[As adopted in Release No. 34-38850, July 18, 1997, effective September 2, 1997,
62 F.R. 39755.]
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: March 31, 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, NV 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.)
<PAGE>
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 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: June 30, 1999 115,330,600
Transitional Small Business Disclosure Format (check one). Yes ; No x
2
<PAGE>
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, 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 months ended March 31, 1999
may not be indicative of the results that may be expected for the year ending
December 31, 1999.
3
<PAGE>
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31 December 31
1999 1998
----------- -----------
ASSETS
Current Assets
Cash and cash equivalents ...................... $ 45,026 $ 109,824
Accounts receivable, net ....................... 79,235 7,825
Prepaid expenses ............................... 5,285 5,285
Inventory ...................................... 20,000 20,000
----------- -----------
Total current assets ........................... 149,546 142,934
----------- -----------
Property and Equipment, net .................... 183,740 204,740
Intangible and other assets .................... 3,442,604 3,442,604
----------- -----------
Total assets .............................. $ 3,775,890 $ 3,790,278
=========== ===========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE>
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31 December 31
1999 1998
----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
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 current liabilities ...................... 7,843,209 7,746,709
Long term obligations, net of current portion .. -- --
----------- -----------
Total Liabilities Subject to Compromise ........ 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
115,330,600 in 1999 and 1998 .................. 576,653 576,653
Additional paid-in capital ..................... 32,044,903 32,044,903
Accumulated deficit ............................ (36,688,875) (36,577,987)
----------- -----------
Total stockholders' deficit .................... (4,067,319) (3,956,431)
----------- -----------
Total Liabilities and Stockholders' Deficit .... $ 3,775,890 $ 3,790,278
=========== ===========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
<PAGE>
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended March 31
1999 1998
----------- -----------
Revenue ........................................ $ 87,501 $ 184,790
Cost of revenue ................................ - 92,280
----------- -----------
Gross margin .................................. 87,501 92,510
----------- -----------
Expenses ....................................... 101,889 1,060,118
----------- -----------
Loss from operations ........................... 14,388 967,608
Other income (expense), net .................... (96,500) 873,318
----------- -----------
Net Loss ....................................... $ (110,888) $ (94,290)
=========== ===========
Net loss per common share ...................... $ -- $ --
=========== ===========
Weighted average common shares outstanding ..... 115,330,600 27,367,080
The accompanying notes are an integral part of the condensed consolidated
financial statements.
6
<PAGE>
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended March 31
1999 1998
----------- -----------
Cash Flows From Operating Activities:
Net Loss ........................................... $ (110,888) $ (94,290)
Adjustments to Reconcile Net Loss to Net
Cash Provided by (Used in) Operating Activities:
Depreciation and amortization ...................... 21,000 316,434
Issuance of common stock for expenses .............. -- 93,500
Change in operating assets and liabilities:
Accounts receivable ................................ (71,410) (68,924)
Prepaid expenses .................................. -- 56,934
Deferred charges .................................. -- 192,218
Inventory .......................................... -- 53,550
Notes receivable ................................... -- 809
Accounts payable and accrued liabilities ........... 96,500 (922,620)
----------- -----------
Net cash used in operating activities .............. (64,798) (372,389)
----------- -----------
Cash Flows From Investing Activities:
Intangible assets .................................. -- --
Purchase of property and equipment ................. -- --
Disposal of property and equipment ................. -- 298,144
Security deposits .................................. -- (2,181)
Deferred development costs ........................ -- 7,750
----------- -----------
Net cash provided by (used in) investing activities. -- 303,713
----------- -----------
7
<PAGE>
Advanced Gaming Technology, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended March 31,
1999 1998
----------- -----------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock ............. -- 1,560,345
Proceeds from debt and notes ...................... -- --
Repayment of debt and notes ....................... -- (625,000)
Payment of convertible notes ...................... -- (1,250,000)
Proceeds from convertible notes .................... -- 150,000
Principal payments on long-term debt ............... -- (33,599)
Proceeds from long-term debt ....................... -- 306,112
----------- -----------
Net cash provided by financing activities .......... -- 107,858
----------- -----------
Net increase(decrease) in cash and cash equivalents (64,798) 39,182
Cash and cash equivalents at beginning of period ... 109,824 17,276
----------- -----------
Cash and cash equivalents at end of period ......... $ 45,026 $ 56,458
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest ........... $ -- $ 122,377
Supplemental Disclosure of Non-Cash Investing
and Financing Activities:
Conversion of notes to common stock ................ $ -- $ 1,577,124
Issuance of common stock for debt reduction ........ $ -- 310,696
The accompanying notes are an integral part of the condensed consolidated
financial statements.
8
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 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
with 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 month period ending March 31, 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 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, 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 nor 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.
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.
9
<PAGE>
The company filed a plan of reorganization in December 1998. The plan and
disclosure statement was approved in March1999. The plan of reorganization was
confirmed by the bankruptcy court on June 29, 1999. The plan is expected to
become effective in early August 1999.
Confirmation of the plan gives the company a new start and an opportunity
to execute a new business plan. The company will receive approximately $1
million on the effective date of the plan through settlement of outstanding
litigation and new investment in the company. The new business plan will attempt
to capitalize on the existing electronic bingo systems. The company will also
look to explore new gaming related products and services as such opportunities
become available. Diversification of operating revenue is a long-term goal.
Results of Operations -
1999 Compared to 1998
The loss for the three months ended March 31, 1999 was $110,888 compared to
a loss of $94,290 for the same period in 1998. Revenue was $87,501 in the first
quarter of 1999 compared to $184,790 in 1998. Most revenue in 1999 was royalty
revenue from the Max Plus licensing agreement. Most of this revenue had not been
collected at March 31, 1999 due to a dispute with the licensee.
The licensing matter was resolved in July of 1999. The parties were
disputing payments received under the agreement. The company filed suit against
the licensee and its successor in June of 1999. The matter was resolved in July
of 1999. The company received a one-time payment of $850,000 in full settlement
of the licensing agreement. The company regains the right to market the Max Plus
and TurboMax systems.
Expenses for the quarter ended March 31, 1999 decreased to $101,889 from
$1,060,118 in 1998. A substantial cost reduction effort was implemented when the
reorganization effort began in August 1998.
Other income(expense) for the first quarter of 1998 was boosted by a
one-time license fee related to the Max Plus license and royalty agreement of
$1,500,000. This caused net other income for the first quarter of 1998 of
$873,318. Other income (expense) for the first quarter of 1999 of consisted of
an expense of $96,500. This cost represented interest expense on notes payable.
10
<PAGE>
Interest expense decreased substantially in the first quarter of 1999 due
to the conversion of some obligations to common stock during the second half of
1998 and due to re-negotiation efforts in conjunction with the bankruptcy
proceeding.
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. This is due
in part to the highly capital intensive nature of the majority of the business
of the Company, thereby reducing the chances of competition providing for sales
price reductions while inflation in the costs are more likely to be passed
through to the customer. The Company's operations are subject to state and local
gaming laws as well as various federal laws and regulations governing business
activities with Native American Tribes. The State and local laws in the United
States which govern the lease and use of gaming products are widely disparate
and continually changing due to legislative and administrative actions and
judicial interpretations. If any changes occur in gaming laws through statutory
enactment or amendment, judicial decision or administrative action restricting
the manufacture, distribution or use of some or all of the Company's products,
the Company's present and proposed business could be adversely affected. The
operation of gaming on Native American reservations is subject to the Indian
Gaming Regulatory Act ("IGR"). Under IGR certain types of gaming activities are
classified as Class I, Class II or Class III. The Company's business will be
impacted based upon how its products are ultimately classified. However, 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.
Liquidity and Capital Resources -
The Company has minimal revenues, but has eliminated most operating costs
until additional product can be placed. The company's plan of reorganization was
confirmed by the bankruptcy court in the district of Las Vegas on June 29, 1999.
The plan is expected to become effective in early August, 1999. In conjunction
with the plan and settlement of outstanding litigation the company will receive
approximately $1 million of new funding. The company believes that this funding
will be adequate for near-term operating needs. In the future additional
financing may be necessary to support expansion of existing products or to
pursue new projects. There is no certainty that such funds will be available to
the company when needed. This could inhibit future growth of the company or
could cause the company to delay future projects until financing is available.
11
<PAGE>
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.
12
<PAGE>
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: July 28, 1999 By: /s/ Daniel H. Scott
-------------- ---------------------
Daniel H. Scott,
President, Chief Executive Officer
and Chairman
(Principle executive and
accounting officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE OF ADVANCED GAMING TECHNOLOGY, INC. AS OF MARCH 31, 1999 AND THE RELATED
STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE THREE MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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