SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended Commission file number
JUNE 30, 1996 0-8927
NEVADA GOLD & CASINOS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 88-0142032
(state or other Jurisdiction (IRS Employer
of incorporation) Identification Number)
3040 POST OAK BLVD. SUITE 675, HOUSTON, TEXAS 77056
(Address of principle executive offices) (Zip Code)
Registrant's telephone number: (713) 621-2245
Securities registered pursuant to Section 12 (b) of
the Act:
NONE
COMMON STOCK $0.04 PAR VALUE OVER -THE-COUNTER
- ---------------------------- -----------------
(Title of Class) (Name of each exchange
on which registered)
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.
(1) Yes [ X ] No [ ] (2) Yes [ X ] No [ ]
As of June 30, 1996 there were 24,292,114 share of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>
NEVADA GOLD & CASINOS, INC.
INDEX
PART I
ITEM 1. FINANCIAL STATEMENTS PAGE NO.
Balance Sheets - at June 30,1996 and March 31, 1996 3
Statements of Operations at June 30, 1996 and June 30, 1995 5
Statements of Cash Flows - for the three months ended
June 30, 1996 and June 30, 1995 6
Notes to interim Financial Statements 7
ITEM 2.
Management's Discussion and Analysis
of Financial Condition and Results of Operations 9
PART II
OTHER INFORMATION
Item 1 through 6 11
-2-
NEVADA GOLD & CASINOS, INC.
BALANCE SHEETS
AS OF JUNE 30, 1996, AND MARCH 31, 1996
June 30, 1996 March 31, 1996
(Unaudited) (Audited)
---------- ----------
CURRENT ASSETS
Cash and cash equivalents ............. $ 28,560 $ 76,371
Short term investments ................ 18,306 109,789
Receivable from broker/Dealer ......... 1,419,639 125,000
---------- ----------
TOTAL CURRENT ASSETS ..................... 1,466,505 311,160
Property held for development ......... 3,606,341 3,602,084
Mining properties & claims ............ 1,005,812 1,005,812
Furniture, fixtures, and equipment, Net 131,982 138,635
---------- ----------
TOTAL ASSETS ............................. $6,210,640 $5,057,691
========== ==========
The accompanying notes are an integral part of these financial statements
-3-
NEVADA GOLD & CASINOS, INC.
BALANCE SHEETS
AS OF JUNE 30, 1996, AND MARCH 31, 1996
<TABLE>
<CAPTION>
June 30, 1996 March 31, 1996
(UNAUDITED) (AUDITED)
----------- -----------
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts payable & accrued liabilities ................................ $ 679,042 $ 538,002
Notes payable ......................................................... 1,609,025 1,606,481
Current portion of long term debt ..................................... 106,313 106,313
----------- -----------
TOTAL CURRENT LIABILITIES ................................................ 2,394,380 2,250,796
----------- -----------
LONG TERM DEBT
Mortgage Payables, net of current portion ............................. 202,661 202,661
Notes payable, net of current portion ................................. 1,462,987 193,137
----------- -----------
TOTAL LONG TERM DEBT ..................................................... 1,665,648 395,798
----------- -----------
TOTAL LIABILITIES ........................................................ $ 4,060,028 $ 2,646,594
----------- -----------
STOCKHOLDERS' EQUITY:
Common Stock, $.04 par value, 30,000,000 shares authorized, 24,292,114 and
24,292,114 shares issued and outstanding at
June 30, 1996 and March 31, 1996, respectively ........................... 971,685 971,685
Additional paid - in capital ............................................ 4,885,358 4,881,808
Accumulated deficit prior to development stage (12/27/93) ............... (2,296,077) (2,296,077)
Accumulated deficit during development stage ........................... (1,410,354) (1,146,319)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY .......................................... 2,150,612 2,411,097
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................... $ 6,210,640 $ 5,057,691
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
-4-
NEVADA GOLD & CASINOS, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996, AND 1995, UNAUDITED
AND CUMULATIVE AMOUNTS DURING DEVELOPMENT STAGE (SINCE DECEMBER 27, 1993),
UNAUDITED
<TABLE>
<CAPTION>
Cumulative Amounts
During Development
1996 1995 STAGE (SINCE 12/27/93)
------------ ------------ ----------------------
<S> <C> <C> <C>
REVENUES:
Royalty income ............. $ 5,000 $ 15,000 $ 179,000
Interest income ............ 16,095 38,686 448,260
Other income ............... 0 444 0
------------ ------------ ------------
TOTAL INCOME .................... $ 21,095 54,130 $ 627,260
------------ ------------ ------------
General & administrative ... 137,708 74,208 802,637
Salaries ................... 24,245 13,404 153,719
Legal & Professional fees .. 60,214 18,307 675,289
Interest expense ........... 33,748 23,733 182,551
Other ...................... 29,215 53,326 223,418
------------ ------------ ------------
TOTAL EXPENSES .................. 285,130 182,978 2,037,614
------------ ------------ ------------
NET LOSS ........................ $ (264,035) $ (128,848) $ (1,410,354)
------------ ------------ ------------
PER SHARE INFORMATION:
Weighted average number of common 24,410,365 23,995,983 18,241,634
shares outstanding
Net Loss per common share ....... (0.01) (0.01) (0.08)
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements
-5-
NEVADA GOLD & CASINOS, INC.
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995, UNAUDITED
AND CUMULATIVE AMOUNTS DURING DEVELOPMENT STAGE (SINCE DECEMBER 27, 1993),
UNAUDITED
<TABLE>
<CAPTION>
Cumulative Amounts
During Development
1996 1995 STAGE (SINCE 12/27/93)
----------- --------- ----------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) .............................................. $ (264,035) $(128,848) $(1,410,354)
Adjustments to reconcile net cash provided (used) by operations:
Depreciation ................................................ 6,853 0 26,711
Increase in accrued receivable .............................. 18,306 (37,324) 232,450
Increase in accounts payable & accrued liabilities .......... 136,121 35,983 672,253
----------- --------- -----------
Net cash used by operating activities .......................... (102,755) (130,189) (478,940)
Investing Activities
Purchased investment in Gold Mountain ....................... 0 (42,500) 0
Capital expenses for development property ................... (18,478) (23,469) (1,237,729)
Purchase of furniture, fixtures, & equipment ................ 0 (3,086) (29,038)
Advances to related parties ................................. 0 (39,628) 0
Decrease in short term investments .......................... 91,483 0 91,483
----------- --------- -----------
Net cash used by investing activities .......................... 73,005 (108,683) (1,175,284)
Financing Activities
Proceeds from issuance of LT. debt, and related party ...... 69,078 49,930 623,411
Proceeds due from escrow .................................... 0 225,000 0
Common stock issued for cash, net of offering costs ......... 3,550 16,264 993,863
Payments on debt ............................................ (85,496) (33,284) (311,162)
Increase in notes payable ................................... (20,393) 0 58,685
Salaries contributed by officers ............................ 0 0 1,000
Prepaid stock subscription .................................. 0 0 295,500
Increase in capital leases .................................. 15,200 0 15,200
----------- --------- -----------
Net cash provided by financing activities ...................... (18,061) 257,910 1,676,497
----------- --------- -----------
Net increase (decrease) in cash and cash equivalents ........... (47,811) 19,038 22,273
Cash and cash equivalents at the beginning of the period ....... 76,371 71,448 218,363
----------- --------- -----------
Cash and cash equivalents at the end of the period ............. 28,560 90,486 240,636
=========== ========= ===========
Supplemental Information:
Cash paid for Interest ....................................... $ 6,760 $ 3,454 $ 110,119
Cash paid for taxes .......................................... 0 0 0
</TABLE>
The accompanying notes are an integral part of these financial statements
-6-
NEVADA GOLD & CASINOS, INC.
JUNE 30, 1996
NOTES TO INTERIM FINANCIAL STATEMENTS
ITEM 1.
GENERAL BUSINESS
Nevada Gold & Casinos, Inc. ("the Company") was originally formed in
1977 under the name Pacific Gold & Uranium Corporation for the principal purpose
of operating and managing mining activities primarily in the western United
States. During 1993, in connection with the acquisition of a controlling
interest in the Company by affiliates of the Company's current management, the
Company's primary focus was redirected toward the development of gaming and real
estate properties in Colorado. The Company's current business activities are
described below:
GAMING AND REAL ESTATE DEVELOPMENT
The principle focus of management during 1996 was the negotiation of and
signing of the agreement concerning the Black Hawk hotel/casino project.
Additionally, management spent a substantial portion of its time raising capital
necessary to fund the ongoing operations of the Company as well as to provide
for capital to increase the Company's participation in the project. As a result
of management's negotiations, an operating agreement was signed, March 7, 1996,
with a wholly owned subsidiary of Caesars World Inc. ("Caesars") creating
Caesars Black Hawk, LLC. ("Caesars Black Hawk"), (a Colorado limited liability
Company). Caesars Black Hawk has not yet been fully capitalized by the Company
and Caesars. The Company would hold its interest in Caesars Black Hawk through a
wholly owned subsidiary. Under the terms of the operating agreement the Company
would make an initial capital contribution of land, valued under the agreement
at $4.9 million. The land to be transferred includes lots 5,6,7 and 8 of Block
51 and adjoining land comprised of over three acres located in Black Hawk,
Colorado. Options to acquire the land referred to as the "Weaver Parcel" and the
"Woodall Parcel" were contributed by the Company and exercised in 1995. The land
will be transferred to Caesars subject to any encumbrances and Caesars will
satisfy such encumbrances up to $250,000 above which amount the capital account
of the Company will be adjusted downward. Additionally, the Company was given
the right to make an additional contribution of cash into the project in order
to increase its ownership in Caesars Black Hawk as described below. As of August
15, 1996, the Company had not made this contribution by the original deadline.
However, the Company believes it has been given a verbal extension of this time
period. If the Company is not successful in raising additional capital for this
purpose under the terms of the Caesars Black Hawk operating agreement, the
Company could lose its contractual right to make such additional capital
contribution or to acquire any additional ownership in Caesars Black Hawk as
described below. Upon the contribution of the Company's land as described above,
the Company will own approximately 14% of Caesars Black Hawk. The Company's
right to acquire additional ownership of the Caesars Black Hawk project which
the Company believes has been extended by a verbal agreement with Caesars will
if exercised enable the Company to own up to 40% of the Caesars Black Hawk
project. There can be no
-7-
NEVADA GOLD & CASINOS, INC.
JUNE 30, 1996
NOTES TO INTERIM FINANCIAL STATEMENTS
assurance that the Company will be successful in locating the capital required
to acquire this additional interest. The Company is actively negotiating with
various major financial institutions to obtain the capital necessary to exercise
this additional purchase right. A major U.S. underwriter has provided the
Company with a letter of undertaking to obtain this capital for the Company The
exact terms of any such capital contribution and or debt are not currently known
and therefore the impact, including any dilution, of such a contribution on the
Company's shareholders cannot currently be assessed. The Company expects any
such contribution to be on commercially reasonable terms. No assurances can be
given that such capital can be obtained and that the Company can retain its
right to acquire any additional ownership interest in Caesars Black Hawk. The
remaining interest in Caesars Black Hawk would be owned by Caesars and a third
party. Under the terms of the agreement, Caesars will prepare a Development Plan
for the project and will receive a development fee equal to two percent of the
total capital budget for the project. Such development fee is the liability of
Caesars Black Hawk and will be paid on a monthly basis over the term of the
development period of the project. The current budget for the project is $94
million and the anticipated development fee to be paid to Caesars World Inc., is
$1,880,000 over the 12 month development period. The management of the
hotel/casino project will be conducted pursuant to a Management Agreement with
Caesars. Under the terms of the Management Agreement, Caesars will manage the
project over a thirty year term, with the right to renew for two consecutive ten
year terms. Caesars will be paid a base management fee equal to 5 percent of
gross revenues generated by the project and an incentive management fee equal to
10 percent of the operating profit of the project before interest, income taxes,
depreciation and amortization but excluding one-half of the base management fee,
all as determined in accordance with generally accepted accounting principles.
Generally, the agreement calls for Ceasars to contribute up to $28 million in
equity and arrange for the debt financing of the project.
On May 19, 1995, the Company transferred real estate to Gold Mountain
Development, LLC, an entity in which the Company had a forty percent interest.
Real estate, having a cost basis of $867,283, mortgages payable and certain
other assets were transferred to Gold Mountain Development, LLC. The Company
received a note receivable from Gold Mountain in the amount of $919,248 which
bears interest at the rate of fourteen percent per annum and matures on March
31, 1997. The Company was required to assume debt totaling $115,384. On
September 1, 1995, the Company acquired the remaining 60% interest in Gold
Mountain Development, LLC, making it a wholly owned subsidiary. The former
members received a portion of the land owned subject to the underlying mortgages
and a note in the amount of $150,000, which had a balance of $24,241 as of June
30, 1996. All Intercompany balances, have been eliminated in preparing the
Company's financial statements as of June 30, 1996.
MINING INTERESTS
The Company has had joint-venture agreements with such mining companies
as Hanna Mining, Noranda Exploration Inc., Southern Pacific Land Co., Santa Fe
Minerals, AMAX Exploration Inc., and Dexter Gold Mines Inc. among others. The
Company was party to an agreement with Cameco U.S., Inc.
-8-
NEVADA GOLD & CASINOS, INC.
JUNE 30, 1996
NOTES TO INTERIM FINANCIAL STATEMENTS
which, at its inception on May 1, 1991, was with Noranda Exploration, Inc. The
most recent agreement with Cameco was terminated effective March 31, 1996. The
agreement called for monthly payments to the Company of $5,000.00 per month. The
agreement also provided for the Company to receive a production royalty,
amounting to five percent of all the net smelter returns for products shipped
out of the mining claims; however, there is no production from the claims, as of
June 30, 1996. Management is currently in negotiations with other prominent
mining companies to further extend the exploration of the mining property and
believes that it will be able to enter into a Lease Agreement which will be
sufficient to recover the Cost Basis of the mining interests.
As of March 31, 1995, the Company entered into an agreement to purchase
100% of the outstanding common stock of Sunrise Land and Minerals, Inc. The
seller financed the entire purchase price of the acquisition through a
non-recourse note. The Company at the option of the holder, extended the note
through March 31, 1997, and accrued interest was paid in the form of the
Company's stock.
As of June 30, 1996, the Company recorded a receivable from broker and
related short-term debt in the amount of $1,419,000, which was deposited in the
escrow account for the Company's $8.5 million debt offering. This offering is
being withdrawn. Per the terms of the offering the Company is returning the
principle and will pay interest that accumulated in the escrow account. The
Company is in negotiations with major U.S. financial institutions to obtain
capital to increase its ownership interest in Caesar's Black Hawk, to repay
certain indebtedness of the Company and to provide working capital for the
Company's immediate working capital needs. The Company has obtained a letter of
undertaking from a major U.S. underwriting organization offering assistance to
the Company in obtaining such funding. No assurance can be given, however that
such capital will be obtained from any of the parties with whom the Company is
negotiating. The short term viability of the Company is dependent upon its
ability to raise sufficient capital to meet its cash requirements.
As of July 5, 1996, a $350,000 master secured note offering which is
collateralized by the Company's 4 gaming lots located in Black Hawk, Colorado
became due. The note calls for an interest rate of 12% per annum, wich both
principle and interest to be paid at maturity. The company has paid accrued
interest through August 5, 1996, and has requested an extension of the note for
a period of 90 days, to be paid on or before October 3, 1996. The note holders
will receive the stated rate of interest through the extension. The Company
believes it will receive extensions from all parties but, is prepared to pay any
note holder who chooses not to extend.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
-9-
NEVADA GOLD & CASINOS, INC.
JUNE 30, 1996
COMPARISON OF QUARTER ENDED JUNE 30, 1996 AND 1995
As of May 29, 1996 the Company reduced its short term liabilities
through the payoff of a $100,000 short term note which was collateralized by a
certificate of deposit of the same amount. The Company received a final payment
of $5,000 from its mining joint venture agreement, which was terminated
effective March 31, 1996. Management is currently in negotiations with other
prominent mining companies to further extend the exploration of the mining
property and believes that it will be able to enter into a Lease Agreement which
will be sufficient to recover the Cost Basis of the mining interests. The
Company also received a $15,000 payment from BSH, Inc., an affiliate which was
applied to the unpaid accrued interest.
General and Administrative expenses of the Company increased during the
quarter ended June 30, 1996 as compared to 1995. The components of higher
General and Administrative expenses were due to increased travel associated with
the Caesars Black Hawk project and the further development of other gaming
projects. The Company also recorded audit and accounting fees associated with
the Company's annual audit in the first quarter as opposed to these fees being
recorded in the second quarter in 1995. Additionally, the Company experienced
higher Legal and Professional fees which were mostly attributable to the
indirect and general costs associated with the acquisition of capital during the
year and the negotiation of the Caesars Black Hawk operating agreement.
Additionally, the Company had increased salary expense due to the higher use of
hourly contract labor for assistance in accounting and administrative
activities.
As of June 30, 1996. The Company recorded a receivable from broker and
related short-term debt in the amount of $1,419,000, which was deposited in the
escrow account for the Company's $8.5 million debt offering. This offering is
being withdrawn. Per the terms of the offering, the Company is returning the
principle and will pay interest that accumulated in the escrow account. The
Company is in negotiations with major U.S. financial institutions to obtain
capital to increase its ownership interest in Caesar's Black Hawk, to repay
certain indebtedness of the Company and to provide working capital for the
Company's immediate working capital needs. The Company has obtained a letter of
undertaking from a major U.S. underwriting organization offering assistance to
the Company in obtaining such funding. No assurance can be given, however that
such capital will be obtained from any of the parties with whom the Company is
negotiating. The short term viability of the Company is dependent upon its
ability to raise sufficient capital to meet its cash requirements.
In connection with the Gold Mountain Development, LLC., note receivable
described below, the Company recorded interest income during the first quarter
of 1995.
LIQUIDITY AND CAPITAL RESOURCES
For the period ended June 30, 1996, revenues of the Company did not
cover it's operating deficit. The Company received $15,000 of interest income as
a partial payment on a note receivable. This cash
-10-
NEVADA GOLD & CASINOS, INC.
JUNE 30, 1996
assisted in reducing the operating deficit experienced by the Company, but was
not sufficient to fully cover all operating expenses. Through Affiliates and
third parties the Company borrowed $131,500 to cover its operating deficit. Some
of these funds were obtained through private sales of restricted Company stock
to "accredited" investors, as that term is defined under Securities and Exchange
Commission Regulation D. Additionally, there have been no revenues from the
Company's gaming interests to date, since the activities are currently in the
pre-development stage. Management does not anticipate significant increases in
revenues from any of its operations over the next year.
The Company will continue to require substantial capital to fund the
continued acquisition and development of the real estate properties and to cover
the anticipated operating deficits and debt maturities during the next several
years. The Company has obtained a letter of undertaking from a major U.S.
underwriting organization offering assistance to the Company in obtaining such
funding. No assurance can be given, however that such capital will be obtained
from any of the parties with whom the Company is negotiating. The short term
viability of the Company is dependent upon its ability to raise sufficient
capital to meet its cash requirements.
As of July 5, 1996, a $350,000 master secured note offering which is
collateralized by the Company's 4 gaming lots located in Black Hawk, Colorado
became due. The note calls for an interest rate of 12% per annum, with both
principle and interest to be paid at maturity. The company has paid accrued
interest through August 5, 1996, and has requested an extension of the note for
a period of 90 days, to be paid on or before October 3, 1996. The note holders
will receive the stated rate of interest through the extension. The company
believes it will receive extensions from all parties but, is prepared to pay any
note holder who chooses not to extend.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable
-11-
NEVADA GOLD & CASINOS, INC.
JUNE 30, 1996
ITEM 5. OTHER INFORMATION.
On September 1, 1995 Mr. William G. Jayroe became a director of the
Company. In 1993, Mr. Jayroe was an officer in three corporations, Wellhead
Systems, Inc., Seair Equipment, Inc., and Houston Industrial Products, Inc.,
which filed petitions under the federal Bankruptcy laws. These corporations were
essentially defunct at the time of this filing. The purpose of the filing was to
wind down the business of these corporations. Government tax agencies were the
main creditors of each corporation, and these agencies were paid in full.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
INDEX TO EXHIBITS
*3.1 - Articles of Incorporation
*3.1a - Amendment to Articles of Incorporation
*3.2 - By-Laws
*4.1 - Deed of Trust
*4.2 - Master Secured Note
*4.3 - Note Participation Agreement
*10.1 - Operating Agreement Caesars Black Hawk, LLC.
27 - Financial Data Schedule
* Incorporated by reference
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has fully caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NEVADA GOLD & CASINOS, INC.
(Registrant)
By:/s/ DAVID K. MCCALEB
--------------------
David K. McCaleb
Treasurer
DATE: August 20, 1996
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 3,560
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,437,945
<PP&E> 4,744,735
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,185,640
<CURRENT-LIABILITIES> 2,369,380
<BONDS> 1,665,648
0
0
<COMMON> 971,685
<OTHER-SE> 1,179,927
<TOTAL-LIABILITY-AND-EQUITY> 6,185,640
<SALES> 0
<TOTAL-REVENUES> 21,095
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 251,382
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,748
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (264,035)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (264,035)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
