SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1998
Commission File No. 0-10315
ROYAL CASINO GROUP INC.
(Name of Registrant as specified in its charter)
Utah 95-4091368
(State or other jurisdiction 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
(Registrants telephone number) (Registrants 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, 1998 5,433,140 shares of registrants $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
as of January 31, 1998 3
Statement of Operations
as of January 31, 1998 5
Statement of Cash Flows
as of January 31, 1998 6
Notes to Financial Statements 7
Item 2 Managements Discussion and Analysis of
Financial Condition and Results of Operations
8
PART ll OTHER INFORMATION
Item 2. Change in Securities
17
Item 6. Exhibits and Reports on Form 8-K
17
ROYAL CASINO GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 31, 1998
ASSETS January 31,1998 July
30,1997
Current Assets
Cash and cash equivalents $ 365
77,609
Accounts Receivable 79,457
5,135
Inventories
32,927
Prepaid expenses 19,547
347,998
Total Current Assets $ 99,369
$463,669
Property and equipment $ 44,732
$2,277,685
(Accumulated Depreciation) ( 10,833)
Total Fixed Assets $ 33,899
$2,277,685
Other Assets $ 75,000 $
114,116
TOTAL ASSETS $ 208,268 $
2,855,470
ROYAL CASINO GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 31, 1998
LIABILITIES & EQUITY January 31,1998 July
30,1997
Current Liabilities
Notes payable $ 164,205 $
324,296
Accounts Payable 164,104
370,954
Loan Payable - Royal Casino Group ( 414,971)
Accrued liabilities 236,908
Accrued payroll and
benefits 147,083
Other accruals 15,070
Other 40,000
Net liabilities of discontinued
operation (see Basis of Present
ation Page 7) 260,907
TOTAL CURRENT LIABILITIES $ 376,398
932,158
Long Term Liabilities
Capital Leases $ 0
44,674
TOTAL LIABILITIES 376,398
976,832
Equity
Preferred Stock, 100,000,000
authorized; 1,100,000 Series A
convertible shares issued and
outstanding at January 31, 1998 $ 1,100
1,100
Common Stock, $0.001 par, 150,000,000
shares authorized; 4,638,825 issued
and outstanding $ 98,147
5,164
Additional Paid in Capital 5,573,089
5,573,089
Accumulated deficit (5,840,466)
(3,700,715)
TOTAL EQUITY ( 168,130)
1,878,638
TOTAL LIABILITIES & EQUITY $ 208,268
$2,855,470
ROYAL CASINO GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
January 31, 1998
January 31, 1998 January
31, 1997
REVENUES
Casino $ 169,987
Food & Beverage
78,947
Room
21,577
Other
40,184
Less Promotional Allowances (
32,547)
NET REVENUES
278,148
COSTS & EXPENSES
Selling, General & Admin. 136,235
669,151
Depreciation/Amortization 1,863
66,956
138,098
736,377
OTHER (INCOME) EXPENSE
Interest Expense ( 4,453)
Unrealized Gain(Loss) (
575)
Other Income
1,384
Interest Income __________
6,098
( 4,453)
6,907
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 142,551
451,322
INCOME TAX PROVISION
Discontinued Operations:
LOSS FROM OPERATIONS OF
DISCONTINUED SUBSIDIARY
(TAX BENEFIT NOT REALIZED) ( 167,828)
LOSS ON DISPOSAL OF
DISCONTINUED SUBSIDIARY
(TAX BENEFIT NOT REALIZED) (1,519,647)
NET LOSS ( 1,830,026) (
39,867)
Basic & Diluted Loss Per Share, Continuing Operations: $.03
Basic & Diluted Loss Per Share, Discontinued Operations: $.31
ROYAL CASINO GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
QUARTER ENDED January 31, 1998
Cash Flows from Operating Activities:
Net Loss from Continuing Operations $ ( 142,551)
Net Loss from Discontinued Operations (1,687,475)
Non-Cash Items in Net Loss
Depreciation & Amortization 1,863
Issuance of stock for Services Rendered 11,166
Adj. of Fixed Assets of Discontinued
Operation to net realizable value 1,528,912
(Increase)Decrease in:
Prepaid Expenses & Other Current Assets 45,000
Accounts Receivable 16,799
Inventories 10,029
Other Assets ( 78,075)
Increase(Decrease)in:
Accounts Payable ( 228,753)
Accrued Liabilities ( 18,197)
- -----------
Net Cash Used in Operating Activities: 24,215
Cash Flows from Investing Activities:
0
-----------
Net Cash Used in Investing Activities: 0
Cash Flows from Financing Activities:
Payments on Notes Payable ( 39,218)
-----------
Net Cash Used in Financing Activities (
39,218)
Net Increase(Decrease) in Cash and Cash Equivalents (
115,003)
Cash and Cash Equivalents, Beginning Period $ 22,905
-----------
Cash and Cash Equivalents, End of Period $ 7,902
***********
ROYAL CASINO GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED January 31, 1998
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying interim financial statements of Royal Casino
Group Inc. (The Company) are unaudited; however, in the opinion
of Management, all adjustments necessary for a fair presentation
of such financial statements have been reflected in the interim
periods presented. Such adjustments consisted only of normal
recurring items.
Due to the fact that the Companys single source of revenue,
Goldiggers Hotel & Gaming Est. closed on January 5, 1998
operating results for the three months ended January 31, 1998
are not necessarily indicative of the results that may be
expected for the year ended July 31, 1998. The significant
accounting policies and certain financial information which are
normally included in financial statements prepared in accordance
with generally accepted accounting principles, but which are not
required for interim reporting purposes, have been condensed or
omitted. The accompanying financial statements of the Company
should be read in conjunction with the Companys audited
financial statements for the year ended July 31, 1997 and the
notes thereto, included in the Companys annual report on Form
10-K.
The net assets of discontinued operations have been segregated
in the Jan 1998 Consolidated Balance Sheet and are stated at the
Companys estimate of their net realizable value. These net
assets consist of:
Current Assets $ 133,098
Other Assets 37,499
Property, plant & equip. 705,541
Less:
Current Liabilities 1,092,369
Long term debt net of
current portion (note 5) 44,676
Net liabilities of
discontinued operations 260,907
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
General Financial Condition
The Company is still experiencing residual financial
difficulties as a result of the unanticipated need to inject a
considerable portion of its cash resources into the Companys
wholly-owned subsidiary which operated Goldiggers casino in
Deadwood, South Dakota. This was necessary to sustain operations
due to the severest winter in 107 years which adversely impacted
the property revenues. The winter also had severe consequences
on the areas ranchers, not only the States largest industry, but
one of the market areas primary sources of customers. The winter
was followed by severe spring flooding in eastern South and
North Dakota plus western Minnesota which are historically
strong sources of summer tourism in the Black Hills where
Goldiggers is located. Coupled with a reduction in the States
tourism advertising budget, the results produced a poor tourist
season which continued to negatively impact Goldiggers revenues.
Furthermore, the local market is primarily employed in the areas
gold mines and with the price of gold at an 18 year low, cutback
and closures have resulted. Consequently, local residents are
not frequenting the Deadwood market.
To curtail the ongoing losses, the Companys subsidiary closed
Goldiggers Hotel & Gaming Est. on January 5, 1998. The Company
plans an orderly sale of Goldiggers assets which will be used to
pay the secured debt and taxes. Goldiggers has accounts payable
of approximately $170,000. In addition, the Company is owed
approximately $415,000 by its subsidiary. A portion of the
assets are slot machines which have severe restrictive rules and
regulations imposed by the South Dakota Commission on Gaming as
to who and how and where they can be sold. There can be no
assurance that all of the assets can be sold, or if they are
sold that funds received as a result of the sale of assets will
be sufficient to satisfy all of the subsidiarys debt in addition
to repayment to Royal Casino Group of funds loaned to sustain
Goldiggers operations.
The Company is actively seeking alternate sources of funding to
sustain operations. The Company believes that funding on
acceptable terms to the Company may be available although there
can be no assurances that the financing currently being
contemplated by the Company will come to fruition. As Goldiggers
has been a drain on the Companys cash resources, the closure of
the property may produce positive long term results for the
Company as it pursues other gaming opportunities.
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. There can be no assurances that such funding
will be available, or if available, on terms and conditions and
within the time frames acceptable to the Company.
Results of Operations:
Goldiggers
In order to curtail losses and preserve shareholder capital, the
Companys wholly-owned subsidiary, Atlantic-Pacific Corp.,
discontinued operations at Goldiggers Hotel & Gaming
Establishment in Deadwood, South Dakota on January 5, 1998.
Further, the buildings owner entered into an agreement to sell
the building occupied by Goldiggers to a competitor of the
Company after refusing to sell the building to the Company. The
new owner, through his representative, informed the Company that
they did not buy the building to be a landlord. Consequently,
Goldiggers closed on January 5, 1998 and subsequently the
Company removed all of its property from the buildings.
Management believes the downward trend in the Deadwood gaming
market which coincided with the Companys arrival into the
market, will continue and that revenues will continue to erode.
Deadwood was the first of the new gaming jurisdictions outside
of Nevada and Atlantic City. Since gaming was introduced, the
market has been impacted by competition in the form of casinos
in numerous States, Provinces and Indian Reservations while
Deadwood remained "limited stakes gaming" restricted by a $5
betting limit. The States reluctance to allow the industry to
remain competitive both in the revision of betting limits and
the introduction of new games while tourism numbers in the
region decrease, continues to fuel the demise of the Deadwood
gaming industry.
When the Company contemplated the acquisition of Goldiggers the
operation had annual revenues in excess of $2.3M yet operated at
a loss. The Company identified several areas where it believed
savings could be attained thereby generating a profit. The
Company acquired Goldiggers in June, 1996. Cost containment
measures implemented by the Company cut operating expenses
$885,000 in the most recently completed fiscal year. However,
significant losses existed due to the widely reported severe
climatic conditions that prevailed in the region throughout last
Winter and Spring resulting in an overall downturn in Summer
tourism. For the year Goldiggers generated over $300,000 less
in revenues. Continuing downward, Goldiggers revenues for the
second fiscal quarter decreased and Goldiggers sustained
operating losses of $167,828. Royal Casino Group continued to
provide cash injections to support the losses and sustain
Goldiggers operations. Management has determined that it has
fully implemented its planned cost reductions and savings
programs and unfortunately believes the revenues will not return
to the 1995 or 1996 levels required for the property to be
profitable. The Company is the fourth publicly traded gaming
company to exit the Deadwood market.
Cash flows from operations during the quarter ended January 31,
1998 were $24,215. There was no investing cash flow activity
during the period. Cash flows from financing activities were
limited to payments on short term notes payable in the amount of
$39,218.
The Board of Directors of the Companys subsidiary company,
Atlantic-Pacific Corp. has authorized its president to, if
necessary, file for federal bankruptcy protection. The Company
is attempting to resolve the many issues resulting from the
closure of Goldiggers without the filing of a bankruptcy
petition.
Planned Riverboat Casino in Southeast Missouri
In response to the Companys application in April, 1996, on
November 14, 1997 the Company received correspondence from the
Army Corps of Engineers stating the Companys chosen location for
its planned riverboat casino was satisfactory and that the Corps
has no objection to the site and that the site does not require
a regulatory permit to be issued. The site was on the 35 acres
on the land side of the levee that the Company controls.
However, on November 25, 1997 the Supreme Court for the State
of Missouri issued a 7-0 opinion to the effect that locations
such as the one proposed by the Company are not permitted under
sections of the Missouri Constitution. After consulting with
the Companys engineer and attorney to determine its options, the
Company has undertaken to re-apply to the Corps with a site on
the 15 acre portion of land that is controlled by the Company
which is on the river side of the levee. As contemplated, if
acceptable to the Corps, the site will conform to all
requirements of the Missouri Constitution as opined by the
Supreme Court. Due to the awareness of members of the Corps as
to the Companys site dynamics it is not anticipated by the
Company that the re-application process will take the same
amount of time to determine suitability as the initial
application.
The Company is awaiting the consent from the Army Corps of
Engineers to dock its planned riverboat casino on land that the
Company controls on the Mississippi River near the confluence of
the Ohio River in Southeastern Missouri near the twin cities of
Wyatt and Wilson City. The Companys engineer had a fruitful
meeting with the Corps and plans a second meeting within 60
days. At this meeting it is contemplated that the Companys
plans will be approved in principle and that a 30 day public
notice seeking comments will be forthcoming shortly thereafter.
Barring any last minute viable objections, the Company believes
that the necessary permit can be granted within 120 days from
the date of this filing. The Company originally applied to the
Corps in April, 1996. In addition the City of Wyatt has not
completed the annexation of the land controlled by the Company
into the City limits.
Royal Casino Group plans to apply for its gaming license
once it has received approval from the Army Corps of Engineers
and the land controlled by the Company has been annexed into the
City, a requisite under the Missouri gaming statutes.
Royal will be submitting a complete package comprised of an
exclusive 25-year definitive agreement with the host city;
sufficient land to adequately develop the Riverboat Casino
Entertainment Center; governmental and regulatory docking
approval on its site; preliminary
architectural 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.
Discontinued Oklahoma Racetrack Casino Project
For several months the Company had been working towards
the acquisition of Blue Ribbon Downs, an active horse racing
facility located on Interstate 40 in Sallisaw, Oklahoma. In
January, 1998 the Company made a proposal to acquire all of the
stock in the racetracks parent company. The proposal was
accepted in principle by the Board of Directors of the
racetracks parent company. The offer was contingent upon the
passage by referendum of an initiative which would add a new
measure to the State of Oklahomas constitution approving casino
gaming. The measure called for the approval of non-restricted
gaming at only four sites in the state. Blue Ribbon Downs was
one of the four sites. Casino gaming would be exclusive to
these four sites for a period of five years. Blue Ribbon Downs
would have been the only casino located directly on Interstate
40 between the Memphis, Tennessee market and Oklahoma City. The
casino would have also been the closest casino to Branson,
Missouri. [See: Subsequent Events]
Additional Gaming and Related Opportunities
As Goldiggers has been a drain on the Companys cash
resources, the closure of the property requires no further
demand on the parent Companys funds and therefore should produce
positive long term results for the Company as it pursues other
gaming opportunities.
The Company is currently evaluating two specific casino
opportunities in areas which fit the Companys goal to acquire
and manage casinos in small to mid-sized markets and will make
appropriate announcements at the time the efforts prove fruitful.
The Company is evaluating the creation of a hospitality
division that would provide management services to existing
hospitality venues throughout the country. The Company believes
that there is currently a convergence of the hospitality and
gaming industries due to the compatibility of the businesses.
Gaming, being a highly regulated industry, requires considerable
time for Companies and their Officers and Directors to be found
suitable and licensed while the hospitality industry requires no
such licensing making the opportunity to grow faster appealing
to the Company. Revenues garnered from this undertaking would
support the Companys ongoing cash requirements from the time of
planning, acquisition and/or the development of casino
opportunities through to the time those casinos begin to produce
revenues. The Company believes that skilled, experienced,
hospitality management will be required rather than capital to
enter this arena.
Extension of the Companys Warrants
At a Board of Directors meeting on January 19, 1998, the
Board extended the exercise date of the Companys Class B
Warrants six months, to July 26, 1998 with all other terms and
conditions remaining in effect.
Stock Issuances
In December, 1997 the Company instructed its transfer agent to
issue 68,116 common shares of stock to Dalton & Mathais, the
Companys outside accounting firm, as a portion of their
compensation for consulting services performed for the company;
7,692 common shares in the name of Arthur Lovett for his efforts
as an outside consultant assisting the Company with its EDGAR
compliance filings; and, 4,217 in the name of OTR Inc. for
outside services performed for the Company. All the
aforementioned issuances were from the Companys active S-8
registration # 333-32415.
Legal Matters
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 judgment for the
remaining portion of the settlement. In response, Stephen
Grogan has chosen to file a counterclaim and third party
complaint against the Company and its President, Jon Elliott,
alleging that it was the Company, not Stephen Grogan, who
breached the Agreement and seeking a determination of duties to
be performed by both sides under the agreement. The Company
believes the counterclaim and third party complaint is without
merit. On December 18, 1997 Stephen Grogan filed for personal
bankruptcy seeking Chapter 7 liquidation proceedings. However,
two days prior to his filing for bankruptcy, Mr. Grogans
attorney contacted the Companys transfer agent requesting that
50,000 common shares of Royal Casino Group stock issued to
Stephen Grogan be transferred "immediately" out of Mr. Grogans
name and into his fathers name and one other individual. The
Company rejected the attempted transfer as explicitly counter to
provisions contained in the Settlement Agreement.
Conditions of the July, 1997 Settlement Agreement between
Stephen Grogan and the Company called for both sides to dismiss,
without prejudice, their lawsuits against each other. Mr.
Grogans suit against the Company filed in Colorado was dismissed
however, when the Company attempted to dismiss their lawsuit
filed in South Dakota against Mr. Grogan in November, 1997, Mr.
Grogan filed a motion pro se with the Court seeking to stop the
Court from allowing the Company to dismiss its suit against Mr.
Grogan. The Court agreed to defer dismissal 90 days.
Subsequent to the closing of Goldiggers and as expected by
the Company, several vendors have elected to assert their claims
in small claims court. The Company believes these accounts will
be paid once the assets of Goldiggers have been sold. [See:
Subsequent Events]
Regulatory Matters
As is customary with the permanent closing of a casino, the
South Dakota Commission on Gaming is conducting an audit of all
Goldiggers gaming records from the date the property was
acquired in June, 1996 through to the date of closing, January
5, 1998. The audit is ongoing at the time of the filing of this
report.
In January, 1998 the Nevada Gaming Control Board advised the
Company that pursuant to its request in July, 1997 to withdraw
its application for registration and licensing in Nevada as a
result of its planned acquisition of the Triple J Casino in
Henderson, Nevada, since discontinued, that its representative
will be in Royal Casino Groups offices in late February, 1998 to
review all financial reports and documents generated by
Goldiggers. In addition they have requested to review related
Royal Casino Group financial information and correspondence plus
corporate documentation relating to the Companys Nevada
subsidiary which had been created solely to acquire the Triple J
Casino. [See: Subsequent Events].
The State of South Dakota Department of Revenue has advised the
Company that they will be conducting an audit of the sales tax
paid by the Companys subsidiary that operated Goldiggers. They
had selected three random months for review, two of which
occurred when the subsidiary was owned by Casino Magic. [See:
Subsequent Events]
The South Dakota Commission on Gaming has requested a complete
set of financial information containing departmentalized gaming
revenues for the calendar year ended December 31, 1997 plus the
first five days of January, 1998 on forms provided by the
Commission to be completed and submitted by March 15, 1998
On December 11, 1997 the South Dakota Commission on Gaming
filed a complaint against the Company that the Company had
failed to provide the Commission with a copy of its Form 10-K
plus two Form 8-Ks within the required 10 day period after such
documents are filed with the Securities & Exchange Commission.
In addition the complaint alleged that Royal Casino Group is two
months delinquent in the payment of real estate taxes on the
property occupied by Goldiggers. [See: Subsequent Events]
Per the rules and regulations of the South Dakota Commission on
Gaming, the Company has placed newspaper advertisements to run
twice a week in four area newspapers from January 22, 1998
through May 15, 1998 announcing that persons in possession of
Goldiggers gaming chips and tokens may redeem them for face
value through May 15, 1998. The Company is compelled to
purchase all outstanding chips and tokens at face value redeemed
during the aforementioned period.
Repayment of Outstanding Debt
The Company is assembling an inventory list of all
Goldiggers assets. Once completed the Company will circulate
the list to parties who have expressed an interest. The Company
will attempt to sell the Deadwood Stage, the Companys 13-vehicle
transportation system. Should the Company be unable to sell the
Deadwood Stage for a price it deems acceptable, then the Company
will operate the system. The system was used exclusively to
bring patrons to Goldiggers and now would be used to bring
patrons to the remaining Deadwood casinos. The Company will
retain an auctioneer to hold an auction to sell the casinos
furnishings, fixtures and equipment. The Company will attempt
to sell the gaming equipment however, slot machines are
regulated by the South Dakota Commission on Gaming as to who may
own, who may buy and where they may be sold. The Company will
list its land for sale. Proceeds will be applied to the
Companys secured debt, taxes and Goldiggers accounts payable
plus to repay loans to the Company. The Company believes the
proceeds derived from an orderly liquidation of Goldiggers
assets will be sufficient to pay all secured debt and taxes.
The Company is unsure how much of Goldiggers accounts payable
together with Goldiggers loan repayment to Royal Casino Group
will be made.
Equipment Rental, Overhead Reimbursement, Rent, Support Services
The Company leases space for its corporate offices paying
rent of $950 per month. The lease expires in May, 1998 at which
time the Company plans to renew only half the space it currently
occupies at a reduced rent. Additionally, the Companys
wholly-owned subsidiary, Atlantic-Pacific, Corp. leased the
three buildings on Main Street that housed Goldiggers on a five
year lease with four five year options. The Company is not
current with the terms of its Goldiggers lease. Since
Goldiggers closed on January 5, 1998 the Company has vacated the
premises.
Subsequent Events
Discontinued Oklahoma Racetrack Acquisition
The ballot measure to add to Oklahomas Constitution to permit
casino gaming at four sites, including Blue Ribbon Downs
Racetrack, was defeated in a special state election on February
10, 1998. The Companys offer was to acquire all the outstanding
shares of the parent company of the racetrack should the measure
pass. Since the results of the election ensured there would be
no casino gaming for the foreseeable future, the Companys offer
was withdrawn.
Regulatory Matters
In late February, 1998 a representative of the Nevada Gaming
Control Board visited the Companys office to review information
pursuant to the Companys request to withdraw its application for
a Nevada Gaming license. Subsequently, the Company was informed
by an agent of the
Nevada Gaming Control Board that the Companys request to
withdraw has been tentatively scheduled on the agenda of the
Nevada Gaming Control Boards meeting on June 3, 1998 and on the
Nevada Gaming Commissions agenda at its meeting on June 25,
1998. Should both agencies grant the Companys request to
withdraw, then the Company is entitled to a refund of the
unused portion of the $85,000 deposited by the Company with the
Nevada Gaming Control Board at the onset of their investigation
into the Companys application.
On February 18, 1998 the Company entered into a Stipulation and
Assurance of Voluntary Compliance with the South Dakota
Commission on Gaming concerning two complaints filed by the
Commission against the Company in December, 1997. The Company
stated that they had provided the Commission with the securities
filings and agreed to a $500 fine with the entire amount
suspended on the condition that the Company have no like or
similar violations for the life of its license. The Stipulation
also stated that because the real estate taxes had been paid the
Commission dismissed the charges without prejudice.
The Company received a letter dated February 27, 1998 from the
Securities and Exchange Commission concerning an examination of
certain areas of the companys Form 10-k for the fiscal year
ended July 31, 1997. The Company, together with its
professionals including its auditor, securities counsel and
outside accountant, is in the process of addressing the issues
raised in the letter and will respond in a timely manner. The
Company believes all issues raised by the Commission can be
answered thoroughly and to the Commissions satisfaction.
The State of South Dakota Department of Revenue has advised the
Company that they will be conducting an audit of all Goldiggers
sales tax related documentation for the period from November,
1994 through December, 1997. Goldiggers was owned and operated
by Atlantic-Pacific Corp. which in turn was owned by Casino
Magic Corp from inception through to its acquisition by Royal
Casino Group in June, 1996. Per the terms of the acquisition,
Casino Magic indemnified Royal Casino Group from any prior
obligations arising from actions such as an outstanding sales
tax obligation should one exist.
Stock Issuance
In February, 1998 the Company instructed its transfer agent to
issue 58,400 common shares of stock to Deb Berg, the former
General Manager of Goldiggers, who is providing outside
consulting services to the Company subsequent to the closing of
Goldiggers by assisting the Company throughout the transition
period. This issuance was from the Companys active S-8
registration # 333-32415.
Repayment of Outstanding Debt
The Company is negotiating the sale of the Deadwood Stage, the
transportation division of the Companys subsidiary Company,
which is comprised of 13 vehicles. The business was used
primarily to bring patrons to Goldiggers. The proceeds will be
used to repay non-banking secured debt, taxes, a portion of
Goldiggers accounts payable and a partial loan repayment to
Royal Casino Group.
The Company is negotiating with its Bank to assign real property
owned to the bank in return for elimination of all its secured
bank debt plus cash to the Company.
An auction is scheduled to be held on March 27, 1998 to sell
Goldiggers furnishings, fixtures and equipment.
The Company is actively seeking buyers for its gaming equipment,
subject to the rules and regulations of the South Dakota
Commission on Gaming.
Legal Matters
In small claims action filed in Lawrence County, South Dakota
the judge, whos decision is not appealable, has entered two
judgments in favor of Goldiggers vendors and against
Atlantic-Pacific Corp. for monies owed by Goldiggers. However,
the judge has gone on record stating that if the monies owed are
not paid then he will issue a judgment against Royal Casino
Group Inc., Atlantic-Pacific Corp.s parent company. Despite
overwhelming evidence that Atlantic-Pacific Corp. has at all
times, even during Casino Magics ownership of Atlantic-Pacific
Corp., operated Goldiggers; that the leases for the premises,
the W-2s issued to employees, the income tax returns and the
beer and wine licenses were all issued in the name of
Atlantic-Pacific Corp.; and that at no time did Royal Casino
Group ever enter into any relationship with any Goldiggers
vendors; the judge stated that Royal Casino Group would be held
responsible. In the Companys opinion this violates the tenants
of basic corporate law. However, if cases continue to appear
before this judge and he continues to rule in this fashion, and
further if the sale proceeds of Goldiggers assets are not
sufficient to satisfy all outstanding accounts, then Royal
Casino Group could, depending upon the shortfall amount, be
forced to seek bankruptcy protection.
On February 9, 1998 the owner of the building which housed
Goldiggers filed suit against C. Don Tyner and Reunion Corp.
plus Jon Elliott, Atlantic-Pacific Corp. and Royal Casino Group
Inc. for forcible entry and detainer, plus back rent and taxes,
damages to the property and costs. The Company believes the
allegations are totally without merit as neither Jon Elliott,
Atlantic-Pacific Corp. and/or Royal Casino Group has never had
any contractual relationship, lease or obligation with the
property owner. The Company has a sub-lease with Reunion Corp.
for the premises and Reunion Corp. has a lease with the property
owner. The Company has answered the complaint accordingly and
is aggressively seeking to depose the property owner and
subsequently have the action dismissed. Reunion Corp. has filed
a $500,000 counterclaim against the property owner.
PART II. OTHER INFORMATION
Item 2. Changes in Securities
NONE
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None.
Exhibits other 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
1. Form 8-K filed January 9, 1998 stating the closing of
Goldiggers Hotel & Gaming Est.
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 16, 1998
By: /s/ Larry C.
Close
Larry C. Close
Director, Vice
President
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): January 6, 1998
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 in- File Number) Identification #)
corporation)
152 Sherman St., Deadwood, SD 57732
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (605)578-1299
Total number of sequentially numbered pages : 3
Exhibit index page number: none
ITEM 5. OTHER EVENTS
(i)
In order to curtail losses and preserve shareholder capital,
the Registrants wholly-owned subsidiary, Atlantic-Pacific Corp.,
has discontinued operations at Goldiggers Hotel & Gaming
Establishment located in Deadwood, South Dakota as of January
6, 1998.
The Company believes the downward trend in the Deadwood gaming
market which coincided with the Companys arrival into the
market, will continue and that revenues will continue to erode.
When the Company contemplated the acquisition of Goldiggers the
operation had annual revenues in excess of $2.3M yet operated at
a loss. The Company identified several areas where it believed
savings could be attained thereby generating a profit. The
Company acquired Goldiggers in June, 1996. Cost containment
measures implemented by the Company cut operating expenses
$885,000 in the most recently completed fiscal year. However,
significant losses existed due to the widely reported severe
climatic conditions that prevailed in the region throughout last
Winter and Spring resulting in an overall downturn in Summer
tourism. For the year Goldiggers generated over $300,000 less
in revenues. Continuing downward, Goldiggers revenues for the
first fiscal quarter decreased $194,000 year over year yet the
Company was able to improve direct operating department costs
$302,000 during the same period. Royal Casino Group continued
to provide cash injections to support the losses and sustain
Goldiggers operations. The Company has determined that it has
fully implemented its planned cost reductions and savings
programs and unfortunately believes the revenues will not return
to the 1995 or 1996 levels required for the property to be
profitable. The Company is the fourth publicly traded gaming
company to exit the Deadwood market.
As Goldiggers has been a drain on the Companys cash resources,
the closure of the property requires no further demand on the
parent Companys funds and therefore should produce positive long
term results for the Company as it pursues other gaming
opportunities. The Company continues to work on its planned
riverboat casino entertainment development in Southeast
Missouri. In addition, the Company continues to devote its
energies towards two additional gaming opportunities which are
in various stages of due diligence.
Royal Casino continues to own and operate the Deadwood Stage, a
13-vehicle transportation system.
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: January 9, 1998
