UNITED STATES
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, 1997
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
of incorporation) Identification Number)
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, 1997 there were 8,537,224 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, 1997 ............... 3
Statements of Operations for the Three Months Ended
December 31, 1997 and 1996 .................................... 4
Statements of Operations for the Nine Months Ended
December 31, 1997 and 1996 .................................... 5
Statements of Cash Flows for the Nine Months Ended
December 31, 1997 and 1996 ................................... 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 16
<PAGE>
NEVADA GOLD & CASINOS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 83,381 $ 78,245
Short term investments 18,121 17,408
Other assets 66,416 65,000
----------- -----------
TOTAL CURRENT ASSETS 167,918 160,653
Investment in Isle of Capri-Black Hawk 901,685 -
Property and assets held for development 2,166,269 4,203,418
Mining properties & claims 480,812 480,812
Furniture, fixtures and equipment, net 100,876 111,140
----------- -----------
TOTAL ASSETS $ 3,817,560 $ 4,956,023
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 73,284 $ 261,930
Accrued interest payable 31,793 63,963
Short term notes payable 257,099 1,504,367
Current portion of long term debt 79,405 112,492
----------- -----------
TOTAL CURRENT LIABILITIES 441,581 1,942,752
----------- -----------
LONG TERM DEBT
Mortgages payable, net of current portion 120,066 176,632
Notes payable, net of current portion 525,131 32,268
----------- -----------
TOTAL LONG TERM DEBT 645,197 208,900
----------- -----------
TOTAL LIABILITIES 1,086,778 2,151,652
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $10 par value, 500,000 shares
authorized, 141,490 and 90,100 shares outstanding
at December 31, and March 31, 1997, respectively 1,414,900 901,000
Common stock, $.12 par value, 10,000,000 shares
authorized, 8,537,224 and 8,349,046 shares
outstanding at December 31, and March 31, 1997,
respectively 1,024,467 1,001,886
Additional paid in capital 6,233,444 5,956,959
Accumulated deficit prior to development
stage (12/27/93) (2,296,077) (2,296,077)
Accumulated deficit during development stage (3,645,952) (2,759,397)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 2,730,782 2,804,371
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 3,817,560 $ 4,956,023
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NEVADA GOLD & CASINOS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-------------------------------
1997 1996
----------- -----------
<S> <C> <C>
REVENUES
Royalty income $ - $ 10,000
Other income 107,045 39,290
----------- -----------
TOTAL REVENUES 107,045 49,290
----------- -----------
EXPENSES
General & administrative 115,286 68,870
Interest expense 28,288 171,016
Salaries 80,292 57,119
Legal & professional fees 32,899 52,875
Other 18,058 24,638
----------- -----------
TOTAL EXPENSES 274,823 374,518
----------- -----------
EQUITY IN EARNINGS (LOSS) OF ISLE OF CAPRI-BLACK HAWK (590,000) -
----------- -----------
NET INCOME (LOSS) $ (757,778) $ (325,228)
=========== ===========
PER SHARE INFORMATION
Weighted average number of common
shares and equivalent outstanding 8,506,888 8,280,272
=========== ===========
Net income (loss) per common share $ (.09) $ (.04)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
NEVADA GOLD & CASINOS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Cumulative Amounts
December 31, During Development
------------------------------- Stage (Since
1997 1996 12/27/93)
----------- ----------- ------------------
<S> <C> <C> <C>
REVENUES
Royalty income $ 15,000 $ 15,000 $ 219,000
Other income 648,164 63,890 1,144,333
----------- ----------- -----------
TOTAL REVENUES 663,164 78,890 1,363,333
----------- ----------- -----------
EXPENSES
General & administrative 436,163 371,770 1,565,318
Interest expense 140,516 286,839 627,537
Salaries 191,511 100,020 470,496
Legal & professional fees 153,008 304,999 1,420,959
Other 38,520 71,043 334,975
----------- ----------- -----------
TOTAL EXPENSES 959,718 1,134,671 4,419,285
----------- ----------- -----------
EQUITY IN EARNINGS (LOSS) OF ISLE OF CAPRI-
BLACK HAWK (590,000) - (590,000)
----------- ----------- -----------
NET LOSS $ (886,554) $(1,055,781) $(3,645,952)
=========== =========== ===========
PER SHARE INFORMATION
Weighted average number of common
shares and equivalent outstanding 8,438,845 8,183,158 6,758,831
=========== =========== ===========
Net loss per common share $ (.11) $ (.13) $ (.54)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NEVADA GOLD & CASINOS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Cumulative Amounts
December 31, During Development
------------------------------- Stage (Since
1997 1996 12/27/93)
----------- ----------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (886,554) $(1,055,781) $(3,645,952)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation 18,697 19,959 65,167
Consultant and investment banker
option expense - - 320,625
Equity in earnings (loss) of Isle of
Capri-Black Hawk 590,000 - 590,000
Changes in operating assets
and liabilities:
Receivable (2,129) 109,179 204,396
Accounts payable and accrued
liabilities 43,998 448,035 1,111,039
----------- ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (235,988) (478,608) (1,354,725)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and assets held for development (46,532) (19,075) (1,319,046)
Purchase of furniture, fixtures and
equipment (17,530) - (46,568)
Disposition of property 195,557 - 195,557
----------- ----------- -----------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES 131,495 (19,075) (1,170,057)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 879,894 634,616 4,466,056
Common stock issued for cash, net of
offering costs 181,500 31,250 1,203,063
Fractional shares redeemed - (36) (36)
Payments on debt (951,765) (180,165) (3,363,707)
Salaries contributed by officers - - 1,000
Prepaid stock subscription - - 295,500
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 109,629 485,665 2,601,876
----------- ----------- -----------
Net increase (decrease) in cash 5,136 (12,018) 77,094
Beginning cash balance 78,245 76,371 6,287
----------- ----------- -----------
Ending cash balance $ 83,381 $ 64,353 $ 83,381
=========== =========== ===========
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 93,634 $ 146,884 $ 358,077
=========== =========== ===========
Cash paid for taxes $ - $ - $ -
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1997
NOTES TO INTERIM FINANCIAL STATEMENTS
ITEM 1.
GENERAL BUSINESS
Nevada Gold & Casinos, Inc.'s (the "Company") principal business
historically was mineral exploration and development of properties indirectly,
principally through investments in partnerships and joint ventures. On December
27, 1993, control of the Company changed and the Company began to explore the
real estate development and gaming businesses in Colorado. The Company is
considered to be in the development stage since December 27, 1993. In January
1994, the Company changed its name from Pacific Gold Corporation to Nevada Gold
& Casinos, Inc. While the Company is maintaining its mining business, it is
anticipated that its growth will be in the real estate and gaming businesses.
GAMING DEVELOPMENT
In June 1997, through wholly-owned subsidiaries of each company, Nevada
Gold & Casinos, Inc. and Casino America, Inc. entered into a joint venture to
develop a new Isle of Capri casino in Black Hawk, Colorado, 30 miles west of
Denver. The joint venture plans to develop, own and operate the Isle of
Capri-Black Hawk as a premier casino gaming facility. The casino will be one of
the first gaming facilities encountered by customers traveling from Denver to
the Black Hawk market and, upon completion, it will be one of the largest gaming
facilities in Colorado. It will feature 101,000 square feet on one level with
1,100 slot machines, 24 blackjack and poker games, a fine dining restaurant, a
delicatessen, a Las Vegas style buffet, and an event center. The facility also
will include 1,000 on-site parking spaces. The Isle of Capri-Black Hawk will be
designed and constructed pursuant to a bonded "guaranteed maximum price"
design/build agreement, which also provides for the addition of a hotel at the
option of the venture for an agreed-upon increase to the guaranteed maximum
price.
The Company holds its interest in the Isle of Capri-Black Hawk through a
wholly owned subsidiary, Black Hawk Gold, Ltd., a Colorado corporation ("Black
Hawk Gold"). The Company, through Black Hawk Gold, made a capital contribution
valued under the joint venture agreement at $7.5 million. The contribution
consisted of land valued at $7.9 million, subject to a note payable with a
balance, including principal and interest, of approximately $400,000 that was
paid by the joint venture. The property included lots 5, 6, 7 and 8 of Block 51,
and adjoining land comprised of over three acres located in Black Hawk,
Colorado. Casino America, Inc. will manage the casino under a long-term
management agreement for a fee based upon the revenues generated by the project.
The development of the project is subject to a number of conditions, including
the receipt of all required regulatory approvals, particularly approval from the
Colorado Gaming Commission.
<PAGE>
NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1997
NOTES TO INTERIM FINANCIAL STATEMENTS
In March 1996, Nevada Gold & Casinos, Inc. and Caesar's World Gaming
Corporation ("Caesar's"), a subsidiary of ITT Corporation, had announced joint
development plans for this project. Although all the necessary land was
assembled, designs were completed, and operating agreements were signed, no
further action was taken. In August 1997, Casino America purchased Caesar's
interest in this project.
Under the terms of the original agreement with Casino America, the
Company would have retained about 48% interest in the joint venture and Casino
America would have owned about 52%. In July 1997, the operating agreement with
Casino America was amended. The Company's ownership was decreased to 45% and
Casino America's ownership was increased to 55% to compensate Casino America for
providing a Completion Capital Commitment and the Managers Subordination
Agreement. Pursuant to the amended operating agreement, the Company received
from Casino America a $500,000 loan, $700,000 in cash for sale of part of its
ownership interest in the joint venture, and an additional commitment to fund up
to $800,000 toward the Company's future cash requirements. The Company's
ownership of the joint venture was reduced to approximately 41% upon receipt by
the Company of the initial $1,200,000 and the ownership has subsequently been
reduced to 40% because of the use of $133,333 of the $800,000 commitment. Its
ownership will be reduced to approximately 36% if all of the additional $800,000
commitment is used. Substantially all of the original $1,200,000 proceeds were
paid directly to creditors of the Company in full payment of the Company's
outstanding obligations to such creditors. The Company has the option to
repurchase the sold portion of its ownership interest in the project within 180
days after the date of each funding. The loan bears interest at the higher of
14.5% or Casino America's highest cost of funds plus two percentage points and
is due on August 20, 2000.
In January 1997, the Company engaged Jefferies and Company, Inc., 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 casino project. In August 1997, first mortgage notes in the aggregate
amount of $75,000,000 were issued by Isle of Capri Black-Hawk, LLC and its
wholly owned subsidiary, Isle of Capri-Black Hawk Capital Corp. (collectively
the "Issuers"). These notes mature on August 31, 2004 and bear interest at 13%
per annum. Interest on the notes is payable semi-annually on each February 28
and August 31, commencing February 28, 1998. Contingent interest is payable on
the notes, on each interest payment date, in an aggregate amount equal to 5% of
the Isle of Capri-Black-Hawk, LLC's consolidated cash flow for the two fiscal
quarters ending during the January or July immediately preceding such interest
payment date. The notes are secured by a first lien on substantially all of the
existing and future assets of the Issuers and are without recourse to the
members of Isle of Capri-Black Hawk, LLC or their respective parent or affiliate
entities.
The Company conveyed property to the City of Black Hawk for the
realignment of Miners Mesa Road in exchange for a fifteen-foot strip of
adjoining gaming property which would increase the square footage available for
gaming and provide additional land to the joint venture.
<PAGE>
NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1997
NOTES TO INTERIM FINANCIAL STATEMENTS
The Company's 40% ownership of the Isle of Capri-Black Hawk is being
accounted for using the equity method of accounting. The Company's investment in
the joint venture is stated at cost, adjusted for its equity in the
undistributed earnings or losses of the project. The following is a summary of
condensed unaudited financial information pertaining to the Isle of Capri-Black
Hawk as of December 28, 1997:
(in thousands)
Current assets $ 1,236
Property & Equipment 20,225
Other assets 71,002
-----------
$ 92,463
===========
Current liabilities $ 3,933
Long-term debt 75,000
Stockholders' Equity 13,530
-----------
$ 92,463
===========
Interest income $ 1,200
Interest expense 2,675
===========
Net loss $ (1,475)
===========
There have been no revenues from the Company's gaming joint venture to
date since these are currently in the development stage. Revenues have not been
sufficient to cover the Company's operating expenses during the past several
years. Management does not expect significant increases in revenues from any of
its operations over the next year. The long-term viability of the Company is
dependent upon the successful completion and operation of a casino.
REAL ESTATE DEVELOPMENT
On September 9, 1994, Gold Mountain Development, LLC ("Gold Mountain")
was formed. Per negotiated agreement with the other three members, Nevada Gold &
Casino, Inc.'s ownership was 40%. On May 19, 1995, Nevada Gold transferred real
estate and other assets to Gold Mountain in exchange for a note receivable from
Gold Mountain. On September 26, 1995, the Company acquired the remaining 60%
interest in Gold Mountain Development, making it a wholly-owned subsidiary.
Inter-company balances have been eliminated in preparing the Company's financial
statements as of December 31, and March 31, 1997.
<PAGE>
NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1997
NOTES TO INTERIM FINANCIAL STATEMENTS
On July 9, 1996, President Clinton signed legislation authorizing a
public-private land exchange with Gold Mountain Development 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 exchange 133 separate tracts of
federal land comprised of over 300 acres for the wilderness areas. The
wilderness area consists of two Colorado ranches that were acquired by an
investor group not affiliated with Gold Mountain in January 1998. The two
ranches will be transferred to the Bureau of Land Management in exchange for the
federal land tracts in the Black Hawk area and a portion of those tracts will be
acquired by Gold Mountain. The land exchange is expected to occur within 45 to
60 days, depending upon the need for additional appraisals, surveys and the
requirements of the Bureau of Land Management.
Upon completion of the Bureau of Land Management acquisition and
exchange, Gold Mountain will have approximately 170 contiguous acres available
for development in the immediate area of Black Hawk, Colorado. The project is
designed to provide housing, commercial infrastructure, retail and resort
facilities for the fast-growing gaming area of Black Hawk and Central City. The
various casinos in these two towns employee in excess of 4,500 individuals, all
of whom must commute daily for distances of twenty-five miles or more each way
because there is virtually no housing in the vicinity of Black Hawk. With the
exception of the casinos, there are no commercial facilities to provide
amenities for Black Hawk residents.
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 166,667 restricted shares of the Company's common stock.
MINING INTERESTS
The Company had a joint venture agreement with Cameco U.S., Inc.
("Cameco") which was terminated effective March 31, 1996. Effective November 1,
1996, the Company entered into a lease with Sagebrush Exploration, Inc.,
("Sagebrush") permitting Sagebrush to explore, develop, and mine the properties
in the Goldfield Mining District located in Nye and Esmeralda Counties, Nevada.
Under the terms of this agreement, the Company was to receive advance minimum
royalty payments, production royalty and 100,000 shares of the capital stock
from Sagebrush's parent company, Coromandel Resources, Ltd., ("Coromandel").
Sagebrush agreed to incur expenditures for exploration and development of the
property and any and all taxes and maintenance fees. Sagebrush has been in
default of this lease since July 1997. Management is currently negotiating with
a potential new lessee.
<PAGE>
NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1997
NOTES TO INTERIM FINANCIAL STATEMENTS
REVERSE COMMON STOCK SPLIT
On August 23, 1996, the Company's Board of Directors approved and
declared a three-for-one reverse stock split of the Company's authorized, issued
and outstanding shares of common stock, par value $.04 per share. Holders of the
Common Stock were not entitled to cumulative voting. The stock split was
accompanied by an increase in the par value of the common stock from $.04 per
share to $.12 per share. All references in the consolidated financial statements
referring to shares, share prices, per share amounts and stock plans have been
adjusted retroactively for the three-for-one reverse stock split.
INCREASE IN AUTHORIZED SHARES OF COMMON STOCK
On December 18, 1997, the Board of Directors passed a resolution
recommending an increase in the number of authorized shares of common stock of
the Company by 10,000,000 shares to permit the Company to raise additional
capital and to explore acquisitions and mergers. The increase in authorized
shares was approved at the annual stockholders' meeting on February 9, 1998.
PREFERRED STOCK
Effective December 31, 1996, the Board of Directors and the holders of
the Company's common stock having at least a majority of the voting power of the
shares, approved and authorized the issuance of 500,000 shares of Preferred
Stock, $10 par value per share. The resolution authorized the preferred stock to
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 shareholders.
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.
These financial statements are consolidated for all wholly-owned
subsidiaries. All significant inter-company transactions and balances have been
eliminated in the financial statements. The equity method of accounting is used
for the Isle of Capri-Black Hawk joint venture.
<PAGE>
NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1997
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED WITH THREE MONTHS ENDED DECEMBER
31, 1996
Revenues increased $57,755 for the three months ended December 31, 1997
compared to the same period in the prior year. The current year includes a gain
of $103,454 for the sale of part of the Company's interest in the Isle of
Capri-Black Hawk joint venture. The prior year included $36,756 interest income
from BSH, Inc., an affiliate of the Secretary, and $10,000 royalty income under
the terms of the Sagebrush Exploration rental agreement.
General and administrative expenses increased $46,416 for the three
months ended December 31, 1997 compared to the same period in the prior year.
The prior year included a $32,100 reimbursement received from Sagebrush for a
portion of expenses for annual maintenance fees in association with the
Company's Goldfield properties that were originally paid and expensed in
September 1996.
Interest expense decreased $142,728 for the three months ended December
31, 1997 as compared to the same period last year. The prior year included
interest on short terms notes and interest on accrued expenses related to the
management agreement with Aaminex.
Salaries increased $23,173 for the three months ended December 31, 1997
as compared to the same period last year, due to the hiring of additional
personnel to handle accounting, legal and other functions previously outsourced
by the Company.
Legal and professional fees decreased $19,976 including a decrease of
$29,558 in legal and professional fees, partially offset by an increase of
$4,089 in accounting expense for the revision of the March 31, 1997 10K and an
increase of $4,500 in consulting fees.
Other expenses decreased $6,580, including a decrease of $7,627 in
printing expense. The prior year included expenses for SEC filings.
The current year includes the Company's equity of $590,000 in the net
loss of Isle of Capri-Black Hawk, primarily resulting from interest expense on
the long-term debt.
<PAGE>
NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1997
NINE MONTHS ENDED DECEMBER 31, 1997 COMPARED WITH NINE MONTHS ENDED DECEMBER 31,
1996
Revenues increased $584,274 for the nine months ended December 31, 1997
compared to the same period in the prior year. The current year includes gains
of $646,873 for the sale of part of the Company's interest in the Isle of
Capri-Black Hawk joint venture. The prior year included $36,756 interest income
from BSH, Inc., an affiliate of the Secretary, and interest earned on the
proceeds of commercial paper in the amount of $2,000,000.
General and administrative expenses increased $64,393 for the nine
months ended December 31, 1997 compared to the same period in the prior year,
including increases of $55,700 in commission expense and $33,574 in land
maintenance fees, partially offset by a decrease of $25,680 in contract labor.
The current year included fees in the amount of $79,700 related to the casino
project and the acquisition of financing. The same period last year included
$24,000 related to the acquisition of financing. The prior year also included a
$32,100 reimbursement for land maintenance fees paid and expensed in September
1996.
Interest expense decreased $146,323 for the nine months ended December
31, 1997 as compared to the same period last year. The prior year included
interest on short terms notes and interest on accrued expenses related to the
management agreement with Aaminex. The prior year also included $30,000 interest
expense on commercial paper in the amount of $2,000,000.
Salaries increased $91,491 for the nine months ended December 31, 1997
as compared to the same period last year, due to the hiring of additional
personnel to handle accounting, legal, and other functions previously outsourced
by the Company.
Legal and professional fees decreased $151,991, including decreases of
$47,354 in accounting expense, $41,754 in consulting fees and $62,883 for legal
and professional fees. The prior year included consulting and legal fees
associated with the acquisition of capital and audit and accounting fees
associated with the Company's annual audit.
Other expenses decreased $32,523, including a decrease of $24,997 in
printing expense. The prior year included expenses for SEC filings.
The current year includes the Company's equity of $590,000 in the net
loss of Isle of Capri-Black Hawk, primarily resulting from interest expense on
the long-term debt.
LIQUIDITY AND CAPITAL RESOURCES
Revenues from the Company have not been sufficient to cover the
Company's operating expenses during the past two years. In addition, there have
been no revenues from the Company's gaming joint venture to date since these are
currently in the development stage. Management does not expect significant
increases in revenues from any of its operations over the next year.
<PAGE>
NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1997
During the nine months ended December 31, 1997, the Company received
proceeds from short-term debt of $879,894 to cover its operating deficit and for
scheduled payments on its long-term debt. Additional funds were obtained through
private sales of restricted Company Stock to "accredited" investors, as such
term is defined under Securities and Exchange Commission Regulation D.
Pursuant to an amended operating agreement with Casino America, the
Company received from Casino America a $500,000 loan, $700,000 in cash for sale
of part of its ownership interest in the joint venture, and an additional
commitment to fund up to $800,000 toward the Company's future cash requirements.
The Company's ownership of the joint venture was reduced to approximately 41%
upon receipt by the Company of the initial $1,200,000 and the ownership has
subsequently been reduced to 40% because of the use of $133,333 of the $800,000
commitment. Its ownership will be reduced to approximately 36% if all of the
additional $800,000 commitment is used. Substantially all of the $1,200,000
proceeds were paid directly to creditors of the Company in full payment of the
Company's outstanding obligations to such creditors. The Company has the option
to repurchase the sold portion of its ownership interest in the project within
180 days after the date of each funding. The loan bears interest at the higher
of 14.5% or Casino America's highest cost of funds plus two percentage points
and is due on August 20, 2000.
During the year ended March 31, 1996, the Company offered $8,500,000 in
Convertible Secured Notes. As of August 23, 1996, the company withdrew this debt
offering. Funds in escrow 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.
In January 1997, the Company engaged Jefferies and Company, Inc., 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 casino project. In August 1997, first mortgage notes in the aggregate
amount of $75,000,000 were issued by the Isle of Capri-Black Hawk, LLC and its
wholly-owned subsidiary, Isle of Capri-Black Hawk Capital Corp. (collectively
the "Issuers"). These notes mature on August 31, 2004 and bear interest at 13%
per annum. Interest on the notes is payable semi-annually on each February 28
and August 31, commencing February 28, 1998. Contingent interest is payable on
the notes, on each interest payment date, in an aggregate amount equal to 5% of
the Isle of Capri-Black Hawk, LLC's consolidated cash flow for the two fiscal
quarters ending during the January or July immediately preceding such interest
payment date. The notes are secured by a first lien on substantially all of the
existing and future assets of the Issuers and are without recourse to the
members of the Isle of Capri-Black Hawk, LLC or their respective parents or
affiliate entities.
<PAGE>
NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1997
Effective December 31, 1996, the Board of Directors and the holders of
the Company's common stock having at least a majority of the voting power of the
shares, approved and authorized the issuance of 500,000 shares of Preferred
Stock, $10 par value per share. The Company has issued 141,490 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 of the Company, and accrued
management fees due to Aaminex Capital Corp.
("Aaminex,") an affiliate of the President of the Company.
ITEM 3
Not applicable
<PAGE>
NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1997
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In October 1997, the Company became aware that a lawsuit had been
filed in August 1997 under Case Number H-97-2955 in the United
District Court for the Southern District of Texas, Houston, Texas by
James R. Cleveland, Plaintiff, against the Company and twenty-three
(23) other Defendants, including all of the Directors and two Officers
of the Company. Mr. Cleveland, who is an inmate in a Texas county
jail, proceeding under a pauper's affidavit, alleged that the
Defendants conspired to defraud and deceive him for the purpose of
securing an investment of funds in the Company. The Company's counsel
responded to this lawsuit and the lawsuit was dismissed on or about
December 17, 1997.
ITEM 2. CHANGES IN SECURITIES.
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
By unanimous consent dated August 14, 1997, the Board of Directors of
the Company and the Company as the sole stockholder of Blackhawk Gold,
approved and authorized the conveyance of the Blackhawk Gold Parcel to
the Isle of Capri-Black Hawk, LLC. The Board of Directors determined
that stockholder approval and/or ratification of this transaction was
not required under the applicable provisions of the Nevada Revised
Statutes. At the request of Jefferies and Company, Inc., the
underwriters for the Isle of Capri-Black Hawk, LLC's note offering,
Winstock Mining Corporation, Clay County Holdings, Aaminex Capital
Corporation, Paul J. Burkett, William J. Jayroe and Hubert T. Wen,
holders of a majority of the outstanding common shares of the Company
(collectively the "Majority Stockholders"), entered into a written
agreement to approve and ratify, and did approve and ratify on October
31, 1997, the conveyance of the Blackhawk Gold Parcel to the Isle of
Capri-Black Hawk LLC. The Majority Shareholders legally and
beneficially owned an aggregate of 5,142,415 shares of the common
stock of the Company, representing a majority of the outstanding
shares of the Company authorized to vote.
ITEM 5. OTHER INFORMATION.
Not applicable
<PAGE>
NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1997
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) INDEX TO EXHIBITS
*3.1 - Articles of Incorporation
*3.2 - Amendment to Articles of Incorporation
*3.3 - 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
*10.2 - Operating Agreement of ICB LLC
*10.3 - Amended and Restated Operating Agreement of Isle of
Capri-Black Hawk, LLC
*10.4 - Members Agreement
*10.5 - License Agreement
27 - Financial Data Schedule
- ---------
*Exhibits were previously filed and are incorporated by reference.
<PAGE>
NEVADA GOLD & CASINOS, INC.
DECEMBER 31, 1997
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 and
Chief Financial Officer
DATE: February 14, 1998
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