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FORM 10-QSB
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UNITED STATES
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 March 31, 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 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
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)
(702) 734-0711
(Registrant's telephone number, including area code)
(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
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 July 3, 1997.
This filing consisting of 15 sequentially numbered pages. The exhibit index is
located at sequentially numbered page 14.
Page 1 of 15
<PAGE>
FORM 10-QSB
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PAGE 2 OF 15
DEBBIE REYNOLDS HOTEL & CASINO, INC.
Form 10-QSB for the Quarter ended March 31, 1997
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets:
As of March 31, 1997 (unaudited) and December 31, 1996 3
Unaudited Consolidated Statement of Operations:
For the three months ended March 31, 1997 and 1996 4
Unaudited Consolidated Statements of Cash Flows:
For the three months ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
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 14
SIGNATURES 15
<PAGE>
PAGE 3 OF 15
PART I. ITEM 1. FINANCIAL STATEMENTS
DEBBIE REYNOLDS HOTEL & CASINO, INC.
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996
March 31, December 31,
Assets 1997 1996
Current assets: ................................... (Unaudited)
Cash and cash equivalents .....................$ 18,000 $ --
Restricted cash ............................... 2,000 2,000
Accounts receivable ........................... 1,022,000 985,000
Inventories and Other ......................... 773,000 844,000
Total current assets ................... 1,815,000 1,831,000
Land and building ................................. 6,619,000 6,576,000
Furniture and equipment ........................... 3,826,000 4,010,000
10,445,000 10,586,000
Less accumulated depreciation ..................... (3,528,000) (3,219,000)
Net property and equipment ............. 6,917,000 7,367,000
Other assets:
Deposits and other ............................ 87,000 94,000
Total assets ...........................$ 8,819,000 $ 9,292,000
Liabilities and Shareholders' Equity
Current liabilities:
Bank overdraft ................................$ 103,000
Current maturities of long-term debt and capita 9,716,000 8,688,000
obligations
Accounts payable and accrued liabilities ...... 5,118,000 5,381,000
Due to affiliates ............................ 1,589,000 1,447,000
Timeshare deposits ........................... 2,000 2,000
Total current liabilities .............. 16,425,000 15,621,000
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.0001 par value. Authorized
50,000,000 shares, 2,000,000 designated Series
AA, 215,844 issued and outstanding ............ -- --
Common stock, $.0001 par value. Authorized 25,
shares, 12,645,417 and 12,615,417 shares issued
and outstanding, respectively 1,000 1,000
Additional paid-in capital .................... 15,171,000 15,160,000
Accumulated deficit ........................... (22,778,000) (21,490,000)
Total shareholders' equity (deficiency) (7,606,000) (6,329,000)
Total liabilities and shareholders' equi 8,819,000 $ 9,292,000
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PAGE 4 OF 15
DEBBIE REYNOLDS HOTEL & CASINO, INC.
Consolidated Statements of Operations
Three months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
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Revenue:
Timeshare ...................................... $ $ 326,000
Rooms .......................................... 442,000 751,000
Showroom ....................................... 356,000 189,000
Museum ......................................... 82,000 121,000
Food & Beverage ................................ 90,000 275,000
Other .......................................... 61,000 224,000
Total revenue ........................... 1,031,000 1,886,000
Operating expenses:
Timeshare ...................................... -- 262,000
Rooms .......................................... 186,000 309,000
Showroom ....................................... 379,000 451,000
Museum ......................................... 67,000 84,000
Food & Beverage ................................ 147,000 409,000
General and administrative, Facilities and Other 813,000 1,092,000
Depreciation and amortization .................. 309,000 378,000
Total operating expenses ................ 1,901,000 2,985,000
Loss from operations .................... (870,000) (1,099,000)
Other income (expense):
Interest expense ............................... (418,000) (338,000)
Total other income (expense) ............ (418,000) (338,000)
Net loss ........................................... $ (1,288,000)$ (1,437,000)
Loss per weighted-average common and common share
equivalents outstanding: Net loss per share... $ (.10)$ (.12)
Weighted-average number of common shares and
common share equivalents outstanding ......... 12,630,750 11,655,181
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PAGE 5 OF 15
DEBBIE REYNOLDS HOTEL & CASINO, INC.
Consolidated Statements of Cash Flows
Three months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
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Cash flows from operating activities:
Net loss for the period ........................ $(1,288,000) $(1,437,000)
Adjustments to reconcile net income to net cash
provided by (used in) operations .............. 137,000 1,609,000
Net cash used in operating activities ... (1,151,000) 172,000
Cash flows from investing activities:
Purchases of property and equipment ............ 141,000 (560,000)
Net cash used in investing activities ... 141,000 (560,000)
Cash flows from financing activities:
Additional investments from shareholder ........ -- 150,000
Net increase In long-term debt ................. 1,028,000 (22,000)
Net cash provided by financing activities 1,028,000 128,000
Net increase (decrease) in cash .................... 18,000 (260,000)
Cash at beginning of period ........................ 172,000 -0-
Cash at end of period .............................. $ 18,000 $ (88,000)
Supplemental disclosures of cash flow information:
Interest paid on borrowings .................... $ 418,000 $ 338,000
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.
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PAGE 6 OF 15
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Form 10-QSB
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DEBBIE REYNOLDS HOTEL & CASINO, INC.
Notes to Unaudited Financial Statements
March 31, 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 DebbieReynolds 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]
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PAGE 7 OF 15
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>
PAGE 8 OF 15
(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 March
31, 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>
PAGE 9 OF 15
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Form 10-QSB PM
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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 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. As of
January 1997, 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>
PAGE 10 OF 15
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 itscommon 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 March 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 March 31, 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 March 31, 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 March 31, 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 March 31, 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>
PAGE 11 OF 15
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 $14,610,000 at March 31, 1997,
compared with a working capital deficiency of $10,059,000 at December 31, 1996,
an increase of $4,551,000. This increase is attributable to the Company
continuing to incur substantial operating losses during the three months ended
March 31, 1997 and maturing long-term debt.
(3) Revenues
Revenues for the quarter ended March 31, 1997 totaled $1,031,000 as compared to
$1,886,000 for the quarter ended March 31, 1996, representing an 45.3% decrease
for 1997. This decrease is attributable, in large part, to the decrease in rooms
revenue of $309,000 as compared to the quarter ended March 31, 1996 and the
decrease in timeshare revenue of $326,000 as compared to the quarter ended March
31, 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
actively selling timeshare units.
<PAGE>
PAGE 12 OF 15
The loss from operations for the quarter ended March 31, 1997 totaled $870,000
as compared to a $1,099,000 loss from operations for the first quarter ended
1996. Included in the loss from operations was $57,000 loss from the restaurant
operations. The net loss for the quarter ended March 31, 1997 totaled $1,288,000
as compared to $1,437,000 for the quarter ended March 31, 1996.
(4) Interest Expense
Interest expense increased from $338,000 for the three months ended March 31,
1996 to $418,000 for three months ended March 31, 1997 due to additional debt
which was incurred and the increased interest rates associated the with new
loans and the 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. <PAGE>
PAGE 13 OF 15
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
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 March 31, 1997 is approximately
$490,000.
As of March 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 March 31, 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 March 31, 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 March 31, 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 March 31, 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). <PAGE>
PAGE 14 OF 15
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 March 31, 1997 the Registrant filed the following
reports on Form 8-K:
None
<PAGE>
Form 10-QSB PM
Page 15 of 15
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: July 23, 1997
By: /S/ Todd Fisher_
Todd Fisher, Chief Financial Officer
