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, 2001
[] 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, 2001 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, 2001 and December 31, 2000, and the related
statements of operations, and cash flows for the three month period ended March
31, 2001 and 2000. 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, 2001
2
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
ASSETS: 2001 2000
Current Assets
Cash and cash equivalents ................ $ 93,249 $ 171,807
Accounts Receivable 6,775 -
Prepaid expenses ......................... 1,000 1,000
Inventory ................................ 20,000 20,000
---------- ----------
Total current assets ..................... 121,024 192,807
Property and Equipment, net .............. 134,500 125,753
Other assets ............................. 78,178 78,178
---------- ----------
Total assets ............................. $333,702 $ 396,738
========== ==========
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' DEFICIT: 2001 2000
Liabilities
Accounts payable and accrued liabilities ........ $ 337,644 $ 330,798
Current portion of long term debt ............... 13,100 13,100
------------ ------------
Total liabilities ............................... 350,744 343,898
Long term obligations, net of current portion ... 883,802 887,176
------------ ------------
Total liabilities ............................... 1,234,546 1,231,074
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 shares, issued and outstanding
25,000,000 at March 31, 2001 and
December 31, 2000, respectively ................ 125,000 125,000
Additional paid-in capital ...................... -- --
Accumulated deficit ............................. (1,025,844) (959,336)
------------ ------------
Total stockholders' deficit ..................... (900,844) (834,336)
------------ ------------
Total liabilities and stockholders deficit ...... $ 333,702 $ 396,738
============ ============
See accompanying notes and accountants' report.
4
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months
Ended March 31,
2001 2000
------------ ------------
Revenue ............................. $ 53,701 $ 15,163
Expenses
Corporate Expense/Salaries......... 56,250 56,250
Depreciation....................... 15,000 16,000
Other Operating Expenses........... 32,066 26,685
------------ ------------
Income (Loss) from operations ....... (49,615) (83,772)
Other income (expense)...............
Interest, net (16,893) (31,358)
------------ ------------
Net income (loss) ................... (66,508) (115,130)
============ ============
Net income(loss) per common share ... $ (.00) $ (.00)
============ ============
Weighted average common
shares outstanding ................. 25,000,000 25,000,000
See accompanying notes and accountants' report.
5
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Three Months Ended
March 31,
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) ................................. $ (66,508) $ (115,130)
Adjustments to Reconcile Net Loss to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and amortization ..................... 15,000 16,000
Change in operating assets and liabilities:
Accounts Receivable (6,775) --
Accounts payable and accrued liabilities .......... 6,846 34,404
----------- -----------
Net cash provided by (used in) operating activities (51,437) (64,726)
Cash Flows From Investing Activities:
Other assets ...................................... -- 1,750,000
Purchase of property and equipment ................ (23,747) --
----------- -----------
Net Cash (Used in) provided by Investing Activities (23,747) 1,750,000
Cash Flows From Financing Activities:
Proceeds from debt and notes ...................... -- --
Repayment of debt and notes ....................... (3,374) (1,729,322)
----------- -----------
Net cash provided by financing activities ......... (3,374) (1,729,322)
Net change in cash and cash equivalents ........... (78,558) (44,048)
Cash and cash equivalents at beginning of period .. 171,807 440,561
----------- -----------
Cash and cash equivalents at end of period ........ $ 93,249 $ 396,513
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest .......... $ 17,737 $ 36,889
See accompanying notes and accountants' report.
6
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2001 and 2000 (Unaudited)
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
The 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, 2001 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
For the Three Months Ended March 31, 2001 and 2000 (Unaudited)
(Continued)
(d) Revenue. Revenue is generated on operating leases and is recognized on an
accrual basis. Certain reclassifications have been made in the 2000
financial statements to conform with the 2001 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:
2001 2000
-------------------------------- -----------------------------------
Number Number
Of Loss of Loss
Loss Shares per Share Loss Shares per Share
(Numerator) (Denominator) (Numerator) (Denominator)
Basic EPS
Loss to Common
Shareholders $ (66,508) 25,000,000 $(0.00) $ (115,130) 25,000,000 $(0.00)
=========== =========== ====== =========== ========== ======
The effect of outstanding common stock equivalents are anti-dilutive for
2001 and 2000 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 2000 financial statements
to conform with the 2001 presentation.
8
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2001 and 2000 (Unaudited)
(Continued)
NOTE 3 - OTHER ASSETS
2001 2000
------------- -----------
Investment in TravelSwitch ........... 78,178 78,178
------------- -----------
$ 78,178 $ 78,178
============= ===========
NOTE 4 - LONG-TERM DEBT
Long-term debt consists of the following:
2001 2000
---------- ----------
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 .................................... 896,902 900,276
Less: current maturities ............................. 13,100 13,100
---------- ----------
Net long-term debt ................................... $ 883,802 $ 887,176
========== ==========
NOTE 5 - INCOME TAXES
As of December 31, 2000, 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 2015. 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, 2001
9
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2001 and 2000 (Unaudited)
(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, 2000. 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.
In February of 2001 the company decided to accept offers for an outright sale of
the company. The reorganization process has been completed. The company's
balance sheet is in the best condition in years. The sales, service and support
network needs to be expanded. This could be accomplished by an existing entity
that could do so efficiently gaining significant economies of scale. The
company's most valuable assets could its intellectual property. Additionally,
the tax benefits of the company could prove beneficial to a larger scale
operation.
11
Results of Operations -
2001 Compared to 2000
Operating loss for the three months ended March 31, 2001 was $49,615 compared to
a loss of $83,772 for the same period in 2000. The improvement in operating
income was the result of increased revenue from placement of Max Lite and Max
Plus units. Revenue increased to $53,701 for the three months ended March 31,
2001 from $15,163 in 2000.
The Company is currently pursuing distribution of the Max Lite and Max Plus
electronic bingo system. Management is hopeful that the company's new product
Firecracker Bingo will be implemented in the second quarter of 2001. This new
Product is a complement to the existing products and can stand alone in a bingo
Facility without any other electronics.
Modifications have been made to the Max Lite and Max Plus products in an effort
to increase competitiveness in the market. These updates have been accomplished
at minimal cost.
Expenses for the first three months of 2001 were $103,316 compared to $98,935 in
the prior year. The slight increase was a direct result of the additional
product placements. Salaries and wages in the amount of $56,250 were accrued but
not paid at the election of management in both years. Management is making
efforts to minimize expenses until additional cash flow can be generated from
product installations.
Other income(expense) for the first three months of 2001 was $(16,893) compared
to $(31,358) in 2000. Interest expense decreased in 2001 due to the elimination
of certain long-term debt during the past year. Debt service has been reduced to
approximately $7,000 per month.
12
Liquidity and Capital Resources -
The Company has a cash balance of $93,249. Cash is being preserved as much as
possible until product distribution arrangements are in place. Management has
again elected to defer payment of salaries and wages until the second Quarter of
2001. The company is 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 A
$1.75 million note. 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 continues to aggressively market the existing Max Lite and Max Plus
electronic bingo systems. In addition, the company intends to introduce new
projects as opportunities arise. These projects could 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, llc. TravelSwitch provides room
reservations for the Las Vegas market from the Internet addresses
www.777lasvegas.com and www.PlayVegas.com. The entity began live sales in
February 2000. TravelSwitch also operates Imperial Travel, a traditional travel
Agency and Speedway Travel, which specializes in travel arrangements for NASCAR
Events. TravelSwitch generated positive earnings from operations during the
first quarter of 2001. However, after depreciation the resulting net earnings
were negligible.
Internet travel is one of the fastest growing sectors of electronic commerce.
The company does not expect to receive cash flow from TravelSwitch during 2000
as excess cash, if any, will likely be utilized to enhance the promotion of the
company's brands.
Advanced Gaming Technology 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, 2001 By: /s/ DANIEL H. SCOTT
------------------------------------
Daniel H. Scott
President, Chief Executive
Officer and Director
DATE: May 9, 2001 By: /s/ DANIEL H. SCOTT
------------------------------------
Daniel H. Scott
Chief Financial Officer
15