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 March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period ______________ to _______________
Commission file number 0-5474
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 75 - 2571032
(State of incorporation or organization) (IRS Employer
Identification No.)
777 E. 15th Street, Plano, Texas 75074
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (214) 423-9113
Check whether the issuer (1) has filed all reports required to be
filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days.
Yes xx No __
Number of shares of common stock, par value $.01 per share,
outstanding as of March 31, 1996: 14, 711,589
1
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
NORTH AMERICAN GAMING AND ENTERTAINMENT
CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
31-Mar-96 31-Dec-95
--------- ---------
ASSETS UNAUDITED
- - ------
CURRENT ASSETS:
Cash $ 625,993 $ 531,996
Restricted Cash 148,532 164,123
Accounts Receivable 32,577 92,791
Inventories, at cost 68,642 59,891
Prepaid Insurance 28,630 47,075
Notes Receivable - current 176,306 253,035
Income Taxes Receivable 70,547 116,634
Current deferred tax asset 10,161 10,161
--------- ---------
TOTAL CURRENT ASSETS 1,161,388 1,275,706
--------- ---------
PROPERTY AND EQUIPMENT, net of
accumulated depreciation 1,506,142 1,660,542
--------- ---------
OTHER ASSETS:
Deposits 54,545 47,246
Revenue interest rights 325,273 338,113
Goodwill and merger costs 675,451 720,451
Notes Receivable-long-term 95,767 57,115
1,151,036 1,162,925
--------- ---------
TOTAL ASSETS $ 3,818,566 $4,099,173
========= =========
LIABILITY AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities $ 662,923 $ 795,711
Notes payable - current 1,917,116 2,096,065
Preferred stock dividends payable 700,000 580,000
--------- ---------
TOTAL CURRENT LIABILITIES 3,280,039 3,471,776
NOTES PAYABLE-LONG-TERM 119,736 143,884
NOTES PAYABLE TO CERTAIN
STOCKHOLDERS-LONG-TERM 589,231 665,450
--------- ---------
2
<PAGE>
TOTAL LIABILITIES 3,989,056 4,281,110
STOCKHOLDERS' EQUITY:
Preferred stock, $3.00 par value,
10,000,000 shares authorized,
1,600,000 shares issued at March
31, 1996 and December 31, 1995 4,800,000 4,800,000
Common stock, $.01 par value,
25,000,000 shares authorized,
14,711,89 shares issued at
March 31, 1996 and December 31, 1995 147,094 147,094
Additional paid-in-capital (deficit) (3,334,543) (3,334,543)
Retained earnings (deficit) (1,783,041) (1,794,488)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY (170,490) (181,937)
--------- ---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $3,818,566 $4,099,173
========= =========
The accompanying notes are an integral
part of the financial statements
3
<PAGE>
NORTH AMERICAN GAMING AND ENTERTAINMENT
CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE QUARTERS ENDED MARCH 31, 1996 AND 1995
QUARTER ENDED
------------------------
31-MAR-96 31-MAR-95
---------- ----------
REVENUE:
Video Poker Revenue $3,082,416 $3,061,161
Truck Stop and Convenience Store 1,235,930 546,624
--------- ---------
4,318,346 3,607,785
--------- ---------
COST AND EXPENSES:
Cost of Revenues 2,819,894 2,346,498
Direct Operating Expenses 1,025,641 861,407
General and Administrative Expenses 159,282 154,443
Interest Expense 43,502 77,046
Depreciation and Amortization 144,388 174,585
--------- ---------
4,192,707 3,613,979
--------- ---------
OPERATING INCOME (LOSS) 125,639 (6,194)
--------- ---------
OTHER REVENUE (EXPENSE), net 41,802 47,046
--------- ---------
INCOME BEFORE PROVISION FOR INCOME
TAXES 167,441 40,852
PROVISION FOR INCOME TAXES (36,000) (15,524)
--------- ---------
NET INCOME $ 131,441 $ 25,328
LESS: Preferred Stock Dividends (120,000) (120,000)
NET INCOME (LOSS) APPLICABLE
TO COMMON STOCK $ 11,441 $ (94,672)
========= ========
EARNINGS PER SHARE - assuming no
dilution $ 0.00 $ (0.01)
========= ========
The accompanying notes are an integral
part of the financial statements
4
<PAGE>
NORTH AMERICAN GAMING AND ENTERTAINMENT
CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
QUARTER ENDED
-------------------------
31-MAR-96 31-MAR-95
--------- ----------
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 131,441 $ 25,328
Adjustments to reconcile net income
to net cash:
Depreciation and amortization 144,388 174,585
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable 106,301 46,919
(Increase) decrease in inventories (8,751) -
(Increase) decrease in prepaid
insurance 18,445 5,747
(Increase) decrease in deposits (7,299) (25,930)
Increase (decrease) in accounts payable
and accrued liabilities (132,788) (212,322)
--------- ---------
Net cash provided (used) by
operating activities 251,737 14,327
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant
and equipment (11,384) (30,453)
Proceeds to borrowers (38,652) -
Repayment by borrowers 155,971 181,535
--------- ---------
Net cash provided (used) by
investing activities 105,935 151,082
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on subordinated debt - (336,820)
Issuance of common stock - 375,741
Increase (decrease) in notes payable (279,266) (446,124)
Dividends paid - -
--------- ---------
Net cash provided (used) by
financing activities (279,266) (407,203)
--------- ---------
5
<PAGE>
NET INCREASE (DECREASE) IN CASH 78,406 (241,794)
CASH - beginning of period 696,119 1,018,781
CASH - ending of period $774,525 $ 776,987
======== =========
The accompanying notes are an integral
part of the financial statements
6<PAGE>
NORTH AMERICAN GAMING AND ENTERTAINMENT
CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1996 AND 1995
Note 1. OPINION OF MANAGEMENT
- - -----------------------------
The preceding financial information has been prepared by the
Company pursuant to the rules and regulations of the Securities
and Exchange Commission ("SEC") and, in the opinion of the
Company, includes all normal and recurring adjustments necessary
for a fair statement of the results of each period shown.
Certain information and footnote disclosures normally included in
the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to SEC rules and regulations. The Company believes that
the disclosures made are adequate to make the information
presented not misleading. It is suggested that these financial
statements be read in conjunction with the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1995.
Note 2. LEGISLATIVE ACTION
- - --------------------------
In April 1996, the Louisiana Legislature approved a local-option
bill which gives the voters in each parish the right to decide
during the November 5, 1996, general election what forms of
gaming they want to continue in their parish. The Company
anticipates being able to operate under its current licenses
until July 1999, if the parishes where its properties are
located do not approve the continuation of truck stop video
poker.
(THIS SPACE INTENTIONALLY LEFT BLANK)
7<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Liquidity and Capital Resources
The Company ended its first quarter with $774,525 in cash and
other current assets amounting to $386,863, including inventories
and prepaid expenses totaling $97,272 and receivables of
$289,591. The Company's total liabilities were $3,989,056 at
March 31, 1996, including accounts payable and current
liabilities of $662,923, current notes payable of $1,917,116,
long-term notes payable of $708,967 and preferred stock dividends
payable of $700,000. The Company's liabilities decreased
$292,054 from $4,281,110 at December 31, 1995 to $3,989,056 at
March 31, 1996. This decrease was comprised of a reduction of
pre-Merger liabilities of Western Natural Gas Company (WNGC)
amounting to $23,000, payments on long and short-term debt to
banks and equipment manufacturers totaling $144,797, principal
reduction on the Gold Rush casino and truck stop amounting to
$111,469, a reduction in accounts payable and accrued liabilities
totaling $132,788 and the accrual of preferred dividends payable
adding $120,000.
Accounts payable and accrued liabilities of $662,923 included
$212,262 in trade payables, payroll and payroll taxes of $93,069,
casino distributions of $178,031, state franchise taxes of
$173,214 and accrued interest of $6,347.
The current portion of other notes payable totaling $1,917,116,
includes video poker machine debt of $188,124; $1,165,905
payable to banks under various loans obtained for the
construction of the Pelican Palace, the purchase of the Lucky
Longhorn and debt assumed as a result of the Gold Rush
acquisition; the stock purchase and a working capital loan
resulting from the Gold Rush acquisition amounting to $353,794;
equipment leases and other notes totaling $38,940; and WNGC
current notes payable of $170,353.
Long-term debt of $709,017 includes $84,319 payable to a bank
under a loan assumed in the Gold Rush acquisition; the stock
purchase debenture resulting from the Gold Rush acquisition
amounting to $589,231; and equipment leases and other notes
totaling $35,467.
The Company believes it will be able to generate cash flow from
operations to service all debt according to terms and conditions
specified in debt instruments. In addition, the Company believes
cash flow from operations will be sufficient to pay preferred
dividends on the Company's Preferred Stock of $480,000 per year,
once current obligations on notes and debentures are satisfied.
The Company also believes that it will be able to generate or
8<PAGE>
obtain the necessary capital from outside sources for expansion
projects, but there are no assurances that current economic
conditions will prevail.
The remaining pre-Merger liabilities of WNGC constitute a note
payable with a remaining balance of $170,353 at March 31, 1996;
this note is also guaranteed by a director of the Company. The
amount paid on WNGC pre-Merger liabilities totaled $23,000 in the
first quarter of 1996.
In July 1993, OM Investors, Inc. committed to loan $1,450,000 to
the Curray Corporation (Curray) for the construction of the
Pelican Palace truck stop and video poker facility in Toomey,
Louisiana. Construction was commenced in 1993 and substantially
completed in March 1994. As of December 31, 1995, the Company
had advanced the remainder of the $1,450,000 commitment and
agreed to fund certain renovations to the truck stop and parking
lot out of the cash flow of the Pelican Palace ($48,449 as of
December 31, 1995). During the first quarter of 1996, the
Company funded an additional $18,602 for additional improvements
to the property. The total amount advanced and funded through
March 31,1996 was $1,517,051. The $1,450,000 loan is evidenced
by a promissory note payable to the Company having an outstanding
principal balance at March 31, 1996 of $76,998. The note is
pledged by the Company against a $1,250,000 line of credit at a
bank (which had an outstanding principal balance of $833,118 at
March 31,1996), and is secured by the facility. Under the
Operating and Financing Agreement with Curray, 70% of the net
income from the operations of the facility is dedicated to
repayment of the note. The remainder is split 50/50 between the
Company and Curray. When the note receivable from Curray is
paid-in-full the net income will be split 50% to the Company and
50% to Curray. The Company has recently arranged with the lender
to release the Pelican Palace as collateral on the note, once the
receivable from Curray is satisfied, substituting the Gold Rush
land and buildings as collateral on a new note to be amortized
over five years.
At March 31, 1996, property and equipment (net) on truck stop and
video poker facilities totaled $1,506,142. As of March 31, 1996,
the Company owed video poker equipment manufacturers a total
principal amount of $188,124 pursuant to four promissory notes
secured by such machines and equipment. These notes require
total monthly principal and interest payments of $22,213. During
the first quarter of 1996, promissory notes to equipment
manufacturers were reduced by $99,214.
During the fourth quarter of 1995, the Company retained a
Certified Highway Engineer to evaluate its video poker facilities
for the purpose of complying with State regulations, which
require a minimum of 50,000 square feet of paved truck parking.
9<PAGE>
The Company committed to fund approximately $187,000 to bring the
following properties into compliance: the Pelican Palace in
Toomey, Louisiana; King's Lucky Lady in Port Barre, Louisiana;
the Gold Rush in Opelousas, Louisiana; and Stelly's Southern
Gold in LeBeau, Louisiana. The Company also entered into
agreements with a contractor to pave the parking areas defined as
necessary to comply with State regulations for each property.
The paving was completed before January 1, 1996 at all locations.
State inspectors approved the Pelican, King's and the Gold Rush,
but did not approve Stelly's, at which the engineer had certified
51,250 square feet was paved. State inspectors disallowed 7,800
square feet, claiming that additional driveways were needed to
accommodate easier access to the highway, and suspended
operations of the video poker casino on January 4, 1996. The
Company protested the findings of the State inspectors, but
gained no satisfaction. The State also required that the
establishment license be re-applied for and re-issued, which made
it necessary to gain re-approval from the local Fire Marshall
before the video poker operation could reopen. The Company has
paved an additional 10,000 square feet and has complied with all
items which State inspectors have identified for correction.
There can be no assurances as to when State approval may be given
to re-open this property.
The Company will seek to meet its long-term liquidity needs
primarily through cash flow from operations, additional
borrowings from the Company's traditional lending sources and
possible sales of equity or debt securities. While the Company
believes it will be able to generate and obtain the necessary
capital to meet such needs, there can be no assurance that all of
such capital will be available on terms acceptable to the
Company, which could delay or cause the Company to postpone
certain planned activities.
There has been a significant increase during the last two years
in the number of gaming establishments opening for operation in
Louisiana and Mississippi, and competition for the business of
gaming patrons has become very intense. As a result, it is
expected that the profit margins which may be expected by gaming
establishments like the Company will be adversely affected, and
that various gaming establishments may be forced to close because
they cannot compete effectively at such reduced margins. The
Company believes it will be able to maintain a competitive
position by carefully managing expenses and cash flow, but there
can be no assurance.
During the past year, there has been a perceived increase in
anti-gaming sentiment in Louisiana within certain segments of the
population and with certain politicians. The Company cannot
predict whether such anti-gaming sentiment will result in further
changes to the gaming laws of Louisiana, or an outright ban on
10<PAGE>
certain forms of gaming, including truck stop video poker
casinos. The State of Louisiana generates substantial revenues
from license fees and taxes on the gaming industry, so the loss
of portions of these revenues would most likely be carefully
examined in connection with any proposed limitations on gaming.
In April 1996, the Louisiana Legislature approved a local-option
bill which gives the voters in each parish the right to decide
during the November 5, 1996, general election what forms of
gaming they want to continue in their parish. The Company
anticipates being able to operate under its current licenses
until July 1999, if the parishes where its properties are
located do not approve the continuation of truck stop video
poker. The Company continues to monitor these proceedings and
provides input as appropriate. The Company also continues to
review other gaming opportunities outside Louisiana for purposes
of diversification.
11<PAGE>
Results of Operations
Net Income for the first quarter ended March 31, 1996.
Company operations resulted in net income before income taxes of
$167,441 for the three months ended March 31, 1996, an increase
of $126,589, or 310% from 1995's $40,852. The Company also
records the 70% revenue interest it receives in the Pelican
Palace as a repayment of a note receivable, which amounted to
$146,971 in the first quarter of 1996. Once the note receivable
is satisfied, fifty percent of the operating profit generated at
the Pelican Palace will be recorded as income to the Company.
Revenues totaled $4,318,346 for the first quarter of 1996
compared to $3,607,785 for 1995; an increase of 20%.
Video Poker revenues amounted to $3,082,416 through March 31,
1996, up 1% from 1995's $3,061,161. Discontinued operations at
Landry's and Stelly's, and increased competitive pressure at the
Lucky Longhorn, King's Lucky Lady, the Pelican Palace and Route
Operations, resulted in a combined decrease of $670,231 in video
poker revenue from 1995 to 1996. This was off-set by the
acquisition of the Gold Rush which generated $691,486 for the
first quarter of 1996.
Revenue production by location for the first quarter of 1996 and
1995 respectively, was as follows: Lucky Longhorn, Vinton, LA -
$970,956 in 1996 and $1,109,160 in 1995; Pelican Palace, Toomey,
LA - $720,493 in 1996 and $719,288 in 1995; King's Lucky Lady,
Porte Barre, LA - $565,718 in 1996 and $629,498 in 1995;
Landry's Silver Fox, Jeanerette, LA - discontinued operations in
1996 and $347,752 in 1995; Stelly's-LeBeau, LA - $4,848 in 1996
and $95,377 in 1995; Route Operations - South, LA - $128,915 in
1996 and $160,086 in 1995. The Gold Rush, Opelousas, LA -
generated $691,486 in video poker revenue for the first quarter
of 1996.
Revenues from fuel and convenience store, and food and beverage
operations amounted to $1,235,930 for the first quarter of 1996
compared to 1995's $546,624, an increase of 126%. Fuel and
convenience store sales amounted to $930,988 for the first
quarter of 1996 compared to $308,268 in 1995: King's Lucky Lady
truck stop - $430,243, an increase of 40% over 1995's $308,268;
Gold Rush truck stop - $ 500,745 for the first quarter of 1996.
Food and beverage sales totaled $304,942 for the first quarter of
1996 compared to $238,356 in1995: King's Lucky Lady - $178,534,
up .5% from $178,034 in 1995; Pelican Palace - $47,382, down 8%
from $51,478 in1995; Gold Rush - $79,026 in 1996; and Landry's
- - - $8,844 in 1995.
12<PAGE>
The Lucky Longhorn generated average daily revenue per device (50
devices) of $216 for the first quarter compared to 1995's $249.
The Longhorn has seventeen competitors in its market area,
including three riverboats of which two were added during 1995.
In addition, after a major full-scale Native American casino
opened in 1994, absorbing a substantial portion of market share,
it then almost doubled its gaming capacity during the third
quarter of 1995, which significantly affected the Longhorn's
first quarter results. First quarter operating profit from the
Longhorn was $171,965, a decrease of 10% from 1995's $190,940;
this represents 36% and 48% respectively of the Company's
aggregate operating profit, which is defined as Operating
Revenues less Cost of Revenues and Direct Operating Expense as
illustrated in the consolidated statement of operations.
The Pelican Palace generated average daily revenue per device (50
devices) of $160 for the first quarter compared to 1995's $162.
The Pelican was subject to the same competitive pressures as the
Longhorn during the first quarter. First quarter operating
profit from the Pelican was $37,416, a decrease of 13% from
1995's $42,783; this represents 8% and 11% respectively of the
Company's aggregate operating profit. However, as noted above,
the Company also received distributions of $146,971 of the
Pelican Palace's operating profit in payment of the Company's
note receivable from Curray. Once the note receivable is
satisfied, fifty percent of the operating profit generated at the
Pelican will be recorded as income to the Company.
King's Lucky Lady generated average daily revenue per device (50
devices) of $126 for the first quarter compared to 1995's $141.
During the third quarter of 1995 another competitor opened 14
miles away with thirty-five video poker machines. This new
casino is promoting heavily to attract local clientele, and is
having a direct impact on King's as well as the Gold Rush. The
Company anticipates continued competitive pressure which will
make it difficult to regain market share. First quarter
operating profit from King's was $80,741, a decrease of 54% from
1995's $175,439; this represents 17% and 44% respectively of the
Company's aggregate operating profit.
The Gold Rush generated average daily revenue per device (50
devices) of $154 for the first quarter of 1996. First quarter
operating profit from the Gold Rush amounted to $253,969,
representing 54% of the Company's aggregate operating profit.
Landry's Silver Fox - operations were discontinued at this
establishment as of December 31, 1995. First quarter 1995
operating profit amounted to $36,556, representing 9% of the
Company's aggregate operating profit.
13<PAGE>
Stelly's Southern Gold was closed for the majority of the first
quarter as a result of the truck parking compliance issue
discussed above. A first quarter loss totaling $11,939 was the
result of additional license application fees, engineering costs,
device fees and property taxes. First quarter 1995 operating
profit amounted to $16,725, representing 4% of the Company's
aggregate operating profit.
Route Operations posted operating profit for the first quarter of
$18,307, a decrease of 29% from 1995's $25,794; this represents
4% and 6% respectively of the Company's aggregate operating
profit. The Company discontinued operations at three locations
and sold nine video poker machines during the third quarter of
1995; the Company currently has 34 devices operating within 15
locations.
Expenses totaled $4,192,707 for the first quarter compared to
$3,613,979 for 1995; an increase of 16%.
The direct cost of revenue related to video poker operations was
$2,819,894 in 1996 and $2,346,498 in 1995, an increase of 20%.
This includes fees paid to the State of Louisiana of $1,048,934,
up 1% in 1996 from $1,036,971 in 1995, and profit sharing
payments as defined in operating and management contracts of
$739,059, down 19% in 1996 from 1995's $909,809. This decline in
profit share payments resulted from lower video poker revenue at
the Longhorn and King's, and discontinued operations at Landry's
and Stelly's.
The cost of revenue related to retail sales from fuel,
convenience store, food and beverage operations totaled
$1,031,871 (83.5% of truck stop and convenience store sales) in
1996 and $399,718 (73.1% of retail sales) in 1995. This increase
in absolute dollars was mainly due to the addition of the Gold
Rush, which added $508,962 to the cost of revenues, at 87.8% of
retail sales. King's added $131,286 to the retail cost of
revenue with margins of 80.9% and 74.3%, for 1996 and 1995
respectively. This higher margin in cost of sales also resulted
from higher fuel sales, increasing from $252,832 in 1995 to
$782,847 in 1996, with a gross margin of 3.3%, constituting 63.3%
of the Company's retail sales. In order to comply with State
regulations governing truck stops, the Company is being very
aggressive in its marketing and is very competitive with fuel
prices. The regulations require a minimum sales level of 100,000
gallons per month per location, in order to maintain a complement
of 50 video poker machines. In addition, food and beverage
operations generated sales totaling $304,942 for the first
quarter of 1996 with a cost of sales margin of 48.1%, compared to
1995's 57.5% on $238,356 in sales. The need to remain
competitive at all locations requires the setting of lower price
points, which in turn result in a significant number of sales at
14<PAGE>
a low dollar value. The State regulations governing truck stops
also require the Company to operate three low volume 50 seat
restaurants on a 24 hour basis in order to maintain a complement
of 50 video poker machines. All of these factors contribute
significantly to the Company's low gross margin on sales.
Direct operating expenses for the first quarter totaled
$1,025,641, up 19%, or $164,234, from 1995's $861,407; this
represents 23.8% and 23.9% of total revenue for 1996 and 1995
respectively. This increase was primarily due to the addition
of the Gold Rush, which added $144,986 to payroll related
expenses and $80,390 to other direct operating expenses.
General and administrative expenses for the first quarter totaled
$159,282, up 3% from 1995's $154,443; this represents 3.6% and
4.3% of total revenue for 1996 and 1995, respectively.
Interest expense for the first quarter decreased to $43,502 in
1996, down $33,544, or 44%, from 1995's $77,046, as a result of
the rapid reduction of debt in 1995, which continued into the
first quarter of 1996. Depreciation and amortization of video
poker machines, leasehold improvements and goodwill for the 1996
first quarter amounted to $144,388, down 17% from 1995's
$174,585. Other revenue and expense, net, of $41,802 in 1996,
includes rental income, interest income and ATM commissions; this
compares to $47,046 for 1995.
15<PAGE>
PART II. OTHER INFORMATION
Items 2, 4 and 5 are omitted from this report as inapplicable.
Item 1. Legal Proceedings
On August 25, 1995, the Company filed a petition for declaratory
judgement in the 14th Judicial District Court, Calsasieu Parish,
Louisiana, seeking the court's interpretation of the Act of
Contract and Agreement (the "Contract") under which Operator
operates the Lucky Longhorn video poker casino. At issue is
whether the Operator deducts the full 32.5% net device revenue
tax, or only 22.5% (which was the statutory rate prior to the
amendment of the statute effective July 1, 1994), in calculating
net revenues for distribution under the Contract. The other
party to the Contract filed an answer to the Company's suit on
November 28, 1995 claiming that only the old rate should be
deducted, and claiming that Operator was in default for deducting
the higher rate and that the Contract should therefore be
terminated. No trial date has been set, and settlement
discussions are ongoing. The Company believes the issue will be
resolved satisfactorily, but there can be no assurance in this
regard.
Item 3. Default Upon Senior Securities
The Company is $700,000 in arrears on dividends on its Class A
Preferred Stock as of March 31,1996.
Item 6. Exhibits and Reports on Form 8-K
(a) The following documents are filed as part of this Quarterly
Report on Form 10-QSB:
Exhibit
Number Description of Exhibits
- - ------ -----------------------
3.1.1 Certificate of Incorporation of the Company, as amended,
filed as Exhibit 3.1 to the company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1986
(the "1986 Form 10-K"), and incorporated herein by
reference.
3.1.2 Certificate of Amendment of Certificate of Incorporation
of the Company dated April 18, 1994, filed as Exhibit
16
<PAGE>
3.1.8 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 (the "1993 Form
10-K"), and incorporated herein by reference.
3.1.3 Certificate of Amendment of Certificate Incorporation of
the Company effecting one-for-three reverse stock split
filed as Exhibit 3.1 to the Company's Current Report on
Form 8-K dated October 17, 1994, and incorporated herein
by reference.
3.1.4 Certificate of Amendment of Certificate Incorporation of
the Company effecting name change, increase of authorized
shares, authorization of Class A preferred stock and
stock ownership limitations filed as Exhibit 3.1 to the
Company's Current Report on Form 8-K dated October 17,
1994, and incorporated herein by reference.
3.2 Amended and Restated Bylaws of the Company filed as
Exhibit 3.3 to the Company's Current Report on Form 8-K
dated October 17, 1994, and incorporated herein by
reference.
*27.1 Financial Data Schedule required by Item 601 of
Regulation S-B.
______________________
* Filed herewith.
(b) No reports on Form 8-K were filed during the quarter ending
March 31,1996.
17
<PAGE>
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION
SIGNATURES
_______
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
NORTH AMERICAN GAMING AND
ENTERTAINMENT CORPORATION
(Registrant)
By: /s/ George J. Akmon
George J. Akmon
Executive Vice-President
& Chief Financial Officer
(Principal Financial
and Chief Accounting
Officer)
Date: May 13, 1996
18<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet at March 31, 1996 and the consolidated statements of
operations and cash flows for the quarter ended March 31, 1996, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 774,525
<SECURITIES> 0
<RECEIVABLES> 279,430
<ALLOWANCES> 0
<INVENTORY> 68,642
<CURRENT-ASSETS> 1,181,388
<PP&E> 2,978,808
<DEPRECIATION> 1,472,666
<TOTAL-ASSETS> 3,818,566
<CURRENT-LIABILITIES> 3,280,039
<BONDS> 708,967
0
4,800,000
<COMMON> 147,094
<OTHER-SE> (5,117,584)
<TOTAL-LIABILITY-AND-EQUITY> (170,490)
<SALES> 4,318,346
<TOTAL-REVENUES> 4,318,346
<CGS> 2,819,894
<TOTAL-COSTS> 4,192,707
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,502
<INCOME-PRETAX> 167,441
<INCOME-TAX> 36,000
<INCOME-CONTINUING> 131,441
<DISCONTINUED> 0
<EXTRAORDINARY> 120,000
<CHANGES> 0
<NET-INCOME> 11,441
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
