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, 1999
[ ] 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
(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: August 10, 1998 110,330,600
Transitional Small Business Disclosure Format (check one).Yes [ ]; No [X]
2
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, 1998. 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, 1999 may not be indicative of the results that may be
expected for the year ending December 31, 1999.
3
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
ASSETS: 1999 1998
- ------- ----------- -----------
Current Assets
Cash and cash equivalents $ 14,891 $ 109,824
Accounts receivable, net 166,735 7,825
Prepaid expenses 5,285 5,285
Inventory 20,000 20,000
----------- -----------
Total current assets 206,911 142,934
Property and Equipment, net 162,740 204,740
Intangible and other assets 3,343,088 3,442,604
----------- -----------
Total assets $ 3,712,739 $ 3,790,278
=========== ===========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1999 1998
----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT:
- --------------------------------------
Liabilities subject to compromise
Accounts payable and accrued liabilities $ 2,863,088 $ 2,766,588
Notes payable 313,000 313,000
Convertible notes 748,750 748,750
Current portion of long term debt 3,918,371 3,918,371
----------- -----------
Total liabilities subject to compromise 7,843,209 7,746,709
Long term obligations, net of current portion -- --
----------- -----------
Total liabilities 7,843,209 7,746,709
----------- -----------
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
143,594,531 in 1998 and 98,439,431 in 1997 576,653 576,653
Additional paid-in capital 32,044,903 32,044,903
Accumulated deficit (36,752,026) (36,577,987)
----------- -----------
Total stockholders' deficit (4,130,470) (3,956,431)
----------- -----------
Total liabilities and stockholders deficit $ 3,712,739 $ 3,790,278
=========== ===========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
Revenues $ 87,501 $ 60,265 $ 175,002 $ 245,055
Cost of revenues -- 20,430 -- 112,710
---------- ---------- ---------- ----------
Gross margin 87,501 39,835 175,002 132,345
Expenses 150,653 612,279 252,542 1,672,397
---------- ---------- ---------- ----------
Loss from operations 63,152 572,444 77,540 1,540,052
Other income (expense), net -- (376,986) (96,500) 496,332
---------- ---------- ---------- ----------
Net Loss $ 63,152 $ 949,430 $ 174,040 $1,043,720
========== ========== ========== ==========
Net loss per common share $ -- $ (.01) $ -- $ (.01)
========== ========== ========== ==========
Weighted average common
shares outstanding 110,330,600 119,655,013 110,330,600 119,655,013
The accompanying notes are an integral part of the condensed consolidated
financial statements.
6
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months
Ended June 30,
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (174,040) $(1,043,720)
Adjustments to Reconcile Net Loss to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and amortization 141,517 413,250
Issuance of common stock for expenses -- 93,500
Change in operating assets and liabilities:
Accounts receivable (158,910) 13,657
Prepaid expenses -- 63,684
Deferred charges -- 192,217
Inventory -- 53,551
Notes receivable -- 1,347
Accounts payable and accrued liabilities 96,500 (776,864)
----------- -----------
Net cash used in operating activities (94,933) (989,378)
Cash Flows From Investing Activities:
Other assets -- --
Purchase of property and equipment -- 298,144
----------- -----------
Net Cash (Used in) provided by Investing Activities -- 298,144
Cash Flows From Financing Activities:
Proceeds from issuance of common stock -- 2,648,595
Proceeds from debt and notes -- 290,511
Repayment of debt and notes -- (2,250,000)
----------- -----------
Net cash provided by financing activities -- 689,106
Net change in cash and cash equivalents (94,933) (2,128)
Cash and cash equivalents at beginning of period 109,824 17,276
----------- -----------
Cash and cash equivalents at end of period $ 14,891 $ 15,148
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest -- $ 2,000
Supplemental Disclosure of Non-Cash
Investing and Financing Activities:
Conversion of notes to common stock -- $ 1,625,000
The accompanying notes are an integral part of the condensed consolidated
financial statements.
7
Advanced Gaming Technology, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(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, 1999, are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999. 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, 1998.
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, 1998. 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.
8
Advanced Gaming Technology, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
The company filed for reorganization under chapter 11 of the U. S. Bankruptcy
Code on August 26, 1998. Since that time, efforts have been focused on
developing a new operating strategy and completing the reorganization process.
The company filed a plan of reorganization in December of 1998. The company's
plan and disclosure statement was approved by the bankruptcy court in March
1999. The plan of reorganization was confirmed by the bankruptcy court on June
29, 1999. The plan becomes effective on August 19, 1999.
On the effective date of the plan the company will undergo a substantial
restructuring of its balance sheet and financial position. Liabilities subject
to compromise will be reduced to $2.6 million. The remainder of the liabilities
will be converted to equity, paid or eliminated based on the treatment provided
in the court approved plan. The $2.6 million will consist of two long-term notes
payable to creditors secured by the company's real estate near Branson,
Missouri. Administrative and priority claims of approximately $200,000 will be
paid on the effective date.
On or before the effective date the company will receive $1 million in cash from
capital contributions of new investors and the settlement of outstanding
litigation. The current common stock of the company will be cancelled. New
common stock consisting of approximately 21 million shares will be issued to
creditors, current shareholders and new investors in accordance with the terms
of the court approved plan. The company expects to have operating capital of
approximately $700,000 after payment of administrative and priority claims and
operating expenses.
Results of Operations -
1999 Compared to 1998
The net loss for the six months ended June 30, 1999 was $174,040 compared to a
net loss $1,043,720 for the same period in 1998. This improvement was due to a
substantial reduction of operating costs implemented in August of 1998. With the
bankruptcy process complete the company will focus all efforts on executing the
new business plan. A priority will be to build new relationships with potential
distributors of the electronic bingo products. This effort will be a challenge
as the marketplace is very competitive.
The company is generating minimal revenue from operations. Revenue for the three
months ended June 30, 1999 was $87,501 compared to $60,265 in 1998.
9
Leasing of the Max Lite hand-held electronic bingo unit has been hampered by a
lack of operating capital necessary to establish a network of distributors to
market, service and support the product. The company is currently pursuing new
distribution arrangements.
The Max Plus licensing agreement was settled in July 1999. Under the terms of
the settlement the company received a one-time payment of $850,000 in July. The
company retains the right to market the Max Plus and Turbo Max systems. The Max
Plus system will be marketed as a complement to the Max Lite system. No further
royalty payments will be received under the settled license agreement.
Expenses for the first six months of 1999 were $252,542 compared to $1,672,397
in the prior year. Substantial cost reductions have been achieved in all
operating areas. Salaries and wages expenses and related payroll taxes and
benefits decreased sharply. The cost reduction program was implemented in August
1998. Expenses are expected to remain low until cash flow can be generated from
product revenue to justify expansion of operations. Expenses for the second
quarter were $150,653 compared to $612,279 in 1998.
Other income (expense) consisted of an expense of $96,500 for the first six
months of 1999 compared to income of $496,332 in 1998. In 1998 a $1.5 million
licensing payment was received related to the Max Plus licensing agreement. This
amount was offset by $1.1 million in expenses related to interest expense and
equipment write-downs. Interest expense decreased in 1999 due to the conversion
of liabilities to equity during the past year.
Liquidity and Capital Resources -
The Company will receive operating capital in the amount of $1 million in
conjunction with the reorganization. A portion of this new capital will be
utilized to pay court approved administrative expenses and priority claims.
After these payments and payments for operating expenses the company expects to
have a cash balance in excess of $700,000. The company is confident that the
working capital generated in conjunction with the plan will allow management to
pursue 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 will be restructured pursuant to the plan. Long-term debt
will consist of two notes totaling $2.6 million. The company is required to make
only minimal debt service payments on these notes for the first six months
following the effective date of the plan.
10
Liabilities subject to compromise will be converted to equity, paid or
restructured on the effective date pursuant to the plan. Each unsecured creditor
holding an allowed claim will receive 1.88 shares of new common stock for each
$1 of allowed claim.
The existing common stock of the company will be cancelled. Shareholders of
record on the effective date will receive one share of new common stock for each
66 shares currently owned. 25 million shares of new common stock will be issued
pursuant to the plan. The company estimates that approximately 21 million shares
will be outstanding on the effective date. The remaining shares will be held in
a reserve for future allowed claims.
The company intends to pursue new projects as opportunities arise. This is part
of an overall strategic plan to diversify revenue. Such projects may require
additional working capital. There is no guarantee that such funding will be
available when the opportunities arise. The company will consider all methods of
financing as a means of funding these projects.
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.
11
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 a report on Form 8-K on July 6, 1999. The Company reported an
event under "Item 5 Other Events" to announce the confirmation of the plan of
reorganization by bankruptcy court.
12
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 19, 1999 By: /s/ DANIEL H. SCOTT
------------------------------
Daniel H. Scott
President, Chief Operating
Officer and Director
(Principal executive and
accounting oficer)