================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT of 1934 [NO FEE REQUIRED]
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Commission file number 33-75806
CAPITOL QUEEN & CASINO, INC.
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MISSOURI 43-1652885
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
740 South Decatur Boulevard
Las Vegas, Nevada 89107
(Address of Principal Executive Offices)
Registrant's telephone number: (702) 258-5200
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
12% First Mortgage Notes due November 15, 2000, Series B
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _______
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K: _______
The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant at September 15, 1997 was $0. The
number of shares of the Registrant's Common Stock outstanding as
of September 15, 1998 was 100.
DOCUMENTS INCORPORATED BY REFERENCE
Specified exhibits listed in Part IV of this report are
incorporated by reference
to the Registrant's Statement on Form S-4 (33-75806) previously
filed.
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<PAGE>
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Form 10-K and other materials filed or to be filed by the Company with the
Securities and Exchange Commission (as well as information included in oral
statements or other written statements made or to be made by the Company)
contains statements that are forward-looking, such as statements relating to
plans for future expansion and other business development activities as well as
other capital spending, financing sources and the effects of regulation
(including gaming and tax regulation) and competition. Such forward-looking
information involves important risks and uncertainties that could significantly
affect anticipated results in the future and, accordingly, such results may
differ from those expressed in any forward-looking statements made by or on
behalf of the Company. These risks and uncertainties include, but are not
limited to, those relating to development and construction activities,
dependence on existing management, debt service (including sensitivity to
fluctuations in interest rates), domestic economic conditions, changes in
federal or state tax laws or the administration of such laws and changes in
gaming laws or regulations (including the legalization of gaming in certain
jurisdictions).
Item 1. Business
As further discussed in Item 3, Legal Proceedings, Capitol Queen &
Casino, Inc. filed for bankruptcy protection under Chapter 11 of United States
Bankruptcy Code.
Capitol Queen & Casino, Inc. ("CQC" or the "Company"), a wholly owned
subsidiary of Becker Gaming, Inc. ("BGI"), was formed to develop, construct, own
and operate the Capitol Queen riverboat casino in Jefferson City, Missouri,
where it was granted a three-year exclusive franchise by the city pursuant to a
Riverfront Development Agreement dated as of September 1, 1992 (the "Development
Agreement"), subject to state licensing to operate a gaming facility. CQC
commenced development and construction work on the Capitol Queen in November
1993. Such work was suspended in August and September 1994 for the reasons
discussed below. CQC's riverboat, the construction of which was completed, is
being stored by the builder. Funding for the Capitol Queen project had been
raised in November 1993 through the sale of the CQC Notes and the concurrent
sale of common stock purchase warrants by BGI, which contributed the net
proceeds therefrom to CQC.
On September 28, 1994, the Missouri Gaming Commission (the
"Commission") denied, without investigative review, CQC's application for a
gaming license and prohibited CQC from reapplying for a license for two years.
The Commission's ruling was based on a finding that CQC failed to disclose
material and substantive information on its gaming license application relating
to a Purchase Agreement dated September 20, 1993, pursuant to which BGI agreed
to issue promissory notes aggregating $5,925,000 in principal amount to various
people in Missouri in consideration for development services provided by them in
connection with the Capitol Queen project. The Purchase Agreement was rescinded
by the parties in early 1995.
CQC believes its Missouri application was complete and accurate.
Moreover, CQC fully disclosed the existence and terms of the Purchase Agreement,
as well as the services rendered by the persons to be compensated, in
post-application filings and communications with the Missouri Gaming
Commission's staff. CQC also disclosed these matters to the Nevada gaming
authorities, who investigated and conducted public hearings on these and other
issues relating to applications for licenses and approvals, all of which were
unanimously granted to the Company in May 1994. The Nevada gaming authorities
most recently reexamined the issue in connection with Becker Gaming Group and
Innerout, Inc.'s (both entities are subsidiaries of BGI) applications for
licenses at Charlie's Bar Down Under, which were unanimously granted in March
1995. In addition, in anticipation of the pursuit of a possible gaming
development, the executive officers of the Company applied to the Mississippi
Gaming Commission for preliminary findings of suitability and were subsequently
found suitable by the Commission to engage in such activities in Mississippi.
CQC's then audited financial statements and public documents filed with the
Securities and Exchange Commission, all of which were submitted to the Missouri
Gaming Commission, also made these disclosures. Management believes that, based
on the foregoing, the Commission's ruling was and remains without basis.
Accordingly, CQC challenged the ruling through administrative and judicial
channels, which challenges have been largely successful. See "Item 3. - Legal
Proceedings".
<PAGE>
Notwithstanding its efforts to seek redress of the Commission's ruling,
in December 1994, CQC, with the approval of the holders of the CQC Notes,
adopted a two-step plan (the "Repayment Plan") to repay the CQC Notes and any
accrued and unpaid interest thereon. The first step, effected in January 1995,
involved the repurchase of $20,000,000 principal amount of the CQC Notes and the
payment of accrued and unpaid interest thereon with proceeds then remaining in
the Capitol Queen project escrow account. The second step of the Repayment Plan,
not yet effected, required CQC, by March 31, 1995, to sell its riverboat, land
site and other project assets and to use the net proceeds realized upon the sale
of such assets to offer to repurchase additional CQC Notes.
CQC has actively marketed its riverboat and other assets for sale and
continues to do so, although such efforts have to date been unsuccessful in a
market that is deemed to be quite limited for vessels of the size and
configuration of that of the Capitol Queen. The failure of CQC to effect the
second step of the Repayment Plan has resulted in the Trustee under the
Indenture issuing a notice of acceleration of the debt and a demand for
immediate payment of the debt and accrued interest. Under the CQC Indenture, the
holders of 25% or more in principal amount of the CQC Notes may cause the CQC
Notes to be accelerated and declared to become immediately due and payable in
full. An aggregate of $20,000,000 principal amount of CQC Notes are outstanding.
On November 7, 1995, voters in Jefferson City rejected an ordinance
permitting riverboat gambling, reversing the vote of an earlier election in
which Jefferson City voters approved riverboat gambling. Because CQC's
Development Agreement with Jefferson City was entered into pursuant to the
earlier ordinance permitting riverboat gambling, the Company believes that as a
matter of law the 1995 election did not affect the validity of the Development
Agreement. To avoid the cost and uncertainty of litigation, however, CQC and
Jefferson City in June 1996 entered into an agreement pursuant to which the
Development Agreement was rescinded and Jefferson City refunded $300,000 of the
$400,000 CQC had paid to the City pursuant to the Agreement.
Claims by Trustee
Arizona Charlie's, Inc ("AC") issued $55,000,000 of 12% First Mortgage
Notes due 2000 (the "AC Notes"). Sunset Coin, Inc. ("SC") has issued a limited
guaranty with respect to the AC Notes (the "SC Limited Guaranty"). CQC issued
$20,000,000 of 12% First Mortgagee Notes sue 2000 (the "CQC Notes"). AC issued a
limited guaranty with respect to the CQC Notes (the "AC Limited Guaranty").
On November 14, 1997, AC filed for bankruptcy protection with the
United States Bankruptcy Court for the District of Nevada in Las Vegas, Nevada
(the "Bankruptcy Court") under Chapter 11 of the United States Bankruptcy Code
(Case NO. 97-28781 LBR).
On June 25, 1998, a "Consensual Plan of Reorganization Proposed by
Debtor and High River" (the "Plan"), dated June 24, 1998, was approved by the
Bankruptcy Court. Pursuant to the Plan, AC was reorganized as of September 28,
1998 in accordance with the Debt Conversion Option of the Plan. As a part of the
Plan, the AC Limited Guaranty has been canceled in exchange for the payment of
$1,500,000 in cash, which has been paid to the CQC Note holders. See Item 3,
Legal Proceedings.
<PAGE>
Item 2. Properties
CQC owns a site located across the Missouri River from the State
capitol in Jefferson City, Missouri, on which CQC had intended to construct the
Capitol Queen Square. The site, which was originally 80 acres, currently
consists of approximately 65 to 75 acres as a result of land lost to the
Missouri River during major flooding in the Midwest in 1993 and 1994. CQC has
completed construction of a riverboat casino that was to be located adjacent to
the land site. The riverboat vessel is approximately 218 feet long and 62 feet
wide providing approximately 26,000 square feet of interior space for up to
approximately 1,600 passengers.
Item 3. Legal Proceedings
The Company is not presently a party to any lawsuits relating to
routine or other matters incidental to its respective business, except as
described below.
By letters dated July 3, 1997 and July 17, 1997, IBJ Schroder Bank &
Trust Company, the trustee on the CQC Indenture dated as of November 15, 1993,
declared all of the Securities (as defined in the Indenture) to be immediately
due and payable, together with all accrued and unpaid interest thereon.
Subsequent letters from IBJ Schroder Bank & Trust Company, dated September 5,
1997, provided notices of defaults by CQC and AC under their respective
Indentures and also served Notice of Acceleration on AC with respect to its
Securities and its Limited Guaranty of the CQC debt. CQC and AC have retained
counsel to assist them in dealing with the Bondholders and on July 16, 1997, a
proposal for the financial restructuring of the CQC and AC indebtedness was
presented to the Bondholders through the Trustee and Counsel to one of the major
Bondholders. The Bondholders orally responded to such offer as of September 10,
1997.
On November 14, 1997, AC filed for bankruptcy protection in the United
States Bankruptcy Court for the District of Nevada in Las Vegas, Nevada (the
"Bankruptcy Court") under Chapter 11 of the United States Bankruptcy Code (Case
No. 97-28781 LBR) to pursue the financial reorganization of AC.
On June 25, 1998, a "Consensual Plan of Reorganization Proposed by
Debtor and High River" (the "Plan"), dated June 24, 1998, was approved by the
Bankruptcy Court. Pursuant to the Plan, AC was reorganized as of September 28,
1998 (the "Effective Date") in accordance with the Debt Conversion Option of the
Plan. Under the Debt Conversion Option, the AC Notes will be redeemed with
funding provided by an affiliate of High River in the form of a loan to AC for
$18,000,000.
As a part of the Plan, AC, the Reorganized Debtor, will continue in
business as a Nevada closely held corporation. However, the issued and
outstanding shares of common stock of AC were canceled on the Effective Date and
1,000,000 shares of new stock of AC, out of a total of 5,000,000 authorized
shares, were issued to High River, or its nominee. The AC Notes have been
canceled as provided under the Plan, and all security interests that formerly
secured the AC Notes have been removed of record; the AC Limited Guaranty of
indebtedness of CQC has been canceled in exchange for a payment of $1,500,000 in
cash to the CQC Note holders; unsecured creditors have been paid in full; other
secured gaming equipment contracts have been reinstated and will be honored in
full; and BGI has contributed $1,500,000 in cash to AC as a new value
contribution, which contribution was made effective July 24, 1998.
Except as may be otherwise expressly provided in the Plan and in the
Confirmation Order, on the Effective Date all property of the Debtor prior to
the Effective Date will revest in AC as the "Reorganized Debtor", free and clear
of all claims, liens, encumbrances and other interests of creditors and holders
of indebtedness.
<PAGE>
On March 17, 1998, CQC filed for bankruptcy protection in the United
States Bankruptcy Court for the District of Nevada in Las Vegas, Nevada (the
"Bankruptcy Court") under Chapter 11 of the United States Bankruptcy Code (Case
No. 98-22172LBR) to pursue financial reorganization of CQC and to facilitate a
sale of the gaming vessel, the principal asset of CQC, to a third party. A third
party bid for the purchase of the vessel was filed with a Motion for Order
Authorizing Sale of Personal Property, and a hearing on the motion was set for
April 16, 1998. On April 16, 1998, the parties requested the hearing be deferred
to April 29, 1998. On April 29, 1998, the third party buyer withdrew its bid
and, there being no other willing buyers present to made a bid, the sale of the
boat was continued to June 5, 1998, to allow CQC to solicit additional bids and
offers. Since CQC does not presently engage in any business operations, the
Company did not experience any material changes in its operations as a result of
the bankruptcy filing.
Subsequently, CQC received a conditional offer from a third party and a
new hearing date of May 15, 1998 was scheduled to consider this bid and any
others that might be forthcoming. The third party, however, then requested a
continuance to allow for additional time to complete its diligence investigation
regarding the vessel and, there being no other bidders prepared to offer a
competitive bid to that of the third party, a further continuance was requested
and granted to June 15, 1998, at which time the third party bid and that of any
competing buyers were to be considered. Prior to that hearing date, the pending
bid was withdrawn and the hearing was vacated. No additional bids have been
received at this time and sale of the boat has not occurred.
No further action has occurred pursuant to the bankruptcy.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
There is no established public trading market for the Company's Common
Stock, all of which is held by BGI. The Company has not declared or paid any
cash dividends on its Common Stock and does not anticipate the payment of cash
dividends in the foreseeable future.
<PAGE>
Item 6. Selected Financial Data
<TABLE>
================================================================================
Capitol Queen & Casino, Inc.
Years Ended June 30,
(amounts in thousands, except per share data)
================================================================================
<CAPTION>
1998 1997
-------- --------
<S> .................................................. <C> <C>
Income Statement Data:
Operating revenues .............................. $ -- $ --
Operating loss .................................. (1,841) (413)
Net loss before reorganization items and
extraordinary item ......................... (4,594) (3,807)
Reorganization items (4) ........................ (20) --
Net loss before extraordinary item .............. (4,614) (3,807)
Extraordinary item-loss early retirement
of debt (1) ................................. -- --
Net loss ........................................ (4,614) (3,807)
Net loss per share before extraordinary item .... (46,140) (38,070)
Extraordinary item-loss on early
retirement of debt .......................... -- --
Net loss per share (2) .......................... (46,140) (38,070)
Other Data:
Interest expenses, net of amounts capitalized
(contractual interest for the year ended June
30, 1998 in the amount of $3,141) ............... 2,754 3,395
Capital expenditures ............................ -- --
Balances Sheet Data:
Unrestricted cash and cash equivalents .......... $ -- $ --
Cash in restricted escrow account ............... 33 31
Total assets .................................... 6,624 8,257
Long-term obligations (3) ....................... -- --
Stockholders' equity (deficit) (5) .............. (22,479) (17,865)
1996 1995 1994
-------- -------- --------
Income Statement Data:
Operating revenues .................... $ -- $ -- $ --
Operating loss ........................ (4,996) (1,388) (7,094)
Net loss before reorganization items
and extraordinary item ............ (7,785) (5,386) (9,530)
Reorganization items (4) .............. -- -- --
Net loss before extraordinary item .... (7,785) (5,386) (9,530)
Extraordinary item-loss early
retirement of debt (1) ............ -- (4,089) --
Net loss .............................. (7,785) (9,475) (9,530)
Net loss per share before
extraordinary item ................ (77,850) (53,860) (95,300)
Extraordinary item-loss on early
retirement of debt ................ -- (40,890) --
Net loss per share (2) ................ (77,850) (94,750) (95,300)
Other Data:
Interest expenses, net of amounts
capitalized (contractual interest
for the year ended June 30, 1998
in the amount of $3,141) .......... 2,789 4,608 3,091
Capital expenditures .................. -- 1,724 11,212
Balances Sheet Data:
Unrestricted cash and cash
equivalents ....................... $ -- $ 45 $ 33
Cash in restricted escrow account ..... 30 30 24,929
Total assets .......................... 8,449 12,986 37,412
Long-term obligations (3) ............. -- -- --
Stockholders' equity (deficit) (5) .... (14,058) (6,273) 3,202
- ----------
<PAGE>
<FN>
(1) During 1995, CQC retired $20,000 principal amount of the CQC notes at 101%
of such principal amount plus accrued and unpaid interest. CQC incurred an
extraordinary loss of approximately $4,089, reflecting the premium paid to
retire the debt of $200 and the write-off of related, unamortized debt
issue costs and original issue discount in the aggregate of $3,889. No tax
benefit was available or recognized.
(2) The number of shares used in the computation of loss per share of common
stock was 100 for each of the four years in the period ended June 30,
1998. Common stock of 1,000 shares were authorized at a $1.00 par value,
but 100 shares were issued and outstanding.
(3) At June 30, 1998, 1997, 1996 and 1995 and 1994, $18,407, $17,908, $17,526,
$17,118 and $33,164 respectively of CQC notes (net of unamortized
original issue discount of $1,593, $2,092, $2,474, $2,882 and $6,836,
respectively) was classified as current due to CQC's default of the
Indenture governing the CQC Notes.
(4) Reorganization items in fiscal year ended June 30, 1998 are associated with
CQC's Chapter 11 Bankruptcy filing on March 17, 1998.
(5) The ability of CQC to pay dividends is restricted under the CQC Indenture.
</FN>
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Analysis of Development Stage Activities for the period January 20,
1993 (the date of inception) through June 30, 1998
CQC was organized on January 20, 1993 for the purpose of developing,
constructing, owning and operating the Capitol Queen. Since inception, CQC's
activities have been limited to, in addition to the financing transaction
described below, the acquisition of a land site in Jefferson City, Missouri and
the rights to develop the Capitol Queen thereon, the preparation and prosecution
of applications to become licensed to own and operate the Capitol Queen in
Missouri and for all other required permits and approvals, the preparation of
preliminary design plans, drawings and budgets for the project, construction of
a riverboat vessel and other pre-opening development activities. As of August
1994, CQC suspended the development of the Capitol Queen, other than completion
of the riverboat. As a result of a September 28, 1994 ruling by the Missouri
Gaming Commission denying CQC's license application, CQC subsequently terminated
the Capitol Queen project and is currently marketing its assets for sale. Such
assets include its riverboat and the Jefferson City land site.
As of January 1, 1995, the CQC Indenture was amended to (i) eliminate
CQC's obligation to construct and open the Capitol Queen and (ii) permit a
two-step purchase of the CQC Notes at 101% of principal plus accrued and unpaid
interest with funds remaining in the project escrow account and the net proceeds
from a sale of assets. The repurchase of $20,000,000 principal amount of the CQC
Notes (plus accrued and unpaid interest thereon) was completed on January 17,
1995 with funds from the project escrow account at a total cost of $20,200,000.
CQC incurred an extraordinary loss of approximately $4,089,000 in 1995,
reflecting the premium paid to retire the debt of $200,000 and the write-off of
related, unamortized debt issue costs and original issue discount in the
aggregate of $3,889,000. At June 30, 1998, approximately $33,000 remained in the
escrow account held by the Indenture Trustee and an aggregate of $20,000,000
principal amount of the CQC Notes remained outstanding. However, the dates by
which CQC previously agreed with the holders of the CQC Notes to effect the sale
of its assets and repurchase the remaining CQC Notes have passed.
The CQC Notes outstanding require annual interest payments of
$2,400,000, payable in equal installments semi-annually on May 15 and November
15. CQC was not able to make its scheduled interest payments of $1,200,000 on
each of November 15, 1995, May 15, 1996, November 15, 1996, May 15, 1997,
November 15, 1997 and May 15, 1998. Further, AC does not have available funds to
advance on behalf of CQC. See "Liquidity and Capital Resources - Capitol Queen &
Casino, Inc. - Claims by Trustee".
During the period from inception through June 30, 1998, CQC had total
operating expenses of $15,732,000 consisting primarily of an abandonment loss of
$6,034,000 arising from the denial of the company's license application and
management's subsequent decision to terminate the Capitol Queen project and sell
its assets. Also, at March, 1996, CQC wrote-down the cost of the riverboat
assets to their net realizable value based on estimates provided by a
shipbuilder and marine brokers which resulted in an abandonment loss of
$4,392,000 in the 1996 fiscal year. The cost of the riverboat was further
written down at June 30, 1998 to $6,000,000 based on recent offers received for
the riverboat, which resulted in an additional abandonment loss of $1,500,000.
Also included in operating expenses are amortization expense of $1,609,000
associated with debt issue costs and $2,197,000 of project development costs.
For the same period, CQC incurred $17,320,000 of interest cost, of which
$683,000 was capitalized by CQC as required by generally accepted accounting
principles, as part of the riverboat construction. CQC earned interest income of
$1,267,000 for the period from inception to June 30, 1998.
<PAGE>
Liquidity and Capital Resources
For the period from inception through June 30, 1998, net cash used in
development stage activities was $5,244,000. Cash flows used in investing
activities for the period was $13,922,000 which included $12,936,000 of capital
expenditures related to the construction of the riverboat and acquisition of the
Jefferson City land site. At June 30, 1998, CQC had expended a total of
approximately $21,850,000 on the development and construction of the Capitol
Queen project including on-going maintenance and insurance costs.
CQC's obligations consist of the $20,000,000 in principal amount of the
outstanding CQC Notes and past due interest thereon of $7,853,500 at June 30,
1998, which includes amounts accrued on unpaid interest. On March 17, 1998 CQC
filed a petition for reorganization under Chapter 11 of the Bankruptcy Code. As
such, CQC has ceased accruing interest on the CQC Notes as of March 17, 1998, as
it is not probable that post-petition interest for these notes will be an
allowed claim in CQC's bankruptcy proceedings. There can be no assurance that
CQC, will be successful in its efforts to sell its assets or, that if a sale is
effected, the proceeds will be sufficient to fully or substantially repay the
CQC Notes and accrued interest thereon. Additionally, on July 3, 1997 CQC
received a notice of acceleration from the trustee of the CQC Notes. Moreover,
CQC, because it has not paid certain interest due on its Notes and has not yet
effected the sale of its assets, is in default of the CQC Indenture. As a result
of the above items the CQC Notes have been classified as a current liability as
of June 30, 1998 and June 30, 1997.
On November 14, 1997, AC filed for bankruptcy protection with the
United States Bankruptcy Court for the District of Nevada in Las Vegas, Nevada
(the "Bankruptcy Court") under Chapter 11 of the United States Bankruptcy Code
(Case NO. 97-28781 LBR).
On June 25, 1998, a "Consensual Plan of Reorganization Proposed by
Debtor and High River" (the "Plan"), dated June 24, 1998, was approved by the
Bankruptcy Court. Pursuant to the Plan, AC was reorganized as of September 28,
1998 in accordance with the Debt Conversion Option of the Plan. As a part of the
Plan, the AC Limited Guaranty has been canceled in exchange for the payment of
$1,500,000 in cash, which has been paid to the CQC Note holders. See Item 3,
Legal Proceedings.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The Company has completed certain modifications to portions of its
software so that its computer systems will properly utilize dates beyond
December 31, 1999. According, management believes that with these modifications
the Year 2000 Issue will not have a material impact on the financial position,
operations or cash flows of the Company.
<PAGE>
Item 8. Financial Statements and Supplementary Data
The Index to Financial Statements and Schedules appears at page F-1
hereof, the Report of Registrant's Independent Auditors appears at page F-2
hereof, and the Financial Statements and Notes to Financial Statements of the
Registrant at page F-3 through F-18 hereof.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Director and Executive Officers of the Registrant
The following table sets forth certain information with respect to the
directors and executive officers of the Company and each of its subsidiaries.
<TABLE>
<CAPTION>
Name Age Position(s) Held
---- --- ----------------
<S> <C> <C>
Bruce F. Becker 47 President, Chief Executive
Officer, Treasurer and Sole
Director
Barry W. Becker 53 Secretary
</TABLE>
PART III
Item 10. Director and Executive Officers of the Registrant
The following table sets forth certain information with respect to the
directors and executive officers of the Company and each of its subsidiaries.
Name Age Position(s) Held
Bruce F. Becker 47 President, Chief Executive Officer,
Treasurer and Sole Director
Barry W. Becker 53 Secretary
Bruce F. Becker has served as President, Chief Executive Officer,
Treasurer, Sole Director of the Company since its inception. He has served each
of the Nevada subsidiaries as President and Chief Executive Officer since July
1989. Mr. Becker has also served as President, Chief Executive Officer, director
and Chairman of CQC since its inception in January 1993 and President, Chief
Executive Officer and Chairman of the Board of Directors of SC and BGG since
their inceptions in 1984, 1980 and 1986, respectively. Mr. Becker also sits on
the Board of Directors of the Nevada Resort Owners Association.
Barry W. Becker has served as Secretary of the Company since its
inception. He has served each Nevada subsidiary as a Director since their
respective inceptions and as Secretary since July 1989. Mr. Becker is also the
Sales Manager for Becker Enterprises, a Becker family-owned company which
purchases, sells and leases residential and commercial property. He is a past
president of the Southern Nevada Builders Association and serves the community
as a member on the Board of Directors of the Rotary Club, Las Vegas Chamber of
Commerce, Boys Club of Clark County and the Boy Scouts of America. Mr. Becker
was appointed by the then Governor of the State of Nevada to the State
Environment Commission and was an Environmental Commissions Representative on
the State Multiple Use Advisory Land Committee.
<PAGE>
Item 11. Executive Compensation
The Company was incorporated on January 20, 1993. No compensation was
paid by the Company for services rendered to the Company during the fiscal years
ended June 30, 1996, 1997 or 1998.
Compensation of Directors
The directors of the Company do not receive any compensation for
serving in such capacities.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The Company is a wholly owned subsidiary of Becker Gaming, Inc.
Accordingly, there are no sole beneficial owners of the company's common stock.
Item 13. Certain Relationships and Related Transactions
AC currently has outstanding $55,000,000 of 12% First Mortgages Notes
due 2000. SC has issued a limited guaranty with respect to the AC Notes (the "SC
Limited Guaranty"). CQC currently has outstanding $20,000,000 of 12% First
Mortgage Notes due 2000. AC issued a limited guaranty with respect to the CQC
Notes (the "AC Limited Guaranty"). The AC Limited Guaranty has been extinguished
as of September 28, 1998 as a result of the consummation of the Debt Conversion
Option of the Plan. See Item 3, Legal Proceedings.
In May 1995, CQC borrowed $1,200,000 from AC in order to have funds to
make the semi-annual interest payment due on the CQC Notes. The borrowing was
executed as an uncollateralized note payable to AC due May, 1996 with interest
at the rate of 5.56%. In addition, AC has advanced CQC the amounts of $301,000
(1995), $692,000 (1996), $220,000 (1997) and $94,000 (1998).
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
The following are filed as part of this Report:
(a)1. Financial Statements
An Index to Financial Statements appears at page F-1
hereof
(b)2. Financial Statement Schedules
An Index to Financial Statement Schedules appears at
page F-1 hereof
(a)3. Exhibits
2.1 Agreement of Reorganization dated November 16, 1993,
by and among Becker Gaming, Inc. ("BGI"), Arizona
Charlie's, Inc. ("Arizona Charlie's"), Sunset
Coin, Inc. ("Sunset Coin"), Becker Gaming Group, Inc.
("Becker Gaming Group"), Capitol Queen & Casino, Inc.
("Capitol Queen"), Charlie's Land Company ("CLC") ,
and each of Ernest A. Becker, III, Ernest A. Becker,
IV, Barry W. Becker and Bruce F. Becker
(collectively, the "Beckers").*
3.1 Articles of Incorporation of Capitol Queen.*
3.2 First Amended By-Laws of Capitol Queen.*
3.3 Articles of Incorporation of Arizona Charlie's.*
3.4 Amended and Restated By-Laws of Arizona Charlie's.*
10.1 Purchase Agreement dated November 15, 1993 among BGI, Arizona
Charlie's, Capitol Queen, Sunset Coin and the purchasers named
therein (the "Purchasers).*
10.2 Indenture dated November 15, 1993 among Capitol Queen, as issuer,
Arizona Charlie's, as guarantor, and IBJ Schroder Bank & Trust
Company ("IBJ"), as trustee.*
10.3 Deed of Trust, Assignment of Leases, Security Agreement and Fixture
Filing dated November 15, 1993 by Capitol Queen, as grantor, to
Charles W. Riley, as trustee, for the benefit of IBJ , as collateral
agent.*
10.4 Vessel Construction Agreement dated October 23, 1993
between Leevac Shipyards, Inc. and Capitol Queen, as
amended by Amendment No. 1 to Vessel Construction
Agreement dated November 15 and 17, 1993.*
10.5 Form of First Preferred Ship Mortgage Securing an
Indenture between Capitol Queen and IBJ.*
10.6 Security Agreement dated November 15, 1993 between Capitol Queen and
IBJ, as collateral agent.*
10.7 Stock Pledge Agreement dated November 15, 1993 between Capitol Queen
and IBJ, as collateral agent.*
10.8 Collateral Agency Agreement dated November 15, 1993 among Capitol
Queen and IBJ, as trustee and collateral agent.*
10.9 Disbursement and Escrow Agreement dated November 15, 1993 among
Capitol Queen and IBJ, as escrow agent, trustee and collateral
agent.*
10.10 Registration Rights Agreement dated November 15, 1993
among Capitol Queen, Arizona Charlie's and the
Purchasers.*
10.11 Form of Management Agreement to be entered into between BGI and each
of Arizona Charlie's, Capitol Queen, Sunset Coin and Becker Gaming
Group. Included at Exhibit I to Exhibit 2-1 hereof.*
10.12 Form of Tax Allocation Agreement to be entered into between BGI and
each of Arizona Charlie's, Sunset Coin, Becker Gaming Group and
Capitol Queen. Included at Exhibit J to Exhibit 2-1 hereof.*
10.13 Letter Agreement dated September 10, 1993 among BGI, Arizona
Charlie's, Capitol Queen and Ladenburg, Thalmann & Co., Inc., as
placement agent.*
<PAGE>
10.14 Land Purchase Option Contract dated January 4, 1993 between Linda Ann
and Harvey L. McCray and Vernon M. and Joyce G. Burkhalter, as
seller, and R.Q. Enterprises, as buyer; and Wire Transfer Order and
Closing Document dated July 26, 1993 between Arizona Charlie's and
First Interstate Bank of Nevada.*
10.15 Letter of Understanding dated January 26, 1993
between Jefftel, Inc. and JCR Hotel, Inc. and River
Queen Enterprises, Inc. and Capitol Queen.*
10.16 Purchase Agreement dated September 20, 1993 among BGI and Cathryn
Simmons, Public Issue Management, Inc., Byron Neal Fox and Cynthia L.
Pegner, Richard Moore, Byron Neal Fox, P.C., David Chernoff, Oscar B.
Goodman, Eckley M. Keach, Ronald E. Partee and Carol Partee, and Fox
& Partee.*
10.17 Riverfront Development Agreement dated as of September 1, 1993
between Capitol Queen, the Company and Jefferson City, Missouri.*
10.18 First Supplemental Indenture dated January 1, 1995 among Capitol
Queen, as issurer, Arizona Charlie's, as guarantor, and IBJ, as
trustee.
10.19 Assets Purchase agreement dated April 10, 1995 between Aerie
Riverboat Casino of Missouri, Inc., as buyer, and Capitol Queen, as
seller.
10.20 Letter agreement dated December 5, 1994 among BGI and Cathryn
Simmons, Public Issue Management, Inc., Byron Neal Fox and Cynthia L.
Pegner, Richard Moore, Byron Neal Fox, P.C., David Chernoff, Oscar B.
Goodman, Eckley M. Keach, Ronald E. Partee and Carol Partee, and Fox
& Partee.*
- ----------
* All Exhibits are incorporated by reference to the Company's Registration
Statement on Form S-4 (33-75806) declared effective by the Securities and
Exchange Commission on May 20, 1994.
(b) Reports on Form 8-K
On April 15, 1998, the Company filed a current report on Form
8-K stating that on March 17, 1998, CQC filed for bankruptcy protection in the
United States Bankruptcy Court for the District of Nevada in Las Vegas (the
"Bankruptcy Court") under Chapter 11 of the United States Bankruptcy Code (Case
NO. 98-22172 LBR) to purse financial reorganization of CQC and to facilitate a
sale of the gaming vessel, the principal asset of CQC, to a third party. Since
CQC does not presently engage in any business operations, the Company did not
experience any material changes in its operations as a result of the bankruptcy
filing. No financial statements were filed as a part of such report.
<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.
CAPITOL QUEEN & CASINO, INC.
Dated: October 13, 1998 By: /s/ Bruce F. Becker
--------------------------
Bruce F. Becker, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated on the 13th day of October 1998.
Signature Title
--------- -----
/s/ Bruce F. Becker
- -------------------
Bruce F. Becker President, Chief Executive Officer
(Principal Executive Officer) and Sole
Director
/s/ Jerry Griffis
- ----------------- Controller (Principal Financial and
Jerry Griffis Accounting Officer)
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act
The Company has not and does not intend to send to its security holders
any annual report with respect to the Registrant's most recent fiscal year or
any proxy statement, form of proxy or other proxy soliciting material with
respect to a meeting of security holders.
================================================================================
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
CAPITOL QUEEN & CASINO, INC.
Report of Independent Accountants ..............................
Balance Sheets as of June 30, 1998 and 1997 ....................
Statements of Loss Incurred During the Development Stage
for the Years Ended June 30, 1998, 1997 and 1996 and
for the period from January 20, 1993 (the date of
inception) through June 30, 1998 ...............................
Statements of Stockholder's Equity (Deficit) for the years
ended June 30, 1998, 1997 and 1996 and for period from
January 20, 1993 (the date of inception) through June 30, 1998 .
Statements of Cash Flows for the Years Ended June 30, 1998,
1997 and 1996 and for the period from January 20, 1996
(the date of inception) through June 30, 1998 ..................
Notes to Financial Statements ..................................
CAPITOL QUEEN & CASINO, INC.
Schedule II Valuation and Qualifying Accounts as of and
for the Years Ended June 30, 1998, 1997
and 1996 ........................................
Schedules other than those listed above are omitted because they are not
required or are not applicable, or because the required information is shown in
the financial statements or notes to the financial statements. Columns omitted
from schedules filed have been omitted because the information is not
applicable.
- --------------------------------------------------------------------------------
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
----------
To the Board of Directors
Capitol Queen & Casino, Inc.
In our opinion, the financial statements and the financial statement schedule
listed in item 14(a) of this Form 10-K present fairly, in all material respects
the financial position of Capitol Queen & Casino, Inc. (a wholly owned
subsidiary of Becker Gaming, Inc.) at June 30, 1998 and 1997, and their loss
incurred during the development stage and their cash flows for each of the three
years in the period ended June 30, 1998, and for the period from January 20,
1993 (the date of inception) through June 30, 1998 in conformity with generally
accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
The accompanying financial statements and financial statement schedule have
been prepared assuming that Capitol Queen & Casino, Inc. will continue as a
going concern. As more fully described in Notes 2 and 4, the Company is in
default of certain debt covenants and has received a notice of acceleration from
the trustee for this debt resulting in classification of such debt as currently
payable. The Company does not have sufficient resources to repay its
indebtedness and on March 17, 1998 filed for bankruptcy protection with the
United States Bankruptcy Court Under Chapter 11 of the United States Bankruptcy
Code. Management's plans with respect to these matters are also described in
Note 2. These matters raise substantial doubt about the Company's ability to
continue as a going concern. The final outcome of these matters is not presently
determinable and the June 30, 1998 financial statements of the Company do not
include any adjustment that might result from the outcome of this uncertainty.
/s/ PricewaterhouseCoopers LLP
- ---------------------------------
PricewaterhouseCoopers LLP
Las Vegas, Nevada
August 28, 1998, except for Note 8,
as to which the date is
September 28, 1998
<PAGE>
================================================================================
CAPITOL QUEEN & CASINO, INC.
(A Development Stage Company And A Wholly Owned Subsidiary
Of Becker Gaming, Inc.)
BALANCE SHEETS
As Of June 30, 1998 And 1997
(Dollars In Thousands)
================================================================================
ASSETS
1998 1997
------ ------
Current assets:
Restricted cash, in escrow account .............. $ 33 $ 31
------ ------
Total current assets ......................... 33 31
------ ------
Other assets:
Assets held for sale ............................. 6,254 7,754
Financing costs, net of accumulated
amortization of $580 (1998) and
and $445 (1997), respectively .................. 337 472
------ ------
Total other assets ........................... 6,591 8,226
------ ------
Total assets ................................. $6,624 $8,257
====== ======
LIABILITIES & STOCKHOLDER'S EQUITY(DEFICIT)
1998 1997
-------- --------
Current liabilities:
Advances from related parties .......................... $ 14 $ 1,226
Accrued interest ....................................... -- 5,788
Notes payable to related parties ....................... -- 1,200
Long-term debt classified as current due to
default under covenants, net of unamortized
original issue discount of $2,092 .................. -- 17,908
-------- --------
Total current liabilities ...................... 14 26,122
-------- --------
Prepetition liabilities not subject to compromise:
Advances from related parties .......................... 1,440
Accrued interest ....................................... 8,042
Notes payable to related parties ....................... 1,200 --
Long-term debt classified as current due to default
under covenants, net of unamortized original
issue discount of $1,593 ........................... 18,407 --
-------- --------
Total prepetition liabilities
subject to compromise ........................... 29,089 --
-------- --------
Total liabilities ................................. 29,103 26,122
-------- --------
Commitments and contingencies
Stockholder's equity (deficit):
Common stock, $1.00 par value, 1,000 shares
authorized, 100 shares issued and outstanding ....... -- --
Additional paid-in capital ........................... 12,732 12,732
Deficit accumulated during development stage ......... (35,211) (30,597)
-------- --------
Total stockholder's equity (deficit) ........... (22,479) (17,865)
-------- --------
Total liabilities and stockholder's
equity(deficit) ................................ $ 6,624 $ 8,257
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
================================================================================
CAPITOL QUEEN & CASINO, INC.
(A Development Stage Company And A Wholly Owned Subsidiary
Of Becker Gaming, Inc.)
STATEMENTS OF LOSS INCURRED DURING THE DEVELOPMENT STAGE
(Dollars In Thousands)
================================================================================
For The Period
January 20, 1993
(The Date Of
Inception)
Through
Year Ended June 30, June 30,
1998 1997 1996 1998
-------- -------- -------- --------
Revenues ....................... $ -- $ -- $ -- $ --
Operating expenses:
Amortization of financing
and other costs .............. 135 133 100 1,609
Abandonment losses and
write-downs of assets held
for sale ...................... 1,500 -- 4,392 11,926
Development costs ............. 206 280 504 2,197
-------- -------- -------- --------
Total operating expenses .. 1,841 413 4,996 15,732
-------- -------- -------- --------
Operating loss ................. (1,841) (413) (4,996) (15,732)
Other income (expenses):
Interest income ............... 1 1 -- 1,267
Interest expense (contractual
interest for the year ended
June 30, 1998 in the amount
of $3,141) ................... (2,754) (3,395) (2,789) (17,320)
Interest capitalized .......... -- -- -- 683
-------- -------- -------- --------
Total other expenses ........... (2,753) (3,394) (2,789) (15,370)
-------- -------- -------- --------
Net loss before reorganization
items and extraordinary item .. (4,594) (3,807) (7,785) (31,102)
-------- -------- -------- --------
Reorganization items ........... (20) -- -- --
-------- -------- -------- --------
Loss before extraordinary item . (4,614) (3,807) (7,785) (31,122)
Extraordinary item:
Loss on early retirement
of debt (no income tax
benefit available) ........... -- -- -- (4,089)
-------- -------- -------- --------
Net loss ....................... $ (4,614) $ (3,807) $ (7,785) $(35,211)
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
================================================================================
CAPITOL QUEEN & CASINO, INC.
(A Development Stage Company And A Wholly Owned Subsidiary
Of Becker Gaming, Inc.)
STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
For The Period From January 20, 1993
(The Date Of Inception) Through June 30, 1998
And For The Years Ended June 30, 1998, 1997 And 1996
(Dollars In Thousands)
================================================================================
Common Stock
--------------------------------
Shares Amount Subscribed
----------- ----------- -----------
Balances, January 20,
1993 (the date of inception) ... $ -- $ -- $ --
Issuance of common stock ......... 100 -- --
----------- ----------- -----------
Balances, June 30, 1993 .......... 100 -- --
Cash contribution from Becker
Gaming, Inc. relating to sale
of warrants .................... -- -- --
Common stock subscribed .......... -- -- 788
Contribution by Becker Gaming,
Inc. relating to liability
incurred under development
agreement ...................... -- -- --
Write-off of common stock
subscribed due to abandonment
of development project ......... -- -- (788)
Net loss ......................... -- -- --
----------- ----------- -----------
Balances, June 30, 1994 .......... 100 -- --
Net loss ......................... -- -- --
----------- ----------- -----------
Balances, June 30, 1995 .......... 100 -- --
----------- ----------- -----------
Net loss ......................... -- -- --
----------- ----------- -----------
Balances, June 30, 1996 .......... 100 -- --
----------- ----------- -----------
Net loss ......................... -- -- --
----------- ----------- -----------
Balances, June 30, 1997 .......... $ 100 $ -- $ --
----------- ----------- -----------
Net loss ......................... -- -- --
----------- ----------- -----------
Balances, June 30, 1998 .......... $ 100 $ -- $ --
=========== =========== ===========
<PAGE>
Deficit
Accumulated
Additional During The
Paid-In Development
Capital Stage Total
-------- -------- --------
Balances, January 20,
1993 (the date of inception) ............. $-- $-- $--
Issuance of common stock ................... -- -- --
-------- -------- --------
Balances, June 30, 1993 .................... -- -- --
Cash contribution from Becker
Gaming, Inc. relating to sale
of warrants .............................. 7,500 -- 7,500
Common stock subscribed .................... -- -- 788
Contribution by Becker Gaming,
Inc. relating to liability
incurred under development
agreement ................................ 5,232 -- 5,232
Write-off of common stock
subscribed due to abandonment
of development project ................... -- -- (788)
Net loss ................................... -- (9,530) (9,530)
-------- -------- --------
Balances, June 30, 1994 .................... 12,732 (9,530) 3,202
Net loss ................................... -- (9,475) (9,475)
-------- -------- --------
Balances, June 30, 1995 .................... 12,732 (19,005) (6,273)
-------- -------- --------
Net loss ................................... -- (7,785) (7,785)
-------- -------- --------
Balances, June 30, 1996 .................... 12,732 (26,790) (14,058)
Net loss ................................... -- (3,807) (3,807)
-------- -------- --------
Balances, June 30, 1997 .................... $ 12,732 $(30,597) $(17,865)
-------- -------- --------
Net loss ................................... -- (4,614) (4,614)
-------- -------- --------
Balances, June 30, 1998 .................... $ 12,732 $(35,211) $(22,479)
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
================================================================================
CAPITOL QUEEN & CASINO, INC.
( A Development Stage Company And A Wholly Owned Subsidiary
Of Becker Gaming, Inc.)
STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
================================================================================
Year Ended June 30,
---------------------------------
1998 1997 1996
-------- -------- --------
Cash flows from development stage activities:
Net loss ................................ $ (4,614) $ (3,807) $ (7,785)
-------- -------- --------
Adjustments to reconcile net loss
to net cash (used in) development
stage activities:
Amortization of financing and other costs 135 133 100
Amortization of original issue discount . 499 382 408
Abandonment losses and write-downs of
assets held for sale ................... 1,500 60 4,392
Extraordinary loss on retirement of debt -- -- --
Increase(decrease) in accounts payable
and accruals, net of amounts for
capital expenditures ................... 2,254 3,013 2,238
Increase in advances from related
party payable ......................... 228 220 602
-------- -------- --------
Total adjustments ................. 4,616 3,808 7,740
-------- -------- --------
Net cash provided by (used in)
development stage activities ..... 2 1 (45)
-------- -------- --------
Cash flows from investing activities:
Capital expenditures, net of
construction accounts payable .......... -- -- --
Deposits and other assets ............... -- -- --
Capitalization of preopening costs ...... -- -- --
Development costs ....................... -- -- --
Net (additions to) reductions in
restricted cash equivalents ............ (2) (1) --
-------- -------- --------
Net cash provided by (used in)
investing activities .............. (2) (1) --
-------- -------- --------
Cash flows from financing activities:
Principal payments on First Mortgage
Notes .................................. -- -- --
Proceeds from issuance of First
Mortgage Notes, net of financing costs . -- -- --
Proceeds from borrowings under
notes payable to related parties ....... -- -- --
Equity contribution from Becker
Gaming, Inc.relating to sale of
warrants ............................... -- -- --
-------- -------- --------
Net cash (used in) provided by
financing activities .............. -- -- --
-------- -------- --------
Net increase (decrease) in cash
and cash equivalents .............. -- -- (45)
Cash and cash equivalents, beginning
of period ............................... -- -- 45
-------- -------- --------
Cash and cash equivalents, end of period .. $ -- $ -- $ --
======== ======== ========
Supplemental cash flow disclosures:
Interest paid, net of amounts capitalized $ -- $ -- $ --
======== ======== ========
Original issue discount that did not
affect cash ............................ $ -- $ -- $ --
======== ======== ========
Equity contribution by Becker Gaming that
did not affect cash .................... $ -- $ -- $ --
======== ======== ========
<PAGE>
(The Date Of Inception)Through June 30,
---------------------------------------
1998
--------
Cash flows from development stage activities:
Net loss .................................... $(35,211)
--------
Adjustments to reconcile net loss
to net cash used in development
stage activities:
Amortization of financing and other costs ... 1,609
Amortization of original issue discount ..... 2,788
Abandonment losses and write-downs of
assets held for sale ....................... 11,986
Extraordinary loss on retirement of debt .... 4,089
Increase(decrease) in accounts payable
and accruals, net of amounts for
capital expenditures ....................... 8,054
Increase in advances from related
party payable ............................. 1,442
--------
Total adjustments ..................... 29,968
--------
Net cash provided by (used in)
development stage activities ......... (5,243)
--------
Cash flows from investing activities:
Capital expenditures, net of
construction accounts payable .............. (12,936)
Deposits and other assets ................... (60)
Capitalization of preopening costs .......... (340)
Development costs ........................... (553)
Net (additions to) reductions in
restricted cash equivalents ................ (34)
--------
Net cash provided by (used in)
investing activities .................. (13,923)
--------
Cash flows from financing activities:
Principal payments on First Mortgage
Notes ...................................... (20,200)
Proceeds from issuance of First
Mortgage Notes, net of financing costs ..... 30,666
Proceeds from borrowings under
notes payable to related parties ........... 1,200
Equity contribution from Becker
Gaming, Inc.relating to sale of
warrants ................................... 7,500
--------
Net cash (used in) provided by
financing activities .................. 19,166
--------
Net increase (decrease) in cash
and cash equivalents .................. --
Cash and cash equivalents, beginning of period --
--------
Cash and cash equivalents, end of period ...... $ --
========
Supplemental cash flow disclosures:
Interest paid, net of amounts capitalized ... $ 5,807
========
Original issue discount that did not
affect cash ................................ $ 7,500
========
Equity contribution by Becker Gaming that did
not affect cash ........................ $ 5,233
========
The accompanying notes are an integral part of these consolidated financial
statements.
================================================================================
<PAGE>
1. Summary of Significant Accounting Policies:
Basis of Presentation
---------------------
Capitol Queen & Casino, Inc. ("CQC" or the "Company"), a development
stage company, was incorporated in Missouri on January 20, 1993, and
had acquired a franchise from the City of Jefferson City, Missouri to
develop, construct, own and operate a riverboat casino (the "Capitol
Queen"), subject to state licensure. The Company has abandoned the
Capitol Queen project, as more fully described in Note 2. Subsequent to
incorporation, the stockholders of the Company exchanged all of the
outstanding stock of the Company for common stock of a Nevada holding
company, Becker Gaming, Inc. ("BGI"), in a tax-free exchange. BGI is
wholly owned by the Becker family and serves as a holding company for
the Becker family gaming interests, which include CQC and the following
wholly owned subsidiaries:
Sunset Coin, Inc. ("SC"), a Nevada corporation which operates a
Las Vegas gaming machine route and service business.
Becker Gaming Group ("BGG"), a Nevada corporation which (together
with its wholly owned subsidiary Innerout, Inc.) owns and
operates restaurants and bars in Las Vegas under the "Charlie's"
name, each of which offers gaming machines.
Arizona Charlie's, Inc. ("AC"), a Nevada corporation which
operates a Las Vegas hotel and casino.
Cash Equivalents and Concentration of Credit Risk
-------------------------------------------------
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. The Company
has cash on deposit with financial institutions in excess of federally
insured amounts.
Property and Equipment
----------------------
Property and equipment are recorded at cost and include interest
capitalized during the construction period. The Company's policy is to
compute depreciation using the straight-line method. No depreciation
has been recorded while the Company is in the development stage.
Debt Issue Costs
----------------
Costs associated with the issuance of debt are deferred and amortized
over the life of the related indebtedness using the effective interest
method.
Federal Income Taxes
--------------------
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"). Under SFAS 109, deferred tax assets and liabilities are
recognized for the expected future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under
SFAS 109, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date. The Company adopted SFAS 109 at inception (January 20,
1993).
The Company is included in the consolidated federal income tax returns
filed by BGI. CQC's tax allocation is based on the amount of tax it
would incur if it filed a separate return.
<PAGE>
Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates, particularly with respect to the matters described in
Notes 2 and 4.
Accounting Pronouncements
-------------------------
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), which establishes standards for reporting and
display of comprehensive income and its components. SFAS 130 requires a
separate statement to report components of comprehensive income for
each period presented. The provisions of SFAS 130 are effective for
fiscal years beginning after December 15, 1997. Management believes
that the Company currently does not have items that would require
presentation in a separate statement of comprehensive income.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" (SFAS 131"), which supersedes
FASB Statement No. 14, "Financial Reporting for Segments of a Business
Enterprise." SFAS 131 establishes standards for the way that public
business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial
reports issued to shareholders. SFAS 131 is effective for fiscal years
beginning after December 15, 1997 and requires restatement of earlier
periods presented. SFAS 131 will not have a material effect on the
Company's financial statements as the required information is either
currently being presented by the Company or it is not applicable to the
Company.
2. Capitol Queen & Casino, Inc. Bankruptcy Filing:
On March 17, 1998, CQC filed for bankruptcy protection in the United
States Bankruptcy Court for the District of Nevada in Las Vegas, Nevada
(the "Bankruptcy Court") under Chapter 11 of the United States
Bankruptcy Code (Case NO. 98-22172 LBR) to purse financial
reorganization of CQC and to facilitate a sale of the gaming vessel,
the principal asset of CQC, to a third party. Since CQC does not
presently engage in any business operations, the Company did not
experience any material changes in its operations as a result of the
bankruptcy filing.
Interest expense on the CQC Notes (as defined in Note 4) has not been
recognized since CQC's March 17, 1998 bankruptcy petition date as it is
not probable that postpetition interest for the CQC Notes will be an
allowed claim in these proceedings.
Reorganization items presented in the statements of loss incurred
during the development stage are comprised of expenses incurred by CQC
as a result of CQC's reorganization under Chapter 11 of the Bankruptcy
Code. Such expenses consisted entirely of professional fees for the
year ended June 30, 1998.
<PAGE>
3. Construction Project And Related Contingencies:
Capitol Queen Project
---------------------
The Capitol Queen project, as originally contemplated by the Company,
was to include the riverboat, dockside facilities, restaurants and
related ancillary facilities to be built on land acquired by the
Company in July 1993. As a result of the decision to discontinue the
project, all costs associated with the design and development of the
facilities were written off in the fourth quarter of the Company's 1994
fiscal year, with the exception of the historical cost of the land and
the riverboat which was reclassified to assets held for sale.
The Company had contracted with a shipbuilder to construct the Capitol
Queen riverboat. The total cost of the riverboat was $11,892,000,
including construction period interest and other assets. During the
third quarter of the year ended June 30, 1996, based on deteriorating
market conditions after the expiration of the Aerie contract, the
Company recognized a loss of $4,392,000 and wrote-down the carrying
value of the riverboat to $7,500,000. Additionally, the cost of the
riverboat was further written down during the fiscal year ended, June
30, 1998 to $6,000,000 based on recent offers received for the
riverboat, which resulted in an additional abandonment loss of
$1,5000,000. Such revised carrying value represents management's best
estimate of the riverboat's current net realizable value in a cash
sale, based on information obtained from shipbuilders, marine
brokers, and purchase offers made to the Company from third parties.
Jefferson City Development Agreement
------------------------------------
The Company acquired the franchise rights to operate the Capitol Queen
under a development agreement with the City of Jefferson City, Missouri
(the "Development Agreement"), beginning September 1, 1993 for a period
of seven years. The Company's rights and obligations under the
Development Agreement were contingent upon receiving a gaming license
which, until the occurrence of the events described in below,
management believed was probable.
On November 7, 1995, voters in Jefferson City rejected an ordinance
permitting riverboat gambling, reversing the vote an earlier election
in which Jefferson City voters approved riverboat gambling. Because
CQC's Development Agreement with Jefferson City was entered into
pursuant to the earlier ordinance permitting riverboat gambling, the
Company believes that as matter of law the 1995 election does not
affect the validity of the Development Agreement. However, to avoid the
cost and uncertainty of litigation, CQC and Jefferson City in June 1996
entered into an agreement pursuant to which the Development Agreement
was rescinded and Jefferson City refunded $300,000 of the $400,000 CQC
had originally paid to the City under the Development Agreement.
Other Development Agreement
---------------------------
As discussed below, the Company and BGI have each entered into
additional agreements in connection with the development of the Capitol
Queen project, which have been terminated as a result of the decision
by the Missouri Gaming Commission.
In January 1993, prior to incorporation, the stockholders of the
Company agreed that, upon being licensed in Missouri to own and operate
the Capitol Queen, the Company would issue shares of its common stock
to three individuals who assisted the then existing stockholders of the
Company in obtaining the rights to develop the Capitol Queen (the "CQC
Stock Agreement"). The aggregate amount of stock subject to the CQC
Stock Agreement represents 5.25% of the outstanding common stock of the
Company, and was subject to increase to 8.25% if the convention
center required under the Development Agreement was not constructed on
land controlled by the parties to the CQC Stock Agreement. The
Company had the option to repurchase any or all of such stock,
except for 25% held by one individual, for a period of three years
from issuance at an aggregate purchase price of $750,000 ($1,200,000
if the additional shares were issued). In addition to the above
requirements of the CQC Stock Agreement, the Company also agreed to
pay a lump-sum fee of $350,000 to two of the above individuals after
receiving a license and the commencement of operations of the Capitol
Queen.
<PAGE>
At the time CQC was awarded the Development Agreement, and until the
occurrence of the events described above, the Company believed it was
probable it would receive a gaming license in Missouri. Accordingly, to
reflect the CQC Stock Agreement, CQC recorded subscribed stock of
$788,000 (using the $750,000 value described above for 5.0% of the
stock to determine the value of the remaining 25% interest), recorded
amounts payable under the agreement for $350,000 and recorded a
corresponding total charge of $1,138,000 to development costs, to be
amortized over the life of the Development Agreement. As a result of
the decision by the Missouri Gaming Commission and the abandonment of
the Capitol Queen project, management believes that it has been
relieved of these obligations. Accordingly, the subscribed stock, the
$350,000 liability and the related deferred costs (net of amortization
from September 1, 1993 to June 30, 1994) were written-off in the fourth
quarter of fiscal 1994.
In September 1993, the Company's parent, BGI, agreed that it would
repurchase certain rights to acquire equity in CQC (the "Repurchase
Agreement") which it had previously granted to various parties (the
"Sellers"). The Sellers assisted BGI and the Company, through the BGI
stockholders, in obtaining the approval to develop, own and operate the
Capitol Queen in Jefferson City. Under the terms of the Repurchase
Agreement, BGI agreed to pay the Sellers an aggregate amount of
$5,925,000, payable in installments through July 1, 1997 and bearing
interest at 10% per annum from the date the Capitol Queen opens for
business. BGI also agreed that if prior to maturity, BGI proposed to
sell any of its common stock in an underwritten public offering, the
Sellers may accept registered shares in lieu of the payments required
based on the public offering price of such shares (less any
underwriters discount) subject to certain underwriter limitations.
The Repurchase Agreement provided that in the event the development,
ownership or operation of a riverboat gaming business in Jefferson City
becomes unlawful or CQC is declined a gaming license, the Repurchase
Agreement becomes null and void. At the time BGI entered the Repurchase
Agreement, and until the occurrence of the events described above, the
Company believed it was probable it would receive a gaming license in
Missouri. Accordingly, the assumption of the liability under the
Repurchase Agreement was treated as an additional investment in CQC by
BGI, and the related present value of the costs to the Sellers of
$5,232,000 was recorded as deferred development costs to be amortized
over the life of the Development Agreement.
As a result of the decision by the Missouri Gaming Commission and the
abandonment of the Capitol Queen project, BGI believes that it has been
relieved of its obligations under the Repurchase Agreement.
Accordingly, the deferred costs under the Repurchase Agreement (net of
amortization from September 1, 1993 to June 30, 1994) were written-off
in the fourth quarter of fiscal 1994.
In addition to the above, in the fourth quarter of fiscal 1994, CQC
wrote-off previously capitalized expenditures of $1,375,000 and
capitalized pre-opening expenses of $340,000 associated with the
development of the Capitol Queen project.
4. Long-Term Debt:
On November 18, 1993, the Company completed a private placement debt
financing of $40,000,000 principal amount of 12% First Mortgage Notes
Due November 15, 2000 (the " CQC Notes"). The offering generated net
proceeds of approximately $30,666,000 (after deducting original issue
discount of $7,500,000 and debt issue costs). Interest on the Notes is
payable semi-annually. AC provided a limited guarantee for the CQC
Notes (which guarantee was subject to release only upon licensing of
the Capitol Queen, which is not expected) and the CQC Notes are
collateralized by a first mortgage on substantially all of the assets
of the Company. See Note 8.
As described in Note 2, the Company was unable to make the interest
payments due under the CQC Notes on November 15, 1995, May 15, 1996,
November 15, 1996, May 15, 1997, November 15, 1997 and May 15, 1998.
Such past due interest, including accrued interest on unpaid interest,
in the amount of $7,853,000 has been accrued in the accompanying
financial statements. On March 17, 1998 CQC filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code. As such, CQC
has ceased accruing interest on the CQC Notes as of March 17, 1998, as
it is not probable that post-petition interest for these notes will be
an allowed claim in CQC's bankruptcy proceedings.
<PAGE>
As of January 1, 1995, CQC's obligations under the Indenture governing
the CQC Notes were amended with the requisite consent of the holders of
the CQC Notes. CQC's previous obligations to complete and open the
Capitol Queen have been eliminated and CQC has agreed to a two-step
plan to repay the CQC Notes. The first step, which was consummated on
January 17, 1995, involved the repurchase of $20,000,000 principal
amount of the CQC Notes at 101% of such principal amount plus accrued
and unpaid interest with funds held in the restricted project escrow
account. The Company incurred an extraordinary loss of approximately
$4,089,000 in 1995, reflecting the premium paid to retire the debt of
$200,000 and the write-off of related, unamortized debt issue costs and
original issue discount in the aggregate of $3,889,000. The second step
permitted a purchase of the CQC Notes at 101% of principal plus accrued
and unpaid interest from a sale of assets. However, the dates by which
CQC previously agreed with the holders of the CQC Notes to effect the
sale of assets and repurchase the remaining CQC Notes have passed, and
CQC is thus in default of the amended covenants.
Concurrent with the placement of the Notes, BGI sold 2,500,000 warrants
(the "Warrants") exercisable for BGI common stock for gross proceeds of
$7,500,000. The gross proceeds from the sale of the Warrants were
contributed to the Company.
The Indenture governing the CQC Notes (the "Indenture") limits the use
of the net proceeds from the offering and the sale of the Warrants to
fund the cost of the development and construction of the Capitol Queen
project, the development of a convention center in Jefferson City,
Missouri and initial interest payments. The proceeds were placed in
escrow with a trustee pending drawdowns for qualifying project
expenditures. As more fully explained above and in Note 2, certain of
the proceeds were used in January 1995 in connection with the first
step of the plan to repay the CQC Notes. Prior to the receipt of the
Notice on July 3, 1997, the CQC Notes were not subject to mandatory
redemption, except upon a change of control, or other circumstances as
defined in the Indenture. The Company had the option to redeem the
Notes at a premium of 106% beginning on November 15, 1997, declining to
par value on November 15, 1999. If prior to November 15, 1997, BGI
consummated an initial public offering of its common stock, the Company
may also have redeemed the CQC Notes, at a premium of 108%.
The Indenture contains covenants that, among other things, limit the
ability of the Company and, in certain cases, AC, to pay dividends or
management fees, or incur additional indebtedness.
<PAGE>
5. Related-Party Transactions:
Prior to the inception of CQC and through November 18, 1993, AC
advanced a total of approximately $1,090,000 to fund development costs
of CQC which was fully repaid on November 18, 1993 with proceeds from
the private placement financing transaction. As of June 30, 1998 and
1997, the amounts payable to AC by the Company for additional advances
were $1,308,000 and $1,213,000, respectively. The advances are
non-interest bearing. See Note 8.
In May, 1995, CQC borrowed $1.2 million from AC in order to make the
semi-annual interest payment due on the CQC Notes. The borrowing was
executed as an uncollateralized note payable to AC due June 30, 1998,
with interest at an annual rate of 5.56%. Interest expense incurred in
relation to the note payable to AC was $47,000, $67,000 and $67,000
during the years ended June 30, 1998, 1997 and 1996, respectively. The
Company has not paid any interest to AC for this obligation. See Note
8.
Subsequent to AC's November 14, 1997 bankruptcy filing, AC was no
longer able to make advances to CQC. Accordingly, SC made advances to
CQC for the year ended June 30, 1998 totaling $82,000. The Company has
not made repayments to SC for these advances.
6. Income Taxes:
For the fiscal years June 30, 1998, 1997 and 1996, the Company incurred
net operating losses for federal income tax purposes, and accordingly,
these financial statements do not include provision for federal income
tax purposes.
The components included in determining the provision for income taxes
for the years ended June 30, 1998, 1997 and 1996, net of extraordinary
items, are shown below:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Tax provision (benefit) at federal
income tax statutory rate ....... $(1,569,000) $(1,294,000) $(2,647,000)
Unrecognized tax benefit from net
operating losses ................ 1,569,000 1,294,000 2,574,000
Other ............................ -- -- 73,000
----------- ----------- -----------
Income tax provision .... $ -- $ -- $ --
----------- ----------- -----------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes, and the amounts used for income tax
purposes. The major components of deferred taxes as of June 30, 1998
and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Liabilities: $ -- $ --
----------- -----------
Assets:
Federal net operating loss carryforwards 6,936,000 5,877,000
Valuation allowance for assets held
for sale ........................... 2,004,000 1,494,000
--------- ---------
Total deferred tax assets ............ 8,940,000 7,371,000
--------- ---------
Valuation allowance .................. (8,940,000) (7,371,000)
---------- ----------
Net deferred taxes ................... $ -- $ --
----------- -----------
</TABLE>
<PAGE>
As of June 30, 1998, the Company had a federal net operating loss
carryforward of approximately $20,399,000 which expires between 2009 and
2013.
7. Fair Value of Financial Instruments:
The estimated fair value of the Company's financial instruments have
been determined by the Company using available market information and
appropriate valuation methodologies. The carrying amounts of cash and
cash equivalents, accounts receivable, accounts payable, capital lease
obligations and notes approximate fair values due to the short-term
maturities and approximate market interest rates of these instruments.
Management is unable to determine a fair value for the outstanding
$20,000,000 principal amount ($18,407,000 carrying amount at June 30,
1998) of 12% First Mortgage Notes due November 15, 2000 of Capitol
Queen and Casino, Inc. (the "CQC Notes"). It is not practicable to
determine the fair value of these financial instruments due to the debt
covenant violations and related uncertainties involved in the matters
described at Note 2.
8. Subsequent Event:
On November 14, 1997, AC filed a voluntary petition under Chapter 11 of
the US Bankruptcy Code with the United States Bankruptcy Court of the
District of Nevada (the "Bankruptcy Court") in Las Vegas, Nevada in
order to provide it protection from creditors while it attempted to
negotiate a settlement with the holders of certain debt. On June 25,
1998, the Bankruptcy Court approved a Plan of Reorganization (the "AC
Plan"). All significant terms and conditions of the AC Plan were
satisfied as of September 28, 1998, (the "Effective Date" of the AC
Plan). Upon the Effective Date, the AC Plan has resulted in the
transfer of sole ownership of AC to High River Limited Partnership, or
its designee, an entity owned and controlled by Carl Icahn, a majority
owner of certain then outstanding debt of AC.
Prior to the Effective Date of the AC Plan, AC was the limited
guarantor of certain debt of CQC, as described in Note 4. On the
Effective Date of the AC Plan, or as soon thereafter as possible, AC is
required to make a cash payment in the amount of $1,500,000 to the
existing CQC bondholders, which, in conjunction with other requirements
of the AC Plan, will result in the discharge, cancellation and
extinguishment of AC's limited guarantee of the CQC debt.
As described in Note 5, as of June 30, 1998, CQC had certain advances
to AC in the amount of $1,308,000 and certain notes payable to AC in
the amount of $1,200,000 plus accrued and unpaid interest of $190,000.
Upon the effective date of the AC Plan, all such obligations to AC are
immediately terminated.
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE II
CAPITOL QUEEN & CASINO, INC.
VALUATION AND QUALIFYING ACCOUNTS
For The Years Ended June 30, 1998, 1997 And 1996
<TABLE>
<CAPTION>
Additions
------------------------
Balance at Charged to Charged to
Beginning Costs and Other
Description of Year Expenses Accounts
- -------------------------------------- ----------- ----------- -----------
Deferred tax asset valuation allowance
<S> <C> <C> <C>
Year ended June 30, 1998 ............ $ 7,371,000 $ -- $ 1,569,000
=========== =========== ===========
Year ended June 30, 1997 ............ $ 6,994,000 $ -- $ 377,000
=========== =========== ===========
Year ended June 30, 1996 ............ $ 4,420,000 $ -- $ 2,574,000
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Balance at
End of
Description Deductions Year
- -------------------------------------- ----------- --------
<S> <C> <C>
Deferred tax asset valuation allowance
Year ended June 30, 1998 ............ $ -- $ 8,940,000
=========== ===========
Year ended June 30, 1997 ............ $ -- $ 7,371,000
=========== ===========
Year ended June 30, 1996 ............ $ -- $ 6,994,000
=========== ===========
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
EXHIBITS
--------
2.1 Agreement of Reorganization dated November 16, 1993,
by and among Becker Gaming, Inc. ("BGI"), Arizona
Charlie's, Inc. ("Arizona Charlie's"), Sunset
Coin, Inc. ("Sunset Coin"), Becker Gaming Group, Inc.
("Becker Gaming Group"), Capitol Queen & Casino, Inc.
("Capitol Queen"), Charlie's Land Company ("CLC") ,
and each of Ernest A. Becker, III, Ernest A. Becker,
IV, Barry W. Becker and Bruce F. Becker
(collectively, the "Beckers").*
3.1 Articles of Incorporation of Capitol Queen.*
3.2 First Amended By-Laws of Capitol Queen.*
3.3 Articles of Incorporation of Arizona Charlie's.*
3.4 Amended and Restated By-Laws of Arizona Charlie's.*
10.1 Purchase Agreement dated November 15, 1993 among BGI, Arizona
Charlie's, Capitol Queen, Sunset Coin and the purchasers named
therein (the "Purchasers).*
10.2 Indenture dated November 15, 1993 among Capitol Queen, as issuer,
Arizona Charlie's, as guarantor, and IBJ Schroder Bank & Trust
Company ("IBJ"), as trustee.*
10.3 Deed of Trust, Assignment of Leases, Security Agreement and Fixture
Filing dated November 15, 1993 by Capitol Queen, as grantor, to
Charles W. Riley, as trustee, for the benefit of IBJ , as collateral
agent.*
10.4 Vessel Construction Agreement dated October 23, 1993
between Leevac Shipyards, Inc. and Capitol Queen, as
amended by Amendment No. 1 to Vessel Construction
Agreement dated November 15 and 17, 1993.*
10.5 Form of First Preferred Ship Mortgage Securing an
Indenture between Capitol Queen and IBJ.*
10.6 Security Agreement dated November 15, 1993 between Capitol Queen and
IBJ, as collateral agent.*
10.7 Stock Pledge Agreement dated November 15, 1993 between Capitol Queen
and IBJ, as collateral agent.*
10.8 Collateral Agency Agreement dated November 15, 1993 among Capitol
Queen and IBJ, as trustee and collateral agent.*
10.9 Disbursement and Escrow Agreement dated November 15, 1993 among
Capitol Queen and IBJ, as escrow agent, trustee and collateral
agent.*
10.10 Registration Rights Agreement dated November 15, 1993
among Capitol Queen, Arizona Charlie's and the
Purchasers.*
10.11 Form of Management Agreement to be entered into between BGI and each
of Arizona Charlie's, Capitol Queen, Sunset Coin and Becker Gaming
Group. Included at Exhibit I to Exhibit 2-1 hereof.*
10.12 Form of Tax Allocation Agreement to be entered into between BGI and
each of Arizona Charlie's, Sunset Coin, Becker Gaming Group and
Capitol Queen. Included at Exhibit J to Exhibit 2-1 hereof.*
10.13 Letter Agreement dated September 10, 1993 among BGI, Arizona
Charlie's, Capitol Queen and Ladenburg, Thalmann & Co., Inc., as
placement agent.*
10.14 Land Purchase Option Contract dated January 4, 1993 between Linda Ann
and Harvey L. McCray and Vernon M. and Joyce G. Burkhalter, as
seller, and R.Q. Enterprises, as buyer; and Wire Transfer Order and
Closing Document dated July 26, 1993 between Arizona Charlie's and
First Interstate Bank of Nevada.*
<PAGE>
10.15 Letter of Understanding dated January 26, 1993
between Jefftel, Inc. and JCR Hotel, Inc. and River
Queen Enterprises, Inc. and Capitol Queen.*
10.16 Purchase Agreement dated September 20, 1993 among BGI and Cathryn
Simmons, Public Issue Management, Inc., Byron Neal Fox and Cynthia L.
Pegner, Richard Moore, Byron Neal Fox, P.C., David Chernoff, Oscar B.
Goodman, Eckley M. Keach, Ronald E. Partee and Carol Partee, and Fox
& Partee.*
10.17 Riverfront Development Agreement dated as of September 1, 1993
between Capitol Queen, the Company and Jefferson City, Missouri.*
10.18 First Supplemental Indenture dated January 1, 1995 among Capitol
Queen, as issurer, Arizona Charlie's, as guarantor, and IBJ, as
trustee.
10.19 Assets Purchase agreement dated April 10, 1995 between Aerie
Riverboat Casino of Missouri, Inc., as buyer, and Capitol Queen, as
seller.
10.20 Letter agreement dated December 5, 1994 among BGI and Cathryn
Simmons, Public Issue Management, Inc., Byron Neal Fox and Cynthia L.
Pegner, Richard Moore, Byron Neal Fox, P.C., David Chernoff, Oscar B.
Goodman, Eckley M. Keach, Ronald E. Partee and Carol Partee, and Fox
& Partee.*
- ----------
* All Exhibits are incorporated by reference to the Company's Registration
Statement on Form S-4 (33-75806) declared effective by the Securities and
Exchange Commission on May 20, 1994.
(b) Reports on Form 8-K
On April 15, 1998, the Company filed a current report on Form
8-K stating that on March 17, 1998, CQC filed for bankruptcy protection in the
United States Bankruptcy Court for the District of Nevada in Las Vegas (the
"Bankruptcy Court") under Chapter 11 of the United States Bankruptcy Code (Case
NO. 98-22172 LBR) to purse financial reorganization of CQC and to facilitate a
sale of the gaming vessel, the principal asset of CQC, to a third party. Since
CQC does not presently engage in any business operations, the Company did not
experience any material changes in its operations as a result of the bankruptcy
filing. No financial statements were filed as a part of such report.
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 33,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 33,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,624,000
<CURRENT-LIABILITIES> 29,117,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (22,479,000)
<TOTAL-LIABILITY-AND-EQUITY> 6,624,000
<SALES> 0
<TOTAL-REVENUES> 1,000
<CGS> 0
<TOTAL-COSTS> 1,861,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,754,000
<INCOME-PRETAX> (4,614,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,614,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,614,000)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
