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FORM 10-QSB
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UNITED STATES
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SECURITIES & EXCHANGE COMMISSION
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Washington, D.C. 20549
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(Mark One)
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__X__ Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act
of 1934
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For the quarter ended June 30, 1997
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or
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______ Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
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For the Transition period from ____________ to ______________
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Commission File Number 0-18864
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DEBBIE REYNOLDS HOTEL & CASINO, INC.
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(Exact Name of Registrant as specified in its charter)
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Nevada 88-0335924
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(State or other jurisdiction of (I.R.S. Employer
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incorporation or organization) Identification No.)
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305 Convention Center Drive, Las Vegas, Nevada 89109
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(Address of principal executive offices - Zip Code)
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(702) 734-0711
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(Registrant's telephone number, including area code)
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(Former name, Former address, or former fiscal year, if changed since last
report)
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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.
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1. YES _X_____ NO
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2. YES X_____ NO ______
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APPLICABLE ONLY TO CORPORATE ISSUERS:
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Indicate the Number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
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13,906,945 common shares were outstanding as of August 11, 1997. This filing
consisting of 16 sequentially numbered pages. The exhibit index is located at
sequentially numbered page 15.
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 June 30, 1997
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets:
As of June 30,1997 (unaudited) and December 31, 1996 3
Unaudited Consolidated Statement of Operations:
For the six months ended June 30, 1997 and 1996 4
Unaudited Consolidated Statement of Operations:
For the three months ended June 30, 1997 and 1996 5
Unaudited Consolidated Statements of Cash Flows:
For the six months ended June 30, 1997 and 1996 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 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
Page 2 of 16
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Part I. Item 1. Financial Statements
DEBBIE REYNOLDS HOTEL & CASINO, INC.
Consolidated Balance Sheets
June 30, 1997 and December 31, 1996
June 30, December 31,
Assets 1997 1996
------------ ------------
Current assets: (Unaudited)
Cash and cash equivalents $ -- $ --
Restricted cash 2,000 2,000
Accounts receivable 892,000 985,000
Inventories and Other 847,000 844,000
Total current assets 1,741,000 1,831,000
Land and building 6,576,000 6,576,000
Furniture and equipment 3,824,000 4,010,000
10,400,000 10,586,000
Less accumulated depreciation (3,835,000) (3,219,000)
Net property and equipment 6,565,000 7,367,000
Other assets:
Deposits and other 105,000 94,000
Total assets $ 8,411,000 $ 9,292,000
Liabilities and Shareholders' Equity
Current liabilities:
Bank overdraft $ 37,000 $ 103,000
Current maturities of long-term debt and capital lease 9,540,000 8,688,000
Accounts payable and accrued liabilities 5,408,000 5,381,000
Due to affiliates 1,831,000 1,447,000
Timeshare deposits 2,000 2,000
Total current liabilities 16,818,000 15,621,000
Commitments and contingencies Shareholders' equity:
Preferred stock, $.0001 par value. Authorized 50,000,000 shares,
2,000,000 designated Series AA, 187,076 issued and outstanding
Common stock, $.0001 par value. Authorized 25,000,000 1,000 1,000
13,906,945 and 12,615,417 shares issued and outstanding,
respectively
Additional paid-in capital 15,347,000 15,160,000
Accumulated deficit (23,755,000) (21,490,000)
Total shareholders' equity (deficiency) (8,407,000) (6,329,000)
Total liabilities and shareholders' equity $ 8,411,000 $ 9,292,000
Page 3 of 16
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DEBBIE REYNOLDS HOTEL & CASINO, INC
Consolidated Statements of Operations
Six months ended June 30, 1997 and 1996
(Unaudited)
1997 1996
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Revenue:
Timeshare $ 66,000 $ 669,000
Rooms 886,000 1,346,000
Showroom 1,104,000 916,000
Museum 188,000 248,000
Food & Beverage 215,000 477,000
Other 103,000 355,000
Total revenue 2,562,000 4,011,000
Operating expenses:
Timeshare 62,000 504,000
Rooms 374,000 606,000
Showroom 876,000 1,380,000
Museum 140,000 172,000
Food & Beverage 322,000 902,000
General and administrative, Facilities and Other cost 1,704,000 1,774,000
Depreciation and amortization 618,000 755,000
Total operating expenses 4,097,000 6,093,000
Loss from operations (1,535,000) (2,082,000)
Other income (expense):
Interest expense (730,000) (829,000)
Total other income (expense) (730,000) (829,000)
Net loss $ (2,265,000)$ (2,911,000)
Loss per weighted-average common and common share equivalents
outstanding:
Net loss per share $ (.17)$ (.24)
Weighted-average number of common shares and common share
equivalents outstanding 13,443,097 11,943,114
Page 4 of 16
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DEBBIE REYNOLDS HOTEL & CASINO, INC.
Consolidated Statements of Operations
Three months ended June 30, 1997 and 1996
(Unaudited)
1997 1996
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Revenue:
Timeshare $ 66,000 $ 343,000
Rooms 444,000 595,000
Showroom 749,000 727,000
Museum 105,000 127,000
Food & Beverage 125,000 202,000
Other 42,000 131,000
Total revenue 1,531,000 2,125,000
Operating expenses:
Timeshare 21,000 242,000
Rooms 188,000 297,000
Showroom 497,000 929,000
Museum 72,000 88,000
Food & Beverage 175,000 493,000
General and administrative, Facilities and Other cos 935,000 682,000
Depreciation and amortization 309,000 377,000
Total operating expenses 2,197,000 3,108,000
Loss from operations (666,000) (983,000)
Other income (expense):
Interest expense (311,000) (491,000)
Total other income (expense) (311,000) (491,000)
Net loss $(977,000)$(1,474,000)
Loss per weighted-average common and common share equivalents outstanding:
Net loss per share $ (.07) $ (.12)
Weighted-average number of common shares and common share
equivalents outstanding 13,645,417 12,227,882
Page 5 of 16
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DEBBIE REYNOLDS HOTEL & CASINO, INC.
Consolidated Statements of Cash Flows
Six months ended June 30, 1997 and 1996
(Unaudited)
1997 1996
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Cash flows from operating activities:
Net loss for the period $(2,265,000)$(2,911,000)
Adjustments to reconcile net income to net cash
provided by (used in)operations 1,227,000 3,054,000
Net cash used in operating activities (1,038,000) 143,000
Cash flows from investing activities:
Purchases of property and equipment 186,000 (471,000)
Net cash used in investing activities 186,000 (471,000)
Cash flows from financing activities:
Additional investments from shareholder ---- 150,000
Net increase In long-term debt 852,000 (39,000)
Net cash provided by financing activities 852,000 111,000
Net increase (decrease) in cash -0- (217,000)
Cash at beginning of period 172,000 -0-
Cash at end of period $ (45,000) -0-
Supplemental disclosures of cash flow information:
Interest paid on borrowings $ 730,000 $ 829,000
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
$628,000 through conversion of debt.
In April 1997, the Company issued 123,072 shares of common stock through
conversion of 30,768 shares of preferred stock.
In April 1997, the Company issued 138,456 shares of common stock valued at
$138,456 through conversion of debt.
Page 6 of 16
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Form 10-QSB
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DEBBIE REYNOLDS HOTEL & CASINO, INC.
Notes to Unaudited Financial Statements
June 30, 1997 and December 31, 1996
(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, 1996 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, 1997.
(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. 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. The Company is in the process of
restructuring its timeshare division and currently is not actively selling
timeshare units. 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 leased space to a third party for the operation of a
casino. The Company served the operator with a termination notice in February
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]
Page 7 of 16
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DEBBIE REYNOLDS HOTEL & CASINO, INC.
Notes to Unaudited Financial Statements, Continued
On October 30, 1996 the Company entered into an Agreement for Purchase and
Sale with ILX Incorporated ("ILX") under which ILX would 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. On May 15, 1997 ILX elected to cancel and terminate this Agreement. The
Company and ILX continue to negotiate an alternative transaction. There is no
guarantee that an alternative agreement will be reached.
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.
On July 3, 1997 the Company filed for relief under Chapter 11 of the
Bankruptcy Code. Due to the inability of the Company to generate sufficient
funds to cover all of its expenses it filed for relief under Chapter 11 of the
Bankruptcy Code. The Company will seek reorganization of its debts. Also filing
were subsidiary companies Debbie Reynolds Management Company and Debbie Reynolds
Resorts, Inc. In addition, Miss Debbie Reynolds has resigned as Chairman of the
Board, Director and an Officer of Debbie Reynolds Hotel & Casino, Inc., Debbie
Reynolds Management Company and Debbie Reynolds Resorts, Inc.
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. Ms.
Reynolds has agreed to render showroom and other services on an "at will" basis,
terminable at 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 under the
agreements. 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.
Page 8 of 16
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DEBBIE REYNOLDS HOTEL & CASINO, INC.
Notes to Unaudited Financial Statements, Continued
(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. As of June 30,
1997 the Company has accrued $890,000 for these claims.
See Part II (Other Information), Item 1 (Legal Proceedings) for lawsuits filed
against the Company.
Page 9 of 16
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Form 10-QSB
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 Funding
International, LTD., ("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 was due March 22, 1997 and is in default. 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 was due and is in default. 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, 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. This loan
is in default.
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 consideration to the
Company, the unit holders waived the past due interest and dividend payments
owed.
Page 10 of 16
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Part II. Other Information, Continued
In August 1996, the Company obtained a $500,000 loan from Gregory Orman, a
non-affiliated party, the proceeds of which were principally used to reduce past
due tax obligations, reduce accounts payable and enabled the Company to engage
its auditors. The loan bears interest at 12% and has $550,000 principal balance
which was due November 1, 1996 and is in default. This loan is secured with a
fourth mortgage on the Company's property 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. This loan is personally guaranteed
by Ms. Reynolds and Todd Fisher. This loan is in default.
In February 1997, the Company obtained a $1,100,000 loan from Galt Capital,
an affiliate of Gregory Orman, a non-affiliated party, the proceeds of which
were principally used to pay-off the TPM/Source second mortgage that was in
default, reduce past due tax obligations, reduce accounts payable. The balance
was used to fund the Company's operations. The loan bears interest at 12% and
had $1,100,000 principal balance due June 5, 1997 and is in default. 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 recognition 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 has issued a warrant to Galt Capital to purchase approximately 2% of the
Company's outstanding common stock, as calculated pursuant to the agreement, at
an exercise price of $.22 per share, the estimated fair market value, which
expires February 5, 2000. This loan is in default.
In April 1997, the Company offered all remaining holders of the Company's
units issued pursuant to the Company's private placement memorandum dated
November 17, 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
$1.00. The total dollar amount converted from Series AA Preferred Stock and
Debentures was $261,528 which converted into 261,528 shares of the Company's
common stock. As additional consideration to the Company, the unit holders
waived the past due interest and dividend payments owed.
As of June 1997, the Company is 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 balance of approximately $2,115,000 plus accrued interest
outstanding at June 30, 1997; 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 June 30, 1997; the
Gregory Orman ("Orman") mortgage is in default due to non-payment of interest
and the note has matured and the holder has the right to accelerate the mortgage
immediately and make demand on the entire outstanding principal balance; the
Orman mortgage had a principal balance of approximately $550,000 plus accrued
interest outstanding at June 30, 1997; the Galt Capital ("Galt") mortgage is in
default due to non-payment of interest and the note has matured and the holder
has the right to accelerate the mortgage immediately and make demand on the
entire outstanding principal balance; the Galt mortgage had a principal balance
of approximately $1,100,000 plus accrued interest outstanding at June 30, 1997;
and the Company is in default on its unsecured subordinated debentures due to
non-payment of monthly interest, and the debentures have matured, the holders
have the right to accelerate immediately and make demand on the entire
outstanding principal balance.
Page 11 of 16
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Part II. Other Information, Continued
On October 30, 1996 the Company entered into an Agreement for Purchase and
Sale with ILX Incorporated ("ILX") under which ILX would 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. On May 15, 1997 ILX elected to cancel and terminate this Agreement. The
Company and ILX continue to negotiate an alternative transaction. There is no
guarantee that an alternative agreement will be reached.
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.
On July 3, 1997 the Company filed for relief under Chapter 11 of the
Bankruptcy Code, due to the inability of the Company to generate sufficient
funds to cover its expenses and obliagations. The Company will seek
reorganization of its debts. Also filing were subsidiary companies Debbie
Reynolds Management Company and Debbie Reynolds Resorts, Inc. In addition, Miss
Debbie Reynolds has resigned as Chairman of the Board, Director and an Officer
of Debbie Reynolds Hotel & Casino, Inc., Debbie Reynolds Management Company and
Debbie Reynolds Resorts, Inc.
The Company had a working capital deficiency of $15,077,000 at June 30,
1997, compared with a working capital deficiency of $10,059,000 at December 31,
1996, an increase of $5,018,000. This increase is attributable to the Company
continuing to incur substantial operating losses during the six months ended
June 30, 1997 and maturing long-term debt.
(3) Revenues
Revenues for the quarter ended June 30, 1997 totaled $1,531,000 as compared
to $2,125,000 for the quarter ended June 30, 1996, representing an 30% decrease
for 1997. This decrease is attributable, in large part, to the decrease in rooms
revenue of $151,000 as compared to the quarter ended June 30, 1996 and the
decrease in timeshare revenue of $277,000 as compared to the quarter ended June
30, 1996. The decrease in rooms revenue is attributed to increased competition
in the Las Vegas market. The decrease in timeshare revenue is attributed to the
Company restructuring its timeshare division and currently is not selling
timeshare units. The timeshare revenue of $66,000 recognized during the quarter
ended June 30, 1997 were generated from timeshare contracts entered into during
1996.
Page 12 of 16
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Part II. Other Information, Continued
The loss from operations for the quarter ended June 30, 1997 totaled
$666,000 as compared to a $983,000 loss from operations for the second quarter
ended 1996. Included in the loss from operations was $50,000 loss from the
restaurant operations. The net loss for the quarter ended June 30, 1997 totaled
$977,000 as compared to $1,474,000 for the quarter ended June 30, 1996.
Revenues for the six months ended June 30, 1997 totaled $2,562,000 as
compared to 4,011,000 for the six months ended June 30, 1996, representing an
36% decrease for 1997. This decrease is attributed, in large part, to the
decrease of $603,000 in timeshare sales for the six months ended June 30, 1997
as compared to the six months ended June 30, 1996. This decrease in revenue is
also attributable to the decrease in rooms revenue of $460,000 as compared to
the six months ended June 30, 1996. The decrease in room revenue is attributed
to increased competition in the Las Vegas market.
The loss from operations for the six months ended June 30, 1997 totaled
$1,535,000 as compared to $2,082,000 for the six months ended June 30, 1996. The
Company decreased showroom operating expenses by $504,000 as compared to the six
months ended June 30, 1996. The restaurant operation generated $107,000 in
operating losses for the period ended June 30, 1997 as compared to $425,000 in
operating losses for the period ended June 30, 1996. The net loss for the six
months ended June 30, 1997 totaled $2,265,000 as compared to $2,911,000 for the
six months ended June 30, 1996.
(4) Interest Expense
Interest expense decreased from $829,000 for the six months ended June 30,
1996 to $730,000 for six months ended June 30, 1997.
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.
Page 13 of 16
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Part II. Other Information, Continued
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.
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.
On April 21, 1997 Maxim Financial Profit Sharing Plan, filed a lawsuit in
the United States District Court, District of Colorado, against the Company and
others, alleging breach of contract, intentional fraud, Securities Violations
and Recission. The plaintiff is seeking damages in excess of $75,000.
In addition to the above mentioned lawsuits, their are numerous other
lawsuits filed against 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.
However, the Company has recorded a provision for estimated losses from
litigation of $890,000.
Item 2. Changes in Securities
None
Page 14 of 16
<PAGE>
Part II. Other Information, Continued
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 June 30, 1997 is
approximately $472,000.
As of June 1997, the Company is 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 balance of approximately $2,115,000 plus accrued interest
outstanding at June 30, 1997; 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 June 30, 1997; the
Gregory Orman ("Orman") mortgage is in default due to non-payment of interest
and the note has matured and the holder has the right to accelerate the mortgage
immediately and make demand on the entire outstanding principal balance; the
Orman mortgage had a principal balance of approximately $550,000 plus accrued
interest outstanding at June 30, 1997; the Galt Capital ("Galt") mortgage is in
default due to non-payment of interest and the note has matured and the holder
has the right to accelerate the mortgage immediately and make demand on the
entire outstanding principal balance; the Galt mortgage had a principal balance
of approximately $1,100,000 plus accrued interest outstanding at June 30, 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
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 June 30, 1997 the Registrant filed the following
reports on Form 8-K:
None
Page 15 of 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: /S/ Todd Fisher
Todd Fisher, Chief Executive Officer
Date: August 14, 1997
By: /S/ Todd Fisher
Todd Fisher, Chief Financial Officer
Page 16 of 16
