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 MARCH 31, 1997
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515 CONGRESS AVENUE, SUITE 1200, AUSTIN, TEXAS 78701
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(Address of principal executive offices)
(512) 472-2041
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(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 [ ]
On APRIL 21, 1997, the Registrant had 4,235,494 shares of its $.001 par value
common stock outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AMERICAN BINGO & GAMING CORP.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
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March 31, 1997
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,246,330
Accounts receivable, net 89,977
Notes receivable - current, net (Note 2) 322,759
Other current assets 50,493
- ------------------------------------------------------------------------------------
Total Current Assets 1,709,559
Property and Equipment, net (Note 3) 1,794,384
Other Assets
Notes receivable, net (Note 2) 600,873
Intangible assets, net (Note 4) 1,259,665
Licenses, other non-current assets 139,998
Total Other Assets 2,000,536
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TOTAL ASSETS $ 5,504,479
====================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 177,568
Deferred revenues 30,000
- ------------------------------------------------------------------
Obligations under capital leases - current 41,576
Note payable - current (Note 5) 125,348
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Total Current Liabilities 374,492
Long-term liabilities
Obligations under capital leases 97,448
Note payable (Note 5) 614,429
Other payable (Note 6) 206,250
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Total Long-term Liabilities 918,127
Shareholders' Equity
Preferred Stock, $.01 par value, authorized 1,000,000 shares,
no shares issued and outstanding --
Common Stock, $.001 par value, authorized 20,000,000 shares,
issued and outstanding 4,162,494 shares 4,163
Additional paid-in capital 11,063,896
Retained earnings (accumulated deficit) (6,856,199)
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Total Shareholders' Equity 4,211,860
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,504,479
====================================================================================
</TABLE>
See accompanying notes
1
<TABLE>
<CAPTION>
AMERICAN BINGO & GAMING CORP.
CONSOLIDATED STATEMENTS OF NET INCOME (UNAUDITED)
For Three Months Ended March 31, 1997 1996
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<S> <C> <C>
REVENUES:
Rental $ 537,531 $ 523,798
Gaming, concession and other 498,256 407,260
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TOTAL REVENUES 1,035,787 931,058
DIRECT OPERATING COSTS:
Rent and supplies 251,938 266,442
Depreciation and amortization 90,520 73,102
Other operating costs 183,432 214,326
----------- -----------
TOTAL DIRECT OPERATING COSTS 525,890 553,870
- ---------------------------------------------------------------
OPERATING INCOME 509,897 377,188
% 49.2% 40.5%
GENERAL & ADMINISTRATIVE EXPENSES 270,335 248,567
INTEREST INCOME, NET (62,276) (39,052)
- ---------------------------------------------------------------
INCOME BEFORE TAXES 301,837 167,673
PROVISION FOR INCOME TAXES (Note 7) -- --
- ---------------------------------------------------------------
NET INCOME $ 301,837 $ 167,673
===============================================================
EARNINGS PER SHARE $ .07 $ .04
===============================================================
Weighted average shares outstanding 4,202,679 4,093,333
</TABLE>
See accompanying notes
2
<TABLE>
<CAPTION>
AMERICAN BINGO & GAMING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For Three Months Ended March 31, 1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 301,837 $167,673
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 96,640 74,989
Changes in operating assets and liabilities, net (67,389) (93,999)
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 331,088 $148,633
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (140,265) (73,327)
Collection of notes receivable 66,962 86,555
Acquisition of intangible assets (70,000) --
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NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES ($143,303) $ 13,228
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of notes payable -- (9,900)
Payments under capital leases (10,424) --
- ----------------------------------------------------------------------------
NET CASH (USED IN) FINANCING ACTIVITIES ($10,424) ($9,900)
NET INCREASE IN CASH $ 177,361 $151,991
CASH - BEGINNING OF PERIOD $1,068,969 $431,087
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CASH - END OF PERIOD $1,246,330 $583,078
============================================================================
</TABLE>
See accompanying notes
3
AMERICAN BINGO & GAMING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1997
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NOTE 1 BASIS OF PRESENTATION
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The accompanying unaudited consolidated financial statements include the
accounts of American Bingo & Gaming Corp. and its wholly-owned subsidiaries,
hereafter collectively referred to as "The Company." 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-month period
ended March 31, 1997 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1997. Except for historical
information contained herein, certain matters set forth in this report are
forward looking statements that are subject to risks and uncertainties,
including the impact of government regulation, competition, capital resources,
and general economic conditions, among others. For further information, refer
to the consolidated financial statements and footnotes included in the
Company's annual report on Form 10-KSB for the fiscal year ended December 31,
1996.
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NOTE 2 NOTES RECEIVABLE
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Notes receivable consist of two notes totaling $1.6 million from the sale of
four of the Company's former bingo centers in Florida. The current balance on
these notes is approximately $1.19 million, of which $323,000 is due within
the next year. These notes each have unique terms, including annual interest
rates of 9-12% and maturity dates in 1998-2001. Payment on these notes is
primarily dependent on the profitability of the centers. As such, the Company
has an outstanding reserve of $268,000 for collectibility on these notes,
which is being amortized over the life of the notes. Approximately 5% of the
outstanding note balance was past due at the end of the first quarter of 1997,
but has subsequently been collected.
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NOTE 3 PROPERTY AND EQUIPMENT
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Property and Equipment at March 31, 1997 consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
Land $ 189,671
Buildings and improvements 772,246
Leasehold improvements 709,577
Equipment and furniture 750,794
Automobiles 86,879
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Sub-total 2,509,167
Accumulated depreciation and amortization (714,783)
-----------
Net Property and Equipment $1,794,384
</TABLE>
4
AMERICAN BINGO & GAMING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1997
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NOTE 4 INTANGIBLE ASSETS
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Intangible Assets at March 31, 1997 consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
Goodwill $1,342,519
Covenants not to compete 60,000
-----------
Sub-total 1,402,519
Accumulated amortization (142,854)
-----------
Net Intangible Assets $1,259,665
</TABLE>
The Company's intangible assets have been recorded in connection with the
Company's acquisition of certain bingo centers in Texas, Alabama and South
Carolina. The Company added $1.02 million of goodwill during the first quarter
of 1997 pursuant to its acquisition of an increased ownership interest in the
bingo, gaming and concession proceeds from its Columbia, South Carolina bingo
and gaming centers. Goodwill and covenants are being amortized over 15 and 5
years, respectively, consistent with management's estimates of the useful
lives of these assets.
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NOTE 5 NOTE PAYABLE
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This note represents the Company's obligation of $740,000 to the operator of
its South Carolina bingo centers. This liability was incurred in the first
quarter of 1997 pursuant to the Company's purchase of an increased ownership
interest in the bingo, gaming and concession proceeds from its Columbia, South
Carolina bingo and gaming centers from its operator. This note is payable at
$15,000 per month over five years at 8% interest. Approximately $125,000 of
this note is due within the next year.
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NOTE 6 OTHER PAYABLE
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Other payable of $206,250 represents the Company's liability to issue 300,000
shares of its common stock to the operator of its South Carolina bingo
centers. This liability was incurred in the first quarter of 1997 pursuant to
the Company's purchase of an increased ownership interest in the bingo, gaming
and concession proceeds from its Columbia, South Carolina bingo centers from
its operator. This stock is subject to a two year Company lock-up agreement.
- ------------------------------------------------------------------------------
NOTE 7 INCOME TAXES
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The Company did not record any federal income tax liability for the first
fiscal quarter of 1997 or 1996 due to accumulated tax loss carryforwards of
approximately $3.0 million at the end of fiscal 1995. The Company had
available over $2.0 million of tax loss carryforwards at the end of 1996 and
does not expect to incur any federal income tax liability until this
carryforward is depleted.
5
AMERICAN BINGO & GAMING CORP.
March 31, 1997
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 $5.2 million through the issuance of common stock and warrants.
The Company netted approximately $3.1 million from this offering after the
retirement of debt and payment of underwriting fees. The Company used a
majority of these proceeds for expansion activities in 1995. The Company,
through its subsidiaries, provides initial investment capital, facility
set-up, maintenance and management support for charities which utilize bingo
events as a means of fundraising. Participating charities at the Company's
bingo centers raised over $3.6 million and $2.5 million in 1996 and 1995,
respectively. 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 generated from video
gaming rooms in South Carolina, as well as vending and concession operations,
the sale of bingo paper and supplies, electronic bingo "card-minders" and
other miscellaneous revenues.
Company management believes that the $4.4 billion North American charitable
bingo market 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. Management
believes that the Company's industry experience, economies of scale and
financial resources will provide a competitive advantage over competing bingo
operations, which should enable the Company and its participating charities to
mutually prosper. The Company currently has fourteen total bingo centers
located in various markets in Texas, Alabama and South Carolina and intends to
continue its expansion through acquisitions and developments in selected
markets. Management's goal is to operate 25-30 bingo centers by the end of
1997 and 100 bingo centers by the end of the year 2000.
RESULTS OF OPERATIONS
The Company generated consolidated revenues of nearly $1.04 million during its
first fiscal quarter of 1997, ended March 31, 1997, as compared to $931,000 in
the comparable period of the prior fiscal year, which represents an increase
of $105,000 or 11%. Sales from existing bingo centers increased over $178,000
or 22% during this time period. This quarter's sales increase was led by the
Company's successful South Carolina operations. Approximately 50% of this
quarter's total revenues were derived from charity rental revenues, with the
balance comprised of gaming, paper, concessions and other revenues. The
Company expects quarterly revenues to increase in 1997 based on: i) the
successful opening of the Company's four new South Carolina bingo and gaming
centers planned for the second quarter; ii) additional centers expected to be
opened in the second half of the year; and iii) from additional growth of
existing operations. There can be no assurance of any of the foregoing
projections.
Direct operating costs of the Company's bingo centers totaled $526,000 during
the first quarter of 1997 versus $554,000 in the comparable 1996 quarter,
which represents a decrease of $28,000 or 5%, despite the 11% sales increase
discussed previously. This cost decrease was attributable to a business mix
shift away from the Company's former Florida operations to the Company's South
Carolina operations, which have been more profitable. Approximately 65% of the
current period's direct operating costs were comprised of rent, supplies,
depreciation and amortization, which are relatively fixed costs. The balance
of direct costs is primarily comprised of janitorial, utilities, management
and professional services costs.
General & Administrative (G&A) expenses totaled $270,000 during the first
quarter of 1997 as compared to $249,000 in the year ago period, an increase of
nearly $22,000 or 9%. This expense increase was mainly due to higher personnel
costs, which comprise approximately half of the Company's total G&A costs.
6
AMERICAN BINGO & GAMING CORP.
March 31, 1997
RESULTS OF OPERATIONS (CONTINUED)
Net interest income for the quarter ended March 31, 1997 totaled $62,000 as
compared to $39,000 in the year ago period. Interest income was higher in 1997
primarily due to higher cash balances. However, a majority of the Company's
interest income is derived from the Company's notes receivable (See Note 2).
The Company did not record any federal income tax expense during the current
quarter or comparable year ago period due to tax loss carryforwards. The
Company's tax loss carryforward balance was in excess of $3 million at the end
of fiscal 1995 and in excess of $2 million at the end of fiscal 1996. 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 first fiscal quarter of 1997 was a record $302,000, which
equated to earnings per share of $.07. Net income for the comparable quarter
of 1996 was $168,000, which equated to earnings per share of $.04. The
majority of the Company's $134,000 or 80% net income increase was due to the
continued success of the Company's South Carolina operations which were
significantly more profitable in the first quarter of 1997. Management
believes that the Company's direct operating costs and G&A expenses are
relatively fixed. Therefore, management will continue to seek expansion
opportunities that offer incremental operating revenues which, in turn, should
continue to favorably leverage the Company's net income performance.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had cash and cash equivalents of nearly $1.25
million, more than double the cash on hand at March 31, 1996 and an increase
of over $177,000 from the end of fiscal 1996. First quarter 1997 cash flows
were led by over $331,000 of cash flows generated from operations, offset by
$143,000 of net investment expenditures and $10,000 of financing activity
expenditures. The Company invested nearly $100,000 for ten additional gaming
machines for its South Carolina centers in the first quarter. The Company
expects to invest $200,000 - $400,000 to open four new bingo and gaming
centers in South Carolina in the second quarter of 1997. The Company expects
its cash balances to continue to increase assuming: i) the continuation of
strong cash flows from existing operations; ii) the timely opening of its four
new South Carolina bingo and gaming centers; and iii) continued collection of
its Florida notes receivable. There can be no assurance of any of the
foregoing assumptions.
Current assets totaled $1.71 million at the end of the first quarter,
providing the Company with working capital of $1.34 million and a current
ratio (current assets divided by current liabilities) of over 4.5. Accounts
receivable totaled $90,000 at March 31, 1997. 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 $924,000 million at March 31,
1997. Assuming all note payments are made to the Company on a timely basis,
the Company collects nearly $50,000 per month from these notes. Bingo paper
and other supplies are expensed at the time of purchase; thus no inventory is
recorded for operations.
Current liabilities totaled $374,000 at the end of the first quarter, with
nearly half comprised of accounts payable and accrued expenses and the balance
primarily comprised of note payments due over the next year. The Company also
had $918,000 of long-term obligations, the majority of which were comprised of
obligations for a note and stock payable to the operator of the Company's
South Carolina bingo and gaming centers (See Notes 5 and 6).
7
AMERICAN BINGO & GAMING CORP.
March 31, 1997
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company had total assets of over $5.50 million and total liabilities of
$1.29 million at the end of the first quarter, with shareholder equity of
$4.21 million. Management believes that its current cash balances of $1.25
million, current operational cash flows in excess of $100,000 per month and
two credit lines totaling $1.0 million will support operational and expansion
requirements for the next year. The Company intends to finance future
expansion primarily through the use of cash, stock and notes. The Company may
seek incremental financing for certain particularly lucrative acquisition
opportunities.
PART II - OTHER INFORMATION
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
As of April 23, 1997, the Board of Directors of American Bingo & Gaming Corp.
engaged King, Griffin & Adamson P.C. of Dallas, Texas as the Company's
principal accountant to audit the Company's financial statements. The Company
dismissed Weinick, Sanders & Co., LLP as its principal auditors as of this
date. There were no adverse opinions, disclaimers of opinions or modifications
as to uncertainty, audit scope or accounting principles by the previous
auditor in the prior two years. Also, there were no disagreements on
accounting and financial disclosure issues with the previous auditor in the
prior two years.
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.
April 25, 1997
By:
/s/ Gregory L. Wilson
---------------------
Gregory L. Wilson
Chief Executive Officer
/s/ John T. Orton
-----------------
John T. Orton
Chief Financial Officer
8
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.
April 25, 1997
By:
---------------------
Gregory L. Wilson
Chief Executive Officer
-----------------
John T. Orton
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 1996 AND THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH YEAR END REPORT ON FORM 10-K.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
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<RECEIVABLES> 1,326
<ALLOWANCES> 312
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<PP&E> 2,509
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<CURRENT-LIABILITIES> 374
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0
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</TABLE>
