[As adopted in Release No. 34-32231, April 28, 1993, 58 F.R. 26509]
U.S. 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, 1997
[ ] 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.)
2482 - 650 West Georgia Street, P.O. Box 11610, Vancouver, British Columbia
V6B 4N9
(Address of principal executive offices)
(604) 689-8841
Issuer's telephone number
(Former name, former address and former fiscal year, if changed since last
report.)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
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 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:
July 31, 1997 68,807,262
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 Form 10-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, 1996. 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, 1997 may not be indicative of the results that
may be expected for the year ending December 31, 1997.
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
ASSETS: 1997 1996
Current Assets
Cash and cash equivalents $ 77,210 $ 76,615
Accounts receivable, net 309,658 56,492
Prepaid expenses 308,445 129,969
Deferred charges 1,152,431 -
Inventory 272,297 43,000
Notes receivable 49,403 129,426
Total current assets 2,169,444 435,502
Notes Receivable 1,249,113 1,099,300
Property and Equipment 2,918,877 2,553,293
Less: accumulated depreciation (838,248) (583,412)
2,080,629 1,969,881
Intangible and other assets 5,782,846 5,940,882
Total assets $ 11,282,032 $ 9,445,565
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current liabilities
Accounts payable and accrued liabilities $ 2,282,038 $ 3,204,497
Bank loan - 354,100
Convertible notes 6,056,139 3,292,715
Deferred revenue 390,000 765,380
Current portion of long term debt 1,943,706 2,459,528
Total current liabilities 10,671,883 10,076,220
Long term obligations, net of current portion 1,987,268 2,531,220
Total liabilities 12,659,151 12,607,440
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
62,714,009 in 1997 and 42,248,368 in 1996 313,570 211,242
Additional paid-in capital 24,899,940 20,000,471
Accumulated deficit (26,590,629) (23,373,588)
Total stockholders' deficit (1,377,119) (3,161,875)
Total Liabilities and
Stockholders' Deficit $ 11,282,032 $ 9,445,565
The accompanying notes are an integral part of the condensed consolidated
financial statements.
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For
the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
Revenues $ 212,836 $ 224,488 $ 723,202 $ 365,698
Cost of revenues 133,740 54,317 240,474 142,595
Gross margin 79,096 170,171 482,728 223,103
Expenses
Research and development 314,642 556,089 528,883 720,526
General and administrative 1,477,349 341,251 2,102,149 978,769
1,791,991 897,340 2,631,032 1,699,295
Loss from operations 1,712,895 727,169 2,148,304 1,476,192
Other income (expense),net (770,439) (267,412) (1,068,740) (517,029)
Net Loss $2,483,334 $ 994,581 $3,217,044 $1,993,221
Net loss per common share $ (.05) $ (.03) $ (.06) $ (.06)
Weighted average common
shares outstanding 50,777,724 33,763,982 50,777,724 33,763,982
The accompanying notes are an integral part of the condensed consolidated
financial statements.
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months
Ended June 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (3,217,044) $(1,993,221)
Adjustments to Reconcile Net Loss to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and amortization 475,225 260,246
Deferred revenues (310,000) -
Issuance of common stock for expenses 526,808 -
Change in operating assets and liabilities:
Accounts receivable (253,166) (7,720)
Prepaid expenses (178,476) (159,400)
Deferred charges (1,152,431) -
Inventory (229,297) (21,409)
Notes receivable (69,790) -
Accounts payable and accrued liabilities (922,459) (338,466)
Net cash used in operating activities (5,330,630) (2,259,970)
Cash Flows From Investing Activities:
Other assets (60,000) -
Purchase of property and equipment (365,584) (1,260,552)
Acquisition of land - (11,425)
Deferred development costs (2,352) (79,243)
Purchase of gaming equipment - (813,579)
Net Cash Used In Investing Activities (427,936) (2,164,799)
Cash Flows From Financing Activities:
Proceeds from issuance of common stock 1,399,308 1,056,483
Proceeds from debt and notes 7,009,490 5,057,162
Repayment of debt and notes (2,295,537) (1,000,880)
Advances from joint venture partner - 290,000
Stockholder loans - (1,014,372)
Bank loan (354,100) 35,764
Net cash provided by financing activities 5,759,161 4,424,157
Net change in cash and cash equivalents 595 (612)
Cash and cash equivalents at beginning of period 76,615 17,739
Cash and cash equivalents at end of period $ 77,210 $ 17,127
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 246,026 $ 113,652
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Conversion of notes to common stock $ 2,157,500 $ -
The accompanying notes are an integral part of the condensed consolidated
financial statements.
Advanced Gaming Technology, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
1. Interim Reporting
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
and Form 10-QSB requirements. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included.
Operating results for the three and six month periods ended June 30, 1997, are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1997. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on
Form 10-KSB for the year ended December 31, 1996.
2.Bank Loan
The bank loan was repaid during the first quarter of 1997. The Company
has not attained any additional bank loans.
3. Convertible Notes
During the first quarter the Company arranged financing for a total of
$2,137,500 in 12% subordinated convertible redeemable debentures.
Additionally, $1,645,903 of certain debt and liabilities was settled by the
issuance of 4,697,309 common shares.
During the second quarter the Company arranged further financing for a
total of $3,875,000 in 12% subordinated convertible redeemable debentures.
Additionally, $2,108,750 of certain debt and liabilities were settled by the
issuance of 5,170,639 common shares.
Item 2. Management's Discussion and Analysis or Plan of Operation.
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,
1996.
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 July 1997, the Company introduced version 3.0 of its MAXLITE(TM)
hand-held electronic bingo unit. The updated software was tested and approved
in Mississippi and is now being used in all new MAXLITE(TM) installations.
Version 3.0 has been trouble free and has been well received by bingo halls
and customers. In keeping with the Company's commitment to be at the
forefront of the electronic bingo, the Company will be upgrading all existing
customers to version 3.0.
Revenues generated from the Max Bingo Systems, whilst not meeting past
expectations are continuing to grow. Combined revenues from MAXPLUS(TM),
MAXLITE(TM), and TURBOMAX(TM) produced $90,000 in June, and $125,000 in
July. With confirmed additional orders awaiting installation, and after
expiry of revenue free periods, the Company's base revenue will approximate
$170,000 by September, and $200,000 for October 1997.
The company has embarked on a new strategy that will focus on the Max
Bingo Systems. Based on a typical installation of 75 MAXLITE(TM) and 50
MAXPLUS(TM) and TURBOMAX(TM), the Company has targeted to complete six
installations per month. The Company is using average daily rates of $5.00
per day for MAXLITE(TM), and $8.00 per day for both the MAXPLUS(TM) and
TURBOMAX(TM) to estimate revenue. If the Company is successful in meeting the
installation targets, the projected revenue for the month of December 1997,
will be approximately $600,000, which will be sufficient to cover current
monthly operating expenses.
The Company will require funding of approximately $3.5 million to finance
the capital costs of equipment for the projected installations. Various
alternatives are currently being examined to secure funding on a non-dilutive
basis including leasing and floor financing.
The following positive factors add credence to management's belief that
this model can be achieved;
*The MAXLITE(TM) software version 3.0 has remained trouble free since
introduction in July, and is the only hand-held electronic bingo unit that
meets all the licensing requirements for the state of Mississippi.
*Recent acceptance of the Company's speed bingo game - TURBOMAX (TM)
gives a competitive edge over our competitors, and can produce high margin net
revenues.
*The Company is currently licensed for charity bingo in eleven states,
and has applications pending in five additional states, two of which account
for more than 25% of all bingo revenues in the United States. The imminent
approval in Texas will greatly enhance sales opportunities.
During the second quarter the Company made the necessary arrangements to
relocate the U.S. operations from Phoenix to Denver. On August 11, 1997 the
company opened its new 20,000 square foot warehouse facility. This new
facility will be the hub of all U.S. operations, including sales and
marketing, distribution, training, support and research and development. The
Operations department is now fully staffed and trained to handle the projected
new orders for the remainder of the year. The Company will raise operational
efficiencies as both the Operations and Sales departments are now based in
Denver.
The Company will have a major presence at the NIGA tradeshow in
Minneapolis in the last week of August, where its new marketing and promotion
campaign will be unveiled. In addition, the Company will be demonstrating the
leading edge technology of the company's Max Bingo System products. The
Company is expecting to generate a substantial number of new leads from this
show. The annual general meeting has been scheduled for September 17, 1997 in
Vancouver, B.C., Canada.
Results of Operations -
1997 Compared to 1996
The net loss from operations was $3,217,044 in 1997 compared to
$1,993,221 in 1996. Revenues from operations increased 198% from 1996. The
increase is primarily the result of $310,000 joint venture projects income and
13% increase in product sales.
Cost of sales as a percentage of product sales remained relatively
constant at approximately 62% for the past two quarters compared to
approximately 39% for the six months ending June 30, 1996. The increase in
cost of sales over the prior year is due primarily to the mix of products
currently on lease. The general and administrative expenses increased by
approximately $1,120,000 due to the addition of sales, operational and
administrative personnel in anticipation of increases in product sales.
Research and development expenses decreased primarily as a result of the
efforts of the Company with regards to the development of Sonic Bingo, and
enhancements to PARTI-MAX being near completion.
Liquidity and Capital Resources -
The Company requires working capital principally to fund its current
operations, expand its operations and research. From time to time in the past
the Company has relied on short-term borrowing and the issuance of restricted
common stock to fund its operations. There are no formal commitments from
banks or other lending sources for lines of credit or similar short-term
borrowing, but the Company has been able to borrow any additional working
capital that has been required. It is anticipated that current operations
will expand and the funds generated will exceed the Company's working capital
requirements and that it will no longer seek funding to cover current
operations. However, expansion of current markets and the addition of new
markets, most likely will require additional working capital.
The Company does intend to intensify its search for new products or
technologies in development as well as those currently being marketed,
including complete operating businesses. In its acquisition program, the
Company focuses on opportunities that have demonstrated long-term growth
potential, strong marketing presence, and the basis for continuing
profitability. Where the Company believes it is warranted, it may commit its
current liquid resources, leverage its current operations and assets through
additional borrowings, dispose of one or more of its current activities, seek
additional debt or equity financing, or enter into other transactions to fund
a desired acquisition or expansion.
The Company is exploring potential acquisitions, but has not to date
reached any commitment, there can be no assurance that the Company will be
able to identify an acquisition candidate that will meet its criteria, that
the Company would be able to employ its existing resources advantageously to
fund such an acquisition, that any required debt or equity financing could be
obtained through alternative sources, or that any acquisition will in fact be
completed.
On August 7, 1997, the Company announced that it is conducting
discussions with a representative of the purchasers of approximately
$6,700,000 of convertible debentures recently issued by the Company. In an
effort to eliminate recent volatility in the activity of its common stock, the
Company is negotiating a possible modification of the conversion rights of the
debentures. The discussions, if consummated, would give the Company the right
to repurchase the debentures at 120% of their principal amount during a
lock-up period of nine months, during which period the debentures would no
longer be exercisable. The Company also announced that, pending the
consummation of such discussions or the resolution of questions relating to
the issuance of the stock underlying the debentures, the Company would not
issue any stock on exercise of the debentures. The terms of the debentures
permit conversions at any time at discounts from the Company's common stock
trading bid prices over a prescribed time period preceding the conversion. No
assurance can be given as to whether such discussions will be consummated.
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
The Company filed two reports on Form 8-K during the three months ended
June 30, 1997.
3.Item reported: Item 9 sales of equity securities pursuant to regulation S
Date of report: June 19, 1997
4.Item reported: Item 9 sales of equity securities pursuant to regulation S
Date of report: May 28, 1997
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 14, 1997 By: /s/
Firoz Lakhani
President, Chief Operating
Officer and Director
DATE: August 14, 1997 By: /s/
Donald Robert Mackay
Principal Financial and
Accounting Officer