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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
-----------
[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2000
[ ] Transition Report pursuant to 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number 0-30375
LAS VEGAS GAMING, INC.
----------------------
(Exact name of Small Business Issuer as specified in its charter)
Nevada 88-0392994
(State or other jurisdiction of (IRS Employer
incorporation) Identification No.)
3261 S. HIGHLAND, SUITE 613 LAS VEGAS, NEVADA 89109-5403
-----------------------------------------------------------
(Address of principal executive offices)
702-733-9703
---------------------------
(Issuer's telephone number)
_________________________________________________________________
(Former name, former address and former fiscal year if changed
since last report)
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
2,809,200 shares of Common Stock as of June 26, 2000.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GENERAL
The Company's unaudited financial statements for the six months
ended June 30, 2000 are included with this Form 10-QSB. The
unaudited financial statements for the six months ended June 30,
2000 include:
(a) Balance Sheet as of June 30, 2000 and December
31, 1999;
(b) Statements of Income - Six months and three months ended
June 30, 2000 and June 30, 1999;
(c) Statements of Stockholders' Equity - Inception to
June 30, 2000;
(d) Statements of Cash flows - Six months ended June 30, 2000
and June 30, 1999 and inception to June 30, 2000;
(e) Notes to Unaudited Financial Statements.
The unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and, therefore,
do not include all information and footnotes necessary for a
complete presentation of financial position, results of
operations, cash flows, and stockholders' equity in conformity
with generally accepted accounting principles. In the opinion of
management, all adjustments considered necessary for a fair
presentation of the results of operations and financial position
have been included and all such adjustments are of a normal
recurring nature. Operating results for the six months ended
June 30, 2000 are not necessarily indicative of the results that
can be expected for the year ending December 31, 2000.
2
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LAS VEGAS GAMING, INC.
(A Development Stage Enterprise)
FOR THE PERIOD FROM INCEPTION (APRIL 28, 1998) TO DECEMBER 31,
1999 AND THE SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2000 AND
1999
CONTENTS
PAGE
Financial statements:
Balance sheets 4
Statements of operations 5-6
Statements of stockholders' equity 7
Statements of cash flows 8
Notes to financial statements 9-11
3
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LAS VEGAS GAMING, INC.
(A Development Stage Enterprise)
BALANCE SHEET_______________________________________________________________
June 30, December 31,
2000 1999
-------------------------------
ASSETS
Current assets:
Cash $ 838,364 $ 19,545
Accounts receibable 1,741
Note receivable 21,649
-------------------------------
860,013 21,286
Equipment and software,
less accumulated depreciation
of $112,731, $133,470 and 130,839 173,446
OTHER ASSETS:
Patents and other intangibles, net 386,111 196,778
Loan receivable 25,000 25,000
Deposits 1,242 1,242
-------------------------------
412,353 223,020
-------------------------------
1,403,205 417,752
===============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt 32,545
Accounts payable 27,905 75,483
Loans from shareholders 50,000
-------------------------------
77,905 108,028
Long-term debt, less current maturities 54,937
Stockholders' equity:
Common stock, $.001 par, 25,000,000
shares authorized, 2,619,300 and
2,745,700 shares issued and outstanding 2,809 2,619
Preferred stock, $.001 par, 5,000,000
shares authorized, 0 and 184,000 shares
issued and outstanding 184
Additional paid-in capital 2,512,039 1,103,013
Deficit accumulated during
development stage (1,189,732) (850,845)
-------------------------------
1,325,300 254,787
-------------------------------
1,403,205 417,752
===============================
See notes to financial statements.
4
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LAS VEGAS GAMING, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED MARCH 31 2000 AND 1999___________________
Three Three
Months Months
Ended Ended
June 30, June 30,
2000 1999
-------------------------------
Sales $ 17,589 $ 14,120
General and Administrative expenses (168,541) (104,094)
Interest income 107
-------------------------------
Net loss $ (150,952) $ (89,867)
===============================
Basic loss per share $ (0.05) $ (0.05)
===============================
Weighted average shares outstanding 2,760,574 1,912,484
===============================
See notes to financial statements.
5
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LAS VEGAS GAMING, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 AND THE
PERIOD FROM INCEPTION (APRIL 28, 1998) TO JUNE 30, 2000_____________________
Six Six From
Months Months Inception
Ended Ended (April 1998)
June 30, June 30, to June 30,
2000 1999 2000
------------- --------------- -------------
Sales $ 171,296 $ 25,804 $ 237,036
General and Administrative
Expenses (510,183) (214,460) (1,238,313)
Write-down of patents and
Intangibles (120,000)
Write-off of purchase option (75,000)
Interest income 509 6,545
------------- --------------- -------------
Net loss $ (338,887) $ (188,147) $ (1,189,732)
============= =============== =============
Basic loss per share $ (0.12) $ (.10) $ (0.64)
============= =============== =============
Weighted average shares
Outstanding 2,721,620 1,858,077 1,844,186
============= =============== =============
See notes to financial statements.
6
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LAS VEGAS GAMING, INC.
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999, THE PERIOD FROM INCEPTION
(APRIL 28, 1998) TO DECEMBER 31, 1998 AND THE SIX MONTHS ENDED
JUNE 30, 2000 (Unaudited)___________________________________________________
Deficit
Accumulated
Additional during
paid-in development
Shares Par value capital stage Total
---------- --------- --------- ------------ ---------
Common shares sold
in 1998 to:
Officers and
directors 1,000,177 1,000 153,000 154,000
Others 1,243,823 1,244 620,756 622,000
Offering costs (29,248) (29,248)
Net loss (508,125) (508,125)
---------- --------- --------- ------------ ---------
Balances,
December 31, 1998 2,244,000 2,244 744,508 (508,125) 238,627
Common shares sold
in 1999 to:
Officers and
Directors 50,100 50 25,250 25,300
Others 325,200 325 413,875 414,200
Offering costs (80,620) (80,620)
Net loss (342,720) (342,720)
---------- --------- --------- ------------ ---------
Balances,
December 31, 1999 2,619,300 2,619 1,103,013 (850,845) 254,787
Balances, June 30,
2000 (Unaudited):
Common shares sold in
2000 to:
Officers and
Directors 82,000 82 195,918 196,000
Others 107,900 108 323,592 323,700
Preferred shares sold
in 2000 to:
Officers and
Directors 184,000 184 919,816 920,000
Offering costs (30,300) (30,000)
Net loss (338,887) (338,887)
---------- --------- --------- ------------ ---------
Balances,
June 30, 2000 2,993,200 $ 2,993 $2,512,039 $(1,189,732) $1,325,300
========== ========= ========= ============ =========
See notes to financial statements.
7
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LAS VEGAS GAMING, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 AND THE
PERIOD FROM INCEPTION (APRIL 28, 1998) TO JUNE 30, 2000
Six Six From
Months Months Inception
Ended Ended (April 1998)
June 30, June 30, to June 30,
2000 1999 2000
------------- --------------- -------------
Operating activities:
Net loss $ (338,887) $ (188,147) $ (1,189,732)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
Amortization 124,186 76,343 354,139
Write-down of patents and
intangibles 195,000
Compensation for services
with common stock 18,600 40,100
Change in operating assets
(increase) and liabilities
(decrease):
Accounts and note receivable (19,908) 14,452 (21,649)
Inventory (24,557)
Deposits 3,638 (1,242)
Accounts payable 12,422 19,582 27,905
------------- --------------- -------------
Net cash used in operating
Activities (203,587) (98,689) (595,479)
------------- --------------- -------------
Investing activities:
Deferred offering costs (30,300) (140,168)
Purchase of intangible assets (350,000)
Purchase option acquisition (75,000)
Purchase of equipment (912) (36,668) (115,438)
------------- --------------- -------------
Net cash used in investing
Activities (31,212) (36,668) (680,606)
------------- --------------- -------------
Financing activities:
Proceeds from sale of common
stock 71,100 234,400 1,178,600
Proceeds from sale of
preferred stock 920,000 920,000
Repayment of borrowings (87,482) (31,360) (134,151)
Loan to seller of purchase
Option (25,000)
Borrowing from stockholder 150,000 175,000
------------- --------------- -------------
Net cash provided by
financing activities 1,053,618 203,040 2,114,449
------------- --------------- -------------
Increase in cash 818,819 67,683 838,364
Balance, beginning of period 19,545 9,253
------------- --------------- -------------
Balance, end of period $ 838,364 $ 76,936 $ 838,364
============= =============== =============
Supplemental disclosure of
non-cash financing and
investing activities:
Common stock issued for services $ 18,600 $ 40,100
============= =============
Shareholder loan repaid with
common stock $ 100,000 $ 25,000 $ 179,000
============= =============== =============
Equipment purchased with
notes payable $ 134,151
=============
Equipment purchased with
common stock $ 37,500
=============
Intangible assets purchased
with common stock $ 330,000 $ 240,000
============= =============
Intangible asset purchased with
rights to common stock $ 60,000
=============
See notes to financial statements.
8
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LAS VEGAS GAMING, INC.
(A Development Stage Enterprise)
NOTES TO UNAUDITED FINANCIAL STATEMENTS_____________________________________
1. Basis of Presentation:
The accompanying financial
statements have been prepared by
the company pursuant to the rules
and regulations of the Securities
and Exchange Commission relating
the interim financial statements.
Accordingly, certain information
and footnote disclosures normally
included in financial statements
prepared in accordance with
generally accepted accounting
principles have been condensed or
omitted. In the opinion of
management, all necessary
adjustments have been made to
present fairly, in all material
respects, the financial position,
results of operations and cash
flows of the Company at June 30,
2000 and for all periods
presented. The results of
development stage operations for
the six month period ended June
30, 2000 are not necessarily
indicative of the results to be
expected for a full year.
2. Nature of Business:
The Company is in the business of
developing, marketing and
distributing casino games and
related supplies. Currently the
company owns the rights to a
number of games, including, among
others, "Nevada Numbers", "B2B
Roulette", and "4-Play Amore".
3. Commitments:
Purchase of Bonus Keno game.
During 2000, the Company issued
100,000 shares of common stock
for the purchase of the rights to
"Bonus Keno".
Option to purchase Imagineering
Systems, Inc. The Company loaned
$25,000 to the majority
shareholder of Imagineering
Systems, Inc. and received an
option to buy his 54% interest in
Imagineering Systems, Inc. for
150,000 shares of the Company's
common stock plus forgiveness of
the loan. If the Company does
not exercise its option by
November 25, 2000, the
shareholder is to repay the loan
in semi-annual payments over five
years plus interest at 8%. The
option period can be extended for
six months at the sole discretion
of the Company at no additional
cost. The Company currently
intends to exercise its option,
and will be required to obtain a
Nevada gaming license before the
purchase can be completed.
Purchase of Match Pair Bingo
game. In May 2000, the Company
purchased a table game called
Match Pair bingo for 10,000
shares of common stock valued at
$3.00 per share ($30,000). In
this game, the house or casino
pulls two balls with five
possible outcomes: "B", "I",
"N", "G", and "O". Each
player antes a fixed amount to
play, which is taken by the
house, and then bets on the
outcome. The player choosing the
right outcome wins the bets
placed.
Stockholders' loan. During 2000,
a stockholder/ officer/director
loaned the Company $150,000.
$100,000 of this amount has been
settled for 50,000 shares of
common stock and warrants to
purchase 25,000 shares of the
Company's common stock at a price
of $2.00 per share. The warrants
will expire in May 2005. The
stockholder/ officer/director can
also elect to receive an
additional 25,000 shares of
common stock and warrants to
purchase 25,000 shares of the
Company's common stock at $2.00
per share for a period of one
year in settlement of his
remaining $50,000 receivable from
the Company.
Agreements with
officers/directors. In August
1999, the Company assigned the
rights to install, operate, sell
and lease electronic keno systems
in Puerto Rico to Keno
International, Inc.,
9
<PAGE>
whose
controlling shareholder is a
member of the Company's board of
directors. The provisions of the
agreement include:
(a) Issuance of 50,000
restricted shares of common stock
to Keno International;
(b) Payment of a royalty fee of
$5,000 per month until the
trading value of the common
stock issued under item (a)
equals or exceeds $2,000,000
and is registered and traded
or keno ceased to be played
under the license (whichever
comes first).
This agreement further provides
that at the point in time when
the operation of the keno games
under the license had obtained
net earnings of $1 million, the
Company would distribute to Keno
International an additional
150,000 restricted shares of its
common stock.
Also in August 1999, the Company
entered into a similar agreement
with a stockholder/officer/director
and another individual for the
operation of a keno route in
Nevada. The provisions of this
agreement include:
(a) Issuance of 50,000 restricted
shares of common stock;
(b) Payment of a royalty fee of
$5,000 per month until the
trading value of the common
stock issued under item (a)
equals or exceeds $2,000,000
and is registered and traded
or keno ceased to be played
under the license (whichever
comes first).
This agreement further provides
that at the point in time when
the operation of the Nevada route
had obtained net earnings of $1
million, the Company would
distribute an additional 150,000
restricted shares of its common
stock.
Stock option plan. The Company
established a stock option plan
in 1998 (the 1998 Plan) under
which it issued options to
purchase 1,600,000 shares at
prices ranging from $.50 to $1.00
per share, of which officers and
directors were issued options to
purchase up to 920,000 shares.
The options were granted at the
estimated fair value of the
shares at the time of the grants
and, accordingly, no compensation
has been recorded for these
grants. The options are fully
vested and expire on April 28,
2008.
In December 1999, The Company
discontinued issuing stock
options under the 1998 Plan. In
January 2000, a new stock plan
(the 2000 Plan) was established
and additional options were
issued for 42,550 shares at $3.00
per share, of which 30,300 were
issued to officers/directors.
Stock Warrants. There are
outstanding warrants to purchase
63,000 shares of common stock at
a price of $2.00 per share.
Preferred Stock. In June 2000,
the Company filed an amendment to
its articles of incorporation
with the Nevada Secretary of
State's office to allow for the
creation of preferred stock. The
Company is currently offering its
unregistered preferred stock for
sale to raise a maximum of
$10,000,000 on a "best efforts"
basis. The offering is intended
to be exempt from registration
pursuant to Rule 506 of
Regulation D of the Securities
Act of 1933.
10
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The holders of preferred shares
can elect to convert (one to one
basis) any time after one year
from the issue date if the
trading price of the Company's
common stock has remained at
$5.00 per share or greater for a
period of 60 days. Holders of
these shares are restricted from
selling more than 25% of their
holdings per calendar quarter.
The Company can call and convert
the shares into common stock or
purchase the shares for $5.00 per
share beginning four years from
the date of issue.
Gaming regulations and licensing.
The Company is currently not
subject to regulation in
jurisdictions in which its
products are leased or used by
persons or entities licensed to
conduct gaming activities.
However, the Company is seeking
licensure in several gaming
jurisdictions including Nevada,
among others, so that the Company
may participate in the gaming
revenues produced by its
products. Failure to obtain and
retain the necessary licenses
would prevent the Company from
fully implementing its business
plans and have a material adverse
effect on the Company.
On January 28, 2000, the Company
submitted an application for
licensure in Nevada and deposited
$50,000 with the State of Nevada.
In 2000, the Company deposited
an additional $75,000 with the
state of Nevada in connection
with the application for
licensure.
Dependence on single-source
suppliers. The Company depends
on single-source suppliers for
components for certain of its
games. The failure by any
single-source supplier to furnish
the Company with components
meeting its performance
specifications, quality standards
or delivery schedules could have
a material adverse effect on the
Company's business, financial
condition and results of
operation.
Management's plans. To become
fully operational, the Company
must raise additional capital.
In this regard, management
expects to complete an exempt
offering of 200,000 shares at
$3.00 per share ($600,000 less
expected offering costs of
approximately $50,000) and raise
additional capital through
private equity placement and/or
debt financing. During June
2000, the Company completed a
Form 10 registration with the
Securities and Exchange
Commission. Once operational,
management believes, but there is
no assurance, that future
placements of its products will
result in profitable operations
and positive cash flows.
Inability to complete the exempt
public offering, and obtain
additional capital necessary to
acquire, develop and expand its
products, could prevent the
Company from commencing and
maintaining profitable operations
and continuing as a going
concern. The financial
statements, however, have been
prepared assuming the Company
will continue as a going concern,
and reflect no adjustments that
might result from the outcome of
these uncertainties. Because of
these uncertainties, however, no
effect has been given in the
financial statements to any
future income tax benefit of the
loss recorded to date.
11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This report on Form 10-Q contains certain forward-looking
statements within the meaning of section 21e of the Securities
Exchange Act of 1934, as amended, and other applicable securities
laws. All statements other than statements of historical fact
are "forward-looking statements" for purposes of these
provisions, including any projections of earnings, revenues, or
other financial items; any statements of the plans, strategies,
and objectives of management for future operation; any statements
concerning proposed new products, services, or developments; any
statements regarding future economic conditions or performance;
statements of belief; and any statement of assumptions underlying
any of the foregoing. Such forward-looking statements are
subject to inherent risks and uncertainties, and actual results
could differ materially from those anticipated by the forward-
looking statements.
OVERVIEW
The Company is in the business of developing, marketing and
distributing casino games and related supplies. Currently, the
Company owns the rights to a number of games, including, among
others, "Nevada Numbers", "Las Vegas Numbers", and "4-Play
Amore". In addition, the Company has purchased the assets of
Back to Back Gaming, Inc. ("B2B"), which included the rights to
"B2B Roulette".
The Company currently intends to focus its efforts on the
development and operation of its keno games and routes in Nevada.
A "route", as the term is typically used by the gaming industry,
generally refers to the situation where a company owns, operates
and services a game or games at various third-party venues
(generally casinos). In such a route, the Company would act as
the "bank" (money handler), in that it would collect the wagers
and pay out winners, and, in exchange for the use of the location
where the game is run, would pay rent to the casino and/or a
percentage of the game's revenues.
In order to be able to share in any revenues from gaming through
a route or otherwise, a person or entity must be licensed by the
state where the game is operated. The Company is currently in
the process of applying for its gaming license with the state of
Nevada. Such an application is a complicated process and
involves an extensive review of the backgrounds of the officers,
directors and large shareholders of the Company as well as other
matters relating to its operations. No assurance therefore can be
given that the Company will be able to obtain such a license and
thus while it would continue to be able to offer its games, it
would not be able to share in the revenues and operate its
planned Nevada keno route.
On June 21, 2000, the Company commenced a preferred stock
offering for $10 million, the proceeds of which will be used upon
licensing to initiate several large jackpot games in the state of
Nevada and, possibly elsewhere. Proceeds from this preferred
stock offering are also planned to be used for the acquisition of
Imagineering Systems, Inc. (ISI).
In addition to the state of Nevada, the Company is pursuing
licensing in Arizona, New Mexico, New York and Washington.
12
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Quarter ended June 30, 2000 compared to quarter ended June 30,
1999
In 1999, revenue was generated from leasing the fixed version of
the Company's roulette game. In 2000, there was no revenue from
this source; however, the Company did earn revenue from ticket
sales for its bonus keno product. The amount of revenue
generated was fairly consistent
Costs increased in the quarter ended June 30, 2000 compared to
the quarter ended June 30, 1999 primarily due to $50,000 spent in
an effort to acquire the Company's Nevada gaming licenses.
Six months ended June 30, 2000 compared to six months ended June
30, 1999
Revenue nearly quadrupled compared to the prior year's six-month
period. Two contradictory forces were at work. Nearly all of
the revenue from the six months ended June 30, 1999 was due to
lease revenue generated by the fixed version of the Company's
roulette game. In the six months ended June 30, 2000, the
Company generated most of its revenue from: (1) ticket sales from
the Bonus Keno product line; and (2) progressive keno leases. At
the same time, direct costs nearly quintupled due to the start-up
nature of these products. General and administrative costs were
also considerably higher due to the Company's efforts to secure
various gaming licenses in the state of Nevada.
Liquidity and capital resources
CASH FLOWS. At June 30, 2000, the Company maintained $838,364.09
in cash and cash equivalents. The large increase in the cash
balance is due to the $920,000 raised by June 30, 2000 in the
Company's preferred stock offering. As of August 4, 2000, the
Company has raised slightly in excess of $2,000,000 in preferred
stock sales.
CAPITAL EXPENDITURES. Generally, the Company has spent little of
its resources on capital equipment. Later, the Company may begin
to invest in keno equipment and lease it, along with its
progressive keno games, to various casinos around the world. For
these reasons and others, the Company may need to raise further
funding, even if it completes the sale of all of its current
preferred stock offering.
WORKING CAPITAL REQUIREMENTS. Other than cash required to
support the jackpots of the various games the Company offers,
there is currently little need for additional working capital.
There are no inventory requirements and very little in the way of
account receivable needs. Absent some significant change in the
nature of the Company's business, working capital (other than
cash) is not likely to be a major use of financial resources.
YEAR 2000. The Company has experienced no problems and
anticipates none from systems issues related to the new
millennium.
13
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
On May 1, 2000, the Company issued 50,000 shares of common stock
and 25,000 warrants to Russell Roth, the Company's President and
a member of its board of directors, in exchange for the
cancellation of a $100,000 debt. These shares were issued
pursuant to Section 4(2) of the 1933 Act and have been marked
"restricted".
On May 17, 2000, the Company issued 10,000 shares of common
stock to 2 individuals at a deemed value of $3.00 per share in
exchange for the sale of the Match Pair Bingo game to the
Company. These shares were issued pursuant to Section 4(2) of
the 1933 Act and have been marked "restricted".
On May 20, 2000, the Company issued 3,500 shares of common stock
to the Company's attorneys in partial settlement of its legal
bill at a deemed value of $3.00 per share. These shares were
issued pursuant to Section 4(2) of the 1933 Act and have been
marked "restricted".
On June 30, 2000, the Company issued 184,000 shares of preferred
stock to 15 investors at a price of $5.00 per share. These
shares were issued pursuant to Rule 506 of Regulation D of the
1933 Act and have been marked "restricted".
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit - Financial Data Schedule
(b) Reports on Form 8-K: None.
14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
LAS VEGAS GAMING, INC.
(Registrant)
/s/ Russell R. Roth
Date August 18, 2000 _______________________________
Russell R. Roth
Chairman of the Board and
Chief Executive and Financial Officer
15
