SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal quarter ended September 30, 1996
Commission file No. 0-13530
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
American Bingo & Gaming Corp.
(Exact name of small business issuer as specified in its charter)
Delaware 74-2723809
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515 Congress Avenue, Suite 1200, Austin, Texas 78701
(Address of principal executive offices)
(512) 472-2041
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
Redeemable Common
Stock Purchase
Warrants
Common Stock $0.001 Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ]
As of October 18, 1996, the Registrant had 4,111,394 shares of its $.001 par
value Common Stock outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
American Bingo & Gaming Corp.
CONSOLIDATED BALANCE SHEET (Unaudited)
September 30, 1996
- --------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 714,226
Accounts and sundry receivables 121,643
Notes receivable - current portion, net (Note 2) 410,993
Other current assets 130,363
- --------------------------------------------------------------------------------
Total Current Assets 1,377,225
Property and Equipment, net (Note 3) 2,208,138
Other Assets
Notes receivable, net (Note 2) 653,608
Intangible assets, net (Note 4) 282,853
Licenses and other non-current assets, net 146,819
- --------------------------------------------------------------------------------
Total Other Assets 1,083,280
TOTAL ASSETS $4,668,643
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 69,291
Note payable (Note 5) 415,180
Accrued expenses 93,423
- --------------------------------------------------------------------------------
Total Current Liabilities 577,894
Deposit payable 30,000
Obligations under capital lease 91,725
Liability for acquisition (Note 6) 450,000
Shareholders' Equity
Common Stock, $.001 par value, authorized 20,000,000 shares,
issued and outstanding 4,111,394 shares 4,111
Preferred Stock, $.01 par value, authorized 1,000,000 shares,
no shares issued and outstanding --
Additional paid-in capital 9,997,408
Additional paid-in capital - warrants 1,026,750
Subscription notes receivable (100,500)
Retained earnings (accumulated deficit) (7,408,744)
- --------------------------------------------------------------------------------
Total Shareholders' Equity 3,519,025
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,668,643
================================================================================
See accompanying notes
1
<PAGE>
American Bingo & Gaming Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For Three Months Ended September 30, 1996 1995*
- --------------------------------------------------------------------------------
REVENUES:
Rental $491,256 $858,473
Other 423,484 208,152
------- -------
TOTAL REVENUES 914,740 1,066,625
DIRECT OPERATING COSTS:
Rent and supplies 252,882 410,033
Other direct operating costs 124,271 544,462
Depreciation and amortization 69,815 151,476
--------- ---------
TOTAL DIRECT OPERATING COSTS 446,968 1,105,971
- --------------------------------------------------------------------------------
OPERATING INCOME 467,772 (39,346)
% 51.1% (3.7%)
GENERAL & ADMINISTRATIVE EXPENSES 262,899 386,472
INTEREST INCOME, NET (43,554) (27,457)
- --------------------------------------------------------------------------------
INCOME BEFORE TAXES 248,427 (398,361)
PROVISION FOR INCOME TAXES (Note 7) -- --
- --------------------------------------------------------------------------------
NET INCOME $248,427 ($398,361)
================================================================================
EARNINGS PER SHARE $.06 ($.09)
================================================================================
Weighted average shares outstanding (Note 8) 4,111,394 4,216,305
* Reclassified for comparability.
See accompanying notes
2
<PAGE>
American Bingo & Gaming Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For Nine Months Ended September 30, 1996 1995*
- --------------------------------------------------------------------------------
REVENUES:
Rental $1,549,784 $1,790,280
Other 1,159,235 420,925
---------- -----------
TOTAL REVENUES 2,709,019 2,211,205
DIRECT OPERATING COSTS:
Rent and supplies 735,560 758,694
Other direct operating costs 554,667 805,647
Depreciation and amortization 209,800 242,598
---------- ----------
TOTAL DIRECT OPERATING COSTS 1,500,027 1,806,939
- --------------------------------------------------------------------------------
OPERATING INCOME 1,208,992 404,266
% 44.6% 18.3%
GENERAL & ADMINISTRATIVE EXPENSES 738,620 876,922
INTEREST INCOME, NET (131,586) (101,048)
- --------------------------------------------------------------------------------
INCOME BEFORE TAXES 601,958 (371,608)
PROVISION FOR INCOME TAXES (Note 7) -- --
- --------------------------------------------------------------------------------
NET INCOME $601,958 ($371,608)
================================================================================
EARNINGS PER SHARE $.15 ($.09)
================================================================================
Weighted average shares outstanding (Note 8) 4,104,374 4,128,144
* Reclassified for comparability.
See accompanying notes
3
<PAGE>
American Bingo & Gaming Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For Nine Months Ended September 30, 1996 1995*
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $601,958 ($371,608)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and Amortization 215,461 282,562
Changes in operating assets
and liabilities, net (542,934) (446,896)
- --------------------------------------------------------------------------------
NET CASH PROVIDED BY/(USED IN)
OPERATING ACTIVITIES $274,485 ($535,942)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net of disposals (362,892) (2,170,890)
Collection of notes receivable 302,774 --
Other non-current assets (20,053) --
- --------------------------------------------------------------------------------
NET CASH (USED IN) INVESTING ACTIVITIES ($80,171) ($2,170,890)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of notes payable (9,900) (24,345)
Capital lease financing 91,725 --
Issuance of shares pursuant to
Employee Stock Purchase Plan 7,000 --
Payment for offer of recission -- (165,490)
- --------------------------------------------------------------------------------
NET CASH PROVIDED BY/(USED IN)
FINANCING ACTIVITIES $88,825 ($189,835)
NET INCREASE/(DECREASE) IN CASH $283,139 ($2,896,667)
CASH - BEGINNING OF PERIOD $431,087 $3,657,535
- --------------------------------------------------------------------------------
CASH - END OF PERIOD $714,226 $760,868
================================================================================
* Reclassified for comparability.
See accompanying notes
4
<PAGE>
American Bingo & Gaming Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
September 30, 1996
- --------------------------------------------------------------------------------
NOTE 1 BASIS OF PRESENTATION
- --------------------------------------------------------------------------------
The accompanying unaudited consolidated financial statements include the
accounts of American Bingo & Gaming Corp. (the Company) and its subsidiaries,
Texas Charities Inc., 1919 Riverside Corp., SA Charities Inc., JBJ Enterprises
Inc., B/J Charity Bingo Inc., Charity Bingo of Texas, Inc., Charity Bingo Inc.,
Bing-O-Rama Inc., MHJ Corp., Columbia One Corp., SC Properties II Corp.,
Concessions Corp., Delray Hall For Hire, Inc., 6323 14th Street Hall For Hire,
Inc., 959 Hall For Hire, Inc. and Murdock Hall For Hire, Inc., which are all
wholly-owned, and Charity Bingo-Birmingham Inc., in which the Company owned an
80% interest. The financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
and inter-company eliminations considered necessary for a fair presentation of
the interim financial statements have been included. Operating results for the
three- and nine-month periods ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1996. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-KSB for the fiscal year ended December 31, 1995.
- --------------------------------------------------------------------------------
NOTE 2 NOTES RECEIVABLE
- --------------------------------------------------------------------------------
Notes receivable consist of four individual notes totaling $1.6 million from the
sale of four of the Company's former bingo centers in Florida. The outstanding
balance on these notes is approximately $1.3 million, of which $329,000 is due
within one year. These four notes each have unique terms, including annual
interest of 9-12% and maturity dates in 1998-1999. Payment on these notes is
primarily dependent on the profitability of the centers, over which the Company
has no control. As such, the Company has provided a reserve for collectibility
on these notes which it will proportionally amortize as the notes are collected
over time.
- --------------------------------------------------------------------------------
NOTE 3 PROPERTY AND EQUIPMENT
- --------------------------------------------------------------------------------
Property and Equipment at September 30, 1996 consists of the following:
Land $ 189,671
Buildings and improvements 1,925,728
Equipment and furniture 613,372
----------
Sub-total 2,728,771
Accumulated depreciation (520,633)
----------
Net Property and Equipment $2,208,138
5
<PAGE>
American Bingo & Gaming Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
September 30, 1996
- --------------------------------------------------------------------------------
NOTE 4 INTANGIBLE ASSETS
- --------------------------------------------------------------------------------
Intangible Assets at September 30, 1996 consist of the following:
Goodwill $326,787
Covenants not to compete 220,001
--------
Sub-total 546,788
Accumulated amortization (263,935)
--------
Net Intangible Assets $282,853
The Company's intangible assets were originally recorded in connection with the
Company's acquisition of certain bingo centers in Texas, Alabama and South
Carolina. The Goodwill and Covenants are being amortized over 15 and 5 years,
respectively, consistent with management's estimates of the useful lives of
these assets.
- --------------------------------------------------------------------------------
NOTE 5 NOTE PAYABLE
- --------------------------------------------------------------------------------
Note payable of $415,180 represents the balance of the Company's original
$450,000 liability to the seller of two Florida bingo centers to the Company in
July of 1995. The Company subsequently sold these centers due to legal problems
there. The Company ceased making payments on this note alleging certain material
misrepresentations by the seller which have left the amount owing, if any,
undetermined. The Company does not intend to make any further payments on this
note until a settlement with the seller is negotiated (See Note 6). The Company
will continue to recognize its original obligation, less payments, as its
liability for financial reporting purposes until such time as a settlement may
be reached.
- --------------------------------------------------------------------------------
NOTE 6 LIABILITY FOR ACQUISITION
- --------------------------------------------------------------------------------
Liability for acquisition of $450,000 represents the unpaid purchase price from
the Company's acquisition of a Florida bingo center in July of 1995. This
acquisition originally obligated the Company to issue 110,008 shares of its
common stock worth $450,000 at the time of acquisition. The Company subsequently
sold this center due to legal problems there. Alleging certain material
misrepresentations by the seller which have left the amount owing, if any,
undetermined, the Company has not and does not intend to issue these shares, nor
any portion thereof, until a settlement with the seller may be negotiated (See
Note 5). The Company will continue to recognize its original obligation as its
liability for financial reporting purposes until such time as a settlement may
be reached.
- --------------------------------------------------------------------------------
NOTE 7 INCOME TAXES
- --------------------------------------------------------------------------------
The Company did not record any federal income tax liability during any of the
first three fiscal quarters of 1996 or 1995 due to tax loss carryforwards of
$3.0 million accumulated in fiscal 1995 and 1994. The Company does not expect to
record any federal income tax liability until this carryforward is depleted.
6
<PAGE>
American Bingo & Gaming Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
September 30, 1996
- --------------------------------------------------------------------------------
NOTE 8 WEIGHTED AVERAGE SHARES
- --------------------------------------------------------------------------------
The Company has not included any shares issueable under its Employee Stock
Option Plans as the exercise price(s) on such shares are greater than the
current market price. Thus, the inclusion of such shares would be anti-dilutive.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
American Bingo & Gaming Corp. was formed as a Delaware corporation on September
8, 1994 to pursue bingo and gaming business opportunities. The Company completed
its initial public offering in December 1994, raising approximately $3.8 million
in net proceeds through the issuance of common stock and warrants. The Company
used a majority of these proceeds for expansion activities in 1995. The Company,
through its subsidiaries, provides initial investment capital and facility
set-up as well as maintenance and ongoing management consulting for charities
which utilize bingo events as a means of fundraising. Participating charities at
the Company's bingo halls raised over $2.5 million in 1995. The Company's
revenues are primarily derived from rental revenues from participating charities
that conduct bingo activities at the Company's bingo centers. Additional
revenues are also derived from vending and concession operations, the sale of
bingo paper and supplies and, where legal, gaming revenues.
The Company believes that the North American bingo market, estimated by industry
sources at $4.5 billion in annual gross proceeds, is fragmented and inefficient,
yet potentially very profitable. The Company's strategy, therefore, is to
consolidate a portion of the industry to build a national chain of bingo centers
in lucrative markets. The Company believes that its industry experience,
economies of scale and financial resources will provide a competitive advantage
over competing bingo operations, which should enable both the Company and its
participating charities to mutually prosper. The Company currently has thirteen
total bingo centers located in various markets in Texas, Alabama and South
Carolina. The Company has recently signed letters of intent to acquire five
bingo centers in Mississippi and intends to continue its expansion through
acquisitions and developments in selected markets. (See Part II - Item 5).
Results of Operations
The Company generated consolidated revenues of $915,000 during its third fiscal
quarter of 1996 ended September 30, 1996, as compared to $1.06 million in the
comparable period of the prior fiscal year, which represents a decrease of
$152,000 or 14%. Over $400,000 of this $152,000 revenue decrease was due to the
discontinuance and sale of the Company's former Florida operations (See Notes 2,
5 and 6). Excluding Florida, sales from the Company's remaining operations
increased by $250,000 or 37% in the third quarter of 1996 over the third quarter
of 1995 primarily due to the success of the Company's South Carolina operation.
Over half of the Company's third quarter 1996 revenues were derived from bingo
center rentals, with the balance comprised of gaming, supplies and concession
revenues.
The Company generated consolidated revenues of $2.71 million during the first
nine months of fiscal 1996 as compared to $2.21 million in the comparable period
of the prior fiscal year, which represents a revenue increase of nearly $500,000
or 23%. This revenue increase was due to the Company's successful South Carolina
operation which opened late in the second quarter of 1995. If the Company's
discontinued Florida operation revenues are excluded from 1995 results, the
year-over-year revenue increase would have been approximately $900,000 or 50%.
The Company expects future revenues to increase based upon the successful
opening of all four of the Company's South Texas bingo centers, the acquisition
of five bingo centers in Mississippi and additional future acquisitions.
7
<PAGE>
American Bingo & Gaming Corp.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations (continued)
Direct operating costs of the Company's bingo centers totaled $447,000 during
the third quarter of 1996 versus $1.11 million in the comparable 1995 quarter,
which represents a $659,000 or 60% decrease in costs. The majority of this
substantial cost reduction was attributable to the discontinuance and sale of
the Company's Florida bingo centers, which operated at a loss during the
Company's ownership due to high start-up and operating costs. A majority of
direct operating costs are comprised of rent, supplies, depreciation and
amortization, which are relatively fixed expenses. The balance is comprised of
janitorial, legal, utilities, wages and management fee costs.
Direct operating costs of the Company's bingo centers totaled $1.50 million
during the first nine months of fiscal 1996 versus $1.81 million in the
comparable 1995 period, which represents a $307,000 or 17% decrease in costs.
All of the nine-month cost decrease was due to the aforementioned discontinuance
and sale of the Company's Florida bingo centers, which substantially reduced
direct operating costs. This cost reduction has been partially offset by high
start-up costs for the Company's South Texas properties.
General & Administrative (G&A) expenses totaled $263,000 during the third
quarter of 1996 as compared to $386,000 in the year ago period, a decrease in
expenses of $123,000 or 32%. This expense decrease was mainly due to a reduction
in payroll, consulting and travel costs. G&A expenses totaled $739,000 during
the first nine months of fiscal 1996 as compared to $877,000 in the comparable
year ago period, a decrease in expenses of $138,000 or 16%. This year-to-date
expense decrease was mainly due to the aforementioned expense reductions for the
third quarter of 1996.
Net interest income for the quarter ended September 30, 1996 totaled $44,000 as
compared to $27,000 in the year ago period. Nearly all of the current period's
interest income was attributable to interest collected on the Company's notes
receivable (See Note 2). Net interest income for the first nine months of fiscal
1996 totaled $132,000 as compared to $101,000 in the comparable year ago period.
Nearly all of this period's interest income was again attributable to interest
collected on the Company's notes receivable, while the year-ago period's
interest income was attributable to interest earned on the Company's cash
balances.
The Company did not record any tax expense during the first nine months of
fiscal 1996 nor in the comparable fiscal 1995 periods due to tax loss
carryforwards. The Company's tax loss carryforward balance at the end of fiscal
1995 was over $3.0 million and, as such, the Company does not expect to incur
any federal income tax liability until this carryforward is depleted by
operational profits, although there can be no assurance of such (See Note 7).
Net income for the third fiscal quarter of 1996 was $248,000, which equated to
earnings per share of $.06. Net income/(loss) for the third quarter of 1995 was
($398,000), which equated to a loss per share of ($.09). This net income
increase was primarily due to the substantial reduction in direct operating
costs previously discussed. Net income for the first nine months of 1996 was
$602,000, which equated to earnings per share of $.15. Net income/(loss) for the
comparable period of 1995 was ($372,000), which equated to a loss per share of
($.09). This net income increase is again due to the substantial reduction in
operating costs.
Management believes that the Company's direct operating costs and G&A expenses
are relatively fixed. As such, management will continue to seek expansion
opportunities that offer incremental operating revenues which, in turn,
favorably leverage the Company's net income performance as has been successfully
achieved thus far in 1996.
8
<PAGE>
American Bingo & Gaming Corp.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Liquidity and Capital Resources
At September 30, 1996, the Company had cash and cash equivalents of $714,000, an
increase of over $283,000 from the end of fiscal 1995. The vast majority of this
increase was generated by earnings from existing operations. The Company also
netted $9,000 from investing and financing activities over the first nine months
of the year, including $89,000 from financing activities offset by $80,000 spent
on investing activities. Funds from financing activities were primarily derived
from capital lease financing, while funds expended for investing activities
primarily related to the Company's investments in South Texas, partially offset
by Florida note collections. The Company expects its cash position to continue
to increase assuming: i) continued collection of its Florida notes; ii)
successful performance from its recently opened South Texas bingo facilities;
and iii) no unfavorable developments from the Company's ongoing Florida legal
proceedings. There can be no assurance of the foregoing. The Company intends to
finance future acquisitions primarily through the use of stock and, to a lesser
extent, cash and notes.
Accounts and sundry receivables totaled $122,000 at September 30, 1996. Because
the Company collects most of its receivables from its participating charities
within one to four weeks from the time earned, accounts receivable normally
represent only a small portion of the Company's total assets. Total notes
receivable, less provision for doubtful collectibility, totaled $1.06 million at
the end of the quarter. Bingo paper and other supplies are expensed when
purchased; thus no inventory is recorded for operations. Net property and
equipment totaled $2.21 million at the quarter's end, with intangible assets and
bingo licenses comprising the balance of the Company's assets.
Current liabilities totaled $578,000 at the end of the third fiscal quarter, but
over 71% of this total represented a note payable on which the Company does not
intend to make further payments due to a dispute with the seller (See Note 5).
Trade payables represented only 12% of current liabilities. The Company has
outstanding capital lease obligations of $92,000 attributable to equipment lease
financing the Company arranged for operational equipment in order to maintain
strong cash balances. The Company has also recorded a $450,000 liability for
acquisition which is comprised of Company stock which the Company currently has
no intention of issuing (See Note 6). The Company has no long-term debt. The
Company had total assets of $4.67 million and total liabilities of $1.15 million
at the end of the third quarter, with shareholder equity of $3.52 million. The
Company believes that its current capital resources, together with expected
positive operational cash flows and note collections, will support operational
requirements for the next year.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On September 25, 1996 the Company announced that it reached a settlement with
the Texas Lottery Commission. In November of 1995, the Lottery Commission
alleged certain violations against the Company and its Texas subsidiaries. As a
result of the settlement, the Lottery Commission has agreed to approve the
transfer of certain of the Company's bingo licenses to its South Texas
locations. This transfer allowed the Company to have all of its South Texas
bingo properties open in October of 1996.
The Company is involved in ongoing legal proceedings in Florida. For a further
discussion of these proceedings, refer to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1995.
Item 5. Other Events.
On September 11, 1996 the Company announced that it had signed a letter of
intent to acquire three bingo centers in Mississippi. On September 24, 1996 the
Company announced that it had signed another letter of intent to acquire two
additional bingo centers in Mississippi. These acquisitions will be financed
through stock-for-stock exchanges plus some cash. These five centers will
increase the number of centers under Company operation from 13 to 18, double the
number of operating centers that the Company had at the beginning of 1996.
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto authorized.
American Bingo & Gaming Corp.
October 28, 1996
By:
/s/ Gregory Wilson
-------------------
Gregory Wilson
Chief Executive Officer
/s/ John T. Orton
------------------
John T. Orton
Chief Financial Officer
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<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 714,226
<SECURITIES> 0
<RECEIVABLES> 1,186,244
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