<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
AMENDMENT NO. 1
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: DECEMBER 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-28318
Multimedia Games, Inc.
------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Texas 74-2611034
- --------------------------------------------- ----------------------------
(State or Other Jurisdiction of Incorporation (IRS Employer Identification
Number)
7335 South Lewis Avenue, Suite 302
Tulsa, Oklahoma 74136
------------------------------------------
(Address of Principal Executive Offices)
(918) 494-0576
-----------------------------
(Issuer's Telephone Number)
-------------------------------------------
(Former name, former address and former
fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days:
Yes X No
------ ------
As of January 27, 1996 there were 4,035,783 shares of the Company's Common
Stock, par value $.01, outstanding.
Transitional Small Business Disclosure Format (Check one)
Yes No X
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<PAGE> 2
FORM 10-QSB/A
AMENDMENT NO. 1
INTRODUCTION
This amendment to Item 1 of Multimedia Games, Inc.'s quarterly financial
statements on Form 10-QSB for the quarterly period ended December 31, 1996
includes changes from the previous filing to reflect a 731,000 increase in the
weighted average shares outstanding and a $0.01 decrease in the loss per common
and equivalent share on a primary and fully diluted basis for the period.
<PAGE> 3
FORM 10-QSB
INDEX
Part I. Financial Information
Item 1. Unaudited Consolidated Financial Statements
Consolidated Balance Sheets
(December 31, 1996 and September 30, 1996)
Consolidated Statements of Operations
(Three months ended December 31, 1996 and 1995)
Consolidated Statements of Cash Flows
(Three months ended December 31, 1996 and 1995)
Notes to Unaudited Consolidated Financial Statements
Report of Review by Independent Accountants
Item 2. Management's Discussion and Analysis
Part II Other Information
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE> 4
MULTIMEDIA GAMES,INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 1996 and September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
December September
ASSETS 1996 1996
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,782,000 $ 1,508,000
Accounts Receivable:
Trade, net of allowance for doubtful accounts of $76,000 354,000 247,000
Other 77,000 45,000
Inventory, at cost 203,000 358,000
Prepaid expenses 96,000 92,000
----------- -----------
Total current assets 3,512,000 2,250,000
----------- -----------
Restricted cash and cash equivalents 1,536,000 1,534,000
Note receivable from American Gaming Network LLC 336,000 336,000
Property and equipment, net 3,279,000 2,616,000
Other assets 125,000 196,000
Goodwill, net 493,000 499,000
----------- -----------
Total assets $ 9,281,000 $ 7,431,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 50,000 $ 50,000
Current portion of long-term debt 262,000 197,000
Due to American Gaming Network LLC 93,000 99,000
Accounts payable and accrued expenses 1,379,000 1,292,000
Halls' share of surplus 140,000 120,000
Prize fulfillment fees payable 212,000 320,000
----------- -----------
Total current liabilities 2,136,000 2,078,000
----------- -----------
Bridge notes payable -- 800,000
Long-term debt 779,000 787,000
Other long-term liabilities 1,372,000 1,372,000
Commitments and Contingencies (Note 3)
Stockholders' equity:
Preferred stock, Series A, $.01 par value, 2,000,000 shares
authorized, 134,318 shares issued and outstanding 1,000 1,000
Common stock, $.01 par value, 10,000,000 shares authorized,
4,026,783 and 2,859,200 shares issued and 3,992,784 and
2,825,201 shares outstanding 40,000 29,000
Additional paid-in capital 9,112,000 6,296,000
Stockholder notes receivable (1,271,000) (1,271,000)
Treasury stock, 33,999 shares at cost (87,000) (87,000)
Accumulated deficit (2,801,000) (2,574,000)
----------- -----------
Total stockholders' equity 4,994,000 2,394,000
----------- -----------
Total liabilities and stockholders' equity $ 9,281,000 $ 7,431,000
=========== ===========
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE> 5
MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended December 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31
1996 1995
----------- -----------
<S> <C> <C>
Revenues:
Gaming revenue $ 6,804,000 $ 4,025,000
Sale of Intellectual Property -- 500,000
Other 1,000 133,000
----------- -----------
Total Revenue 6,805,000 4,658,000
----------- -----------
Operating costs and expenses:
Bingo prizes and commissions 2,216,000 2,427,000
Allotments to hall operators 3,034,000 806,000
Salaries and wages 477,000 321,000
Selling, general and administrative expenses 920,000 940,000
Amortization and depreciation 289,000 90,000
----------- -----------
Total operating costs and expenses 6,936,000 4,584,000
----------- -----------
Operating Income (Loss) (131,000) 74,000
Interest income 6,000 16,000
Interest expense 65,000 22,000
----------- -----------
Net Income (Loss) $ (190,000) $ 68,000
=========== ===========
Income (Loss) per common and equivalent share,
primary and fully diluted $ (0.06) $ 0.02
=========== ===========
Weighted average shares outstanding 3,957,000 2,008,000
=========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE> 6
MULTIMEDIA GAMES,INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended December 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (190,000) $ 68,000
Adjustments to reconcile net income (loss) to cash
provided by (used for) operating activities:
Amortization and depreciation 289,000 90,000
Other non-cash (revenue) expenses 71,000 (10,000)
(Increase) decrease in:
Accounts and notes receivable (139,000) 56,000
Inventory 155,000 --
Prepaid expenses (4,000) (53,000)
Increase (decrease) in:
Accounts payable and accrued expenses 81,000 24,000
Halls' share of surplus 20,000 133,000
Prize fulfillment fees payable (108,000) (47,000)
----------- -----------
Net cash provided by (used for) operating activities 175,000 261,000
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (946,000) (678,000)
Increase in cash balances in restricted escrow (2,000) (116,000)
----------- -----------
Net cash provided by (used for) investing activities (948,000) (794,000)
----------- -----------
Cash flows from financing activities:
Proceeds from sale of common stock 2,027,000 20,000
Increase in deferred prize liability -- 114,000
Increase in long-term debt 120,000 --
Principal repayments of debt (63,000) (49,000)
Payment of preferred stock dividends (37,000) (37,000)
Purchase of treasury stock -- (14,000)
----------- -----------
Net cash provided by (used for ) financing activities 2,047,000 34,000
----------- -----------
Net change in cash and cash equivalents 1,274,000 (499,000)
Cash and cash equivalents, beginning of period 1,508,000 1,537,000
----------- -----------
Cash and cash equivalents, end of period $ 2,782,000 $ 1,038,000
=========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE> 7
MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements should be read in conjunction
with the Company's financial statements for the twelve months ended
September 30, 1996 contained within the Company's Annual Report on
Form 10-KSB.
The financial statements included herein as of December 31,
1996 and for each of the three month periods ended December 31, 1996
and 1995, have been prepared by the Company, without an audit,
pursuant to generally accepted accounting principles and the rules and
regulations of the Securities and Exchange Commission. The information
presented reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the period. Results for
the three months ended December 31, 1996, are not necessarily
indicative of the results which will be realized for the year ending
September 30, 1997. The September 30, 1996 consolidated balance sheet
data was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting
principles. Certain prior period information has been reclassified to
conform to current period presentation.
INCOME (LOSS) PER COMMON SHARE - Income (loss) per common share is
computed on the basis of the weighted average shares of common stock
outstanding for the three months ended December 31, 1996 and 1995.
Options and warrants are common stock equivalents and, along with
contingent stock issuances, are considered in the computation of
income per common share using the treasury stock method when they are
dilutive. To determine income per common share, net income is adjusted
for preferred stock dividends which were $37,000 for each of the three
months ended December 31, 1996 and 1995. Weighted average shares
outstanding were 3,957,000 and 2,008,000 on a primary and fully
diluted basis, for the three months ended December 31, 1996 and 1995,
respectively.
2. FINANCING ACTIVITIES
In November 1996, the Company completed a private placement
of approximately 1.2 million shares of common stock for $3.00 per
share. Each of the 1.2 million shares sold was accompanied by a
redeemable warrant to purchase an additional share of the Company's
common stock for $8 (a"Redeemable Warrant"). After nine months, each
Redeemable Warrant may be called by the Company for $.10 when the
closing bid price of the Company's common stock has been at least
$12.00 for 20 consecutive trading days. Redeemable Warrants totaling
350,000 were granted to the placement agent in connection with the
November Placement. Proceeds from the November Placement (which
included the conversion of the Bridge Debt discussed below) are
intended to finance the expansion of the Company's MegaMania network.
<PAGE> 8
MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
The November Placement was preceded by a private placement of
bridge debt financing in the amount of $800,000 (the "Bridge Debt")
which was completed in early August 1996. Redeemable Warrants
representing 360,000 shares accompanied the Bridge Debt and an
additional 173,310 Redeemable Warrants were granted to the placement
agent. The Bridge Debt was converted into common stock and Redeemable
Warrants in connection with the completion of the November Placement.
3. COMMITMENTS AND CONTINGENCIES
Pending Investigation
On October 16, 1996, the Company was advised by the Office of
the U.S. Attorney in Tulsa, Oklahoma (the "U.S. Attorney") that the
Company was part of a criminal investigation to determine whether, in
the opinion of the U.S. Attorney, the Company's MegaMania bingo game
constituted Class II or Class III gaming, as defined by the Indian
Gaming Regulatory Act of 1988 (the "Gaming Act"). MegaMania has been
designed and is operated as a Class II game within the definition of
bingo set forth in the Gaming Act. In a written opinion dated July 10,
1996, the Company was informed by the National Indian Gaming
Commission ("NIGC"), of the NIGC's determination that MegaMania
constituted a Class II game.
The Company has relied on the NIGC's opinion in conducting
its operations and believes that the NIGC made its determination with
a complete and accurate understanding of the facts and the applicable
law. The Company is unaware of any circumstances that would have
caused the investigation by the U.S. Attorney or on what basis the
U.S. Attorney could conclude that MegaMania is not a Class II game.
No assurances can be given that the U.S. Attorney will not
conclude that MegaMania is Class III gaming. If the U.S. Attorney does
reach such a conclusion, the Company intends to vigorously defend its
position that MegaMania is a Class II game. No assurances can be given
that the Company will be successful on the merits. If MegaMania is
ultimately determined to be Class III gaming, the loss of the
MegaMania business would have a material adverse effect upon the
Company's financial condition and results of operation.
Litigation
The Company is a party to various lawsuits and claims arising
out of the ordinary course of its business. No accrual for potential
loss has been made in the accompanying financial statements as
management does not believe that the likelihood of a material loss is
probable at this time.
<PAGE> 9
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors and Stockholders
Multimedia Games, Inc.
We have reviewed the accompanying consolidated balance sheet
of Multimedia Games, Inc. and Subsidiaries as of December 31, 1996,
and the related consolidated statements of operations and cash flows
for the three-month period ended December 31, 1996. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public Accountants.
A review of interim financial information consists principally of
applying analytical procedures to financial data and making inquiries
of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying financial
statements for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet as of
September 30, 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended
(not presented herein); and in our report dated December 18, 1996, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet as of September 30, 1996 is
fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
February 7, 1997
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
Multimedia Games, Inc. and subsidiaries (the "Company") were
organized to develop, promote and produce lawful gaming activities
over the information highway, including but not limited to satellites,
television, telephone and the Internet. The Company provides satellite
linked, high stakes bingo games and interactive high speed bingo games
played on interconnected electronic player stations to participating
bingo halls owned primarily by American Indian tribes located
throughout the United States. The Company also provides proxy play
services for its MegaBingo and MegaCash games to bingo players located
off Indian lands through a subsidiary's 49% interest in American
Gaming Network L.L.C. ("AGN").
Prior to August 1995, the Company's principal business was to
furnish the marketing and other operating services required in the
conduct of high stakes bingo games conducted under the names
MegaBingo, MegaCash and MegaBingo Lite (the "MegaBingo Games").
MegaBingo and MegaCash are played simultaneously using a
closed-circuit television satellite link at 50 independently owned
bingo halls located in 14 states throughout the United States,
operated primarily on behalf of American Indian tribes. MegaBingo Lite
provides smaller prizes to similarly linked Indian bingo halls and is
presently delivered to 11 bingo halls located in the State of
Oklahoma.
In August 1995, the Company introduced MegaMania, an
interactive high-speed bingo game developed by the Company that is
played on electronic player stations interconnected among
participating Indian bingo halls. Significant revenue generation for
MegaMania did not begin until March 1996. As of December 31, 1996,
MegaMania is played at 25 independently owned American Indian bingo
halls located in 6 different states, primarily Oklahoma.
RESULTS OF OPERATIONS
The Company's total operating revenues were $6,805,000 and
$4,658,000 for the three months ending December 31, 1996 and 1995
respectively, or an increase of $2,147,000 for the 1996 period. The
increase was primarily a result of an increase in gaming revenue of
$2,779,000, partially offset by a decrease in the sale of intellectual
property of $500,000 that occurred in the 1995 period. The increase in
gaming revenue was driven by increased MegaMania gaming revenues
during the three months ended December 31, 1996, which were partially
offset by MegaBingo revenue decreases.
<PAGE> 11
Bingo prizes and related fees were $2,216,000 and $2,427,000
for the three months ended December 31, 1996 and 1995 respectively, or
a decrease of $211,000. The decrease resulted from decreased MegaBingo
revenue during the period.
Allotments to hall operators was $3,034,000 and $806,000 for
the three months ended December 31, 1996 and 1995 respectively. The
increase resulted from the increase in MegaMania revenues.
Salaries and wages were $477,000 and $321,000 for the three
months ended December 31, 1996 and 1995 respectively, or an increase
of $156,000. Salaries and wages increased during the three months
ended December 31, 1996 due to additional staff needed for the
increased MegaMania operations.
Selling, general and administrative expenses were $920,000
and $940,000 for the three months ending December 31, 1996 and 1995,
respectively, or a decrease of $20,000. The decrease is primarily due
to a decrease in business meals and travel of approximately $100,000
during the three months ended December 31, 1996, partially offset by
additional telephone expense during the period due to the increase in
MegaMania operations and an increase in legal and professional fees
primarily as a result of increased legal and regulatory activity.
Amortization and depreciation was $289,000 and $90,000 for
the three months ending December 31, 1996 and 1995 respectively, or an
increase of $199,000. The increase results from the acquisition of
MegaMania electronic player stations and computer software costs
capitalized during 1996.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had $2,782,000 in cash and
cash equivalents. Cash and cash equivalents increased during the
quarter ended December 31, 1996 by $1,274,000 primarily as a result of
$2,027,000 in net cash proceeds from a private offering of capital
stock and a decrease in inventory of $155,000, partially offset by the
purchase of equipment totaling $946,000. As a result, at December 31,
1996, the Company had positive working capital of $1,376,000.
The Company believes that its current operations can be
sustained from cash from operations. However, in expanding its
MegaMania operations with the purchase and installation of additional
electronic player stations, funding is expected to be obtained from
financial institutions.
<PAGE> 12
FUTURE EXPECTATIONS AND FORWARD LOOKING STATEMENTS
This Quarterly Report and the information incorporated herein
by reference contains various "forward-looking statements" within the
meaning of Federal and state securities laws, including statements
identified or predicated by the words "believes," "anticipates,"
"expects," "plans," or similar expressions. Such statements are
subject to a number of uncertainties that could cause the actual
results to differ materially from those projected. Such factors
include, but are not limited to, those described under "Item 1.
Description of Business - Risk Factors" contained in the Company's
Annual Report on Form 10-KSB for the fiscal year ended September 30,
1996, which are incorporated herein by this reference. Given these
uncertainties, readers of this Quarterly Report are cautioned not to
place undue reliance upon such statements.
<PAGE> 13
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
In November 1996, the Company completed a private placement
(the "November Placement") of 1,158,833 shares of the Company's Common
Stock at a purchase price of $3.00 per share. Net proceeds to the
Company, which excludes the conversion of $800,000 of previously
incurred Bridge Debt,was $2,027,000. Each share of Common Stock sold
was accompanied by a redeemable warrant to purchase an additional
share of the Company's Common Stock for $8 per share (a "Redeemable
Warrant"). After nine months, each Redeemable Warrant may be redeemed
by the Company for $.10 when the closing bid price of the Company's
Common Stock has been at least $12.00 for 20 consecutive trading days.
The Redeemable Warrants expire after November 12, 2001, if not
exercised prior to that date. Redeemable Warrants totaling 350,000
were also granted to Walsh, Manning Securities, LLC, which acted as
the placement agent for the Company in connection with the November
Placement. In addition to such Redeemable Warrants, Walsh, Manning
Securities, LLC, received a commission of 10% and a nonaccountable
expense allowance of 3% of the total proceeds to the Company. The
November Placement was consummated without registration under the
Securities Act of 1933, as amended (the "1933 Act"), in reliance upon
the exemption from registration pursuant to Section 4 (2) of the 1933
Act and Rule 501 of Regulation D promulgated thereunder. All of the
purchasers in the November Placement are believed by the Company to be
"accredited investors" within the meaning of the 1933 Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits filed as part of this Quarterly Report on Form
10-QSB/A are listed in the attached Index to Exhibits.
(b) There were no reports filed on Form 8-K during the current
quarter.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated June 2, 1997 Multimedia Games, Inc.
By: /s/ FREDERICK E. ROLL
----------------------------------
Frederick E. Roll, Vice President and
Chief Financial Officer
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.1 - *Contingent Grand Prize Risk Assumption Agreement dated
October 1, 1995, between the Company and SCA Promotions, Inc.
10.2 - *Lease Agreement dated October 10, 1996, between the Company
and Intervest-Southern Oaks LP
10.3 - *Form of Private Placement Warrant
10.4 - *Registration Rights Agreement among the Company and holders
of Bridge Warrants and Private Placement Warrants
15 - Letter Regarding Unaudited Interim Financial Information
27 - Financial Data Schedule
</TABLE>
* Indicates incorporated by reference to the Company's Form 10-KSB filed with
the Commission for the fiscal year ended September 30, 1996.
<PAGE> 1
EXHIBIT 15
MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFORMATION
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Multimedia Games, Inc.
Registration on Form S-3
We are aware that our report dated February 7, 1997 on our review of the
interim financial information of Multimedia Games, Inc. for the period ended
December 31, 1996, and included in this Form 10-QSB/A is incorporated by
reference in the Company's registration statement on Form S-3 (File No.
333-16729). Pursuant to Rule 436(c) under the Securities Act of 1933, this
report should not be considered a part of the registration statement prepared
or certified by us within the meaning of Sections 7 and 11 of that Act.
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
May 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,782
<SECURITIES> 0
<RECEIVABLES> 507
<ALLOWANCES> 76
<INVENTORY> 203
<CURRENT-ASSETS> 3,512
<PP&E> 4,260
<DEPRECIATION> 981
<TOTAL-ASSETS> 9,281
<CURRENT-LIABILITIES> 2,136
<BONDS> 0
0
1
<COMMON> 40
<OTHER-SE> 4,993
<TOTAL-LIABILITY-AND-EQUITY> 9,281
<SALES> 0
<TOTAL-REVENUES> 6,805
<CGS> 0
<TOTAL-COSTS> 6,930
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65
<INCOME-PRETAX> (190)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (190)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> 0
</TABLE>
