Spintek showing off new products as it teeters on the edge of bankruptcy

David Strow

Wednesday, Oct. 18, 2000 | 11:11 a.m.

This week was supposed to be a coming out for Spintek Gaming Technologies Inc., a week when the Las Vegas company would show off a diversified new line of new products and games.

Instead, a failed financing has left the company with little cash on hand -- and Spintek says that cash may run out in just days.

"The company has substantial cash needs in order to meet its current operations, including payroll, sales expenses, marketing and development," Spintek said in a filing with the Securities and Exchange Commission on Monday. "If the company is unable to raise additional cash it will not be able to maintain operations and may avail itself of protection of the bankruptcy courts."

To raise that cash, Spintek said it is working on a number of options, including the liquidation of inventory, borrowing against sales contracts and the renegotiation of company obligations. Company officials said assets that are being considered for sale may even include patents held by the company.

"This company is currently ... at a better position than it has ever been at before," said Erik Batzloff, Spintek's vice president of administration and legal, citing the company's efforts to diversify its product line and future growth prospects. "(But) on a short-term basis, we need the capital to see our goals through."

As a result of Spintek's cash crunch, Batzloff said a "substantial" number of employees were laid off in the past few days, though he wouldn't specify how many. The company now employs 33 people, and Batzloff said further layoffs could not be ruled out.

Historically, Spintek's primary business has been the sale and marketing of "AccuSystem," a suite of software products designed to allow the automatic tracking of coin hopper levels on slot machines across a casino's floor. Batzloff said this system has been installed in 35,000 slot machines in 10 different gaming jurisdictions.

But Spintek officials had launched an effort to diversify the company's product line. At this week's World Gaming Congress and Expo, Spintek plans to unveil several new video slot machines and two new table games, which company officials hope to license to other gaming manufacturers. Spintek will also demonstrate a new "wireless, cashless gaming system," Batzloff said. The company still intends to exhibit at the trade show, which continues through Friday.

But the costs associated with these development efforts meant that Spintek had to raise capital to keep the company going, at least until sales of the new products picked up. The recent "disruption" of this financial placement put Spintek in its current position, Batzloff said. He declined to say who was providing the financing, how much capital was being raised, or why the transaction fell through.

In the past, Spintek's financing came primarily from Malcolm C. Davenport V, the company's primary stockholder. In August 1999, Davenport agreed to loan up to $2 million to the company over a 12-month period and had loaned the company $1.35 million as of its last financial report. The company did not file its annual report as scheduled in September after its chief financial officer fell ill and required emergency surgery.

Over the nine months ending March 31, Spintek reported a loss of $2.8 million on sales of $5.7 million. Though sales were up nearly 84 percent from the year-ago period, Spintek's loss rose by $200,000.

That was primarily the result of growing expenses from increased sales, customer service, engineering and administration departments, Spintek said. The $4.8 million in selling, general and administrative expense posted over the nine months ending March 31 was up $1.3 million from the year-ago period.

How long Spintek will be able to continue without financing, Batzloff said, is uncertain.

As of Tuesday, the company had not started the legal process of filing for bankruptcy.

"To say any particular date would be misleading," Batzloff said. "It could be a few days. If certain things occur, it could be a much longer period of time. We're pursuing all avenues."