<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 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 0-22498
ACRES GAMING INCORPORATED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NEVADA 88-0206560
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
</TABLE>
7115 AMIGO STREET, SUITE 150
LAS VEGAS, NV 89119
(Address of principal executive offices)
702-263-7588
(Registrant's telephone number)
Check whether the registrant (1) 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 [ ]
The number of shares of Common Stock, $.01 par value, outstanding on
October 31, 2000 was 8,943,531.
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ACRES GAMING INCORPORATED
Table of Contents
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Page
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PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets at September 30, 2000 and June 30, 2000 1
Statements of Operations for the Three Months Ended
September 30, 2000 and 1999 2
Statements of Cash Flows for the Three Months Ended
September 30, 2000 and 1999 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II -- OTHER INFORMATION 11
SIGNATURES 11
INDEX TO EXHIBITS 12
</TABLE>
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACRES GAMING INCORPORATED
BALANCE SHEETS
ASSETS
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<CAPTION>
SEPTEMBER 30, 2000
(UNAUDITED) JUNE 30, 2000
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(in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 2,399 $ 789
Receivables, net of allowance of $15,000 2,397 3,541
Inventories 4,176 3,729
Prepaid expenses 207 83
-------- --------
Total current assets 9,179 8,142
-------- --------
PROPERTY AND EQUIPMENT:
Furniture and fixtures 1,566 1,562
Equipment 4,057 3,935
Leasehold improvements 421 421
Accumulated depreciation (4,759) (4,446)
-------- --------
Total property and equipment 1,285 1,472
OTHER ASSETS 965 1,118
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TOTAL ASSETS $ 11,429 $ 10,732
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 3,559 $ 2,785
Accrued expenses 1,179 1,194
Customer deposits 2,406 855
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Total current liabilities 7,144 4,834
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LITIGATION SETTLEMENT OBLIGATION 2,010 2,010
REDEEMABLE CONVERTIBLE PREFERRED STOCK 4,948 4,948
STOCKHOLDERS' DEFICIT:
Common Stock, $.01 par value, 50 million shares
authorized, 8.9 million shares issued and outstanding 89 89
Additional paid-in capital 19,907 19,904
Accumulated deficit (22,669) (21,053)
-------- --------
Total stockholders' deficit (2,673) (1,060)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 11,429 $ 10,732
======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
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ACRES GAMING INCORPORATED
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------
2000 1999
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(in thousands except
per share data)
<S> <C> <C>
NET REVENUES $ 2,739 $ 6,224
COST OF REVENUES 2,117 3,064
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GROSS PROFIT 622 3,160
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OPERATING EXPENSES:
Research and development 1,082 1,272
Selling, general and administrative 1,152 1,516
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Total operating expenses 2,234 2,788
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INCOME (LOSS) FROM OPERATIONS (1,612) 372
OTHER INCOME (EXPENSE), NET (4) 22
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NET INCOME (LOSS) $(1,616) $ 394
======= =======
NET INCOME (LOSS) PER SHARE - BASIC $ (.18) $ .04
======= =======
NET INCOME (LOSS) PER SHARE - DILUTED $ (.18) $ .04
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
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ACRES GAMING INCORPORATED
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------
2000 1999
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(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,616) $ 394
Adjustments to reconcile net income (loss) to net cash from
operating activities:
Depreciation and amortization 423 464
Changes in assets and liabilities:
Receivables 1,144 (1,353)
Inventories (447) 1,907
Prepaid expenses (124) 174
Accounts payable and accrued expenses 759 (584)
Customer deposits 1,551 (1,303)
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Net cash from operating activities 1,690 (301)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (126) (290)
Capitalized software costs -- (184)
Other, net 43 29
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Net cash from investing activities (83) (445)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 3 --
------- -------
Net cash from financing activities 3 --
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NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 1,610 (746)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 789 5,949
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CASH AND EQUIVALENTS AT END OF PERIOD $ 2,399 $ 5,203
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</TABLE>
The accompanying notes are an integral part of these statements.
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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-K for
the year ended June 30, 2000 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-month period ended September 30, 2000 are not necessarily
indicative of the operating results for the full year or future periods.
2. Revenue Recognition
The Company sells certain of its products under contracts that generally
provide for a deposit to be paid before commencement of the project and for a
final payment to be made after completion of the project. Revenue is recognized
as hardware components are shipped and software components are installed.
Customer deposits received under sales agreements are reflected as liabilities
until the related revenue is recognized.
The Company has entered into certain manufacturing royalty agreements
where revenue is recognized as the licensed manufacturer sells the related
hardware products.
For certain contracts requiring significant product customization,
revenue is recognized on the percentage-of-completion method. Labor costs
incurred for customization and installation are the basis for determining
percentage-of-completion, giving effect to the most recent estimates of such
total labor costs. The effect of changes to total estimated customization and
installation labor costs is recognized in the period in which such changes are
determined. The Company defers revenue subject to forfeiture, refund or other
concession until such revenue meets the criteria for collectibility. Provisions
for estimated losses are made in the period in which the loss first becomes
apparent.
Included in accounts receivable at June 30, 2000 are unbilled
receivables of $1.0 million. The Company did not have any unbilled receivables
at September 30, 2000. Unbilled receivables represent revenues recognized in
excess of billings on certain contracts accounted for under the percentage of
completion method. Unbilled receivables were not billable at the balance sheet
date but are recoverable as billings are made in accordance with the contract
terms.
3. Inventories
Inventories consist of electronic components and other hardware, which
are recorded at the lower of cost (first-in, first-out) or market. Inventories
consist of the following:
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SEPTEMBER 30, JUNE 30,
2000 2000
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(in thousands)
<S> <C> <C>
Raw Materials $2,003 $1,809
Work-in-progress 118 110
Finished Goods 2,055 1,810
</TABLE>
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<TABLE>
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Total inventories $4,176 $3,729
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</TABLE>
4. Capitalized Software
Software development costs for certain projects are capitalized from the
time technological feasibility is established to the time the resulting software
product is commercially feasible. Capitalized software costs, net of accumulated
amortization, were $656,000 and $745,000 at September 30, 2000 and June 30,
2000, respectively and are included in other assets. Capitalized costs are
amortized on a straight-line basis over the estimated life of the product
beginning when the products become commercially feasible. All research and
development costs are expensed as incurred.
5. Income Taxes
At September 30, 2000, the Company had cumulative net operating losses
of approximately $19.2 million that are available to offset future taxable
income through 2020. 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. Deferred tax liabilities were insignificant as of
September 30, 2000 and June 30, 2000.
6. Contingencies
Two related lawsuits have been filed in the U.S. District Court that
allege violation of the federal securities laws by the Company and its executive
officers. Those suits have been consolidated into one combined action that
received class certification for a class consisting of the purchasers of the
Company's Common Stock during the period from March 26, 1997 to December 11,
1997. No trial date or discovery cut-off date has been set. The defense of this
suit has been tendered to and accepted by the Company's directors and officer's
insurance carrier subject to a $1.0 million insurance policy.
In September 2000, the Company and the plaintiffs agreed in principle to
settle the outstanding shareholder litigation, subject to final documentation
and approval by the Court. The Company recorded a one-time charge of $2.0
million in the year ended June 30, 2000, to account for the settlement.
Two lawsuits have been filed regarding ownership of the Wheel of
Gold(TM) ("WOG") technology that is the subject of two patents that have been
assigned to Anchor Gaming ("Anchor"). In the first suit, now pending in U.S.
District Court for the District of Nevada, the WOG plaintiffs brought patent
infringement, breach of warranty and breach of contract actions against the
Company based on the WOG patents and the Company's supply agreement with Anchor.
Plaintiffs seek to enjoin the Company from infringing the WOG patents and from
competing with it in the sale of wheel styled bonus gaming devices. The
plaintiffs also seek unspecified compensatory damages, treble damages, costs of
suit, and attorney's fees. The Company has denied the allegations and has filed
a counterclaim in that proceeding for a declaration that the Company is the sole
or joint owner of the WOG patents. The defense of this suit had been tendered to
and was accepted by the Company's former professional errors and omissions
insurance carrier. In April 2000, the Company's former insurance carrier denied
coverage. In May 2000, the Company filed suit, now pending in the U.S. District
Court of Nevada, against its former insurance carrier claiming breach of
insurance contract. In June 2000, the Company's former insurance carrier filed
suit in U.S. District Court of Nevada for declaratory relief requesting the
Court find that: no coverage is provided for the claim; if coverage is provided
it should be provided by the prior insurance carrier; and the Company must
reimburse the insurance carrier for nominal amounts paid under its insurance
policy to defend the Company.
In the second action, now pending in U.S. District Court for the
District of Nevada, the Company has filed suit against Anchor and Spin for Cash
Wide Area Progressive Joint Venture alleging that Anchor wrongfully used the
Company's intellectual property to obtain the WOG patents, that the filing of
the patent applications was fraudulently concealed from the Company, that Anchor
was unjustly enriched by retaining the benefits of the Company's
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technology without compensating the Company and that Anchor breached fiduciary
duties owed to the Company. The Company seeks $40 million in compensatory
damages, treble damages, costs of suit and attorney's fees.
Four related lawsuits have been filed in the U.S. District Court
resulting from the Company's efforts to enforce its patent rights. Three of
those suits have now been consolidated. The Company denies all asserted
allegations and intends to vigorously defend itself and its intellectual
property rights. No trial date has been set.
In Suit I, Mikohn asserted a claim for declaratory judgment of
noninfringement and invalidity of U.S. Patent No. 5,655,961 ("the `961 patent")
owned by the Company. Mikohn also asserted claims for "intentional interference
with a business relationship", "intentional interference with prospective
business relationship", "unfair competition: trade libel" and "unfair
competition: disparagement". Mikohn's complaint sought unspecified damages,
punitive damages, attorney's fees, interest on the alleged damages, an
injunction against the conduct alleged in the complaint and a declaration that
the `961 patent is invalid and not infringed by Mikohn or its customers. The
Company has filed a counterclaim for infringement of the `961 patent, and has
denied Mikohn's other allegations.
In Suit II, Mikohn asserted a claim for declaratory judgment of
noninfringement and invalidity of U.S. Patent No. 5,741,183 ("the `183 patent")
owned by the Company. Mikohn's complaint sought no damages, but requested an
award of attorney's fees and a declaration that the `183 patent is invalid and
not infringed by Mikohn. Because the Company is not aware of any infringement by
Mikohn, the court granted summary judgment on the noninfringement claim.
Mikohn's invalidity claim is still pending.
In Suit III, the Company sued Mikohn, CDS, New York-New York Hotel and
Casino and Sunset Station Hotel and Casino for infringement of the Company's
U.S. Patent No. 5,752,882 ("the `882 patent"). Mikohn counterclaimed in Suit
III, seeking a declaratory judgment of invalidity and noninfringement of the
`882 patent and asserted claims for "false and misleading representations",
"interference with prospective economic relations", "unfair competition: trade
libel" and "unfair competition: disparagement". Mikohn's counterclaims seek
unspecified damages, as well as a trebling of the damages, punitive damages,
attorney's fees and an injunction against the Company's "continuing to commit
the unlawful acts" alleged in the counterclaims.
In Suit IV, the Company sued Mikohn and CDS for infringement of the
Company's U.S. Patent Nos. 5,820,459 and 5,836,817. The defendants
counterclaimed for declaratory judgment of noninfringement and invalidity of the
patents. In addition, CDS counterclaimed for: "patent misuse", "Sherman Act
section 2 - attempted monopolization", "spoliation of evidence", "unfair
competition - intentional interference with prospective economic advantage" and
"misappropriation of trade secrets". CDS's counterclaims seek unspecified
damages, as well as a trebling of the damages, punitive damages, and attorney's
fees. CDS's counterclaim regarding spoliation of evidence was subsequently
dismissed by the Court under a motion of summary judgment.
In a separate but related action, the Company has filed suit, now
pending in the 9th Circuit Court of Appeals, against its former general
liability insurance carrier for breach of insurance contract related to the cost
of defense in Suit I and II. In addition, in May 2000, the Company filed suit,
now pending in U.S. District Court for the District of Nevada, against another
former general liability insurance carrier for breach of insurance contract
related to the cost of defense of CDS's counterclaims in Suit IV. In June 2000,
the insurance carrier filed suit in U.S. District Court of Nevada for
declaratory relief requesting the Court find that: no coverage is provided for
the claim; if coverage is provided it should be provided by the prior insurance
carrier; and the Company must reimburse the insurance carrier for nominal
amounts paid under its insurance policy to defend the Company.
Unfavorable outcomes in one or more of these suits could have a material
adverse effect on the Company. The Company from time to time is involved in
other various legal proceedings arising in the normal course of business.
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7. Per Share Computation
The Company reports basic and diluted earnings per share. Only the
weighted average number of common shares issued and outstanding is used to
compute basic earnings per share. The computation of diluted earnings per share
includes the effect of stock options, warrants and redeemable convertible
preferred stock, if such effect is dilutive.
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FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
------------------------
2000 1999
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(in thousands except per
share data)
<S> <C> <C>
Net income (loss) $(1,616) $ 394
Preferred stock dividends -- --
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Net income (loss) allocable to common stockholders $(1,616) $ 394
======= =======
Weighted average number of shares of common stock and common stock
equivalents outstanding:
Weighted average number of common shares outstanding for
computing basic earnings per share 8,915 8,913
Dilutive effect of warrants and employee stock options
after application of the treasury stock method -- --
Dilutive effect of redeemable convertible preferred stock
after application of the if-converted method -- 2,228
Weighted average number of common shares outstanding for
computing diluted earnings per share 8,915 11,141
======= =======
Earnings (loss) per share - basic $ (.18) $ .04
======= =======
Earnings (loss) per share - diluted $ (.18) $ .04
======= =======
</TABLE>
The following common stock equivalents were excluded from the earnings
per share computations because their effect would have been anti-dilutive:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
2000 1999
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(in thousands)
<S> <C> <C>
Warrants and employee stock options 1,294 1,326
Redeemable convertible preferred stock, if converted,
assuming conversion at rates in effect at each respective
year end 2,228 --
</TABLE>
The Stock Purchase Agreement between International Game Technology
("IGT") and the Company pursuant to which IGT purchased 519,481 shares of
Redeemable Convertible Preferred Stock (the "Preferred Stock") restricts IGT's
ownership of the Company's Common Stock. Without the consent of the Company, IGT
may not own more than 20% of the outstanding Common Stock, including, for
purposes of the calculation, the shares of Common Stock into which the Preferred
Stock owned by IGT is convertible. The Company believes that this provision
operates to
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limit IGT's right to convert shares of Preferred Stock as well as limiting IGT's
rights to purchase additional shares of Common Stock. IGT has asserted that the
agreement does not limit the number of shares into which the Preferred Stock may
be converted. If there were no limit on IGT's right to convert shares of
Preferred Stock into Common Stock, as of September 30, 2000, the Preferred Stock
could have been converted into 3,007,000 shares of common stock, or 25.2% of the
then outstanding common stock.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company develops, manufactures and markets electronic equipment and
software for the casino gaming industry. The Company's products are based on its
proprietary Acres Bonusing Technology(TM) and are designed to enhance casino
profitability by providing entertainment and incentives to players of gaming
machines. Acres Bonusing Technology improves the efficiency of bonus and
incentive programs currently offered by many casinos, and makes possible some
bonus and incentive programs that have not previously been offered.
Acres Bonusing Technology was conceived to provide the gaming industry
with a system to enable the design and delivery of bonuses and other promotions
directly to players at the point of play and at the time of play. The Company
currently offers bonusing products directly to casinos in the form of standard
and customized bonusing promotions that can be applied casino-wide or to a
limited number of gaming machines. In addition to bonusing products, the Company
also offers slot accounting, player tracking, table game management and visual
analysis modules that may be purchased and installed individually or as
components of an integrated system marketed as the Acres Advantage(TM).
RESULTS OF OPERATIONS
The Company's net revenues for the three months ended September 30, 2000
were $2.7 million versus net revenues of $6.2 million during the three months
ended September 30, 1999. The Company's revenues can fluctuate significantly
based on the timing of the delivery of orders. The current quarter revenues were
primarily generated from Acres Advantage hardware deliveries to MonteCasino in
South Africa and two casinos in California. In the prior year quarter, revenues
were primarily comprised of Acres Advantage hardware deliveries to MotorCity
Casino in Detroit, Michigan and bonusing software to Star City Casino in Sydney,
Australia.
In the current quarter, the gross profit margin decreased to 23% from
51% in the prior year quarter. Hardware sales, which made up the majority of the
current quarter sales, carry a lower gross profit margin than the hardware and
software sales recorded in the quarter ended September 30, 1999.
Operating expenses in the current year quarter were $554,000 less than
in the prior year quarter due primarily to reductions in staffing, redirection
of certain employee efforts from development activities to customer support
activities which are reported as cost of goods sold, decreases in the costs of
defending the Company's intellectual property rights and the timing of certain
trade show expenses. These expense reductions were partially offset by a
reduction in amounts capitalized as software development costs.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, the Company had cash and equivalents of $2.4
million, compared to $789,000 as of June 30, 2000. The Company invests its cash
in highly liquid marketable securities with a maturity of three months or less
at the date of purchase. The Company does not invest in market risk sensitive
instruments, except that it did
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enter into forward exchange contracts during fiscal 2000 to manage well-defined
foreign currency risk related to a sale in Australia.
The Company does not have any debt outstanding but has secured a
revolving credit facility to provide up to $3.5 million in financing secured by
inventory and accounts receivable. As of September 30, 2000, the Company was not
in compliance with certain debt covenants. The Company may not be able to borrow
under its line of credit until the covenants are met or it obtains a waiver of
such covenants from its lender. The Company believes it will be in compliance
with the covenants during the second quarter of fiscal 2001.
At September 30, 2000, the Company had collected $2.4 million of
customer deposits against its order backlog of $13.7 million. The Company
received $5.0 million of additional orders into its backlog in October 2000, of
which $3.4 million is pursuant to a hardware deposit agreement which may be
cancelled if the Company and the customer do not enter in to a definitive
agreement. Backlog, however, may not be a meaningful indication of future sales.
Sales are made pursuant to purchase orders or sales agreements for specific
installations. Products are generally delivered within one to six months of
receipt of an order depending on the nature of the order and the products being
delivered. The Company expects the majority of its backlog to be delivered in
fiscal 2001. The Company does not have any material ongoing long-term sales
contracts. The Company's revenues and results of operations may be materially
affected, in the near term, by the receipt or loss of any one order.
The Company believes that it can complete the deliveries and
installations comprising its order backlog and obtain and complete enough
additional sales to provide sufficient operating cash flow for fiscal 2001.
Failure to successfully deliver the products comprising the order backlog,
failure to obtain additional orders or failure to subsequently collect the
resulting revenues could have a material adverse effect on the Company's
liquidity. The Company has the ability to reduce operating expenses by reducing
staffing and other expenses
The Company's operations have historically used cash. During the current
quarter, the Company's net operating loss, net of non-cash items, used $1.2
million of cash. This use of cash was completely offset by collections of
advance deposits on orders taken during the quarter and receipts of payments on
accounts receivable. During the current quarter, the Company made capital
expenditures of $126,000.
The Company's principal sources of liquidity have been net proceeds of
$7.2 million from its initial public offering in November 1993, $6.2 million
from the exercise of the redeemable warrants in October 1996 and $4.9 million
from the issuance of 519,481 shares of Series A Convertible Preferred Stock to
IGT in January 1997.
FOREIGN CURRENCY EXCHANGE RATE RISK
The Company only enters into derivative instruments to manage
well-defined foreign currency risks. The Company has entered into forward
exchange contracts to hedge the value of sales contracts and accounts receivable
denominated in Australian dollars. Foreign exchange contracts have gains and
losses that are recognized at the settlement date. The impact of changes in
exchange rates on the forward contracts will be substantially offset by the
impact of such changes on the value of the related sales contracts and accounts
receivable. No foreign exchange contracts were held as of September 30, 2000.
YEAR 2000
The Year 2000 issue results from computer programs operating incorrectly
due to date sensitive software incorrectly recognizing dates in the year 2000.
This could result in system failure or miscalculations and could cause
disruptions of operations, including, among other things, a temporary inability
to engage in normal business activities. The Company has not incurred any
material interruptions in its products or business activities related to the
Year 2000.
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The Company has evaluated its technology and data, including imbedded
non-information technology, used in the creation and delivery of its Legacy
products and in its internal operations and has identified no significant Year
2000 issues. The Company's core business systems are compliant. Compliant
upgrades for the Company's Legacy slot accounting and player tracking products
have been developed and were made available to all customers prior to December
31, 1999. The Company has tested its most recent generation of products and did
not identify any material Year 2000 issues. The Company has not incurred
material costs associated with addressing the Year 2000 issue and believes that
future costs will not have a material effect on the Company's financial results.
Although the Company has inquired of certain of its significant vendors
as to the status of their Year 2000 compliance initiatives, no binding
assurances have been received. The Company believes that it is not overly
reliant on any single vendor because its component parts and services can be
obtained from multiple sources. Failure of telephone service providers or other
monopolistic utilities could have a significant detrimental effect on the
Company's operations. The Company does not know the status of its customers'
Year 2000 compliance initiatives. Failure of the Company's customers to
adequately address such issues could negatively affect their ability to purchase
the Company's products.
The Company has developed a contingency plan to address the most
reasonably likely "worst-case" scenario. Such contingency plan includes manually
conducting operations in the short-term, which would be less efficient, but
would not be expected to have a material adverse effect on the Company.
FORWARD-LOOKING INFORMATION
Certain statements in this Form 10-Q contain "forward-looking"
information (as defined in Section 27A of the Securities Act of 1933, as
amended) that involves risks and uncertainties that may cause actual results to
differ materially from those predicted in the forward-looking statements.
Forward-looking statements can be identified by their use of such verbs as
expects, anticipates, believes or similar verbs or conjugations of such verbs.
If any of the Company's assumptions on which the forward-looking statements are
based prove incorrect or should unanticipated circumstances arise, the Company's
actual results could differ materially from those anticipated by such
forward-looking statements. The differences could be caused by a number of
factors or combination of factors including, but not limited to, the risks
detailed in the Company's Securities and Exchange Commission filings, including
the Company's Form 10-K for the fiscal year ended June 30, 2000.
Forward-looking statements contained in this Form 10-Q relate to the
Company's plans and expectations as to: sales backlog; adequacy of cash and
equivalents balances to fund the Company's operations; anticipated future sales;
revenue recognition; cash collections; scheduled product installation dates; new
product development and introduction; the availability of funds under the line
of credit on terms acceptable to both the Company and the lending bank; patent
protection; litigation settlements; and anticipated effects of the Year 2000.
The following factors, among others, could cause actual results to
differ from those indicated in the forward-looking statements: the possibility
that future sales may not occur or product offerings may not be developed as
planned; the possibility that future product installations may not be completed;
developments in the Company's relationship with IGT; the risk that patents may
not be issued; the expense and unpredictability of patent and other litigation;
the timing of development, regulatory approval and installation of products; the
timing of receipt and shipment of orders; the ability of the Company to borrow
under the line of credit; competition; government regulation; market acceptance;
customer concentration; technological change; the effect of economic conditions
on the gaming industry generally; and the results of pending litigation.
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PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter covered by
this Form 10-Q.
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)
Date: November 13, 2000 By /s/ Reed M. Alewel
---------------------------------
Reed M. Alewel
Senior Vice President, Chief
Financial Officer,
Treasurer and Secretary
(authorized officer and principal
financial and chief accounting
officer)
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<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
3.1 Articles of Incorporation of Acres Gaming Incorporated, as
amended(1)
3.2 Bylaws of Acres Gaming Incorporated, as amended(2)
27.1 Financial Data Schedule
</TABLE>
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(1) Incorporated by reference to the exhibits to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended December 31, 1996,
previously filed with the Commission.
(2) Incorporated by reference to the exhibits to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 1996,
previously filed with the Commission.
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