<PAGE>
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 June 30, 1997
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[ ] 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
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(Exact name of small business issuer as specified in its charter)
Delaware 75 - 2571032
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(State of incorporation or organization) (IRS Employer
Identification No.)
13150 Coit Road, Suite 125, Dallas, Texas 75240
(Address of principal executive offices) ------
(Zip Code)
Issuer's telephone number, including area code (972) 671-1133
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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
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Number of shares of common stock, par value $.01 per share, outstanding as of
March 31, 1997: 20,093,347
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Transitional Small Business Disclosure Format (Check One): Yes No xx
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
30-JUNE-97 31-DEC-96
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ASSETS UNAUDITED
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<S> <C> <C>
CURRENT ASSETS:
Cash $ 415,172 $ 364,965
Restricted cash 199,584 183,529
Accounts receivable 459,623 291,597
Inventories, at cost 102,023 81,557
Prepaid Expenses 63,323 99,328
Notes receivable - current 96,210 135,824
Current deferred tax asset 19,030 19,030
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TOTAL CURRENT ASSETS 1,354,965 1,175,830
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PROPERTY AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION 1,434,867 1,492,255
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OTHER ASSETS:
Deposits 90,048 76,488
Long-term deferred tax asset 523,491 539,448
Revenue interest rights 261,072 286,753
Trade name, contract rights and organizational costs, net of
accumulated amortization 206,510 258,583
Goodwill and merger costs 1,106,218 1,183,607
Notes Receivable-long-term 49,173 49,173
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2,236,512 2,394,052
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TOTAL ASSETS $ 5,026,344 $ 5,062,137
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LIABILITY AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 1,148,796 $ 1,005,349
Notes payable - current 1,302,432 1,385,597
Income Taxes Payable 29,517 32,017
Preferred stock dividends payable 780,000 780,000
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TOTAL CURRENT LIABILITIES 3,260,745 3,202,963
NOTES PAYABLE-LONG-TERM 788,532 898,756
NOTES PAYABLE TO CERTAIN STOCKHOLDERS-LONG-TERM 1,521,279 1,757,706
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TOTAL LIABILITIES $ 5,570,556 $ 5,859,425
STOCKHOLDERS' EQUITY:
Class A preferred stock,$3.00 par value, 10% annual cumulative dividend
1,600,000 shares authorized, 1,287,000 and 1,287,000 shares issued,
at March 31, 1997 and December 31, 1996 $ 3,861,000 $ 3,861,000
Preferred stock, $.01 par value, 10,000,000 shares authorized 8,000,000
series "B" issued at March 31, 1997 and December 31, 1996. 80,000 80,000
Common stock, $.01 par value, 25,000,000 shares authorized, 20,093,347
shares issued at March 31, 1997 and December 31, 1996 200,935 200,935
Additional paid-in-capital (deficit) (3,257,090) (3,257,090)
Retained earnings (deficit) (1,429,057) (1,682,133)
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TOTAL STOCKHOLDERS' EQUITY $ (544,212) $ (797,288)
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 5,026,344 $ 5,062,137
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</TABLE>
The accompanying notes are an integral part of the financial statements
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NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
30-JUNE-97 30-JUNE-96 30-JUNE-97 30-JUNE-96
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<S> <C> <C> <C> <C>
REVENUE:
Video Poker Revenue $3,840,224 $ 2,971,055 $7,626,277 $6,053,471
Truck Stop and Convenience Store 1,740,284 1,511,356 3,327,010 2,747,286
Cruise Revenue 471,486 58,975 754,140 58,975
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6,051,994 4,541,386 11,707,427 8,859,732
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COST AND EXPENSES:
Cost of Revenues 4,039,557 2,929,682 7,587,502 5,749,576
General and Administrative Expenses 1,745,453 1,143,535 3,266,484 2,328,458
Interest Expense 104,328 97,631 174,082 141,133
Depreciation and Amortization 161,528 198,555 326,392 342,943
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6,050,866 4,369,403 11,354,460 8,562,110
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OPERATING INCOME (LOSS) 1,128 171,983 352,967 297,622
---------- ----------- ---------- ----------
OTHER REVENUE (EXPENSE), NET 16,629 48,234 46,109 90,036
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INCOME BEFORE PROVISION FOR INCOME TAXES 17,757 220,217 399,076 387,658
PROVISION FOR INCOME TAXES - (43,000) (146,000) (79,000)
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NET INCOME $ 17,757 $ 177,217 $ 253,076 $ 308,658
LESS: Preferred Stock Dividends - (80,000) - (200,000)
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK $ 17,757 $ 97,217 $ 253,076 $ 108,658
========== =========== ========== ==========
EARNINGS PER SHARE $0.00 $0.01 $0.01 $0.01
========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
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NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
30-JUNE-97 30-JUNE-96
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<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 253,076 $ 308,658
Adjustments to reconcile net income to net cash:
Depreciation and amortization 326,392 342,943
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (168,026) 87,804
(Increase) decrease in inventories ( 20,466) (12,923)
(Increase) decrease in prepaid expenses 36,005 (12,271)
(Increase) decrease in deposits (13,560) ( 7,799)
Increase (decrease) in income taxes payable 13,447 -
Increase (decrease) in accounts payable and accrued liabilities 143,444 (138,905)
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Net cash provided (used) by operating activities 570,312 567,507
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (113,853) (1,931,928)
Proceeds to borrowers 48,087 (217,072)
Repayment by borrowers (8,473) 274,081
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Net cash provided (used) by investing activities (74,239) (1,874,919)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock - 49,341
Issuance of preferred stock - 80,000
Redemption of preferred stock - (939,000)
Additional paid-in-capital - 316,643
Increase (decrease) in notes payable (429,811) 1,852,451
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Net cash provided (used) by financing activities (429,811) 1,359,435
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NET INCREASE (DECREASE) IN CASH 66,262 52,023
CASH - beginning of period 548,494 696,119
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CASH - ending of period $ 614,756 $ 748,142
========= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
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NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(UNAUDITED)
JUNE 30, 1997 AND 1996
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NOTE 1. OPINION OF MANAGEMENT
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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, 1996.
NOTE 2. ACQUISITION OF ASSETS
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In January of 1997 the Company formed a subsidiary called "River Port Truck
Stop, Inc." and entered into an agreement with S.W. Day and T. Joe Callaway
("Lessor") to lease property in Port Allen, LA for a period of 50 years. The
terms of the lease call for a monthly base rent payment of $7,000 plus
Additional Rent of 10% of Net Revenue as defined in the lease agreement. Lessor
further agreed that the first 24 months after the commencement of video poker
operations that the Additional Rent would be 5% (rather than 10%) and that
commencing with the 25th month of video poker operations that the Additional
Rent would be 10% of Net Revenue.
The Company is planning to build and operate a video poker casino, restaurant,
truck stop and convenience store on the property. A convenience store and fuel
facility is currently in operation, and effective June 1, 1997 the Company,
through its subsidiary River Port Truck Stop, Inc., began operations. The
Company is currently in the facility design process, and once this phase is
complete, applications to secure the proper permits will be made. Construction
is expected to be completed by the end of the first quarter of 1998.
On June 10, 1996, the Company acquired 100% of the issued and outstanding
capital stock of GalaxSea Cruises and Tours, Inc. ("GalaxSea") and 100% of the
issued and outstanding capital stock of I.T. Cruise, Inc. ("I.T. Cruise") from
International Tours, Inc. ("International"). Both corporations were wholly
owned subsidiaries of International.
GalaxSea was acquired by virtue of a merger with a newly created wholly owned
subsidiary of the Company under the terms of which the Company issued 4,934,106
shares of Common Stock and 8,000,000 shares of a newly designated series of the
Company's preferred stock, par value $.01 per share, designated as Series B
Convertible Preferred Stock ("Series B Preferred Stock"). The 8,000,000 shares
of Series B Preferred Stock are entitled to one vote for each share issued and
will vote together with the Common Stock as one class, and not as a separate
class (except as mandated by law). As a result of this acquisition,
International is the largest stockholder of the Company, owning approximately
44% of the voting stock. Simultaneously with the closing of the merger with
GalaxSea, the Company also restructured its existing, outstanding Class A
Preferred Stock by redeeming 313,000 of the 1,600,000 outstanding shares for a
$939,000 subordinated debenture, placing an agreed moratorium on the accrual of
dividends for two years and obtaining from the holders of Class A Preferred
stock the right to force conversion of the remaining 1,287,000 shares of Class A
Preferred Stock into 8,240,000 shares of Common Stock at any time within the
next two years. In the event of any such forced conversion, as part of the
merger transaction, International was granted anti-dilution protection and will,
upon the issuance of such shares of Common Stock to the former holders of Class
A Preferred Stock, be entitled to an additional 5,452,854 shares of Common Stock
without further consideration, in order to maintain its percentage ownership of
voting stock at 44%. The $780,000 of dividends on the Class A Preferred Stock
accumulated and accrued through May 31, 1996 continues to exist as accrued
dividends payable.
I.T. Cruise was acquired in exchange for $100,000 cash and a promissory note in
the principal amount of $1,400,000 payable by the Company to International. The
promissory note bears interest at nine percent per annum, is payable
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in 31 equal monthly installments of $50,000 each and one final installment of
$27,414.22, and is secured by a pledge of the outstanding capital stock of
GalaxSea and I.T. Cruise owned by the Company.
GalaxSea is an Oklahoma corporation that was formed in September 1995.
Effective October 1, 1995, GalaxSea acquired substantially all of the operating
assets of GalaxSea Associates, Inc. ("GAI"), a Florida corporation. GAI had
been in the business of franchising "cruise only" retail travel stores since
1988. The principal business of GalaxSea will continue to be the granting of
franchises for the operation of travel vacation stores that specialize in the
marketing and selling of cruise travel, tours and related travel arrangements
according to the concept and business system developed by GalaxSea and GAI.
I.T. Cruise is an Oklahoma corporation that was formed in 1993. I.T. Cruise has
served as the cruise marketing division of International since that time. The
principal business of I.T. Cruise is to coordinate cruise marketing programs
between the various major cruise lines and International's network of
approximately 900 travel agency locations.
Effective July 1, 1996 the Company entered into a sub-lease agreement with New
Orleans Video Poker, Inc. (NOVP) to manage the Diamond Jubilee Video Poker
Casino and Truck-Stop in New Orleans, LA. This agreement provides for a 50/50
split between the Company and NOVP of the net cash flow generated by the Diamond
Jubilee. The agreement further provides for the Company to assume the
outstanding liabilities of NOVP, exclusive of notes payable to the principals of
NOVP, with all with the operating assets becoming the property of the Company.
The Company has the option to purchase NOVP's 50% share of the cash flow for the
remaining balance on the notes to NOVP principals; which are reduced on a
monthly basis from cash flow distributions. The transaction also included the
issuance of 450,000 shares of common stock in the Company to NOVP.
NOTE 3. PRESENT CASH SHORTFALL
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As of July 1, 1997, the Company was seven principal payments in arrears, at
regular principal and interest payments of $50,000 per month (a total of
$261,310 in principal - interest has been brought current as of June 30, 1997),
in payments to International on the promissory note issued to International by
the Company as partial consideration for the I.T. Cruise acquisition. The note
had an original principal balance of $1,400,000, requires monthly payments of
principal and interest of $50,000, had an unpaid principal balance of $1,167,260
at June 30, 1997, and is secured by a pledge of the outstanding capital stock of
I.T. Cruise and GalaxSea owned by the Company. The Company is current in
payment of all other indebtedness and payables which are required to be paid.
Until such time as the regular scheduled payments on the International note
recommence and the International note is current, all payments will be suspended
on the subordinated debentures issued by the Company in connection with the
redemption of 313,000 shares of Class A Preferred Stock, which have aggregate
remaining principal balances of 896,346 at July 1, 1997, require aggregate
payments of principal and interest of $11,250 per month (two months payments,
for a total of $22,500, have not been paid pursuant to the subordinated
debenture),and are expressly made subordinate to the International note as well
as other senior debt of the Company. See, also, the discussion of the Company's
default under certain debt instruments described in Item 2 - "Management's
Discussion and Analysis of Plan of Operation -Liquidity and Capital Resources -
Present Cash Shortfall."
NOTE 4. LEASE TERMINATION
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The Company through its consolidated subsidiary, OM Operating, L.L.C., has a
lease for an initial term of five years (commencing May 1, 1992) on King's Lucky
Lady truck stop in Port Barre, Louisiana. OM Operating L.L.C. ("Operator") has
the option to renew the lease for three additional five year terms, subject to
the parties negotiating a percentage rental for the renewal period acceptable to
both parties. The parties have thus far been unable to negotiate an acceptable
renewal percentage rental and the landlord has delivered notice to Operator that
the lease terminated effective April 30, 1997 and that Operator no longer has
any right to operate the video poker casino after such date. Operator has
retained legal counsel and commenced litigation to attempt to retain the lease
for the renewal period. The Company and Operator appeared in court on July 31,
1997 for a hearing on this matter and the judge ordered a continuance as the
landlord's attorney was not prepared to go on with the trial. The landlord's
attorney is expected to redraft his client's pleadings on the matter and a new
court date will be established. There can be no assurance that Operator will
prevail. Operator has been ordered by the court to escrow 50% of monthly
operating profit generated by the facility; this amounted to $22,700 for May
1997 and $15,840 for June 1997. If it does not prevail, Operator's rights to
operate the video poker casino will terminate effective as of April 30, 1997.
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NOTE 5. EARNINGS PER SHARE
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In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share" which
establishes standards for computing and presenting earnings per share ("eps").
Under SFAS No. 128, primary eps is replaced with basic eps. Basic eps is
computed by dividing income available to common shareholders by the weighted
average shares outstanding; no dilution for any potentially convertible shares
is included in the calculation. Fully diluted eps, now called diluted eps, is
still required; however, when applying the treasury stock method, the average
stock price is used rather than the greater of the average or closing stock
price for the period. The adoption of this statement will have no material
impact on the Company's calculation of earnings per share. SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997.
THIS SPACE WAS INTENTIONALLY LEFT BLANK
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
PRESENT CASH SHORTFALL. As of July 1, 1997, the Company was seven principal
payments in arrears (a total of $261,310 in principal - interest has been
brought current as of June 30, 1997) to International on the promissory note
issued to International by the Company as partial consideration for the I.T.
Cruise acquisition. The note had an original principal balance of $1,400,000,
requires monthly payments of principal and interest of $50,000, had an unpaid
principal balance of $1,167,260 at June 30, 1997, and is secured by a pledge of
the outstanding capital stock of I.T. Cruise and GalaxSea owned by the Company.
The Company is current in payment of all other indebtedness and payables.
The cash flow currently being generated by the Company is presently not
sufficient to allow it to make the required payments on the International note
and to continue to remain current on its other indebtedness and payables.
Consequently, International has agreed to allow the $261,310 accrued and owed to
it to continue to remain outstanding (with interest accruing thereon) until the
earlier of January 1, 1998 or the time that excess cash flow is available to
pay such amount (or any portion thereof) and, further, has granted relief to the
Company to allow it to pay the lesser of $50,000 per month or excess available
cash flow, until January 1, 1998, at which time any accrued amounts will be due
and payable and the regular $50,000 scheduled monthly payments will recommence.
Until such time as the regular scheduled payments on the International note
recommence and the International note is current, all payments will be suspended
on the subordinated debentures issued by the Company in connection with the
redemption of 313,000 shares of Class A Preferred Stock, which have aggregate
remaining principal balances of $896,346 at July 1, 1997, require aggregate
payments of principal and interest of $11,250 per month (two months in payments
for a total of $22,500, have not been paid pursuant to the subordinated
debentures), and are expressly made subordinate to the International note as
well as other senior debt of the Company. The Company believes that the relief
granted by International will allow it to meet its cash flow obligations during
1997. Further, the Company plans to enter into negotiations with International
and the holders of the subordinated debentures to attempt to negotiate a revised
payment schedule for all of the Company's indebtedness to such persons which
will accommodate the Company's expected cash flow. Any such revised schedule
will need to be flexible enough to anticipate revenue fluctuations due to
seasonal changes in revenue and to anticipate the loss of the King's Lucky Lady
truck stop and video poker casino, any required restructuring of the Company's
revenue and profits interests in OM Operating, L.L.C., and any loss of
additional video poker devices at any of the Company's video poker casinos as a
result of reduced fuel sales. The Company believes it will be able to negotiate
a satisfactory revised payment schedule by the middle of the fourth quarter of
1997, but there can be no assurance. If not, it is possible that the Company
might continue to experience certain cash shortfalls in 1998, depending on the
level of revenues generated from the Company's operations. It is not possible
to predict whether such cash shortfalls might be experienced, but the Company
believes its cruise operations will contribute positive cash flow as it
continues to mature and it is possible that no cash shortfalls will be
experienced even if no revised payment schedule is negotiated, although there
can be no assurance.
OM Operating, L.L.C. has a lease for an initial term of five years (commencing
May 1, 1992) on King's Lucky Lady truck stop in Port Barre, Louisiana. OM
Operating L.L.C. ("Operator") has the option to renew the lease for three
additional five year terms, subject to the parties negotiating a percentage
rental for the renewal period acceptable to both parties. The parties have thus
far been unable to negotiate an acceptable renewal percentage rental and the
landlord has delivered notice to Operator that the lease terminated effective
April 30, 1997 and that Operator will no longer has any right to operate the
video poker casino after such date. Operator has retained legal counsel to seek
the courts protection and judgement on this matter, and commenced litigation to
attempt to retain the lease for the renewal period. The Company and Operator
appeared in court on July 31, 1997 a hearing on this matter and the judge
ordered a continuance as the landlord's attorney was not prepared to go on with
the trial. The landlord's attorney is expected to redraft his client's
pleadings on the matter and a new court date will be established. There can be
no assurance that Operator will prevail. Operator has been ordered by the court
to escrow 50% of monthly operating profit generated by the facility; this
amounted to $21,800 for May 1997 and $14,940 for June 1997. If it does not
prevail, Operator's rights to operate the video poker casino will terminate
effective as of April 30, 1997.
If the lease is renewed, under the lease Operator is responsible for all
expenses, utilities, maintenance and repairs and all taxes on the personal
property. The rental payable during the initial five year term is equal to 20%
of the net
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revenues generated from the video poker devices; net revenues being defined as
all money played in the devices less winnings paid out and all fees and taxes
paid to the state. During any renewal period, all lease terms remain the same
except the percentage rental is subject to renegotiation at the commencement of
each renewal period, as noted above. All or a portion of the lease may be
assigned with the landlord's consent, which cannot be unreasonably withheld.
The structure of Operator and the various interests (including revenue and
profits interests) of the Company in Operator are being reviewed by the
Louisiana Gaming Control Board. Any adverse ruling by the Louisiana Gaming
Control Board could further compound the Company's cash flow situation and
possibly result in the inability to meet its scheduled debt payments, even as
revised. The Company does not believe the review will result in material
adverse changes in Operator's structure, but it cannot predict the results of
the review until the review is completed.
The Company will seek to meet its long-term liquidity needs primarily through
cash flow from operations, restructuring its payment obligations on certain debt
described above, 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 if it is able to satisfactorily restructure its payment obligations
as described above, 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.
GENERAL CONDITION. The Company ended the second quarter of fiscal 1997 with
$614,756 in cash and other current assets amounting to $740,209, including
accounts receivable of $459,623, inventories and prepaid expenses of $165,346,
current notes receivable of $96,210 and a current deferred tax asset of $19,030.
The Company's total liabilities were $5,570,556 at June 30, 1997, including
accounts payable and accrued liabilities of $1,148,796, current notes payable of
$1,302,432, long-term notes payable of $2,309,811 and preferred stock dividends
payable of $780,000. The Company's liabilities decreased $288,869 from
$5,859,425 at December 31, 1996 to $5,570,556 at June 30, 1997. This decrease
was comprised of an increase in current liabilities of $143,447, reductions in
liabilities on long and short-term debt to banks and equipment manufacturers
totaling $150,837, payments on the Ozdon notes issued for the stock purchase of
the Gold Rush of $163,714, note reductions related to the acquisition of I.T.
Cruise and GalaxSea of $31,959, payments on promissory notes payable to Class A
Preferred shareholders of $16,928 and final payments totaling $68,878 on pre-
Merger liabilities of Western Natural Gas Company ("WNGC").
Accounts payable and accrued liabilities of $1,148,796 included $650,731 in
trade payables, state franchise taxes of $180,167, casino distributions of
$192,464, payroll and payroll taxes of $105,925 and accrued interest of $19,509.
The current portion of other notes payable totaling $1,302,432 includes $494,050
related to the acquisition of I.T. Cruise and GalaxSea; the stock purchase note
from the Gold Rush acquisition amounting to $350,293; $203,036 payable to a bank
for the construction of the Pelican Palace and the purchase of the Lucky
Longhorn; $203,762 payable to Class A preferred shareholders; and $51,291 in
equipment leases and other notes.
Long-term debt of $2,309,811 includes $724,958 payable to a bank for the
construction of the Pelican Palace and the purchase of the Lucky Longhorn;
$692,584 payable to Class A Preferred shareholders; $673,210 related to the
acquisition of I.T. Cruise and GalaxSea; $155,485 for the stock purchase note
on the Gold Rush acquisition; and $63,574 in equipment leases and other notes.
All pre-Merger liabilities of WNGC have been satisfied.
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 June 1994. The $1,450,000 loan was evidenced by
a promissory note payable to the Company which was paid-in-full as of May 31,
1996. Under the Operating and Financing Agreement with Curray, 70% of the net
income from the operation of the facility was dedicated to the repayment of the
note. Now that the note receivable from Curray is paid-in-full, net income will
be split 50% to the Company and 50% to Curray.
Effective July 1, 1996 the Company entered into a sublease agreement with New
Orleans Video Poker, Inc. ("NOVP") to sublease and manage The Diamond Jubilee
video poker casino and truck stop in New Orleans, Louisiana. This sublease
provides for a 50/50 split between the Company and NOVP of the net cash flow
generated by the Diamond Jubilee. The sublease further provides for the Company
to assume the outstanding liabilities of NOVP, exclusive of notes payable to the
principals of NOVP, as the purchase price for 50 video poker devices and an
automated teller machine.
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The Company has the option to purchase NOVP's 50% share of the cash flow for the
remaining balance on the notes to NOVP principals (approximately $520,420 at
June 30, 1997); which are reduced on a monthly basis from cash flow
distributions. The transaction also included the issuance of 450,000 shares of
common stock in the Company to NOVP.
In January of 1997 the Company formed a subsidiary called "River Port Truck
Stop, Inc." and entered into an agreement with S.W. Day and T. Joe Callaway
("Lessor") to lease property in Port Allen, LA for a period of 50 years. The
terms of the lease call for a monthly base rent payment of $7,000 plus
Additional Rent of 10% of Net Revenue as defined in the lease agreement. Lessor
further agreed that the first 24 months after the commencement of video poker
operations that the Additional Rent would be 5% (rather than 10%) and that
commencing with the 25th month of video poker operations that the Additional
Rent would be 10% of Net Revenue. The Company is planning to build and operate
a video poker casino, restaurant, truck stop and convenience store on the
property. A convenience store and fuel facility is currently in operation, and
effective June 1, 1997 the Company, through its subsidiary River Port Truck
Stop, Inc., began operations. The Company is currently in the facility design
process, and once this phase is complete, applications to secure the proper
permits will be made. Construction is expected to be completed by the end of
the first quarter of 1998.
At June 30, 1997, property and equipment (net) at truck stops, video poker
facilities, cruise marketing and corporate offices totaled $1,434,867. At June
30, 1997 equipment (net) resulting from the Company's acquisition of I.T.
Cruise and GalaxSea, totaled $41,018, up from the 1996's year end of $5,605 due
to the opening of GalaxSea's offices in Coral Springs, Florida. The Company had
paid-in-full the remaining balance on all notes to video poker equipment
manufacturers.
Effective June 10, 1996, the Company acquired GalaxSea and I.T. Cruise,
companies engaged in the cruise travel industry. Cruise revenue as reported is
presented on an accrual basis, and is estimated based on the receipt of
quarterly cash payments of previous years actual revenue; adjusted for seasonal
variations. Cruise revenue is comprised of overrides and commissions on cruise
sales generated by I.T. Cruise from the International network and GalaxSea's
franchise system. The Cruise lines make payments of overrides and commissions
on a quarterly basis which are received 30-45 days following the end of each
quarter. Bonus overrides and commissions are paid by the cruise lines on an
annual basis, which are received 30-45 days into the next calendar year.
GalaxSea franchisees are billed monthly for license fees.
Intense competition for the business of gaming patrons in Louisiana and
Mississippi resulted in a decline in operating profit margins during 1996 and
1997. It is expected that the profit margins may continue to 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 first six months of 1997 the Company was subjected to regulatory
compliance issues which were enforced by the Louisiana State Police. On
February 1, 1997 the Company was ordered to reduce its complement of video poker
devices from 50 to 40 at the Diamond Jubilee for failure to meet minimum fuel
requirements to maintain 50 video poker devices. On May 28, 1997 the Louisiana
State Police suspended the license to operate video poker machines (16) at
Stelly's for failure to meet minimum fuel requirements. During the month of
July 1997 the Louisiana State Police closed two of the Company's route
locations (a loss of 6 devices) as a result of the establishment owners failing
to renew their video poker establishment license.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share" which
establishes standards for computing and presenting earnings per share ("eps").
Under SFAS No. 128, primary eps is replaced with basic eps. Basic eps is
computed by dividing income available to common shareholders by the weighted
average shares outstanding; no dilution for any potentially convertible shares
is included in the calculation. Fully diluted eps, now called diluted eps, is
still required; however, when applying the treasury stock method, the average
stock price is used rather than the greater of the average or closing stock
price for the period. The adoption of this statement will have no material
impact on the Company's calculation of earnings per share. SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997.
-10-
<PAGE>
RESULTS OF OPERATIONS
NET INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1997
Company operations resulted in net income before income taxes of $399,076 for
the six months ended June 30, 1997, an increase of $11,418 or 3% from 1996's
$387,658. Fifty percent of the operating profit generated at the Pelican
Palace is now recorded as income to the Company. Through May of 1996 the
Company recorded the 70% revenue interest it received in the Pelican Palace as a
repayment of a note receivable, which was satisfied at that time. The note
receivable was reduced by $146,971 in the first quarter of 1996 and $236,616 for
the year ended December 31, 1996. Effective June 1, 1996 the Company began
recording income from GalaxSea and I.T. Cruise marketing operations. The
Company also began recording additional video poker income as of July 1, 1996
from the Diamond Jubilee. On June 1, 1997 the Company began recording retail
revenues as a result of operating the River Port Truck Stop in Port Allen, LA.
The Company's earnings before interest, taxes, depreciation and amortization
(EBITDA) amounted to $899,550 for the six months ended June 30, 1997, up 3%
from 1996's $871,734.
REVENUES TOTALED $11,707,427 THROUGH JUNE 30, 1997 COMPARED TO $8,859,732 FOR
1996, UP 32%.
VIDEO POKER revenues totaled $7,626,278 through June 30, 1997, up $1,572,807, or
26% from 1996's $6,053,471. Growth in revenue was mainly due to the Diamond
Jubilee's contribution of $1,251,073. An increased revenue was also attained by
the Gold Rush - $204,412; Stelly's Southern Gold - $183,853; the Pelican
Palace - $116,931; and King's Lucky Lady - $16,126. Heavy competitive pressure
continued on the Lucky Longhorn, as the result of an additional riverboat on
Lake Charles. The Lucky Longhorn posted a decline in revenue of $142,504 for
the six months ended June 30, 1997. Route Operations revenue decreased
$33,704, resulting from competition and a reduction in the number of video poker
devices.
Video Poker revenue production by location for the six months ended June 30,
1997 and 1996 respectively, was as follows: Lucky Longhorn, Vinton, LA -
$1,766,577 in 1997 and $1,909,081 in 1996, down 7%; Gold Rush - Opelousas, LA,
$1,541,737 in 1997 and $1,337,325 in 1996, up 15%; Pelican Palace, Toomey, LA
- - $1,523,416 in 1997 and $1,406,485 in 1996, up 8%; King's Lucky Lady, Porte
Barre, LA - $1,152,014 in 1997 and $1,154,420 in 1996, down .2%; Route
Operations - South, LA - $207,608 in 1997 and $241,312 in 1996, down 14%;
Stelly's Southern Gold -LeBeau, LA - $183,853 in 1997 and $4,849 in 1996 due to
discontinued operations from January 4, 1996 until November 22, 1996 (on May 28,
1997 all machines were removed from stelly's, as noted above). The Diamond
Jubilee contributed $1,251,073 in video poker revenues for the six months ended
June 30, 1997.
RETAIL revenues from fuel and convenience store, and food and beverage
operations amounted to $3,327,010 in 1997 compared to 1996's $2,747,286, an
increase of 21%. Fuel and convenience store sales amounted to $2,565,012
compared to $2,083,966 in 1996, up 23%. Higher fuel sales for 1997, amounting to
$2,157,070, were up 23% from 1996's $1,747,811 constituting 64.8% of the
Company's retail sales, compared to 1996's contribution of 63.6% of the
Company's retail sales. Convenience store retail sales amounted to $407,972,
and were up 21% for the first six months of 1997 compared to 1996's $336,155.
Growth of 25% occurred at the Gold Rush, which reported $1,468,611 in revenue
for the first six months of 1997 compared to 1996's $1,179,083; and King's
generated $1,034,000, up 14% from 1996's $904,916. The River Port Truck Stop
posted sales of $62,401 for the month of June 1997. Food and beverage sales
increased 15% to $761,998 compared to $663,287 in 1996. Food and beverage for
each location was as follows: King's $406,496 in 1997 compared to 1996's
$380,919; Pelican Palace - $119,289 in 1997 versus $108,221 in 1996; Gold Rush
- - $198,637 in 1997 compared to $174,147 in 1996; and the Diamond Jubilee
produced $37,576 for the first six months of 1997.
CRUISE REVENUES for the six months ended June 30, 1997 totaled $754,140. This
amount represents an accrual of $152,105 for overrides and commissions on cruise
sales volume resulting from I.T. Cruise's contracts with International; and the
accrual of GalaxSea's franchise system revenues, comprised of $118,030 in
overrides and commissions, $87,450 in monthly license fees, franchise sales fees
of $2,650, marketing fees totaling $383,162 and convention and training fees of
$10,743.
-11-
<PAGE>
CASINO AND TRUCK STOP OPERATIONS
THE GOLD RUSH generated average daily revenue per device (50 devices) of $170
through June 30, 1997 compared to $147 for the first six months of 1996. The
Gold Rush's operating profit for the first half of 1997 was approximately
$574,779, up 15%, representing 64% of the Company's EBITDA. This compares to
1996's operating profit of $499,722 which represented 57% of the Company's
EBITDA for the first six months of 1996.
THE LUCKY LONGHORN generated average daily revenue per device (50 devices) of
$195 through June 30, 1997 compared to 1996's $210. During the month of January
1997 operations were suspended for 3 days due to an ice storm. The Lucky
Longhorn has eighteen competitors in its market area, including four river
boats, one of which was added in 1996. Also affecting the local market, is the
Las Vegas style Native American casino, which opened during 1994, and then
almost doubled its gaming capacity during the third quarter of 1995. In the
first six months of 1997, the Longhorn's operating profit was approximately
$342,168, down 8%, representing 38% of the Company's EBITDA. This compares to
operating profit for the first six months of 1996 of approximately $370,511, or
43% of the Company's EBITDA.
KING'S LUCKY LADY generated average daily revenue per device (50 devices) of
$127 through June 30, 1997 compared to 1996's $127. King's Lucky Lady's
operating profit was approximately $244,477, up 5%, representing 27% of the
Company's EBITDA. This compares to operating profit for 1996 of approximately
$233,740, or 27% of the Company's EBITDA. As noted above, Operator has received
notice from the landlord that the lease for King's Lucky Lady is terminated, but
Operator has retained legal counsel to seek the courts protection and judgement
on this matter, and has commenced litigation to attempt to retain the lease for
the renewal period. There is the possibility that such lease will be lost for
failure to negotiate terms agreeable to both parties.
THE PELICAN PALACE generated average daily revenue per device (50 devices) of
$168 through June 30, 1997 compared to 1996's $155. During the month of January
1997 operations were suspended for 3 days due to an ice storm. The Pelican was
subject to the same competitive pressures as the Longhorn during 1996. In 1997,
the Company's share of the operating profit from the Pelican was approximately
$299,571 compared to 1995's $117,517, an increase of 155%; this represents 33%
versus 13% in 1996 of the Company's EBITDA.
THE DIAMOND JUBILEE generated average daily revenue per device (on an average of
41.7 devices) of $166 through June 30, 1997. Operating profit was approximately
$78,505, representing 9% of the Company's EBITDA. This operating profit
represents the Company's 50% share of the net cash flow generated by the Diamond
Jubilee. The Diamond Jubilee did not have sufficient fuel sales necessary to
operate 50 video poker devices under Louisiana regulations, and as of February
1, 1997 the Company was required to remove 10 devices from operations until
increased fuel sales are maintained. The Company has implemented promotional
programs to stimulate fuel sales, resulting in an increase of 22% over the first
quarter to an average of 93,000 gallons per month for the second quarter
(100,000 gallons per month is necessary for 50 devices). In order to increase
fuel sales substantially, the Company will be required to make a substantial
investment to include a convenience store and additional gasoline pumps. The
Company is presently negotiating with NOVP and the landlord to share such costs
if any such improvements are desired. There can be no assurance that such
improvements will be made and, if not made, it is not likely that the fuel sales
will increase to a level to allow reinstallation of the 10 devices.
STELLY'S SOUTHERN GOLD generated average daily revenue per device (16 devices)
of $78 through May 28, 1997. Stelly's did not have sufficient fuel sales
necessary to operate 16 video poker devices under Louisiana regulations for the
previous three quarters, therefore the Louisiana State Police suspended the
license to operate video poker devices at this facility until increased fuel
sales are maintained. Operating profit recorded through June 30, 1997 was
approximately $10,347, representing 1% of the Company's EBITDA; this compares to
a loss in 1996 of $20,249. As previously reported, operations were suspended on
January 4, 1996 as a result of the truck parking and compliance issue and
subsequently re-opened on November 22, 1996.
ROUTE OPERATIONS posted operating profit for the six months ended June 30, 1997
of $30,058, a decrease of 13% from 1996's $34,667; this represents 3% and 4%,
respectively, of the Company's EBITDA. At June 30, 1997, the Company had 22
devices operating within 10 locations; the Company had 34 devices operating
within 15 locations during the first six months of 1996. During the month of
July 1997 the Louisiana State Police closed two of the Company's route locations
(a loss of 6 devices) as a result of the establishment owners failing to renew
their video poker establishment license.
-12-
<PAGE>
CRUISE OPERATIONS
The Company recorded revenue from cruise marketing operations for the six months
ended June 30, 1997 totaling $754,140, resulting in an operating loss of
$29,700. GalaxSea's revenues amounted to $602,034, with an operating loss of
approximately $159,878; revenues recorded for I.T. Cruise were $152,105, with an
operating profit of approximately $130,178.
EXPENSES TOTALED $11,354,460 THROUGH JUNE 30, 1997 COMPARED TO $8,562,110 FOR
1996, UP 33%.
VIDEO POKER operations recorded a direct cost of revenue amounting to $4,421,678
for the first six months of 1997 compared to $3,473,866 in 1996, an increase of
27%. This includes fees paid to the State of Louisiana of $2,598,051 (34.1% of
video poker revenue) in 1997 and $2,060,860 (34.0% of video poker revenue) in
1996, and profit sharing payments as defined in operating and management
contracts of $1,823,628 (23.9% of video poker revenue) in 1997 and $1,413,006
(23.3% of video poker revenue) in 1996.
RETAIL operations posted a cost of revenue related to fuel, convenience store,
food and beverage operations totaling $2,767,583 (83.2% of truck stop and
convenience store sales) for the first six months of 1997, compared to
$2,272,215 (82.7% of truck stop and convenience store sales) for 1996. Fuel
sales for 1997 were up 23%, with a gross margin of 5.4%, compared to 1996's
3.4%. In order to comply with State regulations governing truck stops, the
Company continued to be very competitive in its marketing and pricing of fuel
during the first six months of 1997, to increase or maintain the level of fuel
sales. 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. Convenience store retail sales were up 21% for the first six months
of 1997 with the cost of sales being 87.0% compared to 82.7% in 1996. Food and
beverage operations recorded a combined cost of sales margin of 48.9%, compared
to 46.1% in 1996, on a 15% increase in sales. Restaurant promotions designed to
increase fuel sales contributed to this decline in profit margin. The need to
remain competitive at all locations requires the setting of lower price points,
which in turn results in a significant number of sales at 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 operate 19
or more video poker machines.
CRUISE operations recorded a direct cost of revenue amounting to $398,241 for
the first six months of 1996. This was comprised of marketing, training and
promotional expenses totaling $368,918 and royalty fees of $29,313.
GENERAL OPERATING AND ADMINISTRATIVE EXPENSES of $3,266,484 for the six months
ended June 30, 1997 increased 40%, compared to $2,328,458 in 1996, representing
27.9% and 26.3% of total revenue for 1997 and 1996, respectively.
DEPRECIATION AND AMORTIZATION amounted to $326,392 for the first six months of
1997 compared to $342,943 in 1996. Due to a reclassification of goodwill related
to the merger with WNGC to a deferred tax asset, as a result of the 1996 year
end audit, amortization was reduced by $90,000 from the 1996 and 1995 levels as
reported for the first six months for these prior years. The merger of GalaxSea
and I.T. Cruise resulted in the amortization of goodwill totaling $142,537 for
the first six months of 1997. Interest expense amounted to $174,082 for the
first six months of 1997 and $141,133 in 1996. Other revenue and expense (net)
was $46,109 in 1997, compared to $90,036 in 1996.
COMPARISON OF 1997 TO 1996
VIDEO POKER revenues increased from $7,626,277 in 1996 to $6,053,471 in 1997, up
$1,572,806 or 26%, due mainly from the sub-lease agreement on the Diamond
Jubilee and the re-opening of Stelly's Southern Gold, which generated
incremental revenue of $1,251,073 and $179,004 respectively (until Stelly's was
closed again on May 28, 1997).
RETAIL revenues from fuel and convenience store, food and beverage operations
amounted to $3,327,010 in 1997 compared to 1996's $2,747,286, an increase of
21%. Growth in retail sales came from the Gold Rush - $314,018, up 23%: King's
- - $154,594, up 12%; the River Port convenience store - $62,401; and the Diamond
Jubilee beverage sales - $37,576. The cost of revenue related to fuel,
convenience store, food and beverage operations increased $495,373, or 22% from
$2,272,210 in 1996 to $2,767,583 in 1997. A contributing factor to this decline
in profit margin was promotional pricing to retain trucker fuel purchases.
GENERAL OPERATING AND ADMINISTRATIVE EXPENSES were $3,266,484 in 1997 and
$2,328,458 for 1996, an increase of $938,026, or 40%. This overall increase
resulted predominately from new operations: Cruise Operations $385,598;
-13-
<PAGE>
the Diamond Jubilee added operating expenses totaling $287,449; Stelly's
reopening added $45,704; and River Port added $9,193 to operating expenses for
the first six months of 1997. Professional Services, which include legal,
accounting and consulting fees increased $197,518 over 1996. All other operating
expenses (net) were up $12,564, or .5%. The increase in the Federal Minimum Wage
from $4.35 per hour to $4.75 per hour went into effect on October 1, 1996.
DEPRECIATION AND AMORTIZATION amounted to $326,392 for the first six months of
1997 compared to $342,943 in 1996, a decrease of $16,551, or 5%. Depreciation
and amortization on video poker operations, which includes video poker machines,
leasehold improvements and revenue interest rights, amounted to $149,655 in
1997 compared to $192,315 for 1996. Depreciation and amortization on
corporate, truck stop and convenience store operations totaled $34,200 in 1997
and $150,628 for 1996. Due to a reclassification of goodwill related to the
merger with WNGC to a deferred tax asset, amortization was reduced by $90,000
from 1996. The merger of GalaxSea and I.T. Cruise resulted in the amortization
of goodwill and depreciation totaling $142,537 in 1997. Interest expense was
$174,082 in 1997 and $141,137 for 1996, an increase of $32,945, or 23%, which
was due to the note to International and the subordinated debentures resulting
from the purchase of GalaxSea and I.T. Cruise. Other revenue and expense (net)
of $46,109 in 1997 compares to $90,036 for 1996.
FORWARD LOOKING STATEMENTS
Certain statements included in this Management's Discussion and Analysis are
forward looking statements that predict the future development of the Company.
The realization of these predictions will be subject to a number of variable
contingencies, and there is no assurance that they will occur in the time frame
proposed. The risks associated with the potential actualization of the
Company's plans include: regulatory changes, regulatory approvals, regulatory
review of licenses and retention of licenses without material changes to the
existing structure of Operator, the availability and cost of financing, and,
renegotiation of debt instruments, lease renewals and agreements, to name a few.
THIS SPACE INTENTIONALLY LEFT BLANK
-14-
<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, Calcasieu 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.
T.B. Guillory et al versus North American Gaming and Entertainment Corporation
and O.M. Operating, LLC, 27th Judicial District Court, St. Landry Parish,
Louisiana: The preliminary question to be decided by the court is whether the
option to renew the term of the contract of lease on Kings 190 Truck Stop is in
compliance with the requirements of the Louisiana Civil Code governing the
validity of such options. The validity of the option is assailed on grounds
that the alleged failure of the option to stipulate a price renders it invalid.
The result of such invalidity would be that the contract of lease would
terminate on April 30, 1997, the last day of the primary term. The Company and
Operator appeared in court on July 31, 1997 for a hearing on this matter and the
judge ordered a continuance as the landlord's attorney was not prepared to go on
with the trial. The landlord's attorney is expected to redraft his client's
pleadings on the matter and a new court date will be established. There can be
no assurance that Operator will prevail. Operator has been ordered by the court
to escrow 50% of monthly operating profit generated by the facility; this
amounted to $22,700 for May 1997 and $15,840 for June 1997. If it does not
prevail, Operator's rights to operate the video poker casino will terminate
effective as of April 30, 1997.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Simultaneously with the acquisition of GalaxSea and I.T. Cruise, the Company
also restructured its existing, outstanding Class A Preferred Stock by redeeming
313,000 of the 1,600,000 outstanding shares for a $939,000 subordinated
debenture, placing an agreed moratorium on the accrual of dividends for two
years and obtaining from the holders of Class A Preferred stock the right to
force conversion of the remaining 1,287,000 shares of Class A Preferred Stock
into 8,240,000 shares of Common Stock at any time within the next two years. In
the event of any such forced conversion, as part of the merger transaction,
International was granted anti-dilution protection and will, upon the issuance
of such shares of Common Stock to the former holders of Class A Preferred Stock,
be entitled to an additional 5,452,854 shares of Common Stock without further
consideration, in order to maintain its percentage ownership of voting stock at
44%. The $780,000 of dividends on the Class A Preferred Stock accumulated and
accrued through May 31, 1996 will exist as accrued dividends payable.
See, also, the discussion of the Company's default under certain debt
instruments described in Item 2 - "Management's Discussion and Analysis or Plan
of Operation - Liquidity and Capital Resources - Present Cash Shortfall."
-15-
<PAGE>
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 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.
3.1.5 Form of "Certificate of Designation, Preferences and Rights of Series B
Convertible Preferred Stock" creating the Series B Preferred Stock,
filed as Exhibit 10.1.4 to the Company's Current Report on Form 8-K
dated June 10, 1996, 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.
THIS SPACE INTENTIONALLY LEFT BLANK
-16-
<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
Executive Vice-President &
Chief Financial Officer (Principal
Financial and Chief Accounting
Officer)
Date: August 12, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1997 AND THE CONSOLIDATED STATEMENTS OF
OPERATIONS AND CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 614,756
<SECURITIES> 0
<RECEIVABLES> 555,883
<ALLOWANCES> 0
<INVENTORY> 102,023
<CURRENT-ASSETS> 1,354,965
<PP&E> 3,402,640
<DEPRECIATION> 1,967,773
<TOTAL-ASSETS> 5,026,344
<CURRENT-LIABILITIES> 3,260,745
<BONDS> 0
3,861,000
80,000
<COMMON> 200,935
<OTHER-SE> (4,686,147)
<TOTAL-LIABILITY-AND-EQUITY> 5,026,344
<SALES> 11,707,427
<TOTAL-REVENUES> 11,707,427
<CGS> 7,587,502
<TOTAL-COSTS> 3,266,484
<OTHER-EXPENSES> (46,109)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 174,082
<INCOME-PRETAX> 399,076
<INCOME-TAX> 146,000
<INCOME-CONTINUING> 399,076
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 253,076
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
