HARD ROCK HOTEL INC - 10-K Annual Report

Back to GetFilings.com

=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------------------------------------------------

FORM 10-K

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For The Fiscal Year Ended December 31, 2000

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For The Transition Period From To

Commission File Number 333-53211

HARD ROCK HOTEL, INC.
-----------------------------------------------------------------------------
(Exact Name Of Registrant As Specified In Its Charter)

NEVADA 88-0306263
-----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

4455 PARADISE ROAD, LAS VEGAS, NEVADA 89109
-----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (702) 693-5000

-----------------------------------------------------------------------------

Securities registered pursuant to Section 12(b) of the Act: None

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. [X]

The voting common stock of the registrant is not publicly traded. All
of the voting stock is held by an affiliate of the registrant.

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of the registrant's classes
of common stock, as of the latest practicable date.

Common Stock outstanding by class as of March 26, 2001

CLASS OF COMMON STOCK SHARES
-----------------------------------------------------------------------------

Class A Common Stock 12,000
Class B Common Stock 64,023

1

PART I

ITEM 1. BUSINESS

OVERVIEW

Hard Rock Hotel, Inc., a Nevada corporation, owns and operates the Hard
Rock Hotel and Casino in Las Vegas, Nevada, the world's first casino resort with
a rock music theme (the "Resort"). The Resort, modeled after the highly
successful Hard Rock Cafe restaurant chain, is decorated with an extensive
collection of rare rock memorabilia and has a distinctive roof top guitar-shaped
neon sign that extends 180 feet into the Las Vegas skyline. The original Hard
Rock Cafe was co-founded in 1971 by Peter Morton, the Company's Chairman, Chief
Executive Officer, President, and Secretary, and the "Hard Rock" name has grown
to become widely recognized throughout the world. The Resort commenced
operations March 9, 1995. An expansion of the Resort was completed during May
1999.

The Resort currently consists of:

- an eleven-story hotel tower with 657 hotel rooms (including 63
suites),

- a 30,000 square-foot casino,

- a 3,600 square-foot retail store,

- an 11,500 square-foot nightclub, called "Baby's," with a
capacity of 800 persons,

- a 6,000 square-foot banquet facility with a capacity of 390
persons,

- a live music concert hall, called "The Joint," with a capacity
of 2,050 persons,

- a beach club including an outdoor swimming pool area with a
tropical theme,

- five restaurants,

- three cocktail lounges, and

- an 8,000 square-foot spa/salon/fitness center, called the
"Rock Spa."

We have commenced an $8.0 million remodeling project of the 339
rooms in our original hotel tower. We expect the project to be completed in
two phases. The first phase, including the rooms on floors 2 and 8 through
11, was completed during November and December 2000. The second phase is
currently scheduled to be completed during June and July 2001 but may be
rescheduled until November and December 2001 depending on projected occupancy
levels. As of December 31, 2000, we have made approximately $2.2 million of
cash payments related to the remodeling project.

In February 2000, we changed our financial reporting year-end to
December 31. Previously, our fiscal year ended on November 30. As a result of
this change, we are reporting the financial position of Hard Rock Hotel, Inc.
as of December 31, 2000 and November 30, 1999, and the results of our operations
and our cash flows for the years ended December 31, 2000, November 30, 1999
and November 30, 1998, and the one-month period ended December 31, 1999.

BUSINESS STRATEGY

Our business and marketing strategy for the Resort is to create a
vibrant and energetic entertainment and gaming environment that primarily
appeals to a customer base of youthful individuals. We successfully use the Hard
Rock theme, vibrant atmosphere and personalized service to differentiate the
facility from the substantially larger "mega resorts" approximately one mile
west on the Las Vegas Strip. Key elements of our strategy include the following:

2

UNIQUE TARGET CLIENTELE. We have successfully differentiated the Resort
in the Las Vegas market by targeting a predominantly youthful and "hip" customer
base, which management believes consists primarily of rock music fans and
youthful individuals, as well as actors, musicians and other members of the
entertainment industry. We believe that these customers form a combined
demographic group that is currently underserved by competing facilities.

"HIP" ENTERTAINMENT. The Joint has hosted a variety of famous rock
singers and popular music groups which in 2000 included, among others, Lenny
Kravitz, Santana, Don Henley, Stone Temple Pilots, Ozzy Osborne, No Doubt,
Destiny's Child, The Cure, Styx, Ringo Starr and John Lee Hooker. We believe
that the Joint has become a favorite venue for musicians and guests due to
its relatively small capacity and intimate atmosphere.

The Resort has also hosted special events such as a post awards
party for Fox Broadcasting's Billboard Music Awards, The King of the Beach
Invitational, a pro volleyball tournament and VH-1's Fairway To Heaven, a
celebrity golf tournament. We believe that The Joint's concerts and the
Resort's special events generate significant worldwide publicity and
reinforce the Resort's marquee image and unique position in the Las Vegas
marketplace.

GAMING MIX TARGETED TO CUSTOMER BASE. As of December 31, 2000, the
casino included 674 slot machines, 76 table games and a 1,200 square-foot race
and sports book. Our target gaming customer has a higher propensity to play
table games and we strive to create a fun and enthusiastic gaming environment
through the use of music themed gaming chips and playing surfaces and by
promoting interaction between table game dealers and customers. The casino also
features the latest slot machines, some of which reflect the Resort's rock music
theme, as well as more traditional machines.

SIGNIFICANT REVENUE FROM NON-GAMING OPERATIONS. We derive a majority of
our revenues from non-gaming operations. Our hotel, beach club, retail, food and
beverage, and other operations allow us to market the Resort as a full-service
destination. Our diversified revenue base allows us to be less dependent on the
casino as a source of revenues and profits, which we believe results in less
volatility in our earnings.

UNSURPASSED CUSTOMER SERVICE. One of the cornerstones of our business
strategy is to provide our customers with an extraordinary level of personal
service. Our management trains our employees to interact with guests and
continually strives to instill in each employee a dedication to superior service
designed to exceed guests' expectations. Mr. Morton is a visible proponent of
the Resort's emphasis on customer service and regularly speaks to employees and
customers. In addition, Mr. Morton and other members of management personally
respond to suggestions made on comment cards placed in each of the Resort's
hotel rooms.

LOCATION

The Resort occupies one of the most highly visible and easily
accessible sites in Las Vegas. It is located on approximately 16.7 acres of land
near the intersection of Paradise Road and Harmon Avenue, approximately two
miles from McCarran International Airport and approximately one mile east of the
Strip, the main tourist area in Las Vegas. The Resort represents an attractive
alternative for tourists, business travelers and locals who wish to avoid the
crowds and congestion of the Strip, while maintaining close and easy access to
the Strip. We have agreements with major hotels and casinos and retail
establishments pursuant to which shuttle services are provided between such
locations and the Resort. The Resort's location is particularly attractive due
to its proximity to:

- a high concentration of popular Las Vegas restaurants and
nightclubs,

- the Las Vegas Convention Center,

- the Thomas & Mack Center at the University of Nevada Las
Vegas, Las Vegas' primary sporting and special events arena,
and

- a number of non-gaming hotels, which have an aggregate of more
than 1,000 guest rooms.

3

THE RESORT

The Resort currently consists of the hotel, casino, retail store,
Baby's nightclub, banquet facility, The Joint, beach club, six restaurants, four
cocktail lounges, and Rock Spa.

THE HOTEL. The hotel's eleven-story tower houses 657 spacious hotel
rooms, including 594 guest rooms and 63 suites. The guest rooms and deluxe
suites average approximately 500 square feet in size, which is larger than the
size of the average Las Vegas hotel room. Consistent with the Resort's
distinctive decor, the hotel rooms are stylishly furnished with modern
furniture, stainless steel bathroom sinks, pedestal beds with leather headboards
and black-and-white photos of famous rock musicians. The rooms also include
special amenities such as large 27-inch screen televisions, stereo systems and
French doors that open to the outdoors. A full-service concierge and 24-hour
room service are available to all guests of the hotel.

The following table illustrates certain historical information relating
to the hotel for the last three fiscal years:

MONTH
YEAR ENDED ENDED
---------------------------------------------- ----------------
DECEMBER 31, NOVEMBER 30, NOVEMBER 30, DECEMBER 31,
2000 1999 1998 1999
--------------- -------------- -------------- ----------------

Number of hotel rooms............................... 657 657 339 657
Average occupancy rate (1).......................... 94.8% 94.5% 100.0% 72.1%
Average daily rate (1).............................. $109.30 $ 97.41 $ 97.34 $ 98.60

- -----------------------
(1) Includes rooms provided on a complimentary basis

THE CASINO. The innovative, distinctive style of the 30,000 square-foot
circular casino is a major attraction for both Las Vegas visitors and local
residents. The casino is designed with an innovative circular layout around the
elevated Center Bar, which allows the casino's patrons to see and be seen from
nearly every area of the casino. Rock music is played continuously to provide
the casino with an energetic and entertaining, club-like atmosphere. In
addition, the casino promotes a friendly, intimate atmosphere by encouraging its
employees to smile at and interact with casino players. Dealers, for example,
are encouraged to "High Five" winning players.

The casino houses 76 table games including Blackjack, Craps,
Roulette, Caribbean Stud Poker, Baccarat, Mini-Baccarat and Pai-Gow Poker,
674 slot and video poker machines, an approximate 1,200 square-foot race and
sports book as well as the 2,000 square-foot Center Bar. Some of the Casino's
gaming equipment is periodically themed to coincide with various
entertainment events such as slot machines and gaming chips featuring Playboy
artwork introduced during the release, in March 2001, of their "Girls of the
Hard Rock" magazine and video premier event held in the Joint. Other gaming
equipment has been music themed including guitar-neck-shaped levers on slot
machines, piano keyboards on roulette tables and gaming chips featuring the
likeness of artists such as Lenny Kravitz and Van Morrison. The casino also
offers patrons other attractions, such as cutting edge slot technology,
proprietary slot graphics and distinctive slot signage.

RETAIL. The Resort's retail operations consist of the Retail Store, a
3,600 square-foot retail shop, located at the Resort, and sales through our
Internet web site. Visitors may purchase shirts, hats, pins, golf bags,
children's clothing, stationary, leather jackets, collectible pin sets, sundry
items and a variety of other merchandise displaying the popular "Hard Rock
Hotel" and "HRH" logos from the Retail Store, through the web site and from a
sundry store located in the Resort. Our retail operations offer a convenient and
inexpensive outlet to market and advertise the "Hard Rock Hotel" trademark and
attract other Las Vegas visitors to the Resort. Our in-house design team is
responsible for maintaining the consistency of the Resort's image while creating
new merchandise to expand and diversify the retail selection.

BABY'S. Baby's is an approximately 11,500 square-foot facility, with an
800 person capacity, featuring three rooms on two levels, including a sunken
dance floor, three bars and state-of-the-art lighting and sound equipment. We
fly popular and innovative DJs in from all around the country to provide the
proper entertainment to attract our target clientele.

BANQUET FACILITY. Our 6,000 square-foot conference center and
entertainment area has capacity for 390 persons. The state-of-the-art facility
is located adjacent to the Beach Club area and can accommodate one large
event/group and has the capability of being separated into three distinct 2,000
square-foot areas.

4

THE JOINT. As a live music venue with capacity for 2,050 persons,
The Joint successfully draws audiences from Las Vegas visitors and from the
local Las Vegas population. We believe that as a result of hosting concerts
by famous musicians which in 2000 included, among others, Lenny Kravitz,
Santana, Don Henley, Stone Temple Pilots, Ozzy Osborne, No Doubt, Destiny's
Child, The Cure, Styx, Ringo Starr and John Lee Hooker, the Joint has become
a premier venue in Las Vegas for live popular music. We also believe that the
Joint has become a favorite venue for musicians and guests due to its
relatively small capacity and intimate atmosphere. The Resort has also hosted
special events such as a post awards party for Fox Broadcasting's Billboard
Music Awards, The King of the Beach Invitational, a pro volleyball tournament
and VH-1's Fairway To Heaven, a celebrity golf tournament. We believe that
The Joint's concerts and the Resort's special events generate significant
worldwide publicity, reinforce the Resort's marquee image and unique position
in the Las Vegas marketplace and provide an added source of visitors for the
hotel, casino, retail and food and beverage operations.

THE BEACH CLUB. The Beach Club features a 300-foot long, sand
bottomed pool with a water slide, a running stream and underwater rock music.
The Beach Club also features beaches with white sand imported from Monterey,
California, rock outcroppings and whirlpools. In addition, the Beach Club
features swim-up blackjack, a Beach Club bar and grill, 53 Tahitian-style
private cabanas, and a removable dance floor which extends from one of the
beach areas, providing the perfect party space amid thousands of tons of
imported sand. The private cabanas include water misters, a refrigerator, a
television and (for an additional fee) an on-site massage service.

FOOD AND BEVERAGE. The Resort offers its patrons a selection of
high-quality food and beverages at multiple price points. The Resort's food
and beverage operations include five restaurants (AJ's Steakhouse, Pink Taco,
Mortoni's, Mr. Lucky's, and Nobu), three bars in the casino (the Las Vegas
Lounge, Sports Deluxe and Center Bar), three bars in The Joint, a bar at the
Beach Club and catering service for corporate events, conventions, banquets
and parties. AJ's Steakhouse, with seating capacity for approximately 100
persons, is reminiscent of classic steakhouses that reigned in 60's Las
Vegas, with an open kitchen, and serves prime Chicago stockyard beef. Pink
Taco, with seating capacity of approximately 150 persons, is a hip authentic
Mexican eatery with seasonal outside dining. Mortoni's, an elegant restaurant
with seating capacity for approximately 110 persons, serves upscale Italian
cuisine. Mr. Lucky's, a 24-hour restaurant with seating capacity for
approximately 200 persons, specializes in high-quality, moderately priced
American cuisine. Nobu, with seating capacity of approximately 120 persons,
is a ground breaking temple of Japanese cuisine with Latin American
influences created by Master Chef Nobu Matsuhisa and owned and operated
independently of the Resort.

Both the 1,800 square-foot Las Vegas Lounge and the 1,963 square-foot
Center Bar have become popular with both Las Vegas tourists and local residents
who are attracted to the Resort's entertainment and vibrant, energetic
atmosphere. As a result, these bars frequently reach their service capacity on
weekends, holidays and when special events and concerts are held in The Joint or
at the Beach Club. In addition, The Joint and the Beach Club offer their
customers a limited selection of menu items and beverages.

THE ROCK SPA. Our state-of-the-art health club and spa facilities
feature amenities such as treadmills, stair-masters, stationary bicycles, CYBEX
machines, a variety of free-weights, steam rooms, showers, massage, facial and
other personal services. We believe the Rock Spa is a facility suitable for a
first-class destination resort.

BANQUETS AND CORPORATE EVENTS. The Resort hosts a number of corporate
events, conventions, banquets and private parties for up to 3,000 persons. Past
clients include Callaway Golf, ESPN, HBO, VH1, Red Bull, PeopleSoft, Coors
Brewing Co., MCI Worldcom, and Sprint PCS. Depending upon the size of the event,
customers can choose to host their corporate functions, conventions and banquets
either indoors, at The Joint or in the Banquet facility, or outdoors, around the
swimming pool at the Beach Club.

5

MARKETING

Our marketing efforts are targeted at both the visitor market (tourists
and business travelers) as well as local patrons. Our marketing department uses
both traditional and innovative marketing strategies to promote the "Hard Rock
Hotel" and "Hard Rock Casino" trademarks. We employ targeted marketing programs
through use of our database, which contains approximately 770,000 names. The
Resort is aggressively marketed not only through domestic and international
public relations activities, direct mail, print, radio and television
advertising, but also through special arrangements with various members of the
entertainment industry. For example, in January 2001, Howard Stern broadcasted
live from the casino following the Superbowl, reaching approximately 20 million
of his listeners, during which his show's sponsors provided for a $100,000
blackjack bet for charity and in March 2001 Playboy released its April magazine
issue and a video each featuring "Girls of the Hard Rock." In addition, for the
past four years we have provided a number of rooms for the BILLBOARD Music
Awards televised on Fox Network TV in exchange for frequent media exposure
during the telecast. The Resort also hosts many well-publicized and often
televised events such as segments of, and the post-awards party for, the Major
League Baseball's Players Choice Awards, VH-1's Fairway to Heaven Celebrity Golf
Tournament, and the King of the Beach Pro Volleyball Tournament. We believe that
these types of events are held at the Resort because its stylish and distinctive
atmosphere is consistent with the theme of the events. The events, in turn,
reinforce the Resort's image as a destination resort among its target clientele.
The concerts in The Joint by popular artists, some of which have been televised,
are another form of promotional activity that reinforces the Resort's image.

The casino marketing staff has developed the Back Stage Pass program
for visitors to the casino. The Back Stage Pass is a casino player tracking
card. The program, which is available to all casino visitors, tracks each
patron's gaming record, and based on the level of gaming activity, members may
become eligible for discounted or complimentary services, invitations to special
events and merchandise at the Resort. Every visitor who joins the Back Stage
Pass program receives a Six-Pac of coupons redeemable at the Resort. The coupons
are redeemable for certain items available at the Resort such as a complimentary
shot glass or a reduced weekday room rate.

Management targets local residents through direct mail advertising as
well as through hosting special events and parties specifically geared to the
local population. In addition, management believes the off-Strip location and
close proximity to a variety of restaurants and nightclubs attracts local
residents to the Resort.

TRADEMARKS

Hard Rock Hotel-Registered Trademark- and Hard Rock Cafe-Registered
Trademark- are registered trademarks of a wholly owned subsidiary of Rank
Organization plc. Upon the sale of Mr. Morton's interest in the Hard Rock Cafes
to Rank, in June 1996, Mr. Morton and Rank entered into a trademark licensing
agreement pursuant to which Rank granted to Mr. Morton an exclusive, perpetual,
royalty-free license (subject to certain termination provisions designed to
protect the quality of the trademarks) to use the "Hard Rock Hotel" and "Hard
Rock Casino" trademarks in connection with hotel casinos and casinos in the
"Morton Territory" areas of the United States west of the Mississippi River plus
Illinois and Louisiana, but excluding Texas (other than Houston), and in
Australia, Brazil, Israel, Venezuela and metropolitan Vancouver, British
Columbia. Mr. Morton has sublicensed to us the right to use the "Hard Rock
Hotel" and "Hard Rock Casino" trademarks at the Resort's location in Las Vegas
(subject to certain termination provisions designed to protect the quality of
the trademarks) for a term lasting as long as we shall have any outstanding
indebtedness pursuant to our outstanding 9 1/4% Senior Subordinated Notes due
2005 or our current credit facility.

LAS VEGAS MARKET

Las Vegas is one of the fastest growing and largest entertainment
markets in the United States. For fiscal year 2000, gaming revenues in Clark
County reached a new 12-month record of $7.7 billion. The number of visitors
traveling to Las Vegas has increased at a steady and significant rate, from 17.2
million visitors in 1988 to a record 35.8 million in 2000, representing a
compound annual growth rate of 6.3%. Aggregate expenditures by Las Vegas
visitors increased at a compound annual growth rate of 10.0% from $10.0 billion
in 1988 to $31.5 billion in 2000. The number of hotel and motel

6

rooms in Las Vegas increased at a compound annual growth rate of 5.2% from
67,391 in 1989 to 124,270 in 2000. We believe that the addition of quality
themed hotel casinos and resorts during recent years will continue to increase
visitor traffic to Las Vegas and we will benefit in particular due to our unique
niche and proximity to the Strip.

The following table sets forth certain statistical information for the
Las Vegas market for the years 1996 through 2000, as reported by the Las Vegas
Convention and Visitor Authority.

LAS VEGAS MARKET STATISTICS

2000 1999 1998 1997 1996
---- ---- ---- ---- ----

Visitor Volume (in thousands) 35,850 33,809 30,605 30,465 29,002

Clark County Gaming Revenues (in millions) $7,673 $7,209 $6,347 $6,152 $5,718

Hotel/Motel Rooms 124,270 120,294 109,365 105,347 90,046

Airport Passenger Traffic (in thousands) 39,776 33,669 30,227 30,306 28,027

Convention Attendance (in thousands) 3,853 3,773 3,302 3,519 2,925

COMPETITION

The Resort, located less than one mile east of the Strip, competes with
other high-quality Las Vegas resorts and other Las Vegas hotel casinos,
including those located on the Strip, on the basis of overall atmosphere, range
of amenities, price, location, entertainment offered, theme and size. Currently,
there are approximately 29 major gaming properties located on or near the Strip,
13 additional major gaming properties in the downtown area and additional gaming
properties located in other areas of Las Vegas. Many of the competing
properties, such as the Rio, Mandalay Bay, Paris, The Venetian, The Mirage,
Treasure Island, Caesar's Place, Luxor, New York-New York, Bellagio, Aladdin and
the MGM Grand have themes and attractions which draw a significant number of
visitors and directly compete with our operations. Some of these facilities are
operated by companies that have more than one operating facility and may have
greater name recognition and financial and marketing resources than us and
market to the same target demographic group as we do. Furthermore, additional
hotel casinos, containing a significant number of hotel rooms, are expected to
open in Las Vegas within the coming years. There can be no assurance that the
Las Vegas market will continue to grow or that hotel casino resorts will
continue to be popular, and a decline or leveling off of the growth or
popularity of such facilities would adversely affect our financial condition and
results of operations.

We will also face competition from competing "Hard Rock" hotels and
hotel casinos that may be established in jurisdictions other than Las Vegas. We
have the exclusive right to use the "Hard Rock Hotel" and "Hard Rock Casino"
trademarks only in connection with the Resort in Las Vegas. Mr. Morton holds the
exclusive rights to exploit such trademarks in connection with hotel casinos and
casinos in other parts of the Morton Territory, and Rank holds such rights in
the remainder of the world. Neither Mr. Morton nor Rank may open a hotel/casino
or casino using the "Hard Rock" name in Las Vegas. Rank has the right to open
hotels (without casinos) using the "Hard Rock" name anywhere outside of the
State of Nevada.

To a lesser extent, the Resort competes with hotel casinos in the
Mesquite, Laughlin, Reno and Lake Tahoe areas of Nevada, and in Atlantic City,
New Jersey. The Resort also competes with state-sponsored lotteries, on- and
off-track wagering, card parlors, riverboat and Native American gaming
ventures, and other forms of legalized gaming in the United States, as well as
with gaming on cruise ships, Internet gaming ventures and international gaming
operations. In 1998, California enacted The Tribal Government Gaming and
Economic Self-Sufficiency Act (the "Tribal Act"). The Tribal Act provides a
mechanism for federally recognized Native American

7

tribes to conduct certain types of gaming on their land. The California
electorate approved Proposition 1A on March 7, 2000. Proposition 1A gives all
California Indian tribes the right to operate a limited number of certain kinds
of gaming machines and other forms of casino wagering on California Indian
reservations. Continued proliferation of gaming activities permitted by
Proposition 1A may materially negatively affect Nevada gaming markets and our
financial position and results of operations. Management is unable, however, to
assess the magnitude of the impact on us. See "Risk Factors-Recently Enacted and
Possible Legislation."

EMPLOYEES

As of December 31, 2000, we had approximately 862 full-time employees
and 652 on-call employees who are employed on an as-needed basis. None of our
employees are members of unions; however, various unions have been aggressively
soliciting new members in Las Vegas. We cannot assure that one or more unions
will not approach our employees. We consider our relations with our employees to
be good and have never experienced an organized work stoppage, strike or labor
dispute.

REGULATION AND LICENSING

The ownership and operation of casino gaming facilities in Nevada
are subject to: (i) the Nevada Gaming Control Act and the regulations
promulgated thereunder (collectively the "Nevada Act"); and (ii) various
local regulations. The Company's gaming operations are subject to the
licensing and regulatory control of the Nevada Gaming Commission (the "Nevada
Commission"), the Nevada State Gaming Control Board (the "Nevada Board") and
the Clark County Liquor and Gaming Licensing Board (the "CCLGLB" and,
together with the Nevada Commission and the Nevada Board, the "Nevada Gaming
Authorities").

The laws, regulations and supervisory procedures of the Nevada
Gaming Authorities are based upon declarations of public policy which are
concerned with, among other things: (i) the prevention of unsavory or
unsuitable persons from having a direct or indirect involvement with gaming
at any time or in any capacity; (ii) the establishment and maintenance of
responsible accounting practices and procedures; (iii) the maintenance of
effective controls over the financial practices of licensees, including the
establishment of minimum procedures for internal fiscal affairs and the
safeguarding of assets and revenues, providing reliable record keeping and
requiring the filing of periodic reports with the Nevada Gaming Authorities;
(iv) the prevention of cheating and fraudulent practices; and (v) to provide
a source of state and local revenues through taxation and licensing fees.
Changes in such laws, regulations and procedures could have an adverse effect
on the Company's gaming operations.

The Company is required to be licensed by the Nevada Gaming
Authorities. The gaming license requires the periodic payment of fees and
taxes and is not transferable. No person may become a stockholder of, or
receive any percentage of profits from the Company without first obtaining
licenses and approvals from the Nevada Gaming Authorities. The Company has
obtained from the Nevada Gaming Authorities the various approvals, permits
and licenses required in order to engage in its current gaming activities in
Nevada. The Company has received, subject to certain conditions, all
additional approvals, registrations and regulation waivers that were required
for the issuance of up to $120,000,000 aggregate principal amount of 9 1/4%
Senior Subordinated Notes due 2005 (the "Notes").

The Nevada Gaming Authorities may investigate any individual who has
a material relationship to, or material involvement with, the Company in
order to determine whether such individual is suitable or should be licensed
as a business associate of a gaming licensee. Officers, directors and some of
the key employees of the Company must file applications with the Nevada
Gaming Authorities and may be required to be licensed or found suitable by
the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an
application for licensing for any cause that they deem reasonable. A finding
of suitability is comparable to licensing, and both require submission of
detailed personal and financial information followed by a thorough
investigation in which the burden of proving one's suitability is always on
the applicant. The applicant for licensing or a finding of suitability must
pay all the costs of the investigation. Changes in licensed positions must be
reported to the Nevada Gaming Authorities and in addition to their authority
to deny an application for a finding of suitability for license, the Nevada
Gaming Authorities have jurisdiction to disapprove a change in a corporate
position.

8

If the Nevada Gaming Authorities were to find an officer, director
or key employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company, the Company would have to sever all
relationships with such person. In addition, the Nevada Commission may
require the Company to terminate the employment of any person who refuses to
file appropriate applications. Determinations of suitability or of questions
pertaining to licensing are not subject to judicial review in Nevada.

The Company is required to submit detailed financial and operating
reports to the Nevada Commission. Substantially all material loans, leases,
sales of securities and similar financing transactions by the Company must be
reported to, or approved by, the Nevada Commission.

If it were determined that the Nevada Act was violated by the
Company, the gaming licenses we hold could be limited, conditioned, suspended
or revoked, subject to compliance with certain statutory and regulatory
procedures. In addition, the Company and the persons involved could be
subject to substantial fines for each separate violation of the Nevada Act at
the discretion of the Nevada Commission. Further, a supervisor could be
appointed by the Nevada Commission to operate the Company's gaming properties
and, under certain circumstances, earnings generated during the supervisor's
appointment (except for the reasonable rental value of the Company's gaming
properties) could be forfeited to the State of Nevada. 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 the Company's gaming operations.

Any beneficial owner of the Company's voting securities, regardless
of the number of shares owned, may be required to file an application, be
investigated, and have his suitability as a beneficial owner of our equity
securities determined if the Nevada Commission has reason to believe that
such ownership would otherwise be inconsistent with the declared policies of
the State of Nevada. The applicant must pay all costs of investigation
incurred by the Nevada Gaming Authorities in conducting any such
investigation.

The Nevada Act provides that each person who acquires, directly or
indirectly, beneficial ownership of any debt security in a publicly
registered corporation which is registered with the Nevada Commission (a
"Registered Corporation") may be required to be found suitable if the Nevada
Commission has reason to believe that the acquisition of such debt security
would otherwise be inconsistent with the declared policy of the State of
Nevada. In addition, the beneficial owners of the Class A and Class B common
stock of the Company are prohibited from selling, assigning, transferring,
pledging or otherwise disposing of such stock without the prior approval of
the Nevada Commission.

The Nevada Act requires any person who acquires beneficial ownership
of more than 5% of a Registered Corporation's voting securities to report the
acquisition to the Nevada Commission. The Nevada Act requires that beneficial
owners of more than 10% of the voting securities of a Registered Corporation
apply to the Nevada Commission for a finding of suitability within thirty
days after the Chairman of the Nevada Board mails the written notice
requiring such filing. Under certain circumstances, an "institutional
investor," as defined in the Nevada Act, which acquires more than 10%, but
not more than 15%, of a Registered Corporation's voting securities may apply
to the Nevada Commission for a waiver or such finding of suitability if such
institutional investor holds the voting securities for "investment
purposes only." An institutional investor shall not be deemed to hold voting
securities for investment purposes unless the voting securities were acquired
and are held in the ordinary course of business as an institutional investor
and not for the purpose of causing, directly or indirectly, the election of a
majority of the members of the board of directors of the Registered
Corporation, any change in the corporate charter, bylaws, management,
policies or operations of the Registered Corporation, or any of its gaming
affiliates, or any other action which the Nevada Commission finds to be
inconsistent with holding the Registered Corporation's voting securities for
investment purposes only. Activities which are not deemed to be inconsistent
with holding voting securities for investment purposes only include: (i)
voting on all matters voted on by stockholders; (ii) making financial and
other inquiries of management of the type normally made by securities
analysts for informational purposes and not to cause a change in its management,
policies or operations; and (iii) such other activities as the Nevada
Commission may determine to be consistent with such investment intent. If the
beneficial holder of voting securities 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. The applicant
is required to pay all costs of investigation. Under certain circumstances,
the Nevada Commission may find that an entity qualifies as an "institutional
investor" even if the interest held is not a publicly registered company.
However, the same maximum investment of 15% of the equity would remain.

Any person who fails or refuses to apply for a finding of
suitability or a license within thirty days after being ordered to do so by
the Nevada Commission or the Chairman of the Nevada Board, may be found
unsuitable. The same restrictions apply to a record owner if the record
owner, after request, fails to identify the beneficial owner. Any stockholder
found unsuitable and who holds, directly or indirectly, any beneficial
ownership of the common stock of a Registered Corporation beyond such period
of time as may be prescribed by the Nevada Commission may be guilty of a
criminal offense. The Company is subject to disciplinary action if, after it
receives notice that a person is unsuitable to be a stockholder or to have
any other relationship with the Company, the Company (i) pays that person any
dividend or interest upon our voting securities, (ii) allows that person to
exercise, directly or indirectly, any voting right conferred through
securities held by that person, (iii) pays remuneration in any form to that
person for services rendered or otherwise, or (iv) fails to pursue all lawful
efforts to require such unsuitable person to relinquish his voting securities
for cash at fair market value. Additionally, pursuant to the Clark County
Code, the CCLGLB has the authority to approve all persons owning or
controlling the stock of any corporation controlling a gaming license.

The Nevada Commission may, in its discretion, require the holder of any
debt security of a Registered Corporation to file applications, be investigated
and be found suitable to own the debt security of a Registered Corporation. If
the Nevada Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the Registered Corporation can be
sanctioned, including the loss of its approvals, if without the prior approval
of the Nevada Commission, it: (i) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever; (ii) recognizes any voting rights by
such unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any

9

form; or (iv) makes any payment to the unsuitable person by way of principal,
redemption, conversion, exchange, liquidation, or similar transaction.

The Company is required to maintain a current stock ledger in Nevada
that may be examined by the Nevada Gaming Authorities at any time. If any
securities 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
Nevada Gaming Authorities. A failure to make such disclosure may be grounds
for finding the record holder unsuitable. The Company is also required to
render maximum assistance in determining the identity of the beneficial
owner. The Nevada Commission has the power to require the Company's stock
certificates to bear a legend indicating that the securities are subject to
the Nevada Act. Due to the fact that the Company is a corporate gaming
licensee, the Company's stock certificates carry a restrictive legend
indicating the Company's stock is subject to the Nevada Act. Furthermore, any
negative covenant that restricts the transfer of the stock of a corporate
licensee may require the prior approval of the Nevada Commission.

The Company may not make a public offering of our securities without
the prior approval of the Nevada Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. Such approval does not constitute a finding, recommendation or
approval by the Nevada Commission or the Nevada Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities. Any
representation to the contrary is unlawful. The Company has applied for and
received, subject to certain conditions, approval as a Registered Corporation
based upon its debt offering as well as a waiver of certain regulations of
the Nevada Commission that prohibit a public offering by a corporation
holding a Nevada gaming license. Such approval does not constitute a finding,
recommendation or approval by the Nevada Commission or the Nevada Board as to
the accuracy or adequacy of the prospectus or the investment merits of the
debt securities offered. Any representation to the contrary is unlawful.

Changes in control of the Company through merger, consolidation,
stock or asset acquisition, management or consulting agreements, or any act
or conduct by a person whereby he obtains control, may not occur without the
prior approval of the Nevada Commission. Entities seeking to acquire control
of a Registered Corporation must satisfy the Nevada Board and Nevada
Commission in a variety of stringent standards prior to assuming control of
such Registered Corporation. The Nevada 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 prior approval
process relating to the transaction.

The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada gaming licenses, and Registered Corporations that
are affiliated with these operations, may be injurious to stable and
productive corporate gaming. The Nevada Commission has established a
regulatory scheme to ameliorate the potentially adverse effects of these
business practices upon Nevada's gaming industry and to further Nevada'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 Nevada Commission before the Company can
make exceptional repurchases of voting securities above the current market
price thereof and before a corporate acquisition opposed by management can be
consummated. The Nevada Act also requires prior approval of a plan of
recapitalization proposed by the Company's Board of Directors in response to
a tender offer made directly to the Registered Corporation's stockholders for
the purposes of acquiring control of the Registered Corporation.

License fees and taxes, computed in various ways depending on the type
of gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; (iii) the number of table games operated; or (iv) a
percentage of the room rate charged for each occupied room. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food or refreshments.

10

Any person who is licensed, required to be licensed, registered,
required to be registered, or is under common control with such persons (each a
"Licensee"), and who proposes to become involved in a gaming venture outside of
Nevada is required to deposit with the Nevada Board, and thereafter maintain, a
revolving fund in the amount of $10,000 to pay the ongoing expenses of
investigation by the Nevada Board of their participation in such foreign gaming.
The revolving fund is subject to increase or decrease in the discretion of the
Nevada Commission. Thereafter, Licensees are required to comply with certain
reporting requirements imposed by the Nevada Act. Licensees are also subject to
disciplinary action by the Nevada Commission if the Licensee knowingly violates
any laws of the foreign jurisdiction pertaining to the foreign gaming operation,
fails to conduct the foreign gaming operation in accordance with the standards
of honesty and integrity required of Nevada gaming operations, engages in
activities that are harmful to the State of Nevada or its ability to collect
gaming taxes and fees, or employs a person in the foreign operation who has been
denied a license or finding of suitability in Nevada on the ground of personal
unsuitability.

The Company has established, and will be required to maintain, a
Gaming Compliance Program for the purpose of, at a minimum, performing due
diligence, determining the suitability of relationships with other entities
and individuals and to review and ensure compliance by the Company, its
subsidiaries and any affiliated entities, with the Act and Regulations and
the laws and regulations of any other jurisdiction in which the Company or
its subsidiaries or affiliates operate. The Gaming Compliance Program, any
amendments there to, and the members, one such member which shall be
independent, shall be administratively reviewed and approved by the Chairman
of the Nevada Board. The Company shall amend the compliance program, or any
element thereof, and perform such duties as may be assigned by the Chairman
of the Nevada Board or his designee, related to review of activities relevant
to the continuing qualification of the Company.

RISK FACTORS

Some of the risks we are subject to include:

OUR SIGNIFICANT LEVERAGE WILL SEVERELY RESTRICT OUR FINANCING OPTIONS AND WILL
RESULT IN HIGH INTEREST PAYMENTS

We are highly leveraged. We recorded net losses the last four years. As
of December 31, 2000, our total debt was $157.5 million. We have $4.5 million of
available borrowings under our current credit facility. The consequences of our
leverage include, but are not limited to, the following:

- upon full use of our current credit facility, interest payments will be
approximately $15.5 million per year, $20.3 million per year including
cumulative dividends on our preferred stock that will accrue if not
paid, and which will require a substantial portion of our expected
annual cash from operations,

- our ability to obtain additional financing in the future for working
capital, capital expenditures, development financing or other purposes
may be limited, and

- we will be susceptible to adverse changes in the economy and the Las
Vegas gaming market.

Furthermore, our current debt imposes certain operating and
financial restrictions on us. Such restrictions limit, among other things,
our ability to incur additional indebtedness, create liens on our assets,
sell assets or engage in mergers or consolidations, make investments, pay
dividends or engage in intracorporate transactions. Our failure to comply
with numerous restrictive covenants contained in our debt agreements may
result in a default, which, if not cured or waived, could have a material
adverse effect on our business and results of operations.

OUR FAILURE TO GENERATE SUFFICIENT REVENUE TO REPAY DEBT WOULD RESULT IN OUR
REQUIREMENT OF ADDITIONAL FUNDING WHICH WE MAY NOT BE ABLE TO ARRANGE

We will be dependent to a significant extent upon the successful
operation of the Resort for coverage of our debt service. Our future operating
performance is itself dependent on a number of factors, many of which are
outside of our control, including prevailing economic conditions

11

and financial, business, regulatory and other factors. There can be no assurance
that our future cash flows will be sufficient to meet all of our obligations and
commitments.

If we are unable to generate sufficient cash from our future operations
to satisfy any debt service requirements, or to pay our debts as they mature, we
would be required to explore alternatives, such as seeking additional debt or
equity financing, reducing or delaying capital expenditures or selling material
assets or operations. We cannot assure that we would be successful in
implementing any of these alternatives, if necessary. Also, Nevada law contains
certain restrictions on the ability of companies engaged in the gaming business
to undertake certain financing transactions. These restrictions, which are
described in "Business-Regulation and Licensing" and "-Government Regulation"
could cause delays in obtaining necessary capital.

OUR FAILURE TO SATISFY OUR OBLIGATIONS UNDER OUR CREDIT FACILITY COULD RESULT IN
THE LOSS OF SUBSTANTIALLY ALL OF OUR ASSETS

We are dependent on the availability of our credit facility to fund our
continued operations. If we default on our indebtedness, either by failing to
make required payments or by breaching a covenant, the lenders under the credit
facility could elect to:

- declare all borrowings to be due and payable, together with accrued and
unpaid interest, and

- terminate their commitments.

If the lenders for any reason require early repayment of the funds
borrowed pursuant to the credit facility, or fail to provide funds pursuant to
the credit facility, we may not be able to repay that indebtedness or continue
to operate.

Our obligations under the credit facility are secured by liens on
substantially all of our assets. Upon an event of default and acceleration under
the credit facility the lenders may exercise the right to control the operation
of the Resort. That right is subject to prior approval by the Nevada Gaming
Authorities of their application to acquire control of the Resort.

Borrowings under the credit facility bear interest at floating rates
based on the Federal Funds Rate, the prime lending rate or LIBOR. Increases in
interest rates on indebtedness under the credit facility would increase our
interest payment obligations and could adversely effect our business and results
of operations. For more information, see "Quantitative and Qualitative
Disclosures About Market Risk."

WE ARE SUBJECT TO INTENSE LOCAL COMPETITION THAT COULD HINDER OUR ABILITY TO
OPERATE PROFITABLY

Our success is dependent upon the success of the Resort and its
continuing ability to attract visitors and operate profitably. However, our
operations are subject to significant business, economic, regulatory and
competitive uncertainties and contingencies, many of which are beyond our
control.

The Resort, located less than one mile east of the Strip, competes with
other high-quality Las Vegas resorts and other Las Vegas hotel casinos,
including those located on the Strip, on the basis of overall atmosphere, range
of amenities, price, location, entertainment offered, theme and size. See
"Business-Competition."

WE ALSO FACE COMPETITION FROM GAMBLING VENUES LOCATED IN OTHER PARTS OF THE
COUNTRY AND POTENTIALLY FROM OTHER "HARD ROCK" ENTERPRISES

We will also face competition from competing "Hard Rock" hotels and
casinos that may be established in jurisdictions other than Las Vegas. We cannot
assure that the development by Rank or Mr. Morton of other hotels and casinos
using names that include the phrase "Hard Rock" outside of Las Vegas will not
adversely affect us. See "Business-Competition" and "-Use of the `Hard Rock'
Brand Names by Entities Other Than Us Could Damage Our Business and Hurt Our
Results of Operations."

12

To a lesser extent, we compete with hotel casinos in the Mesquite,
Laughlin, Reno and Lake Tahoe areas of Nevada, Atlantic City, New Jersey and
other parts of the United States. We also compete with state-sponsored
lotteries, on- and off-track wagering, card parlors, riverboat and Native
American gaming ventures, and other forms of legalized gaming in the United
States, as well as with gaming on cruise ships, Internet gaming ventures and
international gaming operations. See "Business-Competition." Continued
proliferation of gaming activities could significantly and adversely affect our
business and results of operations. See "-Recently Enacted and Possible
Legislation Governing Gambling Activities Could Materially and Adversely Affect
Our Business."

Many of our competitors in the hotel casino industry are emphasizing or
are expected to emphasize their non-gaming businesses, including retail sales.
Consequently, we have recently experienced, and expect to continue to
experience, increased competition in the retail sales market in Las Vegas.

WE DEPEND UPON ONE KEY MARKET AND HAVE A LIMITED BASE OF OPERATIONS WHICH MAY
RESULT IN FLUCTUATIONS IN OUR OPERATING RESULTS AND INABILITY TO GENERATE
SUFFICIENT CASH FLOW TO FUND OUR WORKING CAPITAL NEEDS

All of our revenues are generated from the Resort. Our results of
operations are dependent on conditions in Las Vegas and, indirectly, Southern
California, where many of the Resort's targeted customers reside. A decline in
the local economies of Las Vegas or Southern California could have a negative
effect on our business and results of operations. In addition, because Las Vegas
draws from a national and international tourist base, a downturn in the domestic
or global economies could have a negative effect on our business and results of
operations. Furthermore, due to our single location, we are subject to greater
risks than a more diversified hotel and casino resort operator.

The combination of the single location and the significant investment
associated with it may cause our operating results to fluctuate significantly
and adversely affect us. Due to the single location, poor operating results at
the Resort would materially affect our total profitability. Future growth in
revenues and profits will depend to a large extent on our ability to
successfully generate cash flow from our single location sufficient for our
working capital needs.

WE RELY ON KEY PERSONNEL, THE LOSS OF THE SERVICES OF WHICH WOULD MATERIALLY AND
ADVERSELY AFFECT OUR RESULTS OF OPERATIONS

Our ability to operate successfully and competitively is dependent, in
part, upon the continued services of certain of our employees, particularly
Peter Morton, Chairman of the Board, Chief Executive Officer, President and
Secretary. In the event that Mr. Morton were to leave us, we might not be able
to find a suitable replacement. We believe that the loss of services by Mr.
Morton could have a material adverse effect on us. We do not maintain key man
life insurance for any officer or director, including Mr. Morton. Mr. Morton has
several outside business interests and may have additional business interests in
the future. Although Mr. Morton currently spends substantially all of his
business time on our business and operations, we cannot assure that he will do
so in the future.

Our shareholders, officers, directors and key employees, including Mr.
Morton, are required to file applications with the Nevada Gaming Authorities and
may be required to be licensed or found suitable by the Nevada Gaming
Authorities. The Nevada Gaming Authorities may deny any application for any
cause that they deem reasonable. In the event the Nevada Gaming Authorities were
to find any person unsuitable for licensing or unsuitable to continue having a
relationship with us, we would be required to sever all relationships with such
person. We cannot assure that any such person will be able to obtain or maintain
any requisite license or finding of suitability by the Nevada Gaming
Authorities.

WE ARE CONTROLLED ENTIRELY BY MR. MORTON

Mr. Morton beneficially owns over 90% of our outstanding common stock,
including 100% of our outstanding voting common stock. Thus, Mr. Morton controls
the election of our Board of Directors and can approve or disapprove any other
matters submitted to the stockholders.

13

LACK OF SIGNIFICANT OPERATING HISTORY WITH CURRENT MANAGEMENT

We have independently operated the Resort for only a little over three
years. During the past year, we have replaced the persons who served as our
Senior Vice President and General Manager and our Chief Financial Officer with
new people. Our continued success will depend on the successful management by
these new officers of our operations. We cannot assure that our new officers
will be able to successfully manage our operations effectively.

OUR OPERATIONS HAVE HISTORICALLY RESULTED IN NET LOSSES

We have recorded net losses for fiscal years 2000, 1999, 1998 and
1997. The $4.7 net loss applicable to common shareholders for the year ended
December 31, 2000 is attributable in part to the settlement of certain
litigation and claims and to disruption from the remodeling of a portion of
the hotel rooms in the Resort's original hotel tower. The net loss applicable
to common shareholders of $12.5 million for fiscal year 1999 is largely
attributable to a $5.0 million write-off of pre-opening expenses and
decreased revenues resulting from disruption caused by construction of the
Expansion. The net loss for the fiscal year ended November 30, 1998 of $3.7
million is largely attributable to the write-off of loan fees of $3.5 million
associated with the termination of our old credit facility and a $1.5 million
write-off of legal fees associated with non-recurring litigation. The net loss
for the fiscal year ended November 30, 1997 of $17.5 million is largely
attributable to the $24.7 million non-recurring charge we paid in connection
with the termination of the management agreement with Harveys Casino Resorts.
We cannot assure that we will not post a net loss in the future.

USE OF THE "HARD ROCK" BRAND NAMES BY ENTITIES OTHER THAN US COULD DAMAGE OUR
BUSINESS AND HURT OUR RESULTS OF OPERATIONS

We benefit from the global name recognition and reputation generated by
the Hard Rock Cafes that are operated by Rank. At present, Rank operates or
franchises over 100 Hard Rock Cafes located in the United States and abroad.
Rank is, however, under no obligation to continue to own, operate or franchise
the Hard Rock Cafes, and there can be no assurance that Rank will not sell,
change the focus of, or manage such restaurants in a manner that would adversely
affect the Resort.

In addition, although we have obtained the exclusive right to use and
develop the "Hard Rock Hotel" and "Hard Rock Casino" trademarks in connection
with the Resort in Las Vegas, a subsidiary of Rank is the sole owner of the
rights to the "Hard Rock Cafe," "Hard Rock Hotel" and "Hard Rock Casino"
trademarks. As a result, Rank or its licensee can exploit the "Hard Rock" name
and logo, other than in connection with hotel casinos and casinos in the Morton
Territory, including marketing "Hard Rock" merchandise, anywhere in the world.
There can be no assurance that our business and results of operations will not
be adversely affected by the management of the "Hard Rock" brand name.

GOVERNMENT REGULATION

The gaming operations and the ownership of our securities are subject
to extensive regulation by the Nevada Gaming Authorities. See "Business-
Regulation and Licensing." The Nevada Gaming Authorities have broad authority
with respect to licensing and registration of entities and individuals involved
with the Company.

Although the Company currently holds a gaming license issued by the
Nevada Gaming Authorities, the Nevada Gaming Authorities may, upon the
violation of a gaming law or regulation and after disciplinary complaint and
public hearing, among other things, revoke, suspend, limit or condition the
gaming license of any corporate entity (a "Corporate Licensee") or the
registration of a Registered Corporation or any entity registered as a
holding company of a Corporate Licensee or fine each person or entity or both
up to $250,000 for each violation. In addition, the Nevada Gaming Authorities
may revoke the license or finding of suitability of any officer, director,
controlling person, shareholder, noteholder or key employee of a licensed or
registered entity. If the Company's gaming licenses and/or registrations were
revoked for any reason, the Nevada Gaming Authorities could require the
closing of the Company's gaming operations, which would result in a material
adverse effect on the Company's business. The Company has been licensed and
certain of the Company's officers, directors, shareholders and key employees
either have been

14

found suitable, or have applied for findings of suitability with, the Nevada
Gaming Authorities.

Any future public offering of debt or equity securities by the
Company requires the prior approval of the Nevada Commission, if the
securities or the proceeds from the sale thereof are intended to be used by
us to pay for construction of, or to acquire an interest in, any gaming
facilities in Nevada, to finance the gaming operations of an affiliated
company or to retire or extend obligations incurred for any such purpose.

WE CANNOT ASSURE THAT THE MARKET DATA INCLUDED IN THIS REPORT IS ACCURATE

We have included in this report market data and information with
respect to the performance of other gaming entities that we believe to be
reasonably accurate. We have not independently verified this data and
information, which is subject to material uncertainties due to, among other
things, the unavailability of raw data, the voluntary nature of the data
gathering process and the inherent uncertainty of the estimation process.
Readers should not place undue reliance on this information as we cannot assure
that it is accurate in all material respects.

WE ARE SUBJECT TO ENVIRONMENTAL RISKS AND REGULATION WHICH COULD MATERIALLY AND
ADVERSELY AFFECT OUR BUSINESS AND RESULTS OF OPERATIONS

We have engaged in real estate development projects and have owned and
operated several parcels of real estate. As a result, we are subject to various
federal, state and local laws and regulations that make us liable for the costs
of cleaning up, and other costs relating to, releases of hazardous substances on
our property or at property to which we have sent solid or hazardous wastes. The
types of activities that can lead to environmental liability include discharges
to air and water, and handling and disposal of solid and hazardous waste.
Environmental laws and regulations may impose liability regardless of whether
the owner or operator caused or even knew of the contamination, and in some
cases, one's liability could exceed the value of the property itself. The
presence of hazardous substances, or the failure to properly remediate any
resulting contamination, may inhibit our ability to sell, lease or operate the
property or to borrow using the property as collateral. We do not have
environmental liability insurance to cover such events. Although there can be no
assurance, we are not aware of any condition at any of our current or past
properties that would have a material adverse effect on our business or results
of operations.

RECENTLY ENACTED AND POSSIBLE LEGISLATION GOVERNING GAMBLING ACTIVITIES COULD
MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS

We also compete to some extent with casinos in other states,
riverboat and Native American gaming ventures, state-sponsored lotteries, on-
and off-track wagering, card parlors and other forms of legalized gaiming in
the United States, as well as with gaming on cruise ships and international
gaming operations. In addition, certain states have recently legalized or are
considering legalizing casino gaming in specific geographical areas within
those states. Any future development of casinos, lotteries or other forms of
gaming in other states, particularly areas close to Nevada, such as
California, could have a material adverse effect on our results of
operations.

The number of casinos on Indian lands has increased since the
enactment of the Indian Gaming Regulatory Act of 1988. The voters in the
State of California addressed this issue on March 7, 2000 when they voted in
favor of Proposition 1A, an amendment to the California State constition that
allows Las Vegas-style gaming on Indian lands in the state. A number of
Native American tribes have already signed and others have begun negotiating
gaming compacts with the State of California. If the compacts are
subsequently approved by the federal government, Las Vegas-style gaming will
be legal in California on those tribal lands. At this time, we cannot
determine the impact this will have on our business. While new gaming
jurisdictions have traditionally not materially impacted Las Vegas, the
potential expansion of gaming into California poses a more serious threat to
the continued growth of Las Vegas.

Our current business is highly dependent on gaming in Las Vegas. We
derive a substantial percentage of our business from tourists principally
from Southern California and the southwestern United States. Weakness in the
economy of Southern California has in the past, and could in the future,
adversely affect our financial results. Recent electrical energy shortages,
and possible rate increases in California could also adversely affect our
financial results.

The National Gambling Impact Study Commission's recommendations may
adversely affect the gaming industry and our operations. A National Gambling
Impact Study Commission was established by the United States Congress to
conduct a comprehensive study of the social and economic impact of legal
gaming in the United States on April 28, 1999, the National Commission voted
to recommend that the expansion of gaming be curtailed. In June 1999, the
National Commission issued a final report of its findings and conclusions,
together with recommendations for legislative and administrative actions.

The United States Congress is presently considering a bill that
stems from a recommendation of the National Commission. This bill proposes to
completely ban betting on college and amateur sports in the United States,
including Nevada, and if enacted into law, would adversely affect the gaming
industry and materially and adversely impact our business and results of
operations.

15

Additionally, from time to time, certain federal legislators have
proposed the imposition of a federal tax on gaming revenues. Any such tax could
have a material adverse effect on our business and results of operations.

ITEM 2. PROPERTIES

We own approximately 16.7 acres of land in Las Vegas where the Resort
is located.

ITEM 3. LEGAL PROCEEDINGS

We are a defendant in various lawsuits relating to routine matters
incidental to our business. Management does not believe that the outcome of
any such litigation, in the aggregate, will have a material adverse effect on
our business or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during
the fourth quarter of fiscal year 2000.

16

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

There is no established public trading market for our common stock.

As of March 26, 2001, there was one holder of record of our Class A
Common Stock and 11 holders of record of our Class B Common Stock.

We have never paid any cash dividends on our common stock and do not
anticipate paying any cash dividends in the foreseeable future. Our outstanding
preferred stock and current debt limit our payment of dividends. We currently
intend to retain future earnings to help fund the development and growth of our
business.

On March 23, 1998, we consummated an offering of $120,000,000 aggregate
principal amount of the Notes, pursuant to exemptions from, or transactions not
subject to, the registration requirements of the Securities Act of 1933, as
amended, and applicable state securities laws. The net proceeds of the offering
were $115.9 million. The offering was underwritten by a syndicate managed by
Bear Stearns & Co., Inc. Following the offering, we effected an exchange offer,
registered under the Securities Act, pursuant to which the Series A 9 1/4%
Senior Subordinated Notes due 2005 were exchanged for Series B 9 1/4% Senior
Subordinated Notes due 2005 with substantially the same terms and conditions as
the Series A 9 1/4% Senior Subordinated Notes due 2005.

We used most of the net proceeds to repay amounts outstanding under a
$120,000,000 credit agreement that we entered into with a consortium of banks in
September of 1997. We used the remainder of the net proceeds, along with
borrowings under our current credit facility and cash flow from operations, to
fund our expansion of the Resort.

On August 31, October 1, October 29 and November 2, 1999 we issued
and sold $2.5 million, $5.5 million, $2.0 million and $18.0 million,
respectively, aggregate liquidations preference of our 9 1/4% Series A
Cumulative Preferred Stock to Mr. Morton. The issuance of the 9 1/4% Series A
Cumulative Preferred Stock was exempted from registration pursuant to Section
4(2) of the Securities Act of 1933, as amended, and Rule 506 promulgated
thereunder because Mr. Morton purchased the shares for his own account and
not with a view to distribution. The net proceeds from these sales of
preferred stock were an aggregate of $28.0 million. These sales were not
underwritten.

We used the net proceeds from these sales of preferred stock to pay for
construction related payables, to reduce amounts outstanding under our current
credit facility and for general corporate expenditures.

On May 30, 2000, we issued $20 million of our 9 1/4% Series B
Cumulative Preferred Stock to Desert Rock, Inc., a Nevada corporation, an
entity wholly owned by Peter Morton. The issuance of the 9 1/4% Series B
Cumulative Preferred Stock was exempted from registration pursuant to Section
4(2) of the Securities Act of 1933, as amended, and Rule 506 promulgated
thereunder because Desert Rock purchased the share for its own account and
not with a view to distribution. The 9 1/4% Series B Cumulative Preferred
Stock contains terms substantially the same our 9 1/4% Series A Cumulative
Preferred Stock. Proceeds from the issuance of the $20.0 million of 9 1/4%
Series B Cumulative Preferred Stock were used to reduce the outstanding
borrowings under our credit facility. In conjunction with the $20 million
reduction of our outstanding borrowings under our credit facility, we reduced
our commitment amount available under our credit facility to $42.0 million.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

Our selected historical income statement data set forth below for
fiscal years 2000, 1999 and 1998 and the one-month period ended December 31,
1999, and the selected historical balance sheet data set forth below at December
31, 2000 and November 30, 1999, have been derived from our Financial Statements,
which have been audited by Ernst & Young LLP, independent auditors, and are
included elsewhere herein. Our selected historical income statement data set
forth below for fiscal years 1997 and 1996 and the selected historical balance
sheet data set forth below at November 30, 1998, 1997 and 1996 have been derived
from our audited Financial Statements not included herein. The selected
financial and operating data set forth below should be read in conjunction with
the Financial Statements and notes thereto and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

17

YEARS ENDED MONTH
(IN THOUSANDS, EXCEPT PER SHARE DATA) ENDED
------------------------------------------------------------------------------------- -----------
DECEMBER NOVEMBER NOVEMBER NOVEMBER NOVEMBER DECEMBER
31, 30, 30, 30, 30, 31,
2000 1999 1998 1997 1996 1999
---------------- ----------------- ---------------- ----------------- --------------- -----------

INCOME STATEMENT DATA:
REVENUES:
Casino $54,466 $37,155 $36,070 $35,395 $36,560 $ 1,821
Lodging 26,372 18,860 12,988 12,919 12,257 1,567
Food and beverage 35,611 24,488 18,973 16,704 15,003 2,252
Retail 9,679 11,492 11,714 15,404 17,336 804
Other income 5,628 4,284 2,109 2,076 1,901 443
Less: complimentaries (10,936) (7,872) (6,189) (5,450) (5,768) (850)
---------------- ----------------- ---------------- ----------------- --------------- -----------
Net revenues 120,820 88,407 75,665 77,048 77,289 6,037
---------------- ----------------- ---------------- ----------------- --------------- -----------
COSTS AND EXPENSES:
Casino 29,625 21,999 18,640 17,921 18,158 2,589
Lodging 7,177 5,360 3,953 4,149 4,112 578
Food and beverage 20,173 15,428 11,405 10,360 10,118 1,384
Retail 4,115 5,232 5,503 7,102 7,869 429
Other 3,285 2,121 952 943 949 176
Marketing 5,329 4,408 4,252 3,174 2,975 409
General and administrative 22,805 15,821 14,607 15,140 14,922 2,171
Depreciation and amortization 12,138 10,527 5,747 5,503 5,523 1,220
Pre-opening expenses - 5,038 - - - -
Charge for termination of
Management Agreement - - - 24,715 - -
---------------- ----------------- ---------------- ----------------- --------------- -----------
Total Costs and expenses 104,647 85,934 65,059 89,007 64,626 8,956
---------------- ----------------- ---------------- ----------------- --------------- -----------
INCOME (LOSS) FROM OPERATIONS 16,173 2,473 10,606 (11,959) 12,663 (2,919)
---------------- ----------------- ---------------- ----------------- --------------- -----------

18

YEARS ENDED MONTH
(IN THOUSANDS, EXCEPT PER SHARE DATA) ENDED
--------------------------------------------------------------------------- ------------
DECEMBER NOVEMBER NOVEMBER NOVEMBER NOVEMBER DECEMBER
31, 30, 30, 30, 30, 31,
2000 1999 1998 1997 1996 1999
-------------- ------------ ---------------- -------------- --------------- ------------

Interest expense, net (16,727) (14,679) (10,766) (5,585) (5,617) (1,539)
Other expenses, net (393) (28) - (32) (54) (36)
-------------- ------------ ---------------- -------------- --------------- ------------
Income (loss) before income tax
provision (benefit) and
extraordinary loss (947) (12,234) (160) (17,576) 6,992 (4,494)
Income tax provision (benefit) - - - (1,168) 2,525 -
-------------- ------------ ---------------- -------------- --------------- ------------
Income (loss) before
extraordinary loss (947) (12,234) (160) (16,408) 4,467 (4,494)
Extraordinary loss - - (3,496) (1,081) - -
-------------- ------------ ---------------- -------------- --------------- ------------
Net income (loss) (947) (12,234) (3,656) (17,489) 4,467 (4,494)
Preferred stock dividends (3,791) (297) - - - (218)
-------------- ------------ ---------------- -------------- --------------- ------------
Income (loss) available to common
shareholders $(4,738) $(12,531) $ (3,656) $(17,489) $ 4,467 $(4,712)
============== ============ ================ ============== =============== ============
Basic and diluted net income (loss)
per share applicable to common
shareholders $(62.32) $(164.83) $ (48.09) $(143.84) $ 35.25 $(61.98)
============== ============ ================ ============== =============== ============
Weighted average number of common
shares outstanding 76,023 76,023 76,023 121,586 126,705 76,023
============== ============ ================ ============== =============== ============

OTHER DATA:
Capital expenditures (1) $ 7,272 $68,275 $39,802 $ 2,557 $ 4,006 $ 1,122
Depreciation and amortization $12,138 $10,527 $ 5,747 $ 5,503 $ 5,523 $ 1,220
Ratio of earnings to fixed
charges (2) - - - - 2.2x -

19

YEARS ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------------------------------------------------------
DECEMBER NOVEMBER NOVEMBER NOVEMBER NOVEMBER
31, 30, 30, 30, 30,
2000 1999 1998 1997 1996
---------------- ----------------- ---------------- ----------------- ---------------

BALANCE SHEET DATA:
Cash and cash equivalents $ 7,979 $ 2,039 $ 4,568 $ 4,214 $ 5,958
Total assets $198,606 $199,912 $142,394 $109,556 $109,044
Total debt $157,500 $179,093 $130,699 $106,013 $ 64,315
Preferred stock, Series A $ 31,213 $ 28,297 $ 0 $ 0 $ 0
Preferred stock, Series B $ 21,092 $ 0 $ 0 $ 0 $ 0
Shareholders' equity (deficit) (3) $(33,573) $(24,123) $(11,592) $ (7,936) $ 30,762

- ---------------
(1) Capital expenditures for fiscal year 1996 exclude $6.4 million of
non-cash additions.

(2) In computing the ratio of earnings to fixed charges: (a) earnings have
been based on income (loss) before extraordinary items, income taxes
and fixed charges, net of interest capitalized, and (b) fixed charges
consist of interest, including amounts capitalized, amortization of
debt, and the estimated interest portion of rentals. Net losses for
fiscal years 2000, 1999, 1998, and 1997 and the month ended December
31, 1999 resulted in coverage deficiencies of $1.0 million, $14.5
million, $1.0 million, $17.6 million and $4.5 million, respectively.

(3) Effective October 24, 1997, the Company redeemed Harveys' 40% equity
interest in the Company and its rights under the Management Agreement
for $45 million. The Company accounted for this transaction in its
November 30, 1997 financial statements with a $21.2 million charge to
paid-in-capital and a $24.7 million charge to expense (which amounts
include $0.9 million in related transaction costs).

20

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH, AND IS
QUALIFIED IN ITS ENTIRETY BY, OUR FINANCIAL STATEMENTS, INCLUDING THE NOTES
THERETO, AND THE OTHER FINANCIAL INFORMATION APPEARING ELSEWHERE IN THIS ANNUAL
REPORT ON FORM 10-K.

OVERVIEW

Our sole business is the operation of the Resort. During the year ended
December 31, 2000, 41.3% of the Resort's revenues were derived from gaming
operations, 27.0% from food and beverage, 20.0% from lodging, and 11.7% from
retail and other sales. Our business strategy is to provide our guests with an
energetic and exciting gaming and entertainment environment with the services
and amenities of a luxury, boutique hotel.

We completed construction related to our expansion of the Resort in
May 1999. The Expansion included the addition of 318 additional rooms, 4 new
restaurants, 6,000 square-feet of ballroom/banquet facilities, new retail
space, an 8,000 square foot spa/salon/fitness center and significantly
enlarged the swimming pool area adding, among other things, swim-up
blackjack. Although we attempted to minimize disruption, management believes
net revenues and operating income for fiscal year 1999 were negatively
impacted by construction activities related to the Expansion.

During fiscal year 2000, we decreased our revolving credit line from
$62 million to $42 million. Also in fiscal year 2000, we sold, for $20
million, $20 million liquidation preference of our 9 1/4% Series B Cumulative
Preferred Stock to Desert Rock, Inc., an entity wholly-owned by Peter Morton,
our Chairman, Chief Executive Officer, President and Secretary. Proceeds of
the preferred stock sale were used to reduce the credit facility.

RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED NOVEMBER 30, 1999

NET REVENUES. Net revenues increased 37% for the year ended December
31, 2000 to $120.8 million compared to $88.4 million for the fiscal year ended
November 30, 1999. The increase in revenues is primarily attributable to the
effects of the Expansion and consisted of a $17.3 million or 47% increase in
casino revenue, a $7.5 million or 40% increase in lodging revenue, a $11.1
million or 45% increase in food and beverage revenue and a $1.3 million or 31%
increase in other income. These increases were partially offset by a $1.8
million or 16% decrease in retail revenues and a $3.0 million or 39% increase in
promotional allowances related to items furnished to customers on a
complimentary basis.

CASINO REVENUES. The $17.3 million increase in casino revenues was
primarily due to a $13.9 million or 60% increase in table game revenues and a
$3.3 million or 24% increase in slot machine revenues. The increase in table
games revenues was due to increases in both table games drop and hold
percentage. Table games drop increased 31% to $242.5 million from $185.5
million. Drop per table per day increased 16% despite a 13% increase in the
number of table games in operation to 76 from 67. Table games hold percentage
increased 2.8 percentage points to 15.3% from 12.5%. The result of these
changes in drop, hold percentage and number of table games in operation was
an increase in average win per table game per day to $1,333 from $941, an
increase of $392 or 42%. We have historically reported table games hold
percentage using the gross method, while casinos on the Strip report hold
percentage using the net method (which reduces the table game drop by marker
repayments made in the gaming pit area). For the purpose of comparison to
properties on the Strip, our net hold percentage for the year ended December
30, 2000 was 17.4%. Slot machine revenues increased due to an increase in
handle offset partially by a decrease in win percentage. Slot machine handle
increased 34% to $372.9 million from $279.1 million. Slot machine win
percentage decreased 0.4 percentage points to 4.9% from 5.3%. We decreased
the number of slot machines in operation to 674 from 705, a decrease of 31 or
4% between comparative periods. The net result of these changes in slot
machine handle, win percent and number of slot machines in operation was an
increase in win per slot machine per day to $74 from $57, an increase of $17
or 30%. We believe the increases

21

in table games drop and slot machine handle were primarily due to having a full
12 months of operations following the Expansion and more effective marketing
programs.

LODGING REVENUES. The $7.5 million increase in lodging revenues was
primarily due to an increase in average daily rooms available as a result of the
Expansion which was completed in May 1999, an increase in the average daily room
rate to $109 from $97, an increase of $12 or 12%. Occupancy remained constant
for the two periods at 95%.

FOOD AND BEVERAGE REVENUES. The $11.1 million increase in food and
beverage revenues was primarily due to revenues from the new restaurants, an
increased number of hotel rooms served by room service, the 6,000 square feet of
ballroom/banquet facilities and the night club which opened in conjunction with
the Expansion.

RETAIL REVENUES. We believe the $1.8 million decrease in retail
revenues was due in part to a general market decline in the themed restaurant
merchandise segment and the addition of other retail operations in Las Vegas.

OTHER INCOME. Other income increased to $5.6 million from $4.3 million,
an increase of $1.3 million or 30%. The increase is due to the Expansion,
including the Rock Spa, sundries, convenience service commissions and Beach Club
operations.

PROMOTIONAL ALLOWANCES. Promotional allowances increased to $10.9
million from $7.9 million, an increase of $3.0 million or 39%. The increase is
due to increases in casino customers and volume of play in addition to a greater
array of available amenities as a result of the Expansion. As a percentage of
casino revenues, promotional allowances decreased 1 percentage point, to 20%
from 21%.

CASINO EXPENSES. Casino expenses as a percentage of casino revenues
decreased to 54% from 59%, a decrease of 5 percentage points. The relative
percentage decrease was due in part to an increase in table games hold
percentage. Variable casino expenses tend to be more closely related to volume,
which increased 31% for table games, as opposed to revenues, which increased 60%
for table games due to the volume increase and hold percentage increase. The
relative percentage decrease in casino expenses was also due to decreases in
labor costs and the cost of rooms and food and beverage furnished to customers
on a complimentary basis in relation to casino revenues offset partially by cash
incentives to slot machine customers which began being offered in January 2000
pursuant to changes in the slot club program.

LODGING EXPENSES. Lodging expenses, prior to reclassifying the cost of
complimentaries, decreased as a percentage of lodging revenues to 34% from 37%,
a decrease of 3 percentage points. The decrease is due primarily to decreases in
administrative, telephone operator and concierge labor costs in relation to
lodging revenues.

FOOD AND BEVERAGE COSTS AND EXPENSES. Food and beverage costs and
expenses in relation to food and beverage revenues, prior to reclassifying the
cost of complimentaries, decreased to 67% from 73%, a decrease of 6 percentage
points. The decrease is primarily due to decreases in administrative costs, Pink
Taco restaurant and banquet labor costs in relation to food revenues and higher
beach club labor efficiencies compared with other outlets offset partially by
increases in room service labor costs incurred in relation to food revenues.

RETAIL COSTS AND EXPENSES. Retail costs and expenses in relation to
retail revenues, prior to reclassifying the cost of complimentaries, remained
constant at 47%.

OTHER COSTS AND EXPENSES. Other costs and expenses in relation to other
income increased to 58% from 50%, an increase of 8 percentage points. The
increase is primarily due to a decrease in chip float revenue for which there is
no significant direct expense and relative labor percentages at certain new
facilities being higher than relative labor percentages in other operating
departments.

MARKETING, GENERAL AND ADMINISTRATIVE. Marketing, general and
administrative expenses in relation to gross revenues remained constant for the
two periods at 21%. Fixed costs related to the Expansion increased at a

22

lower rate than gross revenues the effects of which were offset by providing
certain reserves related to various claims and legal matters.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased to $12.1 million from $10.5 million, an increase of 15% primarily due
to the increased capital expenditures associated with the Expansion offset
partially by a decrease in depreciable assets related to certain equipment with
a 5 year depreciable life that became fully depreciated during the year ended
December 31, 2000.

PRE-OPENING EXPENSE. During the fiscal year ended November 30, 1999,
the Company recorded $5.0 million of pre-opening expense related to the opening
of the Expansion during May 1999.

NET INTEREST EXPENSE. Net interest expense increased to $16.7 million
from $14.7 million, an increase of $2.0 million or 14%. The increase is
primarily due to the increase in borrowings associated with the Expansion offset
partially by a decrease in borrowings under the credit facility as a result of
using the $20.0 million in proceeds from the issuance of the 9 1/4% Series B
Cumulative Preferred Stock. Net interest expense also increased due to an
increase in the average interest rate charged on the credit facility.

LOSS APPLICABLE TO COMMON SHAREHOLDERS. As a result of the factors
described above, the Company recognized net loss applicable to common
shareholders of $4.7 million compared to a net loss applicable to common
shareholders of $12.5 million in the prior year period, an improvement of $7.8
million. The net positive increases noted in the preceding paragraphs were
offset partially by: (i) a $2.9 million increase in dividends declared on the 9
1/4% Series A Cumulative Preferred Stock, due to it being outstanding for all of
2000 and only a portion of 1999, and (ii) the $1.2 million of dividends declared
on the $20 million of 9 1/4% Series B Cumulative Preferred Stock issued between
the comparative periods.

RESULTS OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1999 COMPARED TO YEAR ENDED NOVEMBER 30, 1998

NET REVENUES AND OPERATING INCOME. Net revenues increased 16.8% for
the year ended November 30, 1999 to $88.4 million compared to $75.7 million
for the corresponding period of the prior year. Operating income decreased
37.9% for the year ended November 30, 1999 to $7.5 million (excluding $5.0
million in pre-opening expenses related to the Expansion) compared to $12.1
million (excluding $1.5 million in legal fees related to non-recurring
litigation) for the corresponding period of the prior year. The increase in
revenues is primarily attributable to a 45.2% increase in lodging revenue and
a 29.1% increase in food and beverage revenue, each as a result of the
Expansion. Operating income decreased primarily as a result of decreased
table games hold percentage, increased casino, general and administrative
expenses and increased depreciation expense resulting from the Expansion.

CASINO. Casino revenues increased by 3.0% for the year ended November
30, 1999 to $37.2 million compared to $36.1 million for the corresponding period
of the prior year. The increase is primarily due to increased table game revenue
(up 6.5% to $23.1 million compared to $21.7 million for the corresponding period
of the prior year). Table game drop increased by 38.0% to $185.5 million
compared to $134.4 million for the corresponding period of the prior year. Table
games revenue did not increase proportionately to table games drop primarily as
a result of lower hold percentage of 12.5% compared to 16.6% in the
corresponding period of the prior year.

We have historically reported hold percentage using the gross method,
while casinos on the Strip report hold percentage using the net method (which

23

reduces the table game drop by marker repayments made in the gaming pit area).
For the purpose of comparison to properties on the Strip, our net hold
percentage for the year ended November 30, 1999 was 14.2%. Net slot machine
revenue decreased 4.3% for the year ended November 30, 1999 to $13.4 million
compared to $14.0 for the corresponding period of the prior year. Management
believes slot revenues decreased as a result of the opening of new casinos in
Las Vegas coupled with the construction disruption associated with the Expansion
during the first half of the year and lack of amenities (primarily restaurants)
prior to the completion of the Expansion. After the expanded facilities opened,
slot revenue and coin in improved compared to the corresponding period in the
prior year. Casino departmental income decreased 12.6% for the year ended
November 30, 1999 to $15.2 million from $17.4 million, primarily as a result of
the decreased table games hold percentage. Casino departmental income as a
percentage of casino revenues decreased to 40.8% in 1999 from 48.3% in 1998,
also primarily as a result of decreased table games hold percentage.

LODGING. Lodging revenues increased 45.2% for the year ended November
30, 1999 to $18.9 million from $13.0 million for the corresponding period of the
prior year. The increase is primarily attributed to revenue generated from the
additional 318 hotel rooms placed in service in May 1999. The ADR for the year
ended November 30, 1999 was $97.41 compared to $97.34 for the year ended
November 30, 1998. Hotel occupancy decreased to 94.5% in 1999 from 100% in 1998.
Lodging departmental income increased 49.4% for the year ended November 30, 1999
to $13.5 million from $9.0 million primarily as a result of the availability of
additional rooms. Lodging departmental income as a percentage of lodging
revenues increased to 71.6% in 1999 from 69.6% in 1998.

FOOD AND BEVERAGE. Food and beverage revenue increased 29.1% for the
year ended November 30, 1999 to $24.5 million from $19.0 million for the
corresponding period of the prior year. The increase was related to revenues
from the new restaurants and the nightclub added as part of the Expansion. Food
and beverage departmental income increased 19.7% for the year ended November 30,
1999 to $9.1 million from $7.6 million for the corresponding period of the prior
year, primarily as a result of the additional outlets. Food and beverage
departmental income as a percentage of food and beverage revenues decreased to
37.0% in 1999 from 39.9% in 1998, primarily as a result of increased costs
associated with operating the new restaurants.

RETAIL. Retail revenues decreased 1.7% for the year ended November 30,
1999 to $11.5 million, from $11.7 million for the corresponding period of the
prior year. We believe the decrease is primarily attributable to a diluted
retail market from increased retail competition coupled with construction
disruption associated with the Expansion during the first half of the year.
Retail departmental income increased 1.6% for the year ended November 30, 1999
to $6.3 million from $6.2 million. Retail departmental income as a percentage of
retail revenues increased to 54.5% in 1999 from 53.0% in 1998.

OTHER INCOME. Other income increased 104.8%, for the year ended
November 30,1999 to $4.3 million from $2.1 million for the corresponding period
of the prior year. The increase is partially due to the opening of the new
facilities, including the Rock Spa and a cigar shop, which had combined revenues
for the year ended November 30, 1999 of $1.2 million. Revenues for the Sundry
Store increased to $1.7 million from $1.0 million for the corresponding period
of the prior year. Additionally, we recorded $0.7 million revenue for chip float
compared to $0.4 million for the corresponding period of the prior year,
representing commemorative chips in public circulation management believes will
never be redeemed.

MARKETING, GENERAL AND ADMINISTRATIVE. Marketing, general and
administrative expenses increased 7.2% for the year ended November 30, 1999 to
$20.2 million from $18.9 million for the corresponding period of the prior year.
The increase is attributable to the costs associated with maintaining a larger
facility.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased to $10.5 million for the year ended November 30, 1999 from $5.7
million for the corresponding period of the prior year, primarily due to the
increased capital expenditures associated with the Expansion.

PRE-OPENING EXPENSE. We recorded a pre-opening expense associated with
the Expansion of $5.0 million during the year ended November 30, 1999.

NET INTEREST EXPENSE. Net interest expense increased 36.3% for the year
ended November 30, 1999 to $14.7 million from $10.8 million for the

24

corresponding period of the prior year. The increase is attributable to the
increase in borrowings associated with the Expansion.

INCOME TAXES. No income tax benefit was recorded as a result of
establishing a valuation allowance due to our accumulated losses as of November
30, 1999.

LOSS APPLICABLE TO COMMON SHAREHOLDERS. As a result of the factors
described above, we recorded a net loss applicable to common shareholders for
the year ended November 30, 1999 of $12.5 million compared to a net loss
applicable to common shareholders of $3.7 million for the corresponding period
of the prior year.

LIQUIDITY AND CAPITAL RESOURCES

For the year ended December 31, 2000, our principal sources of funds
were cash on-hand at December 31, 1999, cash provided by operating activities of
$14.8 million and proceeds from the issuance of $20.0 million of 9 1/4% Series B
Cumulative Preferred Stock (the additional preferred share sold pays dividends
and matures in a manner consistent with our existing outstanding shares of 9
1/4% Series A Cumulative Preferred Stock). The amount of cash provided by
operating activities includes depreciation and amortization of $13.0 million and
$2.4 million of changes in operating assets and liabilities. The primary uses of
funds were capital expenditures of $4.8 million, net of a $2.5 million increase
in construction payables, and a $24.5 million reduction in the outstanding
borrowings under our credit facility. As a result, as of December 31, 2000 we
had cash and cash equivalents of $8.0 million.

We have commenced an $8.0 million remodeling project of the 339 rooms
in our original hotel tower. We expect the project to be completed in two
phases. The first phase was completed during November and December 2000. The
second phase is currently scheduled to be completed during June and July 2001
but may be rescheduled until November and December 2001 depending on projected
occupancy levels. As of December 31, 2000, we have made approximately $2.2
million of cash payments related to the remodeling project.

We believe that our current cash balances and cash flow from
operations and other sources of cash including the available borrowings under
our $42.0 million credit facility ($4.5 million as of December 31, 2000) will
be sufficient to provide operating and investing liquidity during the next 12
months. We may, however, need to raise additional funds prior to January 1,
2002. Our ability to raise additional funds is limited by restrictions on our
financing activities under our credit facility and the Notes. We cannot be
certain that additional financing will be available to us on favorable terms
when required, if at all.

The $42.0 million commitment under our credit facility will begin
reducing by $2.0 million the last day of each fiscal quarter commencing with
the fiscal quarter ending September 30, 2001 and will also reduce, beginning
September 30, 2001 and on each succeeding September 30, by 50% of excess cash
flow, as defined, for the then most recently completed fiscal year. Based on
our calculations, we generated no excess cash flow as defined for the year
ended December 31, 2000. Accordingly, no reduction, in excess of the standard
reduction, of the commitment will occur on September 30, 2001.

The credit facility contains certain covenants including, among
other things, financial covenants, limitations on our ability to dispose of
capital stock, enter into mergers and certain acquisitions, incur liens or
indebtedness, issue dividends on stock, and enter into transactions with
affiliates. The credit facility is secured by substantially all of our
property at the Resort.

As of December 31, 2000, $4.3 million aggregate in dividends have
accrued on our 9 1/4% Series A Cumulative Preferred Stock and 9 1/4% Series B
Cumulative Preferred Stock.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to our operations result primarily from changes
in short-term LIBOR interest rates. We do not have any foreign exchange or

25

other significant market risk. We did not have any derivative financial
instruments as of December 31, 2000.

Our exposure to market risk for changes in interest rates relates
primarily to the credit facility. In accordance with the credit facility, we
enter into variable rate debt obligations to support general corporate purposes,
including capital expenditures and working capital needs. We continuously
evaluate our level of variable rate debt with respect to total debt and other
factors, including assessment of the current and future economic environment.

We had $37.5 million in variable rate debt outstanding as of December
31, 2000. Based upon this year-end variable rate debt level, a hypothetical 10%
adverse change in interest rates (approximately a 1 percentage point increase in
the effective interest rate) would increase interest expense by approximately
$0.4 million on an annual basis, and likewise decrease our earnings and cash
flows. We cannot predict market fluctuations in interest rates and their impact
on our variable rate debt, nor can there be any assurance that fixed rate
long-term debt will be available to us at favorable rates, if at all.
Consequently, future results may differ materially from the estimated adverse
changes discussed above.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the Index to Financial Statements beginning on page F-1.

ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

Not applicable.

26

PART III

ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth the name, age and position of each of
our directors, executive officers or key employees:

NAME AGE POSITION
---- --- --------

Peter A. Morton............................. 52 Chairman of the Board, Chief
Executive Officer, President
and Secretary

Rick B. Richards............................. 40 Senior Vice President of
Operations and General
Manager

James D. Bowen............................... 39 Vice President Finance, Chief
Financial Officer
and Treasurer

Christine R. Belcastro...................... 51 Vice President of Hotel
Operations

Loren J. Guidry............................. 37 Vice President of Food and
Beverage Operations

Gilbert Friesen............................. 61 Director

Stephen A. Marks............................ 52 Director

PETER MORTON. Mr. Morton has been our Chairman of the Board, Chief
Executive Officer and President since our formation and Secretary since December
1997. Prior to June 1996, Mr. Morton was the President and Chief Executive
Officer of Hard Rock America. Mr. Morton, a third generation restaurateur,
co-founded the London Hard Rock Cafe in 1971, at the age of 23. He also opened
Morton's Restaurant in Los Angeles, California in 1979 and has developed Hard
Rock Cafes in Aspen, Chicago, Hollywood, Honolulu, Houston, Las Vegas, Los
Angeles, Maui, New Orleans, Newport Beach, Phoenix, San Diego, San Francisco and
Sydney. In addition, Mr. Morton has developed the following restaurants: Great
American Disaster, London, England (1970); and Morton's Bar and Grill, London,
England (1975). Mr. Morton sits on the Board of Trustees of the Natural
Resources Defense Council.

RICK B. RICHARDS. During the month of August 2000, Rick Richards was
appointed to the position of Senior Vice President and General Manager of the
Company. Mr. Richards most recently served as Senior Vice President of Casino
Operations at New York New York in Las Vegas from March 2000 through August
2000. Prior to that, he was the Vice President of Gaming Operations at the
Hard Rock Hotel & Casino from May 1999 until March 2000. Mr. Richards was a
Branch Manager for Hilton National Marketing from 1997 to 1999, and Vice
President and Assistant General Manager of Players Island in Lake Charles,
Louisiana from 1996 to 1997. From 1981 to 1997, Mr. Richards served in
various casino management positions for Station Casinos, Inc., Bally's Las
Vegas, Caesars Palace, and Boyd Gaming.

JAMES D. BOWEN. During the month of April 2000, Mr. Bowen was appointed
to the position of Vice President Finance, Chief Financial Officer and Treasurer
of the Company. Mr. Bowen held the position of Vice President Finance for Lady
Luck Gaming Corp. from 1995 to 2000. Prior to 1995, he worked for five years for
KPMG, LLC, two years for the Dunes Hotel, Casino and Country Club and five years
for Arthur Andersen, LLP.

CHRISTINE R. BELCASTRO. Ms. Belcastro has been our Vice President of
Hotel Operations since October 1997. From April 1996 to October 1997 Ms.
Belcastro was employed by Harveys as Executive Director of Hotel Operations of
the Resort. From 1994 to 1996 she was employed by Harveys as Director of Hotel
Operations for the Resort. From 1992 to 1994, she was Director of Hotel
Operations at the Palace Station in Las Vegas. From 1991 to 1992, Ms. Belcastro
served as Director of Hotel Operations at the Sands Hotel.

27

LOREN J. GUIDRY. Mr. Guidry has been our Vice President of Food and
Beverage since March 2000. From August 1996 through March 2000, Mr. Guidry
served as our Director of Food and Beverage. Prior to August 1996, he worked
in various capacities in the food and beverage departments for Trump Plaza
Hotel and Casino from June 1995 through August 1996 and the New Orleans
Hilton from December 1989 through June 1995.

GILBERT B. FRIESEN. Mr. Friesen has been a Director since December
1997. Currently, Mr. Friesen is a private investor. From 1994 to 1997, he was
Chairman of the Board of Classic Sports Network. Prior to 1994 he was a private
investor.

STEPHEN A. MARKS. Mr. Marks has been a Director since December 1997. He
is the founder of French Connection Group plc, an international fashion company
listed on the London Stock Exchange, and has been its Chief Executive Officer
and a Director since its formation in 1969.

ITEM 11. EXECUTIVE COMPENSATION

Our directors receive no compensation for serving on the Board of
Directors. All directors are reimbursed for expenses incurred in connection with
attendance at board or committee meetings.

The following table sets forth the compensation we paid to our Chief
Executive Officer and the four other most highly compensated executive officers
(the "Named Executive Officers") for fiscal years 2000, 1999 and 1998.

ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------------------------------------------- -------------------------------------
OTHER ANNUAL RESTRICTED STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) COMPENSATION (1)
- ----------------------------------------------------------------------------------------- -------------------------------------

Peter A. Morton 2000 $ - $ - $ 2,413,119 (2) $ - $ -
Chairman of the Board, 1999 - - 1,751,677 (2) - -
Chief Executive Officer, 1998 - - 1,510,260 (2) - -
President and Secretary

Rick Richards 2000 132,352 192,313 - - -
Senior Vice President of 1999 69,711 - - - -
Operations and General 1998 - - - - -
Manager

James D. Bowen 2000 86,538 7,326 - - -
Vice President Finance, 1999 - - - - -
Chief Financial Officer and 1998 - - - - -
Treasurer

Christine R. Belcastro 2000 120,427 32,699 - - -
Vice President of Hotel 1999 118,531 28,789 - - -
Operations 1998 118,893 36,579 - - -

Loren J. Guidry 2000 93,846 41,254 - - -
Vice President of Food and 1999 83,654 13,920 - - -
Beverage Operations 1998 73,596 18,525 - - -

Jonathan Swain 2000 165,000 19,500 - - -
Former Senior Vice 1999 70,000 - - - -
President of Operations 1998 - - - - -
and General Manager

Tjeerd Brink 2000 33,846 6,875 - - -
Former Vice President 1999 35,961 - - - -
Finance, Chief Financial 1998 - - - - -
Officer and Treasurer

28

- ------------------------------
(1) All Other Compensation consists of contributions made by us to the Hard
Rock 401(k) Plan, insurance premiums on term life insurance and medical
reimbursements and is noted only if exceeding 10% of a person's salary
for any given year.

(2) Mr. Morton received his compensation in the form of a supervisory fee.
See "Employment Agreements." A portion of the supervisory fee was paid
directly to the 510 Development Corporation, a corporation owned 100%
by Mr. Morton.

EMPLOYMENT AGREEMENTS

Mr. Morton has entered into an amended and restated supervisory
agreement with us, which expires on December 31, 2022 (the "Supervisory
Agreement"). Mr. Morton has the option to renew the Supervisory Agreement for
two successive fifteen year terms. Pursuant to the terms of the Supervisory
Agreement, Mr. Morton is to provide consulting and supervisory services to us in
exchange for 2.0% of our annual gross revenues (as defined therein), which
excludes the value of any complimentary goods or services. Such payments will be
subordinated to our debt. We will reimburse Mr. Morton for all costs and
expenses incurred by him in connection with services provided to us. In the
event either we are or Mr. Morton is in Default (as defined in the Supervisory
Agreement), the non-defaulting party may terminate the Supervisory Agreement
after the other party has received the opportunity to cure such default.

Mr. Richards has entered into an employment agreement, dated
November 20, 2000 (the "Richards Employment Agreement"), which has a term of
five years. Mr. Richards will serve as our Senior Vice President and General
Manager. We will pay Mr. Richards a base salary of $280,000 per year and an
annual bonus determined by our Board of Directors. If Mr. Richards is
terminated without Cause (as defined in the Richards Employment Agreement),
Mr. Richards will receive a termination fee in an amount equal to one year's
base salary and we shall have no further obligation to Mr. Richards under the
Richards Employment Agreement.

Mr. Bowen has entered into an employment agreement, dated November 8,
2000. Mr. Bowen will serve as Vice President Finance, Chief Financial Officer
and Treasurer of the Company. We will pay Mr. Bowen an initial base salary of
$125,000 per year and an annual bonus to be determined by our Board of
Directors. If Mr. Bowen is terminated by us without Cause (as defined in the
agreement), we will pay Mr. Bowen an amount representing 6 months of his then
current base salary, but in no case less than $62,500.

During fiscal year 2000, Messrs. Swain and Brink resigned their
respective employment relationships with us.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

We did not have a Compensation Committee during 2000. Messrs. Morton,
Richards and Swain each participated in the determination of officers'
compensation during 2000.

INDEMNIFICATION OF DIRECTORS AND OFFICERS AND LIMITATION OF LIABILITY

Chapter 78 of the Nevada Revised Statutes (the "NRS"), Article SIXTH of
our Articles of Incorporation and Article VII of our Bylaws contain provisions
for indemnification of our directors and officers. The Bylaws require us to
indemnify such persons to the fullest extent permitted by Nevada law. Each
person will be indemnified in any proceeding if he acted in good faith and in a
manner which he reasonably believed to be in, or not

29

opposed to, our best interests, and with respect to any criminal proceeding, had
no reasonable cause to believe, was unlawful. Indemnification would cover
expenses reasonably incurred, including attorneys' fees, judgments, fines and
amounts paid in settlement. Our Bylaws provide that our Board of Directors may
cause us to purchase and maintain insurance on behalf of any present or past
director or officer insuring against any liability asserted against such person
incurred in the capacity of director or officer or arising out of such status,
regardless of whether we would have the power to indemnify such person.

In addition, we have, with the approval of the stockholders, entered
into an Indemnification Agreement with each of our directors. These agreements
will require us to indemnify any director, to the fullest extent permitted by
law, who is or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, or any inquiry or investigation (including
discovery), whether conducted by us or any other party, that such director in
good faith believes might lead to the institution of any action, suit or
proceeding, whether civil, criminal, administrative, investigative or other by
reason of (or arising in part out of) any event or occurrence related to the
fact that such director is or was our director, officer, employee, agent or
fiduciary, or is or was serving at our request as a director, officer, employee,
trustee, agent or fiduciary of another corporation, partnership, joint venture,
employee benefit plan, trust or other enterprise, or by reason of anything done
or not done by such director in any such capacity.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling us pursuant
to the foregoing provisions, we have been informed that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.

We have included in our Articles of Incorporation a provision that
limits personal liability for breach of the fiduciary duty of its directors or
officers, except for liability for acts or omissions involving intentional
misconduct, fraud or a knowing violation of law and liability based on payments
of improper dividends.

ITEM 12. PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with regard to the beneficial
ownership of our common and preferred stock as of the date of this Report by (i)
each person who, to the knowledge of management, owned beneficially more than 5%
of the outstanding shares of common stock or (ii) by each director and Named
Executive Officer and (iii) all directors and executive officers as a group:

NAME AND ADDRESS OF OWNER NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT
- ------------------------- ------ ------- ------ ------- ------ ------- ------ -------
CLASS A CLASS B CLASS A CLASS B
(VOTING) (NON-VOTING)
-------- ------------ ------- -------
COMMON STOCK OWNED (1) PREFERRED STOCK OWNED(1) PREFERRED STOCK OWNED(1)
---------------------- ------------------------ ------------------------

Lily Pond Investments, Inc. (2).... 12,000 100.0% 59,487 92.9% - - - -
Peter A. Morton (2)................ 12,000 100.0% 59,487 92.9% 28,000 100.0% 1 100.0%
Desert Rock, Inc. (3).............. - - - - - - 1 100.0%
Rick B. Richards................... - - - - - - - -
James D. Bowen..................... - - - - - - - -
Christine R. Belcastro............. - - - - - - - -
Loren J. Guidry.................... - - - - - - - -
Gilbert Friesen.................... - - 250 * - - - -
Stephen A. Marks................... - - 1,000 1.5% - - - -
All directors and officers as
a group (5 persons)................ 12,000 100.0% 60,737 94.4% 28,000 100.0% 1 100.0%

- --------------------------------------
* Less than one percent

(1) For purposes of this table, a person or group of persons is deemed to
have "beneficial ownership" of any shares as of a given date that such
person has the right to acquire within

30

60 days after such date. For purposes of computing the percentage of
outstanding shares held by each person or group of persons named
above on a given date, any security which such person or persons has
the right to acquire within 60 days after such date is deemed to be
outstanding, but is not deemed to be outstanding for the purpose of
computing the percentage of ownership of any other person. The
address for each of the stockholders in this table is 4455 Paradise
Road, Las Vegas, Nevada 89109.

(2) As the majority stockholder of Lily Pond, Mr. Morton controls the
voting and disposition of all of our voting securities.

(3) Mr. Morton is the sole stockholder of Desert Rock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS RELATED TO THE "HARD ROCK" BRAND NAME

Prior to the sale to Rank of Mr. Morton's interest in the Hard Rock
Cafe businesses and ancillary rights in June 1996, Hard Rock Cafe Licensing
Corporation, which was 40.0% owned by Mr. Morton, owned the right to use the
"Hard Rock" name in connection with hotel casinos and casinos in the Morton
Territory. Hard Rock Cafe Licensing Corporation licensed this right to Mr.
Morton, who in turn sublicensed the right to use the "Hard Rock Hotel" trademark
in Las Vegas to Lily Pond and Lily Pond assigned such right to us.

Upon the sale of his interest in the Hard Rock Cafes to Rank in June
1996, Mr. Morton and Rank entered into a trademark licensing agreement whereby
Mr. Morton received an exclusive, perpetual, royalty-free license (subject to
certain termination provisions designed to protect the quality of the
trademarks) to use the "Hard Rock Hotel" and "Hard Rock Casino" trademarks in
connection with hotel casinos and casinos in the Morton Territory. Mr. Morton in
turn entered into a sublicensing agreement with us in which we obtained the
exclusive right (subject to certain termination provisions designed to protect
the quality of the trademarks) to use the "Hard Rock Hotel" and "Hard Rock
Casino" trademarks in connection with the Resort for a term lasting as long as
we shall have any outstanding indebtedness pursuant to the Notes or our current
credit facility.

TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS

We have entered into the Supervisory Agreement with Mr. Morton that
expires on December 31, 2022. Subject to certain conditions, Mr. Morton has the
option to renew the agreement for two successive fifteen year terms. Pursuant to
the terms of the Supervisory Agreement, Mr. Morton is to provide consulting and
supervisory services to us in exchange for 2.0% of our annual gross revenues (as
defined therein), which excludes the value of any complimentary goods or
services. We will reimburse Mr. Morton for all costs and expenses incurred by
him in connection with services he provides to us. In the event either we are or
Mr. Morton is in Default (as defined in the agreement), the non-defaulting party
may terminate the agreement after the other party has received the opportunity
to cure such default. Total supervisory fee expenses for fiscal year 2000 were
approximately $2.4 million.

Entities controlled by Mr. Morton have provided, and will continue to
provide, additional support services for the development, opening and ongoing
improvement and operation of the Resort. These entities have been, and will
continue to be, reimbursed for the expenses relating to the provision of these
services (including, without limitation, employee salary and benefits and
allocated overhead). Expenses related to these services aggregated approximately
$1.3 million for fiscal year 2000.

SALE OF PREFERRED STOCK TO AN ENTITY CONTROLLED BY MR. MORTON

On May 30, 2000, we issued $20 million of our 9 1/4% Series B
Cumulative Preferred Stock (the "Series B Preferred Stock") to Desert Rock,
Inc., a Nevada corporation, an entity wholly owned by Peter Morton, our
Chairman of the Board, Chief Executive Officer, President, Secretary and
majority beneficial shareholder. The 9 1/4% Series B Cumulative Preferred
Stock has a $20 million liquidation preference and pays dividends
cumulatively from the date of issue out of funds legally available for that
purpose in arrears on November 30 and May 31

31

of each year commencing on November 30, 2000. Any amounts not paid in cash
cumulate and are compounded semi-annually at a rate of 9 1/4% per year until
paid. The Series B Preferred Stock matures 91 days following the earlier of
either April 1, 2005, or the repayment of the Notes.

For more information, see "Management's Discussion and Analysis of Our
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

For certain additional disclosure regarding affiliate transactions see
footnote 6 to our Financial Statements.

32

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

Financial Statements; see Index to Financial Statements beginning on
Page F-1.

(b) Reports on Form 8-K filed during the last quarter of fiscal 2000; none

(c) The following Exhibits are filed as part of this report:

EXHIBIT
NUMBER DESCRIPTION
------ -----------

3. CERTIFICATE OF INCORPORATION AND BY-LAWS

*3.1 Second Amended and Restated Certificate of Incorporation of
the Company.

**3.2 Certificate of Amendment of Second Amended and Restated Articles of Incorporation.

**3.3 Certificate of Designation of 9 1/4% Series A Cumulative Preferred Stock, no par
value per share.

***3.4 Certificate of Designation of 9 1/4% Series B Cumulative Preferred Stock, no par
value per share.

*3.5 Second Amended and Restated By-Laws of the Company

4. INSTRUMENTS DEFINING THE RIGHT OF SECURITY HOLDERS, INCLUDING
INDENTURES.

*4.1 Indenture, dated as of March 23, 1998, between the Company,
and First Trust National Association, as Trustee, relating to
the Notes.

***4.2 First Amendment to Indenture, dated May 30, 2000, between
the Company and U.S. Bank Trust National Association, as Trustee

*4.3 Form of 9 1/4% Senior Subordinated Notes due 2005 (included
in Exhibit 4.1).

*4.4 Form of 9 1/4% Series B Senior Subordinated Note due 2005 (included in Exhibit
4.1).

*4.5 Registration Rights Agreement, dated as of March 23, 1998, by
and among the Company, Bear Stearns Co. Inc., BancAmerica
Robertson Stephens and Donaldson, Lufkin & Jenrette
Securities Corporation.

9. VOTING TRUST AGREEMENTS.

*9.1 Amendment, dated as of July 1, 1997 to Stockholder Agreement,
dated August 30, 1993, among the Company and certain
stockholders listed therein.

*9.2 Stockholder Agreement, dated as of August 30, 1993, among the
Company and certain stockholders listed therein.

10. MATERIAL CONTRACTS.

*10.1 Loan Agreement, dated as of March 23, 1998, among the
Company, as Borrowers, the Lenders party thereto, Bank of
America National Trust and Savings Association, as Agent, and
Bear, Stearns & Co., Inc. as Co-Agent.

****10.2 Amendment to No. 1 to Loan Agreement.

*****10.3 Amendment to No. 2 to Loan Agreement.

***10.4 Amendment No. 3 to Loan Agreement

10.5 Amendment No. 4 to Loan Agreement

*10.6 Make Well Agreement, dated as of March 23, 1998, among Peter
A. Morton, Bank of America National Trust and Savings
Association and the Lenders party to the Loan Agreement,
dated as of March 23, 1998.

*10.7 Amended and Restated Supervisory Agreement, dated as of
October 21, 1997, between the Company and Peter A. Morton.

*******10.8 Employment Agreement, dated November 8, 2000, between the
Company and James D. Bowen.

33

*10.9 Trademark Sublicense Agreement, dated October 24, 1997, between the Company
and Peter A. Morton.

*10.10 Amendment No.1 to Trademark Sublicense Agreement, dated as of
March 23, 1998, between the Company and Peter A. Morton.

**10.11 Subscription Agreement for 2,500 shares of 9 1/4% Series A
Cumulative Preferred Stock of Hard Rock Hotel, Inc., dated
August 31, 1999, between Peter Morton and the Company.

**10.12 Subscription Agreement for 5,500 shares of 9 1/4% Series A
Cumulative Preferred Stock of Hard Rock Hotel, Inc., dated
October 1, 1999, between Peter Morton and the Company.

10.13 Employment Agreement, dated November 30, 2000, between the Company and Rick Richards.

******10.14 Waiver Agreement, dated November 4, 1999, between the Company and the lenders party to
the Loan Agreement, Bank of America National Trust and Savings Association, as Agent,
and Bear, Stearns & Co., Inc. as Co-Agent.

******10.15 Subscription Agreement for 2,000 shares of 9 1/4% Series A
Cumulative Preferred Stock of Hard Rock Hotel, Inc., dated
October 29, 1999, between Peter Morton and the Company.

******10.16 Subscription Agreement for 18,000 shares of 9 1/4% Series A
Cumulative Preferred Stock of Hard Rock Hotel, Inc., dated
November 2, 1999, between Peter Morton and the Company.

***10.17 Subscription Agreement for one share of 9 1/4% Series B
Cumulative Preferred Stock of Hard Rock Hotel, Inc., dated
May 30, 2000, between Desert Rock Inc., a Nevada corporation,
and the Company.

***10.18 Assignment Agreement, dated as of August 4, 2000, entered
into with reference to the Loan Agreement, dated as of March
23, 1998, by and among the Company, as Borrower, the Lenders
party thereto and Bank of America, N.A., as Agent.

12. RATIO OF EARNINGS TO FIXED CHARGES.

12.1 Statement regarding the computation of ratio of earnings to
fixed charges for the Company.

24. POWERS OF ATTORNEY.

24.1 Power of Attorney (included in signature page).

* Incorporated by reference to designated exhibit to our Registration
Statement on Form S-4, filed with the Securities and Exchange Commission
on May 21, 1998 (File No. 333-53211).

** Incorporated by reference to designated exhibit to our Report on Form
10-Q, filed with the Securities and Exchange Commission for the quarter
ended August 31, 1999 (File No. 333-53211).

*** Incorporated by reference to designated exhibit to our Report on Form
10-Q, filed with the Securities and Exchange Commission for the quarter
ended June 30, 2000 (File No. 333-53211).

**** Incorporated by reference to designated exhibit to our Report on Form
10-Q, filed with the Securities and Exchange Commission for the quarter
ended May 31, 1998 (File No. 333-53211).

***** Incorporated by reference to designated exhibit to our Report on Form
10-Q, filed with the Securities and Exchange Commission for the quarter
ended May 31, 1999 (File No. 333-53211).

****** Incorporated by reference to designated exhibit to our Report on Form
10-K, filed with the Securities and Exchange Commission for the year
ended November 30, 1999 (File No. 333-53211).

*******Incorporated by reference to designated exhibit to our Report on Form
10-Q as filed with the Securities and Exchange Commission for the
quarter ended September 30, 2000 (File No. 333-53211).

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

This document includes various "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Sections 21E of
the Securities Exchange Act of 1934, as amended, which represent the Company's
expectations or beliefs concerning future events. Statements containing
expressions such as "believes," "anticipates" or "expects" used in the our press
releases and periodic reports on Forms 10-K and 10-Q filed with the Securities
and Exchange Commission are intended to identify forward-looking statements. All
forward-looking statements involve risks and uncertainties. Although we believe
our expectations are based upon reasonable assumptions within the bounds of our
knowledge of our business and operations, there can be no assurances that actual
results will not

34

materially differ from expected results. We caution that these and similar
statements included in this report and in previously filed periodic reports,
including reports filed on Forms 10-K and 10-Q, are further qualified by
important factors that could cause actual results to differ materially from
those in the forward-looking statements. Such factors include, without
limitation, the following:

Increased competition in existing markets or the opening of new gaming
jurisdictions; a decline in the public acceptance of gaming; the limitation,
conditioning or suspension of any of the our gaming licenses; increases in or
new taxes imposed on gaming revenues or gaming devices; a finding of
unsuitability by regulatory authorities with respect to the our officers,
directors or key employees; loss or retirement of key executives; significant
increases in fuel or transportation prices; adverse economic conditions in the
our key markets; severe and unusual weather in the our key markets; and adverse
results of significant litigation matters. Readers are cautioned not to place
undue reliance on forward-looking statements, which speak only as of the date
thereof. We undertake no obligation to publicly release any revisions to such
forward-looking statements to reflect events or circumstances after the date
hereof. See "Business--Risk Factors."

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, as amended, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized this 29th day of
March 2001.

HARD ROCK HOTEL, INC.

By: /s/ Peter A. Morton
--------------------------------
Peter A. Morton
CHAIRMAN, PRESIDENT,
CHIEF EXECUTIVE OFFICER AND SECRETARY

We, the undersigned officers and directors of Hard Rock Hotel, Inc.,
hereby severally constitute James D. Bowen and Brian Ogaz and each of them
singly, our true and lawful attorneys with full power to them, and each of them
singly, to sign for us and in our names in the capacities indicated below, any
and all amendments to this Annual Report on Form 10-K, and generally do all such
things in our name and behalf in such capacities to enable Hard Rock Hotel, Inc.
to comply with the applicable provisions of the Securities Exchange Act of 1934,
and all requirements of the Securities and Exchange Commission, and we hereby
ratify and confirm our signatures as they may be signed by our said attorneys,
or either of them, to any and all such amendments. Pursuant to the requirements
of the Securities Exchange Act of 1934, as amended, this report has been signed
by the following persons on behalf of the registrant in the capacities and on
the dates indicated.

/s/ Peter A. Morton Chairman, President
- ----------------------------- Chief Executive Officer, March 30, 2001
Peter A. Morton and Secretary

/s/ James D. Bowen Chief Financial Officer,
- ----------------------------- Treasurer (Principal March 30, 2001
James D. Bowen Accounting Officer)

/s/ Gilbert B Friesen Director
- ----------------------------- March 30, 2001
Gilbert B. Friesen

Director
- ----------------------------- March 30, 2001
Stephen A. Marks

35

HARD ROCK HOTEL, INC.

INDEX TO FINANCIAL STATEMENTS

Report of Independent Auditors..............................................................................F-2

Balance Sheets as of December 31, 2000 and November 30, 1999................................................F-3

Statements of Operations for the years ended December 31, 2000, November 30,
1999 and November 30, 1998, and the one month period
ended December 31, 1999.....................................................................................F-4

Statements of Shareholders' Deficit for the years ended December 31, 2000,
November 30, 1999 and November 30, 1998, and the one month
period ended December 31, 1999..............................................................................F-5

Statements of Cash Flows for the years ended December 31, 2000, November 30, 1999 and
November 30, 1998, and the one month period ended
December 31, 1999...........................................................................................F-6

Notes to Financial Statements...............................................................................F-7

Schedule II -- Valuation and Qualifying Accounts............................................................S-1

F-1

Report of Independent Auditors

The Board of Directors
Hard Rock Hotel, Inc.

We have audited the accompanying balance sheets of Hard Rock Hotel, Inc. as of
December 31, 2000 and November 30, 1999, and the related statements of
operations, shareholders' deficit, and cash flows for the years ended December
31, 2000, November 30, 1999 and November 30, 1998, and the one month period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 Hard Rock Hotel, Inc. at
December 31, 2000 and November 30, 1999, and the results of its operations and
its cash flows for the years ended December 31, 2000, November 30, 1999 and
November 30, 1998, and the one month period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.

Ernst & Young LLP

Reno, Nevada
March 9, 2001,
except for the third paragraph of Note 7,
as to which the date is March 28, 2001

F-2

HARD ROCK HOTEL, INC.
BALANCE SHEETS
(in thousands, except share and per share amounts)

DECEMBER NOVEMBER
31, 30,
2000 1999
------------------- -------------------

ASSETS

Current assets:
Cash and cash equivalents....................................................... $ 7,979 $ 2,039
Accounts receivable, net of allowance for doubtful accounts of $1,080 and $449
as of December 31, 2000 and November 30, 1999, respectively................... 6,198 6,370
Income tax refund receivable.................................................... - 87
Inventories..................................................................... 1,865 1,580
Prepaid expenses and other current assets....................................... 660 1,513
Deferred income taxes........................................................... 852 792
--------------- ---------------
Total current assets.......................................................... 17,554 12,381
--------------- ---------------

Property and equipment, net of accumulated depreciation and amortization........... 176,503 181,961

Other assets....................................................................... 4,549 5,570
--------------- ---------------

TOTAL ASSETS....................................................................... $ 198,606 $ 199,912
=============== ===============

LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
Accounts payable............................................................... $ 3,100 $ 3,461
Construction related payables.................................................. 2,479 2,745
Accrued expenses............................................................... 12,918 7,044
Interest payable............................................................... 3,025 2,603
Current obligations under capital leases....................................... - 93
--------------- ---------------
Total current liabilities................................................... 21,522 15,946
--------------- ---------------

Deferred income taxes.......................................................... 852 792
Long-term debt................................................................. 157,500 179,000
--------------- ---------------
Total long-term liabilities................................................. 158,352 179,792
--------------- ---------------
Total liabilities....................................................... 179,874 195,738
--------------- ---------------

Commitments and contingencies

Preferred stock, 9 1/4 Series A Cumulative, no par value, redeemable, 40,000
shares authorized, 28,000 shares issued and outstanding........................ 31,213 28,297
--------------- ---------------
Preferred stock, 9 1/4 Series B Cumulative, no par value, redeemable, one share
authorized, issued and outstanding............................................. 21,092 -
--------------- ---------------

Shareholders' deficit:
Common stock, Class A voting, no par value, 40,000 shares authorized, 12,000
shares issued and outstanding.................................................. - -
Common stock, Class B non-voting, no par value, 160,000 shares authorized, 64,023
shares issued and outstanding.................................................. - -
Paid-in capital .................................................................. 7,508 7,508
Accumulated deficit............................................................... (41,081) (31,631)
--------------- ---------------
Total shareholders' deficit.................................................... (33,573) (24,123)
--------------- ---------------

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT....................................... $ 198,606 $ 199,912
=============== ===============

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE BALANCE SHEETS.

F-3

HARD ROCK HOTEL, INC.
STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)

MONTH
YEAR ENDED ENDED
------------------------------------------------ ---------------
DECEMBER 31, NOVEMBER 30, NOVEMBER 30, DECEMBER 31,
2000 1999 1998 1999
------------ ------------ ------------ ------------

Revenues:
Casino................................................. $ 54,466 $ 37,155 $ 36,070 $ 1,821
Lodging 26,372 18,860 12,988 1,567
Food and beverage...................................... 35,611 24,488 18,973 2,252
Retail................................................. 9,679 11,492 11,714 804
Other income........................................... 5,628 4,284 2,109 443
------------ ------------ ------------ ------------
Gross revenues..................................... 131,756 96,279 81,854 6,887
Less: promotional allowances..................... (10,936) (7,872) (6,189) (850)
------------ ------------ ------------ ------------
Net revenues....................................... 120,820 88,407 75,665 6,037
------------ ------------ ------------ ------------

Costs and expenses:
Casino................................................. 29,625 21,999 18,640 2,589
Lodging................................................ 7,177 5,360 3,953 578
Food and beverage...................................... 20,173 15,428 11,405 1,384
Retail................................................. 4,115 5,232 5,503 429
Other.................................................. 3,285 2,121 952 176
Marketing.............................................. 5,329 4,408 4,252 409
General and administrative............................. 22,805 15,821 14,607 2,171
Depreciation and amortization.......................... 12,138 10,527 5,747 1,220
Pre-opening............................................ - 5,038 - -
------------ ------------ ------------ ------------
Total costs and expenses........................... 104,647 85,934 65,059 8,956
------------ ------------ ------------ ------------

Income (loss) from operations............................... 16,173 2,473 10,606 (2,919)

Other expenses:
Interest expense, net.................................. (16,727) (14,679) (10,766) (1,539)
Other expenses, net.................................... (393) (28) - (36)
------------- ------------ ------------ ------------

Other expenses, net.................................... (17,120) (14,707) (10,766) (1,575)
------------ ------------ ------------ ------------

Loss before extraordinary loss and income tax (provision)
benefit................................................ (947) (12,234) (160) (4,494)

Income tax (provision) benefit.............................. - - - -
------------ ------------ ------------ ------------

Loss before extraordinary loss.............................. (947) (12,234) (160) (4,494)

Extraordinary loss - early extinguishment of debt (Note 3).. - - (3,496) -
------------ ------------ ------------- ------------

NET LOSS (947) (12,234) (3,656) (4,494)

Preferred stock dividends................................... (3,791) (297) - (218)
------------ ------------- ------------ -------------

Loss applicable to common shareholders...................... $ (4,738) $ (12,531) $ (3,656) $ (4,712)
============ ============ ============ ============

BASIC AND DILUTED NET LOSS PER SHARE:

Applicable to common shareholders...................... $ (62.32) $ (164.83) $ (48.09) $ (61.98)
============ ============ ============ ============

Weighted average number of common shares outstanding........ 76,023 76,023 76,023 76,023
============ ============ ============ ============

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-4

HARD ROCK HOTEL, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIT
(in thousands, except share amounts)

------------------------- ------------------------
CLASS A COMMON STOCK CLASS B COMMON STOCK
------------------------- ------------------------ TOTAL
PAID-IN ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT DEFICIT
---------- ----------- ---------- ---------- ---------- --------------- -------------

Balances at November 30, 1997 12,000 $ - 64,023 $ - $7,508 $ (15,444) $ (7,936)

Net loss - - - - - (3,656) (3,656)
---------- ----------- ---------- ---------- ---------- --------------- -------------

Balances at November 30, 1998 12,000 - 64,023 - 7,508 (19,100) (11,592)

Accrued dividends on
redeemable preferred stock - - - - - (297) (297)

Net loss - - - - - (12,234) (12,234)
---------- ----------- ---------- ---------- ---------- --------------- -------------

Balances at November 30, 1999 12,000 - 64,023 - 7,508 (31,631) (24,123)

Accrued dividends on
redeemable preferred stock - - - - - (218) (218)

Net loss - - - - - (4,494) (4,494)
---------- ----------- ---------- ---------- ---------- --------------- -------------

Balances at December 31, 1999 12,000 - 64,023 - 7,508 (36,343) (28,835)

Accrued dividends on
redeemable preferred stock - - - - - (3,791) (3,791)

Net loss - - - - - (947) (947)
---------- ----------- ---------- ---------- ---------- --------------- -------------

Balances at December 31, 2000 12,000 $ - 64,023 $ - $7,508 $ (41,081) $ (33,573)
========== =========== ========== ========== ========== =============== =============

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-5

HARD ROCK HOTEL, INC.
STATEMENTS OF CASH FLOWS
(in thousands, except supplemental schedule)

MONTH
YEAR ENDED ENDED
----------------------------------------------- ---------------
DECEMBER 31, NOVEMBER 30, NOVEMBER 30, DECEMBER 31,
2000 1999 1998 1999
--------------- -------------- --------------- ---------------

Cash flows from operating activities:
Net loss................................................ $ (947) $ (12,234) $ (3,656) $ (4,494)
Adjustments to reconcile net loss to
net cash provided by (used
in) operating activities:
Depreciation and amortization....................... 12,138 10,527 5,747 1,220
Amortization of loan fees........................... 840 974 676 70
Loss on sale of property and
Equipment........................................ 393 - - 36
Early extinguishments of debt....................... - - 3,496 -
Compensation accrual for common
stock to be issued............................... - (325) 300 -
Changes in operating assets and
liabilities:
Accounts receivable............................ (1,755) (3,095) (308) 1,924
Income tax refund receivable................... 87 108 2,249 -
Inventories.................................... (161) (372) (142) (124)
Prepaid expenses and other
current assets............................... 670 (32) (646) 183
Accounts payable............................... (1,675) 723 (155) 1,187
Accrued expenses............................... 5,555 2,570 (382) 431
Interest payable............................... (304) 619 1,907 726
------------- ------------ ------------ ------------
Net cash provided by (used in) operating activities.......... 14,841 (537) 9,086 1,159
------------ ------------ ------------ ------------

Cash flow from investing activities:
Purchases of property and equipment..................... (7,271) (68,275) (39,802) (1,122)
Proceeds from sale of property
and equipment......................................... 65 - - -
Construction related payables........................... 2,479 (10,255) 13,000 (2,745)
Decrease (increase) in other assets..................... - 145 (1,099) 110
------------ ------------ ------------- ------------
Net cash provided by (used in) investing activities.......... (4,727) (78,385) (27,901) (3,757)
------------ ------------ ------------ ------------

Cash flows from financing activities:
Proceeds from issuance of debt.......................... - 66,500 131,500 3,000
Incurrence of loan fees on new debt..................... - - (5,518) -
Principal payments on long-term debt.................... (24,500) (18,000) (106,700) -
Proceeds from issuance of preferred stock............... 20,000 28,000 - -
Payments on capital lease obligations................... (74) (106) (114) (2)
------------ ------------ ------------ ------------
Net cash provided by (used in) financing activities.......... (4,574) 76,394 19,168 2,998
------------ ------------ ------------ ------------

Net increase (decrease) in cash and cash
equivalents............................................. 5,540 (2,528) 353 400
Cash and cash equivalents, beginning of
period.................................................. 2,439 4,567 4,214 2,039
------------ ------------ ------------ ------------
Cash and cash equivalents, end of period..................... $ 7,979 $ 2,039 $ 4,567 $ 2,439
============ ============ ============ ============

Supplemental disclosures of cash flow information:

Cash paid during the period for interest
(net of amount capitalized of $31,
$2,264 and $793 in the years ended
December 31, 2000, November 30, 1999
and November 30, 1998, respectively).................... $ 16,241 $ 13,093 $ 7,753 $ 693
------------ ------------ ------------ ------------
Cash paid during the period for income taxes................. $ 147 $ - $ - $ -
------------ ------------ ------------ ------------

Supplemental Schedule of Non-Cash Investing and Financing Activities:

The value of the Series A Cumulative Redeemable Preferred Stock
increased by approximately $2,691,000, $297,000 and $218,000 in unpaid accrued
dividends for the years ended December 31, 2000 and November 30, 1999 and the
one-month period ended December 31, 1999, respectively.

The value of the Series B Cumulative Redeemable Preferred Stock
increased by approximately $1,092,000 in unpaid accrued dividends for the year
ended December 31, 2000.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-6

Hard Rock Hotel, Inc.
Notes to Financial Statements

1. ACCOUNTING POLICIES

BASIS OF PRESENTATION AND NATURE OF BUSINESS

Hard Rock Hotel, Inc. (the "Company"), a Nevada corporation
incorporated on August 30, 1993, operates a hotel-casino in Las Vegas, Nevada.
Lily Pond Investments, Inc. ("Lily Pond"), a Nevada corporation principally
owned by Peter Morton, owns all of the voting shares and 93% of the non-voting
shares of the Company. Mr. Morton has granted a sublicense to the Company,
pursuant to which the Company holds the exclusive right to use the "Hard Rock
Hotel" trademark for the Company's operations in Las Vegas.

In February 2000, the Company changed its financial reporting year-end
to December 31 of each year. Previously, the fiscal year ended on November 30.
As a result of this change, the Company is disclosing the financial position of
Hard Rock Hotel, Inc. at December 31, 2000 and November 30, 1999, and the
results of its operations and its cash flows for the years ended December 31,
2000, November 30, 1999 and November 30, 1998, and the one-month period ended
December 31, 1999.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash on hand and in banks and
interest bearing deposits with maturities at the date of purchase of three
months or less. Cash equivalents are carried at cost which approximates market.

CONCENTRATIONS OF CREDIT RISK

Substantially all of the Company's accounts receivable are unsecured
and are due primarily from the Company's casino and hotel patrons and convention
functions. Non-performance by these parties would result in losses up to the
recorded amount of the related receivables. Management does not anticipate
significant non-performance, and believes that they have adequately provided for
uncollectible receivables in the Company's allowance for doubtful accounts.

PRE-OPENING COSTS AND EXPENSES

Pre-opening costs incurred during 1998 in connection with the expansion
of the Company's facility were capitalized, and during 1999 these costs were
charged to expense when the expansion was completed in May 1999.

INVENTORIES

Inventories are stated at the lower of cost (determined using the
first-in, first-out method), or market.

DEPRECIATION AND AMORTIZATION

Buildings and improvements, equipment, furniture and fixtures, and
memorabilia are recorded at cost and are depreciated using the straight-line
method over the estimated useful lives of the respective assets ranging from
five to 45 years.

ADVERTISING COSTS

The Company expenses the costs of all advertising campaigns and
promotions as they are incurred. Total advertising expenses (exclusive of
pre-opening) for the years ended December 31, 2000, November 30, 1999 and
November 30, 1998 and the one-month period ended December 31, 1999 amounted to
approximately $2,059,000, $1,103,000, $817,000 and $214,000, respectively. These
expenses are included in marketing expenses in the accompanying statements of
operations.

INCOME TAXES

Deferred tax assets and liabilities are determined based on the
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the temporary differences are expected to reverse. Additionally, deferred
tax assets and liabilities are separated into current and non-current amounts
based on the classification of the related assets and liabilities for financial
reporting purposes.

F-7

Hard Rock Hotel, Inc.
Notes to Financial Statements

CASINO REVENUES AND COMPLIMENTARIES

In accordance with industry practice, the Company recognizes as casino
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 rooms, food and beverage, and other complimentaries
provided to customers without charge. The estimated costs of providing such
complimentaries have been classified as casino operating expenses through
interdepartmental allocations as follows (in thousands):

MONTH
YEAR ENDED ENDED
---------------------------------------------- ----------------
DECEMBER 31, NOVEMBER 30, NOVEMBER 30, DECEMBER 31,
2000 1999 1998 1999
--------------- -------------- -------------- ----------------

Food and beverage................................... $ 3,675 $ 2,352 $ 1,987 $ 253
Lodging............................................. 1,770 1,540 1,121 150
Other............................................... 478 215 134 53
--------------- --------------- --------------- ---------------
Total costs allocated to casino operating costs..... $ 5,923 $ 4,107 $ 3,242 $ 456
=============== =============== =============== ===============

USE OF ESTIMATES IN 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.

EARNINGS PER SHARE

The Company has adopted Financial Accounting Standards Board Statement
No. 128, "Earnings Per Share". This statement establishes standards for
computing and presenting both basic and diluted earnings per share and applies
to entities that are publicly held.

RECLASSIFICATIONS

Certain amounts in the prior years' financial statements have been
reclassified to conform with the 2000 presentation.

2. INVENTORIES

Inventories consist of the following (in thousands):

DECEMBER NOVEMBER
31, 30,
2000 1999
------------------- -------------------

Retail merchandise.......................................................... $ 934 $ 800
Restaurants and bars........................................................ 716 605
Operating supplies.......................................................... 215 175
------------------- -------------------
Total inventories........................................................... $ 1,865 $ 1,580
=================== ===================

F-8

Hard Rock Hotel, Inc.
Notes to Financial Statements

3. OTHER ASSETS

Other assets consist of the following (in thousands):

DECEMBER NOVEMBER
31, 30,
2000 1999
------------------- -------------------

Unamortized loan fees and financing costs on the Notes and Credit
Facility (Note 7), net of accumulated amortization of $2,416 in 2000 and
$1,506 in 1999............................................................ $ 3,210 $ 4,119
Organization costs, net of accumulated amortization of $287 in 1999......... - 116
Prepaid gaming taxes and device fees........................................ 799 339
China, glassware, utensils, linens and other supplies....................... 540 996
------------------- -------------------
Total other assets.......................................................... $ 4,549 $ 5,570
=================== ===================

Loan fees and other financing costs are being amortized over the life
of the respective loans. Prior to 2000, organization costs were being amortized
over a period of five years; however, during 2000 the Company expensed these
costs in accordance with Statement of Position 98-5, Reporting on the Cost of
Start-up Activities. Base stocks of china, glassware, utensils and linens are
being amortized using the straight-line method over three years to a base stock
level of 25% of original cost, with replacements expensed at the time of
purchase.

In connection with the execution of the Notes, the Company's existing
credit facility was paid in its entirety in March 1998 (Note 7). In connection
with this early retirement, the Company wrote-off approximately $3,496,000 in
unamortized loan fee costs in 1998, which amounts were recorded as an
extraordinary loss in the accompanying statements of operations for the year
ended November 30, 1998.

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

DECEMBER NOVEMBER
31, 30,
2000 1999
------------------- -------------------

Land........................................................................ $ 21,015 $ 21,015
Buildings and improvements.................................................. 159,887 160,360
Equipment, furniture and fixtures........................................... 33,319 28,117
Memorabilia................................................................. 3,025 2,906
------------------- -------------------
217,246 212,398
Less: accumulated depreciation and amortization............................. (40,743) (30,437)
------------------- -------------------
Total property and equipment, net $ 176,503 $ 181,961
=================== ===================

5. ACCRUED EXPENSES

Accrued expenses consist of the following (in thousands):

DECEMBER NOVEMBER
31, 30,
2000 1999
------------------- -------------------

Accrued salaries, payroll taxes and
other employee benefits................................................... $ 3,341 $ 2,436
Outstanding gaming chips and tokens......................................... 2,205 747
Reserve for general liability claims........................................ 1,868 675
Advance room and convention deposits........................................ 1,830 668
Accrued miscellaneous taxes................................................. 888 483
Accrued progressive jackpot and slot club payouts........................... 751 288
Accrued supervisory fees.................................................... 139 983
Other accrued liabilities................................................... 1,896 764
------------------- -------------------
Total accrued expenses $ 12,918 $ 7,044
=================== ===================

6. AGREEMENTS WITH RELATED PARTIES

The Company entered into a twenty-five year Amended and Restated
Supervisory Agreement with Peter Morton, which provides for the supervision of
the development, improvement, operation, and maintenance of the Company

F-9

Hard Rock Hotel, Inc.
Notes to Financial Statements

through 2022. As part of this agreement, the Company pays to Mr. Morton a
supervisory fee equal to two percent of annual gross revenues (as defined), net
of complimentaries for each fiscal year. Total supervisory fee expenses for
these services for the years ended December 31, 2000, November 30, 1999 and
November 30, 1998, and the one month period ended December 31, 1999 amounted to
$2,413,000, $1,752,000, $1,510,000 and $112,000, respectively. These expenses
are included in general and administrative expenses in the accompanying
statements of operations. The unpaid amounts at December 31, 2000 and November
30, 1999 of $139,000 and $983,000, respectively, are included in accrued
expenses in the accompanying balance sheets.

Entities controlled by Mr. Morton have provided additional technical
support services for the development, ongoing improvement and operation of the
Company. These expenses aggregated approximately $1,342,000, $1,134,000,
$894,000 and $166,000, for the years ended December 31, 2000, November 30, 1999
and November 30, 1998, and the one month period ended December 31, 1999,
respectively, and are included in the accompanying statements of operations.

Additionally, entities controlled by Mr. Morton expended approximately
$146,000 and $389,000 during fiscal 1998 and 1999 respectively, related to
pre-opening costs incurred in connection with the expansion of the Company's
facility. These amounts are included with pre-opening expenses on the
accompanying statement of operations for the fiscal year ended November 30,
1999.

7. LONG-TERM DEBT

In March 1998, the Company obtained funding of approximately $115.9
million in net proceeds from the offering of $120 million aggregate principal
amount of its 9.25%, Senior Subordinated Notes due in 2005 (the "Notes"). Of
this amount, approximately $105.6 million was used to pay off an existing credit
facility, including accrued interest. Concurrent with the execution of the
Notes, the Company secured a senior secured reducing revolving line of credit
under a new credit facility (the "Credit Facility") through a group of banks. As
of December 31, 2000, the Company had $120.0 million outstanding in Notes and
$37.5 million outstanding on its Credit Facility.

CREDIT FACILITY

In March 1999, the Credit Facility was amended to increase the line
of credit from $67 million to $77 million and, in November 1999, the Company
executed an agreement (the "Waiver Agreement") whereby the amount available
under the Credit Facility was reduced to $62 million. The Waiver Agreement
required the Company to use a portion of the proceeds from the Series A
Preferred Stock Issuance (Note 12) to pay down amounts outstanding under the
Credit Facility. In addition, certain financial covenants, which the Company
was not in compliance with, were waived and modified. In addition, effective
June 2000, the Company entered into an additional amendment with regard to
the Credit Facility whereby, among other things: (i) the commitment amount
available under the Credit Facility was reduced to $42.0 million; (ii) the
commitment will reduce $2.0 million on the last day of each fiscal quarter
commencing March 31, 2001, and will also reduce, beginning September 30, 2001
and on each succeeding September 30, by 50% of excess cash flow, as defined,
for the then most recently completed fiscal year; and, (iii) Mr. Morton has
been released from a make-well agreement, as defined.

Effective March 28, 2001, the Company entered into another amendment
with regard to the Credit Facility whereby the $2.0 million quarterly
commitment reduction was deferred and will commence with the quarter ending
September 30, 2001.

The reduction provisions above shall terminate the date upon which
the commitment available under the Credit Facility is reduced to $25.0
million. The Credit Facility expires on March 23, 2004.

The Credit Facility contains certain covenants including, among other
things, financial covenants, limitations on the Company from disposing of
capital stock, entering into mergers and certain acquisitions, incurring liens
or indebtedness, issuing dividends on stock, and entering into transactions with
affiliates. The Credit Facility is secured by substantially all of the Company's
property at the Las Vegas site. Interest on the credit facility accrues on all
individual borrowings at an interest rate determined at the option of the
Company, at either the LIBOR Index plus an applicable margin (not to exceed 3.5%
and aggregating 10.4% at December 31, 2000), or the Base Rate, defined as the
higher of the Federal Funds Rate plus .5%, or the reference rate, as defined,
plus an applicable margin (not to exceed 2.25%). The Company chose the LIBOR
Index for all

F-10

Hard Rock Hotel, Inc.
Notes to Financial Statements

borrowings outstanding at December 31, 2000. These margins are dependent upon
the Company's debt to EBITDA ratio, as defined. Interest accrued on the Base
Rate borrowings is due monthly, up to the maturity date, while interest on LIBOR
borrowings is due quarterly up to the maturity date.

NOTES

Interest on the Notes is payable on each April 1 and October 1. The
Notes are general unsecured obligations of the Company, subordinated in right of
payment to all existing and future senior indebtedness, including all borrowings
under the Credit Facility. The Notes are subject to redemption at the option of
the Company, in whole or in part, at any time on or after April 1, 2002, at a
premium to the face amount ($120 million) which decreases on each subsequent
anniversary date, plus accrued interest to the date of redemption. The Notes
contain covenants restricting or limiting the ability of the Company to, among
other things, pay dividends, incur additional indebtedness, issue certain
preferred stock and enter into transactions with affiliates.

8. INCOME TAXES

The difference between the Company's recorded income tax benefit of
zero and expected income tax benefit computed at the federal statutory rate is
comprised of the items shown in the following table as a percentage of loss
before income taxes:

MONTH
YEAR ENDED ENDED
------------------------------------------------------ ----------------
DECEMBER 31, NOVEMBER 30, NOVEMBER 30, DECEMBER 31,
2000 1999 1998 1999
-------------------- ----------------- -------------- ----------------

Income tax benefit at the statutory rate.... 34.0% 34.0% 34.0% 34.0%
Nondeductible meals and entertainment....... (3.0) (.1) (4.2) (.6)
Valuation allowance......................... (41.5) (34.2) (29.5) (33.6)
Tax credits................................. 10.5 .5 .4 .2
Other, net.................................. - (.2) (.7) -
-------------------- ----------------- -------------- ----------------

Effective tax rate.......................... - - - -
==================== ================= ============== ================

The significant components of the deferred income tax assets and
liabilities included in the accompanying balance sheets are as follows (in
thousands):

DECEMBER NOVEMBER
31, 30,
2000 1999
------------------- -------------------

Deferred income tax assets:
Preopening costs, net of amortization....................................... $ - $ 92
Accrued expenses............................................................ 1,097 817
Net operating loss carryforwards............................................ 14,171 11,888
Tax credit carryforwards.................................................... 606 421
------------------- -------------------
15,874 13,218
Less: valuation allowance................................................... (12,607) (10,613)
------------------- -------------------
Total deferred income tax assets............................................ 3,267 2,605
------------------- -------------------

Deferred income tax liabilities:
Depreciation and amortization............................................... 3,267 2,605
------------------- -------------------
Total deferred income tax liabilities....................................... 3,267 2,605
------------------- -------------------

Net deferred income tax asset............................................... $ - $ -
=================== ===================

A valuation allowance has been established due to the Company's
accumulated losses as of December 31, 2000. The Company has an operating loss
carryforward of approximately $42 million to reduce future taxable income, which
will expire between 2011 and 2020.

The Internal Revenue Service is currently examining the Company's
federal corporate tax returns for the fiscal years ended November 30, 1994
through November 30, 1997. In the opinion of management, any tax liability
arising out of this examination will not have a material adverse effect on
the Company's financial statements.

F-11

Hard Rock Hotel, Inc.
Notes to Financial Statements

9. COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

Subsequent to December 31, 2000, the Company negotiated the settlement
of a lawsuit, filed against the Company August 27,1999, related to the
termination of an employee for cause. The settlement obligates the Company to
pay the former employee in return for a release and complete dismissal. The
Company has accrued a liability for this settlement as of December 31, 2000.

The Company is also a defendant in various other lawsuits relating to
routine matters incidental to its business.

Management provides an accrual for estimated losses that may occur and
does not believe that the outcome of any pending claims or litigation, in the
aggregate, will have a material adverse effect on the Company's financial
position or results of operations beyond the amounts recorded in the
accompanying balance sheet as of December 31, 2000.

OPERATING LEASES

The Company leases equipment under operating leases expiring through
2004. Future minimum rental payments under these operating leases by fiscal year
of the Company are as follows (in thousands):

2001 $ 111
2002 67
2003 64
2004 5
-------
Total future minimum rental payments $ 247
=======

Total rental expense was approximately $455,000, $408,000, $282,000 and
$62,000 during the years ended December 31, 2000, November 30, 1999 and November
30, 1998 and the one-month period ended December 31, 1999, respectively, and is
included in general and administrative expenses in the accompanying statements
of operations.

CONSTRUCTION COMMITMENT

In August 2000, the Company entered into an agreement to remodel a
portion of the hotel for approximately $4.7 million. At December 31, 2000, a
portion of the work had been completed and the Company had a remaining
commitment of approximately $1.7 million.

SELF-INSURANCE

The Company is self-insured for workers' compensation claims, up to an
annual stop loss of $200,000 per claim. The Company maintains a $2.5 million
surety bond required by the State of Nevada for its self insurance workers'
compensation program. Management has established reserves they consider adequate
to cover estimated future payments on claims incurred by the Company through
December 31, 2000.

The Company has a partial self-insurance plan for general liability
claims up to an annual stop loss per claim of $50,000.

10. EMPLOYEE BENEFIT PLANS

The Company maintains a discretionary cash incentive bonus plan
available to eligible employees, based upon individual and company-wide goals
that are established by management and the Board of Directors of the Company on
an annual basis.

In addition, the Company established a non-discretionary deferred
compensation plan in December 1999 for certain of its executives whereby an
amount equal to their base salary at the time they become covered by the plan
will vest to them as deferred compensation 25% annually over a four year period.
Amounts vested will be adjusted annually on a compound basis at a rate equal to
the change in the Company's earnings before interest, taxes,

F-12

Hard Rock Hotel, Inc.
Notes to Financial Statements

depreciation and amortization; however, during the initial four year period
compound adjustments may not result in a net reduction in vested benefits.

During the years ended December 31, 2000, November 30, 1999 and
November 30, 1998, and the one month period ended December 31, 1999, the Company
recorded approximately $1,254,000, $314,000, $445,000 and $80,000, respectively,
for these bonuses and deferred compensation agreements, in the accompanying
statements of operations.

The Company maintains a 401(k) profit sharing plan whereby
substantially all employees over the age of 21 who have completed one year of
continuous employment and 1,000 hours of service are eligible for the plan. Such
employees joining the plan may contribute, through salary deductions, no less
than 1% nor greater than 20% of their annual compensation. The Company, at its
discretion, will match 50% of the first 6% of compensation contributed by
employees. During the years ended December 31, 2000, November 30, 1999 and
November 30, 1998, and the one month period ended December 31, 1999, the Company
recorded approximately $535,000, $481,000, $516,000 and $29,000, respectively,
for its portion of plan contributions, which are included in the accompanying
statement of operations.

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of the Company's borrowings under the New Credit
Facility approximates the fair value at December 31, 2000 and November 30, 1999,
respectively. The fair value of the Notes, which are publicly traded,
approximated $107 million at December 31, 2000 and approximated $87 million at
November 30, 1999, based on published bid prices.

12. SALE OF PREFERRED STOCK

On May 30, 2000, the Company issued $20 million of its 9 1/4% Series B
Cumulative Preferred Stock (the "Series B Preferred Stock") to Desert Rock,
Inc., a Nevada corporation, an entity wholly owned by Peter Morton. The 9 1/4%
Series B Cumulative Preferred Stock contains terms substantially the same as the
Company's 9 1/4% Series A Cumulative Preferred Stock.

During the fourth fiscal quarter of 1999, the Company completed the
sale of 28,000 shares of 9 1/4% Series A Cumulative Preferred Stock (the "Series
A Preferred Stock" and collectively with the Series B Preferred Stock, the
"Preferred Stock") for proceeds of $28 million. The Series A Preferred Stock was
sold to Peter Morton at its stated subscription price of $1,000 per share.

The Preferred Stock matures 91 days following the earlier of either
April 1, 2005, or the repayment of the Notes (Note 7), together with all accrued
and unpaid dividends. The Company may redeem the Preferred Stock in certain
cases, pursuant to gaming laws. The Preferred Stock does not contain any
conversion rights. The holders of Preferred Stock, as a class, may vote on
certain matters adversely affecting the Preferred Stock, including without
limitation, the creation and/or issuance of any capital stock ranking senior to
the Preferred Stock.

Dividends on the Preferred Stock are cumulative from the date of
original issuance out of funds legally available for that purpose in cash in
arrears on November 30 and May 31 of each year, whether or not declared. Any
amounts not paid in cash cumulate and are compounded semi-annually at the rate
of 9 1/4% per annum until paid. The resulting liabilities at December 31, 2000
and November 30, 1999 of approximately $3,213,000 and $297,000, respectively,
have been accrued in the accompanying balance sheet for the Series A Preferred
Stock. The resulting liability at December 31, 2000 of approximately $1,092,000
has been accrued in the accompanying balance sheet for the Series B Preferred
Stock.

In the event of a liquidation of the Company, the holders of the
Preferred Stock will be entitled to be paid the subscription price of all
outstanding shares, plus any accrued and unpaid dividends, before any payments
are made to the holders of common stock.

F-13

Hard Rock Hotel, Inc.

Schedule II - Valuation and Qualifying Accounts

Years Ended December 31, 2000, November 30, 1999 and November 30, 1998,
and the One Month Period Ended December 31, 1999

(In Thousands)

ADDITIONS DEDUCTIONS
BALANCE AT CHARGED TO WRITE-OFFS BALANCE AT
BEGINNING OF COSTS AND NET OF END OF
PERIOD EXPENSES COLLECTIONS PERIOD

Year ended December 31, 2000:
Deducted from asset accounts:
Allowance for doubtful accounts: $ 628 $ 790 $(338) $1,080

One Month Period ended
December 31, 1999:
Deducted from asset accounts:
Allowance for doubtful accounts: $ 449 $ 196 $ (17) $ 628

Year ended November 30, 1999:
Deducted from asset accounts:
Allowance for doubtful accounts: $ 200 $ 392 $(143) $ 449

Year ended November 30, 1998:
Deducted from asset accounts:
Allowance for doubtful accounts: $ 200 $ 117 $(117) $ 200

S-1