August 13, 1999
CASINO JOURNAL PUBLISHING GROUP INC (CJPG)
Quarterly Report (SEC form 10QSB)
Management's Discussion and Analysis of Financial Condition and Results of Operations:
Trends and Uncertainties. Inasmuch as a major portion of the Company's activities is the publishing of magazines and newsletters primarily for the U.S. gaming industry and its consumers, the organization and sponsorship of major trade shows and conventions for the gaming industry as well as consumer gaming festivals for specific resorts or casinos, the publishing of a mail order-catalog selling various gaming-related products, the development and operation of a daily 900 number hotline information service and providing consulting services, the Company's business operations may be adversely affected by competitors and prolonged recessionary periods.
In addition, the future exercise of any of the outstanding Warrants is uncertain. The lack of future exercise of the Class A or Class B Warrants could negatively impact the Company's ability to successfully expand operations.
Capital and Source of Liquidity. On April 3, 1998, the Company and its combined affiliates merged with Gaming Venture Corp., U.S.A., A Nevada corporation ("Gaming"). The Company and its combined affiliates became wholly-owned subsidiaries of Gaming, the legal acquiror. As the Company's and its combined affiliates' shareholders acquired approximately 65% of Gaming's outstanding voting shares, the merger was accounted for as a reverse acquisition of Gaming by the Company, the accounting acquiror in the transaction.
The total cost of the acquisition was $3,726,235, consisting of the purchase price of $3,217,468, measured by the 1,608,734 common shares retained by the Gaming's shareholders at their fair value at the closing date of $2.00 per share and the value of stock options ($350,000) granted to shareholders of the Company (see Note 4 to the Audited Financial Statements) plus transaction costs of $158,767.
The Company rents two office facilities from shareholders. One facility is occupied pursuant to a ten year lease which began on June 1, 1997 and requires annual rent payments of $120,000, and the other facility is occupied pursuant to a five year lease which began on January 1, 1996 and requires annual rent payments of $18,000. Total related party rent expense was $69,000 and $35,403 for the six months ended June 30, 1999 and 1998, respectively.
For the six months ended June 30, 1999, the Company had an increase in loan receivables from shareholders and related parties of $105,401 and an increase in loans receivable from employees of $4,225. The Company purchased $35,807 worth of equipment, and had an increase in marketable securities of $554,940. As a result, the Company had cash flow used in investing activities of $700,373 for the six months ended June 30, 1999.
For the six months ended June 30, 1998, the Company had an increase in loan receivables from shareholders and related parties of $253,222 and an decrease in loans receivable from employees of $3,322. The Company purchased $60,877 worth of equipment, and had a decrease in marketable securities of $39,664. As a result, the Company had cash flow used in investing activities of $271,113 for the six months ended June 30, 1998.
For the six months ended June 30, 1999, the Company made distributions of $65,194 to a minority interest. The Company received proceeds of $61,375 from the issuance of its common stock. As a result, the Company had net cash used in financing activities of $3,819 for the six months ended June 30, 1999.
For the six months ended June 30, 1998, the Company had an increase in notes payable of $200,000. The Company made principal payments on loan payable, automobile of $9,025. The Company received proceeds of $200,238 from the issuance of its common stock. The Company made distributions of $62,350 to the then sole stockholder for the six months ended June 30, 1998. As a result, the Company had net cash provided by financing activities of $328,863 for the six months ended June 30, 1998.
Results of Operations. The Company had net income of $470,032 for the six months ended June 30, 1999. The Company received revenues of $6,756,416 that consisted of advertising revenue of $3,530,629, subscription revenues of $1,607,357 and other revenues which consisted primarily of consulting fees of $281,325, tradeshow revenues of
$1,186,148 and miscellaneous revenues of $150,957. The Company had direct costs of $3,430,839 for the six months ended June 30, 1999. Operating expenses for the six months ended June 30, 1999 were $2,661,466 that includes payroll related costs of $1,578,580, postage of $138,711 and other nonmaterial expenses of $680,838. Promotion expenses were $263,337 for the six months ended June 30, 1999.
The Company had an increase in accounts receivable of $654,739. Inventories increased $338 for the six months ended June 30, 1999 and prepaid expenses decreased by $19,029. Deferred promotion expenses decreased $13,931. Deferred advertising revenues decreased $31,667. Deferred subscription revenues increased $961,671 from the sale of its magazine and newsletter subscriptions. Deferred tradeshow revenues decreased $312,978. The Company had depreciation and amortization of $100,933 for the six months ended June 30, 1999. The Company had minority interest in earnings of American Gaming Summit, LLC of $65,194. The Company had a decrease in accounts payable and accrued expense of $1,430 and an increase in income taxes payable of $148,000. Other assets decreased by $3,443 for the six months ended June 30, 1999. Net cash provided by operations for the six months ended June 30, 1999 was $781,081.
The Company had net income of $128,663 for the six months ended June 30, 1998. The Company received revenues of $4,705,033 that consisted of advertising revenue of $2,722,540, subscription revenue of $930,641 and other revenues that consisted primarily of consulting fees and trade show revenue of $1,051,852. The Company had direct costs of $2,182,449 for the six months ended June 30, 1998. Operating expenses for the six months ended June 30, 1998 were $2,272,438. These consisted principally of general payroll related costs of $1,268,432, advertising and promotion of $179,668, postage of $131,404, travel and entertainment of $119,248, bad debts of $91,509 and other nonmaterial expenses of $482,177. The Company had an increase in accounts receivable of $9,878. Inventories decreased $3,234 for the six months ended June 30, 1998 and prepaid expenses increased by $523,887. Deferred subscription revenue increased $182,423. The Company had depreciation and amortization of $51,269 for the six months ended June 30, 1998. The Company had a decrease in accounts payable and accrued expenses of $196,397 and an increase in income taxes payable of $80,823. Other assets decreased by $17,473 for the six months ended June 30, 1998. Net cash used in operations for the six months ended June 30, 1998 was $266,277.
The Company is seeking to lower its operating expenses while expanding operations and increasing its customer base and operating revenues. The Company is focusing on decreasing administrative costs. However, increased marketing expenses will probably occur in future periods as the Company attempts to further increase its marketing and sales efforts.
Impact of Year 2000. The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's computer programs that have time- sensitive software may recognize a date using 000 as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send payments on invoices, or engage in similar normal business activities.
The Company has initiated formal communications with its business venture associates and affiliates to determine the extent to which the Company's interface systems are vulnerable to those third parties' failure to remediate their own Year 2000 issues. There can be no guarantee that the systems of other companies on which the Company's own systems may rely will be timely converted and would not have an adverse effect on the Company's systems.
The majority of the Company's computer systems and network are Macintosh based The Y2K bug are not expected to affect Macintosh based systems. The Company's MIS Director has assessed the computer systems for the Company and determined the overall systems to be Y2K ready. The few PC computer systems in the Company have been converted to newer computers that are Certified Year 2000 compliant. Some individual minor issues have been addressed and will be resolved in the middle of 1999. These issues would not significantly affect the function of the Company in any case.
The Company believes that the Year 2000 issue will not pose significant operational problems for its computer systems.
CASINO JOURNAL PUBLISHING GROUP, INC.
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Recent Filings: Nov 1998 (Qtrly Rpt) | Mar 1999 (Annual Rpt) | May 1999 (Qtrly Rpt) | Aug 1999 (Qtrly Rpt)
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