UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X]
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2000
[] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________ to _________
Commission file number 0-21991
ADVANCED GAMING TECHNOLOGY, INC.
(Exact name of small business issuer as specified in its charter)
Wyoming 98-0152226
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
P O BOX 46855 LAS VEGAS, NEVADA 89114 (Address of
principal executive offices)
(702) 227-6578
Issuer's telephone number
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date: March 31, 2000 25,000,000
Transitional Small Business Disclosure Format (check one). Yes [ ] No [X]
PART I
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT ACCOUNTANT'S REPORT
Advanced Gaming Technology, Inc.
We have reviewed the accompanying balance sheets of Advanced Gaming
Technology, Inc. as of March 31, 2000, and the related statements of operations,
and cash flows for the three month period then ended. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statement taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
Respectfully submitted
/S/ Robison, Hill & Co.
Certified Public Accountants
Salt Lake City, Utah
May 8, 2000
2
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
ASSETS: 2000 1999
Current Assets
Cash and cash equivalents ................ $ 396,513 $ 440,561
Accounts receivable, net ................. -- --
Prepaid expenses ......................... 1,000 1,000
Inventory ................................ 20,000 20,000
---------- ----------
Total current assets ..................... 417,513 461,561
Property and Equipment, net .............. 125,740 141,740
Intangible and other assets .............. 156,333 1,906,333
---------- ----------
Total assets ............................. $699,586 $2,509,634
========== ==========
See accompanying notes and accountants' report.
3
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' DEFICIT: 2000 1999
Liabilities
Accounts payable and accrued liabilities ........ $ 174,914 $ 140,510
Current portion of long term debt ............... -- 104,000
------------ ------------
Total liabilities ............................... 174,914 244,510
Long term obligations, net of current portion ... 909,697 2,535,019
------------ ------------
Total liabilities ............................... 1,084,611 2,779,529
Stockholders' Deficit:
Preferred Stock-10% cumulative, $.10 par value;
authorized 4,000,000 shares; issued - nil ...... -- --
Common Stock - $.005 par value; authorized
25,000,000 and 150,000,000 shares, issued
and outstanding 25,000,000 and 1,750,000
in 1999 and 1998, respectively ................. 125,000 125,000
Additional paid-in capital ...................... -- --
Accumulated deficit ............................. (510,025) (394,895)
------------ ------------
Total stockholders' deficit ..................... (385,025) (269,895)
------------ ------------
Total liabilities and stockholders deficit ...... $ 699,586 $ 2,509,634
============ ============
See accompanying notes and accountants' report.
4
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months
Ended March 31,
2000 1999
------------ ------------
Revenue ............................. $ 15,163 $ 87,501
Cost of revenue ..................... -- --
------------ ------------
Gross margin ........................ 15,163 87,501
Expenses ............................ 98,935 101,889
------------ ------------
Earnings (Loss) from operations ..... (83,772) (14,388)
Other income (expense), net ......... (31,358) (96,500)
------------ ------------
Earnings (Loss) before reorganization
charges ....................... (115,130) (110,888)
Reorganization charges .............. -- --
------------ ------------
Net income (loss) ................... (115,130) (110,888)
============ ============
Net income(loss) per common share ... $ (.00) $ (.09)
============ ============
Weighted average common
shares outstanding ................. 25,000,000 1,260,929
See accompanying notes and accountants' report.
5
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended
March 31,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) ................................. $ (115,130) $ (110,888)
Adjustments to Reconcile Net Loss to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and amortization ..................... 16,000 21,000
Change in operating assets and liabilities:
Accounts receivable ............................... -- (71,410)
Prepaid expenses .................................. -- --
Inventory ......................................... -- --
Accounts payable and accrued liabilities .......... 34,404 96,500
----------- -----------
Net cash provided by (used in) operating activities (64,726) (64,798)
Cash Flows From Investing Activities:
Other assets ...................................... 1,750,000 --
Purchase of property and equipment ................ -- --
----------- -----------
Net Cash (Used in) provided by Investing Activities 1,750,000 --
Cash Flows From Financing Activities:
Proceeds from debt and notes ...................... -- --
Repayment of debt and notes ....................... (1,729,322) --
----------- -----------
Net cash provided by financing activities ......... (1,729,322) --
Net change in cash and cash equivalents ........... (44,048) (64,798)
Cash and cash equivalents at beginning of period .. 440,561 109,824
----------- -----------
Cash and cash equivalents at end of period ........ $ 396,513 $ 45,026
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest .......... $ 36,889 $ --
Supplemental Disclosure of Non-Cash
See accompanying notes and accountants' report.
6
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and December 31,1999
NOTE 1 - HISTORY AND ORGANIZATION
The Company was incorporated under the laws of the State of Wyoming in 1963
under the name of MacTay Investment Co. The Company changed its name to Advanced
Gaming Technology, Inc. in 1991. The Company's executive offices are located in
Las Vegas, Nevada. The Company is principally engaged in the development and
marketing of technology for the casino and hospitality industry.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
This summary of accounting policies for Advanced Gaming Technology, Inc. is
presented to assist in understanding the Company's financial statements. The
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
The unaudited financial statements as of March 31, 2000 and for the three months
then ended reflect, in the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to fairly state the financial
position and results of operations for the three months. Operating results for
interim periods are not necessarily indicative of the results which can be
expected for full years.
A summary of the significant accounting policies applied in the preparation of
the accompanying financial statements is as follows:
(a) Principles of Consolidation The consolidated financial statements
include the accounts of Advanced Gaming Technology, Inc. and its
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
(b) Inventory consists of bingo equipment parts and is carried at lower of
cost (first-in, first-out method) and market value.
(c) Property and Equipment Property and equipment is stated at cost.
Depreciation is provided in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives,
principally on a straight-line basis from 3 to 5 years.
Upon sale or other disposition of property and equipment, the cost and
related accumulated depreciation or amortization is removed from the
accounts and any gain or loss is included in the determination of
income or loss.
Expenditures for maintenance and repairs are charged to expense as
incurred. Major overhauls and betterments are capitalized and
depreciated over their useful lives.
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Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and December 31,1999
(Continued)
(d) Revenue. Revenue is generated on operating leases and is recognized on
an accrual basis. Certain reclassifications have been made in the 1999
financial statements to conform with the 2000 presentation
(e) Cash and Cash Equivalents. For purposes of the Statement of Cash Flows,
the Company considers all highly liquid debt instruments purchased with
a maturity of three months or less, as cash equivalents.
(f) Net Loss per Common Share. The reconciliations of the numerators and
denominators of the basic EPS computations are as follows:
2000 1999
-------------------------------- -----------------------------------
Number Number
Of Loss of Loss
Loss Shares per Share Loss Shares per Share
(Numerator) (Denominator) (Numerator) (Denominator)
Basic EPS
Loss to Common
Shareholders $ (115,130) 25,000,000 $(0.00) $ (110,888) 1,260,929 $(0.09)
=========== =========== ====== =========== ========== ======
The effect of outstanding common stock equivalents are anti-dilutive
for 2000 and 1999 and are thus not considered.
(g) Persuasiveness of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Certain reclassifications have been made in the 1999 financial
statements to conform with the 2000 presentation.
8
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and December 31,1999
(Continued)
NOTE 3 - OTHER ASSETS
2000 1999
------------- -----------
Land ...................................... $ -- $ 1,750,000
Investment in Travel Switch.com ........... 156,333 156,333
------------- -----------
$ 156,333 $ 1,906,333
============= ===========
During March 2000, the Company exchanged the land in settlement of a $1.75
million Note.
NOTE 4 - LONG-TERM DEBT
Long-term debt consists of the following:
2000 1999
---------- ----------
Note payable, interest at 7%, due in monthly
Payments of $6,200 beginning March 1, 2000,
Secured by land. The note is due in July of 2006
The note is convertible into common stock at a rate
of $.43 per share ................................... 909,697 906,548
Note payable, interest at 9%, due in monthly
Payments of $25,000 , Secured by land. Due in 2004
The note was cancelled in March 2000 .. -- 1,732,471
Less: current maturities ............................. -- --
---------- ----------
Net long-term debt ................................... $ 909,697 $2,639,019
========== ==========
NOTE 5 - INCOME TAXES
As of December 31, 1999, the Company had a net operating loss ("NOL")
carryforward for income tax reporting purposes of approximately $25,000,000
available to offset future taxable income. This net operating loss carry-forward
expires at various dates between December 31, 2008 and 2013. A loss generated in
a particular year will expire for federal tax purposes if not utilized within 15
years. Additionally, the Internal Revenue Code contains provisions that could
reduce or limit the availability and utilization of these NOLs if certain
ownership changes have taken place or will take place. In accordance with SFAS
No. 109, a valuation allowance is provided when it is more likely than not that
all or some portion of the deferred tax asset will not be realized. Due to the
uncertainty with respect to the ultimate realization of the NOLs, the Company
established a valuation allowance for the entire net deferred income tax asset
of $12,000,000 as of March 31, 2000
9
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Continued)
NOTE 6 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. However, the Company has sustained substantial
operating losses in recent years. In addition, the Company has used substantial
amounts of working capital in its operations.
In view of these matters, realization of a major portion of the assets in the
accompanying balance sheet is dependent upon continued operations of the Company
which in turn is dependent upon the Company's ability to meet its financing
requirements and succeed in its future operations. Management believes that
actions presently being taken to revise the Company's operating and financial
requirements provide the opportunity for the Company to continue as a going
concern.
NOTE 7 - PETITION FOR RELIEF UNDER CHAPTER 11
The company filed for reorganization under chapter 11 of the U S bankruptcy code
in Las Vegas on August 26, 1998. Under Chapter 11, certain claims against the
Debtor in existence prior to the filing of the petitions for relief under the
federal bankruptcy laws are stayed while the Debtor continues business
operations as Debtor-in-possession. These claims were reflected in the March 31,
1999 balance sheet as "liabilities subject to compromise." The bankruptcy plan
was approved June 29, 1999 and became effective on August 19, 1999. On February
15, 2000 the bankruptcy court in the district of Las Vegas approved the final
decree of the company closing the chapter 11 bankruptcy case of the company.
Pursuant to the plan, obligations to secured creditors were re-negotiated. All
remaining liabilities of the company were fully satisfied through issuance of
new common stock. Unsecured creditors received 1.88 shares of new common stock
for each $1 of allowed claim. The company issued 25 million shares of new common
stock in conjunction with the plan. The existing common stock was cancelled.
Existing shareholders of the company on the effective date received 1 share of
new common stock for each 66 shares of common stock currently owned.
Approximately 21 million shares were issued to creditors, existing shareholders
and new investors. A reserve of approximately 4 million shares is maintained for
additional allowed claims.
NOTE 8 FRESH START ACCOUNTING
The Company accounted for the reorganization using fresh-start reporting.
Accordingly, all assets and liabilities were restated to reflect their
reorganization value, which approximates fair value at the date of
reorganization.
10
Item 2. Management's Discussion and Analysis
General -
This discussion should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations in the Company's
annual report on Form 10-KSB for the year ended December 31, 1999. The Company's
shares of capital stock are registered under Section 12 of the Securities
Exchange Act of 1934. The Company became a reporting issuer in March 1997. This
quarterly report on Form 10-QSB and the information incorporated by reference
herein contain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Such statements include, but are not limited
to, projected sales, gross margin and net income figures, the availability of
capital resources, plans concerning products and market acceptance.
Forward-looking statements are inherently subject to risks and uncertainties,
many of which cannot be predicted with accuracy and some of which may not even
be anticipated. Future events and actual results, financial and otherwise, could
differ materially from those set forth in or contemplated by the forward-looking
statements herein and any forward looking statements should be considered
accordingly.
In August of 1998 the company filed for reorganization under chapter 11 of the
U. S. Bankruptcy Code in the District of Las Vegas. The company operated as a
debtor-in-possession until June 29, 1999 when its plan was confirmed by the
court. The plan became effective on August 19, 1999.
Under the terms of the court-approved plan the existing common stock interests
in Advanced Gaming Technology, Inc were cancelled. The company, as reorganized,
issued new common stock. The plan provided, generally, that unsecured creditors
of the company holding allowed claims receive 1.88 shares of new common stock
for each $1 of allowed claim. Holders of common stock of the company received 7%
of the new common stock under the terms of the plan.
The company has adopted fresh-start accounting on the effective date of the plan
in accordance with AICPA Statement of Position 90-7 " Financial reporting by
entities in reorganization under the bankruptcy code" (SOP 90-7). The fresh
start reporting was first reflected in the September 30, 1999 Consolidated
Balance Sheet.
Liabilities subject to compromise immediately prior to the effective date were
discharged on the effective date. Depending on the nature of the claim each
obligation was paid, exchanged for stock, discharged, or carried forward as a
new liability under the terms of the plan.
11
Results of Operations -
2000 Compared to 1999
Net income for the three months ended March 31, 2000 was a loss of $115,130
compared to a net loss of $110,888 for the same period in 1999.
Revenue for the three months ended March 31, 2000 was $15,163 compared to
$87,501 in 1999.
The Company is currently pursuing new distribution arrangements for the Max Lite
electronic bingo system. Management is working to establish a network of
distributors to market, service and support the product. Modifications have been
made to the system to restore its competitiveness in the market. These updates
have been accomplished at minimal cost. Management is currently considering a
national distribution contract for exclusive marketing rights to the system.
The company has adequate inventory of finished units to supply many new
installations. Since the reorganization new arrangements have been made with
suppliers of parts and materials essential to production of additional units.
The damage done to the company's image prior to the reorganization of the
company was significant. Vendors and suppliers were alienated and thus were
unwilling to support the company's ongoing efforts. Distributors and customers
became disenchanted with the company's level of service and support.
The new strategic plan of the company stresses the importance of moving
cautiously and with complete competence in developing new relationships.
Management is confident at this time that the bridges to suppliers have been
rebuilt. New relationships with distributors of the products are now possible.
The image is being rebuilt on a solid foundation.
Expenses for the first three months of 2000 were $98,935 compared to $101,889
in the prior year. Salaries and wages in the amount of $56,250 were accrued but
not paid at the election of management. Expenses are expected to remain low to
preserve cash flow until sufficient revenue can be generated from product
installations.
Other income(expense) for the first three months of 2000 was $(31,358) compared
to $(96,500) in 1999. Interest expense decreased in 2000 due to the conversion
of liabilities to equity during the past year. This expense will continue to
decline in the second quarter due to the elimination of $1,750,000 of long term
debt. Debt service has been reduced to less than $9,000 per month.
12
Liquidity and Capital Resources -
The Company has a cash balance in excess of $300,000. Cash is being preserved as
much as possible until product distribution arrangements are in place.
Management elected to defer payment of salaries and wages until the second
quarter. The company is aggressively pursuing distribution of the Max Lite and
Max Plus products. Due to strong competition in the market there is no guarantee
that such efforts will be successful.
The company's debt was restructured pursuant to the reorganiztion plan during
1999. Long-term debt was reduced to two notes totaling $2.6 million. The company
was required to make only minimal debt service payments on these notes for the
first six months following the effective date of the plan.
In March of 2000, the company further reduced long term debt by eliminating
$1.75 million in note payable. This was accomplished by returning the Company's
170 acres of land held in Branson, Missouri to the first mortgage holder.
Efforts to sell the land in excess of this amount were unsuccessful. The company
did not feel that a real estate investment fit into the overall asset portfolio
of the company. Debt service payments related to the land were nearly $30,000
per month.
The company intends to aggressively market the existing Max Lite and Max Plus
electronic bingo systems. In addition, the company intends to invest in new
projects as opportunities arise. These projects will likely include areas
unrelated to the current electronic bingo systems. This is part of an overall
strategic plan to diversify revenue. Such projects may be funded through
existing cash reserves or may require additional working capital. There is no
guarantee that funding will be available when these opportunities arise. The
company will consider all methods of financing as a means of funding new
projects.
The first new project was identified in 1999. The company invested in a new
Internet travel venture, TravelSwitch.com. The new entity is an on-line seller
of hotel rooms for the Las Vegas market at the internet address 777lasvegas.com.
The entity quietly began live sales in February 2000. The TravelSwitch marketing
plan is being rolled out during the first six months of 2000. Advanced Gaming is
building equity in this investment as Internet travel is one of the fastest
growing sectors of electronic commerce. The company does not expect to receive
cash flow from this operation during 2000 as excess cash, if any, will likely be
utilized to enhance the branding of the site.
The Las Vegas market is booming with a base of 120,000 rooms achieving occupancy
levels in excess of 90%. The national average for hotel occupancy is around 71%.
The Internet is a popular method for booking travel. The company believes that
on-line travel reservations will increase significantly during the next five
years. Advanced Gaming Technology currently owns 22% of TravelSwitch.
13
Inflation and Regulation -
The Company's operations have not been, and in the near term are not expected to
be, materially affected by inflation or changing prices. The Company encounters
competition from a variety of firms offering similar products in its market
area. Many of these firms have long standing customer relationships and are well
staffed and well financed. The Company believes that competition in the industry
is based on competitive pricing, although the ability, reputation and technical
support of a concern is also significant. The Company does not believe that any
recently enacted or presently pending proposed legislation will have a material
adverse effect on its results of operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
14
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ADVANCED GAMING TECHNOLOGY, INC.
(Registrant)
DATE: May 9, 2000 By: /s/ DANIEL H. SCOTT
------------------------------------
Daniel H. Scott
President, Chief Executive
Officer and Director
DATE: May 9, 2000 By: /s/ DANIEL H. SCOTT
------------------------------------
Daniel H. Scott
Chief Financial Officer
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