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 June 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 July 19, 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)
June 30, 1996
- --------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 707,346
Accounts and sundry receivables 117,964
Notes receivable - current portion, net (Note 2) 340,766
Other current assets 89,666
- --------------------------------------------------------------------------------
Total Current Assets 1,255,742
Property and Equipment, net (Note 3) 2,032,745
Other Assets
Notes receivable, net (Note 2) 719,486
Intangible assets, net (Note 4) 297,358
Licenses and other non-current assets, net 126,892
- --------------------------------------------------------------------------------
Total Other Assets 1,143,736
TOTAL ASSETS $ 4,432,223
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 105,780
Notes payable - current portion (Note 5) 394,962
Accrued expenses (Note 6) 160,665
- --------------------------------------------------------------------------------
Total Current Liabilities 661,407
Deposit payable 30,000
Notes payable, net (Note 5) 20,218
Liability for acquisition (Note 7) 450,000
Shareholders' Equity (Note 8)
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) (7,657,171)
- --------------------------------------------------------------------------------
Total Shareholders' Equity 3,270,598
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,432,223
================================================================================
See accompanying notes
1
<PAGE>
American Bingo & Gaming Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For Three Months Ended June 30, 1996 1995*
- --------------------------------------------------------------------------------
REVENUES:
Rental $ 534,730 $ 496,149
Other 328,490 115,850
----------- -----------
TOTAL REVENUES 863,220 611,999
DIRECT OPERATING COSTS:
Rent and supplies 216,237 193,137
Other direct operating costs 193,530 147,075
Depreciation and amortization 66,883 44,081
----------- -----------
TOTAL DIRECT OPERATING COSTS 476,650 384,293
- --------------------------------------------------------------------------------
OPERATING INCOME 386,570 227,706
% 44.8% 37.2%
GENERAL & ADMINISTRATIVE EXPENSES 249,695 257,413
INTEREST INCOME, NET (48,982) (35,253)
- --------------------------------------------------------------------------------
INCOME BEFORE TAXES 185,857 5,546
PROVISION FOR INCOME TAXES (Note 9) -- --
- --------------------------------------------------------------------------------
NET INCOME $ 185,857 $ 5,546
================================================================================
EARNINGS PER SHARE $ .05 $ .00
================================================================================
Weighted average shares outstanding 4,108,394 4,083,333
* Reclassified for comparability
See accompanying notes
2
<PAGE>
American Bingo & Gaming Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For Six Months Ended June 30, 1996 1995*
- --------------------------------------------------------------------------------
REVENUES:
Rental $ 1,058,528 $ 931,807
Other 735,750 212,773
----------- -----------
TOTAL REVENUES 1,794,278 1,144,580
DIRECT OPERATING COSTS:
Rent and supplies 482,679 348,661
Other direct operating costs 407,856 261,185
Depreciation and amortization 139,985 91,122
----------- -----------
TOTAL DIRECT OPERATING COSTS 1,030,520 700,968
- --------------------------------------------------------------------------------
OPERATING INCOME 763,758 443,612
% 42.6% 38.8%
GENERAL & ADMINISTRATIVE EXPENSES 498,262 490,450
INTEREST INCOME, NET (88,034) (73,591)
- --------------------------------------------------------------------------------
INCOME BEFORE TAXES 353,530 26,753
PROVISION FOR INCOME TAXES (Note 9) -- --
- --------------------------------------------------------------------------------
NET INCOME $ 353,530 $ 26,753
================================================================================
EARNINGS PER SHARE $ .09 $ .01
================================================================================
Weighted average shares outstanding 4,100,864 4,083,333
* Reclassified for comparability
See accompanying notes
3
<PAGE>
American Bingo & Gaming Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For Six Months Ended June 30, 1996 1995*
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 350,530 $ 26,753
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and Amortization 143,759 93,028
Changes in operating assets and liabilities, net (311,385) (55,512)
- --------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 185,904 $ 64,269
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net of disposals (101,468) (1,420,831)
Collection of notes receivable 194,723 --
- --------------------------------------------------------------------------------
NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES $ 93,255 ($1,420,831)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of notes payable (9,900) (5,000)
Payment for offer of recission -- (165,490)
Issuance of shares pursuant to Employee
Purchase Plan 7,000 --
- --------------------------------------------------------------------------------
NET CASH (USED IN) FINANCING ACTIVITIES ($ 2,900) ($ 170,490)
NET INCREASE/(DECREASE) IN CASH $ 276,259 ($1,527,052)
CASH - BEGINNING OF PERIOD $ 431,087 $ 3,657,535
- --------------------------------------------------------------------------------
CASH - END OF PERIOD $ 707,346 $ 2,130,483
================================================================================
* Reclassified for comparability
See accompanying notes
4
<PAGE>
American Bingo & Gaming Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 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 for 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 six-month periods ended June 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 $1.4 million, of which $341,000 is due
within one year. These four notes each have unique terms, including annual
interest ranging from 9% to 12% and maturity dates in 1998-1999. Payment on
these notes is primarily dependent on the profitability of the centers. 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 June 30, 1996 consists of the following:
Land $ 189,671
Buildings and improvements 1,752,556
Equipment, furniture, other 560,784
----------
Sub-total 2,503,011
Accumulated depreciation and amortization (470,266)
---------
Net Property and Equipment $2,032,745
5
<PAGE>
American Bingo & Gaming Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 1996
- --------------------------------------------------------------------------------
NOTE 4 INTANGIBLE ASSETS
- --------------------------------------------------------------------------------
Intangible Assets at June 30, 1996 consist of the following:
Goodwill $326,787
Covenants not to compete 220,001
--------
Sub-total 546,788
Accumulated amortization (249,430)
--------
Net Intangible Assets $297,358
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 the
assets.
- --------------------------------------------------------------------------------
NOTE 5 NOTE PAYABLE
- --------------------------------------------------------------------------------
Notes payable of $415,180 represent 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 substantial
Florida legal problems. 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
7). 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 ACCRUED EXPENSES
- --------------------------------------------------------------------------------
Accrued expenses are comprised of accruals for severance and consulting fees to
former employees, legal fees and provisions, and certain other expenses.
- --------------------------------------------------------------------------------
NOTE 7 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 substantial Florida legal problems. 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 is
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.
6
<PAGE>
American Bingo & Gaming Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 1996
- --------------------------------------------------------------------------------
NOTE 8 SHAREHOLDER'S EQUITY
- --------------------------------------------------------------------------------
The Company issued 18,061 restricted shares shortly after the end of the second
quarter, of which 15,000 were related to a consulting agreement and 3,061 were
purchased by two Company officers and an employee pursuant to the Company's
Employee Stock Purchase Plan. For financial reporting purposes, the Company has
treated these shares as having been issued in the second fiscal quarter.
- --------------------------------------------------------------------------------
NOTE 9 INCOME TAXES
- --------------------------------------------------------------------------------
The Company did not record any federal income tax liability for the first or
second fiscal quarters of 1996 or 1995 due to tax loss carryforwards, which
totaled nearly $3.0 million at the end of fiscal 1995. The Company does not
expect to record any federal income tax liability until this carryforward is
depleted.
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 centers 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 U.S. bingo industry, estimated by management at
$3.0 billion, is fragmented and inefficient, yet potentially 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 the Company to effectively execute its long-term growth
plan. The Company currently has twelve total bingo centers located in various
markets in Texas, Alabama and South Carolina. The Company intends to continue
its expansion through acquisitions and developments in selected markets.
Results of Operations
The Company generated consolidated revenues of $863,000 during its second fiscal
quarter of 1996 ended June 30, 1996, as compared to $612,000 in the comparable
period of the prior fiscal year, which represents a 41% increase. Nearly all of
the revenue increase was due to incremental revenues from the opening of two
bingo centers and a gaming center in Columbia, South Carolina in the second
quarter of 1995. Over 60% of the Company's second quarter 1996 revenues were
derived from bingo and gaming center rentals, with the balance comprised of
gaming, paper and concession revenues.
7
<PAGE>
American Bingo & Gaming Corp.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations (continued)
The Company generated consolidated revenues of $1,794,000 during the first half
of fiscal 1996 ended June 30, 1996, as compared to $1,145,000 in the comparable
period of the prior fiscal year, which represents a 57% increase. Over 90% of
this revenue increase was due to the successful opening of the Company's South
Carolina facility. The Company expects quarterly revenues to increase from
current levels upon the opening of all of its four South Texas bingo centers and
current expansion in South Carolina, although there can be no assurance of
either.
Direct operating costs of the Company's bingo centers totaled $477,000 during
the second quarter of 1996 compared to $384,000 in the comparable 1995 quarter,
which represents a 24% increase. Approximately 60% of the cost increase was from
start-up expenses for the Company's South Texas investments, with the balance
attributable to incremental operating costs of the Company's South Carolina
operation.
Direct operating costs of the Company's bingo centers totaled $1,031,000 during
the first half of 1996 compared to $701,000 in the comparable 1995 period, which
represents a 47% increase. This increase was attributable to South Texas
start-up expenses and South Carolina operational costs, each of which comprised
about half the total increase. Nearly 75% of the first half direct operating
costs were comprised of rent, supplies, contract labor, insurance, utilities,
depreciation and amortization, which are relatively fixed expenses. The Company
can thus increase operating profits from its bingo centers through increased
revenues leveraged against this fixed cost base.
General & Administrative (G&A) expenses totaled $250,000 during the second
quarter of 1996 as compared to $257,000 in the year ago period, a decrease of
3%. G&A expenses totaled $498,000 during the first half of fiscal 1996 as
compared to $490,000 in the comparable year ago period, an increase of less than
2%. G&A expenses are primarily comprised of personnel expenses, and, to a lesser
extent, legal, insurance and travel costs.
Interest income for the quarter ended June 30, 1996 totaled $49,000 as compared
to $35,000 in the year ago period. Interest income for the first half of fiscal
1996 totaled $88,000 as compared to $74,000 in the comparable year ago period.
Nearly all of the Company's current interest income is attributable to interest
collected on the Company's notes receivable (See Note 2).
The Company did not record any tax expense during the first or second quarter 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 nearly $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 8).
Net income for the second fiscal quarter of 1996 was $186,000, which equated to
earnings per share of $.05. Net income for the comparable quarter of 1995 was
$6,000, which equated to earnings per share of $.00. Virtually all of the net
income increase of over 3,000% was due to the success of the Company's South
Carolina operations which were only open for a few weeks in the comparable
period of 1995.
Net income for the first half of 1996 was $354,000, which equated to earnings
per share of $.09. Net income for the comparable period of 1995 was $27,000
which equated to earnings per share of $.01. This earnings increase of over
1,200% is again attributable to the Company's successful South Carolina
operation.
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.
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 June 30, 1996, the Company had cash and cash equivalents of $707,000, an
increase of over $275,000 from the end of fiscal 1995 and $125,000 over the
first quarter of 1996. Approximately two-thirds of the year-to-date cash
increase was generated by existing operations, with the balance generated by
collections on the Company's notes receivable less monies invested on capital
expenditures, primarily in South Texas. The Company expects to make minor
additional investments in its facilities, most likely in South Carolina and
South Texas. The Company expects its cash position to continue to increase
assuming: i) continued collection of its Florida notes; ii) the opening of all
or some of the Company's South Texas bingo facilities; iii) successful expansion
of its South Carolina facility; and iv) no unfavorable developments from the
Company's ongoing legal activities. 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 $118,000 at June 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. Notes receivable, less
provision for doubtful collectibility, totaled $1.06 million at June 30, 1996. A
majority of note collections were current at the end of the quarter, with the
balance one month past due. Bingo paper and other supplies are expensed at the
time of purchase; thus no inventory is recorded for operations.
Current liabilities totaled $661,000 at the end of the quarter, but nearly 60%
of this total represented a note payable on which the Company is not currently
making payments due to a dispute with the seller (See Notes 5 and 6). Trade
payables represented only 16% of current liabilities, with the balance
attributable to accrued expenses. 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 7). The Company has no long-term
debt. The Company had total assets of over $4.43 million and total liabilities
of $1.16 million at the end of the second quarter, with shareholder equity of
$3.27 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, although there can be no assurance.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On May 23, 1996, a Travis County, Texas district court judge issued a temporary
injunction requested by the Company against the implementation of a new Texas
Lottery Commission (TLC) ruling disallowing the future licensing of two bingo
centers under one roof . On May 28, 1995 the TLC unanimously agreed to repeal
its adoption of this new rule. On June 25, 1996 the TLC filed a motion with the
court to dismiss or abate the Company's lawsuit challenging the TLC's adoption
of this rule on the grounds that, since the TLC agreed to repeal the new rule,
the Company's lawsuit was therefore moot. The Company was agreeable to this
motion. This ruling, if allowed to stand, would have had a negative effect on
the Company's planned South Texas bingo facilities, each of which is intended to
include two bingo centers.
On June 17, 1996 a Texas administrative law judge issued a Proposal For Decision
recommending approval by the TLC of the transfer of certain bingo licenses held
by Company subsidiaries in Texas. This decision followed an evidentiary hearing
and is a critically important step toward the Company's opening of all of its
planned bingo centers in South Texas. The TLC has appealed this decision.
The Company remains involved in various legal proceedings in Texas and 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.
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.
July 22, 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> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 707,346
<SECURITIES> 0
<RECEIVABLES> 1,178,216
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