RENO, Nev., Dec. 26 -- GameTech International, Inc., a leading supplier of electronic bingo equipment, today announced financial results for the fiscal year and fourth quarter ended October 31, 2002. Revenues for fiscal 2002 totaled nearly $48.9 million compared with $48.5 million for fiscal 2001 and the Company experienced a net income improvement of over $7 million compared with the previous fiscal year. For fiscal 2002, the Company had net income of $2.7 million, equal to $.23 per diluted share, compared with a net loss of $4.4 million, or $0.41 per diluted share in the previous fiscal year. Fourth quarter revenues were $12.4 million compared with $11.8 million in the fourth quarter of 2001, up nearly $600,000. The company incurred a net loss for the fourth quarter ended October 31, 2002 of $385,000, equal to $0.03 per diluted share, compared with a net loss of $4.0 million, or $0.37 per diluted share, for the comparable 2001 fiscal quarter.

 

The significant improvement in fiscal year net income was primarily due to an improved product and increases in units in the field, in addition to improvements in operations and reductions in write-offs over the prior year. The revenue increase for the fiscal year was attributable in large part to the installation of over 7,000 TED 2 C color portable handheld units during the year. Product development successes included the reinvigoration of the Company's back office accounting system software as AllTrak(TM)2 enjoyed installation increases of more than 200% over 2001. The company also introduced flat screens as an enhancement to its fixed base units in many markets, making these terminals more user-friendly. In total, Company units in the field increased over 20% during the year.

 

Revenue was adversely affected in the fourth quarter due to a former employee's misuse of the Company's fixed base electronic bingo system for personal gain outside the scope of his employment, which resulted in temporary shutdowns in the use of the Company's fixed base units in three states. The incident led to subsequent indirect effects, such as delayed new product development, as the Company completed investigations and security enhancements. All units now have been restored to play in every state. Fourth quarter earnings were adversely affected by an additional reserve of approximately $630,000 (pre-tax) of an account receivable related to the termination of a large Texas distributor's contract and costs of approximately $480,000 (pre-tax) associated with the separation of former employees.

 

According to Clarence Thiesen, chief executive officer, the Company's accomplishments during fiscal 2002 included upgrading distribution channels in Texas while retaining virtually every customer relationship in the state. In addition, the company was exonerated from charges of violation of a regulatory statute in a critical administrative action in Texas, clearing the way for further expansion in the state. "As a result of our actions in Texas, the Company is now positioned for expansion throughout the state," said Thiesen.

 

Thiesen noted that, while the company experienced unforeseen setbacks as a result of the unfortunate and tragic situation involving a former employee's unauthorized misuse of the Company's system, earlier actions to enhance the management team proved prudent as the company was well prepared to respond to the challenge. "The management team and all of our employees tackled this unfortunate development with resolve and commitment," said Thiesen. "As a result, we have emerged a stronger company, well positioned for future growth and development."

 

Just after the fiscal year-end, the Company completed the acquisition of certain assets of International Gaming Systems, LLC (IGS), owners and developers of Cadillac Bingo®, strengthening operations in Mississippi and New York and adding experienced research and development staff to the Company's team. Recent additions to the management team include Mark Lowell, vice president of research and development, formerly co-president with Aristocrat Inc. and manager of system projects at International Game Technology; and John Hewitt, chief financial officer, formerly corporate controller of Harveys Casino Resorts. Keith Larkin, previously the company's director of government affairs, was promoted to vice president of government affairs and compliance. Tim Butrum was promoted to director of operations. Stephen Patton and Joseph Lerner, founders and principals of IGS, joined GameTech as a result of the IGS acquisition, assuming management positions in Research and Development.

 

Thiesen also noted that the Company invested in capital expenditures amounting to $12.1 million during fiscal 2002 in order to modernize and increase the numbers of equipment in the field, with emphasis on the TED 2 C units. Long-term debt of $2.4 million was retired during the fiscal year.

 

GameTech International, Inc. is a leading supplier of a comprehensive line of electronic bingo equipment, including hand-held bingo units, fixed base units and turnkey accounting and management software. The Company supports its bingo operator customers with products that typically increase play, revenues and profits, and software customized to enhance management and operations, all backed by unparalleled customer service and support.

 

Certain statements contained in this press release may be deemed to be forward looking statements under federal securities laws, and GameTech intends that such forward-looking statements be subject to the safe harbor created thereby. Such forward-looking statements include expectations of the financial growth and operating results of the company. GameTech cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward looking statements contained herein. Such factors include (a) the ability of the Company to introduce products in the future that achieve commercial success; (b) the results of the Company's cost-containment initiatives (c) the ability of the Company to generate significant revenue in new geographic markets, (d) changes in the regulatory environment for the Company's products and the ability of the company and its products to be licensed; and (e) the ability of the Company's management, individually or collectively, to guide the Company in a successful manner. Additional information on these risk factors that could potentially affect the Company's financial results may be found in documents filed by the company with the Securities and Exchange Commission.

 

GAMETECH INTERNATIONAL, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATION
              (In thousands, except share and per share amounts)

                             Three Months Ended       Twelve Months Ended
                                 October 31,               October 31,
                               2001        2002         2001         2002
                                 (Unaudited)               (Unaudited)

     Revenues                $11,823      $12,409     $48,536       $48,861


     Operating expenses:
      Cost of revenues         8,380        5,221      22,185        19,556
      General and
       administrative          4,488        3,240      14,995         9,535
      Sales and marketing      3,532        3,965      14,400        13,245
      Research and
       development               347          514       2,780         2,097
                              16,747       12,940      54,360        44,433

     Income (loss) from
      operations              (4,924)        (531)     (5,824)        4,428

     Interest income
      and other, net              19          (92)        144            (7)

     Income (loss) before
      provision for
      income taxes            (4,905)        (623)     (5,680)        4,421

     Provision for
      income taxes              (882)        (238)     (1,285)        1,688

     Net income (loss)       $(4,023)       $(385)    $(4,395)       $2,733

     Basic net
      income (loss)
      per share               $(0.37)     $(0.03)      $(0.41)        $0.25

     Diluted net
      income (loss)
      per share               $(0.37)     $(0.03)      $(0.41)        $0.23

     Shares used in the
      calculation of net
      income per share:

      Basic               10,830,111   11,221,689  10,623,068    11,150,064

      Diluted             10,830,111   11,221,689  10,623,068    12,012,514

     Accounting effect of
      SFAS No. 142

     Reported net
      income (loss)          $(4,023)       $(385)    $(4,395)       $2,733
     Add back: Goodwill
      amortization               423           --       1,732            --
     Adjusted net
      income (loss)           (3,600)        (385)     (2,663)        2,733

     Basic net income
      per share
     Reported net
      income (loss)           $(0.37)     $(0.03)      $(0.41)        $0.25
     Add back: Goodwill
      amortization              0.04           --        0.16            --
     Adjusted basic
      net income
      (loss) per share        $(0.33)      (0.03)       (0.25)         0.25

     Diluted net income
      per share
     Reported net
      income (loss)           $(0.37)     $(0.03)      $(0.41)        $0.23
     Add back: Goodwill
      amortization              0.04           --        0.16            --
     Adjusted diluted
      net income
      (loss) per share        $(0.33)     $(0.03)      $(0.25)        $0.23


     Balance Sheet Data

                                             October 31,          October 31,
                                                2001                 2002
                                                                  (unaudited)

     Cash and equivalents                     $10,131                $4,233
     Short-term investments                     2,824                 5,045
     Total assets                              55,676                55,679

     Total liabilities                          9,092                 5,189
     Total stockholders' equity                46,584                50,490
     Total liabilities and
      stockholders' equity                    $55,676               $55,679