As filed with the Securities and Exchange Commission on January 23, 1998.
File No. 33-343861
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
Alpha Hospitality Corporation
(Exact name of Registrant as specified in its charter)
Delaware 13-3714474
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12 East 49th Street
New York, New York 10017
(212) 750-3500
(Address, including zip code, and telephone number,
including area code, of Registrant's
principal executive offices)
James A. Cutler, Chief Financial Officer
Alpha Hospitality Corporation
12 East 49th Street 10017
(212) 750-3500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Craig S. Libson, Esq.
Parker Duryee Rosoff & Haft
529 Fifth Avenue
New York, New York 10017
(212) 599-0500
Approximate date of proposed sale to the public: From time to time
after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
1
<PAGE>
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C> <C>
Title of Each Class Proposed Maximum Proposed Maximum
of Securities to be Amount to be Offering Price Aggregate Amount of
Registered Registered Per Share(1) Offering Price(1) Registration Fee
Common Stock, 100,000 $2.25 $225,000 $66.38
$0.01 par value
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based upon the average of the high and low
sales prices of the Common Stock on The Nasdaq SmallCap Market on
December 29, 1997.
<PAGE>
100,000 Shares
ALPHA HOSPITALITY CORPORATION
Common Stock
The 100,000 shares of common stock, par value $.01 per share (the "Common
Stock"), to which this Prospectus relates (the "Shares") are being offered, from
time to time, on behalf of and for the account of a certain stockholder (the
"Selling Stockholder") of Alpha Hospitality Corporation (the "Company") as
identified herein under "Selling Stockholder." The Shares are comprised of
100,000 shares which have been issued to the Selling Stockholder. The
distribution of the Shares by the Selling Stockholder, or by pledgees, donees,
distributees, transferees or other successors in interest, may be affected from
time to time by underwriters who may be selected by the Selling Stockholder
and/or broker-dealers, in one or more transactions (which may involve crosses
and block transactions) on The Nasdaq SmallCap Market or other over-the-counter
markets or, in special offerings, or secondary distributions pursuant to and in
accordance with rules of such over-the-counter markets, in negotiated
transactions or otherwise, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. In
connection with the distributions of the Shares or otherwise, the Selling
Stockholder may enter into hedging or option transactions with broker-dealers
and may sell Shares short and deliver the Shares to close out such short
positions. The Company has agreed to indemnify the Selling Stockholder,
underwriters who may be selected by the Selling Stockholder and certain other
persons against certain liabilities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act"). See "Selling Stockholder" and
"Plan of Distribution."
These securities involve a high degree of risk. See "Risk Factors".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Company has agreed to pay all expenses of registration in connection
with this offering but will not receive any of the proceeds from the sale of the
Shares being offered hereby. All brokerage commissions and other similar
expenses incurred by the Selling Stockholder will be borne by such Selling
Stockholder. The aggregate proceeds to the Selling Stockholder from the sale of
the Shares will be the purchase price of the Shares sold, less the aggregate
brokerage commissions and underwriters' discounts, if any, and other expenses of
issuance and distribution not borne by the Company.
The Common Stock being offered hereby by the Selling Stockholder has not
been registered for sale under the securities laws of any state or jurisdiction
as of the date of this Prospectus. Brokers or dealers effecting transactions in
the Common Stock should confirm the registration thereof under the securities
law of the state in which such transactions occur, or the existence of any
exemption from registration.
The Common Stock is listed for trading on The Nasdaq SmallCap Market. On
December 30, 1997, the closing bid price of the Common Stock as reported by The
Nasdaq SmallCap Market was $2 1/4 per share.
The date of this Prospectus is January _, 1998.
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations not contained in this Prospectus or
incorporated by reference to this Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or by the Selling Stockholder. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction. The delivery
of this Prospectus at any time does not imply that the information contained
herein is correct as of any time subsequent to its date.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In accordance therewith,
the Company files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Regional Offices of the Commission at 7 World
Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60621. Copies of such material may be obtained
from the Public Reference Section of the Commission at prescribed rates by
writing to the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 or
from the Commission's web site at http://www.sec.gov. The Common Stock is traded
on The Nasdaq SmallCap Market and reports and other information concerning the
Company may be inspected and copied at The Nasdaq Stock Market, Inc. at 1735 K
Street, N.W., Washington, DC 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is made to the Registration Statement, copies of which can be obtained from the
Public Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated herein by reference are the following documents filed by the
Company with the Commission under the Exchange Act:
(a) The Company's Annual Report on Form 10K and Form 10-K/A for its fiscal
year ended December 31, 1996;
(b) The Company's Quarterly Report on Form 10-Q for its fiscal quarter
ended March 31, 1997, June 30, 1997 and September 30, 1997;
(c) The Company's Registration Statement on Form S-8 for a description of
its Common Stock;
(d) The Company's Current Report on Form 8-K dated March 12, 1997 and
(e) The Company's Current Report on Form 8-K dated January 2, 1998.
All documents filed by the Company with the Commission pursuant to Sections
13, 14 and 15(d) of the Exchange Act subsequent hereto, but prior to the
termination of this offering, shall be deemed to be incorporated herein by
reference and to be a part hereof from their respective dates of filing. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
<PAGE>
The Company will provide without charge to each person, including any
beneficial owners, to whom a copy of this Prospectus is delivered, upon the
written and oral request of any such person, a copy of any or all of the
documents referred to above which have been incorporated into this Prospectus by
reference (other than the exhibits to such documents). Requests for such copies
should be directed to James A. Cutler, Chief Financial Officer, 12 East 49th
Street, New York, New York 10017; telephone number (212) 750-3500.
THE COMPANY
General
The Company, through its seven subsidiaries, is engaged in the ownership
and operation of a gaming vessel, the Bayou Caddy's Jubilee Casino (the "Casino"
or the "Jubilee Casino"), located in Greenville, Mississippi, which is operated
by the Company's subsidiary Alpha Gulf Coast, Inc. ("Gulf Coast"), and the
construction of an adjacent hotel, which is being handled through its subsidiary
Alpha Greenville Hotel, Inc. ("Greenville Hotel"), and has been engaged in the
pursuit of gaming licenses for additional casinos in various states (which has
been accomplished through the Company's subsidiaries Alpha Missouri, Inc.
("Alpha Missouri"), Alpha Monticello, Inc. ("Alpha Monticello"), Alpha Rising
Sun, Inc. ("Alpha Rising Sun"), Jubilation Lakeshore, Inc. ("Jubilation
Lakeshore") and Alpha St. Regis, Inc. ("Alpha St. Regis"). From September 1993
through December 1996, the Company, through its former subsidiary, Alpha Hotel
Management Company, Inc. ("Alpha Hotel"), provided management services to hotels
and motels owned by third-parties. Additionally, from December 1995 to July 16,
1996, the Company, through its subsidiary Jubilation Lakeshore (formerly known
as the Cotton Club of Greenville Inc.), operated a second gaming vessel, the
Jubilation Casino.
The Company was incorporated in Delaware on March 19, 1993; Gulf Coast was
incorporated in Delaware on May 4, 1993; Jubilation Lakeshore was incorporated
in Mississippi on December 8, 1992; Alpha Missouri was incorporated in Delaware
on March 17, 1995; Alpha Monticello was incorporated in Delaware on May 30,
1996; Alpha Rising Sun was incorporated in Delaware on August 6, 1993; Alpha St.
Regis was incorporated in Delaware on June 24, 1994; and Greenville Hotel was
incorporated in Delaware on February 27, 1997. The Company's principal executive
offices are located at 12 East 49th Street, New York, New York 10017, and its
telephone number is 212-750-3500.
Recent Developments
On December 17, 1997, the Company, through its subsidiaries Gulf Coast and
Alpha Greenville Hotel, Inc., entered into an Asset Sale Agreement (the "Sale
Agreement") with Greenville Casino Partners, L.P., a Mississippi limited
partnership unrelated to the Company, pursuant to which the Company (by its
subsidiaries) agreed, subject to the terms and conditions set forth therein, to
sell to Buyer substantially all of the Company's operating assets in Greenville,
Mississippi, including a hotel currently under construction on land adjacent to
its Bayou Caddy's Jubilee Casino (the "Casino"). Greenville Casino Partners,
L.P. operates the Las Vegas Casino, which is one of three riverboat casinos
currently operating at the Marina on Lake Ferguson in downtown Greenville,
Mississippi. The Las Vegas Casino is a 1-story casino barge with a mezzanine
level containing approximately 18,000 square feet of gaming space and has 649
slot machines and 19 table games. The Buyer employs approximately 550 full-time
personnel.
Upon consummation of the sale provided for under the Sale Agreement and
related financing (the "Pre-Closing Financing") obtained in conjunction with,
and as part of, the transactions contemplated under the Sale Agreement, the
Company (through its subsidiaries) is anticipated to receive (a) approximately
$26.5 million in cash, and (b) a 25% limited partnership interest in Buyer and
Buyer will assume (i) approximately $2 million of liabilities relating to the
business and assets being assumed and (ii) the Pre-Closing Financing.
<PAGE>
Consummation of the proposed sale under the Sale Agreement is subject to
certain conditions, including approval of the transaction by the Company's
stockholders. The Company is in the process of preparing a proxy statement
relating to the proposed sale for filing with the Securities and Exchange
Commission (the "SEC") and, following review by the SEC, intends to distribute
the proxy statement to its stockholders and solicit their votes in favor of
proposed sale. The Company has been advised by Buyer that through its
solicitation of holders of the Company's capital stock, it has sufficient to
approve the proposed sale.
In conjunction with and in anticipation of the proposed sale contemplated
by the Sale Agreement, on December 30, 1997, Gulf Coast and Alpha Hotel obtained
the Pre-Closing Financing, pursuant to which they borrowed $19.0 million ($23.9
million less loan costs and loan discounts of approximately $5 million) from
Credit Suisse First Boston Mortgage Capital, L.L.C. ("Credit Suisse") and
concurrently therewith Gulf Coast applied the net proceeds therefrom to the
payment and discharge of approximately $17 million of the Company's
indebtedness, including $16 million of secured debt. Additionally, in
conjunction with and as part of the Pre- Closing Financing, Gulf Coast executed
and delivered to Credit Suisse an unsecured, zero-coupon promissory note (the
"Subordinated Debt") in the stated principal amount of $4.8 million. Although no
proceeds were received by Gulf Coast in conjunction with the Subordinated Debt,
under the terms of the Sale Agreement, Buyer is to assume such promissory note
upon consummation of the sale of the Casino Assets. The Pre-Closing financing is
secured by a sescurity interest in substantially all of the Company's assets,
including the Casino and other assets contemplated to be sold to Buyer.
Closing of the purchase and sale of the Casino and related assets is
provided under the Sale Agreement to occur on the earlier to occur of (a) the
fifth business day after all conditions precedent have been met or (b) January
31, 1998 (provided, that if the SEC has not, on or before January 6, 1998,
approved the form of proxy statement to solicit the vote of the Company's
stockholders with respect to the proposed sale , the January 31, 1998 date shall
be extended to the earlier of (i) the 25th day after such approval is given or
(ii) February 25, 1998) or on such other date as Gulf Coast and Buyer may agree.
BUSINESS
Casino Operations and Gaming Activities
Current Operations
The Jubilee Casino. The Jubilee Casino, located in Greenville, Mississippi,
is owned and operated by the Company's wholly-owned subsidiary Gulf Coast. On
May 14, 1993, pursuant to an asset purchase agreement among Gulf Coast, B.C. of
Mississippi, Inc. ("B.C.") (formerly known as Bayou Caddy, Inc.), and certain
shareholders of B.C., the Company acquired B.C.'s leasehold interests under
certain lease agreements and certain other assets incidental to the development
and ownership of the Jubilee Casino. The Company proceeded with this acquisition
because it gave the Company the opportunity to enter the casino business in
Lakeshore, Mississippi, the original site of the Jubilee Casino. Moreover, B.C.
had already initiated the process of obtaining requisite approvals for casino
operation in Lakeshore, thereby expediting the Company's ability to conduct
casino operations in Mississippi.
The Company initiated the Jubilee Casino's gaming operations on January 12,
1994, subsequent to its construction on a marine vessel in 1993, which
construction received the requisite approvals from the U. S. Army Corps of
Engineers and the Mississippi Department of Natural Resources. Prior to the
initiation of the Jubilee Casino's gaming operations, the Company applied for
and received the required license renewals and approvals from the Mississippi
Gaming Commission (the "Mississippi Commission"). See Government Regulation.
Following the Company's acquisition (through Jubilation Lakeshore) of the
Cotton Club casino in October 1995 (See "The Company - Discontinued Operations -
The Jubilation Casino") the Company transferred the Jubilee Casino from
Lakeshore to Greenville. The Jubilee Casino reopened in Greenville on November
17, 1995. The movement of the Jubilee Casino to Greenville increased the
capacity at Greenville and brought an upscale facility to the Greenville market.
Management believed that the relocation of the Jubilee Casino to Greenville was
an appropriate action designed to increase the return on the Company's gaming
assets in Mississippi.
<PAGE>
The Jubilee Casino has 844 slot machines and 29 table games. In addition to
its gaming activities, the Jubilee Casino includes a 175-seat buffet, a 350-seat
showroom, a 98-seat restaurant and parking to accommodate 950 customer vehicles.
In January 1996, the Company completed renovation of its leased restaurant
facility at Greenville in order to give customers a dining alternative, offering
fine dining in an elegant setting. Management believes that the Jubilee Casino,
which offers an attractive casino environment and significant casino capacity,
will continue to at least capture its fair market share of the Greenville gaming
market.
In April 1997, Gulf Coast received approval from the Mississippi Commission
for its infrastructure investment requirement to build and operate a hotel on
property adjacent to the Jubilee Casino location. Greenville Hotel entered into
a long term lease with the Board of Mississippi Levee Commissioners to lease
property, including historical landmark buildings, for the development of a
forty-one key single room and suite hotel. Management believes that this hotel
will add a new dimension to the Company's casino patron experience and will be
an added amenity to the Company's player development program. The total cost of
this project is estimated to be approximately $3.2 million. Although a permanent
source of financing for this project has not been identified at this time,
Greenville Hotel has received interim financing from Bryanston to fund
construction to date.
The Company concentrates its sales, marketing and promotional activities
for the Jubilee Casino in its principal target market within a 50-mile radius of
the casino. The target market is reached through a combination of billboards,
radio, television, newspaper advertising and direct mail. Also, casino brochures
are placed in tourist information areas, local and regional hotels, restaurants
and bars.
The Company has developed an in-house mailing list of in excess 130,000
casino customers. These customers are made up of table game players and "Slot
Club" members. Table game customers are identified through the casin's
marketing representatives, and their play is monitored to evaluate whether the
customer warrants complimentary services provided by the casino. The award of
complimentary services is consistent with standard industry practices and is
based upon a customer's duration of play and average amount wagered. The "Slot
Club" is an operation that allows the casino's computerized tracking system to
identify customers, amount of play and other pertinent characteristics. The
"Slot Club" is an ongoing promotion where members are issued cards and
accumulate points based on the amount of their play. Such points are redeemable
for food, beverages and merchandise. Tournaments for blackjack, craps and poker
are held, along with other special events and promotions.
There are currently 19 casinos located on the Mississippi River. In the
Greenville market, the Company's Jubilee Casino competes with the Las Vegas
Casino (owned and operated by Buyer) and the Lighthouse Point Casino, which
opened in November 1996. The opening of the Lighthouse Point Casino resulted in
a decrease in the gaming revenues of the Jubilee Casino, which is expected to be
corrected as the marketing programs of the new Lighthouse Point Casino help to
increase the total Greenville market.
Since the opening of the new casino, the Jubilee Casino's fair share of the
market, based on the number of player positions in the market, has improved. The
Company believes that the Jubilee Casino is well-positioned to compete
successfully with the two other casinos in the Greenville market. Approximately
60 miles south of the Jubilee Casino is Vicksburg. Vicksburg has four casinos:
the Isle of Capri, Harrahs Vicksburg, Ameristar and Rainbow Casino.
Approximately 110 miles south of the Jubilee Casino is Natchez with the Lady
Luck Natchez Casino. Approximately 90 miles north of the Jubilee Casino is
Coahoma County with the Lady Luck Coahoma Casino. Tunica County is approximately
180 miles north of the Jubilee Casino and has ten casinos - Harrahs (2 casinos),
Sams Town, Fitzgeralds, Sheraton, Hollywood Casino, Circus Circus, Horseshoe
Casino, Grand Casino and Ballys. Since casinos outside a 50- mile radius of the
Jubilee Casino are not considered by the Company to be within its primary
competitive market, the Company does not deem the casinos in Vicksburg, Natchez,
Coahoma County or Tunica County to be among its principal competitors.
The Company has remained competitive in the markets affecting the Jubilee
Casino by keeping its gaming vessel well-maintained and by offering superior
accommodations, entertainment programs and special events. In addition, the
Company's advertising and marketing efforts have focused on maintaining the
Company's presence in its market.
Although the Jubilee Casino has remained competitive, the Jubilation
Casino, located on the Mississippi Gulf Coast, was unable to compete
satisfactorily with the major casino developments in the Biloxi and Gulfport
markets. This resulted in management's decision to close the Jubilation Casino
during August 1996. See Discontinued Operations.
The results of the casinos' operations have been seasonal, with the
greatest activity occurring during the fair weather months of May through
September. Consequently, the Company's operating results during the calendar
quarters ending in December and March are not as successful as those quarters
ending in June and September, and losses result from time to time. The seasonal
nature of a casino's operations increases the risk that natural disasters or the
loss of the casino for any other reason during the May through September period
would have a materially adverse effect on the Company's financial condition and
results of operations.
<PAGE>
Development Activities
New York. In March 1994, the Company entered into a joint venture agreement
relating to the operation and development of a gaming facility located on the
reservation of the St. Regis Mohawk Tribe of Hogansburg, New York (the "Tribe").
The Company subsequently decided not to proceed with the project at Hogansburg,
New York, since the Company and the Tribe began exploring a more suitable
arrangement relating to the development of a casino in Sullivan County, New
York, as discussed below.
On January 19, 1996, the Company, through its subsidiary, Alpha St. Regis,
entered into a memorandum of understanding with Catskill Development, L. L. C.
("Catskill") regarding the development and management of a casino to be built
adjacent to the Monticello Raceway in Sullivan County, New York. Bryanston is a
25 % member of Catskill. This memorandum of understanding was assigned to Alpha
Monticello. Mohawk Management L.L.C. (a company of which the Company's
subsidiary Alpha Monticello owns 50%) has executed an agreement with the Tribe
for the management of such proposed casino, and subject to the obtaining of
requisite approvals, it is anticipated that Mohawk Management L.L.C. will
undertake the development and management of this casino and Alpha Monticello
will be responsible for the day-to-day operations of this casino. It is intended
that the casino will be owned by the Tribe and will be located on land to be
placed in trust for the benefit of the Tribe. The Monticello Raceway is located
90 miles from New York City.
This casino project is subject to approval by the U.S. Department of the
Interior and its Bureau of Indian Affairs, the National Indian Gaming Commission
and the Governor of the State of New York. Under the memorandum of
understanding, Catskill and the Company have committed to enter into a
definitive agreement on the terms established in the memorandum.
Catskill purchased the 225 acre Monticello Raceway in June 1996. The
Company is advised that Catskill plans to continue Monticello's racing program
and to explore other developments at the site in addition to the proposed casino
referred to above.
There can be no assurance that the project will receive all requisite
approvals. However, if such approvals are obtained, it is the Company's current
intention to proceed with the development of this gaming activity.
For the nine months ended September 30, 1997 and the year ended December
31, 1996, the Company incurred casino development costs of $315 and $1,975,
respectively, of which $39 and $734 have been capitalized and the remaining
expenditures of $276,000 and $1,241,000, respectively, are substantially
comprised of a general corporate overhead allocation.
<PAGE>
Discontinued Operations
Missouri. The City of Louisiana is currently competing with other cities in
Missouri for the next gaming license to be granted in that State. In the event
that the state gaming authorities select Louisiana, Missouri as the locality to
receive the next gaming license to be granted, the Company intends to compete
for the license to provide gaming facilities. The City of Louisiana is located
approximately 60 miles north of metropolitan St. Louis and 70 miles from
Springfield, Illinois, that state's capital.
The Company anticipates that, if the license is granted, it will provide a
gaming vessel with a capacity of approximately 750 gaming positions. The project
cost is presently expected to be approximately $30 million. Subject to the
Company's receipt of requisite licenses and approvals and the availability of
any necessary financing, it is the Company's current intention, subject to
confirmation of the economic feasibility of this project, to continue with the
development of this project.
Alpha Missouri has applications pending for site approval and a gaming
license with respect to the development of a river boat gaming facility in
Louisiana, Missouri. Although existing law in Missouri does not restrict the
number of licenses the Missouri Gaming Commission may issue, the Commission has
effectively placed a moratorium on any new licenses in the Louisiana market. The
Company believes that such restriction will remain in place for an indeterminant
time. As a consequence, Alpha Missouri and the City of Louisiana agreed to
terminate the lease by Alpha Missouri of city-owned property that was
anticipated to be used for the gaming project.
The Company has incurred development costs of approximately $243,000 and
$87,000 in 1997 and 1996, respectively, related to its proposed development
comprised of general corporate overhead allocation.
The Jubilation Casino. In October 1995 the Company (through its subsidiary
Lakeshore Jubilation) acquired the Cotton Club casino, a gaming vessel then
moored in Greenville, Mississippi. Such casino was renamed the Jubilation Casino
and was relocated from Greenville to Lakeshore, Mississippi, where it reopened
on December 21, 1995. Management believed that the smaller Jubilation Casino
could adequately service the existing Lakeshore market with substantially
reduced cost of operations. However, based upon the Jubilation Casino's limited
capacity, remote location and the increasing casino development in the Biloxi
and Gulfport markets (which proved to be more attractive to casino patrons), the
Jubilation Casino was unable to overcome operating deficits. As a result, in
July 1996 management began to implement its plans to close the Jubilation Casino
during August 1996. On July 16, 1996, operation of the Jubilation Casino was
suspended in compliance with a directive of the Mississippi Commission, which
asserted that the working capital of the Jubilation Casino was not sufficient
and required that the Jubilation Casino's working capital be increased.
Jubilation Lakeshore reviewed this working capital requirement in light of its
previously announced plan to close the Jubilation Casino during August 1996 and
the costs that would be incurred to reopen the Jubilation Casino. Based on this
review, Jubilation Lakeshore decided not to reopen the Jubilation Casino.
<PAGE>
In connection with the plan to close the Jubilation Casino, management
believes that it took all appropriate action required by federal law with
respect to providing notice of such closing to its employees. In connection with
the closing of the Jubilation Casino, management updated its assessment of the
realizability of the leasehold improvements and related assets of the Jubilation
Casino. Since this would have resulted in an impairment loss of approximately
$14,507,000 and stockholders' equity below the requirements for continued
listing of the Company's securities on NASDAQ, the Company accepted proposals by
Bryanston and BP to convert approximately $19,165,000 and $1,222,000,
respectively, of debt to 693,905 and 44,258 shares of Preferred Stock.
The Company has no current plans to reopen the Jubilation Casino, and is
investigating other possible uses, including the possible sales thereof.
On January,25, 1995, the Company entered into an agreement to acquire all
of the outstanding common stock of Doc Holliday, Inc. ("Doc Holliday"), the
owner and operator of an 18,000 square foot casino in Central City, Colorado. In
the fall of 1995, the Company filed the requisite forms with the Colorado
Division of Gaming for approval of the Company's operation of Doc Holliday's
casino in Central City, Colorado. Since the Company's due diligence
investigation revealed that the acquisition was not in the best interests of the
Company, in early 1996 the Company decided not to proceed with the acquisition
and exercised its contractual right to terminate the agreement.
In February, 1995, Alpha Rising Sun entered into two letters of intent with
subsidiaries of Bally Entertainment Corporation ("Bally") to develop and manage
a proposed casino and related upland development at the City of Rising Sun. In
connection with such arrangement, the Company, through its subsidiary Alpha
Rising Sun, filed an application for a river boat gaming license for the County
of Ohio, City of Rising Sun, with the Indiana Gaming Commission in the first
quarter of 1994. Since the license was awarded to another entity, the Company
has discontinued its efforts to expand its casino operations in Indiana.
Hotel Operations. As of December 31, 1996, the Company sold 100% of the
stock of its subsidiary, Alpha Hotel to Bryanston for consideration of
$3,000,000.
Through Alpha Hotel, the Company provided management services to 14 hotels
or motels. The Company provided management services to 13 of such hotels or
motels primarily under a certain Service Agreement with Bryanston. The Company
provided management services to these 13 hotels on behalf of Bryanston (which
was 50% owned by Mrs. Beatrice Tollman, the spouse of the Company's Chairman,
President and Chief Executive Officer, and 50% owned by a trust for the benefit
of a child of Mr. Monty D. Hundley, the Company's former President and Chief
Executive Officer), pursuant to certain individual management agreements. The
rights to provide the management services were acquired by the Company in
partial consideration for the issuance of the shares of Common Stock to
Bryanston. Such rights were recorded by the Company at no cost to the Company
based on its predecessor's cost, which was $0. Pursuant to the Service
Agreement, the Company was the sole provider to such hotels of management
services required of Bryanston and received substantially all fees due to
Bryanston under the above-referenced management agreements. In addition, the
Company provided management services to one hotel located in Myrtle Beach, South
Carolina, under an agreement with the hotel's owner. All of the 14 hotels were
"mid-priced," ranging between $40 and $70 per night, and all but one were
operated as Days Inns.
<PAGE>
The Company and Bryanston had designed a financial management system
whereby all accounting information was processed in a centralized accounting
office in Hopewell Junction, New York. The system included management of all
cash, accounts payable and receivable, and generated detailed monthly financial
statements. The Company provided each property with standardized forms and
procedures in order that all accounting in the management system was uniform. In
connection with the Service Agreement, effective September 1, 1993, the Company
entered into an expense reimbursement agreement (the "Expense Reimbursement
Agreement") with Bryanston for the use of certain office space at its Hopewell
Junction, New York facility in connection with the Company's hotel management
operations. Pursuant to the terms of the Expense Reimbursement Agreement, the
Company reimbursed Bryanston on a monthly basis for its share of rent, office
expenses and direct payroll. The Expense Reimbursement Agreement allowed for
cost-effective centralization and management of the Company's operations, partly
based on the Service Agreement, and partly based on the fact that Bryanston,
which employed some of the Company's employees, was also based at the Hopewell
Junction office.
Under the Service Agreement, the Company was compensated for its services
in an amount equal to a percentage of total net revenues of the managed hotels
(net of 1% of aggregate revenue retained by Bryanston). Such percentages ranged
from 2% to 5%. Additional fees were earned from various incentive agreements and
accounting fees. The management agreements typically had a term of 10 years and
most had specified renewal terms. The majority of the initial terms were
scheduled to expire in the years 2001 and 2002. The management agreements
contained termination provisions that were consistent with hotel industry
practice and could be terminated by either party due to an uncured default by
the other party. One of the management agreements was terminable at the
discretion of the hotel owner and others were terminable if there was a material
decrease in the hotel operating results or upon sale of the property. The
management agreements could also be terminated upon the sale of the managed
hotels.
As indicated above, all but one of the managed hotels were operated as Days
Inns by arrangement with Bryanston, which was a Days Inns licensee. The terms of
Bryanston's license provided for a special, partial exemption from the Days Inns
license fees, which was ordinarily 8% of total net revenue for each of the
hotels for which the Company provided management services. Each of the managed
hotels was charged applicable fees for marketing and reservation service, but
was exempt from the so-called "basic fee" of 5% since the elimination of the
"basic fee" reduced the license fee to 3%, such reduction was economically
significant to such hotels and was favorable to the Company since the
arrangement was an incentive for Days Inn licensees to enter into management
agreements with the Company. The term of the special exemption was equal to the
term of the related management agreement, including any extensions for which
provision was made therein, plus a further five-year term (intended to cover a
possible future extension). The discount was not available, however, for any
hotels other than those hotels operated by Bryanston. There was no discretion in
the licenser, absent breach, to eliminate or modify the discount.
The Company's hotel management operations were organized under a regional
management structure. The overall hotel operation was supervised by the
president of Alpha Hotel and regional executives were utilized to oversee and
monitor the operations. The Company believed this type of organization, coupled
with extensive operational systems and procedures, was the most effective way to
provide management services for the hotels. In addition to the regional
managers, the Company had a support staff comprised of accounting, marketing,
sales and supervisory personnel. This comprehensive support staff helped ensure
that all of the managed hotels maximized potential revenue and profit
opportunities by implementing financial controls, marketing the Company's
services to existing and potential clients and advising on programs related to
hotel management services.
<PAGE>
The hotels for which the Company provided management services were:
Name and Location No. of Rooms Termination Renewal
Date
Days Inn-Scottsdale, Scottsdale, AZ 167 2001 None
Days Inn-Clearwater, Clearwater, FL 117 2001 None
Days Inn-Buena Vista, Orlando, FL 245 2002 None
Days Inn-Downtown, Atlanta, GA 262 2012 2022
Days Inn-Savannah, Savannah Bay, GA 253 2001 None
Days Inn-Lakeshore, Chicago, IL 580 2006 2021
Days Inn-Kankakee, Kankakee, IL 98 2007 None
Days Inn-Henderson, Henderson, KY 115 2002 None
Days Inn-University, Minneapolis, MN 130 2001 None
Days Inn-Roseville, Roseville, MN 114 2001 None
Days Inn-Plymouth, Plymouth, MN 113 2001 None
Days Inn-Butler, Butler, PA 133 2001 None
Days Inn-Madisonville, Madisonville, KY 141 2002 None
Sheraton-Myrtle Beach, SC 219 2004 None
Total 2,687
The following table sets forth the statements of income (in thousands) of
Alpha Hotel for the years ended December 31, 1996, 1995 and 1994:
Management fees $1,992 $2,863 $2,835
Operating expenses:
Direct payroll and related expenses 1,285 1,236 1,474
Selling, general and administrative 62 276 236
Total Expenses 1,347 1,512 1,710
Income from management fees
before intercompany charges $ 645 $1,35 $1,125
<PAGE>
Government Regulation
The Company's ownership and operation of its gaming properties are subject
to regulation by federal, state and local governmental and regulatory
authorities, including regulation relating to environmental protection. While
the Company has not been the subject of any complaints or other formal or
informal proceedings alleging any violations of government regulations, no
assurance can be given that the Company is, or in the future will be, able to
comply with, or continue to comply with, current or future governmental
regulations in every jurisdiction in which it conducts or will conduct its
business operations without substantial cost or interruption of its operations
or that any present or future federal, state or local regulations may not
restrict the Company's present and possible future activities. In the event that
the Company is unable to comply with any such requirements, the Company could be
subject to sanctions, which could have a materially adverse effect upon the
Company's business. [See "Business - Government Regulation - General," and "The
Company - Current Operations."]
Licensing
General. The gaming industry is highly regulated by each of the states in
which gaming is legal. The regulations vary on a state-by-state basis but
generally require that the operator, each owner of a substantial interest
(usually 5% or more) in the operator, members of the Board of Directors, each
officer and all key personnel be found suitable, and be approved, by the
applicable governing body. The failure of any present, or future, person
required to be approved to be, and remain, qualified to hold a license could
result in the loss of the license.
Mississippi. The ownership and operation of casino facilities in
Mississippi are subject to extensive state and local regulation, primarily the
licensing and regulatory control of the Mississippi Commission and the
Mississippi State Tax Commission (collectively, the "Mississippi Authorities").
The laws, regulations and supervisory procedures of Mississippi and the
Mississippi Commission seek to (i) prevent unsavory or unsuitable persons from
having any direct or indirect involvement with gaming at any time or in any
capacity, (ii) establish and maintain responsible accounting practices and
procedures, (iii) maintain effective control over the financial practices of
licensees, including establishing minimum procedures for internal fiscal affairs
and safeguarding of assets and revenues, providing reliable record keeping and
making periodic reports to the Mississippi Authorities, (iv) prevent cheating
and fraudulent practices, (v) provide a source of state and local revenues
through taxation and licensing fees and (vi) ensure that gaming licensees, to
the extent practicable, employ Mississippi residents. The regulations are
subject to amendment and to extensive interpretation by the Mississippi
Commission in view of their recent adoption. Changes in Mississippi law or
regulations may limit or otherwise materially affect the types of gaming that
may be conducted and could have an adverse effect on the Company and the
Company's Mississippi gaming operations.
The Mississippi Act provides for legalized dockside gaming at the
discretion of the 14 counties that either border the Mississippi Gulf Coast or
the Mississippi River but only if the voters in a county have not voted to
prohibit gaming in that county. The law permits unlimited stakes gaming on
permanently moored vessels on a 24-hour basis and does not restrict the
percentage of space that may be utilized for gaming. There are no limitations on
the number of gaming licenses that may be issued in Mississippi.
<PAGE>
The Company, a registered publicly-traded holding company under the
Mississippi Act, is required periodically to submit detailed financial and
operating reports to the Mississippi Authorities and to furnish any other
information that the Mississippi Authorities may require. The Company and any
subsidiary of the Company that operates a casino in Mississippi (a "Gaming
Subsidiary") are subject to the licensing and regulatory control of the
Mississippi Commission. If the Company is unable to continue to satisfy the
registration requirements of the Mississippi Act, the Company and its Gaming
Subsidiaries cannot own or operate gaming facilities in Mississippi. Each Gaming
Subsidiary must obtain gaming licenses from the Mississippi Commission to
operate casinos in Mississippi. A gaming license is issued by the Mississippi
Commission subject to certain conditions, including continued compliance with
all applicable state laws and regulations and physical inspection of casinos
prior to opening.
Gaming licenses are not transferable, are initially issued for a two-year
period and are subject to periodic renewal. No person may receive any percentage
of profits from a gaming subsidiary of a holding company without first obtaining
licenses and approvals from the Mississippi Commission.
Licensing of Officers, Directors and Employees
Officers, directors and certain key employees of the Company and its gaming
subsidiaries must be found suitable or be licensed by the Mississippi
Commission, and employees associated with gaming must obtain work permits that
are subject to immediate suspension under certain circumstances. In addition,
any person having a material relationship or involvement with the Company may be
required to be found suitable or be licensed, in which case such person must pay
the costs and fees associated with such investigation. The Mississippi
Commission may deny an application for a license for any cause that it deems
reasonable. Changes in licensed positions must be reported to the Mississippi
Commission. In addition to its authority to deny an application for a license,
the Mississippi Commission has jurisdiction to disapprove a change in corporate
officers. The Mississippi Commission has the power to require any gaming
subsidiary and the Company to suspend or dismiss officers, directors and other
key employees or sever relationships with other persons who refuse to file
appropriate applications or whom the authorities find unsuitable to act in such
capacities.
Investigation of Holders of Securities and Others
Mississippi law requires any person who acquires beneficial ownership of
more than 5% of the Common Stock to report the acquisition to the Mississippi
Commission, and such person may be required to be found suitable. Also, any
person who becomes a beneficial owner of more than 10% of the Common Stock, as
reported in filings under the Exchange Act, must apply for a finding of
suitability by the Mississippi Commission and must pay the costs and fees that
the Mississippi Commission incurs in conducting the investigation. The
Mississippi Commission has generally exercised its discretion to require a
finding of suitability of any beneficial owner of more than 5% of a company's
stock. If a stockholder 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. Representatives of the Mississippi Commission have
indicated that institutional investors may only be required to file summary
information in lieu of a suitability finding.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Mississippi
Commission may be found unsuitable. Any person found unsuitable and who holds,
directly or indirectly, any beneficial ownership of the securities of the
Company beyond such time as the Mississippi Commission prescribes may be guilty
of a misdemeanor. The Company is subject to disciplinary action if, after
receiving notice that a person is unsuitable to be a stockholder or to have any
other relationship with the Company or its Gaming Subsidiaries, the Company: (i)
pays the unsuitable person any dividend or other distribution upon the voting
securities of the Company; (ii) recognizes the exercise, directly or indirectly,
of any voting rights conferred by securities held by the unsuitable person;
(iii) pays the unsuitable person any remuneration in any form for services
rendered or otherwise, except in certain limited and specific circumstances; or
(iv) fails to pursue all lawful efforts to require the unsuitable person to
divest himself of the securities, including, if necessary, the immediate
purchase of the securities for cash at a fair market value.
<PAGE>
The Company may be required to disclose to the Mississippi Commission upon
request the identities of the holders of any debt securities. In addition, the
Mississippi Commission under the Mississippi Act may, in its discretion, (i)
require disclosure of holders of debt securities of corporations registered with
the Mississippi Commission, (ii) investigate such holders and (iii) require such
holders to be found suitable to own such debt securities. Although the
Mississippi Commission generally does not require the individual holders of
obligations such as notes to be investigated and found suitable, the Mississippi
Commission retains the discretion to do so for any reason, including, but not
limited to, a default or where the holder of the debt instrument exercises a
material influence over the gaming operations of the entity in question. Any
holder of debt securities required to apply for a finding of suitability must
pay all investigative fees and costs of the Mississippi Commission in connection
with such an investigation.
Required Records
The Company must maintain a current stock ledger in Mississippi that the
Mississippi Commission may examine at any time. If any securities of the Company
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 Mississippi Commission.
A failure to make such disclosure may be grounds for finding the record holder
unsuitable. The Company must also render maximum assistance in determining the
identity of the beneficial owner.
The Mississippi Act requires that the certificates representing securities
of a publicly-traded corporation (as defined in the Mississippi Act) bear a
legend to the general effect that such securities are subject to the Mississippi
Act and the regulations of the Mississippi Commission. The Mississippi
Commission has the power to impose additional restrictions on the holders of the
Company's securities at any time.
Approval of Corporate Matters and Foreign Gaming Operations
Substantially all loans, leases, sales of securities and similar financing
transactions by a Gaming Subsidiary must be reported to and/or approved by the
Mississippi Commission. Changes in control of the Company through merger,
consolidation, acquisition of assets, management or consulting agreements or any
form of takeover cannot occur without the prior approval of the Mississippi
Commission.
The Mississippi legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and other takeover
defense tactics that affect corporate gaming licensees in Mississippi and
corporations whose stock is publicly-traded that are affiliated with those
licensees may be injurious to stable and productive corporate gaming. The
Mississippi Commission has established a regulatory scheme to ameliorate the
potentially adverse effects of these business practices upon Mississippi's
gaming industry and to further Mississippi'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 some circumstances, required from the Mississippi Commission
before the Company may make exceptional repurchases of voting securities above
the current market price of its Common Stock (commonly called "greenmail") or
before a corporate acquisition opposed by management may be consummated.
Mississippi's gaming regulations also require prior approval by the Mississippi
Commission if the Company adopts a plan of recapitalization proposed by its
Board of Directors opposing a tender offer made directly to the stockholders for
the purpose of acquiring control of the Company.
<PAGE>
Neither the Company nor any subsidiary may engage in gaming activities in
Mississippi while also conducting gaming operations outside of Mississippi
without approval of the Mississippi Commission. The Mississippi Commission may
require determinations that, among other things, there are means for the
Mississippi Authorities to have access to information concerning the
out-of-state gaming operations of the Company and its affiliates.
Sanctions
If the Mississippi Commission were to decide that a Gaming Subsidiary had
violated a gaming law or regulation, the Mississippi Commission could limit,
condition, suspend or revoke the license of the Gaming Subsidiary. In addition,
the Gaming Subsidiary, the Company and the persons involved could be subject to
substantial fines for each separate violation. Because of such violation, the
Mississippi Commission could appoint a supervisor to operate the casino
facilities, and under certain circumstances, earnings generated during the
supervisor's appointment (except the reasonable rental value of the casino
facilities) could be forfeited to the State of Mississippi. Limitations,
conditioning or suspension of any gaming license or the appointment of a
supervisor could (and revocation of any gaming license would) materially and
adversely affect the Company's and the Gaming Subsidiary's gaming operations.
On July 16, 1996, operation of the Jubilation Casino was suspended in
compliance with a directive of the Mississippi Commission, which raised certain
issues with regard to the operation of the Jubilation Casino and asserted that
the working capital available to the Jubilation Casino was not sufficient. See
"The Company - Casino Operations and Gaming Activities - Discontinued Operations
- - The Jubilation Casino." The Company does not believe that the issues raised by
the Mississippi Commission regarding the operation of the Jubilation Casino will
adversely affect the license to operate the Jubilee Casino since the Jubilee
Casino is operating in compliance with applicable regulations, including
regulations relating to issues raised by the Mississippi Commission regarding
the operation of the Jubilation Casino. There can be no assurance, however, that
the issues raised by the Mississippi Commission will not adversely affect the
license, or the renewal of the license, to operate the Jubilee Casino or any
future licenses for which applications may be submitted in Mississippi.
On October 23, 1997, the Company received renewal of its casino license
through October 1999, conditioned upon the opening of the Casino Hotel by no
later than February 26, 1998. During its compliance review, in connection with
the Company's license renewal, the Mississippi Gaming Commission noted several
administrative reporting deficiencies. A show cause hearing was held on December
2, 1997, at which management explained its position to the Mississippi Gaming
Commission staff. This issue has been settled by management agreeing to address
the noted deficiencies in future reporting and by payment of a fine of $40,000.
<PAGE>
Fees and Taxes
License fees and taxes, computed in various ways depending on the type of
gaming involved, are payable to the State of Mississippi and to the counties and
cities in which a Gaming Subsidiary's operations will be conducted. Depending
upon the particular fee or tax involved, these fees and taxes are payable either
monthly, quarterly or annually and are based upon (i) a percentage of the gross
gaming revenues received by the casino operation, (ii) the number of slot
machines operated by the casino or (iii) the number of tables games operated by
the casino. The license fee payable to the State of Mississippi based upon
"gaming receipts" (generally defined as gross receipts less payouts to customers
as winnings) equals 4% of gaming receipts of $50,000 or less per month, 6% of
gaming receipts over $50,000 and less than $134,000 per month, and 8% of gaming
receipts over $134,000 per month. The foregoing license fees are allowed as a
credit against the Company's Mississippi income tax liability for the year paid.
Missouri and New York
Missouri law and the Federal Indian Gaming Law (as it relates to the
Company's proposed operation in New York), each provide for a comprehensive,
detailed scheme for the control of gaming operations in the state and the
issuance of licenses for gaming, both to gaming facilities and to persons
involved in certain gaming related activities. With respect to the Company's
compact with the Tribe relating to the proposed casino to be built in Sullivan
County, New York, the State of New York has provided for regulation of Indian
gaming casinos through the New York State Racing and Wagering Board. Each of the
supervising governmental agencies is authorized to promulgate rules and
regulations applicable to the administration of gaming related laws. In
connection with its proposed operations in New York, the required documentation
has been filed with the National Indian Gaming Commission. In connection with
its proposed operations in Missouri, the Company has commenced the application
and approval process with the Missouri Gaming Commission.
Employees
In connection with its casino operations, as of December 17, 1997, the
Company employed approximately [570] employees, of which [510] were full-time
employees. Management considers its employment relations to be satisfactory. In
connection with the closing of the Jubilation Casino and pursuant to the Workers
Adjustment and Retraining Notification Act, the Company provided the 320
employees of the Jubilation Casino with notice of its plans to close the
Jubilation Casino at least 60 days prior to the anticipated closing date, as
required under the act. Therefore, management believes it has taken all
appropriate action required by federal law with respect to providing notice of
the closing of the Jubilation Casino to the employees of the Jubilation Casino.
Legal Proceedings
In January 1996, the Company was named as a defendant in an action brought
in the Circuit Court of Hinds County, Mississippi (Amos vs Alpha Gulf Coast,
Inc.; Batiste vs Alpha Gulf Coast, Inc.; Dycre vs Alpha Gulf Coast, Inc.;
Johnston vs Alpha Gulf Coast, Inc.; Rainey vs Alpha Gulf Coast, Inc.). Based on
the theory of "liquor liability" for the service of alcohol to a customer,
plaintiffs alleged that on January 16, 1995, a vehicle operated by Mr. Amos
collided with a vehicle negligently operated by Mr. Rainey, an individual who
was served alcoholic beverages by the Company. Plaintiffs alleged that they
suffered personal injuries and seek compensatory damages aggregating $17.1
million and punitive damages aggregating $37.5 million. The ultimate outcome of
this litigation cannot presently be determined as this case is presently in the
early phases of discovery. Accordingly, no provision for liability to the
Company that may result upon adjudication has been made in the accompanying
consolidated financial statements. The Company believes that the risk referred
to in this paragraph is adequately covered by insurance.
<PAGE>
In August 1996, Gulf Coast was named as a defendant in an action brought in
the United States District Court for the Southern District of Mississippi
(Joseph R. Cure, Joseph E. Cure, Jr., Cynthia Cure Rutherford, Michael Cure and
Susan Cure Gollot vs. Alpha Gulf Coast, Inc.) for alleged past due and future
accelerated rentals and other costs under an operating lease relative to real
property located in Lakeshore, Mississippi. In March 1997, the Company reached
settlement terms in the action. In the settlement the lease terminates, the
Company will pay $500,000 at closing and $1,200,000 in the form of a three year,
ten percent note payable quarterly. The settlement and early termination of the
operating lease resulted in a $541,000 charge to operations for the year ended
December 31, 1996. The note was secured by assignment of an interest in the
mortgage note payable to Bryanston. Additionally, the Company had as option to
buy out the remaining obligations at reduced principal amounts at accelerated
dates, as specified in the settlement agreement, which option the Company
exercised when it discharged its remaining obligations thereunder with a portion
of the loan proceeds from the Pre-Closing Financing (defined hereinafter).
In September 1996, the Company and Gulf Coast were named as defendants in
an action brought in the Circuit Court of Hancock County, Mississippi (Durward
Dunn, Inc. vs. Alpha Hospitality Corporation; Durward Dunn, Inc. vs. Alpha Gulf
Coast, Inc.) for alleged failure to make payments pursuant to a construction
contract. Plaintiff seeks actual and compensatory damages of approximately
$1,200,000. The consolidated financial statements include a provision for the
liability of $928,000 for this contract at December 31, 1996 and September 30,
1997. This litigation was subsequently settled by the payment of $600,000 from
the proceeds of the Pre-Closing Financing (defined hereinafter).
In December 1996 the Company, Jubilation Lakeshore and Gulf Coast were
named as defendants in an action brought in the United States District Court for
the Southern District of New York (Bally Gaming, Inc. v. Alpha Hospitality Corp.
and Alpha Gulf Coast, Inc.) for allegedly engaging in conduct that would impair
the collateral held as security for certain financial obligations. Such conduct
includes the failure to pay certain monetary obligations unrelated to the
obligations secured by the collateral. Plaintiffs seek specific performance of
particular actions plaintiffs believe are necessary to protect the collateral
that secures the financial obligations, unspecified damages and attorney's fees,
among other things. In July 1997, Jubilation Lakeshore, Gulf Coast and the
Company were named as third party defendants in a related action brought in the
United States District Court for the Northern District of Mississippi,
Greenville Division (General Electric Capital Corporation vs. Bally Gaming,
Inc.), wherein Bally Gaming, Inc. alleged the same complaints as it asserted in
the above-mentioned action. The claims against the Company and its affiliates
in both of these actions have been liquidated and the actions dismissed.
<PAGE>
RISK FACTORS
An investment in the securities offered hereby involves a high degree of
risk. Prospective investors should consider carefully the following risks and
speculative factors, among other things, in making a decision concerning the
purchase of securities offered hereby:
1. History of Losses; Explanatory Paragraph in Independent Auditor's Report.
Since its inception, the Company has suffered significant losses from
operations. The Company had net losses of approximately $22,815,000 in the
fiscal year ended December 31, 1996, $17,993,000 in the fiscal year ended
December 31, 1995, and $9,901,000 in the fiscal year ended December 31, 1994. As
of December 31, 1996 the Company had an accumulated deficit of approximately
$55,414,000. As a result of the material uncertainties relating to the Company's
ability to continue as a going concern and fund its operation, the Company's
independent auditors have included an explanatory paragraph in their report on
the Company's consolidated financial statements addressing such uncertainties.
2. Government Regulation.
General
The Company's ownership and operation of its properties are subject to
regulation by federal, state and local governmental and regulatory authorities,
including regulation relating to environmental protection. While the Company has
not been the subject of any complaints or other formal or informal proceedings
alleging any violations of government regulations, no assurance can be given
that the Company is, or in the future will be, able to comply with, or continue
to comply with current or future governmental regulations in every jurisdiction
in which it conducts or will conduct its business operations without substantial
cost or interruption of its operations, or that any present or future federal,
state or local regulations may not restrict the Company's present and possible
future activities. In the event that the Company is unable to comply with any
such requirements, the Company could be subject to sanctions, which could have a
materially adverse effect upon the Company's business. See "Government
Regulation -- General," and "Casino Operations -- Current Operations."
Licensing: Loss of Gaming License
The gaming industry is highly regulated by each of the states in which
gaming is legal. The regulations vary on a state by state basis, but generally
require the operator, each owner of a substantial interest (usually 5% or more)
in the operator, members of the Board of Directors, each officer and all key
personnel found suitable, and be approved, by the applicable governing body.
The failure of any present, or future, person required to be approved to
be, and remain qualified to hold a license could result in the loss of license.
In almost all instances, the governing body has broad discretion in granting,
renewing and revoking licenses. The loss or suspension of any license would have
a material adverse effect on the Company. The requirement that the governmental
body approve substantial shareholders, directors, officers and key personnel
could discourage, delay or prevent a change in control of the Company.
The operations of the Jubilee Casino and the Jubilation Casino are
regulated by the Mississippi Commission. In October 1995, the Company's original
licenses to operate the Jubilee Casino and the Jubilation Casino were renewed
until October 1997. In October 1997, the Company received renewal of the Jubilee
Casino license through October 1999 conditioned by the opening of its Greenville
casino by no later than February 26, 1998. Each Mississippi gaming license has a
term of two years and is subject to renewal. In July 1996, the Company began to
implement its plans to close the Jubilation Casino during August 1996. On July
16, 1996, operation of the Jubilation Casino was suspended in compliance with a
directive of the Mississippi Commission which raised certain issues with regard
to the operation of the Jubilation Casino and asserted that the working capital
available to the Jubilation Casino was not sufficient. On July 17, 1996,
representatives of Jubilation Lakeshore met with the Mississippi Commission. As
a result of that meeting, the non-working capital issues raised by the
Mississippi Commission have been resolved to the Mississippi Commission's
satisfaction. However, the Mississippi Commission required that the Jubilation
Casino's working capital be increased. This working capital requirement was
reviewed by
<PAGE>
Jubilation Lakeshore in light of its previously announced plan to close the
Jubilation Casino during August 1996 and the costs which would be incurred to
reopen the Jubilation Casino. Based on the review, Jubilation Lakeshore decided
not to reopen the Jubilation Casino. The Company's license to operate the
Jubilation Casino was withdrawn. The Company does not believe that the issues
raised by the Mississippi Commission regarding the operation of the Jubilation
Casino will adversely affect the license to operate the Jubilee Casino since the
Jubilee Casino is operating in compliance with applicable regulations, including
regulations relating to issues raised by the Mississippi Commission regarding
the operation of the Jubilation Casino. There can be no assurance, however, that
the issues raised by the Mississippi Commission will not adversely affect the
license, or the renewal of the license, to operate the Jubilee Casino, or any
future licenses for which applications maybe submitted in Mississippi or
elsewhere. In the event the Mississippi Commission were to revoke or fail to
renew the Company's license to operate the Jubilee Casino, the Company's
operations and financial condition would be materially adversely affected.
3. Defaults in Outstanding Indebtedness; Loan Covenants and Security Interest.
The Company has incurred substantial indebtedness in connection with its
operations, the acquisition of its casino properties and the proposed sale of
the Company's operating assets; a substantial portion of this indebtedness in
presently held by Bryanston, an affiliate of the Company. Substantially all of
the Company's assets utilized in connection with its casino operations are
pledged as security for these loans. The various loan documents contain
covenants and restrictions which may limit or interfere with, the operation of
the Company's business.
In the event of a violation by the Company of any of the loan covenants, or
upon the occurrence of any other events of default set forth in the loan
documents, the lenders could exercise rights of foreclosure under the
agreements, which would have a materially adverse effect on the Company's
financial condition.
While no default or acceleration has been declared by any of the lenders,
no assurance can be given that a default will not be declared in the future.
Declaration of a default would allow the lender whose indebtedness was in
default to foreclose on any collateral for the loan and have a material adverse
effect on the Company's business and operations.
4. Intense Industry Competition; Mississippi Gaming Operations
The Company believes that its major market area is approximately 150 miles
around the Jubilee Casino, based upon analysis of customer records completed by
marketing and operational employees at the site. Within the market area of the
Jubilee Casino there are presently 7 other casinos in operation and one
additional casino in the planning stage. The Company is unaware of any progress
on the planning of this additional casino. Two of the existing casinos are
immediately adjacent to the Company's casino. Substantially all of these
competitors have significantly greater financial, and other, resources than the
Company and more experience in the gaming industry. It is likely that the
intense competition in the Company's market area may limit the profitability of
its operations, or even render them unprofitable. On December 17, 1997, the
Company entered into an Asset Purchase Agreement with Greenville Casino
Partners, L.P., the owner of the Las Vegas Casino in Greeville, to sell the
Company's Jubilee Casino and related assets to such partnership.
<PAGE>
In addition, the Company experienced declining revenues during the year
ended December 31, 1995 with respect to the operation of the Jubilation Casino.
In management's opinion, the decline was due to the remote location of the
Jubilation Casino and the increasing casino development in the Biloxi and
Gulfport markets, which have proven more attractive to casino patrons. Due to
the current level of competition and the anticipated increase in the competition
around the Jubilation Casino, in July 1996, management began to implement its
plans to close the Jubilation Casino during August 1996. Thereafter, on July 16,
1996 the Jubilation Casino was closed at the direction of the Mississippi
Commission. In view of the condition required to reopen and the earlier decision
to close the Jubilation Casino, the Company determined not to reopen the
Jubilation Casino. See "Casino Operations."
5. Possible Insufficiency of Liability Insurance.
The Company maintains and intends to continue to maintain general liability
insurance in amounts which management believes will be sufficient to cover
casualty risks associated with the operation of its business, including fire
property damage, personal injury, liquor liability, etc. At present, the Company
is a defendant in one proceeding based upon the theory of "liquor liability" for
the service of alcohol to a customer. The Company believes that its exposure in
this proceeding is adequately covered by the levels of insurance currently
maintained. There can be no assurance, however, that such insurance will be
adequate to cover unanticipated liabilities. See "Legal Proceedings."
6. Taxation of Gaming Operations.
The Company believes that the prospect of significant additional revenue
through taxation is one of the primary reasons why jurisdictions legalize
gaming. As a result, gaming operators are typically subject to significant taxes
and fees in addition to normal federal and state corporate income taxes, and
such taxes and fees are subject to increase at any time. Any material increase
in these taxes or fees would adversely affect the results of operations of the
Company. Presently, the Company pays approximately 12% of gaming revenues in
taxes and fees in Mississippi.
7. Seasonal Fluctuations.
The results of the casinos' operations have been seasonal, with the
greatest activity occurring during the months of May through September.
Consequently, the Company's operating results during the calendar quarters
ending in December and March are not as profitable as those quarters ending in
June and September, and losses result from time to time. The seasonal nature of
the casinos' operations increases the risk that natural disasters or the loss of
the casinos for any other reason during the May through September period would
have a material adverse effect on the Company's financial condition and results
of operations.
8. Dependence upon Key Personnel; Absence of Full-Time Management.
The success of the Company is largely dependent upon the personal efforts
of Mr. Stanley S. Tollman, its President and Chief Executive Officer. The
Company does not maintain and does not intend to obtain a key employee life
insurance policy on the life of Mr. Stanley S. Tollman. Although Mr. Stanley S.
Tollman is only required to devote approximately 20% of his business time to the
operations of the Company, the loss of the services of Mr. Stanley S. Tollman
would have a material adverse effect on the prospects of the Company. In
addition, although the casino operations are managed by full-time personnel, the
Company and its hotel management operations are managed by individuals who also
work for Bryanston." See "Management" and "Certain Transactions -- Bryanston."
<PAGE>
9. No Assurance of Public Market for Securities.
Although the Company's Common Stock is quoted on NASDAQ and listed on the
Boston Stock Exchange, there can be no assurance that the Company will be able
to maintain such quotation or listing, or that, if maintained, a significant
public market will be sustained. For continued listing on NASDAQ, a company,
among other things, must have at least $2,000,000 in net tangible assets, and
the listed security must have a minimum bid price of $1.00 per share. The Boston
Stock Exchange's maintenance criteria require the Company to have total assets
of at least $1,000,000 and total stockholders' equity of at least $500,000. At
September 30, 1997 (unaudited), the Company had stockholders' equity of
approximately $1,145,000 and assets of $39,972,000. The Company has continued to
operate at a loss through the date of this Prospectus.
In the event the Common Stock were delisted from NASDAQ, trading, if any,
would be conducted on the Boston Stock Exchange and in the over-the-counter
market on the NASD's electronic bulletin board, in what are commonly referred to
as the "pink sheets." As a result, an investor may find it more difficult to
dispose of, or to obtain accurate quotations as to the price of, the Company's
securities. In addition, the Common Stock would be subject to Rules 15g1-15g6
promulgated under the Securities Exchange Act of 1934 (the "Exchange Act") that
impose additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally, a person with assets in excess of $1,000,000 or annual income
exceeding $200,000 or $300,000 together with his or her spouse). For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. Consequently, these rules may
affect the ability of broker-dealers to sell the Company's securities and may
affect the ability of purchasers in the Offering to sell their securities in the
secondary market.
The Commission has also adopted regulations that define a "penny stock" to
be any equity security that has a market price (as defined) of less than $5.00
per share or an exercise price of less than $5.00 per share, subject to certain
exception. For any transaction involving a penny stock, unless exempt, the
regulations require the delivery, prior to the transaction, of a disclosure
schedule prepared by the Commission relating to the penny stock market. The
broker-dealer must also disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market-maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks.
While many NASDAQ-listed securities are covered by the definition of penny
stock, transactions in a NASDAQ-listed security are exempt from all but the sole
market-maker provision for (i) issuers who have $2,000,000 in tangible assets
($5,000,000 if the issuer has not been in continuous operation for three years),
(ii) transactions in which the customer is an institutional accredited investor,
or (iii) transactions that are not recommended by the broker-dealer. In
addition, transactions in a NASDAQ security directly with a NASDAQ market-maker
for such security are subject only to the sole market-maker disclosure, and the
disclosure with respect to commissions to be paid to the broker-dealer and the
registered representative.
Finally, all NASDAQ securities would be exempt from the recently-adopted
regulations regarding penny stocks if NASDAQ raised its requirements for
continued listing so that any issuer with less than $2,000,000 in net tangible
assets or stockholders' equity would be subject to delisting. These criteria are
more stringent than the current NASDAQ maintenance requirements.
<PAGE>
USE OF PROCEEDS
The Shares of Common Stock being offered hereby are for the account of the
Selling Stockholder. Accordingly, the Company will not receive any of the
proceeds from the sale of the Shares by the Selling Stockholder. See "Selling
Stockholder."
SELLING STOCKHOLDER
The following table sets forth certain information with respect to Selling
Stockholder. The number of Shares that may actually be sold by the Selling
Stockholder will be determined by the Selling Stockholder, and may depend upon a
number of factors, including, among other things, the market price of the Common
Stock. The table below sets forth information as of January 1, 1998 concerning
the beneficial ownership of Common Stock of the Selling Stockholder. All
information concerning beneficial ownership has been furnished by the Selling
Stockholder.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Shares of Common Shares of Common Shares of Common
Stock Owned Stock Offered Stock Owned
Before Offering In the Offering After Offering
Name of Stockholder Number Percent(1) Number Number Percent
- ------------------- ------ ------- ------ ------ -------
John Kingsbury 100,000 less than 1% 100,000 (1) (1)
</TABLE>
(1) Because the Selling Stockholder may sell all, some or none of the
Shares that he holds, and because the offering contemplated by this
Prospectus is not now a "firm commitment" underwritten offering, no
estimate can be given as to the number of Shares that will be held by
the Selling Stockholder upon or prior to termination of this offering.
See "Plan of Distribution."
The Selling Stockholder identified above may have sold, transferred or
otherwise disposed of all or a portion of their Shares since the date on which
they provided the information regarding their Common Stock in transactions
exempt from the registration requirements of the Securities Act. Additional
information concerning the above listed Selling Stockholder may be set forth
from time to time in prospectus supplements to this Prospectus. See "Plan of
Distribution."
The Selling Stockholder was formerly employed by the Company , and was
issued the Shares in satisfaction of monies due to the Selling Stockholder.
Pursuant to certain agreements between the Company and the Selling Stockholder,
the Company has agreed to file the Registration Statement of which this
Prospectus forms a part for the purpose of registering the potential resale of
the Shares.
Except as specifically set forth herein, the Selling Stockholder has, and
within the past three years has had, no position, office or other material
relationship with the Company or any of its predecessors or affiliates.
<PAGE>
PLAN OF DISTRIBUTION
Sales of the Shares may be made from time to time by the Selling
Stockholder, or, subject to applicable law, by pledgees, donees, distributees,
transferees or other successors in interest. Such sales may be made on The
Nasdaq SmallCap Market, in another over-the-counter market, on a national
securities exchange (any of which may involve crosses and block transactions),
in privately negotiated transactions or otherwise or in a combination of such
transactions at prices and at terms then prevailing or at prices related to the
then current market price, or at privately negotiated prices. In addition, any
Shares covered by this Prospectus which qualify for sale pursuant to Section
4(1) of the Securities Act or Rule 144 promulgated thereunder may be sold under
such provisions rather than pursuant to this Prospectus. Without limiting the
generality of the foregoing, the Shares may be sold in one or more of the
following types of transactions: (a) a block trade in which the broker-dealer so
engaged will attempt to sell the Shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction; (b) purchases
by a broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; and (d) face-to-face
transactions between sellers and purchasers without a broker-dealer. In
effecting sales, brokers or dealers engaged by the Selling Stockholder may
arrange for other brokers or dealers to participate in the resales.
In connection with distributions of the Shares or otherwise, the Selling
Stockholder may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the Shares registered hereunder in the course of hedging the positions they
assume with the Selling Stockholder. The Selling Stockholder may also sell
Shares short and deliver the Shares to close out such short positions. The
Selling Stockholder may also enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of the Shares
registered hereunder, which the broker-dealer may resell pursuant to this
Prospectus. The Selling Stockholder may also pledge the Shares registered
hereunder to a broker or dealer and upon a default, the broker or dealer may
effect sales of the pledged Shares pursuant to this Prospectus.
Brokers, dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the Selling Stockholder in amounts to
be negotiated in connection with the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales and any such
commission, discount or concession may be deemed to be underwriting discounts or
commissions under the Securities Act.
Information as to whether underwriters who may be selected by the Selling
Stockholder, or any other broker-dealer, is acting as principal or agent for the
Selling Stockholder, the compensation to be received by underwriters who may be
selected by the Selling Stockholder, or any broker-dealer, acting as principal
or agent for the Selling Stockholder and the compensation to be received by
other broker-dealers, in the event the compensation of such other broker-dealers
is in excess of usual and customary commissions, will, to the extent required,
be set forth in a supplement to this Prospectus (the "Prospectus Supplement").
Any dealer or broker participating in any distribution of the Shares may be
required to deliver a copy of this Prospectus, including the Prospectus
Supplement, if any, to any person who purchases any of the Shares from or
through such dealer or broker.
<PAGE>
The Company has advised the Selling Stockholder that during such time as
they may be engaged in a distribution of the Shares included herein they are
required to comply with Regulation M promulgated under the Exchange Act. In
general, Regulation M precludes the Selling Shareholders, any affiliated
purchasers and any broker-dealer or other person who participates in such
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase any security which is the subject of the distribution
until the entire distribution is complete. A "distribution" is defined in the
rules as an offering of securities that is distinguished from ordinary trading
activities and depends on the "magnitude of the offering and the presence of
special selling efforts and selling methods." Regulation M also prohibits any
bids or purchases made in order to stabilize the price of a security in
connection with the distribution of that security.
It is anticipated that the Selling Stockholder will offer all of the Shares
for sale. Further, because it is possible that a significant number of Shares
could be sold at the same time hereunder, such sales, or the possibility
thereof, may have a depressive effect on the market price of the Company's
Common Stock.
LEGAL MATTERS
Certain legal matters in connection with the securities being offered
hereby will be passed upon for the Company by Parker Duryee Rosoff & Haft, New
York, New York 10017.
EXPERTS
The consolidated financial statements of Alpha Hospitality Corporation and
subsidiaries included in the Company's annual report on Form 10-K for the year
ended December 31, 1996 incorporated herein by reference have been audited by
Rothstein, Kass & Company, P.C., independent auditors, as indicated in their
report with respect thereto, and are incorporated herein by reference in
reliance upon the report of said firm given upon their authority as experts in
accounting and auditing.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the Company's estimates of the expenses to
be incurred by it in connection with the Common Stock being offered hereby:
SEC Registration Fee.......................................... $66.38
Legal fees and expenses....................................... $1,000
========
$1,025.46
Item 15. Indemnification of Directors and Officers.
The Delaware General Corporation Law permits Delaware corporations to
eliminate or limit the personal liability of a director to the corporation for
monetary damages arising from certain breaches of fiduciary duties as a
director. The Company's Certificate of Incorporation includes such a provision
eliminating the personal liability of directors to the Company and its
stockholders for monetary damages for breach of fiduciary duty as a director,
except (i) any breach of a director's duty of loyalty to the Company or its
stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) for any transaction
from which the director derived an improper personal benefit; or (iv) for
unlawful payments of dividends or unlawful stock repurchases or redemptions as
provided in Section 174 of the Delaware General Corporation Law. Directors are
also not insulated from liability for claims arising under the federal
securities laws. The foregoing provisions of the Company's Certificate of
Incorporation may reduce the likelihood of derivative litigation against
directors for breaches of their fiduciary duties, even though such an action, if
successful, might otherwise have benefitted the Company and its stockholders.
The Company's Certificate of Incorporation also provides that the Company
shall indemnify its directors, officers and agents to the fullest extent
permitted by the Delaware General Corporation Law. The Company does not have
directors' and officers' liability insurance but may secure such insurance in
the future. Furthermore, the Company may enter into indemnity agreements with
its directors and officers for the indemnification of and advancing of expenses
to such persons to the fullest extent permitted by law.
Item 16. Exhibits and Financial Statement Schedules.
Exhibit
Number Description of Exhibit
5.01 -- Opinion of Parker Duryee Rosoff & Haft
23.01 -- Consent of Rothstein, Kass & Company, P.C.
23.02 -- Consent of Parker Duryee Rosoff & Haft (included in Exhibit 5.01
hereof)
24.01 -- Power of attorney (included in the signature page of Part II of
this Registration Statement)
<PAGE>
Item 17. Undertakings.
The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended (the "Securities Act"), each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Company's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, that is
incorporated by reference in the Registration Statement, shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Company pursuant to Item 15 of Part II of the Registration Statement, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on January 23, 1998.
Alpha Hospitality Corporation
By: *
________________________________________
Stanley S. Tollman, Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James A. Cutler, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and the documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
Signature Title Date
/s/ * Chairman of the Board and January 23, 1998
- ---------------------
Stanley S. Tollman Chief Executive Officer
/s/ * Vice President, Secretary and Director January 23, 1998
- ---------------------
Sanford Freedman
/s/ James A. Cutler Vice President - Operations, Treasurer January 23, 1998
- ---------------------
James A. Cutler and Director
/s/ * Director and Vice President January 23, 1998
- ---------------------
Brett Tollman
/s/ * Director January 23, 1998
- -------------------
Thomas W. Aro
/s/ * Director January 23, 1998
- ---------------------
Matthew B. Walker
/s/ James A. Cutler
_____________________
*James A. Cutler, Attorney in fact
<PAGE>
EXHIBIT 5.01
Parker Duryee Rosoff & Haft
529 Fifth Avenue
New York, New York 10017
January 23, 1998
Alpha Hospitality Corporation
12 East 49th Street
New York, New York 10017
Re: Registration Statement on Form S-3 Under the Securities Act of 1933
Gentlemen:
In our capacity as counsel to Alpha Hospitality Corporation, a Delaware
corporation (the "Company"), we have been asked to render this opinion in
connection with the registration statement on Form S-3, as amended, heretofore
filed by the Company with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Registration Statement"), covering
100,000 shares of Common Stock, par value $.01 per share (the "Common Stock").
In that connection, we have examined the Certificate of Incorporation and
the By-Laws of the Company, the Registration Statement, corporate proceedings of
the Company relating to the issuance of the Common Stock.
In making the aforesaid examinations, we have assumed the genuineness of
all signatures and the conformity to original documents of all copies furnished
to us as original or photostatic copies. We have also assumed that the corporate
records furnished to us by the Company include all corporate proceedings taken
by the Company to date.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
2. The Common Stock has been duly and validly authorized and issued.
We hereby consent to the use of our opinion as herein set forth as an
exhibit to the Registration Statement and to the use of our name under the
caption "Legal Matters" in the Registration Statement.
Very truly yours,
Parker Duryee Rosoff & Haft
<PAGE>
EXHIBIT 23.01
CONSENT OF INDEPENDENT AUDITORS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration (File No. 33-343861) of our report dated
February 14, 1997 included in the annual report on Form 10-K of the Alpha
Hospitality Corporation for the years ended December 31, 1996 and 1995 and to
references to our Firm as experts in this registration statement.
/s/Rothstein, Kass & Company, P.C.
__________________________________
Rothstein, Kass & Company, P.C.
Roseland, New Jersey
January 23, 1998
