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FORM 10-QSB
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
__X__ Quarterly Report Under Section 13 or 15 (d)of the Securities Exchange
Act of 1934
For the quarter ended September 30, 1996
or
______ Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Transition period from ____________ to ______________
Commission File Number 0-18864
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DEBBIE REYNOLDS HOTEL & CASINO, INC.
(Exact Name of Registrant as specified in its charter)
Nevada 88-0335924
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
305 Convention Center Drive, Las Vegas, Nevada 89109
(Address of principal executive offices - Zip Code)
(702) 734-0711
(Registrant's telephone number, including area code)
Former name,Former address, or former fiscal year, if changed since last report)
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.
1. YES ______ NO X_______
2. YES X_____ NO ________
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the Number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
12,556,931 common shares were outstanding as of February 5, 1997.
This filing consisting of 16 sequentially numbered pages. The exhibit index is
located at sequentially numbered page 15.
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Page 1 of 16
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Form 10-QSB
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DEBBIE REYNOLDS HOTEL & CASINO, INC.
Form 10-QSB for the Quarter ended September 30, 1996
Table of Contents
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets:
As of September 30, 1996 (unaudited) and December 31, 1995 3
Unaudited Consolidated Statement of Operations:
For the nine months ended September 30, 1996 and 1995 4
Unaudited Consolidated Statement of Operations:
For the three months ended September 30, 1996 and 1995 5
Unaudited Consolidated Statements of Cash Flows:
For the nine months ended September 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation 10
PART II OTHER INFORMATION
Item 1 Legal Proceedings 13
Item 2 Changes in Securities 14
Item 3 Defaults Upon Senior Securities 14
Item 4 Submission of Matters to a Vote of Security Holders 14
Item 5 Other Information 14
Item 6 Exhibits and Reports on Form 8-K 15
SIGNATURES 16
Page 2 of 16
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Form 10-QSB
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Part I.Item 1.Financial Statements
DEBBIE REYNOLDS HOTEL & CASINO, INC.
Consolidated Balance Sheets
September 30, 1996 and December 31, 1995
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1996 1995
---------------- --------------
Current assets: (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 111,000 $ 172,000
Restricted cash 11,000 152,000
Accounts receivable 1,515,000 1,451,000
Inventories and Other 496,000 729,000
---------------- --------------
Total current assets 2,133,000 2,504,000
---------------- --------------
Land and building 7,095,000 7,073,000
Furniture and equipment 3,806,000 3,361,000
---------------- --------------
10,901,000 10,434,000
Less accumulated depreciation 3,129,000 1,996,000
---------------- --------------
Net property and equipment 7,772,000 8,438,000
---------------- --------------
Other assets:
Due from affiliates 480,000 545,000
Deposits and other 298,000 442,000
---------------- --------------
Total assets $ 10,683,000 $ 11,929,000
================ ==============
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt and capital lease obligations 7,657,000 8,078,000
Accounts payable and accrued liabilities 4,720,000 2,967,000
Accrued legal claims 450,000 450,000
Due to affiliates 1,726,000 916,000
Timeshare deposits 11,000 152,000
---------------- --------------
Total current liabilities 14,564,000 12,563,000
Long-term debt and capital lease obligations, net of current maturities 198,000 250,000
---------------- --------------
Total liabilities 14,762,000 12,813,000
---------------- --------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.0001 par value. Authorized 50,000,000 shares,
2,000,000 designated Series AA, 217,844 issued and outstanding
-- --
Common stock, $.0001 par value. Authorized 25,000,000 shares, 1,000 1,000
12,556,791 and 11,484,070 shares issued and outstanding,
respectively
Additional paid-in capital 15,005,000 14,141,000
Stock subscribed 300,000 300,000
Deferred compensation (300,000) (300,000)
Accumulated deficit (19,085,000) (15,026,000)
---------------- ---------------
Total shareholders' equity (deficiency) (4,079,000) (884,000)
---------------- ---------------
Total liabilities and shareholders' equity $ 10,683,000 $ 11,929,000
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</TABLE>
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Form 10-QSB
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DEBBIE REYNOLDS HOTEL & CASINO, INC.
Consolidated Statements of Operations
Nine months ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
Revenue:
<S> <C> <C>
Timeshare $ 1,501,000 $ 3,078,000
Rooms 1,780,000 1,919,000
Showroom 1,211,000 1,416,000
Museum 335,000 301,000
Food & Beverage 602,000 --
Other 437,000 704,000
-------------- ---------------
Total revenue 5,866,000 7,418,000
-------------- ---------------
Operating expenses:
Timeshare 815,000 2,224,000
Rooms 843,000 1,282,000
Showroom 1,667,000 1,858,000
Museum 238,000 223,000
Food & Beverage 1,121,000 468,000
General and administrative, Facilities and Other costs 2,946,000 3,163,000
Depreciation and amortization 1,133,000 884,000
-------------- ---------------
Total operating expenses 8,763,000 10,102,000
-------------- ---------------
Loss from operations (2,897,000) (2,684,000)
--------------- ----------------
Other income (expense):
Interest expense (1,162,000) (1,091,000)
-------------- ----------------
Total other income (expense) (1,162,000) (1,091,000)
--------------- ----------------
Net loss $ (4,059,000) $ (3,775,000)
=============== ================
Loss per weighted-average common and common share
equivalents outstanding:
$ (.33) $ (.46)
================ ================
Net loss per share
Weighted-average number of common shares and common share
equivalents outstanding 12,147,682 8,171,970
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</TABLE>
Page 4 of 16
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DEBBIE REYNOLDS HOTEL & CASINO, INC.
Consolidated Statements of Operations
Three months ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------------ ------------------
Revenue:
<S> <C> <C>
Timeshare $ 832,000 $ 684,000
Rooms 434,000 614,000
Showroom 295,000 431,000
Museum 87,000 117,000
Food & Beverage 125,000 ----------------
Other 82,000 331,000
-------------- ----------------
Total revenue 1,855,000 2,177,000
-------------- ----------------
Operating expenses:
Timeshare 311,000 475,000
Rooms 237,000 445,000
Showroom 287,000 549,000
Museum 66,000 118,000
Food & Beverage 219,000 468,000
General and administrative, Facilities and Other costs 1,172,000 920,000
Depreciation and amortization 378,000 373,000
--------------- ---------------
Total operating expenses 2,670,000 3,348,000
-------------- ---------------
Loss from operations (815,000) (1,171,000)
-------------- ---------------
Other income (expense):
Interest expense (333,000) (289,000)
------------- ----------------
Total other income (expense) (333,000) (289,000)
--------------- ----------------
Net loss $ (1,148,000) $ (1,460,000)
=============== ================
Loss per weighted-average common and common share
equivalents outstanding:
$ (.09) $ (.18)
================= ===============
Net loss per share
Weighted-average number of common shares and common share
equivalents outstanding 12,550,147 8,289,830
================ ==============
</TABLE>
Page 5 of 16
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Form 10-QSB
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DEBBIE REYNOLDS HOTEL & CASINO, INC.
Consolidated Statements of Cash Flows
Six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------------ ------------------
Cash flows from operating activities:
<S> <C> <C>
Net loss for the period $ (4,059,000) $ (3,775,000)
Adjustments to reconcile net income to net cash provided
by (used in) operations 4,345,000 1,675,000
------------- ----------------
Net cash used in operating activities 286,000 (2,100,000)
------------- ----------------
Cash flows from investing activities:
Purchases of property and equipment (445,000) (1,084,000)
-------------- ----------------
Net cash used in investing activities (445,000) (1,084,000)
-------------- ----------------
Cash flows from financing activities:
Additional investments from shareholder 150,000 2,218,000
Net increase In long-term debt (52,000) 874,000
-------------- ---------------
Net cash provided by financing activities 98,000 3,092,000
-------------- ---------------
Net increase (decrease) in cash (61,000) (92,000)
Cash at beginning of period 172,000 112,000
-------------- ---------------
Cash at end of period $ 111,000 $ 20,000
============= ===============
Supplemental disclosures of cash flow information:
Interest paid on borrowings $ 1,162,000 $ 1,091,000
============= ===============
</TABLE>
Supplemental disclosures of noncash investing and financing activities:
During 1995, the Company issued 814,806 shares of common stock with a fair
market value of approximately $1,233,000 for consulting and other services
rendered.
During 1995, the Company completed the construction of its timeshare units
and transferred all unsold units with a cost of $557,000 into inventory.
During 1995, the Company issued 696,120 shares of common stock through
conversion of 348,060 shares of preferred stock.
During 1995, the Company issued 696,120 shares of common stock valued
at $1,566,000 through conversion of debt.
In May 1996, the Company issued 378,182 shares of common stock through
conversion of 104,000 shares of preferred stock.
In May 1996, the Company issued 425,455 shares of common stock valued at
$486,000 through conversion of debt.
Page 6 0f 16
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Form 10-QSB
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DEBBIE REYNOLDS HOTEL & CASINO, INC.
Notes to Unaudited Financial Statements
September 30, 1996 and December 31, 1995
(1) Basis of Presentation
(a) Corporate Organization
The accompanying consolidated financial statements include the
accounts of Debbie Reynolds Hotel & Casino, Inc., formerly Halter
Venture Corporation (Halter) and its wholly-owned subsidiaries Debbie
Reynolds Management Company, Inc., formerly Debbie Reynolds Hotel &
Casino, Inc. (DRMC) and Debbie Reynolds Resorts, Inc. (DRRI)
(collectively the Companies). The December 31, 1995 balance sheet data
was derived from audited financial statements of Debbie Reynolds Hotel
& Casino, Inc., but does not include all disclosures required by
generally accepted accounting principles. Users of financial
information provided for interim periods should refer to the annual
financial information and footnotes contained in the Annual Report on
Form 10-KSB when reviewing the interim financial results presented
herein. All intercompany accounts and transactions have been
eliminated in consolidation.
In the opinion of management, the accompanying unaudited interim
financial statements are prepared in accordance with the instructions
on Form 10-QSB and contain all material adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the
financial condition, results of operations and cash flows of the
Company for the respective interim periods presented. The current
period results of operations are not necessarily indicative of results
which ultimately will be reported for the full year ending December
31, 1996.
(b) Description of Business
The Company's operations consist primarily of the hotel operations of
DRMC and the timeshare operations of Debbie Reynolds Resorts, Inc.
("DRRI"), a wholly-owned subsidiary of DRMC. DRMC owns and operates
the Debbie Reynolds Hotel & Casino (the "Hotel"), a gift shop, the
Hollywood Motion Picture Museum, a restaurant and bar and a showroom
located on Convention Center Drive in Las Vegas, Nevada. DRMC leased
the restaurant to Celebrity Restaurants, Inc., a company wholly-owned
by Ms. Reynolds, until August 1, 1996 at which time DRMC was granted a
liquor license from Clark County and commenced operating the bar and
the restaurant. Until the Company received approval for its own liquor
license, Celebrity accommodated the Company by undertaking and
operating the restaurant and bar under its liquor license. The
Company's operations, through DRRI, also consist of the sale of
timeshare units in the Debbie Reynolds Hotel. DRRI obtained a
permanent timeshare license on June 28, 1994. In addition, DRMC and
its management have pending applications filed for a gaming license
from the Nevada gaming authorities; however, there can be no assurance
that such license will be granted. Due to the Company's poor capital
structure and acting on the advice of counsel, the Company requested
the Nevada Gaming Authorities to place a hold on processing its
pending gaming applications until its capital structure substantially
improves. Prior to March 31, 1996, the Company
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Form 10-QSB
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DEBBIE REYNOLDS HOTEL & CASINO, INC.
Notes to Unaudited Financial Statements,Continued
leased space to a third party for the operation of a casino. The
Company served the operator with a termination notice in Febrary 1996
pursuant to the terms of the lease agreement, because the Company was
losing money on a monthly basis. The Company requested Jackpot to
cease operations as of June 30, 1996. On March 31, 1996 the operator
discontinued its gaming operations on the property, removed all of its
gaming equipment and subsequently filed a lawsuit against DRHC. [See
Item 3 - Legal Proceedings]
On October 30, 1996 the Company entered into an Agreement for Purchase
and Sale with ILX Incorporated ("ILX") under which ILX will purchase
the Debbie Reynolds Hotel & Casino (the "Hotel"), including all of the
Hotel's real and personal property and the Hotel's timeshare
operations (the "ILX Agreement"). ILX is a publicly-held corporation
based in Phoenix Arizona which principally owns, operates and markets
resort properties in Arizona, Florida, Indiana and Mexico. The
purchase price for the Hotel is $16,800,000, which will consist of
3,750,000 "free-trading" shares of ILX common stock valued for
purposes of the transaction at $2.00 per share, $4,200,000 in cash and
$5,100,000 in assumption of mortgage indebtedness. The market value of
ILX's common stock has recently been substantially less than $2.00 per
share. When the market value of ILX's common stock reduces so does the
negotiated purchase price. Under the ILX agreement, immediately after
the closing, ILX has agreed to lease certain of the hotel facilities
to Debbie Reynolds and /or a designee (the "Hotel Facilities Lease").
The Hotel Facilities Lease is expected to be for a term of 99 years,
with a monthly lease payment to be determined. Although the ILX
Agreement specifies monthly payments of approximately $150,000, it is
unlikely the Lease would be profitable at that rate and there is no
guarantee that ILX will agree to an acceptable lower figure. The Hotel
Facilities Lease is expected to include the showroom, the museum, the
gift shop, the vacant casino space, the back bar and certain joint
areas. In addition, in consideration for use of her name and likeness,
and associated goodwill and other services, Debbie Reynolds will
receive a percentage of the net profit of any timeshare project at the
Hotel pursuant to a Timeshare Profit Agreement. Ms. Reynolds will also
participate in future activities of the Hotel and other ILX business
activities, pursuant to the Debbie Reynolds Participation Agreement.
As a condition precedent to the sale, ILX has requested Debbie
Reynolds to enter into an agreement with Red Rock Collection
Incorporated, a wholly owned subsidiary of ILX. Subsequently, Ms.
Reynolds and Todd Fisher have entered into agreements with Red Rock
Collections Incorporated. The sale of the Hotel to ILX is subject to
the approval of the Company's shareholders, a standard due diligence
investigation by ILX, receipt of any necessary governmental approvals,
and satisfaction of various other conditions. The Company anticipates
that the closing will occur early in the second quarter of 1997;
however, there can be no assurance that the closing will occur.
The Company's recurring losses from operations, its working capital
deficiency, its shareholders equity deficiency, its significant debt
service obligations and its default with respect to various agreements
raise substantial doubt about the Company's ability to continue as a
going concern. The ability of the Company to continue as a going
concern is dependent on its ability to obtain additional financing to
finance its working capital deficit
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Form 10-QSB
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DEBBIE REYNOLDS HOTEL & CASINO, INC.
Notes to Unaudited Financial Statements,Continued
until such time as cash flows from operations are sufficient to
finance the Company's operations, including the Company's proposed
casino operations. If the sale under the ILX Agreement is not
consummated, the Company may need to seek protection under the Federal
bankruptcy laws. In order for the Company to continue to operate until
the sale under the ILX Agreement is consummated, the Company has
obtained a $1,100,000 loan as interim financing which will be used
primarily to fund its operations and to pay off certain defaulted
indebtedness. (See Part I - Item 2 Management Discussion and Analysis
(2) liquidity and Capital resources for a more complete details of the
Galt Capital mortgage).
Debbie Reynolds and Raymax Productions, LTD, ("Raymax"), a corporation
wholly-owned by Ms. Reynolds, terminated their services agreement with
the Company in November 1996 due to the Company's default under the
agreement. Raymax has agreed to render showroom and other services on
an "at will" basis, terminable anytime. In addition, in November 1996
Ms. Reynolds terminated her License Agreement with the Company with
respect to her Hollywood memorabilia collection and her name and
likeness due to the Company's defaults. Also, Hollywood Motion Picture
and Television Museum, a non-profit organization, has terminated its
License Agreement with the Company with respect to its Hollywood
memorabilia collection due to the Company's defaults, effective
January 1997.
The Company's principal executive offices are located at 305
Convention Center Drive, Las Vegas, Nevada 89109 and its telephone
number is (702) 734-0711.
(2) Capital Stock Transactions
See (Item 2) Management's Discussion and Analysis, (2) Liquidity and
Capital Resources, for additional discussions of the Company's capital
stock transactions.
(3) Contingencies
The Company is involved in various claims and legal actions. In the
opinion of management, the ultimate disposition of these matters has
been evaluated and those claims considered probable and estimable have
been accrued for. As of June 30, 1996 the Company has accrued $450,000
for these claims.
See Part II (Other Information), Item 1 (Legal Proceedings) for
lawsuits filed against the Company.
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Form 10-QSB
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PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
(1) Overview
The accompanying consolidated financial statements include the
accounts of Debbie Reynolds Hotel & Casino, Inc. (the Company),
formerly Halter Venture Corporation (Halter) and its present
wholly-owned subsidiaries, Debbie Reynolds Management Company, Inc.,
formerly Debbie Reynolds Hotel & Casino, Inc. (DRMC) and its
wholly-owned subsidiary, Debbie Reynolds Resorts, Inc. (DRRI). The
accompanying consolidated financial statements reflect the historical
operations of DRMC and DRRI.
(2) Liquidity and Capital Resources
In February 1995, the Company obtained a $525,000 loan from Bennett,
the proceeds of which were principally used in the construction of the
museum and for general corporate purposes. The loan bears interest at
13% and is due and payable March 22, 1997. The loan is secured by the
Company's real and personal property.
In May 1995, the Company obtained a $340,000 loan from Bennett, the
proceeds of which were principally used for general corporate
purposes. The loan bears interest at 13% and is due and payable March
22, 1997. The loan is secured by the Company's real and personal
property.
In August 1995, the Company obtained a $2,865,000 loan from Bennett
Funding International, LTD., the proceeds of which were principally
used to pay off existing debt and for general corporate purposes,
which includes the $340,000 advanced to the Company in May of 1995 and
$525,000 advanced in February of 1995. The loan bears interest at 14%
and is due August 23, 1999. The loan is secured by the Company's real
and personal property. Ms. Reynolds has personally guaranteed this
loan. As of January 1997, this loan is in due to non-payment of
interest.
Commencing in December 1995, the Company obtained additional financing
through a Regulation D offering under the Securities Act of 1933 (the
"Act"). The Company sold 200,000 units, consisting of 200,000 shares
of the Company's common stock and 200,000 warrants to purchase one
share of common stock at $1.00, totalling net proceeds of
approximately $182,000. The offering of shares was directed solely to
persons who met the definition of "Accredited Investor" set forth in
rule 501(A) of Regulation D promulgated under the Act. The Company
offered a maximum of 3,000,000 Units, (the "Unit"), each unit
consisting of one share of Common Stock and one warrant to purchase
one share of common stock at $1.00 per share. As of December 31, 1995
the Company sold $50,000 pursuant to the offering and in the first
quarter 1996 the remaining $150,000 was sold.
In May 1996, the Company offered all holders of the Company's units
issued pursuant to the Company's private placement memorandum dated
March 25, 1994 the opportunity to convert the Series AA Preferred
Stock and Debentures constituting part of the units into restricted
shares of the Company's common stock. Each Series AA Preferred Stock
and Debenture converted into one share of the Company's common stock
at the reduced conversion prices of $1.10. The total dollar amount
converted from Series AA Preferred Stock and Debentures was $884,000
which converted into 803,636 shares of the Company's common stock. As
additional consideration, the Company reduced the conversion price for
each Series AA Preferred Stock and Debenture issued pursuant to the
Private Placement Memorandum dated November 17, 1994 to $2.25. As
additional
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Form 10-QSB
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consideration to the Company, the unit holders waived the past due
interest and dividend payments owed.
In August 1996, the Company obtained a $500,000 loan from Gregory
Orman, an independent third party, the proceeds of which were
principally used to reduce past due tax obligations, reduce trade
payable debt and also allowed the Company to engage its auditors. The
loan bears interest at 12% and has $550,000 principal balance due
November 1, 1996. This loan is secured with a forth mortgage and with
certain of the Company's receivables. In connection with the financing
the Company granted Orman warrants to acquire 260,000 shares of the
Company's common stock at an exercise price of $.70 per share. On
October 18, 1996, Orman agreed to extend the maturity date to February
1, 1997. In consideration for the extension the Company reduced
Orman's exercise price on the warrants to acquire 260,000 shares of
the Company's common stock from $.70 per share to $.22 per share. In
addition, Debbie Reynolds and Todd Fisher have personally guaranteed
this loan.
In February 1997, the Company obtained a $1,100,000 loan from Galt
Capital, an affiliate of Gregory Orman, an independent third party,
the proceeds of which were principally used to payoff the second
mortgage that was in default, reduce past due tax obligations, reduce
trade payable debt and will be used as interim financing to fund the
Company's operations until the sale under the ILX Agreement is
consummated. The loan bears interest at 12% and has $1,100,000
principal balance due June 5, 1997. This loan is secured pursuant to
an assignment of TPM Holding, Inc. second Deed of trust, Loan
Agreement and Promissory Note dated December 1994 and is secured by a
$573,000 first deed of trust placed against real property owned by
Selden Enterprises, ("Selden"), an affiliate of Ms. Reynolds and Todd
Fisher. In addition, Debbie Reynolds and Todd Fisher have personally
guaranteed this loan. The Company will issue Selden 500,000 shares of
its common stock as consideration for allowing the deed of trust to be
placed on its real property. The Company will also issue Ms. Reynolds
500,000 shares of its common stock in consideration of her personal
guarantee and in consideration of numerous past uncompensated
guarantees provided by Ms. Reynolds as well as Ms. Reynolds continued
efforts on behalf of the Company. In connection with the financing the
Company granted Orman three year warrants to acquire up to two percent
(2%) of the Company's fully diluted common stock, currently the
warrants represent approximately 260,000 shares, at an exercise price
of $.22 per share. The warrants are anti-dilutive for a period of
eighteen months.
As of January 1997, the Company is currently in default under the
following obligations: the Bennett Management & Development ("BMD")
mortgage is in default due to non-payment of interest and the holder
has the right to accelerate the mortgage immediately and make demand
on the entire outstanding principal balance; the BMD mortgage had a
principal balance of approximately $2,115,000 plus accrued interest
outstanding at September 30, 1996; the Bennett Funding International,
Ltd. ("BFI") mortgage is in default due to non-payment of interest and
the holder has the right to accelerate the mortgage immediately and
make demand on the entire outstanding principal balance; the BFI
mortgage had a principal balance of approximately $2,865,000 plus
accrued interest outstanding at September 30, 1996; and the Company is
in default on its unsecured subordinated debentures due to non-payment
of monthly interest, the holders have the right to accelerate
immediately and make demand on the entire outstanding principal
balance.
On October 30, 1996 the Company entered into an Agreement for Purchase
and Sale with ILX Incorporated ("ILX") under which ILX will purchase
the Debbie Reynolds Hotel & Casino (the "Hotel"), including all of the
Hotel's real and personal property and the Hotel's timeshare
operations (the "ILX Agreement"). The sale of the Hotel to ILX is
subject to the approval of the
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Part II. Other Information, Continued
Company's shareholders, a standard due diligence investigation by ILX,
receipt of any necessary governmental approvals, and satisfaction of
various other conditions. The Company anticipates that the closing
will occur early in the second quarter of 1997; however, there can be
no assurance that the closing will occur. (See Part I - Note 1 (b) for
a more complete description of the ILX Agreement).
The Company's recurring losses from operations, its working capital
deficiency, its shareholders equity deficiency, its significant debt
service obligations and its default with respect to various agreements
raise substantial doubt about the Company's ability to continue as a
going concern. The ability of the Company to continue as a going
concern is dependent on its ability to obtain additional financing to
finance its working capital deficit until such time as cash flows from
operations are sufficient to finance the Company's operations,
including the Company's proposed casino operations. If the sale under
the ILX Agreement is not consummated, the Company may need to seek
protection under the Federal bankruptcy laws.
The Company had a working capital deficiency of $12,291,000 at
September 30, 1996, compared with a working capital deficiency of
$10,059,000 at December 31, 1995, an increase of $2,232,000. This
increase is attributable to the Company continuing to incur
substantial operating losses during the nine months ended September
30, 1996.
(3) Revenues
Revenues for the quarter ended September 30, 1996 totaled $1,855,000
as compared to $2,177,000 for the quarter ended September 30, 1995,
representing an 14.8% decrease for 1996. This decrease is
attributable, in large part, to the decrease in showroom revenue of
$136,000 as compared to the quarter ended September 30, 1995 and the
decrease in rooms revenue of $180,000 as compared to the quarter ended
September 30, 1995. The decrease in showroom revenue is attributed to
Ms. Reynolds not performing in the showroom. The decrease in rooms
revenue is attributed to increased competition in the Las Vegas
market.
The loss from operations for the third quarter ended September 30,
1996 totaled $815,000 as compared to a $1,171,000 loss from operations
for the third quarter ended 1995. Timeshare sales during the third
quarter of 1996 continued not to be sufficient to generate substantial
profits to cover the Company's operating losses. Additionally, the
Company incurred considerable restaurant operating expenses which
resulted in the restaurant generating a loss of $94,000 for the
quarter ended September 30, 1996. The Company is currently
restructuring the restaurant operation to reduce its operating loss.
The net loss for the quarter ended September 30, 1996 totaled
$1,148,000 as compared to $1,460,000 for the quarter ended September
30, 1995.
Revenues for the nine months ended September 30, 1996 totaled
$5,866,000 as compared to $7,418,000 for the nine months ended
September 30, 1995, representing an 20.9% decrease for 1996. This
decrease is attributed, in large part, to the decrease of $1,577,000
in timeshare sales for the nine months ended September 30, 1996 as
compared to the nine months ended September 30, 1995.
The loss from operations for the nine months ended September 30, 1996
totaled $2,897,000 as compared to $2,684,000 for the nine months ended
September 30, 1995. The Company incurred substantial showroom
operating expenses which resulted in the showroom generating a loss of
$636,000 for the nine months ended September 30, 1996. The restaurant
operation generated
================================================================================
Page 12 of 16
<PAGE>
Form 10-QSB
================================================================================
Part II. Other Information, Continued
$519,000 in operating losses for the nine months ended September 30,
1996. The net loss for the nine months ended September 30, 1996
totaled $4,059,000 as compared to $3,775,000 for the nine months ended
September 30, 1995.
(4) Interest Expense
Interest expense increased from $1,091,000 for the nine months ended
September 30, 1995 to $1,162,000 for nine months ended September 30,
1996 due to additional debt which was incurred and the increased
interest rates associated the with loans in default.
Part II. Other Information
Item 1. Legal Proceedings
In January 1994, Edward Stambro, an unaffiliated individual, filed a
lawsuit against one of the Company's subsidiaries and others in the
District Court of Clark County, Nevada, alleging breach of brokers
agreement. The Company's subsidiary filed an answer to the allegations
on February 28, 1994. Management and legal counsel for the Company are
of the opinion that the plaintiff's claim is without merit and the
Company will prevail in defending the suit.
On April 28, 1995, Ronald D. Nitzberg and Ron Nitzberg Associates,
Inc., an unaffiliated corporation, filed a lawsuit against the Company
and others in the District Court of Clark County, Nevada, alleging
breach of contract, slander and other claims, relating to his
employment with the Company. The plaintiffs seek damages in the amount
of approximately $245,000 and an unspecified amount of money damages.
The Company has filed a counterclaim against the plaintiff alleging
breach of fiduciary duty and breach of contract asking for declaratory
relief from consulting and stock agreements.
On April 14, 1995, Edward S. Coleman filed a lawsuit against the
Company and others in the District Court of Clark County, Nevada,
alleging breach of covenant of good faith and fair dealing based on
certain services. The plaintiff seeks unspecified money damages in
excess of $10,000.
On January 26, 1995, American Interval Marketing, Inc., filed a
lawsuit in the District Court of Clark County, Nevada, against the
Company and others, alleging breach of contract and reasonable value
of services. The plaintiff seeks damages of approximately $45,000.
On July 14, 1995, Grand Nevada Hotel Corp., filed a lawsuit in the
District Court of Clark County, Nevada, against the Company, alleging
breach of contract and breach of implied duty of good faith. The
plaintiff seeks damages in excess of $10,000.
On July 27, 1995, Norman Eugene Watson, filed a lawsuit against the
Company and others in the District Court of Clark County, Nevada,
alleging breach of contract, fraud and misrepresentation and other
claims. The plaintiff seeks damages in excess of $10,000.
On August 10, 1995, Fiduciary Trust Company International, as Trustee
of the Taylor-Made Ltd. Defined Benefit Pension Plan, filed a lawsuit
in the District Court of Clark County, Nevada, against the Company and
others, alleging breach of contract and unjust enrichment. The
plaintiff seeks damages in excess of $10,000. The Company is
negotiating a settlement with respect to this lawsuit.
================================================================================
Page 13 0f 16
<PAGE>
Form 10-QSB
================================================================================
Part II. Other Information, Continued
On September 1, 1995, Young Electric Sign Company, filed a lawsuit in
the District Court of Clark County, Nevada, against the Company and
others, alleging breach of contract. The plaintiff is seeking damages
in excess of $10,000.
On April 11, 1996 Jackpot Enterprises, Inc., filed a lawsuit in the
District Court of Clark County, Nevada, against the Company and
others, alleging breach of contract, specific judgment, unjust
enrichment and breach of the implied covenant of good faith and fair
dealing. The plaintiff is seeking damages in excess of $10,000.
In addition to the above mentioned lawsuits, their are numerous other
lawsuits filed againstF the Company by certain of its vendors and
other creditors. The Company believes that these lawsuits may be
satisfied through payment of the indebtedness to the extent the
Company's cash flow permits.
Except as otherwise set forth above, the Company is unable to predict,
at this time, the likelihood of the Company prevailing in the above
lawsuits.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
The Company is in default in respect to the payment of interest on its
8-3/4% senior subordinated convertible debentures due in October 1996
and November 1998. The total amount of the default as of September 30,
1996 is approximately $432,000.
As of January 1997, the Company is currently in default under the
following obligations: the Bennett Management & Development ("BMD")
mortgage is in default due to non-payment of interest and the holder
has the right to accelerate the mortgage immediately and make demand
on the entire outstanding principal balance; the BMD mortgage had a
principal balance of approximately $2,115,000 plus accrued interest
outstanding at September 30, 1996; the Bennett Funding International,
Ltd. ("BFI") mortgage is in default due to non-payment of interest and
the holder has the right to accelerate the mortgage immediately and
make demand on the entire outstanding principal balance; the BFI
mortgage had a principal balance of approximately $2,865,000 plus
accrued interest outstanding at September 30, 1996; the TPM Holding,
Inc., ("TPM"), mortgage was in default due to non-payment of interest
and the holder has the right to accelerate the mortgage immediately
and make demand on the entire outstanding principal balance; the TPM
mortgage was assigned to Galt Capital in February 1997. (See Part I -
Item 2 Management Discussion and Analysis (2) liquidity and Capital
resources for a more complete details of the Galt Capital mortgage).
Item 4. Submission of Matters to a Vote of Security Holders
None
================================================================================
Page 14 of 16
<PAGE>
Form 10-QSB
Part II. Other Information, Continued
Item 5. Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
During the quarter ended September 30, 1996 the Registrant filed
the following reports on Form 8-K:
None
================================================================================
Page 15 0f 16
<PAGE>
Form 10-QSB8 PM
================================================================================
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.
DEBBIE REYNOLDS HOTEL & CASINO, INC.
By: /S/ Todd Fisher
-----------------
Todd Fisher, Chief Executive Officer
Date: February 5, 1997
By: /S/ Todd Fisher
----------------
Todd Fisher, Chief Financial Officer
================================================================================
Page 16 0f 16
<PAGE>
Form 10-QSB
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.
DEBBIE REYNOLDS HOTEL & CASINO, INC.
By:
------------------------------------
Todd Fisher, Chief Executive Officer
Date: ________________, 1995
By:
------------------------------------
Todd Fisher, Chief Financial Officer
================================================================================
Page 16 of 16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 111,000
<SECURITIES> 0
<RECEIVABLES> 1,515,000
<ALLOWANCES> 0
<INVENTORY> 496,000
<CURRENT-ASSETS> 2,133,000
<PP&E> 10,901,000
<DEPRECIATION> 3,129,000
<TOTAL-ASSETS> 10,683,000
<CURRENT-LIABILITIES> 14,564,000
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 15,005,000
<TOTAL-LIABILITY-AND-EQUITY> 10,683,000
<SALES> 0
<TOTAL-REVENUES> 5,866,000
<CGS> 0
<TOTAL-COSTS> 8,763,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,162,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,059,000)
<EPS-PRIMARY> (.33)
<EPS-DILUTED> (.33)
</TABLE>
