<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1997
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 0-20326
GOLD RIVER HOTEL & CASINO CORPORATION
========================================================================
(Exact name of Registrant as specified in its charter)
Delaware 88-0288624
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2800 West Sahara, Suite 4-B, Las Vegas, Nevada 89102
(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code (702) 362-0040
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which
Title of each class registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Series B Common Stock, $.01 par value
Rights to Purchase Series A Preferred Stock
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(Title of class)
Page 1 of 34
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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.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ] N/A
At October 10, 1997, the aggregate market value of Common Stock held
by non-affiliates of the Registrant was approximately
$ INDETERMINABLE (NO KNOWN TRADES since May, 1996)
At October 10, 1997, there were outstanding 581,194 shares of
Series A Common Stock and 1,179,750 shares of Series B Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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GOLD RIVER HOTEL AND CASINO CORPORATION
TABLE OF CONTENTS
Page
PART I
Item 1. Business 4
Item 2. Properties 10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of
Security Holders 12
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters 13
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
Item 8. Financial Statements and Supplementary Data 21
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 22
PART III
Item 10. Directors and Executive Officers of
the Registrant 22
Item 11. Executive Compensation 24
Item 12. Security Ownership of Certain
Beneficial Owners and Management 27
Item 13. Certain Relationships and
Related Transactions 28
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 29
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PART I
Item 1., Business
Gold River Hotel & Casino Corporation, a Delaware corporation
("Gold River"), through its wholly-owned subsidiary, Gold River
Operating Corporation, a Nevada corporation organized in August 1992
("Gold River Operating") and, collectively with Gold River, ("the
Company"), owns and operates the Gold River Gambling Hall & Resort (the
"Casino Hotel") in Laughlin, Nevada.
The facilities at the Casino Hotel are situated on approximately 35
acres in Laughlin, Nevada, with approximately 1,300 feet of frontage on
the Colorado River and approximately the same frontage on the east side
of Casino Drive, Laughlin's principal thoroughfare. The casino, which
has approximately 71,000 square feet of space devoted to gaming, is
located on two levels. While slot machines are the main attraction, the
casino also offers patrons a variety of table games, a race and sports
book with a seating capacity of approximately 120 and a bingo parlor
with a seating capacity of approximately 300. The following table sets
forth the numbers of licensed games or gaming devices at the Casino
Hotel as of June 30, 1997.
<TABLE>
<S> <C>
Game or Gaming Device Number
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Slot Machines................................................1,185
Craps............................................................3
Roulette.........................................................3
Blackjack ("21")................................................28
Keno.............................................................1
Race/Sports Book.................................................1
Bingo............................................................1
Caribbean Stud...................................................1
Let it Ride......................................................1
Other Games......................................................3
</TABLE>
The hotel offers 1,003 guest rooms, including eight suites.
Approximately 778 of the guest rooms (including five of the suites) are
located in a 25-story tower which was completed and opened to the public
in May, 1990 and the balance are located in an adjoining three-story
hotel structure which was completed and opened in 1984. The hotel offers
its guests a variety of services and amenities including room service
from the coffee shop, handicapped facilities, a video arcade, a gift
shop, a car wash, an airport shuttle and free valet parking. A swimming
pool overlooking a terraced walkway which runs the length of the
property along the river's edge is also available to the hotel's guests.
The hotel also offers a full-service health spa to hotel guests and the
general public for a nominal fee. During the year ended June 30, 1997,
the average occupancy rate for the Casino Hotel's standard rooms and
suites was 84% compared with 87% for the preceding year. These
percentages include occupancy on a complimentary basis, principally by
the Casino Hotel's casino patrons. The average non-complimentary
occupancy rate for the Casino Hotel's standard rooms and suites during
the year ended June 30, 1997 was 76% compared with 74% for the preceding
year.
Dining and bar facilities are available on three levels in the
Casino Hotel and include the Opera House Buffet (which has a seating
capacity of approximately 400), Cafe Victoria (a garden cafe with a
commanding view of the Colorado River and a seating capacity of
approximately 195), Pasta Cucina (a bistro featuring Italian specialties
with a seating capacity of approximately 140), and The Lodge (a
steakhouse-style restaurant with a seating capacity of approximately
140). Additional dining options include Aunt B's Deli, Bakery and Ice
Cream Parlor, and the Sub Station.
Live entertainment is offered virtually every night in Cody's
Saloon (which has a seating capacity of approximately 180). During the
National Football League ("NFL") season Cody's has its Monday Night
Football parties and Sunday NFL football games. The Fantasy Theater
(which has a seating capacity of approximately 320) currently offers
"Flash", a magical mystical adventure of illusion and magic.
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Parking for approximately 2,500 vehicles is available to the Casino
Hotel's guests, including approximately 1,100 spaces located in a
four-story parking garage adjacent to the Casino Hotel and approximately
1,400 surface parking spaces.
The Casino Hotel is open 24 hours a day, every day of the year.
Gold River does not consider business at the Casino Hotel to be highly
seasonal, although the summer months and December are generally slower
in terms of revenues and occupancy than other periods of the year. The
casino is the focal point of operations and the primary source of
revenues and income to the Casino Hotel. The hotel, food, beverage and
other related services are integrated with, and intended to complement,
the casino operation. For information concerning the respective
contributions to total revenues of the Casino Hotel's major activities,
see Items 7 and 8 of this Report.
In connection with gaming at the Casino Hotel, a policy of
stringent controls, cross-checks and recording of all receipts and
disbursements is followed. The audit and cash controls developed and
utilized at the Casino Hotel include the following: locked cash boxes,
independent counters, checkers and observers to perform the daily cash
and coin counts, floor observation of the gaming areas, closed-circuit
television observation of certain areas, computer tabulations of
receipts and disbursements for each of the slot machines, table and
other games, and the rapid analysis and resolution of discrepancies or
deviations from normal performance. The Casino Hotel adheres to a
stringent credit policy which limits credit play in the casino to a
minor portion of gaming activities. Casino receivables at the Casino
Hotel were less than 1/2 of 1% of the Company's total assets at June 30,
1997 and 1996, and the annual bad debt expense is immaterial.
Marketing
The marketing philosophy at Gold River is predicated on creating
and implementing broad-based, proactive advertising, promotional and
special event campaigns to position Gold River as one of the pre-eminent
properties in Laughlin. A multi-media campaign depicts the amenities
Gold River has to offer. The areas of concentration are: gaming, hotel,
entertainment, special events, and restaurants. Specifically, Gold
River has embarked on an advertising campaign to promote the Casino
Hotel on television in Southern California and Arizona, augmented with
newspaper and radio ads in these feeder markets as well as highway radio
stations. In addition, travel agents are targeted for promotional
literature as well as an extensive group sales effort directed by the
in-house team.
A comprehensive on-site package of posters, tent cards, door
hangers, placemats, Guest Room Directory, banners, handouts and
promotional in-room flyers are all used to feature the events and
activities on property. Special promotional deals centered around free
night stays are designed to increase room occupancy during soft periods,
and encourage mid-week stay overs. "Amenity-specific" packages have
been created focusing on Gold River's health club, Waverunner rentals
and the availability of golf.
Clientele principally, but not exclusively, comes to Gold River
from Southern California, Nevada, Arizona and the surrounding areas of
the Southwest. Gold River also pursues overnight bus tours (run by
independent operators) as well as air charter business.
With more than 8,000 square feet of flexible convention space, Gold
River is positioned to cater to conventions and the private party
market. Group sales, along with the banquet department, markets the
property to conventions, golf groups, and special events.
Gold River also participates in a series of city-wide events
sponsored by the Laughlin Visitors Bureau in conjunction with the Las
Vegas Convention and Visitors Authority. These include the Laughlin
Desert Challenge-SCORE International Off-Road racing, Laughlin
Riverflight Hot Air Balloon Festival, Laughlin Invitational Series
Final-Professional Bull Riding, Laughlin Air Races- International
Formula One Air Show, Laughlin Rodeo Days/Laughlin River Stampede PRCA
Rodeo and Laughlin River Days.
Laughlin
The Casino Hotel is located in Laughlin, Nevada, an unincorporated
town on the banks of the Colorado River. Laughlin is situated in Clark
County near the southern tip of Nevada, approximately 90 miles south of
Las Vegas, 210 miles northwest of Phoenix, Arizona, and 240 miles
northeast of Los Angeles, California. A bridge spanning the Colorado
River connects Laughlin and Bullhead City, Arizona. The region, which
is near Lake Mojave and contiguous to the Lake Mead National Recreation
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Area, has long served as a destination point for desert and freshwater
recreational activities for persons living in the major metropolitan
areas of Southern California and Arizona. Historically, the Laughlin
gaming market has been patronized by older tourists, including retirees,
who drive to Laughlin. Many of the Casino Hotel's guests are attracted
by the prices charged for rooms, food and entertainment at
establishments in Laughlin, which are generally lower than those charged
in the hotels and casinos of Las Vegas.
The Laughlin-Bullhead City International Airport completed an
expansion in August 1994 and can now accommodate wide-body commercial
passenger airline traffic. Air service to the Laughlin area is currently
available on commuter and charter airlines. The commuter airline
service is limited and the charter service is sporadic. Sun Country,
Sun West, America West Express and Sun Pacific are currently flying into
the Laughlin-Bullhead City International Airport
Competition
The Casino Hotel competes directly with nine other casino
properties located in Laughlin, Nevada, and one eight miles south of
Laughlin. Nine of these properties have hotel facilities and all offer
a variety of food, entertainment and gaming activities. Laughlin has in the
past experienced significant expansion of its hotel and casino capacities,
including an over 100% increase in the number of available hotel rooms since
January 1, 1990. Most recently 300 rooms were constructed on the Native
American competing facility eight miles south of Gold River which has
substantially increased the competition within a declining Laughlin market.
Such increased competition has been reflected by a reduction of the Casino
Hotel's average daily paid room rate which was $20.60 during the year ended
June 30, 1997 as compared to $21.58 for the prior fiscal year.
In addition to competition from local hotels and casinos, Laughlin
properties in general, and the Casino Hotel, in particular, compete with
casinos and hotels in Las Vegas that attract a significant percentage of
their patrons from the same markets. During the fiscal year ended June
30, 1997, the Laughlin gaming market experienced a decline of
approximately 5% in gaming revenues, which is the fourth consecutive
year of declines. The Company believes that the decline in the Laughlin
gaming market is primarily due to increased competition from Las Vegas
where large, highly publicized destination type resorts added rooms
during 1997 and 1996 totaling over 13,000. The critical mass of the
Laughlin hotel/casino market has been redefined with the addition of
almost 2,100 rooms in three years representing an approximately 20%
increase. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Item 7 of this Report for a more
detailed comparison of Gold River's performance as compared to other
Laughlin hotel casinos.
The Casino Hotel also competes with casino and hotel establishments
located along Interstate 15, from the California-Nevada border to the
Nevada-Utah border. The Casino Hotel also encounters gaming competition
by Native American tribes in Southern California and Arizona. Other
Native American tribes have established gaming at additional locations
increasing the circle of competition around Laughlin.
Gaming has expanded dramatically in the United States in recent
years. This growth has been reflected in various forms including low-
limit, land-based casinos, state-sponsored lotteries, off-track
wagering, card parlors, riverboats and Native American gaming ventures.
Since 1990, when there were casinos in only three states (excluding
casinos on Native American lands), gaming has spread to a number of
states and still other states are considering the legalization of casino
gaming in specific geographic areas within their jurisdictions. The
competitive impact on Nevada gaming establishments, in general, and the
Company's operations, in particular, from the continued growth of gaming
in jurisdictions outside of Nevada cannot be determined. The Company
believes that the introduction of casino gaming in areas close to
Nevada, such as California and Arizona, has adversely impacted the
Company's operations.
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Regulation and Licensing
The ownership and operation of casino gaming facilities in Nevada
are subject to: (i) the Nevada Gaming Control Act and the regulations
promulgated thereunder (collectively, the "Nevada Act"); and (ii)
various local regulations. The ownership of the Casino Hotel and the
property's gaming operations are subject to the licensing and regulatory
control of the Nevada Gaming Commission (the "Nevada Commission"), the
Nevada State Gaming Control Board (the "Nevada Board"), and the Clark
County Liquor and Gaming Licensing Board (the "CCLGLB"). The Nevada
Commission, the Nevada Board, and the CCLGLB are collectively referred
to as the "Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada
Gaming Authorities are based upon declarations of public policy that are
concerned with, among other things: (i) the prevention of unsavory or
unsuitable persons from having a direct or indirect involvement with
gaming at any time or in any capacity; (ii) the establishment and
maintenance of responsible accounting practices and procedures; (iii)
the maintenance of effective controls over the financial practices of
licensees, including the establishment of minimum procedures for
internal fiscal affairs and the safeguarding of assets and revenues,
providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of
cheating and fraudulent practices; and (v) providing a source of state
and local revenues through taxation and licensing fees. Change in such
laws, regulations and procedures could have an adverse effect on the
Casino Hotel and its gaming operations.
Gold River Operating, which operates the Casino Hotel, is required
to be licensed by the Nevada Gaming Authorities. The gaming license
requires the periodic payment of fees and taxes and is not transferable.
Gold River is registered by the Nevada Gaming Authorities as a publicly
traded corporation ("Registered Corporation") and as such, it is
required periodically to submit detailed financial and operating reports
to the Nevada Gaming Authorities and furnish any other information that
the Nevada Gaming Authorities may require. No person may become a
stockholder of, or receive any percentage of profits from, Gold River
Operating without first obtaining licenses and approvals from the Nevada
Gaming Authorities. Gold River and Gold River Operating have obtained
from the Nevada Gaming Authorities the various registrations, approvals,
permits and licenses required in order to engage in gaming activities in
Nevada.
The Nevada Gaming Authorities may investigate any individual who
has a material relationship to, or material involvement with, Gold River
or Gold River Operating in order to determine whether such individual is
suitable or should be licensed as a business associate of a gaming
licensee. Officers, directors and certain key employees of Gold River
Operating must file applications with the Nevada Gaming Authorities and
are required to be licensed by the Nevada Gaming Authorities. Officers,
directors and key employees of Gold River who are actively and directly
involved in the gaming activities of Gold River Operating may be
required to be licensed or found suitable by the Nevada Gaming
Authorities. The Nevada Gaming Authorities may deny an application for
licensing or a finding of suitability for any cause they deem
reasonable. A finding of suitability is comparable to licensing, and
both require submission of detailed personal and financial information
followed by a thorough investigation. The applicant for licensing or a
finding of suitability must pay all the costs of the investigation.
Changes in licensed positions must be reported to the Nevada Gaming
Authorities and, in addition to their authority to deny an application
for a finding of suitability or licensure, the Nevada Gaming Authorities
have jurisdiction to disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director
or key employee unsuitable for licensing or to continue having a
relationship with Gold River or Gold River Operating, the companies
involved would have to sever all relationships with such person. In
addition, the Nevada Gaming Authorities may require Gold River or Gold
River Operating to terminate the employment of any person who refuses to
file appropriate applications. Determinations of suitability or initial
licensing decisions are not subject to judicial review in Nevada.
Gold River and Gold River Operating are required to submit detailed
financial and operating reports to the Nevada Gaming Authorities.
Substantially all material loans, leases, sales of securities and
similar financing transactions by Gold River Operating, must be reported
to, or approved by, the Nevada Gaming Authorities.
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If it was determined that the Nevada Act was violated by Gold River
Operating, the gaming license it holds could be limited, conditioned,
suspended or revoked, subject to compliance with certain statutory and
regulatory procedures. In addition, Gold River Operating, Gold River
and the persons involved could be subject to substantial fines for each
separate violation of the Nevada Act at the discretion of the Nevada
Commission. Further, a supervisor could be appointed by the Nevada
Commission to operate the Casino Hotel and, under certain circumstances,
earnings generated during the supervisor's appointment (except for the
reasonable rental value of the Casino Hotel) could be forfeited to the
State of Nevada. Limitation, conditioning or suspension of any gaming
license or the appointment of a supervisor could (and revocation of any
gaming license would) materially adversely affect Gold River's and Gold
River Operating's gaming operations.
Any beneficial holder of Gold River's voting securities, regardless
of the number of shares owned, may be required to file an application,
be investigated, and have his suitability as a beneficial holder of Gold
River's voting securities determined if the Nevada Commission has reason
to believe that such ownership would otherwise be inconsistent with the
declared policies of the State of Nevada. The applicant must pay all
costs of investigation incurred by the Nevada Gaming Authorities in
conducting any such investigation.
The Nevada Act requires any person who acquires more than 5% of
Gold River's voting securities to report the acquisition to the Nevada
Commission. The Nevada Act requires that beneficial owners of more than
10% of Gold River's voting securities apply to the Nevada Commission for
a finding of suitability within thirty days after the Chairman of the
Nevada Board mails a written notice requiring such filing. Under
certain circumstances, an "institutional investor," as defined in the
Nevada Act, which acquires more than 10% but not more than 15% of Gold
River's voting securities, may apply to the Nevada Commission for a
waiver of such finding of suitability if such institutional investor
holds the voting securities for investment purposes only. An
institutional investor shall not be deemed to hold voting securities for
investment purposes unless the voting securities were acquired and are
held in the ordinary course of business as an institutional investor and
not for the purpose of causing, directly or indirectly, the election of
a majority of the members of the board of directors of Gold River, any
change in Gold River's corporate charter, bylaws, management, policies
or operations of Gold River or any of its gaming affiliates, or any
other action which the Nevada Commission finds to be inconsistent with
holding Gold River's voting securities for investment purposes only.
Activities that are not deemed to be inconsistent with holding voting
securities for investment purposes only include: (i) voting on all
matters voted on by stockholders; (ii) making financial and other
inquiries of management of the type normally made by securities analysts
for informational purposes and not to cause a change in its management,
policies or operations; and (iii) such other activities as the Nevada
Commission may determine to be consistent with such investment intent.
If the beneficial holder of voting securities who must be found suitable
is a corporation, partnership or trust, it must submit detailed business
and financial information including a list of beneficial owners. The
applicant is required to pay all costs of the investigation.
Any person who fails or refuses to apply for a finding of
suitability or a license within thirty days after being ordered to do so
by the Nevada Commission or the Chairman of the Nevada Board, may be
found unsuitable. The same restrictions apply to a record owner if the
record owner, after request, fails to identify the beneficial owner.
Any stockholder found unsuitable and who holds, directly or indirectly,
any beneficial ownership of the common stock of a Registered Corporation
beyond such period of time as may be prescribed by the Nevada Commission
may be guilty of a criminal offense. Gold River is subject to
disciplinary action if, after it receives notice that a person is
unsuitable to be a stockholder or to have any other relationship with
Gold River or Gold River Operating, Gold River (i) pays that person any
dividend or interest upon voting securities of Gold River, (ii) allows
that person to exercise, directly or indirectly, any voting right
conferred through securities held by that person, (iii) pays
remuneration in any form to that person for services rendered or
otherwise, or (iv) fails to pursue all lawful efforts to require such
unsuitable person to relinquish his voting securities for cash at fair
market value. Additionally, the CCLGLB has taken the position that it
has the authority to approve all persons owning or controlling the stock
of any corporation controlling a gaming license.
The Nevada Commission may, in its discretion, require the holder of
any debt security of a Registered Corporation to file applications, be
investigated and found suitable to own the debt security of a Registered
Corporation. If the Nevada Commission determines that a person is
unsuitable to own such security, then pursuant to the Nevada Act, the
Registered Corporation can be sanctioned, including the loss of its
approvals, if without the prior approval of the Nevada Commission, it:
(i) pays to the unsuitable person any dividend, interest, or any
distribution whatsoever; (ii) recognizes any voting right by such
unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form; or (iv) makes any payment to
the unsuitable person by way of principal, redemption, conversion,
exchange, liquidation, or similar transaction.
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Gold River is required to maintain a current stock ledger in Nevada
that may be examined by the Nevada Gaming Authorities at any time. If
any securities are held in trust by an agent or by a nominee, the record
holder may be required to disclose the identity of the beneficial owner
to the Nevada Gaming Authorities. A failure to make such disclosure may
be grounds for finding the record holder unsuitable. Gold River is also
required to render maximum assistance in determining the identity of the
beneficial owner. The Nevada Commission has the power to require Gold
River's stock certificates to bear a legend indicating that such
securities are subject to the Nevada Act. However, to date, the Nevada
Commission has not imposed such a requirement on Gold River.
Gold River may not make a public offering of any securities without
the prior approval of the Nevada Commission if the securities or the
proceeds therefrom are intended to be used to construct, acquire or
finance gaming facilities in Nevada, or to retire or extend obligations
incurred for such purposes. Such approval, if given, does not
constitute a finding, recommendation or approval by the Nevada
Commission or the Nevada Board as to the accuracy or adequacy of the
prospectus or the investment merits of the securities. Any
representation to the contrary is unlawful.
Changes in control of Gold River through merger, consolidation,
stock or asset acquisitions, management or consulting agreements, or any
act or conduct by a person whereby he obtains control, may not occur
without the prior investigation by the Nevada Board and approval of the
transaction by the Nevada Commission. Entities seeking to acquire
control of a Registered Corporation must satisfy the Nevada Board and
the Nevada Commission concerning a variety of stringent standards prior
to assuming control of such Registered Corporation. The Nevada
Commission may also require controlling stockholders, officers,
directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be
investigated and licensed as part of the approval process of the
transaction.
In connection with the pending applications of Paulson filed with
the Nevada Board and the Nevada Commission for approval of an
acquisition of control of Gold River for findings of suitability as the
sole officer, director and shareholder of Gold River and for licensure
as the sole officer, director and shareholder of Gold River Operating
(collectively, the "Paulson Applications"), the Nevada Board on
September 10, 1997, unanimously recommended to the Nevada Commission
that it approve such Paulson Applications at its next regular meeting on
September 25, 1997. Accordingly, upon the effectiveness of the Nevada
Commission's orders of deregistration, Gold River Partners L.P. will no
longer be subject to the jurisdiction or regulatory control of the
Nevada Gaming Authorities, and Gold River will be regulated by the
Nevada Gaming Authorities as a privately-held holding company.
Further, the Company anticipates that the Paulson Applications will
thereafter be considered by the CCLGLB at its next regular meeting
scheduled for September 30, 1997. Accordingly, the Revesting Date
described in the Plan will occur on October 14, 1997.
The Nevada legislature has declared that some corporate
acquisitions opposed by management, repurchases of voting securities and
corporate defense tactics affecting Nevada's gaming licensees, and
Registered Corporations that are affiliated with those operations, may
be injurious to stable and productive corporate gaming. The Nevada
Commission has established a regulatory scheme to ameliorate the
potentially adverse effects of these business practices upon Nevada's
gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates;
(ii) preserve the beneficial aspects of conducting business in the
corporate form; and (iii) promote a neutral environment for the orderly
governance of corporate affairs. Approvals are, in certain
circumstances, required from the Nevada Commission before Gold River can
make exceptional repurchases of voting securities above the current
market price thereof and before a corporation's acquisition opposed by
management can be consummated. The Nevada Act also requires prior
approval of a plan of recapitalization proposed by Gold River's board of
directors in response to a tender offer made directly to the Registered
Corporation's stockholders for the purpose of acquiring control of the
Registered Corporation.
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License fees and taxes, computed in various ways depending on the
type of gaming or activity involved, are payable to the State of Nevada
and to Clark County, Nevada. Depending upon the particular fee or tax
involved, these fees and taxes are payable either monthly, quarterly or
annually and are based upon either: (i) a percentage of the gross
revenues received; (ii) the number of gaming devices operated; or (iii)
the number of table games operated. A casino entertainment tax is also
paid by the Casino Hotel where certain entertainment is provided in a
cabaret, nightclub, cocktail lounge or casino showroom in connection
with the serving or selling of food, refreshments or merchandise.
Any person who is licensed, required to be licensed, registered,
required to be registered, or is under common control with such persons
(collectively, "Licensees"), and who proposes to become involved in a
gaming venture outside of Nevada, is required to deposit with the Nevada
Board, and thereafter maintain, a revolving fund in the amount of
$10,000 to pay the expenses of investigation of the Nevada Board of
their participation in such foreign gaming. The revolving fund is
subject to increase or decrease in the discretion of the Nevada
Commission. Thereafter, Licensees are also required to comply with
certain reporting requirements imposed by the Nevada Act. Licensees are
also subject to disciplinary action by the Nevada Commission if they
knowingly violate any laws of the foreign jurisdiction pertaining to the
foreign gaming operation, fail to conduct the foreign gaming operation
in accordance with the standards of honesty and integrity required of
Nevada gaming operations, engage in activities that are harmful to the
State of Nevada or its ability to collect gaming taxes and fees, or
employ a person in the foreign operation who has been denied a license
or a finding of suitability in Nevada on the ground of personal
unsuitability.
The sale of alcoholic beverages by the Casino Hotel is subject to
licensing, control and regulation by the CCLGLB. All licenses are
revocable and are not transferable. The CCLGLB has full power to limit,
condition, suspend or revoke any such license, and any such disciplinary
action could (and revocation would) have a material adverse effect upon
the operations of the Casino Hotel.
Employees
Approximately 1,052 persons were employed at the Casino Hotel at
June 30, 1997. None of the current employees at the Casino Hotel are
covered by a collective bargaining agreement. The Company believes that
employee relations at the Casino Hotel are satisfactory.
Item 2. Properties
Gold River Operating owns approximately 35 acres of land in
Laughlin, Nevada, consisting of (i) 17.9 acres, with approximately 1,300
feet of frontage on the Colorado River and on the east side of Casino
Drive (the "River Front Parcel") on which is located the Casino Hotel,
and (ii) 17.3 acres of land with approximately 2,000 feet of frontage on
the west side of Casino Drive across from the River Front Parcel (the
"West Parcel"). The River Front Parcel, the West Parcel and the Casino
Hotel secure substantially all of Gold River's long term debt.
Gold River Operating also owns the buildings, improvements,
equipment and related facilities comprising the Casino Hotel. The
Casino Hotel includes approximately 1,003 guest rooms (including eight
suites) and approximately 71,000 square feet of casino space. Dining
and bar facilities are available on three levels in the Casino Hotel and
include the Opera House Buffet (which has a seating capacity of
approximately 400), Cafe Victoria (a garden cafe with a commanding view
of the Colorado River and a seating capacity of approximately 195),
Pasta Cucina (a bistro featuring Italian specialties with a seating
capacity of approximately 140), and The Lodge (a steakhouse-style
restaurant with a seating capacity of approximately 140). Facilities
also include Aunt B's Deli, Bakery and Ice Cream Parlor, and the Sub
Station. Parking for approximately 2,500 vehicles is available to
guests, including approximately 1,100 spaces located in a four-story
parking garage adjacent to the hotel/casino and approximately 1,400
surface parking spaces.
Item 3. Legal Proceedings
The Company's February 9, 1996 voluntary Chapter 11 petition filing
contemplated restructuring the Company's debt plus accrued interest.
The Plan as confirmed by the Bankruptcy Court has the holders of the
Company's mortgage notes ("Bondholders") exchanging their interest in
the principal amount of the Company's debt of $75,000,000 and accrued
interest of approximately $10,980,000 for all of the Company's equity.
Mr. Paulson will acquire all of the New Mortgage Notes and receive 100%
of the new Gold River stock and become the sole shareholder of the
reorganized Company, upon receipt of the required approval from the
Nevada Gaming Authorities. The Company's current Series A common stock
and Series B common stock will be canceled and new common stock issued.
- 10 -
<PAGE>
The McCarthy $5,000,000 Note, which is secured by a Deed of Trust
on the hotel's real property, plus accrued interest thereon has been
acquired by Mr. Paulson. This $5,750,000 promissory note payable to Mr.
Paulson will bear interest at eleven percent (11%) per annum and mature
.sixty (60) months after the Revesting Date. Interest on the
outstanding principal balance shall be due and payable semi-annually, in
arrears commencing six (6) months after the Revesting Date which is
expected to occur on October 14, 1997.
The Bankruptcy Court entered its order confirming the Plan on March
4, 1997. Distributions to class 8 and 9 (first of four semi-annual
payments) general unsecured creditors were made on March 27, 1997 and
March 31, 1997. On September 30, 1997 the second semi-annual payment on
the class 9's was made. A Bankruptcy Court hearing is scheduled for
October 9, 1997 which should finalize certain other claims objections.
See Note 1 to the Consolidated Financial Statements included in Item 8
of this Report.
In connection with the pending applications of Paulson filed with
the Nevada Board and the Nevada Commission for approval of an
acquisition of control of Gold River for findings of suitability as the
sole officer, director and shareholder of Gold River and for licensure
as the sole officer, director and shareholder of Gold River Operating
(collectively, the "Paulson Applications"), the Nevada Board on
September 10, 1997, unanimously recommended to the Nevada Commission
that it approve such Paulson Applications at its next regular meeting on
September 25, 1997. Accordingly, upon the effectiveness of the Nevada
Commission's orders of deregistration, Gold River Partners L.P. will no
longer be subject to the jurisdiction or regulatory control of the
Nevada Gaming Authorities, and Gold River will be regulated by the
Nevada Gaming Authorities as a privately-held holding company.
Further the Paulson Applications were considered by the CCLGLB at
its meeting on September 30, 1997. Accordingly, the Revesting Date
described in the Plan will occur on October 14, 1997.
The Company and approximately 40 other major casino operators, as
well as Griffin Investigations and Surveillance Information Network have
been named as defendants in an action entitled Thomas Hyland v. Griffin
Investigations, et al., (filed on August 23, 1995) (the "Action") in
the United States District Court for the District of New Jersey, Camden
Division. The Action was brought under the Sherman Act, the Fair Credit
Reporting Act, and common law fraud and seeks unspecified compensatory
and punitive damages from the defendants. The complaints allege that
the defendants took part in a combination and conspiracy among the
casinos in the United States to refuse to deal blackjack to blackjack
players identified as "card counters" by Griffin Investigations monthly
publication the "Griffin Book"; by Surveillance Information Network; as
well as by other "informal" communication amongst the various casinos in
the United States. The Company believes that plaintiffs' allegations
are without merit, and it intends to defend the Action vigorously.
The Company and approximately 40 other major casino operators, as
well as various manufacturers and distributors of video poker and
electronic slot machines, have been named as defendants in actions
entitled William H. Poulos v. Caesars World, Inc., et al., (filed on
April 26, 1994) and William Ahern v. Caesars World, Inc., et al., (filed
on May 10, 1994) (collectively the "Actions") in the United States
District Court for the Middle District of Florida, Orlando Division.
Both Actions were brought under the Racketeer Influenced and Corrupt
Organizations Act ("RICO") as well as claims of common law fraud,
unjust enrichment and negligent misrepresentation and seeks damages in
excess of $1 billion. The complaints allege that the defendants took
part in a scheme intended to induce people to play video poker and
electronic slot machines based on false beliefs concerning how those
machines actually operate as well as the extent to which there is
actually an opportunity to win on any given play. The Company believes
that plaintiffs' allegations are without merit, and it intends to defend
the Actions vigorously.
Both actions above were stayed as to the Company by the filing of
the Chapter 11 bankruptcy petition on February 9, 1996. Since these
claims arose pre-petition , they will have to be asserted through the
Chapter 11 proceedings, which has not been done. These actions will be
discharged on the Revesting Date.
The Company and approximately 80 other major casino operators were
named defendants in a patent infringement action against Shuffle Master,
Inc. by Progressive Games, Inc. The action entitled Progressive Games,
Inc. v. Shuffle Master, Inc. et al. was filed in June 1996 in the United
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<PAGE>
States District Court for the District of Nevada. In its summons and
complaint, Progressive Games, Inc. alleges that by participating in Let
it Ride( the Tournament( the Company infringed on two of the
plaintiff's patents. These same alleged infringement claims are the
subject of another lawsuit that has been pending since January 1995.
Pursuant to the Let it Ride( the Tournament( license agreement, Shuffle
Master, Inc. will defend, indemnify and hold harmless the Company in
this litigation. The Mississippi Court in February, 1997 denied
Progressive's motion for preliminary injunction. In April, 1997 the
Court issued a written Order and Memorandum explaining the basis for its
decision. Shuffle Master is awaiting the Courts decision on its motion
for summary judgment. In June, 1997 Shuffle Master filed a counter
claim against Progressive seeking compensatory and punitive damages and
alleging claims for abuse of process, unfair competition, antitrust, and
tortious interference with prospective business advantage.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
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<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
There is no established public trading market for Gold River's
Series B Common Stock. The market value of Gold River's common stock
can not be determined since the Company is not aware of any trades in
fiscal year 1997 or the quarter ended September 30, 1997. Gold River
Partners Limited Partnership is the sole record holder of Gold River's
Series A Common Stock. No public trading market for the Series A or
Series B Common Stock will develop due to their cancellations under the
terms of the bankruptcy reorganization plan.
Gold River does not expect to pay any dividends on its Common Stock
in the foreseeable future. Further, the Indenture for Gold River's
$75,000,000 principal amount of New Mortgage Notes due August 31, 1999
prohibits the payment of dividends by Gold River.
Item 6. Selected Financial Data
The following tables set forth selected financial information on a
historical basis for Gold River as of and for the fiscal years ended
June 30, 1997, 1996, 1995, and 1994, as of and for the ten months ended
June 30, 1993 and as of August 31, 1992, and for the eight months ended
August 31, 1992 for its predecessor, Goldriver (or the "Predecessor
Partnership").
<TABLE>
<CAPTION>
Predecessor
Gold River (a) Partnership
_________________________________________________________ ___________
Ten Months Eight Months
ended ended
Year ended June 30, June 30 August 31,
_______________________________________________________________________
1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Statements of
Operations Data:(AMOUNTS IN THOUSANDS, Except per share data) (AMOUNTS
IN
THOUSANDS)
Total Operating
Revenues $ 45,025 $ 48,871 $ 56,477 $ 64,202 $ 51,162 $ 37,690
____________________________________________________________ ___________
Net Loss $(1,867) $(70,340)(c) $ (5,631) $ (4,396)$ (2,993) $ (2,556)(b)
____________________________________________________________ ___________
Net Loss
Per Share $ (1.06) $ (39.94) $ (3.20) $ (2.50) $ (1.70) N/A
____________________________________________________________ ___________
</TABLE>
<TABLE>
<CAPTION>
Predecessor
Gold River (a) Partnership
________________________________________________________________________
At June 30, At August 31,
1997 1996 1995 1994 1993 1992
________________________________________________________________________
Balance Sheet
Data:
<S> <C> <C> <C> <C> <C> <C>
________________________________________________________________________
Total Assets $ 34,994 $ 35,926 $ 96,833 $ 102,212 $ 104,526 $ 107,096
________________________________________________________________________
Long-Term Debt
(including
current portion) $ 81,671 $ 80,761 $ 78,968 $ 78,854 $ 77,736 $ 77,193
________________________________________________________________________
Equity
(Deficiency) $(63,073) $(61,206) $ 9,134 $ 14,765 $ 19,161 $ 22,154
________________________________________________________________________
</TABLE>
(a) Gold River is the successor in interest to Goldriver, the former
owner of the Casino Hotel, pursuant to a Chapter 11 Plan of
Reorganization. See Note 2 to the Consolidated Financial
Statements of Gold River Hotel & Casino Corporation included in
Item 8 of this Report.
(b) The net loss for the eight months ended August 31,1992 reflects a
decrease in depreciation expense due to the writedown of assets at
December 31, 1991. Net loss for the ten months ended June 30, 1993
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<PAGE>
reflects a decrease in depreciation expense due to the revaluation
of assets in accordance with the principles of fresh start
reporting.
(c) The net loss for the year ended June 30, 1996 includes a recognized
loss on permanent impairment of assets in the amount of
$59,060,000. There was no accrual of interest on the 13 7/8% First
Mortgage Bonds due May 1, 1997 or other unsecured debt subsequent
to February 9, 1996. If accrued, interest expense from February
10, 1996 through June 30, 1996 would have totaled $3,753,000 and
interest expense for the year ended June 30, 1996 would have
totaled $9,603,000.
- 14 -
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The Year Ended June 30, 1997 Compared to the Year Ended June 30, 1996
Gold River's loss from operations before loss on permanent
impairment of assets decreased $947,000 during the year ended June 30,
1997, as compared to the year ended June 30, 1996.
Gold River's revenues net of promotional allowances decreased
$3,846,000 or approximately 8% during the year ended June 30, 1997, as
compared to the prior year. Such decrease is primarily the result of
decreases in casino revenues of $3,707,000 or approximately 11%; food
and beverage revenues of $451,000 or approximately 4%; and room revenues
of $929,000 or approximately 13%; and an offsetting increase in other
revenues of $139,000 or approximately 6%; and a reduction in promotional
allowances of $1,102,000 or approximately 21%.
Management believes that the decline in Laughlin market revenues
is, in part, a result of the expansion of gaming activities in the
United States in recent years. Laughlin properties have been further
impacted by the circle of competition from Southern Nevada (Las Vegas,
Mesquite and the California-Nevada border corridor along Interstate 15
into Las Vegas), Southern California and Arizona. The critical mass of
the Laughlin hotel/casino market has been redefined with the addition of
almost 2,100 rooms in three years representing an approximately 20%
increase. The intense competition within the Laughlin market and Gold
River's inability to enhance its facilities to better serve the customer
has resulted in a loss of market share and revenues therefrom.
The approximately 11% decrease in casino revenues for the year
ended June 30, 1997, as compared to the prior year, reflects, in part,
the overall downturn in gaming revenue of 5% in comparison to the year
ended June 30, 1997 experienced by the Laughlin market and, in part, the
gain in market share by properties that have added hotel rooms. Gold
River's slot revenue decreased $2,077,000 or approximately 8% for the
year ended June 30, 1997, as compared to the prior year. Table games
revenues decreased $1,224,000 or approximately 25% for the year ended
June 30, 1997, as compared to the prior year. This was the result of a
decrease in table games "play" of approximately 26%, and a decline in
table games "hold". Additionally, other gaming revenues (composed of
Keno, Bingo, Poker, and the Race/Sports books) also declined $406,000 or
approximately 16% for the year ended June 30, 1997, as compared to the
prior year.
As a part of normal customer relations, Nevada resorts typically
provide beverages without charge to customers who are playing the
various casino games. Additionally Nevada resorts typically provide
hotel accommodations, food and/or beverages to selected customers either
without charge or at reduced rates ("complimentaries"). The retail
value of such services is included in the respective revenue
classifications and is then deducted as a promotional allowance. Gold
River's policy regarding extending discretionary complimentaries is
designed to ensure that such complimentaries are only offered to
customers who exhibit a level of gaming play in an amount sufficient to
warrant the extension of complimentaries. As a result, Gold River has
been increasingly selective in the extension of complimentaries.
Because the retail value of complimentaries was included in its reported
revenues, there was a corresponding decrease in Gold River's room, food
and beverage revenues as a result of the reduction of approximately
$1,102,000 in complimentaries extended under this new policy.
During the year ended June 30, 1997, beverage revenues decreased
$271,000 or approximately 8%, as compared to the prior year, generally
as a result of a decrease in casino traffic. Food revenues decreased
$180,000 or approximately 2%, primarily as a result of a decrease in the
number of customers served of approximately 7%.
The $929,000 or approximately 13% decrease in room revenues during
the year ended June 30, 1997, as compared to the prior year, is the
result of decreases in the average room rate of approximately 9% and
approximately 13,000 in the number of occupied rooms for the year.
During the year ended June 30, 1997 Gold River's hotel room occupancy
was 84% as compared to 87% during the prior year.
The increase of $139,000 or approximately 6% in other revenues
during the year ended June 30, 1997, as compared to the prior year, is
primarily due to increases in arcade revenues of $32,000, health spa
- 15 -
<PAGE>
revenues of $33,000, and miscellaneous revenues of $271,000 which offset
decreases in retail revenues of $163,000 and telephone revenues of
$34,000.
Costs and Expenses
Operating expenses were $46,368,000 during the year ended June 30,
1997 as compared to $51,161,000 during the year ended June 30, 1996, a
decrease of $4,793,000 or approximately 9%.
The $1,390,000 or approximately 8% decrease in casino expense is
primarily the result of decreases of $465,000 in gaming taxes, $538,000
in casino personnel costs and $757,000 in the estimated cost of
providing rooms, food and beverages to customers without charge; offset
by increases of $268,000 in slot club cash awards and $102,000 in other
casino department expenses.
The $300,000 or approximately 4% decrease in food and beverage
expenses is primarily the result of decreases of $224,000 in the cost of
sales, and $355,000 in personnel costs; offset by a $11,000 increase in
other food and beverage expenses and a $268,000 decrease in the
estimated cost of providing food and beverage to customers without
charge (Note: the estimated cost of providing food and beverage to
customers without charge is allocated to the casino department.
Consequently, a decrease in such amount results in an increase in food
and beverage departmental expenses).
The $434,000, or approximately 11%, increase in room expenses is
primarily attributable to increases in, hotel materials and supplies of
$39,000 and a $479,000 decrease in the estimated cost of providing rooms
to customers without charge (Note: the estimated cost of providing rooms
to customers without charge is allocated to the casino department.
Consequently, a decrease in such amount results in an increase in hotel
departmental expenses) offset by a decreases of approximately $61,000 in
cost of personnel and $23,000 "other" hotel expenditures.
The $916,000 or approximately 9% decrease in selling, general and
administrative expense during the year ended June 30, 1997 in comparison
to the prior year is attributable largely to decreases in professional
and consulting services of approximately $517,000, in personnel costs of
approximately $108,000, in other selling, general and administrative
expenses of approximately $291,000.
The decrease of $3,228,000 in depreciation and amortization expense
during the year ended June 30, 1997 as compared to the prior year is due
to the revaluation of the Company's property and equipment.
The $173,000, or approximately 5%, decrease in maintenance and
utilities expense during the year ended June 30, 1997 as compared to the
prior year is primarily the result of a decrease of $145,000 in
utilities, $67,000 in personnel costs and an increase of $39,000 in
other maintenance expenses.
Professional fees related to debt restructuring were $1,464,000
during the year ended June 30, 1997 as compared to $717,000 during the
prior year.
The $230,000 decrease in note discount amortization and $2,419,000
decrease in unamortized note discount are due to their elimination in
the year ended June 30, 1996.
The $5,817,000 decrease in interest expense is attributable to the
Company's Chapter 11 filing and reflects the ceasing of the interest
accrual on the New Mortgage Notes for the entire year.
- 16 -
<PAGE>
Results of Operations
The Year Ended June 30, 1996 Compared to the Year Ended June 30, 1995
Revenues
Gold River's income from operations before loss on permanent
impairment of assets decreased $6,615,000 during the year ended June 30,
1996, as compared to the year ended June 30, 1995.
Revenues, net of promotional allowances, decreased $7,606,000, or
13%, during the year ended June 30, 1996, as compared to the prior year.
Such decrease was primarily the result of decreases in casino revenues
of $6,653,000, or 16%; food and beverage revenues of $1,339,000, or 11%;
room revenues of $520,000, or 7%; and an increase in other revenues of
$42,000, or 2%; and an offsetting reduction in promotional allowances of
$864,000, or 14%.
Management believes that the decline in Laughlin market revenues
is, in part, a result of the expansion of gaming activities in the
United States in recent years. Laughlin properties have been further
impacted by the circle of competition from Southern Nevada (Las Vegas,
Mesquite and the California-Nevada border corridor along Interstate 15
into Las Vegas), Southern California and Arizona. The critical mass of
the Laughlin hotel/casino market has been redefined with the addition of
almost 2,100 rooms in two years representing an approximately 20%
increase. The intense competition within the Laughlin market and Gold
River's inability to enhance its facilities to better serve the customer
has resulted in a loss of market share and revenues therefrom.
Gold River's slot revenue decreased $5,595,000 or approximately 18%
for the year ended June 30, 1996, as compared to the prior year. Table
games revenues decreased $1,098,000 or approximately 18% for the year
ended June 30, 1996 as compared to 1995. This was the result of a
decrease in table games "play" of approximately 12%, which was partially
offset by a 10% increase in table games "hold" percentage in the year
ended June 30, 1996.
As a part of normal customer relations, Nevada resorts typically
provide beverages without charge to customers who are playing the
various casino games. Additionally Nevada resorts typically provide
hotel accommodations, food and/or beverages to selected customers either
without charge or at reduced rates ("complimentaries"). The retail
value of such services is included in the respective revenue
classifications and is then deducted as a promotional allowance. Gold
River's policy regarding extending discretionary complimentaries is
designed to ensure that such complimentaries are only offered to
customers who exhibit a level of gaming play in an amount sufficient to
warrant the extension of complimentaries. As a result, Gold River has
been increasingly selective in the extension of complimentaries.
Because the retail value of complimentaries was included in its reported
revenues, there was a corresponding decrease in Gold River's room, food
and beverage revenues as a result of the reduction of approximately
$864,000 in complimentaries extended under this new policy.
During the year ended June 30, 1996 beverage revenues decreased
$581,000, or 15%, as compared to the prior year, generally as a result
of a reduction of the charge for complimentaries and a decrease in the
number of complimentary customers served. Food revenues decreased
$758,000 or 9%, primarily as a result of a decrease in the number of
complimentary customers served.
The $520,000, or 7%, decrease in room revenues during the year
ended June 30, 1996, as compared to the prior year, was the result of
decreases in occupancy of 5%, in the average paid room rate of 1% or
approximately twenty-six-cents per room, offset by an increase in
complimentary room revenues of $70,000.
The increase of $42,000 in other revenues during the year ended
June 30, 1996, as compared to the prior year, was primarily due to
increases in retail revenues of $51,000, in arcade revenues of $15,000,
and in miscellaneous revenues of $31,000, which more than offset
decreases in telephone and health spa revenues of $17,000 and $39,000,
respectively.
- 17 -
<PAGE>
Costs and Expenses
Partly as a result of Gold River's cost reduction program,
operating expenses before impairment loss were reduced by $1,060,000, or
2%, during the year ended June 30, 1996 as compared to the prior year.
The $1,060,000 reduction was the result of decreases in payroll of
$731,000 as a result of a reduction in the number of employees; benefits
and taxes of $203,000. Such cost decreases were partially offset by
increases of $360,000 in depreciation and $574,000 in other operating
costs.
The $877,000, or 5%, decrease in casino expense was primarily the
result of decreases of $487,000 in gaming taxes, $332,000 in casino
personnel costs, $480,000 in the estimated cost of providing rooms, food
and beverages to customers without charge, offset by an increase of
$422,000 in other casino expenses.
The $97,000 decrease in Other operating departments expenses during
the year ended June 30, 1996, as compared to the prior year, was
primarily due to decreases in retail expenses of $37,000, in telephone
expenses of $13,000, and health spa expenses of $50,700, which more than
offset an increase in arcade expenses of $4,000.
The $498,000, or approximately 5%, decrease in selling, general and
administrative expense during the year ended June 30, 1996 in comparison
to the prior year was attributable largely to decreases of $140,000 in
personnel costs, $577,000 in property taxes and $93,000 in insurance
costs, offset by an increase of $312,000 in other costs.
The increase of $429,000 in depreciation and amortization expense
during the year ended June 30, 1996 as compared to the prior year was
due to the additional depreciation attributable to equipment acquired
subsequent to June 30, 1995.
The $2,419,000 increase in unamortized note discount and $209,000
decrease in note discount amortization is attributable to the Company's
Chapter 11 filing and reflects the ceasing of the interest accrual on
the New Mortgage Notes for the entire year.
Liquidity and Capital Resources
At June 30, 1997, Gold River had $4,474,000 in cash available for
operating requirements, future debt service and capital expenditures.
Growth in cash flows from operations is necessary for Gold River to meet
its debt service requirements and to fund any additional capital
expenditures.
The Company's February 9, 1996 voluntary Chapter 11 petition filing
contemplated restructuring the Company's debt plus accrued interest.
The Plan as confirmed by the Bankruptcy Court has the holders of the
Company's mortgage notes ("Bondholders") exchanging their interest in
the principal amount of the Company's debt of $75,000,000 and accrued
interest of approximately $10,980,000 for all of the Company's equity.
Mr. Paulson who will acquire all of the New Mortgage Notes will receive
100% of the new Gold River stock and become the sole shareholder of the
reorganized Company, upon receipt of the required approval from the
Nevada Gaming Authorities. The Company's current Series A common stock
and Series B common stock will be canceled and new common stock issued.
The Company will be deregistered as a publicly held corporation, and
become privately held by Mr. Paulson.
The McCarthy $5,000,000 Note, which is secured by a Deed of Trust
on the hotel's real property, plus accrued interest thereon has been
acquired by Mr. Paulson. This $5,750,000 promissory note payable to Mr.
Paulson will bear interest at eleven percent (11%) per annum and mature
sixty (60) months after the Revesting Date. Interest on the outstanding
principal balance shall be due and payable semi-annually, in arrears
commencing six (6) months after the Revesting Date.
The Bankruptcy Court entered its order confirming the Plan on March
4, 1997. Distributions to class 8 and 9 (first of four semi-annual
payments) general unsecured creditors were made on March 27, 1997 and
March 31, 1997. On September 30, 1997 the second semi-annual payment on
the class 9's was made. Pre-petition liabilities of the Company as of
February 9, 1996 are reflected in the June 30, 1996 and June 30, 1997
balance sheets as "Liabilities Subject To Compromise". Additional
claims (liabilities subject to compromise) have arisen subsequent to the
- 18 -
<PAGE>
filing date as a result of executory contract rejections, including
leases, and from determination of allowed claims for contingencies and
other disputed amounts. Liabilities incurred subsequent to the filing
date of February 9, 1996 are reported in the accompanying June 30, 1996
and June 30, 1997 balance sheets as "Liabilities Not Subject To
Compromise". The Company will continue to conduct its business as usual
under the supervision of the Bankruptcy Court while it awaits the
Revesting Date and emerging from bankruptcy.
The financial statements do not include all of the consequences of
the proceedings under Chapter 11. Particularly, such financial
statements do not purport to show, with respect to the reorganization
proceedings, (1) the realizable value of assets on a liquidation basis
or their ability to satisfy liabilities, (2) the total amount of
liabilities and contingencies which may be allowed, or the status and
priority of such liabilities and contingencies, (3) the effect upon the
Company's equity accounts of the reorganization, (4) as to operations,
the effect of any changes that may be made to the Company's business,
pursuant to the Plan. The Company's (or its successor's) ability to
continue as a going concern is dependent upon its:
(1) Obtaining approval of the Plan by the Bankruptcy Court and
certain creditor categories, which was obtained on February 26,
1997.
(2) Obtaining the requisite regulatory approvals required by the
State of Nevada, including approvals by the gaming authorities,
which were obtained as of September 30, 1997.
(3) Obtaining sufficient cash to fund all distributions and cash
reserves required at the Effective Date which was completed on
March 31, 1997 and Revesting Date which will be completed on
October 14, 1997.
(4) Achieving profitable operations and sufficient cash flows to meet
future obligations required by the Plan.
The consolidated financial statements do not include all
adjustments that might be necessary should the Company be unable to
continue as a going concern. As shown in the financial statements,
during the fiscal years ended June 30, 1997 and 1996, Gold River
incurred net losses of $1,867,000 and $70,340,000 (which in 1996
includes a recognized loss on permanent impairment of assets of
$59,060,000) respectively. The Company's current liabilities exceeded
its current assets at June 30, 1997 and June 30, 1996 by $85,178,000 and
$90,281,000, respectively.
All of the conditions necessary for the Effective Date to occur
have been satisfied. The conditions satisfied as of the Effective Date
are:
1) The Confirmation Order is final.
2) Paulson contribution's to acquire the remaining approximate 9%
of the New Mortgage Notes and the McCarthy Promissory Note have
been made.
3) The Debtors have made initial class 8 and 9 general unsecured
creditors payments and made on May 28, 1997 the payments
necessary as a result of the May 12, 1997 Bankruptcy Court
hearing which finalized additional claims objections.
4) Sufficient cash is available to fund the Debtors normal working
capital and minimum gaming reserve requirement.
Since the Bankruptcy filing, the Company, other than its payment
obligations for debt service, has had sufficient cash flows to met its
obligations as they have occurred. In management's opinion, the
significant reduction or elimination of debt service should ensure the
viability of the Company's future operating results. The Company
believes that it will be able to meet it's obligations, other than debt
service noted above, when they become due. The Debtors cash is
sufficient to fund the remaining three (3) semi-annual class 9 general
unsecured payments and all other distributions necessary under the Plan.
As of the date of filing this report on Form 10-K, the Company has
engaged various professionals with the approval of the Bankruptcy Court.
In addition, the Bankruptcy Court has approved the Noteholder's and
official unsecured creditors employment of professionals that are
compensated by the Company. As a result, the Company has incurred
$1,464,000, for the fiscal year ended June 30, 1997 for these
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<PAGE>
professional and related Bankruptcy costs. The Company believes that
subsequent to June 30, 1997 additional costs connected with the Chapter
11 filing will have some impact in the short term on Gold River's
ability to meet its normal and ordinary obligations as they occur. The
financial statements for the year ended June 30, 1997 do not reflect all
the professional and related Bankruptcy costs or adjustments necessary
to finalize the Plan. The Plan implementation, including the Revesting
Date which will occur on October 14, 1997, when the Company emerges from
bankruptcy will require approximately $500,000 for additional
professional and related Bankruptcy costs that will be paid or accrued
until the Revesting Date occurs on October 14, 1997. Mr. Paulson has
indicated a willingness to make additional investments in property
up-grades which will be quantified and determined after he takes control
on October 15, 1997.
Forward-Looking Statements/ Risk Factors
Certain matters discussed in this Report may be forward-looking
statements that are subject to risks and uncertainties that could cause
actual results to differ materially from those projected. Such risks
and uncertainties include, but are not limited to, the risk factors set
forth below. The following risk factors, among others, may cause the
Company's operating results and/or financial position to be adversely
affected from time to time:
1. Declining demand or downward pricing pressure for the
Company's products or services as a result of general or
specfic economic conditions and new competition causing a
reduction of demand for Gold River's products or services.
2. Competitive factors including, but not limited to, the
Company's limitations respecting financial resources and its
ability to compete against companies with substantially
greater resources.
3. The Company's ability to control the amount of operating
expenses and/or the impact of any non-recurring or unusual
items resulting from the Company's continuing evaluation of
its strategies, plans, organizational structure and asset
valuations.
4. The cost and effects of legal and administrative proceedings
including Chapter 11 Bankruptcy Reorganization particularly.
those described in Notes 1 and 7 of Notes to Consolidated
Financial Statements contained in this Report and claims made
by or against the Company.
5. The adoption of new, or changes in existing accounting
policies and practices.
- 20 -
<PAGE>
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Page
Independent Auditors' Report F-1
Consolidated Balance Sheets
June 30, 1997 and 1996 F-2
Consolidated Statements of Operations
Years Ended June 30, 1997, 1996 and 1995 F-3
Consolidated Statements of Changes in
Shareholders' Equity (Deficiency)
Years Ended June 30, 1997, 1996 and 1995 F-4
Consolidated Statements of Cash Flows
Years Ended June 30, 1997, 1996 and 1995 F-5
Notes to Consolidated Financial Statements F-6
- 21 -
<PAGE>
INDEPENDENT AUDITORS' REPORT
Gold River Hotel & Casino Corporation
(d.b.a. Gold River Gambling Hall & Resort)
Las Vegas, Nevada
We have audited the accompanying balance sheets of Gold River Hotel &
Casino Corporation (Debtor-in-Possession), (the "Company") as of June
30, 1997 and 1996, and the related statements of operations, changes in
shareholders' equity (deficiency), and of cash flows for each of the
three years in the period ended June 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Gold River Hotel & Casino
Corporation at June 30, 1997 and 1996 , and the results of its
operations and its cash flows for each of the three years in the period
ended June 30, 1997 in conformity with generally accepted accounting
principles.
As discussed in Notes 1 and 2 to the consolidated financial statements,
the Company has filed for reorganization under Chapter 11 of the Federal
Bankruptcy Code. The accompanying financial statements do not purport to
reflect or provide for the consequences of the bankruptcy proceedings.
In particular, such financial statements do not purport to show (a) as
to assets, their realizable value on a liquidation basis or their
availability to satisfy liabilities; (b) as to prepetition liabilities,
the amounts that may be allowed for claims or contingencies, or the
status and priority thereof; (c) as to shareholder accounts, the effect
of any changes that may be made in the capitalization of the Company; or
(d) as to operations, the effect of any changes that may be made in its
business.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Notes 1
and 2 to the consolidated financial statements, the Company's recurring
losses from operations, negative working capital, and shareholders'
capital deficiency raise substantial doubt about its ability to continue
as a going concern. Management's plans concerning these matters are also
discussed in Note 1. The financial statements do not include adjustments
that might result from the outcome of this uncertainty.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
October 10, 1997
F-1
<PAGE>
GOLD RIVER HOTEL & CASINO CORPORATION
(d.b.a. GOLD RIVER GAMBLING HALL & RESORT)
(DEBTOR IN POSSESSION)
CONSOLIDATED BALANCE SHEETS
________________________________________________________________________
<TABLE>
<CAPTION>
June 30, June 30,
ASSETS 1997 1996
------- --------
(in thousands, except share data)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,474 $ 4,200
Accounts receivable, net 254 457
Inventories 532 597
Prepaid expenses and other 1,340 1,328
------- -------
Total Current Assets 6,600 6,582
------- -------
PROPERTY AND EQUIPMENT - NET 28,268 29,000
------- -------
DEPOSITS 126 344
------- -------
TOTAL $ 34,994 $ 35,926
======= =======
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
LIABILITIES NOT SUBJECT TO COMPROMISE:
Current portion of long-term debt $ 382 $ -
Accounts payable 2,601 2,135
Accrued liabilities
Payroll and related 1,184 908
Other 1,462 889
------- -------
Total Current Liabilities
Not Subject To Compromise 5,629 3,932
------- -------
LIABILITIES SUBJECT TO COMPROMISE:
Accounts payable - 1,089
Interest payable 11,149 11,350
Long-term debt - current by its terms - 492
Notes subject to demand for acceleration 75,000 80,000
------- -------
Total Current Liabilities
Subject To Compromise 86,149 92,931
------- -------
LONG-TERM DEBT 6,289 269
------- -------
TOTAL LIABILITIES 98,067 97,132
------- -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIENCY:
Preferred Stock - Series A, $.01 par value
Authorized 500,000 shares;
no shares issued and outstanding - -
Preferred Stock, $.01 par value
Authorized 500,000 shares;
no shares issued and outstanding - -
Common Stock - Series A, $.01 par value
Authorized 1,733,580 shares; issued and
outstanding 581,194 shares 6 6
Common Stock - Series B, $.01 par value
Authorized 2,913,580 shares; issued and
outstanding 1,179,750 shares 12 12
Additional paid-in-capital 22,136 22,136
Accumulated deficit (85,227) (83,360)
------- -------
Total Shareholders' Deficiency (63,073) (61,206)
------- -------
TOTAL $ 34,994 $ 35,926
======= =======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
F-2
<PAGE>
GOLD RIVER HOTEL & CASINO CORPORATION
(d.b.a. GOLD RIVER GAMBLING HALL & RESORT)
(DEBTOR IN POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended June 30, 1997, 1996 and 1995
________________________________________________________________________
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
REVENUES: (in thousands, except per share data)
<S> <C> <C> <C>
Casino $ 29,921 $ 33,628 $ 40,281
Food and beverage 10,284 10,735 12,074
Rooms 6,446 7,375 7,895
Other 2,641 2,502 2,460
------- ------- -------
49,292 54,240 62,710
Less: promotional allowances (4,267) (5,369) (6,233)
------- ------- -------
45,025 48,871 56,477
------- ------- -------
COSTS AND EXPENSES:
Direct costs and expenses of
operating departments:
Casino 17,237 18,627 19,504
Food and beverage 7,868 8,168 8,160
Rooms 4,319 3,885 3,878
Other 1,481 1,448 1,545
Other operating expenses:
Selling, general and
administrative 9,141 10,057 10,555
Depreciation and amortization 1,504 4,732 4,303
Maintenance and utilities 3,354 3,527 3,490
Professional fees related
to reorganization 1,464 717 -
------- ------- -------
46,368 51,161 51,435
------- ------- -------
INCOME (LOSS) BEFORE LOSS ON
PERMANENT IMPAIRMENT OF ASSETS (1,343) (2,290) 5,042
LOSS ON PERMANENT IMPAIRMENT
OF ASSETS - 59,060 -
------- ------- -------
INCOME (LOSS) FROM OPERATIONS (1,343) (61,350) 5,042
OTHER EXPENSE:
Note discount amortization - 2,649 439
Interest expense 524 6,341 10,234
------- ------- -------
(contractual interest $10,127,000 and
$10,093,000 for 1997 and 1996)
LOSS BEFORE INCOME TAXES (1,867) (70,340) (5,631)
INCOME TAXES:
Income tax (benefit) provision - - -
------- ------- -------
NET LOSS $ (1,867) $(70,340) $ (5,631)
======== ======== ========
Weighted average shares
outstanding 1,760,944 1,760,944 1,760,944
========= ========= =========
Net loss per share $ (1.06) $ (39.94) $ (3.20)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
F - 3
<PAGE>
GOLD RIVER HOTEL & CASINO CORPORATION
(d.b.a. GOLD RIVER GAMBLING HALL & RESORT)
(DEBTOR IN POSSESSION)
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY (DEFICIENCY)
For the Years Ended June 30, 1997, 1996 and 1995
(in thousands, except shares outstanding)
________________________________________________________________________
<TABLE>
<CAPTION>
Additional
Shares Common Paid-In Accumulated
Outstanding Stock Capital Deficit Total
----------- ------ --------- ---------- ------
<S> <C> <C> <C> <C> <C>
Balances at
July 1, 1994 1,760,944 $ 18 $ 22,136 $ (7,389) $ 14,765
Net loss - - - (5,631) (5,631)
----------- ------ --------- ---------- -------
Balances at
June 30, 1995 1,760,944 18 22,136 (13,020) 9,134
Net loss - - - (70,340) (70,340)
----------- ------ --------- ---------- -------
Balances at
June 30, 1996 1,760,944 18 22,136 (83,360) (61,206)
Net loss - - - (1,867) (1,867)
----------- ------ --------- ---------- -------
Balances at
June 30, 1997 1,760,944 $ 18 $ 22,136 $(85,227) $(63,073)
========== ====== ======== ========== =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
F - 4
<PAGE>
GOLD RIVER HOTEL & CASINO CORPORATION
(d.b.a. GOLD RIVER GAMBLING HALL & RESORT)
(DEBTOR IN POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended June 30, 1997, 1996 and 1995
________________________________________________________________________
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ---------
CASH FLOWS FROM
OPERATING ACTIVITIES: ( in thousands)
<S> <C> <C> <C>
Net loss $ (1,867) $ (70,340) $ (5,631)
Adjustments to reconcile
net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 1,504 4,732 4,303
Loss on permanent impairment
of assets - 59,060 -
Amortization of Note discount - 2,649 439
Other noncash adjustments:
Decrease (increase) in accounts
receivable, net 203 (83) 51
Decrease (increase) in inventories 65 23 (20)
Decrease (increase) in
prepaid expenses (22) 292 156
Decrease (increase) in deposits 218 (161) 60
Increase in liabilities
not subject to compromise 1,697 263 -
Increase (decrease) in accounts
payable subject to compromise (1,089) 1,089 -
Increase (decrease) in
accounts payable - - (10)
Increase (decrease) in
interest payable (201) 6,072 315
Decrease in accrued
liabilities, net - - (167)
------- -------- ---------
Net cash provided by (used in)
operating activities 508 3,596 (504)
------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES -
Capital expenditures paid in cash (210) (1,184) (817)
------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES -
Cash paid to reduce long-term debt (24) (1,007) (1,459)
------- -------- ---------
Net cash used by investing activities (24) (1,007) (1,459)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 274 1,405 (2,780)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 4,200 2,795 5,575
------ -------- -------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 4,474 $ 4,200 $ 2,795
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during periods
for interest $ 28 $ 9,919 $ 9,182
======= ======= =======
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
During the years ended June 30, 1997, 1996 and 1995, finance
agreement obligations of $5, $83 and $1,134 respectively, were
incurred with the acquisition of new equipment.
The accompanying notes are an integral part of these
consolidated financial statements
F -5
<PAGE>
GOLD RIVER HOTEL & CASINO CORPORATION
(d.b.a. GOLD RIVER GAMBLING HALL & RESORT)
(DEBTOR IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________
1. PETITION FOR RELIEF UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY
CODE
a. Petition for Relief Under Chapter 11
On February, 9, 1996 Gold River filed voluntary petitions in the
United States Bankruptcy Court for the District of Nevada ("Bankruptcy
Court") to reorganize its debt and equity under Chapter 11 of the United
States Bankruptcy Code. The filing was made in order to facilitate the
Company's efforts in restructuring Gold River's New Mortgage Notes.
Under Chapter 11, certain claims against the Company in existence prior
to the filing of the petition are stayed while Gold River continues
business operations as debtor-in-possession. Claims collateralized by
the assets of the Company also are stayed, although the holders of such
claims have the right to move the Court for relief from the stay.
Pre-petition liabilities of the Company as of February 9,1996 are
reflected in the June 30, 1997 and 1996 balance sheets as "Liabilities
Subject To Compromise". Additional claims (liabilities subject to
compromise) may arise subsequent to the filing date resulting from
rejection of executory contracts, including leases, and from
determination of allowed claims for contingencies and other disputed
amounts. Liabilities incurred subsequent to the filing date of February
9, 1996 are reported in the accompanying June 30, 1997 and 1996 balance
sheets as "Liabilities Not Subject To Compromise". The Company has
continued to conduct its business as usual under the supervision of the
Court.
b. Plan of Reorganization
On June 7, 1996 Gold River and the "Official Committee of
Bondholders" filed their Joint Plan of Reorganization, (the "Plan") and
their proposed Disclosure Statement with the Bankruptcy Court outlining
their plan to reorganize the Company's debt and equity under Chapter 11
of the United States Bankruptcy Code. Implementation of the Plan is
subject to a number of conditions, certain distribution requirements and
approval of the Plan by certain creditors and the Bankruptcy Court.
On February 26, 1997 Gold River's confirmation hearing was held in
Bankruptcy Court. The "Second Amended Joint Plan of Reorganization of
Debtors, the Official Committee of Bondholders, and Mr. Allen E. Paulson
(December 13, 1996) (As Modified on February 14, 1997 and February 27,
1997)" was confirmed and the confirming order entered on March 4, 1997.
The effective date of the Plan occurred on March 25, 1997 and the
Debtors expect that the Plan Revesting Date (as defined in the Plan)
will occur on October 14, 1997. The reorganization contemplated by the
Plan will not occur until the Plan Revesting Date and the Company
emerges from bankruptcy.
Under the Plan Mr. Allen E. Paulson will become the sole
shareholder of Gold River and receive 100% of the new Gold River stock
on October 14, 1997 the Revesting Date. Mr. Paulson will also serve as
the sole director, President, Secretary and Treasurer of the Reorganized
Company which along with becoming sole shareholder requires Nevada
Gaming Authorities approval prior to an effective Revesting Date. Mr.
Paulson is the Chairman of the Board of Directors and Chief Executive
Officer of Full House Resorts, Inc. ("Full House") and was the Chairman
F - 6
<PAGE>
of the Board of Directors and Chief Executive Officer of Gulfstream
Aerospace Corporation ("Gulfstream") until his retirement in 1992.
In October and November, 1996 Mr. Paulson acquired approximately
91% of the $75,000,000 in New Mortgage Notes outstanding. Mr. Paulson
will acquire the remaining approximate 9% and the entire $75,000,000 in
New Mortgage Notes and accrued interest will be converted to equity.
The Class A and B common stock will be canceled and Gold River
deregistered as a publicly traded corporation, and become privately held
by Mr. Paulson. The only material remaining debt is a $5,750,000
promissory note payable to Mr. Paulson and secured by a first priority
lien on Gold River's assets (the "Paulson Debt"). On March 25, 1997,
Mr. Paulson made the contribution of cash necessary to acquire the
approximate remaining 9% of the New Mortgage Notes and also to acquire
the McCarthy Promissory Note dated August 31, 1992 in the principal
amount of $5,000,000, plus accrued interest.
On March 27, 1997, Class 8 general unsecured creditors received
full payment on all allowed claims. Also on March 31, 1997, general
unsecured creditors received full payment representing the first of four
semi-annual payments on all allowed Class 9 claims. Certain leases and
contracts have been either assumed or rejected and obligations to
secured creditors have been restructured pursuant to the Plan.
Certain conditions need to be satisfied before the Plan becomes
finally effective on the Revesting Date. The most significant of which
are the formal conversion of debt for equity and Mr. Paulson's licensing
approval. Mr. Paulson has been licensed by the Nevada gaming
authorities, and the confirmed Plan can be implemented with the Company
emerging from bankruptcy. Until the Revesting Date, the Company
continues to operate under the jurisdiction of the Bankruptcy Court.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The accompanying consolidated financial
statements have been prepared on a going concern basis which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, during the years ended June 30, 1997, 1996 and 1995, Gold
River incurred net losses of $1,867,000, $70,340,000 and $5,631,000
(which in 1996 includes a recognized loss on permanent impairment of
assets of $59,060,000), respectively. The Company's current liabilities
exceeded its current assets by $85,178,000 and $90,281,000 at June 30,
1997 and 1996. Furthermore, at June 30, 1997, there is a shareholders'
deficiency of $63,073,000. These factors among others indicate that the
Company is unable to continue as a going concern without the pending
reorganization of debt for equity. Also, Gold River was unable to fund
the semi-annual interest payments due after August 31, 1995 relating to
the New Mortgage Notes and after February 28, 1996 for the McCarthy
Note. The financial statements do not include all of the consequences
of the proceedings under Chapter 11. Particularly, such financial
statements do not purport to show, with respect to the reorganization
proceedings, (1) the realizable value of assets on a liquidation basis
or their ability to satisfy liabilities, (2) the total amount of
liabilities and contingencies which may be allowed, or the status and
priority of such liabilities and contingencies, (3) the effect upon the
Company's equity accounts of the reorganization, (4) as to operations,
the effect of any changes that may be made to the Company's business,
F - 7
<PAGE>
pursuant to the future effectiveness of the Plan. The Company's (or its
successor's) ability to continue as a going concern is dependent upon
its:
1) Obtaining approval of the Plan by the Bankruptcy Court and certain
creditor categories, which was obtained on February 26, 1997.
2) Obtaining the requisite regulatory approvals required by the State
of Nevada, including approvals by the gaming authorities which
were obtained as of September 30, 1997.
3) Obtaining sufficient cash to fund all distributions and cash
reserves required at the time the Plan became effective which was
completed on March 31, 1997.
4) Achieving profitable operations and sufficient cash flows to meet
future obligations required by the Plan.
The consolidated financial statements do not include all
adjustments that might be necessary should the Company be unable to
continue as a going concern.
Nature of Operations - On August 31, 1992 (the "Effective Date"),
Gold River (formerly Goldriver Finance Corporation ("GFC")) acquired
title to the Casino Hotel located in Laughlin, Nevada pursuant to the
Third Amended Plan of Reorganization (the "Plan") filed by GFC and the
Predecessor Partnership under Chapter 11 of the United States Bankruptcy
Code. Gold River is a publicly traded parent company to its wholly
owned operating subsidiary, Gold River Operating Corporation. Gold River
Operating Corporation owns and operates the Casino Hotel in Laughlin,
Nevada.
The Predecessor Partnership was organized in July 1983, and in 1984
constructed the Casino Hotel. In June 1990, the Predecessor Partnership
completed an expansion project, which enlarged the existing facilities
at the Casino Hotel by adding a 25-story hotel tower and related casino,
restaurant, parking and other facilities. From March 30, 1987, until
December 24, 1991, a Las Vegas based management company, California
Hotel & Casino Corporation, operated the Casino Hotel pursuant to a
management contract with the Predecessor Partnership. From December 24,
1991, until August 31, 1992, the Predecessor Partnership operated the
Casino Hotel. On September 1, 1992, Gold River Operating Corporation
began operating the Casino Hotel.
Principles of Consolidation - The consolidated financial statements
include the accounts of Gold River and its wholly owned subsidiary, Gold
River Operating Corporation, which was organized in August 1992 for the
purpose of owning and operating the Casino Hotel. All significant
intercompany transactions have been eliminated in consolidation.
Cash and Cash Equivalents - Highly liquid investments purchased
with maturities of three months or less are treated as cash equivalents.
Inventories - Inventories are stated at the lower of cost or
market. Cost is determined by the first-in, first-out method.
Property and Equipment - Property and equipment are carried at cost
less adjustment for impairment. Depreciation, including amortization of
capitalized leases, is computed using the straight-line method.
Estimated useful lives are 40 years for buildings and improvements and
F - 8
<PAGE>
7 years for furniture and equipment. Costs of major improvements are
capitalized. The cost of normal maintenance and repairs is charged to
expense as incurred. Gains or losses on disposals are recognized as
incurred.
Amortization of Note Valuation Discount - The note valuation
discount was being amortized over the life of the related indebtedness
using the effective interest method. The unamortized valuation discount
was offset against the balance of the related indebtedness.
Amortization of the note valuation discount ceased upon Gold River's
filing of the bankruptcy petition and the unamortized discount was
adjusted to present the amount of the New Mortgage Notes at the allowed
amount.
Federal Income Taxes - Deferred income taxes arise from temporary
differences resulting from income and expense items being reported for
financial accounting and tax purposes in different periods. See Note 6
for additional information regarding the calculation of income taxes.
Casino Revenues and Promotional Allowances - Casino revenues
include the aggregate of gaming wins and losses.
Promotional allowances consist primarily of accommodations, food
and beverages furnished without charge to customers. The retail value
of such services is included in the respective revenue classifications
and is then deducted as promotional allowances.
The estimated costs of providing promotional allowances are
classified as costs of the casino operating department through
interdepartmental allocations. Such allocations for the years ended
June 30, 1997, 1996 and 1995, are as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
1997 1996 1995
------ ------ ------
(in thousands)
<S> <C> <C> <C>
Rooms $ 525 $ 1,005 $ 875
Food and beverage 3,224 3,491 4,101
------ ------ ------
Total costs allocated to
casino department $ 3,749 $ 4,496 $ 4,976
====== ====== ======
</TABLE>
Interest Costs - The Company has determined that there is
insufficient collateral to cover the principal and interest on the
$75,000,000 New Mortgage Notes. Therefore, in accordance with
provisions of the Bankruptcy Code the Company has discontinued accruing
interest on this obligation subsequent to February 9, 1996, the date the
bankruptcy petition was filed.
Net Loss Per Share - The net loss per share is calculated based
upon the weighted average number of shares outstanding during the
period.
Estimates and Assumptions - The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reported period. Actual
results could differ from these estimates.
Recently Issued Accounting Standards - In February 1997, the FASB
issued Statement No. 128 "Earnings per Share". This statement
establishes standards for computing and presenting earnings per share
and is effective for financial statements issued for periods ending
F - 9
<PAGE>
after December 15, 1997. Earlier application of this statement is not
permitted and upon adoption requires restatement (as applicable) of all
prior-period earnings per share data presented. Management believes
that the implementation of this standard will not have a significant
impact on earnings per share.
In February 1997, the FASB issued Statement No. 129 "Disclosure of
Information about Capital Structure". This staement establishes
standards for disclosing information about an entities capital
structure. Management intends to comply with the disclosure
requirements of this statement which are effective for periods ending
after December 15, 1997.
In June 1997, the FASB issued Statement No. 130 "Reporting
Comprehensive Income" ("SFAS 130"). This statement requires companies
to classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other
comprehensive income separately from retained earnings and additional
paid-in-capital in the equity section of statement of financial
position. SFAS 130 is effective for financial statements issued for
fiscal years beginning after December 15, 1997. Management does not
believe that this new standard will have a material impact on the
Company's financial statements.
In June 1997, the FASB issued Statement No. 131 "Disclosure About
Segments of an Enterprise and Related Information" ("SFAS 131"). This
statement establishes additional standards for segment reporting in the
financial statements and is effective for fiscal years beginning after
December 15, 1997. The Company believes that the segment information
required to be disclosed under SFAS 131 will be more comprehensive than
previously provided, including expanded disclosure of income statement
and balance sheet items for each of its reportable segments under SFAS
131. However, the Company has not yet completed its analysis of which
operating segments it will report on.
Reclassifications - Certain prior year accounts have been
reclassified to conform with the current presentation.
3. ACCOUNTS RECEIVABLE
Accounts receivable at June 30, 1997, and 1996 were as follows:
<TABLE>
<CAPTION>
(in thousands)
1997 1996
------ ------
<S> <C> <C>
Casino $ 179 $ 247
Hotel 88 205
Other 125 188
------ ------
Total 392 640
Less allowance for
doubtful accounts 138 183
------ ------
Total $ 254 $ 457
====== ======
</TABLE>
F - 10
<PAGE>
4. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1997, and 1996 consisted of the
following:
<TABLE>
<CAPTION>
(in thousands)
1997 1996
------- -------
<S> <C> <C>
Land $ 7,830 $ 7,830
Buildings and improvements 18,339 18,270
Furniture and equipment 3,594 2,900
------- -------
Total 29,763 29,000
------- -------
Less accumulated depreciation
and amortization 1,495 -
------- -------
Total $ 28,268 $ 29,000
======= =======
</TABLE>
In connection with the petition for relief under Chapter 11 filed
February 9, 1996 and filing of the Plan of Reorganization on June 7,
1996, management of Gold River reassessed the carrying value of its
property and equipment. Management used several approaches to evaluate
the fair value of the Company's assets and considered several options to
realize the value of such assets. The value was primarily based upon
estimated future cash flows. Management concluded its evaluation of the
fair value of the Company's property and equipment in the fourth quarter
of fiscal year 1996 and determined that a reasonable estimate of such
value was $29,000,000. Based upon the evaluation, the property and
equipment was written down by $59,060,000 to reflect the permanent
impairment of value.
5. LONG-TERM DEBT
Long-term debt at June 30, 1997, and 1996, consisted of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
(in thousands)
<S> <C> <C>
$75,000,000 principal amount
of New Mortgage Notes bearing
collateralized by land,
buildings and substantially
all personal property.
Interest was contractually payable
semiannually on February 28 and
August 31. $ 75,000 $ 75,000
11% note payable to Mr. Paulson
collateralized by land,
buildings and fixtures.
Commencing six months after
the Revesting Date interest is to
be paid semiannually.
Principal payments are due after the
Revesting Date (October 14, 1997) on
November 14th in 1998, 1999, 2000
and 2001. 5,750 -
F - 11
<PAGE>
5. LONG-TERM DEBT (continued)
1997 1996
------- -------
8.9% note payable to McCarthy
Western Constructors, Inc.
collateralized by land,
buildings and fixtures.
Interest payable semiannually
on February 28, and August 31. - 5,000
Obligations under capital leases,
or finance agreements
secured by furniture and
equipment, with interest rates
ranging from 7.9% to 14.25%. 921 761
------- -------
Total long-term debt 81,671 80,761
Less: Current portion 382 492
Notes subject to
demand for acceleration 75,000 80,000
------- -------
Total $ 6,289 $ 269
======= =======
</TABLE>
Notes Subject to Acceleration
Because interest payments after the August 31, 1995, and February
28, 1996 were not made the New Mortgage Notes and McCarthy note were
subject to acceleration and the entire $80,000,000 of these outstanding
notes has been classified in the balance sheet as a current liability in
the fiscal year ended June 30, 1996. At June 30, 1997 the $75,000,000
of New Mortgage Notes was still classified as a current liability. The
McCarthy Note of $5,000,000 plus accrued interest was acquired by Mr.
Paulson and booked as a long-term debt.
At June 30, 1997, scheduled maturities of long-term debt, excluding
notes subject to acceleration, were as follows:
(in thousands)
1998 $ 382
1999 346
2000 162
2001 29
2002 2
Thereafter -
-----
Total $ 921
=====
F - 12
<PAGE>
6. INCOME TAXES
The benefit for income taxes is based on pretax loss reported in
the consolidated financial statements. During 1997, 1996 and 1995 the
Company recorded no income tax benefit due to the uncertainty associated
with the recoverability of its operating loss carryforwards.
A reconciliation of the Federal statutory income tax rate to the
effective income tax rate based on income before income tax follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory rate 35% 35% 35%
Surtax amount (1) (1) (1)
Decrease in tax rate
resulting from:
Net operating loss
limitation and other (34) (34) (34)
---- ---- ----
Effective rate 0% 0% 0%
==== ==== ====
</TABLE>
The tax net operating loss carryforward available at June 30, 1997
is approximately $43,000,000, expiring in years beginning 2007.
Availability of the tax net operating loss to offset future taxable
income may be significantly reduced by adjustments and limitations
resulting from the bankruptcy proceedings.
The temporary differences and tax carryforwards which created
deferred tax assets and liabilities at June 30, are detailed below:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
Deferred tax asset:
<S> <C> <C> <C>
Property $ 17,358 $ 15,874 $ -
Bad debts 48 64 93
Net operating loss 15,238 10,461 6,730
Accrued income and
expenses 305 - 682
------ ------ ------
Total deferred tax assets 32,949 26,399 7,505
------ ------ ------
Deferred tax liabilities:
Accrued income and
expenses (3,045) (133) -
Property - - (1,488)
------ ------ ------
Total deferred tax liabilities (3,045) (133) (1,488)
Valuation allowance (29,904) (26,266) (6,017)
------ ------ ------
Net deferred tax asset (liability) $ - $ - $ -
====== ====== ======
</TABLE>
7. CONTINGENCIES
The Company and approximately 40 other major casino operators, as
well as various manufacturers and distributors of video poker and
electronic slot machines, have been named as defendants in actions
entitled William H. Poulos v. Caesars World, Inc., et al., (filed on
April 26, 1994) and William Ahern v. Caesars World, Inc., et al.,
(filed on May 10, 1994) (collectively the "Actions") in the United
States District Court for the Middle District of Florida, Orlando
Division. Both Actions were brought under the Racketeer Influenced and
Corrupt Organizations Act ("RICO") as well as claims of common law
F - 13
<PAGE>
fraud, unjust enrichment and negligent misrepresentation and seeks
damages in excess of $1 billion. The complaints allege that the
defendants took part in a scheme intended to induce people to play video
poker and electronic slot machines based on false beliefs concerning how
those machines actually operate as well as the extent to which there is
actually an opportunity to win on any given play. The Company believes
that plaintiffs' allegations are without merit, and it intends to defend
the Actions vigorously.
The Company and approximately 40 other major casino operators, as
well as Griffin Investigations and Surveillance Information Network have
been named as defendants in an action entitled Thomas Hyland v. Griffin
Investigations, et al., (filed on August 23, 1995) (the "Action") in the
United States District Court for the District of New Jersey, Camden
Division. The Action was brought under the Sherman Act, the Fair Credit
Reporting Act, and common law fraud and seeks unspecified compensatory
and punitive damages from the defendants. The complaints allege that
the defendants took part in a combination and conspiracy among the
casinos in the United States to refuse to deal blackjack to blackjack
players identified as "card counters" by Griffin Investigations monthly
publication the "Griffin Book"; by Surveillance Information Network; as
well as by other "informal" communication amongst the various casinos in
the United States. The Company believes that plaintiffs' allegations
are without merit, and it intends to defend the Action vigorously.
Both actions above were stayed as to the Company by the filing of
the Chapter 11 bankruptcy petition on February 9, 1996. Since these
claims arose pre-petition , they will have to be asserted through the
Chapter 11 proceedings, which has not been done. These actions will be
discharged on the Revesting Date.
The Company and approximately 80 other major casino operators were
named defendants in a patent infringement action against Shuffle Master,
Inc. by Progressive Games, Inc. The action entitled Progressive Games,
Inc. v. Shuffle Master, Inc. et al. was filed in June 1996 in the United
States District Court for the District of Nevada. In its summons and
complaint, Progressive Games, Inc. alleges that by participating in Let
it Ride the Tournament the Company infringed on two of the
plaintiff's patents. These same alleged infringement claims are the
subject of another lawsuit that has been pending since January, 1995.
Pursuant to the Let it Ride the Tournament license agreement,
Shuffle Master, Inc. will defend, indemnify and hold harmless the
Company in this litigation. In June, 1997 Shuffle Master filed a
counter claim against Progressive seeking compensatory and punitive
damages and alleging claims for abuse of process, unfair competition,
antitrust, and tortious interference with prospective business
advantage.
The Company is a party to various other claims, legal actions and
complaints arising in the ordinary course of business. Management
believes that the ultimate disposition of these matters will not have a
material adverse effect on the Company's financial position or results
of operations.
On September 30, 1997 the United States Tax Court issued an adverse
ruling applicable to hotels and casinos which provide meals to
employees. The Tax Court ruled that nonqualifying employees are
required to recognize income based upon the fair value of the meals in
excess of the amount paid by the employee. Accordingly, employers may
F - 14
<PAGE>
be liable for withholding and payroll taxes associated with the fair
value of the meals provided to employees in excess of the amount paid by
the employee. At this time it is uncertain whether or not the Company
will be liable for withholding and payroll taxes related to the income
excluded from nonqualifying employee wages for the meals it has
provided.
8. SELECTED OPERATING DATA (UNAUDITED)
The Indenture for the New Mortgage Notes requires that the Company
present the following information:
Selected Operating Data
(in thousands, except average paid room rate)
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1997 June 30, 1996
--------------- ---------------
<S> <C> <C>
Room occupancy rate 84% 87%
======== ========
Paid occupancy rate 76% 74%
======== ========
Average paid room rate $ 21 $ 22
======== ========
Complimentaries:
Food and beverage $ 3,585 $ 3,875
======== ========
Room $ 689 $ 1,494
======== ========
Change in net credit $ (204) $ 152
======== ========
Provision for bad debts $ 83 $ 22
======== ========
Slot win $ 24,073 $ 26,149
======== ========
Table win $ 3,647 $ 4,872
======== ========
Maintenance expenses $ 1,512 $ 1,540
======== ========
Promotional expenses $ 817 $ 895
======== ========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1997 June 30, 1996
--------------- ---------------
<S> <C> <C>
Room occupancy rate 85% 87%
======== ========
Paid occupancy rate 78% 75%
======== ========
Average paid room rate $ 24 $ 24
======== ========
Room revenues $ 1,797 $ 2,007
======== ========
Food and beverage revenues $ 2,486 $ 2,570
======== ========
Complimentaries:
Food and beverage $ 756 $ 938
======== ========
Room $ 108 $ 378
======== ========
Change in net credit $ (34) $ 8
======== ========
Provision for bad debts $ 10 $ 11
======== ========
Slot win $ 5,577 $ 5,812
======== ========
Table win $ 859 $ 1,069
======== ========
Maintenance expenses $ 387 $ 397
======== ========
Promotional expenses $ 155 $ 193
======== ========
</TABLE>
F - 15
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Set forth below is Gold River's and Gold River Operating's
directors and executive officers names, ages, business experience,
positions and offices with Gold River and Gold River Operating .
Name Age Positions
- ------------ ----- -----------------------------------
John H. Midby 56 President, Chief Executive Officer,
Series A Director and Chairman of
the Board of Gold River; Director
and Chairman of the Board of Gold
River Operating
Richard J. Brand 58 Executive Vice President and Chief
Operating Officer of Gold River
and President and Chief Executive
Officer of Gold River Operating
Ronald J. Giarratano 55 Executive Vice President and Chief
Operating Officer of Gold River
Operating
Benjamin F. Martello 56 Secretary and Treasurer of Gold
River and Secretary, Treasurer and
Chief Financial Officer of Gold
River Operating
Alfred J. Luciani (1) 52 Gold River Series A Director;
Director of Gold River Operating
Robert E. Huggins 50 Gold River Series B Director
Michael C. McNelley (1) 48 Gold River Series B Director;
Director of Gold River Operating
Patrick M. Thorne (1) 51 Gold River Series B Director
_______________________________
(1) Member of the Audit Committee
John H. Midby has been Chairman of the Board of Gold River and of
Gold River Operating since August 31, 1992. Since 1983, Mr. Midby has
served as Chairman of The Midby Group, Inc., a Las Vegas based real
estate investment and development firm which has developed numerous
master planned communities, shopping centers and office parks in Las
Vegas and Laughlin, Nevada. Mr. Midby was also President and a Director
of River Resorts, Inc. ("River Resorts"), the general partner of
Goldriver Limited Partnership ("Goldriver"), from 1983 until August
1992, and in those capacities was primarily responsible for the
development of the Casino Hotel. Goldriver was reorganized pursuant to
a Chapter 11 Bankruptcy proceeding and Gold River is the successor in
interest to Goldriver. From June 14, 1989 to September 1, 1994, Mr.
Midby also served as President and a Director of Orion Land Development
Co. ("Orion"), which filed Chapter 11 Bankruptcy proceedings on January
18, 1991 when changes in the credit markets resulted in the loss of
construction financing for Orion's Emerald River casino hotel project in
Laughlin. Orion has since reorganized.
- 22 -
<PAGE>
Richard J. Brand was appointed President and Chief Executive
Officer of Gold River Operating Corporation (GROC) and Executive Vice
President and Chief Operating Officer of Gold River Hotel & Casino
Corporation (GRHCC) on January 29, 1996. The appointments were ratified
by the Board of Directors on January 29, 1996. Immediately prior to
accepting these positions, Mr. Brand was engaged as Executive Vice
President and Chief Operating Officer of GRHCC and acting General
Manager of GROC. Mr. Brand, who has been involved in gaming for over
fifteen years, served as Vice President/General Manager for three
different Circus Circus Enterprises, Inc. properties from 1986 through
1993. Mr. Brand held various slot department positions between 1980 and
1986 with Circus Circus Hotel/Casino and Silver City Casino including
slot director at Silver City Casino.
Ronald J. Giarratano - Prior to his appointment as Executive Vice
President and Chief Operating Officer of Gold River Operating Mr.
Giarratano served as Vice President/Corporate Marketing of Gold River
Operating for approximately a year. Before his employment by Gold River
Operating, Mr. Giarratano was Director of Marketing for Circus-Circus,
Las Vegas for two years. His experience with the Laughlin market dates
back to 1990 when he was Director of Marketing for the Edgewater
Hotel/Casino. Mr. Giarratano has extensive experience in the gaming and
hotel industry and over two decades of experience in the advertising and
marketing fields.
Benjamin F. Martello was appointed Corporate Controller and
Assistant Treasurer of Gold River and Assistant Treasurer and Chief
Financial Officer of Gold River Operating on July 11, 1995. Mr. Martello
was appointed Secretary and Treasurer of Gold River and Secretary and
Treasurer in addition to Chief Financial Officer of Gold River Operating
on January 29, 1996 and serves as principal financial and accounting
officer of both. The appointments were ratified by the Board of
Directors on January 29, 1996. Mr. Martello was Treasurer of Sports-
Tech, Inc. (formerly Bristol Gaming) from November 1986 until May, 1995.
He was appointed Sports-Tech's Chief Financial Officer on July 1, 1991,
Secretary on August 1, 1993 and served as its principal financial
and accounting officer. Mr. Martello was appointed Controller of
Jackpot Enterprises, Inc. in November, 1984, Treasurer in 1986, Vice
President - Finance and Administration in 1987 and Senior Vice President
- - Finance in 1989. He served in the foregoing capacities for Jackpot
until July 1991. Prior to joining Jackpot, Mr. Martello was a
shareholder and vice president in a Las Vegas public accounting
professional corporation from August 1979 until November 1984. Mr.
Martello is a certified public accountant registered since 1970 in the
State of Nevada
Alfred J. Luciani, a Series A director of Gold River and of Gold
River Operating since August 31, 1992, is currently President of Luciani
& Associates, L.L.C., a company principally involved in gaming
consulting and in pursuing gaming opportunities for itself. During 1990
and 1991, Mr. Luciani was President and Chief Operating Officer of
Foxwoods High Stakes Bingo and Casino in Connecticut. Mr. Luciani
continued to oversee development of Foxwoods until February, 1994. From
April 1993 until December 1995, Mr. Luciani served as President and
Chairman of American Gaming & Entertainment Ltd. (formerly Gamma
International Ltd.) From November 1989 to September 1990, Mr. Luciani
served as Executive Vice President and Chief Operating Officer of Merv
Griffin's Resorts Casino Hotel, responsible for overall operations
during the successful reorganization of the property through its Chapter
11 proceeding. From October 1988 to November 1989, Mr. Luciani was
Chairman of the Board and Chief Executive Officer of A.L.H. Moonstone,
Inc., which was formed to pursue the acquisition of a New Jersey
hotel/casino. From March 1983 to October 1988, Mr. Luciani served in
various capacities with Golden Nugget, Inc. and its affiliates, first
(from March 1983 to May 1987) as Executive Vice President of Golden
Nugget Atlantic City, responsible for casino/hotel operations and
corporate expansion; and next (from June 1977 to October 1988) as
President and Chief Executive Officer of Golden Nugget Las Vegas,
responsible for overall operations. Concurrent with those positions,
from June 1986 to October 1988, Mr. Luciani served as Vice President of
Corporate Development for Golden Nugget, Inc. From December 1980 to
March 1983, Mr. Luciani was engaged in the private practice of law,
representing Golden Nugget, Inc. and other clients in obtaining
regulatory licenses and approvals in New Jersey. From June 1980 to
December 1980, Mr. Luciani was Vice President of Casino Operations for
Golden Nugget Atlantic City, responsible for overseeing the opening and
commencement of operations of the facility. Prior to that time, from
September 1979 to June 1980, Mr. Luciani was engaged in private law
practice. Prior to September 1979, Mr. Luciani was both an Assistant
Attorney General and a Deputy Attorney General with the State of New
Jersey Division of Criminal Justice, where he was a member of the
Governor's Staff Policy Group on Casino Gaming.
Robert E. Huggins, a Series B director of Gold River since August
31, 1992, is a Certified Public Accountant who has an extensive
background in the gaming industry. Since November 1995, Mr. Huggins has
served as the Chief Financial Officer of Spintek Gaming Technologies,
Inc. Prior to joining Spintek, Mr. Huggins was a consultant
- 23 -
<PAGE>
specializing in gaming and Securities Exchange Commission matters from
February 1995 and from February 1992 until February 1995, he served as
the Chief Accounting Officer and Secretary for Elsinore Corporation.
Before he joined Elsinore Corporation Mr. Huggins served in various
capacities with other gaming companies which included Vice President,
Finance and Chief Financial Officer for United Gaming, Inc., as well as
President of two of its casino subsidiaries from February 1988 until
June 1991, Controller for Caesars
- 24 -
<PAGE>
Palace from April 1981 until November 1982; and Controller for the
M & R Investments, Inc. (Dunes Hotel & Country Club) from May 1977 until
April 1981. Mr. Huggins has also served as Vice President, Finance for
two non-gaming companies during his career. The first of which was for
Professional Advisory Services, Inc., from November 1982 until February
1988; and, the second was for Smokey's Sports Cards from June 1991 until
February 1992 Prior to his experience in industry, Mr. Huggins was a
CPA with the firm of Haskins and Sells for four years from 1973 until
1977.
Michael C. McNelley, a Series B director of Gold River and of Gold
River Operating since August 31, 1992, is currently a financial
consultant and advisor with Diversified Income, Inc. From October 1994
to April 1997, Mr. McNelley served as President and Chief Financial
Officer for Gasmaster International Inc.. During the period from
September 1992 to August 1994 he was the Senior Financial Officer for RP
Medical Capital, Inc.. From April 1986 until December 1992, he was a
Senior Vice President of Caywood-Christian Capital Management. From
September 1983 to March 1986, Mr. McNelley served as Vice President and
Manager of Investments of E.F. Hutton Life Insurance Company. From
February 1981 to September 1983, he served as Assistant Vice President
and Investment Officer for San Diego Trust & Savings Bank. From
September 1974 to February 1981, Mr. McNelley served as Trust Officer
for the First National Bank of S.W. Michigan. From January 1972 to
September 1974, Mr. McNelley served as Trust Administrator for the First
National Bank of Nevada.
Patrick M. Thorne, a Series B director of Gold River since October
22, 1992, is managing partner of the Henderson, Nevada, office of
Nelson, Malley & Thorne, Certified Public Accountants. He previously
served as Vice President of Finance and Treasurer of New York-New York
Hotel & Casino in Las Vegas from January 1996 through January 1997.
From July 1992 until December 1995, he served in various
administrative capacities with Station Casinos, Inc., which owns gaming
properties in Nevada, Louisiana and Missouri. He was also a principal
with First Nevada Group, Inc., a hospitality/gaming consulting firm,
from July 1991 until December 1994. From July 1982 to January 1991, Mr.
Thorne was with the Desert Inn in Las Vegas, where he served as Vice
President of Finance and Administration and later as Senior Vice
President of Hotel Operations. Prior to that time, Mr. Thorne served as
Corporate Controller with The Boyd Group (now Boyd Gaming Corporation)
from April 1979 until June 1982. From September 1974 to April 1979, Mr.
Thorne was with the MGM Grand Hotel (now Ballys), where he served
initially as Manager of Internal Audit and later as Assistant
Controller. A Certified Public Accountant, Mr. Thorne began his career
with Haskins & Sells (now Deloitte & Touche) in Las Vegas in 1972.
Item 11. Executive Compensation
Summary Compensation Table The Summary Compensation Table below
sets forth certain information concerning the compensation of (i) the
Company's Chairman, who served as its chief executive officer during the
entire fiscal year ended June 30, 1997, (ii) the President and Chief
Executive Officer of Gold River Operating Corporation, a subsidiary of
the Company, and (iii) all other executive officers of the Company whose
total annual salary and bonus exceeded $100,000 (collectively, the
"Named Officers") for the fiscal year ended June 30, 1997.
- 24 -
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
Awards
Other
Annual All Other
Compen- Compen-
Name and Principal sation($)Options/sation
Position Year Salary($) Bonus($) (1) SARs(#) (2)
________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
John H. Midby 1997 250,000 0 0 0 1,368
Chairman of the 1996 200,000 50,000 0 0 1,014
Company 1995 200,000 50,000 0 0 500
________________________________________________________________________
Richard J. Brand 1997 195,000 5,000 0 0 1,334
President and 1996 156,250 30,000 0 0 2,033
Chief Executive 1995 64,410 15,000 0 0 0
Officer of Gold
River Operating
Corporation
________________________________________________________________________
Benjamin F. Martello 1997 130,000 5,000 0 0 1,396
Chief Financial Officer 1996 103,515 4,500 0 0 864
Secretary and Treasurer 1995 0 0 0 0 0
________________________________________________________________________
Ronald Giarrantano 1997 150,000 5,000 0 0 1,026
Chief Operating Officer 1996 125,740 20,000 0 0 665
of the Company 1995 46,777 10,000 0 0 0
________________________________________________________________________
</TABLE>
(1) The Company provides certain perquisites and other personal
benefits to the Named Officers, including the use of complimentary
rooms, food and beverages. The unreimbursed incremental cost to the
Company of providing perquisites and other personal benefits during the
year ended June 30, 1997 did not exceed as to any Named Officer the
lessor of $50,000 or 10% of the total salary and bonus paid to such
Named Officer for such period and, accordingly, is omitted from the table.
(2) These amounts represent the payments made by the Company for term
life insurance.
Employment Agreements
Messrs. Brand, Giarratano and Martello have employment agreements
which went into effect on January 29, 1996 and established minimum
annual base salaries of $195,000, $150,000 and $130,000 respectively.
Each is eligible to receive a bonus by participation in a bonus pool for
EBITDA exceeding a specified minimum of $12,500,000, payable at the sole
discretion of Gold River. Each is also eligible to participate in any
ISOs/stock bonus plan or warrant program granted at the directors'
discretion and/or based on performance standards being met (EBITDA).
Under a Reorganization Change in Control, each is entitled to the
compensation due through the effective date of change in control, plus
one hundred eighty (180) days severance pay, based upon the salary in
effect at that time plus any accrued but unpaid bonus. Mr. Brand's
contract is for two (2) years and Mr. Giarratano's and Mr. Martello's
contracts are for one (1) year, automatically renewable for one (1) year
on each anniversary date.
Compensation of Directors
Mr. Midby does not receive compensation for his service as a
director of the Company, and is not reimbursed for expenses incurred in
connection with his service as a director. All other directors are paid
directors' fees in the amount of $18,000 per calendar year plus $3,000
for each meeting of the Board of Directors attended, up to a maximum of
$30,000 per calendar year, and are reimbursed for expenses associated
with their service as directors. During the fiscal year ended June 30,
1997, the Board of Directors held board meetings on 5 occasions.
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Board of Directors of the Company does not maintain a
compensation committee (or other committee of the Board performing
equivalent functions). Accordingly, the policies relating to
compensation of executive officers of the Company and its subsidiary are
determined by the Company's entire Board of Directors.
- 25 -
<PAGE>
The only officer or employee of the Company or its subsidiary who
served as members of the Board of Directors of the Company and, as such,
participated in deliberations on compensation of executive officers
during the year ended June 30, 1997 was John H. Midby Chairman and chief
executive officer of the Company.
The Securities and Exchange Commission requires issuers to disclose
the existence of any other corporation in which both (i) an executive
officer of the registrant serves on the board of directors and/or
compensation committee, and (ii) a director of the registrant serves as
an executive officer. The issuer is not aware of any such relationship.
See Item 10, Directors and Executive Officers of the Registrant.
- 26 -
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of October 10, 1997, the number
and percentage of outstanding shares of Common Stock beneficially owned
by each person known by the Company to beneficially own more than 5% of
such stock, by each Named Officer, Director and Director Nominee of the
Company and by all directors and executive officers of the Company as a
group.
Name of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership (1) (6) Class Owned
________________ ____________________________ ____________
Gold River Partners 581,194(2) 33.0%
Limited Partnership
John H. Midby -General Partner
2800 West Sahara
Suite 4-B
Las Vegas, NV 89102
Cargill Financial 198,150(3) 11.3%
Services Corporation
600 Clearwater Drive
Minnetonka, MN 55343
Merrill Lynch Funds 148,000(4) 8.4%
P.O. Box 9011
Princeton, New Jersey 08540
Bear Sterns & Co. Inc. 102,750 5.8%
245 Park Avenue
New York, NY 10167
Michael C. McNelley 5,000(5) (7)
All Directors and 586,194(2) 33.0%
Executive
Officers as a Group (8 Persons)
__________________
(1) To the Company's knowledge, each person named in the table has sole
voting and investment power with respect to all Common Stock shown
as beneficially owned by such person, subject to applicable
community property law and the information contained in the
footnotes hereunder.
(2) As the Managing General Partner of Gold River Group Limited
Partnership, the General Partner of Gold River Partners Limited
Partnership, Mr. Midby controls the voting of the 581,194 shares of
Series A Common Stock held by Gold River Partners Limited
Partnership.
(3) Represents 198,150 shares of Series B Stock owned by Cargill
Financial Services Corporation ("CFSC"), including shares of Series
B Stock owned by the following entities: (i) Minnetonka Limited
Fund, L.P. 85,190 shares; and (ii) GAM-CARGILL Minnetonka Fund Inc.
22,033 shares. Certain officers and employees of CFSC have sole
voting power and disposition power over the shares of the Company's
stock.
(4) Represents 148,000 shares of Series B Stock owned by Merrill Lynch
Funds ("MLF"), which includes the following entities: (i) Merrill
Lynch Investment Management, Inc. 42,500 shares; and (ii) Fund
Asset Management, Inc. 105,500 shares.
(5) Represents 5,000 shares owned by McNelley Family Trust dated May 2,
1989. Mr. McNelley is a trustee and beneficiary of that Trust.
- 27 -
<PAGE>
(6) Under the terms of the Bankruptcy Court approved Reorganization
Plan all of these shares will be canceled on the Revesting Date.
(7) Less than 1%.
Change in Control
Mr. Allen E. Paulson will become the sole shareholder of Gold River
and receive 100% of the new Gold River stock on October 14, 1997 the
Revesting Date. Mr. Paulson will also serve as the sole director,
President, Secretary and Treasurer of the Reorganized Company which
along with becoming sole shareholder requires Nevada Gaming Authorities
approval which has occurred prior to an effective Revesting Date. Mr.
Paulson will acquire all of the New Mortgage Notes and receive 100% of
the new Gold River stock and become the sole shareholder of the
reorganized Company. The Company's current Series A common stock and
Series B common stock will be canceled and new common stock issued.
Warrant Agreement
The Warrant Agreement between Gold River and Gold River Partners
Limited Partnership granted warrants to Gold River Partners Limited
Partnership which were exercisable if certain EBITDA targets were met or
exceeded. If the Company's actual EBITDA equaled or exceeded the stated
thresholds, warrant holders would have had the right to purchase varying
amounts of Class A stock over the next four fiscal years, but not to
exceed an aggregate of 1,006,707 shares. The warrants would have
provided strong management performance incentives and allowed Gold River
Partners Limited Partnership to dilute the percentage ownership of the
Class B stock to an extent whereby Gold River Partners Limited
Partnership would have held a majority equity position in Gold River.
The Company did not meet its minimum EBITDA threshold for the fiscal
years ended June 30, 1997, 1996 and 1995 and, by the terms of the
Warrant Agreement and the Articles of Incorporation of Gold River, all
outstanding warrants expired as of the respective fiscal year end.
Item 13. Certain Relationships and Related Transactions
None.
- 28 -
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
(a)
(1) Financial Statements. See Item 8. Financial Statements and
Supplementary Data.
(2) The following schedules for the years ended June 30, 1997, 1996
and 1995, are submitted herewith:
Page
------
Schedule II - Valuation and Qualifying Accounts 33
for the years ended June 30, 1997, 1996 and 1995
All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or notes
thereto.
(3) Exhibits
Exhibit Page or Method
Number
Description of Filing
-------- -------------------------------- ---------------
2 Third Amended Plan Of Reorganization Proposed (A)
Jointly By the Debtor And The Official Committee
of Bondholders
2.1 Joint Plan of Reorganization of Debtors and (F)
The Official Committee of Bondholders
dated June 7, 1996.
2.2 Notice of Submission of Proposed "Disclosure (F)
Statement to Accompany Joint Plan of Reorganization
of Debtors and The Official Committee of Bondholders"
dated June 7, 1996.
3.1 Amended and Restated Articles of Incorporation of (B)
Gold River Hotel & Casino Corporation (Nevada)
3.2 Amended and Restated Bylaws of Gold River Hotel & (B)
Casino Corporation (Nevada)
3.3 Certificate of Incorporation of Gold River Hotel & (B)
Casino Corporation (Delaware)
3.4 Bylaws of Gold River Hotel & Casino Corporation (B)
(Delaware)
4.1 Indenture by and among Gold River Hotel & Casino (B)
Corporation, as Issuer, Gold River Operating
Corporation, as Guarantor, and IBJ Schroder Bank
& Trust Company, as Trustee
4.2 Warrant Agreement between Gold River Hotel & Casino (B)
Corporation and Gold River Partners Limited
Partnership
- 29 -
<PAGE>
Exhibit Page or Method
Number Description of Filing
- ------ -------------------------------- ---------------
4.3 Form of Series A Warrant (B)
4.4 Form of Series B Warrant (B)
4.5 Form of Series C Warrant (B)
4.6 Rights Agreement between Gold River Hotel & Casino (B)
Corporation and IBJ Schroder Bank & Trust Company
4.7 Form of Series A Common Stock Certificate (C)
4.8 Form of Series B Common Stock Certificate (C)
4.9 Form of Preferred Stock Certificate (C)
10.1 Certificate and Agreement Regarding Hazardous (B)
Substances from Gold River Operating Corporation
in favor of IBJ Schroder Bank & Trust Company, as
Trustee
10.2 Liquidating Trust Agreement (B)
10.3 $75,000,000 Promissory Note from Gold River (B)
Operating Corporation to the order of Gold River
Hotel & Casino Corporation
10.4 Deed of Trust, Assignment of Rents and Security (B)
Agreement from Gold River Operating Corporation,
as Trustor, IBJ Schroder Bank & Trust Company,
as Trustee, as Beneficiary
10.5 Reserve Parcel Option Agreement among Gold River (B)
Hotel & Casino Corporation Gold River Partners Limited
Partnership and IBJ Schroder Bank & Trust Company,
as Trustee
10.6 Note and Stock Pledge Agreement between Gold River (B)
Hotel & Casino Corporation and IBJ Schroder Bank &
Trust Company, as Trustee
10.7 Standstill Agreement among Gold River Hotel & Casino (B)
Corporation, Gold River Group Limited Partnership
and John H. Midby
10.8 $5,000,000 Promissory Note from Gold River Operating (B)
Corporation to the order of McCarthy Western
Constructors, Inc.
- 30 -
<PAGE>
Exhibit Page or Method
Number Description of Filing
- ------ -------------------------------- ---------------
10.9 Deed of Trust from Gold River Operating Corporation, (B)
as Trustor, to McCarthy Western Constructors, Inc.,
as Beneficiary
10.10 Pledge Agreement among Gold River Hotel & Casino (B)
Corporation, Gold River Group Limited Partnership,
Rainbow Development Corp., John H. Midby and IBJ
Schroder Bank & Trust Company, as Trustee
10.12 Incentive Stock Option Plan of Gold River Hotel and (D)
Casino Corporation effective July 22, 1993
10.15 Standstill Agreement effective as of November 30, (E)
1994 and dated April 25, 1995 between Cargill
Financial Services Corporation and the Company
10.17 Employment Agreement between Richard J. Brand and (G)
Gold River Hotel and Casino Corporation
dated January 29, 1996
10.18 Employment Agreement between Ronald Giarratano and (G)
Gold River Hotel and Casino Corporation
dated January 29, 1996
10.19 Employment Agreement between Benjamin F. Martello (G)
and Gold River Hotel and Casino Corporation
dated January 29, 1996
21 Subsidiaries of the Company (A)
(A) Incorporated by reference from Form 10 Registration Statement filed
on June 19, 1992.
(B) Incorporated by reference from Form 8 Amendment No. 1 to
Registration Statement filed on August 18, 1992.
(C) Incorporated by reference from Form 8 Amendment No. 2 to Form 10
Registration Statement filed on August 21, 1992.
(D) Incorporated by reference from Registrant's Annual Report on Form
10-K for the year ended June 30, 1994.
(E) Incorporated by reference from Registrant's Form 10-Q for the
quarter ended March 31, 1995.
(F) Incorporated by reference from Registrant's Form 8-K filed on June
21, 1996
(G) Incorporated by reference from Registrant's Annual Report on Form
10-K for the year ended June 30, 1996.
(b) Reports on Form 8-K. During the fiscal year ended June 30, 1997,
no Current Reports on Form 8-K were filed.
- 31 -
<PAGE>
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
Gold River Hotel & Casino Corporation
(d.b.a. Gold River Gambling Hall & Resort)
Las Vegas, Nevada
We have audited the consolidated financial statements of Gold River
Hotel & Casino Corporation (the "Company") as of June 30, 1997 and 1996,
and for each of the three years in the period ended June 30, 1997 and
have issued our report thereon dated October 10, 1997 (which report
included an explanatory paragraph referring to the uncertainty of the
Company's ability to continue as a going concern); such report is
included elsewhere in this Form 10-K. Our audits also included the
consolidated financial statement schedule of the Company, listed in Item
14. This consolidated financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion
based on our audits. In our opinion, such consolidated financial
statement schedule, when considered in relation to the consolidated
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
October 10, 1997
- 32 -
<PAGE>
GOLD RIVER HOTEL & CASINO CORPORATION
(d.b.a. GOLD RIVER GAMBLING HALL & RESORT)
(DEBTOR IN POSSESSION)
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
________________________________________________________________________
<TABLE>
<CAPTION>
Additions
Balance Charged to Balance
Beginning Costs and Deduct- End of
Description of Period Expenses ions(1) Period
- -------------------- ----------- ------------ -------- ------
1997: (in thousands)
<S> <C> <C> <C> <C>
Note valuation
discount $ - $ - $ - $ -
============ ============ ======== ======
Allowance for
doubtful accounts
(deducted from
accounts
receivable) $ 183 $ 83 $ (183) $ 138
============ ============ ======== ======
1996:
Note valuation
discount $ (2,649) $ 2,649 $ - $ -
============ ============ ======== ======
Allowance for
doubtful
accounts
(deducted from
accounts
receivable) $ 267 $ 56 $ (267) $ 183
============ ============ ======== ======
1995:
Note valuation
discount $ (3,088) $ 439 $ - $ (2,649)
============ ============ ======== ======
Allowance for
doubtful
accounts
(deducted from
accounts
receivable) $ 231 $ 78 $ (42) $ 267
============ ============ ======== ======
</TABLE>
(1) Accounts deemed to be uncollectible.
- 33 -
<PAGE>
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, this 10th day of October 1997.
GOLD RIVER HOTEL & CASINO CORPORATION
By:/s/ John H. Midby By:/s/ Benjamin F. Martello
--------------------------------- -------------------------------
John H. Midby Benjamin F. Martello
Chairman, Chief Executive Officer Secretary Treasurer
and Director (principal financial and
accounting officer)
By:/s/ Patrick M. Thorne By:/s/ Robert E. Huggins
--------------------------------- -------------------------------
Patrick M. Thorne Robert E. Huggins
Director Director
By:/s/ Michael C. McNelley By:/s/ Alfred J. Luciani
--------------------------------- -------------------------------
Michael C. McNelley Alfred J. Luciani
Director Director
- 34 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,474
<SECURITIES> 0
<RECEIVABLES> 392
<ALLOWANCES> (138)
<INVENTORY> 532
<CURRENT-ASSETS> 6,600
<PP&E> 29,763
<DEPRECIATION> (1,495)
<TOTAL-ASSETS> 34,994
<CURRENT-LIABILITIES> 5,629
<BONDS> 75,000
0
0
<COMMON> 18
<OTHER-SE> (63,073)
<TOTAL-LIABILITY-AND-EQUITY> 34,994
<SALES> 45,025
<TOTAL-REVENUES> 45,025
<CGS> 0
<TOTAL-COSTS> 46,368
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 524
<INCOME-PRETAX> (1,867)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,867)
<EPS-PRIMARY> (1.06)
<EPS-DILUTED> (1.06)
</TABLE>
