SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________________
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Earliest Event Reported
January 2, 2004
IGAMES ENTERTAINMENT, INC.
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Nevada
--------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION OF ORGANIZATION)
000-49723 88-0501468
------------------------ ------------------------------------
(COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NUMBER)
700 South Henderson Road, Suite 210
King of Prussia, Pennsylvania 19406
---------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (610) 354-8888
--------------
Not Applicable
--------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
______________________________
Exhibit Index appears on page 33 hereof.
GENERAL EXPLANATION
The purpose of this Report is to amend the registrant's Current Report
on form 8-K dated January 2, 2004 that was filed with the Securities and
Exchange Commission on January 17, 2004 (the "Initial Report") which reported on
the consummation of the Registrant's merger with Money Centers of America, Inc.
This Report amends the Initial Report so as to provide the information required
under Item 7(a) and 7 (b) of form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired
Audited Financial Statements of Money Centers of America, Inc.
Independent Auditors Report
Balance Sheets dated as of September 30, 2003 and September 30, 2002
Statement of Operations and Accumulated Deficit for the Years Ended
September 30, 2003 and September 30, 2002
Statements of Cash Flows for the Years Ended September 30, 2003 and
September 30, 2003
Notes to Financial Statements
Unaudited Financial Statements of Money Centers of America, Inc.
Balance Sheets dated as of December 31, 2003 and December 31, 2002
Statement of Operations and Accumulated Deficit for the Three Months
Ended December 31, 2003 and December 31, 2002
Statements of Cash Flows for the Three Months Ended December 31, 2003
and December 30, 2002
Notes to Financial Statements
(b) Pro Forma Financial Statements of Business Acquired
Unaudited Pro Forma Condensed Combined Financial Statements of Money
Centers of America, Inc. Unaudited Pro Forma Combined Balance Sheet,
December 31, 2003 Unaudited Pro Forma Statement of Operations for the
Year Ended March 31, 2003 Unaudited Pro Forma Statement of Operations
for the Nine Months Ended December 31, 2003
2
(c) Exhibits.
2.1 Amended and Restated Agreement and Plan of Merger By and Among
Money Centers of America, Inc., Christopher M. Wolfington,
iGames Entertainment, Inc., Michele Friedman, Jeremy Stein and
Money Centers Acquisition, Inc., dated as of December 23,
2003. *
4.1 Certificate of Designations Series A Convertible Preferred
Stock
* Previously filed with the Current Report on Form 8-K dated
January 2, 2004 and filed on January 17, 2004
3
(a) Financial Statements of Business Acquired
AUDITED FINANCIAL STATEMENTS OF
MONEY CENTERS OF AMERICA, INC.
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report...................................................5
Balance Sheets.................................................................6
Statements of Operations and Accumulated Deficit...............................7
Statements of Cash Flows.......................................................8
Notes to Financial Statements.............................................9 - 16
4
SHERB & CO., LLP
805 Third Avenue New York, NY 10022 Voice: 212 838-5100 Fax: 212 838-2676
________________________________________________________________________________
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
Board of Directors
Money Centers of America, Inc.
We have audited the accompanying balance sheets of Money Centers of America,
Inc., (an S Corporation) as of September 30, 2003 and 2002, and the related
statements of operations and accumulated deficit and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects the financial position of Money Centers of America, Inc.
as of September 30, 2003 and 2002, and the results of its operations and its
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
Certified Public Accountants
New York, New York
December 10, 2003
5
MONEY CENTERS OF AMERICA, INC.
BALANCE SHEETS
September 30,
-------------------------
2003 2002
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents ........................ $ 1,329,444 $ 279,577
Restricted cash .................................. 432,270 -
Accounts receivable .............................. 588,953 499,821
Loans receivable ................................. - 635,928
Due from officer ................................. 98,618 88,977
Prepaid expenses and other current assets ........ 155,285 130,876
----------- -----------
Total current assets ........................... 2,604,570 1,635,179
Property and equipment, net ........................ 451,534 354,435
Intangible assets, net ............................. 41,805 38,144
Deferred financing costs ........................... 139,275 26,157
----------- -----------
$ 3,237,184 $ 2,053,915
=========== ===========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable ................................. $ 197,469 $ 64,649
Accrued expenses ................................. 84,035 258,074
Current portion of capital lease ................. 15,836 -
Notes payable .................................... 1,321,738 1,940,646
Lines of credit .................................. 1,232,876 -
Due to officer ................................... 100,000 -
Commissions payable .............................. 305,002 106,768
----------- -----------
Total current liabilities ...................... 3,256,956 2,370,137
Capital lease ...................................... 54,767 -
Stockholder's deficit:
Common stock, $.01 par value, 1,000 shares
authorized; 100 shares issued and outstanding ... 1 1
Accumulated deficit .............................. (74,540) (316,223)
----------- -----------
Total stockholder's deficit .................... (74,539) (316,222)
----------- -----------
$ 3,237,184 $ 2,053,915
=========== ===========
See notes to financial statements.
6
MONEY CENTERS OF AMERICA, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
YEARS ENDED
SEPTEMBER 30,
--------------------------
2003 2002
----------- -----------
Revenues ......................................... $ 4,411,090 $ 3,558,781
Operating expenses ............................... 3,503,915 2,801,585
----------- -----------
Gross Profit ..................................... 907,175 757,196
Selling, general and administrative expenses ..... 954,985 819,694
----------- -----------
Loss from operations ............................. (47,810) (62,498)
Other income (expenses):
Gain on forgiveness of debt ...................... 494,470 -
Interest expense, net ............................ (101,603) (28,304)
Gain on disposal of fixed assets ................. 3,263 -
----------- -----------
396,130 (28,304)
----------- -----------
Net income (loss) ................................ 348,320 (90,802)
Accumulated deficit, beginning of year ........... (316,223) (120,124)
Less distributions ............................... (106,637) (105,297)
----------- -----------
Accumulated deficit, end of year ................. $ (74,540) $ (316,223)
=========== ===========
See notes to financial statements.
7
MONEY CENTERS OF AMERICA, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED
SEPTEMBER 30,
-------------------------
2003 2002
----------- -----------
Cash flows from operating activities:
Net income (loss) ................................ $ 348,320 $ (90,802)
Adjustments used to reconcile net income (loss) to
net cash provided (used) by operating activities:
Gain on forgiveness of debt .................... (494,470) -
Depreciation and amortization .................. 138,751 102,284
Increase (decrease) in:
Accounts payable ............................. 132,820 12,144
Accrued expenses ............................. (174,039) (219,234)
Commissions payable .......................... 198,234 106,768
(Increase) decrease in:
Prepaid expenses and other current assets .... (24,409) (42,876)
Accounts receivable .......................... (89,132) (499,821)
----------- -----------
Net cash provided (used) by operating activities ... 36,075 (631,537)
Cash flows from investing activities:
Repayments - Loans receivable .................... 635,928 400,764
Purchases of property and equipment .............. (140,137) (27,292)
Purchase of intangible assets .................... (28,771) (47,557)
----------- -----------
Net cash provided by investing activities .......... 467,020 325,915
Cash flows from financing activities:
Restricted cash .................................. (432,270) -
Proceeds from lines of credit .................... 1,232,876 -
Distributions to owners .......................... (106,637) (105,297)
Advances to officer .............................. (9,641) (88,977)
Advances from officer ............................ 100,000 -
Repayments of notes payable ...................... (124,438) (449,902)
Deferred financing costs ......................... (113,118) (26,157)
----------- -----------
Net cash provided (used) by financing activities ... 546,772 (670,333)
NET INCREASE (DECREASE) IN CASH .................... 1,049,867 (975,955)
CASH, beginning of year ............................ 279,577 1,255,532
----------- -----------
CASH, end of year .................................. $ 1,329,444 $ 279,577
=========== ===========
Supplemental disclosures:
Cash paid during the year for interest ........... $ 57,558 $ 27,190
=========== ===========
See notes to financial statements.
8
MONEY CENTERS OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
1. ORGANIZATION
Money Centers of America Inc. ("MCA", or the "Company"), a Delaware
corporation, was incorporated in October 1997.
MCA provides financial services, primarily automated teller machine ("ATM"),
credit card advances and check cashing, to customers at gaming establishments
located in California and Wisconsin.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. CASH AND CASH EQUIVALENTS
The Company maintains cash in bank accounts which exceed federally insured
limits. At September 30, 2003 and 2002, the Company had deposits in excess of
federally insured amounts aggregating approximately $250,000 and $170,000
respectively, at various financial institutions. The Company believes it has
its cash deposits at high quality financial institutions. In addition, the
Company maintains a significant amount of cash at each of the casinos.
Management believes that the Company has controls in place to safeguard these
on-hand amounts, and that no significant credit risk exists with respect to
cash.
For purposes of the statements of cash flows, the Company considers all
highly-liquid investments with an original maturity date of three months or
less to be cash equivalents.
b. RECEIVABLES AND REVENUE RECOGNITION
i. ATM AND CREDIT CARD RECEIVABLES
Fees earned from ATM and credit card advances are recorded on the date of
transaction.
Accounts receivable arise primarily from ATM, credit card advances and
check cashing services provided at casino locations. Concentrations of
credit risk related to ATM and credit card advances are limited to the
processors who remit the cash advanced back to the Company along with the
Company's allocable share of fees earned. The Company believes these
processors are financially stable and no significant credit risk exists
with respect to accounts receivable arising from credit card advances. No
allowance was considered necessary at September 30, 2003 and 2002.
9
MONEY CENTERS OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
ii. CHECK CASHING
Fees charged for check cashing are recorded at the date the checks are
cashed.
The Company charges operations for potential losses on returned checks. No
allowance was considered necessary at September 30, 2003 and 2002.
c. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of cash and cash equivalents, credit card receivables,
accounts payable and accrued expenses approximate their carrying amounts
because of the short maturities of these instruments.
d. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, and depreciation is provided by
use of straight-line methods over the estimated useful lives of the assets.
e. IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets to assess recoverability from future
operations using undiscounted cash flows. When necessary, charges for
impairments of long-lived assets are recorded for the amount by which the
present value of future cash flows exceeds the carrying value of these
assets.
f. SOFTWARE DEVELOPMENT COSTS
Capitalization of software development costs begins upon the establishment of
technological feasibility of new or enhanced software products. Technological
feasibility of a computer software product is established when the Company
has completed all planning, designing, coding and testing that is necessary
to establish that the software product can be produced to meet design
specifications including functions, features and
10
MONEY CENTERS OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
technical performance requirements. All costs incurred prior to establishing
technological feasibility of a software product are charged to research and
development as incurred.
g. INCOME TAXES
The shareholders of MCA elected to be taxed as an S Corporation, as defined
in the Internal Revenue Code. Such status was also elected for state tax
purposes. Under this status, taxable income is passed through and taxed at
the shareholder level, rather than at the corporate level.
h. USE OF ESTIMATES
Preparation of the financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the balance sheets and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
i. DEFERRED FINANCING COSTS
Deferred financing costs are amortized over the term of the related debt.
3. PROPERTY AND EQUIPMENT
The major classes of property and equipment at September 30, 2003 and 2002
are as follows:
Estimated Life 2003 2002
-------------- ---- ----
Equipment ....................... 5 years $ 631,432 $ 447,148
Furniture ....................... 5 - 7 years 77,256 60,533
--------- ---------
708,688 507,681
Less accumulated depreciation ... (257,154) (153,246)
--------- ---------
$ 451,534 $ 354,435
========= =========
11
MONEY CENTERS OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
3. PROPERTY AND EQUIPMENT (CONTINUED)
Depreciation expense, for property and equipment, for the years ended
September 30, 2003 and 2002 was $113,641 and $92,871 respectively.
The amounts above include equipment under capital leases with a gross
carrying value of approximately $148,000 and $0 and accumulated depreciation
of approximately $11,000 and $0 at September 30, 2003 and 2002 respectively.
4. INTANGIBLE ASSETS
Intangible assets at September 30, 2003 and 2002 consisted of the following
Estimated September 30,
Life 2003 2002
--------- ---- ----
Software ........................ 10 years $ 9,928 $ 5,553
Software development costs ...... 5 years 30,075 18,670
Website development costs ....... 3 years 24,000 24,000
Other ........................... 3 years 1,627 -
-------- --------
65,630 48,223
Less accumulated amortization ... (23,825) (10,079)
-------- --------
$ 41,805 $ 38,144
======== ========
Amortization expense, for intangible assets, and the amortization of the
deferred financing costs, for the years ended September 30, 2003 and 2002 was
$25,110 and $9,413 respectively. Estimated amortization expense over the next
five years is as follows:
Year Amount
---- ------
2004 .......... $ 16,000
2005 .......... 9,000
2006 .......... 7,000
2007 .......... 6,000
2008 .......... 4,000
12
MONEY CENTERS OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
5. NOTES PAYABLE
Notes payable at September 30, 2003 and 2002, consist of the following:
2003 2002
---- ----
Note payable Tunica - Biloxi Tribe 1202;
interest at 9% per annum; the
notes are unsecured and due on demand ........ $ - $ 104,907
Note payable Tunica - Biloxi Tribe 202;
interest at 9% per annum; the notes
are unsecured and due on demand .............. - 63,268
Note payable Tunica - Biloxi Tribe 402;
interest at 9% per annum; the notes
are unsecured and due on demand .............. - 28,001
Note payable Tunica - Biloxi Tribe;
interest at 9% per annum; the notes are
unsecured and due on demand .................. 1,321,738 1,744,470
---------- ----------
$1,321,738 $1,940,646
========== ==========
6. CAPITAL LEASE
Capital lease obligation at September 30, 2003 consists of the following:
2003
----
Obligation under capital lease, imputed
interest rate at 12.78%; due on
May 2007; collateralized by equipment ...................$ 70,603
Less current maturities ................................. (15,836)
--------
$ 54,747
========
Future minimum lease payments for equipment acquired under capital leases at
September 30, 2003 are as follows:
2004 .......... $ 15,836
2005 .......... 17,985
2006 .......... 21,652
2007 .......... 15,130
--------
$ 70,603
========
13
MONEY CENTERS OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
7. LINES OF CREDIT:
Lines of credit at September 30, 2003 consists of the following:
2003
----
Line of credit, maximum availability of $1,800,000, in
October 2003 the line of credit was amended increasing
the maximum availability to $3,000,000, through May 2004;
subject to various restrictive covenants, interest is
payable monthly at 15% per annum, borrowings are
collateralized by restricted cash and guaranteed by the
shareholder of the Company. The line of credit is also
collateralized by all the assets of the Company, in the
case that the restricted cash is not sufficient to
collateralize the outstanding balance on the line of
credit ...................................................... $ 360,030
Line of credit, interest is payable monthly at 9% per
annum, the line is unsecured and due on demand .............. 611,000
Line of credit, non-interest bearing, the line is
unsecured and due on demand ................................. 261,846
----------
$1,232,876
==========
8. COMMITMENTS
a. LEASE COMMITMENTS
The Company leases office space in Minnesota on a month to month basis for
$738 per month.
The Company's total rent expense under operating leases was approximately
$10,000 and $3,000 for the years ended September 30, 2003 and 2002,
respectively.
14
MONEY CENTERS OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
8. COMMITMENTS (CONTINUED)
b. CASINO CONTRACTS
MCA operates at a number of Native American owned gaming establishments under
contracts requiring the Company to pay a rental fee to operate at the
respective gaming locations.
Typically, the fees are earned by the gaming establishment over the life of
the contract based on one of the following scenarios:
- A dollar amount, as defined by the contract, per transaction volume
processed by MCA.
- A percentage of MCA's profits at the respective location.
As of September 30, 2003 and 2002, the Company has recorded $257,098 and
$77,736, respectively, of accrued commissions on casino contracts.
9. DUE FROM / TO OFFICER
Amounts due from and due to officer are non-interest bearing cash advances.
The officer is the sole shareholder of the Company.
15
MONEY CENTERS OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
10. STOCKHOLDER'S DEFICIT
In 2001, the Company issued a warrant, as amended, to an individual to
purchase shares of common stock of the Company representing 10% of the
issued and outstanding shares on a fully diluted basis. The exercise price
for each share of common stock is $.01.
11. SUBSEQUENT EVENTS
On November 26, 2003 the Company signed an agreement and plan of merger with
iGames Entertainment, Inc., (iGames) a Nevada Corporation. iGames is also in
the gaming industry. iGames holds patents, trademarks and rights for a "slot
anti-cheating device," for gaming machines, known as the Protector. On
November 3, 2003 iGames signed a stock purchase agreement for the
acquisition of Chex Services, Inc., a subsidiary of Equitex, Inc. Chex
Services, Inc. provides the same financial services to casinos as MCA.
In October 2003 the Company consolidated all of its notes payable into one
note totaling $1,296,176. In December 2003 the Company paid back the note in
full. The parties to the note, MCA and the Tunica Biloxi Tribe of Louisiana
(the Tribe), have also agreed to a possible additional $3,000,000 to be paid
to the Tribe as royalties based on a percentage of future financial service
contracts introduced to the Company by the Tribe and a percentage of any new
financial service contracts secured by MCA.
16
UNAUDITED FINANCIAL STATEMENTS OF
MONEY CENTERS OF AMERICA, INC.
INDEX TO FINANCIAL STATEMENTS
Balance Sheets (Unaudited)....................................................18
Statements of Operations and Accumulated Deficit (Unaudited)..................19
Statements of Cash Flows (Unaudited)..........................................20
Notes to Financial Statements (Unaudited)................................21 - 26
17
MONEY CENTERS OF AMERICA, INC.
BALANCE SHEETS
(UNAUDITED)
December 31,
-------------------------
2003 2002
----------- -----------
ASSETS
Current assets
Cash and cash equivalents ........................ $ 245,999 $ 681,212
Restricted cash .................................. 1,675,953 -
Accounts receivable .............................. 28,695 83,808
Loans receivable ................................. - 661,601
Due from officer ................................. - 67,631
Prepaid expenses and other current assets ........ 250,231 156,323
----------- -----------
Total current assets ........................... 2,200,878 1,650,575
----------- -----------
Property and equipment, net ........................ 417,306 337,217
----------- -----------
Other assets
Intangible assets, net ........................... 42,360 36,957
Deferred financing costs, net .................... 141,607 35,157
----------- -----------
Total other assets ............................. 183,967 72,114
----------- -----------
$ 2,802,151 $ 2,059,906
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Current portion of capital lease obligations ..... $ 16,521 $ -
Lines of credit .................................. 2,210,417 180,000
Notes payable .................................... - 1,446,176
Due to officer ................................... 100,000 -
Accounts payable ................................. 95,415 79,159
Commissions payable .............................. 97,200 98,904
Accrued expenses ................................. 132,037 184,668
----------- -----------
Total current liabilities ...................... 2,651,590 1,988,907
----------- -----------
Long-term liabilities
Capital lease obligations ........................ 47,795 -
----------- -----------
Total long-term liabilities .................... 47,795 -
----------- -----------
Stockholder's equity
Common stock, $.01 par value, 1,000 shares
authorized; 100 shares issued and outstanding .. 1 1
Additional paid-in capital ....................... 142,000 494,470
Accumulated deficit .............................. (39,235) (423,472)
----------- -----------
Total stockholder's equity ..................... 102,766 70,999
----------- -----------
$ 2,802,151 $ 2,059,906
=========== ===========
The accompanying notes are an integral part of these financial statements.
18
MONEY CENTERS OF AMERICA, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(UNAUDITED)
Three Months Ended
December 31,
-------------------------
2003 2002
----------- ---------
Revenues ......................................... $ 1,748,833 $ 645,623
Operating expenses ............................... 1,324,554 479,032
----------- ---------
Gross Profit ..................................... 424,279 166,591
Selling, general and administrative expenses ..... 285,021 228,962
----------- ---------
Income (loss) from operations .................... 139,258 (62,371)
Interest expense, net ............................ (79,053) (8,210)
----------- ---------
Net income (loss) ................................ 60,205 (70,581)
Accumulated deficit, beginning of period ......... (74,540) (316,223)
Less distributions ............................... (24,900) (36,668)
----------- ---------
Accumulated deficit, end of period ............... $ (39,235) $(423,472)
=========== =========
The accompanying notes are an integral part of these financial statements.
19
MONEY CENTERS OF AMERICA, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
December 31,
--------------------------
2003 2002
------------ -----------
Cash flows from operating activities:
Net income (loss) ............................... $ 60,205 $ (70,581)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation & amortization ................... 48,481 28,030
(Increase) decrease in:
Accounts receivable ........................ 560,258 416,013
Prepaid expenses and other current assets .. (94,946) (25,447)
Increase (decrease) in:
Accounts payable ........................... (102,054) 14,510
Commissions payable ........................ (207,802) (7,864)
Accrued expenses ........................... 48,002 (73,406)
------------ -----------
Net cash provided by operating activities ......... 312,144 281,255
------------ -----------
Cash flows from investing activities:
Decrease in loans receivable .................... - (25,673)
Purchases of property and equipment ............. - (7,625)
Purchase of intangible assets ................... (4,533) (2,001)
------------ -----------
Net cash used by investing activities ............. (4,533) (35,299)
------------ -----------
Cash flows from financing activities:
Increase in restricted cash ..................... (1,243,683) -
Deferred financing costs ........................ (2,332) (9,000)
Proceeds from lines of credit ................... 48,564,637 5,774,001
Principal payments on line of credit ............ (47,597,371) (5,594,000)
Principal payments on notes payable ............. (1,321,738) -
Repayment of advances ........................... 98,618 21,346
Principal payments on capital lease ............. (6,287) -
Additional paid in capital ...................... 142,000 -
Distributions to owners ......................... (24,900) (36,668)
------------ -----------
Net cash provided (used) by financing activities .. (1,391,056) 155,679
------------ -----------
Net increase (decrease) in cash ................... (1,083,445) 401,635
Cash, beginning of period ......................... 1,329,444 279,577
------------ -----------
Cash, end of period ............................... $ 245,999 $ 681,212
============ ===========
Supplemental disclosures:
Cash paid during the three months for interest .. $ 79,053 $ 8,210
============ ===========
The accompanying notes are an integral part of these financial statements
20
MONEY CENTERS OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(UNAUDITED)
1. ORGANIZATION
Money Centers of America Inc. ("MCA", or the "Company"), a Delaware
corporation, was incorporated in October 1997.
MCA provides financial services, primarily automated teller machine ("ATM"),
credit card advances and check cashing to customers at gaming establishments
located in California and Wisconsin.
2. UNAUDITED INTERIM INFORMATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial statements and pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). The accompanying financial
statements for the interim periods are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion
of management, necessary for a fair presentation of the financial position
and operating results for the periods presented. These financial statements
should be read in conjunction with the financial statements and related
footnotes for the year ended September 30, 2003 and notes thereto contained
in the Report on Form 8-K as filed with the Securities and Exchange
Commission. The results of operations for the three months ended December 31,
2003 are not necessarily indicative of the results for the full fiscal year
ending September 30, 2004.
3. PROPERTY AND EQUIPMENT
The major classes of property and equipment at December 31, 2003 and 2002 are
as follows:
Estimated Life 2003 2003
-------------- ---- ----
Equipment ....................... 5 years $ 631,432 $ 454,773
Furniture ....................... 5 - 7 years 77,256 60,533
--------- ---------
708,688 515,306
Less accumulated depreciation ... (291,382) (178,089)
--------- ---------
$ 417,306 $337,217
========= =========
Depreciation expense, for property and equipment, for the three months ended
December 31, 2003 and 2002 were $36,245 and $24,859 respectively.
The amounts above include equipment under capital leases with a gross
carrying value of $148,437 and $0 and accumulated depreciation of $18,555 and
$0 at December 31, 2003 and 2002 respectively.
21
MONEY CENTERS OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(UNAUDITED)
4. INTANGIBLE ASSETS
Intangible assets at December 31, 2003 and 2002 are as follows:
Estimated December 31,
Life 2003 2002
--------- ---- ----
Software ........................ 10 years $ 9,928 $ 5,553
Software development costs ...... 5 years 34,608 20,671
Website development costs ....... 3 years 24,000 24,000
Other ........................... 3 years 1,627 -
-------- --------
70,163 50,224
Less accumulated amortization ... (27,803) (13,267)
-------- --------
$ 42,360 $ 36,957
======== ========
Amortization expense, for intangible assets, for the three months ended
December 31, 2003 and 2002 was $12,236 and $3,171 respectively. Estimated
amortization expense over the next five years is as follows:
Year Amount
---- ------
2004 .......... $ 16,000
2005 .......... 9,000
2006 .......... 7,000
2007 .......... 6,000
2008 .......... 4,000
22
MONEY CENTERS OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(UNAUDITED)
5. NOTES PAYABLE
Notes payable at December 31, 2003 and 2002, consisted of the following:
2003 2002
---- ----
Note payable Biloxi Tribe 1202;
interest at 9% per annum;
the notes are unsecured and due on demand .... $ - $ 104,907
Note payable Biloxi Tribe 202;
interest at 9% per annum;
the notes are unsecured and due on demand .... - 63,268
Note payable Biloxi Tribe 402;
interest at 9% per annum;
the notes are unsecured and due on demand .... - 28,001
Notes payable Biloxi Tribe;
interest at 9% per annum; the
notes are unsecured and due on demand ........ - 1,250,000
---------- ----------
$ - $1,446,176
========== ==========
6. CAPITAL LEASE
Capital lease obligation at December 31, 2003 consisted of the following:
2003
----
Obligation under capital lease, imputed
interest rate at 12.78%; due in May
2007; collateralized by equipment .......................$ 64,316
Less current maturities ................................. (16,521)
--------
$ 47,795
========
Future minimum lease payments for equipment acquired under capital leases at
December 31, 2003 are as follows:
2004 ......... $23,799
2005 ......... 23,799
2006 ......... 23,799
2007 ......... 7,932
-------
Total minimum lease payments ..... 79,329
Less amount representing interest 15,013
-------
Present value of net minimum lease 64,316
Less current portion ............. 16,521
-------
$47,795
=======
23
MONEY CENTERS OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(UNAUDITED)
7. LINES OF CREDIT:
Lines of credit at December 31, 2003 and 2002 consisted of the following:
2003 2002
---- ----
Line of credit, maximum availability of
$3,000,000 through May 2004; subject to various
restrictive covenants, interest is payable
monthly at 15% per annum, borrowings are
collateralized by restricted cash and
guaranteed by the shareholder of the Company ...... $1,675,953 -
Line of credit, interest is payable monthly at
9% per annum, the line is unsecured and due on
demand ............................................ 148,000 180,000
Line of credit, non-interest bearing, the line
is unsecured and due on demand .................... 386,464 -
---------- -------
$2,210,417 180,000
========== =======
8. COMMITMENTS
a. LEASE COMMITMENTS
The Company leases office space in Minnesota on a month to month basis for
$738 per month.
The Company's total rent expense under operating leases was approximately
$2,500 for the three months ended December 31, 2003 and 2002.
b. CASINO CONTRACTS
MCA operates at a number of Native American owned gaming establishments under
contracts requiring the Company to pay a rental fee to operate at the
respective gaming locations.
Typically, the fees are earned by the gaming establishment over the life of
the contract based on one of the following scenarios:
- A dollar amount, as defined by the contract, per transaction volume
processed by MCA.
- A percentage of MCA's profits at the respective location.
As of December 31, 2003 and 2002, the Company has recorded $37,094 and
$71,484, respectively, of accrued commissions on casino contracts.
24
MONEY CENTERS OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(UNAUDITED)
9. CONCENTRATION OF CREDIT RISK
The Company maintains cash in bank accounts which exceed federally insured
limits. At December 31, 2003 and 2002, the Company had deposits in excess of
federally insured amounts aggregating approximately $3,900,000 and
$1,200,000 respectively, at various financial institutions. The Company
believes it has its cash deposits at high quality financial institutions. In
addition, the Company maintains a significant amount of cash at each of the
casinos. These casino locations are monitored by casino surveillance and
security, and the cash maintained at these locations is also subject to the
Company's system of internal controls. Management believes that the Company
has controls in place to safeguard these on-hand amounts, and that no
significant credit risk exists with respect to cash.
10. STOCKHOLDER'S DEFICIT
In 2001, the Company issued a warrant, as amended, to an individual to
purchase shares of common stock of the Company representing 10% of the
issued and outstanding shares on a fully diluted basis. The exercise price
for each share of common stock is $.01.
11. SUBSEQUENT EVENTS
On January 2, 2004, pursuant to an Amended and Restated Agreement and Plan
of Merger (the "Merger Agreement") by and among Money Centers, Christopher
M. Wolfington, iGames, Michele Friedman, Jeremy Stein and Money Centers
Acquisition, Inc., a wholly-owned subsidiary of iGames, Money Centers
Acquisition, Inc. was merged with and into Money Centers and Money Centers,
as the surviving corporation, became a wholly-owned subsidiary of iGames
(the "Merger"). In connection with the Merger, all of the issued and
outstanding shares of capital stock of Money Centers were tendered to iGames
and iGames issued to the Money Centers stockholders an aggregate of
1,351,640 shares of iGames Series A Convertible Preferred Stock, $.001 par
value per share, and warrants to purchase an aggregate of 2,500,000 shares
of iGames common stock, par value $.004 per share, at an exercise price of
$.01 per share. Each share of Series A Convertible Preferred Stock is
entitled to ten votes in all matters submitted to a vote of iGames
shareholders and is convertible at the option of the holders into ten shares
of common stock at any time after the date on which we amend our articles of
incorporation to increase the number of authorized shares of our common
stock to at least 125,000,000. In addition, at the closing of the Company's
previously announced acquisition of Chex (the "Chex Acquisition") each share
of Series A Convertible Preferred Stock will automatically be converted into
ten shares of common stock. In addition, at the closing of the Chex
Acquisition, the Money Centers stockholders are entitled (subject to certain
limitations) to additional consideration equal to that number of shares of
iGames common stock necessary to ensure that they own an aggregate of 30% of
the issued and outstanding shares of iGames common stock following such
issuance, the issuance of shares of iGames common stock in the Chex
Acquisition and assuming full conversion of all shares of Series A
Convertible Preferred Stock. The acquisition will be accounted for as a
reverse acquisition under the purchase method for business combinations. The
combination of the two companies will be recorded as a recapitalization of
Money Centers, pursuant to which Money Centers will be treated as the
continuing entity.
25
Following the consummation of this merger, all of our existing officers
resigned from their positions and Christopher M. Wolfington was appointed
President and Chief Executive Officer of the Company and Chairman of its
Board of Directors. The Company's Board of Directors presently consists of
four members, one of whom is Mr. Wolfington , one of whom is Jeremy Stein,
our former president, and two of whom are independent directors. All other
previous members of our Board of Directors resigned upon consummation of
this merger.
Pursuant to the terms of a Stock Purchase Agreement between iGames, Helene
Regen and Samuel Freshman dated January 6, 2004 (the "Stock Purchase
Agreement"), iGames acquired all of the issued and outstanding shares of
capital stock of Available Money, a provider of cash access services based
in Los Angeles, California. The purchase price of this transaction was
$6,000,000, $2,000,000 of which was paid in cash at closing, $2,000,000 of
which is due in cash on or before March 6, 2004, and $2,000,000 of which is
due in cash or, at the election of iGames, by issuance of 1,470,589 shares
of iGames common stock on the earlier of (i) the closing of iGames'
acquisition of Chex Services, Inc., (ii) the termination of that proposed
transaction or (iii) June 30, 2004. The Stock Purchase Agreement provides
for adjustment of the purchase price in the event that certain of Available
Money's customer contracts do not renew or that the former stockholders of
Available Money do not provide iGames with assistance in obtaining renewals
of such contracts. The primary assets acquired as a result of this
transaction are Available Money's contracts to provide automatic teller
machines to 18 customers, 15 of which are traditional casino operations. The
former stockholders of Available Money retain the right to receive all
payments subsequent to the closing date that relate to services provided by
Available Money through December 31, 2003 and are jointly and severally
liable for all costs and expenses incurred by Available Money relating to
services rendered on or before December 31, 2003.
The cash portion of the purchase price was and will be financed by third
party lenders.
26
(b) Pro Forma Financial Statements of Business Acquired
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Combined Financial Statements of iGames
Entertainment, Inc. ("iGames") and Money Centers of America, Inc. ("Money
Centers") gives effect to the merger between iGames and Money Centers under the
purchase method of accounting prescribed by Accounting Principles Board Opinion
No. 16, Business Combinations. These Pro Forma statements are presented for
illustrative purposes only. The pro forma adjustments are based upon available
information and assumptions that management believes are reasonable. The
Unaudited Pro Forma Combined Financial Statements do not purport to represent
what the results of operations or financial position of iGames would actually
have been if the merger had in fact occurred on April 1, 2002 nor do they
purport to project the results of operations or financial position of iGames for
any future period or as of any date, respectively. The acquisition of Money
Centers by iGames has been accounted for as a reverse acquisition under the
purchase method for business combinations. The combination of the two companies
is recorded as a recapitalization of Money Centers pursuant to which Money
Centers is treated as the continuing entity. Accordingly, the operations
presented in the unaudited pro forma statement of operations include only the
historical operations of Money Centers.
These Unaudited Pro Forma Combined Financial Statements do not give effect to
any restructuring costs or to any potential cost savings or other operating
efficiencies that could result from the merger between iGames and Money Centers.
You should read the financial information in this section along with iGames's
historical financial statements and accompanying notes in prior Securities and
Exchange Commission filings and in this amended Current Report on Form 8-K.
27
iGAMES ENTERTAINMENT, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 2003
Pro Forma
Adjustments
Money ---------------------
Centers iGames Debit Credit Pro Forma
----------- ----------- --------- ---------- -----------
ASSETS
Current assets:
Cash and cash equivalents ........................... $ 245,999 $ 27,398 $ 273,397
Restricted cash ..................................... 1,675,953 150,000 1,825,953
Accounts receivable ................................. 28,695 10,060 38,755
Inventory ........................................... - 132,348 132,348
Deferred acquisition costs .......................... - 160,000 160,000
Prepaid expenses and other current assets ........... 250,231 - 250,231
----------- ----------- -----------
Total current assets .............................. 2,200,878 479,806 2,680,684
Property and equipment, net ........................... 417,306 7,123 424,429
Intangible assets, net ................................ 42,360 426,085 468,445
Deposits .............................................. - 4,865 4,865
Deferred financing costs .............................. 141,607 - 141,607
----------- ----------- -----------
$ 2,802,151 $ 917,879 $ 3,720,030
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable .................................... $ 95,415 $ 133,590 $ 229,005
Accrued expenses .................................... 132,037 168,048 300,085
Current portion of capital lease .................... 16,521 - 16,521
Notes payable ....................................... - 18,500 18,500
Lines of credit ..................................... 2,210,417 375,276 2,585,693
Due to officer ...................................... 100,000 - 100,000
Commissions payable ................................. 97,200 - 97,200
----------- ----------- -----------
Total current liabilities ......................... 2,651,590 695,414 3,347,004
Capital lease ......................................... 47,795 - 47,795
Stockholder's equity:
Preferred stock, Series A, $.001 par value,
5,000,000, shares authorized 1,351,640
shares issued and outstanding, each share
of Series A Preferred stock is
convertible into 10 shares of common stock ........ - - 1,352 1,352
Common stock, $.004 par value, 50,000,000
shares authorized; 3,966,291 shares
issued and outstanding ............................ 1 15,865 1 15,865
Additional paid-in capital .......................... 142,000 4,746,554 4,541,305 347,249
Deferred compensation ............................... - (6,250) 6,250 -
Accumulated deficit ................................. (39,235) (4,533,704) 4,533,704 (39,235)
----------- ----------- -----------
Total stockholder's equity ........................ 102,766 222,465 325,231
----------- ----------- -----------
$ 2,802,151 $ 917,879 $ 3,720,030
=========== =========== ===========
28
iGAMES ENTERTAINMENT, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2003
Pro Forma
Adjustments
Money ---------------------
Centers iGames Debit Credit Pro Forma
----------- ----------- --------- ---------- -----------
Revenues .............................................. $ 3,179,035 $ - $ 3,179,035
Operating expenses .................................... 2,470,630 - 2,470,630
----------- ----------- -----------
Gross Profit .......................................... 708,405 - 708,405
Selling, general and administrative expenses .......... 766,470 - 766,470
----------- ----------- -----------
Loss from operations .................................. (58,065) - (58,065)
Interest expense, net ................................. (17,588) - (17,588)
----------- ----------- -----------
Net loss .............................................. $ (75,653) $ - $ (75,653)
=========== =========== ===========
Net loss per common share-basic ....................... $ (0.03) $ - $ (0.03)
=========== =========== ===========
Net loss per common share-diluted ..................... $ (0.00) $ - $ (0.00)
=========== =========== ===========
Weighted average common shares outstanding
-Basic ............................................. 2,521,346 - 2,521,346
=========== =========== ===========
Weighted average common shares outstanding
-Diluted ........................................... 18,537,746 - 18,537,746
=========== =========== ===========
29
iGAMES ENTERTAINMENT, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
NINE MONTHS ENDED DECEMBER 31, 2003
Pro Forma
Adjustments
Money ---------------------
Centers iGames Debit Credit Pro Forma
----------- ----------- --------- ---------- -----------
Revenues .............................................. $ 4,857,133 $ - $ 4,857,133
Operating expenses .................................... 3,859,592 - 3,859,592
----------- ----------- -----------
Gross Profit .......................................... 997,541 - 997,541
Selling, general and administrative expenses .......... 806,685 - 806,685
----------- ----------- -----------
Income from operations ................................ 190,856 - 190,856
Other income (expenses):
Gain on forgiveness of debt ........................... 494,470 - 494,470
Interest expense, net ................................. (163,069) - (163,069)
Gain on disposal of fixed assets ...................... 3,263 - 3,263
----------- ----------- -----------
334,664 - 334,664
----------- ----------- -----------
Net income (loss) ..................................... $ 525,520 $ - $ 525,520
=========== =========== ===========
Net income per common share-basic ..................... $ 0.14 $ - $ 0.14
=========== =========== ===========
Net income per common share-diluted ................... $ 0.03 $ - $ 0.03
=========== =========== ===========
Weighted average common shares outstanding
-Basic ............................................. 3,772,219 - 3,772,219
=========== =========== ===========
Weighted average common shares outstanding
-Diluted ........................................... 19,788,619 - 19,788,619
=========== =========== ===========
30
iGAMES ENTERTAINMENT, INC.
Unaudited Pro Forma Adjustments
Pro Forma adjustments reflect the following transactions:
DR CR
--------- ---------
1.
Additional Paid-in Capital ............. 4,541,305
Common stock ........................... 1
Preferred stock......................... 1,352
Deferred compensation................... 6,250
Accumulated deficit .................... 4,533,704
To record recapitalization of Money Centers and issuance of 1,351,640 shares of
Series A Preferred Stock of iGames in exchange for all the outstanding shares of
Money Centers.
The acquisition has been accounted for as a reverse acquisition under the
purchase method for business combinations. The combination of the two companies
is recorded as a recapitalization of Money Centers, pursuant to which Money
Centers is treated as the continuing entity.
31
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 hereunto duly authorized.
IGAMES ENTERTAINMENT, INC.
By: /s/ Christopher M. Wolfington
-----------------------------
Name: Christopher M. Wolfington
Title: President and Chief Executive Officer
Date: March 15, 2004
32
EXHIBIT INDEX
Exhibit No.
4.1 Certificate of Designations of Series A Preferred Stock
33