Found a little history this morning. Wilson owned at the point this was written, I believe approx 2 million shares. Don't know what he has now, but this is an interesting review of some history.
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American Bingo & Gaming
Aggressive plans for additional bingo centers drives growth in the charitable gaming industry
By Gary Grobbel and Christopher Forte
Source: The MicroCapitali$t Research Report -- March 1, 1997
Bingo! The images associated with this ageless game are little old ladies with blue hair huddled over their
cards and markers in church halls in Smalltown, U.S.A.
The reality is bingo is very big business. For many charities todav it's also a matter of survival.
Cutbacks in federal and state funding have sent many charities scrambling to raise money to stay afloat.
Traditional "games of chance" like bingo are filling the revenue void for many charities.
During the last decade charity gaming revenues have grown steadily. In 1995 charity gaming generated
profits of$1.3 billion in the United States. Bingoalone generated net proceeds of $210,000million for
charitable purposes according to the National Association of Fundraising Ticket Manufacturers
(NAFTM).
Several companies have found a niche enabling over 64,000 charities toraise much needed flinds through
gaming.American Bingo & Gaming Corporationpresents investors with anopportunity to play the game to
invest in a publicly held company which participates in thehighly fragmented and growing bingo industry.
Description: American Bingo & Gaming Corporation (AB&G) is the nation's largest public owner and
operator of bingo entertainment centers.AB&G provides initial investmentcapital. facility set-up,
maintenance andmanagement consulting services forcharities which utilize bingo events for fundraising.
AB&G derives revenues from rental income from participating
charities as well as vending and concession operations, the sale of bingopaper and supplies and video
gaming.
According to the NAFTM the North American bingo industry generated over$4 billion in revenues in
1995. AB&G'sstrategy is to build a chain of bingocenters in select, lucrative markets.
The company presently has a total of 14 centers located in South Carolina, Alabama and Texas.
The company expands by developing newlocationsandmakingselect acquisitions. Presently the company
is negotiating to acquire four bingo centers in Mississippi.
In the late1980's oilindustry problems in Texas created poor real estate conditions. At that time Mr. Greg
Wilson, looking for a way to utilize idle properties he owned, decided to try the charitable bingo business,
which was new to Texas at that time. He started with one hall in 1987
and successfully grew his holdings to 7 halls by 1994, when he chose to take his company public.
AB&G's initial public offeringing December of 1994 raised $3.8 million in net proceeds through the
issuance of stock and warrants. In general terms, of the 4 million shares outstanding, approximately one
million shares were sold to the public, and another million shares (144 stock) were issued to persons
involved with the legal, accounting and banking services required to bring the company public. CEO Greg
Wilson retained the remaining shares, the majority of which he and his family still control today.
According to John Orton, CFO of AB&G, in 1996 the lock up period on the one million shares to
persons associated with bringing the company public expired and contributed significantly to the
depression of the share price. Despite record sales and earnings in 1996 with consecutively higher
earnings in every quarter, the share price of AB&G struggled under the weight of 144 shares being sold
into the market.
"These sellers essentially had a zero cost basis. Most took the opportunity to sell. This caused the float to
double in a year. That had a negative effect on the stock," said Orton. 'I'm happy to report there are only
25,000 shares of this 144 stock still outstanding. Hopefully if the stock moves up it won't meet the
resistance it had before. It's important to note none of these people were insiders."
AB&G anticipates having 25 - 30 sites by the end of 1997. "We're looking at additional sites in Texas,
South Carolina Iand Mississippi," says Mr. Courtland "Corky" Logue, Jr., Chairman of AB&G. "We
could have several sites from Mississippi up and running by April 1st if all goes well. That would take us
up to 18 sites.
South Carolina is perhaps the most lucrative market targeted by the company. The reason? Slot
machines! South Carolina allows bingo halls to have a limited number of slot machines. This additional
high margin video gamingincomeisa significant contribution to site revenue.
"We have three hallsinSouth Carolina now. The slot machines there are worth about $1 million in bottom
line income and cash flow per year. Last year these sites contributed $1 million and we are projecting
about $1.4 million this year," says Logue. "We have two more new sites in South Carolina we are pretty
far alongwith. We project a late spring to summertime opening. We could get six months of revenue out
of them this year."
"We like South Carolina," continued Logue. "It hasn't been discovered or saturated by the large gaming
companies. South Carolina has rules which limit sites to a maximum of five slot machines per room. This
keeps major casinos out - it's protective for bingo halls and other small scale gaming operators.
Long-term plans project the company to have as many as 100 sites spread ovei Iapproximately 10 states
by the year 2000.
"We'd like to keep them close tc home if possible," says Logue. "We reaIly like the Southeast and
Southwest. They are favorable to bingo and demographically you continue to see older Americans
moving there. There's plenty of market share out there to grab."
As the company expands they expect to experience more muscle in their margins "Eight employees can
support this company for the next couple of years. Our fixed cost could be flat or perhaps just grow five
percent," said Logue.
Added Orton, "In 1996 our operating margins started around the 40% range. By the end of the year it
was about 50%, so we are seeing economy of scale and financial everaging by bringing on startups and
acquisitions which flow right to the botton line."
Logue thinks the company realistically grow 50% a year for the rest of the decade. "We are going to
grow and continue to get better at what we do. The bigger we get the more deals you will see." he said.
The company's original capital structure included three classes of securities. Besides common stock, the
company also has warrants which trade publicly (BNGOW). "There's 3 million warrants outstanding,"
said John Orton. CFO of AB&G. "These warrants expire in December of 1998. They allow the warrant
holder to exchange one warrant for one share of stock at $5 per share. We have preferred shares
authorized but we haven't issued any.
There are stock options to management of about 1 million shares that vest over three years. "Of that
million shares, those that are vested and in the money at year end totaled about 130.000," said Orton. "If
it all came to pass. the options would carry the shares outstanding from 4.1 million to 5.1 million. There's
also the potential of 3 million shares from the warrants. That won't happen unless we hit a $5 stock price.
That would be like a second offering - we'd have another 3 million shares outstanding but it would bring
$15 million into the company.
"I hope they do become dilutive," said Orton. 'That means the stock has appreciated and brought in $15
million."
Recent Events: On April 29, 1996 AB&G announced the hiring of Mr. Courtland "Corky" Logue, Jr. as
company President and present day Chairman. Mr. Logue is the founder of EZCORP, Inc. a NASDAQ
company he built into the nation's second largest pawn shop chain with over 200 stores and $160 million
in annual revenues. The company feels what Mr. Logue accomplished, building EZCORP from a single
store to a national chain, parallels what AB&G is striving to achieve. They expect his experience in
acquisitions, operations management and financing will be highly beneficial to the company's
development. On January 10, 1997 the company announced it signed a new lease with the tenant of its
Columbia, S.C. bingo center, providing AB&G with a greater share of the site's revenues. It also acquired
ownership of another Columbia bingo center that was formerly a competitor. The company anticipates
these transactions will significantly boost their bingo and gaming revenues in the South Carolina market.
Although the company also said in this announcement they had placed their expansion plans into
Mississippi on hold, AB&G stated to the MCRR it was "all systems go" again in this state. As stated
previously. plans to acquire two to four bingo centers were under negotiations.
Financials: On January 28, 1997 AB&G announced record revenues for 1996. Based on preliminary
results revenues for 1996 totaled approximately $3.6 million with revenues of over $950,000 in the fourth
quarter of 1996.
American Bingo
Nine months
Nine months
Sept.30, 1996
Sept.30, 1995
Revenues
$2,709,019
$2,21 1,205
Net Income
601,958
(371.608)
EPS
.15
(.09)
Shares outstanding
4,104,374
4,128,144
Cash position increased to over $1 million at year-end. The company's monthly net cash flow was in
excess of $100,000 per month during the fourth quarter. Final results will be available upon completion of
the company's audit. For the nine months ending September 30, 1996 total revenues were $2.7 million,
net income $602,000 and earnings per share of $.15. Earnings per share over the first three quarters of
1996 were $.04, $.05, and $.06. Cash increased 65% from year end 1995.
The company also points out after nine months of 1996 the balance sheet shows over $700,000 in cash,
$4.7 million in total assets, no long-term debt and more than $3 million in tax loss carryforwards.
Shareholders equity also climbed to $3.5 million.
Competition and risks: The company competes with many small, local operators. Large casino
companies could also present future competition. The company intentionally avoids direct competition
with Native American gaming operations.
The growth of charitable gaming in recent years has resulted in a prolieration of laws and regulations
directed toward gaming activities which has created more comprehensive licensing. reporting and
operating requirements. Standards are also recommended by the NAFTM and the North American
Gaming Regulators Association, Obviously present and future federal, state and local requirements could
inhibit AB&G's business plans.
The company settled two legal entanglements in 1996 - one in Florida and one in Texas. All legal
expenses were reserved last year and should have no effect of 1997 results. There are no pending legal
issues at this time according to the company.
Impressions: We present American Bingo and Gaming as a very attractive way to play the charitable
gaming industry - a large, highly fragmented and growing industry.
After a difficult first year in 1995 and the burden of 1 million shares of 144 stock coming to the open
market during 1996 we feel AB&G presents patient investors with an excellent opportunity.
The company has demonstrated in 1996 it has the ability to grow net income and earnings per share.
With additional bingo centers the company's earnings should continue to improve and substantially impact
the bottom line.
The company has aggressive expansion plans, predicting it can grow from 14 sites now to 25 - 30 centers
by the end of 1997, and then continue 50% growth through the end of the decade.
Last year AB&G made more than $2.5 million for charities utilizing its bingo centers. With charities
increasingly looking for ways to raise money due to governmental cutbacks in funding, AB&G is well
positioned to deliver a much needed service. "Players want bingo and charities need bingo - that creates
opportunity for us," says John Orton.
Like any game of chance there's no sure thing, but we like the odds of winning numbers for shareholders
of American Bingo & Gaming.
Plans for expansion...
AB&G ended 1996 with close to $1.1million in cash.
"This should allow us to acquire four halls in Mississippi, as well as start ups in South Carolina and Alabama," said CFO John
Orton. "These additional sites will take a bite out of our nest egg. We may look at a $3 - $5 million equity offering of some
type, probably a preferred offering, within six to twelve months."
"We could easily support some debt with our cash flow and then have that debt convert to equity at a price closer to $5 per
share so we don't dilute present shareholders. $5 was our IPO price," continued Orton. "We are not interested in any type of
offshore "Reg S" type deal. We wouldn't penalize our present shareholders like that. There is no plan to do that kind of
offering."
Bingo halls in general..
According to AB&G the ideal location for a bingo hall is an old Walmart or Winn Dixie store in the 10,000 - 15,000 square
foot range. A facility this size will accomodate 400 - 800 people seated at long tables with padded chairs.
Bingo players tend to pick a hall and only frequent that hall - it's a social even for many, a family-like atmosphere where they
see friends and co-workers. The company estimates 80% of the players in a busy hall are there every night.
The charities utilizing the facilities run the gamut from churches, military groups, schools, Lions and Rotary clubs, to centers for
battered women, the Red Cross and marching bands.
The average yearly profits generated by a given charity is $25,000 - $50,000. In a very busy hall some charities earn more
than $100,000 annually.
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GO PACK GO!
-Scott |
