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To: T.K. Allen who wrote (8490)	5/8/1998 10:34:00 AM
From: T.K. Allen	Read Replies (1) \| Respond to of 10368

MEMORANDUM From: _______________________ Name _______________________ Shares owned/controlled To: Mr. Andre Hilliou, Chief Executive Officer American Bingo & Gaming, Inc. 515 Congress Avenue, Suite 1200 Austin, Texas 78701 Date: May 8, 1998 RE: Shareholder Questions and Concerns I am a reader and/or member of the Silicon Investor (SI) internet discussion thread on American Bingo & Gaming (AB&G). AB&G press releases over the past six months or so and the sharp decline in share price have raised many questions among AB&G shareholders. The questions and comments below are the result of input from many shareholders associated with the SI discussion thread. Many on the Silicon Investors thread are very concerned about events during the past six months and have been frustrated by AB&G's apparent unwillingness and inability to communicate effectively with shareholders. Many perceive this issue to be one of the core reasons for BNGO's current low share price. This memo is offered to you at the beginning of your tenure as AB&G's Chief Executive Officer in an effort to re-establish the excellent and effective communications AB&G shareholders once enjoyed and to begin rebuilding investor confidence in this company and its management. INVESTOR COMMUNICATIONS: What are/will be the channels of communications with stockholders? Who is authorized to give out information? In an AB&G press release dated April 14, 1998 the following statement was included: "Michael Fearnow of Financial Broker Relations, 409-856-3990, or Gary Bryant of Newport Capital, 706-360-2326, both for American Bingo & Gaming Corp." In view of these comments, please answer the following questions: Please clarify the roles of Financial Broker Relations and Newport Capital? Do Financial Broker Relations and Newport Capital have separate and distinct responsibilities or do they perform similar functions on behalf of AB&G? Who is responsible for investor relations and public relations? In November, 1997, AB&G promised to create a section of the company's website devoted to addressing shareholder questions. This website "Q&A section" was to be updated approximately once per month. This idea was very well received by investors. However, after the first installment of this website "Q&A section", the idea seems to have been abandoned. Do you expect to continue the website "Q&A section" idea? MANAGEMENT: The current Management Salary Agreements are perceived by many investors as exorbitant, particularly those of Mr. Wilson and Mr. Mims. What is the justification for the salaries of Mr. Wilson and Mr. Mims? What specific steps will be taken to reduce these excessive costs? When will a replacement for Mr. Gilbert be named? Why was it deemed necessary to replace Mr. Gilbert on the Board? What is the explanation for the recent replacement of King, Griffin & Adamson as company CPA's by BDO Seidman and then King, Griffin & Adamson's subsequent reinstatement? BUSINESS PLAN: Several recent actions and statements from AB&G have raised many questions about AB&G's business plan. Among these recent actions and statements are: In early 1997, AB&G stated they expected to have 30 bingo halls in operation by the end of the year. According to the conference call held on February 18, 1998, AB&G never had more than 20 halls in operation during 1997 and subsequently had to close or sublet 6 halls due to lack of profitability. We finished the year with 14 operating bingo halls - the same number with which we started the year. In the November 13, 1997 press release was the following statement: "...we continue to see a wealth of attractive investment opportunities...therefore, we decided to call the warrants to aggressively pursue these opportunities." It has been nearly 6 months since the warrants were called, AB&G has over $11 million dollars in cash, and only one additional bingo hall has been purchased. AB&G stated the following in a press release dated February 6, 1998: "As a further step in its growth plan, the Company also announced that it has retained Gaines Berland, Inc., a New York investment banking firm, as financial advisor to review various strategic alternatives to enhance shareholder value." There has been speculation among shareholders that AB&G may be waiting for a resolution of the South Carolina Supreme Court case before putting the warrant call cash to use, perhaps in additional video poker machines in South Carolina. In view of the comments above, please address the following questions: Do you expect to continue to pursue the charitable bingo market as a major focus of the company's business or do you foresee fundamental changes in AB&G's business strategy? What "strategic alternatives" are being considered to grow AB&G's business? What were the flaws in AB&G's "due diligence" process that led to the acquisition and subsequent closing of 6 bingo halls in 1997? What steps have been or will be taken to improve AB&G's "due diligence" process? Because AB&G's stated plan is to grow via acquisitions, and because overhead costs of acquisitions and post-acquisition consolidation costs were major contributing factors in the company's 4th quarter loss, how do you plan to be increasingly profitable under an acquisition-based business plan? What is your target mix of revenue streams (bingo facility rental, bingo supplies, route VGM, free-standing gaming room VGM, VGM attached to bingo halls, etc.), by percentage? For each revenue stream, what would be your estimated cash flow/revenue ratio? What is the cash flow/revenue ratio for the current base of operations? The company has stated at various times in the past year that acquisitions can be made for 1-3 times cash flow or 2-4 times cash flow. Do these ranges hold for both bingo and gaming acquisitions, and if not, what are the expected ranges for the various classes of operations? How have the recent individual acquisitions matched up to these projections? What will the company do to ensure these targets are met in the future? What is the company's strategy in leveraging financial resources through borrowing, leases, notes, etc.? Exactly what is Gaines Berland's role and what value do they bring to AB&G? The most recent AB&G 10K lists 755 machines but the South Carolina Department of Revenue Machine Game Quarterly shows 917 machines. Why is there such a large discrepancy in the South Carolina video poker machine count? What is the purpose of the five Mississippi corporations listed as subsidiaries on the 1997 10K? I am hopeful that your appointment as CEO signals the beginning of a new era of open communications with investors and a strong focus on shareholder value. We all have much to gain by making American Bingo and Gaming strong and profitable. I hope you are as determined to get this company going in the right direction as we in the SI discussion group are. Thank you very much for your time and your careful consideration of our questions and concerns. I look forward to your response to our concerns during the upcoming shareholders meeting. I would also like to invite you to visit our discussion group on the Silicon Investor website and contribute whatever comments you feel are appropriate. The internet address for the SI American Bingo discussion thread is: 207.183.153.23.