment agreements, under which either the employee
or we may terminate employment. If any of these persons were to leave our
company it could be difficult to replace them, and our business could be harmed.
We do not have key-man life insurance.
Our
success also depends on our ability to recruit, retain, and motivate highly
skilled personnel. Competition for these persons in our industry is intense and
we may not be able to successfully recruit, train, or retain qualified
personnel.
If
a downturn in general economic conditions or in the gaming industry or a
reduction in demand for gaming occurs, our results of operations may be
adversely affected.
Our
business operations are affected by international, national and local economic
conditions. A recession or downturn in the general economy, or in a region
constituting a significant source of our customers, or a reduction in demand for
gaming, could harm the health of casino operators and our other customers and
consequently result in fewer customers leasing or purchasing our products, which
would adversely affect our revenues.
Because
we distribute product internationally, economic, political and other risks
associated with our international sales and operations could adversely affect
our operating results.
Since we
sell our products worldwide, our business is subject to risks associated with
doing business internationally. Our sales to customers outside the United States
accounted for approximately 20% of our consolidated revenue from continuing
operations in fiscal 2007. Accordingly, our future results could be harmed by a
variety of factors, including:
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changes
in foreign currency exchange rates;
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changes
in regulatory requirements;
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changes
in a specific country's or region's political or economic
conditions;
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tariffs,
other trade protection measures and import or export licensing
requirements;
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potentially
negative consequences from changes in tax laws or application of such tax
laws;
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difficulty
in staffing and managing widespread
operations;
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changing
labor regulations;
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requirements
relating to withholding taxes on remittances and other payments by
subsidiaries;
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different
regimes controlling the protection of our intellectual
property;
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restrictions
on our ability to own or operate subsidiaries, make investments or acquire
new businesses in these jurisdictions;
and
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restrictions
on our ability to repatriate dividends from our
subsidiaries.
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Our
international operations are affected by global economic and political
conditions. Changes in economic or political conditions in any of the countries
in which we operate could result in exchange rate movement, new currency or
exchange controls or other restrictions being imposed on our
operations.
Fluctuations
in the value of foreign currencies may adversely affect our results of
operations. Because our financial results are reported in U.S. dollars, if we
generate sales or earnings in other currencies, the translation of those results
into U.S. dollars can result in a significant increase or decrease in the amount
of those sales or earnings.
We also
have agreements with casinos in Native American jurisdictions, which may subject
us to sovereign immunity risk and could subject us to additional compliance
costs.
Because
we distribute product internationally, fluctuations in the value of foreign
currencies may adversely affect our results of operations.
We may be
exposed to foreign currency exchange rate risk inherent in our leases and sales
commitments, anticipated leases and sales, anticipated purchases, and assets,
liabilities and debt denominated in currencies other than the U.S. dollar. We
expect to transact business in numerous countries around the world. As such, we
expect our cash flows and earnings to continue to be exposed to the risks that
may arise from fluctuations in foreign currency exchange rates. Although we have
thus far not engaged in hedging activities, we may use forward contracts and
options designated as cash flow hedges to protect against the foreign currency
exchange rate risks inherent in our forecasted net revenues and, to a lesser
extent, cost of leases and sales denominated in currencies other than the U.S.
dollar. Alternatively, we may choose not to hedge the foreign currency risk
associated with our foreign currency exposures if such exposure acts as a
natural foreign currency hedge for other offsetting amounts denominated in the
same currency or the currency is difficult or too expensive to hedge. Further,
hedging or not hedging does not eliminate the foreign currency
risk.
Because
our business strategy includes the acquisition of other companies, we face
considerable business and financial risk in implementing
acquisitions.
As part
of our overall growth strategy, we have in the past acquired, and will continue
to seek to acquire, complementary products, assets and businesses. We regularly
engage in discussions with respect to and investigate possible acquisitions.
Future acquisitions could result in potentially dilutive issuances of equity
securities, significant expenditures of cash, the incurrence of debt and
contingent liabilities and an increase in amortization expenses, which could
have a material adverse effect upon our business, financial condition and
results of operations.
The risks
associated with acquisitions could have a material adverse effect upon our
business, financial condition and results of operations. We cannot assure that
we will be successful in consummating future acquisitions on favorable terms or
at all or that any future acquisition will work out as we expect.
Our
acquisitions of any future potential acquisitions, may not produce the revenues,
earnings or business synergies that we anticipate, and may not perform as
expected for a variety of reasons, including:
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difficulties
in the integration of the operations, financial reporting, technologies,
products and personnel, including those caused by national, geographic and
cultural differences;
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risks
of entering markets in which we have no or limited prior
experience;
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difficulties
in the use, development or sale of intellectual property or future or
present products;
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the
potential loss of employees;
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currency
fluctuations or changes in exchange rates in connection with sales to
customers in foreign currencies;
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diversion
of management's attention away from other business concerns;
and
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expenses
of any undisclosed or potential legal
liabilities.
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Any one
or a combination of these factors may cause our revenues or earnings to
decline.
If
our products contain defects, our reputation could be harmed and our results of
operations adversely affected.
Some of
our products are complex and may contain undetected defects. The occurrence of
defects or malfunctions could result in financial losses for our customers and
in turn termination of leases, cancellation of orders, product returns and
diversion of our resources. Any of these occurrences could also result in the
loss of or delay in market acceptance of our products and loss of
sales.
Because the effects of some events
are unforeseeable, we may be adversely affected by the occurrence of
extraordinary events, such as terrorist attacks.
The
occurrence of extraordinary events, such as terrorist attacks, intentional or
unintentional mass casualty incidents or similar events may substantially
decrease the use of and demand for gaming, which may decrease our revenues. The
occurrence of future terrorist attacks, military actions by the United States,
contagious disease outbreaks or similar events cannot be predicted, and their
occurrence can be expected to further negatively affect the economies of the
United States and other foreign countries where we do business
generally.
Our board of directors may change our
operating policies and strategies without prior notice or stockholder approval
and such changes could harm our business and results of operations and the value
of our stock.
Our board
of directors has the authority to modify or waive certain of our current
operating policies and strategies without prior notice and without stockholder
approval. We cannot predict the effect any changes to our current operating
policies and strategies would have on our business, operating results and value
of our stock. However, the effects might be to cause harm to us.
Our Chief Executive Officer, Robert
Saucier, and our Chief Operating Officer, William O’Hara have significant
influence over our affairs, and might cause us to engage in transactions that
are not in our or our stockholders’ best interests.
In
addition to managing us, our current and future officers provide advice on our
operating policies and strategies. Our officers may also cause us to engage in
future transactions with them and their affiliates, subject to the approval of,
or guidelines approved by, the Board of Directors. Our directors, however, rely
primarily on information supplied by our officers in reaching their
determinations. Accordingly, our officers have significant influence over our
affairs, and may cause us to engage in transactions which are not in our best
interest. Currently, our President, Robert Saucier, and William O’Hara are our
only executive officers and thus have particular influence and control over our
operating policies, strategies, and business decisions.
Because
executive management is free to devote time to other ventures, shareholders may
not agree with their allocation of time. Our executive officers will devote only
that portion of their time, which, in their judgment and experience, is
reasonably required for the management and operation of our business. Executive
management may have conflicts of interest in allocating management time,
services and functions among us and any present and future ventures which are or
may be organized by them, or any future officers or directors and/or their
affiliates.
Management
will not be required to direct us as their sole and exclusive function, and they
may have other business interests and engage in other activities in addition to
those relating to us. This includes rendering advice or services of any kind to
other investors and creating or managing other proprietary table game
businesses. Neither we nor any of the shareholders shall have the right, by
virtue of the Operating Agreement or the relationship created thereby, in or to
such other ventures or activities, or to the income or proceeds derived
therefrom.
Because
our articles of incorporation and bylaws and Nevada law limit the liability of
our officers, directors, and others, shareholders may have no recourse for acts
performed in good faith.
Under our
articles of incorporation, bylaws and Nevada law, each of our officers,
directors, employees, attorneys, accountants and agents are not liable to us or
the shareholders for any acts they perform in good faith, or for any non-action
or failure to act, except for acts of fraud, willful misconduct or gross
negligence. Our articles and bylaws provide that we will indemnify each of our
officers, directors, employees, attorneys, accountants and agents from any
claim, loss, cost, damage liability and expense by reason of any act undertaken
or omitted to be undertaken by them, unless the act performed or omitted to be
performed constitutes fraud, willful misconduct or gross
negligence.
New
legislation, including the Sarbanes-Oxley Act of 2002, may make it more
difficult for us to retain or attract officers and directors.
The
Sarbanes-Oxley Act of 2002 was enacted in response to public concerns regarding
corporate accountability in connection with recent accounting scandals. The
stated goals of the Sarbanes-Oxley Act are to increase corporate responsibility,
to provide for enhanced penalties for accounting and auditing improprieties at
publicly traded companies, and to protect investors by improving the accuracy
and reliability of corporate disclosures pursuant to the securities laws. The
Sarbanes-Oxley Act generally applies to all companies that file or are required
to file periodic reports with the SEC, under the Securities Exchange Act of
1934. As a public company, we are required to comply with the Sarbanes-Oxley
Act. The enactment of the Sarbanes-Oxley Act of 2002 has resulted in a series of
rules and regulations by the SEC that increase responsibilities and liabilities
of directors and executive officers. The perceived increased personal risk
associated with these recent changes may deter qualified individuals from
accepting these roles. As a result, it may be more difficult for us to attract
and retain qualified persons to serve on our board of directors or as executive
officers. We continue to evaluate and monitor developments with respect to these
rules, and we cannot predict or estimate the amount of additional costs we may
incur or the timing of such costs.
We
will become subject to the management report and auditor attestation report
requirements of Section 404 of the Sarbanes-Oxley Act as of the end of our
fiscal year ending December 31, 2008; if we fail to maintain an effective system
of internal control over financial reporting, we may be unable to accurately
report our financial results or prevent fraud, and investor confidence and the
market price of our ADSs may be adversely affected.
We are a
public company in the United States that is subject to the Sarbanes-Oxley Act of
2002, or the Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley Act and the
related SEC rules require, beginning with our fiscal year ending December 31,
2008, that we evaluate the effectiveness, as of the end of each fiscal year, of
our internal control over financial reporting and include in our annual reports
for each fiscal year (i) a report of our management on our internal control over
financial reporting that contains, among other things, management’s assessment
of the effectiveness of our internal control over financial reporting as of the
end of the most recent fiscal year, including a statement whether or not
internal control over financial reporting is effective and (ii) the opinion of
our registered public accounting firm, either unqualified or adverse, as to
whether we maintained, in all material respects, effective internal control over
financial reporting as of the end of such fiscal year. Our management and
auditors will not be permitted to conclude that our internal control over
financial reporting is effective if there is one or more “material weaknesses”
in our internal control over financial reporting, as defined in rules of the SEC
and the U.S. Public Company Accounting Oversight Board, or the PCAOB. Our
management or our auditors may conclude that our efforts to remediate the
problems identified below were not successful or that otherwise our internal
control over financial reporting is not effective. This could result in an
adverse reaction in the financial marketplace due to a loss of investor
confidence in the reliability of our reporting processes, which could adversely
impact the market price of our ADSs. We will need to incur significant costs and
use significant management and other resources in order to comply with Section
404 of the Sarbanes-Oxley Act.
There
is no relationship between the price of our common stock and our assets,
earning, book value, or any other objective criteria of value.
Our
common stock has been arbitrarily determined by past offerings. Among the
factors considered in determining the price and amount were our current
immediate needs, our uncertain prospects, the backgrounds of the directors and
the current condition of the financial markets. There is, however, no
relationship whatsoever between our common stock price and our assets, earnings,
book value or any other objective criteria of value.
Because
our common stock is quoted on the over-the-counter bulletin board or traded and
a public market for our common stock exists, short selling could increase the
volatility of our stock price.
Short
selling occurs when a person sells shares of stock which the person does not yet
own and promises to buy stock in the future to cover the sale. The general
objective of the person selling the shares short is to make a profit by buying
the shares later, at a lower price, to cover the sale. Significant amounts of
short selling, or the perception that a significant amount of short sales could
occur, could depress the market price of our common stock. In contrast,
purchases to cover a short position may have the effect of preventing or
retarding a decline in the market price of our common stock, and together with
the imposition of the penalty bid, may stabilize, maintain or otherwise affect
the market price of our common stock. As a result, the price of our common stock
may be higher than the price that otherwise might exist in the open market. If
these activities are commenced, they may be discontinued at any time. These
transactions may be effected on over-the-counter bulletin board or any other
available markets or exchanges. Such short selling if it were to occur could
impact the value of our stock in an extreme and volatile manner to the detriment
of our shareholders.
Because
we will be subject to the “Penny Stock” rules once our shares are quoted on the
over-the-counter bulletin board, the level of trading activity in our stock may
be reduced.
Broker-dealer
practices in connection with transactions in “penny stocks” are regulated by
penny stock rules adopted by the Securities and Exchange Commission. Penny
stocks generally are equity securities with a price of less than $5.00 (other
than securities registered on some national securities exchanges or quoted on
Nasdaq). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document that provides information about penny stocks and the
nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and, if the broker-dealer is the sole market maker, the broker-dealer must
disclose this fact and the broker-dealer’s presumed control over the market, and
monthly account statements showing the market value of each penny stock held in
the customer’s account. In addition, broker-dealers who sell these securities to
persons other than established customers and “accredited investors” must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser’s written agreement to the transaction.
Consequently, these requirements may have the effect of reducing the level of
trading activity, if any, in the secondary market for a security subject to the
penny stock rules, and investors in our common stock may find it difficult to
sell their shares.
Because
our shares are quoted on the over-the-counter bulletin board, we are required to
remain current in our filings with the SEC and our securities will not be
eligible for quotation if we are not current in our filings with the
SEC.
Because
our shares are quoted on the over-the-counter bulletin board, we are required to
remain current in our filings with the SEC in order for shares of our common
stock to be eligible for quotation on the over-the-counter bulletin board. In
the event that we become delinquent in our required filings with the SEC,
quotation of our common stock will be terminated following a 30 day grace period
if we do not make our required filing during that time. If our shares are not
eligible for quotation on the over-the-counter bulletin board, investors in our
common stock may find it difficult to sell their shares.
The
following persons are our executive officers and directors.
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Name
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Age
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Office(s) held
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Robert
Saucier
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54
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President,
CEO, CFO, and Director
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William
O’Hara
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68
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COO
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Set forth
below is a brief description of the background and business experience of each
of our current executive officers and directors.
Robert B. Saucier is our
President, CEO, and sole director. Mr. Saucier is the founder
of Galaxy and has served as President and CEO of that company and its accounting
and operational predecessors since 1997. Besides leading the executive
team, Mr. Saucier’s primary responsibilities include product development,
strategic planning, developing acquisition strategies and investor relations.
During his career, Mr. Saucier has founded and grown five start-up companies. He
was founder and CEO of the Mars Hotel Corporation, (1992 - 1998) a company that
developed and managed the first non-tribal casino in Washington. Previously, Mr.
Saucier founded International Pacific and served as its President and Chairman
(1986 -1992). He also founded and led Titan International, Inc. (1981 - 1986), a
company that was engaged in electronic safety, security and surveillance
systems. Throughout his career, Mr. Saucier has consulted with and invested in
numerous business ventures and real estate development projects.
William O’Hara is our Chief
Operating Officer and is in charge of the day-to-day operations of our business
After a successful 21-year career in the cosmetic, cosmetology and aesthetic
industry, Bill O’Hara began his gaming industry career as the first employee of
Shuffle Master Gaming in 1991. Mr. O’Hara relocated to Las Vegas in 1992 to head
up that company’s sales, service and marketing. In 1998, he joined
Casinovations, Inc. as Senior Vice President of operations and president of its
Mississippi subsidiary. In 2000, Mr. O’Hara joined PDS Gaming as the
Senior Vice President of their newly formed electronic table games division.
(Bill joined Galaxy Gaming in February 2008.)
Directors
Our
bylaws authorize no less than one (1) and no more than fifteen (15) directors.
We currently have one Director.
Term
of Office
Our
Directors are appointed for a one-year term to hold office until the next annual
general meeting of our shareholders or until removed from office in accordance
with our bylaws. Our officers are appointed by our board of directors and hold
office until removed by the board.
Family
Relationships
There are
no family relationships between or among the directors, executive officers or
persons nominated or chosen by the Company to become directors or executive
officers.
Director
or Officer Involvement in Certain Legal Proceedings
To the
best of our knowledge, except as described below, during the past five years,
none of the following occurred with respect to a present or former director or
executive officer of the Company: (1) any bankruptcy petition filed by or
against any business of which such person was a general partner or executive
officer either at the time of the bankruptcy or within two years prior to that
time; (2) any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses); (3)
being subject to any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of any competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking activities; and (4) being found
by a court of competent jurisdiction (in a civil action), the Securities and
Exchange Commission or the Commodities Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment has
not been reversed, suspended or vacated.
Sherron Associates, Inc. – A
judgment was issued in Washington against Mr. Saucier in 1998. We and Mr.
Saucier believe that it is invalid. Nonetheless, Sherron Associates,
Inc. (“Sherron”) claims to be the assignee of that judgment. Sherron
previously obtained a default judgment in Washington against various Galaxy
companies through service by publication in Washington. That judgment
was reversed and dismissed with prejudice. This judgment was domesticated in
Nevada before its dismissal; the domestication action was likewise
dismissed.
Sherron
filed suit again against Galaxy in Washington still claiming its is the assignee
of the judgment and that Galaxy is the alter-ego of Robert
Saucier. Galaxy position is that Sherron is not the holder of the
alleged judgment against Saucier and that the previous judgment is invalid and
unenforceable.
Sherron
is currently attempting to execute against certain intellectual property of
Galaxy, erroneously claiming the property belongs to Mr. Saucier. In the
unlikely event that Sherron prevails in any of its attempts, damages would be
less than two million dollars. Although we would experience difficulty in paying
or obtaining the financing to pay a properly adjudicated liability to Sherron,
we and our legal advisors believe that the chances of a proper judgment issuing
against us are remote. Some of the Galaxy companies and Mr. Saucier
have filed actions against Sherron in Nevada for various abuses of process in
the litigation.
Committees
of the Board
We do not
currently have a compensation committee, executive committee, or stock plan
committee.
Audit
Committee
We do not
have a separately-designated standing audit committee. The entire Board of
Directors performs the functions of an audit committee, but no written charter
governs the actions of the Board when performing the functions of what would
generally be performed by an audit committee. The Board approves the selection
of our independent accountants and meets and interacts with the independent
accountants to discuss issues related to financial reporting. In addition, the
Board reviews the scope and results of the audit with the independent
accountants, reviews with management and the independent accountants our annual
operating results, considers the adequacy of our internal accounting procedures
and considers other auditing and accounting matters including fees to be paid to
the independent auditor and the performance of the independent
auditor.
Nominating
Committee
Our Board
of Directors does not maintain a nominating committee. As a result, no written
charter governs the director nomination process. Our size and the size of our
Board, at this time, do not require a separate nominating
committee.
When
evaluating director nominees, our directors consider the following
factors:
|
·
|
The
appropriate size of our Board of
Directors;
|
|
·
|
Our
needs with respect to the particular talents and experience of our
directors;
|
|
·
|
The
knowledge, skills and experience of nominees, including experience in
finance, administration or public service, in light of prevailing business
conditions and the knowledge, skills and experience already possessed by
other members of the Board;
|
|
·
|
Experience
in political affairs;
|
|
·
|
Experience
with accounting rules and practices;
and
|
|
·
|
The
desire to balance the benefit of continuity with the periodic injection of
the fresh perspective provided by new Board
members.
|
Our goal
is to assemble a Board that brings together a variety of perspectives and skills
derived from high quality business and professional experience. In doing so, the
Board will also consider candidates with appropriate non-business
backgrounds.
Other
than the foregoing, there are no stated minimum criteria for director nominees,
although the Board may also consider such other factors as it may deem are in
our best interests as well as our stockholders. In addition, the Board
identifies nominees by first evaluating the current members of the Board willing
to continue in service. Current members of the Board with skills and experience
that are relevant to our business and who are willing to continue in service are
considered for re-nomination. If any member of the Board does not wish to
continue in service or if the Board decides not to re-nominate a member for
re-election, the Board then identifies the desired skills and experience of a
new nominee in light of the criteria above. Current members of the Board are
polled for suggestions as to individuals meeting the criteria described above.
The Board may also engage in research to identify qualified individuals. To
date, we have not engaged third parties to identify or evaluate or assist in
identifying potential nominees, although we reserve the right in the future to
retain a third party search firm, if necessary. The Board does not typically
consider shareholder nominees because it believes that its current nomination
process is sufficient to identify directors who serve our best
interests.
Compensation
Discussion and Analysis
The
company’s current executive compensation system consists of cash compensation to
the executive officers who are primarily responsible for the day-to-day
management and continuing development of its business. The company’s
COO, William O’Hara is party to a three-year Employment Agreement with company
which is filed as Exhibit 10.1 hereto. Mr. O’Hara’s
compensation arrangement consists of a base annual salary together with
potential monthly bonus to be awarded for those months in which the company
achieves higher sales figures than in any previous month. The
objective of this arrangement is to provide Mr. O’Hara with regular compensation
which is reasonable in light of the cash constraints faced by the company’s
developing business while also providing an incentive for the COO to lead the
operations towards a continually expanding revenue base.
The
company presently does not have an employment agreement or any fixed policy
regarding compensation of Robert Saucier, its President, CEO, and
CFO. Currently, Mr. Saucier receives cash compensation of
approximately $30,000 per year. Mr. Saucier is the founder of the
company and accordingly, he holds a strong entrepreneurial interest in
developing and expanding the company to the best of his ability.
Summary
Compensation Table
The table
below summarizes all compensation awarded to, earned by, or paid to our current
executive officers for each of the last two completed fiscal years.
|
SUMMARY
COMPENSATION TABLE
|
|
Name
and
principal
position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|
Robert
Saucier,
CEO,
CFO President, Director
|
2008
2007
|
30,000
30,000
|
0
0
|
0
0
|
0
0
|
0
0
|
0
0
|
0
0
|
30,000
30,000
|
|
William
O’Hara, COO
|
2008
2007
|
100,141
n/a
|
3,865
n/a
|
0
n/a
|
0
n/a
|
0
n/a
|
0
n/a
|
0
n/a
|
104,006
n/a
|
|
Munjit
Johal, former CFO, CEO, President, and Director(2)
|
2008
2007
|
15,000
84,000
|
0
0
|
0
0
|
0
0
|
0
0
|
0
0
|
0
0
|
15,000
84,000
|
|
Jan
Wallace, former President and CEO(1)
|
2008
2007
|
n/a
180,000
|
n/a
0
|
n/a
0
|
n/a
0
|
n/a
0
|
n/a
0
|
n/a
0
|
n/a
180,000
|
| (1) |
Effective
January 17, 2008, Ms. Jan Wallace resigned from all positions as an
officer of our company. Ms. Wallace did not obtain any payment for her
services in 2007; all such monies noted in “salary” were accrued by the
company as debt and subsequently discharged under chapter 11 of the United
States Bankruptcy Code.
|
| |
|
| (2) |
Mr.
Johal did not obtain any payment for his services in 2007; all such monies
noted in “salary” were accrued by the company as debt. Mr. Johal received
$15,000 in total compensation in 2008, all received prior to the filing of
our proceeding under chapter 11 of the U.S. Bankruptcy Code. Upon the
closing of the Share Exchange, Mr. Johal resigned as our director and from
all named executive officer
positions.
|
Narrative
Disclosure to the Summary Compensation Table
We do not
have a written employment contract with our President, CEO, and CFO Robert
Saucier. We currently pay him an annual salary of $30,000. The
company’s COO, William O’Hara is party to a three-year Employment Agreement with
company which is filed as Exhibit 10.1 hereto. Mr. O’Hara receives a
base annual salary of $150,000. In addition, for each month in which
our total sales are higher than any previous month, Mr. O’Hara earns a bonus
equal to 10% of the increased sales above the prior monthly record.
Outstanding
Equity Awards At Fiscal Year-end Table
The table
below summarizes all unexercised options, stock that has not vested, and equity
incentive plan awards for each named executive officer outstanding as of the end
of our last completed fiscal year.
|
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|
OPTION
AWARDS
|
STOCK
AWARDS
|
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of
Shares
or
Shares
of
Stock
That
Have
Not
Vested
(#)
|
Market
Value
of
Shares
or
Shares
of
Stock
That
Have
Not
Vested
($)
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Shares
or
Other
Rights
That
Have
Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Shares,
Shares
or
Other
Rights
That
Have
Not
Vested
(#)
|
|
Robert
Saucier, CEO, CFO, President, Director
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
William
O’Hara, COO
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Munjit
Johal, former CFO, CEO, President, and Director
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Jan
Wallace, former President and CEO
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Compensation
of Directors Table
The table
below summarizes all compensation paid to our directors for our last completed
fiscal year.
|
DIRECTOR
COMPENSATION
|
|
Name
|
Fees
Earned or
Paid
in
Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Non-Qualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|
Robert
Saucier
|
30,000
|
0
|
0
|
0
|
0
|
0
|
30,000
|
|
Munjit
Johal (former
director)
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Narrative
Disclosure to the Director Compensation Table
Directors
do not currently receive any cash compensation from the Company or for their
service as members of the Board of Directors. The compensation
summarized above reflects the compensation each of our directors and former
directors received in their capacities as executive officers of the
Company. We may compensate our directors through stock options once a
plan has been put in place. We have no stock option plan as of the
date of this report. We may also reimburse our directors a nominal
fee for attending meetings and for travel expenses.
Stock
Option Grants
We have
not granted any stock options to the executive officers or directors since our
inception.
The
following table sets forth, as of February 10, 2009, the beneficial ownership of
our common stock by each executive officer and director, by each person known by
us to beneficially own more than 5% of the our common stock and by the executive
officers and directors as a group. Except as otherwise indicated, all
shares are owned directly and the percentage shown is based on 29,000,000 shares
of common stock issued and outstanding on February 10, 2009.
|
Title
of class
|
Name
and address of
beneficial owner (1)
|
Amount
of beneficial
ownership
|
Percent
of
class
|
|
Executive
Officers & Directors:
|
|
Common
|
Triangulum
Partners, LLC(2)
6980
O’Bannon Drive
Las
Vegas, Nevada 89117
Beneficial
owner: Robert Saucier
|
25,000,000
|
86.21%
|
|
|
|
|
|
|
Total
of All Directors and Executive Officers:
|
25,000,000
Shares
|
86.21%
|
|
More
Than 5% Beneficial Owners:
|
|
|
None.
|
|
|
| (1) |
As
used in this table, "beneficial ownership" means the sole or shared power
to vote, or to direct the voting of, a security, or the sole or shared
investment power with respect to a security (i.e., the power to dispose
of, or to direct the disposition of, a security). In addition, for
purposes of this table, a person is deemed, as of any date, to have
"beneficial ownership" of any security that such person has the right to
acquire within 60 days after such date.
|
| |
|
| (2) |
Mr.
Robert Saucier, our CEO, CFO, President, and Director, is the Manager of
Triangulum Partners, LLC. In that capacity, he is able to
direct voting and investment decisions regarding the entity’s shares of
common stock.
|
Except as
set forth below, none of our directors or executive officers, nor any proposed
nominee for election as a director, nor any person who beneficially owns,
directly or indirectly, shares carrying more than 5% of the voting rights
attached to all of our outstanding shares, nor any members of the immediate
family (including spouse, parents, children, siblings, and in-laws) of any of
the foregoing persons has any material interest, direct or indirect, in any
transaction over the last two years or in any presently proposed transaction
which, in either case, has or will materially affect us:
1. We
maintain our corporate office at 6980 O’Bannon Drive, Las Vegas,
NV. We sub-lease the property from Galaxy Gaming, LLC at a cost of
$17,500 per month. Mr. Robert Saucier, our CEO, CFO, President,
and Director, holds a 10% membership interest in Galaxy Gaming, LLC and is the
Manager of that entity.
The
information set forth in Item 1.01 and 2.01 of this Current Report on Form 8-K
that relates to the unregistered sales of equity securities is incorporated by
reference into this Item 3.02.
In
connection with the Share Exchange Agreement, we issued 25,000,000 shares of our
common stock pro rata to former shareholders of
Galaxy. The issuance of these shares was not registered under the
Securities Act of 1933, as amended (the “Securities Act”). These
shares were issued in reliance upon the exemption from registration provided by
Section 4(2) of the Securities Act and/or Regulation D promulgated under that
section. These provisions exempt transactions by an issuer not involving any
public offering. These securities may not be offered or sold in the United
States absent registration or an applicable exemption from the registration
requirements. Certificates representing these shares contain a legend stating
the same.
The pro
rata issuance of 4,000,000 shares of our common stock to our former creditors
pursuant to the terms of the Plan was a public offering exempt from the
requirements of section 5 of the Securities Act of 1933 under the terms of the
U.S. Bankruptcy Code, 11 U.S.C. §1145(a)(1).
Description
of Securities
Following
consummation of the Plan, our authorized capital stock consists of 65,000,000
shares of common stock, $0.001 par value per share, and 10,000,000 shares of
preferred stock, $0.001 par value per share. Immediately following the Share
Exchange, there were 29,000,000 shares of common stock issued and
outstanding. There are no shares of preferred stock issued and
outstanding.
Common
Stock
The
holders of common stock are entitled to one vote per share. Our certificate of
incorporation does not provide for cumulative voting. The holders of common
stock are entitled to receive ratably such dividends, if any, as may be declared
by the board of directors out of legally available funds. However, the current
policy of the board of directors is to retain earnings, if any, for operations
and growth. Upon liquidation, dissolution or winding-up, the holders of common
stock are entitled to share ratably in all assets that are legally available for
distribution. The holders of common stock have no preemptive, subscription,
redemption or conversion rights.
Subject
to any preferential rights of any outstanding series of preferred stock created
by our board of directors from time to time, the holders of shares of our common
stock will be entitled to such cash dividends as may be declared from time to
time by our board of directors from funds available therefore.
Subject
to any preferential rights of any outstanding series of preferred stock created
from time to time by our board of directors, upon liquidation, dissolution or
winding up, the holders of shares of our common stock will be entitled to
receive pro rata all assets available for distribution to such
holders.
In the
event of any merger or consolidation with or into another company in connection
with which shares of our common stock are converted into or exchangeable for
shares of stock, other securities or property (including cash), all holders of
our common stock will be entitled to receive the same kind and amount of shares
of stock and other securities and property (including cash). Holders of our
common stock have no pre-emptive rights, no conversion rights and there are no
redemption provisions applicable to our common stock.
Preferred
Stock
Our board
of directors is authorized by our articles of incorporation to divide the
authorized shares of our preferred stock into one or more series, each of which
must be so designated as to distinguish the shares of each series of preferred
stock from the shares of all other series and classes. Our board of directors is
authorized, within any limitations prescribed by law and our articles of
incorporation, to fix and determine the designations, rights, qualifications,
preferences, limitations and terms of the shares of any series of preferred
stock including, but not limited to, the following:
|
1.
|
The
number of shares constituting that series and the distinctive designation
of that series, which may be by distinguishing number, letter or
title;
|
|
2.
|
The
dividend rate on the shares of that series, whether dividends will be
cumulative, and if so, from which date(s), and the relative rights of
priority, if any, of payment of dividends on shares of that
series;
|
|
3.
|
Whether
that series will have voting rights, in addition to the voting rights
provided by law, and, if so, the terms of such voting
rights;
|
|
4.
|
Whether
that series will have conversion privileges, and, if so, the terms and
conditions of such conversion, including provision for adjustment of the
conversion rate in such events as the Board of Directors
determines;
|
|
5.
|
Whether
or not the shares of that series will be redeemable, and, if so, the terms
and conditions of such redemption, including the date or date upon or
after which they are redeemable, and the amount per share payable in case
of redemption, which amount may vary under different conditions and at
different redemption dates;
|
|
6.
|
Whether
that series will have a sinking fund for the redemption or purchase of
shares of that series, and, if so, the terms and amount of such sinking
fund;
|
|
7.
|
The
rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the corporation, and
the relative rights of priority, if any, of payment of shares of that
series;
|
|
8.
|
Any
other relative rights, preferences and limitations of that
series
|
Registration
Rights
We have
not agreed to file a registration statement with the Securities and Exchange
Commission (the “SEC”) to register shares of our common stock.
Market
Price and Dividends
Galaxy
is, and has always been, a privately-held company. There has never been a public
market for the securities of Galaxy. Galaxy has never declared or paid any cash
dividends on its capital stock. In addition, there has never been a trading
market for Galaxy’s common stock.
Our
common stock has been quoted on the OTC Bulletin Board (“OTCBB”), which is
sponsored by FINRA under the symbol “SDFD.OB.” The OTCBB is a network of
security dealers who buy and sell stock. The dealers are connected by a computer
network that provides information on current "bids" and "asks", as well as
volume information.
The
following table sets forth the range of high and low bid quotations for our
common stock for each of the periods indicated as reported by the OTCBB. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
|
Fiscal
Year Ending December 31, 2008
|
|
Quarter
Ended
|
|
High
$
|
|
Low
$
|
|
December
31, 2008
|
|
n/a
|
|
n/a
|
|
September
30, 2008
|
|
n/a
|
|
n/a
|
|
June
30, 2008
|
|
n/a
|
|
n/a
|
|
March
31, 2008
|
|
1.01
|
|
1.01
|
|
Fiscal
Year Ending December 31, 2007
|
|
Quarter
Ended
|
|
High
$
|
|
Low
$
|
|
December
31, 2007
|
|
0.15
|
|
0
|
|
September
30, 2007
|
|
0.15
|
|
0.15
|
|
June
30, 2007
|
|
n/a
|
|
n/a
|
|
March
31, 2007
|
|
n/a
|
|
n/a
|
Transfer
Agent
The
transfer agent for our common stock is Quicksilver Stock Transfer, LLC, at P.O.
Box 371270
Las
Vegas, NV 89137.
Indemnification
of Directors and Officers
Our
officers and directors are indemnified as provided by the Nevada Revised
Statutes and our bylaws.
Under the
governing Nevada statutes, director immunity from liability to a company or its
shareholders for monetary liabilities applies automatically unless it is
specifically limited by a company's articles of incorporation. Our
articles of incorporation do not contain any limiting language regarding
director immunity from liability. Excepted from this immunity
are:
|
1.
|
a
willful failure to deal fairly with the company or its shareholders in
connection with a matter in which the director has a material conflict of
interest;
|
|
2.
|
a
violation of criminal law (unless the director had reasonable cause to
believe that his or her conduct was lawful or no reasonable cause to
believe that his or her conduct was
unlawful);
|
|
3.
|
a
transaction from which the director derived an improper personal profit;
and
|
Our
bylaws provide that we will indemnify our directors and officers to the fullest
extent not prohibited by Nevada law; provided, however, that we may modify the
extent of such indemnification by individual contracts with our directors and
officers; and, provided, further, that we shall not be required to indemnify any
director or officer in connection with any proceeding (or part thereof)
initiated by such person unless:
|
1.
|
such
indemnification is expressly required to be made by
law;
|
|
2.
|
the
proceeding was authorized by our Board of
Directors;
|
|
3.
|
such
indemnification is provided by us, in our sole discretion, pursuant to the
powers vested us under Nevada law;
or;
|
|
4.
|
such
indemnification is required to be made pursuant to the
bylaws.
|
Our
bylaws provide that we will advance to any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was a director or officer, of the company, or
is or was serving at the request of the company as a director or executive
officer of another company, partnership, joint venture, trust or other
enterprise, prior to the final disposition of the proceeding, promptly following
request therefore, all expenses incurred by any director or officer in
connection with such proceeding upon receipt of an undertaking by or on behalf
of such person to repay said amounts if it should be determined ultimately that
such person is not entitled to be indemnified under our bylaws or
otherwise.
Our
bylaws provide that no advance shall be made by us to an officer of the company,
except by reason of the fact that such officer is or was a director of the
company in which event this paragraph shall not apply, in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, if a
determination is reasonably and promptly made: (a) by the board of directors by
a majority vote of a quorum consisting of directors who were not parties to the
proceeding, or (b) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, that the facts known to the decision-making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the company.
The
information set forth in Item 1.01, 2.01, and 3.02 of this Current Report on
Form 8-K that relates to changes of control of the Company is incorporated by
reference into this Item 5.01.
The
information set forth in Item 1.01, 2.01, and 3.02 of this Current Report on
Form 8-K that relates to departure and appointment of officers and directors is
incorporated by reference into this Item 5.02.
Pursuant
to the terms of the Plan, our Articles of Incorporation were amended and
restated in their entirety. The complete text of our Amended and
Restated Articles of Incorporation is filed herewith as Exhibit 3.1 and
incorporated herein by reference. Our fiscal year end remains
December 31.
Financial
Statements of Businesses Acquired. In accordance with Item
9.01(a), the audited financial statements of our predecessor, Galaxy, for the
years ended December 31, 2007 and 2008 are filed in this Current Report on Form
8-K as Exhibit 99.1.
Pro
Forma Financial Information. In accordance with Item 9.01(b), our pro
forma financial statements are filed in this Current Report on Form 8-K as
Exhibit 99.2.
(c) Exhibits.
The
exhibits listed in the following Exhibit Index are filed as part of this Current
Report on Form 8-K.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
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Date: February 13,
2009
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Secured
Diversified Investment, Ltd.
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By: /s/Robert
Saucier
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Robert
Saucier
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President
and CEO
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