<PAGE>
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: June 30, 2000
------------------------------------------------
[ ] 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: 0-22752
--------------------------------------------------------
MIKOHN GAMING CORPORATION
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 88-0218876
---------------------------------- --------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
1045 Palms Airport Drive, P.O. Box 98686, Las Vegas, NV 89193-8686
--------------------------------------------------------------------------------
(Address of principal executive office and zip code)
(702) 896-3890
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
________________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO _______
-------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as the latest practicable date:
11,042,210 as of August 2, 2000
------------------------------- -----------------------
(Amount Outstanding) (Date)
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MIKOHN GAMING CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at June 30, 2000 (unaudited)
and December 31, 1999 2
Condensed Consolidated Statements of Operations for the Three and
Six Months ended June 30, 2000 and 1999 (unaudited) 3
Condensed Consolidated Statements of Cash Flows for the Six Months
ended June 30, 2000 and 1999 (unaudited) 4
Notes to Condensed Consolidated Financial Statements (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Part II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 6. Exhibits and Reports on Form 8-K 22
</TABLE>
1
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MIKOHN GAMING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Amounts in thousands) June 30, 2000 December 31,
(unaudited) 1999
----------- ----
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $ 1,810 $ 48
Accounts receivable, net 24,195 30,447
Notes receivable - related parties - current portion 1,859 2,144
Installment sales receivable - current portion 3,289 1,030
Inventories, net 32,708 26,793
Prepaid expenses 5,981 4,582
Assets held for sale 1,046 781
Deferred tax asset - current portion 1,420 1,420
-------- --------
Total current assets 72,308 67,245
Notes receivable - related parties - net of current portion 154 150
Installment sales receivable - net of current portion 969 865
Property and equipment, net 26,469 25,385
Intangible assets 15,927 16,810
Goodwill 39,511 40,208
Other assets 8,627 8,423
Deferred tax asset - net of current portion 2,914 2,914
-------- --------
Total assets $166,879 $162,000
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt and notes payable $ 2,441 $ 1,436
Trade accounts payable 7,652 11,615
Customer deposits 5,624 3,600
Accrued and other current liabilities 6,766 6,743
Deferred license fees - current portion 451 451
-------- --------
Total current liabilities 22 934 23,845
-------- --------
Long-term debt - net of current portion 88,182 85,417
-------- --------
Deferred license fees - net of current portion 1,629 1,806
-------- --------
Stockholders' equity:
Preferred stock, $.10 par value, 5,000 shares authorized,
none issued and outstanding
Common stock, $.10 par value, 100,000 shares authorized,
11,029 and 10,799 shares issued and outstanding 1,103 1,080
Additional paid-in capital 55,186 53,350
Stockholders' notes receivable (1,251) (1,251)
Foreign currency translation (696) (597)
Retained earnings (accumulated deficit) 20 (1,422)
-------- --------
Subtotal 54,362 51,160
Less treasury stock, 19 shares, at cost (228) (228)
-------- --------
Total stockholders' equity 54,134 50,932
-------- --------
Total liabilities and stockholders' equity $166,879 $162,000
======== ========
</TABLE>
See notes to condensed consolidated financial statements
2
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MIKOHN GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2000 and 1999 (unaudited)
<TABLE>
<CAPTION>
(Amounts in thousands except per share amounts) Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $25,951 $29,010 $48,274 $54,185
Cost of sales 11,162 15,154 21,071 27,498
------- ------- ------- -------
Gross profit 14,789 13,856 27,203 26,687
Selling, general and administrative expenses 10,176 9,941 20,120 19,392
------- ------- ------- -------
Operating income 4,613 3,915 7,083 7,295
Interest expense (2,619) (2,105) (4,958) (4,195)
Other income and expense 188 120 238 244
------- ------- ------- -------
Income before income tax provision 2,182 1,930 2,363 3,344
Income tax provision (811) (747) (921) (1,250)
------- ------- ------- -------
Net income $ 1,371 $ 1,183 $ 1,442 $ 2,094
======= ======= ======= =======
Weighted average common shares:
Basic 10,958 10,707 10,897 10,691
======= ======= ======= =======
Diluted 11,088 10,708 11,026 10,692
======= ======= ======= =======
Earnings per share information:
Basic $ 0.13 $ 0.11 $ 0.13 $ 0.20
======= ======= ======= =======
Diluted $ 0.12 $ 0.11 $ 0.13 $ 0.20
======= ======= ======= =======
</TABLE>
See notes to condensed consolidated financial statements
3
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MIKOHN GAMING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999 (unaudited)
<TABLE>
<CAPTION>
(Amounts in thousands)
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,442 $ 2,094
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,721 2,405
Amortization 2,138 1,701
Provision for bad debts 13 226
Reserve for obsolete inventory 19 308
Change in exchange rate variance (99) 234
Changes in assets and liabilities:
Accounts receivable 6,239 302
Notes receivable - related parties 281 (146)
Installment sales receivable (2,363) 508
Inventories (5,934) (3,140)
Prepaid expenses and other assets (776) (697)
Trade accounts payable (3,963) (1,932)
Accrued and other current liabilities 23 (389)
Customer deposits 2,024 426
------- -------
Net cash provided by operating activities 1,765 1,900
------- -------
Cash flows from investing activities:
Purchase of property and equipment (532) (1,796)
Gaming equipment leased to others (4,456) (724)
Proceeds from sales of property and equipment 918 9
Increase in intangible assets (558) (1,807)
------- -------
Net cash used in investing activities (4,628) (4,318)
------- -------
Cash flows from financing activities:
Proceeds from long-term debt and notes payable 8,161 3,176
Principal payments on notes payable and long-term debt (4,391) (2,618)
Principal payments of deferred license fees (177)
Proceeds from sale of common stock 1,032 176
------- -------
Net cash provided by financing activities 4,625 734
------- -------
Increase (decrease) in cash and cash equivalents 1,762 (1,684)
Cash and cash equivalents, beginning of period 48 3,732
------- -------
Cash and cash equivalents, end of period $ 1,810 $ 2,048
======= =======
</TABLE>
See notes to condensed consolidated financial statements
4
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MIKOHN GAMING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 1 - GENERAL
These condensed unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and notes required
by generally accepted accounting principles for complete financial statements.
These statements should be read in conjunction with the audited financial
statements and notes thereto included in the Company's Annual Report on Form 10-
K for the year ended December 31, 1999.
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (consisting only of normal accruals)
necessary to present fairly the financial position of the Company at June 30,
2000, the results of its operations for the three and six months ended June 30,
2000 and 1999 and cash flows for the six months ended June 30, 2000 and 1999.
The results of operations for the three and six months ended June 30, 2000 are
not necessarily indicative of the results to be expected for the entire year.
As the Company has realigned the reporting of its business units, certain
items of prior year revenue and expense have been reclassified to follow the
Company's current reporting practice. Additionally, all intercompany activity
has been eliminated. Amounts reported in prior years have been adjusted to be
consistent with the Company's current reporting of intercompany activity. All
amounts reported in this section are rounded to the nearest thousand unless
otherwise stated.
NOTE 2 - DIVESTITURE
On November 4, 1999, the Company entered into a Share Sale Agreement by
which the Company sold a 50% interest in its Australian subsidiary, Mikohn
Gaming Australasia Pty Limited ("MGA"), to TAB Limited ("TAB") for $4.9 million.
Ancillary to the Share Sale Agreement, the Company entered into a Management
Services Agreement with MGA which provides that the Company will continue
directing the management of MGA so long as MGA operates profitably. The Company
also entered into a System Acquisition and Services Agreement (the "System
Agreement") with TAB which appointed the Company as the exclusive supplier of
the operating system for a wide-area linked progressive jackpot system in New
South Wales, Australia. TAB holds exclusive licenses from the New South Wales
government to install and operate the progressive jackpot system. The hardware
components of the system will be provided at cost. The software will be licensed
to TAB for a recurring license fee of $(AUD) 50.00 per month per device with a
minimum license fee of $(AUD) 1.5 million per year commencing July 1, 2000. The
Australian dollar exchange rate was $0.5971 at June 30, 2000.
Under the Share Sale Agreement, the Company was entitled to 100% of the
income of MGA for 1999. Therefore, MGA's income statement was included in the
Company's consolidated statements of operations and cash flows for 1999.
Starting on January 1, 2000, MGA is now reported on the equity method of
accounting. However, the MGA balance sheet was not included in the Company's
consolidated balance sheet as of December 31, 1999.
5
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NOTE 3 - INVENTORIES
Inventories at June 30, 2000 and December 31, 1999 consist of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Raw materials $ 13,006 $ 14,616
Finished goods 6,123 6,247
Work-in-progress 15,232 7,693
-------- ------------
Subtotal 34,361 28,556
Reserve for obsolete inventory (1,653) (1,763)
-------- ------------
Total $ 32,708 $ 26,793
======== ============
</TABLE>
NOTE 4 - COMMITMENTS AND CONTINGENCIES
The Company is involved in routine litigation, including bankruptcies,
collection efforts, disputes with former employees and other matters in the
ordinary course of its business operations. Management knows of no matter,
pending or threatened, that in its judgment will or might have a material
adverse effect on the Company or its operations including those noted below.
On October 2, 1997, the Company filed suit against Acres Gaming, Inc.
("Acres") in the U.S. District Court, Las Vegas, Nevada seeking a declaratory
judgment that its MoneyTime(TM) system does not infringe a patent issued to
Acres in August 1997 (U.S. Patent No. 5,655,961) and that the Acres patent is
invalid (the "'961 Action"). In the '961 Action, the Company asserts claims for
relief against Acres for tortious interference with business relationships,
tortious interference with prospective business relationships and trade libel.
Acres has counterclaimed for patent infringement. Two subsequently filed actions
in the same court involving two subsequently issued patents (U.S. Patent Nos.
5,741,183 and 5,752,882), one filed by the Company against Acres and one filed
by Acres against the Company, Casino Data Systems ("CDS"), Sunset Station Hotel
& Casino and New York-New York Hotel & Casino, involve claims for patent
infringement, non-infringement and invalidity similar to the claims asserted in
the '961 Action (the "'183 Action" and the "'882 Action"). The '183 Action and
the '882 Action have been consolidated with the '961 Action (the three actions
hereafter referred to as the "Consolidated Action"). Discovery in the
Consolidated Action closed on February 26, 1999. No trial date has been set.
Management believes that the Company will prevail in the Consolidated Action.
On October 13, 1998, Acres brought suit against the Company and CDS
alleging, as against the Company, that the MoneyTime(TM) system infringes a
patent (U.S. Patent No. 5,820,459) issued to Acres on October 13, 1998 (the
"459 Action"). The Company has responded denying infringement and asserting
that the Acres patent is invalid. The '459 Action is in an early stage of
discovery. No trial date has been set. Management believes that the Company will
prevail in the `459 Action.
The Company is addressing tax issues relating to its table games
operations. They are summarized below:
New Jersey Sales Tax Audit Issue: The State of New Jersey (the "State")
--------------------------------
Division of Taxation audited Mikohn's sales tax returns and issued a Notice of
Assessment Related to Final Audit Determination in the amount of $406 plus
interest of $201. At issue is how the Company accounts for and remits sales tax
on its table game leases. Previously, the Company remitted
6
<PAGE>
sales tax on a monthly basis based on the amounts invoiced to its casino
customers. It is the State's position and the Company now concurs, that the
Company as the lessor of the table game, is the end user and is thus ultimately
responsible for the sales tax at the inception of the lease. At issue is the
method of computation of the use tax due. It is the Company's contention that
use tax should be based upon the lessor's purchase price for the equipment,
materials and other tangible personal property purchased for lease rather than
on the lease revenue stream. The State has assessed the Company for the entire
amount of the sales tax liability based on the lease revenue stream and interest
from the original date of the leases. In July 1999, the Company objected to the
assessment, filed a protest and paid the use tax due based upon the purchase
price of the equipment, materials and other tangible personal property.
A further issue is the passing of the use tax on to the lessee. The
Company's Caribbean Stud(R) Lease Agreement provides, in part, that the "Lessee
shall promptly reimburse to Mikohn any personal property taxes, gaming device
taxes, and any similar taxes or levies that Mikohn is obligated to pay for
tables". The State has already refunded to many of the casinos most of the sales
tax that was remitted by the Company. Although the casinos are contractually
obligated for the payment of sales tax, as it is a pass-through tax, there is no
guarantee that the casinos will reimburse the Company for any assessment paid by
it.
International Withholding Tax Issues: The Company has exposure to potential
------------------------------------
additional withholding taxes on payments remitted to the U.S. by the previous
owner of Progressive Games, Inc. estimated at $1,379. The Company has provided
to the former owner a Power of Attorney with which to handle the withholding tax
issues. To the extent that the Company does not prevail, any payments made may
be charged back to the previous owner under the terms of the Stock Purchase
Agreement for the acquisition of Progressive Games, Inc. The Company had one
year from date of acquisition in which to effect a change in the amount of
goodwill. Based on the potential withholding tax exposure, the Company adjusted
goodwill in the amount of the $1,379 during August 1999.
NOTE 5 - SEGMENT REPORTING
The Company operates in five business segments: Product Sales, Systems,
Table Games, Slot Route and International. The Product Sales segment designs,
manufactures and installs interior signage and displays. It also designs,
manufactures, installs and maintains exterior signage. In addition, it also
manufactures and sells oversized gaming machines, touch-screen multi-game video
machines and progressive jackpot systems. The Systems segment develops, markets
and installs automated data collection systems for player tracking and
accounting for gaming machines and table games. The Table Games segment places
tables under lease or license agreements generating recurring revenues. It owns
or licenses the rights to various progressive jackpot table games including
Caribbean Stud(R). The Slot Route segment leases, licenses and places
proprietary gaming machines under lease, structured participation or license
agreements generating recurring revenues. It owns or licenses the rights to
several categories of proprietary games, including branded slot machines, coin-
push gaming machines, oversized gaming machines and touch-screen multi-game
video machines. The International segment includes the operations of the
Company's international operations including those in Europe and Peru. 50% of
the Company's Australian operation was divested late in 1999 and only 50% of its
net income after taxes is included in sales. The Company does not allocate
corporate expenses to its business segments.
7
<PAGE>
Business segment information for the quarters ended June, 2000 and 1999 consist
of:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Business segments:
----------------
Sales:
Product sales $ 11,630 $ 14,729 $ 24,620 $ 28,648
Systems 1,315 2,944 2,770 4,564
Table games 7,021 4,249 11,169 8,188
Slot route 3,436 1,597 5,881 2,945
International 2,549 5,491 3,834 9,840
---------- ---------- ----------- --------
$ 25,951 $ 29,010 $ 48,274 $ 54,185
========== ========== =========== ========
Gross profit:
Product sales $ 4,830 $ 5,197 $ 9,915 $ 11,322
Systems 683 1,721 1,598 2,320
Table games 6,424 4,090 10,493 7,944
Slot route 2,147 1,220 4,117 2,224
International 705 1,628 1,080 2,877
---------- ---------- ----------- --------
$ 14,789 $ 13,856 $ 27,203 $ 26,687
========== ========== =========== ========
Operating income:
Product sales $ 3,573 $ 3,954 $ 7,470 $ 8,881
Systems 554 1,615 1,273 2,070
Table games 5,774 3,542 9,287 6,856
Slot route 1,127 467 2,140 811
International 93 294 (101) 477
Corporate (6,508) (5,957) (12,986) (11,800)
---------- ---------- ----------- --------
$ 4,613 $ 3,915 $ 7,083 $ 7,295
========== ========== =========== ========
Net income before tax:
Product sales $ 3,264 $ 3,882 $ 5,873 $ 7,571
Systems 503 1,441 1,062 1,892
Table games 4,293 2,318 7,454 5,313
Slot route 304 (180) 1,110 (8)
International (27) 419 (362) 304
Corporate (6,155) (5,950) (12,774) (11,728)
---------- ---------- ----------- --------
$ 2,182 $ 1,930 $ 2,363 $ 3,344
========== ========== =========== ========
Geographic operations:
---------------------
Sales:
North America $ 23,402 $ 23,519 $ 44,440 $ 44,345
Australasia (23) 1,651 (170) 3,595
Europe / Africa 1,997 3,390 3,260 5,322
South America 575 450 744 923
---------- ---------- ----------- --------
$ 25,951 $ 29,010 $ 48,274 $ 54,185
========== ========== =========== ========
</TABLE>
8
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<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross profit:
North America $ 14,083 $ 12,229 $ 26,122 $ 23,810
Australasia (23) 401 (170) 974
Europe / Africa 429 1,001 924 1,434
South America 300 225 327 469
---------- ---------- ----------- --------
$ 14,789 $ 13,856 $ 27,203 $ 26,687
========== ========== =========== ========
Operating income:
North America $ 4,520 $ 3,660 $ 7,184 $ 6,857
Australasia (23) (201) (170) (126)
Europe / Africa 89 368 242 383
South America 27 88 (173) 181
---------- ---------- ----------- --------
$ 4,613 $ 3,915 $ 7,083 $ 7,295
========== ========== =========== ========
Net income before tax:
North America $ 1,937 $ 1,891 $ 2,480 $ 3,420
Australasia (23) (352) (170) (435)
Europe / Africa 182 307 210 222
South America 86 84 (157) 137
---------- ---------- ----------- --------
$ 2,182 $ 1,930 $ 2,363 $ 3,344
========== ========== =========== ========
</TABLE>
NOTE 6 - RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133 - Accounting for Derivative
Instruments and Hedging Activities. SFAS 133 standardizes the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts. Under the standard, entities are required to carry all
derivative instruments in the statement of financial position at fair value.
SFAS 133 is effective for all fiscal years beginning after June 15, 2000, which
for the Company will be the year beginning on January 1, 2001. Although the
Company does not believe SFAS 133 will have a material impact on its
consolidated financial statements, but because of the complexity of SFAS 133,
the ultimate impact of its adoption has not yet been determined.
NOTE 7 - COMMON STOCK
During the quarter ended June 30, 2000 and 1999, the Company issued common
stock as follows:
<TABLE>
<CAPTION>
June 30,
--------
2000 1999
---- ----
<S> <C> <C>
Common stock issuance:
Stock options exercised $ 740 $
Employee stock purchase plan 292 176
Stock warrants issued 827
========== ==========
$ 1,859 $ 176
========== ==========
</TABLE>
9
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MIKOHN GAMING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY NOTICE
This report contains forward-looking statements in which management shares
its knowledge and judgment about factors that it believes may materially affect
Company performance in the future. Terms expressing future expectations,
enthusiasm or caution about future potential and anticipated growth in sales,
revenues and earnings and like expressions typically identify such statements.
All forward-looking statements, although made in good faith, are subject to
the uncertainties inherent in predicting the future. They are necessarily
speculative, and unforeseen factors such as unusual production problems,
competitive pressures, failure to gain the acceptance of regulatory authorities
and other adverse government action, customer resistance and general
deterioration in economic conditions may cause results to be materially poorer
than any that may be projected. Forward-looking statements speak only as of the
date they are made, and readers are warned that the Company undertakes no
obligation to update or revise such statements to reflect new circumstances or
unanticipated events as they occur.
Readers are urged to carefully review and consider disclosures made by the
Company in this and other reports that discuss factors germane to the Company's
business. See particularly the Company's reports on Forms 10-K, 10-Q and 8-K
filed with the Securities and Exchange Commission.
CHANGES IN REPORTING
As the Company has realigned the reporting of its business units, certain
items of prior year revenue and expense have been reclassified to follow the
Company's current reporting practice. Additionally, all intercompany activity
has been eliminated. Amounts reported in prior years have been adjusted to be
consistent with the Company's current reporting of intercompany activity. All
amounts reported in this section are rounded to the nearest thousand unless
otherwise stated. All percentages reported are based on those rounded numbers.
10
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RESULTS OF OPERATIONS
Six Months Ended June 30, 2000 and June 30, 1999
SALES
<TABLE>
<CAPTION>
Change
------
Business Segment 2000 1999 Amount % Comment
---------------- ---- ---- ------ - -------
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales $ 24,620 $ 28,648 $ (4,028) -14.1% 1
Systems 2,770 4,564 (1,794) -39.3% 2
Table games 11,169 8,188 2,981 36.4% 3
Slot route 5,881 2,945 2,936 99.7% 4
International 3,834 9,840 (6,006) -61.0% 5
-------- -------- --------
$ 48,274 $ 54,185 $ (5,911) -10.9%
======== ======== ========
Percentage to total revenues:
Product sales 51.0% 52.9%
Systems 5.8% 8.4%
Table games 23.1% 15.1%
Slot route 12.2% 5.4%
International 7.9% 18.2%
-------- --------
100.0% 100.0%
======== ========
</TABLE>
1 This decrease of $4,028 is primarily due to: (i) a decrease in interior
visual display revenue of $842, (ii) a decrease in exterior sign revenue of
$1,217, (iii) a decrease in electronics revenue of $865, (iv) a decrease in
service revenue of $751 and (v) a decrease in slot machine and keno sales
revenue of $382. The majority of these decreases were directly related to
the lower number of casino openings or refurbishment projects within the
industry during the six months ended June 30, 2000 as compared to the same
period during 1999.
2 This decrease of $1,794 is primarily due to a decrease in CasinoLink(TM)
system revenue. This decrease in revenues is the result of lower sales
levels to Canadian customers during the most recent period. The decrease in
CasinoLink(TM) revenue of $1,984 was partially offset by the revenue from
TableLink(TM) during the first quarter of 2000, which generated $190.
3 This increase of $2,981 is due to: (i) an increase in table game route
revenue of $445 and (ii) a sale of internet and video rights to certain
table games for $2,536.
4 This increase of $2,936 is due to the cumulative effect of the placement of
our Yahtzee(R) slot machine games during the last three quarters. For the
six months ended June 30, 2000 net revenue from the Yahtzee(R) slot machine
route was $3,215. There were no revenues from Yahtzee(R) slot machine games
during the corresponding period in 1999. Offsetting the increase in
Yahtzee(R) slot route revenue, revenue from MiniBertha(TM) and Flip-It(TM)
games decreased by $134 while revenue from MoneyTime(TM) games decreased by
$145.
5 This decrease of $6,006 is due to: (i) a decrease in revenue from our
Australian joint venture of $3,765 which is now reported on the equity
method of accounting, (ii) a decrease in revenue from our subsidiary in
Europe of $2,062 and (iii) a decrease in revenue from our South American
operations of $179. The decrease in revenue from our Australian joint
venture is the result of two factors. Predominant among them is a change in
the accounting
11
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treatment of the unit, from that of a wholly owned subsidiary, in which the
unit's entire revenue was consolidated with the parent's, to that of a
joint venture, which limits revenue recognition to our share of the joint
venture's net income for the period. For the six months ended June 30,
2000, we recorded, as revenue, a net loss of $(170) from the joint venture
as compared to revenue of $3,595 for the six months ended June 30, 1999.
The joint venture's net loss is primarily related to continued regulatory
delays in the approval of its new electronic products and a delay in
implementation of a wide area progressive system in New South Wales. The
decrease in revenue from our European unit was primarily due to lower sales
of interior visual displays, electronic and systems products during the
most recent period. The decrease in revenue from our South American unit is
primarily the result of fewer new casino sign projects in the region.
As of June 30, 2000, the Company had a backlog of orders believed to be
firm of $26,154. As of June 30, 1999 and December 31, 1999, the Company's
backlogs were $19,332 and $16,847 respectively. Management expects that the
backlog of orders at June 30, 2000, will be filled within 120 days.
GROSS PROFIT
<TABLE>
<CAPTION>
Change
------
Business Segment 2000 1999 Amount % Comment
---------------- ---- ---- ------ - -------
<S> <C> <C> <C> <C> <C>
Gross profit:
Product sales $ 9,915 $ 11,322 $ (1,407) -12.4% 1
Systems 1,598 2,320 (722) -31.1% 2
Table games 10,493 7,944 2,549 32.1% 3
Slot route 4,117 2,224 1,893 85.1% 4
International 1,080 2,877 (1,797) -62.5% 5
-------- -------- --------
$ 27,203 $ 26,687 $ 516 1.9%
======== ======== ========
Gross profit margin:
Product sales 40.3% 39.5%
Systems 57.7% 50.8%
Table games 93.9% 97.0%
Slot route 70.0% 75.5%
International 28.2% 29.2%
Total gross profit margin 56.4% 49.3%
</TABLE>
1 This decrease of $1,407 is primarily due to: (i) a decrease in interior
visual display gross profit of $710, (ii) a decrease in exterior sign gross
profit of $544, (iii) a decrease in service gross profit of $179 and (iv)
an offsetting increase in slot glass gross profit of $180. Gross profit
from interior visual displays and exterior signs decreased due to both
lower sales volume and lower overall gross margins. Interior visual display
gross margins decreased from 45% for the six months ended June 30, 1999 to
42% for the six months ended June 30, 2000. Exterior sign gross margins
decreased from 29% for the six months ended June 30, 1999 to 26% for the
six months ended June 30, 2000. The decrease in service gross profit,
although primarily related to the lower revenue levels, was partially
offset by increased gross margins. Service gross margins increased from 33%
for the six months ended June 30, 1999 to 38% for the six months ended June
30, 2000. The increase in slot glass gross profit was directly attributable
to increased gross margin levels during the most recent period. Slot glass
gross margins
12
<PAGE>
increased from 28% for the six months ended June 30, 1999 to 47% for the
six months ended June 30, 2000.
2 This decrease of $722 is primarily due to a decrease in CasinoLink(TM)
system gross profit. This decrease is directly related to the lower revenue
volume during the most recent period. This decrease was partially offset by
increased gross margins during the most recent period. Gross margins
increased from 51% for the six months ended June 30, 1999 to 57% for the
six months ended June 30, 2000.
3 This increase is primarily due to the increases in gross profit generated
by a sale of internet and video rights for certain table games.
4 This increase of $1,893 is primarily due to gross profit from the
Yahtzee(R) slot machine route. For the six months ended June 30, 2000 gross
profit from the Yahtzee(R) slot machine route was $2,045. Partially
offsetting this increase were collective decreases in the MiniBertha(TM),
Flip-It(TM) and MoneyTime(TM) slot route gross profit of $212. Overall slot
route gross margins decreased from 76% for the six months ended June 30,
1999 to 70% for the six months ended June 30, 2000. This decrease in the
gross margin rate is due to the licensing costs associated with Yahtzee(R)
slot machine product line as well as additional service costs related to
the Yahtzee(R) slot machine games.
5 This decrease of $1,797 is due to: (i) a decrease in gross profit from our
Australian joint venture of $1,144 which is now reported on the equity
method of accounting, (ii) a decrease in gross profit from our subsidiary
in Europe of $511 and (iii) a decrease in gross profit from our South
American operations of $142. The decrease in gross profit from our
Australian joint venture is the result of two factors. Predominant among
them is a change in the accounting treatment of the unit, from that of a
wholly owned subsidiary, in which the unit's entire revenue was
consolidated with the parent's, to that of a joint venture, which limits
revenue recognition to our share of the joint venture's net income for the
period. For the six months ended June 30, 2000, we recorded, as gross
profit, a net loss of $(170) from the joint venture as compared to gross
profit of $974 for the six months ended June 30, 1999. The joint venture's
net loss is primarily related to continued regulatory delays in the
approval of its new electronic products and a delay in implementation of a
wide area progressive system in New South Wales. The decrease in gross
profit from the European operation is primarily due to the lower revenue
volume level during the most recent period. The decrease in the South
American operation is due to lower revenue levels and a reduction in the
overall gross profit margin from 51% for the six months ended June 30, 1999
to 44% for the six months ended June 30, 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the six months ended June
30, 2000 increased by 4% or $728, from $19,392 for the six months ended June 30,
1999 to $20,120 for the six months ended June 30, 2000. The significant factors
effecting this increase are as follows:
Selling and marketing expenses for the six months ended June 30, 2000
increased by $34 or less than 1%, from $6,813 for the six months ended June 30,
1999 to $6,847 for the six months ended June 30, 2000.
General and administrative expenses for the six months ended June 30, 2000
decreased by 11% or $595, from $5,605 for the six months ended June 30, 1999 to
$5,010 for the six months ended June 30, 2000.
13
<PAGE>
Research and development expenses for the six months ended June 30, 2000
increased by 19% or $537, from $2,868 for the six months ended June 30, 1999 to
$3,405 for the six months ended June 30, 2000. This increase is due to increased
expenses for the development of new slot machine and table game products.
Depreciation expense for the six months ended June 30, 2000 increased by
13% or $315, from $2,405 for the six months ended June 30, 1999 to $2,720 for
the six months ended June 30, 2000. This increase is primarily due to increased
depreciation related to the increased number of Yahtzee(R) slot machines under
lease or participation agreements.
Amortization expense for the six months ended June 30, 2000 increased by
26% or $437, from $1,701 for the six months ended June 30, 1999 to $2,138 for
the six months ended June 30, 2000. This increase is primarily due to increased
amortization related to the Shuffle Master, Inc. agreement, capitalization of
patent costs and capitalization of software development costs.
INTEREST EXPENSE
Interest expense for the six months ended June 30, 2000 increased by 18% or
$763, from $4,195 for the six months ended June 30, 1999 to $4,958 for the six
months ended June 30, 2000. Included in this interest expense is the
amortization of loan costs of $447 and $443 for the six months ended June 30,
2000 and June 30, 1999, respectively. This increase is primarily due to
increased interest rates on our floating rate debt. The average interest rate on
outstanding debt for the six months ended June 30, 2000 was 10.2% as compared to
8.6% for the six months ended June 30, 1999.
OTHER INCOME AND EXPENSE
Other income and expense for the six months ended June 30, 2000 decreased
by $91, from other income of $64 for the six months ended June 30, 1999 to other
expense of $27 for the six months ended June 30, 2000.
Interest income for the six months ended June 30, 2000 increased by 47% or
$85, from $180 for the six months ended June 30, 1999 to $265 for the six months
ended June 30, 2000.
INCOME TAX PROVISION
Income taxes for the six months ended June 30, 2000 were $921 for an
effective tax rate of 39% as compared to $1,250 and effective rate of 37% for
the six months ended June 30, 1999. The increase in the tax rates between the
comparable periods is primarily due to the impact of the permanent treatment of
certain non-deductible expenses during the six months ended June 30, 2000.
14
<PAGE>
EARNINGS PER SHARE
Both basic and diluted earnings per share for the six months ended June 30,
2000 were $0.13 with basic and diluted weighted average common shares
outstanding of 10,897 and 11,026, respectively. For the six months ended June
30, 1999 basic and diluted earnings per share were $0.20 on both basic and
diluted weighted average common shares outstanding of 10,691 and 10,692,
respectively.
Three Months Ended June 30, 2000 and June 30, 1999
SALES
<TABLE>
<CAPTION>
Change
------
Business Segment 2000 1999 Amount % Comment
---------------- ---- ---- ------ - -------
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales $ 11,630 $ 14,729 $ (3,099) -21.0% 1
Systems 1,315 2,944 (1,629) -55.3% 2
Table games 7,021 4,249 2,772 65.2% 3
Slot route 3,436 1,597 1,839 115.2% 4
International 2,549 5,491 (2,942) -53.6% 5
-------- -------- --------
$ 25,951 $ 29,010 $ (3,059) -10.5%
======== ======== ========
Percentage to total revenues:
Product sales 44.8% 50.8%
Systems 5.1% 10.2%
Table games 27.1% 14.6%
Slot route 13.2% 5.5%
International 9.8% 18.9%
-------- --------
100.0% 100.0%
======== ========
</TABLE>
1 This decrease of $3,099 is primarily due to: (i) a decrease in interior
visual display revenue of $445, (ii) a decrease in service revenue of $681,
(iii) a decrease in exterior signs revenue of $1,135, (iv) a decrease in
electronics revenue of $680 and (v) a decrease in slot glass revenue of
$226. The majority of these decreases were directly related to the lower
number of casino openings or refurbishment projects within the industry
during the three months ended June 30, 2000 as compared to the same period
during 1999.
2 This decrease of $1,629 is primarily due to a decrease in CasinoLink(TM)
systems revenue of $1,819. This decrease in revenues is the result of lower
sales levels to Canadian customers during the most recent period. This
decrease was partially offset by an increase in TableLink(TM) systems
revenue of $150.
3 This increase of $2,772 is due to an increase in table game route revenue
of $404 and a sale of internet and video rights for certain table games.
4 This increase of $1,839 is due to the cumulative effect of our Yahtzee(R)
slot machine placements during the last three quarters. For the three
months ended June 30, 2000 net revenue from the Yahtzee(R) slot machine
route was $2,294. Offsetting the increase in
15
<PAGE>
Yahtzee(R) slot route revenue, revenue from MiniBertha(TM) and Flip-It(TM)
games decreased by $126 while revenue from MoneyTime(TM) games decreased by
$329.
5 This decrease of $2,942 is due to: (i) a decrease in revenue from our
Australian joint venture of $1,674 which is now reported on the equity
method of accounting, (ii) a decrease in revenue from our subsidiary in
Europe of $1,393 and (iii) an offsetting increase in revenue from our South
American operations of $125. The decrease in revenue from our Australian
joint venture is the result of two factors. Predominant among them is a
change in the accounting treatment of the unit, from that of a wholly owned
subsidiary, in which the unit's entire revenue was consolidated with the
parent's, to that of a joint venture, which limits revenue recognition to
our share of the joint venture's net income for the period. For the three
months ended June 30, 2000, we recorded, as revenue, a net loss of $(23)
from the joint venture as compared to revenue of $1,651 for the three
months ended June 30, 1999. The joint venture's net loss is primarily
related to continued regulatory delays in the approval of its new
electronic products and a delay in implementation of a wide area
progressive system in New South Wales. The decrease in revenue from our
European unit was primarily due to lower sales of interior visual displays,
electronic and systems products during the most recent period. The increase
in revenue from our South American unit is primarily the result of
increased interior visual display revenue during the most recent three
month period.
GROSS PROFIT
<TABLE>
<CAPTION>
Change
------
Business Segment 2000 1999 Amount % Comment
---------------- ---- ---- ------ - -------
<S> <C> <C> <C> <C> <C>
Gross profit:
Product sales $ 4,830 $ 5,197 $ (367) -7.1% 1
Systems 683 1,721 (1,038) -60.3% 2
Table games 6,424 4,090 2,334 57.1% 3
Slot route 2,147 1,220 927 76.0% 4
International 705 1,628 (923) -56.7% 5
-------- -------- --------
$ 14,789 $ 13,856 $ 933 6.7%
======== ======== ========
Gross profit margin:
Product sales 41.5% 35.3%
Systems 51.9% 58.5%
Table games 91.5% 96.3%
Slot route 62.5% 76.4%
International 27.7% 29.6%
Total gross profit margin 57.0% 47.8%
</TABLE>
1 This decrease of $367 is primarily due to: (i) a decrease in exterior sign
gross profit of $429, (ii) a decrease in service gross profit of $151 and
(iii) an offsetting increase in gross profit from the sale of slot machines
of $128. The decrease in exterior sign gross profit is related to both the
lower revenue volume as well as lower gross profit margins during the most
recent period. Gross profit margins in exterior signs decreased from 28%
for the three months ended June 30, 1999 to 24% for the three months ended
June 30, 2000. The decrease in service gross profit is primarily due to the
lower revenue volume during the most recent period. The increase in slot
machine sales gross profit is related to both the increased revenue volume
as well as increased gross profit margins during the most recent period.
Slot
16
<PAGE>
machine gross profit margins increased from 15% for the three months ended
June 30, 1999 to 30% for the three months ended June 30, 2000.
2 This decrease of $1,038 is primarily due to a decrease in CasinoLink(TM)
system gross profit of $1,157. Offsetting this decrease was a collective
increase in TableLink(TM) and other system gross profit of $120. The
decrease in CasinoLink(TM) system gross profit is primarily due to the
lower revenue volume during the most recent period.
3 This increase is primarily due to the gross profit generated by a sale of
internet and video rights for certain table games.
4 This increase of $927 is primarily due to gross profit from the Yahtzee(R)
slot machine route. For the three months ended June 30, 2000 gross profit
from the Yahtzee(R) slot machine route was $1,342. Partially offsetting
this increase were collective decreases in MiniBertha(TM), Flip-It(TM) and
MoneyTime(TM) slot route gross profit of $415. Overall slot route gross
margins decreased from 76% for the three months ended June 30, 1999 to 63%
for the six months ended June 30, 2000. This decrease in the gross margin
rate is due to the licensing costs associated with the Yahtzee(R) slot
machine product line as well as additional service costs related to the
Yahtzee(R) slot machine games.
5 This decrease of $923 is due to: (i) a decrease in gross profit from our
Australian joint venture of $424 which is now reported on the equity method
of accounting, (ii) a decrease in gross profit from our subsidiary in
Europe of $573 and (iii) an increase in gross profit from our South
American operations of $74. The decrease in gross profit from our
Australian joint venture is the result of two factors. Predominant among
them is a change in the accounting treatment of the unit, from that of a
wholly owned subsidiary, in which the unit's entire revenue was
consolidated with that of the parent's, to that of a joint venture, which
limits revenue recognition to our share of the joint venture's net income
for the period. For the three months ended June 30, 2000, we recorded, as
gross profit, a net loss of $(23) from the joint venture as compared to
gross profit of $401 for the three months ended June 30, 1999. The joint
venture's net loss is primarily related to continued regulatory delays in
the approval of its new electronic products and a delay in implementation
of a wide area progressive system in New South Wales. The decrease in gross
profit from the European operation is due to the lower revenue volume and
lower gross margin levels during the most recent period. Gross profit
margins in Europe decreased from 30% for the three months ended June 30,
1999 to 22% for the three months ended June 30, 2000. The increase in the
South American operation is due to increased revenue levels and a slight
improvement in the overall gross profit margin from 50% for the three
months ended June 30, 1999 to 52% for the three months ended June 30, 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months ended
June 30, 2000 increased by 2% or $235, from $9,941 for the three months ended
June 30, 1999 to $10,176 for the three months ended June 30, 2000. The
significant factors effecting this increase are as follows:
Selling and marketing expenses for the three months ended June 30, 2000
decreased by 1% or $18, from $3,433 for the three months ended June 30, 1999 to
$3,415 for the three months ended June 30, 2000.
17
<PAGE>
General and administrative expenses for the three months ended June 30,
2000 decreased by 12% or $348, from $2,904 for the three months ended June 30,
1999 to $2,556 for the three months ended June 30, 2000.
Research and development expenses for the three months ended June 30, 2000
increased by 17% or $257, from $1,507 for the three months ended June 30, 1999
to $1,764 for the three months ended June 30, 2000.
Depreciation expense for the three months ended June 30, 2000 increased by
8% or $98, from $1,256 for the three months ended June 30, 1999 to $1,354 for
the three months ended June 30, 2000.
Amortization expense for the three months ended June 30, 2000 increased by
29% or $246, from $841 for the three months ended June 30, 1999 to $1,087 for
the three months ended June 30, 2000. This increase is primarily due to
increased amortization related to the Shuffle Master, Inc. agreement,
capitalization of patent costs and capitalization of software development costs.
INTEREST EXPENSE
Interest expense for the three months ended June 30, 2000 increased by 24%
or $514, from $2,105 for the three months ended June 30, 1999 to $2,619 for the
three months ended June 30, 2000. Included in this interest expense is the
amortization of loan costs of $229 and $223 for the three months ended June 30,
2000 and June 30, 1999, respectively. This increase is primarily due to
increased interest rates on our floating rate debt. The average interest rate on
outstanding debt for the three months ended June 30, 2000 was 10.8% as compared
to 8.7% for the three months ended June 30, 1999.
OTHER INCOME AND EXPENSE
Other income for the three months ended June 30, 2000 decreased by 81% or
$35, from $43 for the three months ended June 30, 1999 to $8 for the three
months ended June 30, 2000.
Interest income for the three months ended June 30, 2000 increased by 134%
or $103, from $77 for the three months ended June 30, 1999 to $180 for the three
months ended June 30, 2000.
INCOME TAX PROVISION
Income taxes for the three months ended June 30, 2000 equaled a provision
of $811 for an effective tax rate of 37% as compared to a provision of $747 and
an effective rate of 39% for the three months ended June 30, 1999.
EARNINGS PER SHARE
Basic and diluted earnings per share for the three months ended June 30,
2000 were $0.13 and $0.12 respectively on both basic and diluted weighted
average common shares outstanding of 10,958 and 11,088, respectively. For the
three months ended June 30, 1999 basic and diluted earnings per share were $0.11
on both basic and diluted weighted average common shares outstanding of 10,707
and 10,708, respectively.
18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 2000, the Company had net income of
$1,442 as compared to a net income of $2,094 for the six months ended June 30,
1999.
Net cash provided by operating activities for the six months ended June 30,
2000 amounted to $1,765. The major items other than earnings were: (i) an
increase in inventories of $5,934, (ii) an increase in installment sales
receivable of $2,363, (iii) a decrease in accounts payable of $3,963, (iv) an
offsetting decrease in accounts receivable of $6,239, (vi) an increase in
customer deposits of $2,024 and (vii) accrued and other current liabilities of
$23. The increase in inventory levels during the most recent period is
attributable to the Company's effort to produce games that will be capitalized
as gaming equipment leased to customers when placed at customer sites under
lease or license agreements.
Net cash used in investing activities consisted primarily of investments in
property and equipment as well as investments in gaming equipment leased to
customers. Net cash provided by financing activities of $4,625 primarily
consisted of principal repayments of Term Loan A and Term Loan B, draws under
our revolving credit facility, financing under capital leases and exercised
employee stock options.
Our cash balance as of June 30, 2000 was $1,810, up from $48 at December
31, 1999. We expect that cash provided from operating activities as well as our
ability to increase the revolving line of credit or term debt by $5,000 and
increase our indebtedness for a variety of other specific purposes will be
sufficient to meet our requirements during the remainder of 2000.
On September 2, 1998, we completed the closing of an Amended and Restated
Credit Agreement. This agreement was funded by First Source Financial LLP and a
consortium of lenders and consisted of a $13,500 fixed rate term loan bearing
interest at 10.25% per annum; a $67,500 variable rate term loan bearing interest
at either prime plus 225 basis points or LIBOR plus 325 basis points; and a
$5,000 variable rate revolving line of credit which bears interest at either
prime plus 175 basis points or LIBOR plus 275 basis points. As part of this
Amended and Restated Credit Agreement the Company has agreed to: (i) maintain
certain financial ratios, (ii) to comply with certain financial covenants, (iii)
not to allow the incurrence of additional debt or the payment of cash dividends,
unless expressly permitted by the Amended and Restated Credit Agreement and (iv)
adhere to a number of other financial restrictions. First Source Financial LLP
is acting as the lenders' agent for this transaction. The term loans are due to
begin maturing in April 2002 with equal 16.7% principal repayments due every six
months until complete maturity on October 24, 2004. As of the date of this
filing we have borrowed $4,823 of the funds available under the revolving line
of credit and have $177 available under this line. Additionally, we have the
ability to increase the revolving line of credit or term loan debt by another
$5,000.
At December 31, 1999 we were in non-compliance with certain covenants for
which we have received waivers. Due to the nature of these covenants we found it
necessary to amend the existing credit agreement and certain covenants in order
to avoid the occurrence of non-compliance during 2000. On April 7, 2000 we
completed the Second Amendment to the Amended and Restated Credit Agreement.
This amendment, in addition to revising certain covenants during 2000, also
provides us with the opportunity to seek additional financing, divest certain
assets and repay portions of the term loans without incurring pre-payment
penalties. In exchange for this amendment we agreed to a pricing increase on all
outstanding debt tranches, which includes Term Loan A, Term Loan B and the
Revolver Loan. Term Loan A will bear an variable interest rate equal to the
Prime Lending Rate plus 275 basis points or the LIBOR rate plus 375 basis
points. Term Loan B will bear a fixed interest rate of 10.75%. The Revolver Loan
19
<PAGE>
will bear a variable interest rate equal to the Prime Lending Rate plus 225
basis points or the LIBOR rate plus 325 basis points.
20
<PAGE>
MIKOHN GAMING CORPORATION
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
Certain matters were submitted to the stockholders for their approval or
other action at the annual meeting of stockholders, all as set forth in the
Company's Proxy Statement dated April 19, 2000, heretofore filed with the
Securities and Exchange Commission and incorporated by this reference.
The annual meeting of stockholders was held on May 9, 2000. On the record
date, March 13, 2000, there were 10,891,515 shares of common stock, each share
entitled to one vote on all matters properly presented for stockholder action.
At the meeting, 5,695,222 shares were represented by proxies and 721,723 shares
were present in person.
Action was taken on the following matters at the meeting:
(a) Election of two Class 2 directors (the directors are divided into three
classes and are elected for three-year terms). Only the incumbent Class 2
directors were nominated. The results of the election were as follows:
<TABLE>
<CAPTION>
Votes
Director Votes For Withheld
-------- --------- --------
<S> <C> <C>
James E Meyer 5,139,665 1,277,280
Douglas M. Todoroff 5,139,665 1,277,280
</TABLE>
(b) A proposal to amend the Articles of Incorporation to change the name of the
Company from Mikohn Gaming Corporation to "Mikohn Corporation."
<TABLE>
<CAPTION>
Votes For Votes Against Votes Abstain
--------- ------------- -------------
<S> <C> <C>
5,736,366 680,577 -
</TABLE>
The name change also must be approved by the Nevada Gaming Commission.
An application for approval is pending. Approval is expected in September
or October of the current year.
(c) A proposal to amend the Articles of Incorporation to increase the
authorized shares of common stock from 20 million to 100 million shares.
<TABLE>
<CAPTION>
Votes For Votes Against Votes Abstain
--------- ------------- -------------
<S> <C> <C>
4,986,240 1,429,505 1,200
</TABLE>
This amendment has been filed with the Nevada Secretary of State and
has become effective.
(d) A proposal to amend the Company's Employee Stock Option Plan by increasing
the number of shares allocated to the plan by 500,000 shares, from
2,400,000 to 2,900,000.
21
<PAGE>
<TABLE>
<CAPTION>
Votes For Votes Against Votes Abstain
--------- ------------- -------------
<S> <C> <C>
5,022,376 1,394,569 -
</TABLE>
(e) A proposal to amend the Company's Director Stock Option Plan by increasing
the number of shares allocated to the plan by 150,000 shares, from 150,000
to 300,000 shares.
<TABLE>
<CAPTION>
Votes For Votes Against Votes Abstain
--------- ------------- -------------
<S> <C> <C>
5,517,681 899,246 -
</TABLE>
Item 6 - Exhibits and Reports on Form 8-K
A. Exhibits:
27 Financial Data Schedules
B. Reports on Form 8-K:
The Company filed a current report on Form 8-K dated June 13, 2000
under Item 4, Changes in Registrant's Certifying Accountant, reporting
the dismissal of Deloitte & Touche LLP on June 13, 2000 and replacing
them with Arthur Andersen LLP on that same date.
22
<PAGE>
SIGNATURE
---------
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 authorized.
MIKOHN GAMING CORPORATION, Registrant
BY: /S/ Donald W. Stevens
-----------------------------------------
Donald W. Stevens, Executive Vice
President, Treasurer, Principal
Financial Officer
Dated: August 11, 2000
23
