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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996 Commission File Number 0-20648
MISSISSISPPI-I GAMING, L.P.
(Exact Name of Registrant as Specified in its Charter)
MISSISSIPPI 64-0828954
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Boomtown, Inc.
P.O. Box 399, Verdi, Nevada 89439-0399
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 345-8643
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1)(A)
AND (B) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes__X__ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Park III of this Form 10-K or any amendment to
this Form 10-K. Yes__X__ No ____
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference into the part
of this Form 10-K as indicated: None
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PART I
ITEM 1. BUSINESS
Mississippi-I Gaming, L.P. (the "Partnership" or "Boomtown Biloxi" or the
"Company"), is a Mississippi limited partnership which is majority owned by
Boomtown, Inc. ("Boomtown"). The Company commenced operations in July 1994 and
occupies nine acres on Biloxi's historic back bay. The dockside property
consists of a land based facility which houses all non-gaming operating space
and a 33,000-square foot casino constructed on a 400 x 110 foot barge
permanently moored to the land-based building. The Company's "old west" theme
is the first of its kind in the Gulf Coast area, and management believes the
casual atmosphere and western theme distinguishes Boomtown Biloxi from
competing casinos in the back bay. The casino offers 1,030 slot machines,
37 table games (including blackjack, craps, roulette, Caribbean stud,
tournament let it ride, pai gow poker, poker, three card poker and royal
match) and other non-gaming amenities including a full service buffet/menu
service restaurant, a 120 seat deli-style restaurant, a western dance
hall/cabaret and a 20,000-square foot family entertainment center. The
family entertainment center, complete with a dynamic motion theater, and the
western theme distinguish Boomtown Biloxi from other casinos on the
Mississippi Gulf Coast as a destination offering entertainment for the
entire family. Boomtown Biloxi currently employs approximately 871 employees.
Boomtown Biloxi is located one-half mile from Interstate 110, the main
highway connecting Interstate 10 and the Gulf of Mexico. Interstate 10 is the
main thoroughfare connecting New Orleans Louisiana and Mobile, Alabama.
According to the Mississippi Department of Transportation, over 12 million
vehicles travel past the Boomtown Biloxi site on Interstate 110 each year.
Auto accessibility to the site is superior when approaching from the north
due to its immediate proximity to the Interstate 110 spur from Interstate 10,
which provides the bulk of traffic to the Gulf Coast region. Boomtown
Biloxi is constructed in the Back Bay and is the first casino visible to
auto traffic traveling south on Interstate 110.
BOOMTOWN'S PROPOSED MERGER WITH HOLLYWOOD PARK, INC. ("HOLLYWOOD PARK") On
April 23, 1996, Boomtown entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Hollywood Park, Inc., ("Hollywood Park") relating to
the strategic combination of Hollywood Park and Boomtown. Pursuant to the
Merger Agreement and subject to the terms and conditions set forth therein
(including shareholder consent and regulatory approval), the Company would
become a wholly-owned subsidiary of Hollywood Park (the "Merger"). The
shareholders of the Company and Hollywood Park have approved the Merger. To
date, the Company has received approval from the Mississippi gaming authorities
and is awaiting approval from other relevant gaming jurisdictions. Pursuant to
the Merger Agreement, at the effective date of the Merger each issued and
outstanding share of Boomtown Common Stock will be converted into the right to
receive 0.625 (the "Exchange Ratio"), of a share of Hollywood Park Common
Stock. The Merger is intended to be structured as a tax-free reorganization.
The shareholders of Boomtown and Hollywood Park have approved the Merger.
To date, the Merger has only been approved by Mississippi gaming authorities,
and is subject to the approval of other relevant gaming jurisdictions.
Certain additional matters relating to the signing of the Merger Agreement
and a complete description of the Merger Agreement are more fully described in
the Company's Form 8-K dated
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April 23, 1996, including the Agreement and Plan of Merger file as exhibit 2.1
thereto, and filed with the Securities and Exchange Commission on May 3, 1996.
On November 18, 1996, the Company entered into an agreement with its
partnership in the venture, Eric Skrmetta (Skrmetta"), in which the Company
agreed to pay $5,673,000 in return for Skrmetta's 7.5% interest in the
Partnership in addition to releasing the Company from any and all claims,
liabilities and causes of action of any kind arising from or related to the
Partnership agreement. The terms set forth thereto require Boomtown to pay a
down payment of $500,000 on or before December 5, 1996, (which amount was paid)
with the remaining $5,173,000 to be paid not later than August 10, 1997.
Additionally, the $5,173,000 shall be reduced by a discount for the time that
the amount or any portion thereof is paid in full prior to August 10, 1997.
OPERATING STRUCTURE In October 1993, prior to beginning construction on
the facility, Boomtown entered into a 99-year lease with Raphael Skrmetta,
which was subsequently transferred to his son Eric Skrmetta ("Skrmetta") for
the site located on the back bay in Biloxi. The lease stipulates base rent
based on gaming revenue with a minimum of $500,000 and a maximum of $2 million,
plus 5 percent of gaming revenues in excess of $25 million ("Percentage
Rent"). At current revenue levels, the base rent is $2 million and is
expected to remain at this maximum level. If gaming revenue exceeds $50
million dollars, the percentage rent increases to 6% of all gaming revenue
over $50 million. For the first two years of the lease, Skrmetta forgave
the "base rent" ($2 million per year) in exchange for a 15 percent limited
partnership interest in the Partnership.
Under the terms of the partnership agreement, quarterly distributions are
made to Skrmetta in relationship to his percentage interest in Boomtown Biloxi.
The distributions are based on his pro rata share of the cash flow generated by
the property after deducting normal capital expenditures and total debt
service.
Each of the Company and Skrmetta (or his transferees) has an option
exercisable after three years, but not later than approximately seven years,
following commencement of gaming operations to exchange Skrmetta's (or his
transferees') interest in the Partnership for, at Skrmetta's option, cash or a
number of shares (or a combination thereof) of Boomtown's Common Stock equal to
the value of the 15% interest in the Partnership. The value of the Partnership
is equal to the difference between (A) six times the sum of (i) Partnership net
income for the last completed fiscal year preceding the exchange, plus (ii)
depreciation and amortization charges for such year, plus (iii) the provision
for any income taxes for accounting purposes for such year, plus (iv) interest
expense on long-term debt for such fiscal year, and (B) the sum of all of the
Partnership's long term debt (provided that debt in excess of $2.5 million
which is incurred in connection with the acquisition of property, plant and
equipment is not included until one year after the in-service date for the
asset with which the debt is associated).
Upon commencement of operations at Boomtown Biloxi, the Company entered
into an agreement with Hospitality Franchise Systems, Inc. ("HFS") whereby HFS
advanced $11 million in return for ownership of the Biloxi barge and shell
building. Also under this agreement, HFS was to receive 20% of the adjusted
earnings before interest, taxes, depreciation and amortization ("EBITDA") as
defined in the related contract. HFS was also to provide marketing services to
the Company. The assets under this agreement, as well as the related
contractual arrangements, were subsequently transferred to National Gaming
Corporation, Inc. ("NGC"). Boomtown Biloxi leases the assets back from NGC
under a 25 year lease with a 25 year renewal option.
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In November, 1995 Boomtown executed an agreement with NGC whereby $2.4
million was returned to NGC in return for a reduction of the EBITDA
distributions from 20% to 16%. Additionally, for $100,000 the Company secured
an option to buy the barge from NGC as well as to buy out the EBITDA
participation at a cost approximating the original investment made by HFS less
the $2.4 million that was paid. The option terminates on March 31, 1997 but is
renewable for an additional two years for $100,000 a year.
For a discussion of the terms of the transactions described above, see
Boomtown's Registration Statement on Form S-4 filed with respect to the
registration of Boomtown's 11 1/2% First Mortgage Notes Due 2003, filed May 4,
1994 (the "1994 Registration Statement on Form S-4").
BILOXI AND THE MISSISSIPPI GAMING MARKET In 1990, the Mississippi
Legislature passed the Mississippi Gaming Control Act, which provided for
legalized dockside gaming at the discretion of the 14 counties that either
border the Gulf Coast or the Mississippi River. As of November 30, 1996
dockside gaming was permissible in nine of the 14 eligible counties in the
State and gaming operations had commenced in Adams, Coahoma, Hancock,
Harrison, Tunica, Warren and Washington counties. The law permits unlimited
stakes gaming on permanently moored vessels on a 24-hour basis and does not
restrict the percentage of space which may be utilized for gaming. There
are no limitations on the number of gaming licenses which may be issued in
Mississippi. State and local gaming taxes for gaming operations in Biloxi
approximate 12% of gaming revenues, plus certain fees.
The Mississippi Gulf Coast has a long tradition as a vacation destination.
Biloxi is within a one and one-half hour drive from New Orleans and a one hour
drive from Mobile, Alabama. With a local population of approximately 300,000,
the Gulf Coast area draws an estimated two million visitors annually, primarily
from Louisiana, Mississippi, Alabama, Florida and Georgia. Direct airline
flight service is provided to Gulfport/Biloxi from Atlanta, Houston, Orlando
and St. Petersburg. Excluding Louisiana, a 200-mile radius around Biloxi
encompasses more than 3.3 million people with an average age of 32. A 300-mile
radius, excluding Louisiana, contains more than 7.7 million people. Area
activities include beaches, golf, fishing, boating and water skiing.
With the advantage of the coastal beaches, the peak season occurs during
the summer months of June through August. The major factor that contributes to
the strong swing in seasonality is the limited number of quality rooms on the
coast. Numerous casino properties currently in existence or under construction
are building hotel rooms to support the region as an entertainment destination
resort.
COMPETITION Dockside gaming has grown rapidly on the Mississippi Gulf
Coast, increasing from no dockside casinos in March of 1992 to 11 operating
casinos by November 30, 1996. Boomtown Biloxi's dockside casino operation has
numerous competitors, some of which have greater name recognition, and
financial and marketing resources than the Company. Boomtown Biloxi also
competes with Louisiana casino operators. Additional casinos are planned
for the Gulf Coast and Louisiana areas, and although not all of the casinos
planned are likely to be developed, the Mississippi Gulf Coast gaming
environment has become increasingly competitive. The Biloxi and Gulf Coast
markets are therefore experiencing significant dilution and any additional
casinos could dilute per unit win even further. The Company is addressing
this competition issue by intensifying its marketing efforts to promote
Boomtown Biloxi's western theme and family entertainment center and,
believes it will be able to continue to effectively
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compete in this market. However, there can be no assurance that such
measures will be successful in addressing the intense competition in this
area.
Management believes Boomtown Biloxi's biggest obstacle to aggressively
competing in the Biloxi/Gulf Coast area is its location. The property is
positioned on the Back Bay of Biloxi approximately one mile north of the
"strip" on coastal Highway 90. The majority of the casinos in the Biloxi,
Gulfport area are located on Highway 90. The property is difficult to reach
when approached from the south due to the lack of an off ramp on Interstate
110 north although, Boomtown Biloxi is working with state and local
officials regarding plans and funding for such an off ramp. However, the
property is the first casino visible to auto traffic when traveling south on
Interstate 110.
FUTURE EXPANSION The Company's current long-term plan is to expand
Boomtown Biloxi by adding a minimum of 200 and up to 500 hotel rooms
adjacent to the casino as well as additional parking facilities. The
project is conditional upon the Company's ability to obtain additional
financing, which ability would be severely and adversely affected if the
Merger is not completed. There can be no assurance that the Company will be
able to obtain such financing, even if the Merger is successfully completed,
on acceptable terms.
REGULATION AND LICENSING
The ownership and operation of casino facilities in Mississippi are
subject to extensive state and local regulation. Regulation is primarily
effected through the licensing and regulatory control of the Mississippi
Gaming Commission and the Mississippi State Tax Commission (the "Mississippi
Gaming Authorities").
The Mississippi Gaming Control Act (the "Mississippi Act"), which
legalized dockside casino gaming in Mississippi, was enacted on June 29, 1990.
Although not identical, the Mississippi Act is similar to the Nevada
Gaming Control Act. Effective October 29, 1991, the Mississippi Gaming
Commission adopted regulations which are also similar in many respects to
the Nevada gaming regulations.
The laws, regulations and supervisory procedures of Mississippi and the
Mississippi Gaming 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 Gaming Commission; (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 interpretation by the Mississippi Gaming Commission. Changes
in Mississippi laws or regulations may limit or otherwise materially affect
the types of gaming that may be conducted and such changes, if enacted could
have an adverse effect on Boomtown and Boomtown's Biloxi, Mississippi gaming
operations.
The Mississippi Act provides for legalized dockside gaming at the
discretion of the 14 counties that either border the Gulf Coast or the
Mississippi River, but only if the voters in such counties have not voted to
prohibit gaming in that county. As of November 30, 1996, dockside gaming
was permissible in nine of the fourteen eligible counties in the State and
gaming operations
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had commenced in Adams, Coahoma, Hancock, Harrison, Tunica, Warren and
Washington counties. Under Mississippi law, gaming vessels must be located
on the Mississippi River or on navigable waters in eligible counties along
the Mississippi Gulf Coast. At least one lawsuit is pending with respect
to the expansion of eligible gaming sites in Mississippi Gulf Coast counties.
The law permits unlimited stakes gaming on permanently moored vessels on
a 24-hour basis and does not restrict the percentage of space which may be
utilized for gaming. There are no limitations on the number of gaming
licenses which may be issued in Mississippi.
Boomtown is required periodically to submit detailed financial and
operating reports to the Mississippi Gaming Commission and furnish any other
information which the Mississippi Gaming Commission may require. Boomtown and
any subsidiary of Boomtown (or a partnership in which the subsidiary is a
partner) that operates a casino in Mississippi (a "Mississippi Gaming
Subsidiary"), is subject to the licensing and regulatory control of the
Mississippi Gaming Authorities. If Boomtown is unable to continue to satisfy
the registration requirements of the Mississippi Act, Boomtown and its
Mississippi Gaming Subsidiaries cannot own or operate gaming facilities in
Mississippi. Each Mississippi Gaming Subsidiary must obtain a gaming license
from the Mississippi Gaming Commission to operate casinos in Mississippi. A
gaming license is issued by the Mississippi Gaming Commission subject to
certain conditions, including continued compliance with all applicable state
laws and regulations and physical inspection of the casinos prior to opening.
Gaming licenses are not transferable, are initially issued for a two-year
period and must be renewed periodically thereafter. Boomtown Biloxi's gaming
license was renewed in 1996 for a two-year period expiring June 20, 1998. No
person may become a shareholder of or receive any percentage of profits from a
gaming licensee subsidiary of a holding company without first obtaining
licenses and approvals from the Mississippi Gaming Commission. Boomtown has
obtained such approvals in connection with the licensing of Boomtown Biloxi.
Certain officers and employees of Boomtown and the officers, directors and
certain key employees of Boomtown's Mississippi Gaming Subsidiary must be found
suitable or be licensed by the Mississippi Gaming Commission. Boomtown
believes that findings of suitability with respect to such persons
associated with Boomtown or Boomtown Biloxi have been applied for or
obtained in connection with the licensing of Boomtown Biloxi. However, the
Mississippi Gaming Commission in its discretion may require additional
persons to file applications for suitability. 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 Boomtown may be required to be found
suitable or licensed, in which case those persons must pay the costs and
fees associated with such investigation. The Mississippi Gaming 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 Gaming
Commission. In addition to its authority to deny an application for a
license, the Mississippi Gaming Commission has jurisdiction to disapprove a
change in corporate position. The Mississippi Gaming Commission has the
power to require any Mississippi Gaming Subsidiary and Boomtown 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.
At any time, the Mississippi Gaming Commission has the power to
investigate and require the finding of suitability of any record or
beneficial shareholder of Boomtown. Mississippi law requires any person who
acquires more than 5% of the common stock of a publicly traded holding
company to report the acquisition to the Mississippi Gaming Commission, and
such person may be
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required to be found suitable. Also, any person who becomes a beneficial
owner of more than 10% of Boomtown's Common Stock, as reported to the
Securities and Exchange Commission, must apply for a finding of suitability
by the Mississippi Gaming Commission and must pay the costs and fees that
the Mississippi Gaming Commission incurs in conducting the investigation.
The Mississippi Gaming Commission has generally exercised its discretion to
require a finding of suitability of any beneficial owner of more than 5% of
a public company's common stock. However, the Mississippi Gaming
Commission has adopted a policy that could permit certain institutional
investors to beneficially own up to 10% of a public company's common stock
without a finding of suitability. If a shareholder 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.
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 Gaming
Commission may be found unsuitable. Any person found unsuitable and who holds,
directly or indirectly, any beneficial ownership of the securities of Boomtown
beyond such time as the Mississippi Gaming Commission prescribes, may be guilty
of a misdemeanor. Boomtown is subject to disciplinary action if, after
receiving notice that a person is unsuitable to be a shareholder or to have any
other relationship with Boomtown or its Mississippi Gaming Subsidiaries,
Boomtown: (i) pays the unsuitable person any dividend or other distribution
upon the voting securities of Boomtown; (ii) recognizes the exercise,
directly or indirectly of any voting rights conferred by securities held by
the suitable 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 on the securities, including,
if necessary, the immediate purchase of the securities for cash at a fair
market value.
Boomtown may be required to disclose to the Mississippi Gaming Commission
upon request the identities of security holders including the holders of any
debt securities. In addition, the Mississippi Gaming Commission under the
Mississippi Act may, in its discretion, (i) require holders of securities of
registered corporations to file applications, (ii) investigate such holders and
(iii) require such holders to be found suitable to own such securities.
Although the Mississippi Gaming Commission generally does not require the
individual holders of obligations such as notes to be investigated and found
suitable, the Mississippi Gaming 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 Gaming Commission in connection with such an investigation.
The Company must maintain a current stock ledger in its principal
office in Mississippi and Boomtown must maintain a current list of
stockholders in the principal offices of the Gaming Subsidiary which must
reflect the record ownership of each outstanding share of any class of
equity security issued by Boomtown. The stockholder list may thereafter be
maintained by adding reports regarding the ownership of such securities that
it receives from Boomtown's transfer agent. The ledger and stockholder
lists must be available for inspection by the Mississippi Gaming Commission
at any time. If any securities of Boomtown 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 Gaming Commission. A failure to
make such disclosure may be grounds for finding the record holder unsuitable.
Boomtown must also render maximum assistance in determining the identity of
the beneficial owners.
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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 Gaming Commission.
The Mississippi Gaming Commission has the power to impose additional
restrictions on the holders of Boomtown's securities at any time. Boomtown
has received a waiver from this legend requirement from the Mississippi
Gaming Commission.
Substantially all loans, leases, sales of securities and similar financing
transactions by a Mississippi Gaming Subsidiary must be reported to or approved
by the Mississippi Gaming Commission. A Mississippi Gaming Subsidiary may not
make an issuance or a public offering of its securities, but may hypothecate
casino facilities, if it obtains the prior approval of the Mississippi Gaming
Commission. Boomtown may not make an issuance or public offering of its
securities without the prior approval of the Mississippi Gaming Commission if
any part of the proceeds of the offering is to be used to finance the
construction, acquisition or operation of gaming facilities in Mississippi
or to retire or extend obligations incurred for one or more such purposes.
Such approval, if given, does not constitute a recommendation or approval of
the investment merits of the securities subject to the offering. Any
representation to the contrary is unlawful.
Change in control of Boomtown through merger (including the Merger),
consolidation, acquisition of assets, management or consulting agreements or
any form of takeover, and certain recapitalizations and stock repurchases by
Boomtown, cannot occur without the prior approval of the Mississippi Gaming
Commission. The Mississippi Gaming Commission may also require controlling
stockholders, officers, directors and other persons having a material
relationship or involvement with the entity proposing to acquire control, to be
investigated and licensed as part of the approval process relating to the
transaction.
The Mississippi legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and other corporate
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 Gaming 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 certain circumstances, required from
the Mississippi Gaming Commission before Boomtown 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
will also require prior approval by the Mississippi Gaming Commission if
Boomtown adopts a plan of recapitalization proposed by its Board of
Directors opposing a tender offer made directly to the shareholders for the
purpose of acquiring control of Boomtown.
Neither Boomtown nor any subsidiary may engage in gaming activities in
Mississippi while also conducting gaming operations outside of Mississippi
without approval of the Mississippi Gaming Commission. The Mississippi Gaming
Commission may require determinations that, among other things, there are means
for the Mississippi Gaming Commission to have access to information concerning
the out-of-state gaming operations of Boomtown and its affiliates. The
Mississippi Gaming Commission must approve any future gaming operations of
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Boomtown outside Mississippi. The Mississippi Gaming Commission has approved
Boomtown's operations in Nevada and Louisiana but must approve Boomtown's
operations in any other jurisdictions.
If the Mississippi Gaming Commission decides that a Mississippi Gaming
Subsidiary violated a gaming law or regulation, the Mississippi Gaming
Commission could limit, condition, suspend or revoke the license of the Gaming
Subsidiary. In addition, a Mississippi Gaming Subsidiary, Boomtown and the
persons involved could be subject to substantial fines for each separate
violation. Because of such a violation, the Mississippi Gaming Commission
could seek to appoint a supervisor to operate the casino facilities.
Limitation, conditioning or suspension of any gaming license or the
appointment of a supervisor could (and revocation of any gaming license
would) materially adversely affect Boomtown's and the Mississippi Gaming
Subsidiary's gaming operations and Boomtown's results of operations.
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 Mississippi Gaming Subsidiary's respective 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 table games operated by the casino. The license fee
payable to the State of Mississippi is based upon "gaming receipts"
(generally defined as gross receipts less pay outs to customers as winnings)
and equals 4 percent of gaming receipts of $50,000 or less per month, 6
percent of gaming receipts over $50,000 and less than $134,000 per month,
and 8 percent of gaming receipts over $134,000. The foregoing license fees
are allowed as a credit against Mississippi income tax liability for the
year paid.
In October 1994, the Mississippi Gaming Commission adopted two new
regulations. Under the first regulation, as a condition of licensure or
license renewal, casino vessels on the Mississippi Gulf Coast that are not
self-propelled must be moored to withstand a Category 4 hurricane with 155
mile per hour winds and 15 foot tidal surge. Boomtown Biloxi believes that
it currently meets this requirement. The second regulation requires as a
condition of licensure or license renewal that a gaming establishment's plan
include a 500-car parking facility in close proximity to the casino complex
and infrastructure facilities, the expenditures for which will amount to at
lease 25% of the casino cost. Such facilities shall include any of the
following: a 250 room hotel of at least a two star rating as defined by the
current edition of the Mobil Travel Guide, a theme park, golf courses,
marinas, a tennis complex, entertainment facilities, or any other such
facility as approved by the Mississippi Gaming Commission as infrastructure.
Parking facilities, roads, sewage and water systems, or facilities normally
provided by cities and/or counties are excluded. The Mississippi Gaming
Commission may in its discretion reduce the number of rooms required, where
it is shown to the Commission's satisfaction that sufficient rooms are
available to accommodate the anticipated visitor load. The Company believes
that Boomtown Biloxi currently meets such requirements and was relicensed by
the Mississippi Gaming Commission effective June 20, 1996 for an additional
two-year period. In addition, Boomtown Biloxi is planning to construct and
operate a hotel to satisfy this requirement; however, there can be no
assurance that it will be successful in completing such a hotel. It is
probable that the Mississippi Gaming Commission will require further
development on the casino site including hotel rooms and additional parking
prior to Boomtown Biloxi being relicensed in June 1998.
The sale of food or alcoholic beverages at the Boomtown Biloxi property is
subject to licensing, control and regulation by the applicable state and local
authorities. The agencies
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involved have full power to limit, condition, suspend or revoke any such
license, and any such disciplinary action could (and revocation would) have
a material adverse effect upon the operations of the affected casino or
casinos. Certain officers and managers of Boomtown and Boomtown Biloxi must
be investigated by the Alcoholic Beverage Control Division of the State Tax
Commission (the "ABC") in connection with Boomtown Biloxi's liquor permits.
Changes in licensed positions must be approved by the ABC.
ITEM 2. PROPERTIES
During November 1993, the Partnership entered into a 99-year lease of an
8.9 acre site in Biloxi, Mississippi. This land is being used to operate the
land-based amenities and parking for its dockside casino at Boomtown Biloxi.
The Partnership has also entered into several leases from 10-25 years on
additional land being used for additional parking. Upon commencement of
operations on July 18, 1994, the Partnership sold its casino barge and building
to Hospitality Franchise Systems, Inc. ("HFS") for $11 million and immediately
leased them back for 25 years for a rental amount based on adjusted earnings
before interest, taxes, depreciation and amortization, as defined in the
relevant contract. HFS subsequently transferred the contract to National
Gaming Corporation, Inc. All land-based facilities, including restaurants,
bars, fun center, and entertainment facility are owned by Boomtown Biloxi.
Boomtown Biloxi also leases submerged tidelands at the casino site from the
State of Mississippi. The term of the lease is ten years with a five-year
option to renew. Annual rent is determined by the State of Mississippi.
In November, 1995 Boomtown executed an agreement with NGC whereby $2.4
million was returned to NGC in return for a reduction of the EBITDA
distributions from 20% to 16%. Additionally, the Company secured an option to
buy the barge from NGC as well as to buy out the EBITDA participation at a cost
approximating the original investment made by HFS less the $2.4 million that
was paid in. The option terminates on March 31, 1997 but is renewable for an
additional two years for $100,000 a year.
ITEM 3. LEGAL PROCEEDINGS
The Company has no history of material claims and no material actions are
currently pending against the Company, nor is the Company a plaintiff in any
material actions currently pending.
PART II
10
<PAGE>
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Partnership's equity securities are not publicly traded.
A 5% general partnership interest in the Partnership is owned by Boomtown
through Boomtown's wholly-owned subsidiary, Bayview Yacht Club, Inc., a
Mississippi corporation. Boomtown also owns an 80% limited interest in the
Partnership.
Quarterly distributions will be made by the Partnership as follows:
(1) For each of the first three quarters of each year, to the extent
permitted under applicable law, 75% of the Partnership Distributable
Income (as defined below) shall be distributed on a pro rata basis to
all equity holders within forty-five (45) days after the quarter end.
(2) Within sixty (60) days after the end of the fourth quarter of each
fiscal year, to the extent permitted under applicable law, a pro rata
distribution shall be made which results in 100% of the Partnership
Distributable Income for the fiscal year having been distributed on a
cumulative basis. "Partnership Distributable Income" is defined as
(a) the sum of (i) the net income for the Partnership for the fiscal
quarter or year, plus (ii) depreciation and amortization charges for
such period and (iii) the provision for any income taxes (or similar
governmental fees) for accounting purposes for such period, less (b)
the sum of (i) all capital expenditures incurred during such period in
the normal course of operation, (ii) all scheduled principal
repayments on all indebtedness which are required to be made during
such period and (iii) any income taxes (or similar governmental fees)
actually paid in such period, all as determined with regard to amounts
accrued or incurred in accordance with generally accepted accounting
principles consistently applied, and less (c) 50% of any aggregate
deficit in Partnership Distributable Income for all prior periods.
ITEM 7. NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS
11
<PAGE>
RESULTS OF OPERATIONS
Years Ended September 30,
1995 1996
----------------- -----------------
Revenues:
Gaming $ 41,675 90.0% $ 45,471 88.9%
Non-gaming 4,852 10.0 5,701 11.1
--------- ------ --------- -------
46,527 100.0 51,172 100.0
Operating expenses:
Gaming 19,474 41.9 17,367 34.0
Non-gaming 3,484 7.5 4,271 8.3
Marketing, general and
administrative 18,160 39.0 20,889 40.8
Rent 4,365 9.4 4,011 7.8
Management fee-
Boomtown, Inc. 756 1.6 732 1.4
Depreciation and
amortization 1,338 2.9 1,683 3.3
---------- ------ --------- -------
47,577 102.3 48,953 95.6
Income (loss) from operations (1,050) (2.3) 2,219 4.4
Interest and other
expense, net (4,322) (9.3) (4,797) (9.4)
----------- ------ ---------- -------
Net loss ($ 5,372) (11.6)% ($ 2,578) (5.0)%
----------- ------ ---------- -------
----------- ------ ---------- -------
FISCAL 1996 COMPARED TO FISCAL 1995
Total revenues for the year ended September 30, 1996 were $51.2 million,
10.0% higher than the $46.5 million in the prior fiscal year. Gaming revenues
improved $3.8 million or 9.1% and non-gaming revenues improved $849,000 or
17.5%. The Partnership generates approximately 89% of its total revenues from
gaming operations consisting primarily of slot and video poker machines and
various types of table games. The improvement in gaming revenue resulted
primarily from improvements in the Company's slot and video poker machines.
Slot revenue improved $6.0 million or 18.8% during fiscal 1996. The Company
increased the number of slot machines on the floor from 983 machines in fiscal
1995 to an average of 1,040 in 1996. Additionally, the Company's win per unit
improved 12.4% to approximately $110.00 per unit per day. The overall
improvement in gaming revenues was offset by $900,000 or 11.8% reduction in
table games revenue resulting from the discontinuance of the Company's
FunFlight Program as well as table gaming space being substituted for slot
machines. During fiscal 1995 the Company generated FunFlight games revenues
of $1.2 million compared to virtually no revenues in fiscal 1996 as the
FunFlight Program was canceled in October 1995. Additionally, the decline
in games revenue resulted from a $226,000 decline in Keno which was
discontinued in August 1995. The Company continues to improve its market
share in the Gulf Coast region as higher casino patronage and relating
gaming play expands in the Biloxi area with the opening of additional
properties.
The improvement in non-gaming revenue resulted primarily from a $557,000
improvement in food and beverage sales during fiscal 1996. The Company
continues to make efforts to improve its food product, expand marketing efforts
to include specialty nights, increased the number of seats in its deli from 40
to 120 and continues to capitalize on the Boomtown brand during fiscal
12
<PAGE>
1996. Additionally, the Company began operations of its General Store which
opened in April 1996. Formerly, the General Store was leased to a third party.
Family Entertainment Center revenues were virtually flat at approximately $2.2
million for fiscal 1996 and 1995.
The gaming margin increased $5.9 million during the year ended September
30, 1996 to 61.8% of gaming revenues compared to 53.3% during the prior year
period. The improvements resulted from the termination of the FunFlight
Program in October 1995, efficiencies in labor costs associated with higher
revenues and the discontinuance of Keno gaming in August 1995. The gaming
margin was negatively affected in both fiscal periods from gaming equipment
leases under three year operating terms. As a result of these leases, the
related gaming equipment is expensed over a three year period as compared to
useful lives of approximately six years. These leases expire in August and
September of 1997. The non-gaming margin of $1.4 million, was comparable to
the prior fiscal year.
Marketing expenses were $7.3 million for the fiscal year ended September
30, 1996 compared to $5.5 million during the prior year. Marketing expenses
consist of costs associated with printed advertising, outdoor signs, media
advertising, the Company's players club and bus programs, promotional events
and other administrative expenses. The increase in marketing expense for
1996 resulted primarily from higher advertising and promotional expenses,
including the Company's direct mail program from $3.2 million in fiscal 1995
to $3.7 million in 1996. Additionally, the Company's bus tour efforts
increased, adding approximately $721,000 to marketing expense. The Company
spent approximately $1.7 million in fiscal 1996 to transport over 5,200
buses carrying approximately 190,000 passengers to its casino. Additionally,
the Company's players club redemption fees increased approximately $278,000
due to increased slot volume.
General and administrative expenses were $13.5 million during fiscal 1996
an increase of $863,000 from the prior year. The increase is due primarily to
higher insurance premiums and 401(k) contributions. The Company also incurred
additional maintenance costs on the properties facilities. During the year the
Partnership was charged management fees of $732,000 by Boomtown compared to
$756,000 charged during the prior year period. Boomtown is responsible for
managing the operation of the Partnership and charges its subsidiaries a
pro-rata share of costs incurred relative to this management function.
Depreciation and amortization expense for the years ended September 30,
1996 and 1995 was $1.7 million and $1.3 million, respectively. The increase
resulted from higher depreciation as depreciable assets increased $3.3 million,
or 9.4%. This includes the capitalization of gaming leases valued at
approximately $2.0 million. During fiscal 1996 interest expense was $4.9
million compared to $4.4 million recorded during the prior year period. The
increase resulted primarily from higher interest costs on its note payable to
Boomtown, Inc.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership believes that its current available cash and cash
equivalents and anticipated cash flow from operations, will be sufficient to
fund the Partnership's working capital and normal recurring capital
expenditures through the end of fiscal 1997.
The statements set forth above regarding the Partnership's estimates of
its liquidity and capital expenditure requirements and the sufficiency of its
resources are "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and
13
<PAGE>
Section 21E of the Securities Exchange Act of 1934, as amended, and are
subject to the safe harbors created thereby. Future operating results of
the Partnership and its liquidity may be adversely affected or otherwise
fluctuate significantly as a result of a number of factors, including
without limitation, seasonality, weather conditions, the general level of
demand for casino gaming and entertainment facilities, competition in the
gaming industry, and uncertainties in general economic, regulatory and
political conditions affecting the gaming industry, difficulties in
integrating the businesses of Boomtown and Hollywood Park following the
proposed merger and lack of financing following the proposed merger. For
example, competition in Mississippi has intensified due to the rapid growth
of dockside gaming on the Mississippi Gulf Coast, as well as continued
competition from Louisiana casinos. The Biloxi and Gulf Coast markets are
therefore experiencing significant dilution and any additional casinos could
dilute per unit win even further. Any of the above factors, among others,
could cause the Partnership's operating results and liquidity to be weaker
than expected, and could cause the Partnership's cash requirements to differ
materially from the Partnership's current estimates.
GUARANTEE OF BOOMTOWN NOTES BY THE PARTNERSHIP
In November 1993, Boomtown closed the issuance and sale of an aggregate of
$103.5 million principal amount of 11-1/2% First Mortgage Notes due November 1,
2003 (the "Notes") and warrants to purchase 472,000 shares of Boomtown's Common
Stock. Payment of the principal, interest and any other amounts owing under
the Notes has been unconditionally guaranteed by certain subsidiaries of
Boomtown, including the Partnership. See the Indenture, which is hereby
incorporated by reference, attached as Exhibit 12.36 to Boomtown, Inc.'s
Annual Report on Form 10-K for the year ended September 30, 1994.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information is incorporated by reference to the financial statements
data listed in Item 14 of Part IV of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
14
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following items are filed as part of this Report:
Item 1. FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors................. 16
Balance Sheets, September 30, 1995 and 1996....................... 17
Statements of Operations for the years
ended September 30, 1994, 1995 and 1996........................... 18
Statements of Partners' Capital (Deficit) for the years ended
September 30, 1994, 1995 and 1996................................. 19
Statements of Cash Flows for the years ended
September 30, 1994, 1995 and 1996................................. 20
Notes to Financial Statements..................................... 21
Item 2. FINANCIAL STATEMENT SCHEDULES
Valuation and Qualifying Accounts................................. 29
All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or
notes thereto.
Item 3. EXHIBITS
The Exhibits listed on the accompanying index immediately following
the signature page are filed as part of this Report.
(b) Reports on Form 8-K. Not applicable.
(c) Exhibits
See Item 14(a)(3) above.
(d) Financial Statement Schedules
See Item 14(a)(2) above.
15
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Executive Committee
Mississippi-I Gaming, L.P.,
a Mississippi Limited Partnership
We have audited the accompanying balance sheets of Mississippi-I Gaming, L.P.
(the Partnership), a Mississippi limited partnership, as of September 30, 1995
and 1996, and the related statements of operations, and statements of partners'
capital (deficit) and cash flows for each of the three years in the period
ended September 30, 1996. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements and
schedule 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 financial statements referred to above present fairly, in
all material respects, the financial position of the Partnership at
September 30, 1995 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1996, in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
New Orleans, Louisiana
October 31, 1996
16
<PAGE>
MISSISSIPPI-I GAMING, L.P.
BALANCE SHEETS
(in thousands)
September 30,
----------------------------
1995 1996
-------- --------
ASSETS:
Current assets:
Cash and cash equivalents $ 2,928 $ 2,907
Accounts receivable, net 55 148
Inventories 511 363
Prepaid expenses and other current assets 2,171 2,584
-------- --------
Total current assets 5,665 6,002
Property and equipment, at cost, net 33,837 35,671
Other assets 2,317 4,479
-------- --------
Total assets $ 41,819 $ 46,152
-------- --------
-------- --------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT):
Current liabilities:
Accounts payable $ 550 $ 481
Accrued compensation 499 765
Other accrued liabilities 2,796 2,918
Note payable - Boomtown, Inc. 37,672 41,432
Accrued interest payable - Boomtown, Inc. 2,399 2,651
Long-term debt and capital lease
obligations due within one year (Note 5) 284 1,570
--------- ---------
Total current liabilities 44,200 49,817
Long-term debt and capital lease
obligations due after one year (Note 5) 320 60
Commitments and contingencies (Note 6)
Partners' capital (deficit):
General partner -- --
Limited partners (2,701) (3,725)
-------- --------
Total partners' capital (deficit) (2,701) (3,725)
-------- --------
Total liabilities and partners' capital
(deficit) $ 41,819 $ 46,152
-------- --------
-------- --------
See accompanying notes.
17
<PAGE>
MISSISSIPPI-I GAMING, L.P.
STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
Years Ended September 30,
-----------------------------------------
1994 1995 1996
-------- --------- ---------
<S> <C> <C> <C>
Revenues:
Gaming (including funflight program) $ 8,073 $ 41,675 $ 45,471
Family entertainment center 573 2,219 2,232
Food and beverage 541 2,396 2,953
General Store -- -- 130
Other income 14 237 386
-------- --------- ---------
9,201 46,527 51,172
Costs and expenses:
Gaming (including funflight program) 3,211 17,193 15,054
Gaming equipment leases 190 2,281 2,313
Family entertainment center 261 1,046 1,141
Food and beverage 490 2,438 3,032
General Store -- -- 98
Marketing 1,259 5,479 7,345
Management fee-Boomtown, Inc. -- 756 732
General and administrative 1,577 12,681 13,544
Property rent 623 4,365 4,011
Pre-opening expenses 5,476 -- --
Depreciation and amortization 234 1,338 1,683
-------- --------- ---------
13,321 47,577 48,953
-------- --------- ---------
Income (loss) from operations ( 4,120) ( 1,050) 2,219
Interest expense, net of capitalized interest ( 765) ( 4,365) ( 4,904)
Interest income 25 43 48
Gain on sale of assets -- -- 59
-------- --------- ---------
Net loss ($ 4,860) ($ 5,372) ($ 2,578)
-------- --------- ---------
-------- --------- ---------
Net loss allocated to partners:
General partner ($ 226) ($ 166) ($ 54)
Limited partners ( 4,634) ( 5,206) ( 2,524)
-------- --------- ---------
-------- --------- ---------
($4,860) ($5,372) ($ 2,578)
-------- --------- ---------
-------- --------- ---------
</TABLE>
See accompanying notes.
18
<PAGE>
MISSISSIPPI-I GAMING, L.P.
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
Years ended September 30, 1994, 1995 and 1996
(in thousands)
<TABLE>
<CAPTION>
Limited Partners Total
----------------
Partners'
General Boomtown Capital
Partner Inc. Other (Deficit)
---------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Balances, September 30, 1993 $ -- $ -- $ -- $ --
Capital contributions 250 4,750 389 5,389
Net loss ( 226) ( 4,283) ( 351) ( 4,860)
---------- ----------- -------- ----------
Balances, September 30, 1994 24 467 38 529
Capital contributions 142 -- 2,000 2,142
Net loss ( 166) ( 2,741) ( 2,465) ( 5,372)
---------- ---------- -------- ---------
Balances, September 30, 1995 -- ( 2,274) ( 427) ( 2,701)
Capital contributions 54 -- 1,500 1,554
Net loss ( 54) ( 863) ( 1,661) ( 2,578)
---------- ---------- -------- ---------
Balances, September 30, 1996 $ -- ($ 3,137) ($ 588) ($ 3,725)
---------- ---------- -------- ---------
---------- ---------- -------- ---------
</TABLE>
See accompanying notes.
19
<PAGE>
MISSISSIPPI-I GAMING, L.P.
STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(in thousands)
<TABLE>
Years Ended September 30,
---------------------------------------------
1994 1995 1996
------------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ($ 4,860) ($ 5,372) ($ 2,578)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Lease expense recorded in exchange
for limited partnership interest 389 2,000 1,500
Depreciation and amortization 234 1,338 1,683
Gain (loss) on the sale of property
and equipment ( 54) 146 35
Changes in operating assets and liabilities:
Accounts receivable, net ( 267) 212 ( 93)
Inventories ( 596) 85 ( 138)
Prepaid expenses and other
current assets ( 2,009) 288 ( 413)
Other assets ( 2,238) ( 1) ( 2,295)
Accounts payable 679 ( 211) 15
Accrued compensation 285 214 266
Other accrued liabilities 1,197 1,599 129
Accrued interest payable - Boomtown, Inc. 760 1,639 252
------------ ------------ ----------
Net cash provided by (used in)
operating activities ( 6,480) 1,937 ( 1,637)
------------ ------------ ----------
Cash flows from investing activities:
Payments for purchases of property
and equipment ( 45,274) ( 1,705) ( 1,277)
Reductions of other assets 3 -- --
Increase (decrease) in construction related
payables 344 ( 344) ( 82)
Proceeds from sale of property and equipment 14,083 34 --
------------- ------------ ----------
Net cash used in investing activities ( 30,844) ( 2,015) ( 1,359)
------------- ------------ ----------
Cash flows from financing activities:
Advances from Boomtown, Inc. ( 3,088) -- --
Note payable-Boomtown, Inc., net 36,780 1,033 3,814
Proceeds from additions to long-term debt -- 857 --
Principal payments on long-term debt -- ( 253) ( 839)
Equity investment by general partner 250 -- --
Equity investment by Boomtown, Inc. 4,750 -- --
------------ ----------- ----------
Net cash provided by financing activities 38,692 1,637 2,975
------------ ----------- ----------
Net increase (decrease) in cash and
cash equivalents 1,368 1,559 ( 21)
Cash and cash equivalents:
Beginning of year 1 1,369 2,928
------------- ----------- ---------
End of year $ 1,369 $ 2,928 $ 2,907
------------ ------------ ----------
------------ ------------ ----------
</TABLE>
See accompanying notes.
20
<PAGE>
MISSISSIPPI-I GAMING, L.P.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
BASIS OF PRESENTATION AND NATURE OF BUSINESS - Mississippi - I
Gaming, L.P. (the "Partnership"), a Mississippi limited partnership, is a
majority owned and controlled partnership of Boomtown, Inc. ("Boomtown").
Boomtown owns an 80% limited partnership interest and through its
wholly-owned subsidiary, Bayview Yacht Club, Inc. (a Mississippi corporation
and the general partner of the Partnership), Boomtown owns an additional 5%
general partnership interest in the Partnership. A 15% limited partnership
interest was transferred to an individual as a result of executing a lease
for the property upon which the gaming facility is located (Note 6). Under
the terms of the Partnership agreement, after three years of operation,
either Boomtown or the lessor may exercise an option to convert the lessor's
ownership interest into Boomtown common stock or cash at an amount
calculated per the agreement which is based upon a multiple of earnings.
The Partnership agreement also provides for quarterly distributions to be
made to the partners. The Partnership also leases the casino barge and
building from National Gaming Corporation for an amount equal to 16% of
earnings before depreciation, interest and taxes.
ADVERTISING - Advertising costs are expensed as incurred.
Advertising expenses for the years ended September 30, 1994, 1995 and 1996,
totaled $585,000, $1.6 million and $1.8 million, respectively.
USE OF ESTIMATES - The accompanying financial statements have been
prepared in conformity with generally accepted accounting principles which
require the Partnership's management to make estimates and assumptions that
effect the amounts reported therein. Actual results could vary from such
estimates.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents consist of
cash on hand and in banks. The Partnership considers highly liquid
investments with original maturities of three months or less as cash
equivalents. Purchases of property and equipment of approximately $83,000
are included in accounts payable in the accompanying balance sheet at
September 30, 1995. Long-term debt (capital leases) incurred for the
purchase of property and equipment during the year ended September 30, 1996
totaled approximately $1,981,000.
CONCENTRATIONS OF CREDIT RISK - The Partnership places its cash in an
interest bearing account with a financial institution. The account is
collateralized by securities issued by the United States Government and other
high-quality credit instruments.
FAIR VALUES OF FINANCIAL INSTRUMENTS - The carrying amounts
reported in the accompanying balance sheets for cash and cash equivalents
approximately their respective fair values. The carrying amounts of the
Company's borrowings under its debt agreements approximate their fair value.
The fair value was based on the Company's current incremental borrowing
rates for similar types of borrowing arrangements.
INVENTORIES - Inventories consist primarily of food and beverage
stock and uniforms, and are stated at the lower of cost (determined using
the first-in, first-out method) or market.
21
<PAGE>
MISSISSIPPI-I GAMING, L.P.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (CONTINUED)
DEPRECIATION AND AMORTIZATION - Depreciation and amortization of property
and equipment is provided on the straight-line method over the useful lives of
the respective assets which range from three to thirty-five years.
Amortization of certain lease costs is provided using the straight-line
method over the term of the individual leases which range from three to ten
years. Accumulated amortization of the lease costs as of September 30, 1995
and 1996 is $49,000 and $71,000, respectively. The unamortized balance of
$173,000 and $151,000 is included in prepaid expenses on the accompanying
balance sheet at September 30, 1995 and 1996, respectively.
PRE-OPENING EXPENSES - Pre-opening expenses were associated with the
acquisition, development and opening of the dockside casino. These amounts
include items that were capitalized as incurred prior to opening and items that
are directly related to the opening of the dockside casino. They were expensed
when the Partnership commenced gaming operations on July 22, 1994.
INCOME TAXES - No provision for income taxes has been made in the
accompanying financial statements since any liability is that of the individual
partners and not of the Partnership. The tax basis exceeded the book basis of
the Partnership's assets and liabilities by approximately $3.0 million and $2.0
million at September 30, 1995 and 1996, respectively.
GAMING REVENUES AND PROMOTIONAL ALLOWANCES - In accordance with industry
practice, the Partnership recognizes as gaming revenues the net win from gaming
activities, which is the difference between gaming wins and losses.
Revenues in the accompanying statements of operations exclude the retail
value of food, beverage and other promotional allowances provided to
customers without charge. The estimated costs of providing such promotional
allowances have been classified as gaming operating expenses through
interdepartmental allocations as follows:
Years Ended September 30,
-------------------------
1994 1995 1996
---------- ----------- -----------
Food and beverage $ 592,000 $ 3,068,000 $ 3,791,000
Other -- 48,000 41,000
---------- ----------- -----------
Total costs allocated to gaming
operating expenses $ 592,000 $ 3,116,000 $ 3,832,000
---------- ----------- -----------
---------- ----------- -----------
RECLASSIFICATIONS - Certain amounts in the 1994 and 1995 financial
statements have been reclassified to conform to the 1996 presentation.
22
<PAGE>
MISSISSIPPI-I GAMING, L.P.
NOTES TO FINANCIAL STATEMENTS
2. PREPAID EXPENSES AND OTHER CURRENT ASSETS
The components of prepaid expenses and other current assets consist of the
following:
September 30,
-------------------------
1995 1996
-------------------------
Prepaid insurance premiums $ 672,000 $ 789,000
Land lease -related party -- 500,000
Tidelands lease (Note 6) 416,000 394,000
Other prepaid leases 645,000 339,000
Prepaid taxes and licenses 182,000 184,000
Other current assets 256,000 378,000
----------- -----------
$ 2,171,000 $ 2,584,000
------------ -----------
------------ -----------
The components of other assets consist of the following:
September 30,
---------------------------
1995 1996
--------------------------
Pre-payment of property lease $ -- $ 2,188,000
Land lease - related party 2,000,000 2,000,000
Other assets 317,000 291,000
------------ ------------
$ 2,317,000 $ 4,479,000
------------ ------------
------------ ------------
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
September 30,
------------------------------
1995 1996
------------------------------
Buildings and improvements $ 31,985,000 $ 32,864,000
Equipment 1,878,000 4,022,000
Furniture and fixtures 1,362,000 1,649,000
Land 96,000 226,000
Construction in progress 1,000 16,000
------------- -------------
35,322,000 38,777,000
Less accumulated depreciation
and amortization 1,485,000 3,106,000
------------- -------------
$ 33,837,000 $ 35,671,000
------------- -------------
------------- -------------
Equipment recorded under capital lease obligations totaled $1,981,000 with
accumulated amortization of $123,000 at September 30, 1996. Amortization of
leased assets is included in depreciation and amortization expense.
23
<PAGE>
MISSISSIPPI-I GAMING, L.P.
NOTES TO FINANCIAL STATEMENTS
4. NOTE PAYABLE - BOOMTOWN, INC.
Note payable - Boomtown, Inc., consists of advances to the Partnership
from Boomtown used to fund the pre-opening expenses, construction of the
land-based facility and to acquire furniture, fixtures and equipment. The
principal of the note is variable and is due on demand along with the
interest. Interest is calculated on the note at 11.5% and is based on the
average monthly outstanding balance. Payments are applied first to the
accrued interest and then to principal. In addition, management of Boomtown
has agreed to continue to fund the Partnership's negative cash flows.
Certain cash payments were made by Boomtown on behalf of the Partnership,
primarily while in the Partnership's development stage and are included in the
accompanying statements of cash flows for the year ended September 30, 1994.
During 1996 software leased under a capital lease by Boomtown was
capitalized by the Partnership resulting in an increase in the note payable of
approximately $221,000. Also, a payment made by Boomtown on behalf of the
Partnership to secure a decrease in the barge lease (see Note 6) resulted in an
increase in the note payable of approximately $2,480,000. Both of these
transactions are included in the accompanying statement of cash flows for the
year ended September 30, 1996.
The Partnership incurred interest costs of $760,000 (net of $1,346,000
capitalized), $4,239,000 and $4,727,000 on advances and notes from Boomtown for
the years ended September 30, 1994, 1995 and 1996, respectively. No interest
was capitalized in 1995 or 1996.
The advances, note payable, accrued interest payable and interest expense
to Boomtown are eliminated in the consolidated financial statements of
Boomtown.
5. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations consists of the following:
SEPTEMBER 30,
--------------------------
1995 1996
------------ ----------
11.5% Note payable $604,000 $ 320,000
Capital lease obligations -- 1,310,000
------------ ----------
604,000 1,630,000
Less amounts due within one year 284,000 1,570,000
------------ ----------
$320,000 $ 60,000
------------ ----------
------------ ----------
The note payable is secured by furniture, fixtures and equipment with
net book values of approximately $657,000 and $569,000 at September 30, 1995
and 1996, respectively, and the note matures in September 1997. Interest of
$85,000 and $55,000 was paid on this note during the years ended September
30, 1995 and 1996, respectively.
24
<PAGE>
MISSISSIPPI-I GAMING, L.P.
NOTES TO FINANCIAL STATEMENTS
5. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
The capital lease obligations are secured by furniture, fixtures and
equipment with net book values of approximately $1,858,000 at September 30,
1996. The obligations mature between August of 1997 and January 1999.
Interest of $61,000 was paid on the obligations during the year ended
September 30, 1996.
Principal maturities of long-term debt and capital lease obligations by
fiscal year as of September 30, 1996 are as follows:
1997 $1,570,000
1998 44,000
1999 16,000
----------
$1,630,000
----------
----------
6. COMMITMENTS AND CONTINGENCIES
DEBT GUARANTEES - On November 24, 1993, Boomtown completed the private
placement of $103.5 million of 11.5% First Mortgage Notes due November 2003
(the "Notes"). The Notes are secured by, among other things, a full and
unconditional guarantee by the Partnership, as defined in the Indenture to
the Notes. The Indenture governing the Notes places certain business,
financial and operating restrictions on Boomtown and its subsidiaries
including, among other things, the incurrence of additional indebtedness,
issuance of preferred equity interests and entering into operational leases;
limitations on dividends, repurchase of capital stock of Boomtown and
redemption's of subordinated debt; limitations on transactions with
affiliates; limitations on mergers, consolidations and sales of assets;
limitations on amending existing partnership and facility construction
agreements; and limitations on the use of proceeds from the issuance of the
Notes.
The Partnership is a guarantor for a $1.1 million promissory note for
Blue Diamond Hotel & Casino, Inc., a wholly owned subsidiary of Boomtown,
Inc., with an outstanding balance of $442,000 at September 30, 1996.
In addition, the Company is a guarantor for a ship mortgage with an
outstanding balance of $3.2 million at September 30, 1996, of Louisiana - I
Gaming, L.P., a majority owned and controlled partnership of Boomtown.
OPERATING LEASES - The Partnership leases its facilities and operating
equipment under noncancelable operating lease arrangements with terms in
excess of one year.
LAND LEASES WITH RELATED PARTIES - During 1993 Boomtown signed an
agreement to lease property through the Partnership intended for the
development, construction and operation of the gaming facility. The
Partnership invested $2 million as a long-term deposit on the lease and
committed to annual rentals of base rent (estimated at $2 million) and
percentage rent (5% of adjusted gaming win over $25 million). The
Partnership exchanged a 15% interest with the lessor
25
<PAGE>
MISSISSIPPI-I GAMING, L.P.
NOTES TO FINANCIAL STATEMENTS
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
in lieu of base rent payments for the first two years of the lease. Rent
expense was charged to operations for the two year period and the lessor's
limited partner capital account is being credited. Boomtown or the lessor
have an option to convert the lessors' partnership interest into Boomtown
Common Stock (see Note 1). The lease term is 99 years and is cancelable upon
one year's notice.
BARGE LEASE UNDER AGREEMENT - On July 22, 1994, the Partnership sold the
barge moored in Biloxi, Mississippi and the building upon the barge housing
the casino to HFS Gaming Corp. ("HFS"), a Delaware corporation.
Approximately $2.4 million of the $11.0 million sales price was held by
Boomtown to be used for the development and construction at the casino site.
Simultaneously with the sale, the Partnership leased the barge and building
for 25 years and was granted the option to purchase the leased asset for fair
market value at the end of the lease or upon occurrence of certain events as
defined in the lease agreement. In the event of default by the Partnership,
HFS may terminate the lease or require the Partnership to repurchase the
assets for fair market value. HFS agreed to provide certain marketing
services for the Partnership. The Partnership will pay HFS aggregate rent
under the lease and payments for services under the marketing agreement equal
to approximately 20% of the annual adjusted earnings before interest, taxes,
depreciation and amortization, as defined, for the Partnership (including the
proposed hotel). As the lease payments represent contingent rentals, they
are excluded from the future minimum annual rental commitments schedule
below. HFS subsequently transferred the contract to National Gaming Corp.
("NGC").
In November 1995 Boomtown executed an agreement with NGC whereby the
$2.4 million was returned to NGC in return for a reduction of the EBITDA
distributions from 20% to 16%. Additionally, for $100,000, the Partnership
secured an option to buy the barge from NGC as well as to buy out the EBITDA
participation at a cost approximating the original investment made by HFS
less the $2.4 million that was paid. The option terminates on March 31,
1997, but is renewable for an additional two years at $100,000 per year.
TIDELANDS LEASE - The Partnership leases submerged tidelands at the
casino site from the State of Mississippi. Annual rent is $525,000 and the
term of the lease is ten years with a five-year option to renew. Rent in the
second five-year period of the lease will be determined in accordance with
Mississippi law, based on an appraisal obtained by the State of Mississippi.
The aggregate future minimum annual rental commitments as of September
30, 1996 under operating leases having noncancelable lease terms in excess of
one year is as follows:
1997 $3,393,000
1998 1,430,000
1999 843,000
2000 409,000
2001 340,000
Thereafter 871,000
----------
$7,286,000
----------
----------
26
<PAGE>
MISSISSIPPI-I GAMING, L.P.
NOTES TO FINANCIAL STATEMENTS
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Rental expense included in the accompanying statements of operations for
the years ended September 30, 1994, 1995 and 1996 totaled $616,000,
$7,388,000 and $7,557,000, respectively ($418,000, $2,711,000 and $2,934,000
with related parties, respectively). Of these amounts, $227,000, $6,877,000
and $6,827,000 represented minimum rentals, respectively and $389,000,
$511,000 and $729,000 represented contingent rentals, respectively.
SELF-INSURANCE - The Partnership maintains a plan of partial
self-insurance for medical and dental coverage for substantially all
full-time employees and their dependents. Claims in excess of $50,000 for
policy year ended February 28, 1995, and $75,000 for policy years ended
February 28, 1996 and 1997, per individual are fully covered by insurance.
Management has established reserves (approximately $489,000 at September 30,
1996) considered adequate to cover estimated future payments on claims
incurred through September 30, 1994, 1995 and 1996.
GAMING LICENSE REQUIREMENTS - In October 1994, the Mississippi Gaming
Commission adopted a regulation that requires, as a condition of licensure or
license renewal, for a gaming establishment's plan to include various
expenditures including parking facilities and infrastructure facilities
amounting to at least 25% of the casino cost. Although the Partnership
believes they have satisfied this requirement, there can be no assurance the
Mississippi Gaming Commission will not require further development on the
casino site including hotel rooms and additional parking facilities.
Additionally, there can be no assurance that the Partnership will be
successful in completing such a project or that the Partnership would be able
to obtain a waiver if the Partnership decides not to build.
7. 401(K) PLAN
The Partnership's employees are covered under the Boomtown, Inc., 401(k)
Plan (the "Plan"). Under the Plan, the Partnership will match 50% of
employees' contributions up to a maximum of 5% of the employees' wages. The
Partnership recorded $4,000, $35,000 and $112,000 of expense during the years
ended September 30, 1994, 1995 and 1996, respectively, related to their
matching contributions.
8. MANAGEMENT FEE
Boomtown is responsible for managing the operations of the Boomtown
subsidiaries (collectively the "Subsidiaries"). During 1995 and 1996
Boomtown charged the Subsidiaries for their pro-rata share of the costs it
incurred relative to this management function (the "Management Fee"). During
the years ended September 30, 1995 and 1996 the Partnership recorded
Management Fees of $756,000 and $732,000, respectively (none in 1994).
27
<PAGE>
MISSISSIPPI-I GAMING, L.P.
NOTES TO FINANCIAL STATEMENTS
9. OTHER EVENTS
BOOMTOWN'S PROPOSED MERGER WITH HOLLYWOOD PARK, INC. ("HOLLYWOOD PARK")
- -On April 23, 1996, Boomtown entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Hollywood Park relating to the strategic
combination of Hollywood Park and Boomtown. Pursuant to the Merger Agreement
and subject to the terms and conditions set forth therein, Boomtown would
become a wholly-owned subsidiary of Hollywood Park (the "Merger"). Pursuant
to the Merger Agreement, at the effective date of the Merger, each issued and
outstanding share of Boomtown Common Stock will be converted into the right
to receive 0.625 of a share of Hollywood Park Common Stock. The Merger is
intended to be structured as a tax-free reorganization for income tax
purposes and the merger will be accounted for as a purchase for financial
reporting purposes. The shareholders of Boomtown and Hollywood Park have
approved the Merger. To date, the Merger has only been approved by
Mississippi gaming authorities, and is subject to the approval of other
relevant gaming jurisdictions.
On November 26, 1996 the Partnership paid approximately $500,000 to amend
an operating lease for certain slot machines, whereby the Partnership will
purchase the slot machines at the end of the lease term (August 1997) for
approximately $554,000. The cost of the slot machines under this capital
lease obligation is approximately $2.5 million and will be depreciated over
the remainder of their useful lives.
28
<PAGE>
MISSISSIPPI-I GAMING, L.P.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
Additions Deductions
Balance at Charged to Write-offs,
beginning of Costs and net of Balance at
Description Period Expenses Collections End of Period
- ------------------------------------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
Year ended September 30, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts: $16 $ 92 $(74) $34
Year ended September 30, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts: $ 6 $43 $(33) $16
Year ended September 30, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts: $-- $ 6 $ -- $ 6
</TABLE>
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized on this 27th day
of December, 1996.
Mississippi-I Gaming, L.P.
By: Bayview Yacht Club, Inc.,
its General Partner
/S/ Timothy J. Parrott
------------------------------------------
Timothy J. Parrott, Chairman of the
Board and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Timothy J. Parrott and Phil
Bryan and each of them acting individually, as such person's true and lawful
attorneys-in-fact and agents, each with power of substitution, for such
person, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Report on Form 10-K, and to file with
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as such person
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 substitutes,
may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report on Form 10-K has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/S/ Timothy J. Parrott Chairman of the Board and Chief December 27 , 1996
- ----------------------------- Officer (Principal Executive Officer)
Timothy J. Parrott
/S/ Phil E. Bryan President and Director December 27 , 1996
- -----------------------------
Phil E. Bryan
/S/ Jon L. Whipple Vice President of Finance (Principal December 27 , 1996
- ----------------------------- Financial and Accounting Officer)
Jon L. Whipple
/S/ Robert F. List Director December 27, 1996
- -----------------------------
Robert F. List
</TABLE>
30
<PAGE>
SCHEDULE OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
10.1(1) Letter of Intent dated as of March 26, 1993 among Boomtown, Inc. and
Raphael Skrmetta, relating to the property in Biloxi, Mississippi.
10.2(2) Agreement to Lease Real Property in Biloxi, Mississippi by and between
Boomtown, Inc., and Raphael Skrmetta.
10.3(3) Purchase Agreement dated as of November 3, 1993 among Boomtown, Inc.,
Boomtown Hotel & Casino, Inc., Blue Diamond Hotel & Casino, Inc.,
Louisiana-I Gaming, L.P., Louisiana Gaming Enterprises, Inc.,
Mississippi-I Gaming, L.P., Bayview Yacht Club, Inc., Oppenheimer &
Co., Inc. and Sutro & Co. Incorporated.
10.4(4) Asset Purchase and Sale Agreement dated as of April 27, 1994 by and
between HFS Gaming Corp. and Mississippi-I Gaming, L.P.
10.5(4) Lease Agreement between HFS Gaming Corp. as Landlord and
Mississippi-I Gaming, L.P. as Tenant dated as of April 27, 1994.
10.6(4) Marketing Services Agreement dated as of April 27, 1994 by and among
Boomtown, Inc. and HFS Gaming Corp.
10.7(5) Option Agreement dated as of November 6, 1995 by and between National
Gaming Mississippi, Inc. and Mississippi-I Gaming, L.P.
10.8(5) Lease Agreement dated November 6, 1995 to the Lease Agreement dated as
of April 27, 1994 by and among National Gaming Mississippi, Inc. and
Mississippi-I Gaming, L.P.
10.9(5) Marketing Services Agreement Amendment dated as of November 6, 1995
to Marketing Services Agreement dated as of April 27, 1994 by and
among Boomtown, Inc. and HFS Gaming Corporation.
___________________________
(1) Incorporated by reference to the exhibit filed with Boomtown's Current
Report on Form 8-K filed with the SEC on April 1, 1993.
(2) Incorporated by reference to the exhibit filed with Boomtown's
Registration Statement on Form S-1 (File No. 33-61198), effective May 24,
1993.
(3) Incorporated by reference to the exhibit filed with Boomtown's Form 10-K
for the fiscal year ended September 30, 1993.
31
<PAGE>
SCHEDULE OF EXHIBITS
(4) Incorporated by reference to the exhibit filed with the Boomtown, Inc.'s
Registration Statement on Form S-4 (File No. 33-70350), effective May 4, 1994.
(5) Incorporated by reference to the exhibits filed with Boomtown's Form
10-K for the fiscal year ended September 30, 1995.
32
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 2,907,000
<SECURITIES> 0
<RECEIVABLES> 148,000
<ALLOWANCES> 34,000
<INVENTORY> 363,000
<CURRENT-ASSETS> 6,002,000
<PP&E> 35,671,000
<DEPRECIATION> 3,106,000
<TOTAL-ASSETS> 46,152,000
<CURRENT-LIABILITIES> 49,817,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (3,725,000)
<TOTAL-LIABILITY-AND-EQUITY> 46,152,000
<SALES> 3,083,000
<TOTAL-REVENUES> 51,172,000
<CGS> 3,130,000
<TOTAL-COSTS> 21,638,000
<OTHER-EXPENSES> 27,315,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,904,000
<INCOME-PRETAX> (2,578,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,578,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,578,000)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
