SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter ended January 31, 1997
Commission File No. 0-10315
ROYAL CASINO GROUP INC.
(Name of Registrant as specified in its charter)
Utah 95-4091368
(State or other jurisdiciton of (IRS Employer
Incorporation or organization) Identification
No.)
152 Sherman St.
Deadwood, SD 57732
(Address of principal executive offices)
(605) 578-1299 (605) 578-1298
(Registrant's telephone number) (Registrant's fax
number)
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 Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
[x]Yes[]No
As of January 31, 1997 4,638,825 shares of registrant's $0.001
par value common stock were outstanding.
ROYAL CASINO GROUP INC.
INDEX
Page
Number
PART l. FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements
Balance Sheet (Unaudited)
as of January 31, 1997..........................3
Balance Sheet (Unaudited)
as of January 31, 1996..........................5
Statement of Operations (Unaudited)
as of January 31, 1997..........................6
Statement of Stockholder's Equity (Unaudited)
as of January 31, 1997..........................7
Statement of Cash Flows (Unaudited)
as of January 31, 1997..........................8
Notes to Financial Statements (Unaudited).......9
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations.....13
PART ll OTHER INFORMATION
Item 2. Change in Securities..............................19
Item 6. Exhibits and Reports on Form 8-k..................19
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ROYAL CASINO GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1997
ASSETS
Current Assets
Cash - Bank $ 149,047
Casino Funds 182,007
Chip/Token Liab. ( 161,152)
Net Casino Funds $ 169,902
Accounts Receivable 7,610
Accrued Revenues 0
Inventories
Slot parts 4,245
Food 10,133
Bar 5,409
Souvenirs 3,145
Gaming Supplies 7,079
Prepaid Device Stamps 75,000 Other Prepaids 21,998
Marketable Securities 38,125 $ 172,744
Total Current Assets $ 342,646
Fixed Assets
Slot Machines $ 479,422
Other Gaming Device 14,549
Monetary Control 53,535
Casino F&F 116,713
Deadwood Stage 232,007
Restaurant Equipment 74,335
Restaurant Furnishing 29,096
Restaurant Smallware 38,026
Bar F&F 17,578
Security & Surveillance 43,742
Hotel Furnishings 27,755
Office Equipment 77,621
Leasehold Improvements 1,005,990
Parking Lot 12,145
Accum. Depreciation ( 157,559)
Land 337,022
TOTAL FIXED ASSETS $2,401,977
Other Assets
Investment in Subsidiary 0
Advance to Subsidiary 0
A/C Receivable other 1,500
Employee Advance 300
Loans to Officers 18,100
Note Receivable - Berg 37,499
TOTAL OTHER ASSETS $ 57,399
TOTAL ASSETS $ 2,802,022
1
ROYAL CASINO GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1997
LIABILITIES & EQUITY
Current Liabilities
Accounts Payable $ 161,405
Current Maturity of LT Debt 3,372
Payroll Taxes 21,048
Sales Taxes Payable 4,523
Accrued Interest 0
Accrued Wages 0
Health Ins. Claims Payable 0
Gaming Taxes Payable 5,234
Prop. Taxes Payable 5,006
Customer Prepaid Deposits 0
Chips & Token Float 19,000
Prog. Meter Liabilities 3,410
Other Current Liabilities 1,474
Short Term Notes 0
TOTAL CURRENT LIABILITIES $ 224,472
Long Term Liabilities
Capital Leases $ 1,421
TOTAL LIABILITIES
Equity
Common Stoc $ 4,639
Common Additional
Paid in Capital 2,782,840
Preferred Stock 2,440,000
Retained Earnings (2,651,350)
TOTAL EQUITY $ 2,576,129
TOTAL LIABILITIES & EQUITY $ 2,802,022
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ROYAL CASINO GROUP INC.
BALANCE SHEET - JANUARY 31,
1996
ASSETS
Current assets:
Cash in bank $ 44,980
Total current assets $44,980
Fixed Assets
Total fixed assets
0
Total Assets
$44,980
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued expenses $60,334
Short term notes 67,250
Loans payable - officers 16,577
Total current liabilities $144,161
Stockholders' equity:
Common stock, 150,000,000 shares
authorized, 2,664,078 issued and
outstanding $1,176,306
Retained earnings (1,235,620)
Net income <loss> (39,867)
($ 99,181)
Total Liabilities and Stockholders Equity $
44,980
1
ROYAL CASINO GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
JANUARY 31, 1997
January 31, 1997 January 31, 1996
REVENUES
Casino 169,987
Food & Beverage 78,947
Room 21,577
Other 40,184
310,695
Less Promotional Allowances ( 32,547)
NET REVENUES 278,148
COSTS & EXPENSES
Casino 186,852
Food & Beverage 90,868 Rooms 10,048
General & Administrative 381,653 39,867
Depreciation/Amortization 66,956
736,377
LOSS FROM OPERATIONS ( 458,229) (
39,867)
OTHER (INCOME) EXPENSE
Interest Expense
Unrealized Gain(Loss) ( 575)
Other Income 1,384
Interest Income 6,098
( 6,907)
LOSS BEFORE INCOME TAXES (451,322)
INCOME TAX PROVISION
NET LOSS ( 451,322) ( 39,867)
NET LOSS PER SHARE $.1137
$.015
WEIGHTED AVERAGE COMMON
STOCK O/S (PRIMARY) 4,520,725
2,670,083
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ROYAL CASINO GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT
QUARTER ENDED JANUARY 31, 1997
Common Stock Preferred Stock Deficiency
Total Shares $ Shares $
Balance 10/31/96 4,436,459 2,778,102 1,000,000 2,440,000
<2,200,029> 3,018,074
Issuance of
Common Stockfor service
& debt 286,088 91,877
91,877
Cancellation
of Common
Stock
a) PFC (60,000) (82,500)
(82,500)
b) M. Tse (25,000)
Adj from
last qtr.
- -@Style #3@ L. Cov. 1,278
Net profit
<loss> of the quarter
ended 01/31/97
(451,322) (451,322)
__________ ________ _________ _________
_________ _________
Balance at
01/31/97 4,638,825 2,787,479 1,000,000 2,440,000
<2,651,350> 2,576,129
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ROYAL CASINO GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
QUARTER ENDED JANUARY 31, 1997
Cash flows from operating activities:
Net profit <loss> $ <451,322>
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation/Amortization 65,062
Stock issued for Services 91,877
Retirement of stock issued for services (82,500)
Unrealized Gain (Loss) on Marketable Securities 575
(Increase)Decrease in Prepaid Expenses 168,006
(Increase)Decrease in Accounts Receivable 35,149
(Increase)Decrease in Deposits and Other 19,635
Increase(Decrease) in Accounts Payable 66,150
Increase(Decrease) in Accrued Expenses (69,651)
Increase(Decrease) in Other Current Liabilities (66,532)
- ---------------@Style #10@
Net Cash
Provided (used) by operating activities: (223,551)
Cash Flows from Investing Activities:
Acquisitions of Property and Equipment
( 3,654)
Disposition of Property and Equipment 38,000
Loan to Officers (18,100)
Investment in Legal Settlement ( 1,500)
- --------------
Net Cash used in Investing Activities 14,746
Cash Flows from Financing Activities:
Note Receivable (37,499)
- --------------
Net Cash provided by Financing Activities ( 37,499)
Net Increase(Decrease) in Cash and Cash Equivalents (
246,304)
Cash and Cash Equivalents, Beginning Period $
416,206
- --------------
Cash and Cash Equivalents, End of Period $
169,902
***********
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ROYAL CASINO GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JANUARY 31, 1997
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization, Business and Basis of Presentation:
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 the United States Bank- ruptcy Code. On April 18, 1988,
Reliance acquired Capitol Television Net- work Inc., a
California corporation ("CTN California") formed on December 31,
1986, in exchange for a controlling interest in Reliance. "CTN
Cali- fornia's" president and largest share holder 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 sta-tions. 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.
Goldiggers Hotel & Gaming Establishment
The Company acquired Goldiggers Hotel and Gaming Est. from
Casino Magic on June 13, 1996 after receiving its gaming license
from the South Dakota Commission on Gaming on June 6, 1996.
Details of the acquisition are described in the Company's Form
10-K for the fiscal year ended July 31, 1996 which has been
filed with the Securities and Exchange Commission. The Company
operates Goldiggers through its wholly owned subsidiary,
Atlantic-Pacific Corp.
Goldiggers Hotel & Gaming Est. consists of three separate but
con-nected buildings housing 87 slot machines, 10 video lottery
machines plus three blackjack tables, a fine dining restaurant,
bar and nine room hotel located in historic Deadwood, South
Dakota. Deadwood, a turn-of-the-cen-tury restored gold mining
town nestled in the famous Black Hills of South Dakota, is on
the National Historical Registry and attracts over 1.5 mil-lion
visitors per year. The Company also owns and operates the
Deadwood Stage, a transportation system consisting of two 47
passenger tour 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. In
addition, the Company owns, free and clear, lots adjacent to the
casino on which it plans to expand both the hotel and casino.
1
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 locatedwhere
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 river boat 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 River
boat 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 entered into an agreement with a
local landowner whereby the Company has 50 acres of land on the
Mississippi River under its control. This land is suitable to
accommodate not only the Riverboat Casino Entertainment Center
but also potential expansion to the complex such as a hotel,
recreational vehicle park and other amenities. Details of this
transaction are described in the Company's Form 10-K for its
fiscal year ended July 31, 1996. As a condition of the
transaction, the City of Wyatt will annex the property into the
city with the local landowner paying the costs associated with
this procedure. This annexation it anticipated to be completed
during the second quarter of 1997, although no assurances to
this effect can be given due to the complexities and variables
associated with this procedure.
Current Operations
The Company made no material sales from inception until its
acquisition of Goldiggers Hotel & Gaming Est. from Casino Magic
Corp. on June 13, 1996. Consequently, the revenues shown for
this period are difficult to compare to the previous years same
quarter when the Company had not yet achieved any revenues.
It is anticipated that additional losses will be incurred in
the future as the Company continues to make infusions of capital
into Goldiggers and develops other casino properties and will
continue until the planned expansion to Goldiggers has been
completed and/or the Company's second property is operational.
1
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".
Basis of Financial Statements:
The accompanying financial statements have been prepared with
the Company as a going concern. Royal Casino's revenues are
derived solely from its wholly-owned subsidiary,
Atlantic-Pacific Corp. which operates Goldiggers Hotel & Gaming
Est. in Deadwood, South Dakota. Goldiggers has its own revenues
and expenses while Royal Casino Group has additional corporate
operating expenses normally associated with a developing
company. The company will require a continuous flow of capital
to develop the casinos the Company aspires to open.
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. The Company has recorded a full evaluation allowance
against income tax benefits for all years presented in its July
31, 1996 audit due to uncertainty related to the Company's
ability to realize such tax benefits in future periods. The
Company's deferred tax assets and net operating loss carry
forwards are $373,000 for 1996 and $111,925 for 1995.
Officers' Salaries:
Officers' salary expense for the period was $56,250.
Loans payable, Officers/Directors-Stockholders:
There are no Officers or Directors loans outstanding at the end
of this quarter.
Stockholders' Equity
Common Stock:
The Company has 150,000,000 shares authorized and 4,638,825
issued and outstanding. There are presently outstanding
1,611,846 "B" Warrants which entitle the holder to purchase one
share of Common Stock at a purchase price of $20 until July 26,
1997. The "B" Warrants are callable by the Company at a
purchase price of $.20 per Warrant.
Preferred Stock:
The Company has 100,000,000 shares authorized of which 1,000,000
are issued and outstanding. In June, 1996 the Company issued
1,000,000 Class A Preferred Shares to Casino Magic Corp. In
connection with its acquisition of Goldiggers Hotel & Gaming
Establishment. These shares are non-dividend bearing,
convertible and redeemable up to one third of the total number
of shares issued each year for three years at Casino Magic's
option. The Company has received a request from Casino Magic to
convert one third of the shares into common shares. The Company
is actively preparing a
1
registration statement to do so although there can be no
assurance when it will be become effective.
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.
The Company has issued one hundred and seventy thousand
(170,000) options to its officers/directors-stockholders. The
options may be exercised at a purchase price of $1.25 per share.
The options expire on January 31, 1999. The common stock
issued pursuant to these options is restricted under the
Securities and Exchange Commission Rule 144.
1
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion provides information on results of
opera-tions, liquidity, capital resources, and the impact of
inflation on the Company. The financial statements and notes
thereto also contain inform-ation that is pertinent to this
analysis.
Selected Financial Data:
The selected financial data set forth below should be read in
conjunc-tion with the financial statements and related notes.
Balance sheet in-formation is presented as of the end of the
period shown.
The following table summarizes certain selected unaudited
financial data and is qualified in its entirety by the more
detailed financial statements included elsewhere herein. For the
quarter ended January 31, 1997, the Company had revenues of
$278,148 and a consolidated net loss of $451,322. The Company's
revenues are derived from its wholly-owned subsidiary,
Atlantic-Pacific Corp. which operates Goldiggers Hotel & Gaming
Establish-ment in Deadwood, South Dakota.
January 31, 1997
(Unaudited)
Total Assets...........................................
$2,802,022
Total Liabilities...................................... $
225,893
Shareholders' Equity...................................
$2,576,129
Shares Outstanding
Common Stock ....................... 4,638,825 (1)
Series A Preferred Stock ........... 1,000,000
Net Tangible Book Value
Per Share of Common
Stock . . . . . . . . . . . . . . . . $0.56
(1) There are presently outstanding 1,611,846 "B" Warrants
which entitle the holder to purchase one share of Common Stock
at a purchase price of $20 until July 26, 1997. The "B"
Warrants are callable by the Company at a price of $.20 per
Warrant. This calculation assumes that none of the
aforementioned "B" Warrants have been exercised.
1
General Financial Condition
The Company has sufficient cash on hand for current corporate
purposes and has arranged a credit line through its local bank
of $125,000 which the Company feels is sufficient to cover the
anticipated cash flow shortfalls in Goldiggers through the
Spring. The Company has commenced seeking the funding necessary
for the expansion to Goldiggers although there is no guarantee
that the funding will be available on terms and conditions
acceptable to the Company.
Additionally, 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.
Results of Operations:
Goldiggers
The Company, since it assumed control of Goldiggers Hotel &
Gaming Est. in mid-June, has continued to invest in capital
improvements. First, Royal Casino Group has 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 has turned the adjacent land into a parking lot for its
hotel guests saving $50,000 per year in parking expense. Third,
the Company has relocated and built a new gift shop and ordered
new apparel with the Goldiggers logo. Fourth, the Company has
installed new kitchen equipment resulting in increased
efficiency in Goldiggers' restaurant and upgraded the quality of
the food. Fifth, the Company has undertaken a major cleanup of
the property; repainting the front, side and rear entrances,
refurbishing the copper and brass entrance moldings, installing
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 has
implemented cost cutting measures such as instituting a
comprehensive yet less expensive employee health insurance
program. Royal Casino Group is developing an aggressive
marketing program.
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
1
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 multi-leval parking structure
due to open in May, 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.
Royal Casino Group's plan is to expand the hotel by adding 24
new rooms and doubling the size of the casino by adding 90
gaming devices. The expansion would take place on land adjacent
to Goldiggers a portion of which is under a long term lease with
the balance owned free and clear by the Company. The Company
has prepared its business plan and has recently begun seeking
the $3,750,000 the Company feels is necessary to construct the
building together with the furnishings, fixtures and equipment,
signs, gaming device fees and operating capital required to
open. The Company will use its fleet of buses and vans to bring
tour groups to the property.
Recently, Kevin Costner and his brother have announced that
their $140M Dunbar Resort is due to commence construction this
year with an anticipated May, 1999 opening. When completed
Management believes this will have a positive effect on
Goldiggers revenues. During the construc-tion phase Management
believes the 1,000 construction workers which will be in
Deadwood will also have a positive impact on Goldiggers revenues.
The South Dakota legislature and senate approved a measure for
implementation on July 1, 1997 which provides the South Dakota
Commission on Gaming the authority to approve derivative poker
and blackjack games. It is anticipated that popular games such
as `Let It Ride' and `Caribbean Stud' will be approved.
Implementation is projected for the Fall of 1997. When added,
these games should prove to be a positive influence on
Goldiggers revenues.
Wyatt, Missouri Riverboat Casino
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
1
public notice on October 8, 1996. This information proved to be
erroneous. On March 7, 1997 the Army Corps of Engineers issued
the public notice seeking comments to determine whether to grant
a Section 404 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.
It is anticipated that the Army Corps together with the Missouri
Department of Natural Resources will make a determination on
this matter within several weeks after receiving comments,
although no time frame can be assured due to the potential for
unanticipated delays.
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.
Board Matters
At a Board of Directors meeting on January 25,1997 the Board
ex-tended the exercise date for the Company's Class B Warrants
six months to July 26, 1997 with all other terms and conditions
remaining in effect. At the same 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. Additional restrictions were
imposed on both stock issuances.
Consulting Agreements
The Company renewed its Consulting Agreement with Mahoney
Inter-national of Toronto for six months from January through
June, 1997 at a cost of $4,000 (CDN) per month. Mahoney
International is assisting the Company in its pursuit to develop
and manage charity casinos in the Province of Ontario.
1
Stock Issuances
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 charity casinos 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.
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.
Other Matters
On January 14, 1997 the South Dakota Commission on Gaming filed
a complaint against Royal Casino Group and Jon F. Elliott
stating that, pursuant to the Gaming Commission's rules and
regulations, the Commission had not received notification within
the required thirty days of the lawsuit filed by Stephen Grogan
against Royal Casino Group & Jon F. Elliott, and Royal Casino
Group's lawsuit filed against Stephen Grogan. The Executive
Secretary of the Commission held a telephonic informal
consultation resulting in stipulations being signed and
submitted by both Royal Casino Group and Jon F. Elliott assuring
voluntary compliance. The corporation's counsel informed the
Commission that this was an inadvertant oversight on his part
and not Royal Casino Group's error. The Commission imposed
monetary penalties of $200 against Jon Elliott, the entire
amount of which was suspended; and, $500 against Royal Casino
Group of which $300 was suspended. The company's counsel
reimbursed the penalty in full to the company. Suspension would
be revoked if either party had a like violation within one year.
The Company believes that Stephen Grogan, a former Officer and
Director of the Company, performed acts while serving as an
Officer and Director of the Company that were contrary to the
interests of the Company and its shareholders and caused damages
to the Company. As such on November 21, 1996 the Company filed
suit against Stephen Grogan in Lawrence
1
County, South Dakota, the County where the Company maintains its
corporate headquarters. The suit alleges deceit, fraud and
breach of fiduciary duties against Stephen Grogan and seeks the
return of the Company's stock issued to Mr. Grogan together with
the return of the proceeds Mr. Grogan received from the sale of
common shares of the Company's stock. This action had been
preceded by a suit filed on August 5, 1996 by Stephen Grogan,
against Royal Casino Group Inc. and Jon Elliott, its President
seeking damages in excess of $200,000 plus punitive action for a
variety of alleged occurrences. The Company strongly believes
these charges are meritless andis currently engaged in
vigorously defending these actions. In addition, the Company
has asserted numerous affirmative defenses in response to the
action filed by Mr. Grogan.
In December, 1996 the Company acquired an existing outstanding
default judgment against Stephen Grogan with principal and
interest totaling in excess of $9,000. [See: Subsequent Events]
The Company continues to pursue the acquisition and development
of small to mid-sized casino opportunities throughout the
country.
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. Viewing
a year-over-year comparison of operations, gross casino revenues
were down 18% in the first quarter. Management attributes this
decrease to less 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. Second quarter revenues were negatively
impacted by the coldest November-January three month period in
the 107 years of record keeping in South Dakota. The severest
winter storms in a century, including snow and ice storms,
pelted the region almost every weekend. A record number of
Interstate closures occurred thus making access to Deadwood
practically impossible. As a result second quarter revenues
were down 35% compared to same quarter last year revenues.
Deadwood gaming revenues have been negatively impacted.
Direct Expenses
The Company has had sufficient cash on hand to pay all its
current expenses associated with maintaining the Company
Consulting Fees
The Company expensed $26,000 in consulting fees in this period.
Of this amount $2,500 is outstanding, $11,500 was paid in cash
and the balance was paid in common stock.
1
Equipment Rental, Overhead Reimbursement, Rent, Support Services
The Company pays rent of $425 per month for its corporate
offices. Atlantic-Pacific pays a monthly rent of $19,500 for
Goldiggers. Atlantic-Pacific has $11,000 owing on equipment
rental.
Impact Of Inflation Upon The Company
Inflation has not impacted the Company.
Subsequent Events
In an effort to collect on the Stephen Grogan judgment the
Company retained counsel who, on February 6, 1997, served a writ
on Stephen Grogan to seize a certificate for 111,250 shares of
Royal Casino Group common stock issued in Stephen Grogan's name.
Stephen Grogan informed the Sheriff that the certificate was
being held by his attorney. Thereupon, on February 10, 1997,
Royal's counsel sought a Court Order, which was granted on
February 18, 1997, ordering the stock transfer agent to cancel
that certificate and issue another certificate for the same
number of shares in Stephen Grogan's name. Further, the order
directed the transfer agent to forward the certificate to the
Court. The transfer agent complied with the court order. A
Notice of Seizure dated February 20, 1997 notifying Stephen
Grogan of the levy upon his Royal Casino Group stock was
subsequently served on Stephen Grogan. A Motion Authorizing
Sheriff's Sale of the Securities was filed with the Court on
March 11, 1997.
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.
1
PART II. OTHER INFORMATION
Item 2. Changes in Securities
NONE
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None.
Exhibits others than those listed have been omitted because
they are non-existent, inapplicable or because the information
is given in the financial statements of the Company.
b. Reports on Form 8-K
None.
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed by
the undersigned thereunto duly authorized.
ROYAL CASINO
GROUP INC.
(Registrant)
By: /s/ Jon F.
Elliott
Jon F. Elliott,
President
and Chief Executive
Officer
Date: March 15, 1997
By: /s/ Larry C.
Close
Larry C. Close
Director, Vice
President
1
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] JUL-31-1996
[PERIOD-END] JAN-31-1997
[CASH] 169,902
[SECURITIES] 38,125
[RECEIVABLES] 7,610
[ALLOWANCES] 0
[INVENTORY] 30,011
[CURRENT-ASSETS] 342,646
[PP&E] 2,559,536
[DEPRECIATION] 157,559
[TOTAL-ASSETS] 2,802,022
[CURRENT-LIABILITIES] 224,472
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 2,440,000
[COMMON] 2,787,479
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 2,802,022
[SALES] 310,695
[TOTAL-REVENUES] 278,148
[CGS] 255,221
[TOTAL-COSTS] 703,830
[OTHER-EXPENSES] 25,065
[LOSS-PROVISION] 575
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] (451,322)
[INCOME-TAX] 0
[INCOME-CONTINUING] (451,322)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (451,322)
[EPS-PRIMARY] (.099)
[EPS-DILUTED] (.099)
</TABLE>
