UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1996
-------------------------------------------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______ to ______ .
Commission file number 0-22482 .
-----------------
INNOVATIVE GAMING CORPORATION OF AMERICA
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(Exact Name of Registrant as Specified in Its Charter)
Minnesota 41-1713864
- ------------------------------------ ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
4750 Turbo Circle, Reno, Nevada 89502
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(Address of Principal Executive Offices)
(702) 823-3000
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(Issuer's Telephone Number, Including Area Code)
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(Former Address, 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___
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: At November 4, 1996 there were
6,456,515 shares of common stock, $0.01 par value, outstanding.
INNOVATIVE GAMING CORPORATION OF AMERICA
Form 10-Q Index
September 30, 1996
Part I: Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
September 30, 1996 and December 31, 1995 (Unaudited) 3
Consolidated Condensed Statements of Operations -
for the three and nine months ended
September 30, 1996 and 1995 (Unaudited) 4
Consolidated Condensed Statements of Cash Flows -
for the three and nine months ended
September 30, 1996 and 1995 (Unaudited) 5
Notes to Consolidated Condensed
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
Part II: Other Information
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
<TABLE>
<CAPTION>
INNOVATIVE GAMING CORPORATION OF AMERICA AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
ASSETS
September 30, December 31,
1996 1995
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,946 $ 897
Available-for-sale securities 3,818 7,852
Restricted investments 542 542
Accounts receivable 216 116
Current portion of notes receivable 265 873
Inventories 5,086 5,806
Prepaid expenses and other 220 351
-------- --------
Total current assets 14,093 16,437
NOTES RECEIVABLE, LESS CURRENT PORTION -- 951
PROPERTY AND EQUIPMENT, NET 458 359
DEFERRED INCOME TAXES 720 854
INTANGIBLE ASSETS, NET 2,169 328
-------- --------
$ 17,440 $ 18,929
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 609 $ 335
Accrued expenses 208 63
-------- --------
Total liabilities 817 398
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 100,000,000 shares authorized,
6,456,515 and 4,968,915 shares issued and outstanding, respectively 65 50
Class B non-voting common stock, $.01 par value, 1,025,000 shares
authorized, 0 and 1,025,000 shares issued and outstanding, respectively -- 10
Additional paid-in capital 24,865 21,848
Accumulated deficit (8,278) (3,380)
Unrealized holding gain (loss) on available-for-sale securities (29) 3
-------- --------
Total stockholders' equity 16,623 18,531
-------- --------
$ 17,440 $ 18,929
======== ========
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
INNOVATIVE GAMING CORPORATION OF AMERICA AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SALES $ 733 $ 357 $ 1,969 $ 6,199
COST OF SALES 526 312 1,395 3,961
----------- ----------- ----------- -----------
Gross profit 207 45 574 2,238
SELLING, GENERAL AND ADMINISTRATIVE 1,502 1,157 4,067 3,529
RESTRUCTURING COSTS -- -- 1,716 --
----------- ----------- ----------- -----------
Loss from operations (1,295) (1,112) (5,209) (1,291)
INTEREST INCOME, NET 136 181 466 472
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAXES (1,159) (931) (4,743) (819)
Provision for (benefit of) income taxes -- -- 155 (14)
----------- ----------- ----------- -----------
NET LOSS (1,159) (931) (4,898) (805)
Preferred stock dividends paid -- 20 -- 60
Preferred stock accretion adjustment -- 7 -- 17
----------- ----------- ----------- -----------
LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS ($ 1,159) ($ 958) ($ 4,898) ($ 882)
=========== =========== =========== ===========
LOSS PER COMMON SHARE
AND COMMON SHARE EQUIVALENTS:
PRIMARY AND FULLY DILUTED ($ 0.18) ($ 0.16) ($ 0.77) ($ 0.15)
=========== =========== =========== ===========
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 6,445,702 5,878,702 6,352,195 5,815,693
=========== =========== =========== ===========
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
INNOVATIVE GAMING CORPORATION OF AMERICA AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($ 1,159) ($ 931) ($ 4,898) ($ 805)
Adjustments to reconcile net loss to
cash flows from operating activities -
Depreciation and amortization 117 84 439 252
Deferred income taxes -- (76) 134 (110)
(Gain) loss on sale of property and equipment (1) -- 98 --
Loss on sale of securities and investments 2 21 27 19
Increase in allowance for uncollectible accounts -- -- 78 --
Stock option compensation earned 3 (2) 7 13
Changes in operating assets and liabilities 922 1,331 2,628 822
-------- -------- -------- --------
Cash flows from operating activities (116) 427 (1,487) 191
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities and investments -- (4,041) (5,936) (13,342)
Proceeds from sale of securities and investments 3,708 -- 9,912 8,700
Purchase of property and equipment (71) -- (350) (3)
Proceeds from sale of property and equipment -- -- 45 --
Payments on non-compete agreement (24) -- (66) --
-------- -------- -------- --------
Cash flows from investing activities 3,613 (4,041) 3,605 (4,645)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term obligations (1) (8) (3) (25)
Preferred stock dividends paid -- (20) -- (60)
Net proceeds from sale of common stock 137 342 934 802
Payments on repurchase of common stock -- -- -- (203)
-------- -------- -------- --------
Cash flows from financing activities 136 314 931 514
-------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,633 (3,300) 3,049 (3,940)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 313 4,152 897 4,792
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,946 $ 852 $ 3,946 $ 852
======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Noncash transactions:
Class B common stock converted to common stock -- -- $ 10 --
Intangible assets acquired with common stock -- -- $ 2,081 --
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
INNOVATIVE GAMING CORPORATION OF AMERICA AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
(1) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. Although management believes that the disclosures are adequate to
make the information presented not misleading, it is suggested that these
interim consolidated condensed financial statements be read in conjunction with
the Company's most recent audited consolidated financial statements and notes
thereto included in the Company's Annual Report to Shareholders and Form 10-K
for the year ended December 31, 1995. In the opinion of management, all
adjustments (including recurring adjustments) necessary for a fair presentation
of the financial position, results of operations and cash flows for the interim
period presented have been made. Operating results for the nine months ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996, however losses are expected to
continue for the near term.
(2) COMMITMENTS AND CONTINGENCIES
The manufacture, distribution and sale of the Company's products are regulated
by various jurisdictions and entities, including requirements to obtain licenses
and product approval in several jurisdictions. Failure to successfully obtain
these licenses, approvals, or meet other regulatory requirements could
materially impact the expansion and future operation of the Company. As a result
of these factors, the Company expects quarterly results to be volatile until
corporate and game license approvals in major gaming markets are obtained and
appropriate marketing efforts in new jurisdictions have been performed. Until
all major gaming market approvals and game licenses are received, future sales
and earnings levels are expected to continue to be negatively impacted.
On May 14, 1996, the Company entered into a noncancelable operating lease
agreement for office and warehouse space in Reno, Nevada. On July 19, 1996, this
lease was extended through October 2001. The lease requires monthly payments of
$19,000 and requires minimum annual rental commitments of $148,000, $229,000,
$235,000, $266,000, $283,000 and $248,000 for the years ending December 31, 1996
through 2001, respectively.
On August 28, 1996, the Company entered into a noncancelable operative lease
agreement for office and warehouse space in Las Vegas, Nevada. The lease
commenced September 1, 1996, for a term of three years with monthly payments of
$2,144 and minimum annual rental commitments of $9,000, $26,000, $28,000 and
$18,000 for the years ending December 31, 1996 through 1999, respectively.
(3) RELATED PARTY TRANSACTIONS
Sales of approximately $67,000 were made to Grand Casinos, Inc. ("GCI") during
the quarter ended September 30, 1995. Total sales to GCI for the nine months
ended September 30, 1995 were $560,000. There were no sales to GCI for the nine
months ended September 30, 1996. GCI, which is in the business of owning,
managing and developing casinos, is a stockholder of the Company. These sales
were made at reduced prices for the purpose of testing, evaluating and marketing
Live Video Blackjack, Live Video Craps and Live Video Roulette. On October 20,
1994, the Company issued 1,025,000 shares of its Class B non-voting common stock
in exchange for: i) 1,025,000 shares of common stock held by GCI, ii) an option
to purchase 102,500 additional shares of common stock at $7.00 per share
including registration rights on the additional shares, and iii) an increase in
the number of games GCI may purchase under the existing discount machine
purchase agreement by 50 games (up to an aggregate of 125 games). On December 1,
1995, the Company and GCI amended their earlier agreement to provide that if the
Company did not receive certain approvals from the Nevada Gaming Commission
("the Nevada Approvals") on or before December 31, 1995, GCI would, subject to
approval of the Minnesota Commissioner of Commerce, exchange its 1,025,000
shares of Class B non-voting common stock for 1,025,000 shares of the Company's
common stock. The Company did not receive the Nevada Approvals on or before
December 31, 1995. On March 21, 1996, GCI converted 1,025,000 shares of Class B
non-voting common stock into 1,025,000 shares of the Company's common stock.
(4) ACQUISITION OF INTANGIBLE ASSETS
On February 2, 1996, the Company acquired the balance of all remaining patents,
copyrights and other proprietary information related to its products from
certain Japanese suppliers in exchange for 225,000 shares of common stock, which
had a market value of $2,081,000 on the date of the exchange. The Company is
amortizing the acquired intangible assets over their useful lives, which range
from five to ten years.
(5) COMMON STOCK
On October 20, 1994, the Company's Board of Directors authorized the Company to
repurchase up to 500,000 shares of its currently outstanding common stock from
time to time on the open market or in privately negotiated transactions
depending on market conditions. As of September 30, 1996, the Company had
repurchased 248,500 shares at prices ranging from $3.56 to $6.08 per share for
total consideration of $1,199,000. A total of 50,000 shares were repurchased
during the nine months ended September 30, 1995. No shares were repurchased in
the quarter ended September 30, 1995. No shares were repurchased during the nine
months ended September 30, 1996.
(6) INCOME TAXES
The Company has adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", under which deferred income tax assets and
liabilities are recognized for differences between financial and income tax
reporting basis of assets and liabilities based on currently enacted rates and
laws. The Company had cumulative federal net operating loss carry forwards of
approximately $2,900,000 as of December 31, 1995. These losses, if not used,
will begin to expire in 2009. The use of approximately $1,250,000 of these
losses is limited to approximately $250,000 per year for the next five years
because the loss was generated in a short tax year. Future changes in the
ownership of the Company may place limitations on the use of these net operating
loss carry forwards.
(7) DISTRIBUTION AGREEMENTS
On February 7, 1996, the Company entered into a distribution agreement with
Aristocrat Leisure Industries PTY LTD to exclusively distribute the Company's
games in Australia, New Zealand and other Asian-Pacific territories. The term of
the agreement is five years with minimum game purchase requirements of 100 units
per year. The agreement is also subject to certain regulatory and product
licensing requirements in various jurisdictions prior to product sales.
On March 5, 1996, the Company entered into distribution agreements with Ludi
S.F.M. and S.A.M. Eurusa to exclusively distribute the Company's games in
France, Monaco, Morocco, Tunisia and Italy. Ludi is affiliated with Eurusa. The
agreements have terms of three years and are subject to certain regulatory and
product licensing requirements in various jurisdictions prior to product sales.
(8) EMPLOYMENT AND CONSULTING AGREEMENTS
The Company has entered into employment contracts with certain of its executive
officers which generally provide for base compensation, bonus compensation and
stock option grants. In addition, the Company has entered into a consulting and
noncompete agreement with its former chief executive officer.
(9) RESTRUCTURING PLAN
During the quarter ended June 30, 1996, the Company formalized details of a
comprehensive restructuring plan designed to reduce costs and improve efficiency
of operations. Included in the restructuring plan was the consolidation and
relocation of corporate facilities to Reno, Nevada, replacement of management
with Nevada gaming experienced management, and an overall evaluation of the
Company's product lines and new markets. As a result of this restructuring plan,
the Company recorded a one-time charge against earnings in the second quarter
totaling $1,716,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company was formed in 1991 to develop, manufacture, market and distribute
group participation and other specialty video gaming machines. The Company
manufactures, distributes and markets electronic blackjack, craps, roulette and
progressive blackjack machines to gaming markets worldwide. Since inception, the
Company has focused most of its resources on the regulatory approval process and
the sale and installation of its machines and the development of other products.
In late October 1996, the Company received administrative approval from the
Nevada gaming authorities to place its multi-terminal blackjack, roulette and
craps games on field trial in a Las Vegas, Nevada casino. Upon completion of the
field trial and final formal approval by the Nevada Gaming Commission, the
Company intends to begin distribution of its games in Nevada; approximately
first quarter 1997. Additionally, in late October 1996, the Company received
approval by the Colorado Gaming Commission for licensure as a
manufacturer/distributor. The Company has submitted its multi-terminal blackjack
game to authorities for technical approval in the Colorado market.
In the second quarter ended June 30, 1996, the Company initiated a restructuring
plan which included relocating to Reno, Nevada as described in Note 9 of the
Notes to Consolidated Condensed Financial Statements. On May 14, 1996, the
Company entered into a noncancelable operating lease for office and warehouse
space in Reno to relocate its corporate and manufacturing headquarters in order
to draw from a more experienced vendor and employee pool and to work more
closely with a significant number of potential customers in designing,
developing and marketing the Company's products. In June 1996, the Company began
the process of relocating its corporate offices, inventory and manufacturing
activities. The Company completed the move in mid-August 1996.
The Company and Grand Casinos, Inc. ("GCI") have entered into an agreement which
will allow casinos owned or managed by GCI or its affiliates to purchase up to
125 of the Company's video gaming machines at prices lower than the price the
Company charges unrelated parties. From inception through September 30, 1996,
the Company has sold 42 blackjack machines, 11 craps machines and 8 roulette
machines to casinos either owned or managed by GCI. There were no sales to GCI
for the nine months ended September 30, 1996.
The Company distributes its products both directly to the gaming marketplace and
through licensed distributors. In certain jurisdictions, the Company has
received technical game approval but has not sought or received its
distributor's license. In certain jurisdictions the Company may use an existing
licensed distributor to sell its products pursuant to any necessary Tribal or
regulatory transaction approvals. The Company has, and/or intends to apply for
necessary licenses or technical approvals in key jurisdictions both domestically
and internationally where Class III type gaming is permitted.
The Company has granted Sodak Gaming, Inc. a five-year non-exclusive license to
distribute the Company's electronic blackjack, craps and roulette machines to
North American Indian casinos (excluding the states of Minnesota and Nevada) and
to non-Indian casinos in the states of North Dakota, South Dakota and Wyoming.
The Company has also granted Drew Distributing a three-year exclusive license to
distribute the Company's electronic blackjack, craps and roulette in South
Carolina.
On February 7, 1996, the Company entered into a distribution agreement with
Aristocrat Leisure Industries PTY LTD to exclusively distribute the Company's
games in Australia, New Zealand and other Asian-Pacific territories. The term of
the agreement is five years with minimum game purchase requirements of 100 units
per year, which are expected to begin in 1997. The agreement is also subject to
certain regulatory and product licensing requirements in various jurisdictions.
On March 5, 1996, the Company entered into distribution agreements with Ludi
S.F.M. and S.A.M. Eurusa to exclusively distribute the Company's games in
France, Monaco, Morocco, Tunisia and Italy. Ludi is affiliated with Eurusa.
These agreements have terms of three years and are subject to certain regulatory
and product licensing requirements in various jurisdictions.
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1996 COMPARED TO SEPTEMBER 30, 1995
For the three and nine month periods ended September 30, 1996, the Company
recorded losses attributable to shareholders of $1,159,000, or $.18 per share,
and $4,898,000, or $.77 per share, respectively. These losses were the result of
low sales volume while expense levels were high due to the Company's efforts to
develop/enhance its products while pursuing licensing and the introduction of
those products into new markets. The expenses for the nine month period also
included a restructuring charge of $1,716,000, recorded in the second quarter.
SALES, COST OF SALES AND GROSS PROFIT
Sales for the quarter ended September 30, 1996 increased $376,000 to $733,000
compared to $357,000 recorded in the quarter ended September 30, 1995. Net sales
included 9 games in the current quarter compared to 3 games sold in the prior
year period. Sales for the nine months ended September 30, 1996 decreased to
$2.0 million from $6.2 million recorded in the nine months ended September 30,
1995. Game sales for the 1996 period totaled 24 compared to 92 in the comparable
1995 period. The first nine months of 1995 included the Company's entrance into
the markets of Arizona, Wisconsin and North Carolina, which resulted in the sale
of 33 games, and 39 games sold into South Carolina. A total of 7 games were sold
into these markets in the first nine months of 1996. Delays in acquiring certain
gaming licenses in key jurisdictions has limited the markets available to sell
the Company's products. Sales will continue to be volatile while new
jurisdictional licenses and/or distribution agreements are obtained. The Company
is pursuing game approval in the key jurisdictions of Nevada and Australia.
The gross margin for the third quarter of 1996 was 28.2 % compared to 12.6% for
the third quarter of 1995. The lower gross margin in 1995 was due to higher cost
of game components as a result of unfavorable Yen exchange rates and due to
shrinking demand for the Company's products in certain existing licensed Indian
and riverboat jurisdictions. The gross margin for the nine months ended
September 30, 1996 was 29.2% compared to 36.1% for the nine months ended
September 30, 1995. This decline as due to higher cost of game components as a
result of unfavorable Yen exchange rates, and due to 100% of game sales in 1996
being to distributors, which yield lower gross margins than direct sales made by
the Company.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expense for the three months ended September
30, 1996 increased $345,000 to $1,502,000 compared to $1,157,000 for the three
months ended September 30, 1995. For the nine months ended September 30, 1996,
selling, general and administrative expense increased $538,000 to $4,067,000.
These expense increases were primarily due to higher product engineering and
development expenses related to preparing the Company's products for
introduction into new jurisdictions, and increased payroll expenses.
RESTRUCTURING COSTS
The Company recognized $1,716,000 in restructuring costs, which included
expenses relating to the Company's relocation to Reno, management transition and
product focus. All anticipated expenses related to the relocation and
restructuring were accrued in the quarter ended June 30, 1996. During the
relocation process, the Company maintained operations in both Reno and Plymouth
for over two months, which resulted in duplication of various expenses.
Additionally, the Company incurred a loss upon the sale and disposal of unusable
office equipment, computer equipment and leasehold improvements when moving out
of the Plymouth office.
As part of the restructuring, management also focused on the product lines it
feels are necessary to provide the salability, manufacturing capability, and
ultimately the profit margins necessary to achieve and sustain future growth. As
part of this process the Company recorded an inventory obsolescence reserve on
certain of its inventory.
INTEREST INCOME
In the quarter ended September 30, 1996, interest income was $136,000 compared
to $181,000 in the quarter ended September 30, 1995. The decrease in interest
income was due to a decrease in notes receivable and investments in interest
bearing accounts. For the nine months ended September 30, 1996, interest income
decreased $6,000 compared to the prior year period.
PROVISION FOR INCOME TAXES
The Company recorded a $155,000 provision for income taxes during the second
quarter of 1996 to provide a full valuation allowance on its deferred tax asset
relating to its net operating loss carry forwards.
ACCUMULATED DEFICIT
The Company had an accumulated deficit of $8,278,000 as of September 30, 1996.
Due to the highly regulated environment in which the Company operates, the
likelihood of future profitable quarters cannot be predicted. Future results are
highly dependent on the Company's ability to obtain the necessary licenses
and/or product approvals in various jurisdictions in order to expand its market
base. There can be no assurance as the time frame during which such anticipated
approvals may occur due to uncertain time periods involved in the regulatory
approval process. Due to the unique nature and prices of the Company's products,
it is difficult to predict the appropriate selling cycle time frame involved in
each new jurisdiction.
As a result of these factors, the Company expects quarterly results to be
volatile until licenses and approvals are obtained in major gaming markets and
appropriate marketing efforts can be performed in new jurisdictions. The Company
has experienced delays in acquiring certain gaming licenses in key
jurisdictions. Future sales and earnings levels are expected to continue to be
negatively impacted until licenses are acquired in key new jurisdictions.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a $542,000 standby letter of credit/revolving credit arrangement
to facilitate acquisition of components and supplies from foreign vendors. The
facility is collateralized by short-term investments of the Company.
On October 20, 1994, the Company's Board of Directors authorized the Company to
repurchase up to 500,000 shares of its currently outstanding common stock from
time to time on the open market or in privately negotiated transactions,
depending on market conditions. As of September 30, 1996, the Company had
repurchased 248,500 shares at prices ranging from $3.56 to $6.08 per share for
total consideration of $1,199,000. A total of 50,000 shares were repurchased
during the nine months ended September 30, 1995. No shares were repurchased
during the nine months ended September 30, 1996.
The Company had $8,306,000 and $9,291,000 in cash and cash equivalents,
available-for-sale securities and restricted investments as of September 30,
1996 and December 31, 1995, respectively. The Company believes that its cash and
cash equivalents, available-for-sale securities and restricted investments, and
additional financing capacity will be sufficient to meet the Company's current
liquidity and capital requirements. These resources and cash generated from
operations are expected to meet the Company's long-term capital requirements.
The Company had no long-term debt as of September 30, 1996.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
The foregoing Management's Discussion and Analysis contains various
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Sections 21E of the Securities Exchange Act of
1934, as amended, which represent the Company's expectations or beliefs
concerning future events, including statements regarding the Company's timetable
of game approval in Nevada, Colorado and Australia. In addition, statements
containing expressions such as "believes," "anticipates," "hopeful" or "expects"
used in the Company's periodic reports on Forms 10-K and 10-Q filed with the SEC
are intended to identify forward looking statements. The Company cautions that
these and similar statements included in this report and in previously filed
periodic reports including reports filed on Forms 10-K and 10-Q are further
qualified by important factors that could cause actual results to differ
materially from those in the forward-looking statement, including, without
limitation, the following: decline in demand for gaming products or reduction in
the growth rate of new markets; increased competition; the effect of economic
conditions; a decline in the market acceptability of gaming; political and
economic instability in developing international markets; a decrease in the
desire of established casinos to upgrade machines in response to added
competition from newly constructed casinos; the loss of a distributor; changes
in interest rates causing a reduction on investment income or in the market
interest rate sensitive investments; loss or retirement of key executives;
approval of pending patent applications or infringement upon existing patents;
the effect of regulatory and governmental actions; unfavorable determination of
suitability by regulatory authorities with respect to officers, directors or key
employees; the limitation, conditioning or suspension of any gaming license;
adverse results of significant litigation matters; fluctuation in exchange
rates, tariffs and other barriers. Many of the foregoing factors have been
discussed in the Company's prior SEC filings and, had the amendments to the
Securities Act of 1933 and Securities Exchange Act of 1934 become effective at a
different time, would have been discussed in an earlier filing.
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule - which is only submitted
electronically to the Securities and Exchange Commission for
EDGAR information purposes.
(b) Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INNOVATIVE GAMING CORPORATION OF AMERICA
/s/ Scott Shackelton
------------------------------
Scott Shackelton
Chief Financial Officer
(Principal Accounting Officer)
Date: November 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,946
<SECURITIES> 4,360
<RECEIVABLES> 481
<ALLOWANCES> 0
<INVENTORY> 5,086
<CURRENT-ASSETS> 14,093
<PP&E> 458
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,440
<CURRENT-LIABILITIES> 817
<BONDS> 0
0
0
<COMMON> 65
<OTHER-SE> 16,558
<TOTAL-LIABILITY-AND-EQUITY> 17,440
<SALES> 1,969
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<OTHER-EXPENSES> 5,783
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (466)
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<INCOME-TAX> 155
<INCOME-CONTINUING> (4,898)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,898)
<EPS-PRIMARY> (.77)
<EPS-DILUTED> (.77)
</TABLE>
