<PAGE>
--------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
QUARTERLY REPORT PUSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2000
TRANSISTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to _________
------------------------------------------------------------------------------
Commission File No. 000-20685
AMERICAN WAGERING, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 88-0344658
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
675 Grier Drive, Las Vegas, Nevada 89119
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
(702) 735-0101
---------------------------
(Issuer's telephone number)
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(Former name, former address and former fiscal year, if changed since last year)
Check whether the issuer (1) filed 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_____
The number of shares of Common Stock outstanding as of June 13, 2000 was
7,836,846
<PAGE>
Part I Financial Information
Item I Financial Statements
AMERICAN WAGERING, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30 January 31
2000 2000
----- ----
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 2,042,454 $ 3,415,793
Accounts receivable, net of allowance for doubtful accounts
of $ 96,613 and $188,624 701,525 686,418
Inventories, net of obsolescence reserve of $161,370 and $161,370 280,297 436,947
Prepaid expenses and other current assets 341,899 309,951
------------ ------------
TOTAL CURRENT ASSETS 3,366,175 4,849,109
PROPERTY AND EQUIPMENT, net 4,109,148 4,098,355
INTANGIBLE ASSETS, net 1,122,938 1,175,637
DEPOSITS AND OTHER ASSETS 614,575 605,955
------------ ------------
TOTAL ASSETS $ 9,212,836 $ 10,729,056
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 47,505 $ 61,892
Accounts payable 1,703,323 1,703,476
Accrued expenses 982,969 988,398
Unpaid winning tickets 1,084,973 1,888,424
Other current liabilities 1,136,389 1,154,995
----------- ------------
TOTAL CURRENT LIABILITIES 4,955,159 5,797,185
LONG-TERM DEBT, less current portion 1,816,517 1,816,517
MINORITY INTEREST (101,672) (105,801)
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series A Preferred stock - 10% cumulative; $100 par value;
authorized: 25,000,000 shares; issued and
outstanding: 15,162 and 15,424 shares 1,516,200 1,542,400
Common Stock - $.01 par value; authorized: 25,000,000 shares;
issued and outstanding: 7,836,846 and 7,824,513 shares 78,979 78,857
Shares to be issued in settlement of litigation - 337,500 shares 3,587,625 3,587,625
Additional paid-in capital 10,794,892 10,709,223
Accumulated deficit (13,107,371) (12,369,457)
Less: treasury stock; at cost: 61,100 shares (327,493) (327,493)
------------- ------------
TOTAL STOCKHOLDERS' EQUITY 2,542,832 3,221,155
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,212,836 $ 10,729,056
============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
AMERICAN WAGERING, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
REVENUES $ 3,056,911 $ 3,010,123
OPERATING COSTS AND EXPENSES:
Direct costs 2,438,417 1,765,585
Research and development 305,298 151,381
Selling, general and administrative 740,380 579,881
Depreciation and amortization 228,434 188,145
-------------- ---------------
TOTAL OPERATING COSTS AND EXPENSES 3,712,529 2,684,992
-------------- ---------------
OPERATING INCOME (LOSS) (655,618) 325,131
OTHER INCOME (EXPENSE):
Interest income 6,414 7,520
Other income 3,076 --
Minority interest (4,129) 5,023
Interest expense (49,541) (70,494)
------------- ---------------
TOTAL OTHER EXPENSE (44,180) (57,951)
-------------- ---------------
NET INCOME (LOSS) (699,798) 267,180
PREFERRED STOCK DIVIDEND REQUIREMENTS (38,116) (15,770)
------------- ---------------
NET INCOME (LOSS) APPLICABLE TO COMMON SHAREHOLDERS $ (737,914) $ 251,410
============= ===============
BASIC AND DILUTED INCOME (LOSS) PER SHARE
Net Income (loss) $ (0.09) $ 0.03
============= ===============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
AMERICAN WAGERING, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(699,798) $ 251,410
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization 228,434 236,155
Discontinued operations -- (145,223)
Minority interest 4,129 (5,023)
Decrease (increase) in assets:
Accounts receivable, net (15,107) (168,122)
Inventories 156,650 42,638
Prepaid expenses and other current assets (31,948) (122,175)
Increase (decrease) in liabilities:
Accounts payable (153) 59,072
Accrued expenses (5,429) (314,369)
Unpaid winning tickets (803,451) (2,022,388)
Other current liabilities (18,606) 344,911
---------- ----------
Total adjustments (485,481) (2,094,524)
---------- ----------
Net cash used in operating activities (1,185,279) (1,843,114)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (186,528) (22,865)
Deposits and other assets (8,620) (33,580)
Proceeds from sale of assets -- 40,000
Decrease in short-term investments -- 110,570
---------- ----------
Net cash provided by (used in) investing activities (195,148) 94,125
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock option exercise 85,791 --
Repayment of long-term debt (14,387) (38,513)
Redemption of preferred stock (26,200) --
Preferred stock dividends (38,116) --
---------- ----------
Net cash provided by (used in) financing activities 7,088 (38,513)
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,373,339) (1,787,502)
CASH, beginning of period 3,415,793 3,076,563
---------- ----------
CASH, end of period $2,042,454 $1,289,061
========== ==========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest $ 49,541 $ 142,112
========== ==========
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES:
None
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
AMERICAN WAGERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000
1. Summary of Business and Significant Accounting Policies
Summary of Business
In August 1995, American Wagering, Inc., a Nevada Corporation, (the
"Company") was formed as the holding Company for Leroy's Horse and
Sports Place ("Leroy's") and Leroy's Hotel Corporation ("LHC").
Immediately prior to the closing of the initial public offering by the
Company, the stockholders of Leroy's and LHC exchanged their shares in
those companies for shares of the Company. These transactions are
referred to as the "Reorganization".
Leroy's was incorporated under the laws of the State of Nevada on
November 14, 1977. Through a central computer system located at its Las
Vegas headquarters, Leroy's operates a statewide network of race and
sports wagering facilities in 48 casinos. Leroy's leases the square
footage necessary to conduct its operations at the non-Company owned
gaming establishments. Leroy's operates its main race and sports book
and a 5,600 square foot casino with approximately 65 electronic gaming
devices including slot machines, video poker machines and multi-game
video machines at the Howard Johnson Hotel on 3111 West Tropicana
Avenue in Las Vegas, Nevada.
The Company also owns and operates Mega$ports (ACT) Pty Ltd.
("Mega$ports (ACT)") located in Canberra, Australia. Mega$ports (ACT)
is the Company's international wagering hub licensed to accept fixed
odds and pari-mutuel interactive wagers on the Internet from patrons
around the world except patrons located in the United States. In
November 1998, Mega$ports (ACT) was issued a 15 year sports betting
license from the Bookmakers Licensing Committee in the Australian
Capital Territory ("ACT"). Mega$ports (ACT) began accepting wagers from
non-Internet patrons within Australia in January 1999. Mega$ports (ACT)
received regulatory approval for its Internet operations from the ACT
and began accepting wagers on the Internet in March 1999.
The Company owns AWI Keno, Inc. ("AWIK") which designs, installs,
operates and maintains computerized keno systems and eventually will
offer a progressive jackpot starting at $1 million.
The Company also owns and operates Computerized Bookmaking Systems,
Inc. ("CBS"). CBS designs, installs and maintains sports and race book
equipment, software and computer systems for the sports betting - North
America industry. In 1994, CBS signed a joint venture agreement with
IGT for the purpose of developing and marketing a pari-mutuel sports
system, known as MEGA$PORTS(R). MEGA$PORTS(R) offered opportunities to
wager on the outcome of individual sports contests, events occurring
within or during the contests, and outcomes of groups of sports
contests On February 1, 1999, the Mega$ports joint venture agreement
was terminated. In March 2000, the Company ceased ongoing operations of
Mega$ports, Inc. and has notified the Nevada Gaming Control Board of
its intent to let expire in July 2000, the Mega$ports, Inc. gaming
license.
On July 28, 1998, the Company acquired certain assets from Advanced
Computer Services, Inc. ("ACS"). Two new subsidiaries, AWI Sports
Systems, Inc. and AWI Hotel Systems, Inc. were formed to hold the
assets acquired from ACS.
In November 1999, the Company formed Secured Telephone Operating
Platform, Inc. ("STOP") which designs, installs, and operates a
telephone call identification system for its customers. The system
determines the origin of a telephone call and accepts or rejects a call
based on its origination. The system is used in conjunction with
telephone account wagering within the State of Nevada.
On April 22, 1998, the Company determined it would concentrate its
business efforts on its core competency, sports wagering, and began
seeking a qualified buyer for the hotel, food and beverage segment of
the Company. On June 30, 1999, the Company finalized the sale of these
operations and entered into a lease with the new owner to continue to
operate the casino for up to two years. The casino serves as the
Company's principal gaming location.
<PAGE>
Period Results Not Indicative of the Full Year
The results of operations for the Three Months ended April 30, 2000 are
not necessarily indicative of the results to be expected for the full
fiscal year.
The accompanying unaudited consolidated financial statements do not
include all information and disclosures required under generally
accepted accounting principles. However, in the opinion of management,
the accompanying financial statements contain all adjustments
(consisting only of normal recurring adjustments) considered necessary
to present fairly the financial position, results of operations and
cash flows, of American Wagering, Inc., a Nevada corporation, (the
"Company") for the periods presented. The financial statements as of
and for the years ended January 31, 2000 and 1999 and the notes thereto
included in the Company's Annual Report on Form 10-KSB should be read
in conjunction with these interim financial statements.
Earnings per Share
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128 -"Earnings Per Share" ("SFAS No. 128")
which became effective for periods ending after December 15, 1997 and
replaces historically reported earnings per share with "basic" and
"diluted" earnings per share. Basic earnings per share is computed by
dividing net income by the weighted average number of shares
outstanding during the period, while diluted earnings per share
reflects the additional dilution for all potentially dilutive
securities, such as stock options.
In accordance with SFAS No. 128, if potential shares outstanding would
have an anti-dilutive effect on the diluted earnings per share
calculation, then the shares are not included in the diluted earnings
per share calculation. Options outstanding during the Three Months
ending April 30, 2000 under the Company's Employee Stock Option Plan
and its Directors Stock Option Plan were not included in the
computation of diluted earnings per share because they were
anti-dilutive with regard to the losses incurred by the Company for the
three months then ended.
The weighted-average number of common and common equivalent shares used
in the calculation of basic and diluted earnings per share consisted of
the following:
<TABLE>
<CAPTION>
Three months ended April 30,
-----------------------------------
2000 1999
-------- ---------
<S> <C> <C>
Weighted-average common shares outstanding (used in the
computation of basic earnings per share) 7,832,891 7,824,513
</TABLE>
There were no dilutive securities for the period ended April 30, 1999.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All signi-ficant inter-Company balances
and transactions have been eliminated. The financial results for
acquisitions are included in the consolidated financial statements from
the date of acquisition. Investments in 50% or less owned joint
ventures are accounted for under the equity method.
Reclassifications
Certain amounts in the 1999 consolidated financial statements have
been reclassified to conform with the 2000 presentation. These
reclassifications had no effect on the Company's net income.
Concentration of Risk
The Company derives a substantial portion of its revenues from a
limited number of licensed race and sports books in the State of
Nevada. Limitations on the scope of operations at such licensed race
and sports books due to statutory or regulatory changes or
deterioration in the general economic conditions which impact the
gaming industry in Nevada could adversely affect the Company's
operating results. The Company also derives a portion of its revenues
from its Internet operations in Australia, which is susceptible to
regulatory or economic changes, which may impact the Internet or the
gaming industry outside of the United States.
<PAGE>
The Company has expanded its sports wagering activities to Australia
and is exploring other jurisdictions outside of the United States to
expand its sports wagering and keno business lines. The level of
customer acceptance for the Company's sports wagering and keno products
in these new jurisdictions is undetermined. Establishing these
operations may require initial investments of several hundred thousand
dollars. If the required investments cannot be funded through current
operations, the Company would have to obtain additional debt or equity
funding. There can be no assurance that the Company would be able to
complete such debt or equity funding or do so on terms satisfactory to
the Company.
The ownership and operation of casino gaming facilities, including race
and sports books, in Nevada are subject to extensive state and local
regulation. The Company's gaming operations are subject to the Nevada
Gaming Control Act and the regulations promulgated thereunder,
(hereinafter collectively referred to as the "Nevada Act") and various
local regulations. If it were determined that the Nevada Act was
violated by the Company or its subsidiaries the gaming licenses or
registration held by the Company and it subsidiaries could be limited,
conditioned, suspended or revoked subject to compliance with certain
statutory and regulatory procedures. Limitation, conditioning or
suspension or revocation of any gaming license may have a material
effect on the Company's gaming operations.
On March 22, 2000 legislation entitled the "Amateur Sports Integrity
Act" was introduced in Congress. The general purpose of the proposed
legislation is to prohibit wagering on games and performances at the
Summer and Winter Olympics and on high school and college games.
Leroy's currently accepts wagers on the Olympic and college games.
Leroy's estimates that wagering on college sports represents
approximately 26% of its revenues and therefore the passage of such
legislation could have a material adverse impact upon the Company's
wagering operations.
On December 16, 1999, the Nevada State Gaming Control Board ("Board")
filed a complaint for disciplinary action against American Wagering,
Inc. relating to the operation of Mega$ports (ACT). The complaint
alleges the Company, as a company registered with the Nevada Gaming
Commission, engaged in an unsuitable method of operation due to the
fact that Mega$ports (ACT) accepted a series of wagers from a patron
who was physically located in Las Vegas, Nevada. The patron was an
undercover agent of the Board. The Board further alleges that the
acceptance of these wagers is a violation of both federal and Nevada
State laws that prohibit Internet sports wagering. However, the Company
believes a number of factual and legal defenses may be asserted against
the claims contained in the complaint. The Company and the Board have
been actively pursuing a settlement of the complaint, and it is hoped
that the parties will reach a settlement to the complaint in the near
future. Should the parties be unable to settle the complaint, a hearing
would be held and the Commission could take disciplinary action against
the Company in the event that the Company is unsuccessful in defending
itself against the claim. The Company, in connection with the
settlement discussions with the Board, is considering various
alternatives that would be acceptable to the Board.
In December, 1999 The Australian government released its Productivity
Commissions report on Australia's Gambling Industries. The report made
certain recommendations including regulation of online casinos.
Following this report, the Senate Select Committee on Information
Technologies issued a report entitled "NETBETS" a review of online
gambling in Australia. The Committee made a series of proposals to
reduce online gambling. One such proposal was to limit the expansion of
online casinos with a moratorium on the issuance of online gaming
licenses until consumer protection policies are implemented. The
federal government is pursuing a total ban on Internet gambling.
However, the states and territories in Australia are opposed to any
limitations on issuing new online gaming licenses.
At this time, the Company is unable to determine the effect, if any, of
the outcome of the implementation of the recommendations made in these
reports or whether the government will be successful in banning online
gaming. If the federal government is successful in banning online
gaming, such ban may have a material adverse effect on the operations
of Mega$ports (ACT).
<PAGE>
2. Business Segments
The Company's primary operations are reported in the following four
segments: wagering, casino, systems, and keno.
The wagering segment consists of Leroy's, the licensed bookmaking
operations with the largest number of sports books in the state of
Nevada. As of April 30, 2000, in addition to its main location, the
Company operated 48 race and sports books located within licensed
gaming establishments owned by other Companies throughout the state of
Nevada. Leroy's leases the square footage necessary to conduct its
operations at non-Company owned establishments. Additionally, the
wagering segment consists of Mega$ports U.S. and Mega$ports (ACT)
operations. Mega$ports (ACT) is the Company's international wagering
hub for Internet sports wagering. The financial records of Mega$ports
(ACT) are maintained in Australia. Mega$ports US which offered a
parimutual sports wagering system in the State of Nevada ceased
operations in March 2000.
<PAGE>
The casino segment includes a 5,600 square foot casino within the
Howard Johnson Hotel containing approximately 65 electronic gaming
devices including slot machines, video poker machines and multi-game
video machines.
The systems segment, consisting of CBS, AWISSI and AWIHSI and STOP,
designs, sells, installs and maintains equipment, software and computer
systems to the sports betting and hotel industries.
The keno segment develops, sells, operates and services stand alone
linked progressive keno games using state-of-the-art graphical
interfaces. Keno is currently in its startup phase and has primarily
incurred labor and marketing expenses.
In accordance with Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information",
the following summarizes the segment information for the Company:
<TABLE>
<CAPTION>
Three Months
Ended
April 30 Wagering Casino Systems Keno Corporate Total
---------- ---------- -------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues 2000 $1,401,149 $169,422 $1,409,883 $ 76,457 $ -- $3,056,911
1999 1,797,261 199,080 1,013,782 -- -- 3,010,123
Research and 2000 -- -- 305,298 -- -- 305,298
Development 1999 -- -- 151,381 -- -- 151,381
Operating 2000 (122,341) 48,831 298,258 (314,776) (565,590) (655,618)
Income (Loss)* 1999 483,866 76,986 197,045 (66,924) (365,842) 325,131
Capital 2000 28,317 -- 12,734 146,063 (586) 186,528
Expenditures 1999 18,439 -- 1,323 -- 3,103 22,865
Depreciation 2000 70,261 2,083 87,338 61,290 7,462 228,434
and Amortization 1999 68,258 4,076 97,714 0 18,097 188,145
Identifiable 2000 2,213,055 290,578 4,968,837 1,039,624 700,742 9,212,836
Assets January 3,943,317 277,607 5,070,162 931,046 506,924 10,729,056
31, 2000
</TABLE>
* Operating income (loss) does not include the allocation of corporate
management fees. The management fees are equal to 9.5% of each operating
Company's net operating income.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
Three Months ended April 30, 2000 compared to the Three Months ended April 30,
1999.
Revenues for the Three Months ended April 30, 2000, were $3,056,911, an
increase of $46,788 or 1.6% from revenues of $3,010,123 for the Three Months
ended April 30, 1999. The increase was principally attributed to the additional
Systems revenues of $396,101 and Keno revenue of $76,457 which were offset by a
decrease in wagering revenues of $396,112 and casino revenues of $29,658.
Operating loss of $655,618 for the Three Months ended April 30, 2000 decreased
by $980,749 or 301.6% compared to operating income of $325,131 for the Three
Months ended April 30, 1999. This decrease was due to the additional cost of
operating Keno and increased expenses of the wagering operations. Offsetting the
operating loss was Systems operating income due to increased equipment sales.
Wagering operations
Revenues from wagering operations were $1,401,149 for the Three Months
ended April 30, 2000, a decrease of $396,112 or 22.0% from revenues of
$1,797,261 for the Three Months ended April 30, 1999. The decrease was due to a
31.6% decrease in net win percentage (revenues divided by handle) between
quarters. The net win percentage was 5.2% for the Three Months ended April 30,
2000 compared to 7.6% for the Three Months ended April 30, 1999. Handle of
$25,908,151 for the Three Months ended April 30, 1999 increased by $3,114,812
from handle of $22,793,339 for the Three Months ended April 30, 1999. An
increase or decrease in handle is not necessarily indicative of an increase or
decrease in revenues or profits. Operating costs of $1,523,490 for the Three
Months ended April 30, 2000 increased by $210,096 from operating costs of
$1,313,394 for the Three Months ended April 30, 1999 primarily due to the
addition of Megasports (ACT) being fully operational for the Three Months ended
April 30, 2000.
Casino Operations
Revenues from Casino operations were $169,422 for the Three Months
ended April 30, 2000, a decrease of $29,658 or 14.9% from revenues of $199,080
for the Three Months ended April 30, 1999. The decrease was principally
attributed to decreased slot play of local customers. Operating costs remained
approximately the same between fiscal quarters.
System Operations
Revenues from Systems operations were $1,409,883 for the Three Months
ended April 30, 2000, an increase of $396,101 or 39.1% from revenues of
$1,013,782 for the Three Months ended April 30, 1999. Increased revenues of
$423,155 from CBS operations were attributed to increased equipment and ticket
paper sales. Sport Systems and Hotel Systems, which began operations in July
1998 and are partly owned, generated revenues of $55,613 primarily from
recurring maintenance billings for the Three Months ended April 30, 2000.
Operating costs of $1,092,124 for the Three Months ended April 30, 2000
increased by $275,386 or 33.7% from operating costs of $816,738 for the Three
Months ended April 30, 1999 mainly due to costs associated with new product
development and and costs associated with increased equipment sales.
Keno Operations
Keno began operations in August 1999. During the Three Months ended
April 30, 2000 Keno generated revenue from commissions of $76,457 and incurred
costs of $410,732 which including location operating costs, labor, marketing and
professional services.
Direct Costs
Direct costs of $2,438,417 for the Three Months ended April 30, 2000
increased by $672,832 or 38.1% from direct costs of $1,765,585 for the Three
Months ended April 30, 1999 principally due to increased costs in the wagering
operations for the addition of Megasports (ACT) Keno segment which were fully
operational for the Three Months ended April 30, 2000.
<PAGE>
Research and Development Costs
Research and development costs of $305,298 for the Three Months ended
April 30, 2000 increased by $153,917 or 101.7% from research and development
costs of $151,381 for the Three Months ended April 30, 1999 due principally to
increased labor costs associated with new product development.
The Company has expanded its sports wagering activities to Australia
and is exploring other jurisdictions to expand its keno business lines. The
level of customer acceptance for the Company's keno products in these new
jurisdictions is undetermined. Establishing these operations may require initial
investments of several hundred thousand dollars. If the required investments
cannot be funded through current operations, the Company would have to obtain
additional debt or equity funding. There can be no assurance that the Company
would be able to complete such debt or equity funding or do so on terms
satisfactory to the Company.
Selling, General and Administrative Costs
Selling, general and administrative costs of $740,380 for the Three
Months ended April 30, 2000 increased $160,499 or 27.7% from $579,881 for the
Three Months ended April 30, 1999 primarily due to the addition of Keno,
Mega$ports (ACT) and STOP which were fully operational for the Three Months
ended April 30, 2000.
Net Loss
Net loss for the Three Months ended April 30, 2000 of $699,798
decreased $966,978 or 361.9% from the Three Months ended April 30, 1999. The
unfavorable variance was due to the additional costs associated with operating
Keno and Mega$ports (ACT) which were fully operational for the Three Months
ended April 30, 2000.
Liquidity and Capital Resources
Working capital decreased $640,908 from $36,167 for the Three months
ended April 30, 2000. Cash used in operating activities was $1,185,279 for the
Three Months ended April 30, 2000 compared to cash used in operating activities
of $1,843,114 for the Three Months ended April 30, 1999. Net cash used in
investing activities was $195,148 for the Three Months ended April 30, 2000
compared to cash provided by investing activities of $94,125 for the Three
Months ended April 30, 1999. Net cash provided by financing activities amounted
to $7,088 for the Three Months ended April 30, 2000 compared to net cash used in
financing activities of $38,513 for the Three Months ended April 30, 1999.
While management believes that the Company will be able to satisfy its
operating cash requirements for at least the next 12 months from existing cash
balances and anticipated cash flows, these requirements may necessitate
curtailment of certain capital expenditures and reduction in staffing levels.
The uncertainty created by proposed legislation which could ban wagering on
amateur athletic events requires the Company to research the sources of its
future revenue growth. As described in the Company's annual report on Form
10-KSB for the year ended January 31, 2000, the Company is in the process of
reviewing various programs in fiscal year 2001 aimed at building cash liquidity
which can be used to fund working capital requirements.
The Company has expanded its sports wagering activities to Australia
and is exploring other jurisdictions to expand its keno business lines. The
level of customer acceptance for the Company's keno products in these new
jurisdictions is undetermined. Establishing these operations may require initial
investments of several hundred thousand dollars. If the required investments
cannot be funded through current operations, the Company would have to obtain
additional debt or equity funding. There can be no assurance that the Company
would be able to complete such debt or equity funding or do so on terms
satisfactory to the Company.
Forward-Looking Statements
Certain information included in this report and other materials filed
or to be filed by the Company with the Securities and Exchange Commission (as
well as information included in oral statements or written statements made or to
be made by the Company) contains statements that are forward-looking 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
information relating to current expansion projects, plans for future expansion
projects and other business development activities as well as other capital
spending, financing sources, Year 2001 compliance and the effects of regulation
(including gaming and tax regulation) and competition. Such forward-looking
information involves important risks and uncertainties that could significantly
affect anticipated results in the future and, accordingly, such results may
differ from those expressed in any forward-looking statements made by or on
behalf of the Company. These risks and uncertainties include, but are not
limited to, those relating to the Company taking financial risks on the outcome
of sports events as a principal betting against its patrons, domestic or global
economic conditions, changes in federal or state tax laws or the administration
of such laws, changes in gaming laws or regulations (including the legalization
of gaming in certain jurisdictions) and applications for licenses and approvals
under applicable laws and regulations (including gaming laws and regulations).
<PAGE>
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS - See the description of these legal
proceedings set forth in the Registrant's Form 10-KSB for the
year ended January 31, 2000.
Item 2. CHANGES IN SECURITIES - NON APPLICABLE
Item 3. DEFAULTS UPON SENIOR SECURITIES - NON APPLICABLE
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
NON APPLICABLE
Item 5. OTHER INFORMATION - NON APPLICABLE
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits - Financial Data Schedule
Number Description Method of Filing
------ ----------- ----------------
27 Financial Data Schedule Filed Herewith
(b) The following report on Form 8-K was filed during the quarter ended April
30, 2000:
NONE
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN WAGERING, INC.
(Registrant)
Date: June 14, 2000 By: /s/ Robert D. Ciunci
----------------------------
Robert D. Ciunci
Executive Vice President and
Chief Financial Officer
