U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Fiscal Year Ended: December 31, 1999
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
Commission file number 000-21991______
ADVANCED GAMING TECHNOLOGY, INC.
(Name of small business issuer in its charter)
Wyoming 98-0152226
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
P O Box 46855, Las Vegas, Nevada 89114 (Address of
principal executive offices)(Zip code)
Issuer's telephone number (702) 227-6578
Securities registered under Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Act:
Common Stock Par Value $.005
(Title of Class)
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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 required for the past 90 days. Yes X No
Total pages: 21
Exhibit Index Page: 20
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $ 789,788
As of January 31, 2000, there were 25,000,000 shares of the Registrant's
common stock, par value $0.005, issued and outstanding. The aggregate market
value of the Registrant's voting stock held by non-affiliates of the Registrant
was approximately $3,208,812 computed at the average bid and asked price as of
January 31, 2000.
ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PAST FIVE YEARS
Check whether the issuer 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
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) Into
which the document is incorporated: (1) any annual report to security
holders;(2) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"):
None
Transitional Small Business Disclosure Format (check one): Yes___ NO X
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TABLE OF CONTENTS
Item Number and Caption Page
PART I
Item 1 Description of Business............................................... 4
Item 2 Description of Property...............................................11
Item 3 Legal Proceedings.....................................................11
Item 4 Submission of Matters to a Vote of Security Holders...................13
PART II
Item 5 Market for Common Equity and Related Stockholder Matters..............13
Item 6 Management's Discussion and Analysis or Plan of Operations ...........14
Item 7 Financial Statements..................................................16
Item 8 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure..................................................16
PART III
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.....................16
Item 10 Executive Compensation...............................................17
Item 11 Security Ownership of Certain Beneficial Owners and Management.......19
Item 12 Certain Relationships and Related Transactions.......................19
Item 13 Exhibits and Reports on form 8-K ....................................20
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PART I
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ITEM I DESCRIPTION OF BUSINESS
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GENERAL
Advanced Gaming Technology, Inc., a Wyoming corporation (the "Company"), is
A provider of technology to the casino and hospitality industry. The company
formed TravelSwitch.com, a global Internet travel service provider in January,
2000. The company also, markets electronic bingo Systems. The Company's common
stock is traded on the National Association of Securities Dealers, Inc. (the
"NASD") OTC Bulletin Board Under the symbol "ADVI."
The Company was incorporated pursuant to the laws of the state of Wyoming
on November 20, 1963, under the name "MacTay Investment Co." On June 19, 1987,
the Company changed its name to "Auto N Corporation." On April 22, 1991, the
Company changed its name again to "Advanced Gaming Technology, Inc." when it
acquired all of the assets and certain liabilities of Selectro Vision Ltd., a
California corporation, in exchange for 1,359,000 shares of the Company's common
stock, $.005 par value per share (the "Common Stock").
The Company has the following wholly owned subsidiaries: Executive Video
Systems, Inc., a Maryland corporation ("Executive Video"), Palace Entertainment
Limited, a company organized under the laws of the British Virgin
Islands("Palace"), Branson Signature Resorts, Inc., a Nevada corporation
("Branson"),River Oaks Holdings, Inc., a Missouri corporation ("River Oaks"),
Branson Bluffs Resorts, Inc. ("Branson Bluffs") a Missouri corporation, Allied
Resorts, Inc. ("Allied") a Missouri corporation, River Oaks Resorts and Country
Club, Inc.("River Oaks Resort") a Texas corporation, Prisms, Inc., a North
Carolina corporation ("Prisms"), Pleasure World Ltd., ("Pleasure World"), and
its subsidiary Prisms (Bahamas) Ltd. ("Prisms Bahamas"), both companies
organized under the laws of the Bahamas, and A.G.T. Acceptance Corp., a Nevada
Corporation("A.G.T. Acceptance Corp."). The company also owns twenty two percent
of TravelSwitch, LLC, a Nevada Limited Liability Company.
Executive Video prior to the merger with the Company, supplied five bingo
locations.
Palace Entertainment, an inactive company was organized in August 1996 to
be a joint venture partner with various entities in China for the operation of
entertainment centers in China, none of which materialized.
Branson and its wholly-owned subsidiaries are have no assets and are
currently inactive. These entities have either been liquidated or are in the
process of being liquidated at December 31, 1999.
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Prisms, Inc. and Prisms (Bahamas) Ltd., formerly owned several patents and
undeveloped games. Prisms, Inc. currently has no assets.
TravelSwitch, LLC is a global Internet travel service provider.
The principal office of the Company is located in Las Vegas, Nevada.
On August 26, 1998 Advanced Gaming Technology, Inc and Branson Signature
Resorts filed for reorganization in Las Vegas under chapter 11 of The U. S.
bankruptcy code. The cases were jointly administered. The company continued to
operate as "debtor in possession" during the reorganization effort. The company
filed a plan of reorganization with the bankruptcy court in December, 1998. The
company's plan and disclosure statement was approved by the court on March 22,
1998. The plan was confirmed by the bankruptcy court on June 29, 1999. The plan
became effective on August 19, 1999. The final decree to close the bankruptcy
cases was approved by the bankruptcy court on February 15, 2000.
OPERATING LOSSES. The Company incurred net losses of $394,895, $3,628,887,
and $9,575,512 for the fiscal years ended December 31, 1999, 1998 and 1997,
respectively. Substantial cost reductions were made in conjunction with the plan
of reorganization. However, the company has generated minimal revenue from
product distribution. The Company's operations are subject to numerous risks
associated with establishing any new business, including unforeseen expenses,
delays and complications. There can be no assurance that the Company will
achieve or sustain profitable operations or that it will be able to remain in
business.
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING. Since the
Company's formation, it has funded its operations and capital expenditures
primarily through private placements of debt and equity securities. The company
raised $1,000,000 in conjunction with the reorganization effort through new
investment and settlement of outstanding litigation. Should the Company require
additional financing in the future there can be no assurance that such financing
will be available at all or available on terms acceptable to the Company.
GOVERNMENT REGULATION. Some of the Company's operations are subject to
gaming laws, which vary according to the jurisdiction in which each product is
marketed. The state and local laws in the United States that govern the lease
and use of gaming products vary widely and change frequently 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. See "Business - Government Regulation" and "Business -
- -Native American Bingo Operations."
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RISK OF LOW-PRICED STOCKS. Rules 15g-1 through 15g-9 promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act") impose sales practice and
disclosure requirements on certain brokers and dealers who engage in certain
transactions involving "a penny stock."
Currently, the Company's Common Stock is considered a penny stock for
purposes of the Exchange Act. The additional sales practice and disclosure
requirements imposed on certain brokers and dealers could impede the sale of the
Company's Common Stock in the secondary market. In addition, the market
liquidity and price for the Company's securities may be adversely affected.
Under the penny stock regulations, a broker or dealer selling penny stock
to anyone other than an established customer or "accredited
investor"'(generally, an individual with a net worth in excess of $1,000,000 or
annual incomes exceeding $200,000, or $300,000 together with his or her spouse)
must make a special suitability determination for the purchaser and must receive
the purchaser's written consent to the transaction prior to sale, unless the
broker or dealer or the transaction is otherwise exempt.
In addition, the penny stock regulations require the broker or dealer to
deliver, prior to any transaction involving a penny stock, a disclosure schedule
prepared by the Securities and Exchange Commission (the "SEC") relating to the
penny stock market, unless the broker, or dealer, or the transaction is
otherwise exempt. A broker, or dealer is also required to disclose commissions
payable to the broker or dealer and the registered representative and current
quotations for the Securities. In addition, a broker or dealer is required to
send monthly statements disclosing recent price information with respect to the
penny stock held in a customer's account and information with respect to the
limited market in penny stocks.
TRADEMARK AND PATENT PROTECTION. The Company relies on a combination of
patent, copyright and trademark law and technical security measures to protect
certain products. Notwithstanding these safeguards, it is possible for
competitors of the Company to imitate it products. Furthermore, others may
independently develop products similar or superior to those developed or planned
by the Company. While the Company may obtain patents with respect to certain of
its products, the Company may not have sufficient resources to defend such
patents; such patents may not afford all necessary protection and competitors
may develop equivalent or superior products that may not infringe such patents.
See "Business - Patents and Trademarks."
PRODUCTS
INVESTMENT IN TRAVELSWITCH.COM
In January, 2000 the company formed TravelSwitch.com to provide travel
services on the Internet. The company teamed with seasoned Las Vegas hotel
veterans to specialize initially in the Las Vegas market through the INTERNET
ADDRESS WWW.777LASVEGAS.COM The Las Vegas site will provide hotel reservations,
airfare, car rentals and other services. TravelSwitch.com expects to become a
major source for inbound Las Vegas travelers by also offering dining,
entertainment, events and gaming information. Customers will be able to find any
information related to their upcoming Las Vegas visit. Management believes the
site will drive substantial room reservations for the Las Vegas market.
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Las Vegas is the largest hotel visitor market in the country with over
120,000 rooms. The Las Vegas casinos typically attain occupancy levels above 90
percent. The addition of new properties including, Bellagio, Mandalay Bay, Paris
and The Venetian have driven increased visitor volume to the market.
TravelSwitch.com expects to gain a reasonable market share of inbound Las Vegas
visitor traffic.
TravelSwitch.com has entered into a relationship with Hotelguide.com that
will bolster the marketing efforts OF THE GLOBAL INTERNET ADDRESS
WWW.TRAVELSWITCH.COM. Hotelguide.com publishes the popular publication "The
Hotel Guide", a directory with information on over 60,000 hotels Worldwide. The
directory is now available on CD-ROM for consumers and travel professionals.
Reservations can be made by accessing the Internet with one click from the
CD-ROM.
Advanced Gaming Technology has a twenty two percent interest in this new entity.
The company does not incur additional expenses from the operations of this
entity.
MAX BINGO SYSTEMS
The Company's MAX Bingo Systems currently include three different products:
[i] MAXPLUS. The MAXPLUS is a fixed based Electronic Bingo System. MAXPLUS
is designed to increase bingo revenue at bingo halls, reduce administration
costs and increase the excitement of play. MAXPLUS gives players the opportunity
to electronically play up to 300 bingo cards simultaneously. In addition, the
System tracks necessary financial and analytical information by providing a
fully integrated accounting package.
[ii] MAXLITE. The MAXLITE Bingo system is a portable, hand-held electronic
bingo unit that allows users to play up to 300 bingo cards per game. The unit
offers many of the advantages of the MAXPLUS system in a lightweight wireless
package.
[iii] TurboMAX. TurboMAX is a pari-mutuel electronic bingo system that has
five progressive jackpots with five different patterns for each game. A
percentage of player purchases can be allocated toward a jackpot, which allows a
jackpot to be offered on every game. This high-speed bingo game can be played
every 45 to 60 seconds.
In February, 1998 the Company executed a Financing, Licensing, and Royalty
agreement with a major competitor, Bingo Technologies Corporation ("BTC"). This
agreement granted BTC the exclusive right to sell, market, manufacture, and
distribute the MAXPLUS and TurboMAX products in the United States for a period
of five years. This agreement produced a one-time licensing fee of $1,500,000,
and was to generate royalties of 15% based on the gross revenues generated by
BTC from marketing these products. The royalty amount was in dispute at December
31, 1998. In January of 1999 BTC was acquired by Gametech International, another
competitor. Gametech continued to dispute the amount of royalty payments. AGT
filed suit regarding the issue in June 1999. In July of 1999 the parties
resolved the dispute. In settlement, Gametech made a one time payment of
$850,000 to AGT. Gametech was allowed to retain and operate existing MAXPLUS and
Turbo MAX locations. AGT re-acquired the rights to these products for the
future. In clarification of an existing patent license between the parties,
Gametech was granted an non-exclusive license to the AGT patents.
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OTHER PRODUCTS
The company has considered development of two additional
products known as Sonic Bingo and PartiMAX. The company is currently evaluating
the cost involved to complete development. These projects will not proceed until
a market analysis is performed to determine the potential return on investment.
The company may decide to abandon these efforts if the market potential is not
sufficient.
Sonic Bingo is a high-stakes electronic speed bingo unit that uses the
Company's TurboMAX software, and is capable of playing multiple cards
simultaneously in sixty (60) second intervals. This system is capable of being
networked throughout gaming halls as well as on a wide area basis, (subject to
regulatory approvals).
Parti MAX is a hand held unit designed for use in the United Kingdom. The
unit, although similar in concept to the MAXLITE requires significant
development cost to design and produce. The United Kingdom was identified as a
new market for a portable unit since no portable electronic bingo systems are in
use. The U. K. bingo market there is considered substantial.
SALES AND MARKETING
MAX Bingo Systems are leased to distributors or directly to bingo halls.
The Company's MAX Bingo Systems complement paper-based bingo play.
TARGET MARKETS. Native American, charity, military, casino and cruise line
bingo operations are considered by the Company to be prospective markets for the
Company's electronic bingo systems. Currently, the Company is focusing its
marketing efforts on the Native American and charity markets.
MARKET SEGMENTS. The key segments of the bingo market are as follows:
HIGH STAKES NATIVE AMERICAN BINGO. There are presently over 200 bingo
operations located on Native American reservations in the United States and
Canada. It is believed that the largest bingo games in the United States are run
on Native American reservations. The bingo halls located on these reservations
typically seat between 300 and 2,000 players. Bingo games are conducted three to
seven days per week, playing up to 28 bingo sessions per week.
CHARITY BINGO. Charity bingo sessions are conducted on a regular basis by
parochial, private and public schools, churches, and other organizations across
the United States and Canada. Although this is a major market source for
electronic systems, many of these operations are too small to consider for
permanent electronic installations.
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REAL ESTATE HOLDING
The company currently owns 170 acres of undeveloped property near Branson,
Missouri. The Company is attempting to sell the property. The property is
security for a first trust deed of $1.75 million and a second mortgage of
$884,000. During March 2000, the Company exchanged the property in settlement of
the $1.75 million Note.
NATIVE AMERICAN BINGO OPERATIONS
THE INDIAN GAMING REGULATORY ACT. IGR classifies games that may be played
on Native American land into three categories. Class I gaming includes
traditional Native American social and ceremonial games and is regulated only by
the tribes. Class II gaming includes bingo, pull tabs, lotto, punch boards,
instant bingo, certain card games played under limited circumstances and other
games similar to bingo if those games are played at the same location where
bingo is played. Class III gaming consists of all forms of gaming that are not
Class I or Class II, such as video casino games, slot machines, most table games
such as black jack, craps and keno. Generally, Class II gaming may be conducted
on Native American lands if the state in which the Native American reservation
is located permits such gaming for any purpose by any person. Class III gaming
may only be conducted pursuant to a compact reached between the Native American
tribe and the state in which the tribe is located.
GOVERNMENT REGULATION
In the United States, bingo is legal in the District of Columbia and all
states, except Utah and Hawaii. In 46 of those states, it must be operated
either by, or in association with, a not-for-profit organization. The two states
where it may be played under private ownership for profit are Nevada and certain
parts of Maryland. In any of the 48 states where bingo and other forms of gaming
are legal, bingo may be played on tribal lands under tribal ordinance and with
licensing approval by the tribes without state regulation. In each of the states
where bingo is legal, the opening and operation of a game requires a license. In
some states licensing is controlled at the state level and in other states it is
controlled and issued at the local level. Some states have formed and maintain
formal gaming commissions. In several states, the gaming commissions require
that distributors, manufacturers and suppliers of bingo products and equipment
as well as their sales representative obtain licenses. State regulations may
limit the amount of revenues that the Company can generate by limiting the
number of sessions, revenues per session, number of locations which may be
operated, or other matters. The application for administrative approval by the
Nevada Gaming Control Board to market and operate the Company's electronic bingo
systems was filed to obtain access to the Nevada market. The Company is licensed
in Alaska, Mississippi, Nevada, Texas, Kentucky, Ohio, Virginia and Wisconsin.
The state and local laws in the United States that 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.
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Under IGR certain types of gaming activities are classified as Class I,
Class II or Class III. Class I gaming includes traditional Native American
Social and ceremonial games and is regulated only by the tribes. Class II gaming
includes bingo, pull-tabs, lotto, punch boards, instant bingo, certain card
games played under limited circumstances and other games similar to bingo if
those games are played at the same location where bingo is played. Class III
gaming consists of all forms of gaming that are not Class I or Class II, such as
video casino games, slot machines, most table games such as black jack, craps
and keno. Generally, Class II gaming may be conducted on Native American lands
if the state in which the Native American reservation is located permits such
gaming for any purpose by any person. Class III gaming, on the other hand, may
only be conducted pursuant to a compact reached between the Native American
tribe and the state in which the tribe is located. The Company's business will
be impacted based upon how its products are ultimately classified.
COMPETITION
As the company pursues new technology and new sources of revenue, it is
likely that competition will exist in these areas of interest. Management will
weigh the market potential of new products taking into consideration all factors
including existing or potential competition.
The company's investment in TravelSwitch.com is subject to substantial
competition in the global Internet travel industry. Travel reservations and
services is among the fastest growing segments of electronic commerce.
The Company believes it has five main competitors for electronic bingo
systems, all of which have substantially greater financial, marketing and
technological resources than the Company. In addition, since electronic bingo
comprises only a very small segment of the industry, it is conceivable that
there will be new products and new companies entering this area of business.
Notwithstanding this, the Company will continue to pursue a meaningful share of
the electronic bingo market.
PATENTS AND TRADEMARKS
The Company relies on a combination of patent, trade secret, copyright and
trademark law, nondisclosure agreements and technical security measures to
protect its products. Notwithstanding these safeguards, it is possible for
competitors of the Company to imitate its products.
Furthermore, others may independently develop products similar or superior
to those developed or planned by the Company. While the Company may obtain
patents with respect to certain of its products, the Company may not have
sufficient resources to defend such patents, such patents may not afford all
necessary protection and competitors may develop equivalent or superior products
which may not infringe such patents.
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RESEARCH AND MARKET DEVELOPMENT
As a technology company there will likely be expenditures for research and
development in the future to bring new products to market. There were no such
expenditures during the year ended December 31, 1999 due to the reorganization
proceedings and a general shortage of working capital. Research and development
expenses of $279,059 were incurred during 1998 prior to the bankruptcy filing.
EMPLOYEES
As of February 1, 2000, the Company had 1 employee. This employee was not
represented by a labor union.
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ITEM 2. DESCRIPTION OF PROPERTY
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The Company's principal executive offices are located in Las Vegas, Nevada.
The offices were relocated from Vancouver, British Columbia during 1998.
The company owns 170 acres of undeveloped land in Branson, Missouri. The
property has been pledged to secure the repayment of a promissory note in an
aggregate principal amount of $1,750,000, bearing interest at nine percent (9%)
per annum, due in July 2006 and a promissory note in the principal amount of
$884,000, bearing interest at seven percent (7%) per annum, due in July 2006.
This note is convertible into common stock at a price of $.43 per share. During
March 2000, the Company exchanged the property in settlement of the $1.75
million Note.
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ITEM 3. LEGAL PROCEEDINGS
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In addition to ordinary routine litigation incidental to its business
operations, which the Company does not believe, in the aggregate, will have a
material adverse effect on the Company, or its operations, the Company is
engaged in the following lawsuits:
In January 1996, Tierra Corporation ("Tierra") commenced an action in the
Circuit Court of Stone County, Missouri, claiming that River Oaks Resort and
Country Club, Inc. a Texas corporation and a subsidiary of Branson ("River Oaks
Resort") defaulted on a promissory note.
A judgment was sought in the principal amount of $75,106, plus interest
since October 18, 1995, at 10% per annum.
An answer has been filed on behalf of River Oaks Resort averring that
Tierra has not performed conditions precedent to assessing any deficiency and
that no accounting regarding the disposition of security for such note has been
provided and, in addition, a counter claim was filed, asserting Tierra disposed
of stock collateral in a commercially unreasonable manner.
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A principal of Tierra filed suit in Dallas, Texas concerning the stock
collateral. A summary judgement was awarded to Tierra Corp in June of 1999. The
River Oaks resort subsidiary has no assets at this time. This wholly owned
subsidiary of Branson Signature Resorts is subject to dissolution in conjunction
with the effective date of the bankruptcy plan. River Oaks Resort and Country
Club currently has no assets.
In February 1996, P.D.I., LLC, a Missouri limited liability company
("PDI")commenced an action in the Circuit Court of Stone County Missouri,
claiming breach of a real estate purchase agreement which in part, provided for
the construction of a sewage treatment facility for which damages are claimed,
including the awarding to PDI of all escrow funds, costs and expenses incurred
by PDI over and above the amount of escrow funds and cost and expenses,
including attorney fees in connection with the commencement of the action.
In response, the Company and River Oaks Resort have counter claimed for
damages, in an amount to be determined at trial, incurred when plaintiff PDI
withdrew funds from the escrow fund created for construction of the sewage
treatment facility and the permit application for construction approval by the
Missouri Department of Natural Resources. Moreover, a claim has also been made
by River Oaks Resort and the Company that subsequent development attempted by
PDI has encroached upon property development belonging to River Oaks Resort and
the Company without the right to do so, including damages for disruption
resulting therefrom.
In April 1996, Larry Newman ("Newman") commenced a mechanics' lien in the
Circuit Court of Stone County, Missouri, seeking $177,282, plus interest, for
excavation work performed during the period between July 19, 1995 to September
25, 1995 on a road across the River Oaks development in Stone County.
Thereafter, on or about June 24, 1996, Jack L. Holt ("Holt") filed a similar
petition in the Circuit Court of Stone County, Missouri, claiming a mechanics'
lien for engineering and land surveying during the period May 16, 1995 to July4,
1995 for a road across the River Oaks development property in the amount
of$9,610, plus interest. The Holt case has now been consolidated in the case
originally filed by Newman.
The Company has filed a counterclaim alleging Newman and Holt extended the
road beyond the boundaries of the River Oaks development property onto land
owned by Sunset Cove, Ltd., a Missouri corporation.
The court has since ordered Sunset Cove, Ltd. joined as a party needed for
justadjudication. Discovery has not yet commenced.
On November 15, 1996, Fortunet, Inc., a Nevada corporation
("Fortunet"),filed a patent infringement claim in the United States District
court Southern District of California against the company and certain other
companies which manufacture and distribute electronics bingo systems, claiming
that the defendants, including the Company, infringed Fortunet's United States
Patent No.4,624,462 (the "Patent"). Fortunet seeks to enjoin the defendants from
any further alleged infringement of the Patent and is seeking actual and
enhanced damages as well as attorneys fees and other costs. In July 1997, the
case was transferred from the federal court in San Diego, California to the
federal court in Phoenix, Arizona. Discovery has not yet commenced.
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The Company is defending these lawsuits. However, no assurance can be given
as to the outcome of these cases. Management and counsel believe that the cases
have been dismissed as a result of the company's reorganization. Any ultimate
liability should not have a material adverse effect on the company's financial
position or results of operations.
In July 1997, the Company commenced a lawsuit against G&J Production Trust,
of Victorville, California, for delinquent payments related to the lease of an
electronic bingo system. The company received $15,000 in full settlement of this
matter in January of 2000.
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ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
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During the year ended December 31, 1999 shareholders were asked to vote on
the company's plan of reorganization. The measure passed and the plan was
confirmed by the Bankruptcy Court in Las Vegas, Nevada on June 29, 1999. The
plan became effective on August 19, 1999.
PART II
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ITEM 5. MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
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MARKET INFORMATION. The Company's Common Stock is traded on the NASD's OTC
Bulletin Board under the symbol "ADVI." The following table presents the high
and low bid quotations for the Common Stock as reported by the NASD for each
quarter during the last two years. Such prices reflect inter-dealer quotations
without adjustments for retail markup, markdown or commission, and do not
necessarily represent actual transactions.
Year Period Low High
1998
First Quarter .02 .08
Second Quarter .02 .08
Third Quarter .01 .03
Fourth Quarter .01 .02
1999
First Quarter .01 .12
Second Quarter .01 .06
Third Quarter .03 .30
Fourth Quarter .03 .30
DIVIDENDS. The Company has never declared or paid dividends. The Company
does not anticipate paying dividends on its Common Stock in the foreseeable
future.
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The number of shareholders of record of the Company's Common Stock as of
December 31, 1999 was 571.
RECENT SALES OF UNREGISTERED SECURITIES. There were no sales of
unregistered securities during the past year. 25 million shares were issued in
conjunction with the bankruptcy plan that became effective on August 19, 1999.
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ITEM 6. MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS
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GENERAL
The company experienced operating losses of $3,628,887 in 1998 and
$9,575,512 in 1997. During 1998 liabilities of the company significantly
exceeded assets. The company was in default on debt obligations and was unable
to meet the cash flow needs in the ordinary course of business. The company
had exhausted additional financing sources. Management determined that the best
course of action was to seek reorganization under chapter 11 of the U. S.
bankruptcy code. A petition for reorganization was filed with the bankruptcy
court in the District of Las Vegas on August 26, 1998. The company filed a plan
of reorganization in December 1998. The plan and disclosure statement was
approved in March of 1999. The bankruptcy plan was confirmed by the court on
June 29, 1999. The plan became effective on August 19, 1999.
RESULTS OF OPERATIONS
Successful completion of the plan of reorganization and the resulting
infusion of $1 mllion in cash gave the company new life during 1999. The company
reduced losses in 1999 to $395,000 from $3.6 million in 1998 and $9.5 million in
1997. The reduced operating loss was primarily due to a substantial cost
reduction program implemented in conjunction with the reorganization effort. The
company has changed its operating philosophy in an effort to implement new
technology.
Revenue production during 1999 was minimal due to the limited resources
available to promote products. In July 1999 the company settled a dispute for a
one-time payment of $850,000 from the licensee of the company's Max Plus
electronic bingo system. The company retains the rights to the Max Plus product
and is able to market the product without restrictions. The company is currently
seeking placement for Max Lite and Max Plus units. The company is also exploring
new technology to improve revenue sources and diversify revenue to decrease
reliance on the electronic bingo markets.
14
<PAGE>
In January of 2000 the company formed TravelSwitch.com with several other
investors. TravelSwitch.com, a Nevada Limited Liability Company, is a global
Internet travel service provider. The investment represents an opportunity for
the company to be involved in electronic commerce for a modest investment of
$156,000 through January of 2000. Management believes that the return on this
investment could be substantial. Travel reservations and service is one of the
fastest growing segments of electronic commerce.
Future success of the company depends on its ability to find investment and
technology opportunities similar to the TravelSwitch.com project as well as its
ability to place the existing electronic bingo products. The company has
substantial inventory of hand-held bingo units and could generate high margins
if the units can be placed in revenue producing situations. The company will
consider all options regarding the electronic bingo systems including licensing
of the system or even outright sale.
INFLATION AND REGULATION
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.
LIQIUDITY AND CAPITAL RESOURCES
The company exhausted financing sources during 1998. The resulting
shortfall in operating capital required the company to seek reorganization under
chapter 11 of the U. S. Bankruptcy Code. The company's bankruptcy plan was
confirmed by the court in June 1999. The plan became effective in August, 1999.
The liabilities of the company were substantially reduced by the terms of
the plan of reorganization. The company currently has $2.6 million in debt
secured by the Branson real estate. All other debt, secured and unsecured, was
satisfied in full through issuance of new common stock. The company raised $1
million through new investment and settlement of outstanding litigation.
15
<PAGE>
The company may require additional capital to fund future projects. There
is no assurance that such capital will be available when needed. The potential
lack of access to capital could inhibit the growth of the company. Management
will consider all reasonable forms of financing to fund future projects.
- --------------------------------------------------------------------------------
ITEM 7. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements of the Company and supplementary data are included
immediately following the signature page to this report. See Item 13 for a list
of the financial statements and financial statement schedules included.
- --------------------------------------------------------------------------------
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
- --------------------------------------------------------------------------------
The Company has no changes in or disagreements with its accountants on any
accounting and financial disclosure.
PART III
- --------------------------------------------------------------------------------
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- --------------------------------------------------------------------------------
Director
Name, Age and Principal Employment for Past Five Years Since
- - ------------------------------------------------------------------------------
Daniel H. Scott, 44, is currently Chairman, President and Chief 1998
Executive Officer of the company. Prior to joining the
company Mr. Scott was Senior Vice President and Chief
Financial for MGM Grand Hotel Corp. of Las Vegas, Nevada,
a casino operator, from September 1995 until August 1997. Prior
to that Mr. Scott was Vice President and Treasurer during a
twelve-year employment with Caesars Palace, a casino operator,
in Las Vegas, Nevada.
Robert L. Hunziker, 55, was appointed as a Director of the 1998
Company effective January 14, 1998. Mr. Hunziker has been
employed in corporate relations and corporate finance with public
companies since 1992. Previously, he was a limited partner
(associate director)of Bear, Sterns & Company, Inc., and he was
a principal of Oppenheimer & Company, Inc.
16
<PAGE>
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of forms 3, 4, and 5 and amendments thereto,
furnished to the Company during or respecting its last fiscal year, no director,
officer, beneficial owner of more than 10% of any class of equity securities of
the Company or any other person known to be subject to Section 16 of the
Exchange Act of 1934, as amended, failed to file on a timely basis reports
required by Section 16(a) of the Exchange Act for the last fiscal year or prior
fiscal years.
- --------------------------------------------------------------------------------
ITEM 10. EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The following summary compensation table sets forth certain information
regarding compensation paid in each of the Company's last two fiscal years to
the Company's Chief Executive Officer and other executive officers whose
salaries and bonus exceeded $100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Other All
Name and Principal Fiscal Annual Other
Position Year Salary Bonus Compensation Compensation (1)
- - ----------------------- ----- -------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Robert C. Silzer, Sr., 1996 $175,000 (2) - $ 10,000 $ 16,692
Chairman and Chief 1997 $225,000 (3) - $ 10,000 $ 16,832 (4)
Executive Officer(10) 1998 - - - -
Firoz Lakhani 1996 $125,000 (5) - $ 10,000 $ 16,692
President and 1997 $175,000 (6) - $ 10,000 $ 13,004 (7)
Chief Operating Officer 1998 - - - -
Thomas Nieman 1998 $ 52,500 - - $ 750
Daniel H. Scott 1999 $198,000 - -
</TABLE>
(1) Amounts under "All Other Annual Compensation" represent an automobile
allowance for: Robert C. Silzer, Sr., of $10,800 for 1996, $12,000 for 1997
and certain employee benefits; an automobile allowance for Firoz Lakhani of
$9,600 for 1996, $10,800 for 1997 and certain employee benefits; an
automobile allowance for Thomas Nieman $750 for 1998 and certain employee
benefits.
(2) Includes $37,500 deferred to subsequent year.
(3) Includes $29,375 deferred to subsequent year.
(4) Includes $1,500 deferred to subsequent year.
(5) Includes $33,333 deferred to subsequent year.
(6) Includes $23,125 deferred to subsequent year.
(7) Includes $1,350 deferred to subsequent year.
17
<PAGE>
Effective February 15, 1998, Mr. Silzer, Sr. and Mr. Lakhani resigned as Chief
Executive Officer and Chief Operating Officer, respectively.
No bonuses were paid in 1999 or 1998.
Director Compensation
There are no arrangements pursuant to which Directors are compensated for any
services provided as a Director.
Option Grants in Last Fiscal Year
No options were granted during the year ended December 31, 1999.
Aggregate Option Exercises in Last Year, and Year-End Option Values
No options were exercised during 1999.
Employment Agreements
Effective January 1, 1994, the Company entered into an employment
agreement with Robert C. Silzer, Sr., under which Mr. Silzer, Sr. served as
Chairman and Chief Executive Officer of the Company. Pursuant to the Agreement,
Mr. Silzer,Sr,. was paid a salary of $75,000 in 1994, $125,000 in 1995 and
$137,500 in1996. He deferred $37,500 of his salary for the year 1996. He was
paid a salary of $225,000 in 1997 and deferred $29,375 to 1998. The employment
agreement was terminated in February 1998 in conjunction with Mr. Silzer's
resignation as chief executive officer. In February 2000, the company settled a
claim by Mr. Silzer for unpaid wages under the contract.
Effective September 5, 1995, the Company entered into an employment
agreement with Firoz Lakhani, under which Mr. Lakhani served as President and
Chief Operating Officer of the Company. Pursuant to the Agreement, Mr. Lakhani
was paid a salary of $6,250 per month from September 1, 1995 to December 31,
1995 and $91,667 in 1996. He deferred $33,333 of his salary for the year 1996.
Mr. Lakhani was paid a salary of $175,000 in 1997, and deferred $23,125 1998.
The employment agreement was terminated in February 1998 in conjunction with Mr.
Lakhani's resignation as President and chief operating officer. In February
2000, the company settled a claim by Mr. Lakhani for unpaid wages under the
contract.
On February 15, 1994, the Company entered into an employment agreement,
amended December 8, 1997 and February 17, 1998, with Robert C. Silzer, Jr. (the
"Silzer Jr. Employment Agreement") under which Mr. Robert C. Silzer, Jr. served
as Executive Vice President of the Company, effective September 1, 1997.
Pursuant to the Silzer, Jr. Employment Agreement, and amendments thereto, Robert
C. Silzer, Jr. was paid a salary of $49,000 in 1994, $55,000 in 1995 and $85,937
in 1996 and effective September 1, 1997, his annual salary increased to
$125,000. The company terminated this agreement on July 31, 1998. In February
2000, the company settled a claim by Mr. Silzer for unpaid wages under the
contract.
18
<PAGE>
On March 6, 1998, the Company entered into an employment agreement with
Thomas N. Nieman, under which Mr. Nieman was to serve as President and Chief
Executive Officer. This agreement was terminated upon Mr. Nieman's resignation
from the company in August 1998.
On August 4, 1998 the company entered into an employment arrangement with
Daniel H. Scott for Mr. Scott to serve as President and chief executive officer.
- --------------------------------------------------------------------------------
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
The following table sets forth information as of March 31, 1999 regarding
the beneficial ownership of Common stock of the Company by (i) the directors of
the Company, (ii) each executive named in the Summary Compensation Table that
appears under "Executive Compensation-Summary Compensation Table," (iii) each
person who was known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock of the Company and (iv) all officers and
directors as a group.
Name and address of Beneficial Owner Number of Shares Owned Percent of Class
Dr. Kenneth Landow 2,100,000 8.4%
P O Box 46855
Las Vegas, NV 89114
Robert Hunziker(1) 175,000 .5%
PO Box 46855
Las Vegas, Nevada
Daniel H. Scott
P O Box 46855
Las Vegas, Nevada 12,089,750 48%
All officers and directors 12,275,000 48.5% (2)
as a group
(1) Includes 25,000 shares held by indirect ownership.
- --------------------------------------------------------------------------------
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
During the fiscal year ended December 31, 1999, the Board of Directors held
approximately 5 meetings. The Company does not have a standing audit committee,
nominating committee or compensation committee.
19
<PAGE>
- --------------------------------------------------------------------------------
ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
(a) The following documents are filed as part of this report.
1. Financial Statements Page
Report of Robison, Hill & Co., Independent Certified Public Accountants F - 1
Consolidated Balance Sheets as of December 31, 1999 and 1998 F - 2
Consolidated Statements of Operations for the years ended
December 31, 1999 and 1998 F - 4
Consolidated Statement of Stockholders' Deficit for the year ended
December 31, 1999 F - 5
Consolidated Statement of Stockholders' Deficit for the year ended
December 31, 1998 F - 6
Consolidated Statements of Cash Flows for the years ended
December 31, 1999 and 1998 F - 7
Notes to Financial Statements F - 9
2. Financial Statement Schedules
The following financial statement schedules required by Regulation S-X are
included herein.
All Schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
3. Exhibits
The following exhibits are included as part of this report:
Exhibit
Number Exhibit
2.1 (1) Articles of Amendment to Articles of Incorporation of the Company.
2.2 (1) Articles of Amendment to Articles of Incorporation of the Company.
2.3 (1) Articles of Amendment to Articles of Auto N Corporation.
2.4 (1) Articles of Amendment to Articles of MacTay Investments Co.
2.5 (1) Articles of Incorporation of MacTay Investments Co.
2.6 (1) Bylaws of the Company.
6.20 (1) Financing, Royalty and Licensing agreement with Bingo Technologies
Corporation, dated February 9, 1998.
27.1 Financial Data Schedule
(1) Documents previously filed and incorporated by reference herein, the same
numbered exhibit to Registrant's Registration Statement on Form 10-SB filed
on January 16, 1997.
(b) Sales of unregistered securities during the past year were filed pursuant
to 8-K on the following dates: none. The U S Bankruptcy Court authorized
the issuance of 25 million shares on the effective date of the bankruptcy
plan, August 19, 1999.
(c) The exhibits listed under Item 14(a)(3) are incorporated by reference.
(d) No financial statement schedules required by this paragraph are required to
be filed as a part of this form.
20
<PAGE>
- --------------------------------------------------------------------------------
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, hereunto duly authorized.
ADVANCED GAMING TECHNOLOGY, INC.
Dated: March 29, 2000 By /s/ Daniel H. Scott
--------------- -------------------------------------
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 29th day of March, 2000.
Signatures Title
/s/ Daniel H. Scott, Chairman and Director
(Principal Executive and Accounting
Officer)
/s/ Robert L. Hunziker Director
21
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Advanced Gaming Technology, Inc.
We have audited the accompanying consolidated balance sheets of Advanced
Gaming Technology, Inc. and subsidiaries as at December 31, 1999 and 1998, and
the consolidated statements of operations, stockholders' deficit, and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Advanced Gaming Technology,
Inc. and subsidiaries as of December 31, 1999 and 1998 and the results of their
operations, and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company incurred a net loss of $394,895 for 1999 and has incurred
substantial net losses in recent years. These factors, and the others discussed
in note 13, raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
Respectfully submitted,
/s/ Robison, Hill & Co.
Certified Public Accountants
Salt Lake City, Utah
March 25, 2000
F-1
<PAGE>
Advanced Gaming Technology, Inc.
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS
1999 1998
---------- ---------
Current Assets
Cash and cash equivalents (note 2(h)) ............. $440,561 $109,824
Accounts receivable, net .......................... -- 7,825
Inventory (note 2 (c)) ............................ 20,000 20,000
Deferred charges .................................. -- --
Prepaid expenses .................................. 1,000 5,285
---------- ---------
Total current assets ................................ 461,561 142,934
Property and Equipment, net (note 2(d)) ............. 141,740 204,740
Other Assets (note 3) ............................... 1,906,333 3,442,604
---------- ---------
Total assets ........................................ $2,509,634 $3,790,278
========== ==========
The accompanying notes are an integral part of these financial statements
F-2
<PAGE>
Advanced Gaming Technology, Inc.
CONSOLIDATED BALANCE SHEETS
December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
---------- ---------
Current Liabilities
Liabilities
Accounts payable and accrued liabilities............ 140,510 2,766,588
Notes payable (note 4) ............................. -- 313,000
Convertible notes (note 5) ......................... -- 748,750
Current maturities of long-term debt (note 6)....... 104,000 3,918,371
---------- ---------
Total current liabilities .......................... 244,510 7,746,709
Long-Term Debt (note 9) ............................. 2,535,019 --
---------- ---------
Total Liabilities .................................. 2,779,529 7,746,709
Commitments and Contingencies (notes 11, 12, 13 and 14)
Stockholders' Equity (Deficit)
Preferred stock - 10% cumulative $.10 par value;
authorized 4,000,000 shares; issued - nil .......... -- --
Common stock - $.005 par value; authorized 25 million
And 150 million shares; issued and outstanding
25,000,000 and 1,750,000 in 1999 and 1998,
respectively........................................ 125,000 8,750
Additional paid-in capital ......................... -- 32,612,806
Accumulated deficit ................................ (394,895) (36,577,987)
---------- ---------
Net stockholders' equity (deficit).................. (269,895) (3,956,431)
---------- ---------
Total liabilities and stockholders' equity ......... $2,509,634 $3,790,278
========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Advanced Gaming Technology, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31,
1999 1998
---------- ---------
Revenue ............................................. $ 789,788 $ 537,827
Cost of revenue ..................................... -- 197,980
---------- ---------
Gross margin ........................................ 789,788 339,847
---------- ---------
Expenses
Research and development ............................ -- 279,059
General and administration ......................... 512,606 1,722,006
---------- ---------
512,606 2,001,065
---------- ---------
Operating income (loss)............................. 277,182 (1,661,218)
Other (expense) income
Foreign exchange adjustments (note 2 (g)) .......... -- (2,338)
Financing costs and interest ....................... (166,519) (1,034,243)
Asia project abandonment costs ..................... -- (9,986)
Restructuring charge ............................... (266,789) (200,000)
Write-down of Land held for investment ............. (250,466) (1,137,432)
Loss on disposal of assets .......................... -- (1,083,670)
Licensing income .................................... -- 1,500,000
Interest income 11,697 --
---------- ---------
Net Loss ............................................ $ (394,895) $(3,628,887)
========== ===========
Net loss per common share (note 2(i)) ............... $ (0.02) $ (3.42)
========== ============
Weighted average common shares
outstanding (note 2 (i)) ............................ 25,000,000 1,060,155
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
Advanced Gaming Technology, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
For the Year Ended December 31, 1999
<CAPTION>
Price Range Additional
Per Share Common Stock Paid-in Accumulated
$ Shares Amount Capital Deficit Total
--------- ----------- --------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 115,330,600 $ 576,653 $ 32,044,903 $(36,577,987) $(3,956,431)
To implement fresh start
Accounting in conjunction
With plan of reorganization -- 113,580,600 (567,903) (32,044,903) 36,577,987 3,965,181
Adjusted balance at January 1, 1999 1,750,000 8,750 -- -- 8,750
Common stock issued in conjunction
With plan of reorganization 23,250,000 116,250 -- -- 116,250
Net loss for the year -- -- -- (394,895) (394,895)
----------- --------- ------------ ------------ -----------
Balance at December 31, 1999 25,000,000 $ 125,000 $ -- $ (394,895) $ (269,895)
=========== ========= ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
<TABLE>
Advanced Gaming Technology, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
For the Year Ended December 31, 1998
<CAPTION>
Price Range Additional
Per Share Common Stock Paid-in Accumulated
$ Shares Amount Capital Deficit Total
--------- ----------- --------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,1998 24,609,858 $ 123,049 $ 28,072,458 $(32,949,100) $(4,753,593)
To settle convertible notes
& liabilities 90,720,742 453,604 3,972,445 -- 4,426,049
Net loss for the year -- -- -- (3,628,887) (3,628,887)
----------- --------- ------------ ------------ -----------
Balance at December 31, 1998 115,330,600 $ 576,653 $ 32,044,903 $(36,577,987) $(3,956,431)
=========== ========= ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
Advanced Gaming Technology, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
1999 1998
---------- ---------
Cash flows from operating activities:
Net loss ........................................... $ (394,895) $(3,628,887)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ...................... 162,517 437,410
Reorganization charges 266,789 --
Write down of property, equipment & Investment in land 250,466 1,857,990
Deferred revenue ................................... -- (390,000)
Change in operating assets and liabilities:
Accounts receivable ................................ 7,825 236,240
Inventory .......................................... -- 143,156
Deferred charges ................................... -- 248,564
Prepaid expenses ................................... 4,285 79,355
Accounts payable and accrued liabilities............ (127,808) (1,543,737)
---------- ---------
Net cash provided by(used in)operating activities ... 169,179 (2,559,909)
---------- ---------
Cash flows from investing activities:
Intangible assets.................................... 94,775 --
Purchase of Investments.............................. (156,333) --
Disposal of property and equipment .................. -- 986,894
Other ............................................... -- 172,451
---------- ---------
Net cash used in investing activities ............... $ 61,558 1,159,345
---------- ---------
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
Advanced Gaming Technology, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
For the Years Ended December 31,
1999 1998
---------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock .............. 150,000 4,426,049
Proceeds from convertible notes ..................... -- 525,000
Payments of convertible notes ....................... -- (3,253,750)
Principal payments on notes payable ................. -- (625,000)
Proceeds from notes payable ......................... -- 138,000
Principal payments of long-term debt ................ (50,000) --
Proceeds from long-term debt ........................ -- 282,813
---------- ---------
Net cash provided by financing activities ........... 100,000 1,493,112
---------- ---------
Net change in cash and cash equivalents ............. 330,737 92,548
Cash and cash equivalents at beginning of year ...... 109,824 17,276
---------- ---------
Cash and cash equivalents at end of year ............ $ 440,561 $ 109,824
========== =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest .............. $ 20,000 $ 340,626
Non cash investing and financing activities:
Issuance of common stock for debt reduction
and settlement of convertible notes ............... $ -- $4,426,049
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 1 - HISTORY AND ORGANIZATION
The Company was incorporated under the laws of the State of Wyoming in 1963
under the name of MacTay Investment Co. In 1987, the name was changed to Auto N
Corporation. The Company changed its name to Advanced Gaming Technology, Inc. in
1991. The Company's executive offices are located in Las Vegas, Nevada. The
Company is principally engaged in the development and marketing of technology
for the casino and hospitality industry.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation
of the accompanying financial statements is as follows:
(a) Principles of Consolidation
The consolidated financial statements include the accounts of Advanced
Gaming Technology, Inc. and its wholly-owned subsidiaries, Executive Video
Systems, Inc., Palace Entertainment Limited, Branson Signature Resorts, Inc.,
Branson Bluffs Resorts, Inc., River Oaks Resorts and Country Club, Inc., Allied
Resorts, Inc., River Oaks Holding, Inc., Prisms, Inc., Pleasure World Ltd.,
Prisms (Bahamas) Ltd., and A.G.T. Acceptance Corp. All significant intercompany
accounts and transactions have been eliminated.
(b) Joint Venture Operations Accounting
Joint venture operations are accounted for under the equity method of
accounting.
(c) Inventory
Inventory consists of bingo equipment parts and is carried at lower of cost
(first-in, first-out method) and market value.
(d) Property and Equipment
Property and equipment is stated at cost. Depreciation is provided in
amounts sufficient to relate the cost of depreciable assets to operations over
their estimated service lives, principally on a straight-line basis from 3 to
5years.
F-9
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
(Continued)
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (Continued)
Upon sale or other disposition of property and equipment, the cost and
related accumulated depreciation or amortization is removed from the accounts
and any gain or loss is included in the determination of income or loss.
Expenditures for maintenance and repairs are charged to expense as
incurred. Major overhauls and betterments are capitalized and depreciated over
their useful lives.
(e) Investment - Land
Investment in land is carried at the lower of cost or net realizable value.
(f) Intangible Assets
Goodwill and software rights were created by the excess of the purchase
price over the cost of the acquisitions made in 1995 and 1996, and are amortized
on a straight-line basis over five years. Software rights are capitalized after
technological feasibility has been established. Capitalization of computer
software cost is discontinued when the computer software product is available to
be sold, leased or otherwise marketed. Costs for maintenance and customer
support are charged to operations when incurred, or when the related revenue is
recognized, whichever occurs first. Management regularly assesses the carrying
amount of intangible assets and where, in their opinion, the value is less than
the carrying amount, the loss is recognized immediately. Unamortized computer
software costs that have been capitalized are reported at net realizable value.
The company has implemented the provisions of SFAS No. 121, "Accounting for
the impairment of Long-Lived Assets and for Long-Lived Assets Disposed of." SFAS
No. 121 requires that long-lived assets and certain identifiable intangibles to
be held and used by the Company be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. If the sum of the expected future cash flows from the use of the
assets and its eventual disposition (undiscounted and without interest charges)
is less than the carrying amount of the asset, an impairment loss is recognized.
F-10
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
(Continued)
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (Continued)
(g) Translation of Foreign Currency
All balance sheet accounts of foreign operations are translated into U.S.
dollars at the year-end rate of exchange. Statement of operations items are
translated at the weighted average exchange rates for the year. The resulting
translation adjustments are made directly to a separate component of the
stockholders' equity. Certain foreign activities are considered to be an
extension of the U.S. operations, and the gain or loss resulting from
re-measuring these transactions into U.S. dollars is included in income. Gains
or losses from other foreign currency transactions, such as those resulting from
the settlement of foreign receivables or payables, are included in the Statement
of Operations.
(h) Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less, as cash equivalents.
(i) Net Loss per Common Share
In 1997, the Financial Accounting Standards Board issued SFAS No.
128,"Earnings per Share" (EPS). SFAS No. 128 replaced the calculation of primary
and fully diluted EPS with basic and diluted EPS. The effect of outstanding
common stock equivalents are anti-dilutive for 1999 and 1998 and are thus not
considered. The reconciliations of the numerators and denominators of the basic
EPS computations are as follows:
<TABLE>
1999 1998
-------------------------------- -----------------------------------
Number Number
Of Loss of Loss
Loss Shares per Share Loss Shares per Share
Basic EPS
Loss to Common
<S> <C> <C> <C> <C> <C> <C>
Shareholders $(394,895) 25,000,000 $(0.02) $(3,628,887) 1,060,155 $(3.42)
=========== =========== ====== =========== ========== ======
</TABLE>
F-11
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
Continued)
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (Continued)
(j) Revenue
Revenue is generated on operating leases and is recognized on an accrual
basis.
(k) Deferred Revenue
Revenues are deferred until commencement of the project operations.
(l) Persuasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Certain reclassifications have been made in the 1998 financial statements
to conform with the 1999 presentation
NOTE 3 - OTHER ASSETS
1999 1998
----------- -----------
Land $ 1,750,000 $ 3,000,000
Investment in Travel Switch.com 156,333 --
Patents, software rights and other -- 442,604
----------- -----------
$ 1,906,333 $ 3,442,604
=========== ===========
During March 2000, the Company exchanged the land in settlement of a $1.75
million Note.
F-12
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
(Continued)
NOTE 4 - NOTES PAYABLE
1999 1998
----------- -----------
Other -- 313,000
----------- -----------
Total notes payable $ -- $ 313,000
=========== ===========
NOTE 5 - CONVERTIBLE NOTES
The convertible notes were eliminated in conjunction with the plan of
reorganization. At December 31, 1998 the convertible notes were due to
individuals and corporations, bearing interest at rates between U.S. base rate
and 12% per year, due on demand. The notes were convertible into common shares
of the Company at fixed prices ranging from $0.049 to $0.102, and others were
convertible at a 20% discount to the closing bid price at the time of
conversion. Certain convertible notes had warrants attached thereto, granting
the holders the option to purchase common shares of the Company at prices
ranging from $0.10 to $0.40, (see notes 7, 13 and 14).
F-13
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(Continued)
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following: 1999 1998
----------- -----------
Note payable, interest at 9%, due in monthly
Payments of $21,600 beginning March 1, 2000,
Secured by land. The note is due in July of 2006. $ 1,732,471 --
Note payable, interest at 7%, due in monthly
Payments of $6,200 beginning March 1, 2000,
Secured by land. The note is due in July of 2006. 906,548 --
The note is convertible into common stock at a
rate of $.43 per share.
Notes payable, interest at 9%, quarterly interest
only payments until July 2002, collateralized
by deed of trust -- 1,339,792
Note payable, interest at 10%, quarterly interest
only payments, balance due on demand,
collateralized by deed of trust -- 60,812
Loan payable, interest at 13.2%, due in monthly
installments of $31,000 including interest, due
on demand, secured by equipment -- 86,862
Note payable, interest at 3% above the Chase
Manhattan prime lending rate, due in quarterly
principal installments of $17,857 plus accrued
interest, matures January 2002 -- 464,286
Note payable, interest at 10%, principal is due, and
is secured by 100,000 common shares of the Company -- 75,106
Note payable, interest at 10%, due on demand -- 37,644
Note payable, interest at 10%, due on demand -- 3,600
Note payable, interest at 9%, due on demand -- 55,000
Convertible debenture, total facility $1,000,000
plus accrued interest, interest at 2% per month
compounded monthly, principal and accrued interest
convertible into common stock in whole or part at
holder's option, redeemable by the Company at any
time to maturity; bonus consideration of $150,000
per year for four years, convertible into stock at
holder's option, due on demand -- 1,763,199
Loan payable, interest at 12%, due in monthly
installments of $1,000 including interest, matures
December 1999, secured by a patent -- 32,070
----------- -----------
-- 3,918,371
Less: current maturities 104,000 3,918,371
----------- -----------
Net long-term debt $ 2,535,019 $ --
=========== ===========
All of the long-term debt obligations were in default at December 31, 1998,
and accordingly were classified as short term. (see note 13 and 14).
F-14
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(Continued)
NOTE 7 - STOCK OPTIONS AND WARRANTS
All options and warrants outstanding were eliminated in 1999 in conjunction
with the effective date of the plan of reorganization. Formerly, options and
warrants had been granted at exercise prices greater than the market value on
the date of granting except for 5,015,000 options. All options vested 100% at
the date of granting of the options.
1999 1998
----------- -----------
Options and warrants outstanding, beginning of year -- 29,867,440
Granted -- 2,850,000
Expired -- --
Cancelled -- (32,717,440)
Exercised -- --
----------- -----------
Options and warrants outstanding, end of year -- --
=========== ===========
Option and warrant price for options and warrants
outstanding, end of year -- --
=========== ===========
Options and warrants granted subsequent to year end -- --
=========== ===========
Option and warrant price range granted subsequent
to year end -- --
=========== ===========
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." As permitted by the standard, the Company has elected to continue
to follow existing accounting guidance, Accounting Principles Board Opinion
No.25 and related interpretations (APB No. 25), for stock-based compensation.
However, SFAS No. 123 requires companies electing to follow existing accounting
rules to disclose in a note the pro forma effects as if the fair value based
method of accounting had been applied. In accordance with APB No. 25, no
compensation expense has been recognized for the Company's stock options.
F-15
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(Continued)
NOTE 7- STOCK OPTIONS AND WARRANTS (Continued)
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions for grants in 1999 and 1998, respectively: dividend yield of 0.0
percent for both years, expected volatility of 149.75 and 149.05 percent,
respectively, risk-free interest rates of 6.2 percent for both years and
expected lives of 5 years for both years. If compensation expense for the
Company's stock options granted in 1999 and 1998 had been determined based on
the fair value at the grant dates for such awards in accordance with SFAS
No.123, the effect on the Company's net income and earnings per share for each
of the years ended December 31, 1999 and 1998 would have been immaterial.
NOTE 8 - SEGMENTED INFORMATION
The company derived all revenues in 1999 and 1998 from operations within
the United States. The company has no assets outside of the United States. The
company incurred an operating loss of $9,986 in 1998 due to an abandoned project
in Asia.
NOTE 9 - SELECTED FINANCIAL DATA (Unaudited)
The following tables set forth certain unaudited quarterly financial
information:
1999 Quarters ended,
Mar. 31 Jun. 30 Sep. 30 Dec. 31
--------- --------- --------- ---------
Revenue $ 87,501 $ 87,501 $ 612,536 $ 2,250
Gross margin 87,501 87,501 612,536 2,250
--------- --------- --------- ---------
Operating income (loss) (14,388) (63,152) 459,118 (104,396)
Other income (expense), net (96,500) -- -- (308,788)
--------- --------- --------- ---------
Loss before reorganization
Charges (110,888) (63,152) 459,118 (413,184)
Reorganization charges -- -- (266,294) (495)
--------- --------- --------- ---------
Net Loss $(110,888) $ (63,152) $ 192,824 $ (413,679)
========= ========= ========= =========
F-16
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998
(Continued)
NOTE 9 - SELECTED FINANCIAL DATA (Unaudited)(continued)
1998 Quarters Ended,
Mar. 31 Jun. 30 Sep. 30 Dec. 31
--------- --------- --------- ---------
Revenues $ 184,790 $ 60,265 $ 68,664 $ 224,108
Gross margin 92,510 39,835 58,394 149,108
--------- --------- --------- ---------
Operating income(loss) (967,608) (572,444) (444,332) 323,166
Other expenses, net 873,318 (376,986) (134,112) (2,329,889)
--------- --------- --------- ---------
Loss before taxes 94,290 949,430 578,444 2,006,723
Income taxes -- -- -- --
--------- --------- --------- ---------
Net Loss $ 94,290 $ 949,430 $ 578,444 $2,006,723
========= ========= ========= =========
NOTE 10 - INCOME TAXES
Deferred taxes result from temporary differences in the recognition of
income and expenses for income tax reporting and financial statement reporting
purposes. Deferred benefits of $12,000,000 and $12,000,000 for the years ended
December 31, 1999 and 1998 respectively, are the result of net operating losses
and the gaming license rights reserve.
The Company has recorded net deferred income taxes in the accompanying
consolidated balance sheets as follows:
1999 1998
----------- -----------
Future deductible temporary differences related to
reserves, accruals, and net operating losses $12,000,000 $12,000,000
Valuation allowance (12,000,000) (12,000,000)
----------- -----------
Net deferred income tax $ -- $ --
=========== ===========
F-17
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998 (Continued)
NOTE 10 - INCOME TAXES (continued)
As of December 31, 1999, the Company had a net operating loss ("NOL")
carryforward for income tax reporting purposes of approximately $25,000,000
available to offset future taxable income. This net operating loss carry-forward
expires at various dates between December 31, 2008 and 2013. A loss generated in
a particular year will expire for federal tax purposes if not utilized within 15
years. Additionally, the Internal Revenue Code contains provisions that could
reduce or limit the availability and utilization of these NOLs if certain
ownership changes have taken place or will take place. In accordance with SFAS
No. 109, a valuation allowance is provided when it is more likely than not that
all or some portion of the deferred tax asset will not be realized. Due to the
uncertainty with respect to the ultimate realization of the NOLs, the Company
established a valuation allowance for the entire net deferred income tax asset
of $12,000,000 as of December 31, 1999. Also consistent with SFAS No. 109, an
allocation of the income (provision) benefit has been made to the loss from
continuing operations. The differences between the effective income tax rate and
the federal statutory income tax rate on the loss from continuing operations are
presented below:
1999 1998
----------- -----------
Benefit at the federal statutory rate of 34% $ 134,264 $ 1,234,000
Non-deductible expenses -- (5,000)
Utilization of net operating loss carryforward (134,264) (1,357,000)
Other -- (128,000)
----------- -----------
$ -- $ --
=========== ===========
F-18
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998 (Continued)
NOTE 11 - CONTINGENCIES
(a) The Company entered into an agreement, dated July 17, 1996, amended
September 15, 1996 with Fortune Entertainment Corporation, a Delaware
corporation ("FEC"), under which FEC has the right to receive a
participating interest in certain of the Company's projects. As of December
31, 1998, Fortune Entertainment had provided the Company with $1,025,738.
The company has stopped development efforts on the projects and is
considering abandonment. The company has rejected this agreement in the
reorganization process.
(b) In addition to ordinary routine litigation incidental to its business
operations, which the Company does not believe, in the aggregate, will have
a material adverse effect on the Company, or its operations, the Company is
engaged in the following lawsuits:
Braintech, Inc. ("Braintech") filed a statement of claim in the Supreme
Court of British Columbia on November 24, 1995 and amended on March 26, 1996
claiming default by the Company on three promissory notes. Braintech claimed
damages in the amount of $200,000, plus interest of ten percent (10%) per annum,
and costs. In 1997, the Company settled this dispute for $75,000 to be paid by
issuance of stock.
In January 1996, Tierra Corporation ("Tierra") commenced an action in the
Circuit Court of Stone County, Missouri, claiming that River Oaks Resort and
Country Club, Inc., a Texas corporation and a subsidiary of Branson ("River Oaks
Resort") defaulted on a promissory note. A judgment is sought in the principal
amount of $75,106, plus interest since October 18, 1995, at 10% per annum (see
note 9). An answer has been filed on behalf of River Oaks Resort averring that
Tierra has not performed conditions precedent to assessing any deficiency and
that no accounting regarding the disposition of security for such note has been
provided and, in addition, a counter claim was filed, asserting Tierra disposed
of stock collateral in a commercially unreasonable manner. Preliminary discovery
has occurred but no depositions have been taken.
A principal of Tierra has recently filed a suit in Dallas, Texas concerning
the stock collateral.
In February 1996, P.D.I., LLC, a Missouri limited liability company ("PDI")
commenced an action in the Circuit Court of Stone County Missouri, claiming
breach of a real estate purchase agreement which in part, provided for the
construction of a sewage treatment facility for which damages are claimed,
including the awarding to PDI of all escrow funds, costs and expenses incurred
F-19
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998 (Continued)
NOTE 11 - CONTINGENCIES (continued)
by PDI over and above the amount of escrow funds and cost and expenses,
including attorney fees in connection with the commencement of the action. In
response, the Company and River Oaks Resort have counter claimed for damages, in
an amount to be determined at trial, incurred when plaintiff PDI withdrew funds
from the escrow fund created for construction of the sewage treatment facility
and the permit application for construction approval by the Missouri Department
of Natural Resources. Moreover, a claim has also been made by River Oaks Resort
and the Company that subsequent development attempted by PDI has encroached upon
property development belonging to River Oaks Resort and the Company without the
right to do so, including damages for disruption resulting therefrom.
In April 1996, Larry Newman ("Newman") commenced a mechanics' lien in the
Circuit Court of Stone County, Missouri, seeking $177,282, plus interest, for
excavation work performed during the period between July 19, 1995 to September
25, 1995 on a road across the River Oaks development in Stone County. On or
about June 24, 1996, Jack L. Holt ("Holt") filed a similar petition in the
Circuit Court of Stone County, Missouri, claiming a mechanics' lien for
engineering and land surveying during the period May 16, 1995 to July 4, 1995
for a road across the River Oaks development property in the amount of $9,610,
plus interest. The Holt case has now been consolidated in the case originally
filed by Newman. The Company has filed a counterclaim alleging Newman and Holt
extended the road beyond the boundaries of the River Oaks development property
onto land owned by Sunset Cove, Ltd., a Missouri corporation. The court has
since ordered Sunset Cove, Ltd. joined as a party needed for just adjudication.
Discovery has not yet commenced.
On November 15, 1996, Fortunet, Inc., a Nevada corporation ("Fortunet"),
filed a patent infringement claim in the United States District court Southern
District of California against the company and certain other companies which
manufacture and distribute electronics bingo systems, claiming that the
defendants, including the Company, infringed Fortunet's United States Patent No.
4,624,462 (the "Patent"). Fortunet seeks to enjoin the defendants from any
further alleged infringement of the Patent and is seeking actual and enhanced
damages as well as attorney fees and other costs. In July 1997, the case was
transferred from the federal court in San Diego, California to the federal court
in Phoenix, Arizona. Discovery is expected to commence in 1999.
F-20
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998 (Continued)
NOTE 11 - CONTINGENCIES (continued)
In February and March 1998, actions were brought against the Company in the
District Courts in the States of New York and Colorado by certain Convertible
Debenture holders. The plaintiffs alleged the Company was in default in regard
to the conversion of these debentures. A settlement was reached in April 1998.
NOTE 12 - SUBSEQUENT EVENTS
On February 15, 2000 the bankruptcy court in the district of Las Vegas
approved the final decree of the company ending the chapter 11 bankruptcy case
of the company.
During March 2000, the Company exchanged the land in settlement of a $1.75
million Note. See Note 3.
F-21
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998 (Continued)
NOTE 13 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. However, the Company has sustained substantial
operating losses in recent years. In addition, the Company has used substantial
amounts of working capital in its operations. On August 26, 1998 the Company
filed a petition for reorganization under chapter 11 of the U S bankruptcy code
in Las Vegas, Nevada.
In view of these matters, realization of a major portion of the assets in
the accompanying balance sheet is dependent upon continued operations of the
Company which in turn is dependent upon the Company's ability to successfully
complete the reorganization process and meet its financing requirements and
succeed in its future operations. Management believes that actions presently
being taken to revise the Company's operating and financial requirements provide
the opportunity for the Company to continue as a going concern.
NOTE 14 - PETITION FOR RELIEF UNDER CHAPTER 11
The company filed for reorganization under chapter 11 of the U S bankruptcy
code in Las Vegas on August 26, 1998. Under Chapter 11, certain claims against
the Debtor in existence prior to the filing of the petitions for relief under
the federal bankruptcy laws are stayed while the Debtor continues business
operations as Debtor-in-possession. These claims are reflected in the December
31 1998 balance sheet as "liabilities subject to compromise." Additional claims
(liabilities subject to compromise) may arise subsequent to the filing date
resulting from rejection of executory contracts, including leases, and from the
determination by the court (or agreed to by parties in interest) of allowed
claims for contingencies and other disputed amounts. Claims secured against the
Debtor's assets ("secured claims") also are stayed, although the holders of such
claims have the right to move the court for relief from the stay. Secured claims
are secured primarily by liens on the Debtor's property, plant, and Equipment.
F-22
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998 (Continued)
NOTE 14 - PETITION FOR RELIEF UNDER CHAPTER 11 (continued)
The Debtor received approval from the Bankruptcy Court to pay or otherwise
honor certain of its obligations, including employee wages and product
warranties. The Debtor has Determined that there is insufficient collateral to
cover the interest portion of scheduled payments on its prepetition debt
obligations. Contractual interest on those obligations is in excess of reported
interest expense; therefore, the Debtor has discontinued accruing interest on
these obligations.
The company filed a plan of reorganization with the court in December 1998.
The plan and disclosure statement was approved by the court on March 22, 1999.
The company's reorganization plan was confirmed by the bankruptcy court on June
29,1999. The plan became effective on August 19, 1999.
Pursuant to the plan, obligations to secured creditors were re-negotiated.
The new amount of secured debt on the effective date is $2,634,000. All
remaining liabilities of the company have been fully satisfied through issuance
of new common stock. Other secured creditors received 3 shares of new common
stock for each $1 of allowed secured claim. Unsecured creditors received 1.88
shares of new common stock for each $1 of allowed claim.
The company issued 25 million shares of new common stock in conjunction
with the plan. The existing common stock was cancelled. Existing shareholders of
the company on the effective date received 1 share of new common stock for each
66 shares of common stock currently owned. Approximately 19 million shares were
issued to creditors, existing shareholders and new investors. A reserve of
approximately 7 million shares is being maintained for additional allowed
claims.
F-23
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and December 31, 1998 (Continued)
NOTE 15 FRESH START ACCOUNTING
On June 29, 1999 the bankruptcy Court confirmed the Company's plan of
reorganization. The plan became effective on August 19, 1999. The plan provided
for the following:
Secured debt- The secured debt was exchanged for a $1,750,000 secured note,
payable in monthly installments of $21,600 commencing on March 1, 2000, with
interest at 9% per annum and a secured note for $884,000, payable in monthly
installments of $6,200 commencing on March 1, 2000, with interest at 7%. Both
notes are due in July of 2006. Other secured creditors received 3 shares of new
common stock in exchange for each $1 of secured debt.
Unsecured creditors- The holders of unsecured allowed claims received 1.88
shares of new common stock for each $1 of allowed claim.
Common Stock - The holders of existing shares of the Company's common stock
received, in exchange for their shares, 1 new share of common stock for each 66
shares owned.
The Company accounted for the reorganization using fresh-start reporting.
Accordingly, all assets and liabilities are restated to reflect their
reorganization value, which approximates fair value at the date of
reorganization.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE OF ADVANCED GAMING TECHNOLOGY, INC. AS OF DECEMBER 31, 1999 AND THE
RELATED STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE YEAR THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 441
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 20
<CURRENT-ASSETS> 461
<PP&E> 142
<DEPRECIATION> 0
<TOTAL-ASSETS> 2510
<CURRENT-LIABILITIES> 245
<BONDS> 0
0
0
<COMMON> 125
<OTHER-SE> (395)
<TOTAL-LIABILITY-AND-EQUITY> 2510
<SALES> 790
<TOTAL-REVENUES> 790
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 513
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 167
<INCOME-PRETAX> (3629)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (395)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
