GameTech International Inc. (GMTC, Financial) filed Annual Report for the period ended 2011-10-30.
Gametech International Inc. has a market cap of $0.84 million; its shares were traded at around $0 with and P/S ratio of 0.02.
Business Segments Bingo - As of October 30, 2011, we had bingo devices, games, and systems in service in 38 states, various Native American locations, the Philippines, and Canada. We market portable, handheld and stationary, fixed-base bingo player devices; unique electronic and paper bingo games, such as Big Bad Bingo™ (“B3”™) and Crystal Ball Bingo®; other related for-fun games, such as solitaire; and bingo management systems. Our devices display electronic bingo card images for each game and assist the players in managing and marking their bingo cards in physical bingo facilities operated in charitable, Native American, commercial, and military locations. These devices enable players to purchase and play substantially more bingo cards compared to paper cards, typically leading to more fun and greater spend for the player and increased profits for the operator. Our bingo management systems, such as Diamond Plus®, AllTrak 2®, and our newest system the GameTech Edge Bingo System®, provide bingo operators with important information regarding the profitability of their bingo hall(s), inventory systems, and player tracking demographics, among other modules. We generally enter into one to three year contracts with bingo operators for the use of the bingo devices and management systems. During fiscal 2011, deployment of the GameTech Edge Bingo System™ grew to eight states and one province in Canada. Many of these installations also included the deployment of our new Explorer™ handheld player device, which players and operators seem to prefer for its larger screen and other enhanced capabilities. In the third quarter of fiscal 2011, we completed a successful field trial of an upgraded version of the GameTech Edge Bingo System™ at Mohawk Bingo Palace in Hogansburg, New York. This upgrade included the following additional management functionality modules: inventory management, payout center, accruals and bank management. During the fourth quarter of fiscal 2011, we received Gaming Laboratories, Inc (GLI) certification for this latest release of the GameTech Edge Bingo System™, which will enable a wider release of this system into the tribal bingo market. Further enhancements to the GameTech Edge Bingo System™ were released during the final quarter of fiscal 2011, which were coupled with the release of our newest hand held bingo device, the Explorer II™. The Explorer II will provide the advanced functionality of the Explorer at a substantially lower production cost, making this product available to a wider variety of customers. Internationally, operations in the U.K. ceased during fiscal 2011; however the Company has expanded penetration in the Philippines market with the introduction of the Traveler™ along with the B3™ stand-alone systems, the GameTech Edge Bingo System™, and Crystal Ball Bingo™. During fiscal 2011, the Company s management also developed and implemented certain strategic plans focused the introduction of new bingo products and systems, including (1) a new stand alone bingo verification system, known as the “Bingo Boss™”, which was introduced in December 2011 on a limited basis, (2) the development of our next generation bingo management system, “GameTech Phoenix™”, and (3) development of a new low production cost portable bingo device. The GameTech Phoenix™ system, which is expected to be introduced during fiscal 2012, is being designed to perform all the functions of previous operating systems as well as the capabilities needed to satisfy the needs of larger tribal casinos and commercial bingo halls and casinos. These operators demand a higher level of security and accountability as well as an enhanced set of functional features, which the GameTech Phoenix™ system will support. The GameTech Phoenix™ system also addresses a number of customer entertainment needs and allows GameTech to focus on different variations of the game of bingo and offer unique bingo game content. The system was redesigned from the ground up based on the experience of past products as well as emerging technologies not available during the design of previous products. The new low production cost portable bingo device has also been design from the ground up and is expected to offer a unique form-factor and more engaging user interface. 13 VLT – We also manufacture and sell video lottery terminals (VLT s), associated gaming equipment, related software, and game content, collectively called the “VLT business.” We entered the VLT business on March 28, 2007 with our acquisition of substantially all of the assets of Summit Amusement & Distributing, Ltd. Our VLTs are typically sold to route operators, bar/tavern gaming operators, and distributors. During fiscal 2011, our VLT product development efforts remained focused on products specifically designed for several new markets as well as providing new and improved platforms and game content to our existing markets. During fiscal 2011, we also increased our efforts in pursuing game content licensing opportunities through other manufacturers and distributors of gaming products. We continue to develop market specific products and games. However, our ability to continue to develop these VLT products, and our ability to continue to develop new bingo products, in order to penetrate new markets and maintain and grow existing markets will largely depend on our ability to generate increased cash and/or raise additional capital as may be restricted by capital expenditure limits imposed by our lenders under our existing credit facility. For additional information, see discussion within this Item under “Liquidity and Capital Resources.” Fiscal 2011 Highlights
Product sales include primarily the sale of equipment, parts, and game content, including conversion kits. Infrequently, our arrangements call for receipt of recurring participation revenue, which has not been material, in lieu of a predetermined sales price payable upon delivery, typically with 30-day terms. Revenues are recorded net of incentives, discounts, sales taxes, and other taxes of a similar nature. Revenues related to contracted production are recognized as the related work is delivered following testing and submission of application for approval by state regulatory agencies. Amounts received prior to completing the earnings process are deferred until revenue recognition criteria are met. Complex systems and/or any multiple element contracts may take several months to complete.
The decrease in net bingo revenue is primarily due to pricing pressures and hall closures from adverse economic conditions, particularly in the charitable bingo market. VLT net revenues increased compared to prior year due to increased sales of new equipment in Montana from the completion of the first phase of our 2008 Purchase, Sale and Software Development Agreement with Rocky Mountain Industries, LLC. During 2011 and 2012, we fulfilled the development of the initial five custom games and sixteen retrofit games and delivered 300 units.
The decrease in Bingo cost of revenue is primarily due to a decrease in current depreciation expense ($1.2 million) as the Traveler and Tracker became fully depreciated, staff reductions ($0.7 million) to align our costs to lower business levels and a reduction in contracted labor ($0.3 million), offset in part by increased amortization ($0.1 million) related to the acquired license rights for the Explorer. VLT cost of revenue was up slightly compared to prior year and is directly related to the increase in VLT cost of equipment and component parts ($1.9 million) associated with the completion of the first phase of our agreement with Rocky Mountain Industries (RMI) where the Company developed the initial custom five games and sixteen retrofit games and delivered 300 units, offset by decreases in write-offs of obsolete equipment and parts ($1.4 million) compared to the prior year.
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Gametech International Inc. has a market cap of $0.84 million; its shares were traded at around $0 with and P/S ratio of 0.02.
Highlight of Business Operations:
We are a domestic and international gaming technology company dedicated to the development and manufacturing of gaming entertainment products and systems. We hold a significant position in the North American bingo market with our interactive electronic bingo systems, portable and fixed-based gaming units, and complete hall management modules (our Bingo Segment). We also hold a significant position in select North American VLT markets, primarily Montana, Louisiana, and South Dakota, where we offer video lottery terminals and related gaming equipment and software (our VLT Segment). Historically, we have generated over 90% of our revenues domestically. For fiscal 2011 and 2010, 78.3% and 85.5% respectively, of our net revenue came from our Bingo segment.Business Segments Bingo - As of October 30, 2011, we had bingo devices, games, and systems in service in 38 states, various Native American locations, the Philippines, and Canada. We market portable, handheld and stationary, fixed-base bingo player devices; unique electronic and paper bingo games, such as Big Bad Bingo™ (“B3”™) and Crystal Ball Bingo®; other related for-fun games, such as solitaire; and bingo management systems. Our devices display electronic bingo card images for each game and assist the players in managing and marking their bingo cards in physical bingo facilities operated in charitable, Native American, commercial, and military locations. These devices enable players to purchase and play substantially more bingo cards compared to paper cards, typically leading to more fun and greater spend for the player and increased profits for the operator. Our bingo management systems, such as Diamond Plus®, AllTrak 2®, and our newest system the GameTech Edge Bingo System®, provide bingo operators with important information regarding the profitability of their bingo hall(s), inventory systems, and player tracking demographics, among other modules. We generally enter into one to three year contracts with bingo operators for the use of the bingo devices and management systems. During fiscal 2011, deployment of the GameTech Edge Bingo System™ grew to eight states and one province in Canada. Many of these installations also included the deployment of our new Explorer™ handheld player device, which players and operators seem to prefer for its larger screen and other enhanced capabilities. In the third quarter of fiscal 2011, we completed a successful field trial of an upgraded version of the GameTech Edge Bingo System™ at Mohawk Bingo Palace in Hogansburg, New York. This upgrade included the following additional management functionality modules: inventory management, payout center, accruals and bank management. During the fourth quarter of fiscal 2011, we received Gaming Laboratories, Inc (GLI) certification for this latest release of the GameTech Edge Bingo System™, which will enable a wider release of this system into the tribal bingo market. Further enhancements to the GameTech Edge Bingo System™ were released during the final quarter of fiscal 2011, which were coupled with the release of our newest hand held bingo device, the Explorer II™. The Explorer II will provide the advanced functionality of the Explorer at a substantially lower production cost, making this product available to a wider variety of customers. Internationally, operations in the U.K. ceased during fiscal 2011; however the Company has expanded penetration in the Philippines market with the introduction of the Traveler™ along with the B3™ stand-alone systems, the GameTech Edge Bingo System™, and Crystal Ball Bingo™. During fiscal 2011, the Company s management also developed and implemented certain strategic plans focused the introduction of new bingo products and systems, including (1) a new stand alone bingo verification system, known as the “Bingo Boss™”, which was introduced in December 2011 on a limited basis, (2) the development of our next generation bingo management system, “GameTech Phoenix™”, and (3) development of a new low production cost portable bingo device. The GameTech Phoenix™ system, which is expected to be introduced during fiscal 2012, is being designed to perform all the functions of previous operating systems as well as the capabilities needed to satisfy the needs of larger tribal casinos and commercial bingo halls and casinos. These operators demand a higher level of security and accountability as well as an enhanced set of functional features, which the GameTech Phoenix™ system will support. The GameTech Phoenix™ system also addresses a number of customer entertainment needs and allows GameTech to focus on different variations of the game of bingo and offer unique bingo game content. The system was redesigned from the ground up based on the experience of past products as well as emerging technologies not available during the design of previous products. The new low production cost portable bingo device has also been design from the ground up and is expected to offer a unique form-factor and more engaging user interface. 13 VLT – We also manufacture and sell video lottery terminals (VLT s), associated gaming equipment, related software, and game content, collectively called the “VLT business.” We entered the VLT business on March 28, 2007 with our acquisition of substantially all of the assets of Summit Amusement & Distributing, Ltd. Our VLTs are typically sold to route operators, bar/tavern gaming operators, and distributors. During fiscal 2011, our VLT product development efforts remained focused on products specifically designed for several new markets as well as providing new and improved platforms and game content to our existing markets. During fiscal 2011, we also increased our efforts in pursuing game content licensing opportunities through other manufacturers and distributors of gaming products. We continue to develop market specific products and games. However, our ability to continue to develop these VLT products, and our ability to continue to develop new bingo products, in order to penetrate new markets and maintain and grow existing markets will largely depend on our ability to generate increased cash and/or raise additional capital as may be restricted by capital expenditure limits imposed by our lenders under our existing credit facility. For additional information, see discussion within this Item under “Liquidity and Capital Resources.” Fiscal 2011 Highlights
Product sales include primarily the sale of equipment, parts, and game content, including conversion kits. Infrequently, our arrangements call for receipt of recurring participation revenue, which has not been material, in lieu of a predetermined sales price payable upon delivery, typically with 30-day terms. Revenues are recorded net of incentives, discounts, sales taxes, and other taxes of a similar nature. Revenues related to contracted production are recognized as the related work is delivered following testing and submission of application for approval by state regulatory agencies. Amounts received prior to completing the earnings process are deferred until revenue recognition criteria are met. Complex systems and/or any multiple element contracts may take several months to complete.
The decrease in net bingo revenue is primarily due to pricing pressures and hall closures from adverse economic conditions, particularly in the charitable bingo market. VLT net revenues increased compared to prior year due to increased sales of new equipment in Montana from the completion of the first phase of our 2008 Purchase, Sale and Software Development Agreement with Rocky Mountain Industries, LLC. During 2011 and 2012, we fulfilled the development of the initial five custom games and sixteen retrofit games and delivered 300 units.
The decrease in Bingo cost of revenue is primarily due to a decrease in current depreciation expense ($1.2 million) as the Traveler and Tracker became fully depreciated, staff reductions ($0.7 million) to align our costs to lower business levels and a reduction in contracted labor ($0.3 million), offset in part by increased amortization ($0.1 million) related to the acquired license rights for the Explorer. VLT cost of revenue was up slightly compared to prior year and is directly related to the increase in VLT cost of equipment and component parts ($1.9 million) associated with the completion of the first phase of our agreement with Rocky Mountain Industries (RMI) where the Company developed the initial custom five games and sixteen retrofit games and delivered 300 units, offset by decreases in write-offs of obsolete equipment and parts ($1.4 million) compared to the prior year.
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