<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1996
______________________________
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 000-20685
________________________________________
American Wagering, Inc.
_________________________________________________________________
(Exact name of small business issuer as specified in its charter)
Nevada 88-0344658
___________________________________ _________________________
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
675 Grier Drive, Las Vegas, Nevada 89119
_________________________________________________________________
(Address of principal executive office)
(702) 735-0101
_________________________________________________________________
(Issuer's telephone number)
_________________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
___________ _____________
The number of shares of Common Stock outstanding as of December
13, 1996 was 7,837,500.
<PAGE>
AMERICAN WAGERING, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
October 31, January 31,
1996 1996
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 10,099,987 $ 3,938,582
Other current assets 1,206,454 459,414
------------ ------------
11,306,441 4,397,996
PROPERTY AND EQUIPMENT, NET 8,616,899 420,992
INVESTMENTS 210,173 1,331,844
DEPOSITS AND OTHER ASSETS 475,313 88,977
INTANGIBLE ASSETS 1,152,521 --
EXCESS OF COST OVER FAIR MARKET VALUE
OF NET ASSETS ACQUIRED 2,175,016 --
------------ ------------
$ 23,936,363 $ 6,239,809
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Unpaid winning tickets $ 724,672 $ 1,006,056
Accounts payable/accrued expenses 940,468 495,176
Current portion of long-term debt 510,013 236,365
Stockholder notes payable 2,433,124 --
Other current liabilities 1,008,271 656,157
--------- ------------
5,616,548 2,393,754
LONG-TERM DEBT (less current portion) 5,087,472 757,956
------------ ------------
10,704,020 3,151,710
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock 78,376 50,251
Additional paid-in capital 14,686,207 445,006
Retained earnings(accumulated deficit) (1,532,240) 2,592,842
------------ ------------
13,232,343 3,088,099
------------ ------------
$ 23,936,363 $ 6,239,809
============ ============
NOTE: The balance sheet at January 31, 1996 has been taken
from the audited financial statements at that date and condensed.
The accompanying notes are an integral part of these financial statements.
<PAGE>
AMERICAN WAGERING, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED OCTOBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
REVENUES:
<S> <C> <C>
Horse and sports wagering $ 1,100,983 $ 1,652,213
Hotel and casino revenues 1,130,655 --
Computerized bookmaking systems 32,564 --
----------- -----------
Total revenues 2,264,202 1,652,213
DIRECT COSTS 1,424,807 716,273
----------- -----------
Gross profit 839,395 935,940
ADMINISTRATIVE EXPENSES 998,603 561,228
DEPRECIATION AND AMORTIZATION 114,853 19,029
----------- -----------
Operating income (loss) (274,061) 355,683
INTEREST INCOME(EXPENSE) AND OTHER INCOME, net 76,465 (7,860)
----------- -----------
Earnings (loss) before provision for income taxes (197,596) 347,823
PROVISION (BENEFIT) FOR INCOME TAXES -- --
----------- -----------
NET EARNINGS (LOSS) $ (197,596) $ 347,823
=========== ===========
PROFORMA EARNINGS (LOSS) PER SHARE $ (0.03) $ 0.07
=========== ===========
PROFORMA WEIGHTED AVERAGE SHARES OUTSTANDING 7,837,500 5,250,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
AMERICAN WAGERING, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED OCTOBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
REVENUES:
<S> <C> <C>
Horse and sports wagering $ 2,847,184 $ 3,464,665
Hotel and casino revenues 2,011,270 --
Computerized bookmaking systems 32,564 --
----------- -----------
Total revenues 4,891,018 3,464,665
DIRECT COSTS 3,287,536 1,932,137
----------- -----------
Gross profit 1,603,482 1,532,528
ADMINISTRATIVE EXPENSES 1,987,392 1,172,582
DEPRECIATION AND AMORTIZATION 259,692 56,613
----------- -----------
Operating income (loss) (643,602) 303,333
INTEREST INCOME(EXPENSE) AND OTHER INCOME, net 167,417 (18,790)
----------- -----------
Earnings (loss) before provision for income taxes (476,185) 284,543
PROVISION (BENEFIT) FOR INCOME TAXES -- --
----------- -----------
NET EARNINGS (LOSS) $ (476,185) $ 284,543
=========== ===========
PROFORMA EARNINGS (LOSS) PER SHARE $ (0.07) $ 0.05
=========== ===========
PROFORMA WEIGHTED AVERAGE SHARES OUTSTANDING 6,791,743 5,250,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
AMERICAN WAGERING, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings (loss) $ (476,185) $ 284,543
------------ ------------
Adjustments to reconcile net earnings (loss)
to cash provided by operating activities:
Depreciation and amortization 259,692 56,613
Equity in earnings from investment in partnership (68,041) (808)
Changes in assets and liabilities:
Decrease (increase) in assets:
Restricted cash -- (2,873)
Other current assets 370,318 (3,669)
Deposits and other assets (129,787) (62,457)
Increase (decrease) in liabilities:
Unpaid winning tickets (281,384) (365,329)
Other current liabilities 384,741 236,769
Accounts payable/accrued expenses (173,485) 94,425
------------ ------------
Total adjustments 362,054 (47,329)
------------ ------------
Net cash provided by operating activities (114,131) 237,214
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (490,423) (184,515)
Proceeds from sale of property and equipment -- 150,000
Purchase of remaining 50% interest in partnership,
net of cash acquired (3,046,993)
Purchase of subsidiary, net of cash acquired (2,997,736)
Proceeds from distribution of investee partnership -- 10,000
------------ ------------
Net cash used in investing activities (6,535,152) (24,515)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase(decrease) of long-term debt (242,741) (173,955)
Stockholder notes payable 2,433,124 --
Net proceeds from issuance of common stock 13,711,326 251
Contributions from stockholders 558,000 --
Distributions to stockholders (3,649,021) (1,700,000)
------------ ------------
Net cash provided by (used in) financing activities 12,810,688 (1,873,704)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,161,405 (1,661,005)
============ ============
CASH AND CASH EQUIVALENTS, beginning of period 3,938,582 4,485,116
============ ============
CASH AND CASH EQUIVALENTS, end of period $ 10,099,987 $ 2,824,111
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
AMERICAN WAGERING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED OCTOBER 31, 1996 AND 1995
1. Information and Disclosure
The accompanying unaudited condensed consolidated financial statements
do not include all information and disclosures required under generally
accepted accounting principles. However, in the opinion of management,
the accompanying financial statements contain all adjustments
(consisting only of normal recurring adjustments) considered necessary
to present fairly the financial position of the Company at October 31,
1996 and 1995, and the results of its operations and cash flows for the
periods presented. The financial statements as of and for the years
ended January 31, 1996 and 1995 and the notes thereto included in the
Company's Registration Statement on Form SB-2 should be read in
conjunction with these interim financial statements.
Financial statements prepared in accordance with generally accepted
accounting principles require the use of management estimates. The most
significant estimates with regard to these financial statements relate
to setting and adjusting lines on sporting events. The sportsbook
operator is betting as a principal against its patrons. Therefore, if
the "book" of wagers placed on an event is not balanced, the sportsbook
operator is significantly at risk for the outcome of a sporting event.
Although sportsbook operators attempt to keep the book in balance by
adjusting the betting line, the risk of a non-balanced book is inherent
in the operation of a sportsbook. To the extent that a book on a
particular event is not balanced, the book-making operation, like its
patrons, is gambling on the outcome of an event.
The Condensed Balance Sheet as of January 31, 1996 and the results of
operations and cash flows through May 15, 1996 are the combined
financial statements of American Wagering, Inc., Leroy's Horse and
Sports Place and Leroy's Hotel Corporation (See Note 3).
The financial results for acquisitions are included in the condensed
consolidated financial statements from the date of acquisition.
The earnings (loss) per share calculation is based on the net earnings
(loss) for the periods reported divided by the weighted average number
of shares outstanding. The number of outstanding shares were 5,250,000
through the initial public offering, 7,500,000 after the initial public
offering on May 15, 1996 and 7,837,500 after the underwriter exercised
its overallotment option on June 28, 1996.
2. Period Results Not Indicative of the Full Year
The results of operations for the three months and nine months ended
October 31, 1996 and 1995 are not necessarily indicative of the results
to be expected for the full calendar year.
3. Reorganization
In August 1995, the Company was formed to be a holding company for two
wholly owned subsidiaries, Leroy's Horse and Sports Place (LHSP) and
Leroy's Hotel Corporation (LHC). Immediately prior to the closing of
the stock offering (see Note 8), the stockholders of LHSP and LHC
exchanged their shares in those companies for shares of American
Wagering, Inc. These transactions are referred to as the
Reorganization.
4. Cash Equivalents
Cash equivalents consist of highly liquid investments with a maturity
of nine months or less and are carried at cost which approximates
market value.
5. Excess of Cost Over Fair Market Value of Net Assets Acquired and Other
Intangible Assets
The excess of the cost over the fair market value of net assets of
acquired companies ("goodwill") is being amortized over the periods
expected to be benefited, or approximately 25 years. The other
intangible assets including software and rights for manufacturing and
<PAGE>
distribution acquired in the purchase of the subsidiary are being
amortized between 7 and 10 years.
The realizability of the goodwill and other intangible assets is
evaluated periodically as events or circumstances warrant. Such
evaluations are based on various analyses, including cash flow and
profitability projections that incorporate, as applicable, the impact
on existing company business. The analysis necessarily involves
significant management judgment to evaluate the capacity of an acquired
business to perform within projections.
6. Income Taxes
In connection with the Reorganization on May 10, 1996, the S
corporation status of LHSP and LHC terminated. Upon termination of the
S corporation election, LHSP and LHC became subject to federal income
taxes.
No income tax benefits have been provided for the three months and nine
months ended October 31, 1996.
7. Investment in Subsidiaries
In March, 1995, LHC purchased fifty percent interests in certain
entities which own and operate a hotel/casino located in Las Vegas,
Nevada. The related entities are BSRB Resort Hotels (a Nevada general
partnership) and B-P Food Corporation (a Nevada corporation which is
wholly owned by BSRB Resort Hotels). The purchase was financed by a
bank note made by LHSP for approximately $1.1 million. In February,
1996, the stockholders of LHSP purchased a fifty percent interest in
the stock of B-P Gaming Corporation (a Nevada corporation), which was
contributed to the Company in connection with the Reorganization.
The purchase has been accounted for under the equity method and the
excess of the purchase price over the net assets received in the
purchase has been capitalized and is being amortized over 25 years.
Summarized, combined financial information for these entities for the
period from December 31, 1995 to May 15, 1996 is as follows:
Revenues $1,597,000
Operating Income $ 339,000
Net Earnings $ 136,000
On May 15, 1996, the Company purchased the remaining fifty percent
interest in BSRB Resort Hotels and BP-Gaming Corporation for $3,601,000
in cash and the assumption of certain liabilities. The acquisition of
BSRB Resort Hotels and BP-Gaming Corporation have been accounted for as
a purchase. Had the acquisitions occurred as of February 1, 1996,
Consolidated Revenue, Operating Loss, and Net Loss for the nine months
ended October 31, 1996 would have been as follows:
Revenues $6,142,000
Operating Loss $ (307,000)
Net Loss $ (418,000)
On October 25, 1996, the Company purchased Autotote CBS, Inc. for
$3,000,000 in cash and agreed to guarantee, pursuant to a Guarantee
Agreement, Autotote CBS, Inc.'s obligation under its current mortgage
of approximately $2,000,000 on the real estate and building in Las
Vegas, Nevada where the Company currently maintains its corporate
offices. In addition, the Company has incurred costs of $156,000 in
connection with the acquisition. Autotote CBS, Inc. is the dominant
provider of sports and race book equipment and software in the state of
<PAGE>
Nevada, including all major casinos along the Las Vegas strip. The
financial information provided in this document includes the unaudited
operations of Autotote CBS, Inc. from the date of acquisition. The
acquisition of Autotote CBS, Inc. has been accounted for as a purchase.
Had the acquisition occurred as of February 1, 1996, Consolidated
Revenue, Operating Income, and Net Earnings for the nine months ended
October 31, 1996 would have been as follows:
Revenues $8,322,000
Operating Income $ 84,000
Net Earnings $ 121,000
The preliminary purchase price allocation used in the preparation of
the accompanying October 31, 1996 condensed consolidated balance sheet
is based on initial estimates obtained by the Company of the fair value
of the assets and liabilities of Autotote CBS, Inc. The final
allocation will be based on additional assessments of asset and
liability values of Autotote CBS, Inc. which is expected to be
completed by January, 1997. Any changes in the purchase price
allocation are expected to be limited to the amounts allocated to
inventory, intangibles, and goodwill. Accordingly, any changes in the
final purchase price allocation are not expected to have a material
impact on the Company's consolidated results of operations.
8. Stock Offering
On May 15, 1996, the Company completed a public offering of stock. The
initial public offering price was $6.00 a share, with 2,250,000 shares
being offered. In June, 1996 the underwriter exercised its
over-allotment option to purchase an additional 337,500 shares at $6.00
a share. A portion of the proceeds of the offering was used to purchase
the remaining fifty percent interest in BSRB Resort Hotels and B-P
Gaming Corporation. The balance of the proceeds will be used to
renovate and expand the hotel/casino into a sports theme hotel/casino,
to support the Company's growth and expansion strategy and for general
corporate purposes.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF COMPANY'S FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Fiscal Quarter Ended October 31, 1996 Compared to Fiscal Quarter Ended October
31, 1995
Revenues for the fiscal quarter ended October 31, 1996 ("Third Quarter
of Fiscal 1997") were $2,264,000, an increase of $612,000 or 37.0% from revenues
of $1,652,000 for the quarter ended October 31, 1995 ("Third Quarter of Fiscal
1996"). On May 15, 1996 the Company completed the acquisition of the Howard
Johnson Hotel and Casino (the "Hotel and Casino") located in Las Vegas, Nevada.
Revenues from the Hotel and Casino for the Third Quarter of Fiscal 1997 were
approximately $1,131,000. Revenues from horse and sports wagering, which
represents gaming wins less losses, were approximately $1,101,000 for the Third
Quarter of Fiscal 1997 a decrease of $551,000 or 33.4% from revenues of
$1,652,000 for the Third Quarter of Fiscal 1996. Handle, which represents total
amount wagered by patrons, was $23,105,000 for the Third Quarter of Fiscal 1997
an increase of $309,000 or 1.4% from the Handle of $22,796,000 in the Third
Quarter of Fiscal 1996. Net win percentage (revenues divided by handle) was 4.8%
in the Third Quarter of Fiscal 1997 compared to 7.2% in the Third Quarter of
Fiscal 1996. Net win percentage fluctuates depending on the outcome of various
sporting events within the reporting period. The increase in handle was
principally due to the new sportsbook locations which were opened at various
times in the Third Quarter of Fiscal 1997 partly offset by the loss of handle
from certain sportsbook locations which have closed. The Handle and revenues
from locations which were operating in both periods increased by $2,668,000 or
14.5% and $54,000 or 5.0%, respectively for the Third Quarter of Fiscal 1997
compared to Handle of $18,458,000 and revenues of $1,090,000 for the Third
Quarter of Fiscal 1996.
Direct costs were $1,425,000 for the Third Quarter of Fiscal 1997, an
increase of $709,000 or 99.0% from Third Quarter of Fiscal 1996 direct costs of
$716,000. Direct costs were 62.9% of revenues for the Third Quarter of Fiscal
1997 compared to 43.4% for the Third Quarter of Fiscal 1996. Direct costs
include labor costs, gaming taxes, franchise fees, and other costs. An increase
in direct costs of $622,000 for the Third Quarter of Fiscal 1997 was attributed
to the acquisition of the Hotel and Casino which occurred during the Second
Quarter of Fiscal 1997. Directs costs associated with horse and sports wagering
were $803,000 for the Third Quarter of Fiscal 1997, an increase of $87,000 or
12.2% as compared to direct costs of $716,000 for the Third Quarter of Fiscal
1996 principally due to expenses associated with the new sportsbook locations,
including higher labor related expenses.
<PAGE>
Administrative expenses were $999,000 in the Third Quarter of Fiscal
1997, an increase of $438,000 or 78.1% from the Third Quarter of Fiscal 1996
administrative expenses of $561,000. Administrative expenses were 44.1% of
revenues for the Third Quarter of Fiscal 1997 compared to 34.0% in the Third
Quarter of Fiscal 1996. The increase in administrative expenses in the Third
Quarter of Fiscal 1997 was principally due to the acquisition of the Hotel and
Casino which occurred during the Second Quarter of Fiscal 1997. Administrative
expenses associated with horse and sports wagering were $430,000 for the Third
Quarter of Fiscal 1997, a decrease of $132,000 or 23.5% as compared to
administrative expenses of $562,000 for the Third Quarter of Fiscal 1996.
Decreases in legal, rent, telephone, utilities, and general reserve expenses
were offset by an increase in advertising expense for horse and sports wagering.
Depreciation and amortization was $115,000 for the Third Quarter of
Fiscal 1997, an increase of $96,000 or 505.3% from depreciation and amortization
of $19,000 for the Third Quarter of Fiscal 1996. The increase in depreciation
and amortization over the Third Quarter of Fiscal 1996 was attributed to
depreciation and amortization associated with the acquisition of the Hotel and
Casino and additional capital expenditures associated with new sportsbook
locations which opened during the Third Quarter of Fiscal 1997.
Interest income (expense) and other income was $76,000 for the Third
Quarter of Fiscal 1997, an increase of $84,000 from interest income (expense)
and other income for the Third Quarter of Fiscal 1996 of ($8,000). The increase
in interest income (expense) and other income was principally due to earnings
from temporary investments of the net proceeds from the initial public offering
of the Company's common stock and an increase in miscellaneous other income.
Partly offsetting this increase was interest expense on the long term debt of
the Hotel and Casino.
Net loss for the Third Quarter of Fiscal 1997 of $198,000 varied
unfavorably by $546,000 as compared to net earnings of $348,000 for the Third
Quarter of Fiscal 1996. Net loss from the horse and sports wagering operations
of $177,000 for the Third Quarter of Fiscal 1997 varied unfavorably by
approximately $525,000 as compared to the net earnings of $348,000 for the Third
Quarter of Fiscal 1996 due to lower revenues and higher direct costs associated
with opening new sportsbook locations during the Third Quarter of Fiscal 1997.
Additionally, revenues from horse and sports wagering were negatively impacted
by the success of bettors in wagering selections, a trend which was felt
industry-wide. The net loss from the Hotel and Casino operations was
approximately $101,000. Prior to May, 1996 affiliates of the Company were
S Corporations and income taxes were assessed at the stockholder level. Income
tax benefits were not provided against the net loss for the Third Quarter of
Fiscal 1997.
Nine Months Ended October 31, 1996 Compared to the Nine Months Ended October 31,
1995
Revenues for the nine months ended October 31, 1996 were $4,891,000, an
increase of $1,426,000 or 41.1% from revenues of $3,465,000 for the nine months
ended October 31, 1995. On May 15, 1996 the Company completed the acquisition of
the Howard Johnson Hotel and Casino (the "Hotel and Casino") located in Las
Vegas, Nevada. Revenues from the Hotel and Casino since the date of acquisition
were approximately $2,011,000. Revenues from horse and sports wagering were
approximately $2,847,000 for the nine months ended October 31, 1996, a decrease
of $618,000 or 17.8% from revenues of $3,465,000 for the nine months ended
October 31, 1995. Handle for the nine months ended October 31, 1996 was
$52,966,000 a decrease of $1,062,000 or 2.0% from the Handle of $54,028,000 for
the nine months ended October 31, 1995. Net win percentage (revenues divided by
handle) was 5.4% for the nine months ended October 31, 1996 compared to 6.4% for
the nine months ended October 31, 1995. Net win percentage fluctuates depending
on the outcome of various sporting events within the reporting period. The
decrease in Handle was principally due to the loss of certain sportsbook
locations partly offset by the Handle from the new replacement locations which
were opened at various times during the nine months ended October 31, 1996.
Handle of $47,929,000 for nine months ended October 31, 1996 at locations that
were operating in both periods increased $5,547,000 or 13.1% over the Handle of
$42,190,000 for the nine months ended October 31, 1995. Revenues of $2,670,000
for the nine months ended October 31, 1996 at locations operating in both
periods increased $344,000 or 14.8% over revenues of $2,318,000 for the nine
months ended October 31, 1995.
<PAGE>
Direct costs were $3,288,000 for the nine months ended October 31,
1996, an increase of $1,356,000 or 70.2% from direct costs of $1,932,000 for the
nine months ended October 31, 1995. Direct costs were 67.2% of revenues for the
nine months ended October 31, 1996 compared to 55.8% for the nine months ended
October 31, 1995. Direct costs include labor costs, gaming taxes, franchise
fees, and other costs. The acquisition of the Hotel and Casino which occurred
during the Second Quarter of Fiscal 1997 contributed to an increase in direct
costs for the nine months ended October 31, 1996 of $1,231,000. Directs costs
associated with horse and sports wagering were $2,057,000 an increase of
$125,000 or 6.5% as compared to direct costs of $1,932,000 for the nine months
ended October 31, 1995. The increase in direct costs associated with horse and
sports wagering was principally due to increased labor related expenses for the
nine months ended October 31, 1996. The increase in direct costs as a percentage
of revenues from the nine months ended October 31, 1995 to the nine months ended
October 31, 1996 was attributed to the new sportsbook locations at Leroy's and
the acquisition the Hotel and Casino.
Administrative expenses were $1,987,000 for the nine months ended
October 31, 1996, an increase of $814,000 or 69.4% from administrative expenses
of $1,173,000 for the nine months ended October 31, 1995. The increase in
administrative expenses for the nine months ended October 31, 1996 was
principally due to the acquisition of the Hotel and Casino which occurred during
the Second Quarter of Fiscal 1997. Administrative expenses associated with horse
and sports wagering were $1,045,000 for the Third Quarter of Fiscal 1997, a
decrease of $129,000 or 11.0% as compared to administrative expenses of
$1,174,000 for the Third Quarter of Fiscal 1996. Administrative expenses were
40.6% of revenues for the nine months ended October 31, 1996 compared to 33.8%
for the nine months ended October 31, 1995.
Depreciation and amortization was $260,000 for the nine months ended
October 31, 1996, an increase of $203,000 or 356.1% from depreciation and
amortization of $57,000 for the nine months ended October 31, 1995. The increase
in depreciation and amortization over the nine months ended October 31, 1995 was
principally due to depreciation and amortization associated with the acquisition
of the Hotel and Casino and an increase in capital expenditures associated with
the new sportsbook locations which opened during the Second and Third Quarters
of Fiscal 1997.
Interest income (expense) and other income was $167,000 in the nine
months ended October 31, 1996, an increase of $186,000 from interest income
(expense) and other income in the nine months ended October 31, 1995 of
($19,000). The increase in interest income (expense) and other income was
principally due to earnings from the investment of the net proceeds from the
initial public offering of the Company's common stock, an increase in the equity
in net earnings from the investment in the Hotel and Casino and an increase in
miscellaneous other income. Partly offsetting this increase was interest expense
on the long term debt of the Hotel and Casino.
Net loss for the nine months ended October 31, 1996 of $476,000 varied
unfavorably by $761,000 or 267.0% compared to the net earnings of $285,000 for
nine months ended October 31, 1995. Net loss from horse and sports wagering
operations of $356,000 for the nine months ended October 31, 1996 varied
unfavorably by approximately $641,000 as compared to the net earnings of
$285,000 for the nine months ended October 31, 1995 principally due to reduced
revenues and increased direct costs. The net loss from the Hotel and Casino
operations was approximately $252,000. Partly offsetting these losses were
earnings from temporary investments. Prior to May, 1996 affiliates of the
Company were S Corporations and income taxes were assessed at the stockholder
level. Income tax benefits were not provided against the net loss for the nine
months ended October 31, 1996.
Liquidity and Capital Resources
As of October 31, 1996 working capital was $5,852,000 reflecting the
net proceeds from the Company's initial public offering and the exercise of the
underwriters over-allotment option during the Second Quarter of Fiscal 1997.
Cash used in operating activities was $114,000. Net investing
activities amounted to $6,535,152 reflecting the purchase of the remaining fifty
percent interest in the Hotel and Casino and the purchase of Autotote CBS, Inc.
Net cash provided from financing activities amounted to $12,811,000 including
the net proceeds from the Company's initial public offering of $13,711,000,
issuance of stockholder notes of $2,433,000, contributions from stockholders
<PAGE>
of $558,000, partly offset by distributions to stockholders of $3,649,000 and a
decrease in long-term debt of $243,000.
Leroy's, a subsidiary of the Company was an S Corporation under the
Internal Revenue Code. From inception through February 29, 1996, Leroy's made
cash distributions of approximately $4,400,000 in aggregate to its stockholders.
On March 21, 1996, Leroy's made cash distributions to its stockholders in the
aggregate amount of $3,000,000 representing undistributed earnings as of January
31, 1996, on which the stockholders had previously paid federal income taxes. Of
the $3,000,000 distributed, approximately $2,400,000 was loaned back to Leroy's
by the stockholders and $558,000 was contributed as capital to Leroy's by the
stockholders. The loans are repayable pursuant to stockholder notes maturing on
April 1, 1997 and bear interest at a 7% annual rate.
On May 15, 1996 the Company completed an initial public offering of
2,587,500 shares ( 337,500 shares were sold on June 28, 1996 at $6.00 a share
upon the exercise of the underwriters option) of its common stock at $6.00 per
share. Simultaneous with the completion of the initial public offering, the
Company completed the purchase of the remaining fifty percent interest in the
150 room hotel/casino complex located at 3111 W. Tropicana Ave. in Las Vegas
Nevada. The balance of the proceeds will be used to renovate and expand the
hotel/casino into a sports theme hotel/casino, to support the Company's growth
and expansion strategy and for general corporate purposes.
The Company believes that the net proceeds of the initial public
offering together with the anticipated cash provided by its operating activities
will be sufficient to finance its operations, scheduled debt repayment and
anticipated capital expenditures through October 31, 1997.
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this document which are not historical facts contain
forward looking information with respect to plans, projections or future
performance of the Company, the occurrence of which involve certain risks and
uncertainties, including that the sportsbook operator takes financial risks on
the outcome of sporting events as a principal betting against its patrons and
uncertainties detailed in the Company's filings with the Securities and Exchange
Commission.
<PAGE>
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Financial Date Schedule
Number Description Method of Filing
------ ----------- ----------------
27 Financial Data Schedule Filed Herewith
(b) The following report on Form 8-K was filed during the quarter
ended October 31, 1996:
1. Form 8-K on October 15, 1996 with respect to Item 5 of
Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
AMERICAN WAGERING, INC.
--------------------------------
(Registrant)
Date December 16, 1996 By: /s/ Robert D. Ciunci
--------------------------------
Robert C. Ciunci
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Americam Wagering, Inc.
Financial Data Schedule Required under:
Appendix A to Item 601(c) of Regulation S-B
Commercial and Industrial Companies
Article 5 of Regulation S-X
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> OCT-31-1996
<CASH> 10,099,987
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,206,454
<PP&E> 8,616,899
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,936,363
<CURRENT-LIABILITIES> 5,616,548
<BONDS> 5,087,472
0
0
<COMMON> 78,376
<OTHER-SE> 13,153,967
<TOTAL-LIABILITY-AND-EQUITY> 23,936,363
<SALES> 0
<TOTAL-REVENUES> 4,891,018
<CGS> 0
<TOTAL-COSTS> 3,287,536
<OTHER-EXPENSES> 2,247,084
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (476,185)
<INCOME-TAX> 0
<INCOME-CONTINUING> (476,185)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (476,185)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
