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: March 31, 2004
| ¨ | 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: 000-22752
MIKOHN GAMING CORPORATION
(Exact name of registrant as specified in its charter)
| Nevada | 88-0218876 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification Number) |
920 Pilot Road, Las Vegas, NV 89119
(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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)
YES ¨ NO x
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:
| 21,964,486 | as of | May 12, 2004 | ||
| (Amount Outstanding) | (Date) |
MIKOHN GAMING CORPORATION
| Page | ||||||
| Part I |
FINANCIAL INFORMATION | |||||
| Item 1. | Condensed Consolidated Financial Statements |
|||||
| Condensed Consolidated Balance Sheets at March 31, 2004 (Unaudited) and December 31, 2003 |
2 | |||||
| 3 | ||||||
| 5 | ||||||
| Notes to Condensed Consolidated Financial Statements (Unaudited) |
6 | |||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 | ||||
| Item 3. | 34 | |||||
| Item 4. | 34 | |||||
| Part II |
OTHER INFORMATION | |||||
| Item 6. | 35 | |||||
| Signatures/Certifications | 36 | |||||
1
MIKOHN GAMING CORPORATION
| (Amounts in thousands, except per share amounts)
|
March 31, 2004 |
December 31, 2003 |
||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 8,733 | $ | 8,683 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $1,472 and $1,996 |
11,625 | 11,497 | ||||||
| Installment sales receivable, net of allowance for doubtful accounts of $1,529 and $1,500 |
436 | 501 | ||||||
| Inventories, net of reserves of $3,943 and $4,479 |
6,838 | 6,258 | ||||||
| Prepaid expenses |
3,101 | 2,498 | ||||||
| Deferred tax asset |
3,313 | 3,313 | ||||||
| Total current assets |
34,046 | 32,750 | ||||||
| Installment sales and notes receivable, net |
59 | 97 | ||||||
| Property and equipment, net |
10,909 | 11,869 | ||||||
| Intangible assets, net |
55,100 | 55,506 | ||||||
| Goodwill |
2,860 | 2,860 | ||||||
| Other assets |
5,618 | 6,090 | ||||||
| Total assets |
$ | 108,592 | $ | 109,172 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: |
||||||||
| Trade accounts payable |
$ | 3,865 | $ | 6,176 | ||||
| Customer deposits |
3,015 | 2,981 | ||||||
| Current portion of long-term debt and notes payable |
590 | 727 | ||||||
| Accrued liabilities |
11,930 | 8,696 | ||||||
| Deferred revenues and license fees |
1,432 | 1,027 | ||||||
| Total current liabilities |
20,832 | 19,607 | ||||||
| Long-term debt and notes payable, net of unamortized discount of $2,283 and $2,412 |
63,079 | 62,989 | ||||||
| Other long-term liabilities |
3,196 | 3,073 | ||||||
| Deferred tax liability |
16,114 | 16,114 | ||||||
| Total liabilities |
103,221 | 101,783 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.10 par value, 5,000,000 shares authorized, none issued and outstanding |
— | — | ||||||
| Common stock, $0.10 par value, 100,000,000 shares authorized 21,953,356 and 21,910,611 shares issued and outstanding |
2,195 | 2,191 | ||||||
| Additional paid-in capital |
114,499 | 114,325 | ||||||
| Other comprehensive loss |
(96 | ) | (253 | ) | ||||
| Accumulated deficit |
(110,515 | ) | (108,162 | ) | ||||
| Subtotal |
6,083 | 8,101 | ||||||
| Less treasury stock, 194,913 shares, at cost |
(712 | ) | (712 | ) | ||||
| Total stockholders’ equity |
5,371 | 7,389 | ||||||
| Total liabilities and stockholders’ equity |
$ | 108,592 | $ | 109,172 | ||||
See notes to unaudited consolidated financial statements.
2
MIKOHN GAMING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
| Three Months Ended March 31, |
||||||||
| (Amounts in thousands, except per share amounts)
|
2004 |
2003 |
||||||
| Revenues: |
||||||||
| Slot and table games |
$ | 9,525 | $ | 11,264 | ||||
| Product sales |
9,089 | 10,700 | ||||||
| Systems |
2,515 | 2,548 | ||||||
| Total revenues |
21,129 | 24,512 | ||||||
| Cost of revenues: |
||||||||
| Slot and table games |
2,936 | 4,075 | ||||||
| Product sales |
5,325 | 6,680 | ||||||
| Systems |
1,481 | 1,429 | ||||||
| Total cost of revenues |
9,742 | 12,184 | ||||||
| Gross profit |
11,387 | 12,328 | ||||||
| Selling, general and administrative expense |
5,825 | 6,176 | ||||||
| Slot rent expense |
822 | 1,390 | ||||||
| Research and development |
1,530 | 1,187 | ||||||
| Depreciation and amortization |
2,544 | 3,301 | ||||||
| Other expense / asset write-downs |
564 | 1,347 | ||||||
| 11,285 | 13,401 | |||||||
| Operating income (loss) |
102 | (1,073 | ) | |||||
| Interest expense |
(2,480 | ) | (3,878 | ) | ||||
| Other income (expense), net |
25 | (92 | ) | |||||
| Loss before income tax provision |
(2,353 | ) | (5,043 | ) | ||||
| Income tax provision |
— | (3 | ) | |||||
| Net loss |
$ | (2,353 | ) | $ | (5,046 | ) | ||
| Weighted average common shares: |
||||||||
| Basic |
21,731 | 12,877 | ||||||
| Diluted |
21,731 | 12,877 | ||||||
| Basic and diluted loss per share: |
||||||||
| Net loss per share |
$ | (0.11 | ) | $ | (0.39 | ) | ||
See notes to unaudited consolidated financial statements.
3
MIKOHN GAMING CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
| Three Months Ended March 31, |
||||||||
| (Amounts in thousands)
|
2004 |
2003 |
||||||
| Net Loss |
$ | (2,353 | ) | $ | (5,046 | ) | ||
| Other comprehensive income (loss): |
||||||||
| Foreign currency translation gain (loss) |
158 | (37 | ) | |||||
| Comprehensive Loss |
$ | (2,195 | ) | $ | (5,083 | ) | ||
See notes to unaudited consolidated financial statements.
4
MIKOHN GAMING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
| (Amounts in thousands)
|
Three Months March 31, 2004 |
Three Months March 31, 2003 |
||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (2,353 | ) | $ | (5,046 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
| Depreciation |
2,055 | 2,608 | ||||||
| Amortization |
489 | 693 | ||||||
| Provision for bad debts |
88 | 244 | ||||||
| Provision for obsolete inventory |
— | 273 | ||||||
| Amortization of debt discount and debt issue costs |
394 | 577 | ||||||
| Loss (gain) on disposition of assets |
30 | 95 | ||||||
| Other |
50 | 7 | ||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
(215 | ) | 2,603 | |||||
| Notes and installment sales receivable |
103 | 126 | ||||||
| Inventories |
(625 | ) | (1,148 | ) | ||||
| Other assets |
(1,084 | ) | 372 | |||||
| Trade accounts payable |
(2,311 | ) | (1,920 | ) | ||||
| Accrued expenses |
3,409 | 2,129 | ||||||
| Other liabilities |
689 | (1,201 | ) | |||||
| Net cash provided by operating activities |
719 | 412 | ||||||
| Cash flows from investing activities: |
||||||||
| Purchase of property and equipment |
(245 | ) | (464 | ) | ||||
| Purchase of inventory leased to others |
(247 | ) | — | |||||
| Net cash used in investing activities |
(492 | ) | (464 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Principal payments on notes payable and long-term debt |
(4 | ) | (89 | ) | ||||
| Principal payments on capital leases |
(172 | ) | (480 | ) | ||||
| Principal payments of deferred license fees |
(129 | ) | (117 | ) | ||||
| Proceeds from issuance of common stock |
128 | 97 | ||||||
| Net cash used in financing activities |
(177 | ) | (589 | ) | ||||
| Increase (decrease) in cash and cash equivalents |
50 | (641 | ) | |||||
| Cash and cash equivalents, beginning of period |
8,683 | 16,275 | ||||||
| Cash and cash equivalents, end of period |
$ | 8,733 | $ | 15,634 | ||||
| Supplemental disclosure of cash flow information: |
||||||||
| Cash paid during the period for: |
||||||||
| Interest |
$ | 39 | $ | 249 | ||||