SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended May 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-23588
PAUL-SON GAMING CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 88-0310433
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2121 South Industrial Road, Las Vegas, Nevada 89102
(Address of principal executive offices) (Zip Code)
(702) 384-2425
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Not Applicable Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $ .01 PAR VALUE
(Title of class)
<PAGE>
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non
affiliates of the registrant as of August 20, 1996, based on the
last reported bid price as reported on the Nasdaq National Market
of $8 1/2 per share, was approximately $12,097,200.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of August 20, 1996.
Common Stock, $.01 par value, 3,324,000 shares
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Report is
incorporated by reference from the Paul-Son Gaming Corporation
Proxy Statement to be filed with the Commission not later than
120 days after the end of the fiscal year covered by this Report.
2
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report (Deloitte & Touche LLP)
Independent Auditors' Report (McGladrey & Pullen, LLP)
Consolidated Balance Sheets at May 31, 1996 and May 31, 1995
Consolidated Statements of Operations for the Years Ended
May 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity for the
Years Ended May 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Years Ended
May 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Financial Statement Schedule included in Part IV of this
report
3
<PAGE>
[ORIGINAL PRINTED ON DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Board of Directors
Paul-Son Gaming Corporation:
We have audited the accompanying consolidated balance sheet of
Paul-Son Gaming Corporation and subsidiaries as of May 31, 1996,
and the related consolidated statements of income, stockholders'
equity, and cash flows for the year ended May 31, 1996. Our audit
also included the financial statement schedules for the year
ended May 31, 1996 listed in the Index at Item 14(a)2. These
financial statements and financial statement schedules are the
responsibility of the Corporation's management. Our
responsibility is to express an opinion on the financial
statements and financial statement schedules based on our audit.
The financial statements and financial statement schedules of the
Company as of May 31, 1995 and for each of the two years in the
period ended May 31, 1995 were audited by other auditors whose
report, dated August 25, 1995, expressed an unqualified opinion
on those statements.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Paul-Son Gaming Corporation and subsidiaries as of May 31, 1996,
and the results of their operations and their cash flows for the
year ended May 31, 1996 in conformity with generally accepted
accounting principles. Also, in our opinion, such 1996 financial
statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present
fairly in all material respects the information set forth
therein.
/s/ Deloitte & Touche LLP
August 2, 1996
4
<PAGE>
[ORIGINAL PRINTED ON MCGLADREY & PULLEN, LLP LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Paul-Son Gaming Corporation
Las Vegas, Nevada
We have audited the accompanying consolidated balance sheet of
Paul-Son Gaming Corporation and Subsidiaries as of May 31, 1995
and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the two years in
the period ended May 31, 1995. These financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Paul-Son Gaming Corporation and Subsidiaries as of
May 31, 1995 and the results of their operations and their cash
flows for each of the two years in the period ended May 31, 1995,
in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
Las Vegas, Nevada
August 25, 1995
5
<PAGE>
<TABLE>
<CAPTION>
PAUL-SON GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, 1996 AND 1995
ASSETS 1996 1995
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 997,509 $ 1,253,987
Securities held to maturity (Note 2) - 1,493,536
Trade receivables, less allowance for doubtful
accounts 1996 $281,712; 1995 $214,000 2,601,910 3,576,401
Income tax refund claim - 661,499
Inventories (Note 3) 5,604,630 5,665,881
Prepaid expenses 170,903 182,352
Other current assets 296,660 727,724
TOTAL CURRENT ASSETS 9,671,612 13,561,380
Property and Equipment, net (Notes 4 and 6) 7,259,423 4,989,764
Other Assets 470,090 488,893
$17,401,125 $19,040,037
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt (Note 6) $ 85,914 $ 105,944
Accounts payable (Note 7) 661,521 2,647,746
Accrued expenses 403,627 302,205
Customer deposits 865,438 673,346
Income tax payable (Note 9) 54,170 -
TOTAL CURRENT LIABILITIES 2,070,670 3,729,241
Long-Term Debt, less current maturities
Due to related parties (Note 7) 15,000 250,000
Other (Note 6) 456,161 538,342
471,161 788,342
Commitments and Contingencies (Note 8)
Stockholders' Equity (Note 10)
Preferred stock, authorized 10,000,000 shares,
$.01 par value, none issued and outstanding - -
Common stock, authorized 30,000,000 shares, $.01
par value, issued and outstanding 3,324,000 shares 33,240 33,240
Additional paid-in capital 12,256,698 12,256,698
Retained earnings 2,569,356 2,232,516
14,859,294 14,522,454
$17,401,125 $19,040,037
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE>
<TABLE>
<CAPTION>
PAUL-SON GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MAY 31, 1996, 1995 AND 1994
1996 1995 1994
<S> <C> <C> <C>
Revenues, including related party revenues of
1996-$0; 1995-$0; 1994-$591,066 $ 23,379,252 $ 24,595,192 $ 21,088,190
Cost of revenues, including related party
cost of revenues of 1996-$331,355;
1995-$493,799; 1994-$128,534 (Note 7) 16,323,043 17,137,403 14,601,232
GROSS PROFIT 7,056,209 7,457,789 6,486,958
Selling, general and administrative
expenses (Note 7) 6,577,397 7,738,507 4,770,585
OPERATING INCOME (LOSS) 478,812 (280,718) 1,716,373
Other income (expense)
Interest income 57,694 295,249 -
Interest expense (Note 7) (63,906) (109,593) (144,362)
Other 57,856 (45,744) 98,507
INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTEREST IN NET INCOME
OF CONSOLIDATED COMPANIES 530,456 (140,806) 1,670,518
Income tax expense (Note 9) (193,616) - (522,916)
INCOME (LOSS) BEFORE MINORITY INTEREST
IN NET INCOME OF CONSOLIDATED COMPANIES 336,840 (140,806) 1,147,602
Minority interest in net income of
consolidated companies - - (89,950)
NET INCOME (LOSS) $ 336,840 $ (140,806) $ 1,057,652
Net income (loss) per common share (Note 11) $ 0.10 $ (0.04)
</TABLE>
See Notes to Consolidated Financial Statements.
7
<PAGE>
<TABLE>
<CAPTION>
PAUL-SON GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED MAY 31, 1996, 1995 AND 1994
Additional
Common Stock Paid-in Retained
Shares Dollars Capital Earnings Total
<S> <C> <C> <C> <C> <C>
Balance, May 31, 1993 2,064,000 $ 20,640 $ - $1,745,235 $1,765,875
Shares issued for acquisition of
minority interest 80,000 800 899,200 - 900,000
Proceeds from initial public
offering, net of offering expenses 1,180,000 11,800 11,229,491 - 11,241,291
Preferential dividend to majority
stockholder - - - (429,565) (429,565)
Obligation to majority stockholder
contributed to capital - - 128,007 - 128,007
Net income - - - 1,057,652 1,057,652
Balance, May 31, 1994 3,324,000 33,240 12,256,698 2,373,322 14,663,260
Net loss - - - (140,806) (140,806)
Balance, May 31, 1995 3,324,000 33,240 12,256,698 2,232,516 14,522,454
Net income - - - 336,840 336,840
Balance, May 31, 1996 3,324,000 $33,240 $12,256,698 $2,569,356 $14,859,294
</TABLE>
See Notes to Consolidated Financial Statements.
8
<PAGE>
<TABLE>
<CAPTION>
PAUL-SON GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 31, 1996, 1995 AND 1994
1996 1995 1994
<S> <C> <C> <C>
Cash Flows from Operating Activities
Cash received from customers $ 24,513,389 $ 22,756,375 $ 18,647,176
Cash paid to suppliers and employees (23,357,951) (25,198,210) (18,940,860)
Interest paid (69,060) (109,593) (144,362)
Interest received 57,694 162,796 -
Income tax refunds 494,019 - -
Income taxes paid (6,750) (850,271) (365,738)
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 1,631,341 (3,238,903) (803,784)
Cash Flows from Investing Activities
Deposits on real property - (200,000) -
Proceeds received on sale of equipment 15,400 47,686 -
Purchase of property and equipment (3,059,544) (2,824,588) (1,737,932)
Purchase of short-term investments - - (5,933,959)
Proceeds from short-term investments 1,493,536 - -
Purchase of securities held to maturity - (1,427,124) -
Proceeds from maturities of securities
held to maturity - 6,000,000 -
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (1,550,608) 1,595,974 (7,671,891)
Cash Flows from Financing Activities
Payments on due to related party (235,000) (250,000) (250,000)
Proceeds from long-term borrowings - - 658,965
Principal payments on long-term borrowings (102,211) (149,216) (704,023)
Proceeds from initial public offering - - 11,241,291
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (337,211) (399,216) 10,946,233
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (256,478) (2,042,145) 2,470,558
Cash and cash equivalents, beginning 1,253,987 3,296,132 825,574
Cash and cash equivalents, ending $ 997,509 $ 1,253,987 $ 3,296,132
Reconciliation of Net Income (Loss) to
Net Cash Provided By
(Used in) Operating Activities
Net income (loss) $ 336,840 $ (140,806) $ 1,057,652
Depreciation and amortization 768,787 585,924 364,749
Accretion of discounts - (132,453) -
Provision for bad debts 68,516 912,697 20,000
Minority interest - - 89,950
Gain (Loss) on sale of equipment 5,698 (11,608) -
Change in assets and liabilities:
(Increase) decrease in accounts
receivable 905,975 (308,791) (2,461,014)
(Increase) decrease in inventories 61,251 (2,517,960) (1,212,612)
(Increase) decrease in other assets 449,867 (231,773) 17,994
(Increase) decrease in prepaid expenses 11,449 (130,633) (51,719)
(Increase) decrease in income tax
refund receivable 661,499 (661,499) -
Increase (decrease) in accounts payable
and accrued expenses (1,884,803) 1,116,797 846,493
Increase (decrease) in customer
deposits 192,092 (1,530,026) 414,349
Increase (decrease) in income taxes
payable 54,170 (188,772) 110,374
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ 1,631,341 $ (3,238,903) $ (803,784)
</TABLE>
See Notes to Consolidated Financial Statements.
9
<PAGE>
PAUL-SON GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Paul-Son Gaming Corporation and Subsidiaries ("Paul-Son" or
"Company") is the leading manufacturer and supplier of casino
table game equipment in the United States. The Company's
products include casino chips, table layouts, playing cards,
dice, furniture, table accessories and other products, which are
used with casino table games such as blackjack, poker, baccarat,
craps and roulette. The Company sells its products in every
state in which casinos operate in the United States and in
various countries throughout the world.
BASIS OF PRESENTATION AND REORGANIZATION
On December 22, 1993, Paul-Son Gaming Corporation was
incorporated. The stockholders' equity reflects the equity
structure of Paul-Son Gaming Corporation as if it was
incorporated at the earliest period presented.
The consolidated financial statements include the accounts of
Paul-Son, Paul-Son Gaming Supplies [formerly Paul-Son Dice and
Card, Inc. ("Paul-Son Dice")] Paul-Son Mexicana, S.A. de C.V.
("Mexicana") and Comercial Paul-Son, S.A. de C.V. All material
intercompany balances and transactions have been eliminated in
consolidation.
Paul-Son conducted an initial public offering (IPO) in March 1994
of 1,380,000 shares of common stock, 1,180,000 of which were sold
by Paul-Son. A plan and agreement of merger and exchange became
effective immediately prior to and simultaneously with the
effective date of the initial public offering, which provided
that Paul-Son Casino Supplies of New Jersey, Inc. ("PSCS"), Paul-
Son Playing Cards, Inc. ("PSPC") and Paul-Son Dice merge with
Paul-Son Dice as the surviving corporation. Paul-Son and Paul-
Son Dice were owned entirely by the majority stockholder, who
also owned 50% of PSPC and 99.9% of Mexicana. The "minority
interest" accounts included in the consolidated balance sheets
and statements of income reflect the portions of PSPC and
Mexicana not owned by the majority stockholder prior to the
reorganization. The agreement also provided that 99.9% of the
stock of Mexicana be exchanged for Paul-Son Dice stock and .1% of
Mexicana stock be exchanged for Paul-Son stock. The stockholders
of Paul-Son Dice then exchanged their stock for stock in Paul-
Son, making Paul-Son Dice, a wholly owned subsidiary of Paul-Son
and Mexicana a 99.9% owned subsidiary of Paul-Son Dice. In
addition, Paul-Son Dice purchased certain assets and obligations
of C. J. Sisk, a sole proprietorship, from the majority
stockholder. As a result of this purchase, the Company recorded
a preferential dividend to the majority stockholder of $429,565.
Also, as part of the reorganization, the owners of the 50% of
PSPC not owned by the majority stockholder exchanged their
ownership interest in PSPC for 80,000 shares of Paul-Son. This
transaction was accounted for as a purchase.
A summary of the Company's significant accounting policies
follows:
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments and
repurchase agreements with original maturities of three months or
less to be cash and cash equivalents.
10
<PAGE>
PAUL-SON GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
At various times throughout the year, the Company maintained cash
balances at financial institutions in excess of federally insured
amounts.
SECURITIES HELD TO MATURITY
Securities classified as held to maturity are those debt
securities the Company has both the intent and ability to hold to
maturity regardless of changes in market conditions, liquidity
needs or changes in general economic conditions. These
securities are carried at cost adjusted for amortization of
premium and accretion of discount, computed by the interest
method over their contractual lives.
Reference should be made to Note 2 regarding a change in the
method of accounting for certain investments in debt and equity
securities.
INVENTORY
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
EQUIPMENT
Property and equipment are stated at cost, net of depreciation.
Depreciation is computed primarily on the straight-line method
for financial reporting purposes over the following estimated
useful lives:
<TABLE>
<CAPTION>
YEARS
<S> <C>
Buildings and improvements 18-27
Furniture and equipment 5-10
Vehicles 5-7
</TABLE>
GOODWILL
Goodwill is amortized on a straight-line basis over 20 years.
ADVERTISING COSTS
Advertising costs, consisting primarily of costs of attending
industry trade shows, are expensed as incurred.
INCOME TAX
The Company uses Financial Accounting Standards Board Statement
109 for financial accounting and reporting for income taxes. A
current tax liability or asset is recognized for the estimated
taxes payable or refundable on tax returns for the current year.
A deferred tax liability or asset is recognized for the estimated
future tax effects, based on provisions of the enacted law,
attributable to temporary differences and carryforwards.
FOREIGN TRANSACTIONS
Sales outside of the United States are not significant and
substantially all transactions occur in United States dollars.
11
<PAGE>
PAUL-SON GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
EARNINGS PER SHARE
Earnings per share is computed based on the weighted average
number of shares outstanding during the period. Common stock
equivalents were anti-dilutive or not material.
ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
RELIANCE ON SUPPLIERS
For certain of its products, the Company is dependent upon a
limited number of suppliers to provide the Company with raw
materials for manufacturing and finished goods for distribution.
The failure of one or more of these suppliers to meet the
Company's performance specifications, quality standards or
delivery schedules could have a material adverse effect on the
Company.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Company is required to adopt SFAS No. 123, Accounting for
Stock-Based Compensation in the fiscal year ending May 31, 1997.
SFAS No. 123 establishes accounting and disclosure requirements
using a fair value based method of accounting for stock based
employee compensation plans. Under SFAS No. 123 the Company may
either adopt the new fair value based accounting method or
continue the intrinsic value based method and provide pro forma
disclosures of net income and earnings per share as if the
accounting provisions of SFAS No. 123 had been adopted. The
Company plans to adopt only the disclosure requirements of SFAS
No. 123; therefore, such adoption will have no effect on the
Company's consolidated net earnings or cash flows.
The Financial Accounting Standards Board ("FASB") issued SFAS No.
121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" in May 1995. This
statement, effective for the Company's fiscal year ending May 31,
1997, requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Management believes that if SFAS No. 121 had been adopted at May
31, 1996, it would not have had a significant effect on the
financial position or results of operations of the Company.
NOTE 2. SECURITIES AND CHANGE IN ACCOUNTING PRINCIPLE
Effective June 1, 1994, the Company adopted FASB Statement No.
115, Accounting for Certain Investments in Debt and Equity
Securities, which requires the Company to classify investment
securities as trading, held for sale or held to maturity.
Securities classified as trading and available for sale are to be
valued at their fair market value. Securities classified as held
to maturity are valued at amortized cost. At June 1, 1994, the
Company classified its investment portfolio as held to maturity.
No amounts were
12
<PAGE>
PAUL-SON GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SECURITIES AND CHANGE IN ACCOUNTING PRINCIPLE
(CONTINUED)
classified as trading or available for sale. Upon adoption of
this Statement, no adjustment to the investment portfolio was
necessary as there was no difference between the amortized cost
and the fair market value of investments at that time.
As of May 31, 1995 the carrying amount and estimated fair value
of held to maturity securities, which consist of U. S. Treasury
Bills, all of which mature within one year, are $1,493,536. As
of May 31, 1996 held to maturity securities were $0.
NOTE 3. INVENTORIES
Inventories consist of the following at May 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Raw materials $ 2,778,329 $ 2,548,329
Work in process 436,726 404,979
Finished goods 2,389,575 2,712,573
$ 5,604,630 $ 5,665,881
</TABLE>
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at May 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Land $ 805,052 $ 471,719
Buildings and improvements 6,126,608 4,059,382
Furniture and equipment 2,774,628 2,312,194
Vehicles 819,153 666,624
10,525,441 7,509,919
Less accumulated depreciation 3,266,018 2,520,155
$ 7,259,423 $ 4,989,764
</TABLE>
NOTE 5. SHORT-TERM BORROWINGS
The Company finances some of its activities through a revolving
line of credit with a financial institution which allows maximum
borrowings of the lesser of $750,000 or 75% of eligible accounts
receivable. Borrowings are collateralized by a general pledge
agreement covering all assets. There was no balance outstanding
under the line of credit at May 31, 1996 and at May 31, 1995.
There was no activity on the line for the years ending May 31,
1996 and 1995. The average balance outstanding during the year
ended May 31, 1994 was approximately $246,000 at a weighted
average interest rate of 8.07%. The maximum balance outstanding
during the year ended May 31, 1994 was $600,000. Interest on
the line is based on the institution's prime rate plus 2%,
payable monthly. The credit agreements contain restrictive
covenants, generally requiring the Company to maintain certain
financial ratios as defined in the agreement. As of May 31, 1996
the Company was in compliance with all financial ratios and
covenants required as defined in the agreement.
13
<PAGE>
PAUL-SON GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. LONG-TERM DEBT AND PLEDGED ASSETS
Long-term debt excluding amounts due to related parties consists
of the following at May 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Notes payable to bank, collateralized by
a deed of trust, interest at 8%,
principal and interest payments of $6,077
are due monthly through 1998 $ 406,376 $ 443,856
Various notes payable for equipment,
interest at 14.5% to 25.5%, payable in
monthly payments of $6,300 through 1998 67,643 127,308
Notes payable to mortgage companies,
collateralized by real estate, interest at
7.5% to 9.5%, principal and interest payments
of $898 are due monthly through 2016 68,056 73,122
542,075 644,286
Less current portion 85,914 105,944
$ 456,161 $ 538,342
</TABLE>
Estimated annual principal maturities of long-term debt at May
31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $ 85,914
1998 73,175
1999 325,091
2000 6,294
2001 6,802
Thereafter 44,799
$ 542,075
</TABLE>
The majority stockholder has personally guaranteed approximately
$450,000 of the above debt.
14
<PAGE>
PAUL-SON GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. RELATED PARTIES
The Company purchases plastic coated playing cards from an entity
related through common ownership. Included in accounts payable
at May 31, 1996 and 1995, are payables to the related entity for
these purchases in the amounts of $33,859 and $70,063,
respectively. Included in interest expense is approximately
$7,000, $23,000 and $10,000 to related parties in 1996, 1995 and
1994, respectively.
Included in rent expense is $40,000 to the majority stockholder
in 1994.
The following amounts were paid for legal, accounting, and
consulting services to individuals who are currently, or were at
the time of providing such service, members of the Company's
Board of Directors:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Laurence A. Speiser $ 128,591 $ 152,033 $ 236,697
Wayne H. White 23,819 56,575 70,449
Michael E. Cox 36,691 79,493 76,281
</TABLE>
Due to related parties consists of the following at May 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Unsecured note payable to
majority stockholder, annual
payments of $125,000 plus
interest at 6% $ 15,000 $ 250,000
Less current portion - -
$ 15,000 $ 250,000
</TABLE>
NOTE 8. COMMITMENTS AND CONTINGENCIES
The Company leases land, manufacturing and office space under
operating leases with terms of between 3 to 8 years. Approximate
minimum annual rental commitments at May 31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $ 191,625
1998 177,120
1999 160,480
2000 142,380
2001 130,515
Thereafter -
$ 802,120
</TABLE>
The Company has a twelve year option to extend the lease at one
facility. The annual rent during the first 8 year term is
$142,380. The rent payments during the option period will
increase 5% annually.
Rent expense totaled $228,222, $231,186 and $237,967 in 1996,
1995 and 1994, respectively.
15
<PAGE>
PAUL-SON GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company is party to various claims arising in the normal
course of business. Management believes that these matters are
expected to be resolved with no material impact on the Company's
financial position, liquidity, or results of operations.
NOTE 9. INCOME TAX MATTERS
The components of income tax expense for the years ended May 31,
follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Currently paid or
payable $ 193,616 $ - $ 522,916
Deferred - - -
$ 193,616 $ - $ 522,916
</TABLE>
A reconciliation of income tax expense and the amount computed by
applying the Federal income tax rate to income (loss) before
income taxes is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Income tax expense (benefit) at
statutory rate $ 180,000 $ (48,000) $ 568,000
State income taxes 10,600 - 29,000
Nondeductible meals and
entertainment 23,000 26,000 6,000
Nondeductible penalties - 6,000 3,000
Other (19,984) 16,000 (83,084)
Income Tax Expense $ 193,616 $ - $ 522,916
</TABLE>
As of May 31, 1996 and 1995, there were no material temporary
differences or carryforwards.
16
<PAGE>
PAUL-SON GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. STOCK OPTION PROGRAMS
The Company has stock option programs which consist of the 1994
Long-Term Incentive Plan and the 1994 Directors' Stock Option
Plan. The 1994 Long-Term Incentive Plan provides for the grant
of stock options to executive officers, key employees, outside
consultants and employee-directors. The options granted under
this plan expire 10 years after the date of grant or the vesting
date, whichever is latest. The following is a summary of option
activity for the 3 years ended May 31, 1996:
<TABLE>
<CAPTION>
Options
Available ISOP Option
for Grant Activity Price
<S> <C> <C> <C>
Outstanding at May 31, 1993 - - -
Shares reserved 575,000 - -
Granted (306,500) 306,500 $ 11.25
Canceled - - -
Exercised - - -
Outstanding at May 31, 1994 268,500 306,500 11.25
Granted (36,500) 36,500 13.25-14.00
Canceled 42,250 (42,250) 11.25
Exercised - - -
Outstanding at May 31, 1995 274,250 300,750 11.25-14.00
Granted (320,000) 320,000 8.75-13.25
Canceled 306,750 (306,750) 8.75-13.25
Exercised - - -
Outstanding at May 31, 1996 261,000 314,000 $ 8.75-14.00
</TABLE>
At May 31, 1996, 2,000 of the above stock options are
exercisable. On July 29, 1996, the Board amended the 1994 Long-
Term Incentive Plan, subject to stockholder approval, to increase
the aggregate shares issuable under the plan to 1,000,000, a
500,000 share increase.
The 1994 Directors' Stock Option Plan provides that each non-
employee director, upon joining the Board, will receive an option
to purchase 3,000 shares of common stock. The initial option
grant shall vest over a 3 year period, with one-third of the
option grant vesting at the end of each year. At the beginning
of the fourth year of service on the Board, and each year
thereafter, each nonemployee director will receive an annual
grant to purchase 1,000 shares of common stock. In addition,
each non-employee director receives options to purchase 1,000
shares of common stock for serving on the following committees of
the board of directors for at least six months prior to the date
of grant: the Audit Committee; the Compensation Committee; and
the Compliance Committee. No option is exerciseable sooner than
6 months and one day after the date of grant. The options expire
on the tenth anniversary of the date of grant or 9 months after
17
<PAGE>
PAUL-SON GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. STOCK OPTION PROGRAMS (CONTINUED)
retirement or 2 years after death. Options covering 6,000 shares
were granted during the year ended May 31, 1996 at $6.50 per
share. The options are exercisable as follows:
<TABLE>
<CAPTION>
AMOUNT EXERCISE DATE
<S> <C>
2,000 July 18, 1996
2,000 July 18, 1997
2,000 July 18, 1998
6,000
</TABLE>
As of July 19, 1996 a maximum of 1,075,000 shares of common stock
has been reserved for issuance under these plans. None of the
options can be granted at less than the fair market value of the
Company's common stock on the date of grant.
NOTE 11. PRO FORMA PRESENTATION
The Company's results of operations for the year ended May 31,
1994 on a pro forma basis to reflect certain transactions which
occurred as part of the reorganization follows. These
transactions include the purchase of certain assets and
assumption of related obligations of C.J. Sisk, a sole
proprietorship, the purchase of certain real property owned by
the majority stockholder, a reduction of obligations to the
majority stockholder reflected as a capital contribution, and the
acquisition of the minority interest in PSPC and Mexicana.
The pro forma results of operations for the year ended May 31,
1994, had the transactions described above been consummated on
June 1, 1993, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Revenue $ 22,839,650
Net income $ 1,424,431
Earnings per share $ 0.61
</TABLE>
NOTE 12. CASH FLOW INFORMATION
The following schedule describes the Company's noncash investing
and financing activities for the year ended May 31, 1994:
18
<PAGE>
PAUL-SON GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. CASH FLOW INFORMATION (CONTINUED)
<TABLE>
<S> <C>
Acquisition of C. J. Sisk:
Note payable to majority stockholder $ 750,000
Net assets acquired, primarily working capital (320,435)
PREFERENTIAL DIVIDEND TO MAJORITY STOCKHOLDER $ 429,565
Acquisition of PSPC minority interest:
Shares of Paul-Son issued $ 900,000
Minority interest eliminated (242,851)
Reduction of debt to minority stockholders (63,874)
Other (26,225)
NET GOODWILL RECORDED $ 567,050
Obligation to majority stockholder
contributed to capital $ 128,007
</TABLE>
There were no significant noncash investing or financing
activities during the years ended May 31, 1996 and 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
Included in Part II of this report:
Consolidated Balance Sheets at May 31, 1996 and
May 31, 1995
Consolidated Statements of Operations for the
Years Ended May 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity
for the Years Ended May 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the
Years Ended May 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
19
<PAGE>
2. FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Account
Other schedules are omitted because of the absence
of conditions under which they are required or
because the required information is given in the
financial statements or notes thereto.
(b) Reports on FORM 8-K
None.
(c) EXHIBITS
3.01 Articles of Incorporation of Paul-Son Gaming
Corporation and Certificate of Amendment of
Articles of Incorporation of Paul-Son Gaming
Corporation incorporated herein by reference
from the Company's registration statement on
Form S-1 (SEC No. 33-74758), Part II, Item 16,
Exhibit 3.01.
3.02 Bylaws of Paul-Son Gaming Corporation
incorporated herein by reference from the
Company's registration statement on Form S-1
(SEC No. 33-74758), Part II, Item 16, Exhibit
3.02.
4.01 Plan and Agreement of Merger and Exchange dated
March 25, 1994 between Paul-Son Playing Cards,
Inc., Paul-Son Casino Supplies of New Jersey,
Inc., Paul-Son Dice and Card, Inc., Paul-Son
Gaming Corporation, Paul S. Endy, and Eric P.
Endy, incorporated herein by reference from the
Company's annual report on Form 10-K for the
year ended May 31, 1994, Part IV, Item 14(c),
Exhibit 4.01.
4.02 Specimen Common Stock Certificate for the
Common Stock of Paul-Son Gaming Corporation
incorporated herein by reference from the
Company's registration statement on Form S-1
(SEC No. 33-74758), Part II, Item 16, Exhibit
4.01.
10.01 Loan Agreement dated December 8, 1993, by and
among Paul-Son Dice and Card, Inc., and Paul-
Son Casino Supplies of New Jersey, Inc., as
borrowers, and First Interstate Bank of Nevada,
N.A., as lender; Promissory Note dated December
8, 1993, executed by Paul-Son Dice and Card,
Inc. and Paul-Son Casino Supplies of New
Jersey, Inc. payable to the order of First
Interstate Bank of Nevada, N.A.; Deed of Trust
With Assignment of Rents dated December 8,
1993, by Paul-Son Dice and Card, Inc., as
trustor, in favor of First Interstate Bank of
Nevada, N.A., as beneficiary; Guaranty dated
December 8, 1993, executed by Paul S. Endy in
favor of First Interstate Bank of Nevada, N.A.;
and Guaranty dated December 8, 1993, executed
by Aniela Endy in favor of First Interstate
Bank of Nevada, N.A. incorporated herein by
reference from the Company's registration
statement on Form S-1 (SEC No. 33-74758),
Part II, Item 16, Exhibit 10.01.
20
<PAGE>
10.02 Loan Agreement dated January 9, 1996 by and
between Paul-Son Gaming Supplies, Inc., as
borrower, and First Interstate Bank of Nevada,
N.A., as lender; Promissory Note dated January
9, 1996, executed by Paul-Son Gaming Supplies,
Inc., payable to the order of First Interstate
Bank of Nevada, N.A.; Commercial Security
Agreement dated January 9, 1996, executed by
Paul-Son Gaming Supplies, Inc., as debtor, in
favor of First Interstate Bank of Nevada, N.A.,
as secured party; Commercial Guaranty dated
January 9, 1996, by and between Paul-Son Gaming
Supplies, Inc. As borrower and Paul-Son Gaming
Corporation as guarantor and First Interstate
Bank of Nevada, N.A., as lender.*
10.03 Paul-Son Gaming Corporation 1994 Directors'
Stock Option Plan (as amended July 29, 1996).*
10.04 Paul-Son Gaming Corporation 1994 Long-Term
Incentive Plan (as amended July 29, 1996).*
10.05 Lease dated May 17, 1993, by and between
Paul-Son Mexicana S.A. de C.V., as lessee, and
Coprodiedad Arte Y Diseno, as lessor
incorporated herein by reference from the
Company's registration statement on Form S-1
(SEC No. 33-74758), Part II, Item 16, Exhibit
10.05.
10.06 Employment Agreement by and between Eric P.
Endy and Paul-Son Dice and Card, Inc.
incorporated herein by reference from the
Company's registration statement on Form S-1
(SEC No. 33-74758), Part II, Item 16, Exhibit
10.05.
10.07 Agreement of Purchase and Sale of Real Property
dated April 6, 1994 by and between the Paul S.
Endy, Jr. Living Trust and Paul-Son Dice and
Card, Inc., incorporated herein by reference
from the Company's annual report on Form 10-K
for the year ended May 31, 1994, Part IV, Item
14(c), Exhibit 10.08.
10.08 Agreement of Purchase and Sale of Assets dated
March 28, 1994 by and between C.J. Sisk, a sole
proprietorship, and Paul-Son Dice and Card,
Inc., incorporated herein by reference from the
Company's annual report on Form 10-K for the
year ended May 31, 1994, Part IV, Item 14(c),
Exhibit 10.09.
10.09 Exclusive Distributor Agreement dated
November 1, 1993, by and between Jones Casino
Supplies, Inc. and Paul-Son Supplies and Card,
Inc. incorporated herein by reference from the
Company's registration statement on Form S-1
(SEC No. 33-74758), Part II, Item 16, Exhibit
10.13.
10.10 Form of Purchase and Sale Agreement by and
between Resolution Trust Corporation as
receiver for Frontier Savings Association and
Paul-Son Gaming Supplies, Inc. incorporated by
reference from the Company's annual report on
Form 10-K for the year ended May 31, 1995, Part
IV, Item 14, Exhibit 10.14.*
21.01 List of subsidiaries of Paul-Son Gaming
Corporation.
21
<PAGE>
23.01 Consent of Deloitte & Touche LLP.
23.02 Consent of McGladrey & Pullen, LLP.
27.01 Financial data schedule.
_________________________
* Filed previously; not included with this amendment.
22
<PAGE>
[ORIGINAL PRINTED ON MCGLADREY & PULLEN, LLP LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
ON THE SCHEDULE
To the Board of Directors
Paul-Son Gaming Corporation
Las Vegas, Nevada
Our audit of the consolidated financial statements of Paul-Son
Gaming Corporation and Subsidiaries included Schedule II
contained herein, for each of the two years in the period ended
May 31, 1995.
In our opinion, the schedule presents fairly the information
required to be set forth therein in conformity with generally
accepted accounting principles.
/s/ McGladrey & Pullen, LLP
Las Vegas, Nevada
August 25, 1996
23
<PAGE>
<TABLE>
<CAPTION>
PAUL-SON GAMING CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended May 31, 1996, 1995 and 1994
Balance at Provisions
Beginning Charged to Balance at
Years Ended May 31, of Year Expenses Charge-Offs End of Year
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
1996 $ 214,000 $ 96,000 $ 28,288 $ 281,712
1995 $ 20,000 $ 912,697 $ 718,697 $ 214,000
1994 $ - $ 35,868 $ 15,868 $ 20,000
</TABLE>
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned
thereunto duly authorized.
PAUL-SON GAMING CORPORATION
September 16, 1996 By /s/ Eric P. Endy
Eric P. Endy
Chief Executive Officer
(Duly Authorized Officer)
25
<PAGE>
EXHIBIT INDEX
NO. DESCRIPTION PAGE
23.01 Consent of Deloitte & Touche LLP. 27
23.02 Consent of McGladrey & Pullen, LLP. 29
27.01 Financial Data Schedule 31
26
<PAGE>
EXHIBIT 23.01
27
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement Nos. 33-84726 and 33-84728 of Paul-Son Gaming
Corporation on Forms S-8 of our report dated August 2, 1996,
appearing in this Form 10-K/A of Paul-Son Gaming Corporation for
the year ended May 31, 1996.
/s/ Deloitte & Touche LLP
Las Vegas, Nevada
September 13, 1996
28
<PAGE>
EXHIBIT 23.02
29
<PAGE>
[ORGINAL PRINTED ON MCGLADREY & PULLEN, LLP LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
PAUL-SON GAMING CORPORATION
Las Vegas, Nevada
We hereby consent to the use in this Form 10-K/A (Amendment No.
1) of our report dated August 25, 1995, relating to the
consolidated financial statements of Paul-Son Gaming Corporation
and Subsidiaries.
/s/ McGladrey & Pullen, LLP
Las Vegas, Nevada
September 12, 1996
30
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENTS OF INCOME OF PAUL-SON GAMING
CORPORATION, AS OF AND FOR THE YEAR ENDED MAY 31, 1996, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> MAY-31-1996
<CASH> 998
<SECURITIES> 0
<RECEIVABLES> 2,884
<ALLOWANCES> 282
<INVENTORY> 5,605
<CURRENT-ASSETS> 9,672
<PP&E> 10,525
<DEPRECIATION> 3,266
<TOTAL-ASSETS> 17,401
<CURRENT-LIABILITIES> 2,071
<BONDS> 0
0
0
<COMMON> 33
<OTHER-SE> 14,826
<TOTAL-LIABILITY-AND-EQUITY> 17,401
<SALES> 23,379
<TOTAL-REVENUES> 23,379
<CGS> 16,323
<TOTAL-COSTS> 16,323
<OTHER-EXPENSES> 6,577
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 64
<INCOME-PRETAX> 530
<INCOME-TAX> 194
<INCOME-CONTINUING> 337
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 337
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
