Company Is a Shell of Its Former Self By Design : Trading: A Laguna Hills firm is purchased by a gaming operation for its stock listing.


A Tennessee company that makes gaming equipment has slipped into the public markets by purchasing a publicly held Laguna Hills company that essentially had become a shell corporation.

Spintek Gaming Inc. of Chattanooga purchased GSA Inc. of Laguna Hills earlier this month and is trading on the over-the-counter market. The former GSA, which had made disposable medical products since 1987, has become a private company under a new name, Tag Industries.

GSA shareholders, for the moment, should be satisfied. After lingering below $1 a share for years, the stock’s price has soared since GSA began trading as a gaming equipment manufacturer. GSA shares, which traded at 62.5 cents on Sept. 1, closed Thursday at $3.125, up 400%.


Some traders and securities officials frown on such transactions, which are called “backdoor listings” because they allow a company to become public without clearing several regulatory hurdles or filing a prospectus fully disclosing its financial position and other pertinent information.

“Backdoor listings are always looked at negatively by the underwriting community,” said Fred Roberts, a board member of Nasdaq and president of F.M. Roberts Inc., a Los Angeles investment banking firm.

Officials from the Securities and Exchange Commission concur.

“Any stock traded over the counter [through a backdoor listing] could have less extensive disclosure because trading can commence without obtaining specific clearance from the SEC or a specific exchange,” said Frederick Goss, an SEC assistant regional director in Los Angeles.

Spintek attorney Robert H. Jaffe defended the GSA deal, arguing that the company is saving money normally paid to underwriters to put together an initial public offering.

“There are honest people working the shell route,” Jaffe said. “These people are putting out good technical products with solid business plans.”

He added that the company will file financial information and merger statements within 30 days, as required by the SEC.


Spintek makes slot machines, and is testing a new electronic money counter, called Accuhopper, that is designed to cut down on internal thefts in casinos. The company has two offices in Las Vegas, where Accuhopper is being tested, executives said.

The company plans to file corporate papers in Delaware and keep its headquarters in Chattanooga, said Jonathan Hoover, the company’s treasurer.

As part of the Spintek-GSA deal, former GSA President Terry Shirley, the major stockholder, gave the Tennessee company 2 million shares of GSA stock. In exchange, Spintek paid Shirley $36,000, assumed a $1-million company debt, and gave him 100,000 shares in the new corporation, which Shirley is restricted from trading for two years.

Shirley also will operate Tag Industries as a private medical products company in Laguna Hills. “I saw an opportunity to move the company ahead without the public exposure,” he said.


Through the Back Door By purchasing the corporate shell of publicly traded GSA Inc., Spintek Gaming Inc. went public without clearing the usual regulatory hurdles. Here’s how the change was effected: 1. Tag Industries LLC created as subsidiary of medical product manufacturer GSA Inc. 2. GSA’s assets sold to Tag Industries, which becomes private company. 3. GSA shareholders agree to purchase by Spintek on Sept. 14. 4. GSA corporate shell (name and stock market listing) sold Sept. 15 to privately held Spintek Gaming Inc. 5. Spintek becomes public company under name GSA. 6. Former GSA manufacturing continues under new company, Tag Industries. Here’s a look at the companies as they are operating today: Tag Industries Headquarters: Laguna Hills Founded: 1995 (GSA was founded in 1987) Business: Disposable medical products Employees: 5 Annual sales: $1 million Status: Private President: Terry L. Shirley, 48 GSA (Spintek Gaming Inc.) Headquarters: Chattanooga, Tenn.; two offices in Las Vegas Founded: 1993 as Spintek Gaming Business: Gaming equipment Employees: 20-25, including consultants Projected revenue, 1996: $20 million Status: Public, traded over the counter President: Lanier M. Davenport, 41 Source: GSA Inc.; Researched by JANICE L. JONES / Los Angeles Times