<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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 No. 0-19128
---------------------
CAPITAL GAMING INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
New Jersey 22-3061189
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3030 East Camelback Road, 85016
Suite 295 (Zip Code)
Phoenix, Arizona
(Address of principal executive offices)
</TABLE>
---------------------
Registrant's telephone number, including area code: (602) 667-0670
Registrant's former address:
2701 East Camelback Road, Suite 484, Phoenix, Arizona 85016
----------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities 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 [ ]
Applicable only to issuers 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 [ X ] No [ ]
Indicate the number of shares outstanding for each of the issuer's classes of
common stock as of September 30, 2000: 1,999,745 (consisting of 1,600,000 shares
of Class A Common Stock and 399,745 shares of Common Stock)
<PAGE> 2
CAPITAL GAMING INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 2000
(Unaudited) and June 30, 2000 (Audited) 1
Consolidated Statements of Operations for the three months
ended September 30, 2000 and 1999 (Unaudited) 3
Consolidated Statements of Cash Flows for the three months
ended September 30, 2000 and 1999 (Unaudited) 4
Notes to Consolidated Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures about Market Risks 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities and Use of Proceeds 9
Item 3. Default Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Securityholders 10
Item 6. Exhibits and Reports on Form 8-K 10
Signature Page 11
</TABLE>
<PAGE> 3
PART I., Item 1.
CAPITAL GAMING INTERNATIONAL, INC.,
DEBTOR-IN-POSSESSION, AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
ASSETS
<TABLE>
<CAPTION>
September 30, 2000 June 30, 2000
------------------ -------------
[Unaudited]
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,676 $ 2,352
Restricted funds 9,589 9,497
Interest receivable 56 172
Current portion - Native American loans receivable 573 627
Current portion of direct financing leases 100 101
Prepaid expenses and other current assets 292 296
Income tax receivable 276 780
------- -------
TOTAL CURRENT ASSETS 13,562 13,825
------- -------
FURNITURE, FIXTURES AND EQUIPMENT, Net 12 5
OTHER ASSETS:
Native American loans receivable 791 927
Direct financing leases, net of current portion 560 584
------- -------
TOTAL OTHER ASSETS 1,363 1,516
------- -------
TOTAL ASSETS $14,925 $15,341
======= =======
</TABLE>
The Accompanying Notes are an Integral Part of these
Consolidated Financial Statements
1
<PAGE> 4
CAPITAL GAMING INTERNATIONAL, INC.,
DEBTOR-IN-POSSESSION, AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
September 30, 2000 June 30, 2000
------------------ -------------
[Unaudited]
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 286 $ 112
Due to related party -- 9
-------- --------
TOTAL CURRENT LIABILITIES 286 121
LIABILITIES SUBJECT TO COMPROMISE 24,711 24,778
-------- --------
TOTAL LIABILITIES 24,997 24,899
-------- --------
COMMITMENT AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Common stock, no par value, authorized 5,000,000 shares;
issued and outstanding 1,999,745 shares 400 400
Additional paid in capital 300 300
Accumulated deficit (since May 29, 1997, date of reorganization) (10,772) (10,258)
-------- --------
TOTAL STOCKHOLDERS' DEFICIT (10,072) (9,558)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 14,925 $ 15,341
======== ========
</TABLE>
The Accompanying Notes are an Integral Part of these
Consolidated Financial Statements
2
<PAGE> 5
CAPITAL GAMING INTERNATIONAL, INC.,
DEBTOR-IN-POSSESSION, AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
(In Thousands except Share Data)
<TABLE>
<CAPTION>
Three Months Ended Three months Ended
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
REVENUES:
Native American casino management fees $ -- $ 1,976
----------- -----------
COSTS AND EXPENSES:
Salaries and related costs 185 212
Native American gaming development costs 105 52
Professional fees 135 139
General and administrative 75 83
Depreciation and amortization 2 554
----------- -----------
TOTAL COSTS AND EXPENSES 502 1,040
----------- -----------
INCOME (LOSS) FROM OPERATIONS (502) 936
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 138 118
Interest expense (not including $693,000
as a result of the 2000 Reorganization) -- (684)
----------- -----------
TOTAL OTHER INCOME (EXPENSE) 138 (566)
INCOME (LOSS) BEFORE REORGANIZATION ITEMS (364) 370
REORGANIZATION ITEMS:
Professional fees (234) --
Interest income 87 --
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (511) 370
INCOME TAXES 3 81
----------- -----------
NET INCOME (LOSS) $ (514) $ 289
=========== ===========
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE $ (.26) $ .14
=========== ===========
WEIGHTED AVERAGE BASIC AND DILUTIVE COMMON
AND EQUIVALENT SHARES OUTSTANDING 1,999,745 1,999,745
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of these
Consolidated Financial Statements
3
<PAGE> 6
CAPITAL GAMING INTERNATIONAL, INC.,
DEBTOR-IN-POSSESSION, AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
(In Thousands)
<TABLE>
<CAPTION>
Three months Ended Three Months Ended
September 30, 2000 September 30, 1999
------------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (514) $ 289
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 2 554
Payments on Muckleshoot settlement -- 287
Changes in assets and liabilities:
Interest receivable 116 (5)
Native American management fees and expenses receivable -- 63
Prepaid expenses and other current assets 4 25
Income tax receivable 504 --
Accounts payable and accrued expenses 174 (32)
Accrued interest -- 684
Federal income taxes payable -- (72)
State income taxes payable -- 78
Related party payable (9) --
Liabilities subject to compromise (67) --
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 210 1,871
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayments of Native American loans receivable 190 421
(Increase) in restricted funds (92) (1,588)
(Increase) in deferred charges -- (373)
Payments received on direct financing leases 25 --
Purchase of furniture, fixtures and equipment (9) --
------- -------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 114 (1,540)
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 324 331
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIODS 2,352 4,440
------- -------
CASH AND CASH EQUIVALENTS - END OF PERIODS $ 2,676 $ 4,771
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash Paid During the Periods for:
Income Taxes $ 3 $ 72
Professional Fees paid for services rendered in
connection with the Chapter 11 filing $ 47 --
</TABLE>
The Accompanying Notes are an Integral Part of these
Consolidated Financial Statements
4
<PAGE> 7
PART I., Item 1.
CAPITAL GAMING INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
[1] ORGANIZATION
Capital Gaming International, Inc., a New Jersey corporation
(the "Company"), together with its subsidiaries, is a multi-jurisdictional
gaming company.
The management and development of Native American gaming facilities is
conducted through Capital Gaming Management, Inc. ("CGMI"), a wholly-owned
subsidiary of the Company. CGMI developed and currently manages the Dancing
Eagle Casino for the Pueblo of Laguna in Casa Blanca, New Mexico.
Capital Development Gaming Corporation ("CDGC"), a wholly-owned
subsidiary of the Company, also has a contract to develop and manage the
Narragansett casino project in Rhode Island ("Rhode Island Project"). Currently
the contract faces several regulatory issues and a disputed termination by the
Tribe, and there can be no assurance that the project will be successfully
launched.
[2] BASIS OF PRESENTATION
The Consolidated Balance Sheet as of September 30, 2000, the
Consolidated Statements of Operations for the three-month periods ended
September 30, 2000 and 1999, and the Consolidated Statement of Cash Flows for
the three-month periods ended September 30, 2000 and 1999 are unaudited. The
June 30, 2000 Balance Sheet data was derived from audited consolidated financial
statements. These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, such statements include all adjustments
(consisting only of normal recurring items) which are considered necessary for a
fair presentation of the financial position of the Company at September 30,
2000, and the results of its operations and cash flows for the three-month
periods ended September 30, 2000 and 1999. The results of operations for interim
periods are not necessarily indicative of a full year of operations. It is
suggested that these financial statements be read in conjunction with the
consolidated financial statements and notes included in the Capital Gaming
International, Inc. Form 10-K for the fiscal year ended June 30, 2000 as filed
with the Securities and Exchange Commission.
The Consolidated Financial Statements include the accounts of the
Company and all of its wholly-owned subsidiaries. Inter-company transactions and
balances have been eliminated in consolidation.
[3] REORGANIZATION UNDER CHAPTER 11
Reorganization
In late 1999, management determined that the Company's capital
structure was impairing its ability to win new management contracts. While the
Company's operations were expected to generate sufficient revenue to make debt
service payments through the calendar year 2000, the Company anticipated that it
might not have sufficient revenue to make the final principal and interest
payment on the Senior Notes when they become due in May 2001. After extensive
meetings and negotiations with certain of the Senior Noteholders and the
Indenture Trustee, those Senior Noteholders and the Indenture Trustee, with the
concurrence of the Company, concluded that the best way to maximize recovery to
the Senior Noteholders and preserve the Company as a going concern was to
"de-leverage" the Company by converting the Senior Notes to equity. Although the
long-term success of the Company remains dependent upon its ability to obtain
new management contracts and gaming opportunities, the reorganization would (i)
eliminate the uncertainty created by the existing debt structure; (ii) provide
the Company needed flexibility to finance future operations; and (iii) provide
the Company more flexibility to compete with better financed competitors.
Accordingly, on May 15, 2000 (the "Petition Date") the Company filed a
voluntary petition for reorganization of the Company under Chapter 11 of the
Bankruptcy Code in the Bankruptcy Court, Case No. 00-14052 (JHW). The Company
remained in possession of its property and assets and maintained and operated
its business as debtor-in-possession pursuant to the provisions of the
Bankruptcy Code. Additionally no trustee or receiver was appointed. The
Company's two operating subsidiaries were not included in the filing.
5
<PAGE> 8
In connection with the filing of the petition, the Company and the
Indenture Trustee jointly submitted a Disclosure Statement and Plan of
Reorganization (the "Plan") for the Company. The Plan is the result of extensive
negotiations among the Company, the Indenture Trustee, and holders of
approximately eighty-four (84%) percent of the Company's then outstanding Senior
Notes and holders of approximately seventy (70%) percent of the Company's then
outstanding stock. A copy of the Plan is attached as Exhibit 10.181 to the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000.
The Plan provided that holders of the Senior Notes, as payment in full
for their claims, will receive a distribution on account of their secured claims
equal to their pro rata share of (a) the greater of (i) $9,000,000 or (ii) the
Distributable Cash (hereinafter defined) after payment of Indenture Trustee fees
and expenses, and (b) two million sixty-eight thousand (2,068,000) shares of New
Class A Common Stock, representing ninety-four (94%) percent of the aggregate
voting securities of the Company, as reorganized. "Distributable Cash" means all
cash of the Company, whether held by the Indenture Trustee or the Company, in
excess of $2,900,000, determined after payment of all Plan distributions to
creditors and equity security holders, other than holders of Senior Notes.
General unsecured creditors, including holders of deficiency claims would
receive a pro rata share of $100,000 and certain holders of the Company's equity
interests would receive their pro rata share of 550 shares of New Class B Common
Stock. The Company intends to use its post-confirmation cash balance primarily
to seek new gaming opportunities in order to create new sources of cash flow for
the Company.
On September 26, 2000 the Bankruptcy Court conducted a hearing
regarding Confirmation of the Plan and, on October 4, 2000, entered an order
confirming the Plan. In connection with creditor approval of the Plan, 99.9770%
of holders of the Senior Notes who voted approved the Plan. The Effective Date
of the Plan is October 16, 2000, at which time distribution commenced.
[4] SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies of the Company are set forth in the
Company's form 10-K, as amended, for the fiscal year ended June 30, 2000 as
filed with the Securities and Exchange Commission.
Derivative Instruments and Hedging Activities:
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, which is
required to be adopted in all fiscal quarters of all fiscal years beginning
after June 15, 2000. The Statement permits early adoption as of the beginning of
any fiscal quarter after its issuance. The Company has adopted the new
Statement, effective July 1, 2000 with no effect on the financial statements.
Recent Accounting Developments:
In December 1999, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in
Financial Statements". SAB No. 101 summarizes some of the staff's
interpretations of the application of generally accepted accounting principles
to revenue recognition. The Company will adopt SAB No. 101 when required in the
second quarter of fiscal year 2001. Management believes the adoption of SAB No.
101 will not have a significant effect on its financial statements.
[5] LEGAL PROCEEDINGS
With the exception of the Company's voluntary reorganization
proceedings commenced on May 15, 2000, there was no material litigation
involving or pending against the Company on September 30, 2000. The Company is
or may become a defendant in pending or threatened legal proceedings in the
ordinary course of business although it is not aware of the existence of any
such pending or threatened legal proceedings at this time. See the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 2000, section
entitled "Risk Factors - Accounting Disagreement" for a description of a
disagreement with the Laguna Development Corporation concerning accounting
treatment of pre-opening expenses under the Laguna Management Contract, which
disagreement may result in arbitration in the fiscal year ending June 30, 2001.
During the quarter the Company continued to manage the Dancing Eagle
Casino for the Pueblo of Laguna. Because of the above described disagreement and
in accordance with generally accepted accounting principles the Company has not
recognized approximately $111,000 revenue from the Laguna Management Contract
for the quarter ended September 30, 2000. The Company also paid $62,000 to
Laguna Development Corporation during the quarter.
6
<PAGE> 9
PART I., Item 2.
CAPITAL GAMING INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements as of September 30, 2000 (unaudited)
and June 30, 2000 (audited) and for the three-month periods ended September 30,
2000 and 1999 (unaudited) contained herein and the Company's audited
Consolidated Financial Statements and the related notes thereto appearing in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000
filed with the Securities and Exchange Commission.
Notice Regarding Forward-Looking Statements
To the extent the information contained in this management discussion
and analysis of consolidated financial condition as of September 30, 2000
(unaudited) and June 30, 2000 (audited) and results of operations for the
three-month periods ended September 30, 2000 and 1999 (unaudited) are viewed as
forward-looking statements, the reader is cautioned that various risks and
uncertainties exist that could cause the actual future results to differ
materially from those inferred by the forward-looking statements. Words such as
"expects", "anticipates", "intends", "potential", "believes" and similar
expressions are intended to identify forward-looking statements, which speak
only as of the date the statements were made. Those statements may include
projections of revenues, income or loss, capital expenditures, plans for future
operations or strategies, and financing needs or plans, as well as assumptions
relating to the foregoing.
Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future events
and actual results could differ materially from those set forth in, contemplated
by, or underlying the forward-looking statements. Additional risk factors that
could cause actual results to differ materially from those expressed in such
forward-looking statements are set forth in Exhibit 99, which is attached hereto
and incorporated by reference into this Quarterly Report on Form 10-Q. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise. The following management discussion and analysis should be
read in conjunction with the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 2000.
Liquidity and Capital Resources
Sources and Uses of Cash
For the three months ended September 30, 2000, the Company had a net
increase in cash and cash equivalents of $324,000, of which $210,000 was
provided by Company operating activities, and $114,000 was provided by Company
investing activities.
Operating Activities: Cash flows from operating activities for the
three months ended September 30, 2000 were provided by interest income of
approximately $225,000. Significant operating activity balances required to
reconcile the Company's GAAP accrual net loss of $514,000 for the three months
ended September 30, 2000 to net cash flows provided by operating activities
include (i) a decrease in interest receivable of $116,000 (ii) a decrease in
income tax receivable of $504,000, (iii) a decrease in liabilities subject to
compromise of $67,000, (iv) an increase in accounts payable and accrued expenses
of $174,000.
Effects of Plan: As a result of the confirmation of the Plan and the
Company's cancellation of all senior indebtedness, the Company anticipates that
the sources of its cash for operating expenses and investing activities for
fiscal 2001 will come primarily from (i) management fees received pursuant to
the Laguna Management Contract, (ii) debt and lease service payments received
from the Laguna Development Corporation and (iii) existing cash on hand.
Investing Activities: Cash flows from investing activities for the
three month period ended September 30, 2000 were provided by a $190,000
collection of Native American loans receivable and $25,000 direct financing
lease payments, and used by (i) an increase in restricted funds of $92,000, (ii)
payments to acquire furniture, fixtures and equipment of $9,000.
Financing Activities: The Company did not have any financing activities
for the three month period ended September 30, 2000.
The Company's source of cash for the next twelve months is expected to
be derived from the receipt of management fees from the Dancing Eagle Casino
(Pueblo of Laguna), the receipt of debt service payments on the Native American
loans receivable from the Dancing Eagle Casino and the receipt of lease payments
in relation with the Dancing Eagle Casino.
Capital Requirements: The Company will continue to operate, through
CGMI, on the management fees, principal and interest loan repayments, and lease
payments from the Dancing Eagle Casino as well as with its post-Plan cash
reserves.
7
<PAGE> 10
The development, management and operation of Native American gaming,
other gaming establishments and ancillary and complimentary businesses is time
consuming and capital intensive. Substantial capital is needed to finance the
licensing, development, construction, architectural, engineering, equipping,
legal and accounting fees and operating expenses associated with the management,
development and operation of casino gaming establishments. It is anticipated
that the Company will require significant additional capital in order to fund
future projects. There can be no assurance that such financing will be available
or, if available, that the terms thereof will be attractive to the Company.
Results of Operations
Overview
The following discussion about the Company's results of operations
includes the Company and its subsidiaries, CGMI, and CDGC.
Three-month Period Ended September 30, 2000 as Compared to the
Three-month Period Ended September 30, 1999
Income From Operations
Loss from operations for the three-month period ended September 30, 2000
totaled approximately $502,000 as compared to income of $936,000 for the
three-month period ended September 30, 1999, representing a decrease in income
from operations of $1,438,000. This decrease in income is due to the combination
of two factors, (i) a decrease in revenues of $1,976,000, and (ii) a decrease in
operating expenses of $538,000.
Revenues
The following table outlines the Company's revenues for the three months
ended September 30, 2000 and 1999 (in thousands except % change):
<TABLE>
<CAPTION>
3 Months 3 Months
Ended Ended
9/30/00 9/30/99 Inc. (Dec.) % Change
------ ------- ---------- --------
<S> <C> <C> <C> <C>
Umatilla $ -- $ 1,290 $(1,290) -100.0%
Tonto Apache -- 686 (686) -100.0%
------- ------- ------- -------
$ -- $ 1,976 $ 1,865 -94.4%
======= ======= ======= =======
</TABLE>
Revenues decreased $1,976,000, or 100.0% from $1,976,000 to $0 for the
three-month period ended September 30, 2000 as compared to the three-month
period ended September 30, 1999. The decreased revenue from the Umatilla Casino
of $1,290,000 resulted from the expiration of the management agreement in
February 2000. The decreased revenue from the Tonto Apache Casino of $686,000
resulted from the expiration of the management agreement in March 2000.
Costs and Expenses
Salaries and wages decreased to $185,000 from $212,000, a $27,000 or
12.7% decrease in the first quarter of fiscal 2001 as compared to the first
quarter of fiscal 2000. This decrease in salaries and related expenses is
primarily attributable to a reduction in staff.
Company development costs increased $53,000 or 101.9% to $105,000 for
the three months ended September 30, 2000 as compared to the three months ended
September 30, 1999. This increase is primarily due to a payment of $62,000 to
Laguna Development Corporation.
Professional fees decreased to $135,000 from $139,000, a 2.8% or $4,000
decrease in the first quarter of fiscal 2001 as compared to the first quarter of
fiscal 2000. This decrease is primarily due to management's continued efforts to
reduce expenses.
General and administrative expenses declined $8,000 or 9.6% to $75,000
for the three months ended September 30, 2000. This decline is attributable to
the continued streamlining of the Company's operations and general expense
reductions in the first quarter of fiscal 2001.
Depreciation and amortization expense for the first quarter of fiscal
year 2001 decreased $552,000 to $2,000, a decrease of 99.1% over the first
quarter of fiscal year 2000. The decrease is primarily due to no amortization of
deferred charges as all deferred charges were expenses in prior years.
8
<PAGE> 11
Other Income and Expenses
Interest income increased $20,000 or 16.9% to $138,000 for the three
months ended September 30, 2000. This increase is the result of an increase in
restricted funds, direct financing leases and Native American loans receivable.
Interest expense decreased $684,000 or 100.0% to $0 for the first
quarter of fiscal 2001 due to the Chapter 11 reorganization.
Reorganization Items
As a result of the 2000 Reorganization, the Company earned interest of
$87,000 on funds that would have been used to make the May 15, 2000 payment on
the Senior Secured Notes that was not made due to the bankruptcy filing. In
addition, the Company incurred $234,000 in professional fees related to the
Reorganization.
PART I., Item 3.
Quantitative and Qualitative Disclosures about Market Risks
Not applicable.
PART II., Item 1.
CAPITAL GAMING INTERNATIONAL, INC.
LEGAL PROCEEDINGS
With the exception of the Company's voluntary reorganization
proceedings commenced on May 15, 2000, there was no material litigation
involving or pending against the Company on September 30, 2000. The Company is
or may become a defendant in pending or threatened legal proceedings in the
ordinary course of business although it is not aware of the existence of any
such pending or threatened legal proceedings at this time. See the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 2000, section
entitled "Risk Factors - Accounting Disagreement" for a description of a
disagreement with the Laguna Development Corporation concerning accounting
treatment of pre-opening expenses under the Laguna Management Contract, which
disagreement may result in arbitration in the fiscal year ending June 30, 2001.
During the quarter the Company continued to manage the Dancing Eagle
Casino for the Pueblo of Laguna. Because of the above described disagreement and
in accordance with generally accepted accounting principles the Company has not
recognized approximately $111,000 revenue from the Laguna Management Contract
for the quarter ended September 30, 2000. The Company also paid $62,000 to
Laguna Development Corporation during the quarter.
Part II., Item 2.
Changes in Securities and Use of Proceeds
See note [3] to the unaudited financial statements contained herein and
the Reorganization section in the Company's Annual Report filed on form 10-K for
the fiscal year ended June 30, 2000, filed with the Securities and Exchange
Commission.
9
<PAGE> 12
PART II., Item 3.
Default Upon Senior Securities
See note [3] to the unaudited financial statements contained herein and
the Reorganization section in the Company's Annual Report filed on form 10-K for
the fiscal year ended June 30, 2000, filed with the Securities and Exchange
Commission.
Part II., Item 4.
Submission of Matters to a Vote of Securityholders
There were no matters required to be brought to a vote of the
securityholders during the three months ended September 30, 2000.
PART II., Item 6.
CAPITAL GAMING INTERNATIONAL, INC.
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number
-------
<S> <C>
# Filed herewith
27 Financial Data Schedule
(b) Reports on Form 8-K
99 Private Securities Litigation Reform Act of 1995
Safe Harbor Compliance Statement for Forward-Looking Statements
</TABLE>
10
<PAGE> 13
Signature Page
CAPITAL GAMING INTERNATIONAL, INC.
SIGNATURES
Pursuant to the requirements 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.
Dated: November 20, 2000 By: /s/ Michael W. Barozzi
---------------------------------------------
Michael W. Barozzi, President and Chief
Operating Officer
(Authorized Representative)
Dated: November 20, 2000 By: /s/ William S. Papazian
------------------------------------------
William S. Papazian, Executive Vice President
and General Counsel and Secretary
(Authorized Representative)
Dated: November 20, 2000 By: /s/ James McDermott
------------------------------------------
James McDermott
(Principal Accounting Officer)
11
