[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: September 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:
October 31, 1997 85,767,895
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 nine months ended September 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)
September 30, December 31,
ASSETS: 1997 1996
Current Assets
Cash and cash equivalents $ - $ 76,615
Accounts receivable, net 459,112 56,492
Prepaid expenses 390,874 129,969
Deferred charges 649,423 -
Inventory 196,608 43,000
Notes receivable 52,525 129,426
Total current assets 1,748,542 435,502
Notes Receivable 1,245,991 1,099,300
Property and Equipment 3,562,147 2,553,293
Less: accumulated depreciation (980,538) (583,412)
2,581,609 1,969,881
Intangible and other assets 5,609,347 5,940,882
Total assets $ 11,185,489 $ 9,445,565
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current liabilities
Accounts payable and
accrued liabilities $ 3,387,492 $ 3,823,853
Bank loan - 354,100
Convertible notes 4,062,302 3,292,715
Deferred revenue 390,000 765,380
Current portion of long term debt 1,696,460 2,459,528
Total current liabilities 9,536,254 10,695,576
Long term obligations,
net of current portion 1,987,268 1,911,864
Total liabilities 11,523,522 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 80,769,776
in 1997 and 42,248,368 in 1996 403,849 211,242
Additional paid-in capital 27,726,698 20,000,471
Accumulated deficit (28,468,580) (23,373,588)
Total stockholders' deficit (338,033) (3,161,875)
Total Liabilities and
Stockholders' Deficit $ 11,185,489 $ 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 Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
Revenues $ 304,662 $ 220,442 $1,027,864 $ 586,140
Cost of revenues 169,353 55,577 409,827 198,172
Gross margin 135,309 164,865 618,037 387,968
Expenses
Research and
development 389,487 372,464 918,370 1,092,990
General and
administrative 1,060,231 673,239 3,162,380 1,652,008
1,449,718 1,045,703 4,080,750 2,744,998
Loss from operations 1,314,409 880,838 3,462,713 2,357,030
Other income
(expense),net (563,542) (643,600) (1,632,282) (1,160,629)
Net Loss $1,877,951 $1,524,438 $5,094,995 $3,517,659
Net loss per
common share $ (.03) $ (.04) $ (.09) $ (.10)
Weighted average
common shares
outstanding 57,368,781 34,579,285 57,368,781 34,579,285
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 Nine Months
Ended September 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (5,094,995) $(3,517,659)
Adjustments to Reconcile Net Loss to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and amortization 658,399 378,096
Deferred revenues (310,000) -
Issuance of common stock for expenses 526,808 -
Loss on sale of assets and allowance for loss 89,330 525,613
Change in operating assets and liabilities:
Accounts receivable (402,620) (118,172)
Prepaid expenses (260,905) ( 9,915)
Deferred charges (649,423) -
Inventory (153,608) (23,785)
Notes receivable (69,790) -
Accounts payable and accrued liabilities (507,385) (594,335)
Net cash used in operating activities (6,174,189) (3,360,157)
Cash Flows From Investing Activities:
Other assets (86,568) (215,303)
Purchase of property and equipment (1,008,854) (2,208,508)
Deferred development costs - (150,527)
Proceeds from sale of assets 67,500 -
Net Cash Used In Investing Activities (1,027,922) (2,574,338)
Cash Flows From Financing Activities:
Proceeds from issuance of common stock 2,099,308 1,700,000
Proceeds from debt and notes 6,891,578 4,240,000
Repayment of debt and notes (1,511,290) (757,690)
Advances from joint venture partner - 755,757
Bank loan (354,100) -
Net cash provided by financing activities 7,125,496 5,938,067
Net change in cash and cash equivalents (76,615) 3,572
Cash and cash equivalents at beginning of period 76,615 17,739
Cash and cash equivalents at end of period $ - $ 21,311
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 340,627 $ 113,652
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Conversion of notes to common stock $ 4,672,662 $ -
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 NINE MONTHS ENDED SEPTEMBER 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 nine month periods ended September 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.
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.
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 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 located in a more central
location.
On November 4, 1997 the Company received an order for 100 MAXLITE(TM)
handset units and 80 MAXPLUS(TM)/TurboMAX(TM) units. Once these units are
installed and in operation, the Company projects that they will generate gross
revenues to the Company of $275,000 per year. When all the current back-log
of orders now being installed are operational, the Company will have in excess
of 1,600 MAX Bingo System units in the market.
The Company has recently completed an in-depth analysis of the utility of
its products in each customer hall. This comprehensive exercise has resulted
in the Company adopting and introducing a program whereby the Company will
work with the customers to increase the demand for the MAX line of products.
Recently, MAX Bingo Systems has enjoyed wide media coverage having been
featured in some of the most recognized trade journals in the Bingo industry,
including September's issue of Indian Gaming Magazine; October's issue of
Bingo Manager and the fall issue of Market Pulse Journal. This type of media
coverage increases the consumer awareness of the MAX Bingo Systems, which in
turn assists the Company's sales team.
On November 4, 1997 the Company reached an agreement with Bingo
Technologies Corporation of Nevada, whereby Bingo Technologies Corporation
will distribute in certain bingo halls the MAXPLUS(TM) fixed base system and
TurboMAX(TM), the Company's speed game. Bingo Technologies Corporation is a
private company engaged in production and distribution of its own hand-held
electronic bingo unit, a field in which it is one of the industry leaders.
This arrangement allows the MAX Bingo Systems line of products to be more
expeditiously placed in the industry
Results of Operations -
1997 Compared to 1996
For the nine months ended September 30, 1997 the net loss from operations
was $5,095,000 in 1997 compared to $3,518,000 in 1996 and the three months
ended September 30, resulted in a loss of $1,878,000 in 1997 compared to
$1,524,000 in 1996. Revenues from operations increased 75% from 1996. The
increase is primarily the result of $310,000 in income from joint venture
projects and a 22% increase in product sales.
Cost of sales as a percentage of product sales remained relatively
constant at approximately 57% for the past three quarters compared to
approximately 34% for the nine months ending September 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 $1,510,000 due to among other things the relocation of
operations from Phoenix to Denver as well as 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 which are nearing 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, based on the Company's projections of expansion of the
current markets and the addition of new markets, the Company will require
funding 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 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.
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 certain convertible notes. The negotiations between the Company and
the subscribers are at an advanced stage, however no agreement has been
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.
At the annual general meeting held September 17, 1997 in Vancouver, B.C.,
Canada the stockholders voted to approve the election of the Directors to
serve until the 1998 annual meeting, to effect a reverse stock split in which
one new share of common stock would be exchanged for a number of shares to be
determined by the Board of Directors (not more than four shares) and ratified
the selection of Robison, Hill & Co. to audit the Company's books and records
for the fiscal year ending December 31, 1997.
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
September 30, 1997.
1.Item reported: Item 9 sales of equity securities pursuant to regulation S
Date of report: July 31, 1997
2.Item reported: Item 9 sales of equity securities pursuant to regulation S
Date of report: August 26, 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: November 14, 1997 By: /s/
Firoz Lakhani
President, Chief Operating
Officer and Director
DATE: November 14, 1997 By: /s/
Donald Robert Mackay
Principal Financial and
Accounting Officer