<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 March 31, 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 incorporation or
organization) Identification No.)
Bayport One, Yacht Club Drive, Suite 300, West Atlantic City, New Jersey 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 April 30, 1997
____________________________________ ______________________________
Common Stock, $.01 par value 12,532,102 shares
1
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<TABLE> AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1997 1996
___________ ____________
<S> <C> <C>
ASSETS
Current Assets
Cash $ 240,000 $ 265,000
Prepaid expenses 309,000 397,000
Investments - current 375,000 485,000
Inventories and other current assets 542,000 293,000
___________ ___________
Total current assets 1,466,000 1,440,000
Casino barge and improvements, subject to lease, net of
accumulated depreciation of $2,893,000 - 1997
and $2,599,000 - 1996 9,700,000 9,994,000
Furniture, fixtures and equipment, net of accumulated
depreciation of $64,000 - 1997 and $62,000 - 1996 16,000 19,000
Investments 54,000 54,000
Other non-current assets 413,000 729,000
___________ ___________
$11,649,000 $12,236,000
=========== ===========
See Notes to Consolidated Financial Statements
</TABLE>
2
<PAGE>
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<TABLE>
AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1997 1996
_____________ ______________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Amounts due to related parties:
Accrued interest $ 12,577,000 $ 11,217,000
Dividends payable 1,503,000 1,353,000
Accrual for lease costs 2,701,000 2,701,000
Current portion of long term debt 39,852,000 39,688,000
_____________ ___________
56,633,000 54,959,000
Accounts payable 199,000 75,000
Accrued payroll and related expenses 13,000 13,000
Accrued expenses and other current liabilities 1,395,000 1,553,000
Current portion of mortgage note payable 21,000 27,000
_____________ ___________
Total current liabilities 58,261,000 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
_____________ ___________
62,761,000 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 13,652,000 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 44,688,000 45,154,000
Cost of shares held in treasury (25,000) (25,000)
Accumulated deficit (109,554,000) (107,579,000)
_______________ ______________
(51,112,000) (48,987,000)
_______________ ______________
$ 11,649,000 $ 12,236,000
=============== ==============
See Notes to Consolidated Financial Statements
</TABLE>
3 <PAGE>
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<TABLE>
AMERICAN GAMING & ENTERTAINMENT LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended March 21,
___________________________________
1997 1996
________________ ______________
<S> <C> <C>
Consulting services and other revenues $ 1,000 $ 1,184,000
________________ ______________
Costs and expenses
Direct operating and cost of sales - 65,000
Selling, general and administrative 337,000 385,000
Casino project development costs - 138,000
Depreciation and amortization 297,000 410,000
______________ ______________
Total costs and expenses 634,000 998,000
______________ ______________
Operating income (loss) (633,000) 186,000
______________ ______________
Other income (expense)
Interest income 19,000 4,000
Interest expense (1,363,000) (1,427,000)
Net gain on sale of investments 2,000 948,000
______________ ______________
Total other income (expense) (1,342,000) (475,000)
______________ ______________
Net loss (1,975,000) (289,000)
Dividends and accretion on preferred stock 467,000 408,000
______________ ______________
Net loss for common stockholders $ (2,442,000) $ (697,000)
Net loss per common share $ (0.19) $ (0.06)
============== =============
Weighted average number of common
shares outstanding 12,532,102 12,532,102
============== =============
See Notes to Consolidated Financial Statements
</TABLE>
4 <PAGE>
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<TABLE>
AMERICAN GAMING & ENTERTAINMENT LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 21,
____________________________________
1997 1996
________________ _______________
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (1,975,000) $ (289,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 297,000 410,000
Amortization of deferred financing costs - 160,000
Net gain on sale of keno operations - (948,000)
Changes in operating assets and liabilities
Other current assets 99,000 13,000
Other non-current assets - (8,000)
Accrued interest 1,360,000 1,133,000
Accounts payable, accrued expenses and
other current liabilities (34,000) (779,000)
________________ ______________
Net cash used in operating activities (253,000) (308,000)
________________ ______________
Investing activities
Proceeds from asset dispositions 110,000 72,000
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 1,599,000
________________ ______________
Financing Activities
Proceeds from notes payable and other long-term
obligations 56,000 -
Utilization of proceeds from charter of casino 164,000
barge
Principal payments on notes payable and other
long-term obligations (102,000) (1,275,000)
________________ ______________
Net cash provided by (used in)
financing activities 118,000 (1,275,000)
________________ ______________
Increase (decrease) in cash (25,000) 16,000
Cash at beginning of year 265,000 487,000
________________ ______________
Cash at end of period $ 240,000 503,000
================ ==============
See Notes to Consolidated Financial Statements
</TABLE>
5
<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 March 31, 1997) considered necessary for a fair
presentation have been included. Operating results for the three month
periods ended March 31, 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 March 1996, the Company utilized, retained and
initially recorded as revenues
6<PAGE>
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the PMCC Payments from January 1, 1996 through March 31, 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 March 31, 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 months ended March 31, 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.
On March 4, 1997, the Company advised PMCC that PMCC was in default under the
Charter Agreement for failure to make the February 1997 and March 1997 PMCC
Payments when due and for failure to make the October 1996 through January
1997 PMCC Payments in full (collectively totaling approximately $1,316,000).
On March 5, 1997, PMCC alleged that the
7<PAGE>
<PAGE> 8
Company does not have standing to assert any default under the Charter
Agreement because a preliminary injunction entered by the United States
Bankruptcy Court, Southern District of Mississippi requires PMCC Payments to
be deposited into an escrow account for the benefit of the creditors of AMGAM
and AGRM, and not to be paid directly to the Company. Additionally, PMCC
alleged that the Company had breached the Charter Agreement by, among other
defaults, (i) failing to ensure PMCC s peaceful use and enjoyment of the Gold
Coast Barge, (ii) misrepresenting the Company s ownership of the Gold Coast
Barge and (iii) failing to disclose that the Gold Coast Barge was not in good
condition. The Company has advised PMCC that the Company believes that it has
not breached the Charter Agreement and will vigorously defend against any
allegations of default under the Charter Agreement. PMCC also has not made the
April or May 1997 PMCC Payments. On April 11, 1997, the Company filed suit
against PMCC seeking compliance by PMCC with the terms and conditions of the
Charter Agreement (see Note 6). 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 for
unsecured creditors in the bankruptcy proceedings of AMGAM and AGRM
(collectively, the "Committees") and Shamrock, on a mutually acceptable
amended charter agreement, 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.
The Company has verbally agreed with Shamrock that, beginning with the
February 1997 PMCC Payment, the Company shall repay Shamrock at least $100,000
per month of the Company s indebtedness to Shamrock contingent upon the
Company receiving its portion of at least 75% of the monthly amount of the
PMCC Payments. PMCC has not made any PMCC Payments since paying 50% of the
January 1997 PMCC Payment and therefore the Company has not repaid Shamrock
any of the Company s indebtedness to Shamrock.
The Company had available cash of approximately $354,000 as of April 30, 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 middle of the third quarter 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.
8<PAGE>
<PAGE> 9
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
Since July 1995, Shamrock has 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 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
April 1997 due under such leases or quarterly property taxes due under such
leases, collectively totaling approximately $825,000. 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. The Company has recorded the unpaid lease payments
and property taxes from April 1996 through March 1997 totaling approximately
$773,000 (the "Unpaid Harolds Obligations") as current liabilities as of March
31, 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 written off 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 expires 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.
9<PAGE>
<PAGE> 10
Prichard, Alabama
On March 27, 1997, the Company sold seven adjoining parcels of real estate in
Prichard, Alabama to the City of Prichard for $110,000. The net sales proceeds
of approximately $98,000 were used to repay a portion of a promissory note
payable to a former employee of the Company related to expenses that such
employee incurred during his employment with the Company, which note was
secured by the seven parcels of real estate in Prichard, Alabama owned by the
Company (See Note 4).
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
March 31, 1997 and December 31, 1996, the Company had outstanding amounts due
Shamrock of approximately $56,633,000 and $54,959,000, respectively, including
accrued interest of approximately $12,577,000 and $11,217,000, respectively.
Such amounts due Shamrock also include approximately $2,701,000 under the SCS
Lease and accrued dividends of approximately $1,503,000 and $1,353,000 at
March 31, 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 March 31, 1997 represents approximately 90% 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 March 31, 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) $5,260,000 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 March 31, 1997 and
December 31, 1996, the Company owed approximately $21,000 and $123,000,
respectively, under a mortgage note payable (See Note 3).
10<PAGE>
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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 April 30, 1997 into approximately 794,676,000 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 April 30, 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 Common Stock to 500,000,000 shares and the Trustee
converted as of April 30, 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
On April 11, 1997, in an action filed in the Chancery Court of Harrison
County, Mississippi, Second Judicial District (Case No. C2402-97-409), the
Company filed suit against PMCC and President Riverboat Casino - Mississippi,
Inc. seeking, alternatively, (i) that the defendants be specifically required
to comply with the terms and conditions of the Charter Agreement and to pay
all sums previously due thereunder or (ii) judgment against the defendants of
approximately $23,425,000. As an answer from the defendants is not yet due and
has not been filed, 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, 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
11<PAGE>
<PAGE> 12
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.
In July 1996 and August 1996, in separate actions filed in the Second Judicial
District Court of the State of Nevada in and for the County of Washoe (Case
Nos. CV9604947, CV9604933, CV9604939, CV9604997 and CV9604692), the five
lessors of the Harolds Club property have filed suit against, among others,
the Company and Shamrock seeking, variously, among other relief, (i) payment
of all unpaid lease payments and property taxes, (ii) a court order voiding
the transfer of the title to the land and the building related to the Harolds
Club from the Company to Shamrock to the extent necessary to satisfy the
claims of creditors of the Company, (iii) a court order prohibiting and
enjoining Shamrock from transferring the title to the land and the building
related to the Harolds Club during the pendency of the actions, (iv) temporary
and permanent court orders mandating that the Company protect the
grandfathered right of nonlicensed gaming on the leaseholds by locating a
suitable gaming sub-tenant and (v) reasonable attorneys fees and costs of
suit. The pleadings in one action are closed. On March 5, 1997, the plaintiffs
in such action filed a summary judgment motion against Hughes Properties, Inc.
("Hughes"). On March 21, 1997, Hughes responded and filed a cross-motion
against Fitzgerald Reno, Inc. ("Fitzgerald"), Hughes assignee, and the
Company, Fitzgerald s assignee. The Company filed an opposition to Hughes
cross-motion for summary judgment against the Company. On April 21, 1997,
Fitzgerald filed a motion seeking leave to amend its answer in such action to
assert a cross-claim against the Company for indemnification. If such motion
is granted, which outside counsel to the Company deems is likely, and
Fitzgerald amends its answer to assert such cross-claim, the Company will file
an answer. The pleadings in the other four suits are not yet closed as the
Company and the other four plaintiffs had stipulated to stay the respective
actions until April 15, 1997. Since April 15, 1997, the plaintiffs in three
actions have advised the Company that the stay has been lifted. The Company
has filed answers in two actions and will file an answer in the third action
when due. The fourth action remains stayed. As pleadings in four actions are
not yet closed, and discovery and depositions have not yet 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 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
12<PAGE>
<PAGE> 13
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 March 31, 1997 and December 31, 1996 is
as follows:
March 31, December 31,
1997 1996
Assets
______
Current Assets and Other $3,938,000 $3,897,000
Property and Equipment, Net 41,000 41,000
__________ __________
Total Assets $3,979,000 $3,938,000
=========== ==========
Liabilities and Stockholders Deficiency
________________________________________
Current Liabilities $25,704,000 $25,005,000
Amounts Due to Parent 12,147,000 12,147,000
Stockholders Deficiency (33,876,000) ( 33,214,000)
_____________ _____________
Total Liabilities and Stockholders
Deficiency
$ 3,979,000 $ 3,938,000
============ ============
NOTE 8: RECENT ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128").
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.
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 129 had been implemented, the pro forma amounts of basic
earnings per share and diluted earnings per share for the three month periods
ended March 31, 1997 and 1996 would not have differed from the net loss per
share disclosed in the accompanying unaudited Consolidated Interim Statements
of Operations.
13 <PAGE>
<PAGE> 14
ITEM 2. MANAGEMENT S DISCUSSION AND ANALYSIS
Results of Operations: Comparison of the three month periods ended March 31,
1997 and March 31, 1996
Revenues
Consulting service and other revenues for the three months ended March 31,
1997 amounted to approximately $1,000, a decrease of approximately $1,183,000
or approximately 99% compared to the three months ended March 31, 1996. For
the three months ended March 31, 1996, the Company recorded revenues of (i)
approximately $986,000 from PMCC Payments and (ii) approximately $194,000
attributable to keno operations. For the three months ended March 31, 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 three months
ended March 31, 1997.
Costs and Expenses
Direct operating expenses and cost of sales were approximately $65,000 for the
three months ended March 31, 1996. The Company s keno assets and operations
were sold on March 28, 1996 and therefore no such costs were incurred for the
three months ended March 31, 1997.
Selling, general and administrative expenses were approximately $337,000 for
the three months ended March 31, 1997, representing a decrease of
approximately $48,000 or approximately 12% when compared to the three months
ended March 31, 1996. The decrease in selling, general, and administrative
expenses was primarily due to 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, offset by an increase of approximately $48,000
in corporate expenses. For the three months ended March 31, 1996, certain
corporate expenses were classified as casino project development costs. As a
result of the Company s current business direction of holding equity interests
in various properties which, at the respective times of purchase, were
anticipated to be utilized in casino gaming projects, no corporate expenses
were classified as casino project development costs for the three months ended
March 31, 1997.
Casino project development costs for the three months ended March 31, 1996
were approximately $138,000. As stated above, no corporate expenses were
classified as casino project development costs for the three months ended
March 31, 1997 as a result of the Company s current business direction.
Depreciation and amortization costs were approximately $297,000 for the three
months ended March 31, 1997, representing a decrease of approximately $113,000
or approximately 28% when compared to the three months ended March 31, 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
$55,000 related to the Gold Coast Barge. The Gold Coast Barge was being
14
<PAGE> 15
depreciated over a useful life of 25 years for the three months ended March
31, 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.
Net interest expense for the three months ended March 31, 1997 was
approximately $1,344,000, a decrease of approximately $79,000 or approximately
6% compared to the three months ended March 31, 1996. Interest expense
decreased approximately $64,000 while interest income increased approximately
$15,000 during the three months ended March 31, 1997 compared to the three
months ended March 31, 1996. The decrease in interest expense was primarily
due to decreases of approximately $159,000 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 $133,000
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 March 31, 1997. The increase in interest income was
principally attributable to approximately $19,000 in interest income recorded
during the three months ended March 31, 1997 associated with the sale of the
Company s keno operations sold on March 28, 1996. No such interest income was
recorded during the three months ended March 31, 1996.
The Company recorded a net gain of approximately $2,000 for the three months
ended March 31, 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 three months ended March 31, 1996.
15<PAGE>
<PAGE> 16
Changes in Financial Condition, Liquidity and Capital Resources
As of March 31, 1997, the Company had no committed financing arrangements and
a working capital deficiency of approximately $56,795,000. 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 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).
16
<PAGE> 17
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 April 30, 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 April 30, 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
April 30, 1997, dividends totaling approximately $650,000 which were due and
payable on the outstanding shares of its Series C Preferred Stock from January
1, 1995 through March 31, 1997. (In the Company s 10-KSB for the year ended
December 31, 1996, the amount of dividends which were due and payable on the
outstanding shares of its Series C Preferred Stock from January 1, 1995 though
December 31, 1996 is incorrectly stated to be $675,000; the correct amount is
$575,000.) The Company has accrued, but has not declared or paid as of April
30, 1997, dividends totaling approximately $550,000 which were due and payable
on the outstanding shares of its Series D Preferred Stock from January 1, 1995
through March 31, 1997. (In the Company s 10-KSB for the year ended December
31, 1996, the amount of dividends which were due and payable on the
outstanding shares of its Series D Preferred Stock from January 1, 1995 though
December 31, 1996 is incorrectly stated to be $575,000; the correct amount is
$475,000.) 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.
17<PAGE>
<PAGE> 18
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.
18<PAGE>
<PAGE> 19
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: 5/1/97 By:/s/ J. Douglas Wellington
___________________________
J. Douglas Wellington
President and Chief Executive
Officer, and Principal Accounting Officer
19
<PAGE>
<PAGE> 20
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION PAGE NO.
11 Computation of Earnings Per Share. 21
27 Financial Data Schedule 22
20
EXHIBIT 11
AMERICAN GAMING & ENTERTAINMENT, LTD.
COMPUTATION OF EARNINGS (LOSS) PER SHARE
PRIMARY AND FULLY-DILUTED
Three Months Ended
March 31,
1997 1996
____ ____
Weighted average number
of shares for computation 12,532,102 12,532,102
============ ===========
Net loss $ (1,975,000) $(289,000)
Dividends and accretion
on preferred stock 467,000 408,000
____________
____________
Net loss for common
stockholders $ (2,442,000) $(697,000)
============ ==========
Net loss per common
share $(0.19) $(0.06)
======= =======
<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 THREE MONTH PERIOD ENDED MARCH 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 240,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,466,000
<PP&E> 12,673,000
<DEPRECIATION> 2,957,000
<TOTAL-ASSETS> 11,649,000
<CURRENT-LIABILITIES> 58,261,000
<BONDS> 21,000
0
13,653,000
<COMMON> 126,000
<OTHER-SE> (64,891,000)
<TOTAL-LIABILITY-AND-EQUITY> 11,649,000
<SALES> 0
<TOTAL-REVENUES> 1,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 634,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,363,000
<INCOME-PRETAX> (1,975,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,975,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,442,000)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
