Valleys
Despite a hardy endorsement last week from Business Week, Toronto-based gaming software developer Cryptologic Inc. (CRYP) dropped below the $20 Thursday (as low as 18.50) for the first time since June 2. Shares have since rebounded, however, climbing today as high as $22. Curiously, the Business Week article intimated that there was very little chance of the Kyl bill passing. Crypto's only notable activity last week was the opening of Fiesta Casino, an online casino powered by Crypto's software and operated by International Thunderbird Gaming Corporation.
Hilton Group (HG.L) took a bit of plunge Friday, dropping from 238p to 225, possibly a result of Lehman Brothers downgrading the stock from buy to neutral and removing it from its recommended European portfolio. According to a Reuters article, Lehman leisure analyst Fraser Ramzan said he saw "limited growth potential available for Hilton's betting interests as improved margins were cancelled out by Internet spend."
After rising steadily for a few weeks on the Toronto Exchange, Magna Entertainment (MIEA.TO) finally peeked, closing last Monday at 11.40. Shares of the company then proceeded to drop steadily through the week until closing Friday at 9.25.
Stocks to Watch
Penn National Gaming, Inc. (PENN) hit a 52-week high of 15.6875 and closed at 15.0625 on Wednesday. By Friday's close, however, the company had dropped to 13.625, its lowest closing point since May 30. Sandwiched between the week's high and low prices was the company's announcement that it has commenced a cash tender offer to purchase all of its outstanding $69 million 10 5/8 percent senior notes due 2004 and a related consent solicitation to eliminate certain restrictive covenants and related provisions in the indenture pursuant to which the notes were issued. Meanwhile, eBet Limited, part of a three-way interactive race wagering partnership with TrackPower Inc. and Penn, announced Wednesday revised terms of the joint-venture agreement in which TrackPower will not be issuing shares or warrants to Penn. Further, it was announced that TrackPower will not be required to pay any ongoing licensing fees to Penn with respect to its telephone betting operations and that Penn will remain responsible for the costs associated with those operations.
Kerry Packer's Publishing and Broadcasting Ltd. (PBL.AX) hovered last week in the neighborhood of 12.75, but skipped up to 12.906 at the opening of trading today on the Australian Stock Exchanged. Shares rose as high as 13.550 and closed at 13.450.
The price of Sports Internet Group (SRT.L) spent recent weeks on the decline following the company's being purchased by Bsky in May. After dropping from over 700p to the low 500s, the company's stock has finally found the 700 mark again, but it hasn't been a smooth ride. Prices dropped Thursday from 710 to under 690, but bounced back considerably Friday. The company closed today at 705.
Quarterly Reports
In its discussion and analysis of financial condition and results of operation for the quarterly report, Poker.com Inc. (PKER) reported the following:
Net Sales: $257,000
Sub-license Revenues: $55,000
Banner Advertising Revenues: $121,000
Royalty Fees: $79,000
The company believes that royalty revenue from casinos and the new Poker card room software will substantially improve the gross revenues for the next quarter.
Gross Margin: 89 percent of net sales. Management believes the margin is consistent with licensing and marketing of turnkey Internet gaming systems. Poker.com's gross margin may be affected by several factors including (i) the mix of revenues streams, (ii) the price of products sold and (iii) other components of cost of sales.
Operating Expenses: $368,000. The major expense items were for website marketing to bring traffic to the Poker.com's portal and to develop the company's name brand. This was consistent with Poker's aggressive marketing campaign. The company intends to continue their aggressive marketing strategy.
Provision for Income Taxes: No tax provision was made for the three months ended March 31, 2000. The company also has available a net operating loss carry forward of approximately $405,000 that may be used to offset future United States federal taxable income.
Liquidity and Capital Resources: At March 31, 2000 the company had cash and cash equivalents totaling $188,000 compared to $41,000 at December 31, 1999. The increase in cash is mainly due to a subscription for common shares in the quarter ended March 31, 2000. Poker.com's principal source of liquidity is $188,000 in cash and cash equivalents.
Approximately $275,000 of the $330,000 accounts receivable and long term receivable was due from Antico Holdings for the purchase of a Poker sub-license and royalty fees. The amount due from Antico Holdings for their License fee is payable in equal installments over a period of three years. Antico Holdings has assigned to Poker.com Inc the 15 percent credit card hold back which will be released from June 2000.
Net cash (used) by operating activities for the quarter ended March 31, 2000 was ($85,000). The decrease in cash was mainly due to increase in accounts receivable of $80,000 to $180,000 from December 31, 1999. This is due to royalty revenue, banner advertising and sale of casino license fees being accrued.
Net cash (used) for investing activities for the three months ended March 31, 2000 was ($27,000). The cash was used for the purchase of additional capital assets and casino software.
AGC Acquires Funding for Lottery Expansion
Applied Gaming Solutions of Canada Inc. (AGC) announced Wednesday the execution of term sheet for an investment of up to $17.3 million CDN with Trinity Capital Securities Limited (Trinity) of Toronto, Canada. Trinity has agreed to purchase on behalf of its investor group a $17.3 million convertible debenture issue of AGC. The debenture will bear an interest rate of 13 percent over a term of 5 years from the date the funds are advanced. At the end of the 5-year term the principal amount must be repaid to the lender. The funds will be used to expand the National online Lottery program into the Ho Chi Minh City region. AGC will purchase up to 1200 terminals and all associated hardware and software required to implement daily and weekly lottery games along with sports based wagering. The company expects that the
implementation process can take up to six months after completion of the financing and anticipates start up in the Ho Chi Minh City region in early 2001. The principal amount of the debenture will be convertible, at the holder's option, into units of Applied Gaming Solutions at a price of $.50 per unit, each unit consists
of one common share and one common share purchase warrant. Each share purchase warrant shall entitle the holder thereof to purchase one common share at an exercise price of $0.65 per common share. The expiry date on the exercise of the purchase warrants shall be no later than 36 months from the date of a NASDAQ listing or 36 months from closing whichever is earlier. The Debenture is subject to mutually satisfactory final agreements; all necessary and required regulatory approvals; AGC's board of directors approval, Bridge holders approval, shareholder approval, investors and their management committees approval; and all statutory hold periods that may be imposed by the applicable regulatory authorities. As well, both parties acknowledge that the applicable securities and exchange commissions may modify the terms and conditions of the convertible debenture as required.