<PAGE>
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 June 30, 1997
[ ] 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)
Delaware 74-2504501
__________________ _______________
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Bayport One, Yacht Club Drive, Suite 300, West Atlantic City, NJ 08232
______________________________________________________________________
(Address of principal executive offices)
(609) 272-9099
___________________________
(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.
Class Outstanding at July 31, 1997
____________________________________ ____________________________
Common Stock, $.01 par value 12,532,102 shares
<PAGE> 2
<TABLE>
AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1997 1996
___________ ____________
<S> <C> <C>
ASSETS
Current Assets
Cash $ 503,000 $ 265,000
Restricted cash 379,000 -
Prepaid expenses 367,000 397,000
Investments - current 375,000 485,000
Other current assets 295,000 293,000
___________ ___________
Total current assets 1,919,000 1,440,000
Casino barge and improvements, subject to lease, net of
accumulated depreciation of $3,186,000 - 1997
and $2,599,000 - 1996 9,407,000 9,994,000
Furniture, fixtures and equipment, net of accumulated
depreciation of $66,000 - 1997 and $62,000 - 1996 14,000 19,000
Investments 55,000 54,000
Other non-current assets 593,000 729,000
___________ ___________
$11,988,000 $12,236,000
=========== ===========
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<PAGE> 3
<TABLE>
AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1997 1996
_____________ ______________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Amounts due to related parties:
Accrued interest $ 13,959,000 $ 11,217,000
Dividends payable 1,653,000 1,353,000
Accrual for lease costs 2,701,000 2,701,000
Current portion of long term debt 40,510,000 39,688,000
______________ ___________
58,823,000 54,959,000
Accounts payable 146,000 75,000
Accrued payroll and related expenses 15,000 13,000
Accrued expenses and other current liabilities 1,440,000 1,553,000
Current portion of mortgage note payable 13,000 27,000
______________ ___________
Total current liabilities 60,437,000 56,627,000
Long term portion of estimated net liabilities for
subsidiaries in bankruptcy 4,500,000 4,500,000
Long term portion of mortgage note payable - 96,000
______________ ___________
64,937,000 61,233,000
______________ ___________
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 13,969,000 13,336,000
Common stock, par value $.01 per share; 50,000,000 shares
authorized, 12,532,102 shares issued (including 24,035
shares held in treasury) 126,000 126,000
Additional paid-in capital 44,221,000 45,154,000
Cost of shares held in treasury (25,000) (25,000)
Accumulated deficit (111,241,000) (107,579,000)
_______________ ______________
(52,949,000) (48,987,000)
_______________ ______________
$ 11,988,000 $ 12,236,000
=============== ==============
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<PAGE> 4
<TABLE>
AMERICAN GAMING & ENTERTAINMENT LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended June 30, Six months ended June 30,
___________________________________ ____________________________________
1997 1996 1997 1996
_______________ _______________ _________________ _________________
<C> <C> <C> <C>
Revenues $ 379,000 $ 982,000 $ 380,000 $ 2,166,000
_______________ _______________ _________________ _________________
Costs and expenses
Direct operating and cost of sales - - - 65,000
Selling, general and administrative 407,000 926,000 744,000 1,311,000
Casino project development costs 95,000 - 233,000
Depreciation and amortization 295,000 258,000 592,000 688,000
Writedown of impaired assets - 19,000 - 19,000
Equity in losses of subsidiaries
in bankruptcy - 250,000 - 250,000
_______________ _______________ _________________ _________________
Total costs and expenses 702,000 1,548,000 1,336,000 2,546,000
_______________ _______________ _________________ _________________
Operating loss (323,000) (566,000) (956,000) (380,000)
_______________ _______________ _________________ _________________
Other income (expense)
Interest income 19,000 24,000 38,000 28,000
Interest expense (1,383,000) (1,401,000) (2,746,000) (2,828,000)
Net gain on sale of investments - - 2,000 948,000
_______________ _______________ _________________ _________________
Total other income (expense) (1,364,000) (1,377,000) (2,706,000) (1,852,000)
_______________ _______________ _________________ _________________
Net loss (1,687,000) (1,943,000) (3,662,000) (2,232,000)
Dividends and accretion on preferred stock 467,000 467,000 933,000 875,000
_______________ _______________ _________________ _________________
Net loss for common stockholders $ (2,154,000) $ (2,410,000) $ (4,595,000) (3,107,000)
================ =============== ================= =================
Net loss per common share $ (0.17) $ (0.19) (0.37) (0.25)
=============== =============== ================= =================
Weighted average number of common
shares outstanding 12,532,102 12,532,102 12,532,102 12,532,102
============== ============= ================ =================
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 5
<TABLE>
AMERICAN GAMING & ENTERTAINMENT LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30,
____________________________________
1997 1996
________________ _______________
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (3,662,000) $ (2,232,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Restricted proceeds from investment (377,000) -
Depreciation and amortization 592,000 668,000
Accrued interest 2,742,000 2,373,000
Amortization of deferred financing costs - 318,000
Writedown of impaired assets - 19,000
Equities in losses of subsidiaries in bankruptcy - 250,000
Net gain on sale of keno operations - (948,000)
Changes in operating assets and liabilities
Other current assets 45,000 (178,000)
Other non-current assets (1,000) (16,000)
Accounts payable, accrued expenses and
other current liabilities (40,000) (959,000)
________________ ______________
Net cash used in operating activities (701,000) (705,000)
________________ ______________
Investing activities
Proceeds from asset dispositions 110,000 100,000
Proceeds from sale of keno operations - 500,000
Proceeds from return of investment deposit - 1,027,000
________________ ______________
Net cash provided by investing activities 110,000 1,627,000
________________ ______________
Financing Activities
Proceeds from notes receivable and other long-term
assets 117,000 53,000
Utilization of proceeds from charter of casino 822,000 -
barge
Principal payments on notes payable and other
long-term obligations (110,000) (1,281,000)
________________ ______________
Net cash provided by (used in)
financing activities 829,000 (1,228,000)
________________ ______________
Increase (decrease) in cash 238,000 (306,000)
Cash at beginning of year 265,000 487,000
________________ ______________
Cash at end of period $ 503,000 181,000
================ ==============
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 6
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 unaudited Consolidated Interim Financial
Statements include the accounts of American Gaming & Entertainment, Ltd. and
its subsidiaries (collectively, 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 June 30, 1997) considered necessary for a fair
presentation have been included. Operating results for the three and six
month periods ended June 30, 1997 may not be indicative of the results that
may be expected for the year ending December 31, 1997. 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, 1996.
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, Shamrock Holdings Group, Inc. ("Shamrock"), and certain
related entities (The Bennett Funding Group, Inc. ("Bennett Funding") and
Bennett Management and Development Corp. ("Bennett Management"), collectively
with Shamrock, the "Bennett Entities") for both working capital and project
related 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 by the federal government against, Bennett Funding
and Bennett Management (see Note 2) 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.
Based upon (a) a verbal understanding which the Company believed it had with
Shamrock to allow the Company to utilize and retain the rental payments ("PMCC
Payments") from President Mississippi Charter Corporation ("PMCC") under an
agreement (the "Charter Agreement") whereby PMCC is leasing the Gold Coast
Casino barge and related leasehold improvements (collectively, the "Gold Coast
Barge") while the Company and Shamrock were negotiating the terms of a
comprehensive restructuring and (b) the course of conduct of Shamrock from
January 1, 1996 through June 1996, the Company utilized, retained and
initially recorded as revenues the
<PAGE>
<PAGE> 7
PMCC Payments from January 1, 1996 through June 30, 1996. However, because
there is no agreement with the Trustee (the "Trustee") for Bennett Funding and
Bennett Management under Chapter 11 of the U.S. Bankruptcy Code (the "Code")
allowing the Company to utilize and retain the PMCC Payments, in the fourth
quarter of 1996 the Company (1) reversed as revenue the PMCC Payments from
January 1, 1996 through June 30, 1996, (2) recorded such payments as
indebtedness due to Shamrock ("PMCC/Bennett Debt") and (3) recorded interest
expense on such PMCC/Bennett Debt. Such adjustments were the result of a
change in circumstances, and accordingly the Company has not restated the
accompanying unaudited Consolidated Interim Financial Statements for the three
or six months ended June 30, 1996. Certain reclassifications have been made to
the 1996 amounts in order to conform to the classifications used in 1997.
NOTE 2: LIQUIDITY AND CONTINUATION OF BUSINESS
Given the Company's present financial and liquidity position, the legal
problems described above relating to certain Bennett Entities (see Note 1) and
the Company s other litigation described below (see Note 6), the business of
the Company is unlikely to continue to be the ownership of equity interests in
casino gaming ventures. Additionally, the Company's ability to continue in
business is dependent upon its ability to (i) obtain sufficient funds for its
operations through the charter of the Gold Coast Barge, sales of assets, or
otherwise, (ii) obtain Shamrock s and, if necessary, Bennett Management s
agreement to modify, terminate or restructure on terms acceptable to the
Company all obligations due from the Company to Shamrock and, if applicable,
Bennett Management, (iii) consummate the liquidations under Chapter 11 of the
Code of AMGAM Associates ("AMGAM") and American Gaming and Resorts of
Mississippi, Inc. ("AGRM"), each a wholly-owned subsidiary of the Company,
under plans acceptable to the Company, resulting in a liquidation of the
various trade and debt obligations of those entities, and (iv) satisfactorily
resolve the litigation filed against the Company (see Note 6). However, there
can be no assurance the Company will be successful in obtaining Shamrock s
and, if necessary, Bennett Management s agreement to modify, terminate or
restructure on terms acceptable to the Company all obligations due from the
Company to Shamrock and possibly Bennett Management, consummating the
liquidations of AMGAM and AGRM under Chapter 11 of the Code under plans
acceptable to the Company or satisfactorily resolving the litigation filed
against the Company. 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. If either
action is required to be pursued, all such obligations would probably not be
completely satisfied and the stockholders of the Company would probably not
recover any of their investment in the Company.
For a discussion of specific factors affecting the Company s liquidity and
continuation of business, see the Company s Annual Report on Form 10-KSB for
the year ended December 31, 1996 and Quarterly Report on Form 10-QSB for the
period ended March 31, 1997.
In the second quarter of 1997, the Company received its portion of 50% of the
monthly amount of PMCC Payments for February 1997 through May 1997 paid by
PMCC, totaling approximately $565,000. PMCC has not made any PMCC Payments for
June 1997 or July 1997.
<PAGE>
<PAGE> 8
The Company had available cash of approximately $448,000 as of July 31, 1997
and its only current significant source of cash is payments of $25,000 per
month under a note issued to the Company in connection with the sale of its
keno operations. The Company believes that such cash and anticipated cash
receipts, collectively, are sufficient to fund the Company s operations
through the end of 1997, based on the Company s current level of operations
and projected expenditures. If the Company is unable to generate additional
cash through the charter of the Gold Coast Barge, sales of assets, or
otherwise, the Company will probably not have sufficient cash to operate
beyond such date. 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 be applied to outstanding obligations. If either action is
required to be pursued, all such obligations would probably not be completely
satisfied and stockholders of the Company would probably not recover any of
their investment in the Company.
As of June 30, 1997, the Company had recorded as "Restricted Cash" in the
accompanying unaudited Consolidated Interim Financial Statements approximately
$379,000 attributable to profit distributions and interest thereon received by
the Company relating to the Company s 24.5% beneficial equity interest (the
"RSR Interest") in RSR, LLC, a limited liability company formed by the Company
and a group of non-affiliated individuals, representing the equivalent of a
4.9% equity interest in a riverboat gaming and entertainment complex in the
City of Rising Sun, Indiana on the Ohio River. Legal title to the RSR Interest
has been transferred by the Company to NBD Bank, N.A., as trustee ("NBD"). NBD
is holding the distributions received in respect of the RSR Interest in trust
until such time as NBD sells or otherwise disposes of the RSR Interest in
accordance with the provisions of a trust agreement entered into between the
Company and NBD.
NOTE 3: SIGNIFICANT DEVELOPMENTS WITH RESPECT TO INVESTMENTS
Mississippi
For a discussion of significant developments since December 31, 1996 with
respect to the Company s investment in Mississippi, see Note 2.
Harolds Club Casino
Prior to 1996, Shamrock assumed responsibility for all carrying costs of the
Harolds Club property in Reno, Nevada including, but not limited to, lease
payments under certain land leases held by the Company related to the Harolds
Club, taxes, insurance and utilities. However, such land leases have not been
transferred to Shamrock and therefore the Company is obligated to make all
lease payments. Even if the Company transfers to Shamrock 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 Company has been informed by Shamrock and
the lessors under such leases that Shamrock has not made any lease payments
from April 1996 through July 1997 due under such leases or quarterly property
taxes due under such leases, collectively totaling approximately $1,558,000.
The lessors have,
<PAGE>
<PAGE> 9
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. The Company has recorded the unpaid lease payments
and property taxes from April 1996 through June 1997 totaling approximately
$1,485,000 (the "Unpaid Harolds Obligations") as current liabilities as of
June 30, 1997. The Company has also recorded the amounts of the Unpaid Harolds
Obligations as a receivable due from Shamrock, but, as a result of the
Company s determination that there is a substantial likelihood that such
amounts will be uncollectible, has fully reserved for such amounts at the same
time such amounts have been recorded as a receivable. In September 1996,
Shamrock and the Company entered into an agreement pursuant to which Shamrock
has agreed, upon the sale of the Harolds Club, to reimburse the Company for
(i) all costs and expenses, in an amount not to exceed $15,000, incurred by
the Company in connection with such sale, (ii) all reasonable attorneys fees
incurred by the Company in connection with litigation commenced against, among
others, the Company by the five lessors of the Harolds Club property seeking,
among other relief, payment of all unpaid lease payments and property taxes
(see Note 6), and (iii) all reasonable costs and expenses incurred by the
Company in connection with the operation and maintenance of the Harolds Club.
One of the land leases relating to the Harolds Club expired in June 1997. On
March 25, 1997, the Company exercised its option to renew such land lease.
However, the lessor has advised the Company that such option may not be
exercised until all defaults currently existing under such land lease,
including defaults in the payment of rent and real property taxes, are cured
in full. If such land lease is not renewed, sale or development of the Harolds
Club could be adversely affected.
Mobile, Alabama
On July 2, 1997, the Company agreed to sell the GM&O Building in Mobile,
Alabama to the City of Mobile for approximately $423,000, subject to approval
of the City Council of the City of Mobile. The GM&O building is recorded as
"Investments-Current" in the amount of $375,000 in the accompanying unaudited
Consolidated Interim Financial Statements. The Company intends to use the net
sales proceeds for working capital purposes. The sale is scheduled to close on
or before August 31, 1997; there can be no assurance, however, that the City
Council of the City of Mobile will approve the purchase of the GM&O Building.
NOTE 4: AMOUNTS DUE TO RELATED PARTIES AND LONG-TERM DEBT
The Company is delinquent in the payment of (i) interest due under the
Company s various loan agreements with Shamrock and (ii) rent which was due
under an operating lease between the Company and Bennett Management (the "SCS
Lease") with respect to a riverboat vessel and supporting barge, which SCS
Lease Shamrock orally represented to the Company that Bennett Management,
prior to its bankruptcy filing, assigned to Shamrock. The Company has
therefore classified all indebtedness due to Shamrock as current liabilities
in the accompanying unaudited Consolidated Interim Financial Statements. At
June 30, 1997 and December 31, 1996, the Company had outstanding amounts due
Shamrock of approximately $58,823,000 and $54,959,000, respectively, including
accrued interest of approximately $13,959,000 and
<PAGE>
<PAGE> 10
$11,217,000, respectively. Such amounts due Shamrock also include
approximately $2,701,000 due under the SCS Lease and accrued dividends of
approximately $1,653,000 and $1,353,000 at June 30, 1997 and December 31,
1996, respectively, on the Company s Series C Cumulative Preferred Stock
("Series C Preferred Stock") and Series D Cumulative Preferred Stock ("Series
D Preferred Stock"). The outstanding amount due Shamrock at June 30, 1997
represents approximately 91% of the Company s liabilities as of such date and
is substantially in excess of the Company s estimates of the fair value of the
Company s assets.
The balance of long-term debt at June 30, 1997 and December 31, 1996 is
comprised of approximately (i) $1,066,000, at the end of each period, related
to a working capital line of credit, (ii) $2,041,000, at the end of each
period, related to a term loan to assist the Company in financing pertaining
to a casino in Biloxi, Mississippi which the Company owned, managed and
operated in prior years (the "Gold Shore Casino"), (iii) $5,918,000 and
$5,096,000, respectively, of PMCC/Bennett Debt, (iv) $384,000, at the end of
each period, related to the Company s utilization of slot machine sales
proceeds, which slot machines were beneficially owned by Bennett Management
and which slot machine proceeds Shamrock orally represented to the Company
that Bennett Management, prior to its bankruptcy filing, assigned to Shamrock
and (v) $31,101,000, at the end of each period, related to project financing
for the Gold Shore Casino.
In addition to the Company s indebtedness to Shamrock, at June 30, 1997 and
December 31, 1996, the Company owed approximately $13,000 and $123,000,
respectively, under a mortgage note payable.
NOTE 5: OTHER RELATED PARTY ISSUES
Shamrock, of which the Trustee is the sole stockholder, owns (i) 4,423,454
shares of Common Stock, and (ii) all of the Company s outstanding Series A
Preferred Stock, convertible into, and voting as, 1,399,565 shares of Common
Stock. Additionally, the Trustee owns (i) an additional 1,500,000 shares of
Common Stock and (ii) all of the Company s outstanding Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock, convertible as
of July 31, 1997 into approximately 487,615,000 shares of Common Stock. The
Company does not have a sufficient number of authorized shares of Common Stock
to enable the conversion of all of the Series C Preferred Stock, the Series D
Preferred Stock and the Series E Preferred Stock. On April 1, 1996 the Board
of Directors voted to request the stockholders of the Company to approve an
amendment to the Company s Restated Certificate of Incorporation increasing
the number of authorized shares of Common Stock to 500,000,000 shares no later
than the next annual meeting of the Company s stockholders. The Board of
Directors has not set a date for such annual meeting. Assuming the Trustee
converted as of July 31, 1997 that number of shares of the Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock convertible into
the total number of the Company s presently authorized but unissued shares of
Common Stock (i.e. 37,467,898 shares), the Trustee, on behalf of the estates
of certain Bennett Entities and Shamrock, would own approximately 86.8% of the
total outstanding shares of Common Stock and approximately 87.1% of the total
voting power represented by the total outstanding voting securities of the
Company. Assuming the Company s stockholders approve an amendment to the
Company s Restated Certificate of Incorporation increasing the number of
authorized shares of
<PAGE>
<PAGE> 11
Common Stock to 500,000,000 shares and the Trustee converted as of July 31,
1997 that number of shares of the Series C Preferred Stock, the Series D
Preferred Stock and the Series E Preferred Stock convertible into the total
number of the Company s authorized but unissued shares of Common Stock
immediately after giving effect to such amendment (i.e. resulting in a total
of 487,467,898 shares of Common Stock being issued to the Trustee as of such
date), the Trustee, on behalf of the estates of certain Bennett Entities and
Shamrock, would own approximately 98.7% of both the total outstanding shares
of Common Stock and the total voting power represented by the total
outstanding voting securities of the Company.
NOTE 6: CONTINGENCIES
As discussed in the Company s Quarterly Report on Form 10-QSB for the period
ended March 31, 1997, the Company has filed suit against PMCC and President
Riverboat Casino - Mississippi, Inc. In its answer, PMCC denies all material
allegations and also claims that the Company has breached the Charter
Agreement by breaching the covenant of quite enjoyment premised upon the
litigation commenced as to the Company by the committees for unsecured
creditors in the bankruptcy proceedings of AMGAM and AGRM in the respective
bankruptcy proceedings. PMCC has also filed a counterclaim against the Company
seeking damages for alleged defamation as a result of the Company s May 1997
press release regarding the filing of the suit by the Company against PMCC and
President Riverboat Casino - Mississippi, Inc. Outside counsel to the Company,
due to the limited facts available on this matter, is unable to predict the
outcome of these suits. If the Company does not, by some means, (i) receive
its portion of the PMCC Payments due from PMCC under the Charter Agreement or
(ii) agree with PMCC, with the concurrence of the Committees and Shamrock, on
a mutually acceptable amended charter agreement, or if PMCC prevails on its
counterclaim, the Company would not be able to meet its obligations as they
come due. 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 be applied to outstanding obligations. If either
action is required to be pursued, all such obligations would probably not be
completely satisfied and stockholders of the Company would probably not
recover any of their investment in the Company.
As discussed in the Company s Quarterly Report on Form 10-QSB for the period
ended March 31, 1997, the five lessors of the Harolds Club property have filed
suit against, among others, the Company and Shamrock. The Company has filed
answers in four actions which had been stayed until April 15, 1997. Trial
dates have been set for September 4, 1997 and November 20, 1997 in two of the
actions and a third action has been stayed to permit arbitration between the
plaintiff and one of the defendants. An amended pleading has been filed in one
of the actions which the Company will answer when due. Although the Company
has filed an answer to the cross-claims of Hughes Properties, Inc. and
Fitzgeralds Reno, Inc., the other defendants in the fifth action, the
plaintiff has not requested that an answer be filed by the Company and the
pleadings in this case remain open. As pleadings are not yet closed, discovery
is not completed and depositions have not commenced, outside counsel to the
Company, due to the limited facts available on this matter, is unable to
predict the outcome of these suits. However, should the plaintiffs prevail,
these suits would have a material adverse effect on the Company s business and
financial condition. The Company would then need to pursue a formal plan of
reorganization or
<PAGE>
<PAGE> 12
liquidation which would generally result in the sale of the Company's assets
to satisfy outstanding obligations. If either action is required to be
pursued, it is unlikely that all such obligations would be completely
satisfied or that stockholders of the Company would recover any of their
investment in the Company.
NOTE 7: DECONSOLIDATION OF AMGAM AND AGRM
As a result of the bankruptcy proceedings under Chapter 11 of the Code with
respect to AMGAM and AGRM, and the expected liquidation of these subsidiaries
in the near future, the Company s control of these entities is likely to be
temporary. In accordance with generally accepted accounting principles, the
Company has elected 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 accompanying unaudited Consolidated Interim Statements of
Operations for financial reporting purposes. A combined unaudited condensed
balance sheet of these entities as of June 30, 1997 and December 31, 1996 is
as follows:
June 30, December 31,
1997 1996
Assets
Current Assets and Other $3,783,000 $3,897,000
Property and Equipment, Net 41,000 41,000
__________ __________
Total Assets $3,824,000 $3,938,000
=========== ==========
Liabilities and Stockholders Deficiency
________________________________________
Current Liabilities $26,480,000 $25,005,000
Amounts Due to Parent 12,147,000 12,147,000
Stockholders Deficiency (34,803,000) (33,214,000)
_____________ _____________
Total Liabilities and Stockholders
Deficiency
$ 3,824,000 $ 3,938,000
============ ===========
NOTE 8: RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per
Share. SFAS No. 128 specifies the computation, presentation and disclosure
requirements of earnings per share and supersedes Accounting Principles Board
Opinion No. 15, Earnings Per Share. SFAS No. 128 requires a dual presentation
of basic and diluted earnings per share on the face of the Company s
consolidated statement of operations and a reconciliation of the computation
of basic earnings per share to diluted earnings per share. Basic earnings per
share, which replaces primary earnings per share, excludes the dilutive impact
of common stock equivalents and is computed by dividing net income by the
weighted average number of shares of common stock outstanding for the period.
Diluted earnings per share will include the effect of potential dilution from
the exercise of outstanding common stock equivalents into common stock using
the treasury stock method. Currently, the Company s common stock equivalents
would be excluded from the calculation because they have an antidilutive
effect on net loss per share.
<PAGE>
<PAGE> 13
SFAS No. 128 is effective for financial statements for both interim and annual
periods ending after December 15, 1997 and early adoption is not permitted.
When adopted by the Company for the fourth quarter and year ending December
31, 1997, all prior years earnings per share information will be required to
be restated.
Assuming that SFAS No. 128 had been implemented, the pro forma amounts of
basic earnings per share and diluted earnings per share for the three and six
month periods ended June 30, 1997 and 1996 would not have differed from the
net loss per share disclosed in the accompanying unaudited Consolidated
Interim Statements of Operations.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
This statement, which establishes standards for reporting and disclosure of
comprehensive income, is effective for interim and annual periods beginning
after December 15, 1997, although earlier adoption is permitted.
Reclassification of financial information for earlier periods presented for
comparative purposes is required under SFAS No. 130. As this statement only
requires additional disclosures in the Company's consolidated financial
statements, its adoption will not have any impact on the Company's
consolidated financial position or results of operations. The Company expects
to adopt SFAS No. 130 effective January 1, 1998.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement, which establishes
standards for the reporting of information about operating segments and
requires the reporting of selected information about operating segments in
interim financial statements, is effective for fiscal years beginning after
December 15, 1997, although earlier application is permitted.
Reclassification of segment information for earlier periods presented for
comparative purposes is required under SFAS No. 131. The Company does not
expect adoption of this statement to result in changes to its presentation of
financial information. The Company expects to adopt SFAS No. 131 effective
January 1, 1998.
ITEM 2. MANAGEMENT S DISCUSSION AND ANALYSIS
Results of Operations: Comparison of the three month periods ended June 30,
1997 and June 30, 1996
Revenues
Revenues for the three months ended June 30, 1997 amounted to
approximately $379,000, a decrease of approximately $603,000 or approximately
61% compared to the three months ended June 30, 1996. For the three months
ended June 30, 1997, the Company recorded revenues of approximately $377,000
attributable to the RSR Interest (see Note 2). For the three months ended
June 30, 1996, the Company recorded revenues of approximately $986,000 from
PMCC Payments. For the three months ended June 30, 1997, the Company recorded
PMCC Payments as PMCC/Bennett Debt and not as revenue (see Note 1).
<PAGE>
<PAGE> 14
Costs and Expenses
Selling, general and administrative expenses were approximately $407,000 for
the three months ended June 30, 1997, representing a decrease of approximately
$519,000 or approximately 56% when compared to the three months ended June 30,
1996. The decrease in selling, general, and administrative expenses was
primarily due to the Company s current business direction of holding equity
interests in casino gaming projects, resulting in reduced legal and personnel
expenses.
Casino project development costs for the three months ended June 30, 1996 were
approximately $95,000. No expenses were classified as casino project
development costs for the three months ended June 30, 1997 consistent with the
Company s current business direction, discussed above.
Depreciation and amortization expense was approximately $295,000 for the three
months ended June 30, 1997, representing an increase of approximately $37,000
or approximately 14% when compared to the three months ended June 30, 1996.
The increase in depreciation and amortization expense was primarily due to an
increase of approximately $53,000 related to the Gold Coast Barge. The Gold
Coast Barge was being depreciated over a useful life of 25 years for the three
months ended June 30, 1996; the Company reevaluated the useful life of the
Gold Coast Barge in the fourth quarter of 1996 and determined that it has a
useful life of 10 years.
The Company wrote down approximately $19,000 for the three months ended June
30, 1996 related to certain furniture, fixtures and equipment; no such
writedown was recorded for the three months ended June 30, 1997.
Equity in losses of subsidiaries in bankruptcy for the three months ended June
30, 1996 is attributable to an accrual of $250,000 as management s estimate of
additional settlement liabilities to be paid out of the PMCC Payments; no such
accrual was recorded for the three months ended June 30, 1997.
Net interest expense for the three months ended June 30, 1997 was
approximately $1,364,000, a decrease of approximately $13,000 or approximately
1% compared to the three months ended June 30, 1996. Interest expense
decreased approximately $18,000 while interest income decreased approximately
$5,000 during the three months ended June 30, 1997 compared to the three
months ended June 30, 1996. The decrease in interest expense was primarily
due to a decrease of approximately $159,000 attributable to amortization of
deferred financing fees, partially offset by an increase of approximately
$143,000 attributable to PMCC/Bennett Debt. In the third quarter of 1996, the
Company wrote off all deferred financing fees, therefore
no such costs were incurred for the three months ended June 30, 1997.
<PAGE>
<PAGE> 15
Results of Operations: Comparison of the six month periods ended June 30,
1997 and June 30, 1996
Revenues
Revenues for the six months ended June 30, 1997 amounted to approximately
$380,000, a decrease of approximately $1,786,000 or approximately 82% compared
to the six months ended June 30, 1996. For the six months ended June 30, 1997,
the Company recorded revenues of approximately $377,000 attributable to the
RSR Interest (see Note 2). For the six months ended June 30, 1996, the
Company recorded revenues of (i) approximately $1,972,000 from PMCC Payments
and (ii) approximately $194,000 attributable to keno operations. For the six
months ended June 30, 1997, the Company recorded PMCC Payments as PMCC/Bennett
Debt and not as revenue (see Note 1). The Company s keno assets and operations
were sold on March 28, 1996 and therefore no keno revenues were generated
during the six months ended June 30, 1997.
Costs and Expenses
Direct operating expenses and cost of sales were approximately $65,000 for the
six months ended June 30, 1996. The Company s keno assets and operations were
sold on March 28, 1996 and therefore no such costs were incurred for the six
months ended June 30, 1997.
Selling, general and administrative expenses were approximately $744,000 for
the six months ended June 30, 1997, representing a decrease of approximately
$567,000 or approximately 43% when compared to the six months ended June 30,
1996. The decrease in selling, general, and administrative expenses was
primarily due to the Company s current business direction of holding equity
interests in casino gaming projects, resulting in reduced legal and personnel
expenses, and a decrease of approximately $96,000 in keno related expenses,
resulting from the sale of the Company s keno assets and operations on March
28, 1996.
Casino project development costs for the six months ended June 30, 1996 were
approximately $233,000. No expenses were classified as casino project
development costs for the six months ended June 30, 1997 as a result of the
Company s current business direction.
Depreciation and amortization expense was approximately $592,000 for the six
months ended June 30, 1997, representing a decrease of approximately $76,000
or approximately 11% when compared to the six months ended June 30, 1996. The
decrease in depreciation and amortization expense was primarily due to a
decrease of approximately $141,000 related to the Company s keno assets which
were sold on March 28, 1996, partially offset by an increase of approximately
$108,000 related to the Gold Coast Barge. The Gold Coast Barge was being
depreciated over a useful life of 25 years for the six months ended June 30,
1996; the Company reevaluated the useful life of the Gold Coast Barge in the
fourth quarter of 1996 and determined that it has a useful life of 10 years.
<PAGE>
<PAGE> 16
The Company wrote down approximately $19,000 for the six months ended June 30,
1996 related to certain furniture, fixtures and equipment; no such writedown
was recorded for the six months ended June 30, 1997.
Equity in losses of subsidiaries in bankruptcy for the six months ended June
30, 1996 is attributable to an accrual of $250,000 as management s estimate of
additional settlement liabilities to be paid out of the PMCC Payments; no such
accrual was recorded for the six months ended June 30, 1997.
Net interest expense for the six months ended June 30, 1997 was approximately
$2,708,000, a decrease of approximately $92,000 or approximately 3% compared
to the six months ended June 30, 1996. Interest expense decreased
approximately $82,000 while interest income increased approximately $10,000
during the six months ended June 30, 1997 compared to the six months ended
June 30, 1996. The decrease in interest expense was primarily due to
decreases of approximately $318,000 attributable to amortization of deferred
financing fees and approximately $25,000 attributable to the repayment of
indebtedness due to Shamrock and Bennett Funding in the first quarter of 1996,
partially offset by an increase of approximately $276,000 attributable to
PMCC/Bennett Debt. In the third quarter of 1996, the Company wrote off all
deferred financing fees, therefore no such costs were incurred for the six
months ended June 30, 1997. The increase in interest income was principally
attributable to an increase of approximately $15,000 associated with a note
receivable for the Company s keno assets which were sold on March 28, 1996.
The Company recorded a net gain of approximately $2,000 for the six months
ended June 30, 1997 related to the sale of certain furniture, fixtures and
equipment. The Company recorded a net gain of approximately $948,000 on the
sale of keno operations for the six months ended June 30, 1996.
Changes in Financial Condition, Liquidity and Capital Resources
As of June 30, 1997, the Company had no committed financing arrangements and a
working capital deficiency of approximately $58,518,000. For a discussion of
liquidity and capital resources, see Note 2 to the unaudited Consolidated
Interim Financial Statements.
Risk Factors; Forward Looking Statements
Management s Discussion and Analysis contains forward-looking statements
regarding the Company s future plans, objectives and expected performance.
These statements are based on assumptions that the Company believes are
reasonable, but are subject to a wide range of risks and uncertainties, and a
number of factors could cause the Company s actual results to differ
materially from those expressed in the forward-looking statements. These
factors include, among others, the uncertainties related to (i) the Company s
ability to obtain sufficient funds for its operations, through the charter of
the Gold Coast Barge, sales of assets, or otherwise, (ii) obtaining Shamrock s
and, if necessary, Bennett Management s agreement to modify, terminate or
restructure on terms acceptable to the Company all obligations due from the
Company to
<PAGE>
<PAGE> 17
Shamrock and, if applicable, Bennett Management, (iii) consummating 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, (iv) satisfactorily resolving the legal
proceedings filed against the Company (see Note 6 to the unaudited
Consolidated Interim Financial Statements), and (v) the legal problems
described above relating to certain Bennett Entities (see Notes 1 and 2 to the
unaudited Consolidated Interim Financial Statements).<PAGE>
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a discussion of legal proceedings, see Note 6 to the unaudited
Consolidated Interim Financial Statements.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
For a discussion of defaults with respect to the Company s indebtedness due to
Shamrock, see Notes 2 and 4 to the unaudited Consolidated Interim Financial
Statements.
The Company has accrued and declared, but has not paid as of July 31, 1997,
dividends totaling approximately $152,000 which were due and payable on the
outstanding shares of its Series C Preferred Stock as of December 31, 1994.
The Company has accrued and declared, but has not paid as of July 31, 1997,
dividends totaling approximately $152,000 which were due and payable on the
outstanding shares of its Series D Preferred Stock as of December 31, 1994.
Additionally, the Company has accrued, but has not declared or paid as of July
31, 1997, dividends totaling approximately $725,000 which were due and payable
on the outstanding shares of its Series C Preferred Stock from January 1, 1995
through June 30, 1997. The Company has accrued, but has not declared or paid
as of July 31, 1997, dividends totaling approximately $625,000 which were due
and payable on the outstanding shares of its Series D Preferred Stock from
January 1, 1995 through June 30, 1997. Although such dividends do not
constitute actual liabilities of the Company until declared, the Company has
accrued for such dividends because, under the terms of the Series C Preferred
Stock and the Series D Preferred Stock, dividends are cumulative whether or
not declared and the Company is prohibited from paying dividends on,
purchasing or redeeming any of its Series A Preferred Stock or Common Stock so
long as any such cumulated dividends are unpaid. 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.
<PAGE>
<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Description
11 Computation of Earnings Per Share.
27 Financial Data Schedule
(b) Reports on Form 8-K. None.<PAGE>
<PAGE> 20
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 hereunto duly authorized.
American Gaming & Entertainment, Ltd.
Date: 8/5/97 By: /s/ J. Douglas Wellington
_________________________ ___________________________
J. Douglas Wellington
President and Chief Executive
Officer, and Principal
Accounting Officer
<PAGE>
<PAGE> 21
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
___________ ___________ ________
11 Computation of Earnings Per Share. 22
27 Financial Data Schedule 23
<TABLE>
EXHIBIT 11
AMERICAN GAMING & ENTERTAINMENT, LTD.
COMPUTATION OF EARNINGS (LOSS) PER SHARE
PRIMARY AND FULLY-DILUTED
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
____ ____ ____ ____
<S> <C> <C> <C> <C>
Weighted average number
of shares for computation 12,532,102 12,532,102 12,532,102 12,532,102
========== ========== ========== ==========
Net loss $(1,687,000) $(1,943,000) $(3,662,000) $(2,232,000)
Dividends and accretion
on preferred stock 467,000 467,000 933,000 875,000
__________ ___________ __________ __________
Net loss for common
stockholders $(2,154,000) $(2,410,000) $(4,595,000) $(3,107,000)
=========== =========== =========== ===========
Net loss per common
share $(0.17) $(0.19) $(0.37) $(0.25)
======= ====== ======= =======
</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 SIX MONTH PERIOD ENDED JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> $882,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,919,000
<PP&E> 12,673,000
<DEPRECIATION> 3,252,000
<TOTAL-ASSETS> 11,988,000
<CURRENT-LIABILITIES> 60,437,000
<BONDS> 13,000
0
13,970,000
<COMMON> 126,000
<OTHER-SE> (67,045,000)
<TOTAL-LIABILITY-AND-EQUITY> 11,988,000
<SALES> 0
<TOTAL-REVENUES> 380,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,336,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,746,000
<INCOME-PRETAX> (3,662,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,662,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,595,000)
<EPS-PRIMARY> (0.37)
<EPS-DILUTED> (0.37)
</TABLE>
