U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1996
__________________
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________________ to ________________
Commission file number 0-19049
________________
American Gaming & Entertainment, Ltd.
_________________________________________________________________
(Exact name of small business issuer as specified in its charter)
<TABLE>
<CAPTION>
Delaware 74-2504501
________ __________
<S> <C>
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
</TABLE>
Bayport One, Yacht Club Drive, Suite 300, West Atlantic City, New Jersey 08232
______________________________________________________________________________
(Address of principal executive offices)
(609) 272-7700
__________________________________________________
(Issuer's telephone number)
Not Applicable
_________________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all 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
___ ___
Number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at May 8, 1996
____________________________ __________________________
<S> <C>
Common Stock, $.01 par value 12,508,067 shares
</TABLE>
<PAGE>
AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited)
___________ ____________
<S> <C> <C>
ASSETS
Current Assets
Cash $ 503,000 $ 487,000
Prepaid expenses 110,000 97,000
Investments in gaming projects - deposit - 1,027,000
Inventories and other current assets 217,000 25,000
___________ ___________
Total current assets 830,000 1,636,000
Casino barge and improvements, net of
accumulated depreciation of $2,623,000-
1996 and $2,384,000-1995 13,889,000 14,128,000
Property and Equipment
Furniture, fixtures and equipment 244,000 264,000
___________ ___________
244,000 264,000
Accumulated depreciation (128,000) (112,000)
___________ ___________
116,000 152,000
Assets held for sale or lease
Equipment under operating leases,
net of accumulated depreciation of
$1,470,000-1995 - 851,000
___________ ___________
- 851,000
___________ ___________
Investments in gaming projects 2,174,000 2,152,000
Deferred financing fees 2,180,000 2,275,000
Other non-current assets 915,000 41,000
___________ ___________
$20,104,000 $21,235,000
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited)
___________ ____________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Amounts due to related parties:
Accrued interest $ 7,169,000 $ 6,036,000
Dividends payable 903,000 778,000
Accrual for unutilized lease costs 4,144,000 4,463,000
Current portion of long term debt 38,122,000 39,072,000
___________ ___________
50,338,000 50,349,000
Accounts payable 234,000 420,000
Accrued payroll and related expenses 42,000 48,000
Accrued expenses and other current
liabilities 1,361,000 1,933,000
Current portion of mortgage note payable 25,000 24,000
___________ ___________
Total current liabilities 52,000,000 52,774,000
Long term portion of estimated net liabilities
for subsidiaries in bankruptcy 2,250,000 2,250,000
Long term portion of mortgage note payable 119,000 126,000
___________ ___________
54,369,000 55,150,000
___________ ___________
Commitments and Contingencies
STOCKHOLDERS' DEFICIENCY
Preferred stock, 1,000,000 shares authorized:
Series A preferred stock, par value $.01
per share, 55,983 shares issued 1,000 1,000
Series C and D cumulative preferred stock,
and Series E preferred stock, par value
$.01 per share, 4,000 shares authorized
and issued for each series 12,385,000 12,102,000
Common stock, par value $.01 per share;
50,000,000 shares authorized -:
12,532,102 shares issued and
12,508,067 outstanding 126,000 126,000
Additional paid-in capital 46,554,000 46,963,000
Cost of shares held in treasury (25,000) (25,000)
Deferred financing and commitment fees (1,482,000) (1,547,000)
Accumulated deficit (91,824,000) (91,535,000)
___________ ___________
(34,265,000) (33,915,000)
___________ ___________
$20,104,000 $21,235,000
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
_______________________________
1996 1995
__________ __________
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(289,000) $(4,850,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 410,000 608,000
Amortization of deferred financing costs 160,000 159,000
Stock option compensation expense - 70,000
Equity in losses of subsidiaries in bankruptcy - 1,544,000
Changes in operating assets and liabilities, net
of effect from business combination:
Accounts receivable, inventories and other (977,000) 938,000
current assets
Other non-current assets 28,000 58,000
Accounts payable, accrued expenses and other
current liabilities 500,000 432,000
_________ ___________
Net cash used in operating activities (168,000) (1,041,000)
_________ ___________
INVESTING ACTIVITIES
Proceeds from sale of keno operations 500,000 -
Capital expenditures - (182,000)
Investments in gaming activities 1,004,000 (588,000)
Amounts received under financing agreement 87,000 35,000
_________ ___________
Net cash provided by (used in) investing
activities 1,591,000 (735,000)
_________ ___________
FINANCING ACTIVITIES
Proceeds from notes payable and other
long-term obligations - 1,692,000
Interest payments on accrued interest (132,000) -
Principal payments on notes payable (1,275,000) -
Principal payments on capitalized leases - (12,000)
__________ ___________
Net cash provided by (used in)
financing activities (1,407,000) 1,680,000
__________ ___________
Increase (decrease) in cash 16,000 (96,000)
Cash at beginning of quarter 487,000 1,605,000
__________ ___________
Cash at end of quarter $ 503,000 $ 1,509,000
========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
AMERICAN GAMING & ENTERTAINMENT LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
_______________________________
1996 1995
__________ __________
<S> <C> <C>
Consulting services and other revenues $ 1,184,000 $ 248,000
___________ ___________
Costs and expenses
Direct operating and cost of sales 65,000 74,000
Selling, general and administrative 385,000 959,000
Casino project development costs 138,000 672,000
Depreciation and amortization 410,000 608,000
Equity in losses of subsidiaries in bankruptcy - 1,544,000
___________ ___________
Total costs and expenses 998,000 3,857,000
___________ ___________
Operating Income/(Loss) 186,000 (3,609,000)
___________ ___________
Other income (expense)
Interest income 4,000 27,000
Interest expense (1,427,000) (1,268,000)
Net gain on sale of keno operations 948,000 -
___________ __________
Total other income (expense) (475,000) (1,241,000)
___________ __________
Net Loss (289,000) (4,850,000)
Dividends and accretion on preferred stock 408,000 350,000
___________ __________
Net Loss for Common Stockholders $ (697,000) $(5,200,000)
=========== ===========
Net Loss per Common Share $ (0.06) $ (0.42)
=========== ===========
Weighted average number of common
shares outstanding 12,532,102 12,347,049
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
AMERICAN GAMING & ENTERTAINMENT, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated interim financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. The consolidated interim financial statements
include the accounts of American Gaming & Entertainment, Ltd. and its
subsidiaries (the "Company"). The unaudited consolidated interim financial
statements do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of the Company, all adjustments (including normal recurring
accruals) and disclosures (including events occurring subsequent to March 31,
1996) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 1996 may not be
indicative of the results that may be expected for the year ending December 31,
1996. For further information, reference is also made to the consolidated
financial statements contained in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1995.
The accompanying unaudited consolidated interim financial statements
have been prepared on a going concern basis, which contemplates continuity of
operations, realization of assets and liquidation of liabilities in the
ordinary course of business. As further described in Note 2, the Company has
sustained recurring operating losses since its inception. The Company has also
had a history of insufficient liquidity and has been dependent upon its largest
stockholder, Bennett Holdings, Inc. ("Bennett Holdings"), and certain related
entities (The Bennett Funding Group, Inc. ("Bennett Funding") and Bennett
Management and Development Corp. ("Bennett Management")) for both working
capital and project relating financing. As a result, the Company's recurring
losses, negative working capital, stockholders' deficiency, defaults under its
debt agreements, uncertainties relating to the ability to consummate the
liquidation of certain of its subsidiaries (see Notes 2 and 3) and
uncertainties relating to the bankruptcy of, and charges relating to, Bennett
Funding and Bennett Management (see Note 7) raise substantial doubt about the
ability of the Company to continue as a going concern. Management's plans
concerning these matters are discussed in Note 2. The accompanying unaudited
consolidated interim financial statements do not include any additional
adjustments that might result from the outcome of these uncertainties.
As a result of the bankruptcy proceedings under Chapter 11 of the
U.S. Bankruptcy Code (the "Code") involving two of the Company's wholly owned
subsidiaries, AMGAM Associates, a Mississippi partnership ("AMGAM"), and
American Gaming and Resorts of Mississippi, Inc., a Mississippi corporation
("AGRM"), and the expected imminent liquidation of these subsidiaries, the
Company's control of these entities is likely to be temporary. In accordance
with generally accepted accounting principles, the Company elected, effective
beginning the year ended December 31, 1995, to deconsolidate AMGAM and AGRM and
present the results of operations for AMGAM and AGRM on the equity basis of
accounting as a single line item in the Consolidated Statement of Operations
for financial reporting purposes.
<PAGE>
Certain reclassifications have been made to the 1995 amounts in order
to conform to the classifications used in 1996.
NOTE 2: LIQUIDITY AND CONTINUATION OF BUSINESS
The Company has sustained recurring operating losses since its
inception, including significant losses related to the Gold Shore Casino, as
more fully set forth below. The Company also has had a history of insufficient
liquidity and has been dependent upon Bennett Holdings, Bennett Funding and
Bennett Management for both working capital and project related financing.
However, as a result of the bankruptcy filings of Bennett Funding and Bennett
Management and the filing by the U.S. Securities and Exchange Commission (the
"Commission") of securities fraud charges against Bennett Funding and Bennett
Management (see Note 7), the Company does not anticipate receiving any
additional funds from the Bennett entities. As of March 31, 1996, the Company
owes approximately $45,291,000 to Bennett Holdings (see Note 4), which amount
includes approximately $1,886,000 under a 66-month operating lease between the
Company and Bennett Management (the "SCS Lease") with respect to the "Sioux
City Sue" riverboat vessel and its supporting barge (the "Vessels") which, as
discussed below, Bennett Holdings has orally represented to the Company that
Bennett Management, prior to its bankruptcy filing, assigned to Bennett
Holdings.
As more fully discussed below, in the bankruptcy proceeding before
the United States Bankruptcy Court, Southern District of Mississippi (the
"Bankruptcy Court") of AMGAM, the committee for unsecured creditors in the
bankruptcy proceeding of AMGAM (the "AMGAM Committee") has filed an adversary
complaint (the "Complaint") challenging the transfers of the ownership
interests in the Gold Coast Casino barge (the "Gold Coast Barge") by AGRM and
AMGAM to the Company and the transfer of the leasehold interest in the Gold
Coast Barge by AMGAM to the Company as fraudulent transfers or voidable
preferences under the Code, and seeking, among other things, that all rental
payments from President Mississippi Charter Corporation ("PMCC") under an
agreement (the "Charter Agreement") between the Company and PMCC whereby PMCC
is leasing from the Company the Gold Coast Barge and certain related equipment
including certain identified gaming equipment (collectively, the "Leased
Assets") which the Company owns and on which the Company had previously
operated the Gold Shore Casino, be deposited into an escrow account for the
benefit of the creditors of AMGAM and AGRM (see Note 5).
On April 29, 1996, a preliminary injunction (the "Preliminary
Injunction"), which was agreed upon by the AMGAM Committee and the committee
for unsecured creditors in the bankruptcy proceeding of AGRM (collectively with
the AMGAM Committee, the "Committees") and the Company, was entered by the
Bankruptcy Court (i) to require all rental payments from PMCC under the Charter
Agreement, beginning with the May 1996 payment, be deposited into an escrow
account for the benefit of the creditors of AMGAM and AGRM pending confirmation
of a joint plan of liquidation and (ii) to allow a monthly payment from such
escrow account to the Company in the amount of $304,000 for its monthly
operating expenses. Such payments are the Company's only present significant
source of net cash flow and liquidity. The Preliminary Injunction will remain
in effect through the earlier of (i) confirmation of a plan of liquidation of
the AMGAM and AGRM estates or (ii) August 1, 1996. If such a plan has not been
confirmed by such time, the Preliminary Injunction will be reviewed by the
Bankruptcy Court prior to August 1, 1996 to determine if cause exists to extend
the term of the Preliminary Injunction.
<PAGE>
The Company, AMGAM, AGRM and the Committees are currently negotiating
a proposed joint plan of liquidation (the "Plan"), more fully described below,
pursuant to which the payments by PMCC under the Charter Agreement and with
respect to certain slot machines acquired by PMCC from AMGAM formerly used in
the operation of the Gold Shore Casino (collectively, the "PMCC Payments")
would be deemed an asset of the bankruptcy estates of AMGAM and AGRM and the
Company would receive a portion of such payments, if any. The portion of such
payments, if any, to be received by the Company would be subject to the claim
allowance process in the AMGAM and AGRM bankruptcies, pursuant to which all
allowed claim amounts, including those of the Company, will be fixed for
purposes of distributions under the Plan. There can be no assurance that the
Plan as currently being discussed will be implemented or that the Company will
receive any payments from the AMGAM or AGRM bankruptcy cases.
If (i) the Company, AMGAM, AGRM and the Committees can not agree on a
joint consensual plan of liquidation for AMGAM and AGRM or any such plan is
agreed upon but not approved by the creditors in the AMGAM and AGRM bankruptcy
proceedings in accordance with the provisions of the Code or thereafter
confirmed by the Bankruptcy Court and (ii) a motion filed by the AMGAM
Committee with the Bankruptcy Court seeking the substantive consolidation of
the AMGAM and AGRM bankruptcy proceedings (the "Motion"), resulting in a
combination of the assets and liabilities of AMGAM and AGRM into one bankruptcy
estate, is granted by the Bankruptcy Court and the AMGAM Committee prevails on
the Complaint, the Company would not be able to meet its obligations as they
come do. Additionally, if the Company and the Committees can not agree on a
joint consensual plan of liquidation for AMGAM and AGRM, resulting in the Court
not extending the term of the Preliminary Injunction and not allowing payment
to the Company for its monthly operating expenses from the rental payments from
PMCC under the Charter Agreement, the Company, as of the end of the term of the
Preliminary Injunction on August 1, 1996, would not be able to meet its
obligations as they come do. In either such case, the Company would then need
to pursue a formal plan of reorganization or liquidation which would generally
result in the sale of the Company's assets to satisfy outstanding obligations.
There can be no assurance that if either action is required to be pursued that
all such obligations would be completely satisfied. Further, in the event of
either action, it is unlikely that stockholders of the Company will recover any
of their investment in the Company. Even if the Plan is confirmed in the AMGAM
and AGRM bankruptcies, and the Company receives all of the PMCC Payments, such
payments would not be sufficient to satisfy the Company's currently anticipated
operating needs and its obligations to Bennett Holdings and Bennett Management.
<PAGE>
As discussed below, the Company is seeking a termination of certain
agreements (but excluding Bennett Holdings' assumption of the obligation
related to a first preferred ship mortgage (the "Ship Mortgage") on the Gold
Coast Barge of approximately $2,278,000, which assumption has been consummated)
executed between the Company, Bennett Holdings and Bennett Management whereby
the Company agreed to assign all its rights and interests in the Charter
Agreement, including the rights to all rental payments thereunder from PMCC,
and the Leased Assets to Bennett Holdings and Bennett Management, respectively,
for cancellation of approximately $22,722,000 in debt due Bennett Holdings with
respect to the Gold Shore Casino (the "Leased Asset Debt") and Bennett
Holdings' assumption of the Ship Mortgage (collectively, the "Bennett Debt
Exchange") and a restructuring of all other obligations due from the Company to
Bennett Holdings because (i) if the rental payments under the Charter Agreement
were required to be paid to Bennett Holdings, the Company would not be able to
meet its obligations as they come due and (ii) the Company is otherwise unable
to service the debt or repay the principal due to Bennett Holdings under all
other such obligations.
Bennett Holdings has orally represented to the Company that Bennett
Management, prior to its bankruptcy filing, assigned to Bennett Holdings all of
Bennett Management's rights and obligations under all agreements previously
executed by and between the Company and Bennett Management including, without
limitation, (i) agreements constituting the Bennett Debt Exchange, (ii) a
security agreement whereby the Company granted to Bennett Management a security
interest in all of the Company's accounts receivable and all bank accounts in
the State of New Jersey to secure all obligations owing by the Company to
Bennett Management and its affiliates and to obtain the agreement of Bennett
Holdings to enter into the Bennett Debt Exchange (the "Security Agreement") and
(iii) the SCS Lease. However, the Company has not been provided with written
evidence of such assignment and, as the result of the bankruptcy filing of
Bennett Management, any such assignment might be challenged as a fraudulent
transfer or voidable preference under the Code. There can be no assurance that
such assignment was entered into between Bennett Holdings and Bennett
Management or, if entered into, that it will not be voided as a fraudulent
transfer or voidable preference in the bankruptcy proceeding of Bennett
Management if any such assignment became effective within one year prior to the
bankruptcy filing of Bennett Management.
<PAGE>
If Bennett Holdings and, to the extent an assignment to Bennett
Holdings of Bennett Management's interest in the agreements constituting the
Bennett Debt Exchange never took place or are voided as a fraudulent transfer
or voidable preference in the bankruptcy proceeding of Bennett Management,
Bennett Management agree to a termination of the Bennett Debt Exchange as of
the respective dates of the agreements comprising the Bennett Debt Exchange
(excluding Bennett Holdings' assumption of the Ship Mortgage) and agree to
continue to let the Company utilize the payments from PMCC under the Charter
Agreement (subject in all cases to the Preliminary Injunction), (i) the Company
would recognize as revenue amounts previously recorded as indebtedness to
Bennett Holdings arising out of the payments received by the Company from July
21, 1995, the scheduled effective date of the Bennett Debt Exchange (the "BDE
Date"), through December 31, 1995 under the Charter Agreement (the
"PMCC/Bennett Debt") as of the date of such termination and (ii) the Company
would reverse interest expense on the PMCC/Bennett Debt recognized from the BDE
Date through December 31, 1995. Based upon (i) a verbal understanding which the
Company believes it has with Bennett Holdings to allow the Company to utilize
and retain the PMCC payments under the Charter Agreement while the Company and
Bennett Holdings have been negotiating the terms of a comprehensive
restructuring and (ii) the course of conduct of Bennett Holdings since January
1, 1996, the Company has utilized, retained and recorded as revenues the PMCC
payments under the Charter Agreement received by the Company since January 1,
1996. If the Company's understanding is determined to be incorrect or a
restructuring of the Company's obligations to Bennett Holdings and, if
necessary, Bennett Management is not consummated, the Company would (i) reverse
as revenue the payments received from PMCC under the Charter Agreement since
January 1, 1996, (ii) record such payments as additional PMCC/Bennett Debt and
(iii) record interest expense on such PMCC/Bennett Debt. There can be no
assurance that Bennett Holdings or, if necessary, Bennett Management will agree
to terminate the Bennett Debt Exchange or restructure all other obligations due
from the Company to Bennett Holdings and, if applicable, Bennett Management or
that the verbal understanding which the Company believes it has with Bennett
Holdings to allow the Company to utilize and retain the PMCC payments under the
Charter Agreement while the Company and Bennett Holdings have been negotiating
a comprehensive restructuring is correct. Failure to obtain such termination or
restructuring would have a material adverse effect on the Company and the
Company would need to pursue a formal plan of reorganization or liquidation.
Any action to be taken by Bennett Management in connection with terminating the
Bennett Debt Exchange would probably require the approval of the bankruptcy
court before which the Bennett Management bankruptcy proceeding is being heard.
The Company is delinquent in the payment of interest due on its
various obligations to Bennett Holdings totaling approximately $7,169,000 as of
March 31, 1996 and is therefore in default with respect to such payments under
the Company's various loan agreements with Bennett Holdings. If Bennett
Holdings takes any action with respect to its rights and remedies in connection
with such defaults, it would have a material adverse effect on the Company's
business and financial condition and the Company would need to pursue a formal
plan of reorganization or liquidation. The Company is also delinquent in the
payment of rent totaling approximately $1,886,000 as of March 31, 1996 under
the SCS Lease. Bennett Holdings has a security interest in certain assets of
the Company including the Gold Coast Barge and therefore because of such
defaults could foreclose on such assets in the amount of such defaults. Bennett
Holdings or Bennett Management, to the extent an assignment to Bennett Holdings
of Bennett Management's interest in the Security Agreement never took place or
is voided as a fraudulent transfer or voidable preference in the bankruptcy
proceeding of Bennett Management, has a security interest in all of the
Company's accounts receivable and bank accounts located in the State of New
Jersey and therefore because of such defaults could foreclose on such assets in
the amount of such defaults. There can be no assurance that Bennett Holdings
and, if necessary, Bennett Management will agree on and execute an agreement
restructuring the Company's obligations to Bennett Holdings and, if applicable,
Bennett Management. Additionally, any action required to be taken by Bennett
Management would probably require the approval of the bankruptcy court before
which the Bennett Management bankruptcy proceeding is being heard. Since the
announcement of securities fraud charges against, and the filing of bankruptcy
petitions by, certain Bennett entities (see Note 7), no substantive
negotiations have been held with Bennett Holdings on any such restructuring.
Even if the Plan is confirmed, and such a restructuring is consummated, there
can be no assurance that the Company would receive payments pursuant to the
Plan sufficient to satisfy the Company's currently anticipated operating needs
and its obligations to Bennett Holdings and, if applicable, Bennett Management,
as restructured.
<PAGE>
The Company has not experienced any success in raising debt or equity
financing from sources independent of Bennett Holdings, Bennett Funding or
Bennett Management and has no present commitments or other alternatives for
such financing. Given the Company's historical operating losses and present
liquidity position and the legal problems described below relating to certain
Bennett entities (see Note 7) there can be no assurance that the Company will
achieve any success in its attempt to raise additional equity, working capital
or long-term project related financing.
The Company's ability to continue in business is dependent upon its
ability to (i) obtain Bennett Holdings' and, if necessary, Bennett Management's
agreement to terminate the Bennett Debt Exchange (excluding Bennett Holdings'
assumption of the Ship Mortgage) and restructure all other obligations due from
the Company to Bennett Holdings and, if applicable, Bennett Management, (ii)
consummate the liquidations under Chapter 11 of the Code of AMGAM and AGRM
under plans acceptable to the Company, resulting in a liquidation of the
various trade and debt obligations of those entities, and (iii) achieve levels
of revenues necessary to support the Company's cost structure. The Company, in
an effort to reduce its cost structure, has substantially decreased its number
of employees and is seeking ways to reduce its overhead costs. Additionally,
the Company has negotiated, and will continue to negotiate, voluntary payment
agreements with its creditors. However, there can be no assurance the Company
will be successful in obtaining Bennett Holdings' and, if necessary, Bennett
Management's agreement to terminate the Bennett Debt Exchange (excluding
Bennett Holdings' assumption of the Ship Mortgage) and restructure all other
obligations due from the Company to Bennett Holdings and possibly Bennett
Management, consummating the liquidations of AMGAM and AGRM under Chapter 11 of
the Code under plans acceptable to the Company or achieving the revenue levels
necessary to support the Company's cost structure. If the Company is
unsuccessful in these efforts, the Company would then need to pursue a formal
plan of reorganization or liquidation of the Company. Either such action would
generally result in the sale of the Company's assets to satisfy outstanding
obligations. There can be no assurance that if either action is required to be
pursued that all such obligations would be completely satisfied. Further, in
the event of either action, it is unlikely that stockholders of the Company
will recover any of their investment in the Company.
<PAGE>
NOTE 3: SIGNIFICANT DEVELOPMENTS WITH RESPECT TO INVESTMENTS IN GAMING
PROJECTS
INDIANA
The Company has been requested by the Indiana Gaming Commission (the
"IGC") to respond by May 15, 1996 to a series of questions relating to the
Company's suitability for licensure as an equity riverboat owner in connection
with the development of a riverboat gaming and entertainment complex in the
City of Rising Sun, Indiana (the "Rising Sun Project"). Such questions relate
to the relationships between the Company and various Bennett entities and the
Company's ability to continue as a going concern. If the IGC determines that
the Company is unsuitable for licensure, resulting in the loss of the license
to participate in the Rising Sun Project, the Company may transfer its 4.9%
interest in the Rising Sun Project to a trust established for the purpose of
disposing of such interest, provided that (i) the terms of the trust and the
identity of the trustee are acceptable to the IGC and the other members of the
Rising Sun Project and (ii) the trust does not impair development or operations
of the Rising Sun Project. If such transfer is not effected, if the trust is
not effective in preventing a loss of license or if the trust terminates prior
to the disposition of the Company's interest, the Company's partners in the
Rising Sun Project shall have the right to purchase the Company's interest in
the Rising Sun Project at an appraised fair market value.
If the IGC determines that the Company is unsuitable for licensure
because Bennett Holdings, the Company's largest stockholder, is unsuitable for
licensure, the Board of Directors of the Company has the right, under the
Company's Articles of Incorporation, as amended, to require Bennett Holdings to
dispose of the voting stock of the Company which it owns within ten days. Such
disposition could be effected by transferring such stock into a voting trust
over which Bennett Holdings would not posses the right to vote, to direct the
voting of or to be consulted with respect to the voting of such shares.
However, there can be no assurance that such an arrangement would be acceptable
to the IGC or that the IGC would thereafter determine that the Company is
suitable for licensure.
If the IGC determines that the Company is unsuitable for licensure,
such a determination could result in the gaming authorities in other
jurisdictions in which the Company has, or has applied for, licenses
(Mississippi, Nebraska, Connecticut, Iowa and New Jersey) determining that the
Company is unsuitable for licensure in those respective jurisdictions. A
determination by the Mississippi Gaming Commission that the Company is
unsuitable for licensure could result in a termination of the Charter Agreement
or the Company being prohibited from receiving any payments made by PMCC
pursuant to the Charter Agreement (see Note 2 and discussion below). A
determination by the gaming authorities in the other jurisdictions that the
Company is unsuitable for licensure could result in the Company being
prohibited from (i) performing the obligations under the maintenance and
servicing agreements with the licensed operators for stations and locations at
which the company's computerized keno system is utilized (the "Keno Maintenance
Agreements") pending the issuance to American Heartland Corporation ("AHC") of
the temporary licenses, permanent licenses or other gaming approvals or
authorizations or other evidence of non-disapproval (the "Required Licenses")
necessary to enable AHC to lawfully perform the obligations assumed by AHC
under the Keno Maintenance Agreements or (ii) under certain circumstances,
retaining certain Keno Maintenance Agreements (see discussion below).
<PAGE>
If the Company is determined to be unsuitable for licensure by the
IGC or the Mississippi Gaming Commission, the Company might then need to pursue
a formal plan of reorganization or liquidation of the Company. Either such
action would generally result in the sale of the Company's assets to satisfy
outstanding obligations. There can be no assurance that if either action is
required to be pursued that all such obligations would be completely satisfied.
Further, in the event of either action, it is unlikely that stockholders of the
Company will recover any of their investment in the Company.
MISSISSIPPI
The Company, AMGAM, AGRM and the Committees are currently negotiating
the terms of the Plan. Pursuant to the Plan as it currently stands, (i) each
administrative and priority claim, as defined in the Code, incurred in
connection with the bankruptcy proceedings of AMGAM and AGRM would be paid in
full from the respective estates of AMGAM and AGRM in accordance with statutory
priorities pursuant to the Code, (ii) each secured claim would be paid in full
from the sale of the related collateral and (iii) each unsecured claim,
including any claims of the Company (in the claimed amount of at least
$32,000,000), would be paid on a pro rata basis from the assets of the
respective estates of AMGAM and AGRM, in an amount not to exceed 100% of the
amount of such claim. All payments made by PMCC pursuant to the Charter
Agreement from the date the Plan is confirmed (the "Confirmation Date"), which
date is expected to be no earlier than August 1996, through the end of the
initial term of the Charter Agreement and all payments made from October 1,
1995 through October 1, 1997 by PMCC with respect to slot machines acquired by
PMCC from AMGAM formerly used in the operation of the Gold Shore Casino would
be included jointly in the AMGAM and AGRM estates and would be paid on a pro
rata basis based on the consolidated claims of AMGAM and AGRM, including the
claims of the Company (in the claimed amount of at least $32,000,000). The
amounts to be paid to creditors would be subject to the claim allowance process
in the AMGAM and AGRM bankruptcies, pursuant to which all allowed claim
amounts, including those of the Company in the order set forth above, would be
fixed for purposes of distributions under the Plan. The Bankruptcy Court has
set May 17, 1996 as the final date for filing proofs of claim or interest in
both the AMGAM and AGRM bankruptcy cases. Additionally, pursuant to the Plan,
the Committees would agree to stay all litigation, including the Complaint,
until the Confirmation Date, at which time the Committees would dismiss the
Complaint and all other litigation brought against the Company with prejudice,
that is, the Committees would be precluded from filing any action against the
Company based on the alleged causes of action set forth in the Complaint or any
such other litigation.
<PAGE>
There can be no assurance that the Company, AMGAM, AGRM and the
Committees will agree on a joint plan of liquidation for AMGAM and AGRM with
terms and conditions substantially equivalent to the Plan, that the creditors
in the AMGAM and AGRM bankruptcy proceedings will approve any such plan in
accordance with the provisions of the Code or that any such plan will
thereafter be confirmed by the Bankruptcy Court.
As previously described, the Bankruptcy Court has entered the
Preliminary Injunction (See Note 2).
In 1996, the Company reevaluated the useful life of the Gold Coast
Barge based on the Company's current plans for the use of such barge and
determined that it has a useful life of 25 years, which is the industry average
for such type of barge. Previously, the Gold Coast Barge was being depreciated
over a useful life of 10 years based on its previous utilization by AMGAM. The
change in such estimated useful life reduced depreciation and amortization
expense by approximately $159,000 and reduced net loss per common share by
approximately $0.01 for the three months ended March 31, 1996.
HAROLDS CLUB CASINO
Pursuant to an agreement between Bennett Holdings and the Company
(the "HC Purchase Agreement") under which Bennett Holdings provided the
necessary funds to the Company to close the purchase of the Harolds Club
casino, the Company transferred to Bennett Holdings title to the land and the
building related to the Harolds Club, Bennett Holdings canceled $650,000 of the
Company's then outstanding indebtedness to Bennett Holdings and caused Bennett
Funding to cancel $500,000 of the Company's then outstanding indebtedness to
Bennett Funding, and the Company agreed to transfer to Bennett Holdings all of
the Company's rights, title and interest in certain land leases related to the
Harolds Club by July 30, 1995. The Company is in breach of the latter provision
because such transfer has not been completed pending the negotiation by the
Company with Bennett Holdings relating to possible future development of the
Harolds Club. The HC Purchase Agreement does not give Bennett Holdings any
particular rights with respect to such breach by the Company. Although the
Company is obligated until such transfer to make all lease payments under such
leases and notwithstanding that such leases have not yet been assigned to
Bennett Holdings, since July 30, 1995 Bennett Holdings has assumed
responsibility for all carrying costs of the Harolds Club property including,
but not limited to, such lease payments, taxes, insurance and utilities.
However, even if the Company transfers to Bennett Holdings all of the Company's
rights, title and interest in such leases, the Company could still be
ultimately obligated under such leases, pursuant to certain guaranties of lease
executed by the Company. The accompanying unaudited consolidated interim
financial statements do not include any adjustments that might result from such
obligations. The Company has been informed by Bennett Holdings and the lessors
under such leases that Bennett Holdings has not made the April 1996 or May 1996
lease payments due under such leases or the past two quarterly property taxes
due under such leases collectively totaling $175,000. The lessors have, among
other rights, the right to terminate the respective leases and hold the Company
responsible for all obligations under such leases through the end of the
respective lease terms. Such leases require aggregate annual lease payments of
approximately $620,000, $584,000 and $548,000 for 1996, 1997 and 1998, subject
to increase based upon increases in the Consumer Price Index, and have terms
ranging from June 1997 to October 2022.
<PAGE>
Pursuant to certain agreements between Bennett Holdings and the
Company, the Company has the right to lease the Harolds Club from Bennett
Holdings or manage the Harolds Club on behalf of Bennett Holdings. The Company
does not have, nor does it anticipate having, the financial ability to exercise
the above described lease option. Additionally, the Company does not currently
have the personnel to manage the Harolds Club. The Company and Bennett Holdings
are currently jointly assessing opportunities to sell their interests in the
Harolds Club.
The Company is precluded from conducting casino operations in the
Harolds Club prior to receipt of a gaming license from the Nevada State Gaming
Control Board. In January 1996, the Company withdrew, without prejudice to
reapply, a previously filed Nevada gaming licensing application.
CALIFORNIA
On September 29, 1994, the Company executed a Memorandum of
Understanding ("MOU") with International Marine and Gaming, Inc. to jointly
pursue the potential development of a card club casino in Bell, California. In
connection with the execution of the MOU, the Company deposited $1,027,000 (the
"Bell Deposit") in trust with the City of Bell in order to participate as a 25%
interest holder in the card club casino project. The Company withdrew from such
project in January 1996 and the Bell Deposit was returned to the Company,
without interest, in February 1996. The Company used $1,000,000 of the Bell
Deposit to repay (i) approximately $183,000 of its indebtedness to Bennett
Holdings under a $1,900,000 working capital line of credit provided to the
Company by Bennett Holdings in September 1994, (ii) approximately $175,000 of
its indebtedness to Bennett Funding under a line of credit provided to the
Company by Bennett Funding in March 1995, including outstanding accrued
interest on such indebtedness and (iii) approximately $642,000 of its
indebtedness to Bennett Holdings under a non-revolving working capital line of
credit provided by Bennett Holdings to the Company in July 1995, including
outstanding accrued interest on such indebtedness.
<PAGE>
KENO
On March 28, 1996, the Company entered into an assignment and
transfer agreement (the "Keno Agreement") with American Heartland Corporation
("AHC"), and Big Red Keno, Ltd., a licensed keno operator in Omaha, Nebraska
("BRK"), pursuant to which: (i) the Company assigned, and AHC assumed, all of
the Company's rights and obligations under that certain financing agreement
dated October 15, 1991 with BRK to provide equipment, services and financing
for the operation of a multiple parlor keno game in the City of Omaha in
exchange for a revenue participation equal to 50% of cash net income of BRK
after deduction of certain cash payments by BRK: (ii) the Company transferred
and assigned to AHC all of the Company's right, title and interest to all of
the assets utilized by the Company in the conduct of its keno gaming activities
(the "Keno Assets"), including, without limitation, all maintenance and
servicing agreements with the licensed operators for stations and locations at
which the Company's computerized keno system is utilized (the "Keno Maintenance
Agreements") and the Company's computerized keno system; (iii) the Company
agreed not to compete, directly or indirectly, with AHC or BRK as a
distributor, manufacturer or maintainer of keno equipment or software, other
than in the normal course of any casino operations of the Company for a period
of five years; (iv) AHC paid the Company $500,000 on March 29, 1996; and (v)
AHC issued and delivered its promissory note to the Company in the principal
amount of approximately $1,112,000 (the "Keno Note"). The Keno Note requires
principal and interest payments, at an interest rate of 8% per annum, based on
a fifty-three month amortization with payments commencing on April 28, 1996,
which initial payment has been received by the Company. The Keno Note is
secured by the Keno Assets and is guaranteed by BRK, which guarantee is secured
by keno equipment previously provided to BRK by the Company.
AHC has agreed to submit licensing applications to the appropriate
governmental authorities for the temporary licenses, permanent licenses or
other gaming approvals or authorizations or other evidence of non-disapproval
(the "Required Licenses") necessary to enable AHC to lawfully perform the
obligations assumed by AHC under the Keno Maintenance Agreements. Pending the
issuance of the Required Licenses, the Company shall perform the obligations
under the Keno Maintenance Agreements for the benefit of AHC and shall be
reimbursed by AHC for any net cash operating expenses incurred by the Company
in connection with the performance of such obligations. If the arrangement
described above is not permitted by applicable laws or regulations, then,
pending the issuance of the Required Licenses, the Company shall continue to
perform its obligations under the Keno Maintenance Agreements for its own
benefit and at its own expense. If AHC does not submit the required licensing
applications or obtain the Required Licenses within specified time frames set
forth in the Keno Agreement, AHC and BRK, jointly and severally, shall (i)
indemnify the Company for any damages relating to the termination of the Keno
Maintenance Agreements, and (ii) except with respect to a failure to submit
applications for or to obtain licenses required by the State of Nebraska, pay
the Company liquidated damages in the amount of $100,000 as compensation for
damages relating to the termination of the Keno Maintenance Agreements. If AHC
does not obtain the Required Licenses within specified time frames set forth in
the Keno Agreement, the Company has the right, but not the obligation, to
retain certain Keno Maintenance Agreements and the Keno Assets located in the
Company's Billerica, Massachusetts facility. AHC's obligations under the Keno
Note are not contingent upon AHC submitting appropriate licensing applications
or obtaining the Required Licenses.
<PAGE>
NOTE 4: LONG TERM DEBT AND ACCRUAL FOR UNUTILIZED LEASE COSTS
As discussed above, the Company is delinquent in the payment of (i)
interest due under the Company's various loan agreements with Bennett Holdings
and (ii) rent under the SCS Lease (see Note 2) and therefore has classified all
indebtedness due to Bennett Holdings as current liabilities in the accompanying
unaudited consolidated interim financial statements. At March 31, 1996 and
December 31, 1995, the Company had outstanding amounts due Bennett Holdings
approximating $45,291,000 and $45,108,000, respectively, including accrued
interest of approximately $7,169,000 and $6,036,000, respectively. Such amounts
due Bennett Holdings also include approximately $1,886,000 and $1,567,000,
respectively, under the SCS Lease which Bennett Holdings has orally represented
to the Company that Bennett Management, prior to its bankruptcy filing,
assigned to Bennett Holdings (see Note 2). As a result of the Company's
determination as of December 31, 1995 that there is a substantial likelihood
that the Company will not record any revenues from the Vessels through the end
of the SCS Lease term to offset the remaining lease payments due Bennett
Holdings thereunder, the portion of such lease payments for the period from
April 1, 1996 through the end of the SCS Lease term totaling approximately
$4,144,000 have been recorded as a liability under accrual for unutilized lease
costs as of March 31, 1996. Additionally, the amount due Bennett Holdings as of
December 31, 1995 includes approximately $562,000 under a line of credit from
Bennett Funding to the Company which Bennett Holdings has orally represented to
the Company that Bennett Funding, prior to its bankruptcy filing, assigned to
Bennett Holdings. All borrowings under such line of credit were repaid by the
Company to Bennett Funding in the first quarter of 1996.
In addition to the Company's indebtedness to Bennett Holdings, at
March 31, 1996 and December 31, 1995, the Company owed approximately $146,000
and $150,000, respectively, under a mortgage note payable.
NOTE 5: CONTINGENCIES
The AMGAM Committee has filed the Motion which would result in a
combination of the assets and liabilities of AMGAM and AGRM into one bankruptcy
estate. The Bankruptcy Court has scheduled a hearing on the Motion on June 19
and 20, 1996; AMGAM, AGRM and the Company presently intend to oppose the Motion
on the basis, among others, that AMGAM, AGRM and the Company were separate
entities with separate ownership at the time most liabilities of AMGAM and AGRM
were incurred.
The AMGAM Committee has also filed the Complaint seeking that (i) the
transfer of the ownership interests in the Gold Coast Barge by AGRM and AMGAM
to the Company be declared null and void, (ii) the transfer of the leasehold
interest in the Gold Coast Barge by AMGAM to the Company be declared null and
void, (iii) the Company and Bennett Holdings be required to deliver to AGRM and
AMGAM their respective interests in both the ownership and leasehold in the
Gold Coast Barge, (iv) the Company and Bennett Holdings disgorge and return to
the respective AMGAM and AGRM estates all amounts received from PMCC or its
affiliates pursuant to the Charter Agreement, such funds to be deposited in an
escrow account and not expended without further order of the Bankruptcy Court,
and (v) PMCC be ordered and directed to immediately deposit all rental payments
under the Charter Agreement into an escrow account for the benefit of the
creditors of AMGAM and AGRM, such funds not to be expended without further
order of the Bankruptcy Court. The Bankruptcy Court has scheduled a hearing on
the Complaint on June 19 and 20, 1996; AMGAM, AGRM and the Company presently
intend to oppose the Complaint on the bases, among others, that the transfer of
the Gold Coast Barge from AGRM to the Company involved contemporaneous
exchanges of value and that the Company and Bennett Holdings were not insiders
of AMGAM or AGRM at the time such entities granted the Company and Bennett
Holdings security interests in their assets, including the Gold Coast Barge.
<PAGE>
As discussed in Note 2, pursuant to the Plan, as it is currently
proposed, the Committees would agree to stay all litigation, including the
Complaint, until the Confirmation Date, at which time the Committees would
dismiss the Complaint and all other litigation brought against the Company with
prejudice, that is, the Committees would be precluded from filing any action
against the Company based on the alleged causes of action set forth in the
Complaint or any such other litigation. The Motion would be rendered moot
because the Plan is a joint plan of liquidation.
If (i) the Company, AMGAM, AGRM and the Committees can not agree on a
joint consensual plan of liquidation for AMGAM and AGRM or any such plan is
agreed upon but not approved by the creditors in the AMGAM and AGRM bankruptcy
proceedings in accordance with the provisions of the Code or thereafter
confirmed by the Bankruptcy Court and (ii) the Motion is granted by the
Bankruptcy Court and the AMGAM Committee prevails on the Complaint, the Company
would not be able to meet its obligations as they come do. Additionally, if the
Company and the Committees can not agree on a joint consensual plan of
liquidation for AMGAM and AGRM, resulting in the Bankruptcy Court not extending
the term of the Preliminary Injunction and not allowing payment to the Company
for its monthly operating expenses from the rental payments from PMCC under the
Charter Agreement, the Company would not be able to meet its obligations as
they come do. In either such case, the Company would then need to pursue a
formal plan of reorganization or liquidation which would generally result in
the sale of the Company's assets to satisfy outstanding obligations. There can
be no assurance that if either action is required to be pursued that all such
obligations would be completely satisfied. Further, in the event of either
action, it is unlikely that stockholders of the Company will recover any of
their investment in the Company.
As previously described, the Bankruptcy Court has entered the
Preliminary Injunction (See Note 2). The Preliminary Injunction was sought by
the Committees and the Company in connection with their negotiations involving
the Plan, but it is independent of the Complaint which seeks, among other
things, similar relief.
NOTE 6: DECONSOLIDATION OF AMGAM AND AGRM
The Company has determined that, because of the filings of AMGAM and
AGRM under the Code and the expected imminent liquidation of AMGAM and AGRM,
such entities should be deconsolidated for financial statement purposes. A
combined unaudited condensed balance sheet of these entities as of March 31,
1996 and December 31, 1995, is as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
_________ ____________
<S> <C> <C>
Assets
Current Assets and Other $ 4,027,000 $ 3,024,000
Property and Equipment, Net 41,000 5,706,000
Land - 10,000,000
___________ ___________
Total Assets $ 4,068,000 $18,730,000
=========== ===========
Liabilities and Stockholders' Deficiency
Current Liabilities $22,729,000 $22,740,000
Amounts Due to Parent 12,147,000 30,138,000
Stockholders' Deficiency (30,808,000) (34,148,000)
___________ ___________
Total Liabilities and Stockholders'
Deficiency $ 4,068,000 $18,730,000
=========== ===========
</TABLE>
<PAGE>
NOTE 7: RECENT RELATED PARTY DEVELOPMENTS
On March 28, 1996, Mr. Patrick Bennett, the Chief Financial Officer
of Bennett Funding and Bennett Management, was charged by the federal
government with, among other charges, (a) fraud and making material
misstatements and omissions in connection with the purchase and sale of up to
$80,000,000 of notes issued by a wholly-owned subsidiary of Bennett Funding and
(b) perjury in testimony before the Commission. Additionally, on or about March
28, 1996, Mr. Patrick Bennett, Bennett Funding, Bennett Management and two
wholly-owned subsidiaries of Bennett Funding were charged by the Commission
with, among other charges, using misrepresentations and omissions of material
facts to offer and sell over $570,000,000 of purported assignments of equipment
leases and promissory notes issued by Bennett Funding or such subsidiaries. On
March 29, 1996, Bennett Funding and Bennett Management filed for protection
under Chapter 11 of the Code. The Company's management believes, based on
recent court filings, that Bennett Funding is owned by members of the Bennett
family and Bennett Management is owned by Mr. Patrick Bennett. The Company
understands that, based upon certain oral representations made by Bennett
Holdings and a review of public records, Bennett Holdings has not filed for
protection under the Code, although the Company has not received from Bennett
Holdings written confirmation of such understanding, and that, based on filings
made with the Commission by Bennett Holdings and Mr. Michael Bennett, Bennett
Holdings is solely owned Mr. Michael Bennett.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS: COMPARISON OF THE THREE MONTH PERIODS ENDED MARCH 31,
1996 AND MARCH 31, 1995
REVENUES
Consulting service and other revenues for the three months ended
March 31, 1996 amounted to approximately $1,184,000, an increase of
approximately $936,000 or approximately 377% compared to the three months ended
March 31, 1995. The increase is primarily attributable to revenues for the
three months ended March 31, 1996 from the Charter Agreement with PMCC in the
amount of approximately $986,000. The Charter Agreement became effective on
June 18, 1995 and, therefore, no such revenues were generated during the three
months ended March 31, 1995.
COSTS AND EXPENSES
Direct operating expenses and cost of sales were approximately
$65,000 for the three months ended March 31, 1996, representing a decrease of
approximately $9,000 or 12% when compared to the three months ended March 31,
1995. The decrease was primarily attributable to the cost of sales of keno
systems sold during the three months ended March 31, 1995. No such costs were
incurred for the three months ended March 31, 1996.
Selling, general and administrative expenses were approximately
$385,000 for the three months ended March 31, 1996, representing a decrease of
approximately $574,000 or approximately 60% when compared to the three months
ended March 31, 1995. The decrease in selling, general, and administrative
expenses was primarily due to a decrease of approximately $329,000 due to the
resignation or termination effective December 31, 1995 of all but fourteen of
the Company's employees, and a decrease of approximately $176,000 in legal
expenses associated with the Company's change in business direction in 1996
from the development of gaming projects to the management of its equity
interests in gaming projects.
Casino project development costs for the three months ended March 31,
1996 were approximately $138,000, representing a decrease of approximately
$534,000 or approximately 79% when compared to the three months ended March 31,
1995. Such decrease was primarily due to decreases of approximately $374,000
and $57,000 in personnel and legal expenses, respectively, associated with the
Company's change in business direction discussed above.
Depreciation and amortization costs were approximately $410,000 for
the three months ended March 31, 1996, representing a decrease of approximately
$198,000 or approximately 33% when compared to the three months ended March 31,
1995. The decrease in depreciation and amortization expense was principally due
to a decrease of approximately $176,000 as a result of the transfer of certain
assets to PMCC in September 1995 and the change in the estimated useful life of
certain depreciable or amortizable assets from 10 years to 25 years.
<PAGE>
Equity in losses of subsidiaries in bankruptcy for the three months
ended March 31, 1995 of approximately $1,544,000 related to the results of
operations for AMGAM and AGRM. The Company wrote off its investments in AMGAM
and AGRM as of December 31, 1995 and therefore no such costs were incurred for
the three months ended March 31, 1996.
Net interest expense for the three months ended March 31, 1996 was
approximately $1,423,000, an increase of approximately $182,000 or
approximately 15% compared to the three months ended March 31, 1995. Interest
expense increased approximately $159,000 during the three months ended March
31, 1996, while interest income decreased approximately $23,000 during the
three months ended March 31, 1996. The reason for the increase in interest
expense of approximately $159,000 was due to an increase in average debt
outstanding of approximately $3,639,000. The decrease in interest income was
principally attributable to approximately $19,000 in interest income recorded
during the three months ended March 31, 1995 associated with the sale of
substantially all of the assets utilized by the Company in the conduct of its
high stakes bingo gaming activities. No such interest income was recorded
during the three months ended March 31, 1996.
The Company recorded a net gain of approximately $948,000 on the sale
of keno operations for the three months ended March 31, 1996 (see Note 3). No
such income was recorded during the three months ended March 31, 1995.
CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company had no committed financing
arrangements and a working capital deficiency of $51,170,000. For a discussion
of liquidity and capital resources, see Note 2.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a discussion of legal proceedings, see Note 5 to the Consolidated
Financial Statements.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
For a discussion of defaults with respect to the Company's
indebtedness due to Bennett Holdings, see Notes 2 and 4.
The Company has accrued and declared, but has not paid as of April
30, 1996, dividends totaling approximately $152,000 which were due and payable
on the outstanding shares of its Series C Cumulative Preferred Stock as of
December 31, 1994. The Company has accrued and declared, but has not paid as of
April 30, 1996, dividends totaling approximately $152,000 which were due and
payable on the outstanding shares of its Series D Cumulative Preferred Stock as
of December 31, 1994.
Additionally, the Company has accrued, but has not declared or paid
as of April 30, 1996, dividends totaling approximately $350,000 which were due
and payable on the outstanding shares of its Series C Cumulative Preferred
Stock from January 1, 1995 through March 31, 1996. The Company has accrued, but
has not declared or paid as of April 30, 1996, dividends totaling approximately
$250,000 which were due and payable on the outstanding shares of its Series D
Cumulative Preferred Stock from January 1, 1995 through March 31, 1996. The
Company is prohibited under the General Corporation Law of Delaware from
declaring such dividends unless the Company has (i) capital surplus or (ii) net
profits in the fiscal year in which such dividends are declared and/or the
preceding fiscal year.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Number Description
______________ ___________
<S> <C>
11 Computation of Earnings Per Share.
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the first quarter of 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
American Gaming &
Entertainment, Ltd.
Date: 5/13/96 By: /s/ William I. Fasy
_______________________ _________________________________
William I. Fasy
Chairman, President and
Chief Executive Officer,
Vice President - Finance
and Chief Financial
Officer, Treasurer,
Assistant Secretary and
Principal Accounting
Officer
Date: 5/13/96 By: /s/ J. Douglas Wellington
_______________________ _________________________________
J. Douglas Wellington
General Counsel and
Secretary
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
_______ _____________ _________
<S> <C> <C>
11 Computation of Earnings Per Share. 24
27 Financial Data Schedule. 25
</TABLE>
AMERICAN GAMING & ENTERTAINMENT, LTD.
COMPUTATION OF EARNINGS (LOSS) PER SHARE
PRIMARY AND FULLY-DILUTED
<TABLE>
<CAPTION>
Three Months Ended March 31,
____________________________
1996 1995
__________ ___________
<S> <C> <C>
Weighted average number of shares
for computation 12,532,102 12,347,049
=========== ==========
Net loss $ (289,000) $(4,850,000)
Dividends and accretion on
preferred stock 408,000 350,000
___________ ___________
Net loss for common stockholders $ (697,000) $(5,200,000)
=========== ===========
Net loss per share $ (0.06) $ (0.42)
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF AMERICAN GAMING &
ENTERTAINMENT, LTD. FOR THE QUARTERLY PERIOD 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> 503,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 830,000
<PP&E> 16,756,000
<DEPRECIATION> 2,751,000
<TOTAL-ASSETS> 20,104,000
<CURRENT-LIABILITIES> 52,000,000
<BONDS> 119,000
0
12,386,000
<COMMON> 126,000
<OTHER-SE> (46,777,000)
<TOTAL-LIABILITY-AND-EQUITY> 20,104,000
<SALES> 0
<TOTAL-REVENUES> 1,184,000
<CGS> 0
<TOTAL-COSTS> 998,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,427,000
<INCOME-PRETAX> (289,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (289,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (697,000)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
