Business Editors
NORWALK, Conn.--(BUSINESS WIRE)--March 7, 2001
eLOT, Inc. (NASDAQ:ELOT), a provider of web-based retailing and Internet marketing services to governmental lotteries, today reported financial results for the fourth quarter and year ended December 31, 2000.
Gross revenues from continuing operations for the fourth quarter of 2000 were $443,000 compared to $12,000 in the fourth quarter of 1999. Sequential revenues increased 44% percent compared to $308,000 in the third quarter of 2000. Net revenues for the fourth quarter of 2000 were $401,000 compared to $8,000 in 1999. During the fourth quarter the Company began recording its advertising revenue net of agency sales commissions, in accordance with new guidance issued by the FASB's Emerging Issues Task Force. The loss from continuing operations for the fourth quarter was $4.7 million, or $0.07 per share, compared to a loss from continuing operations of $6.8 million, or $0.11 per share, in the fourth quarter of 1999.
For the full year 2000, gross revenues from continuing operations were $1 million compared to $12,000 for 1999. Net revenues were $831,000 for the 2000 year versus $8,000 in 1999. The loss from continuing operations for the year was $15 million, or $0.23 per share, compared to a loss from continuing operations of $12.0 million, or $0.21 per share in 1999.
Edwin McGuinn, President and Chief Executive Officer, commented, "During 2000 this Company completed a major transition from a telephony company to an Internet company while at the same time attempting to pioneer an industry with numerous political obstacles. Despite these significant obstacles and the overall weakness in stock market conditions eLOT has made substantial progress executing its business plan. It is our belief that broad adoption of Internet lottery is inevitable. In the near term we are working to put the company on secure financial footing by reducing expenses and growing several revenue verticals so we are in the position to capture significant market share when Internet lottery is widely adopted."
Highlights since the beginning of the fourth quarter include:
-- Introduced a free instant lottery game with a $1 million jackpot on eLotteryFreeWay.com. -- Formed strategic alliance with MDI Entertainment. Subsequently launched second and third chance sites for the Hoosier Lottery, the Kentucky Lottery and the New Jersey Lottery. -- Launched enhanced eLottoNet.com web site with a new design and new features including a free Lottery Email Notification Service (LENS). -- Adopted amendments to the Company's bylaws designed to improve corporate governance. -- Awarded a contract by the Maryland Lottery to provide an Internet interface to their lottery subscription system. This will allow the Maryland Lottery to receive subscription orders over the Internet for the multi-state jackpot BIG GAME and Maryland's weekly Lotto Game. -- Entered into a licensing agreement for Virtgame.com Corp.'s Macro eBorder Control technology. The proprietary eBorder Control technology will allow eLottery to restrict the distribution of Internet lottery tickets based on geographic location. -- Partly as a result of significant lobbying efforts by eLOT, the 106th Congress adjourned without enacting legislation that would have restricted the ability of state lotteries to distribute lottery tickets over the Internet. Congress' refusal to act on the Internet Gambling Prohibition Act (H.R. 3125) ensures the rights of individual states to bring their lotteries onto the Internet. -- Hired Greg Ziemak as Senior Vice President of Sales and Marketing. Mr. Ziemak has over 27 years of lottery industry experience including positions as the Executive Director of the Kansas Lottery, Director of the Connecticut State Lottery and President of the North American Association of State and Provincial Lotteries (NASPL).
At December 31, 2000, the Company had approximately $5.7 million of cash and cash equivalents. To improve its financial situation and preserve its cash resources, the Company has implemented the following: 1) hired an investment banker to sell a portion of the Company's investment in Dialogic Communications Corporation ("DCC), a private company, based in Franklin, Tennessee, that develops and markets interactive call processing and two-way notification solutions for business, industry and government; 2) made a significant reduction in the Company's workforce; 3) reduced its planned capital expenditures substantially; 4) dramatically reduced its lobbying expenditures; 5) implemented a 15% salary deferral program for senior management; 6) reduced rewards and content costs related to the operation of the Company's consumer web sites; and 7) reduced all other expenditures to the extent possible.
These actions have reduced the Company's total cash burn to less than $1,000,000 per month. Additional identified savings should reduce the cash burn to less than $850,000 per month during the second quarter. The Company continues to explore several strategic alternatives for financing its activities and operations going forward.
As expected, due to the Company's limited cash resources and until the Company is able to raise additional cash through the sale of its investment in DCC or other strategic financing alternatives, the report of independent public accountants on the Company's consolidated financial statements for the year ended December 31, 2000 will contain an explanatory paragraph stating that the consolidated financial statements have been prepared assuming that the Company will continue as a going concern, while noting that the Company's losses and current cash resources raise doubt about the Company's ability to continue as a going concern. Upon successfully raising additional capital, which would provide the Company sufficient cash resources to support its operations through December 31, 2001, the Company plans to request that the independent public accountants reconsider the explanatory paragraph in its report on the Company's consolidated financial statements.
eLOT has scheduled a conference call on Thursday, March 8th at 11:00 a.m. eastern time to review the fourth quarter and full year results. To access the call please dial 212-896-6084. The call will also be broadcast over the Internet at www.vcall.com.
About eLOT, Inc.
eLOT, Inc. is committed to leading the governmental lottery industry into the e-commerce market. The Company's subsidiary, eLottery, Inc., is a leading web-based retailer of governmental lottery tickets and has developed, installed and operated systems that have processed e-commerce lottery ticket sales and transactions. It has operated Internet, Intranet, telephone, communications, accounting, banking, database and other applications and services that can facilitate the electronic sale of new and existing lottery products worldwide. eLottery is also an application service provider of Internet marketing and advertising technology for lotteries. The Company's IMARCS (Internet Marketing Analysis Research and Communications System) database marketing solution enables government lotteries to attract, register and communicate with lottery players through advanced Internet technology.
The Company also maintains a reward-entertainment web site located at www.eLotteryFreeWay.com. eLotteryFreeWay's mission is to build an Internet community whose members are expected to be highly predisposed to purchase governmental lottery tickets over the Internet. In addition, eLottery offers a free daily lottery email notification service (LENS) of state lottery results and other information and services at www.eLottoNet.com. eLottery's corporate web site is located at www.eLottery.com.
This news release contains forward-looking statements. Such statements are subject to certain factors, which may cause eLOT's plans to differ or results to vary from those expected including the risks associated with the development of new products and the uncertainty of product acceptance, the competitive nature of the Company's industry, rapid technological change, legal uncertainties, the Company's dependence on key personnel, and a variety of risks set forth from time to time in Company filings with the Securities and Exchange Commission.
eLOT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Year Ended (In thousands, except for per share amounts) December 31, December 31, 2000 1999 2000 1999 (Unaudited) REVENUES: Gross Revenues 443 12 1,001 12 Less: Agency Sales Commissions 42 4 170 4 Net Revenue 401 8 831 8 COSTS AND EXPENSES: Prizes, content, advertising and promotion 422 296 2,311 296 General and Administrative 2,572 1,701 9,701 4,621 Asset Impairment --- 1,461 128 1,461 Non Cash Compensation Charge 650 2,625 650 2,625 Depreciation and Amortization 1,130 252 2,524 1,085 4,774 6,335 15,314 10,088 OPERATING LOSS (4,373) (6,327) (14,483) (10,080) INTEREST EXPENSE (434) (958) (1,627) (3,279) OTHER INCOME, NET 114 523 1,094 1,337 LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (4,693) (6,762) (15,016) (12,022) INCOME TAXES --- --- --- --- LOSS FROM CONTINUING OPERATIONS (4,693) (6,762) (15,016) (12,022) DISCONTINUED OPERATIONS: Income (loss) from discontinued operations (101) (9,699) (6,421) (14,906) Gain (loss) on sale of discontinued operations, (net of tax provision of $15,924) --- --- 387 --- Income (loss) from discontinued operations (101) (9,699) (6,034) (14,906) NET INCOME (LOSS) $(4,794)$(16,461)$(21,050)$(26,928) BASIC AND DILUTED LOSS PER SHARE: Loss from continuing operations $(0.07) $(0.11) $(0.23) $(0.21) Loss from discontinued operations --- (0.15) (0.10) (0.25) Gain on sale of discontinued operations --- --- 0.01 --- NET INCOME (LOSS) PER SHARE $(0.07) $(0.26) $(0.32) $(0.46) AVERAGE COMMON SHARES OUTSTANDING: 67,165 63,006 65,303 58,752 eLOT, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share amounts) December 31, December 31, 2000 1999 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 5,731 $ 1,060 Accounts receivable 222 8 Prepaid expenses and other current assets 709 174 Net assets of discontinued operations 8,294 51,402 Total Current Assets 14,956 52,644 PROPERTY AND EQUIPMENT, net 5,143 2,480 INTANGIBLE ASSETS, net 4,018 --- OTHER ASSETS 3,486 5,034 $ 27,603 $ 60,158 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 240 $ 19,818 Accounts payable 1,841 5,342 Accrued payroll and related costs 838 772 Accrued liabilities 2,083 1,804 Total Current Liabilities 5,002 27,736 LONG-TERM DEBT Debentures, net 13,336 13,660 Notes Payable 907 --- Total Long-Term Debt 14,243 13,660 Total Liabilities 19,245 41,396 STOCKHOLDERS' EQUITY: Common stock: $.01 par value; 80,000,000 shares authorized; 69,645,441 and 63,010,953 issued and outstanding 696 630 Additional paid-in capital 91,911 81,054 Accumulated other comprehensive loss (613) (336) Accumulated deficit (83,636) (62,586) Total Stockholders' Equity 8,358 18,762 $ 27,603 $ 60,158
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