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, 2002
[] 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: March 31, 2002 21,430,587
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, 2002 and December 31, 2001, and the related
statements of operations, and cash flows for the three month period ended March
31, 2002 and 2001. 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 1, 2002
2
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2002 2001
----------- -----------
ASSETS:
Current Assets
Cash and cash equivalents ........................ $ 37,998 $ 45,709
Prepaid expenses ................................. -- 1,000
----------- -----------
Total current assets ............................. 37,998 46,709
Property and Equipment, net ..................... 51,862 66,862
----------- -----------
Total assets ..................................... $ 89,860 $ 113,571
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Liabilities
Accounts payable and accrued liabilities ......... $ 5,206 $ 10,000
Notes Payable .................................... 1,451,914 1,367,424
----------- -----------
Total liabilities ................................ 1,457,120 1,377,424
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
21,430,587 at March 31, 2002 and
December 31, 2001, respectively ................. 107,153 107,153
Additional paid-in capital ....................... -- --
Accumulated deficit .............................. (1,474,413) (1,371,006)
----------- -----------
Total stockholders' deficit ...................... (1,367,260) (1,263,853)
----------- -----------
Total liabilities and stockholders deficit ....... $ 89,860 $ 113,571
=========== ===========
See accompanying notes and accountants' report.
3
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months
Ended March 31,
2002 2001
------------ ------------
Revenue .................................. $ -- $ 53,701
Expenses
Corporate Expense/Salaries ............. 56,250 56,250
Depreciation ........................... 15,000 15,000
Other Operating Expenses ............... 3,935 32,066
------------ ------------
75,185 103,316
Loss from operations ..................... (75,185) (49,615)
Other income (expense)
Interest, net ............................ (28,222) (16,893)
------------ ------------
Net income (loss) ........................ (103,407) (66,508)
============ ============
Net income(loss) per common share ........ $ (.00) $ (.00)
============ ============
Weighted average common
shares outstanding ...................... 21,430,587 25,000,000
See accompanying notes and accountants' report.
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Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Three Months Ended
March 31,
2002 2001
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) .................................... $(103,407) $ (66,508)
Adjustments to Reconcile Net Loss to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and amortization ........................ 15,000 15,000
Change in operating assets and liabilities:
Accounts Receivable .................................. -- (6,775)
Prepaid expenses ..................................... 1,000 --
Accounts payable and accrued liabilities ............. (4,794) 6,846
Notes payable ........................................ 84,490 --
--------- ---------
Net cash used in operating activities ................ (7,711) (51,437)
Cash Flows From Investing Activities:
Purchase of property and equipment ................... -- (23,747)
--------- ---------
Net Cash (Used in)Investing Activities ............... -- (23,747)
Cash Flows From Financing Activities:
Proceeds from debt and notes ......................... -- --
Repayment of debt and notes .......................... -- (3,374)
--------- ---------
Net cash provided by financing activities ............ -- (3,374)
Net change in cash and cash equivalents .............. (7,711) (78,558)
Cash and cash equivalents at beginning of period ..... 45,709 171,807
--------- ---------
Cash and cash equivalents at end of period ........... $ 37,998 $ 93,249
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest ............. $ -- $ 17,737
See accompanying notes and accountants' report.
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Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2002 and 2001
(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, 2002 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) 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 Three Months Ended March 31, 2002 and 2001 (Unaudited)
(Continued)
(c) 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.
(d) Net Loss per Common Share. The reconciliations of the numerators and
denominators of the basic EPS computations are as follows:
2002 2001
------------------------------ ------------------------------
Number Loss Number Loss
Of per of per
Loss Shares Share Loss Shares Share
Basic EPS:
Loss to Common
Shareholders $(103,407) 21,430,587 $ (0.00) $(66,508) 25,000,000 $ (0.00)
========= ========== ======== ======== ========== ========
(e) 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 2001 financial statements
to conform with the 2002 presentation.
7
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2002 and 2001 (Unaudited)
(Continued)
NOTE 3 - OTHER ASSETS
2002 2001
------------- -----------
Investment in TravelSwitch ........... -- --
------------- -----------
$ -- $ --
============= ===========
NOTE 4 - NOTES PAYABLE
Notes Payable consist of the following:
2002 2001
---------- ----------
Note payable, interest at 9%, 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 ......................... $ 961,819 $ 940,939
Note Payable, interest at Prime plus 2%
Payable to an officer of the company, secured
By all assets of the company .............. 490,095 426,485
---------- ----------
Net long-term debt ........................ $1,451,914 $ 1,367,424
========== ==========
NOTE 5 - INCOME TAXES
As of December 31, 2001, 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 would
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
8
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2002 and 2001(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.
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, 2001. 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.
10
Results of Operations -
2002 Compared to 2001
Operating loss for the three months ended March 31, 2002 was $103,407 compared
to a loss of $66,508 for the same period in 2000. The decrease in operating
income was the result of a decrease in revenue from placement of Max Lite and
Max Plus units. There was no revenue in the current quarter from electronic
bingo products. The electronic bingo units are not competitive due to the age
and quality of the product. Management does not expect revenue from existing
electronic bingo units in the future.
The Company is currently pursuing all possible options including the sale of
company assets, merger or dissolution.
Expenses for the first three months of 2002 were $75,185 compared to $103,316 in
the prior year. The improvement is due to a decrease in administrative expenses.
In addition, $71,250 of the 2002 expenses were non-cash expenses representing
depreciation and unpaid salary. 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 cash outlays.
Other income(expense) for the first three months of 2002 was $(28,222) compared
to $(16,893) in 2001.
11
Liquidity and Capital Resources -
The Company has a cash balance of $37,998. The company will require additional
capital to continue operations. There is no assurance that capital will be
available. Management is considering all options including sale, merger, reverse
merger or dissolution of the Company. Any such transaction could have a
significant negative impact on current shareholders.
Management has again elected to defer payment of salaries and wages until the
second Quarter of 2002.
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. In March of
2000, the company further reduced long term debt by eliminating A $1.75 million
note.
The company owns a 22% interest in TravelSwitch, LLC a Internet travel service
provider. The Company does not expect to receive cash flow from TravelSwitch
during 2000.
12
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.
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: May 7, 2002 By: /s/ DANIEL H. SCOTT
------------------------------------
Daniel H. Scott
President, Chief Executive
Officer and Director
DATE: May 7, 2002 By: /s/ DANIEL H. SCOTT
------------------------------------
Daniel H. Scott
Chief Financial Officer
14