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 DECEMBER 31, 1996
Commission file number 0-8927
NEVADA GOLD & CASINOS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 88-0142032
(State or other Jurisdiction (IRS Employer Identification Number)
of incorporation)
3040 POST OAK BLVD. SUITE 675, HOUSTON, TEXAS 77056
(Address of principal executive offices) (Zip Code)
(713) 621-2245
Registrant's telephone number:
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 December 31, 1996 there were 8,316,357 shares of common stock outstanding.
<PAGE>
NEVADA GOLD & CASINOS, INC.
INDEX
PART I
ITEM 1. FINANCIAL STATEMENTS
PAGE NO.
--------
Balance Sheets as of December 31, and March 31, 1996 3
Statements of Operations for the three months ended
December
31, 1996 and 1995 4
Statements of Operations for the nine months ended
December
31, 1996 and 1995 5
Statements of Cash Flows for the nine months ended
December 31, 1996 and 1995 6
Notes to interim Financial Statements 7
ITEM 2.
Management's Discussion and Analysis
of Financial Condition and Results of Operations 12
PART II
OTHER INFORMATION
Item 1 through 6 15
2
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NEVADA GOLD & CASINOS, INC.
BALANCE SHEETS
December 31, March 31,
1996 1996
----------- -----------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents ......................... $ 64,353 $ 76,371
Short term investments ............................ 15,609 109,789
Receivable from broker ............................ 0 125,000
Other assets ...................................... 70,000 0
----------- -----------
TOTAL CURRENT ASSETS .............................. 149,962 311,160
Property and assets held for development .......... 4,146,160 4,127,084
Mining properties & claims ........................ 480,812 480,812
Furniture, fixtures and equipment, net ............ 117,793 138,635
=========== ===========
TOTAL ASSETS ...................................... $ 4,894,727 $ 5,057,691
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities .......... $ 352,097 $ 538,002
Short term notes payable .......................... 1,273,333 1,606,481
Current portion of long term debt ................. 108,364 106,313
----------- -----------
TOTAL CURRENT LIABILITIES ......................... 1,733,794 2,250,796
----------- -----------
LONG TERM DEBT
Mortgages payable, net of current portion ......... 171,233 202,661
Notes payable, net of current portion ............. 42,350 193,137
----------- -----------
TOTAL LONG TERM DEBT .............................. 213,583 395,798
----------- -----------
TOTAL LIABILITIES ................................. 1,947,377 2,646,594
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $10 par value, 500,000 shares
authorized, 90,100 shares outstanding at
December 31, 1996 ............................ 901,000 --
Common stock, $.12 par value, 10,000,000 shares
authorized, 8,316,357 and 8,097,372 shares
outstanding at December 31, and March 31, 1996,
respectively .................................. 997,963 971,685
Additional paid in capital ........................ 5,546,565 4,881,808
Accumulated deficit prior to development
stage (12/27/93) .............................. (2,296,077) (2,296,077)
Accumulated deficit during development stage ...... (2,202,101) (1,146,319)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY ....................... 2,947,350 2,411,097
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY ........................................ $ 4,894,727 $ 5,057,691
=========== ===========
The accompanying notes are an integral part of these financial statements
3
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NEVADA GOLD & CASINOS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
December 31,
----------------------------
1996 1995
----------- -----------
REVENUES
Royalty income ............................... $ 10,000 $ 15,000
Other income ................................. 39,290 905
----------- -----------
TOTAL REVENUES ............................... 49,290 15,905
----------- -----------
EXPENSES
General & administrative ..................... 68,870 100,286
Interest expense ............................. 171,016 8,607
Salaries ..................................... 57,119 19,300
Legal & professional fees .................... 52,875 147,984
Other ........................................ 24,638 52,349
----------- -----------
TOTAL EXPENSES ............................... 374,518 328,526
----------- -----------
NET LOSS ..................................... $ (325,228) $ (312,621)
=========== ===========
PER SHARE INFORMATION
Weighted average number of common
shares and equivalent outstanding ........ 8,816,762 7,998,661
=========== ===========
Net loss per common share .................... $ (.04) $ (.04)
=========== ===========
The accompanying notes are an integral part of these financial statements
4
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NEVADA GOLD & CASINOS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Cumulative
Amounts
Nine Months Ended During
December 31, Development
-------------------------- Stage (Since
1996 1995 12/27/93)
----------- --------- -----------
REVENUES
Royalty income ...................... $ 15,000 $ 45,000 $ 189,000
Other income ........................ 63,890 71,910 496,056
----------- --------- -----------
TOTAL REVENUES ...................... 78,890 116,910 685,056
----------- --------- -----------
EXPENSES
General & administrative ............ 371,770 320,838 1,091,550
Interest expense .................... 286,839 62,188 433,333
Salaries ............................ 100,020 48,600 203,448
Legal & professional fees ........... 304,999 267,858 921,913
Other ............................... 71,043 89,802 236,913
----------- --------- -----------
TOTAL EXPENSES ...................... 1,134,671 789,286 2,887,157
----------- --------- -----------
NET LOSS ............................ $(1,055,781) $(672,376) $(2,202,101)
=========== ========= ===========
PER SHARE INFORMATION
Weighted average number of common
shares and equivalent ........... 8,791,921 7,998,661 6,440,043
=========== ========= ===========
Net loss per common share ........... $ (.12) $ (.08) $ (.34)
=========== ========= ===========
The accompanying notes are an integral part of these financial statements
5
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NEVADA GOLD & CASINOS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Cumulative
Amounts
Nine Months Ended During
December 31, Development
-------------------------- Stage (Since
1996 1995 12/27/93)
--------- --------- -----------
CASH FLOWS FROM OPERATING
Activities:
Net income (loss) ..................... $(1,055,781) $(672,376) $(2,202,101)
Adjustments to reconcile net loss
to net cash provided (used) by
operating activities:
Depreciation ...................... 19,959 3,531 39,817
Changes in operating assets
and liabilities:
Receivable .................... 109,179 0 323,323
Accounts payable and
accrued liabilities ......... 448,035 314,590 984,167
--------- --------- -----------
NET CASH USED IN OPERATING
ACTIVITIES ............................ (478,608) (354,255) (854,793)
--------- --------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Property and assets held for
development ..................... (19,075) (260,499) (1,238,326)
Purchase of furniture, fixtures
and equipment ................... 0 (21,736) (29,038)
Advances to related parties ....... 0 (227,547) 0
Other, net ........................ 0 66,209 0
--------- --------- -----------
NET CASH USED BY INVESTING
ACTIVITIES ............................ (19,075) (443,573) (1,267,364)
--------- --------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from debt ................ 0 333,092 554,333
Proceeds from escrow .............. 0 225,000 0
Common stock issued for cash,
net of offering costs ........... 31,250 21,697 1,021,563
Fractional shares redeemed ........ (36) 0 (36)
Payments on debt .................. (180,165) (79,091) (405,831)
Increase in short term debt ....... 634,616 239,979 713,694
Salaries contributed by officers .. 0 0 1,000
Prepaid stock subscription ........ 0 0 295,500
--------- --------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES ............................ 485,665 740,677 2,180,223
--------- --------- -----------
Net increase (decrease) in cash ....... (12,018) (57,151) 58,066
Beginning cash balance ................ 76,371 89,180 6,287
--------- --------- -----------
Ending cash balance ................... $ 64,353 $ 32,029 $ 64,353
========= ========= ===========
SUPPLEMENTAL INFORMATION:
Cash paid for interest ............ $ 146,884 $ 3,482 $ 250,243
========= ========= ===========
Cash paid for taxes ............... $ 0 $ 0 $ 0
========= ========= ===========
The accompanying notes are an integral part of these financial statements
6
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NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 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 DEVELOPMENT
During 1996, management negotiated and signed an agreement concerning the
Black Hawk hotel/casino project. The Company also entered into a land swap
agreement with the City of Black Hawk to obtain a fifteen foot strip of
bordering gaming property which increased the square footage available for
gaming.
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. In January
1997, the Company engaged Jefferies and Company, Inc. ("Jefferies" or the
"Financial Advisor") a nationally known investment banking concern, prominent in
the gaming industry, as its exclusive financial advisor in connection with the
structuring and financing of the planned hotel/casino project. There can be no
assurance, however, that the Company's efforts to secure additional funds will
be successful and the exact terms of any such equity and/or notes are not known.
On March 7, 1996, an operating agreement was signed with a wholly owned
subsidiary of Caesars World Inc. ("Caesars") creating Caesars Black Hawk, LLC.
("Caesars Black Hawk"), (a Colorado limited liability Company). Caesars would
prepare a development plan and be paid a fee of 2% of the construction budget
estimated at about $1.5 million. The management of the hotel/casino project
would be conducted pursuant to a Management Agreement with Caesars, who would 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.
On October 3, 1996, in a meeting at Caesar's headquarters in Las Vegas,
Nevada, the Company entered into discussions with Caesars to revise the
operating agreement. The Company has continued its discussions with Caesars
regarding modifications of its joint venture with Caesars and joint development
of the project and believes that the original joint venture with Caesars may be
substantially modified. The
7
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NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1996
NOTES TO INTERIM FINANCIAL STATEMENTS
Company's Financial Advisor is assisting the Company in developing a modified
financial structure for the project and the Company, with its Financial Advisor,
is evaluating all available alternatives.
REAL ESTATE DEVELOPMENT
On September 9, 1994, Gold Mountain Development, LLC was formed. Per
negotiated agreement with the other three members, Nevada Gold & Casino's
ownership was 40%. The Company had no cost basis in this ownership. On May 19,
1995, the Company transferred real estate having a cost basis of $867,283,
mortgages payable and certain other assets 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 14% per annum and matures on March
31, 1997. The Company was required to assume debt totaling $115,384.
On September 26, 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. The Company conveyed real estate having a cost basis of $242,063 and
a note in the amount of $150,000, which had a balance of $24,693 as of December
31, 1996. In accordance with this transaction, the Company was released from
$115,384 of debt that has been assumed with the original purchase of equity into
Gold Mountain, LLC in May, 1995. Approximately $96,239 of debt was assumed by
the former members. In connection with the acquisition of the remaining interest
in Gold Mountain Development, LLC, the value of the assets owned by Gold
Mountain Development, LLC were recorded at management's estimate of their fair
value, with a resulting adjustment to the equity of Gold Mountain Development,
LLC. Intercompany balances have been eliminated in preparing the Company's
financial statements as of December 31, 1996.
On July 9, 1996, President Clinton signed legislation authorizing a
public-private land exchange that will make possible the creation of a major new
residential and recreational development near the Black Hawk gaming area west of
Denver, while also preserving 8,700 acres of pristine wilderness area throughout
Colorado. Public law 104-158 authorizes the Bureau of Land Management to swap
133 separate tracts of federal land comprised of over 300 acres, which will
complete the final assemblage of land for a 500 acre master planned community
overlooking Black Hawk and Central City. This project is designed to provide
housing, commercial infrastructure, retail and resort facilities for more than
5,000 new residents to the fast growing gaming area.
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.,
("Sunrise"). The seller financed the entire purchase price of the acquisition
through a non-recourse note. Effective August 23, 1996, the Company retired the
short term non-recourse note associated with the Sunrise purchase, through the
issuance of restricted shares of the Company's common stock.
8
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NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1996
NOTES TO INTERIM FINANCIAL STATEMENTS
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., Dexter Gold Mines Inc., and Cameco U.S., Inc.,
("Cameco"). The Cameco U.S., Inc., agreement was terminated effective March 31,
1996. Effective November 1, 1996, the Company entered into a new lease with
Sagebrush Exploration, Inc., ("Sagebrush") to explore, develop, and mine the
Goldfield property. The Company received a cash payment of $32,100 for annual
land maintenance fees, and the lease also calls for advance minimum royalty
payment of $5,000 per month. The Company is also to receive a production royalty
of five percent (5%) of "net smelter returns" for all products mined or removed
from the property. Sagebrush may elect at any time during the course of the
agreement to purchase up to one percent (1%) of the royalty for the sum of $2.5
million. The Company will receive from Sagebrush, upon approval of the Vancouver
Stock Exchange, 50,000 shares of the capital stock from its parent company,
Coromandel Resources, Ltd., ("Coromandel"). The Company will receive an
additional 50,000 shares of capital stock of Coromandel one year from the
effective date of this lease. This agreement is for an initial term of 10 years.
The lease can be extended at Sagebrush's option for nine additional terms of 10
years each, so long as Sagebrush is conducting exploration, development, or
mining of the property. For a period of 66 months from the effective date of
this agreement, the Company has the option to acquire a 49% working interest in
the property. Sagebrush agrees to incur expenditures and development of the
property of not less than $5 million in the aggregate, over the first five years
of this agreement. Sagebrush will also be responsible for keeping the property
current on any and all taxes and maintenance fees.
REVERSE SPLIT
On August 23, 1996, the Board of Directors ("Board") of Nevada Gold &
Casinos, Inc. approved and declared a three for one reverse stock split ("Stock
Split") of the Company's authorized and issued and outstanding shares of common
stock, par value $.04 per share ("Common Stock"). Holders of the Common Stock
were not entitled to cumulative voting. The record date to determine the number
of shares affected by the Stock Split was set at September 23, 1996 (the "Record
Date").
The Stock Split was effective as of the Record Date with respect to all
the Company's authorized and issued and outstanding shares of Common Stock held
of record as of the Record Date. The Stock Split was accompanied by an increase
in the par value of the Common Stock from $.04 per share to $.12 per share.
Existing outstanding shares of Common Stock as of the Record Date were reverse
split on a three to one basis. Shareholders holding less than one share of
Common Stock after the Stock Split will receive from the Company, in lieu of a
fraction of a share, payment for the fraction at $6.00 per share. All other
shareholders, (shareholders holding more than one share) owning any fraction of
a share after the Stock Split, were issued, at no cost to the shareholder, such
additional fraction of a share as is necessary to
9
<PAGE>
DECEMBER 31, 1996
NOTES TO INTERIM FINANCIAL STATEMENTS
increase the fractional share to a full share. Payment to each holder of less
than one share will be made upon receipt by the Company of such holder's stock
certificate(s) issued prior to the Record Date. Any fractional shares to be
issued to holders of greater than one share will be issued to each such holder
upon receipt by the Company's transfer agent, Nevada Agency & Trust Company, of
such holder's stock certificates issued prior to the Record Date. Upon
completion of the reverse split, the total number of authorized shares of Common
Stock was reduced from 30,000,000 to 10,000,000 and the total number of issued
and outstanding shares of Common Stock was reduced from 24,835,213 shares to up
to 8,281,405 shares, depending upon the number of fractional shares issued to
complete the Stock Split. All shares, including any shares reserved for issuance
pursuant to any options or warrants granted by the Company, will be
automatically adjusted to reflect the Stock Split.
PREFERRED STOCK
Effective December 31, 1996, the Board of Directors and shareholders
having at least a majority of the voting power of the shares of the Company
authorized and approved the Company to authorize 500,000 shares of Preferred
Stock, $10 par value per share. The preferred stock may be issued in one or more
series, which may be determined at the time of issuance by the Board of
Directors without further action by the stockholders, and may include voting
rights (including the right to vote as a series on particular matters),
preference as to dividends and liquidation, conversion, redemption rights and
sinking fund provisions. On December 31, 1996, the Board of Directors approved
the issuance of 125,000 shares of preferred stock and the Company issued 90,100
shares of 12% cumulative preferred stock, $10 par value, which are callable by
the Company. These shares were issued in exchange for short term notes payable
to Clay County Holdings, Inc., an affiliate of the Secretary, and accrued
management fees due to Aaminex Capital Corp., an affiliate of the President.
WARRANTS
The Company granted warrants to purchase 666,667 shares of common stock at
$2.25 a share to Pravin Banker or Assigns for financial advisor services
provided during 1996. These options expire on July 1, 1999.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. 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 considered
necessary for fair presentation have been included. Certain prior year balances
have been reclassified to conform to current year presentation.
These financial statements are consolidated for all wholly owned
subsidiaries. All significant intercompany transactions and balances have been
eliminated in the financial statements.
10
<PAGE>
DECEMBER 31, 1996
NOTES TO INTERIM FINANCIAL STATEMENTS
CHANGES IN DEBT
In 1996, the Company offered $8.5 Million in Convertible Secured Notes. As
of August 23, 1996, the Company withdrew this debt offering. Funds in the escrow
account were returned in compliance with the terms of the offering.
On July 5, 1996, the Company issued $2,030,000 in discounted commercial
paper with a 31 day term, for which it received proceeds of $2,000,000. The
commercial paper was paid in full at maturity.
During the nine months ended December 31, 1996, the Company increased its
short term debt by $634,616 to cover its operating deficit and to reduce its
long term debt. Advances in the amount of $111,685 were received from
Affiliates.
The Company has a $350,000 master secured note which is collateralized by
the Company's 4 gaming lots located in Black Hawk, Colorado. The note called for
an interest rate of 12% per annum, with both principal and interest due at
maturity, October 3, 1996. The Company has received extensions of the maturity
date, both written and verbal, from the various participants in the note. The
Company is attempting to secure alternative financing; however, there can be no
assurance that such capital will be obtained from any of the parties with whom
the Company is negotiating.
11
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NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1996
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1996 COMPARED WITH THREE MONTHS ENDED
DECEMBER 31, 1995
Revenues increased $33,385 for the three months ended December 31, 1996
compared to the same period in the prior year. The current quarter included a
$38,385 increase in Other Income, primarily interest income received from BSH,
Inc., an affiliate of the President and Treasurer. Royalty Income decreased
$5,000. The current year included $10,000 under the terms of the Sagebrush
Exploration rental agreement that was effective beginning November 1, 1996,
while the prior year included $15,000 received under the terms of a rental
agreement with Cameco that was terminated effective March 31, 1996.
General and Administrative expenses decreased $31,416, including a
decrease of $29,940 in land maintenance fees. This decrease is primarily the
result of a $32,100 reimbursement received from Sagebrush for a portion of
expenses of $32,065 for annual maintenance fees in association with the
Company's Goldfield properties that were originally paid and expensed in
September 1996. The land maintenance fees were paid by Cameco in prior years.
Interest Expense increased $162,409 for the three months ended December
31, 1996 as compared to the same period last year. The current quarter included
interest expense on short term notes and interest on the accrued expenses
related to the management agreement with Aaminex.
Salaries increased $37,819 for the three months ended December 31, 1996 as
compared to the same period last year, because employees have been added for the
Caesars Black Hawk Project and to handle functions previously provided by
contract services.
Legal and Professional fees decreased $95,108, including decreases of
$63,029 for accounting expense and $28,111 in legal fees. The prior year
included costs associated with the acquisition of capital, legal fees related to
the Caesars Black Hawk project, and audit and accounting fees associated with
the Company's annual audit.
Other Expenses decreased $27,712, including decreases of $17,869 in
stockholder expense, primarily for the annual meeting, and $14,264 in
promotional expense, including press releases and public relations expense and
$8,500 for sponsorship of a reception and for a presentation at the Regional
Investment Bankers Association's 65th Investment Banking Conference.
12
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NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1996
NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED WITH NINE MONTHS ENDED
DECEMBER 31, 1995
Revenues decreased $38,020 for the nine months ended December 31, 1996
compared to the same period in the prior year. Royalty Income decreased $30,000.
The current year included $10,000 under the terms of the Sagebrush Exploration
rental agreement that was effective beginning November 1, 1996 and $5,000 under
the terms of a rental agreement with Cameco that was terminated effective March
31, 1996. The prior year included $45,000 from Cameco. Included in Other Income
for the nine months ended December 31, 1995 was $67,637 recognized as a gain on
the disposal of assets in connection with the acquisition of the remaining
interest in Gold Mountain Development, LLC and the related distribution of land
to the former members. The current year included a $59,611 increase in interest
income including interest earned on the proceeds of the $2,000,000 commercial
paper and $33,385 interest income received from BSH, Inc., an affiliate of the
President and Treasurer.
General and Administrative expenses increased $50,933, including increases
of $16,500 for commission expense, $16,427 for depreciation , and $6,799 for
telephone expense.
Interest Expense increased $224,650, for the nine months ended December
31, 1996 as compared to the same period last year. The current year included
$30,000 interest on the $2,000,000 commercial paper and an increase of $193,853
in other interest expense, primarily for other short term notes payable and
interest on the accrued expenses related to the management agreement with
Aaminex.
Salaries increased $51,420 for the nine months ended December 31, 1996 as
compared to the same period last year, because employees have been added for the
Caesars Black Hawk Project and to handle functions previously provided by
contract services.
Legal and Professional fees increased $37,142, generally attributable to
the acquisition of capital during the year, legal fees related to the Caesars
Black Hawk project and the $8.5 million debt offering.
Other Expenses decreased $18,760, including a decrease of $23,652 in
promotional expense. The prior year included expenses for the Regional
Investment Bankers Association and costs of press releases and other public
relations expense.
LIQUIDITY AND CAPITAL RESOURCES
For the period ended December 31, 1996, revenues of the Company did not
cover it's operating deficit. 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.
13
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NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1996
Through third parties and Affiliates, the Company increased its short term
debt by $634,616 to cover its operating deficit and to reduce its long term
debt. Some 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.
On December 31, 1996, the Board of Directors and shareholders having at
least a majority of the voting power of the shares of the Company authorized and
approved the Company to authorize 500,000 share of Preferred Stock, $10 par
value per share. The preferred stock may be issued in one or more series, which
may be determined at the time of issuance by the Board of Directors without
further action by the stockholders, and may include voting rights (including the
right to vote as a series on particular matters), preference as to dividends and
liquidation, conversion, redemption rights and sinking fund provisions. On
December 31, 1996, the Board of Directors approved the issuance of 125,000
shares of preferred stock and the Company issued 90,100 shares of 12% cumulative
preferred stock, $10 par value, which are callable by the Company. These shares
were issued in exchange for short term notes payable to Clay County Holdings, an
affiliate of the Secretary, and accrued management fees due to Aaminex, an
affiliate of the President.
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. As of August 23, 1996, the Company withdrew the $8.5 million debt
offering. Funds in the escrow account were returned in compliance with the terms
of the offering. The Company is actively pursuing the structuring, issuance and
sale of up to $140 million of notes and up to $25 million in equity. 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.
SUBSEQUENT EVENTS
The Company had a $400,000 12% note collateralized by 66,667 shares of
Company stock owned by Clay County Holdings, an affiliate of the Secretary. The
note matured on January 31, 1997. The maturity date of the note has been
extended for six months and the interest rate has been increased to 18%.
On January 10, 1997, the Company engaged Jefferies & Company, Inc. , a
nationally known investment banking concern, prominent in the gaming industry,
as exclusive financial advisor and sole placement agent in connection with the
structuring, issuance and sale of notes and/or equity in connection with the
development of its gaming project in Black Hawk, Colorado. Upon consummation of
the sale of the notes and/or equity, the Financial Advisor will receive a fee
based upon the aggregate principal amount of notes and/or equity sold. Upon the
opening of the hotel/casino, the Financial Advisor will also receive a success
fee.
14
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NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1996
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES.
On December 31, 1996, the Board of Directors and
shareholders having at least a majority of the voting power of the
shares of the Company authorized and approved the Company to authorize
500,000 share of Preferred Stock, $10 par value per share. The
preferred stock may be issued in one or more series, which may be
determined at the time of issuance by the Board of Directors without
further action by the stockholders, and may include voting rights
(including the right to vote as a series on particular matters),
preference as to dividends and liquidation, conversion, redemption
rights and sinking fund provisions. On December 31, 1996, the Board of
Directors approved the issuance of 125,000 shares of preferred stock
and the Company issued 90,100 shares of 12% cumulative preferred stock,
$10 par value, which are callable by the Company. These shares were
issued in exchange for short term notes payable to Clay County
Holdings, an affiliate of the Secretary, and accrued management fees
due to Aaminex, an affiliate of the President.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On December 31, 1996, the Board of Directors and
shareholders having at least a majority of the voting power of the
shares of the Company authorized and approved the Company to authorize
500,000 share of Preferred Stock, $10 par value per share. The
preferred stock may be issued in one or more series, which may be
determined at the time of issuance by the Board of Directors without
further action by the stockholders, and may include voting rights
(including the right to vote as a series on particular matters),
preference as to dividends and liquidation, conversion, redemption
rights and sinking fund provisions. This was done by a consent to
action without a meeting of the majority shareholders and the Board of
Directors of the Company and votes representing 5,338,489 shares were
cast for this matter.
ITEM 5. OTHER INFORMATION.
15
<PAGE>
NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1996
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
* Exhibits are incorporated by reference.
16
<PAGE>
NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1996
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/ ELIZABETH A. WOODS
Elizabeth A. Woods
Treasurer
DATE: February 14, 1997
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