U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A-1
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 0-22498
Acres Gaming Incorporated
(Exact name of small business issuer as specified in its charter)
Nevada 88-0206560
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
815 NW Ninth Street
Corvallis, Oregon 97330
(Address of principal executive offices)
541-753-7648
(Issuer's telephone number)
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 _______
The number of shares of Common Stock, $.01 par value, outstanding on
April 15, 1996 was 7,556,525.
ACRES GAMING INCORPORATED
Table of Contents
Page
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets at March 31, 1996 and
June 30, 1995 3
Statements of Operations for the Three
and Nine Months Ended March 31, 1996 and 1995 4
Statements of Cash Flows for the Nine Months
Ended March 31, 1996 and 1995 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II -- OTHER INFORMATION 9
SIGNATURES 11
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
ACRES GAMING INCORPORATED
BALANCE SHEETS
ASSETS
March 31, 1996
(unaudited) June 30, 1995
CURRENT ASSETS:
Cash and cash equivalents $ 487,000 $ 1,325,000
Receivables 854,000 967,000
Inventories 2,267,000 2,395,000
Prepaid expenses 60,000 73,000
------------ ------------
Total current assets 3,668,000 4,760,000
------------ ------------
PROPERTY AND EQUIPMENT:
Furniture and fixtures 515,000 508,000
Equipment 1,230,000 1,014,000
Leasehold improvements 506,000 498,000
Accumulated depreciation (1,184,000) (789,000)
------------ ------------
Total property and equipment 1,067,000 1,231,000
OTHER ASSETS 399,000 273,000
------------ ------------
$ 5,134,000 $ 6,264,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 350,000 $ 427,000
Accrued expenses 399,000 482,000
Customer deposits 1,089,000 393,000
------------ ------------
Total current liabilities 1,838,000 1,302,000
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value, 50,000,000
shares authorized, 7,556,525 and 7,494,500
shares issued and outstanding at
March 31, 1996 and June 30, 1995 76,000 75,000
Additional paid-in capital 10,972,000 10,615,000
Accumulated deficit (7,752,000) (5,672,000)
Less - Deferred charge - warrants -- (56,000)
------------ ------------
Total stockholders' equity 3,296,000 4,962,000
------------ ------------
$ 5,134,000 $ 6,264,000
============ ============
The accompanying notes are an integral part of these balance sheets.
ACRES GAMING INCORPORATED
STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended March 31, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31 March 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET REVENUES $ 1,451,000 $ 355,000 $ 3,311,000 $ 3,193,000
COST OF REVENUES 764,000 338,000 1,781,000 2,029,000
----------- ----------- ----------- -----------
GROSS PROFIT 687,000 17,000 1,530,000 1,164,000
OPERATING EXPENSES:
Research and development 535,000 478,000 1,613,000 1,457,000
Selling, general and
administrative 643,000 585,000 1,998,000 1,520,000
----------- ----------- ----------- -----------
Total operating expenses 1,178,000 1,063,000 3,611,000 2,977,000
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (491,000) (1,046,000) (2,081,000) (1,813,000)
OTHER INCOME (EXPENSE) (11,000) (6,000) 1,000 6,000
----------- ----------- ----------- -----------
NET LOSS (502,000) (1,052,000) (2,080,000) (1,807,000)
=========== =========== =========== ===========
NET LOSS PER SHARE $ (0.07) $ (0.15) $ (0.27) $ (0.25)
=========== =========== =========== ===========
SHARES USED IN PER
SHARE COMPUTATION 7,557,000 7,146,000 7,644,000 7,139,000
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
ACRES GAMING INCORPORATED
STATEMENTS OF CASH FLOWS
For the Nine Months Ended March 31, 1996 and 1995
(unaudited)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (2,080,000) (1,807,000)
Adjustments to reconcile net loss to net
cash from operations
Depreciation and amortization 474,000 328,000
Amortization of warrants 56,000 --
Changes in assets and liabilities
Receivables 113,000 (629,000)
Inventories 128,000 (462,000)
Prepaid expenses and other assets 13,000 (104,000)
Accounts payable and accrued expenses (160,000) (423,000)
Customer deposits 696,000 239,000
----------- -----------
Net cash used for operating activities (760,000) (2,858,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (231,000) (175,000)
Capitalized software costs (70,000) --
Other, net (135,000) --
----------- -----------
Net cash used for investing activities (436,000) (175,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 358,000 --
Borrowings under line of credit -- 592,000
----------- -----------
Net cash from financing activities 358,000 592,000
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (838,000) (2,441,000)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 1,325,000 2,545,000
----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 487,000 $ 104,000
=========== ===========
The accompanying notes are an integral part of these statements.
ACRES GAMING INCORPORATED
Notes to Unaudited Financial Statements
1. Unaudited Financial Statements
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted from these unaudited financial statements.
These statements should be read in conjunction with the Company's Annual
Report on Form 10-KSB for the year ended June 30, 1995 filed with the
Securities and Exchange Commission.
In the opinion of management, the interim financial statements include
all adjustments, consisting only of normal recurring adjustments,
necessary in order to make the financial statements not misleading. The
results of operations for the three and nine month periods ended March
31, 1996 are not necessarily indicative of the operating results for the
full year or future periods.
2. Line of Credit
At June 30, 1995, the Company had a $1,000,000 line of credit with a bank
which accrued interest at the bank's prime rate plus 1.0 percent. The
line expired in October, 1995 and was renewed for $750,000 with interest
at the bank's prime rate plus 2.0 percent. The renewed bank line expired
at March 31, 1996. Borrowings under the line were secured by
substantially all assets of the Company. There were no borrowings under
the line at March 31, 1996.
3. Income Taxes
At March 31, 1996, the Company had cumulative net operating losses of
approximately $7,700,000 which are available to offset future taxable
income through 2010. The Company has provided a valuation allowance for
the entire amount of the benefit related to these net operating loss
carryforwards as realizability is uncertain at this time.
4. Per Share Computation
Net loss per share was computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the periods.
5. Stockholders' Equity
In June 1995, the Company issued 400,000 shares of common stock to a
group of private investors for net proceeds of $2,255,000. In connection
with this offering, the Company granted warrants to purchase 40,000
shares of the Company's common stock at $7.20 per share which
approximated market value at that date.
In exchange for services, in February 1995, the Company granted warrants
to another company to purchase up to 120,000 shares of the Company's
common stock at $5.50 per share. The warrants expire in February 2000.
The value of the warrants of $96,000 was recorded as paid in capital and
the related expense was deferred and amortized over the term of the
related service agreement. For the three and nine month periods ended
March 31, 1996, expense associated with these warrants was $8,000 and
$56,000, respectively.
ACRES GAMING INCORPORATED
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company's Concept III products are designed to enhance casino
profitability by making gaming machines more fun to play while providing the
control, accounting and security functions necessary to ensure more efficient,
profitable casino operation. In November, 1993, the Company issued 1,667,500
units (consisting of 1,667,500 shares of common stock and 833,750 warrants) in
an initial public offering resulting in net proceeds of $7,153,000. In June
1995, the Company issued 400,000 shares of common stock to a group of private
investors for net proceeds of $2,255,000. Such proceeds are being used to hire
additional engineering personnel and for other research and development costs to
enhance the Company's product line, for capital expenditures for computer and
other equipment, and to lease office space. At its current stage of operations,
the Company's financial position and operating results may be materially
affected by a number of factors, including the timing of receipt, installation
and regulatory approval of any one order, availability of additional capital,
competition and technological change.
Results of Operations
The Company's net revenues for the three months ended March 31, 1996 were
$1,451,000, an increase of 309% over net revenues of $355,000 during the three
months ended March 31, 1995. The increase in revenue was primarily the result of
sales of custom products based on the Company's Concept III technology to other
manufacturers for inclusion in gaming machines developed by them. For the nine
months ended March 31, 1996, net revenues were $3,311,000, a increase of 4% from
the $3,193,000 during the same period in the prior year.
Gross profit as a percentage of net revenue was 47% in the three-month
period ended March 31, 1996, compared to 5% for the same period in the prior
year. For the nine-month periods ended March 31, 1996 and 1995, gross profit as
a percentage of net revenue was 46% and 36%, respectively. The increase in gross
margin is a result of changes in the mix of products sold and reductions in
certain costs of production and service.
In order to support growth in revenue and continue to develop its
products, since completion of its initial public offering in November, 1993, the
Company has hired additional personnel, made capital expenditures for computer
and other equipment, leased additional space to serve as its headquarters and
opened and expanded a sales and service office in Las Vegas, Nevada. As a
result, operating expenses increased from $1,063,000 in the three-month period
ended March 31, 1995 to $1,178,000 in the same period in 1996. For the
nine-month periods ended March 31, operating expenses increased from $2,977,000
in 1995 to $3,611,000 in 1996.
Financial Condition
As of March 31, 1996, the Company had working capital of $1,830,000,
compared to $3,458,000 as of June 30, 1995. During the nine months ended March
31, 1996, net cash used by operating activities was $760,000, of which the major
components were the net loss, offset by depreciation and amortization of
$474,000 and by an increase of $696,000 in customer deposits. Net cash used by
investing activities was $436,000, while net cash provided by financing
activities was $358,000, resulting from exercise of employee stock options.
The Company's net cash position (balance of cash and cash equivalents
less borrowings under the line of credit) improved significantly during the
three months ended March 31, 1996. At the end of the previous quarter, as of
December 31, 1995, the net cash position was $(332,000). At March 31, 1996, the
net cash position was $487,000, an increase of $819,000. This improvement
resulted from receipt of customer deposits, increased revenue, and a decrease in
receivables.
The Company's sources of liquidity include its $487,000 balance of cash
and cash equivalents, and payment terms which generally include deposits with
the receipt of customer orders. Although its operations generated negative cash
flow prior to the three month period ending March 31, 1996, the sources of
liquidity referred to above, along with the flexibility that the Company has in
adjusting operating levels, are expected to be sufficient to fund the Company's
operations for at least the next 12 months.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on January 4, 1996.
The following matters were submitted to a vote of the shareholders at the
Annual Meeting:
Election of Director. The following person was elected to serve as a
director for a term of one year:
John F. Acres
Approval of Amendment to 1993 Stock Option and Incentive Plan. (3,881,232
votes FOR, 274,036 votes AGAINST, and 101,500 votes ABSTAINED)
Ratification of Appointment of Arthur Andersen LLP as Independent
Auditors. (4,298,813 votes FOR, 2,900 votes AGAINST, and 2,130 votes
ABSTAINED)
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter covered by
this Form 10-QSB.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACRES GAMING INCORPORATED
(Registrant)
July 12, 1996 Robert W. Brown
Date (Signature)
Chief Financial Officer and Treasurer
(Principal Accounting and Financial Officer)
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<NAME> ACRES GAMING INCORPORATED
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 487,000
<SECURITIES> 0
<RECEIVABLES> 854,000
<ALLOWANCES> 0
<INVENTORY> 2,267,000
<CURRENT-ASSETS> 3,668,000
<PP&E> 2,251,000
<DEPRECIATION> 1,184,000
<TOTAL-ASSETS> 5,134,000
<CURRENT-LIABILITIES> 1,838,000
<BONDS> 0
0
0
<COMMON> 76,000
<OTHER-SE> 3,220,000
<TOTAL-LIABILITY-AND-EQUITY> 5,134,000
<SALES> 3,311,000
<TOTAL-REVENUES> 3,311,000
<CGS> 1,781,000
<TOTAL-COSTS> 1,781,000
<OTHER-EXPENSES> 3,611,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,000
<INCOME-PRETAX> (2,080,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,080,000)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> 0
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