<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _______________ to ____________
Commission file number 0-19049
American Gaming & Entertainment, Ltd.
______________________________________________________________________________
(Exact name of small business issuer as specified in its charter)
Delaware 74-2504501
_____________________ _________________________________
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
51 Beech Road, Glen Rock, New Jersey 07452
______________________________________________________________________________
(Address of principal executive offices)
(609) 822-8505
___________________________
(Issuer's telephone number)
One Woodland Avenue, Paramus, New Jersey 07652
______________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No ___
Number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date.
Class Outstanding at September 30, 1999
____________________________ _________________________________
Common Stock, $.01 par value 12,532,102 shares
<PAGE 2>
AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1999 1998
_____________ ____________
ASSETS
Current Assets
Cash $ 280,000 $ 123,000
Restricted cash - Mississippi 5,011,000 4,320,000
Restricted cash - Rising Sun 1,158,000 1,119,000
Note receivable 4,006,000 -
Prepaid expenses 100,000 71,000
Other current assets 127,000 801,000
_____________ ____________
Total current assets 10,682,000 6,434,000
Asset held for sale: Casino barge
and improvements, subject to lease,
net of accumulated depreciation
of $5,243,000 - 1998
- 7,350,000
Furniture, fixtures and equipment,
net of accumulated depreciation
of $82,000 - 1999 and $79,000 - 1998
6,000 9,000
_____________ ____________
$ 10,688,000 $ 13,793,000
============= ============
See Notes to Consolidated Financial Statements
<PAGE 3>
AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1999 1998
____________ ___________
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Amounts due to related parties:
Accrued interest $ 22,849,000 $ 19,882,000
Dividends payable 3,003,000 2,553,000
Accrual for lease costs 2,701,000 2,701,000
Current portion of long term debt 34,592,000 34,592,000
____________ ___________
63,145,000 59,728,000
Accounts payable 81,000 86,000
Accrued payroll and related expenses 6,000 3,000
Accrued expenses and other current liabilities 138,000 2,241,000
Short term portion of estimated net liabilities
for subsidiaries in bankruptcy - 2,070,000
Deferred charter revenue - 10,238,000
____________ ___________
Total current liabilities 63,370,000 74,366,000
____________ ___________
Long term portion of estimated net liabilities
for subsidiaries in bankruptcy - 1,640,000
____________ ____________
63,370,000 76,006,000
____________ ____________
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 16,819,000 15,869,000
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 40,021,000 41,421,000
Cost of shares held in treasury (25,000) (25,000)
Accumulated deficit (109,624,000) (119,605,000)
____________ ___________
(52,682,000) (62,213,000)
____________ ___________
$ 10,688,000 $ 13,793,000
============ ==========
See Notes to Consolidated Financial Statements
<PAGE 4>
<TABLE>
AMERICAN GAMING & ENTERTAINMENT LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
___________________________ ____________________________
1999 1998 1999 1998
_____________ ___________ _____________ ____________
<S> <C> <C> <C> <C>
Revenues
Charter payments $ 11,743,000 $ - $ 11,743,000 $ -
Rising Sun - - - 445,000
_____________ ___________ _____________ ____________
Total revenues 11,743,000 - 11,743,000 445,000
_____________ ___________ _____________ ____________
Costs and expenses
Selling, general and administrative 158,000 397,000 750,000 1,283,000
Depreciation and amortization 1,000 336,000 525,000 1,009,000
Reversal of bad debt expense related to
lease expenses - - (2,785,000) -
Reversal of net liabilities for subsidiaries
in bankruptcy - - (75,000) -
_____________ ___________ _____________ ____________
Total costs and expenses 159,000 733,000 (1,585,000) 2,292,000
_____________ ___________ _____________ ____________
Operating income (loss) 11,584,000 (733,000) 13,328,000 (1,847,000)
_____________ ___________ _____________ ____________
Other income (expense)
Interest income 16,000 26,000 50,000 70,000
Interest expense (1,176,000) (1,353,000) (3,492,000) (4,137,000)
Net gain on sale of assets 7,000 - 95,000 -
_____________ ___________ _____________ ____________
Total other income (expense) (1,153,000) (1,327,000) (3,347,000) (4,067,000)
_____________ ___________ _____________ ____________
Net income (loss) 10,431,000 (2,060,000) 9,981,000 (5,914,000)
Dividends and accretion on preferred stock 467,000 467,000 1,400,000 1,400,000
_____________ ___________ _____________ ____________
Net income (loss) for common stockholders $ 9,964,000 $ (2,527,000) $ 8,581,000 $ (7,314,000)
============= =========== ============= ============
Income (loss) for common stockholders per
common share $ 0.80 $ (0.20) $ 0.68 $ (0.58)
============= =========== ============= ============
Weighted average number of common
shares outstanding 12,532,102 12,532,102 12,532,102 12,532,102
============= =========== ============= ============
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE 5>
AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months ended September 30,
1999 1998
____________ ____________
Operating Activities
Net income (loss) $ 9,981,000 $ (5,914,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Charter revenues (11,743,000) -
Restricted proceeds from investment - (445,000)
Depreciation and amortization 525,000 1,009,000
Accrued interest 3,492,000 4,199,000
Interest income from restricted cash (39,000) (30,000)
Reversal of previously recorded
interest expense - (62,000)
Reversal of bad debt expense related
to lease expenses (2,785,000) -
Reversal of net liabilities for
subsidiaries in bankruptcy (75,000) -
Net gain on sale of assets (95,000) -
Changes in operating assets and liabilities
Restricted proceeds from sale of barge (933,000) -
Other current assets (8,000) 78,000
Other non-current assets - (4,000)
Accounts payable, accrued expenses and
other current liabilities 181,000 721,000
____________ ____________
Net cash used in operating
activities (1,499,000) (448,000)
____________ ____________
Investing Activities
Proceeds from sale of barge 723,000 -
Proceeds from disposition of building 423,000 -
____________ ____________
Net cash provided by investing
activities 1,146,000 -
____________ ____________
Financing Activities
Proceeds from note receivable - barge 210,000 -
Proceeds from note receivable - keno assets 300,000 219,000
____________ ____________
Net cash provided by financing
activities 510,000 219,000
____________ ____________
Increase (decrease) in cash 157,000 (229,000)
Cash at beginning of year 123,000 381,000
____________ ____________
Cash at end of period $ 280,000 $ 152,000
============ ============
See Notes to Consolidated Financial Statements
<PAGE 6>
AMERICAN GAMING & ENTERTAINMENT, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited Consolidated Interim Financial
Statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. The unaudited Consolidated Interim Financial
Statements include the accounts of American Gaming &
Entertainment, Ltd. and its subsidiaries (collectively, the
"Company"). The unaudited Consolidated Interim Financial
Statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of the Company, all
adjustments (including normal recurring accruals) and disclosures
(including events occurring subsequent to September 30, 1999)
considered necessary for a fair presentation have been included.
Operating results for the three and nine month periods ended
September 30, 1999 may not be indicative of the results that may
be expected for the year ending December 31, 1999. For further
information, reference is also made to the Consolidated Financial
Statements contained in the Company's Annual Report on Form 10-
KSB for the year ended December 31, 1998 (the "1998 10-K").
The accompanying unaudited Consolidated Interim Financial
Statements have been prepared on a going concern basis, which
contemplates continuity of operations, realization of assets and
liquidation of liabilities in the ordinary course of business. As
further described in Note 2, the Company has sustained recurring
operating losses since its inception. The Company has also had a
history of insufficient liquidity and has been dependent upon its
largest stockholder, Shamrock Holdings Group, Inc. ("Shamrock"),
and certain related entities (The Bennett Funding Group, Inc.
("Bennett Funding") and Bennett Management and Development Corp.
("Bennett Management"), collectively with Shamrock, the "Bennett
Entities") for both working capital and project related
financing. As a result, the Company's available cash, recurring
losses, negative working capital, stockholders' deficiency,
defaults under its debt agreements, uncertainties relating to the
bankruptcies of Shamrock, Bennett Funding and Bennett Management
and securities fraud charges by the federal government against
Bennett Funding and Bennett Management raise substantial doubt
about the ability of the Company to continue as a going concern.
Management's plans concerning these matters are discussed in Note
2. The accompanying unaudited Consolidated Interim Financial
Statements do not include any additional adjustments that might
result from the outcome of these uncertainties.
NOTE 2: LIQUIDITY AND CONTINUATION OF BUSINESS
Given the Company's present financial and liquidity position and
the legal problems described above relating to the Bennett
Entities (see Note 1), the business of the Company is unlikely to
continue to be the ownership of equity interests in casino gaming
ventures. Additionally, the Company's ability to continue in
business is dependent upon numerous factors, discussed below.
<PAGE 7>
The Company had available cash of approximately $280,000 as of
September 30, 1999. The Company believes that such cash is
sufficient to fund the Company's operations, excluding the
Company's (a) obligations to Shamrock and, if applicable, Bennett
Management, and (b) contingent obligations to the Company's
President, through the second quarter of 2000, based on the
Company's current level of operations and projected expenditures.
Unless Shamrock agrees that the Company may retain some of the
funds recorded as restricted cash (see below), the Company does
not anticipate receiving additional operating 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. If Shamrock demands that such funds should be utilized
to repay indebtedness due to Shamrock, the Company would need to
pursue a formal plan of reorganization or liquidation.
As of September 30, 1999, the Company had recorded as restricted
cash approximately $1,158,000 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. 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
discussed below in Note 3, RSR has asserted certain claims
against the Company and has offered to release the Company from
such alleged claims in exchange for the RSR Interest and all
distributions received by the Company with respect to the RSR
Interest. As discussed in Note 3, the Company disputes such
claims and has rejected RSR's offer.
As of September 30, 1999, cash escrowed and to be distributed to
the Company pursuant to the confirmed joint plan of liquidation
(the "Mississippi Plan") of AMGAM Associates ("AMGAM") and
American Gaming and Resorts of Mississippi, Inc. ("AGRM"), each a
wholly-owned subsidiary of the Company, in the amount of
approximately $5,011,000 is also recorded as restricted cash. The
Company and the Bennett Entities agreed on October 21, 1998 that
any cash received by the Company pursuant to the Mississippi Plan
would be escrowed and disbursed only upon the order of the United
States Bankruptcy Court, Northern District of New York. Shamrock
has orally notified the Company that all such cash should be paid
to Shamrock to reduce the Company's indebtedness to Shamrock.
<PAGE 8>
The Company's ability to continue in business is also dependent
upon obtaining Shamrock's and, if necessary, Bennett Management's
agreement to modify, terminate or restructure on terms acceptable
to the Company all obligations due from the Company to Shamrock
and, if applicable, Bennett Management. However, there can be no
assurance the Company will be successful in those efforts. If the
Company is unsuccessful in these efforts, the Company would then
need to pursue a formal plan of reorganization or liquidation of
the Company.
Either reorganization or liquidation would generally result in
the sale of the Company's assets to satisfy outstanding
obligations. If either such action is necessary, all of the
Company's obligations would probably not be completely satisfied
and the stockholders of the Company would probably not recover
any of their investment in the Company.
For a discussion of other specific factors affecting the
Company's liquidity and continuation of business, see the 1998
10-K.
NOTE 3: SIGNIFICANT DEVELOPMENTS WITH RESPECT TO INVESTMENTS
Mississippi
As previously disclosed in the Company's Current Report on Form
8-K dated August 10, 1999, the Company sold the Gold Coast Casino
barge to The President Riverboat Casino-Mississippi, Inc. for
$6,827,500. Upon closing the Purchaser paid $1,000,000 and
delivered a promissory note (the "Note") in the amount of
$5,827,500 to an escrow agent, who will disburse all amounts paid
by the Purchaser pursuant to the Mississippi Plan. As previously
disclosed in the Company's Quarterly Report on Form 10-QSB for
the quarter ended June 30, 1999, on July 23, 1999, the United
States Bankruptcy Court, Southern District of Mississippi (the
"Mississippi Bankruptcy Court") confirmed the Mississippi Plan.
Pursuant to the Mississippi Plan, creditors of AMGAM and AGRM are
entitled to a specified percentage of (a) the cash currently
being escrowed in the AMGAM and AGRM bankruptcy estates and (b)
the cash to be paid under the Note. As a result of the
confirmation of the Mississippi Plan, as of July 23, 1999, the
Company set off "Short Term Portion of Estimated Net Liabilities
for Subsidiaries in Bankruptcy", totaling approximately
$3,635,000, against the "Restricted Cash - Mississippi" and "Note
Receivable" amounts (totaling approximately $2,024,000 and
$1,611,000, respectively) to be received by creditors of AMGAM
and AGRM other than the Company. Additionally, as a result of the
confirmation of the Mississippi Plan and the dismissal of an
adversary complaint filed by the Official Committee of Unsecured
Creditors of AMGAM Associates challenging the transfer of the
Gold Coast Barge from AGRM to the Company, and as discussed in
the 1998 10-K, as of July 23, 1999, the Company recognized
"Deferred Charter Revenue" of approximately $11,743,000 as
revenue.
In 1998, Shamrock orally notified the Company that any
distributions to the Company under the Mississippi Plan should be
paid to Shamrock to reduce the Company's indebtedness to
Shamrock.
<PAGE 9>
Indiana
Effective August 23, 1996, the Company transferred legal title to
the RSR Interest to NBD, as trustee. Additionally, at such time,
pursuant to an Irrevocable Proxy and Consent Agreement (the
"Proxy Agreement") 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. Pursuant to the
Proxy Agreement, RSR is currently obligated to purchase the RSR
Interest from NBD, for the benefit of the Company, at an average
appraised fair market value. Additionally, RSR and the Company
are currently obligated to close on the sale of the RSR Interest
at the lower of the two appraisal amounts, with the balance due
upon the completion of an independent third appraisal. The
Company has obtained an appraisal valuing the RSR Interest at $6
million. The Company understands that RSR has obtained an
appraisal that values the RSR Interest significantly lower.
On September 9, 1999, RSR alleged that the Company and its
principal stockholders fraudulently induced RSR and the Remaining
Members to enter into the operating agreement for RSR and the
Proxy Agreement by failing to disclose the existence or substance
of the securities fraud investigation by the federal government
against Bennett Funding and Bennett Management. RSR has offered
to release the Company from such alleged claims in exchange for
the RSR Interest and all distributions received by the Company
with respect to the RSR Interest. The Company has advised RSR
that it disclosed such federal investigation as soon as the
Company became aware of such investigation. The Company has
rejected RSR's offer and has filed suit against RSR in the
Superior Court of New Jersey, Law Division, Bergen County for
damages arising from RSR's failure to comply with the provisions
of the Proxy Agreement and purchase the RSR Interest.
NOTE 4: AMOUNTS DUE TO RELATED PARTIES AND LONG-TERM DEBT
The Company is delinquent in the payment of (i) interest due
under the Company's various loan agreements with Shamrock and
(ii) rent which was due under an operating lease between the
Company and Bennett Management (the "SCS Lease") with respect to
certain gaming vessels, which SCS Lease Shamrock orally
represented to the Company that Bennett Management, prior to its
bankruptcy filing, assigned to Shamrock. The Company has
therefore classified all indebtedness due to Shamrock as current
liabilities in the accompanying unaudited Consolidated Interim
Financial Statements. At September 30, 1999 and December 31,
1998, the Company had accrued for financial statement purposes
outstanding amounts due Shamrock of approximately $63,145,000 and
$59,728,000, respectively, including accrued interest of
approximately $22,849,000 and $19,882,000, respectively.
The above outstanding amounts due Shamrock also include
approximately $2,701,000 due under the SCS Lease and accrued
dividends of approximately $3,003,000 and $2,553,000 at September
30, 1999 and December 31, 1998, respectively, on the Company's
Series C Cumulative Preferred
<PAGE 10>
Stock ("Series C Preferred Stock") and Series D Cumulative
Preferred Stock ("Series D Preferred Stock").
The balance of accrued long-term debt due Shamrock at September
30, 1999 and December 31, 1998 is comprised of approximately (i)
$1,066,000, at the end of each period, related to a working
capital line of credit, (ii) $2,041,000, at the end of each
period, related to a term loan to assist the Company in financing
pertaining to a casino in Biloxi, Mississippi which the Company
owned, managed and operated in prior years (the "Gold Shore
Casino"), (iii) $384,000, at the end of each period, related to
the Company's utilization of slot machine sales proceeds, which
slot machines were beneficially owned by Bennett Management and
which slot machine proceeds Shamrock orally represented to the
Company that Bennett Management, prior to its bankruptcy filing,
assigned to Shamrock and (iv) $31,101,000, at the end of each
period, related to project financing for the Gold Shore Casino.
The accrued outstanding amount due Shamrock at September 30, 1999
represents approximately 99.6% of the Company's liabilities in
the accompanying unaudited Consolidated Interim Financial
Statements as of such date and is substantially in excess of the
Company's estimates of the fair value of the Company's assets.
The Company has entered into an agreement under which amounts
received by Shamrock will reduce the Company's indebtedness to
Shamrock. The Company has also 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.
NOTE 5: OTHER RELATED PARTY ISSUES
Shamrock, of which Richard C. Breeden, the bankruptcy trustee of
Bennett Funding and Bennett Management (the "Trustee") is the
sole stockholder, owns (i) 4,423,454 shares of Common Stock and
(ii) all of the Company's outstanding Series A Preferred Stock,
convertible into, and voting as, 1,399,565 shares of Common
Stock. Additionally, the Trustee owns (i) an additional 1,500,000
shares of Common Stock and (ii) all of the Company's outstanding
Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock, convertible as of September 30, 1999 into
1,063,129,442 shares of Common Stock. The Company does not have a
sufficient number of authorized shares of Common Stock to enable
the conversion of all of the Series C Preferred Stock, the Series
D Preferred Stock and the Series E Preferred Stock. On April 1,
1996 the Board of Directors voted to request the stockholders of
the Company to approve an amendment to the Company's Restated
Certificate of Incorporation increasing the number of authorized
shares of Common Stock to 500,000,000 shares no later than the
next annual meeting of the Company's stockholders. The Board of
Directors has not set a date for such annual meeting. Assuming
the Trustee converted as of September 30, 1999 that number of
shares of the Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock convertible into the total number of
the Company's presently authorized but unissued shares of Common
Stock (i.e. 37,467,898 shares), the Trustee, on behalf of the
estates of certain Bennett Entities and Shamrock, would own
approximately 86.8% of the total outstanding shares of Common
Stock and approximately 87.1% of the total voting power
represented by the total outstanding voting
<PAGE 11>
securities of the Company. Assuming the Company's stockholders
approve an amendment to the Company's Restated Certificate of
Incorporation increasing the number of authorized shares of
Common Stock to 500,000,000 shares and the Trustee converted as
of September 30, 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 Trustee as of such date), the Trustee, on behalf of the
estates of certain Bennett Entities and Shamrock, would own
approximately 98.7% of both the total outstanding shares of
Common Stock and the total voting power represented by the total
outstanding voting securities of the Company.
NOTE 6: RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (the
"FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This statement, which establishes accounting
and reporting standards for derivatives and hedging activities,
was to be effective for fiscal years beginning after June 15,
1999. In June 1999, the FASB issued SFAS No. 137, which defers
the effective date of SFAS No. 133 to fiscal quarters of all
fiscal years beginning after June 15, 2000. 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 Company is currently
evaluating the impact the adoption of SFAS No. 133 will have on
its financial position and results of operations.
NOTE 7: CONTINGENCIES
As disclosed in the 1998 10-K, the U.S. Department of Labor (the
"DOL") 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
Associates d/b/a Gold Shore Casino Associate Benefit Plan (the
"AMGAM Benefit Plan"). The DOL 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 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 U.S. Bankruptcy Code and the Mississippi Bankruptcy Court and
intends to use its best efforts to seek priority status under
such 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.
On August 17, 1999, the Company advised the DOL that, in the
AMGAM and AGRM bankruptcies, the Mississippi Bankruptcy Court
approved a procedure whereby all employees were advised to file a
proof of claim for all employee claims, including medical claims.
Claims totaling approximately $600,000 were filed by or on behalf
of medical providers and employees.
<PAGE 12>
Of such alleged claims, approximately $191,000 of employee claims
(substantially all of which the Company believes are medical
claims under the AMGAM Benefit Plan) were approved for payment as
priority claims under the Mississippi Plan. Such approved amounts
exceed the employee contributions collected under the AMGAM
Benefit Plan after March 28, 1995. As a result, the Company
requested that the DOL find that the rights of the employees
under the AMGAM Benefit Plan were sufficiently protected and
therefore close its investigation. The DOL has not yet responded
to the Company's request.
<PAGE 13>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations: Comparison of the three month periods
ended September 30, 1999 and September 30, 1998
Revenues
As a result of the confirmation of the Mississippi Plan and the
dismissal of an adversary complaint filed by the Official
Committee of Unsecured Creditors of AMGAM Associates challenging
the transfer of the Gold Coast Barge from AGRM to the Company,
and as discussed in the 1998 10-K, the Company recognized
"Deferred Charter Revenue" of approximately $11,743,000 as
revenue for the three months ended September 30, 1999. Cash
received from the charter of the Gold Coast Barge is recorded as
"Restricted Cash - Mississippi" in the accompanying unaudited
Consolidated Balance Sheets (see Note 2 to the unaudited
Consolidated Interim Financial Statements). No such amounts were
recorded for the three months ended September 30, 1998.
Costs and Expenses
Selling, general and administrative expenses were approximately
$158,000 for the three months ended September 30, 1999,
representing a decrease of approximately $239,000 or
approximately 60% when compared to the three months ended
September 30, 1998. Such decrease was primarily due to a decrease
of bad debt expense of approximately $173,000 related to the
Harolds Club in Nevada, which was sold in June 1999, a decrease
in legal fees of approximately $26,000 and a decrease in
accounting fees of approximately $13,000.
Depreciation and amortization costs were approximately $1,000 for
the three months ended September 30, 1999, compared to
depreciation and amortization costs of approximately $336,000 for
the three months ended September 30, 1998, as a result of the
sale of the Gold Coast Barge in August 1999.
Net interest expense for the three months ended September 30,
1999 was approximately $1,160,000, a decrease of approximately
$167,000 or approximately 13% compared to the three months ended
September 30, 1998. Interest expense decreased approximately
$177,000 while interest income decreased approximately $10,000
during the three months ended September 30, 1999 compared to the
three months ended September 30, 1998. Interest expense for the
three months ended September 30, 1998 includes interest on debt
of approximately $5,917,000 that was reclassified as deferred
charter revenue as of December 31, 1998.
For the three months ended September 30, 1999, the Company
recorded a net gain on sale of assets of $7,000, which amount
represents the reversal of accrued expenses relating to the GM&O
Building in Mobile, Alabama, which was sold in March 1999. No
such gain was recorded for the three months ended September 30,
1998.
<PAGE 14>
Results of Operations: Comparison of the nine month periods
ended September 30, 1999 and September 30, 1998
Revenues
As a result of the confirmation of the Mississippi Plan and the
dismissal of an adversary complaint filed by the Official
Committee of Unsecured Creditors of AMGAM Associates challenging
the transfer of the Gold Coast Barge from AGRM to the Company,
and as discussed in the 1998 10-K, the Company recognized
"Deferred Charter Revenue" of approximately $11,743,000 as
revenue for the nine months ended September 30, 1999. Cash
received from the charter of the Gold Coast Barge is recorded as
"Restricted Cash - Mississippi" in the accompanying unaudited
Consolidated Balance Sheets (see Note 2 to the unaudited
Consolidated Interim Financial Statements). No such amounts were
recorded for the nine months ended September 30, 1998.
The Company has not received any financial statement information
or payments relating to the RSR Interest for the nine months
ended September 30, 1999 and therefore has not recorded any
revenues attributable to the RSR Interest for the nine months
ended September 30, 1999. For the nine months ended September 30,
1998, the Company recorded revenues of approximately $445,000
attributable to the RSR Interest. Cash received from the Rising
Sun Project is recorded as "Restricted Cash - Rising Sun" in the
accompanying unaudited Consolidated Balance Sheets (see Note 2 to
the unaudited Consolidated Interim Financial Statements).
Costs and Expenses
Selling, general and administrative expenses were approximately
$750,000 for the nine months ended September 30, 1999,
representing a decrease of approximately $533,000 or
approximately 42% when compared to the nine months ended
September 30, 1998. Such decrease was primarily due to a decrease
of approximately $431,000 related to the Harolds Club in Nevada,
which was sold in June 1999, a decrease in insurance expense of
approximately $65,000, a decrease in legal fees of approximately
$29,000 and a decrease in accounting fees of approximately
$22,000.
Depreciation and amortization costs were approximately $525,000
for the nine months ended September 30, 1999, representing a
decrease of approximately $484,000 or approximately 48% when
compared to the nine months ended September 30, 1998, as a result
of the sale of the Gold Coast Barge in August 1999.
For the nine months ended September 30, 1999, the Company
recorded a reversal of bad debt expense related to lease expenses
of approximately $2,785,000 based on the sale of the Harolds Club
and a reversal of net liabilities for subsidiaries in bankruptcy
of approximately $75,000 based upon the sale of the Gold Coast
Barge and the anticipated distributions under the Mississippi
Plan (See Note 3 to the unaudited Consolidated Interim Financial
Statements). No such amounts were recorded for the nine months
ended September 30, 1998.
<PAGE 15>
Net interest expense for the nine months ended September 30, 1999
was approximately $3,442,000, a decrease of approximately
$625,000 or approximately 15% compared to the nine months ended
September 30, 1998. Interest expense decreased approximately
$645,000 while interest income decreased approximately $20,000
during the nine months ended September 30, 1999 compared to the
nine months ended September 30, 1998. Interest expense for the
nine months ended September 30, 1998 includes interest on debt of
approximately $5,917,000 that was reclassified as deferred
charter revenue as of December 31, 1998.
The Company recorded a net gain of approximately $55,000 for the
nine months ended September 30, 1999 related to the sale of the
GM&O Building in Mobile, Alabama. Additionally, for the nine
months ended September 30, 1999, the Company recorded a net gain
of $40,000 as the result of the settlement of a lawsuit brought
by the Company against the purchaser of one of the Company's keno
systems. The associated account receivable had been written off
in 1996. No such gains were recorded for the nine months ended
September 30, 1998.
Changes in Financial Condition, Liquidity and Capital Resources
As of September 30, 1999, the Company had no committed financing
arrangements and a working capital deficiency of approximately
$52,463,000. For a discussion of liquidity and capital resources,
see Note 2 to the unaudited Consolidated Interim Financial
Statements.
Risk Factors; Forward Looking Statements
Management's Discussion and Analysis contains forward-looking
statements regarding the Company's future plans, objectives and
expected performance. These statements are based on assumptions
that the Company believes are reasonable, but are subject to a
wide range of risks and uncertainties, and a number of factors
could cause the Company's actual results to differ materially
from those expressed in the forward-looking statements. These
factors include, among others, the uncertainties related to (i)
the Company's ability to obtain sufficient funds for its
operations, (ii) obtaining Shamrock's and, if necessary, Bennett
Management's agreement to modify, terminate or restructure on
terms acceptable to the Company all obligations due from the
Company to Shamrock and, if applicable, Bennett Management, and
(iii) the legal problems described above relating to certain
Bennett Entities (see Notes 1 and 2 to the unaudited Consolidated
Interim Financial Statements).
<PAGE 16>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a discussion of legal proceedings, see Note 7 to the
unaudited Consolidated Interim Financial Statements.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
For a discussion of defaults with respect to the Company's
indebtedness due to Shamrock, see Notes 2 and 4 to the unaudited
Consolidated Interim Financial Statements.
The Company has accrued and declared, but has not paid as of
September 30, 1999, dividends totaling approximately $152,000
which were due and payable on the outstanding shares of its
Series C Preferred Stock as of December 31, 1994. The Company has
accrued and declared, but has not paid as of September 30, 1999,
dividends totaling approximately $152,000 which were due and
payable on the outstanding shares of its Series D Preferred Stock
as of December 31, 1994.
Additionally, the Company has accrued, but has not declared or
paid as of September 30, 1999, dividends totaling approximately
$1,400,000 which were due and payable on the outstanding shares
of its Series C Preferred Stock from January 1, 1995 through
September 30, 1999. The Company has accrued, but has not declared
or paid as of September 30, 1999, dividends totaling
approximately $1,300,000 which were due and payable on the
outstanding shares of its Series D Preferred Stock from January
1, 1995 through September 30, 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 17>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Description
______________ ___________
11 Computation of Earnings Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K. The following report was filed by
the Company during the third quarter of 1999:
(1) Form 8-K dated August 10, 1999 with respect to the
sale of the Gold Coast Casino barge.
<PAGE 18>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
American Gaming & Entertainment, Ltd.
Date: 11/11/99 By: J. DOUGLAS WELLINGTON
___________________________________
J. Douglas Wellington
President and Chief Executive
Officer, and Principal Accounting
Officer
<PAGE 19>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION PAGE NO.
_______ ___________ ________
11 Computation of Earnings Per Share 20
27 Financial Data Schedule 21
<PAGE 20>
<TABLE>
EXHIBIT 11
AMERICAN GAMING & ENTERTAINMENT, LTD.
COMPUTATION OF EARNINGS (LOSS) PER SHARE
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
____ ____ ____ ____
<S> <C> <C> <C> <C>
Weighted average number
of shares for computation 12,532,102 12,532,102 12,532,102 12,532,102
========== ========== ========== ==========
Net income (loss) $10,431,000 $(2,060,000) $9,981,000 $(5,914,000)
Dividends and accretion
on preferred stock 467,000 467,000 1,400,000 1,400,000
_______ _______ _________ _________
Net income (loss) for common
stockholders $9,964,000 $(2,527,000) $8,581,000 $(7,314,000)
========== ============ ========== ============
Income (loss) for common
stockholders per common
share $0.80 $(0.20) $0.68 $(0.58)
===== ======= ===== =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF AMERICAN GAMING &
ENTERTAINMENT, LTD. FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 280,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,682,000
<PP&E> 88,000
<DEPRECIATION> 82,000
<TOTAL-ASSETS> 10,688,000
<CURRENT-LIABILITIES> 63,370,000
<BONDS> 0
0
16,820,000
<COMMON> 126,000
<OTHER-SE> (69,628,000)
<TOTAL-LIABILITY-AND-EQUITY> 10,688,000
<SALES> 0
<TOTAL-REVENUES> 11,743,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (1,585,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,492,000
<INCOME-PRETAX> 9,981,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,981,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,581,000
<EPS-BASIC> 0.68
<EPS-DILUTED> 0.68
</TABLE>
