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: June 30, 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) 227-6668
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: June 30, 2000 25,000,000
Transitional Small Business Disclosure Format (check one). Yes [ ] No [X]
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited condensed consolidated financial statements presented herein
have been prepared by the Company in accordance with the instructions to
Form10-QSB and do not include all of the information and note disclosures
required by generally accepted accounting principles. These condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Form 10-KSB for the year ended December 31, 2000. The accompanying financial
statements have not been examined by independent accountants in accordance with
generally accepted auditing standards, but in the opinion of management such
financial statements include all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the Company's financial
position and results of operations. The results of operations for the three and
six months ended June 30, 2000 may not be indicative of the results that may be
expected for the year ending December 31, 2001.
2
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
ASSETS: 2001 2000
- --------- ----------- -----------
Current Assets
Cash and cash equivalents $ 83,238 $ 171,807
Accounts receivable 3,700 --
Prepaid expenses 1,000 1,000
Inventory 20,000 20,000
----------- -----------
Total current assets 107,938 192,807
Property and Equipment, net 119,500 125,753
Other assets 45,178 78,178
----------- -----------
Total assets $ 272,616 $ 396,738
=========== ===========
June 30, December 31,
2001 2000
LIABILITIES AND STOCKHOLDER'S DEFICIT ----------- -----------
- ----------------------------------------
Current Liabilities
Accounts payable and accrued liabilities $ 88,779 $ 330,798
Notes payable 1,200,497 900,276
----------- -----------
Total current liabilities 1,289,276 1,231,074
Long term obligations, net of current portion -- --
----------- -----------
Total liabilities 1,289,276 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
150,000,000 shares; issued and outstanding
25,000,000 on June 30, 2001 and December 31, 2000 125,000 125,000
Additional paid-in capital -- --
Accumulated deficit (1,141,660) (959,336)
----------- -----------
Total stockholders' deficit (1,016,660) (834,336)
----------- -----------
Total liabilities and stockholders deficit $ 272,616 $ 396,738
=========== ===========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2001 2000 2001 2000
---------- ---------- ---------- ----------
Revenues $ 27,721 $ -- $ 81,422 $ 15,163
Expenses
Salaries and wages 56,250 56,250 112,500 112,500
Depreciation 15,000 16,000 30,000 32,000
Administrative expenses 31,455 29,995 63,521 56,681
---------- ---------- ---------- ----------
102,705 102,245 206,021 201,181
Loss from operations 74,984 102,245 124,599 186,017
Other income (expense), net (40,832) (10,831) (57,725) (42,188)
---------- ---------- ---------- ----------
Net Loss $ 115,816 113,076 $ 182,324 $ 228,206
========== ========== ========== ==========
Net loss per common share $ -- $ -- $ (.01) $ (.01)
========== ========== ========== ==========
Weighted average common
shares outstanding 25,000,000 25,000,000 25,000,000 25,000,000
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months
Ended June 30,
2001 2000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (182,324) $ (228,206)
Adjustments to Reconcile Net Loss to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and amortization 30,000 32,000
Loss from earnings of affiliate 33,000 --
Change in operating assets and liabilities:
Accounts receivable (3,700) --
Accounts payable and accrued liabilities (241,798) (29,595)
Conversion of accounts payable to notes payable 300,000 --
----------- -----------
Net cash used in operating activities (64,822) (225,801)
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:
Repayment of debt and notes -- (1,638,271)
----------- -----------
Net cash provided by financing activities -- (1,638,271)
Net change in cash and cash equivalents (88,569) (114,072)
Cash and cash equivalents at beginning of period 171,807 440,561
----------- -----------
Cash and cash equivalents at end of period $ 83,238 $ 326,489
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 34,562 $ 31,368
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
Advanced Gaming Technology, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 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 June 30, 2001 and for the six 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.
6
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six Months Ended June 30, 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
Loss Of Shares Loss Loss Of Shares Loss
(Numerator)(Denominator)Per Share (Numerator)(Denominator)Per Share
Basic EPS
Loss to
Common
Shareholders$182,324 25,000,000 $ (.01) $228,206 25,000,000 $(.01)
======== ============ ======== ========= ============= ========
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.
NOTE 3 - OTHER ASSETS
2001 2000
------------- -----------
Investment in TravelSwitch ........... 45,178 78,178
------------- -----------
$ 45,178 $ 78,178
============= ===========
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Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2001 and 2000 (Unaudited)
(Continued)
NOTE 4 - NOTES PAYABLE
Notes payable consist of the following:
2001 2000
---------- ----------
Note payable, interest at 7%, due in monthly Payments
of $6,200 beginning March 1, 2000, The note is due in
July of 2006 The note is convertible into common
stock at a rate of $.53 per share. The note is in
default subsequent to 6/30/2001 and has been
reclassified as current............................... 900,497 900,276
Note payable, interest at prime plus 2%, payable on
Demand to an officer of the company, secured by all
Assets of the company 300,000 --
---------- ----------
Notes payable ................................... $ 1,200,497 $ 900,276
========== ==========
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
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. Subsequent to June 30, 2001 the
company defaulted on its long term debt obligation.
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.
8
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2001 and 2000 (Unaudited)
(Continued)
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.
9
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.
Results of Operations -
2001 Compared to 2000
The company incurred a net loss for the quarter ended June 30, 2001 of $115,816
compared to a loss of $113,076 in the same quarter of 2000. The net loss for the
six months ended June 30, 2001 was $182,324 compared to a loss of $228,206 for
the same period in 2000.
The Company completed a Chapter 11 bankruptcy reorganization in the third
quarter of 1999. Since that time the company has focused efforts on placement of
the existing electronic bingo systems. These efforts have proven to be a
challenge as the marketplace is very competitive and most distributors are
aligned with one or more of these competitors. To further complicate these
efforts the Max Lite handheld unit has not been well received. It is near the
end of its useful life cycle. Placements with certain distributors have been
unsuccessful as customer acceptance of the product is low. Revenue from bingo
systems is expected to be limited during the remainder of 2001.
In January of 2000 the Company formed the Internet travel provider
TravelSwitch.com . This venture accepts room reservations for the Las Vegas
market from the Internet address www.777LasVegas.com. The venture also handles
all forms of retail travel. Advanced Gaming Technology holds a 22% interest in
TravelSwitch.
Online commerce has experienced difficulties during the past twelve months. The
online travel market is extremely competitive. Many of these competitiors have
far greater resources than TravelSwitch. Due to the immediate cash needs of the
company, AGT is considering all options related to this investment including
sale of the entire interest.
10
The Company was named in a patent infringement action during June of 2001.
Although the company believes the claims to be unfounded, the outcome of this
action could delay or prevent the introduction of AGT's new bingo product,
Firecracker Bingo.
All of the items discussed above indicate that revenue and cash for operations
will be minimal during the second half of 2001. The company will consider all
options to generate cash for operations including sale of some or all assets of
the company.
Expenses for the first six months of 2001 were $206,021 compared to $201,181 in
.0the prior year. A portion of this expense in 2001 and 2000 represents
management salary that has been converted to a secured note payable at June 30,
2001. Expenses for the second quarter were $102,705 compared to $102,245 in
2000.
Other income (expense) consisted of an expense of $57,725 for the first six
months of 2001 compared to an expense of $42,188 in 2000. $33,000 of this
expense in 2001 represents loss on earnings of affiliate. Interest expense was
$34,562 in 2001 compared to $52,573 in 2000.
Liquidity and Capital Resources -
Efforts to place electronic bingo systems have not been successful. Minimal
revenue is expected during the second half of 2001. Additional operating capital
is necessary to continue operations. There is no guarantee that such capital
will be readily available. The company will consider all options including the
sale of certain assets in efforts to raise cash.
Debt in excess of $10 million at June 30, 1998 has been reduced to one note for
$900,000 and one note for $300,000 at June 30, 2001. The larger note is
convertible at the option of the holder at a rate of $.53 per share. The company
has discontinued payments on this note. Efforts are underway to negotiate a
settlement of this obligation. Settlement could include conversion of all or a
portion of this note to stock at or below current market value.
The $300,000 note is payable on demand to an officer of the company. This note
is secured by the assets of the company. This note could be settled in a similar
manner.
This debt presents a barrier to company's ability to generate funding for new
projects. The most likely solution to settlement of these obligations is
conversion to equity through issuance of common shares. The issuance of stock to
settle these obligations or to acquire revenue producing assets could
significantly dilute the positions of current shareholders. The company is
authorized to issue 150 million common shares. There are currently 25 million
shares issued and outstanding. A significant portion of the unissued shares
could be necessary to satisfy these obligations or to acquire new investment
capital or assets.
11
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.
12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
Subsequent to June 30, 2001 the company was in default on a promissory note as a
payment scheduled for July, 1, 2001 was not made. The company is currently
attempting to negotiate a compromise to this obligation.
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
The company filed one report on form 8K during the three months ended June 30,
2001.
1. On April 30, 2001 An officer of the company announced a plan to sell shares
in the company in accordance with rule 10b-5.
13
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: August 1, 2001 By: /s/ DANIEL H. SCOTT
------------------------------
Daniel H. Scott
President, Chief Operating
Officer and Director
(Principal executive and
accounting oficer)
14