5/15/94SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended July 31, 1997
Commission File No. 0-10315
ROYAL CASINO GROUP INC.
(exact name of registrant as specified in its charter)
Utah 95-4091368
(State of Incorporation) (I.R.S. Employee
I.D.No.)
152 Sherman St.
Deadwood, SD 57732
(605) 578-1299 Fax (605) 578-1298
Address and telephone of principal executive offices
Securities registered pursuant to Section 12(g) of the
Act:
Common Stock, $0.001 Par
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:
[x] Yes [ ] No
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13, or
15(d) of the Securities and Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a court.
[x] Yes [ ] No
The aggregate market value of registrant's voting stock held by
non-affiliates as of the close of business on July 31, 1997 was
$2,204,878
5,163,765 shares of registrant's $0.001 par value
common stock were outstanding and issued as
of July 31, 1997
Documents incorporated by reference: None
TABLE OF CONTENTS
PART I
PAGE
NUMBER
ITEM 1. BUSINESS222222222222222222222222222222222222222222222 3
ITEM 2. PROPERTIES2222222222222222222222222222222222222222222 4
ITEM 3. LEGAL PROCEEDINGS222222222222222222222222222222222222 5
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT22222222222222222222222222222222 5
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON
STOCK AND RELATED SECURITY HOLDER MATTERS222222222222 6
SUBMISSION OF MATTERS TO A VOTE OF
SECURITY
HOLDERS2222222222222222222222222222222222222 6
ITEM 6. SELECTED FINANCIAL DATA222222222222222222222222222222 6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS22222222 9
ITEM 8. FINANCIAL STATEMENTS222222222222222222222222222222222
28
NOTES TO FINANCIAL STATEMENTS222222222222222222222222 37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL
DISCLOSURES222222222222222222222222222222222222222222 50
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS222222222222222222222
51
ITEM 11. EXECUTIVE COMPENSATION222222222222222222222222222222
52
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS2222222222222222222222222222222222222222 54
SUBSEQUENT EVENTS22222222222222222222222222222222222 54
PART IV
ITEM 12. FINANCIAL STATEMENTS, SCHEDULES,
EXHIBITS AND REPORTS ON FORM 8-K22222222222222222222 56
SIGNATURE PAGE
2222222222222222222222222222222222222222222222222222 57
PART I
Item 1. Business
General Development of Business
The Company, which is a Utah Corporation, was originally formed
on March 21, 1981, under the name "Arrowhead Energy Corporation"
("Arrowhead") which later changed its name to "Reliance
Enterprises, Inc." ("Reliance"). At the time of incorporation,
Arrowhead, and subsequently Reliance, were engaged primarily
in the acquisition and drilling of oil and gas prospects
principally through private sales of limited partnership
interests. On March 5, 1986, Reliance filed for protection
under Chapter 11 of the United States Bankruptcy Code. On April
18, 1988, Reliance acquired Capitol Television Network Inc., a
California corporation ("CTN California") formed on December
31, 1986, in exchange for a controlling interest in Reliance.
"CTN California's" president and largest shareholder was Jon
Elliott. Pursuant to a Plan of Reorganization, as Confirmed by
the U.S. Bankruptcy Court, Reliance emerged from bankruptcy
proceedings and amended its Articles of Incorporation to change
its name to Capitol Television Network Inc. The Company was
formed to establish a national broadcasting network to provide
programming via satellite for independent and low power
television stations. Due to the company's inability to attract
the necessary funds to commence and sustain operations, combined
with the then current recession, the Company ceased operations
in January, 1992. The Company was dormant until January, 1994
when it amended its Articles of Incorporation to change its name
to Royal Casino Group Inc.
The Company's revenues are derived from Goldiggers Hotel &
Gaming Est., the company's casino and hotel in Deadwood, South
Dakota combined with revenues from the Deadwood Stage, a
transportation system operated by the Company in conjunction
with Goldiggers. The revenues from Goldiggers were not
sufficient to support Goldiggers and the corporate overhead
required to maintain the corporation's existing operation plus
the costs inherent in pursuing other gaming opportunities.
Consequently, the Company experienced an operating loss. It is
anticipated that additional losses will be incurred in the
future as the Company develops casino properties and will
continue until the Company's second or third property is
operational.
Royal Casino Group Inc. is a publicly traded company whose
stock trades on the NASDAQ Over-The-Counter ("OTC") Bulletin
Board under the symbol "WINZ". The Company currently maintains
its principal office at 152 Sherman St, Deadwood, SD 57732.
The Company's mailing address is P.O. Box 545 Deadwood, SD
57732, it's telephone number is (605) 578-1299 and the fax
number is (605) 578-1298
Narrative Description of Business
Just a few short years ago the only casinos in the country were
in Nevada and Atlantic City. Faced with a shortage of civic
funds due to the recession, several small cities such as
Deadwood, SD, Davenport, IA and three obscure gold mining towns
in Colorado began to allow casinos as a way to replenish
municipal coffers. The phenomenal success of gaming in these
communities soon spawned riverboats on the Mississippi River and
on Indian reservations and the "new gold rush of the `90's was
on". Several gaming companies that began less than five years
ago in small cities in Iowa, South Dakota and Illinois now have
a market cap in excess of $200M. As these companies expand their
horizons to larger population centers the tendency is to
overlook the smaller communities.
The Corporation's business plan consists of the development of
gaming properties in small to medium sized jurisdictions
throughout the country. The Company believes that with the
proliferation of gaming many compelling opportunities will be
available to aggressive gaming organizations over the next
several years. Therefore, the Company's strategy is to operate
many smaller casinos in small to medium sized markets, some
potentially on a Joint Venture basis with one or more of the
larger gaming companies. In most markets Royal Casino Group
will elect to develop the property in-house.
The Company through its wholly-owned subsidiary,
Atlantic-Pacific Corp., owns and operates Goldiggers Hotel &
Gaming Est. in Deadwood, South Dakota. The property consists
of a limited stakes casino with 90 gaming devices, a nine room
hotel, restaurant and bar. In addition the Company owns the
Deadwood Stage, a transportation system consisting of 11
vehicles including two 47 passenger busses, three 25 passenger
busses, a 20 passenger bus plus assorted vans. Two parcels of
land adjacent to the property are owned outright by the Company
and could be utilized to expand the property.
The Company has signed a 25 year exclusive contract with the
City of Wyatt, Missouri to develop a riverboat casino
entertainment center on the Mississippi River. The Company has
50 acres of land on the Mississippi River under its control to
develop the project. The Company's application to the Missouri
Gaming Commission is pending receipt of a suitable docking
permit from the Army Corps of Engineers and the annexation of
the property into the City of Wyatt. It is anticipated that the
application will be submitted to the gaming commission during
the Company's second quarter, ending January 31, 1998, although
there can be no assurances that the docking permits and/or
annexation will be completed within that time frame.
Employees
Including its wholly-owned subsidiary Atlantic-Pacific Corp.,
the Company employs approximately 55 full time employees year
round increasing to approximately 75 during the summer.
Item 2. Properties
The Company leases approximately 1,000 square feet for its
corporate headquarters in Deadwood, South Dakota from First
Western Bank for $950 per month on a lease through April, 1998.
The Company leases the three building complex that houses
Goldiggers for an aggregate $19,500 per month on a five year
lease with three five year renewal options. The Company
experienced a 50% rent deferral of the $16,000 per month portion
of its Goldiggers lease from January-May, 1997 due to the severe
winter's impact on the business. The deferred portion was to be
added to the monthly rent and paid from June-October, 1997. As
of the date of this filing two payments of the deferred portion
have been paid. Additionally, the Company's wholly owned
subsidiary is delinquent three months on its rent. The Company,
through its wholly-owned subsidiary, Atlantic-Pacific Corp.,
owns outright two contiguous lots on Main Street in Deadwood
adjacent to Goldiggers.
Item 3. Legal Proceedings
In July, 1997 the Company settled its only lawsuit. In August,
1996 Stephen Grogan, a former Officer and Director of the
Company sued Royal Casino Group Inc. and Jon Elliott, its
President seeking $1 million. The Company sued Stephen Grogan
and in the course of such suit discovered formal documentation
from the South Dakota Commission on Gaming recommending that
Stephen Grogan not be given a gaming license. Solely to avoid
the continuous distraction and costs associated with litigation,
the Company, without admitting any wrongdoing, chose to settle
Grogan's suit for less than $75,000, and withdraw their suit.
The Company is not involved in any existing law suits, nor is
the Company aware of any pending legal proceedings. [See:
Subsequent Events]
Item 4. Security Ownership of Certain
Beneficial Owners and Management
The following table sets forth certain information regarding
the Company's Common Stock as of July 31, 1997, not giving
effect to any stock options or Warrants outstanding as of such
date, owned or recorded beneficially by each person owning more
than 5% of such Common Stock and by all officers and directors
as a group.
COMMON STOCK
Name of Number
Beneficial Owner of Shares % of Total
Outstanding
Jon F. Elliott
P.O. Box 623
Deadwood, SD 1,029,974 19.95
CEO/President and Director
Larry C. Close
1917 Catherine Court
Gardnerville, NV 89410 412,500 8.
Vice President Gaming,
Secretary and Director
- -----------------------------------------------------------------
- --------
All Officers & Directors
as a Group 1,442,474 27.95
PART II
Item 5. Market for the Registrant's Common
Stock and Related Security-Holder Matters
(a) Market Information. Royal Casino Group's common stock is
traded on the NASDAQ Bulletin Board under the symbol "WINZ".
The following table sets forth the high and low bid prices per
share of the Company's Common Stock for the quarters indicated.
These prices represent inter-dealer prices, without adjustment
for retail mark-up, markdown or commissions, and may not
necessarily represent actual transactions.
High Low
1996 Third Quarter. . . . . $1.28 $0.66
1996 Fourth Quarter . . . . $0.94 $0.44
1997 First Quarter. . . . . $0.99 $0.44
1997 Second Quarter . . . . $0.97 $0.49
(b) Holders. The approximate number of holders of record of the
Company's Common Stock as of July 31, 1997 was 2,569.
(c) The Company has not paid a cash dividend on its Common
Stock and does not anticipate that it will do so in the
foreseeable future.
(d) On January 25, 1997 the Board of Directors passed a
motion extending the exercise date for the Company's Class "B"
Warrants to July 26, 1997, with all other terms and conditions
applicable to the warrants remaining in effect. On July 15, 1997
the Board of Directors passed a motion extending the exercise
date for the Company's Class "B" Warrants six months to January
26, 1998, with all other terms and conditions applicable to the
warrants remaining in effect.
Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders
during the fourth quarter of the fiscal year ended July 31, 1997.
Item 6. Selected Financial Data
The selected financial data set forth below should be read in
conjunction with the financial statements and related notes.
Balance sheet information is presented as of the end of the
period shown.
The following table summarizes certain audited financial data
and is qualified in its entirety by the more detailed financial
statements included elsewhere herein. For the year ended July
31, 1997, the Company had gross revenues of $1,947,653 and
incurred a net loss of $1,848,419.
July 31, 1997
(Audited)
Total Assets ...............................$ 2,855,470
Total Liabilities...........................$ 976,832
Shareholders' Equity .......................$ 1,878,638
Shares Outstanding
Common Stock ................................ 5,163,765
Series A Preferred Stock .................... 1,100,000
Net Tangible Book Value
Per Share of Common
Stock . . . . . . . . . . . . .$ 0.36
(1) There are presently outstanding 1,628,612 "B" Warrants
which entitle the holder to purchase one share of Common Stock
at a purchase price of $20 until January 26, 1998. The "B"
Warrants are callable by the Company at a price of $0.20 per
Warrant. There are presently outstanding 550,000 "C" Warrants
which entitle the holder to purchase one share of Common Stock
at a purchase price of $4 until December 31, 2000. The "C"
Warrants are callable by the Company at a price of $1 per
Warrant. This calculation assumes that none of the
aforementioned "B" and "C" Warrants have been exercised.
Income Taxes:
The Company is current with all its Federal and State Income
Tax filings. The Company does not owe any Federal or State
Income Taxes, and has a net operating loss of approximately
$3,002,651 expiring beginning 2010.
Officers' Salaries:
Officers' salary expense for the year was $225,000. In an
effort to preserve the Company's cash, both Officers deferred
their salaries for June and July, 1997. At a January 25, 1997
board meeting as a bonus for improving the Company's assets from
$21 to over $3,900,000 and improving Shareholder Equity from a
negative $135,000 to over $3,200,000 and securing an existing
operation with annual revenues projected over $2,000,000, the
board voted to bonus the Company's two senior executive
officers. Larry Close, the Company's Vice President of
Operations received a bonus of $25,000 and Jon Elliott the
Company's President and CEO received a bonus of $31,250. To
preserve the Company's cash, both officers agreed to take their
bonus in stock. Due to the stock being restricted the bonus was
calculated at a discount of 50% to the then current bid price
for the Company's common stock. Therefore, Larry Close was
issued 100,000 restricted common shares and Jon Elliott was
issued 125,000 restricted common shares on January 29, 1997.
Loans payable, Officers/Directors-Stockholders:
Jon Elliott, an officer and director, who is also the Company's
largest stockholder, loaned and advanced certain moneys to the
Company for its operational overhead and expenses. As of the
date of this report $9,100 is owed plus expenses incurred by
executives of the Company during the normal course of performing
their duties.
Stockholders' Equity
Common Stock:
The Company has 150,000,000 shares authorized, 5,163,765 shares
issued and outstanding. There are presently outstanding
1,628,612 "B" Warrants which entitle the holder to purchase one
share of Common Stock at a purchase price of $20 until January
26, 1998. The "B" Warrants are callable by the Company at a
purchase price of $0.20 per Warrant. Additionally, as part of
the Company's acquisition of Goldiggers, Casino Magic Corp.
holds 500,000 "C" Warrants which entitle the holder to purchase
one share of Common Stock at a purchase price of $4. until
December, 2000. These Warrants are callable by the Company at a
purchase price of $1. per Warrant. As part of the Company's
acquisition of the Triple J Casino in Henderson, Nevada, since
discontinued, the Company issued 50,000 of the aforementioned
$4. "C" Warrants to the seller.
Preferred Stock:
The Company has 100,000,000 shares authorized of which
1,000,000 Class A Preferred were issued to Casino Magic Corp.
in connection with the Company's acquisition of Goldiggers Hotel
& Gaming Establishment. As part of the Company's acquisition of
the Triple J Casino in Henderson, Nevada, since discontinued,
the Company issued 100,000 shares of the aforementioned Class A
Preferred Stock to the seller.
Stockholders' Equity
Stock Options:
Under the terms of its nonqualified employee stock option plan
the Company is authorized to establish a plan for up to two
hundred and fifty thousand (250,000) shares of Common Stock
pursuant to a resolution of the Board of Directors and by
Amendment of its Certificate of Incorporation and/or Bylaws.
Pursuant to this plan the Company has issued one hundred and
seventy thousand (170,000)options to an
officer/director/stockholder. The options may be exercised at a
purchase price of $1.25 per share. The options expire on
January 31, 1999. Board action on July 15, 1997 extended the
expiration date of these options to December 31, 2003.
Additionally, in Board action on July 15, 1997, the Company
created options, with an expiration date of December 31, 2003,
equating to three million shares of common stock to an Employee
Stock Option Plan. The Board granted 900,000 options to Jon
Elliott, the Company's President and CEO; and 600,000 options to
Larry Close, the Company's Vice President. These options carry
an exercise price of $0.60 per share. Additionally, the Board
on the same date authorized the establishment of 500,000
options, each to be exchanged on a one for one common stock
basis, to be offered at the discretion of the President to
investors. These options would be priced at the time granted,
at a price above the then current price of the Company's shares.
Further, that each option shall be for a period established by
the President at the time they are granted. The common stock
issued pursuant to all of the aforementioned options are
restricted under the Securities and Exchange Commission Rule 144.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion provides information on results of
operations, liquidity, capital resources, and the impact of
inflation on the Company. The financial statements and notes
thereto also contain information that is pertinent to this
analysis.
General Financial Condition
From May, 1996 until their expiration on July 26, 1996, over
1,000,000 of the Company's Class "A" Warrants were exercised at
$1 providing the Company with substantial operating capital to
complete the acquisition of Goldiggers from Casino Magic and
commence operations. However, due to the extraordinarily harsh
winter experienced in South Dakota(the coldest and most severe
in over 107 years); the decline in revenues of the Deadwood
gaming market combined with the 10% increase in the number of
gaming devices in Deadwood; the loss of 50 parking spaces across
the street from Goldiggers; the ongoing costs of operation of
the Company; plus the costs incurred in seeking out other gaming
opportunities, the Company has depleted its cash resources. The
Company has borrowed funds from the Company's bank and third
parties and is currently seeking additional financing to sustain
operations. Current cash on hand is not sufficient to meet
ongoing operating expenses however the Company is optimistic
that financing alternatives are available. These alternatives
include raising additional cash through a private placement,
taking on additional debt and/or disposing of selected assets.
Further, to acquire or develop additional gaming properties, the
Company will require funding in varying amounts, time frames and
methods corresponding to each of the gaming opportunities the
Company elects to pursue. The Company has entered into an
agreement with an investment banking firm to raise the funds
required for identified gaming opportunities.
Results of Operations:
The Company, through its wholly-owned subsidiary,
Atlantic-Pacific Corp., operates Goldiggers Hotel & Gaming
Establishment in Deadwood, South Dakota. In addition, the
Company owns and operates the Deadwood Stage, a transportation
system operated, primarily in conjunction with Goldiggers.
Goldiggers Hotel & Gaming Est.
Goldiggers Hotel & Gaming Est. consists of three separate but
connected buildings housing 87 slot machines, 10 video lottery
machines plus three gaming tables, a restaurant, bar and nine
room hotel located in historic Deadwood, South Dakota.
Deadwood, a turn-of-the-century restored gold mining town
nestled in the famous Black Hills of South Dakota, is on the
National Historical Registry and attracts over 1.5 million
visitors per year. In addition to Goldiggers, the Company also
owns and operates the Deadwood Stage, a transportation system
consisting of two 47 passenger buses, three 25 passenger buses,
a 20 passenger bus plus an assortment of vans and school buses
which are primarily used to bring gaming patrons to the casino.
For the first fiscal quarter, the Company, continued to invest
in capital improvements. First, Royal Casino Group replaced
more than 50% of the slot machine game program chips with
current, new, more customer-appealing games and redesigned the
casino's layout to create a more open customer-friendly appeal.
Second, the Company turned the adjacent land into a parking lot
for its hotel guests saving $50,000 per year in parking expense.
Third, the Company relocated and built a new gift shop stocked
with new apparel with the Goldiggers logo. Fourth, the Company
installed new kitchen equipment resulting in increased
efficiency in Goldiggers' restaurant and upgraded the quality of
the food. Fifth, the Company undertook a major cleanup of the
property; repainting the front, side and rear entrances,
refurbishing the copper and brass entrance moldings, ordering
new signs for the front of the building, new roof lights to
brighten the front of the building and new uniforms for its
managerial personnel. Simultaneously, the Company implemented
cost cutting measures such as instituting a comprehensive yet
less expensive employee health insurance program. Viewing a
year-over-year first fiscal quarter comparison of operations,
gross casino revenues were down 18% in this period. Management
attributed this decrease to fewer visitors in the Black Hills in
general and Deadwood in particular as compared to the previous
summer tourist season as a direct result of the cutting of the
State's tourism budget. Deadwood gaming revenues have been
negatively impacted. Further comparison showed that despite the
decrease in the number of tourists to the area and customers in
Goldiggers, restaurant and beverage sales remained constant with
last year, hotel revenue increased 18% while
management-implemented cost-cutting measures and tighter expense
controls reduced the casino's operating costs in excess of 11%.
Although the property experienced a loss of $25,000 for the
quarter, overall EBITDA resulted in a 22% improvement as
compared to the same period last year.
The Company's second quarter represented the coldest
November-January three month period in the 107 years of record
keeping in South Dakota according to the state climatologist.
In December, inclement conditions hindered travel and commerce
across northern-tier states which comprise the majority of
Goldigger's market area. Virtually all Christmas parties booked
for Goldiggers were canceled due to continuous snow and ice
storms. According to a state official the blizzards and below
zero temperatures may cause the greatest cattle losses in more
than a century. Ranching is South Dakota's largest industry and
Goldiggers depends upon area ranchers to form a significant
portion of its local non-tourist business throughout the winter
and spring. In Deadwood, gross gaming revenues were the lowest
in more than two years falling 8.6% from November, which was
down 18% from a year ago and just half of the September, 1996
gross earnings. January's figures remained below the previous
two years January mark. Another factor affecting revenues was
the closing of the 50-car parking lot across the street from
Goldiggers. This was done as construction began on a 500-car
multilevel parking structure due to open in December, 1998.
When completed Management believes it will have a positive
effect on revenues as Goldiggers will be the first casino seen
when exiting the parking structure. The aforementioned
conditions contributed to significantly lower results for
Goldiggers when viewed on a year-over-year basis. For the
second quarter gaming revenues were down 35%, $263,690 to
$169,984, while non-gaming revenues were down 3%, $145,014 vs.
$140,713. However, due to cost-cutting measures the Company cut
operating expenses 28%, from $441,700 to $317,289. For the six
month period ending January 31, 1997 year-over-year gaming
revenues were down 15%, $738,078 vs. $627,571; non-gaming
revenues down 6%, $437,194 vs. $410,167 and overall revenues
down 12% from $1,175,272 to $1,037,738. There was impact
however on the expense side of the ledger as newly implemented
controls resulted in a saving of 17.5% equating to $180,457 in
operating expenses. In spite of a 12% drop in revenues equating
to a shortfall of $137,534 in year-over-year figures, Goldiggers
improved its operating performance by 7.5% or $26,418.
For the Company's fiscal third quarter net gaming revenues for
Goldiggers were up $123,650, or 44% from the Company's last
fiscal quarter. Despite continuous inclement weather and
climatic conditions being considerably worse than previous
years, the decrease in gaming revenues from the same quarter in
1996 was a modest 6%. Due to the implementation of Management's
cost-cutting measures direct departmental costs improved 44% as
a percentage of net gaming revenues over last quarter for a
gross dollar saving of $60,876.
For the Company's fiscal fourth quarter comprising the months
of May, June and July, net gaming revenues for Goldiggers were
down $72,000, or 13% from the Company's fourth fiscal quarter
the previous year. However, due to the continued implementation
of Management's cost-cutting measures, Goldiggers loss from
operations actually improved by $159,000 or 46% in
year-over-year comparison.
Comparing year-over-year results at Goldiggers, pro forma net
revenues for the previous fiscal year ended July 31, 1996, were
$2,094,000 resulting in a pro forma net loss of $1,336,000. This
period was for a time where all but 45 days were under prior
ownership. Although net revenues for the current fiscal year
ended July 31, 1997 were $1,785,000, down $309,000 or 15% from
the previous fiscal year, net losses from operations were
$788,000, an improvement of $548,000 or 41% over the previous
fiscal year. EBITDA was a negative $468,000. The worst winter
in decades caused high losses in livestock for the regions
ranchers. These climatic conditions also adversely affected
ancillary industries resulting in a significant negative impact
on the regions economy culminating in both South Dakota and
North Dakota formally being declared Federal Disaster Areas by
the President. In addition, South Dakota and surrounding regions
suffered through a very wet spring with severe flooding in the
eastern sections of South Dakota and North Dakota and the
western section of Minnesota. With the absence of the regions
ranchers and the residents of eastern North and South Dakota
plus western Minnesota who comprise the primary summer tourist
market for Deadwood, results were negatively impacted. Had
revenues remained at fiscal 1996 levels, EBITDA would have been
negative $130,000. During the just completed fiscal year,
$71,000 was invested in fixed assets.
In September, 1996, Royal Casino Group planned to expand the
hotel by adding 24 new rooms and doubling the size of the casino
by adding 90 gaming devices. The Company believed this
expansion when completed, would have a dramatic, positive effect
on its revenues. The expansion was planned for land adjacent to
Goldiggers which is owned free and clear by the Company. The
Company prepared its business plan and commenced discussions
with investment bankers seeking the $3,750,000 the Company
determined was necessary to construct the building together with
the furnishings, fixtures and equipment, signs, gaming device
fees and operating capital necessary to open. The Company
planned to use its fleet of buses and vans to bring tour groups
to the property and thereby fill the new hotel rooms. However,
due to the severe winter combined with the continuous decline in
Deadwood gaming revenues and with the lack of available parking
due to the delay in the development of the 500-car parking lot
across the street, the Company tabled this expansion until
improved market conditions are present and suitable parking is
available.
The South Dakota legislature and senate approved a measure for
implementation on July 1, 1997 which gave the South Dakota
Commission on Gaming the authority to approve derivative poker
and blackjack games. On July 1, 1997 `Let It Ride' and `Three
Card Poker' were approved and added to Goldiggers replacing two
blackjack tables. Management believes these games should prove
to be a positive influence on Goldiggers revenues.
Recently, Kevin Costner and his brother announced that their
$140M Dunbar Resort is due to commence construction with an
anticipated opening in the year 2000. When completed Management
believes this will have a positive effect on Goldiggers
revenues. During the construction phase Management believes the
1,000 construction workers which will be in Deadwood will also
have a positive impact on Goldiggers revenues.
Pursuant to the terms of Royal Casino Group's agreement with
Casino Magic to acquire Goldiggers Hotel & Gaming Est., in June,
1996 the Company received correspondence from Casino Magic
requesting the Company register 333,333 common shares. In a
subsequent conversation with a member of Casino Magic's senior
management team it was stated that due to the low price of the
Company's common stock Casino Magic was not interested in
selling any of its shares on the market.
Wyatt, Missouri Riverboat Casino
On November 9, 1995 the Company signed a definitive 25 year
Docking and Franchise agreement with the City of Wyatt, Missouri
granting Royal Casino Group the exclusive right to develop and
manage a Riverboat Casino Entertainment Center on the
Mississippi River. The agreement contains five additional five
year renewal periods at Royal's option. Wyatt is located where
the states of Missouri, Illinois & Kentucky meet and is just 20
miles from Tennessee. The location, strategically situated at
the confluence of the Ohio and Mississippi Rivers, is visible
from both Interstate 57, the main north-south artery from
Chicago to New Orleans, and U.S. Highways 60/62 connecting
Southeast Missouri to both Illinois & Kentucky. Highway 60/62,
currently being widened to four lanes, is the main trafficked
road to Branson, Missouri and its millions of annual visitors.
Combined daily vehicle count tops 15,000 with an additional
10,000 vehicles traveling each day on Interstate 55 less than
twenty minutes from the site. Interstate 55 is the main
north-south artery between St. Louis & New Orleans. A 5-state
territory with a population of just under 2 million is within
100 miles. The closest operating riverboat casino is Players
located approximately 40 miles away in Metropolis, IL with
annual revenues in excess of $70M. ROYAL plans, subject to
receiving the required regulatory approvals, to develop a
Riverboat Casino Entertainment Complex including a 7,400 square
foot Visitor's Center containing a 150 seat buffet restaurant,
lounge, ticketing area plus a Missouri Arts & Craft shop.
On March 23, 1996 the Company and a local landowner entered
into a three year lease with an unlimited number of five year
renewal options (at base plus customary CPI adjustments) plus an
option to purchase 50 acres of land directly on the Mississippi
River near Wyatt, Missouri. The term and annual lease payments
of $50,000 commence upon the earlier of the Company beginning
construction on the land or the selection of its gaming
application for review by the Missouri Gaming Commission. The
Company has an option for three years to purchase the land for
$300,000 with 50% of the rent paid credited towards the purchase
price. Ten percent of the rental sum due for the initial three
year term will be payable in the Company's restricted common
stock priced at the average ask price of the Company's shares
for the preceding 15 trading days prior to the payment due date.
As a condition of the transaction, the City of Wyatt will annex
the property into the city with the lessor paying the costs
associated with this procedure. This annexation is anticipated
to be completed during the first quarter of 1998 although no
assurances to this effect can be given due to the complexities
and variables associated with this procedure.
In April, 1996 the Company submitted its application for the
required regulatory docking permits to the Army Corps of
Engineers. As reported in it's Form 10-Q for the quarter ended
October 31, 1997, the Company had been informed that the Army
Corps of Engineers had issued a public notice on October 8,
1996. This information proved to be erroneous. On March 7,
1997 the Army Corps of Engineers issued a public notice seeking
comments to determine whether to grant a Section 401 water
quality certification permit which would grant Royal Casino
Group the permission necessary to dock its planned riverboat at
its planned location in Wyatt, Missouri. The Company received
communication from the Army Corps of Engineers concerning its
application for a 404 docking permit. Three separate
engineering sections of the Corps stated concerns about the
Company's proposed design for its riverboat casino and
entertainment center as it may interfere with the Mississippi
River's flow at that juncture and impact on the levee in that
area. The Company's engineer is in contact with the various
sections of the Corps with proposed changes to the projects
specific site location within the 50 acres it controls. The
Company anticipates that an accord can be achieved within the
next several months which would allow the project to proceed.
Additionally, Missouri statutes require the land used for a
riverboat casino development to be located within the city
limits of that community. In July, 1997 the City Council of
Wyatt voted to annex the 50 acres of land into the City of
Wyatt. This procedure is expected to be complete within the next
90 days although unexpected circumstances may delay this
procedure.
Once the Company has received its docking permit from the Army
Corps of Engineers and the annexation of the land has been
completed, Royal Casino Group plans to submit its application
for licensing to the Missouri Gaming Commission. Royal will be
submitting a complete package comprised of an exclusive 25-year
definitive agreement with the City of Wyatt, sufficient land to
adequately develop the Riverboat Casino Entertainment Center,
governmental and regulatory docking approval on its site,
preliminary drawings, an available, suitable riverboat together
with demonstrable financing capabilities. Licensing is solely
at the discretion of the Missouri Gaming Commission and there
can be no assurances that Royal will gain approval.
The Triple J Casino
On March 18, 1997 the Company entered into an Agreement in
Principle to acquire the Triple J Casino including 16 acres of
land located in Henderson, Nevada in a transaction valued at
$9.5 million.
The Triple J Casino sits on 16 acres of land and is
comprised of a 35,000 square foot building, 320 slot machines, a
restaurant, lounge and a sports book. The building also
includes a 15,000 square foot area suitable for casino expansion
and other revenue generating entertainment opportunities. The
two main attractions for Royal Casino Group were 1)the fact that
the casino has an unrestricted gaming license and 2) the plans
to build a 550 room hotel on the site have been approved by the
City of Henderson=s zoning, planing and City Council.
Terms of the agreement provided for the current owners of
the Triple J Casino to receive $4.9 million in cash; be issued
shares of the Company's redeemable, non-dividend bearing,
convertible, preferred stock valued at $3 million; 200,000
restricted common shares of the Company's common stock; a 48
month non-convertible, redeemable $1.5 million debenture with
dividends deferred for the first two years and 500,000 "C"
Warrants, convertible on a one-for-one basis into the Company's
common stock, with an exercise price of $4. As a down payment
and in consideration of removing the property from the market,
the Company gave the following as a non-refundable deposit to
the current owners of the Triple J: the 200,000 shares of
restricted common shares, 100,000 shares of the aforementioned
preferred stock plus a "C" Warrant to acquire 50,000 shares of
the Company's common stock at the above mentioned terms and
conditions.
A Board Meeting authorizing the appropriate amendment to
the Company's Articles of Incorporation to reflect the
preferences, rights and limitations of the preferred stock to be
issued in conjunction with the transaction was held with the
amendment being subsequently filed with the State of Utah.
Completion of the acquisition was subject to customary
conditions consistent with a transaction of this kind including
the issuance to Royal Casino Group of a license from the Nevada
Gaming Commission, financing and the execution of a definitive
agreement.
Management believed that this acquisition would have made a
significant positive impact upon the assets and revenues of the
Company. From 1990 through 1994, the U.S. Census Bureau ranked
Henderson as the fastest growing large city in the nation. Its
current population of 140,000 is expected to double in the next
decade. Basically a suburb of Las Vegas, this area showed the
second largest increase of all Nevada gaming areas with gaming
revenues up 17.6% in 1996 according to figures released by
Nevada's Gaming Control Board.
Management believed it could attract the requisite
financing necessary to acquire the property and that it could
have been raised in a timely fashion on terms and conditions
acceptable to the Company. The Company's plan was to assume
ownership of the property and through the implementation of a
solid marketing plan and experienced gaming management, effect a
turn around of the property. Once demonstrated that the
property was producing a positive cash flow the Company believed
that it could attract the financing to commence Phase I of the
expansion which was the expansion of the casino and the addition
of 200 hotel rooms plus some amenities. Once demonstrated that
the hotel was running a high occupancy rate the company would
seek the financing necessary to commence Phase II of the
expansion which would be the addition of 350 additional hotel
rooms. It was contemplated that completion of the project would
take two to three years. The Company retained the services of
the former head of zoning and planning for the City of Henderson
as a consultant. With the building permits due to expire in
May, 1998 the Company believed that if it enhanced the plans, an
extension would be attainable from the City of Henderson.
Therefore, the Company's architects created a preliminary set of
drawings enhancing the appearance and overall development of the
contemplated expansion.
In June 1997 legislation was authored and passed in July,
1997 that severely restricts the growth of casinos and casino
hotels in residential areas. Specifically, the legislation
prohibited any casino related development within 500 feet of a
home. The Triple J has homes adjacent to its parking lot and
although grandfathered as to the legislation by virtue of the
fact that it proceeded the development of the homes, with the
Company's timetable for expansion and development in phases over
a period of years, the Company realized that it would require an
extension of the building plans. Due to the publicity
surrounding the recently passed legislation, Senate Bill 208,
the Company believed that it would be unable to garner the
extensions from the Municipal authorities which it would
require. The Company determined it would be unable to raise the
approximately $55 million required to acquire, remodel and
develop the property on acceptable terms and conditions within
the time frame prior to the expiration of the permit. Once the
existing permit expired, the Company believed it would be very
difficult to re-apply for a permit to develop the hotel. After
conferring with agents of the Nevada Gaming Control Board and
receiving their initial comments with respect to Royal's
proposed acquisition, the Company decided to cease its pursuit
of the Triple J.
At the time Nevada Gaming Control Board agents began their
investigation into the suitability of Royal Casino Group the
company did not have the financial capability to fund the
acquisition of the Triple J and was actively pursuing outside
financing. One of the elements in determining suitability by
NGC agents in the acquisition of a Nevada gaming property is
that the buyer have the financial strength to not only acquire
the property, but to fund operation as needed. At the time
Nevada Gaming Commission agents started their investigation and
finding of suitability of Royal Casino Group, the company did
not meet either criteria.
Although the company was pursuing financing for the
acquisition and the funding for the proposed hotel expansion,
the company could not demonstrate that it would get the
necessary acquisition financing to satisfy Nevada gaming
authorities in the time frame of their suitability investigation
for a Nevada gaming license. Further, if additional funding for
the hotel expansion could not be obtained to meet the Henderson
building commencement date of May 1998 then the company might
have trouble renewing the building permit for the hotel because
of the recently passed Senate Bill 208. If that occurred, the
potential revenue growth of the property would be jeopardized.
Based on these factors, it was determined in conversations
during the initial stages of the suitability investigation
interviews with Nevada gaming agents that the Company chose to
withdraw its application. Although, as of the date of this
report the Company is waiting for approval of the withdrawal
from the Nevada gaming regulators.
In anticipation of the acquisition the Company incorporated
a Nevada corporation, Goldiggers Southern Nevada Inc., as a
wholly owned subsidiary. The Nevada company does not and has
never had any assets, revenues or liabilities and remains a
shell corporation.
The Company will take a one-time write-off of $275,000
pursuant to costs associated with this proposed acquisition.
These costs include professional fees, travel associated
expenses, regulatory fees, consultants fees, investment banking
and due diligence fees.
Ownership and Operation of Casinos in Nevada
The ownership and operation of casino gaming facilities in
Nevada are subject to the Nevada Gaming Control Act and the
regulations promulgated thereunder (the "Nevada Act") and to
licensing and regulatory control by the Nevada Gaming
Authorities. The laws, regulations and supervisory procedures of
the Nevada Gaming Authorities are based upon declarations of
public policy which are concerned with, among other things, (i)
the character of persons having any direct or indirect
involvement with gaming, (ii) the establishment and maintenance
of responsible accounting practices and procedures, (iii)
maintenance of effective control over the financial practices
and financial stability of licensees, including procedures for
internal fiscal affairs and the safeguarding of assets and
revenues, (iv) the prevention of cheating and fraudulent
practices, and (v) providing a source of state and local
revenues through taxation and licensing fees.
The Company must register with the Nevada Gaming Commission and
be found suitable and be granted all requisite licenses under
the terms of the Nevada Act to conduct a nonrestricted gaming
operation in Nevada. The Company applied for the necessary
governmental licenses, permits and approvals for its proposed
hotel/casino venture in Henderson, Nevada. However, there can be
no assurances that any licenses, permits or approvals that would
be required would have been given or that once received, they
would not have been suspended or revoked. Nevada gaming licenses
are not transferable and require periodic payments of fees.
The Nevada Gaming Authorities may investigate any individual
who has a material relationship to, or material involvement
with, a corporation registered under the Nevada Act or which
holds a license in order to determine whether such individual is
suitable or should be licensed as a business associate of a
gaming licensee. Officers, directors and certain key employees
of licensed gaming corporations must file license applications
with the Nevada Gaming Authorities. In addition, changes in
corporate positions must be reported to the Nevada Gaming
Authorities. Officers, directors and key employees of the
Company who are actively and directly involved in gaming
activities of the Company may be required to be licensed or
found suitable by the Nevada Gaming Authorities. The Nevada
Gaming Authorities may deny an application for licensing for any
cause which they deem reasonable. A finding of suitability is
comparable to licensing, and both require submission of detailed
personal and financial information followed by a thorough
investigation. The applicant for licensing or a finding of
suitability must pay all the costs of the investigation.
If the Nevada Gaming Authorities were to find an officer,
director or key employee unsuitable for licensing or unsuitable
to continue having a relationship with the Company, the Company
involved would be required to sever all relationships with such
persons. In addition, the Nevada Gaming Commission may require a
registered company or licensee to terminate the employment of
any person who refuses to file appropriate applications.
Determinations of suitability or of questions pertaining to
licensing are not subject to judicial review in Nevada.
Any beneficial holder of the voting securities of a corporation
registered under the Nevada Act, including the Company
regardless of the number of shares owned, may be required to
file applications, be investigated, and have such holder's
suitability determined if the Nevada Gaming Commission has
reason to believe that such ownership may be inconsistent with
the declared policies of the State of Nevada. Pursuant to the
regulations of the Nevada Gaming Commission, the applicant must
reimburse all costs of investigation incurred by the Nevada
Gaming Commission in conducting its investigation upon an
application.
Persons who acquire beneficial ownership of more than 5% of the
voting securities of a corporation registered under the Nevada
Act must report the acquisition to the Nevada Gaming Commission.
The Nevada Act requires that beneficial owners of more than 10%
of the voting securities of a corporation registered under the
Nevada Act must apply to the Nevada Gaming Commission for a
finding of suitability within 30 days after the Chairman of the
Nevada Gaming Control Board mails the written notice requiring
such filing. If the stockholder who is required to be found
suitable is a corporation, partnership or trust, it must submit
detailed business and financial information including a list of
beneficial owners. In addition, the Liquor and Gaming Licensing
Board of the county having jurisdiction over a licensee has the
authority to require that any person owning or controlling any
of the stock of a gaming licensee, such as the Company, be
investigated for suitability to be licensed. The applicant is to
pay all costs of investigation. Any person who fails or refuses
to apply for a finding of suitability for a license within 30
days after being ordered to do so by the Nevada Gaming
Commission or the Chairman of the Nevada Gaming Control Board
may be found unsuitable. Under certain circumstances an
"institutional investor" (as such term is defined in the Nevada
Gaming Commission's regulations) which acquires more than 10% of
the Company's voting securities may apply to the Nevada Gaming
Commission for a waiver of such finding of suitability. The
Company applied for and was found suitable by the City of
Henderson, Nevada to own and operate the Triple J Casino subject
to obtaining a Nevada Gaming License and obtaining the
appropriate local and county licenses and permits.
Any stockholder who is found unsuitable and who continues to
hold, directly or indirectly, any beneficial ownership of the
voting securities of a corporation registered under the Nevada
Act beyond such period of time as may be prescribed by the
Nevada Gaming Commission may be guilty of a criminal offense.
The registered corporation could be subject to disciplinary
action by the Nevada Gaming Commission if after it receives
notice that a person is unsuitable to be a stockholder or to
have any other relationship with it, it (i) pays the unsuitable
person any dividends or interest upon any of its securities or
any other payment or distribution of any kind whatsoever, (ii)
recognizes the exercise, directly or indirectly, of any voting
rights in its securities by the unsuitable person, (iii) pays
the unsuitable person any remuneration in any form for services
rendered or otherwise, except in certain limited and specific
circumstances, or (iv) fails to pursue all lawful efforts to
require the unsuitable person to divest the voting securities,
including if necessary, the immediate purchase of the voting
securities for cash at fair market value. The Nevada Commission
may, in its discretion, require the holder of any debt security
of a Registered Corporation to file applications, be
investigated and be found suitable to own the debt security of a
Registered Corporation if the Nevada Commission has reason to
believe that such ownership would otherwise be inconsistent with
the declared policies of the State of Nevada. If the Nevada
Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the Registered
Corporation can be sanctioned, including the loss of its
approvals, if without the prior approval of the Nevada
Commission, it: (i) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever, (ii) recognizes any
voting right by such unsuitable person in connection with such
securities, (iii) pays the unsuitable person remuneration in any
form, or (iv) makes any payment to the unsuitable person by way
of principal, redemption, conversion, exchange, liquidation or
similar transaction. After licensing, the Company is required to
maintain current stock ledgers in the State of Nevada which may
be examined by the Nevada Gaming Authorities at any time. If any
securities are held in trust by an agent or by a nominee, the
record holder may be required to disclose the identity of the
beneficial owner to the Nevada Gaming Authorities. A failure to
make such disclosure may be grounds for finding the record
holder unsuitable. The Company is also required to render
maximum assistance in determining the identity of the beneficial
owner. The Nevada Gaming Commission has the power to require
certificates representing shares of the Common Stock of the
company bear a legend to the general effect that the securities
are subject to the Nevada Act. The Nevada Gaming Authorities,
through the power to regulate licensees, have the power to
impose additional restrictions on the holders of the Company's
securities at any time.
The regulations of the Nevada Gaming Commission provide that
the control of a corporation registered under the Nevada Act may
not change without the prior approval of the Nevada Gaming
Commission. Under the Nevada Gaming Commission's regulations, an
acquisition of control includes stock acquisitions (including
tender offers) and certain other transactions. Persons seeking
approval to control a corporation registered under the Nevada
Act must satisfy the Nevada Gaming Commission in a variety of
stringent standards prior to assuming control of such
corporation. The failure of a person to obtain such approval
prior to assuming control over the registered corporation may
constitute grounds for finding such person or persons unsuitable.
Regulations of the Nevada Gaming Commission prohibit certain
purchases of securities by publicly traded corporations
registered under the Nevada Act without the prior approval of
the Nevada Gaming Commission. Transactions covered by these
regulations are generally aimed at discouraging repurchases of
securities at a premium over market price from certain holders
of greater than 3% of the outstanding securities of the publicly
traded registered corporation. The regulations of the Nevada
Gaming Commission also require prior approval for a "plan of
recapitalization," as defined by the regulations. Generally, a
plan of recapitalization is a plan proposed by the management of
a corporation registered with the Nevada Gaming Commission that
contains recommended action in response to a proposed corporate
acquisition opposed by the company's management, which
acquisition itself would require the prior approval of the
Nevada Gaming Commission. Substantially all loans, leases, sales
of securities and other financial transactions entered into by
the Company must also be reported to or approved by the Nevada
Gaming Authorities.
Nevada law prohibits corporations registered under the Nevada
Act from making a public offering of their securities without
the approval of the Nevada Gaming Commission if any part of the
proceeds of the offering is to be used to finance the
construction, acquisition or operation of gaming facilities in
Nevada, or to retire or extend obligations incurred for one or
more purposes. Furthermore, any such approval, if granted, does
not constitute a finding, recommendation or approval by the
Nevada Gaming Commission, or Board as to the accuracy or
adequacy of any offering circular, or the investment merits of
the securities offered thereby. Any representation to the
contrary is unlawful. Pursuant to recent changes in Nevada law,
the Company and its subsidiaries may engage in gaming activities
outside the State of Nevada without seeking the approval of the
Nevada Gaming Authorities provided that such activities are
lawful in the jurisdiction where they are to be conducted and
that certain information regarding the foreign operation is
provided to the Nevada Gaming Authority on a periodic basis. The
Company and its Nevada based affiliates may be disciplined by
the Nevada Gaming Commission if it violates any laws of the
foreign jurisdiction pertaining to the foreign gaming operation,
fails to conduct the foreign gaming operation in accordance with
the standards of honesty and integrity required of Nevada gaming
operations, engages in activities that are harmful to the State
of Nevada or its ability to collect gaming taxes and fees, or
employs a person in the foreign operation who has been denied a
license or finding of suitability on Nevada on the ground of
personal unsuitability.
License fees and taxes, computed in various ways depending on
the type of gaming or activity involved, are payable to the
State of Nevada and to the counties and cities in which the
Company's respective operations are conducted. Depending upon
the particular fee or tax involved, these fees and taxes are
payable monthly, quarterly or annually and are based upon (i) a
percentage of the gross gaming revenues received, (ii) the
number of slot machines operated by the casino or (iii) the
number of table games operated by the casino. A casino
entertainment tax is also paid by licensees where entertainment
is furnished in connection with the selling of food or
refreshments.
Application for a Nevada Gaming License
The ownership and operation of casino gaming activities in
Nevada are subject to the Nevada Gaming Control Act and the
regulations promulgated thereunder and to licensing and
regulatory control by the Nevada gaming authorities. The
Company must be found suitable and be granted all requisite
licenses under the terms of the Nevada Act to conduct a
non-restricted gaming operation in Nevada. In April, 1997 the
Company submitted its application together with the applications
of the Company=s Officers and Directors both of which are
required to be licensed prior to assuming control of the Triple
J Casino. Although the Company and its Officers and Directors
were found suitable by the South Dakota gaming regulators and
were issued a gaming license by the South Dakota Commission on
Gaming, there can be no assurances that the Company would
receive its Nevada Gaming License or if it did there can be no
assurances as to when it would be issued. The Company is
responsible for all costs incurred by the Nevada Gaming
regulatory bodies pursuant to the background and suitability
findings during the licensing process and as such made a deposit
of $85,000 to two divisions of the Nevada Gaming Board to
commence the investigations.
However, as mentioned above the building permit was due to
expire in May 1998 and the Company determined it would be unable
to raise the approximately $55 million required to acquire,
remodel and develop the property on acceptable terms and
conditions within the required time frame prior to the
expiration of the permit. Once the existing permit expired, the
Company believed it would be very difficult to re-apply for a
permit to develop the hotel. After conferring with agents of
the Nevada Gaming Control Board and receiving their initial
comments with respect to Royal's proposed acquisition, the
Company decided to cease its pursuit of the Triple J. In July,
1997 the Company requested the Nevada Gaming Commission to allow
it to withdraw its application for a gaming license relating to
its proposed acquisition of the Triple J Casino. As of the date
of this filing this action is still pending.
Option To Purchase
On April 1, 1997 the Company optioned the 7 acres adjacent
to the Triple J Casino for $75,000. Terms of the agreement
allow the Company to acquire the property anytime within 18
months for $1.5 million. The $75,000 is considered a deposit
towards the total purchase price and was paid by the Company
through the issuance of 105,634 restricted shares of the
Company=s common stock. The purpose behind the option was that
upon completion of the purchase this would have brought the
Company=s land assemblage to 23 contiguous acres, one of the
largest parcels of casino-zoned land in the City of Henderson
holding a non-restricted gaming license.
Fort Erie Racetrack
In April, 1997 the Company responded to a Request for
Proposals (RFP) from the Ontario Jockey Club to purchase their
Fort Erie Racetrack in Fort Erie, Ontario across from Buffalo,
New York. What prompted the Company's interest was the
announcement by the Ontario Provincial Government that Video
Lottery Terminals would be placed in the racetracks in the
Province with no capital outlay by the track's owner. The
racetrack was also the optimum site for a Provincially approved
charity casino in the City of Fort Erie. The Company assembled
a group of three prominent Canadians who would share active
involvement in the venture should the Company's proposal be
accepted. The Company submitted what it believed to be a
competitive bid. In May, 1997 all members of Senior Management
of the Ontario Jockey Club recommended Royal Casino Group's
proposal to their Board of Trustees. The Board selected another
bid, with the caveat that should the other group fail to close
the transaction or fail to receive their license from the
Ontario Racing Commission, Royal's proposal would be accepted as
presented and that the bidding process would not be reopened.
After extended delays the other group received a temporary
license from the Ontario Racing Commission enabling them to
close the transaction. As of the date of this filing the other
group had not received their permanent license and a significant
shareholder of the other group was still undergoing license
review.
The Company will take a one-time write-off of $21,000 pursuant
to costs associated with this proposed acquisition. These costs
include professional fees and travel associated expenses.
Other Corporate Activities
Royal Casino Group had an active interest in an initiative in
Trinidad, Colorado which would have allowed a local referendum
to permit gaming. The Company had a representative in the
community negotiating with Realtor's which, the Company
believed, would give it a significant competitive advantage over
the competition. However, the measure was defeated in the
November 4, 1997 election.
The Company is in the early stages of actively investigating
and evaluating specific casino opportunities in certain markets
which fit the Company's goal to acquire and manage casinos in
small to mid-sized markets.
Class "A" & Class "B" Warrants
At a Board of Directors meeting on January 25, 1997, the Board
extended the exercise date for the Company's Class "B" Warrants
to July 26, 1996 with all other terms and conditions remaining
in effect.
At a Board of Directors meeting on July 15, 1997 the Board
extended the exercise date for the company's Class "B" Warrants
until January 26, 1998 with all terms and conditions remaining
in effect.
Retention of Auditors
On August 12, 1996 Royal Casino Group dismissed Caldwell,
Becker, Dervin Petrick & Co., LLP, as its independent
accountants. On the same day the Company retained the services
of the Minneapolis office of Arthur Andersen LLP, an accounting
organization, to conduct an audit of the Company's financial
statements. A Form 8-K detailing the aforementioned dismissal
and retention was filed with the Securities & Exchange
Commission on August 14, 1996. The Securities & Exchange
Commission, in a letter dated August 30, 1996 requested a
refiling of the Form 8-K including the words "through the date
of dismissal" when referring to the stated fact that there had
been no disagreements with the former accountants. A Form 8-KA
including the requested words was subsequently filed on
September 18, 1996.
Pursuant to a Securities & Exchange Commission requirement that
in an acquisition, if the acquired entity represents 40% or more
of the annual sales of the acquiring entity, a Form 8-K must be
filed within 15 days announcing the acquisition with a second
Form 8-K containing audited financial statements for the
acquired entity's most recent three year period filed within the
following 60 days. As Atlantic-Pacific, the Company's
wholly-owned subsidiary which owns and operates Goldiggers, was
deemed not material by Casino Magic's auditors due to the
percentage of total sales it represented, the Company retained
the Minneapolis office of Arthur Anderson, LLP to conduct the
required audit. An audit of the financial statements of Atlantic
Pacific Corp., the Company's wholly-owned subsidiary that
operates Goldiggers, for the three years preceding the
acquisition by the Company, specifically for the years ended
December 31, 1995, 1994 and 1993 and for the three years then
ended December 31, 1995, was prepared by Arthur Andersen, LLP.
The audit was completed and filed with a Form 8-K within the
allowed time frame on August 28, 1996.
The hereunto referred Form 8-Ks are included as an exhibit with
this report. [See Subsequent Events]
The Company's financial statements together with a consolidated
audit for the fiscal year ended July 31, 1996, as prepared by
Arthur Andersen, LLP., was included in the filing of the
Company's Form 10-K as filed with the Securities & Exchange
Commission.
Board of Directors Matters
At a Board Meeting on July 16, 1996 the Board voted to
establish a par value of 1 mil per share for the Corporation's
Common and Preferred Stock effective August 1, 1996. [See:
Amendment to Articles of Incorporation]
Amendment to Articles of Incorporation
Subject to the Corporation's request on August 5, 1996 the
Company received a Certificate from the Utah Division of
Corporations and Commercial Code amending its Articles of
Incorporation to include the par value of a mil per share for
the Corporation's Common and Preferred Stock as of August 1,
1996.
Corporate Loans
On July 1, 1996 the Company borrowed $180,000 from its bank to
pay the annual device fees to the South Dakota Commission on
Gaming. Fees are calculated at $2,000 per gaming device per
year and are due each year on July 1st. As Goldiggers has 90
gaming devices the fees are $180,000. The Company repaid the
$180,000 including interest on time by September 30, 1997.
In February, 1997 the Company arranged an $125,000 line of
credit with its bank to be applied to the operating expenses
incurred at Goldiggers due to the sustained and severe winter.
The funds were drawn down through April, 1997 and are due to be
repaid in February, 1998. The Company believes it will not be
able to repay the credit line from revenue generated by
operations and will need to either attract outside capital or
dispose of a portion of its assets to satisfy the debt.
On July 1, 1997 the Company borrowed $180,000 from its bank to
pay the annual device fees to the South Dakota Commission on
Gaming. Fees are calculated at $2,000 per gaming device per year
and are due each year on July 1st. As Goldiggers has 90 gaming
devices the fees are $180,000. As of the date of this filing the
Company has repaid the majority of its indebetedness leaving a
balance of approximately $50,000 still owed.
In July, 1997 the Company borrowed $30,000 each for a period of
60 days and 90 days from an individual and a corporation
providing the Company's Deadwood Stage vehicles and marketable
securities as collateral. [See: Subsequent Events]
Retention of Investment Banking Firm
On July 18, 1997 the Company retained the services of McGinn,
Smith & Co., Inc. of Albany, New York, a 20 year old investment
banking firm, to raise financing for the Company's proposed
gaming acquisitions and developments on a project by project
basis. Per the agreement the Company paid McGinn, Smith & Co.,
Inc. a non-refundable retainer/engagement fee of 50,000 common
shares from its active S-8 registration.
Consultants
On August 13, 1996 the Company entered into a public relations
contract with Pinnacle Funding Corp. of West Palm Beach,
Florida. The agreement called for the Company to pay Pinnacle
$7,500 per month for nine months, issue Pinnacle 90,000 common
shares from its active S-8 registration to be delivered 30,000
upon signing, 30,000 in three months and 30,000 in six months
and grant Pinnacle options to purchase 350,000 common shares at
prices ranging from $1.25 to $2.50. The Company terminated the
agreement in December, 1996 and therefore instructed its
transfer agent to cancel the two aforementioned stock
certificates in the amount 30,000 common shares each which had
not been presented to Pinnacle. The shares were canceled on
January 29, 1997 and returned to the treasury.
The Company severed its financial public relations agreement
with Guidera Communications of Hilton Head Island, South
Carolina in April, 1997.
On October 1, 1996 the Company renewed its financial public
relations contract with Gaming Venture Corp., USA (formerly
Lucky Management) for a fee of $2,500 per month plus options to
purchase 18,000 restricted common shares of the Company's stock
at $0.88. Gaming Venture Corp., USA's (GVCU) president is Alan
Woinski, widely recognized as the gaming industry's leading
stock market analyst. In July, 1997 GVCU lent the Company
$30,000 interest free for 90 days. The Company simultaneously
increased GVCU's monthly fee to $5,000 for the months
August-December, 1997.[See: Subsequent Events]
The Company retained Mainstream Consultants of Boca Raton,
Florida for public relations services at $10,000 per month for
June and July, 1997. Mainstream had performed similar services
for the Company in 1996.
The Company retained Mahoney International of Toronto, Canada
on a six month contract at $4,000 per month beginning July 1,
1996 to further the Company's efforts to develop a Canadian
casino. In January, 1997 the contract was renewed for an
additional five months. Mahoney International was instrumental
in the Company's RFP proposal for the acquisition of Fort Erie
Racetrack. Mahoney International's president is Steven Mahoney
who served many years as the Official Opposition Party Whip in
the Ontario Provincial Government and is now a federal Member of
Parliament in Ottawa.
Stock Issuances
On August 1, 1996 the Corporation instructed its transfer agent
to issue 2,000 common shares to David Somerville as compensation
for entertainment services. On August 14, 1996 the Corporation
instructed its transfer agent to issue three certificates each
in the amount of 30,000 common shares in the name of Pinnacle
Funding Corp. from the Company's active S-8 Registration
#33-34786. One of these certificates was delivered to Pinnacle.
As a result of the termination of its consulting agreement with
Pinnacle Funding Corp. the Company returned two certificates
each in the amount of 30,000 common shares to the Company's
transfer agent. These shares had not been earned pursuant to
the terms of the agreement and were canceled and retired into
the Company's treasury on January 29, 1997. On October 9, 1996
the Company instructed its transfer agent to issue: 7,000 common
shares in the name of Dalton & Mathias as a portion of their
consulting compensation for their efforts as the Corporation's
outside accounting firm and, 2,500 common shares to Lloyd
Covens, for his consulting services in Trinidad, Colorado in
connection with the Company's efforts to develop a casino in
that community. Both of these issuances were from the Company's
active S-8 registration #33-34786. On December 10, 1996 the
Corporation instructed its transfer agent to issue 6,000 common
shares in the name of Arthur Lovett from the Company's active
S-8 Registration #33-34786. These shares were issued for
consulting services assisting the Company with its EDGAR
compliance filings. On December 11, 1996 the Corporation
instructed its transfer agent to issue 21,334 common shares in
the name of Gaming Venture Corp., U.S.A. from the Company's
active S-8 Registration #33-34786. These shares were issued for
consulting services per the May, 1996 agreement. On January 28,
1997 the Company instructed its transfer agent to issue: 7,754
common shares in the name of Daniel French as a portion of his
consulting compensation for his efforts as the Corporation's
construction manager; and, 24,000 common shares to Mahoney
International in their capacity as public relations consultant
for their efforts in assisting the Company with their efforts to
develop gaming opportunities in the Province of Ontario; and
2,000 common shares in the name of Arthur Lovett for his efforts
as an outside consultant assisting the Company with its EDGAR
compliance filings. All of these issuances were from the
Company's active S-8 registration #33-34786. On March 14, 1997
the Company instructed its transfer agent to issue 24,000 common
shares to Mahoney International in their capacity as public
relations consultant for their efforts in assisting the Company
with their efforts to develop gaming opportunities in the
Province of Ontario. On May 9, and on May 30, 1997 the
Corporation instructed its transfer agent to issue 750 and 300
common shares respectively in the name of Arthur Lovett from the
Company=s active S-8 Registration #33-34786. These shares were
issued for consulting services assisting the Company with its
EDGAR compliance filings. On May 9, 1997 the Corporation
instructed its transfer agent to issue 12,308 common shares in
the name of Dalton & Mathias from the Company=s active S-8
Registration # 33-34786. These shares were issued for
consulting services associated with the Company=s financial
preparations. On May 30, 1997 the Corporation instructed its
transfer agent to issue: 2,500 common shares in the name of Dan
French as a portion of his consulting compensation for his
efforts as the Corporation=s construction manager; and, 14,500
common shares in the name of Global Broker Services for due
diligence consulting connected with advising the Company on
financing its Henderson gaming property. These issuances were
from the Company=s active S-8 registration #33-34786.
Supplementary issues of 1,243 common shares to Dan French and
4,390 common shares to Global Broker Systems were made on June
20, 1997 for the aforementioned services. On June 6, 1997 the
Corporation instructed its transfer agent to issue 23,077
common shares in the name of Advisco Capital Corp. for due
diligence consulting connected with advising the Company on
financing its Henderson gaming property. These shares were from
the Company=s active S-8 registration #33-34786. On June 20,
1997 the Company instructed its transfer agent to issue 5,000
common shares from its active S-8 registration #33-34786 to
Trina Thorn, Goldiggers controller, as a bonus. On June 23,
1997 the Company instructed its transfer agent to issue 17,000
common shares from its active S-8 registration #33-34786 to
Mainstream for consulting services similar to those received in
1996. On June 30, 1997 the Company instructed its transfer agent
to issue 3,571 common shares from its active S-8 registration #
33-34786, to Roderick Powell as a portion of his compensation as
attorney for his assistance in the preparation of the Company's
S-8 registration. On July 8, 1997 the Company instructed its
transfer agent to issue two certificates of 25,000 common shares
each from its active S-8 registration # 33-34786, to Gaming
Venture Corp. USA as partial compensation for its consulting
agreement. Based on the foregoing, the Company has issued a
total of 261,227 common shares from its S-8 Registration at an
average bid price of $0.66 per share for a total consideration
of $173,302
South Dakota Commission on Gaming
To operate a gaming facility in Deadwood, South Dakota each
gaming company together with its officers, directors and 5%
shareholders must be found suitable, after thorough background
checks, to hold a South Dakota Gaming License. The licenses are
renewable each year. Royal Casino Group together with
Goldiggers, the Company's casino were issued renewals of their
gaming licenses in July, 1997.
In February, 1997 the South Dakota Commission on Gaming
filed a complaint against Royal Casino Group and Jon Elliott
stating that both had failed to notify the Commission within the
required thirty days of the Company's law suits involving
Stephen Grogan, a former officer and director of the Company,
which is a violation of the gaming regulations. Royal Casino
Group's attorney informed the Executive Secretary in an informal
telephonic consultation that he had inadvertently overlooked
informing the Company and its President of the need to alert the
Commission as to the legal actions. The Company and Jon Elliott
entered into stipulations and assurances of voluntary compliance
and as a result Mr. Elliott received a suspended $200 fine and
the Company received a $500 fine of which $300 was suspended.
The Company's attorney reimbursed the Company for its fine.
Suspension would be revoked if either party had a like violation
within one year.
At Deadwood=s annual City-Wide Poker Tournament held in
April, 1997 a 20 year-old man was found to have gambled at one
Deadwood casino, began play in the poker tournament at a second
Deadwood casino and participated in the tournament finals at
Goldiggers. This was a non-profit tournament, staffed by
volunteers, in which Goldiggers acted as the host venue for this
year's event. When Goldiggers management discovered the man was
under 21 years of age they notified the South Dakota Commission
on Gaming. Subsequent to an investigation the gaming commission
imposed $5,000 fines on all three gaming establishments. Because
the commission determined the man registered for the tournament
at Goldiggers, they failed to suspend Goldiggers fine while
suspending a portion of the fines for the other casinos.
Other Matters
On September 18, 1996 the Company filed a Form 8-KA
replacing the Form 8-K filed August 14, 1996. The amended
filing included the words "through the date of dismissal" to
Item 4. (a) (iv) in connection with the absence of any
disagreement with the Company's former auditors on any work they
performed on the Company's behalf. A copy of this Form 8-KA is
included as an exhibit with this report.
In May, 1997 a current stockholder of the Company invested
an additional $25,000 to acquire restricted common shares of the
Company to be priced on July 31, 1997. The shares were priced at
$0.50 each per share resulting in the individual being issued
50,000 common shares. These shares were restricted and issued
pursuant to Rule 144 of the Securities & Exchange Act as amended.
During the Company's fiscal year from August, 1996 through
July, 1997 Jon Elliott, the company's Chief Executive Officer
and a Director sold a total of 18,000 common shares at an
average price of $0.71 on the open market all of which were sold
in the last fiscal quarter. All appropriate forms concerning the
aforementioned transactions were filed in a timely fashion with
the Securities & Exchange Commission.
On July 30, 1997 the Company filed an S-8 registration
statement with the Securities & Exchange Commission. [See:
Subsequent Events]
The Company is in the early stages of actively investigating
and evaluating specific casino opportunities in certain markets
which fit the Company=s goal to acquire and manage casinos in
small to mid-sized markets.
Revenues
The Company's revenues are derived from its wholly-owned
subsidiary, Atlantic-Pacific Corp. which operates Goldiggers
Hotel & Gaming Establishment in Deadwood, South Dakota.
Goldiggers owns and operates the Deadwood Stage, a
transportation system consisting of 14 vehicles that is used
primarily to bring patrons to Goldiggers.
Direct Expenses
The Company's direct expenses throughout the year have been
made from cash on hand plus borrowings on a line of credit from
the Company's bank. Current finances are strained by an
insufficient cash supply. The Company is optimistic that the
financing the Company requires to sustain operations will be
attainable on terms and conditions acceptable to the company
although there can be no assurances that such financing will be
available.
Consulting Fees
The Company paid consulting fees to Lucky Management and
Mainstream Consultants to perform financial public relations for
the Company. Compensation for both entities consisted of a
combination of cash and common stock or common stock issued
pursuant to an S-8 registration of the Company's securities.
In addition, the Company also paid consulting fees in the form
of common stock issued pursuant to the same S-8 registration to:
Roderick Powell, who received both cash and common stock issued
pursuant to the same S-8 registration for legal services in
connection with the preparation of the Company's S-8
registration; Dalton & Mathias, the Company's outside accounting
firm for services for which it received both cash and common
stock pursuant to the aforementioned S-8 registration; and
Mahoney International, a Canadian public relations firm retained
to assist the Company in its efforts to develop a Canadian
casino for which it received common stock pursuant to the
Company's S-8 registration. As previously mentioned the Company
retained the following as consultants at various times during
the recently ended fiscal year: Pinnacle Funding, Lloyd Covens,
Arthur Lovett, Dan French, Global Broker Services and Advisco
Capital. [See Subsequent Events]
In July, 1997, the Company retained the services of Ron Island,
a Deadwood resident, as a consultant for one month for $2,500
for his input on the Deadwood gaming market.
In this fiscal year, the Company expensed $160,544 in
consulting fees. Of this amount, $36,185 was expensed in the
4th quarter; $54,650 was paid in cash; $105,843 was paid in S-8
stock of which $12,968 remains in prepaid consulting fees.
Employment Agreements
At a September 25, 1996 Board Meeting the Board formally
approved of the Employment Agreements for both Jon Elliott, the
Corporation's President and CEO and Larry Close, the
Corporation's Vice President of Gaming. In addition the Board
approved the automobile leases for both Mr. Elliott and Mr.
Close. Further, since the Corporation was relocating its
Corporate Headquarters from California to South Dakota, the
Board approved the Company purchasing a residence on behalf of
Mr. Elliott until Mr. Elliott received approval from his
mortgage lender. The Corporation agreed to resell the home to
Mr. Elliott at the same price however, Mr. Elliott agreed to pay
the Company 9% per annum interest on all funds expended in this
fashion. The home was purchased on August 19, 1996 and resold
to Mr. Elliott on September 13, 1996. Mr. Elliott has paid the
Company its interest in full in regards to this transaction.
Officer's Salaries
Jon F. Elliott the Company's President & CEO and Larry C. Close
the Company's Vice President of Gaming received annual salaries
of $125,000 and $100,000 respectively in the Company's fiscal
year August 1, 1996 to July 31, 1997. However, in an effort to
preserve the Company's cash, both Officers have deferred their
salaries for June and July, 1997. For the current fiscal year,
per the terms of their employment contracts, Mr. Elliott is to
receive $140,000 and Mr. Close $115,000 [See: Subsequent Events]
Equipment Rental, Overhead, Rent, Support Services
The Company rents approximately 1,000 square feet of office
space for its corporate headquarters for $950 per month on a
lease through April, 1998. Additionally, the Company's
wholly-owned subsidiary pays $19,500 per month rent for
Goldiggers Hotel & Gaming Est. on a five year lease with three
five year options. The Company's general and administration
expenses have been paid from cash reserves. Support services
have been compensated by cash from the Company's cash on hand
and/or through the issuance of shares of the Company's common
stock. The Company experienced a 50% rent deferral of the
$16,000 per month portion of its Goldiggers lease from
January-May, 1997 due to the severe winter's impact on the
business. The deferred portion was to be added to the monthly
rent and paid from June-October. 1997. As of the date of this
filing two payments of the deferred portion have been paid.
Additionally, the Company's wholly-owned subsidiary is
delinquent three months on its rent.
Impact Of Inflation Upon The Company
Inflation has not impacted, nor would it be expected to have an
impact upon the Company.
ROYAL CASINO GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
JULY 31, 1997 AND 1996
ROYAL CASINO GROUP, INC. AND SUBSIDIARIES
CONTENTS
As of July 31, 1997
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets 2 - 3
Consolidated Statements of Operations 4
Consolidated Statements of Shareholders' Equity 5
Consolidated Statements of Cash Flows 6 - 7
Notes to Consolidated Financial Statements 8 - 19
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Royal Casino Group, Inc. and subsidiaries
We have audited the accompanying consolidated balance sheet of
Royal Casino Group, Inc. (a Utah corporation) and subsidiaries
as of July 31, 1997, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year
then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Royal Casino Group, Inc. and subsidiaries
as of July 31, 1997, and the consolidated results of their
operations and cash flows for the year then ended, in conformity
with generally accepted accounting principles.
The accompanying financial statements for the year ended July
31, 1997 have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 2 to the
financial statements, the Company's recurring losses from
operations and limited capital resources raise substantial doubt
about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2.
The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
November 1, 1997
ROYAL CASINO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of July 31,1997 & 1996
ASSETS
1997 1996
Current assets
Cash and cash equivalents $ 77,609 $ 1,014,701
Accounts receivable, net of allowance of $1,500 5,135 80,681
Inventories 32,927 52,112
Prepaid expenses and other assets (Note 5) 347,998 250,078
Total current assets 463,669 1,397,572
Property and equipment, net (Notes 6 and 7) 2,277,685 2,532,776
Other assets 114,116 2,000
Total assets $ 2,855,470 $ 3,932,348
ROYAL CASINO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
As of July 31,1997 & 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
1997 1996
Current liabilities
Notes payable (Note 7) $ 324,296 $ 178,632
Accounts payable 370,954 282,709
Accrued liabilities (Note 8) 236,908 229,202
Total current liabilities 932,158 690,543
Long-term liabilities - capital leases 44,674 -
Total liabilities 976,832 690,543
Commitments and contingencies (Notes 10 and 11)
Shareholders' equity (Note 10)
Preferred stock:, $.001 par value
100,000,000 shares authorized
Series A Convertible
1,100,000 and 1,000,000 shares
issued and outstanding 1,100 1,000
Series B Convertible
no shares issued and outstanding - -
Common stock: $.001 par value
150,000,000 shares authorized
5,163,765 and 4,334,959 shares issued and
outstanding 5,164 4,335
Additional paid-in capital 5,573,089 5,088,767
Accumulated deficit (3,700,715) (1,852,297)
Total shareholders' equity 1,878,638 3,241,805
Total liabilities and shareholders'
equity $ 2,855,470 $3,932,348ROYAL CASINO GROUP, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended July 31,1997, 1996 & 1995
1997 1996 1995
Revenues
Casino $ 1,114,131 $ 270,762 $ -
Food and beverage 477,437 86,846 -
Rooms 142,933 26,258 -
Other 213,152 32,339 -
Gross revenues 1,947,653 416,205 -
Less promotional allowances 162,520 17,000 -
Net revenues 1,785,133 399,205 -
Costs and expenses
Casino 1,475,093 399,693 -
Food and beverage 325,964 96,107 -
Rooms 39,104 11,409 -
Selling, general, and
administrative 1,102,221 541,638 322,899
Depreciation and amortization 326,422 24,167 -
Total costs and expenses 3,268,804 1,073,014 322,899
Loss from operations (1,483,671) (673,809) (322,899)
Other income (expense)
Interest income 12,502 - -
Interest expense (10,034) (8,757) -
Other expense (70,944) (924) -
Loss on abandoned projects (296,172) - -
Total other income (expense) (364,648) (9,681) -
Loss before provision for income
taxes (1,848,319) (683,490) (322,899)
Provision for income taxes 100 100 100
Net loss $ (1,848,419) $ (683,590) $ (322,999)
Net loss per common share $ (.40) $ (.22) $ (.15)
Weighted average common shares
outstanding 4,671,182 3,090,362 2,190,904
ROYAL CASINO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended July 31,1997, 1996 & 1995
Preferred Stock Additional
Series A Series B Common Stock
Paid-in Accumulated
Shares Amount Shares Amount Shares Amount
Capital Deficit Total
Balance, July 31,
1994 - $ - - $ - 2,045,111 $ 2,045 $ 828,031 $ (845,708) $ (15,
632)
Issuance of common stock
for services rendered 235,000 235 177,765 - 178,000
Issuance of common stock 100,052 100 25,130 - 25,230
Net loss (322,999) (322,999)
Balance, July 31,
1995 - - - - 2,380,163 2,380 1,030,926 (1,168,707) (135,40
1)
Issuance of preferred
stock for
acquisition 1,000,000 1,000 2,439,000 2,440,000
Issuance of common
stock for services
rendered and debt
conversion 854,895 855 530,040 - 530,895
Exercise of
warrants 1,079,901 1,080 1,078,821 - 1,079,901
Sale of common stock 20,000 20 9,980 - 10,000
Net loss (683,590) (683,590)
Balance, July 31,
1996 1,000,000 1,000 - - 4,334,959 4,335 5,088,767 (1,85
2,297) 3,241,805
Issuance of preferred
stock 100,000 100 49,900 50,000
Issuance of common
stock for services
rendered and
compensation 778,806 779 384,472 385,251
Sale of common stock 50,000 50 49,950 50,000
Net loss (1,848,419) (1,848,419)
Balance, July 31,
1997 1,100,000 $ 1,100 - $ - 5,163,765 $ 5,164 $ 5,573,089 $
(3,700,715)$ 1,878,638
ROYAL CASINO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended July 31,1997, 1996 & 1995
1997 1996 1995
Cash flows from operating activities
Net loss $ (1,848,418) $ (683,590) $ (322,999)
Non-cash items included in net loss
Depreciation and amortization 326,422 24,167 -
Issuance of stock for services rendered
and compensation 385,251 410,000 178,000
(Increase) decrease in
Accounts receivable 75,546 75,911 -
Inventories 19,185 (10,213) -
Prepaid expenses and other assets (210,036) (191,814) -
Increase (decrease) in
Accounts payable 88,245 142,327 11,519
Accrued liabilities 7,706 45,638 70,387
Net cash used in operating
activities (1,156,099) (187,574) (63,093)
Cash flows from investing activities
Acquisitions of property and equipment (24,881) (72,837) -
Cash acquired through acquisition - 55,000 -
Net cash (used in) provided by investing
activities (24,881) (17,837) 1,247
Cash flows from financing activities
Payments on capital leases (1,776) - -
Issuance of preferred stock 50,000 - -
Borrowings under notes payable 365,025 223,632 34,584
Payments on notes payable (219,361) (93,442) -
Issuance of common stock 50,000 1,089,901 25,230
Net cash provided by financing
activities 243,888 1,220,091 59,814
Net (decrease) increase in cash and cash
equivalents (937,092) 1,014,680 (2,032)
Cash and cash equivalents, beginning of
year 1,014,701 21 2,053
Cash and cash equivalents, end of year $ 77,609 $ 1,014,701 $ 21
ROYAL CASINO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
For the Years Ended July 31,1997, 1996 & 1995
Supplemental schedule of non-cash investing and financing
activities
Option acquired by issuance of
common stock $ 75,000 $ - $ -
Net assets acquired by issuance of
preferred stock $ - $ 2,385,000 $ -
Common stock issued for services rendered
and debt conversion $ - $ 531,000 $ 178,000
Equipment acquired under capital lease $ 46,450 $ - $ -
ROYAL CASINO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997
NOTE 1 - NATURE OF BUSINESS AND BASIS OF PRESENTATION
The business plan of Royal Casino Group, Inc. and subsidiaries
(the "Company") consists of the development of gaming properties
in small- to medium-sized jurisdictions within and outside the
United States. The Company's strategy is to operate several
smaller casinos in small- to medium-sized markets, some of which
may be on a joint venture basis with one or more larger gaming
companies. Prior to changing its name in January 1994, the
Company, previously known as Arrowhead Energy Corporation,
Reliance Enterprises, Inc., and Capitol Television Network,
Inc., was engaged in the energy and broadcasting industries.
The Company is no longer engaged in such industries.
The Company's only active subsidiary, Atlantic-Pacific
Corporation, operates a limited stakes gaming establishment and
hotel in Deadwood, South Dakota under the name of Goldiggers
Hotel and Gaming Establishment ("Goldiggers"). The
establishment consists of 87 slot machines, 10 routed video
lottery machines, 3 table games, a restaurant and bar, a 9-room
hotel, and a passenger transportation division operating under
the name Deadwood Stage. Goldiggers was acquired by the Company
on June 13, 1996 (see Note 3.) The financial statements as of
July 31, 1996 reflect activity from June 13, 1996 to July 31,
1996.
NOTE 2 - REALIZATION OF ASSETS
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles which
assume that the Company will continue as a going concern.
However, during the year ended July 31, 1997, the company
incurred a net loss of $1,848,419. Recovery of the Company's
assets is dependent upon future events, the outcome of which is
indeterminable. In addition, the Company's attainment of
profitable operations is dependent upon obtaining adequate
financing to support its expansion activities and achieving a
level of revenues adequate to support the Company's cost
structure. In view of these matters, realization of a major
portion of the assets in the accompanying balance sheet is
dependent upon the Company's ability to meet its financing
requirements.
Management has taken the following steps to revise its
operating and financial requirements which it believes are
sufficient to provide the Company with the ability to continue
in existence:
The Company continues to reduce operating expenses.
The Company is optimistic that financing alternatives are
available. These alternatives include raising additional cash
through a private placement, taking on additional debt, and/or
disposing of selected assets.
1 The Company is currently negotiating to sell part of its bus
fleet.
ROYAL CASINO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of
Royal Casino Group, Inc. and its wholly-owned subsidiaries,
Atlantic-Pacific Corporation and Goldiggers Southern Nevada.
All material intercompany balances and transactions have been
eliminated in the consolidation.
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company
considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.
Inventories
Inventories, consisting primarily of food, beverage, retail,
and operating supplies, are stated at the lower of cost or
market. Cost is determined using the first-in, first-out method.
Licensing Costs
Cost incurred to acquire annual licenses which are required by
the South Dakota Commission on Gaming are recorded as prepaid
expenses when paid on July 1 and amortized over twelve months.
Property and Equipment
Property and equipment are stated at cost. Depreciation and
amortization are provided using the straight-line method over
the estimated useful lives as follows:
Furniture and equipment 5 to 7 years
Leasehold improvements 10 years
Maintenance and minor replacements are charged to expenses as
incurred. Expenditures which materially extend the useful lives
of capital assets are capitalized.ROYAL CASINO GROUP, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the year in which those temporary
differences are expected to be recovered or settled. Reserves
for deferred tax assets are recorded when ultimate recovery of
such assets is deemed uncertain.
Casino Revenues and Complimentaries
In accordance with common industry practice, casino revenue is
the net win from gaming activities which is the difference
between gaming wins and losses. The retail value of food and
beverage provided to customers without charge has been included
in revenues, and a corresponding amount has been deducted as
promotional allowances. The cost of providing promotional
allowances for hotel, food, and beverage is not significant and
has been included in costs and expenses.
Recently Issued Accounting Pronouncement
The Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings Per Share," which is effective for financial
statements issued for periods ending after December 15, 1997,
including interim periods. Early adoption is not permitted.
SFAS No. 128 requires public companies to present basic earnings
per share and, if applicable, diluted earnings per share instead
of primary and fully-diluted earnings per share. The Company
does not believe that diluted earnings per share in accordance
with SFAS No. 128 will be materially different from the earnings
per share previously reported.
SFAS No. 129, "Disclosure of Information about Capital
Structures," issued by FASB is effective for financial
statements ending after December 15, 1997. The new standard
reinstates various securities disclosure requirements previously
in effect under Accounting Principles Bulletin ("APB") Opinion
No. 15, "Computing Earnings per Share," which has been
superseded by SFAS No. 128. The Company does not expect
adoption of SFAS No. 129 to have a material effect, if any, on
its financial position or results of operations.
SFAS No. 130, "Reporting Comprehensive Income," issued by FASB
is effective for financial statements with fiscal years
beginning after December 15, 1997. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and
its components in a full set of general-purpose financial
statements. The Company does not expect adoption of SFAS No.
130 to have a material effect, if any, on its financial position
or results of operations.ROYAL CASINO GROUP, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Net Loss Per Share
Net loss per share is based on the weighted average number of
common and common share equivalents outstanding during each
year. When anti-dilutive, common share equivalents are excluded
from the calculation. Primary and fully-diluted earnings per
share are not materially different.
Reclassifications
Certain reclassifications have been made to conform prior
period amounts to the current year presentation.
NOTE 4 - ACQUISITION OF ATLANTIC-PACIFIC CORPORATION
On June 13, 1996, the Company completed a transaction to buy
all of the outstanding common stock of Atlantic-Pacific
Corporation, a South Dakota gaming corporation, from Casino
Magic Corporation. In exchange, the Company delivered to Casino
Magic Corporation 1,000,000 shares of the Company's Series A
convertible preferred stock, a Series C warrant to acquire
500,000 shares of the Company's common stock at an exercise
price of $4.00 per share (see Note 10), and $1,000 in cash.
This transaction was recorded using the purchase method of
accounting.
The pro forma results listed below are unaudited and reflect
purchase price accounting adjustments assuming the acquisition
occurred at the beginning of the year presented:
July 31,1996
(unaudited)
Net revenues $2,094,000
Net loss $(1,366,000)
Net loss per common share $(.44)
The pro forma results are not necessarily indicative of what
actually would have occurred if the acquisition had been in
effect for the entire period presented. In addition, they are
not intended to be a projection of future results and do not
reflect any synergies that might be achieved from the combined
operations.
ROYAL CASINO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997
NOTE 5 - PREPAID EXPENSES AND OTHER ASSETS
At July 31, prepaid expenses and other assets consisted of the
following:
1997 1996
Prepaid device stamps $ 165,000 $ 165,000
Marketable security 31,250 30,000
Gaming license deposit 65,000 -
Prepaid consulting 36,094 -
Prepaid insurance 31,320 -
Other 19,334 55,078
Total $ 347,998 $250,078
NOTE 6 - PROPERTY AND EQUIPMENT
Property and equipment at July 31 consisted of the following:
1997 1996
Land $ 337,022 $ 337,022
Furniture and equipment 1,285,274 1,229,933
Leasehold improvements 1,005,978 989,988
2,628,274 2,556,943
Less accumulated depreciation and
amortization 350,589 24,167
Total $ 2,277,685 $2,532,776
Total gross assets under capital leases were $46,535 and $0 at
July 31, 1997 and 1996, respectively.
ROYAL CASINO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997
NOTE 7 - NOTES PAYABLE
Notes payable at July 31 consisted of the following:
1997 1996
Line of credit, due on February 12, 1998.
Principal and interest is due at maturity,
interest accruing at 0.5% under the monthly
average of the United States 26-week
Treasury Bill rate (5.15% at July 31, 1997)
and collateralized by all slot machines,
equipment, and inventory of the
Company. $ 125,025 $-
Line of credit, due on September 23, 1996.
Principal and interest is due at maturity,
interest accruing at 9.5% and collateralized
by a certificate of deposit of the
Company. - 43,632
Note payable to bank, 13-week term at $14,110
per week at 10.25%. Principal and interest
is paid weekly, due October 3, 1997 and is
collateralized by the Company's owned real
estate. 139,271 -
Note payable to bank, 12-week term at $15,000
per week at 9.5%. Principal and interest
is paid weekly, due October 1, 1996 and is
collateralized by owned real estate, slot
machines, and equipment. - 135,000
Note payable to individual, collateralized by
certain assets of Deadwood Stage. Principal
and interest is due at maturity, November
8, 1997, with interest at 12%. 30,000 -
Promissory note, 0% interest for the first three
months, then converting to bear interest at
7% at the beginning of the fourth month,
October 10, 1997 and collateralized by
common stock of the lender held by the
borrower. 30,000 -
Total $ 324,296 $178,632
ROYAL CASINO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997
NOTE 8 - ACCRUED LIABILITIES
At July 31, accrued liabilities consisted of the following:
1997 1996
Accrued payroll, benefits, and taxes $ 107,750 $ 114,063
Accrued real estate taxes - 65,789
Accrued legal settlement 70,000 -
Other 59,158 49,350
Total $ 236,908 $229,202
NOTE 9 - INCOME TAXES
The current provision for income taxes is the minimum tax due
to the state of South Dakota.
The components of the Company's net deferred taxes as of July
31, 1997 and 1996 are as follows:
1997 1996
Deferred tax assets
Net operating loss carryforward $ 1,020,901 $362,680
Officer compensation in stock 39,128 20,003
Total deferred tax assets 1,060,029 382,683
Deferred tax liabilities
Property and equipment (39,482) (9,681)
Unrealized securities gain (425) -
Total deferred tax liabilities (39,907) (9,681)
Valuation allowance (1,020,122) (373,002)
Net deferred taxes $ - $-ROYAL CASINO GROUP, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997
NOTE 9 - INCOME TAXES (Continued)
The Company has established a valuation allowance based on a
number of factors which impact the likelihood the deferred tax
assets will be recovered, including the Company's history of
operating losses. Based upon a weighting of all available
evidence, management believes that there is no basis to project
significant United States-sourced taxable income. Therefore, it
is more likely than not that the deferred tax assets will not be
realized, and a full valuation allowance has been established.
The net change in the valuation allowance for the years ended
July 31, 1997 and 1996 was an increase of $627,995 and $263,217,
respectively.
As of July 31, 1997, the Company had a federal net operating
loss carryforward of $3,002,651. This carryforward, if unused,
begins to expire in 2010.
The overall effective tax rate differs from the federal
statutory tax rate of 34% due to operating losses not providing
benefit for income tax purposes.
NOTE 10 - SHAREHOLDERS' EQUITY
Preferred Stock
The Company has 100,000,000 authorized shares of preferred
stock. 1,100,000 and 1,000,000 shares were designated as Series
A Convertible preferred stock (Series A Convertible) at July 31,
1997 and 1996, respectively. 1,000,000 shares were designated
as Series B Convertible preferred stock (Series B Convertible)
at July 31, 1997 and 1996.
The Series A Convertible is redeemable only by the Company, is
non-dividend bearing, and is convertible at the option of the
holder into shares of common stock over a three-year period as
defined. Upon liquidation of the Company, holders of Series A
Convertible shall be entitled to receive $3 in cash from the
assets of the Company for each share held. Effective August 1,
1996, the Company amended its articles of incorporation to
change the par value of its Series A Convertible from no par to
$.001 par value per share. The accompanying financial
statements have been restated to reflect the new par value for
all periods presented. The Company had 1,100,000 and 1,000,000
shares of the Series A Convertible issued and outstanding at
July 31, 1997 and 1996 respectively.
The Series B Convertible is redeemable only by the Company and
is non-dividend bearing. The company had no shares issued and
outstanding of the Series B Convertible at July 31, 1997 and 1996
Common Stock
The Company has 150,000,000 shares authorized and 5,163,765 and
4,334,959 shares issued and outstanding at July 31, 1997 and
1996, respectively. Effective August 1, 1996, the Company
amended its articles of incorporation to change the par value of
its common stock from no par to $.001 par value per share. The
accompanying financial statements have been restated to reflect
the new par value for all periods presented.ROYAL CASINO GROUP,
INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997
NOTE 10 - SHAREHOLDERS' EQUITY (Continued)
Warrants
During the year ended July 31, 1996, 1,079,901 Series A
warrants were exercised. These warrants entitled the holder to
purchase one share of common stock at a purchase price of $1.
Approximately 592,000 unexercised Series A warrants expired July
26, 1996. There were no A warrants issued and outstanding at
July 31, 1997 and 1996.
The Company has 1,628,612 Series B warrants issued and
outstanding at July 31, 1997 and 1996. These warrants entitle
the holder to purchase one share of common stock at a purchase
price of $20 and are callable by the Company for $.20 per
warrant. The Company has extended the expiration date of the
Series B warrants from July 26, 1996 to January 26, 1998.
During the year ended July 31, 1997, the Company issued 50,000
additional Series C warrants. These warrants entitle the holder
to purchase one share of common stock at a purchase price of $4.
The Series C warrants are callable by the Company for $1 per
warrant and expire on December 31, 2000.
Options
Under the terms of its nonqualified employee stock option plan,
the Company is authorized to establish a plan for up to 250,000
shares of common stock. Pursuant to this plan, the Company has
issued 170,000 options to an officer/director/shareholder. The
options may be exercised at a purchase price of $1.25 per share.
During the year ended July 31, 1997, the expiration date was
extended from January 31, 1999 to December 31, 2003.
During the year ended July 31, 1997, the terms of the Company's
nonqualified stock option plan were modified to authorize the
Company to issue 3,000,000 options at a price that is above the
market price on the grant date. Pursuant to the plan, at July
31, 1997, the Company had issued 1,518,000 options to its
officers/directors/shareholders and to a consultant. The
options may be exercised at a purchase price from $.60 to $.88
per share and expire on December 31, 2003.
During the year ended July 31, 1997, the Company was also
authorized to issue 500,000 options to investors as an
inducement. The options will be issued at a price above the
then current market price and shall be for a period established
at the time they are granted. At July 31, 1997, none of these
options had been issued.
ROYAL CASINO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997
NOTE 10 - SHAREHOLDERS' EQUITY (Continued)
Options (Continued)
The following table summarizes certain information relative to
stock options:
Weighted
Average
Option Exercise
Shares Price Price
Balance, July 31, 1995 170,000 $ 1.25 $ 1.25
Balance, July 31, 1996 170,000 $ 1.25 1.25
Granted 1,518,000 $ 0.60 - 0.88 $ 0.60
Balance, July 31, 1997 1,688,000 $ 0.60 - 1.25 $ 0.69
The weighted average life of the options outstanding and
exercisable at July 31, 1997 is 65 months. Options available
for future grant at July 31, 1997 were 2,062,000.
The Company has adopted the disclosure-only provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation."
Accordingly, no compensation cost other than that required to be
recognized by APB 25 for the difference between the fair value
of the Company's common stock at the grant date and the exercise
price of the options has been recognized. Had compensation cost
for the Company's stock option plan been determined based on the
fair value at the grant date for awards in 1997 consistent with
the provisions of SFAS No. 123, the Company's net loss and loss
per share would have been increase to the pro forma amounts
indicated below:
Net loss as reported $ (1,848,419)
Net loss, pro forma $ (2,118,419)
Loss per share as reported $ (.40)
Loss per share, pro forma $ (.45)
The fair value of each option grant is estimated on the date of
the grant using the Black-Scholes option-pricing model with the
following weighted average assumptions used for grants in 1997:
Risk free interest rate 5.9%
Expected lives (years) 1.5
Expected volatility 65%
Expected dividends $0ROYAL CASINO GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Leases
The Company has lease agreements for its building and corporate
office space which are classified as operating leases. The
initial terms of the building leases expired in 1996.
Subsequent to year end, the Company renewed the building leases
for a five-year period. The Company has four five-year options
remaining.
The following is a schedule of future minimum lease payments
for leases with initial or remaining terms in excess of one year
as of July 31, 1997:
Years Ending Capital Operating
July 31, Leases Leases
1998 $ 2,596 $ 323,387
1999 2,596 238,234
2000 2,596 234,000
2001 2,596 117,000
2002 2,031 -
Thereafter 37,499 -
Total minimum lease payments 49,914 $ 912,621
Less amount representing interest 4,007
Present value of net minimum lease
payments 45,907
Less current portion 1,233
Long term capital lease obligation $ 44,674
Rent expense for the years ended July 31, 1997 and 1996 was
$247,626 and $19,500, respectively.
On November 9, 1995, the Company signed a definitive 25-year
docking and franchise agreement with the city of Wyatt, Missouri
granting the Company the exclusive right to development and
manage a riverboat casino entertainment center on the
Mississippi River. On March 23, 1996, the Company entered into
a three-year lease plus renewal options for land on the
Mississippi River near Wyatt, Missouri. Payments under the
lease will be required only if the Company begins construction
or if the Missouri Gaming Commission selects the Company for
gaming license review. In the event that one of these
conditions is met, the Company will be required to pay lease
payments of $50,000 annually.ROYAL CASINO GROUP, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997
NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)
Gaming Regulation Licensing
The Company's gaming operations in the state of South Dakota
depend on the continued licensability or qualification of the
Company. Such licensing and qualifications are reviewed
periodically by the gaming authorities in this jurisdiction.
Failure to maintain continued licensability or qualification of
the Company would have a significantly adverse impact on the
Company's financial position and results of operations.
NOTE 12 - RELATED PARTIES
The Company is the lessee in a capital lease with an employee
of the Company for ten routed video lottery machines.
The Company has notes receivable outstanding for $9,000 each
from two officers/directors/shareholders of the Company as of
July 31, 1997. The notes earn interest at 9% and had initial
maturity dates of April 9, 1997 which have since been extended
to January 9, 1998.
At July 31, 1997, an officer/director/shareholder had advanced
funds totaling $2,900 to the Company for its operational
overhead and expenses.
NOTE 13 - SUBSEQUENT EVENT (UNAUDITED)
On October 10, 1997, the Company entered into an Amendment to
the Settlement Agreement previously entered into with a
shareholder and former director on July 30, 1997. On October
29, 1997, the Company filed suit against the same shareholder
and former director alleging a breech of the Settlement and are
seeking a declaratory judgment for the remaining portion of the
Settlement.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Certified Public Accountants & Management Consultants
Consent of Independent Certified Public Accountant
We have issued our report dated November 1, 1997, accompanying
the consolidated financial statements included in the Annual
Report of Royal Casino Group Inc. and subsidiaries on Form 10-K
for the year ended July 31, 1997. We hereby consent to the
incorporation by reference of said report in the Registration
Statement of Royal Casino Group Inc. and subsidiaries on Form
S-8 (File No. 33-34786, effective May 31, 1996 and File No.
333-32415, effective August 5, 1997).
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
November 12, 1997
10960 Wilshire Boulevard, Suite 1100, Los Angeles, California
90024 Telephone 310/477-3924 Fax 310/478-6070
Item 9. Changes in and Discussions with Accountants on
Accounting and
Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers
of the Registrant
The names of the directors and executive officers of the
Company and certain information about them is set forth below:
Directors and Executive Officers
The Directors and Executive Officers of the Company, their
positions and ages are as follows:
Name Age Position
Jon F. Elliott 50 President, Chief
Executive
Officer &
Chairman of the
Board
Larry C. Close 56 Director,
Secretary and
Vice President,
Gaming
Jon F. Elliott, President & Chief Executive Officer - As
President of the Company Mr. Elliott will oversee all corporate
matters pertaining to the development and operation of the
Company. In addition to having a background in television
production and broadcasting, Mr. Elliott has 17 years of
management, marketing and franchise skills. Mr. Elliott has
completed course studies at the William F. Harrah Institute of
Casino Entertainment
Mr. Elliott's employment history is as follows:
1993 to Present - Founder, President, Chief Executive Officer
and Chairman of the Board, Royal Casino Group.
1993 - Consultant, Gallery Rodeo International, a gaming and
fine art organization based in Beverly Hills, California.
1986 to 1992 - Founder, President, Chief Executive Officer, and
Chairman of Board, Capitol Television Network Inc. which was
formed to create, produce and acquire television programming to
be a satellite-delivered national programming service primarily
for independent and low power television stations.
1985 to 1986 - President, Close to Coast Productions, a
Television Production Company.
1982 to 1985 - President, Jon F. Elliott Productions, a
Franchise and Television/Motion Picture Marketing Company.
For twelve years prior to 1982, Mr. Elliott served as Director
of Franchising for the following companies: Day's Inns
(Canada); Numero Uno Pizzerias (Italian restaurant chain), Big
Top Deli and Charlie Chan Restaurants (fast-food chains);
Figurmagic International (a chain of over 100 women's figure
salons). With respect to all of the foregoing franchisors, Mr.
Elliott's primary responsibility was to enhance growth through
development and implementation of each respective franchise's
marketing program.
Larry C. Close, Vice President Gaming, Secretary and a Director.
Mr. Close's 27 years of experience in all phases of gaming
management affords him the background enabling Mr. Close to
establish the policy's, systems and procedures for all Royal
Casino Group gaming properties. He will have direct
responsibility for all phases of casino operations including
personnel, training, marketing and advertising.
Mr. Close's employment history is as follows:
1995-1989 - President Close Management, Inc. a hotel/casino
management and marketing consulting company. Clients included
Bayou Caddy Casino, Waveland, MS; Pride Cruise Lines, Ltd.,
Gulfport, MS; Wayne Newton Gaming, Inc., Las Vegas; John L.
Ritter Productions, Stateline, NV; The Bell Agency, Las Vegas;
Lone Star Casino Corp., Tinian Island
1993-1995 - Vice President and General Manager, Players
International. Directed riverboat gaming operations in
Metropolis, Illinois and transferred to Mesquite, Nevada to head
up development of Players Island Resort and Casino.
1991-1993 - General Manager, The Glory Hole Saloon & Gaming
Hall, Central City, Colorado. Planned, supervised and directed
restoration and expansion of this historic property and
responsible for gaming operations.
1988-1989 - General Manager, Ormsby House Hotel & Casino, Carson
City, Nevada. Directed gaming operations and 200-room
convention hotel and casino property. Developed business plan
and marketing programs to successfully turn property around and
obtain additional financing for property to continue expansion
efforts.
1988 - President and Chief Operating Officer, Windjammer Cruises
International, Oahu, Hawaii. Operations included tour and
dinner cruises in Oahu, Maui and Guam.
1969-1988 - Del Webb Hotels. 20-year career with this major
operator of casinos and resorts in Nevada. Served as vice
president and general manager of High Sierra Hotel/Casino, Lake
Tahoe (1985-1988); Mint Hotel/Casino (1984-1985); Nevada Club
(1983-1984); vice president of marketing/entertainment
(1981-83); vice president hotel operations and administrative
assistant to general manager, executive director of
advertising/promotions, Sahara Reno Hotel/Casino (1977-81);
administrative assistant/assistant general manager, Primadonna
Club, Reno (1974-1977); Director of Advertising and Promotion,
Sahara Hotel, Las Vegas (1969-74).
Item 10. Executive Compensation
Pursuant to Management Agreements approved and signed by the
Board of Directors, Jon Elliott and Larry Close, the Company's
two senior executive officers received annual salaries of
$125,000 and $100,000 respectively in the Company's fiscal year
August 1, 1996 to July 31, 1997. However, in an effort to
preserve the Company's cash, both Officers have deferred their
salaries for June and July, 1997. For the current fiscal year,
per the terms of their employment contracts, Mr. Elliott is to
receive $140,000 and Mr. Close $115,000 [See: Subsequent Events]
(1) Directors will be paid $200 for each meeting and are
reimbursed for their out-of-pocket expenses when attending
meetings on behalf of the Company. Executive Officers will be
paid such additional consideration for attending Board Meetings.
The Directors have deferred all compensation for attending Board
Meetings to date.
Stock Options
The Company has issued a total of 170,000 options to purchase
Common Stock from its initial stock option plan. These options
are non-qualified stock options. The Company is authorized to
issue up to 250,000 shares of Common Stock from this initial
stock option plan at an exercise price of $1.25 per option
pursuant to resolution of the Board of Directors and by
Amendment of its Certificate of Incorporation and/or Bylaws.
At a July 15, 1997 Board Meeting the Board added options with
an expiration date of December 31, 2003 equating to three
million shares of common stock to its Employee Stock Option
Plan. In addition the expiration date of the existing options
were extended to December 31, 2003. Further, the president was
empowered to issue the options at his discretion and the option
price would be above the then current offer price of the
Company's common shares at the time of the granting of the
options.
The following table sets forth the options issued by the
Company on January 7, 1989:
Number of Shares Weighted Average
Expiration
Name Subject to Option Exercise Price
Dates
Jon F. Elliott 170,000 $1.25 Dec.
31, 2003
These options are exercisable at any time up to December 31,
2003, at $1.25 per share unless an individual leaves his
employment or formal association with the Company for any
reason, in which case, the options expire unless exercised
within 90 days from the date the individual resigns, is
terminated or otherwise ceases to be with the Company
The following table sets forth the options issued by the
Company on July 15, 1997:
Number of Shares Weighted Average Expiration
Name Subject to Option Exercise Price
Dates
Jon F. Elliott 900,000 $0.60 Dec.
31, 2003
Larry C. Close 600,000 $0.60 Dec.
31, 2003
The Board of Directors on July 15, 1997 authorized the
establishment of 500,000 options, each to be exchanged on a one
for one common stock basis, to be offered at the discretion of
the President to investors. These options would be priced at
the time granted at a price above the then current price of the
Company's shares. Further, that each option shall be for a
period established by the President at the time they are
granted. The common stock issued pursuant to all of the
aforementioned options are restricted under the Securities and
Exchange Commission Rule 144.
Certain Relationships and Related Transactions
The Company believes that in the past all transactions with
officers, directors and affiliates have been on terms no less
favorable to the Company than would have customarily been
obtained from non-affiliated parties, and that future
transactions, if any, with officers, directors and affiliates
will likewise be subject to such standard and to approval by a
majority of the directors who have no economic interest in the
transaction.
Appointments and Resignations to the Board of Directors
None.
Subsequent Events
Dismissal of Auditors
At a Board of Directors meeting on August 8, 1997 the Board
dismissed Arthur Andersen LLP as the Company's auditors. A Form
8-K stating that event was filed on August 12, 1997, a copy of
which is included as an exhibit to this report.
Appointment of Auditors
At a Board of Directors meeting on October 20, 1997 the Board
selected Singer, Lewak, Greenbaum & Goldstein, LLP, a regional
accounting firm based in Los Angeles, California as its
auditors. A Form 8-K stating this event and that there were no
disagreements with the previous auditors was filed on October
24, 1997 a copy of which is included as an exhibit to this
report.
Employment Agreements
The Company's two executive officers voluntarily offered to
restructure their employment agreements. Jon Elliott, the
Company's President & CEO reduced the relocation fee from
$15,000 down to $5,000, eliminated all bonuses due on the
Company's net profit and reduced his gross revenues bonus to
$130,000 on revenues up to $6 million and four percent of those
revenues above. Larry Close, the Company's Vice President,
reduced the relocation fee from $10,000 down to $5,000,
eliminated all bonuses due on the Company's gross revenues and
reduced his bonus allocation to two percent of net profits in
excess of $1 million.
S-8 Registration
An S-8 registration statement was filed on July 30, 1997. On
August 5, 1997 Royal Casino Group received its registration
number from the Securities & Exchange Commission making the
registration statement effective as of that date. The
Registration Number 333-32415 is for employees and consultants
and is for 500,000 common shares with the proposed maximum
offering price of $0.60 per share resulting in a proposed
maximum aggregate offering price of $300,000. A copy of this
registration statement is included as an exhibit with this
report. On August 11, 1997 the Company instructed it transfer
agent to issue from this registration: 10,938 common shares to
Gaming Venture Corp., USA, a public relations consultant to the
company, as the balance of compensation due for its fees for the
months of August through December, 1997; 17,000 common shares to
Mainstream Consultants, a financial public relations firm who
had performed consulting services on behalf of the Corporation;
44,845 shares to Dalton & Mathias for consulting services
performed as the Company's outside accounting firm; 25,000
common shares to Debra Berg, Goldiggers' General Manager as a
bonus; 26,470 common shares to David Addison, one of the
Company's Colorado attorneys as compensation; and 50,000 common
shares to McGinn, Smith & Co., Inc. as a retainer/engagement fee
per the July 18, 1997 investment banking agreement.
Also on August 11, 1997 the Company instructed its transfer
agent to issue from its active S-8 Registration #33-34786 dated
July, 30, 1997: 6,000 common shares to Ron Island for his
consulting concerning the Deadwood market in July, 1997.
Legal Matters
On October 10, 1997 the Company entered into an Amendment to
the Settlement Agreement previously entered into on July 30,
1997 with Stephen Grogan calling for different payment terms.
On October 29, 1997 the Company filed suit against Stephen
Grogan in Lawrence County, South Dakota alleging a breech of the
Settlement Agreement and seeking a declaratory judgement for the
remaining portion of the settlement.
South Dakota Commission on Gaming
On September 17, 1997 the South Dakota Commission on Gaming
filed a complaint against Royal Casino Group alleging a
violation of the minimum bankroll requirements in Goldiggers.
The complaint stated that Goldiggers had $61,000 cash on hand
when the regulations called for $63,000. In correspondence to
the Commission from the Company's attorney and further in a
meeting between the Company's attorney and the Company's
President with the Executive Secretary, the Director of
Enforcement and the Senior Auditor of the South Dakota
Commission on Gaming, it was pointed out that the individual
conducting the audit was a new agent who overlooked certain
moneys on hand bringing the total to over $78,000, 25% more than
the required minimum. The Executive Secretary promptly
dismissed the complaint on October 2, 1997
Repayment of Outstanding Debt
From September 16, 1997 through October 9, 1997 the Company
sold its shares of Gaming Venture USA, Inc. in open market
transactions resulting in proceeds of $ 38,004.11 and a profit
of $8,004.11. The proceeds were used to repay the $30,000
loaned to Royal Casino Group in July, 1997 by Gaming Venture
Corp. USA.
The $30,000 loan due September 8, 1997 was extended by the
individual lender to November 8, 1998 and remains outstanding.
The Company is negotiating the sale of that portion of the
Deadwood Stage that provides mine shuttle services and surface
tours for the Homestake Gold mine in Lead. The purpose of the
sale is that this portion of the business is unrelated to the
core business of the Company, which is gaming, and to provide
funding to the Company. The Company will retain the majority of
the vehicles in its transportation system which brings customers
to the casino.
PART IV
Item 11. Financial Statements, Schedules
Exhibits and Reports on Form 8-K
(1) Financial Statements
(a) The Financial Statements required pursuant to this Item have
been filed as part of this report under Part II, Item 8.
All other schedules have been omitted because the information
prescribed therein is not applicable, not required, or is
furnished in the financial statements or notes thereto.
(b) Two reports on Form 8-K were filed during the year ended
July 31, 1997, one on August 12, 1996 and the other the other on
August 27, 1996. A Form 8-KA was filed on September 18, 1996.
Subsequent to the end of the fiscal year a Form 8-K was filed on
August 12, 1997 and a second Form 8-K was filed on October 24,
1997.
(2) Exhibits
Exhibit No. Description Page No.
1 Form S-8 Registration Statement dated
58
July 30, 1997,Registration # 333-32415
2 Form 8-K which was filed on August 12,
67
1996 announcing the replacement of
Caldwell, Becker, Dervin & Petrick as
the Company's auditors with Arthur Anderson.
3 Form 8-K which was filed on August 27, 1996
71
containing three years of audited financial
statements for Atlantic-Pacific Corp.
4 Form 8-KA which was filed on September 12,
74
1996 and which replaces the Form 8-K previously
filed on August 14, 1996.
5 Certificate of Amendment to the Company's
78
Article amending the Corporation's Common
and Preferred Stock to have a value of a mil
per share effective August 1, 1996
6 Form 8-K which was filed on August 12, 1997 79
announcing the dismissal of Arthur Andersen,
LLP as the Company's auditors.
7 Form 8-K which was filed on October 24, 1997
84
announcing the appointment of Singer, Lewak,
Greenbaum & Goldstein LLP as the Company's
auditors.
Exhibits other than those listed have been omitted because they
are nonexistent, inapplicable or because the information is
given in the financial statements of the Company.
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of The
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, this 11th day of November, 1997.
ROYAL CASINO GROUP INC.
By /s/ Jon F. Elliott
Jon F. Elliott
President and Chief Executive Officer
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that such person whose signature
appears below constitutes and appoints Jon F. Elliott,
his-attorney-in-fact, with power of substitution, for him in any
and all capacities, to sign this Annual Report on Form 10-K, and
any amendments thereto, each with exhibits thereto, and other
documents in connection therewith, with The Securities and
Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title
Date
/s/ Jon F. Elliott President,
November 11, 1997
Jon F. Elliott Chief Executive Officer,
Chairman of the Board
/s/ Larry C. Close Director, Vice President
November 11, 1997
Larry C. Close Secretary
Form 10-K 7/31/97 Exhibit 1
As filed with the Securities and Exchange Commission on July 30,
1997
Registration No. 333-32415
==============================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________
ROYAL CASINO GROUP INC.
(Exact name of registrant as specified in its charter)
Utah 95-4091368
(State or other jurisdiction of (IRS Employer
Identification No.)
Incorporation or organization)
152 Sherman St.
Deadwood, SD
57732
(Address of principal executive offices) (Zip
Code)
_______________________
Consulting/Compensation Plan
(Full title of plan)
_______________________
Jon F. Elliott
Royal Casino Group Inc.
152 Sherman St.
Deadwood SD 57732
(Name and address of agent for service)
______________________________
(605) 578-1299
(Telephone number, including area code, of agent of service)
______________________________
Copy to:
Roderick H. Powell III, Esq.
684 Higuera Street, Suite C
San Luis Obispo, CA 93401-3511
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Maximum Maximum
Securities To Amount To Offering Price Aggregate
Amount of
Be Registered Be Registered(1) Per share(3) Offering Price(3)
Registration fee
Common Stock
($0.01 par
value per 500,000(2) $0.60 $300,000 $
103.45
share)
(1) Pursuant to Rule 416, the number of shares registered shall
be adjusted to include any additional shares of Common Stock
that may become issuable as a result of stock splits, stock
dividends, or similar transactions in accordance with
anti-dilution provisions of stock options, and anti-dilutions
adjustments to the amount of shares of Common Stock issuable
pursuant to stock options exercised thereafter.
(2) Represents 500,000 to be issued pursuant to the informal
consulting/compensation plan of Registrant and includes
re-offers of such shares.
(3) Estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457 (c) and (h), based upon
the average of the bid and asked price of Common Stock on June
27, 1997.
=================================================================
==
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item 1. Plan information.
Omitted as Permitted.
Item 2. Registrant information and Employee Plan Annual
Information.
Not applicable.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents filed with the Securities and Exchange
Commission (the "Commission") by ROYAL CASINO GROUP INC. (the
"Company) are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal
year ended July 31, 1996 filed pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended
("Exchange Act").
(b) All other reports filed by the Company pursuant to
Section 13(a) or 15(d) of the Exchange Act since the end of the
Company's fiscal year ended July 31, 1996.
All reports or other documents subsequently filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act prior to the filing of a post-effective amendment which
indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold shall be
deemed to be incorporated by reference herein and to be a part
hereof from the respective dates of filing of such reports or
documents.
Although the Company's financial statements for the nine months
ended April 30, 1997 have not been audited by Arthur Andersen
LLP, they have informed the Company that if the current cash
flow and liquidity problems continue to exist at the time of
their audit of the financial statements for the year ended July
31, 1997, their report on those statements will include an
explanatory fourth paragraph because of substantial doubt about
the Company's ability to continue as a going concern.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel
Not applicable.
Item 6. Indemnification of Directors and Officers.
The Company's Bylaws provide for indemnification (to the full
extent permitted by law) of directors, officers, and other
agents of the Company against expenses, judgments, fines and
amounts paid in settlements actually and reasonably incurred in
connection with any proceeding arising by reason of the fact
that such person is or was an officer, director, or agent of the
Company.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits
1. Opinion and consent of Roderick H. Powell III, Esq.
2. Consent of Roderick H. Powell III, Esq.
(included in Exhibit 1)
3. Consent of Arthur Andersen. LLP
4. Power of Attorney (Page 6 of this Registration Statement)
Item 9. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post effective amendment to this registration
statement:
(I) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
(ii) to reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a) (1) (ii)
shall not apply to information required to be included in a
post-effective amendment by those paragraphs which are contained
in periodic reports filed by the registrant pursuant to Section
13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such port-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein and the offering of such securities
at that time shall be deemed to be the initial bona-fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for the
purposes of determining any liability under the Securities Act,
each filing of the registrant's annual report pursuant to
Section 13(a) or Section15(d) of the Exchange Act that is
incorporated by reference in this registration statement shall
be deemed to be a new registration statement relating to the
Securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona-fide
offering thereof.
(c) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions
of Item 6 of this registration statement, or otherwise, the
registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form S-8 and
has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the
City of Deadwood, State of South Dakota, on June 24, 1997
ROYAL CASINO GROUP INC.
By: /s/ Jon F. Elliott
Jon F. Elliott, Chairman, President, Chief Executive
Officer & Chief Financial Officer
POWER OF ATTORNEY
Each person in so signing also makes, constitutes and appoints
Jon F. Elliott and Roderick H. Powell III and either of them,
with full power of substitution and resubstitution, his true and
lawful attorneys-in-fact, for him in any and all capacities, to
sign any amendments (including post-effective amendments) to
this Registration Statement and to file the same, with exhibits
thereto, and other documents in connection therein, with the
Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Jon F. Elliott Chairman (President/Chief June
27, 1997
Jon F. Elliott Executive Officer/Chief Financial
Officer) and Director
/s/ Larry C. Close Vice President and Director June
27, 1997
Larry C. Close
INDEX TO EXHIBITS
EXHIBIT
PAGE
1 Opinion and Consent of Roderick H. Powell III, Esq. 8
2 Consent of Roderick H. Powell III, Esq.
8
(Included in Exhibit 1)
3 Consent of Arthur Andersen, LLP 9
4 Power of Attorney (page 6 of this Registration 6
Statement)
RODERICK H. POWELL III
Attorney at Law
684 Higuera Street, Suite C
San Luis Obispo, CA 93401-3511
(805) 541-5100
(805) 541-5149 FAX
July 17, 1997
Royal Casino Group Inc.
152 Sherman Street
Deadwood, South Dakota 57732
RE: Registration Statement on
Form S-8
Gentlemen:
At your request, we have examined the Registration Statement on
Form S-8, together with exhibits thereto, to be filed by you
relating to the registration of 500,000 shares of common stock,
$0.001 par value per share (the "Common Stock"), issuable in
connection with Royal Casino Group Inc., a Utah Corporation (the
"Company") Consulting/Compensation plan ("Plan"). We are
familiar with the proceedings taken, and to be taken, by the
Company in connection with the issuance of shares of Common
Stock under the Plan and authorization of such issuance
thereunder, and have examined such documents and such questions
of law and fact as we deem necessary in order to express the
opinion hereinafter stated.
Based on the foregoing, it is our opinion that the shares of
Common Stock of the Company to be issued pursuant to the Plan
have been duly authorized, and that such Common Stock, when
issued in accordance with the terms of the Plan, will be legally
and validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit
to the above referenced Registration Statement .
Very truly yours,
RODERICK H. POWELL III
Exhibit 3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement on
Form S-8 of our report dated October 25, 1996, included in Royal
Casino Group Inc.'s Form 10-K for the year ended July 31, 1996,
and to all references to our Firm included in this Registration
Statement.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
July 15, 1997
FORM 10-K 7/31/97 EXHIBIT 2
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 12,
1996
ROYAL CASINO GROUP INC.
(Exact name of registrant as specified in its charter)
UTAH 0-10315 95-4091368
(State or other (Commission (I.R.S.
Employer
jurisdiction of File Number)
Identification #)
incorporation)
5446 Luis Dr., Agoura Hills, CA 91301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818)
991-1082
Total number of sequentially numbered pages : 4
Exhibit index page number: 4
In accordance with Rule 202 of Regulation S-T, this Form 8-K is
being filed in paper pursuant to a continuing hardship exemption
ITEM 4 CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
(a) Previous independent accounts
(i) On August 12, 1996 Royal Casino Group Inc. dismissed
Caldwell,
Becker, Dervin, Petrick & Co., L.L.P. as its independent
accountants.
(ii) The report of Caldwell, Becker, Dervin, Petrick & Co.,
L.L.P.
on the balance sheet as of July 31, 1995 and the
related
statements of (loss), stockholders' equity (deficit),
and cash
flows for the years ended July 31, 1995 and 1994 and
for the
period from August 1, 1988 (inception) to July 31,
1995
contained no adverse opinion or disclaimer of
opinion, but
contained a separate paragraph regarding the
uncertainty of the
Company to continue as a going concern. The period
from August
1, 1988 to July 31, 1989, which is included in the
figure from
inception to July 31, 1995, was audited by other
auditors.
(iii)The Registrant's Board of Directors participated in and
approved
the decision to change independent accountants.
(iv) In connection with its audit for the period indicated at
(a)(ii)
above, there have been no disagreements with
Caldwell, Becker,
Dervin, Petrick & Co., L.L.P. on any matter of
accounting
principles or practices, financial statement
disclosure,
or auditing scope or procedure, which disagreements if
caused
them to make reference thereto in their report on the
financial
statements for such period.
(v) During the period there have been no reportable events [as
defined in Regulation S-K Item 304(a)(1)(v)].
(vi) Caldwell, Becker, Dervin, Petrick & Co., L.L.P. has
furnished
the Registrant with a letter addressed to the SEC
stating that
it agrees with the above statements. A copy of this
letter is
included as an exhibit to this Form 8-K Report.
(b) New Independent accountants
(i) The Registrant engaged Arthur Andersen LLP as its new
independent accountants as of August 12, 1996.
During the two
most recent periods and through August 12, 1996, the
Registrant
has not consulted with Arthur Andersen LLP on items
which (1)
were or should have been subject to SAS 50 or
(2)concerned the
subject matter of a disagreement or reportable event
with the
former auditor ( as described in Regulation S-K Item
304(a)(2).
ITEM 7 FINANCIAL STATEMENTS & EXHIBITS
(c) Exhibits
(1) Letter regarding change in certifying accountant
SIGNATURES
Pursuant to the requirements of the securities and exchange act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
Royal Casino Group Inc.
By:__/s/ Jon F. Elliott
Jon F. Elliott, President/CEO
Date: August 14, 1996
EXHIBIT 1
CALDWELL, BECKER, DERVIN, PETRICK & CO., LLP
20750 VENTURA BLVD., STE. 140
WOODLAND HILLS, CA 91364
(818) 704-1040 - FAX (818) 704-5536
August 14, 1996
Securities and Exchange Commission
Mail Stop 9-5
450 Fifth Street Northwest
Washington, DC 20549
Ladies and Gentlemen:
We have read and agree with the comments in Item 4 of Form 8-K
of Royal Casino Group Inc. dated August 12, 1996.
Sincerely,
Caldwell, Becker, Dervin, Petrick & Co., L.L.P.
FORM 10-K 7/31/97 EXHIBIT 3
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 13,
1996
ROYAL CASINO GROUP INC.
(Exact name of registrant as specified in its charter)
UTAH 0-10315 95-4091368
(State or other (Commission (I.R.S.
Employer
jurisdiction of File Number)
Identification #)
incorporation)
5446 Luis Dr., Agoura Hills, CA 91301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (605)
578-1299
Total number of sequentially numbered pages : 3
Exhibit index page number: 2
In accordance with Rule 202 of Regulation S-T, this Form 8-K is
being filed in paper pursuant to a continuing hardship exemption
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 13, 1996 Royal Casino Group consummated an agreement
previously entered into in December, 1995 with Casino Magic
Corp. for the purchase of all the shares of stock of
Atlantic-Pacific Corp., a South Dakota corporation, doing
business as Goldiggers Hotel & Gaming Establishment in Deadwood,
South Dakota. A summary of the terms follow:
A Form 8-K detailing the Consideration, Effective Date,
Principle Followed in Determining the Amount of the
Consideration, the Relationship Between the Parties and the
assets Acquired was filed on June 25, 1996
ITEM 7 FINANCIAL STATEMENTS & EXHIBITS
(a)(4) Financial Statements
As audited statements had not been prepared for
Atlantic-Pacific Corp, Royal Casino Group engaged Arthur
Andersen, LLP as its auditors. Arthur Andersen, LLP then
performed a three year audit as is required under this Section.
By filing this Form 8-K with the Commission within the 60 day
time frame allowed through an automatic extension pursuant to
This Section, registrant believes it has complied with the
appropriate regulations pursuant to providing the financial
statements concerning this transaction.
(c) Exhibits
(2) (I) Audited financial statements of Atlantic Pacific
Corporation (DBA Goldiggers Hotel & Gaming), as
of December 31, 1995, 1994 and 1993, and for the
three years then ended December 31, 1995.
SIGNATURES
Pursuant to the requirements of the securities and exchange act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
Royal Casino Group Inc.
By: /s/ Jon F. Elliott
Jon F. Elliott, President/CEO
Date: August 27, 1996
FORM 10-K 7/31/97 EXHIBIT 4
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-KA
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September
18, 1996
ROYAL CASINO GROUP INC.
(Exact name of registrant as specified in its charter)
UTAH 0-10315 95-4091368
(State or other (Commission (I.R.S.
Employer
jurisdiction of File Number)
Identification #)
incorporation)
152 Sherman St., Deadwood, SD 57732
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (605)
578-1299
Total number of sequentially numbered pages : 4
Exhibit index page number: 4
In accordance with Rule 202 of Regulation S-T, this Form 8-K is
being filed in paper pursuant to a continuing hardship exemption
ITEM 4 CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
(a) Previous independent accounts
(i) On August 12, 1996 Royal Casino Group Inc. dismissed
Caldwell,
Becker, Dervin, Petrick & Co., L.L.P. as its
independent
accountants.
(ii) The report of Caldwell, Becker, Dervin, Petrick & Co.,
L.L.P.
on the balance sheet as of July 31, 1995 and the
related
statements of (loss), stockholders' equity (deficit),
and cash
flows for the years ended July 31, 1995 and 1994 and
for the
period from August 1, 1988 (inception) to July 31,
1995
contained no adverse opinion or disclaimer of
opinion, but
contained a separate paragraph regarding the
uncertainty of the
Company to continue as a going concern. The period
from August
1, 1988 to July 31, 1989, which is included in the
figure from
inception to July 31, 1995, was audited by other
auditors.
(iii)The Registrant's Board of Directors participated in and
approved
the decision to change independent accountants.
(iv) In connection with its audit for the period indicated at
(a)(ii)
above, there have been no disagreements with
Caldwell, Becker,
Dervin, Petrick & Co., L.L.P. on any matter of
accounting
principles or practices, financial statement
disclosure, or
auditing scope or procedure through the date of
dismissal, which
disagreements would cause them to make reference
thereto in
their report on the financial statements for such
period.
(v) During the period there have been no reportable events [as
defined in Regulation S-K Item 304(a)(1)(v)].
(vi)Caldwell, Becker, Dervin, Petrick & Co., L.L.P. has
furnished
the Registrant with a letter addressed to the SEC
stating that it
agrees with the above statements. A copy of this
letter is
included as an exhibit to this Form 8-K Report.
(b) New Independent accountants
(i) The Registrant engaged Arthur Andersen LLP as its new
independent accountants as of August 12, 1996.
During the two
most recent periods and through August 12, 1996, the
Registrant
has not consulted with Arthur Andersen LLP on items
which (1)
were or should have been subject to SAS 50 or (2)
concerned the
subject matter of a disagreement or reportable event
with the
former auditor ( as described in Regulation S-K Item
304(a)(2).
ITEM 7 FINANCIAL STATEMENTS & EXHIBITS
(c) Exhibits
(1) Letter regarding change in certifying accountant
SIGNATURES
Pursuant to the requirements of the securities and exchange act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
Royal Casino Group Inc.
By: /s/ Jon F. Elliott
Jon F. Elliott, President/CEO
Date: September 18, 1996
EXHIBIT 1
CALDWELL, BECKER, DERVIN, PETRICK & CO., L.L.P.
20750 VENTURA BLVD., STE. 140
WOODLAND HILLS CA 91364
(818) 704-1040 - FAX (818) 704-5536
September 18, 1996
Securities and Exchange Commission
Mail Stop 9-5
450 Fifth Street Northwest
Washington DC 20549
Ladies and Gentlemen:
We have read and agree with the comments in item 4 of Form 8-KA
of Royal Casino Group, Inc. dated September 18, 1996.
Sincerely,
CALDWELL, BECKER, DERVIN, PETRICK & CO., L.L.P.
FORM 10-K 7/31/97 EXHIBIT 5
CERTIFICATE OF AMENDMENT
OF
RECEIVED
ARTICLES OF INCORPORATION
AUG 05 96
OF
Utah Div. of Corp.
ROYAL CASINO GROUP INC & Comm. Code
JON F. ELLIOTT and LARRY C. CLOSE certify that
A) They are the President and Secretary, respectively
of Royal
Casino Group Inc., a Utah Corporation.
B) The Articles of Incorporation of this corporation are
amended as follows:
The Corporation's Common and Preferred Stock each have a
par value of a mil per share effective August 1,
1996.
C) The foregoing amendment to the Articles of
Incorporation was duly approved by Unanimous Consent by the
Board of Directors at a board meeting on July 16, 1996.
Shareholder approval not required.
We further declare under penalty of perjury under the
laws of the State of Utah that the matters set forth in this
certificate are true and correct of our own knowledge.
Dated: July 22, 1996 ROYAL CASINO GROUP INC.
By /s/ Jon F. Elliott
Jon F. Elliott, President
By /s/ Larry C. Close
Larry C. Close
FORM 10-K 7/31/97 EXHIBIT 6
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 30, 1997
ROYAL CASINO GROUP INC.
(Exact name of registrant as specified in its charter)
UTAH 0-10315 95-4091368
(State or other (Commission (I.R.S.
Employer
jurisdiction of File Number Identification #)
152 Sherman St., Deadwood, South Dakota 57732
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (605) 578-1299
Total number of sequentially numbered pages: 5
Exhibit index page number: 5
ITEM 4 CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
(a) Previous independent accountants
(i) On August 8, 1997, Royal Casino Group Inc. dismissed
Arthur Andersen, L.L.P. as its independent accountants.
(ii) The report of Arthur Andersen, L.L.P. on the financial
statements for the past fiscal year ended July 31, 1996
contained no adverse opinion or disclaimer of opinion, and was
not qualified or modified as to uncertainty, audit scope or
accounting principle.
(iii) The Registrants Board of Directors participated in and
approved the decision to change independent accountants.
(iv) In connection with its audit for the period indicated at
(a)(ii) above, there have been no disagreements with Arthur
Andersen, L.L.P. on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure, which disagreements if not resolved to the
satisfaction of Arthur Andersen L.L.P. would have caused them to
make reference thereto in their report on the financial
statements for such year.
(v) During the period there have been no reportable events [as
defined in Regulation S-k Item 304 (a) (1) (v)].
(vi) Arthur Andersen, L.L.P. has furnished the Registrant with
a letter addressed to the SEC stating that it agrees with the
above statements. A copy of this letter is included as an
exhibit to this Form 8-K Report.
(b) New independent accountants
(i) The Registrant has not engaged new independent accountants
as of August 8, 1997.
Item 5 OTHER EVENTS
(i) On August 1, 1997, the Company requested the Nevada Gaming
Commission to allow it to withdraw its application for a gaming
license relating to its proposed acquisition of the Triple J
Casino in Henderson, Nevada. The Company had entered into an
Agreement in Principle to acquire the Triple J in March, 1997
and submitted its gaming application to the Nevada gaming
regulators in April, 1997. The main attractions this property
held for the Company were its nonrestricted gaming license plus
municipal permits to build 550 hotel rooms. The building permit
was due to expire in
May, 1998 and the Company determined it would be unable to
raise the approximately $55 million required to acquire, remodel
and develop the property on acceptable terms and conditions
within the time frame prior to the expiration of the permit.
Once the existing permit expired, the Company believed that it
would be very difficult to re-apply for a permit to develop the
hotel. After conferring with agents of the Nevada Gaming
Control Board and receiving their initial comments with respect
to Royal's proposed acquisition, the Company decided to cease
its pursuit of the Triple J.
(ii) The Company entered into a Settlement Agreement on July
30, 1997 with Stephen Grogan concerning law suits that the
parties had filed against each other. Neither party admitted
wrong doing however, the Company entered into the agreement to
avoid the distraction and costs associated with continuing
litigation. The Company settled the actions for less that its
projected ongoing legal costs. The Company has no other
existing litigation proceedings nor any pending actions.
ITEM 7 FINANCIAL STATEMENTS & EXHIBITS
(c) Exhibits
(1) Letter regarding change in certifying accountant.
SIGNATURES
Pursuant to the requirements of the securities and exchange act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
Royal Casino Group Inc.
By: /s/ Jon F. Elliott
Jon F. Elliott,
President/CEO
Date: August 8, 1997
EXHIBIT 1
Arthur Andersen L.L.P.
45 South Seventh St.
Minneapolis, MN 55402
August 8, 1997
Securities and Exchange Commission
Mail Stop 9-5
450 Fifth Street Northwest
Washington, DC 20549
Ladies and Gentlemen:
We have read and agree with the comments in Item 4 of Form 8-K
of Royal Casino Group Inc. dated August 8, 1997.
Sincerely,
/s/ Arthur Andersen, L.L.P.
Arthur Andersen, L.L.P.
FORM 10-K 7/31/97 EXHIBIT 7
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October
20, 1997
ROYAL CASINO GROUP INC.
(Exact name of registrant as specified in its charter)
UTAH 0-10315 95-4091368
(State or other (Commission (I.R.S.
Employer
jurisdiction of File Number)
Identification #)
incorporation)
152 Sherman St., Deadwood, South Dakota 57732
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (605)
578-1299
Total number of sequentially numbered pages : 4
Exhibit index page number: 3
ITEM 4 CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
(a) Previous independent accountants
(i) On August 8, 1997 Royal Casino Group Inc. dismissed
Arthur Andersen, L.L.P. as its independent accountants.
(ii) The report of Arthur Andersen, L.L.P. on the financial
statements for the past fiscal year ended July 31, 1996
contained no adverse opinion or disclaimer of opinion, and were
not qualified or modified as to uncertainty, audit scope or
accounting principle.
(iii) The Registrant's Board of Directors participated in and
approved the decision to change independent accountants.
(iv) In connection with its audit for the period indicated at
(a)(ii)
above, there have been no disagreements with Arthur Andersen,
L.L.P. on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or
procedure,
which disagreements if not resolved to the satisfaction of
Arthur Andersen L.L.P. would have caused them to make
reference
thereto in their report on the financial statements for such
year.
(v) During the period there have been no reportable events
[as defined in Regulation S-K Item 304(a)(1)(v)].
(vi Arthur Andersen, L.L.P. has furnished the Registrant with
a letter addressed to the SEC stating that it agrees with the
above statements. A copy of this letter was included as an
exhibit to our Form 8-K Report of August 8, 1997.
(b) New Independent accountants
(i) The Registrant engaged Singer Lewak Greenbaum & Goldstein
L.L.P. as its new independent accountants as of October
20, 1997. During the two most recent periods and through
October 20, 1997, the Registrant has not consulted with Singer
Lewak Greenbaum & Goldstein L.L.P. on items which (1) were or
should have been subject to SAS50 or (2)concerned the subject
matter of a disagreement or reportable event with the former
auditor [as described in Regulation S-K Item 304(a)(2)].
ITEM 5 OTHER EVENTS
None
ITEM 7 FINANCIAL STATEMENTS & EXHIBITS
(c) Exhibits
None
SIGNATURES
Pursuant to the requirements of the securities and exchange act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
Royal
Casino Group Inc.
By: /s/ Jon F. Elliott
Jon F. Elliott, President/CEO
Date: October 21, 1997
