UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the quarter ended JUNE 30, 1998
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 August 14, 1998 there were 9,030,073 shares of common stock outstanding.
<PAGE>
NEVADA GOLD & CASINOS, INC.
INDEX
PART I
ITEM 1. FINANCIAL STATEMENTS PAGE NO.
Balance Sheets as of March 31 and June 30, 1998 ........ 3
Statements of Operations for the Three Months Ended
June 30, 1998 and 1997 ............................... 4
Statements of Cash Flows for the Three Months Ended
June 30, 1998 and 1997 ............................... 5
Notes to Interim Financial Statements .................. 6
ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations .................. 9
PART II
OTHER INFORMATION
Item 1 Through 6 ....................................... 10
2
<PAGE>
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1998 1998
--------- ---------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ........................... $ 71,396 $ 154,367
Other assets ........................................ 83,111 83,211
----------- -----------
TOTAL CURRENT ASSETS ................................ 154,507 237,578
Investment in Isle of Capri Black Hawk .............. 218,628 599,828
Real estate and assets held for development ......... 2,255,978 2,201,809
Mining properties & claims .......................... 480,812 480,812
Furniture, fixtures and equipment, net of accumulated
depreciation of $89,249 and $81,677 on June 30
and March 31,1998, respectively ..................... 89,371 95,672
=========== ===========
TOTAL ASSETS ........................................ $ 3,199,296 $ 3,615,699
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities ............ $ 32,846 $ 56,248
Accrued interest payable ............................ 64,010 49,154
Short term notes payable ............................ 245,532 279,591
Current portion of long term debt ................... 66,894 73,187
----------- -----------
TOTAL CURRENT LIABILITIES ........................... 409,282 458,180
----------- -----------
LONG TERM DEBT
Mortgages payable, net of current portion ........... 123,656 111,023
Notes payable, net of current portion ............... 518,812 521,718
----------- -----------
TOTAL LONG TERM DEBT ................................ 642,468 632,741
----------- -----------
OTHER LIABILITIES
Deferred gain ....................................... 591,404 591,404
----------- -----------
TOTAL LIABILITIES ................................... 1,643,154 1,682,325
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $10 par value, 500,000 shares
authorized, 121,490 and 141,490 shares
outstanding at June 30, and March
31, 1998, respectively ............................. 1,214,900 1,414,900
Common stock, $.12 par value, 20,000,000 shares
authorized, 9,069,489 and
8,822,464 shares outstanding at
June 30, and March 31, 1998, respectively .......... 1,088,339 1,058,696
Additional paid in capital .......................... 7,509,387 7,095,896
Accumulated deficit prior to development stage
(12/27/93) ......................................... (2,296,077) (2,296,077)
Accumulated deficit during development stage ........ (5,960,407) (5,340,041)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY .......................... 1,556,142 1,933,374
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $ 3,199,296 $ 3,615,699
=========== ===========
</TABLE>
3
The accompanying notes are an integral part of these financial statements.
<PAGE>
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
CUMULATIVE
AMOUNTS
THREE MONTHS ENDED DURING
JUNE 30, DEVELOPMENT
------------------------- STAGE (SINCE
1998 1997 12/27/93)
--------- ---------- ---------------
REVENUES
Royalty income .............. $ -- $ 15,000 $ 219,000
Gain on sale-part interest
Isle of Capri Black Hawk .. -- -- 135,116
Other income ................ 809 365 500,074
----------- ----------- -----------
TOTAL REVENUES .............. 809 15,365 854,190
----------- ----------- -----------
EXPENSES
General & administrative .... 101,594 105,412 1,804,526
Interest expense ............ 20,661 65,937 725,253
Salaries .................... 66,084 51,841 595,278
Legal & professional fees ... 35,905 41,078 1,947,923
Other ....................... 15,731 10,071 388,913
----------- ----------- -----------
TOTAL EXPENSES .............. 239,975 274,339 5,461,893
----------- ----------- -----------
EQUITY IN EARNINGS (LOSS)
OF ISLE OF CAPRI-BLACK
HAWK ....................... (381,200) -- (1,352,70)
----------- ----------- -----------
NET LOSS .................... $ (620,366) $ (258,974) $(5,960,407)
=========== =========== ===========
PER SHARE INFORMATION
Net loss .................... $ (620,366) $ (258,974) $(5,960,407)
Preferred stock dividends
accumulated ................. (42,331) (26,956) (188,378)
----------- ----------- -----------
Loss available to common
stockholders ................ $ (662,697) $ (285,930) $(6,148,785)
=========== =========== ===========
Weighted average number of
common shares outstanding . 8,905,734 8,355,048 7,037,104
=========== =========== ===========
Net loss per common share ... $ (.07) $ (.03) $ (.87)
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE
AMOUNTS
THREE MONTHS ENDED DURING
JUNE 30, DEVELOPMENT
------------------------- STAGE (SINCE
1998 1997 12/27/93)
-------- ------ --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
Activities:
Net loss ................................... $(620,366) $ (258,974) $(5,960,407)
Adjustments to reconcile net loss
to net cash provided (used)
by operating activities:
Depreciation ........................... 7,752 6,653 80,623
Equity in net loss of
Isle of Capri
Black Hawk ......................... 381,200 1,352,704
Consultant and investment banker
option expense ...................... -- -- 763,069
Gain on sale-part interest Isle
of Capri Black Hawk ................. -- -- (135,116)
Other .................................. -- -- 231
Changes in operating assets and liabilities:
Other .................................. (1,801) (1,200) 201,740
Accounts payable and accrued
liabilities .......................... 2,697 81,325 1,181,362
--------- ----------- -----------
NET CASH USED IN OPERATING
ACTIVITIES ................................ (230,518) (172,196) (2,515,794)
--------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Real estate and assets held for
development ................................ (36,668) (25,176) (1,394,393)
Purchase of furniture, fixtures and
equipment .................................. (1,453) (2,279) (50,112)
Proceeds from sale of part interest
of Isle of Capri Black Hawk .............. -- -- 833,334
Proceeds on disposition of property ........ -- -- 8,866
--------- ----------- -----------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES ....................... (38,121) (27,455) (602,305)
--------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from debt ..................... 150,000 164,500 4,915,658
Common stock issued for cash,
net of Offering costs ................ 243,836 -- 1,620,791
Fractional shares redeemed ............. -- -- (36)
Payments on debt ....................... (208,168) (31,760) (3,649,705)
Salaries contributed by officers ....... -- -- 1,000
Prepaid stock subscription ............. -- -- 295,500
--------- ----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES ............................... 185,668 132,740 3,183,208
--------- ----------- -----------
Net increase (decrease) in cash ............ (82,971) (66,911) 65,109
Beginning cash balance ..................... 154,367 78,245 6,287
--------- ----------- -----------
Ending cash balance ........................ $ 71,396 $ 11,334 $ 71,396
========= =========== ===========
SUPPLEMENTAL INFORMATION:
Cash paid for interest ................. $ 4,561 $ 14,604 $ 418,061
========= =========== ===========
Cash paid for taxes .................... $ -- $ -- $ --
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
NEVADA GOLD & CASINOS, INC.
JUNE 30, 1998
NOTES TO INTERIM FINANCIAL STATEMENTS
ITEM 1.
BUSINESS
Nevada Gold & Casinos, Inc. ("Nevada Gold" or the "Company") was 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. On December 27, 1993, control of the Company changed and the Company's
primary focus was redirected toward the development of gaming and real estate
properties 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.
In April 1997, the Company and Casino America, Inc. ("Casino America")
through wholly owned subsidiaries, BlackHawk Gold Ltd. ("BlackHawk Gold") and
Casino Colorado of Colorado, Inc. ("Casino Colorado"), respectively, formed a
limited liability company, the Isle of Capri Black Hawk. The limited liability
company's purpose is the construction and operation of the Isle of Capri Black
Hawk Casino (the "Casino") on the Black Hawk Property. Casino America will
operate the Casino under a management agreement for a fee based upon a
percentage of revenues.
The Company also owns approximately 150 acres of real property in the
vicinity of Black Hawk, Colorado, and contemplates the completion of additional
acquisitions by the end of July 1998. The Company intends to develop a
commercial and residential real estate project on the property.
The Company's internally generated cash flows from operations have
historically been and continue to be insufficient for its cash needs. The
Company has historically relied upon equity and debt financing to fund
operations. The Company's current cash forecasts indicate that there will be
negative cash flows from operations for the balance of the current fiscal year.
It is likely that the Company will be required to seek debt or equity financing,
curtail operations, or sell assets in order to bring its cash flow into balance;
however, there are currently no specific plans or commitments with respect
thereto. Management's strategy is to raise additional funds through the sale of
Company debt and equity securities, including those held by affiliates of the
Company. In the event that such actions are required, there can be no assurances
that the Company will be successful in any such effort.
The short-term viability of the Company is dependent upon the Company's
ability to raise sufficient capital to meet its cash requirements. In addition,
the Company and its venture partner, Casino America, are in the process of
developing a casino as described above; however, there is no assurance that the
development of a successful casino will be completed. The ownership and
operation of gaming facilities are subject to extensive state and local
regulations. There is no assurance that the Company or its partner will be able
to comply or conduct business in accordance with applicable regulations. The
long-term viability of the Company is dependent upon successful completion and
operation of a casino hotel complex. The factors described above raise
substantial doubt about the Company's ability to continue as a going concern.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. If the Company is unable to continue
as a going concern, the values realized from the Company's assets may be less
than the carrying amounts reported in its financial statements. The accompanying
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
6
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The interim financial statements have been prepared by the Company without
audit and, in the opinion of management, reflect all adjustments of a normal
recurring nature necessary for a fair statement of (a) the results of operations
for the three months ended June 30, 1998 and 1997, (b) the financial position as
of June 30, 1998, and (c) the cash flows for the three month period ended June
30, 1998 and 1997. Interim results are not necessarily indicative of results for
a full year.
The consolidated balance sheet presented as of March 31, 1998 has been
derived from the consolidated financial statements that have been audited by the
Company's independent public accountants. The consolidated financial statements
and notes are condensed as permitted by Form 10-QSB and do not contain certain
information included in the annual financial statements and notes of the
Company. The consolidated financial statements and notes included herein should
be read in conjunction with the financial statements and notes included in the
Company's Annual Report on Form 10-K.
3. ISLE OF CAPRI BLACK HAWK
On April 25, 1997, the Isle of Capri Black Hawk, a Colorado limited
liability company, was formed. The Isle of Capri Black Hawk is owned by Casino
Colorado, a wholly owned subsidiary of Casino America and Black Hawk Gold, a
wholly owned subsidiary of Nevada Gold. The Isle of Capri Black Hawk is a
development stage company and has not commenced gaming operations. The principal
purpose of the Isle of Capri Black Hawk is to develop and operate a casino
entertainment complex in Black Hawk, Colorado, which is anticipated to open in
December 1998 or January 1999. The Company's capital contribution to the limited
liability company was 4 lots within the City of Black Hawk that are zoned for
gaming and adjacent totaling approximately 6.5 acres, all with a value of $7.9
million. The real estate was subject to notes payable and accrued interest of
approximately $400,000 that was paid by the Isle of Capri Black Hawk. The
Company's initial interest in the Isle of Capri Black Hawk was 45%.
On August 20, 1997, the Isle of Capri Black Hawk and Isle of Capri Capital
Corp., a wholly owned subsidiary of the Isle of Capri Black Hawk, that had no
operations, assets or liabilities, issued $75,000,000 of 13% First Mortgage
Notes due 2004, with contingent interest, in order to finance the construction
and development of the Casino.
The rights and obligations of Casino Colorado and BlackHawk Gold are
governed in part by the Amended and Restated Operating Agreement of the Isle of
Capri Black Hawk (the "Agreement") dated as of July 1997. The Agreement provides
that the Isle of Capri Black Hawk will continue until December 31, 2096, or
until such date that dissolution may occur. Pursuant to the Agreement, Casino
Colorado contributed cash, land purchase rights and development costs to the
Isle of Capri Black Hawk and BlackHawk Gold contributed cash and land to the
Isle of Capri Black Hawk.
On July 29, 1997, Casino Colorado, Casino America, BlackHawk Gold and
Nevada Gold also entered into a Members Agreement (the "Members Agreement")
which addressed the development of the Casino, management of the Isle of Capri
Black Hawk, additional capital contributions, and other matters. On August 20,
1997, pursuant to the Members Agreement, Casino Colorado purchased from
BlackHawk Gold a 4.2% ownership interest (the "Transferred Interest") in the
Isle of Capri Black Hawk for $700,000 and BlackHawk Gold had 180 days within
which to reacquire all or a portion of the Transferred Interest for $700,000
together with interest. In addition, pursuant to the Members Agreement,
BlackHawk Gold had the right to sell up to an additional 4.8% ownership interest
in the Isle of Capri Black Hawk to Casino Colorado (the "Put"), for up to
$800,000, and to repurchase, within 180 days, any ownership interest sold
pursuant to the Put, with the repurchase price being the price for which such
ownership interest was sold, together with interest. Pursuant to the Put, Casino
America purchased from BlackHawk Gold (i) an additional .8% interest on November
13, 1997 for $133,333 and (ii) an additional 4.0% ownership interest on February
16, 1998 for $666,667, exhausting BlackHawk Gold's right to sell any additional
interest under the terms of the Put. BlackHawk Gold subsequently repurchased
from Casino America Colorado a 4.0% ownership interest out of the Transferred
Interest for $715,000, which includes interest. As a result, BlackHawk Gold
restored its ownership interest in the Isle of Capri Black Hawk to 40%. Profits
and losses of the Isle of Capri Black Hawk are allocated in proportion to
ownership interests.
7
<PAGE>
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 Isle of Capri Black Hawk is stated at cost, adjusted for its equity in the
undistributed earnings or losses of the project. The following is a summary of
condensed financial information pertaining to the Isle of Capri Black Hawk as of
March 29, 1998:
(in thousands)
---------------
Current assets .......................... $ 1,194
Property and Equipment .................. 37,597
Other assets ............................ 56,503
--------
$ 95,294
========
Current liabilities ..................... $ 7,702
Long-term debt .......................... 75,000
Stockholders' Equity .................... 12,592
--------
$ 95,294
========
Interest income ......................... $ 1,988
Interest expense ........................ 4,401
========
Net loss ................................ $ (2,413)
========
At March 31, 1998, BlackHawk Gold had the right to repurchase the .8%
ownership interest and the 4.0% ownership interest purchased by Casino Colorado
on November 13, 1997 and February 16, 1998, respectively, under the 180 day
repurchase provision of the Put. The 180-day period for repurchase of the .8%
ownership interest expired on May 12, 1997 and the gain resulting from the sale
has been recognized in the Company's March 31, 1998 financial statements. The
180-day repurchase period on the ownership interest sold to Casino Colorado on
February 16, 1998 expires on August 15, 1998 and the $591,404 gain relating to
the sale has been deferred in the Company's March 31, 1998 financial statements.
In the event management of BlackHawk Gold is successful in its intent to
repurchase this 4.0% interest before August 15, 1998, BlackHawk Gold's ownership
will be increased to 44%.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussions of the Company's results of operations and
financial position should be read in conjunction with the financial statements
and notes pertaining thereto, appearing elsewhere in this Form 10-QSB.
Management is of the opinion that inflation and changing prices will have
little, if any, effect on the Company's financial position or results of
operations.
GENERAL
Revenues from the Company have not been sufficient to cover the Company's
operating expenses during the past year. In addition, there have been no
revenues from the Company's gaming operations to date since these are currently
in the development stage. Management does not expect revenues from operations
until after the opening of the Isle of Capri Black Hawk Casino, anticipated to
open in late December 1998 or January 1999.
The Company's significant source of revenue will likely be from its
membership interest in the Isle of Capri Black Hawk. To date, no distributions
have been declared. Although it is anticipated that the casino will commence
operations in the next calendar year, there can be no assurances that this will
occur. In the event operations do commence, there can be no assurance that the
Isle of Capri Black Hawk will be profitable. Other numerous contingencies, out
of the control of the Company, may affect distributions by the Isle of Capri
Black Hawk, and there can be no assurance that the Company will receive
distributions or that they will be of an amount substantial enough to fund the
Company's operations.
The Company's internally generated cash flows from operations have
historically been and continue to be insufficient for its cash needs. The
Company has historically relied upon equity and debt financing to fund
operations. The Company's current cash forecasts indicate that there will be
negative cash flows from operations for the next 12-month period. It is likely
that the Company will be required to seek debt or equity financing, curtail
operations, or sell assets in order to bring its cash flow into balance;
however, there are currently no specific plans or commitments with respect
thereto. Management's strategy is to raise additional funds through the sale of
Company debt and equity securities, including those held by affiliates of the
Company. In the event that such actions are required, there can be no assurances
that the Company will be successful in any such effort.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1997
Revenues decreased $14,556 for the three months ended June 30, 1998
compared to the same period in the prior year. The prior year included $15,000
royalty income under the terms of the Sagebrush Exploration rental agreement,
which has subsequently been terminated due to default in payments.
General and administrative expenses increased $3,818 for the three months
ended June 30, 1998 compared to the same period in the prior year. The increase
is attributable to an increase in office rent and tax increases due to
additional employees.
Interest expense decreased $45,276 for the three months ended June 30,
1998 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.
9
<PAGE>
Salaries increased $14,243 for the three months ended June 30, 1998 as
compared to the same period last year, due to the hiring of additional personnel
to handle accounting, legal and other functions previously performed by
consultants and outside professionals.
Legal and professional fees decreased $5,173 including a decrease of
$8,835 in legal and professional fees, partially offset by an increase of $4,000
in consulting fees.
Other expenses increased $5,660, resulting from increases in general
insurance expenses, printing expenses, and professional development.
Although total expenses decreased $34,364 for the first three months ended
June 30, 1998 as compared to the same period last year, the Company's net loss
for the period increased $361,392 partially attributable to a loss of $381,200
in equity in the Isle of Capri Black Hawk, a development stage project.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
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.
Not applicable
ITEM 5. OTHER INFORMATION.
Not applicable
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.
10
<PAGE>
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.
By: /s/ H. THOMAS WINN
President and Chief Financial Officer
DATE: August 12, 1998
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 71,396
<SECURITIES> 18,111
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 154,507
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,199,296
<CURRENT-LIABILITIES> 409,282
<BONDS> 0
0
1,214,900
<COMMON> 1,088,339
<OTHER-SE> 7,509,387
<TOTAL-LIABILITY-AND-EQUITY> 3,199,296
<SALES> 0
<TOTAL-REVENUES> 809
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 219,314
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,661
<INCOME-PRETAX> (620,366)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> 0
</TABLE>
