<PAGE 1>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1998
American Gaming & Entertainment, Ltd.
_____________________________________
(Name of small business issuer in its charter)
0-19049
________________
Commission file number
Delaware 74-2504501
_______________________ __________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Woodland Avenue
Paramus, New Jersey 07652
______________________________ _______
(Address of principal executive offices) (Zip Code)
(609) 822-8505
____________________________________
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange
Act: None
Securities registered pursuant to Section 12(g) of the Exchange
Act:
Common Stock ($0.01 par value per share) ("Common Stock")
_________________________________________________________
(Title of Class)
Check whether the Company (1) has 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 [ ]
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of the Company's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [x]
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The Company's revenues for the fiscal year ended December 31,
1998 were approximately $445,000.
On February 28, 1999 the aggregate market value of the voting
stock of the Company held by non-affiliates of the Company was
approximately $103,000.
On February 28, 1999 there were 12,532,102 shares of the
Company's Common Stock outstanding.
_____________________________________________________
Additional Information
For the purpose of calculating the aggregate market value of the
Company's Common Stock held by non-affiliates, it has been
assumed that only the outstanding Common Stock legally or
beneficially held by the directors and executive officers of the
Company and the two stockholders indicated in "Security
Ownership" with the largest holdings of the Company's Common
Stock are held by affiliates of the Company. However, this should
not be deemed to constitute an admission that all of such persons
are, in fact, affiliates or that there are no other persons who
may be deemed to be affiliates of the Company.
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AMERICAN GAMING & ENTERTAINMENT, LTD.
1998 FORM 10-KSB ANNUAL REPORT
TABLE OF CONTENTS
PART 1
Item 1. Description of Business....................4
Item 2. Description of Property...................19
Item 3. Legal Proceedings.........................19
Item 4. Submission of Matters to a Vote of
Security Holders.......................22
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters....................23
Item 6. Management's Discussion and Analysis or
Plan of Operation......................25
Item 7. Financial Statements......................27
Item 8. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure...................27
PART III
Item 9. Directors, Executive Officers,
Promoters and Control Persons; Section
16(a) Beneficial Ownership Report
Compliance.............................28
Item 10. Executive Compensation...................30
Item 11. Security Ownership of Certain Beneficial
Owners and Management..................32
Item 12. Certain Relationships and Related
Transactions...........................36
Item 13. Exhibits and Reports on Form 8-K..........38
SIGNATURES............................................77
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PART I
Item 1. Description of Business
GENERAL
The Company owns equity interests in various properties that, at
the respective times of purchase, the Company anticipated could
be utilized in casino gaming projects. The Company has a 4.9%
beneficial equity interest in a riverboat gaming and
entertainment complex in Rising Sun, Indiana, which interest is
in the process of being sold (See "- Investments - Indiana").
President Mississippi Charter Corporation ("PMCC") is leasing
from the Company the Gold Coast Casino barge and related
leasehold improvements (collectively, the "Gold Coast Barge")
which the Company owns and on which the Company had previously
operated the Gold Shore Casino (See "- Investments -
Mississippi"). The Company is no longer actively seeking to
develop gaming projects and is currently managing its equity
interests. Given the Company's present financial and liquidity
position, the legal problems described below relating to Shamrock
Holdings Group, Inc., formerly known as Bennett Holdings, Inc.
("Shamrock"), The Bennett Funding Group, Inc. ("Bennett Funding")
and Bennett Management and Development Corp. ("Bennett
Management") (collectively, the "Bennett Entities") and the
Company's litigation described below (see "- Liquidity and
Continuation of Business" and "Legal Proceedings"), the business
of the Company is unlikely to continue to be the ownership of
equity interests in casino gaming ventures.
The Company conducts its business directly and through wholly-
owned subsidiaries. The term "Company" as used herein refers to
American Gaming & Entertainment, Ltd. and such subsidiaries
unless the context otherwise requires. The Company's principal
executive offices are located at One Woodland Avenue, Paramus,
New Jersey 07652; telephone: (609) 822-8505. The Company was
incorporated in 1988 under the laws of the State of Delaware.
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LIQUIDITY AND CONTINUATION OF BUSINESS
The Company has sustained recurring operating losses since its
inception, including significant losses related to the Gold Shore
Casino. The Company also has had a history of insufficient
liquidity and has been dependent upon the Bennett Entities for
both working capital and project related financing. However, as a
result of the bankruptcy filings of Bennett Funding and Bennett
Management on March 29, 1996 and the bankruptcy filing of
Shamrock on June 3, 1998 and the filing by the U.S. Securities
and Exchange Commission (the "Commission") of securities fraud
charges against Bennett Funding and Bennett Management on March
28, 1996, the Company does not anticipate receiving any
additional funds from the Bennett Entities.
The Company had available cash of approximately $317,000 as of
February 28, 1999. The Company believes that such cash is
sufficient to fund the Company's operations, excluding the
Company's obligations to Shamrock and, if applicable, Bennett
Management, through the middle of 1999, based on the Company's
current level of operations and projected expenditures. The
Company does not anticipate receiving additional funds and
therefore 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.
On March 10, 1999, Shamrock advised the Company that it should
consult Shamrock before utilizing the net proceeds of $415,000
from the sale on March 1, 1999 of a former railroad station in
Mobile, Alabama (the "GM&O Building") for working capital
purposes (See "- Discontinued Ventures - Mobile, Alabama"). If
Shamrock demands that such funds to be utilized to repay
indebtedness due to Shamrock, the Company would need to pursue a
formal plan of reorganization or liquidation.
As of February 28, 1999, the Company had recorded as restricted
cash approximately $1,127,000 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 ("RSR"), 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 (the "Rising Sun Project"). The
Company has transferred legal title to the RSR Interest 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 (see "- Investments - Indiana").
Shamrock has orally notified the Company that all net proceeds
received by the Company from the sale of the RSR Interest and the
cash held by NBD attributable to the RSR Interest should be paid
to Shamrock to reduce the Company's indebtedness to Shamrock.
The amount of any such payments will reduce the Company's
indebtedness to Shamrock.
As of February 28, 1999, cash received from the charter of the
Gold Coast Barge in the amount of approximately $4,790,000 is
also recorded as restricted cash. Pursuant to an agreement dated
November 5, 1997 (the "Escrow Allocation Agreement") with
Shamrock, the Company would
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have received a percentage of any funds related to the charter or
sale of the Gold Coast Barge disbursed to the Company and the
Bennett Entities, jointly, from the bankruptcy cases of AMGAM
Associates ("AMGAM") and American Gaming and Resorts of
Mississippi, Inc. ("AGRM"), each a wholly-owned subsidiary of the
Company. Notwithstanding the Escrow Allocation Agreement, the
Company and the Bennett Entities agreed on October 21, 1998 that
any such payments would be escrowed and disbursed only upon the
order of the United States Bankruptcy Court, Northern District of
New York (the "New York Bankruptcy Court"). Shamrock has orally
notified the Company that all such payments should be paid to
Shamrock to reduce the Company's indebtedness to Shamrock. (See
"- Investments - Mississippi"). Any such cash not disbursed to
Shamrock will be disbursed to the creditors of AMGAM and AGRM.
As of February 28, 1999, the Company owes approximately
$60,584,000 to Shamrock. The Company is delinquent in the payment
of interest due on its various obligations to Shamrock totaling
approximately $20,638,000, included in the amount above, as of
February 28, 1999 and is therefore in default with respect to
such payments under the Company's various loan agreements with
Shamrock. Additionally, the Company has agreed to repay
indebtedness to Shamrock of $125,000 from the sale in 1997 of
certain securities, which amount has not yet been paid to
Shamrock.
Shamrock has orally represented to the Company that Bennett
Management, prior to its bankruptcy filing, assigned to Shamrock
all of Bennett Management's rights and obligations under all
agreements previously executed by and between the Company and
Bennett Management including, without limitation, (i) a security
agreement whereby the Company granted to Bennett Management a
security interest in all of the Company's accounts receivable and
all bank accounts in the State of New Jersey to secure all
obligations owing by the Company to Bennett Management and its
affiliates (the "Security Agreement") and (ii) under an operating
lease between the Company and Bennett Management (the "SCS
Lease") with respect to the "Sioux City Sue" riverboat vessel and
its supporting barge (the "SCS Barge", collectively with the
"Sioux City Sue" riverboat vessel, the "Vessels"). However, the
Company has not been provided with written evidence of such
assignment and, as the result of the bankruptcy filing of Bennett
Management, any such assignment might be challenged as a
fraudulent transfer or voidable preference under the U.S.
Bankruptcy Code (the "Code"). There can be no assurance that such
assignment was entered into between Shamrock and Bennett
Management or, if entered into, that it will not be voided as a
fraudulent transfer or voidable preference in the bankruptcy
proceeding of Bennett Management or otherwise voided on other
grounds if any such assignment became effective within one year
prior to the bankruptcy filing of Bennett Management.
Any action taken by Shamrock or Bennett Management, to the extent
an assignment to Shamrock of Bennett Management's interest in the
Security Agreement never took place or is voided as a fraudulent
transfer, voidable preference or otherwise in the bankruptcy
proceeding of Bennett Management, with respect to its rights and
remedies in connection with defaults under the Company's various
loan agreements, as discussed above, would have a material
adverse effect on the Company's business and financial condition
and the Company would need to pursue a formal plan of
reorganization or liquidation. Such actions by Shamrock or
Bennett Management could
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include foreclosing on (i) the Gold Coast Barge pursuant to a
first preferred ship mortgage held by Shamrock on the Gold Coast
Barge in the amount of approximately $2,041,000 (the "Ship
Mortgage"), a second preferred ship mortgage on the Gold Coast
Barge in the amount of $31,101,000 (the "Second Mortgage") and
other agreements and (ii) all of the Company's accounts
receivable and bank accounts located in the State of New Jersey
pursuant to the Security Agreement. There can be no assurance
that Shamrock or, if necessary, Bennett Management will agree to
modify, terminate or restructure the obligations due from the
Company to Shamrock and, if applicable, Bennett Management.
Failure to obtain such modification, termination or restructuring
would have a material adverse effect on the Company and the
Company would need to pursue a formal plan of reorganization or
liquidation. Any action to be taken by Shamrock or Bennett
Management in connection with modifying or terminating any
obligations from the Company would probably require the approval
of the New York Bankruptcy Court.
The Company has not experienced any success in raising debt or
equity financing from sources independent of the Bennett Entities
and has no present commitments or other alternatives for such
financing. Given the Company's historical operating losses and
present liquidity position and the legal problems described above
relating to certain Bennett Entities it is unlikely that the
Company will achieve any success raising additional equity,
working capital or long-term project related financing.
Given the Company's present financial and liquidity position, the
legal problems described above relating to certain Bennett
Entities and the Company's litigation described below (see "Legal
Proceedings"), the business of the Company is unlikely to
continue to be the ownership of equity interests in casino gaming
ventures. The Company's ability to continue in business is
primarily dependent upon its ability to obtain sufficient funds
for its operations. However, as stated above, the Company does
not anticipate receiving additional funds and would then need to
pursue a formal plan of reorganization or liquidation.
Additionally, the Company's ability to continue in business is
dependent upon its ability to (i) obtain Shamrock's and, if
necessary, Bennett Management's agreement to modify, terminate or
restructure all obligations due from the Company to Shamrock and,
if applicable, Bennett Management, (ii) consummate the
liquidations under Chapter 11 of the Code of AMGAM and AGRM under
plans acceptable to the Company, resulting in a liquidation of
the various trade and debt obligations of those entities, and
(iii) satisfactorily resolve the litigation filed against the
Company (see "Legal Proceedings"). 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 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.
A formal plan of reorganization or liquidation would generally
result in the sale of the Company's assets to satisfy outstanding
obligations. There can be no assurance that if either action is
required to be pursued that all such obligations would be
completely satisfied. Further,
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in the event of either action, it is unlikely that the
stockholders of the Company will recover any of their investment
in the Company.
INVESTMENTS
Indiana. The Company owns the RSR Interest, representing the
equivalent of a 4.9% equity interest in the Rising Sun Project.
Effective August 23, 1996, the Company transferred legal title to
the RSR Interest to NBD, as trustee. Additionally, at such time,
the Company granted an irrevocable proxy to the other members of
RSR (collectively, the "Remaining Members") to vote the RSR
Interest in the same manner and proportion as the Remaining
Members vote on any matter, provided, however, that such proxy
may not be exercised to vote in favor of any action that could
reasonably be viewed as decreasing or otherwise adversely
affecting the value of the RSR Interest or the ability to sell or
otherwise transfer the RSR Interest. The RSR Interest is in the
process of being purchased from NBD, for the benefit of the
Company, by either the Remaining Members or RSR at an average
appraised fair market value. The Company has obtained an
appraisal valuing the RSR Interest at $6 million. The Company
understands that the appraisal obtained by RSR values the RSR
Interest significantly lower, and therefore the Company and RSR
are in the process of obtaining an independent third appraisal.
Shamrock has orally notified the Company that all net proceeds
received by the Company from the sale of the RSR Interest and the
cash held by NBD attributable to the RSR Interest should be paid
to Shamrock to reduce the Company's indebtedness to Shamrock.
The amount of any such payments will reduce the Company's
indebtedness to Shamrock. (See "-Liquidity and Continuation of
Business"). In 1998, the Board of Directors of the Company
approved granting Shamrock a security interest in the RSR
Interest in exchange for Shamrock agreeing to forebear from the
exercise of any rights or remedies in respect of all obligations
owing by the Company to Shamrock. No such security interest,
however, has been granted.
Mississippi. Prior to 1996, an involuntary petition for
liquidation under Chapter 7 of the Code was filed with the United
States Bankruptcy Court, Southern District of Mississippi (the
"Mississippi Bankruptcy Court") against AMGAM, which operated the
Gold Shore Casino in Biloxi, Mississippi. The case was
subsequently converted into a reorganization under Chapter 11 of
the Code. Additionally prior to 1996, AGRM, which owned and
leased certain property in Vicksburg, Mississippi, filed a
voluntary petition for reorganization under Chapter 11 of the
Code with the Mississippi Bankruptcy Court. On February 1, 1996,
the Mississippi Bankruptcy Court approved the sale of the leases
comprising the Gold Shore Casino site (the "Leasehold Sale") to a
third party for the sum of $750,000 plus the assumption and
payment of all outstanding liabilities relating to and arising
from such leases. On March 12 and 13, 1996, the personal property
of AMGAM was sold at auction for the net sum of approximately
$337,000. In the first quarter of 1996, the creditors under
certain borrowing agreements foreclosed on one of two parcels of
real property in Vicksburg, Mississippi owned by AGRM that served
as collateral for such borrowing agreements. On March 14, 1996,
the Bankruptcy Court approved the rejection by AGRM of its lease
with the lessor of a parcel of real property in Vicksburg,
Mississippi. On April 8, 1996, the Bankruptcy Court lifted the
automatic stay to allow an action
<PAGE 9>
of foreclosure on the second parcel of the real property owned by
AGRM that served as collateral for certain borrowing agreements.
The creditors under such borrowing agreements subsequently
foreclosed on such parcel.
Prior to 1996 and the bankruptcy proceedings of AGRM and AMGAM,
the Gold Coast Barge had been transferred to the Company from
AGRM in exchange for the cancellation of AGRM's guaranty to the
Company of certain unpaid lease obligations of AMGAM to the
Company. Pursuant to a Charter Agreement (the "Charter
Agreement") entered into prior to 1996 between the Company and
PMCC, PMCC is leasing the Gold Coast Barge from the Company. PMCC
is responsible for operating, insurance and maintenance costs of
the Gold Coast Barge under the terms of the Charter Agreement.
Prior to 1996, the Official Committee of Unsecured Creditors of
AMGAM Associates (the "AMGAM Committee") filed an adversary
complaint (the "Complaint") in the Mississippi Bankruptcy Court
challenging the transfer of the Gold Coast Barge to the Company
seeking, among other things, that all payments under the Charter
Agreement (the "PMCC Payments") be deposited into an escrow
account (the "Escrow Account") for the benefit of the creditors
of AMGAM and AGRM (See "Legal Proceedings").
Prior to 1996, the Company, Shamrock and Bennett Management
executed certain agreements whereby the Company agreed to assign
all its rights and interests in the Charter Agreement, including
all rights to charter payments, and the Gold Coast Barge to
Shamrock and Bennett Management, respectively, for cancellation
of approximately $22,722,000 in debt due Shamrock with respect to
the Gold Shore Casino and Shamrock's assumption of the Ship
Mortgage (collectively, the "Bennett Debt Exchange"). Although
Shamrock assumed the Ship Mortgage, the Bennett Debt Exchange was
never consummated. However, Shamrock notified the Company that
the Company had not fulfilled its obligations under the Bennett
Debt Exchange and that Shamrock was entitled to all charter
payments. The Company continued to utilize the charter payments
for its operating needs from the date Shamrock was licensed with
the Mississippi Gaming Commission because the Company's
management determined that, because of the Company's liquidity
problems, consummating the Bennett Debt Exchange would prevent
the Company from meeting its obligations to its creditors and
would have required the Company to file a formal plan of
reorganization or liquidation. Consequently, the Company recorded
charter payments received by the Company from such date through
December 31, 1997 totaling approximately $5,918,000 as
indebtedness to Shamrock ("Charter Debt"), as if the Bennett Debt
Exchange had been consummated. Additionally, the Company recorded
interest expense of approximately $2,120,000 on such indebtedness
("Charter Debt Interest Expense"). As discussed below, the
Company has recorded the Charter Debt as deferred revenue and
reversed the Charter Debt Interest Expense.
Pursuant to an order (the "PMCC Order") of the Mississippi
Bankruptcy Court, prior to 1996 PMCC acquired from AMGAM all of
the furniture, fixtures and equipment, including certain slot
machines, formerly used in the operation of the Gold Shore Casino
in exchange for the promise to make to AMGAM an initial payment
of approximately $48,000 and twenty-six equal
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monthly payments of approximately $121,000 totaling approximately
$3,188,000 (the "FF&E Payments"). PMCC made FF&E Payments through
July 1996 totaling approximately $1,618,000 (of which amount the
Company received approximately $411,000 and paid IGT $375,000 to
settle certain litigation). FF&E Payments, other than those
received by the Company, are being escrowed in the AMGAM
bankruptcy proceeding pending a determination by the Mississippi
Bankruptcy Court as to the disposition of such proceeds. The
Company has no claim to the escrowed FF&E Payments. On January
31, 1997 AMGAM and the AMGAM Committee filed suit in the
Mississippi Bankruptcy Court (Adv. No. 970868) against PMCC and
an affiliate seeking payment of all FF&E Payments currently due
under the PMCC Order, among other relief. This matter is set for
a hearing by the Mississippi Bankruptcy Court on April 13, 1999.
In the third quarter of 1996, the Company recognized a write down
of $2,146,000 in the value of its investment in the Gold Coast
Barge to reflect its appraised market value.
On April 29, 1996, a preliminary injunction (the "Preliminary
Injunction"), which was agreed upon by the AMGAM Committee and
the Official Committee of Unsecured Creditors of American Gaming
and Resorts of Mississippi, Inc. (collectively, the "Committees")
and the Company, was entered by the Mississippi Bankruptcy Court,
(i) to require the PMCC Payments from May 1996 through July 1996
be deposited into the Escrow Account pending confirmation of a
proposed joint plan of liquidation and (ii) to allow a monthly
payment from the Escrow Account to the Company in the amount of
$304,000 for the Company's monthly operating expenses.
In June 1996, the trustee (the "Bennett Trustee") for Bennett
Funding and Bennett Management under Chapter 11 of the Code, who,
pursuant to information from the Bennett Trustee, is the sole
owner of Shamrock, orally notified the Company that Shamrock, as
a result of Shamrock being the holder of the Ship Mortgage and
the Second Mortgage, which secure debt due Shamrock with respect
to the Gold Coast Barge, was entitled to all payments to be
received by the Company from the Escrow Account with respect to
PMCC Payments. However, the Company continued to utilize such
payments for its operating needs for the reasons stated above.
The Preliminary Injunction was revised and extended by the
Bankruptcy Court effective August 1, 1996 (i) to require the PMCC
Payments from August 1996 until the agreement by the Company and
the Committees on a joint plan of liquidation of the AMGAM and
AGRM estates or upon further order of the Mississippi Bankruptcy
Court be deposited into the Escrow Account pending confirmation
of a proposed joint plan of liquidation and (ii) to allow a
monthly payment from the Escrow Account to the Company in the
amount of approximately $282,000 for the Company's monthly
operating expenses subject, however, to a term sheet (the "Term
Sheet") for a proposed joint plan of liquidation executed by the
Company, Shamrock, AMGAM, AGRM and the Committees.
PMCC made PMCC Payments, excluding certain setoffs, through May
1997 (the "Original Charter Payments") totaling approximately
$6,378,000. The Company received Original Charter Payments of
approximately $3,419,000, excluding certain setoffs, prior to the
Mississippi
<PAGE 11>
Bankruptcy Court entering the Preliminary Injunction and
approximately $2,606,000 from the Escrow Account with respect to
the Original Charter Payments pursuant to the Preliminary
Injunction and the Term Sheet. IGT, a creditor in the AMGAM
bankruptcy case, subsequently objected to the Company receiving
disbursements under the Preliminary Injunction and the Company
has received no such disbursements since May 1997.
On October 21, 1998, the Company and the Bennett Entities agreed
that, notwithstanding the Escrow Allocation Agreement, any
AGEL/Shamrock Payments (as defined below) would be escrowed and
disbursed only upon the order of the New York Bankruptcy Court.
Shamrock has orally notified the Company that any AGEL/Shamrock
Payments should be paid to Shamrock to reduce the Company's
indebtedness to Shamrock (See "-Liquidity and Continuation of
Business").
Effective October 30, 1998, PMCC and the Company entered into an
amendment to the Charter Agreement (the "Charter Amendment"). The
Charter Amendment was entered into with the concurrence of AMGAM,
AGRM, the Committees and Shamrock (collectively with the Company,
the "AMGAM Group"). Pursuant to the Charter Amendment, among
other things, (i) PMCC paid $4,105,000 (the "Amendment Payments")
into the Escrow Account in addition to the Original Charter
Payments, (ii) PMCC agreed to pay into the Escrow Account a
monthly charter payment of $215,000 for the period from December
1, 1998 through April 15, 2000 (the "Remaining Charter Term")
(and has made all such payments through February 28, 1999), (iii)
PMCC agreed to pay into the Escrow Account a late fee of $21,500
for each PMCC Payment which is paid later than the tenth of such
month, (iv) PMCC and the AMGAM Group agreed to fund equally an
escrow account not to exceed $1,000,000 to remove the Gold Coast
Barge from PMCC's Biloxi, Mississippi site at the end of the
Remaining Charter Term, (v) at any time during the Remaining
Charter Term, PMCC has the right to make a written offer to
purchase the Gold Coast Barge, which offer shall be deemed
accepted unless rejected by the AMGAM Group within thirty days of
receipt of such offer, (vi) the Charter Agreement or the Gold
Coast Barge may be assigned or sold, subject to PMCC's written
consent, which may not be unreasonably withheld, (vii) during the
Remaining Charter Term, PMCC has a right of first refusal to
purchase the Gold Coast Barge on the same terms and conditions
set forth in any offer acceptable to the AMGAM Group and (viii)
PMCC and the AMGAM Group executed mutual releases and are filing
appropriate pleadings seeking dismissal, with prejudice, of all
lawsuits and counterclaims, including suits brought by the
Company against PMCC and President Riverboat Casino -
Mississippi, Inc. and counterclaims filed by PMCC against the
Company alleging various respective breaches of the Charter
Agreement.
On March 1, 1999, the Company, AMGAM, AGRM, the Committees and
the Bennett Trustee, as trustee for Bennett Funding and Bennett
Management and as president of Shamrock, filed a motion in the
Mississippi Bankruptcy Court requesting, among other relief, that
the Mississippi Bankruptcy Court establish procedures for
competitive bidding to purchase the Gold Coast
<PAGE 12>
Barge. Such procedures would require bids not less than
$5,000,000, with $1,000,000 in cash being deposited with the
Mississippi Bankruptcy Court prior to the sales hearing. The
Mississippi Bankruptcy Court denied the motion without prejudice,
thereby allowing the motion to be filed again.
On March 15, 1999, AMGAM, AGRM, the Committees, the Company,
Shamrock and IGT agreed in principle on a proposed joint plan of
liquidation (the "Consensus Plan") for AMGAM and AGRM.
Pursuant to the Consensus Plan, each administrative and priority
claim, as defined in the Code, incurred in connection with the
bankruptcy proceedings of AMGAM and AGRM would be paid in full
from the respective estates of AMGAM and AGRM in accordance with
statutory priorities pursuant to the Code.
Pursuant to the Consensus Plan, each secured claim) would be
either paid in full from the sale of the related collateral or
satisfied in full by abandoning the collateral to the secured
creditor, except for (i) the Ship Mortgage and the Second
Mortgage and (ii) a guaranteed claim of IGT in the amount of
$1,400,000 (the "IGT Guaranteed Claim"). The Ship Mortgage, the
Second Mortgage and the IGT Guaranteed Claim would each be
treated as discussed below. The balance of the claim of IGT would
be treated as an unsecured claim.
Pursuant to the Consensus Plan, the IGT Guaranteed Claim will be
paid in four equal installments. The first installment will be
payable upon the effective date of the Consensus Plan from 30% of
the PMCC Payments, including the Amendment Payments, in the
Escrow Account. The second installment will be paid from 30% of
the PMCC Payments made during the Remaining Charter Term. The
third installment will be paid from 28% of the first $3,000,000
of net proceeds from a sale of the Gold Coast Barge, if any. The
fourth and final installment will be paid from 25% of the net
proceeds in excess of $3,000,000, if any, from a sale of the Gold
Coast Barge.
Pursuant to the Consensus Plan, each unsecured claim, excluding
any claims of the Company and Shamrock, would be paid from the
assets of the respective estates of AMGAM and AGRM. Such assets
would include, subject to the payment of the installments of the
IGT Guaranteed Claim, as discussed above, (a) 30% of all PMCC
Payments, including the Amendment Payments, (b) 28% of the first
$3,000,000 of net proceeds from a sale of the Gold Coast Barge,
if any, and (c) 25% of the net proceeds in excess of $3,000,000,
if any, from a sale of the Gold Coast Barge. Such assets would
additionally include the funds remaining in an escrow account for
the benefit of the creditors of AMGAM and AGRM with respect to
the Leasehold Sale and all FF&E Payments.
Pursuant to the Consensus Plan, the Company's and Shamrock's
unsecured claims, and the Ship Mortgage and the Second Mortgage
would be paid from (a) 70% of all PMCC Payments, including the
Amendment Payments, (b) 72% of the first $3,000,000 of net
proceeds from a sale of the Gold Coast Barge, if any, and (c) 75%
of the net proceeds in excess of $3,000,000, if any, from a sale
of the Gold Coast Barge (collectively, the "AGEL/Shamrock
Payments").
<PAGE 13>
Pursuant to the Consensus Plan, all equity interests of the
Company in AMGAM and AGRM would be canceled as of the effective
date of the Consensus Plan and the Complaint would be dismissed
(see "Legal Proceedings").
The amounts to be paid to creditors would be subject to the claim
allowance process in the AMGAM and AGRM bankruptcies, pursuant to
which all allowed claim amounts, in the order set forth above,
would be fixed for purposes of distributions under the Consensus
Plan.
The Mississippi Bankruptcy Court has scheduled a hearing on the
Consensus Plan on April 12, 1999. There can be no assurance that
the creditors in the AMGAM and AGRM bankruptcy proceedings will
approve the Consensus Plan in accordance with the provisions of
the Code or that the Consensus Plan will thereafter be confirmed
by the Mississippi Bankruptcy Court.
As stated above, in 1998 Shamrock orally notified the Company
that any AGEL/Shamrock Payments should be paid to Shamrock to
reduce the Company's indebtedness to Shamrock (See "-Liquidity
and Continuation of Business").
Pursuant to the Escrow Allocation Agreement, Shamrock agreed that
any amounts related to the charter or sale of the Gold Coast
Barge received by Shamrock from the AMGAM and AGRM bankruptcy
proceedings will reduce the Company's indebtedness to Shamrock.
Pursuant to the Charter Amendment, Shamrock acknowledged the
Company as the owner of the Gold Coast Barge. On January 4, 1999,
the Bennett Trustee, as trustee for Bennett Funding and Bennett
Management and as president of Shamrock, filed proofs of claim in
the AMGAM and AGRM bankruptcy proceedings, asserting claims based
upon Shamrock holding the Ship Mortgage and the Second Mortgage,
but not based upon any rights under the Bennett Debt Exchange.
The Company has therefore determined that Shamrock has implicitly
acknowledged that the Bennett Debt Exchange was never consummated
and that the Company had the right to utilize the charter
payments. Accordingly, as stated in the Company's prior filings
with the Securities and Exchange Commission, the Company, as of
December 31, 1998, reversed the Charter Debt Interest Expense of
approximately $2,120,000. However, the Company has recorded the
Charter Debt of approximately $5,918,000 as deferred revenue
because the Complaint, which challenges the Company's ownership
of the Gold Coast Barge, is still pending. The Company also
recorded the Amendment Payments of approximately $4,105,000 and
the December 1998 charter payment of $215,000 made by PMCC as
deferred revenue for the year ended December 31, 1998. If the
Complaint is dismissed, pursuant to the Consensus Plan or
otherwise, the Company will recognize the deferred revenue
amounts as revenue.
Nevada. Prior to 1996, pursuant to an agreement between Shamrock
and the Company (the "HC Purchase Agreement") under which
Shamrock provided the necessary funds to the Company to close the
purchase of the Harolds Club casino in Reno, Nevada, the Company
transferred to Shamrock title to the land and the building
related to the Harolds Club. Shamrock assumed responsibility for
all carrying costs of the Harolds Club property including, but
not limited to, lease payments under certain land leases held by
the Company related to the Harolds Club, taxes,
<PAGE 14>
insurance and utilities. Such land leases were assigned by the
Company to Shamrock as of September 29, 1998. However, 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 lease payments from April
1996 through February 1999 due under such leases or quarterly
property taxes due under such leases (the "Unpaid Harolds Club
Obligations"), collectively totaling approximately $2,288,000.
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. Four such leases require aggregate annual lease
payments of approximately $548,000 for each of the years 1999 and
2000, subject to increase based upon increases in the Consumer
Price Index, and have terms ending between April 2001 and October
2022. A fifth land lease relating to the Harolds Club, with an
annual lease payment of approximately $72,000, subject to
increase based upon increases in the Consumer Price Index,
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.
The Company has recorded the Unpaid Harolds Club Obligations as
current liabilities. The Company has also recorded the amount of
the Unpaid Harolds Club 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, the Company 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 (the "HC Reimbursement 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 "Legal
Proceedings"), and (iii) all reasonable costs and expenses
incurred by the Company in connection with the operation and
maintenance of the Harolds Club.
Pursuant to agreements between Shamrock and the Company entered
into prior to 1996 (the "Harolds Agreements"), the Company has
the right to lease Harolds Club from Shamrock or, under certain
circumstances, manage the Harolds Club. The Company does not
have, nor does it anticipate having, the financial ability or
personnel to exercise such lease option. Additionally, the
Company has no current intention of exercising such lease option
or managing the Harolds Club.
<PAGE 15>
The Company is precluded from conducting casino operations in the
Harolds Club prior to receipt of a gaming license from the Nevada
State Gaming Control Board. In January 1996, the Company
withdrew, without prejudice to reapply, a previously filed
licensing application.
On October 8, 1998, the New York Bankruptcy Court authorized the
sale by Shamrock of the Harolds Club. Shamrock has advised the
Company that such sale is scheduled to close by May 1999. The
leases discussed above shall terminate at closing, and the
Company shall be released from all obligations under such leases,
except for environmental conditions resulting from the Company's
intentional or negligent conduct. Additionally, lawsuits filed
against the Company by the five lessors of the Harolds Club
property and cross-claims filed against the Company by co-
defendants will be dismissed upon closing (see "Legal
Proceedings").
Empire/Marine Star. Prior to 1996, the Company invested
$3,000,000 in cash to acquire a 15% initial equity interest (with
the right to increase its percentage ownership to 30%) in Empire
Cruise Lines, Ltd., a Delaware corporation ("Empire"), which
acquired ownership of the Marine Star, a U.S. flag cruise ship
suitable for refurbishment as a gaming vessel. Empire had no
prior operating history or business operations and was formed
solely for the purpose of acquiring and refurbishing the Marine
Star. The Marine Star has been docked in protected fresh waters
since 1963 when it left service as a ferry on the Great Lakes.
The vessel was constructed in 1945 and originally served as a
troop carrier for the United States Navy for three years. Under
an agreement with Empire, the Company has the right, under
certain circumstances, to manage the Marine Star. The Company
does not have, nor does it anticipate having, the financial
ability or personnel to manage such property as a gaming or other
facility. The Company is currently assessing opportunities to
sell its equity ownership in Empire. Additionally, the Company,
on behalf of Empire, is currently seeking opportunities to sell
the Marine Star. Prior to 1996, the Company determined that there
was a substantial likelihood that the Marine Star would not be
able to be utilized as a gaming project in the next few years and
recognized a write down of $2,250,000 in the value of its
investment in Empire to reflect the estimated net scrap metal
proceeds which would be received by the Company if the Marine
Star was unable to be developed as a gaming project and instead
sold for its scrap metal value. As a result of the Company's
determination in the fourth quarter of 1996 that there (i) is a
substantial likelihood that the Marine Star will not be able to
be utilized as a gaming project and (ii) the outstanding carrying
costs of the Marine Star exceed its estimated net scrap metal
value, the Company wrote off its investment of $750,000 in
Empire.
DISCONTINUED VENTURES
Mobile, Alabama. Prior to 1996, the Company acquired the GM&O
Building for $1,006,000 in cash. Prior to 1997, the Company
recognized writedowns in the value of its investment in the GM&O
Building to reflect its fair market value.
On March 1, 1999, the Company sold the GM&O Building in Mobile,
Alabama to the City of Mobile for approximately $423,000. The
Company intends to use the net sales proceeds of approximately
$415,000 for working capital purposes. As discussed above,
Shamrock has
<PAGE 16>
advised the Company that it should consult Shamrock before
utilizing the net proceeds from the sale of the GM&O Building for
working capital purposes (See "- Liquidity and Continuation of
Business").
Prichard, Alabama. Prior to 1996, the Company purchased seven
adjoining parcels of real estate in Prichard, Alabama for a total
of approximately $676,000 for possible development in connection
with a casino gaming facility. On March 27, 1997, the Company
sold such parcels 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 such
parcels. In addition, the Company had a lease through July, 1997
for another parcel of real estate in Prichard, Alabama at a rent
of approximately $22,000 per year, which lease was not renewed.
Keno. On March 28, 1996 the Company entered into an assignment
and transfer agreement with American Heartland Corporation
("AHC"), and Big Red Keno, Ltd., a licensed keno operator in
Omaha, Nebraska ("BRK"), pursuant to which: (i) the Company
assigned, and AHC assumed, all of the Company's rights and
obligations under a certain financing agreement with BRK to
provide equipment, services and financing for the operation of a
multiple parlor keno game in the City of Omaha in exchange for a
revenue participation equal to 50% of cash net income of BRK
after deduction of certain cash payments by BRK: (ii) the Company
transferred and assigned to AHC all of the Company's right, title
and interest to all of the assets utilized by the Company in the
conduct of its keno gaming activities, including, without
limitation, the Company's computerized keno system and all
maintenance and servicing agreements with the licensed operators
for stations and locations at which the Company's computerized
keno system is utilized; (iii) the Company agreed not to compete,
directly or indirectly, with AHC or BRK as a distributor,
manufacturer or maintainer of keno equipment or software, other
than in the normal course of any casino operations of the Company
for a period of five years; (iv) AHC paid the Company $500,000 on
March 29, 1996; and (v) AHC issued and delivered its promissory
note to the Company in the principal amount of approximately
$1,112,000 (the "Keno Note"). On September 22, 1998, AHC asserted
set offs against the Keno Note aggregating approximately
$198,000. The Company received principal and interest payments on
the Keno Note totaling $850,000 through December 31, 1998. On
January 8, 1999, the Company agreed to the payment of $300,000
from AHC in full satisfaction of the Keno Note and accordingly
recorded a writedown in the value of the Keno Note in the amount
of $165,000.
Sioux City Sue. Prior to 1996, Bennett Management consummated the
purchase of the Vessels from a third party. In conjunction
therewith, the Company entered into the SCS Lease with Bennett
Management whereby the Company leased the Vessels for casino
gaming purposes at a monthly rental of approximately $106,000
plus operating and maintenance expenses. The Company, pursuant to
such lease, insured the Vessels and named Bennett Management as
an additional insured party. Prior to 1996, the Vessels were
vandalized and burglarized and the supporting barge was grounded,
giving rise to insurance claims for theft and property damage
(collectively, the "Claims"). The Company has been advised by
Shamrock that the SCS Barge
<PAGE 17>
was sold by Shamrock on November 20, 1996. The Company has
advised Shamrock that it believes that the SCS Lease terminated
on such date. The Company has not paid approximately $2,701,000
in rent to Bennett Management due under the SCS Lease through
November 20, 1996. Effective August 10, 1998, the Company
assigned to Bennett Management the Company's right to proceed
against the underwriters who issued the marine insurance policy
covering the Vessels and the right to collect the insurance
proceeds, if any, from the Claims.
Shamrock has orally represented to the Company that Bennett
Management, prior to its bankruptcy filing, assigned to Shamrock
all of Bennett Management's rights and obligations under the SCS
Lease. However, the Company has not been provided with written
evidence of such assignment and, as the result of the bankruptcy
filing of Bennett Management, any such assignment might be
challenged as a fraudulent transfer or voidable preference under
the Code. There can be no assurance that such assignment was
entered into between Shamrock and Bennett Management or, if
entered into, that it will not be voided as a fraudulent transfer
or voidable preference in the bankruptcy proceeding of Bennett
Management.
NET OPERATING LOSS CARRYFORWARDS AND RELATED OWNERSHIP CHANGE
LIMITATIONS
As of December 31, 1998, the Company had net operating loss
carryforwards ("NOLs") of approximately $52,640,000 available to
offset future taxable income. Under Section 382 of the Internal
Revenue Code of 1986, as amended (the "Tax Code") if a loss
corporation has an "ownership change" (as defined in the Tax
Code) within a designated testing period, its ability to use its
NOLs is subject to certain limitations. The Company has had
various ownership changes for Section 382 purposes which limit
the amount of pre-April 9, 1993 losses that may be utilized
annually to offset taxable income. NOLs subject to an annual
limitation as of April 9, 1993 amounted to approximately
$17,000,000. Losses after April 9, 1993 totaling approximately
$35,640,000 are also subject to such limitation as of the date of
this filing. There can be no assurance that a future ownership
change will not occur or that a past event will be determined to
not be an ownership change which could further limit the
utilization of the Company's NOLs during future periods, nor can
there be any assurance that operations of the Company will
generate taxable income in future years so as to realize a tax
benefit from such NOLs.
COMPETITION AND GOVERNMENT REGULATION
Certain forms of casino gaming, including riverboat casino
gaming, are now permitted in portions of Colorado, Illinois,
Indiana, Iowa, Louisiana, Michigan, Mississippi, Missouri,
Nevada, New Jersey and South Dakota, as well as on American
Indian lands in many States. Some form of gaming (e.g.,
lotteries, horse or dog racing, charitable games) is now legal in
every State except Utah and Hawaii. The many forms of gaming
conducted both on and off Indian lands in the United States may,
in a broad sense, be deemed to be in competition with the gaming
ventures in which the Company invests and affect the value of
such gaming ventures. The extent to which the various forms of
gaming conducted both on and off Indian lands in the United
States may be competitive with the gaming ventures in which the
Company invests depends upon
<PAGE 18>
several factors including the nature and location of the gaming
activity and the demographics of the player populations.
Additionally, the gaming industry in which the Company invests is
subject to extensive government regulation by federal, state and
local authorities and, accordingly, regulatory and legislative
changes, including gaming related taxes, could have an adverse
effect on the Company's investments by increasing competition, by
increasing costs or by making gaming a relatively less attractive
activity for its customers as compared with other competing
activities.
To the extent the Company continues to do business in the gaming
industry, if at all, such competition and government regulation
could have an adverse effect on the Company's business by
increasing competition, by increasing costs, by making gaming a
relatively less attractive activity for its customers as compared
with other competing activities, and by imposing restrictions on
the Company's business activities. To the extent the Company's
activities in a particular jurisdiction are regulated, the
Company has complied, or has taken the appropriate steps to
comply, with any applicable regulations. To the extent the
Company commences gaming operations in other jurisdictions, it
will become subject to the regulatory systems in effect in those
jurisdictions.
No material portion of the business of the Company is seasonal.
No portion of the Company's business is subject to termination of
contracts or renegotiation of profits at the election of the
government. Compliance with federal, state and local
environmental regulations has not had and is not expected to have
a material effect upon the capital expenditures, earnings (or
losses) or competitive position of the Company. Inflation has not
had and is not expected to have a material effect on the
Company's business.
SERVICE MARKS
The Company has registered the service mark for "MEGAPICK" with
the United States Patent and Trademark Office (the "PTO"). The
Company has granted to MegaBingo, Inc. the exclusive, paid-up
perpetual right and license to use the service mark "MEGAPICK" or
any variant thereof in connection with any and all bingo
operations. The Company has granted to AHC the right to use the
names "Gamma", "Gamma International" and variants thereof,
provided however, that the Company retains the right to continue
to use the name "Gamma" or any variant thereof for corporate, but
not commercial, purposes (See "- Discontinued Ventures - Keno").
The Company has registrations pending with the PTO for the
service marks "GOLD SHORE CASINO" and "MISSISSIPPI GOLD SHORE
CASINO", but intends to abandon such registrations upon the
liquidation of AMGAM.
<PAGE 19>
EMPLOYEES
As of February 28, 1998, the Company had 2 employees, consisting
of 1 executive officer and 1 office employee. All of the
Company's personnel are employed full-time.
For additional information concerning the Company and its
business and operations, see "Management's Discussion and
Analysis."
Item 2. Description of Property
Headquarters. The Company's operations are located in Paramus,
New Jersey. The property is currently in operative condition and
is sufficient for the Company's current administrative and known
operating needs. The property is leased with an expiration term
of August 31, 1999.
The Gold Coast Barge. The Gold Coast Barge measures 300' x 90'
with two decks measuring 300' x 110' (approximately 33,000 square
feet each) and one deck measuring 300' x 40' (approximately
12,000 square feet). As discussed above, the Company has entered
into the Charter Agreement with PMCC to charter the Gold Coast
Barge to PMCC for use at PMCC's existing site in Biloxi,
Mississippi. Shamrock has ship mortgages on the Gold Coast Barge
totaling approximately $35,062,000 related to loans utilized to
finance the construction and opening of the Gold Shore Casino
previously operated on the Gold Coast Barge. For a description of
the general competitive conditions see "Description of Business -
Competition."
Pursuant to the Charter Agreement, PMCC is responsible for
insuring the Gold Coast Barge. Management has no knowledge that
such properties are not adequately insured and believes that all
other properties are adequately insured.
Item 3. Legal Proceedings
On September 20, 1995, the U.S. Department of Labor (the "DOL")
informed AMGAM that it had concluded an investigation of the
AMGAM Associates d/b/a Gold Shore Casino Associate Benefit Plan
(the "AMGAM Benefit Plan") for the period May 15, 1994 through
September 20, 1995. As a result of such investigation, the DOL
has alleged that AMGAM and possibly certain related parties
and/or AMGAM officers violated, and continue to violate, certain
provisions of the Employee Retirement Income Security Act of 1974
("ERISA") with respect to the administration of the AMGAM Benefit
Plan. The DOL has indicated that AMGAM's failure to take
necessary corrective action may result in the referral of this
matter to the Office of the Solicitor of Labor for possible legal
action. In addition, whether or not any such referral is made,
AMGAM is and would remain liable to possible legal action by
other parties including plan fiduciaries and plan participants or
their beneficiaries. Certain violations of ERISA may also result
in the assessment of civil penalties by the Secretary of Labor
against the violating parties. The DOL has requested AMGAM to
discuss how such violations noted in the DOL's investigation may
be corrected and how to restore any losses to the AMGAM Benefit
Plan. The
<PAGE 20>
Company responded to such allegations on November 20, 1995,
and advised the DOL (i) that AMGAM does not believe that there
have been any fiduciary violations or prohibited transactions
under ERISA, (ii) AMGAM intends to satisfy medical claims due and
payable under the AMGAM Benefit Plan to the extent permitted by
the Code and the Mississippi Bankruptcy Court and intends to use
its best efforts to seek priority status under the Code for the
payment of such medical claims, and (iii) in no event will the
amount paid with respect to such medical claims be less than the
employee contributions collected under the AMGAM Benefit Plan
after March 28, 1995. Although the actions taken by AMGAM,
certain related parties and AMGAM officers with respect to the
AMGAM Benefit Plan will be vigorously defended, the outcome of
this matter is uncertain. Any legal action or civil penalties
arising out of this matter could materially affect the Company
and its business and financial condition.
The AMGAM Committee has filed the Complaint seeking that (i) the
transfer of the ownership interests in the Gold Coast Barge by
AGRM and AMGAM to the Company be declared null and void, (ii) the
transfer of the leasehold interest in the Gold Coast Barge by
AMGAM to the Company be declared null and void, (iii) the Company
and Shamrock be required to deliver to AGRM and AMGAM their
respective interests in both the ownership and leasehold in the
Gold Coast Barge, (iv) the Company and Shamrock disgorge and
return to the respective AMGAM and AGRM estates all PMCC Payments
received, such funds to be deposited in an escrow account and not
expended without further order of the Mississippi Bankruptcy
Court, and (v) PMCC be ordered and directed to immediately
deposit all PMCC Payments into an escrow account for the benefit
of the creditors of AMGAM and AGRM, such funds not to be expended
without further order of the Mississippi Bankruptcy Court. The
Mississippi Bankruptcy Court has not scheduled a hearing date on
the Complaint. AMGAM, AGRM and the Company presently intend to
oppose the Complaint on the bases, among others, that the
transfer of the Gold Coast Barge from AGRM to the Company
involved contemporaneous exchanges of value and that the Company
and Shamrock were not insiders of AMGAM or AGRM at the time such
entities granted the Company and Shamrock security interests in
their assets, including the Gold Coast Barge.
Pursuant to the Consensual Plan, the Complaint and all other
litigation brought against the Company would be dismissed with
prejudice, that is, the Committees would be precluded from filing
any action against the Company based on the alleged causes of
action set forth in the Complaint or any such other litigation.
If (i) the Consensual Plan is not approved by the creditors in
the AMGAM and AGRM bankruptcy proceedings in accordance with the
provisions of the Code or thereafter confirmed by the Mississippi
Bankruptcy Court and (ii) the AMGAM Committee prevails on the
Complaint, the Company would not be able to meet its obligations
as they come due. In such case, the Company would then need to
pursue a formal plan of reorganization or liquidation.
As discussed above (See "Description of Business - Liquidity and
Continuation of Business"), the Mississippi Bankruptcy Court has
entered the Preliminary Injunction. The Preliminary Injunction
was sought by the Committees and the Company in connection with
their negotiations
<PAGE 21>
involving the Consensual Plan, but it is independent of the
Complaint which seeks, among other things, similar relief.
On September 16, 1996, two stockholders of the Company, who were
bondholders and stockholders of AGRM prior to the merger of AGRM
into the Company (the "Merger"), filed suit against the Company
and three former officers and/or directors of AGRM in the Circuit
Court of Harrison County, Mississippi, Second Judicial District
(Civil Action No. A2402-96-00210). The plaintiffs allege (i)
federal and state securities fraud by the defendants based on
alleged fraudulent misrepresentations made by the defendants in
connection with plaintiffs' decision to purchase common stock of
AGRM, to convert certain debentures issued by AGRM into common
stock of AGRM and to tender their common stock of AGRM in
exchange for Common Stock of the Company in connection with the
Merger and (ii) a breach of directors' duties of good faith and
due care by the three former officers and/or directors of AGRM.
The plaintiffs are seeking compensatory damages in the amount of
$250,000, punitive damages in the amount of $1,000,000 and
attorneys fees and costs. Outside counsel to the Company, due to
the limited facts available on this matter, is unable to predict
the outcome of this lawsuit. However, should the plaintiffs
prevail, this litigation 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.
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 Company has
filed answers in four actions. Judgment in one of the actions has
been taken against co-defendants and the lessor's claim has been
satisfied. In February 1998, judgment was taken against the
Company in another action in the approximate amount of $591,000.
The Company is presently considering its options regarding such
judgment. If undisturbed, the judgment would have a material
adverse effect on the Company's business and financial condition.
The third action has been stayed to permit arbitration between
the plaintiff and one of the defendants. Although the Company has
filed an answer in the fifth action to the cross-claims of Hughes
Properties, Inc. and Fitzgeralds Reno, Inc., the other defendants
in such action, the plaintiff has not requested that the Company
file an answer 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 facts available on this matter, is unable to predict
the outcome of these remaining suits. However, should the
plaintiffs prevail, these suits would have a material adverse
effect on the Company's business and financial
<PAGE 22>
condition. If the judgment is undisturbed or the plaintiffs in
the remaining suits prevail, the Company would then need to
pursue a formal plan of reorganization or liquidation.
The lawsuits filed against the Company by the five lessors of the
Harolds Club property and cross-claims filed against the Company
by co-defendants will be dismissed upon the closing of the
pending sale of the Harolds Club. However, there can be no
assurance that such sale will close (see "Description of Business
- - Investments - Nevada").
On May 29, 1998, Richard C. Breeden, Trustee for The Bennett
Funding Group, Inc., et. al., filed suit against the Company in
the United States Bankruptcy Court, Northern District of New York
(Bankruptcy Case No. 96-61376, Adversary Proceeding No. 98-
70465A). The plaintiff alleges that payments made by The Bennett
Funding Group, Inc. and related entities (collectively,
"Bennett") to the Company between March 29, 1990 and March 29,
1996, collectively totaling approximately $70,155,000 (the
"Transfers"), were actual or constructive fraudulent transfers by
Bennett. In the alternative, the plaintiff alleges that all or
some of the Transfers were loans by Bennett to the Company and
are currently due and payable on demand. The plaintiff is seeking
payment by the Company of the amount of the Transfers, accrued
and unpaid interest, attorneys fees and costs. As discovery and
depositions have not yet commenced, outside counsel to the
Company is unable to predict the outcome of this lawsuit.
However, should the plaintiff prevail, this litigation 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.
A formal plan of reorganization or liquidation would generally
result in the sale of the Company's assets to satisfy outstanding
obligations. There can be no assurance that if either action is
required to be pursued that all such obligations would be
completely satisfied. Further, in the event of either action, it
is unlikely that the stockholders of the Company will recover any
of their investment in the Company.
In addition to the items set forth above, the Company is involved
in other legal proceedings and claims of various types. While
any litigation contains an element of uncertainty, it is the
opinion of management, after consultation with counsel, that the
outcome of each such other proceeding or claim which is pending
or known to be threatened, or all of them combined, can be
successfully defended or resolved. In addition, management is
unable, with any degree of certainty, to predict the outcome, or
to estimate the amount of any liability, if any, that may result
from these actions. However, management believes that none of
such other proceedings or claims will have a material adverse
effect on the Company's business or financial condition.
Item 4. Submission Of Matters To A Vote Of Security Holders
Not Applicable. The last annual meeting of stockholders of the
Company was held on October 12, 1995. No meeting of stockholders
has been held since such date and the Company has no present
intention of holding a meeting of stockholders in 1999.
<PAGE 23>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Market Information. The Common Stock trades under the
symbol "AGEL" on the OTC Bulletin Board. The following table sets
forth, for the calendar periods indicated, the high and low bid
prices (which prices are interdealer prices without retail
markup, markdown or commissions, and may not necessarily
represent actual transactions).
Bid Price Per Share
___________________
Calendar Periods High Low
________________ ____ ____
1997
First Quarter $ 0.0625 $ 0.0156
Second Quarter 0.0313 0.0156
Third Quarter 0.0625 0.0156
Fourth Quarter 0.0469 0.0156
1998
First Quarter $ 0.0313 $ 0.0156
Second Quarter 0.0156 0.0156
Third Quarter 0.0156 0.0156
Fourth Quarter 0.0156 0.0156
1999
First Quarter (through
February 28, 1999) $ 0.0156 $ 0.0156
(b) Holders. At February 28, 1999, there were approximately 284
holders of record of the Common Stock.
(c) Dividends.
(1) The Company has never declared or paid any dividends on
its Common Stock. The Board of Directors presently intends to
retain any and all earnings for use in the Company's business and
therefore does not anticipate paying any cash dividends on the
Common Stock in the foreseeable future.
(2) The terms of the Company's Series C Cumulative
Preferred Stock ("Series C Preferred Stock") provide that the
Company shall not declare or pay any dividends on the Common
Stock or Series A Preferred Stock if there are, at such time, any
cumulative accrued but unpaid dividends on the Series C Preferred
Stock. The Series C Preferred Stock ranks equally as to
dividends with all shares of the Company's Series D Cumulative
Preferred Stock ("Series D Preferred Stock"). The Company has
accrued and declared, but has not paid as of February 28, 1999,
dividends totaling approximately $152,000 which were due and
payable on the outstanding shares of Series C Preferred Stock as
of December 31, 1994. The Company has accrued, but has
<PAGE 24>
not declared or paid as of February 28, 1999, dividends totaling
approximately $1,225,000 on the outstanding shares of Series C
Preferred Stock from January 1, 1995 through February 28, 1999.
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.
(3) The terms of the Company's Series D Preferred Stock
provide that the Company shall not declare or pay any dividends
on the Company's Common Stock or Series A Preferred Stock if
there are, at such time, any cumulative accrued but unpaid
dividends on the Series D Preferred Stock. The Series D
Preferred Stock ranks equally as to dividends with all shares of
the Company's Series C Preferred Stock. The Company has accrued
and declared, but has not paid as of February 28, 1999, dividends
totaling approximately $152,000 which were due and payable on the
outstanding shares of Series D Preferred Stock as of December 31,
1994. The Company has accrued, but has not declared or paid as of
February 28, 1999, dividends totaling approximately $1,125,000 on
the outstanding shares of Series D Preferred Stock from January
1, 1995 through February 28, 1999. 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 25>
Item 6. Management's Discussion and Analysis or Plan of
Operation
The following analysis of the results of operations and financial
condition of the Company should be read in conjunction with the
Company's financial statements, including the notes thereto,
contained elsewhere in this report.
Results of Operations: Comparison of the years ended December
31, 1998 and December 31, 1997
Revenues
Revenues for the year ended December 31, 1998 amounted to
approximately $445,000, a decrease of approximately $188,000 or
approximately 30% compared to the year ended December 31, 1997.
For the years ended December 31, 1998 and December 31, 1997, the
Company recorded revenues of approximately $445,000 and $623,000,
respectively, attributable to the RSR Interest. Cash received
from the Rising Sun Project is recorded as "Restricted Cash" in
the accompanying Consolidated Balance Sheets.
Costs and Expenses
Selling, general and administrative expenses were approximately
$1,633,000 for the year ended December 31, 1998, representing a
decrease of approximately $13,000 or approximately 1% when
compared to the year ended December 31, 1997. However, selling,
general and administrative expenses for the year ended December
31, 1997 included the reversal of a previously recorded
consulting expense in the amount of approximately $195,000 due to
a consulting firm advising the Company that such firm was not
seeking payment of such unpaid amount and a reversal of
previously recorded state taxes in the amount of approximately
$188,000 due to a tax refund. Exclusive of such reversals,
selling, general and administrative expenses decreased
approximately $396,000 for the year ended December 31, 1998 as
compared to the year ended December 31, 1997. Such decrease was
primarily due to decreases in compensation, rent, insurance,
consulting expense and expenses related to real property in
Alabama and the Harolds Club in Nevada.
Depreciation and amortization costs were approximately $1,344,000
for the year ended December 31, 1998, representing an increase of
approximately $27,000 or approximately 2% when compared to the
year ended December 31, 1997.
For the year ended December 31, 1998, the Company recorded a
reversal of net liabilities for subsidiaries in bankruptcy of
$781,000 based upon the anticipated distributions under the
Consensus Plan (See "Description of Business - Investments -
Mississippi"). No such amounts were recorded for the year ended
December 31, 1997.
Net interest expense for the year ended December 31, 1998 was
approximately $2,937,000, a decrease of approximately $2,556,000
or approximately 47% compared to the year ended
<PAGE 26>
December 31, 1997. Interest expense decreased approximately
$2,542,000 while interest income increased approximately $14,000
during the year ended December 31, 1998 compared to the year
ended December 31, 1997. Interest expense for the year ended
December 31, 1998 included (i) the reversal of Charter Debt
Interest Expense of approximately $2,120,000 (see "Description of
Business - Investments- Mississippi"), (ii) a reversal of
previously recorded interest expense in the amount of
approximately $160,000 on indebtedness due Shamrock on which the
Company has determined no interest is due and (iii) a reversal of
previously recorded interest expense in the amount of
approximately $62,000 due to a refund of such interest pursuant
to a legal settlement.
For the year ended December 31, 1998, the
Company wrote down the value of a note receivable by
approximately $165,000, to reflect the agreement by the Company
to accept the payment of $300,000 from AHC in full satisfaction
of the Keno Note (See "Description of Business - Discontinued
Ventures - Keno"). No writedowns were recorded for the year ended
December 31, 1997.
Net gain on sale of investments for the year ended December 31,
1997 was substantially due to a net gain of approximately
$625,000 on the sale of 12,500 shares of Multimedia Games, Inc.
preferred stock. No such gains were recorded for the year ended
December 31, 1998.
Liquidity and Capital Resources
For a discussion of liquidity and capital resources, see
"Description of Business - Liquidity and Continuation of
Business."
Risk Factors; Forward Looking Statements; Year 2000 Disclosure
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, (ii) obtaining Shamrock's and, if necessary, Bennett
Management's agreement to modify on terms acceptable to the
Company or terminate the Bennett Debt Exchange (excluding
Shamrock's assumption of the Ship Mortgage) and restructure all
other 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 "Legal Proceedings"), and (v) the legal problems
described above relating to certain Bennett Entities (see
"Description of Business - Liquidity and Continuation of
Business").
<PAGE 27>
The Company has determined that the potential consequences of the
year 2000 problem will not materially affect its operations. The
Company's business is the management of equity interests in
casino gaming projects, specifically the Gold Coast Barge and the
RSR Interest. The charter of the Gold Coast Barge to PMCC is not
dependent on the date, and the Company anticipates selling the
RSR Interest prior to January 1, 2000. Also, the Company has
determined that the cost will be minimal to upgrade the software
used by the Company in its operations to be year 2000 compliant.
Item 7. Financial Statements
See pages 42 through 76 following Item 13 below.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not Applicable.
<PAGE 28>
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Section 16(a) Beneficial Ownership Compliance Report.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
(a) Executive Officers and Directors
The executive officers and directors of the Company are as
follows:
DIRECTOR
NAME AGE SINCE POSITION
J. Douglas Wellington 45 1996 President and Chief
Executive Officer ("CEO"),
General Counsel,
Secretary, Director
Paul L. Patrizio 42 1996 Chairman of the Board of
Directors
William R. Rafferty 60 1993 Director
Each of the Company's current directors serve until the next
annual meeting of stockholders and until his successor is duly
elected and qualified. The holders of the Series A Preferred
Stock are entitled to elect one director to the Board of
Directors, but have not elected a director. In connection with a
prior year restructuring of the Company's debt (the
"Restructuring"), the Company agreed that Shamrock would be
entitled to control the Board of Directors by designating for
election two of the then four directors to be elected by the
holders of Common Stock, in addition to electing one director as
the holder of Series A Preferred Stock. The Company believes
that, in connection with an amendment of the by-laws of the
Company reducing the total number of directors to four, Shamrock
currently has the right to designate for election one of the
three directors to be elected by the holders of Common Stock.
However, in accordance with the terms of the Restructuring, such
designee will only serve on the Board of Directors as a designee
of Shamrock until such time that (i) the Company has raised $50
million in financing from sources other than Shamrock and (ii)
the management of the Company has invested $1,250,000 into equity
of the Company (of which total the Company's management, as of
February 28, 1998, has invested $293,000 into equity of the
Company). Shamrock has not designated anyone for election to the
Board of Directors pursuant to such right under the
Restructuring. Mr. Wellington was elected to the Board of
Directors on April 11, 1996; Mr. Wellington has agreed to serve
as a director until such time as Shamrock designates someone for
election to the Board of Directors in his stead pursuant to such
right.
J. Douglas Wellington was elected CEO of the Company in September
1996, after being elected President and Chief Operating Officer
in August 1996. Mr. Wellington joined the Company in November
1993 as Corporate Counsel, was elected an Assistant Secretary of
the Company in December 1993, was elected Secretary in May 1994
and was promoted to General Counsel in December 1994. In April
1996, Mr. Wellington was elected to the Board of Directors. Mr.
<PAGE 29>
Wellington was elected Controller (which position he held until
September 1996) and Principal Accounting Officer in May 1996 and
was elected interim President and Chief Operating Officer in July
1996.
Paul L. Patrizio was elected a director of the Company in April
1996 and was appointed the Company's Chairman of the Board of
Directors in September 1996. Mr. Patrizio has been Chairman of
Angel Partners, an investment firm specializing in the
communications and entertainment industries, and a principal of
such firm's broker-dealer affiliate, Angel Investments LLC, since
July 1995. From July 1995 to July 1997 Mr. Patrizio was a partner
at the law firm of Rick, Steiner & Tannenbaum, P.C. in New York,
New York; since July 1997 he has been of counsel to such law
firm. From November 1992 to June 1995, Mr. Patrizio was a partner
at Campbell & Fleming, P.C. in New York, New York.
William R. Rafferty was elected a director of the Company in
October 1993. Mr. Rafferty has been, since 1978, President of
Rafferty Real Estate, Inc., a real estate brokerage firm
specializing in commercial real estate transactions, including
acquisitions of properties in Atlantic City, New Jersey for
companies engaged in the gaming industry and residential housing
developments.
(b) Significant Employees. None.
(c) Family Relationships. None.
(d) Involvement in Certain Legal Proceedings. None.
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE REPORT
Section 16(a) of the Exchange Act requires the Company's officers
and directors, and persons who own more than 10% of a registered
class of the Company's equity securities, to file an initial
report of ownership of such securities on Form 3 and changes in
ownership of such securities on Form 4 or 5 with the Commission.
Such officers, directors and 10% stockholders are required to
furnish the Company with copies of all Section 16(a) forms they
file with the Commission.
Based solely on its review of the copies of such forms received
by it, or written representations from certain such reporting
persons that no Form 5's were required for such persons, the
Company believes that, for the fiscal year ended December 31,
1998, its officers, directors and 10% stockholders complied with
all applicable Section 16(a) filing requirements.
<PAGE 30>
Item 10. Executive Compensation
The following tables set forth certain information respecting the
compensation awarded to, earned by, or paid to the sole
individual serving as the Company's CEO during 1998. No other
individual had a total annual compensation exceeding $100,000 for
the year ended December 31, 1998.
<TABLE>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
Other Annual Securities All Other
Name and Principal Year Salary Bonus Compensation Underlying Compensation
<S> <C> <C> <C> <C> <C>
J. Douglas 1998 125,000 --- --- --- 23,432 (1)
Wellington, CEO 1997 125,000 62,500 --- --- 21,275 (2)
1996 125,000 62,500 --- 500,000 6,693 (3)
(1) Consists of $17,432 for accrued vacation and sick time, $6,000 for car allowance.
(2) Consists of $15,148 for accrued vacation and sick time, $6,000 for car allowance
and $127 for interest on a letter of credit (discussed below).
(3) Consists of $4,593 for accrued vacation and sick time and $2,000 for car allowance.
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
Value of
Unexercised in-
Number of the-money
Shares Unexercised Options Options at
Acquired Value At FY-End (#) FY-End ($)
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
J. Douglas Wellington 0 $0 518,750/0 $0/$0
<PAGE 31>
Compensation of Directors
The Company's non-employee directors were each paid a fee of
$4,000 per month as compensation for services as a director.
Directors who are employed by the Company receive no such
compensation. Every director is reimbursed for out-of-pocket
expenses incurred in connection with attendance at meetings of
the Board of Directors and other Company business.
Employment Contracts and Termination of Employment
The Company and Mr. Wellington executed an employment agreement
dated as of September 12, 1996 (the "Wellington Employment
Agreement"). The Wellington Employment Agreement had an initial
term of two years, which term was extended on May 12, 1998
through September 12, 2000, and provides for annual compensation
payable to Mr. Wellington of $125,000. The Wellington Employment
Agreement also provides for (i) a signing bonus of $62,500, which
amount was paid to Mr. Wellington upon execution of the
Wellington Employment Agreement, (ii) a severance payment of
$250,000 to be paid to Mr. Wellington in the event (a) Mr.
Wellington is terminated "without cause", (b) a "substantial
breach" occurs or (c) Mr. Wellington resigns after a "change of
control" (as such terms are defined in the Wellington Employment
Agreement), (iii) the issuance of an irrevocable letter of credit
in the amount of $62,500, which amount was paid to Mr. Wellington
upon Mr. Wellington being employed by the Company through
September 11, 1997, (iv) the grant of options to purchase 350,000
shares of Common Stock, and (v) a car allowance of $500 per
month.
<PAGE 32>
Item 11. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth information as of February 28,
1999 with respect to the only persons or groups known to the
Company who may be deemed to own beneficially more than 5% of the
Company's voting securities (i.e. Common Stock or Series A
Preferred Stock). Unless otherwise noted, each holder has sole
voting and investment power with respect to the shares of the
listed securities.
Title of Class Name and Address Amount and Nature Percent of Class
of Beneficial Owner of Beneficial
Ownership (1)
Common Stock Shamrock Holdings 5,823,019 (2) 41.8%
Group, Inc.
2 Clinton Square
Syracuse, NY 13202
Common Stock Richard C. Breeden, 493,391,352 (3) 98.7%
Trustee
C/o Shamrock
Holdings Group, Inc.
2 Clinton Square
Syracuse, NY 13202
Series A Shamrock Holdings 55,982.61 (4) 100%
Preferred Stock Group, Inc.
2 Clinton Square
Syracuse, NY 13202
Series A Richard C. Breeden, 55,982.61 (5) 100%
Preferred Stock Trustee
C/o Shamrock Holdings
Group, Inc.
2 Clinton Square
Syracuse, NY 13202
(1) Based on information supplied by persons listed or as reported on the
most recent Schedule 13D filed by any such persons. As used in this table,
"beneficial ownership" of securities means the sole or shared power to vote,
or to direct the voting of, such securities, or the sole or shared investment
power with respect to such securities, including the power to dispose of, or
to direct the disposition of, such securities. In addition, for purposes of
this table, a person is deemed to have "beneficial ownership" of any security
that such person had the right to acquire within 60 days after February 28,
1999 (see "- Changes in Control").
(2) Includes 1,399,565 shares of Common Stock issuable upon the conversion
of Series A Preferred Stock.
<PAGE 33>
(3) Includes the 5,823,019 shares of Common Stock beneficially owned by
Shamrock. The Company understands that Mr. Breeden is sole stockholder and
President of Shamrock. Includes, collectively, 486,068,333 shares of Common
Stock issuable upon conversion of Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock assuming that those conversions took place
on February 28, 1999 and that the Company amended its Certificate of
Incorporation increasing the number of authorized shares of Common Stock to
500,000,000 shares (see "- Changes in Control").
(4) Each share of Series A Preferred Stock is convertible into 25 shares
of Common Stock.
(5) Includes the 55,982.61 shares of Series A Preferred Stock beneficially
owned by Shamrock. The Company understands that Mr. Breeden is sole
stockholder and President of Shamrock.
<PAGE 34>
Security Ownership of Management
The following table sets forth information as of February 28,
1999 with respect to (i) each director, (ii) all individuals
serving as the Company's CEO during 1998, and (iii) all directors
and all such executive officers as a group. Unless otherwise
noted, each holder has sole voting and investment power with
respect to the shares of the listed securities. An asterisk (*)
indicates beneficial ownership of less than 1%.
COMMON STOCK
Name and Address of Amount and Nature of Percent of Class
Beneficial Owner Beneficial Ownership
(1) (2) (3)
J. Douglas Wellington 518,750 3.97%
c/o American Gaming &
Entertainment, Ltd.,
One Woodland Avenue,
Paramus, New Jersey, 07652
Paul L. Patrizio 0 *
c/o Angel Partners
Wall Street Tower
20 Exchange Place
30th Floor
New York, NY 10005
William R. Rafferty 0 *
c/o Rafferty Real Estate
10 N. California Avenue
Atlantic City, NJ 08401
Executive Officers and 518,750 3.97%
Directors as a group
(3 persons)
(1) As used in this table, "beneficial ownership" of securities means the
sole or shared power to vote, or to direct the voting of, such securities,
and/or the sole or shared investment power with respect to such securities
(i.e., the power to dispose of, or to direct the disposition of, such
securities). In addition, for purposes of this table, a person is deemed to
have "beneficial ownership" of any security which such person had the right to
acquire within 60 days after February 28, 1999.
(2) Includes for J. Douglas Wellington and all executive officers and
directors as a group, 518,750 shares of Common Stock that, in each case, are
subject to presently exercisable options or options which will become
exercisable within 60 days after February 28, 1999.
<PAGE 35>
Changes in Control
Except as described below, the Company knows of no arrangements
the operation of which may at a subsequent date result in a
change of control.
Shamrock, of which the Bennett 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 Bennett 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 February 28, 1999 into 1,381,178,027
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 Bennett Trustee converted as of February 28, 1999 that number
of shares of 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 Bennett 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 Bennett Trustee converted as of February 28, 1999
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 Bennett Trustee as of such
date), the Bennett 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. As of March 1999, the Bennett Trustee
has not asserted any rights he may have against the Company for
the Company's failure to maintain a sufficient number of
authorized shares of Common Stock to enable the Bennett Trustee
to convert all of the Series C Preferred Stock, the Series D
Preferred Stock and the Series E Preferred Stock.
In addition to the right of Shamrock, as beneficial owner of 100%
of the Series A Preferred Stock, to elect one director to the
Board of Directors, in connection with the Restructuring,
Shamrock was given the right to designate, but has not so
designated, one additional director of the four present directors
to the Board of Directors (see "Directors, Executive Officers,
Promoters and Control Persons; Section 16(a) Beneficial Ownership
Report Compliance -
<PAGE 36>
Directors, Executive Officers, Promoters and Control Persons -
Executive Officers and Directors").
Item 12. Certain Relationships and Related Transactions
See "Security Ownership of Certain Beneficial Owners and
Management" for those persons or groups known to the Company who
may be deemed to own beneficially more than 5% of the Company's
voting securities (i.e. Common Stock or Series A Preferred
Stock). Bennett Funding and Bennett Management are assumed to be
affiliates of Shamrock. However, this should not be deemed to
constitute an admission that such entities are, in fact,
affiliates of Shamrock.
See "Description of Business - Liquidity and Continuation of
Business" and "Description of Business - Investments -
Mississippi" for a description of certain relationships and
related transactions related to the Gold Coast Barge, the Charter
Agreement and PMCC Payments. See "Description of Business -
Liquidity and Continuation of Business" and "Description of
Business - Investments - Indiana" for a description of certain
relationships and related transactions related to the RSR
Interest.
Current Transactions
As more fully described above, the Company and Shamrock entered
into the HC Purchase Agreement and the Harolds Agreements prior
to 1996 and the HC Reimbursement Agreement in September 1996 (see
"Description of Business - Investments in Gaming Ventures -
Nevada").
The shares of Series A Preferred Stock, all of which outstanding
shares are held by Shamrock, are convertible at the holder's
option into 25 shares of Common Stock per share of Series A
Preferred Stock, bear the right to elect, but Shamrock has not so
elected, one director to the Board of Directors prior to the
first annual meeting of the Company's stockholders held after
June 30, 1997 and otherwise vote, and receive dividends, as one
class with the Common Stock as if converted into Common Stock,
are non-redeemable, and do not accrue or pay dividends or bear
any liquidation preference.
The shares of Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock, all of which outstanding shares are
held by the Bennett Trustee, are senior to all other classes of
the Company's outstanding stock. Each of the Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock is
convertible by the holder thereof into the number of shares of
Common Stock equal to the then-applicable redemption price for
each such Series (as described below) divided by an amount equal
to 75% of the average market price of Common Stock for the ten
consecutive business days prior to the conversion date.
Conversion of each of the Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock could result in
significant dilution to the ownership interest of the Company's
stockholders (see "Security Ownership of Certain Beneficial
Owners and Management - Changes in Control"). The Company has
the right to redeem all three series of Preferred Stock at any
time. The redemption price for each share of the three series of
Preferred Stock (which price is also used to determine
<PAGE 37>
the conversion price) increases quarterly as follows: (i) for the
Series C Preferred Stock, from a redemption price of $1,411.35
per share as of January 1, 1999, $29.17 per share per quarter;
(ii) for the Series D Preferred Stock, from a redemption price of
$1,357.16 per share as of January 1, 1999, $29.17 per share per
quarter; and (iii) for the Series E Preferred Stock, from a
redemption price of $1,277.91 per share as of January 1, 1999,
$20.83 per share per quarter. The Series C
Preferred Stock and the Series D Preferred Stock each have a
current cumulative dividend rate of 7.5%. The Series E Preferred
Stock has no stated dividend rate.
For the year ended December 31, 1997, the law firm of Rick,
Steiner & Tannenbaum, P.C., in which Mr. Patrizio was formerly a
partner, and is now of counsel, was paid approximately $39,000
for legal services. No payments were made to such law firm in
1998.
Terminated or Superseded Agreements
On March 21, 1996 the Company invested $400,000 with Bennett
Funding. Such investment is evidenced by a demand promissory note
from Bennett Funding to the Company, which terms included
interest of 8% per annum on outstanding balances. On March 28,
1996 the Company demanded payment of such note. Bennett Funding
filed for protection under the Code on March 29, 1996, and has
not repaid such note. In 1996, the Company set off the amount of
such investment against the then remaining balance of the
Company's indebtedness due to Bennett Funding.
<PAGE 38>
Item 13. Exhibits And Reports On Form 8-K.
(a) Exhibits.
EXHIBIT
NO. DESCRIPTION LOCATION
3.1 Restated Certificate of Incorporation (1) Exh. 3.1
3.2 Certificate of Amendment of Restated
Certificate of Incorporation (2) Exh. 3.3
3.3 Bylaws, as amended (3) Exh. 3.3
4.1 Specimen Common Stock Certificate (4) Exh. 4.1
10.1 Stock Option Plan (4) Exh 10.7; (16)
10.2 First Amendment to Employment Agreement dated
May 12, 1998 between the Company and J. Douglas
Wellington, together with Employment Agreement
dated September 12, 1996 between the Company
and J. Douglas Wellington (5) Exh. 10.2; (16)
10.3 Charter Agreement dated as of February 17,
1995 between the Company and President
Mississippi Charter Corporation (3) Exh. 10.3
10.4 First Amendment to Charter, amending the
Charter dated as of February 17, 1995, made
and entered into November 6, 1998 (effective
as of December 1, 1997) by President
Mississippi Charter Corporation and the Company,
with the concurrence of AMGAM Associates,
American Gaming and Resorts of Mississippi,
Inc., the Official Committee of Unsecured
Creditors of AMGAM Associates, the Official
Committee of Unsecured Creditors of American
Gaming and Resorts of Mississippi, Inc., and
Shamrock Holdings Group, Inc. (6)
10.5 Preferred Ship Mortgage dated January 14, 1994,
granted by American Gaming Corporation to
Ship Mortgage, L.P., (4) Exh. 10.28
10.6 First Amendment of Preferred Ship Mortgage
dated July 26, 1994 from American Gaming
Corporation to Ship Mortgage, L.P. (4) Exh. 10.29
10.7 Assumption and Second Amendment of Preferred
Ship Mortgage dated January 31, 1995 made
by the Company and executed by American
Gaming and Resorts of Mississippi, Inc. in
favor of Ship Mortgage, L.P. (4) Exh. 10.30
10.8 First Preferred Ship Mortgage, dated May 6,
1994 granted by American Gaming Corporation
to the Company (4) Exh. 10.33
10.9 First Amendment to First Preferred Ship
Mortgage dated July 28, 1994 from American
Gaming Corporation to the Company (4) Exh. 10.34
<PAGE 39>
10.10 Second Amendment to First Preferred Ship
Mortgage dated December 15, 1994 granted
by American Gaming and Resorts of Mississippi,
Inc. to the Company, together with Assignment
of First Preferred Ship Mortgage dated
December 15, 1994 from the Company to Bennett
Holdings, Inc. (4) Exh. 10.35
10.11 Assumption and Third Amendment of First
Preferred Ship Mortgage dated as of January 31,
1995 made by the Company and executed by
American Gaming and Resorts of Mississippi,
Inc. in favor of Bennett Holdings, Inc. (4) Exh. 10.36
10.12 Agreement and Plan of Merger dated November
10, 1994 by and between the Company,
American Gaming and Resorts of Mississippi,
Inc., AMGAM Associates and American Gaming
Corporation (7) Exh. 10.91
10.13 Settlement Agreement dated as of August 21,
1998 by and between the Company, AMGAM
Associates, American Gaming and Resorts of
Mississippi, Inc., Shamrock Holdings Group,
Inc., Bennett Management and Development Co.,
the Official Committee of Unsecured Creditors
of AMGAM Associates, and the Official
Unsecured Creditors Committee of American
Gaming and Resorts of Mississippi, Inc. (8) Exh. 10.12
10.14 Irrevocable Proxy and Consent Agreement
dated as of August 23, 1996 by and between
Paul L. Partridge, Patrick F. Daly, James A.
Everatt, Charles E. Reisert, Jr., Eric C.
Jackson, the Company and RSR, LLC (9) Exh. 10.72
10.15 Trust Agreement dated as of August 23, 1996 by
and between the Company and NBD Bank, N.A. (9) Exh. 10.73
10.16 Assignment and Transfer Agreement dated as
of March 28, 1996 by and between the
Company, American Heartland Corporation and
Big Red Keno, Ltd. (3) Exh. 10.5
10.17 Agreement to Restructure and Cancel Debt
dated as of April 12, 1995 by and between
Bennett Management and Development Company
and the Company (4) Exh. 10.44
10.18 Assignment of Charter Agreement and Collateral
Assignment Agreement dated as of April 13,
1995 by and between the Company and Bennett
Holdings, Inc. (4) Exh. 10.45
10.19 Security Agreement dated April 12, 1995 by
and between Bennett Management and
Development Company and the Company. (10) Exh. 10.101
<PAGE 40>
10.20 Amendment to Agreement to Restructure
and Cancel Debt and Assignment of Charter
Agreement and Collateral Assignment
executed on July 10, 1995 by and between
the Company, Bennett Management and
Development Company and Bennett Holdings,
Inc. (11) Exh. 10.104
10.21 Agreement dated as of August 15, 1995 by
and between Bennett Holdings, Inc. and
Emerald Gaming, Inc. (12) Exh. 10.111
10.22 Exclusive Management Agreement dated as
of August 15, 1995 by and between Bennett
Holdings, Inc. and Emerald Gaming, Inc. (12) Exh. 10.112
10.23 Letter agreement dated September 26, 1996
between Shamrock Holdings Group, Inc. and
the Company (13) Exh. 10.74
10.24 Letter agreement dated September 20, 1994
by and between Bennett Holdings, Inc. and
the Company (14) Exh. 10.89
10.25 Letter agreement dated November 5, 1997 by
and between Shamrock Holdings Group, Inc.
and the Company (15) Exh. 10.24
10.26 Letter agreement dated October 21, 1998
by and between Shamrock Holdings Group,
Inc., Bennett Management and Development
Co., AMGAM Associates, American Gaming
and Resorts of Mississippi, Inc., and
the Company (8) Exh. 10.26
11 Statement re computations of per share
earnings (6)
21 List of Subsidiaries (6)
23 Consent of Deloitte & Touche LLP (6)
27 Financial Data Schedule (6)
(1) This exhibit is incorporated by reference to the Company's
Current Report on Form 8-K dated June 24, 1994.
(2) This exhibit is incorporated by reference to the Company's
Current Report on Form 8-K dated November 30, 1994.
(3) Each of these exhibits is incorporated by reference to the
Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1995.
(4) Each of these exhibits is incorporated by reference to the
Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1994.
(5) This exhibit is incorporated by reference to the Company's
Current Report on Form 8-K dated May 12, 1998.
(6) Enclosed herewith.
(7) This exhibit is incorporated by reference to the Company's
Quarterly Report on Form 10-QSB for the period ended
September 30, 1994.
(8) Each of these exhibits is incorporated by reference to the
Quarterly Report on Form 10-QSB for the period ended
September 30, 1998.
(9) Each of these exhibits is incorporated by reference to the
Company's Current Report on From 8-K dated December 15,
1995.
(10) This exhibit is incorporated by reference to the Company's
Quarterly Report on Form 10-QSB for the period ended March
31, 1995.
<PAGE 41>
(11) This exhibit is incorporated by reference to the Company's
Current Report on Form 8-K dated June 18, 1995.
(12) Each of these exhibits is incorporated by reference to the
Company's Quarterly Report on Form 10-QSB for the period
ended September 30, 1995.
(13) This exhibit is incorporated by reference to the Company's
Quarterly Report on Form 10-QSB for the period ended
September 30, 1996.
(14) This exhibit is incorporated by reference to the Company's
Current Report on From 8-K dated September 30, 1994.
(15) This exhibit is incorporated by reference to the Company's
Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997.
(16) Each of these exhibits is a management contract or
compensatory plan or arrangement required to be filed as
an exhibit to this Form 10-KSB.
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the
fourth quarter of 1998.
<PAGE 42>
American Gaming & Entertainment, Ltd.
Form 10-KSB - Item
List of Financial Statements
The following financial statements are included in Item 7:
Independent Auditors' Report...................................43
Consolidated Balance Sheets at December 31, 1998 and 1997...44-45
Consolidated Statements of Operations for the years ended
December 31, 1998 and 1997................................46
Consolidated Statements of Stockholders' Deficiency for
the years ended December 31, 1998 and 1997................47
Consolidated Statements of Cash Flows for the years ended
December 31, 1998 and 1997................................48
Notes to Consolidated Financial Statements..................49-76
<PAGE 43>
To the Board of Directors and Stockholders of
American Gaming & Entertainment, Ltd.
Paramus, New Jersey
We have audited the accompanying consolidated balance sheets of
American Gaming & Entertainment, Ltd. and subsidiaries as of
December 31, 1998 and 1997, and the related consolidated
statements of operations, stockholders' deficiency and cash flows
for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express (or disclaim) an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our report.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed
in Note 1 to the consolidated financial statements, the Company's
recurring losses, negative working capital, stockholders'
deficiency, defaults under its debt agreements, uncertainties
relating to the liquidation of its subsidiaries (see Note 3)
uncertainties relating to the bankruptcy of, and charges relating
to affiliates of, its major stockholder and creditor (see Note 4)
and available cash (see Note 5) 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
5. The financial statements do not include any additional
adjustments that might result from the outcome of these
uncertainties.
Because of the possible material effects of the uncertainties
referred to in the preceding paragraph, we are unable to express,
and we do not express, an opinion on the financial statements for
1998 or 1997.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
April 14, 1999
<PAGE 44>
AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
1998 1997
___________ ___________
ASSETS
Current assets
Cash $ 123,000 $ 381,000
Restricted cash - charter payments 4,320,000 -
Restricted cash - Rising Sun 1,119,000 630,000
Prepaid expenses 71,000 232,000
Other current assets 801,000 313,000
_________ _________
Total current assets 6,434,000 1,556,000
Assets held for sale - 431,000
Casino barge and improvements, subject
to lease, net of accumulated depreciation
of $5,243,000 - 1998 and
$3,907,000 - 1997 7,350,000 8,686,000
Furniture, fixtures and equipment, net
of accumulated depreciation of
$79,000 - 1998 and $71,000 - 1997 9,000 14,000
Other non-current assets - 465,000
___________ ___________
$13,793,000 $11,152,000
=========== ===========
See Notes to Consolidated Financial Statements
<PAGE 45>
AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
1998 1997
___________ ___________
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Amounts due to related parties:
Accrued interest $ 19,882,000 $ 16,788,000
Dividends payable 2,553,000 1,953,000
Accrual for lease costs 2,701,000 2,701,000
Current portion of long term debt 34,592,000 40,510,000
__________ __________
59,728,000 61,952,000
Accounts payable 86,000 68,000
Accrued payroll and related expenses 3,000 12,000
Accrued expenses and other current liabilities 2,241,000 1,389,000
Short term portion of estimated net
liabilities for subsidiaries in bankruptcy 2,070,000 1,162,000
Deferred charter revenue 10,238,000 -
__________ __________
Total current liabilities 74,366,000 64,583,000
Long term portion of estimated net liabilities
for subsidiaries in bankruptcy 1,640,000 3,329,000
__________ __________
76,006,000 67,912,000
__________ __________
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 15,869,000 14,602,000
Common stock, par value $.01 per share;
50,000,000 shares authorized, 12,556,137
shares issued (including 24,035 shares
held in treasury) 126,000 126,000
Additional paid-in capital 41,421,000 43,288,000
Cost of shares held in treasury (25,000) (25,000)
Accumulated deficit (119,605,000) (114,752,000)
____________ ___________
(62,213,000) (56,760,000)
____________ ____________
$ 13,793,000 $ 11,152,000
============ ===========
See Notes to Consolidated Financial Statements
<PAGE 46>
AMERICAN GAMING & ENTERTAINMENT LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31,
1998 1997
___________ _____________
Revenues
Equity interest in gaming project $ 445,000 $ 633,000
__________ __________
Total revenues 445,000 633,000
__________ __________
Costs and expenses
Selling, general and administrative 1,633,000 1,646,000
Depreciation and amortization 1,344,000 1,317,000
Reversal of net liabilities for subsidiaries
in bankruptcy (781,000) -
Writedown of impaired assets 165,000 -
__________ __________
Total costs and expenses 2,361,000 2,963,000
__________ __________
Operating loss (1,916,000) (2,330,000)
__________ _________
Other income (expense)
Interest income 95,000 81,000
Interest expense (3,032,000) (5,574,000)
Net gain on sale of investments - 650,000
__________ _________
Total other income (expense) (2,937,000) (4,843,000)
__________ _________
Net loss (4,853,000) (7,173,000)
Dividends and accretion on preferred stock 1,867,000 1,866,000
__________ _________
Net loss for common stockholders $ (6,720,000) $ (9,039,000)
========== =========
Loss for common stockholders per common share $ (0.54) $ (0.72)
========== =========
Weighted average number of common
Shares outstanding 12,532,102 12,532,102
========== =========
See Notes to Consolidated Financial Statements
<PAGE 47>
AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
1998 1997
__________ __________
Series A Preferred Stock
Balance at beginning and end of year $ 1,000 $ 1,000
========== =========
______________________________________________________________________________
Series C, D & E Preferred Stock
Balance at beginning of year $ 14,602,000 $ 13,336,000
Accretion 1,267,000 1,266,000
__________ _________
Balance at end of year $ 15,869,000 $ 14,602,000
========== =========
______________________________________________________________________________
Common Stock
Balance at beginning and end of year $ 126,000 $ 126,000
========== =========
______________________________________________________________________________
Additional Paid-In Capital
Balance at beginning of year $ 43,288,000 $ 45,154,000
Accrual of dividends on preferred stock (600,000) (600,000)
Accretion of preferred stock (1,267,000) (1,266,000)
__________ _________
Balance at end of year $ 41,421,000 $ 43,288,000
========== =========
______________________________________________________________________________
Treasury Stock
Balance at beginning and end of year ($25,000) ($25,000)
========== =========
______________________________________________________________________________
Accumulated Deficit
Balance at beginning of year ($114,752,000) ($107,579,000)
Net loss (4,853,000) (7,173,000)
_________ _________
Balance at end of year ($119,605,000) ($114,752,000)
============ ===========
See Notes to Consolidated Financial Statements
<PAGE 48>
AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
1998 1997
____ ____
Operating Activities
Net loss $ (4,853,000) $ (7,173,000)
Adjustments to reconcile net loss to net cash
used in
Operating activities:
Restricted proceeds from investment (445,000) (626,000)
Interest income from restricted cash (44,000) -
Depreciation and amortization 1,344,000 1,317,000
Accrued interest 3,094,000 5,571,000
Equity in losses of subsidiaries in
bankruptcy (781,000) -
Writedown of impaired assets 165,000 -
Net gain on sale of securities - (625,000)
Net gain on sale of keno operations - (21,000)
Other changes in operating assets and liabilities
Restricted cash - charter payments (4,320,000) -
Deferred charter revenue 4,320,000 -
Litigation settlement payment - (375,000)
Other current assets 132,000 173,000
Other non-current assets 1,000 (6,000)
Accounts payable, accrued expenses and
other current liabilities 846,000 215,000
_________ _________
Net cash used in operating activities (541,000) (1,550,000)
_________ _________
Investing Activities
Proceeds from asset dispositions - 110,000
Proceeds from sale of securities - 625,000
_________ _________
Net cash provided by investing
activities - 735,000
_________ _________
Financing Activities
Proceeds from notes receivable and other
long-term assets 283,000 232,000
Utilization of proceeds from charter of casino barge - 822,000
Principal payments on notes payable and other
long-term obligations - (123,000)
_________ _________
Net cash provided by financing
activities 283,000 931,000
_________ _________
Increase (decrease) in cash (258,000) 116,000
Cash at beginning of year 381,000 265,000
_________ _________
Cash at end of period $ 123,000 $ 381,000
========= =========
See Notes to Consolidated Financial Statements
<PAGE 49>
AMERICAN GAMING & ENTERTAINMENT, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
Note 1 - Significant Accounting Policies
Basis of Presentation
The accompanying consolidated 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 5, 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
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 and Bennett Funding, 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 its subsidiaries (see Note 3) and
uncertainties relating to the bankruptcy of, and charges relating
to certain related entities of, its major stockholder and
creditor (see Note 4) 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 5. The financial
statements do not include any additional adjustments that might
result from the outcome of these uncertainties.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and (except as described below) its wholly owned
subsidiaries. All significant intercompany accounts and
transactions have been eliminated. These financial statements
reflect significant related party transactions which are
described throughout the notes to the consolidated financial
statements.
As a result of the bankruptcy proceedings under Chapter 11 of the
U.S. Bankruptcy Code (the "Code") affecting the Company's wholly
owned subsidiaries, AMGAM Associates, a Mississippi partnership
("AMGAM") and American Gaming and Resorts of Mississippi, Inc.,
("AGRM") and the expected liquidation of these subsidiaries in
the near future, the Company's control of these entities is
likely to be temporary and therefore AMGAM and AGRM are not
included in the consolidated financial statements for financial
reporting purposes. The Company follows the equity method of
accounting for its investment in AMGAM and AGRM. (See Note 3).
Revenues
Revenues are principally from an equity interest in a riverboat
gaming entertainment complex (see Note 7).
<PAGE 50>
Assets Held for Sale
Assets held for sale are stated at the lower of cost or net
realizable value and consist primarily of land, buildings and
assets which, at the respective times of purchase, were
anticipated to be utilized in casino gaming projects. Management
periodically reviews the status of such assets as well as the
likelihood of gaming being legalized in the jurisdiction related
to the asset and, if necessary, adjusts the carrying value of
such assets to estimated fair market value (See Notes 6 and 7).
Property and Equipment
Property and equipment are carried at cost. Depreciation and
amortization are provided over the estimated useful lives of the
assets using the straight-line method based on the following:
Furniture, fixtures and equipment 3-10 years
Software 5 years
Leased assets at December 31, 1998 consist of the Gold Coast
Barge, net of accumulated depreciation (See Note
3), calculated on the straight-line method over a 10 year life.
Loss For Common Stockholders Per Common Share
Loss for common stockholders per common share is computed by
dividing net loss for common stockholders by the weighted average
number of shares of common stock outstanding for the period.
Diluted loss for common stockholders per common share includes
the effect of potential dilution from the exercise of outstanding
potential shares of common stock into common stock using the
treasury stock method. For the years ended December 31, 1998 and
1997, the Company's Series A Preferred Stock, Series C Cumulative
Preferred Stock ("Series C Preferred Stock"), Series D Cumulative
Preferred Stock ("Series D Preferred Stock"), Series E Preferred
Stock and Common Stock options and warrants which are considered
to be potential shares of common stock are excluded from the
calculation of diluted loss for common stockholders per common
share because they have an antidilutive effect. Accordingly,
diluted loss for common stockholders per common share has not
been presented.
Income Taxes
The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." Under this method, deferred tax
assets and liabilities are determined based on differences
between financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to
reverse (See Note 12).
Asset Impairment
Long-lived assets are reviewed for impairment on an annual basis
in conjunction with the preparation of the annual budget or when
a specific event indicates that the carrying value of an asset
may not be recoverable. Recoverability is assessed based on
estimates of future cash flows
<PAGE 51>
expected to result from the use and eventual disposition of the
asset. If the sum of expected undiscounted cash flows is less
than the carrying value of the asset, an impairment loss is
recognized. The impairment loss is measured as the amount by
which the carrying amount of the asset exceeds its estimated fair
value (See Note 6).
Fair Market Value of Financial Instruments
The amounts reported in the Consolidated Balance Sheets for cash
and cash equivalents, receivables, and payables approximate fair
value. Because of the related party nature of the Company's
debt, determination of fair value would be impractical.
Accounting Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of
management's estimates and assumptions. Management believes the
estimates and assumptions used in the preparation of these
consolidated financial statements are reasonable based upon
currently available facts and known circumstances but recognizes
that actual results may differ from those estimates and
assumptions. Such differences, if any, are not expected to have
a material impact on the Company's financial condition, results
of operations or liquidity.
Recent Accounting Pronouncements
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. Reclassification of financial information for
earlier periods presented for comparative periods is required
under SFAS No. 130. The Company adopted SFAS No. 130 effective
January 1, 1998. This statement only requires additional
disclosures in the Company's consolidated financial statements
and its adoption did not have any impact on the Company's
consolidated financial position or results of operations.
Currently the Company has no components of other comprehensive
income.
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. Reclassification of segment information
for earlier periods presented for comparative periods is required
under SFAS No. 131. The Company adopted SFAS No. 131 effective
January 1, 1998 although presentation for interim periods in the
initial year of adoption is not required. Adoption of this
statement has not resulted in any changes to the Company's
presentation of financial information for the year ending
December 31, 1998.
In June 1998, the Financial Accounting Standards Board issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This statement, which establishes accounting and
reporting standards for derivatives and hedging activities, is
effective for fiscal years beginning after June 15, 1999. Upon
the adoption of SFAS No. 133, all derivatives are required to be
recognized in the statement of financial position as either
assets or liabilities and measured at fair value. The
<PAGE 52>
Company is currently evaluating the impact the adoption of SFAS
No. 133 will have on its financial position and results of
operations.
Reclassifications
Certain reclassifications have been made to the 1997 amounts in
order to conform to the classifications used in 1998.
Supplemental Cash Flow Information
The Consolidated Statements of Cash Flows exclude the effects of
certain noncash financing activities, as follows:
1998 1997
______ ______
Dividends on Series C and D
Preferred Stock $600,000 $600,000
Accretion on Series C, D and E
Preferred Stock 1,267,000 1,266,000
The Company paid interest of approximately $3,000 for the year
ended December 31, 1997; no interest was paid for the year ended
December 31, 1998. The Company paid no income taxes for the years
ended December 31, 1998 and 1997 (See Note 12).
Note 2 - Nature of Business
The Company owns equity interests in various properties which, at
the respective times of purchase, the Company anticipated could
be utilized in casino gaming projects. The Company has a 4.9%
beneficial equity interest in a riverboat gaming and
entertainment complex in Rising Sun, Indiana, which interest is
in the process of being sold (See Note 7). President Mississippi
Charter Corporation ("PMCC") is leasing from the Company the Gold
Coast Barge which the Company owns and on which the Company had
previously operated the Gold Shore Casino (See Note 3). The
Company is no longer actively seeking to develop gaming projects
and is currently managing its equity interests. Given the
Company's present financial and liquidity position, the legal
problems described below relating to Shamrock, Bennett Funding
and Bennett Management and the Company's litigation described
below (see Notes 3, 4, 5 and 13), the business of the Company is
unlikely to continue to be the ownership of equity interests in
casino gaming ventures.
The gaming industry in which the Company invests is subject to
extensive government regulation by federal, state and local
authorities and, accordingly, regulatory and legislative changes,
including gaming related taxes, could have an adverse effect on
the Company's investments by increasing competition, by
increasing costs or by making gaming a relatively less attractive
activity for its customers as compared with other competing
activities.
<PAGE 53>
To the extent the Company continues to do business in the gaming
industry, if at all, competition and government regulation could
have an adverse effect on the Company's business by increasing
competition, by increasing costs, by making gaming a relatively
less attractive activity for its customers as compared with other
competing activities, and by imposing restrictions on the
Company's business activities. To the extent the Company's
activities in a particular jurisdiction are regulated, the
Company has complied, or has taken the appropriate steps to
comply, with any applicable regulations. To the extent the
Company commences gaming operations in other jurisdictions, it
will become subject to the regulatory systems in effect in those
jurisdictions.
Note 3 - Subsidiary Bankruptcies and Related Legal Proceedings
Historical Information
Prior to 1997, an involuntary petition for liquidation under
Chapter 7 of the Code was filed with the United States Bankruptcy
Court, Southern District of Mississippi (the "Mississippi
Bankruptcy Court") against AMGAM, which operated the Gold Shore
Casino in Biloxi, Mississippi. The case was subsequently
converted into a reorganization under Chapter 11 of the Code.
Additionally, prior to 1997, AGRM, which owned and leased certain
property in Vicksburg, Mississippi, filed a voluntary petition
for reorganization under Chapter 11 of the Code with the
Mississippi Bankruptcy Court.
Gold Coast Barge/Charter
Prior to 1997 and the bankruptcy proceedings of AGRM and AMGAM,
the Gold Coast Barge had been transferred to the Company from
AGRM in exchange for the cancellation of AGRM's guaranty to the
Company of certain unpaid lease obligations of AMGAM to the
Company. Pursuant to a Charter Agreement (the "Charter
Agreement") entered into prior to 1997 between the Company and
PMCC, PMCC is leasing the Gold Coast Barge from the Company. PMCC
is responsible for operating, insurance and maintenance costs of
the Gold Coast Barge under the terms of the Charter Agreement.
Prior to 1997, a preliminary injunction (the "Preliminary
Injunction"), which was agreed upon by the Official Committee of
Unsecured Creditors of AMGAM Associates (the "AMGAM Committee")
and the Official Committee of Unsecured Creditors of American
Gaming and Resorts of Mississippi, Inc. (collectively, the
"Committees") and the Company, was entered, and subsequently
revised and extended, by the Mississippi Bankruptcy Court, (i) to
require that all payments under the Charter Agreement (the "PMCC
Payments") be deposited into an escrow account (the "Escrow
Account") for the benefit of the creditors of AMGAM and AGRM
pending confirmation of a proposed joint plan of liquidation and
(ii) to allow a monthly payment from the Escrow Account to the
Company in the amount of $282,000 for the Company's monthly
operating expenses subject, however, to a term sheet (the "Term
Sheet") for a proposed joint plan of liquidation executed by the
Company, Shamrock, AMGAM, AGRM and the Committees.
For the year ending December 31, 1997, PMCC made PMCC Payments
through May 1997 (the "Original Charter Payments") totaling
approximately $822,000. The Company received Original Charter
Payments of approximately $706,000 pursuant to the Preliminary
Injunction and the
<PAGE 54>
Term Sheet. IGT, a creditor in the AMGAM bankruptcy case,
subsequently objected to the Company receiving disbursements
under the Preliminary Injunction and the Company has received no
such disbursements since May 1997.
Effective October 30, 1998, PMCC and the Company entered into an
amendment to the Charter Agreement (the "Charter Amendment"). The
Charter Amendment was entered into with the concurrence of AMGAM,
AGRM, the Committees and Shamrock (collectively with the Company,
the "AMGAM Group"). Pursuant to the Charter Amendment, among
other things, (i) PMCC paid $4,105,000 (the "Amendment Payments")
into the Escrow Account in addition to the Original Charter
Payments, (ii) PMCC agreed to pay into the Escrow Account a
monthly charter payment of $215,000 for the period from December
1, 1998 through April 15, 2000 (the "Remaining Charter Term")
(and has made all such payments through February 28, 1999), (iii)
PMCC agreed to pay into the Escrow Account a late fee of $21,500
for each PMCC Payment which is paid later than the tenth of such
month, (iv) PMCC and the AMGAM Group agreed to fund equally an
escrow account not to exceed $1,000,000 to remove the Gold Coast
Barge from PMCC's Biloxi, Mississippi site at the end of the
Remaining Charter Term, (v) at any time during the Remaining
Charter Term, PMCC has the right to make a written offer to
purchase the Gold Coast Barge, which offer shall be deemed
accepted unless rejected by the AMGAM Group within thirty days of
receipt of such offer, (vi) the Charter Agreement or the Gold
Coast Barge may be assigned or sold, subject to PMCC's written
consent, which may not be unreasonably withheld, (vii) during the
Remaining Charter Term, PMCC has a right of first refusal to
purchase the Gold Coast Barge on the same terms and conditions
set forth in any offer acceptable to the AMGAM Group and (viii)
PMCC and the AMGAM Group executed mutual releases and are filing
appropriate pleadings seeking dismissal, with prejudice, of all
lawsuits and counterclaims, including suits brought by the
Company against PMCC and President Riverboat Casino -
Mississippi, Inc. and counterclaims filed by PMCC against the
Company alleging various respective breaches of the Charter
Agreement.
The Company has not accrued for the cost to remove the Gold Coast
Barge from PMCC's Biloxi, Mississippi site at the end of the
Remaining Charter Term. PMCC has the right to make an offer to
purchase the Gold Coast Barge and has a right of first refusal
during the Remaining Charter Term, and therefore the Gold Coast
Barge may not be removed from PMCC's site. Also, the Company is
unable, at this time, to estimate the cost of such removal, if
necessary.
On March 1, 1999, the Company, AMGAM, AGRM, the Committees and
the trustee (the "Bennett Trustee") for Bennett Funding and
Bennett Management under the Code and as president of Shamrock,
filed a motion in the Mississippi Bankruptcy Court requesting,
among other relief, that the Mississippi Bankruptcy Court
establish procedures for competitive bidding to purchase the Gold
Coast Barge. Such procedures would require bids not less than
$5,000,000, with $1,000,000 in cash being deposited with the
Mississippi Bankruptcy Court prior to the sales hearing. The
Mississippi Bankruptcy Court denied the motion without prejudice,
thereby allowing the motion to be filed again.
<PAGE 55>
Shamrock Claims
Prior to 1997, the Company, Shamrock and Bennett Management
executed certain agreements whereby the Company agreed to assign
all its rights and interests in the Charter Agreement, including
all rights to charter payments, and the Gold Coast Barge to
Shamrock and Bennett Management, respectively, for cancellation
of approximately $22,722,000 in debt due Shamrock with respect to
the Gold Shore Casino and Shamrock's assumption of the Ship
Mortgage (collectively, the "Bennett Debt Exchange"). Although
Shamrock assumed a first preferred ship mortgage held by Shamrock
on the Gold Coast Barge in the amount of approximately $2,041,000
(the "Ship Mortgage"), the Bennett Debt Exchange was never
consummated. However, Shamrock notified the Company that the
Company had not fulfilled its obligations under the Bennett Debt
Exchange and that Shamrock was entitled to all charter payments.
The Company continued to utilize the charter payments for its
operating needs from the date Shamrock was licensed with the
Mississippi Gaming Commission because the Company's management
determined that, because of the Company's liquidity problems,
consummating the Bennett Debt Exchange would prevent the Company
from meeting its obligations to its creditors and would have
required the Company to file a formal plan of reorganization or
liquidation. Consequently, the Company recorded charter payments
received by the Company from such date through December 31, 1997
totaling approximately $5,918,000 as indebtedness to Shamrock
("Charter Debt"), as if the Bennett Debt Exchange had been
consummated. Additionally, the Company recorded interest expense
of approximately $2,120,000 on such indebtedness ("Charter Debt
Interest Expense"). As discussed below, the Company has recorded
the Charter Debt as deferred revenue and reversed the Charter
Debt Interest Expense.
Prior to 1997, the Bennett Trustee, who, pursuant to information
from the Bennett Trustee, is the sole owner of Shamrock, orally
notified the Company that Shamrock, as a result of Shamrock being
the holder of the Ship Mortgage and a second preferred ship
mortgage on the Gold Coast Barge in the amount of $31,101,000
(the "Second Mortgage"), which secure debt due Shamrock with
respect to the Gold Coast Barge, was entitled to all payments to
be received by the Company from the Escrow Account with respect
to PMCC Payments. However, the Company continued to utilize such
payments for its operating needs (See Note 5).
Pursuant to an agreement dated November 5, 1997 (the "Escrow
Allocation Agreement") with Shamrock, the Company would have
received a percentage of any funds related to the charter or sale
of the Gold Coast Barge disbursed to the Company and the Bennett
Entities, jointly, from the bankruptcy cases of AMGAM and AGRM.
On October 21, 1998, the Company and the Bennett Entities agreed
that, notwithstanding the Escrow Allocation Agreement, any
AGEL/Shamrock Payments (as defined below) would be escrowed and
disbursed only upon the order of the United States Bankruptcy
Court, Northern District of New York (the "New York Bankruptcy
Court"). Shamrock has orally notified the Company that any
AGEL/Shamrock Payments should be paid to Shamrock to reduce the
Company's indebtedness to Shamrock (See Note 5).
As discussed above, Shamrock agreed that any amounts related to
the charter or sale of the Gold Coast Barge received by Shamrock
from the AMGAM and AGRM bankruptcy proceedings will
<PAGE 56>
reduce the Company's indebtedness to Shamrock. Pursuant to the
Charter Amendment, Shamrock acknowledged the Company as the owner
of the Gold Coast Barge. On January 4, 1999, the Bennett Trustee,
as trustee for Bennett Funding and Bennett Management and as
president of Shamrock, filed proofs of claim in the AMGAM and
AGRM bankruptcy proceedings, asserting claims based upon Shamrock
holding the Ship Mortgage and the Second Mortgage, but not based
upon any rights under the Bennett Debt Exchange. The Company has
therefore determined that Shamrock has implicitly acknowledged
that the Bennett Debt Exchange was never consummated and that the
Company had the right to utilize the charter payments.
Accordingly, as stated in the Company's prior filings with the
Securities and Exchange Commission, the Company, as of December
31, 1998, reversed the Charter Debt Interest Expense of
approximately $2,120,000. However, the Company has recorded the
Charter Debt of approximately $5,918,000 as deferred revenue
because the Complaint (as defined below), which challenges the
Company's ownership of the Gold Coast Barge, is still pending.
The Company also recognized the Amendment Payments of
approximately $4,105,000 and the December 1998 charter payment of
$215,000 made by PMCC as deferred revenue for the year ended
December 31, 1998. Cash received from the Amendment Payments and
the December 1998 charter payment is recorded as "Restricted
Cash" in the accompanying Consolidated Balance Sheets. If the
Complaint is dismissed, pursuant to the Consensus Plan (as
defined below) or otherwise, the Company will recognize the
deferred revenue amounts as revenue. If the Consensus Plan is
approved and confirmed, and the cash in the Escrow Account is
distributed, 30% of the cash distributed relating to charter
payments under the Charter Amendment, including the Amendment
Payments, shall be used to reduce "Estimated Net Liabilities for
Subsidiaries in Bankruptcy" in the accompanying Consolidated
Balance Sheet as of December 31, 1998. As discussed above, 70% of
the cash distributed relating to charter payments under the
Charter Amendment, including the Amendment Payments, shall be
used to reduce the Company's indebtedness to Shamrock.
Proposed Plan of Liquidation
On March 15, 1999, AMGAM, AGRM, the Committees, the Company,
Shamrock and IGT agreed in principle on a proposed joint plan of
liquidation (the "Consensus Plan") for AMGAM and AGRM.
Pursuant to the Consensus Plan, each administrative and priority
claim, as defined in the Code, incurred in connection with the
bankruptcy proceedings of AMGAM and AGRM would be paid in full
from the respective estates of AMGAM and AGRM in accordance with
statutory priorities pursuant to the Code.
Pursuant to the Consensus Plan, each secured claim would be
either paid in full from the sale of the related collateral or
satisfied in full by abandoning the collateral to the secured
creditor, except for (i) the Ship Mortgage and the Second
Mortgage and (ii) a guaranteed claim of IGT in the amount of
$1,400,000 (the "IGT Guaranteed Claim"). The Ship Mortgage, the
Second Mortgage and the IGT Guaranteed Claim would each be
treated as discussed below. The balance of the claim of IGT would
be treated as an unsecured claim.
<PAGE 57>
Pursuant to the Consensus Plan, the IGT Guaranteed Claim will be
paid in four equal installments. The first installment will be
payable upon the effective date of the Consensus Plan from 30% of
the PMCC Payments, including the Amendment Payments, in the
Escrow Account. The second installment will be paid from 30% of
the PMCC Payments made during the Remaining Charter Term. The
third installment will be paid from 28% of the first $3,000,000
of net proceeds from a sale of the Gold Coast Barge, if any. The
fourth and final installment will be paid from 25% of the net
proceeds in excess of $3,000,000, if any, from a sale of the Gold
Coast Barge.
Pursuant to the Consensus Plan, each unsecured claim, excluding
any claims of the Company and Shamrock, would be paid from the
assets of the respective estates of AMGAM and AGRM. Such assets
would include, subject to the payment of the installments of the
IGT Guaranteed Claim, as discussed above, (a) 30% of all PMCC
Payments, including the Amendment Payments (as defined below),
(b) 28% of the first $3,000,000 of net proceeds from a sale of
the Gold Coast Barge, if any, and (c) 25% of the net proceeds in
excess of $3,000,000, if any, from a sale of the Gold Coast
Barge. Such assets would additionally include the funds remaining
in the Escrow Account with respect to all FF&E Payments (as
defined below) and the sale of the leases comprising the Gold
Shore Casino site.
Pursuant to the Consensus Plan, the Company's and Shamrock's
unsecured claims, and the Ship Mortgage and the Second Mortgage
would be paid from (a) 70% of all PMCC Payments under the Charter
Amendment, including the Amendment Payments, (b) 72% of the first
$3,000,000 of net proceeds from a sale of the Gold Coast Barge,
if any, and (c) 75% of the net proceeds in excess of $3,000,000,
if any, from a sale of the Gold Coast Barge (collectively, the
"AGEL/Shamrock Payments").
Pursuant to the Consensus Plan, all equity interests of the
Company in AMGAM and AGRM would be canceled as of the effective
date of the Consensus Plan and the Complaint and all other
litigation brought against the Company would be dismissed with
prejudice, that is, the Committees would be precluded from filing
any action against the Company based on the alleged causes of
action set forth in the Complaint or any such other litigation.
The amounts to be paid to creditors would be subject to the claim
allowance process in the AMGAM and AGRM bankruptcies, pursuant to
which all allowed claim amounts, in the order set forth above,
would be fixed for purposes of distributions under the Consensus
Plan.
The Mississippi Bankruptcy Court has scheduled a hearing on the
Consensus Plan disclosure statement on April 12, 1999. There can
be no assurance that the creditors in the AMGAM and AGRM
bankruptcy proceedings will approve the Consensus Plan in
accordance with the provisions of the Code or that the Consensus
Plan will thereafter be confirmed by the Mississippi Bankruptcy
Court.
<PAGE 58>
Litigation
Prior to 1997, the AMGAM Committee filed an adversary complaint
(the "Complaint") in the Mississippi Bankruptcy Court challenging
the transfer of the Gold Coast Barge to the Company seeking,
among other things, that all PMCC Payments be deposited into the
Escrow Account. If (i) the Consensus Plan is not approved by the
creditors in the AMGAM and AGRM bankruptcy proceedings in
accordance with the provisions of the Code or thereafter
confirmed by the Mississippi Bankruptcy Court and (ii) the AMGAM
Committee prevails on the Complaint, the Company would not be
able to meet its obligations as they come due. In such case, the
Company would then need to pursue a formal plan of reorganization
or liquidation.
Pursuant to an order (the "PMCC Order") of the Mississippi
Bankruptcy Court, prior to 1997 PMCC acquired from AMGAM all of
the furniture, fixtures and equipment, including certain slot
machines, formerly used in the operation of the Gold Shore Casino
in exchange for the promise to make to AMGAM an initial payment
of approximately $48,000 and twenty-six equal monthly payments of
approximately $121,000 totaling approximately $3,188,000 (the
"FF&E Payments"). Prior to 1997, PMCC made FF&E Payments totaling
approximately $1,618,000, of which amount the Company received
approximately $411,000. PMCC made no FF&E Payments for the years
ending December 31, 1998 or 1997. FF&E Payments, other than those
received by the Company, are being escrowed in the AMGAM
bankruptcy proceeding pending a determination by the Mississippi
Bankruptcy Court as to the disposition of such proceeds. The
Company has no claim to the escrowed FF&E Payments. On January
31, 1997, AMGAM and the AMGAM Committee filed suit in the
Mississippi Bankruptcy Court (Adv. No. 970868) against PMCC and
an affiliate seeking payment of all FF&E Payments currently due
under the PMCC Order, among other relief. This matter is set for
a hearing by the Mississippi Bankruptcy Court on April 13, 1999.
Prior to 1997, the U.S. Department of Labor (the "DOL") informed
AMGAM that it had concluded an investigation of the AMGAM
Associates d/b/a Gold Shore Casino Associate Benefit Plan (the
"AMGAM Benefit Plan") for the period May 15, 1994 through
September 20, 1995. As a result of such investigation, the DOL
has alleged that AMGAM and possibly certain related parties
and/or AMGAM officers violated, and continue to violate, certain
provisions of the Employee Retirement Income Security Act of 1974
("ERISA") with respect to the administration of the AMGAM Benefit
Plan. The DOL has indicated that AMGAM's failure to take
necessary corrective action may result in the referral of this
matter to the Office of the Solicitor of Labor for possible legal
action. In addition, whether or not any such referral is made,
AMGAM is and would remain liable to possible legal action by
other parties including plan fiduciaries and plan participants or
their beneficiaries. Certain violations of ERISA may also result
in the assessment of civil penalties by the Secretary of Labor
against the violating parties. The DOL has requested AMGAM to
discuss how such violations noted in the DOL's investigation may
be corrected and how to restore any losses to the AMGAM Benefit
Plan. The Company responded to such allegations and advised the
DOL (i) that AMGAM does not believe that there have been any
fiduciary violations or prohibited transactions under ERISA, (ii)
AMGAM intends to satisfy medical claims due and payable under the
AMGAM Benefit Plan to the extent permitted by the Code and the
Bankruptcy Court and intends to use its best efforts to
<PAGE 59>
seek priority status under the Code for the payment of such
medical claims, and (iii) in no event will the amount paid with
respect to such medical claims be less than the employee
contributions collected under the AMGAM Benefit Plan after March
28, 1995. Although the actions taken by AMGAM, certain related
parties and AMGAM officers with respect to the AMGAM Benefit Plan
will be vigorously defended, the outcome of this matter is
uncertain. Any legal action or civil penalties arising out of
this matter could materially affect the Company and its business
and financial condition.
Prior to 1997, two stockholders of the Company, who were
bondholders and stockholders of AGRM prior to the merger of AGRM
into the Company (the "Merger"), filed suit against the Company
and three former officers and/or directors of AGRM in the Circuit
Court of Harrison County, Mississippi, Second Judicial District
(Civil Action No. A2402-96-00210). The plaintiffs allege (i)
federal and state securities fraud by the defendants based on
alleged fraudulent misrepresentations made by the defendants in
connection with plaintiffs' decision to purchase common stock of
AGRM, to convert certain debentures issued by AGRM into common
stock of AGRM and to tender their common stock of AGRM in
exchange for Common Stock of the Company in connection with the
Merger and (ii) a breach of directors' duties of good faith and
due care by the three former officers and/or directors of AGRM.
The plaintiffs are seeking compensatory damages in the amount of
$250,000, punitive damages in the amount of $1,000,000 and
attorneys fees and costs. As 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 this lawsuit. However, should the plaintiffs prevail, this
litigation 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.
A formal plan of reorganization or liquidation would generally
result in the sale of the Company's assets to satisfy outstanding
obligations. There can be no assurance that if either action is
required to be pursued that all such obligations would be
completely satisfied. Further, in the event of either action, it
is unlikely that the stockholders of the Company will recover any
of their investment in the Company.
Deconsolidation of Subsidiaries
The Company has determined that, because of the AMGAM and AGRM
Chapter 11 bankruptcy filings and the expected liquidation in the
near future of AMGAM and AGRM under a consolidated plan of
liquidation, it would be appropriate to deconsolidate AMGAM and
AGRM.
<PAGE 60>
The Company has accrued approximately $3,710,000 as management's
estimate of the settlement liabilities to be paid to unsecured
creditors of AMGAM and AGRM pursuant to the Term Sheet and the
Consensus Plan. For the year ended December 31, 1998, estimated
net liabilities for subsidiaries in bankruptcy was reduced by
$781,000 based upon the anticipated distributions under the
Consensus Plan. For the year ended December 31, 1997, estimated
net liabilities for subsidiaries in bankruptcy was reduced by (i)
$375,000 relating to the settlement of a lawsuit brought by IGT
(see Note 6) and (ii) approximately $147,000 relating to the
portion of PMCC Payments paid by PMCC into the Escrow Account for
the benefit of creditors of AMGAM and AGRM. It is reasonably
possible that the Company's ultimate settlement of these
liabilities will change in the near term due to the uncertainties
regarding the bankruptcies of AMGAM and AGRM, the charter of the
Gold Coast Barge and potential sale, if at all, of the Gold Coast
Barge, and that the effect of such uncertainties could be
material to the Company's financial statements. The Company has
classified the long term portion of this liability in the
accompanying Consolidated Balance Sheet as of December 31, 1998
and 1997 in the amounts of $1,640,000 and $3,329,000,
respectively, as "Long Term Portion of Estimated Net Liabilities
for Subsidiaries in Bankruptcy." There can be no assurance that
the Company, AMGAM, AGRM and the Committees will agree on a joint
plan of liquidation for AMGAM and AGRM with terms and conditions
substantially equivalent to the Consensus Plan, that the creditors
in the AMGAM and AGRM bankruptcy proceedings will approve any such
plan in accordance with the provisions of the Code or that any such
plan will thereafter be confirmed by the Mississippi Bankruptcy Court.
Note 4 - Related Party Developments
Prior to 1997, the U.S. Securities and Exchange Commission (the
"Commission") charged Bennett Funding and Bennett Management with
securities fraud. Bennett Funding and Bennett Management
subsequently filed for protection under Chapter 11 of the Code.
On June 3, 1998, Shamrock filed for protection under Chapter 11
of the U.S. Bankruptcy Code for reasons that the Company believes
are unrelated to the Company. The ultimate impact, if any, of
these allegations on the accompanying consolidated financial
statements can not presently be determined.
Note 5 - Liquidity and Continuation of Business
The Company has sustained recurring operating losses since its
inception, including significant losses related to the Gold Shore
Casino, as more fully set forth below. The Company also has had
a history of insufficient liquidity and has been dependent upon
the Bennett Entities for both working capital and project related
financing. However, as a result of the bankruptcy filings of
Bennett Funding, Bennett Management and Shamrock and the filing
by the Commission of
<PAGE 61>
securities fraud charges against Bennett Funding and Bennett
Management (See Note 4), the Company does not anticipate
receiving any additional funds from the Bennett Entities.
The Company had available cash of approximately $123,000 as of
December 31, 1998. The Company believes that such cash is
sufficient to fund the Company's operations, excluding the
Company's obligations to Shamrock and, if applicable, Bennett
Management, through the middle of 1999, based on the Company's
current level of operations and projected expenditures. The
Company does not anticipate receiving additional funds and
therefore 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.
On March 10, 1999, Shamrock advised the Company that it should
consult Shamrock before utilizing the net proceeds of $415,000
from the sale on March 1, 1999 of a former railroad station in
Mobile, Alabama (the "GM&O Building") for working capital
purposes (See Note 6). If Shamrock demands that such funds to be
utilized to repay indebtedness due to Shamrock, the Company would
need to pursue a formal plan of reorganization or liquidation.
As of December 31, 1998, the Company had recorded as "Restricted
Cash" approximately $1,119,000 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 ("RSR"), 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 (the "Rising Sun Project"). The
Company has transferred legal title to the RSR Interest 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 (see Note 7). Shamrock has orally
notified the Company that all net proceeds received by the
Company from the sale of the RSR Interest and the cash held by
NBD attributable to the RSR Interest should be paid to Shamrock
to reduce the Company's indebtedness to Shamrock. The amount of
any such payments will reduce the Company's indebtedness to
Shamrock.
As of December 31, 1998, the Amendment Payments and the December
1998 charter payment made by PMCC of approximately $4,320,000,
collectively, is also recorded as restricted cash. Shamrock has
orally notified the Company that any AGEL/Shamrock Payments
disbursed from such restricted cash account should be paid to
Shamrock to reduce the Company's indebtedness to Shamrock. Any
such cash not disbursed to Shamrock will be disbursed to the
creditors of AMGAM and AGRM. (See Note 3).
As of December 31, 1998, the Company owes approximately
$59,728,000 to Shamrock. The Company is delinquent in the payment
of interest due on its various obligations to Shamrock totaling
approximately $19,882,000, included in the amount above, as of
December 31, 1998 and is therefore in default with respect to
such payments under the Company's various loan agreements with
Shamrock. Additionally, the Company has agreed to repay
indebtedness to
<PAGE 62>
Shamrock of $125,000 from the sale in 1997 of certain securities,
which amount has not yet been paid to Shamrock.
Shamrock has orally represented to the Company that Bennett
Management, prior to its bankruptcy filing, assigned to Shamrock
all of Bennett Management's rights and obligations under all
agreements previously executed by and between the Company and
Bennett Management including, without limitation, (i) a security
agreement whereby the Company granted to Bennett Management a
security interest in all of the Company's accounts receivable and
all bank accounts in the State of New Jersey to secure all
obligations owing by the Company to Bennett Management and its
affiliates (the "Security Agreement") and (ii) under an operating
lease between the Company and Bennett Management (the "SCS
Lease") with respect to the "Sioux City Sue" riverboat vessel and
its supporting barge (the "SCS Barge", collectively with the
"Sioux City Sue" riverboat vessel, the "Vessels"). However, the
Company has not been provided with written evidence of such
assignment and, as the result of the bankruptcy filing of Bennett
Management, any such assignment might be challenged as a
fraudulent transfer or voidable preference under the Code. There
can be no assurance that such assignment was entered into between
Shamrock and Bennett Management or, if entered into, that it will
not be voided as a fraudulent transfer or voidable preference in
the bankruptcy proceeding of Bennett Management or otherwise
voided on other grounds if any such assignment became effective
within one year prior to the bankruptcy filing of Bennett
Management.
Any action taken by Shamrock or Bennett Management, to the extent
an assignment to Shamrock of Bennett Management's interest in the
Security Agreement never took place or is voided as a fraudulent
transfer, voidable preference or otherwise in the bankruptcy
proceeding of Bennett Management, with respect to its rights and
remedies in connection with defaults under the Company's various
loan agreements, as discussed above, would have a material
adverse effect on the Company's business and financial condition
and the Company would need to pursue a formal plan of
reorganization or liquidation. Such actions by Shamrock or
Bennett Management could include foreclosing on (i) the Gold
Coast Barge pursuant to the Ship Mortgage, the Second Mortgage
and other agreements and (ii) all of the Company's accounts
receivable and bank accounts located in the State of New Jersey
pursuant to the Security Agreement. There can be no assurance
that Shamrock or, if necessary, Bennett Management will agree to
modify, terminate or restructure the obligations due from the
Company to Shamrock and, if applicable, Bennett Management.
Failure to obtain such modification, termination or restructuring
would have a material adverse effect on the Company and the
Company would need to pursue a formal plan of reorganization or
liquidation. Any action to be taken by Shamrock or Bennett
Management in connection with modifying or terminating any
obligations from the Company would probably require the approval
of the New York Bankruptcy Court.
The Company has not experienced any success in raising debt or
equity financing from sources independent of the Bennett Entities
and has no present commitments or other alternatives for such
financing. Given the Company's historical operating losses and
present liquidity position and the legal problems described above
relating to certain Bennett Entities it is unlikely that the
<PAGE 63>
Company will achieve any success raising additional equity,
working capital or long-term project related financing.
Given the Company's present financial and liquidity position, the
legal problems described above relating to certain Bennett
Entities and the Company's litigation (See Notes 3, 4 and 13),
the business of the Company is unlikely to continue to be the
ownership of equity interests in casino gaming ventures. The
Company's ability to continue in business is primarily dependent
upon its ability to obtain sufficient funds for its operations.
However, as stated above, the Company does not anticipate
receiving additional funds and would then need to pursue a formal
plan of reorganization or liquidation. Additionally, the
Company's ability to continue in business is dependent upon its
ability to (i) obtain Shamrock's and, if necessary, Bennett
Management's agreement to modify, terminate or restructure all
obligations due from the Company to Shamrock and, if applicable,
Bennett Management, (ii) consummate the liquidations under
Chapter 11 of the Code of AMGAM and AGRM under plans acceptable
to the Company, resulting in a liquidation of the various trade
and debt obligations of those entities, and (iii) satisfactorily
resolve the litigation filed against the Company (See Notes 3, 4,
8 and 13). 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 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.
A formal plan of reorganization or liquidation would generally
result in the sale of the Company's assets to satisfy outstanding
obligations. There can be no assurance that if either action is
required to be pursued that all such obligations would be
completely satisfied. Further, in the event of either action, it
is unlikely that the stockholders of the Company will recover any
of their investment in the Company.
Note 6 - Discontinued Ventures
Keno
Prior to 1997 the Company entered into an assignment and transfer
agreement with American Heartland Corporation ("AHC") and Big Red
Keno, Ltd., a licensed keno operator in Omaha, Nebraska, pursuant
to which the Company transferred and assigned to AHC all of the
Company's right, title and interest to all of the assets utilized
by the Company in the conduct of its keno gaming activities in
exchange for $500,000 in cash and a promissory note to the
Company in the principal amount of approximately $1,112,000 (the
"Keno Note"). The Company received principal and interest
payments on the Keno Note totaling approximately $300,000 for
each of the years ended December 31, 1998 and 1997, respectively.
On September 22, 1998, AHC asserted set offs against the Keno
Note aggregating approximately $198,000. On January 8, 1999, the
Company agreed to the payment of $300,000 from AHC in full
satisfaction of the Keno Note and accordingly recorded a
writedown in the value of the Keno Note in the amount of $165,000
<PAGE 64>
for the year ended December 31, 1998. The non-current portion of
the Keno Note at December 31, 1997 of approximately $465,000 is
included in "Other non-current assets" in the accompanying
Consolidated Balance Sheets.
Sioux City Sue
Prior to 1996, Bennett Management consummated the purchase of the
Vessels from a third party. In conjunction therewith, the Company
entered into the SCS Lease with Bennett Management whereby the
Company leased the Vessels for casino gaming purposes at a
monthly rental of approximately $106,000 plus operating and
maintenance expenses. The Company, pursuant to such lease,
insured the Vessels and named Bennett Management as an additional
insured party. Prior to 1996, the Vessels were vandalized and
burglarized and the supporting barge was grounded, giving rise to
insurance claims for theft and property damage (collectively, the
"Claims"). The Company has been advised by Shamrock that the SCS
Barge was sold by Shamrock on November 20, 1996. The Company has
advised Shamrock that it believes that the SCS Lease terminated
on such date. Effective August 10, 1998, the Company assigned to
Bennett Management the Company's right to proceed against the
underwriters who issued the marine insurance policy covering the
Vessels and the right to collect the insurance proceeds, if any,
from the Claims.
Shamrock has orally represented to the Company that Bennett
Management, prior to its bankruptcy filing, assigned to Shamrock
all of Bennett Management's rights and obligations under the SCS
Lease. However, the Company has not been provided with written
evidence of such assignment and, as the result of the bankruptcy
filing of Bennett Management, any such assignment might be
challenged as a fraudulent transfer or voidable preference under
the Code. There can be no assurance that such assignment was
entered into between Shamrock and Bennett Management or, if
entered into, that it will not be voided as a fraudulent transfer
or voidable preference in the bankruptcy proceeding of Bennett
Management. The Company has not paid approximately $2,701,000 in
rent to Bennett Management due under the SCS Lease as of December
31, 1998. Such amount is included in "Accrual for lease costs" in
the accompanying Consolidated Balance Sheets at December 31, 1998
and 1997.
GM&O Building
Prior to 1997, the Company acquired the GM&O Building for
approximately $1,006,000 in cash. Prior to 1997, the Company
recognized writedowns in the value of its investment in the GM&O
Building to reflect its fair market value. The value of the GM&O
Building in the amount of $375,000 is included in "Other current
assets" in the accompanying Consolidated Balance Sheet at
December 31, 1998.
On March 1, 1999, the Company sold the GM&O Building in Mobile,
Alabama to the City of Mobile for approximately $423,000. The
Company intends to use the net sales proceeds of approximately
$415,000 for working capital purposes. Shamrock has advised the
Company that it should consult Shamrock before utilizing the net
proceeds from the sale of the GM&O Building for working capital
purposes (See Note 5).
<PAGE 65>
Prichard, Alabama
Prior to 1997, the Company purchased seven adjoining parcels of
real estate in Prichard, Alabama for a total of approximately
$676,000 for possible development in connection with a casino
gaming facility. On March 27, 1997, the Company sold such parcels
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 such
parcels. In addition, the Company had a lease through July 1997
for another parcel of real estate in Prichard, Alabama at a rent
of approximately $22,000 per year, which lease was not renewed.
Multimedia Games, Inc. Preferred Stock
On October 10, 1997, the Company sold 12,500 shares of preferred
stock of Multimedia Games, Inc. for $625,000, and recorded a net
gain of approximately $625,000. The Company used $375,000 of such
funds to settle a lawsuit brought by IGT seeking a judgment
against the Company under a guarantee of AMGAM's indebtedness to
IGT totaling approximately $3,306,000 (See Note 3). Pursuant to
the Escrow Allocation Agreement, the Company agreed to use
$125,000 of such funds to repay indebtedness due to Shamrock but
has not yet made such payment (See Note 5).
Note 7 - Assets Held for Sale
Assets held for sale consists of the following at December 31,
1997:
1997
______
RSR Interest $ 56,000
GM&O Building (See Note 6) 375,000
_______
$431,000
========
The RSR Interest and GM&O Building are both classified as "Other
current assets" in the accompanying Consolidated Balance Sheet as
of December 31, 1998.
Rising Sun
The Company owns the RSR Interest, representing the equivalent of
a 4.9% equity interest in the Rising Sun Project. Effective
August 23, 1996, the Company transferred legal title to the RSR
Interest to NBD, as trustee. Additionally, at such time, the
Company granted an irrevocable proxy to the other members of RSR
(collectively, the "Remaining Members") to vote the RSR Interest
in the same manner and proportion as the Remaining Members vote
on any matter, provided, however, that such proxy may not be
exercised to vote in favor of any action that could reasonably be
viewed as decreasing or otherwise adversely affecting the value
of the RSR Interest or the ability to sell or otherwise transfer
the RSR Interest. The RSR Interest is in the process of being
purchased from NBD, for the benefit of the Company, by either the
Remaining Members or RSR at an average appraised fair market
value. The Company has obtained an
<PAGE 66>
appraisal valuing the RSR Interest at $6 million. The Company
understands that the appraisal obtained by RSR values the RSR
Interest significantly lower, and therefore the Company and RSR
in the process of obtaining an independent third appraisal.
Shamrock has orally notified the Company that the Company that
all net proceeds received by the Company from the sale of the RSR
Interest and the cash held by NBD attributable to the RSR
Interest should be paid to Shamrock to reduce the Company's
indebtedness to Shamrock. The amount of any such payments will
reduce the Company's indebtedness to Shamrock (see Note 5). In
1998, the Board of Directors of the Company approved granting
Shamrock a security interest in the RSR Interest in exchange for
Shamrock agreeing to forebear from the exercise of any rights or
remedies in respect of all obligations owing by the Company to
Shamrock. No such security interest, however, has been granted.
For the years ended December 31, 1998 and December 31, 1997, the
Company recorded revenues of approximately $445,000 and $623,000,
respectively, attributable to the RSR Interest. Cash received
from the Rising Sun Project is recorded as "Restricted Cash" in
the accompanying Consolidated Balance Sheets.
Marine Star
In a prior year, the Company invested $3,000,000 in cash to
acquire a 15% initial equity interest (with the right to increase
its percentage ownership to 30%) in Empire Cruise Lines, Ltd., a
Delaware corporation ("Empire"), which has acquired ownership of
the Marine Star, a U.S. flag cruise ship suitable for
refurbishment as a gaming vessel. Under an agreement with Empire,
the Company has the right to manage the Marine Star. The Company
does not have, nor does it anticipate having, the financial
ability or personnel to manage such property as a gaming or other
facility. The Company is currently assessing opportunities to
sell its equity ownership in Empire. Additionally, the Company,
on behalf of Empire, is currently seeking opportunities to sell
the Marine Star. Prior to 1997, as a result of the Company's
determination that (i) there is a substantial likelihood that the
Marine Star will not be able to be utilized as a gaming project
and (ii) the outstanding carrying costs of the Marine Star exceed
its estimated net scrap metal value, the Company wrote off its
investment in Empire.
Harolds Club Casino
Prior to 1997, pursuant to an agreement between Shamrock and the
Company under which Shamrock provided the necessary funds to the
Company to close the purchase of the Harolds Club casino in Reno,
Nevada, the Company transferred to Shamrock title to the land and
the building related to the Harolds Club. Shamrock assumed
responsibility for all carrying costs of the Harolds Club
property including, but not limited to, lease payments under
certain land leases held by the Company related to the Harolds
Club, taxes, insurance and utilities. Such land leases were
assigned by the Company to Shamrock as of September 29, 1998.
However, 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 lease
payments from April 1996 through February 1999 due under such
leases or quarterly property taxes due under such leases,
collectively totaling
<PAGE 67>
approximately $2,288,000. 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. Four such leases require aggregate
annual lease payments of approximately $548,000 for each of the
years 1999 and 2000, subject to increase based upon increases in
the Consumer Price Index, and have terms ending between April
2001 and October 2022. A fifth land lease relating to the Harolds
Club, with an annual lease payment of approximately $72,000,
subject to increase based upon increases in the Consumer Price
Index, 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.
The Company has recorded the unpaid lease payments and property
taxes from April 1996 through December 1998 totaling
approximately $2,133,000 (the "Unpaid Harolds Club Obligations")
as current liabilities as of December 31, 1998. The Company has
also recorded the amount of the Unpaid Harolds Club 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, the Company has fully
reserved for such amounts at the same time such amounts have been
recorded as a receivable.
Prior to 1997, 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 13), and (iii) all reasonable costs and expenses
incurred by the Company in connection with the operation and
maintenance of the Harolds Club.
Pursuant to agreements between Shamrock and the Company entered
into prior to 1997, the Company has the right to lease Harolds
Club from Shamrock or, under certain circumstances, manage the
Harolds Club. The Company does not have, nor does it anticipate
having, the financial ability or personnel to exercise such lease
option. Additionally, the Company has no current intention of
exercising such lease option or managing the Harolds Club.
The Company is precluded from conducting casino operations in the
Harolds Club prior to receipt of a gaming license from the Nevada
State Gaming Control Board. Prior to 1997, the Company withdrew,
without prejudice to reapply, a previously filed licensing
application.
On October 8, 1998, the New York Bankruptcy Court authorized the
sale by Shamrock of the Harolds Club. Shamrock has advised the
Company that such sale is scheduled to close by May 1999. The
leases discussed above shall terminate at closing, and the
Company shall be released from all obligations under such leases,
except for environmental conditions resulting from the
<PAGE 68>
Company's intentional or negligent conduct. Additionally,
lawsuits filed against the Company by the five lessors of the
Harolds Club property and cross-claims filed against the Company
by co-defendants will be dismissed upon closing (See Note 13).
Note 8 - Long Term Debt
Debt consists of $34,592,000 and $40,510,000 at December 31, 1998
and 1997, respectively, payable to Shamrock and certain related
entities. All outstanding debt is classified as current, as
discussed below. The balance at December 31, 1998 and 1997 is
comprised of approximately (i) $1,066,000, at the end of each
year, related to a working capital line of credit, (ii)
$2,041,000, at the end of each year, related to a term loan to
assist the Company in financing pertaining to the Gold Shore
Casino, (iii) $5,918,000 of Charter Debt as of December 31, 1997
(see Note 3) (iv) $384,000, at the end of each year, related to
the Company's utilization of slot machine sales proceeds, which
slot machines were beneficially owned by Bennett Management and
(v) $31,101,000, at the end of each year, related to project
financing for the Gold Shore Casino. The term loan is secured by
the Ship Mortgage and the project financing loan is secured by
the Second Mortgage. Of such project financing debt outstanding,
$24,774,000 pertained to a previous project financing facility
which was restructured in 1994 into one 7-year note requiring
only interest payments through December 1995, and thereafter
principal and interest payments based on a 15 year amortization,
but with a balloon payment at the end of the seventh year. Such
restructuring also required the Company to pay a refinancing fee
equal to 10% of the balance of the amounts encompassed by the
restructuring. The payment of the financing fee bore the same
terms as the 7-year note.
The above amounts do not include approximately $2,701,000 as of
December 31, 1998 and 1997, respectively, in rent due under the
SCS Lease (See Note 6).
The weighted average rate of interest (stated or accrued) on all
outstanding amounts due to Shamrock and certain related entities
as of December 31, 1998 and 1997 was 13.49% and 13.83%,
respectively. Accrued and unpaid interest at December 31, 1998
and 1997 was $19,882,000 and $16,788,000, respectively. The
Company, as of December 31, 1998, reversed the Charter Debt
Interest Expense (see Note 3). The weighted average rate of
interest and amount of accrued and unpaid interest at December
31, 1997 includes (a) the Charter Debt Interest Expense and (b)
interest expense reversed in the year ended December 31, 1998 in
the amount of approximately $160,000 on indebtedness due Shamrock
on which the Company has determined no interest is due. The
Company is currently delinquent in the payment of interest due on
its obligations to Shamrock and certain related entities.
Accordingly, the Company has classified all of the outstanding
debt to Shamrock and certain related entities as current as of
December 31, 1998 and 1997.
Note 9 - Other Transactions with Shamrock and the Bennett Trustee
As of December 31, 1998, the Bennett Trustee and Shamrock, of
which the Bennett Trustee is the sole stockholder, collectively
own 100% of the outstanding shares of the Company's Series A
<PAGE 69>
Preferred Stock and approximately 47.3% of the outstanding shares
of the Common Stock, thereby owning approximately 52.6% of the
total voting power represented by the Company's outstanding
voting securities. Additionally, the Bennett Trustee owns all of
the outstanding shares of the Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock (see Note 10).
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, which were collectively convertible as
of December 31, 1998 into 1,354,154,667 shares of Common 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 Bennett Trustee converted as of
December 31, 1998 that number of shares of 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 Bennett 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
Bennett Trustee converted as of December 31, 1998 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 Bennett Trustee as of such date), the Bennett
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. As of March 1999, the Bennett Trustee has not asserted
any rights he may have against the Company for the Company's
failure to maintain a sufficient number of authorized shares of
Common Stock to enable the Bennett Trustee to convert all of the
Series C Preferred Stock, Series D Preferred Stock and the Series
E Preferred Stock.
Note 10 - Stockholders' Equity
The shares of Series A Preferred Stock, all of which outstanding
shares are held by Shamrock, are convertible at the holder's
option into 25 shares of Common Stock per share of Series A
Preferred Stock, bear the right to elect, but Shamrock has not so
elected, one director to the Board of Directors prior to the
first annual meeting of the Company's stockholders held after
June 30, 1997 and otherwise vote, and receive dividends, as one
class with the Common Stock as if converted into Common Stock,
are non-redeemable, and do not accrue or pay dividends or bear
any liquidation preference.
<PAGE 70>
The shares of Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock, all of which outstanding shares are
held by the Bennett Trustee, are senior to all other classes of
the Company's outstanding stock. Each of the Series C Preferred
Stock, Series D Preferred Stock and the Series E Preferred Stock
is convertible by the holder thereof into the number of shares of
Common Stock equal to the then-applicable redemption price for
each such Series (as described below) divided by an amount equal
to 75% of the average market price of Common Stock for the ten
consecutive business days prior to the conversion date.
Conversion of each of the Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock could result in
significant dilution to the ownership interest of the Company's
stockholders. The Company has the right to redeem all three
series of Preferred Stock at any time. The redemption price for
each share of the three series of Preferred Stock (which price is
also used to determine the conversion price) increases quarterly
as follows: (i) for the Series C Preferred Stock, from a
redemption price of $1,382.18 per share as of December 31, 1998,
$29.17 per share per quarter; (ii) for the Series D Preferred
Stock, from a redemption price of $1,327.99 per share as of
December 31, 1998, $29.17 per share per quarter; and (iii) for
the Series E Preferred Stock, from a redemption price of
$1,257.08 per share as of December 31, 1998, $20.83 per share per
quarter. The Series C Preferred Stock and the Series D Preferred
Stock each have a current cumulative dividend rate of 7.5%. The
Series E Preferred Stock has no stated dividend rate.
The terms of the Company's Series C Preferred Stock and Series D
Preferred Stock each provide that the Company shall not declare
or pay any dividends on the Common Stock or Series A Preferred
Stock if there are, at such time, any cumulative accrued but
unpaid dividends on the Series C Preferred Stock or Series D
Preferred Stock, respectively. The Series C Preferred Stock and
Series D Preferred Stock rank equally as to dividends. The
Company has accrued and declared on the outstanding shares of
Series C Preferred Stock and Series D Preferred Stock, but has
not paid as of December 31, 1998, dividends which were due and
payable as of December 31, 1994 totaling approximately $152,000
and approximately $152,000, respectively. The Company has accrued
on the outstanding shares of Series C Preferred Stock and Series
D Preferred Stock, but has not declared or paid as of December
31, 1998, dividends from January 1, 1995 through December 31,
1998 totaling approximately $1,175,000 and approximately
$1,075,000, respectively. 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.
Note 11 - Stock Options, Warrants and Other Compensation
The Company maintains a stock option plan (the "Stock Option
Plan") for employees which provides for the issuance of both
incentive and nonqualified stock options to purchase shares of
<PAGE 71>
Common Stock at exercise prices not less than the fair market
value of the Common Stock on the date of grant. Options
outstanding vest over varying time periods, ranging from being
fully vested upon issuance to being fully vested in March 1998,
in accordance with the individual's stock option agreements.
These options expire up to ten years from the date of grant. At
December 31, 1998 and 1997 the Company has reserved 5,250,000
shares for the exercise of options granted under the Stock Option
Plan. Transactions related to the Stock Option Plan were as
follows:
<PAGE 72>
Weighted Weighted
Average Average
Exercise Exercise
Price Per Price Per
1998 Share 1997 Share
____ _________ ____ _________
Options
Outstanding at
Beginning of Year 1,505,406 $3.12 1,523,906 $3.12
Options granted -- -- -- --
Options exercised -- -- -- --
Options canceled -- $3.12 18,500 $2.78
__________ _________
Options
Outstanding at end
of year 1,505,406 $3.12 1,505,406 $3.12
========= =========
At December 31, 1998, all options were exercisable under the
Stock Option Plan. Significant option groups outstanding at
December 31, 1998 were as follows:
Weighted
Average Weighted
Exercise Price Average
Per Share of Remaining
Options Options Contractual
Outstanding Outstanding Life of
and Exercise Price and Options
Grant Dates Exercisable Range Exercisable Outstanding
___________ ___________ ___________ ___________ ___________
Pre-1993 392,281 $7.75 to $18.00 $8.46 1 years
1994 583,125 $2.3125 $2.31 6 years
1996 530,000 $0.0625 to $0.08 $0.07 8 years
_________
Total 1,505,406
=========
The Company has determined that it will continue to account for
employee stock-based transactions under APB No. 25. Accordingly,
no compensation cost has been recognized for options issued with
an exercise price equal to the market value of the Common Stock
at the date of grant. The Company has adopted the disclosure-only
provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 defines a fair value method of
accounting for stock options and other equity instruments. Under
the fair value method, compensation cost is measured at the grant
date based on the fair value of the award and is recognized over
the service period, which is usually the vesting period. The
Company believes that had compensation cost been determined based
on the fair value at the grant dates consistent with the
provisions of SFAS No. 123 there would have been no material
effect on the Company's
<PAGE 73>
net loss and net loss for common stockholders per common share
for the years ended December 31, 1998 and 1997. No options were
granted during the years ended December 31, 1998 and 1997.
Prior to 1997, the Company's President and Chief Executive
Officer was issued an irrevocable letter of credit in the amount
of $62,500 to be paid in certain events, including remaining
employed by the Company through September 11, 1997, which amount
was recognized as compensation expense over a one year period
ending on such date and paid to the Company's President and Chief
Executive Officer at the end of such period. The Company's
President and Chief Executive Officer is entitled to a severance
payment of $250,000 in certain events, as specified in his
employment agreement with the Company. Due to the uncertainty of
such severance payment being earned, the Company has not accrued
for such cost.
The Company issues warrants on a one for one basis, from time to
time, for the purchase of shares of Common Stock. The exercise
prices of the warrants are no less than the fair market values of
the Common Stock on the dates of grant. The estimated fair
market value of the warrants are measured on the date of grant
(measurement date), if any, and accounted for as part of the
related transaction.
Transactions related to stock purchase warrants are summarized
and more fully discussed below:
Exercise Price Exercise Price
1998 Range 1997 Range
____ ______________ ____ _______________
Warrants outstanding
at beginning
of year 182,813 $3.00 to $16.03 343,442 $3.00 to $16.03
Warrants expired or
Canceled 4,063 $6.76 160,629 $4.00 to $16.00
_____ _______
Warrants outstanding
at end of year 178,750 $3.00 to $16.03 182,813 $3.00 to $16.03
======= =======
An equal number of shares of Common Stock have been reserved for
future issuance in connection with the warrants. No warrants were
issued or exercised in 1998 or 1997. All warrants outstanding at
December 31, 1998 are exercisable.
Note 12 - Income Taxes
The Company has not provided for any tax benefit for net
operating losses incurred because realization is not more likely
than not. At December 31, 1998, the Company has net operating
loss carryforwards for income tax purposes of approximately
$52,640,000 that expire through the year 2013. In total, the
Company has deductible temporary differences for differences
between the reported amounts and the tax basis of its assets and
liabilities of approximately $32,743,000. The difference between
the reported amounts and the tax basis principally relates to
certain start-
<PAGE 74>
up costs capitalized for tax purposes, allowances for amounts not
collectible under financing agreements and other receivables,
accrued expenses and different methods of depreciation. For
financial reporting purposes, a valuation allowance has been
recognized to completely offset the deferred tax assets related
to the carryforwards and deductible differences. The change in
valuation allowance during 1998 relates primarily to net
operating losses generated for the year.
Under Section 382 of the Internal Revenue Code of 1986, as
amended (the "Tax Code") if a loss corporation has an "ownership
change" (as defined in the Tax Code) within a designated testing
period, its ability to use its net operating losses is subject to
certain limitations. The Company has had various ownership
changes for Section 382 purposes which limit the amount of pre-
April 9, 1993 losses that may be utilized annually to offset
taxable income. Net operating losses subject to an annual
limitation as of April 9, 1993 amounted to approximately
$17,000,000. Losses after April 9, 1993 totaling approximately
$35,640,000 are also subject to such limitation as of the date of
this filing. There can be no assurance that a future ownership
change will not occur or that a past event will be determined to
not be an ownership change which could further limit the
utilization of the Company's net operating losses during future
periods, nor can there be any assurance that operations of the
Company will generate taxable income in future years so as to
realize a tax benefit from such net operating losses.
Note 13 - Other Commitments and Contingencies
Leases
Future minimum lease payments at December 31, 1998 are
approximately $5,000 under a noncancelable operating lease for
the Company's office facilities.
Rental expenses under operating leases amounted to approximately
$8,000 and approximately $65,000 in 1998 and 1997, respectively.
Other Litigation
See Note 3 for a discussion of litigation related to AMGAM and
AGRM.
Prior to 1997, 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 Company has filed answers in four actions.
Judgment in one of the actions has been taken against co-
defendants and the lessor's claim has been satisfied. In February
1998, judgment
<PAGE 75>
was taken against the Company in another action in the
approximate amount of $591,000. The Company is presently
considering its options regarding such judgment. If undisturbed,
the judgment would have a material adverse effect on the
Company's business and financial condition. The third action has
been stayed to permit arbitration between the plaintiff and one
of the defendants. Although the Company has filed an answer in
the fifth action to the cross-claims of Hughes Properties, Inc.
and Fitzgeralds Reno, Inc., the other defendants in such 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
facts available on this matter, is unable to predict the outcome
of these remaining suits. However, should the plaintiffs prevail,
these suits would have a material adverse effect on the Company's
business and financial condition. If the judgment is undisturbed
or the plaintiffs in the remaining suits prevail, the Company
would then need to pursue a formal plan of reorganization or
liquidation.
The lawsuits filed against the Company by the five lessors of the
Harolds Club property and cross-claims filed against the Company
by co-defendants will be dismissed upon the closing of the
pending sale of the Harolds Club. However, there can be no
assurance that such sale will close (see Note 7).
On May 29, 1998, Richard C. Breeden, Trustee for The Bennett
Funding Group, Inc., et. al., filed suit against the Company in
the United States Bankruptcy Court, Northern District of New York
(Bankruptcy Case No. 96-61376, Adversary Proceeding No. 98-
70465A). The plaintiff alleges that payments made by The Bennett
Funding Group, Inc. and related entities (collectively,
"Bennett") to the Company between March 29, 1990 and March 29,
1996, collectively totaling approximately $70,155,000 (the
"Transfers"), were actual or constructive fraudulent transfers by
Bennett. In the alternative, the plaintiff alleges that all or
some of the Transfers were loans by Bennett to the Company and
are currently due and payable on demand. The plaintiff is seeking
payment by the Company of the amount of the Transfers, accrued
and unpaid interest, attorneys fees and costs. As discovery and
depositions have not yet commenced, outside counsel to the
Company is unable to predict the outcome of this lawsuit.
However, should the plaintiff prevail, this litigation 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.
A formal plan of reorganization or liquidation would generally
result in the sale of the Company's assets to satisfy outstanding
obligations. There can be no assurance that if either action is
required to be pursued that all such obligations would be
completely satisfied. Further, in the event of either action, it
is unlikely that the stockholders of the Company will recover any
of their investment in the Company.
In addition to the items set forth above, the Company is involved
in other legal proceedings and claims of various types. While
any litigation contains an element of uncertainty, it is the
opinion of management, after consultation with counsel, that the
outcome of each such other proceeding or claim which is pending
or known to be threatened, or all of them combined, can be
<PAGE 76>
successfully defended or resolved. In addition, management is
unable, with any degree of certainty, to predict the outcome, or
to estimate the amount of, any liability, if any, that may result
from these actions. However, management believes that none of
such other proceedings or claims will have a material adverse
effect on the Company's business or financial condition.
<PAGE 77>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Company caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
American Gaming & Entertainment, Ltd.
Date: 4/14/99 By: J. DOUGLAS WELLINGTON
____________________ _________________________
J. Douglas Wellington
President and
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.
J. DOUGLAS WELLINGTON Date: 4/14/99 PAUL L. PATRIZIO Date: 4/14/99
___________________________________ _______________________________
J. Douglas Wellington, Paul L. Patrizio,
President and Chairman of the Board of Directors
Chief Executive Officer, General
Counsel and Secretary, Principal
Financial Officer and Principal
Accounting Officer and Director
WILLIAM R. RAFFERTY Date: 4/14/99
____________________________________
William R. Rafferty, Director
<PAGE 78>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION PAGE
_______ ___________ ____
3.1 Restated Certificate of Incorporation *
3.2 Certificate of Amendment of Restated Certificate
of Incorporation *
3.3 Bylaws, as amended *
4.1 Specimen Common Stock Certificate *
10.1 Stock Option Plan *
10.2 First Amendment to Employment Agreement dated May 12, 1998
between the Company and J. Douglas Wellington, together
with Employment Agreement dated September 12, 1996 between
the Company and J. Douglas Wellington *
10.3 Charter Agreement dated as of February 17, 1995 between the
Company and President Mississippi Charter Corporation *
10.4 First Amendment to Charter, amending the Charter dated as of
February 17, 1995, made and entered into November 6, 1998
(effective as of December 1, 1997) by President Mississippi
Charter Corporation and the Company, with the concurrence of
AMGAM Associates, American Gaming and Resorts of Mississippi,
Inc., the Official Committee of Unsecured Creditors of AMGAM
Associates, the Official Committee of Unsecured Creditors of
American Gaming and Resorts of Mississippi, Inc., and Shamrock
Holdings Group, Inc. 81
10.5 Preferred Ship Mortgage dated January 14, 1994, granted by
American Gaming Corporation to Ship Mortgage, L.P., *
10.6 First Amendment of Preferred Ship Mortgage dated July 26, 1994
from American Gaming Corporation to Ship Mortgage, L.P. *
10.7 Assumption and Second Amendment of Preferred Ship Mortgage
dated January 31, 1995 made by the Company and executed by
American Gaming and Resorts of Mississippi, Inc. in favor of
Ship Mortgage, L.P. *
10.8 First Preferred Ship Mortgage, dated May 6, 1994 granted by
American Gaming Corporation to the Company *
10.9 First Amendment to First Preferred Ship Mortgage dated
July 28, 1994 from American Gaming Corporation to the Company *
<PAGE 79>
10.10 Second Amendment to First Preferred Ship Mortgage dated
December 15, 1994 granted by American Gaming and Resorts of
Mississippi, Inc. to the Company, together with Assignment
of First Preferred Ship Mortgage dated December 15, 1994 from
the Company to Bennett Holdings, Inc. *
10.11 Assumption and Third Amendment of First Preferred Ship
Mortgage dated as of January 31, 1995 made by the Company
and executed by American Gaming and Resorts of Mississippi,
Inc. in favor of Bennett Holdings, Inc. *
10.12 Agreement and Plan of Merger dated November 10, 1994 by and
between the Company, American Gaming and Resorts of Mississippi,
Inc., AMGAM Associates and American Gaming Corporation *
10.13 Settlement Agreement dated as of August 21, 1998 by and
between the Company, AMGAM Associates, American Gaming and
Resorts of Mississippi, Inc., Shamrock Holdings Group, Inc.,
Bennett Management and Development Co., the Official Committee
of Unsecured Creditors of AMGAM Associates, and the Official
Unsecured Creditors Committee of American Gaming and Resorts of
Mississippi, Inc. *
10.14 Irrevocable Proxy and Consent Agreement dated as of August 23,
1996 by and between Paul L. Partridge, Patrick F. Daly,
James A. Everatt, Charles E. Reisert, Jr., Eric C. Jackson,
the Company and RSR, LLC *
10.15 Trust Agreement dated as of August 23, 1996 by and between
the Company and NBD Bank, N.A. *
10.16 Assignment and Transfer Agreement dated as of March 28, 1996
by and between the Company, American Heartland Corporation and
Big Red Keno, Ltd. *
10.17 Agreement to Restructure and Cancel Debt dated as of
April 12, 1995 by and between Bennett Management and
Development Company and the Company *
10.18 Assignment of Charter Agreement and Collateral Assignment
Agreement dated as of April 13, 1995 by and between the Company
and Bennett Holdings, Inc. *
10.19 Security Agreement dated April 12, 1995 by and between
Bennett Management and Development Company and the Company. *
<PAGE 80>
10.20 Amendment to Agreement to Restructure and Cancel Debt and
Assignment of Charter Agreement and Collateral Assignment
executed on July 10, 1995 by and between the Company, Bennett
Management and Development Company and Bennett Holdings, Inc. *
10.21 Agreement dated as of August 15, 1995 by and between Bennett
Holdings, Inc. and Emerald Gaming, Inc. *
10.22 Exclusive Management Agreement dated as of August 15, 1995
by and between Bennett Holdings, Inc. and Emerald Gaming, Inc. *
10.23 Letter Agreement dated September 26, 1996 between Shamrock
Holdings Group, Inc. and the Company *
10.24 Letter agreement dated September 20, 1994 by and between
Bennett Holdings, Inc. and the Company *
10.25 Letter agreement dated November 5, 1997 by and between
Shamrock Holdings Group, Inc. and the Company *
10.26 Letter agreement dated October 21, 1998 by and between
Shamrock Holdings Group, Inc., Bennett Management and
Development Co., AMGAM Associates, American Gaming and
Resorts of Mississippi, Inc., and the Company *
11 Statement re computations of per share earnings 92
21 List of Subsidiaries 93
23 Consent of Deloitte & Touche LLP 94
27 Financial Data Schedule 95
* Incorporated by reference.
<PAGE 81>
Exhibit 10.4
FIRST AMENDMENT TO CHARTER
This Amendment (the "Amendment"), amending the Charter dated
as of February 17, 1995 (the "Charter") between American Gaming &
Entertainment, Ltd. ("AGEL"), owner, and President Mississippi
Charter Corporation ("Charterer"), is made and entered into this
30th day of October, 1998, (effective as of December 1, 1997), by
Charterer, on the one hand, and AGEL, as owner with the
concurrence of the following parties (hereinafter sometimes
referred to collectively as the "AmGam Group"), on the other
hand: AmGam Associates, a Mississippi partnership ("AmGam"),
American Gaming & Resorts of Mississippi, Inc., a Mississippi
corporation ("AGRM"), the Official Committee of the Unsecured
Creditors of AmGam, the Official Committee of the Unsecured
Creditors of AGRM, AGEL and Shamrock Holdings, Inc. (formerly
known as Bennett Holdings Group, Inc.) ("Shamrock").
WHEREAS, pursuant to the Charter, Charterer chartered from
AGEL the vessel known as the Gold Coast Barge, U.S.O.C. No.
995650;
WHEREAS, Charterer desires to amend the Charter as
hereinafter set forth; and
WHEREAS, the parties have entered into a letter agreement
dated October 22, 1997 setting forth the financial terms of this
Amendment, agreeing to settle certain litigation, and setting
forth other understandings among the parties (the "Term Sheet");
WHEREAS, this Term Sheet has been approved by the United
States Bankruptcy Court for the Northern District of New York and
the United States Bankruptcy Court for Southern District of
Mississippi.
WHEREAS, the members of the AmGam Group have proposed to
settle all disputes among themselves pursuant to an agreement
dated November 11, 1996 (the "Global Settlement");
NOW THEREFORE, in consideration of the foregoing and of the
representations, warranties and covenants in this Amendment and
in the Charter, and for other good and valuable consideration set
forth in the Term Sheet, the parties agree that the Charter shall
be amended to conform with provisions of the Term Sheet as
follows:
DEFINITIONS
Capitalized terms used herein and not otherwise defined or
redefined shall have the meanings set forth in the Charter. The
following terms, however, shall be defined for purposes of this
Amendment and for purposes of the Charter provisions that survive
this Amendment as follows:
<PAGE 82>
1. The term "Owner" as used in this Charter shall refer
to AGEL.
2. The term "Charter" as used hereinbelow and in the
Charter shall hereinafter refer to the Charter, as it has been
amended by this Amendment. Any reference to the Charter in the
Charter itself, whether directly or through the use of words such
as "herein," shall refer to the Charter as amended by this
Amendment.
3. The term "Closing Date" shall mean the date of
execution of this Amendment.
4. The term "Payee" shall refer to the law firm of
Rimmer, Rawlings, MacInnis & Hedglin, in its capacity as the
escrow agent for the escrow account of AmGam established pursuant
to the Order of the Bankruptcy Court dated April 28, 1996 (as
amended on August 1, 1996), or such other person or entity
designated by the Bankruptcy Court or designated to Charterer by
the Owner in writing.
I. CHARTER PERIOD
Section 2 of the Charter shall be amended by deleting the
entire Section 2 and substituting, in lieu thereof, the
following:
The amended charter period for the Vessel shall extend from
December 1, 1997 until April 15, 2000, unless earlier terminated
because the Vessel has been sold to Charterer or a third party
(the "Charter Period"). The date of the expiration of the
Charter Period shall be referred to herein as the "Charter
Expiration Date." Upon the Charter Expiration Date, unless the
Vessel shall have been purchased by Charterer pursuant to Section
15 of the Charter (as amended by this Amendment), the Vessel
shall be returned to the Owner in accordance with the terms of
Section 13 of the Charter.
II. CHARTER HIRE AND INITIAL PAYMENT
Section 3 of the Charter shall be amended by deleting the
entire Section 3 and substituting, in lieu thereof, the
following:
(a) On the Closing Date, Charterer shall pay the Payee
the sum of One Million, Five Hundred Twenty-Five Thousand Dollars
<PAGE 83>
($1,525,000.00) representing past due sums pursuant to the
original charter and in addition thereto, all monthly Charter
Hire payments that have accrued since December 1, 1997, up until
the Closing Date. In connection therewith, the parties shall
execute the Agreement of Release attached hereto as Exhibit A.
(b) The Charter Hire owed by Charterer under the Charter
for each month of the Charter Period shall be Two Hundred Fifteen
Thousand Dollars ($215,000.00). The Charter Hire for any partial
calendar month during the Charter Period shall be equal to Two
Hundred Fifteen Thousand Dollars ($215,000.00) multiplied by a
fraction the numerator of which is the number of Charter Period
days in such partial month and the denominator of which is the
total number of days in such month. From and after the Closing
date, the Charter Hire for each month shall be paid prior to the
tenth of the month.
(c) From and after the Closing date, if the Charter Hire
in any particular month is not paid by the tenth calendar day of
such month, then Charterer shall pay to Payee a late fee of
$21,500, together with the Charter Hire for such month.
III. INSURANCE
Subsection (a) of Section 5 of the Charter shall be amended
to delete Subsection 5(a) and to substitute the following
language prior to the "provided however":
(a) Charterer shall obtain and maintain during the
Charter Period, at Charterer's sole cost and expense, insurance
in such amounts covering the Vessel and all equipment aboard the
Vessel against such risks as Owner shall reasonably determine to
be desirable to fully protect its economic interests in the
Vessel (which amounts shall in no event be less than $9,000,000,
provided that the value survey submitted to Charterer's
underwriter supports such value to the reasonable satisfaction of
such underwriter), and shall obtain and maintain during the
Charter Period at Charterer's sole cost and expense general
liability and such other insurance policies with respect to the
Vessel and the operation to be conducted on the Vessel and at the
Dockage Site, and in such amounts, as Charterer shall reasonably
determine to be necessary or appropriate. In no event shall the
amount of general liability insurance be less than $12,000,000.
Both the Owner and Charterer shall be named as insureds with
waiver of subrogation under the general liability policies (and
such other policies as Charterer shall deem appropriate) and as
loss payees under all other insurance policies so obtained and
maintained. Charterer's responsibility for the cost of the
insurance required to be obtained and maintained under this
Section 5 shall for the cost of the insurance required to be
obtained and maintained under this Section 5 shall commence upon
delivery of the Vessel to Charterer at the Delivery Site on the
Commencement Date.
<PAGE 84>
IV. REPRESENTATIONS AND WARRANTIES
Section 6(b) of the Charter shall be amended to add a new
paragraph (xi), which shall read as follows:
(xi) Except as disclosed on Exhibit B to this Amendment, (A)
Charterer is not aware of nor has it received any notice, written
or oral, by any governmental agency or entity that an order or
directive has been issued or will be issued relating to any known
condition or defect with respect to the Vessel; (B) Charterer is
unaware of any condition or defect that may result in a claim for
a breach of the representations and warranties of Owner under
Section 6(a) of the Charter, other that those items released
pursuant to the release attached hereto as Exhibit A; and (C)
following the date hereof, Charterer will disclose to Owner each
and every notice, written or oral, by any governmental agency or
entity advising that an order or directive has been or will be
issued relating to a breach of any representation and warranty
under Section 6(a) hereof.
V. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 8(a) shall be amended to add the following clause at
the end of the sentence comprising Section 8(a) of the Charter,
to read as follows:
"; provided, however, that Owner shall be responsible for
any breach of the representations and warranties of Owner under
Section 6(a) of the Charter only to the extent that such breach
was not known to Charterer on the Closing Date. Breaches of
representations and warranties that were known to Charterer on or
before the Closing Date are waived and released to the fullest
extent of the law."
VI. REDELIVERY
The first sentence of Section 13(a) shall be deleted in its
entirety, and the following shall be substituted in lieu thereof:
(a) Subject to Charterer's exercise of the Purchase
Option set forth in Section 15 of the Charter (as amended by this
Amendment), Owner shall cause the Vessel (other than the
Electrical Equipment, the Fire Pump and the Transition Equipment)
to be removed from the Dockage Site no later than ten (10)
business days after the Charter Expiration Date.
Section 13(b) shall be amended to read as follows:
Upon redelivery of the Vessel, the Owner may require that
the Vessel be surveyed by a qualified independent marine surveyor
<PAGE 85>
mutually acceptable to the Owner and the Charterer. Charterer
shall reimburse Owner for one-half of the reasonable costs of the
marine survey obtained pursuant to this Section 13(b) up to a
maximum reimbursement of Five Thousand ($5,000.00) Dollars. In
addition to Charterer's obligations pursuant to Sections 9 and 11
of the Charter, which shall remain intact, Charterer shall be
obligated to redeliver the Vessel in the same condition that
Charterer last used the Vessel in its normal business operations.
A new section 13(c) shall be added as follows:
(c) On February 1, 2000 (assuming the Charter has not
been terminated prior thereto), Charterer shall establish an
escrow account, and shall escrow up to $500,000.00 of the Charter
Hire due from February 1, 2000 until the end of the Charter
Period (the "Removal Escrow"), to fund Owner's share of the cost
of the removal of the Vessel at the termination of the Charter
Period. The Charterer shall fund its equal share of the
Removal Escrow concurrently with Owner. If the amounts held in
the Removal Escrow are greater than the cost of the removal of
the Vessel under Section 13(a), then any excess shall be paid to
Owner and Charterer equally upon the removal of the Vessel in
accordance with Section 13(a).
A new Section 13(d) shall be added to the Charter, to read,
in its entirety, as follows:
(d) Upon termination of the Charter, for any reason (i)
Charterer shall leave in place all wiring, connections, switches,
splitters, couplings and junctions necessary to operate slot and
player tracking Systems; and (ii) Charterer shall be entitled to
remove from the Vessel all furniture, slot, tracking and other
equipment and all other property owned by Charterer;
VII. PURCHASE OPTION
Section 15 shall be deleted in its entirety, and a new
Section 15 shall be substituted in lieu thereof to read as
follows:
Section 15. Purchase Option. At any time during the
Charter Period, Charterer shall have the right to make a written
offer to purchase the Vessel, which offer shall be addressed to
every member of the AmGam Group, or their assigns. The AmGam
Group (or their assigns) shall have the right to accept or reject
the offer within thirty days receipt of the written notice
from Charterer. Charterer's written offer shall state "The AmGam
Group shall have the right to accept or reject this offer within
thirty days of receipt of this written notice from Charterer, and
if it this written offer is not rejected in 30 days, it is deemed
accepted." The offer shall contain the following language:
<PAGE 86>
"If the Charterer delivers a written offer containing
the foregoing language and if the AmGam Group does not
reject the offer within 30 days of receipt of the
written offer, then such offer shall be deemed to have
been accepted."
Any rejection shall be communicated in writing. Upon
acceptance, the parties shall take all actions necessary or
appropriate (including the cancellation of any liens that members
of the AmGam Group shall have) to cause Charterer to receive a
good and merchantable title to the Vessel, free and clear of all
liens and encumbrances.
VIII. ASSIGNMENT
Section 17 of the Charter shall be amended by deleting
Section 17 in its entirety and substituting in lieu thereof, the
following:
Section 17. Assignment of Sale of Barge.
(a) The Charter, the right to receive payments
thereunder, or any other interest therein, may be assigned by
individual members of the AmGam Group upon the written consent of
Charterer, which consent shall not be unreasonably withheld;
provided, however, that the assignee must assume in writing all
of the assignor's obligations under the Charter (including
without limitation, Owner's indemnification obligations pursuant
to Section 8 of the Charter). No assignment shall be permitted
unless the transferring party and the transferee shall have
received all governmental approvals, consents and actions
necessary to effectuate such Transfer, and such Transfer shall
not unreasonably disturb Charterer's peaceful enjoyment of the
Vessel during the Charter Period. Any assignment of a percentage
interest in the Charter must also include the sale of the same
percentage interest in the Vessel pursuant to Section 17(b), and
the "Sale Notice" provided for in Section 17(b) shall include the
terms and conditions of the assignment of the Charter.
(b) The Vessel, or any interest therein, may be sold
subject to the Charter at any time during the Charter Period;
provided, however, that Charterer shall have the first right of
refusal with respect to any such sale. Notice of a proposed sale
shall be provided to Charterer by registered mail, setting forth
the name of the proposed transferee, the price to be paid and any
other relevant terms of the proposed transaction (a "Sale
Notice"). Charterer shall have the right, exercisable within
thirty days of the date that a Sale Notice is received, (a) to
purchase only the Vessel, or any interest therein, on the same
terms and conditions set forth in the Sale Notice, in which case
the Charter shall remain outstanding, or (b) to purchase both the
interest in the
<PAGE 87>
Vessel and the interest in the Charter proposed to be
transferred. If Charterer does not exercise its right of first
refusal, then the proposed transfer can be effected on the same
terms and conditions contained in the Sale Notice within sixty
days of the termination of the thirty-day period during which
Charterer had the right to exercise its right of first refusal.
If the Vessel, or such interest therein, is not sold within such
sixty-day period, then the proposed sale cannot be consummated
without giving Charterer another Sale Notice and allowing
Charterer to exercise its right of first refusal.
(c) The AmGam Group shall structure any settlement among
the members of the AmGam Group so that, if Charterer exercises
its rights to purchase the Vessel (or portion thereof) pursuant
to this Section 17, Charterer shall receive a good and
merchantable title to the Vessel (or portion thereof), free and
clear of all liens or encumbrances.
IX. NOTICES
Section 19 of the Charter shall be amended to provided for
notice as follows:
If to Charterer:
President Mississippi Charter Corporation
c/o President Casinos, Inc.
800 North First Street
St. Louis, Missouri 63102
Fax: (314) 622-3049
Attention: John S. Aylsworth
With a copy to;
Virginia Boulet
Phelps Dunbar, L.L.P.
400 Poydras Street
New Orleans, Louisiana 70130
If to Owner, to all of the following:
American Gaming & Entertainment, Ltd.
c/o Douglas Wellington
1 Woodland Avenue
Paramus, New Jersey 07652
with a copy to:
Robert A. Byrd
145 Main Street
Biloxi, Mississippi 39530
<PAGE 88>
AmGam Associates and American Gaming & Resorts of Mississippi,
Inc.
c/o John Hedglin
Rimmer, Rawlings, MacInnis & Hedglin, P.A.
1290 Deposit Guaranty Plaza
Jackson, Mississippi 39201
The Official Committee of the Unsecured Creditors of AmGam
Associates
c/o T. Glover Roberts
Sheinfeld, Maley & Kay, P.C.
1700 Pacific Avenue
Suite 4400
Dallas, Texas 75201
The Official Committee of the Unsecured Creditors of American
Gaming & Resorts of Mississippi, Inc.
c/o William S. Boyd, III
Attorney at Law
1225 Thirty-First Avenue
Gulfport, Mississippi 39501
Shamrock Holdings, Inc.
c/o Richard Breeden
2 Clinton Square
Syracuse, New York 13202
with a copy to:
Brenda T. Rhoades
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201
WHEREFORE, this Amendment has been executed by the parties
as of the date first above mentioned.
PRESIDENT MISSISSIPPI CHARTER CORPORATION
JAMES A. ZWEIFEL
________________________
BY:
ITS:
PRESIDENT RIVERBOAT CASINO-MISSISSIPPI, INC.
JAMES A. ZWEIFEL
________________________
BY:
ITS:
<PAGE 89>
AMERICAN GAMING & ENTERTAINMENT, LTD.
J. DOUGLAS WELLINGTON
________________________
BY: J. Douglas Wellington
ITS: President & CEO
AMGAM ASSOCIATES
J. DOUGLAS WELLINGTON
________________________
BY: J. Douglas Wellington
ITS: Manager
AMERICAN GAMING & RESORTS OF MISSISSIPPI, INC.
J. DOUGLAS WELLINGTON
________________________
BY: J. Douglas Wellington
ITS: President
THE OFFICIAL COMMITTEE OF THE UNSECURED CREDITORS OF AMGAM
ASSOCIATES
T. GLOVER ROBERTS
________________________
BY: Glover Roberts
ITS: Counsel
THE OFFICIAL COMMITTEE OF THE UNSECURED CREDITORS OF AMERICAN
GAMING & RESORTS OF MISSISSIPPI, INC.
WILLIAM S. BOYD III
________________________
BY: William S. Boyd III
ITS: Counsel
SHAMROCK HOLDINGS, INC.
RICHARD C. BREEDEN
________________________
BY: Richard C. Breeden
ITS: President
<PAGE 90>
STATE OF Louisiana
PARISH OF Orleans
Personally appeared before me, the undersigned authority in
and for the said Parish and State, within my jurisdiction, the
within James A. Zweifel, who acknowledged that he is Executive
Vice President and Chief Financial Officer, respectively of
PRESIDENT MISSISSIPPI CHARTER CORPORATION, a Mississippi
Corporation, and that for and on behalf of said corporation, and
as its act and deed, he signed, sealed and delivered the above
and foregoing instrument for the purposes mentioned on the day
and year therein mentioned, after first having been duly
authorized by said corporation so to do.
GIVEN under my hand and official seal of office on this the
30th day of October, 1998.
Virginia Boulet
__________________
Notary Public
My Commission Expires:
for life
___________
STATE OF Louisiana
PARISH OF Orleans
Personally appeared before me, the undersigned authority in
and for the said County and State, within my jurisdiction, the
within James A. Zweifel, who acknowledged that he is Executive
Vice President and Chief Financial Officer, respectively of
PRESIDENT RIVERBOAT CASINO-MISSISSIPPI, INC., a Mississippi
Corporation, and that for and on behalf of said corporation, and
as its act and
<PAGE 91>
deed, he signed, sealed and delivered the above and foregoing
instrument for the purposes mentioned on the day and year therein
mentioned, after first having been duly authorized by said
corporation so to do.
GIVEN under my hand and official seal of office on this the
30th day of October, 1998.
VIRGINIA BOULET
________________
Notary Public
My Commission Expires:
for life
__________
STATE OF New Jersey
COUNTY OF Bergen
Personally appeared before me, the undersigned authority in
and for the said County and State, within my jurisdiction, the
within J. Douglas Wellington, who acknowledged that he is
President & CEO, respectively of AMERICAN GAMING & ENTERTAINMENT,
LTD., a Delaware Corporation, and that for and on behalf of said
corporation, and as its act and deed, he signed, sealed and
delivered the above and foregoing instrument for the purposes
mentioned on the day and year therein mentioned, after first
having been duly authorized by said corporation so to do.
GIVEN under my hand and official seal of office on this the
26 day of October, 1998.
MONICA SHAMON
_______________
Notary Public
My Commission Expires:
Dec. 8, 2002
<PAGE 92>
Exhibit 11
AMERICAN GAMING & ENTERTAINMENT, LTD.
COMPUTATION OF EARNINGS (LOSS) PER SHARE
December 31,
1998 1997
____ ____
Weighted average shares for
computation 12,532,102 12,532,102
========== ==========
Net loss $(4,853,000) $(7,173,000)
Dividends accrued and accretion
on preferred stock 1,867,000 1,866,000
_________ _________
Net loss for common stockholders $(6,720,000) $(9,039,000)
========= =========
Loss for common stockholders
per common share $(0.54) $(0.72)
====== ======
<PAGE 93>
Exhibit 21
AMERICAN GAMING & ENTERTAINMENT, LTD.
SUBSIDIARIES
STATE OF DATE OF
COMPANY INCORPORATION INCORPORATION
_______ _____________ ______________
American Gaming and Resorts
of Mississippi, Inc. Mississippi 04-27-92
Emerald Gaming, Inc. Nevada 06-10-94
<PAGE 94>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
American Gaming & Entertainment, Ltd.:
We consent to the incorporation by reference in the Registration
Statements of American Gaming & Entertainment, Ltd. on Form S-8
(Registration Nos. 33-57194, 33-80714 and 33-87790) of our report
dated April 14, 1999 (which report does not express an opinion on
the 1997 or 1996 financial statements), appearing in this Annual
Report on Form 10-KSB of American Gaming & Entertainment, Ltd.
for the year ended December 31, 1998.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
May 24, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN GAMING & ENTERTAINMENT, LTD FOR
THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 123,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,434,000
<PP&E> 12,681,000
<DEPRECIATION> 5,322,000
<TOTAL-ASSETS> 13,793,000
<CURRENT-LIABILITIES> 74,366,000
<BONDS> 0
0
15,870,000
<COMMON> 126,000
<OTHER-SE> (78,209,000)
<TOTAL-LIABILITY-AND-EQUITY> 13,793,000
<SALES> 0
<TOTAL-REVENUES> 445,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,361,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,937,000
<INCOME-PRETAX> (4,853,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,853,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,720,000)
<EPS-BASIC> (0.54)
<EPS-DILUTED> (0.54)
</TABLE>
