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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal period ended September 30, 2003
[ ] 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 0-8927
------
NEVADA GOLD & CASINOS, INC.
(Name of issuer in its charter)
Nevada 88-0142032
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or organization)
3040 Post Oak Blvd.
Suite 675 Houston, Texas 77056
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (713) 621-2245
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 any shorter period that the
registrant was required to file the reports), and (2) has been subject to those
filing requirements for the past 90 days.
[X] Yes [ ] No
Indicated by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act.) [ ] Yes [X] No
The number of common shares outstanding was 11,954,652 as of November
14, 2003.
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2003 AND
MARCH 31, 2003.....................................................3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 2003 AND 2002...........................4
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX
MONTHS ENDED SEPTEMBER 30, 2003 AND 2002...........................5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX
MONTHS ENDED SEPTEMBER 30, 2003 AND 2002...........................6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...........................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.....................17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..........24
ITEM 4. CONTROLS AND PROCEDURES.............................................24
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ..................................................24
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS...........................25
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.....................................25
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................25
ITEM 5. OTHER INFORMATION...................................................25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................26
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
September 30, March 31,
2003 2003
------------------ -----------------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,908,945 $ 3,968,146
Notes receivable 5,964,540 -
Accounts receivable 2,861,014 359,008
Other receivable 669,971 2,125
------------------ -----------------
TOTAL CURRENT ASSETS 11,404,470 4,329,279
------------------ -----------------
Other Assets:
Isle of Capri-Black Hawk, L.L.C. 12,977,042 8,633,782
Dry Creek Casino, L.L.C. 808,510 659,897
Route 66 Casinos, L.L.C. 1,296,592 1,290,199
Gold Mountain Development, L.L.C. 3,203,728 3,065,281
Goldfield Resources, Inc. 480,812 480,812
Sunrise Land and Minerals Corporation 371,750 371,750
Restaurant Connections International, Inc. - -
Note receivable from Dry Creek Rancheria, net of current portion 27,794,144 28,334,437
Note receivable from affiliates, net of current portion 4,401,515 6,150,552
Note receivable - other - 3,339,060
Deferred loan issue costs 818,664 838,026
Other assets 630,034 236,416
Furniture, fixtures, and equipment, net of accumulated depreciation of
$112,526 and $130,653 at September 30 and March 31, 2003, respectively 37,003 43,399
------------------ -----------------
TOTAL ASSETS $ 64,224,264 $ 57,772,890
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 1,227,863 $ 882,388
Accrued interest payable - 314,829
Deferred income tax liability 4,425,164 2,384,425
Current portion of long term debt 5,457,295 1,932,072
------------------ -----------------
TOTAL CURRENT LIABILITIES 11,110,322 5,513,714
------------------ -----------------
LONG TERM LIABILITIES
Deferred income 1,039,867 1,014,729
Notes payable, net of current portion 30,548,896 34,683,665
------------------ -----------------
TOTAL LONG TERM LIABILITIES 31,588,763 35,698,394
------------------ -----------------
TOTAL LIABILITIES 42,699,085 41,212,108
------------------ -----------------
MINORITY INTEREST
Dry Creek Casino, L.L.C. 704,374 360,450
Route 66 Casinos, L.L.C. 881,567 671,852
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock, $0.12 par value, 20,000,000 shares authorized, 11,312,985 and
11,149,772 shares issued and outstanding at September 30 and March 31, 2003,
respectively 1,357,558 1,337,973
Additional paid in capital 10,190,451 9,847,840
Retained earnings 8,753,691 4,912,245
Accumulated other comprehensive loss (362,462) (569,578)
------------------ -----------------
TOTAL STOCKHOLDERS' EQUITY 19,939,238 15,528,480
------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 64,224,264 $ 57,772,890
================== =================
The accompanying notes are an integral part of these financial statements.
3
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
September 30,
-------------------------------------------
2003 2002
--------------- -------------
REVENUES
Gaming Assets Participations:
Dry Creek Casino, L.L.C. $ 1,408,750 $ -
Route 66 Casinos, L.L.C. 971,645 145,516
Other income:
Royalty income 15,134 12,500
Lease income - 1,400
Gain on land sale - 561,649
Interest income 1,245,651 620,885
Miscellaneous income 19,330 7,005
--------------- -------------
TOTAL REVENUES 3,660,510 1,348,955
--------------- -------------
EXPENSES
General and administrative 287,516 159,663
Interest expense 1,001,179 518,012
Salaries 286,551 219,985
Legal and professional fees 528,291 156,135
Write-off of capitalized development cost 23,403 178,437
Other 46,678 45,520
Route 66 Casinos, L.L.C. expense 594,586 94,586
--------------- -------------
TOTAL EXPENSES 2,768,204 1,372,338
--------------- -------------
EQUITY IN EARNINGS OF ISLE OF CAPRI-BLACK HAWK 2,657,101 2,351,897
MINORITY INTEREST
Dry Creek Casino, L.L.C. (215,632) (21,874)
Route 66 Casinos, L.L.C. (184,759) (24,955)
--------------- -------------
Net income before federal income tax provision 3,149,016 2,281,685
Federal income tax provision 1,070,666 354,039
--------------- -------------
NET INCOME $ 2,078,350 $ 1,927,646
=============== =============
PER SHARE INFORMATION
Net income available to common
shareholders $ 2,078,350 $ 1,927,646
=============== =============
Net income per common share - basic $ 0.18 $ 0.18
=============== =============
Net income per common share - diluted $ 0.16 $ 0.16
=============== =============
Basic weighted average number of
common shares outstanding 11,251,185 10,898,558
=============== =============
Fully diluted weighted average number of
common shares outstanding 13,363,005 12,415,735
=============== =============
The accompanying notes are an integral part of these financial statements.
4
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended
September 30,
-------------------------------------------
2003 2002
--------------- -------------
REVENUES
Gaming Assets Participations:
Dry Creek Casino, L.L.C. $ 1,709,208 $ -
Route 66 Casinos, L.L.C. 1,117,162 202,584
Other income:
Royalty income 28,634 23,000
Lease income - 3,500
Gain on land sale - 589,916
Interest income 2,553,300 994,803
Miscellaneous income 34,975 25,551
--------------- -------------
TOTAL REVENUES 5,443,279 1,839,354
--------------- -------------
EXPENSES
General and administrative 520,375 313,225
Interest expense 1,975,290 779,652
Salaries 560,155 439,444
Legal and professional fees 842,318 202,872
Write-off of capitalized development cost 23,403 238,437
Other 68,886 68,387
Route 66 Casinos, L.L.C. expense 689,172 133,317
--------------- -------------
TOTAL EXPENSES 4,679,599 2,175,334
--------------- -------------
EQUITY IN EARNINGS OF ISLE OF CAPRI-BLACK HAWK 5,490,448 4,910,278
MINORITY INTEREST
Dry Creek Casino, L.L.C. (268,924) (54,373)
Route 66 Casinos, L.L.C. (209,715) (33,941)
--------------- -------------
Net income before federal income tax provision 5,775,489 4,485,984
Federal income tax provision 1,934,043 1,177,988
--------------- -------------
NET INCOME $ 3,841,446 $ 3,307,996
=============== =============
PER SHARE INFORMATION
Net income available to common
shareholders $ 3,841,446 $ 3,307,996
=============== =============
Net income per common share - basic $ 0.34 $ 0.31
=============== =============
Net income per common share - diluted $ 0.29 $ 0.26
=============== =============
Basic weighted average number of
common shares outstanding 11,211,676 10,838,954
=============== =============
Fully diluted weighted average number of
common shares outstanding 13,251,925 12,891,425
=============== =============
The accompanying notes are an integral part of these financial statements.
5
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
September 30,
-----------------------------------------------
2003 2002
------------------- ------------------
CASH FLOWS - OPERATING ACTIVITIES:
Net income $ 3,841,446 $ 3,307,996
Adjustments to reconcile net income to net cash
Provided by (used in) operating activities:
Depreciation 11,581 15,853
Consultant option expenses 77,500 -
Amortization of loan issue costs 148,949 73,616
Amortization of capitalized development cost 57,751 -
Amortization of deferred income (143,960) (30,409)
Gain on sales of land - (589,916)
Write-off of project development cost 23,403 238,437
Equity in earnings of Isle of Capri-Black Hawk (5,490,448) (4,910,278)
Cash distribution from Isle of Capri-Black Hawk 1,461,000 3,183,000
Deferred income tax expense 1,934,043 1,177,988
Minority interest
Dry Creek Casino, L.L.C. 268,924 54,373
Route 66 Casinos, L.L.C. 209,715 33,941
Changes in operating assets and liabilities:
Receivables and other assets (3,165,112) (933,343)
Accounts payable and accrued liabilities 38.989 222,655
------------------- ------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (726,219) 1,843,913
------------------- ------------------
CASH FLOWS - INVESTING ACTIVITIES:
Net Proceeds from the sales of land - 3,611,200
Purchases of real estate and assets held for development (769,776) (813,978)
Purchase of furniture, fixtures, and equipment (5,185) (10,181)
Note receivable from Dry Creek Rancheria (4,089,855) (14,012,074)
Note receivable - other 3,339,060 (32,129)
Note receivable from affiliates 549,037 730,332
------------------- ------------------
NET CASH USED IN INVESTING ACTIVITIES (976,719) (10,526,830)
------------------- ------------------
CASH FLOWS - FINANCING ACTIVITIES:
Proceeds from debt - 11,168,497
Deferred loan issue costs (129,587) (394,913)
Reacquisition and retirement of common stock - (402,820)
Dry Creek Casino, L.L.C. capital contribution 75,000 5,250
Common stock issued for cash 307,870 329,120
Payments on debt (609,546) (10,320)
------------------- ------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (356,263) 10,694,814
------------------- ------------------
Net increase (decrease) in cash (2,059,201) 2,011,897
Beginning cash balance 3,968,146 1,021,913
------------------- ------------------
Ending cash balance $ 1,908,945 $ 3,033,810
=================== ==================
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 2,428,198 $ 813,732
------------------- ------------------
The accompanying notes are an integral part of these financial statements.
6
NEVADA GOLD & CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BUSINESS
We are primarily a developer of gaming properties.
Isle of Capri Black Hawk, L.L.C.
--------------------------------
We are a 43% non-operating owner of Isle of Capri Black Hawk, L.L.C.
("IC-BH") with Isle of Capri Casinos, Inc. ("Isle"). In April 2003, IC-BH
completed the acquisition of the Colorado Central Station Casino and Colorado
Grande Casino from IGT for $84 million. Also, to replace its existing credit
facility, IC-BH entered into a new $210.6 million senior secured credit
facility to provide financing for the acquisition of the casinos and for
possible future expansion. IC-BH now owns and operates three casinos in
Colorado (referred to collectively as the "Casinos"). Isle manages the Casinos
under an agreement for a fee based upon a percentage of the casino's revenues
and operating profit. IC-BH's gaming properties are:
o the Isle of Capri - Black Hawk Casino and hotel located in
Black Hawk, Colorado;
o the Colorado Central Station Casino located in Black Hawk,
Colorado; and
o the Colorado Grande Casino located in Cripple Creek,
Colorado.
The Isle of Capri - Black Hawk Casino has a 101,000-square-foot floor
plate, and is strategically located at the entrance to Black Hawk. The Casino
features 1,123 slot machines, 14 table games, three restaurants, an event
center, and a 1,100-space covered parking garage. A 237-room hotel is on top of
the casino.
Colorado Central Station Casino is located across the intersection of
Main Street and Mill Street from the Isle of Capri - Black Hawk Casino.
Colorado Central Station casino has a total facility area of 46,250 square
feet, features 754 gaming machines, 15 table games, a full service restaurant,
a buffet, two casino bars, and 700 parking spaces.
Colorado Grande Casino is located at a primary intersection, near the
center of the Cripple Creek market. Colorado Grande Casino's gaming area totals
3,125 square feet and offers 219 gaming machines. Colorado Grande Casino does
not offer table play.
Dry Creek Casino, L.L.C.
------------------------
Dry Creek Casino, L.L.C. of which we own 69%, was formed to assist the
Dry Creek Rancheria Band of Pomo Indians with the development and financing of
its River Rock Casino located approximately 75 miles north of the San Francisco
Bay area, in Sonoma County, California. The casino features 1,600 slot
machines, 16 table games, and two restaurants. As of September 30, 2003, we had
loaned $31.1 million to Dry Creek Casino, L.L.C., which loaned such funds to the
River Rock Casino project, and we guaranteed equipment financing and operating
leases of approximately $13.3 million. Under the development and loan
agreement, Dry Creek Casino, L.L.C. began earning 20% of River Rock Casino's
earnings before taxes, depreciation, and amortization for five years, starting
June 1, 2003 and ending on May 31, 2008. (See Note 10, Subsequent Events)
Route 66 Casinos, L.L.C.
------------------------
Route 66 Casinos, L.L.C. ("Route 66"), of which we are a 51% owner,
was formed to assist the Laguna Development Corporation (the "LDC"), a
federally chartered corporation which is wholly-owned by the Pueblo of Laguna
tribe with the design and development of a casino located in New Mexico ("Route
66 Casino"). In exchange for its service, Route 66 has the exclusive right to
lease gaming equipment to the LDC for a period of five years for the Route 66
Casino. On September 4, 2003, the Route 66 Casino opened. The gaming equipment
agreements include a five-year contract for 1,250 gaming devices to be placed
in the Route 66 Casino, a one-year contract for 100 gaming devices in Rio
Puerco temporary casino, and a contract that runs through February 2004 for 45
gaming devices in the existing Dancing Eagle Casino. We are currently in
arbitration and litigation with the other member of Route 66 as discussed in
Part II, Item 1. As a result, information presented in our consolidated
financial statements related to Route 66 Casinos, L.L.C. has been estimated by
us.
7
In addition, we and/or our subsidiaries own interests in undeveloped
real estate, restaurant franchises, and gold mining claims.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements included herein have been prepared by us,
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission, and reflect all adjustments which are, in the opinion of
management, necessary to present a fair statement of the results for the
interim period on a basis consistent with the annual audited consolidated
financial statements. All such adjustments are of a normal recurring nature.
The results of operations for the interim periods are not necessary indicative
of the results to be expected for an entire year. Certain information,
accounting policies and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations, although we believe
that all disclosures are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with our
audited consolidated financial statements included in our Annual Report on Form
10-KSB for the year ended March 31, 2003.
CASH AND CASH EQUIVALENTS - Interest-bearing deposits and other
investments, with original maturities of three months or less from the date of
purchase, are considered cash and cash equivalents.
REAL ESTATE HELD FOR DEVELOPMENT - Real estate held for development
consists of undeveloped land located in and around Black Hawk, Colorado and
Nevada County, California. We have capitalized certain direct costs of
pre-development activities together with capitalized interest. Property held
for development is carried at the lower of cost or net realizable value.
FURNITURE, FIXTURES, AND EQUIPMENT - We depreciate furniture,
fixtures, and equipment over their estimated useful lives, ranging from two to
seven years, using the straight-line method. Expenditures for furniture,
fixtures, and equipment are capitalized at cost. When items are retired or
otherwise disposed of, a gain or (loss) is recorded for the difference between
net book value and proceeds realized on the property. Ordinary maintenance and
repairs are charged to expense, and replacements and improvements are
capitalized.
REVENUE RECOGNITION - We record revenues from interest income as such
interest accrues on outstanding notes receivable. The dates on which interest
income is actually collected is dependent upon the terms of the particular debt
agreement, and may not correspond to the date such interest income is recorded.
INCOME TAXES - The asset and liability approach is used for financial
accounting and reporting for income taxes. Under this approach, deferred tax
assets and liabilities are recognized based on anticipated future tax
consequences, using currently enacted tax laws, attributable to differences
between financial statement carrying amounts of assets and liabilities and
their respective tax basis.
EARNINGS PER SHARE DATA - Basic earnings per common share amounts are
calculated using the average number of common shares outstanding during each
period. Diluted earnings per share assumes the exercise of all stock options
having exercise prices less than the average market price of the common stock
using the "treasury stock method" and for convertible debt securities using the
"if converted method".
STOCK-BASED COMPENSATION - We have adopted Statement of Financial
Accounting Standards ("SFAS") No. 123 - "Accounting for Stock Based
Compensation." Under SFAS No. 123, we are permitted to either record expenses
for stock options and other employee compensation plans based on their fair
value at the date of grant or to continue to apply our current accounting
policy under Accounting Principles Board, ("APB") Opinion No. 25 "Accounting
for Stock Issued to Employees," and recognize compensation expense, if any,
based on the intrinsic value of the equity instrument at the measurement date.
We elected to continue following APB No. 25.
BASIS OF PRESENTATION - These financial statements are consolidated
for all majority owned subsidiaries as of September 30, 2003. Affiliated
companies in which we do not have a controlling interest or for which control
is expected to be temporary are accounted for using the equity method. All
significant intercompany transactions and balances have been eliminated in the
financial statements.
USE OF ESTIMATES - The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of
8
the financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. We are
currently in arbitration and litigation with the other member of Route 66 as
discussed in Part II, Item 1. As a result, information presented in our
consolidated financial statements related to Route 66 has been estimated by us.
CONCENTRATION OF RISK - We are dependent to a large extent upon IC-BH
for our earnings and cash flows from operations. Accordingly, we will be
subject to greater risks than a geographically diversified gaming operation,
including, but not limited to, risks related to local economic and competitive
conditions, complications caused by weather or road closure, road construction
on primary access routes, changes in local and state governmental laws and
regulations (including changes in laws and regulations affecting gaming
operations and taxes) and natural and other disasters.
Any decline in the number of visitors to the Black Hawk Market, a
downturn in the overall economy of the area served by the Black Hawk Market, a
decrease in gaming activities in the Black Hawk Market or an increase in
competition could have a material adverse effect on us.
We maintain cash accounts in major U.S. financial institutions. The
terms of these deposits are on demand to minimize risk. The balances of these
accounts occasionally exceed the federally insured limits, although no losses
have been incurred in connection with such cash balances.
SUBSTANTIAL LEVERAGE - In April 2003, IC-BH entered into a $210.6
million senior secured credit facility, which replaced its prior credit
facility. The degree to which IC-BH is leveraged could have important
consequences including, but not limited to, the following: (a) its increased
vulnerability to adverse general economic and industry conditions; (b) the
dedication of a substantial portion of its operating cash flow to the payment
of principal and interest of indebtedness, thereby reducing the funds available
for operations and further development of IC-BH; and (c) its impaired ability
to obtain additional financing for future working capital, capital
expenditures, acquisitions or other general corporate purposes. To date, cash
flow from the Isle of Capri - Black Hawk Casino's operations has been
sufficient to pay its debt obligations.
At September 30, 2003, we were highly leveraged with $36 million in
corporate debt and lease guarantees of approximately $13.3 million for the
River Rock Casino project. We also have guaranteed debt of $552,000 for an
affiliated company that may mature during the next fiscal year. To date, cash
distributions from IC-BH and loan repayments from the River Rock Casino project
have been sufficient to satisfy our current debt obligations. Also, the Dry
Creek Casino, L.L.C. began earning credit enhancement fees from River Rock
Casino for five years, starting in June 2003. However, if the River Rock Casino
project is closed due to pending litigation, governmental inquiries or other
reasons beyond our control, or if we are required to perform on our outstanding
guarantees, we may have insufficient cash flow to satisfy our obligations
without raising additional financing. There is no assurance that we will be
able to obtain additional financing if required, the failure of which could
have a material effect on our operations. (See Note 10, Subsequent Events)
RECENT ACCOUNTING PRONOUNCEMENTS - In May 2003, the Financial
Accounting Standards Board (the "FASB") issued SFAS No. 150, "Accounting for
Certain Instruments with Characteristics of Both Liabilities and Equity." SFAS
No. 150 clarifies the accounting for certain financial instruments with
characteristics of both liabilities and equity and requires that those
instruments be classified as liabilities in statements of financial position.
Previously, many of those financial instruments were classified as equity. SFAS
No. 150 is effective for financial instruments entered into or modified after
May 31, 2003 and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have
a significant impact on our financial statements.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
No. 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends
and clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." This
Statement is effective for contracts entered into or modified after June 30,
2003. We did not participate in any applicable activities as of and for the
quarter ended September 30, 2003.
In January 2003, the FASB issued Financial Interpretation ("FIN")
No. 46, "Consolidation of Variable Interest Entities." In general, a variable
interest entity is a corporation, partnership, trust, or any other legal entity
used for business purposes that either (a) does not have equity investors with
voting rights or (b) has equity investors that do not provide sufficient
financial resources for the entity to support its activities. FIN No. 46
requires certain
9
variable interest entities to be consolidated by the primary beneficiary of the
entity if the investors in the entity do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. The consolidation requirements of FIN No. 46 apply
immediately to variable interest entities created after January 31, 2003. The
consolidation requirements apply to older entities in the first fiscal year or
interim period beginning after June 15, 2003. Certain of the disclosure
requirements apply to all financial statements issued after January 31, 2003,
regardless of when the variable interest entity was established. We did not
participate in any applicable activities as of and for the quarter ended
September 30, 2003.
NOTE 3. ISLE OF CAPRI - BLACK HAWK, L.L.C.
We are a 43% non-operating owner of IC-BH which now owns and operated
three casinos in Colorado. Financing for the Isle of Capri - Black Hawk Casino
was initially provided by the IC-BH debt offering of $75 million in 13% First
Mortgage Notes. In December 2001, IC-BH refinanced the $75 million with a new
$90 million credit facility that included two $40 million term loans that were
due in five years and a $10 million line of credit. The average interest on the
credit facility was 6% to 7%. In the fourth quarter of fiscal 2002, IC-BH
entered into interest rate swap agreement that effectively converted $40
million of its floating rate debt to a fixed-rate basis for the following three
years.
In April 2003, in connection with IC-BH's acquisition of the Colorado
Central Station Casino and Colorado Grande Casino from IGT for $84 million,
IC-BH's $90 million senior secured credit facility was increased to $210.6
million, (of which $166 million has been drawn down) to provide financing for
the acquisition of the new casinos and for possible future expansion. The
weighted average effective interest rate of total debt outstanding under the
IC-BH's senior secured credit facility at July 27, 2003 was 5.9%. IC-BH now
owns and operates three casinos in Colorado.
Our 43% ownership of the IC-BH is accounted for using the equity
method of accounting. Our investment in IC-BH is stated at cost, adjusted for
our equity in the undistributed earnings or losses of the project. IC-BH's
undistributed earnings allocable to us through October 26, 2003 (IC-BH's
quarter end) totaled $2,657,101 which has been included in our statement of
operations for the six months ended September 30, 2003. During our quarter
ended September 30, 2003, we received cash distributions of $1,057,000 from
IC-BH and our basis in the project through October 26, 2003 is $12,977,042
which includes an other comprehensive gain of $76,523, net of taxes of $39,421,
related to the interest rate swap transaction.
10
The following is a summary of condensed financial information pertaining to
IC-BH as of October 26, 2003 and for the quarter then ended:
ISLE OF CAPRI BLACK HAWK, L.L.C.
BALANCE SHEET
(UNAUDITED)
October 26,
2003
---------------
ASSETS (in Thousands)
Current assets:
Cash and cash equivalents $ 19,493
Short-term investments 16,997
Accounts receivable - other 1,105
Accounts receivable - related parties 9
Deferred income taxes 414
Inventories 657
Prepaid expenses 2,032
---------------
TOTAL CURRENT ASSETS 40,707
Property and equipment, net 155,679
Deferred financing costs, net of accumulated amortization 3,026
Restricted cash 35
Goodwill and other intangible assets 35,479
Prepaid deposits and other 420
---------------
TOTAL ASSETS $ 235,346
===============
LIABILITIES AND MEMBERS' EQUITY Current liabilities:
Current maturities of long-term debt $ 11,924
Accounts payable - trade 2,806
Accounts payable - related parties 1,993
Accrued liabilities:
Interest 1,245
Payroll and related expenses 5,995
Property, gaming and other taxes 8,368
Income taxes 933
Progressive jackpot and slot club awards 3,991
Other 1,045
---------------
TOTAL CURRENT LIABILITIES 38,300
Long-term debt, less current maturities 154,140
Other liabilities 1,277
Deferred income taxes 328
---------------
TOTAL LONG-TERM LIABILITIES 155,745
---------------
TOTAL LIABILITIES 194,045
Members' equity:
Members' equity 42,578
Accumulated other comprehensive loss (1,277)
---------------
TOTAL MEMBERS' EQUITY 41,301
---------------
TOTAL LIABILITIES AND MEMBERS' EQUITY $ 235,346
===============
11
ISLE OF CAPRI BLACK HAWK, L.L.C.
INCOME STATEMENT
(UNAUDITED)
Six Months Ended
October 26, 2003
---------------------
REVENUES (in Thousands)
Casino $ 91,248
Rooms 3,045
Food, beverage and other 10,736
---------------------
Gross revenues 105,029
Less promotional allowances 21,498
---------------------
Net revenues 83,531
OPERATING EXPENSES
Casino 13,189
Gaming taxes 17,200
Rooms 799
Food, beverage and other 2,266
Facilities 3,577
Marketing and administrative 19,507
Management fees 3,621
Depreciation and amortization 4,285
---------------------
Total operating expenses 64,444
---------------------
Operating income 19,087
Interest expense (5,747)
Interest income 64
---------------------
Income before income taxes 13,404
Income tax provision (equitable to two subsidiaries) 636
---------------------
Net income $ 12,768
=====================
The difference in carrying value of our investment in IC-BH and our
equity interest in IC-BH is primarily due to the fact that we originally
contributed appreciated property which was initially recorded by IC-BH at our
fair market value while we continued to carry the property at its original cost
basis.
During IC-BH's quarter ended October 26, 2003, IC-BH recorded an other
comprehensive gain of $269,638 related to the interest rate swap transaction.
Our share of the other comprehensive gain was $76,523, net of taxes of $39,421.
12
NOTE 4. NOTES RECEIVABLE
NOTES RECEIVABLE - DRY CREEK RANCHERIA - At September 30,
2003, Dry Creek Casino, L.L.C. had loans to the Dry Creek Rancheria Band of
Pomo Indians totaling $32.6 million for the development and financing of its
River Rock Casino project. The loans consist of a $23 million term loan and a
$9.6 million construction advance loan. The $23 million loan bears interest at
12% per annum with interest only due through August 2003 and will then be
amortized over a four year period. The $9.6 million construction advance loan
bears interest at 12% per annum. (See Note 10, Subsequent Events)
NOTES RECEIVABLE - AFFILIATES - At September 30, 2003, Clay County
Holdings, Inc ("CCH") owed us $2.8 million which amount bears interest at 12%
per annum, and is payable by maker in a minimum amount of $150,000 plus accrued
interest per quarter until paid in full. At September 30, 2003, Service
Interactive, Inc. ("SI") owed us $2.8 million which amount bears interest at
12% per annum, and is payable by maker in a minimum amount of $150,000 plus
accrued interest per quarter until paid in full. Both notes are collateralized
by a lien on our shares owned by CCH having $14.6 million of market equity
value as of September 30, 2003. The outstanding balances of notes receivable
from CCH and SI were reduced by $150,000 and $150,000, respectively, during the
quarter ended September 30, 2003.
NOTE 5. LONG-TERM DEBT
At September 30, 2003, we had a $13 million long-term credit facility
bearing interest at 11% per annum, payable monthly, with principal maturing on
December 24, 2005. The credit facility is secured by our interest in the IC-BH
Casino. Up to 54% of the credit facility is convertible into shares of our
restricted common stock at the rate of $3.00 per share or 85% of the closing
market price at the date of conversion, whichever is less. This conversion is
limited during a twelve month period to an amount not to exceed 4.99% of our
then total issued and outstanding stock. As of September 30, 2003, we have
drawn down the entire $13 million available under this credit facility.
At September 30, 2003, we had a $23 million five-year credit facility.
This credit facility was used to satisfy the $23 million commitment Dry Creek
Casino, L.L.C. made to the River Rock Casino project. The $23 million long-term
credit facility bears interest at 12% with interest only payable through
October 15, 2003 and will then be amortized over four years starting on October
15, 2003. This credit facility is secured by our interest in the IC-BH Casino,
real property in the vicinity of Black Hawk, Colorado and the note receivable
from River Rock Casino project. As of September 30, 2003, we have drawn down
the entire $23 million available under this credit facility.
NOTE 6. FEDERAL INCOME TAXES
Temporary differences reflected in the deferred income tax accounts
primarily relate to timing differences in the recognition of the allocated
equity in earnings from IC-BH for tax and financial reporting purposes and tax
benefits generated by available net operating loss carryforwards ("NOL's"). As
of September 30, 2003, we have completely utilized our NOL's.
For the three months ended September 30, 2003, we recorded deferred
tax expense in the amount of $1,070,666. Our recorded deferred tax expense
excludes tax expense of $39,421 related to an interest rate swap transaction,
which was recorded net of tax as an accumulated other comprehensive gain.
13
NOTE 7. EQUITY
During the six months ended September 30, 2003, we granted options to
purchase 260,000 shares of our common stock for director, and employee, and
consultant compensation. We have recorded compensation expenses totaling
$77,500 in consultant expenses for options granted to non-employees based on
the options' estimated fair value on the date of grant. Had compensation costs
for all options issued been determined based on the fair value at the grant
date consistent with the provisions of SFAS No. 123, net income and net income
per share would have decreased to the pro froma amounts indicated below:
Three Months Ended Six Months Ended
September 30, September 30,
----------------------------------------------------------------------------
2003 2002 2003 2002
----------------------------------------------------------------------------
Net income - as reported $ 2,078,350 $ 1,927,646 $ 3,841,446 $ 3,307,996
Less: total stock-based employee compensation
expense determined under fair value based
method for all awards granted to employees,
net of related tax effect (555,311) - (555,311) -
----------------------------------------------------------------------------
et income - pro forma $ 1,523,039 $ 1,927,646 $ 3,286,135 $ 3,307,996
----------------------------------------------------------------------------
Net income per share - as reported
Basic $ 0.18 $ 0.18 $ 0.34 $ 0.31
Diluted $ 0.16 $ 0.16 $ 0.29 $ 0.26
Net income per share - pro forma
Basic $ 0.14 $ 0.18 $ 0.29 $ 0.31
Diluted $ 0.12 $ 0.16 $ 0.25 $ 0.26
The following is presented as a reconciliation of the numerators and
denominators of basic and diluted earnings per share computations, in
accordance with SFAS No. 128.
THREE MONTHS ENDED SEPTEMBER 30, 2003
--------------------------------------------------------
Income Shares Per-Share Amount
(Numerator) (Denominator)
--------------------------------------------------------
BASIC EPS
Income available to common stockholders $ 2,078,350 11,251,185 $ 0.18
EFFECT OF DILUTIVE SECURITIES
Common stock options and warrants - 1,553,426 (0.02)
Convertible debt 30,405 558,394 -
------------ ----------------- ----------
FULLY DILUTED EPS
Income available to common stockholders $ 2,108,755 13,363,005 $ 0.16
============ ================= ==========
SIX MONTHS ENDED SEPTEMBER 30, 2003
--------------------------------------------------------
Income Shares Per-Share Amount
(Numerator) (Denominator)
--------------------------------------------------------
BASIC EPS
Income available to common stockholders $ 3,841,446 11,211,676 $ 0.34
EFFECT OF DILUTIVE SECURITIES
Common stock options and warrants - 1,483,876 (0.04)
Convertible debt 60,589 556,373 (0.01)
------------ ----------------- ----------
FULLY DILUTED EPS
Income available to common stockholders $ 3,902,035 13,251,925 $ 0.29
============ ================= ==========
14
THREE MONTHS ENDED SEPTEMBER 30, 2002
--------------------------------------------------------
Income Shares Per-Share Amount
(Numerator) (Denominator)
--------------------------------------------------------
BASIC EPS
Income available to common stockholders $ 1,927,646 10,898,558 $ 0.18
EFFECT OF DILUTIVE SECURITIES
Common stock options and warrants - 974,142 (0.02)
Convertible debt 29,568 543,035 -
------------ ----------------- ----------
DILUTED EPS
Income available to common stockholders $ 1,957,214 12,415,735 $ 0.16
============ ================= =========
SIX MONTHS ENDED SEPTEMBER 30, 2003
--------------------------------------------------------
Income Shares Per-Share Amount
(Numerator) (Denominator)
--------------------------------------------------------
BASIC EPS
Income available to common stockholders $ 3,307,996 10,838,954 $ 0.31
EFFECT OF DILUTIVE SECURITIES
Common stock options and warrants - 1,519,262 (0.04)
Convertible debt 58,066 533,209 (0.01)
------------ ----------------- ----------
FULLY DILUTED EPS
Income available to common stockholders $ 3,366,062 12,891,425 $ 0.26
============ ================= ==========
As discussed in Note 5, we have a convertible debt security the holder
of which has the option to convert a portion of principal and accrued interest
into our common stock. In accordance with SFAS No. 128, the effects of applying
the if-converted method for the quarters ended September 30, 2003 and 2002
results in this convertible debt security being dilutive. (See Note 10,
Subsequent Events)
NOTE 8. SEGMENT REPORTING
We primarily operate in the gaming segment. The gaming segment
consists of IC-BH, Dry Creek Casino, L.L.C. and Route 66 Casinos, L.L.C.
Summarized financial information concerning our reportable segments is shown in
the following table. The "Other" column includes amounts not allocated to the
gaming segment such as corporate-related items, and results of insignificant
AS OF AND FOR THE SIX MONTH ENDED SEPTEMBER 30, DECEMBER 2003
---------------------------------------------------------------------
Gaming Other Totals
---------------------------------------------------------------------
Revenue $ 2,826,370 $ 63,609 $ 2,889,979
Segment profit (loss) 954,964 (191,284) 763,680
Segment assets 52,620,511 4,056,290 56,676,801
Investment in Isle of Capri
Black Hawk L.L.C. 12,977,042 - 12,977,042
Interest expense 1,975,290 - 1,975,290
Interest income 2,105,152 448,148 2,553,300
Equity in earnings of
equity investment 5,490,448 - 5,490,448
15
AS OF AND FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2002
---------------------------------------------------------------------
Gaming Other Totals
---------------------------------------------------------------------
Revenue $ 202,584 $ 641,967 $ 844,551
Segment profit (loss) (1,217,076) 881,096 (335,980)
Segment assets 26,595,042 3,753,720 30,348,762
Investment in Isle of Capri
Black Hawk L.L.C. 6,596,361 - 6,596,361
Interest expense 779,652 - 779,652
Interest income 507,214 487,589 994,803
Equity in earnings of
equity investment 4,910,278 - 4,910,278
Reconciliation of reportable segment assets to our consolidated totals are as
follows:
SEPTEMBER 30,
------------------------------------
2003 2002
---------------- ---------------
Assets
Total assets for reportable segments $ 56,676,801 $ 30,348,782
Cash not allocated to segments 1,908,945 3,033,810
Notes receivable not allocated to segments 5,601,515 6,763,400
Furniture, fixtures, & equipment not allocated to segments 37,003 51,443
Other assets not allocated to segments - 1,144,634
---------------- ---------------
Total assets $ 64,224,264 $ 41,342,069
=============== ===============
Reconciliation of reportable segment revenues to our consolidated totals are as
follows:
SIX MONTHS ENDED
SEPTEMBER 30,
------------------------------------
2003 2002
---------------- ---------------
Revenue
Total revenue for reportable segments $ 2,889,979 $ 844,551
Interest income allocated to reportable segments 2,553,300 994,803
------------- -------------
Total revenue $ 5,443,279 $ 1,839,354
============= =============
Reconciliation of reportable segment profit or loss to our consolidated totals
are as follows:
SIX MONTHS ENDED JUNE 30,
--------------------------------------
2003 2002
------------------ ----------------
Profit or loss
Total Profit or (loss) for reportable segments $ 763,680 $ (335,980)
Equity in income of equity investments 5,490,448 4,910,278
Minority interest (478,639) (88,314)
------------- -------------
Net income before federal income tax provision $ 5,775,489 $ 4,485,984
============= =============
16
NOTE 9. COMMITMENTS AND CONTINGENCIES
As of September 30, 2003, we have a total of $13.3 million in
guarantees on equipment financing and operating leases for the River Rock
Casino project. The guarantees supported equipment financing and operating
leases. In the event of the River Rock Casino's nonperformance under the terms
of the equipment financing and operating lease, our maximum potential future
payments under these guarantees will be equal to the carrying amount of the
liabilities. Assuming normal operations, we expect that our guarantees for the
River Rock Casino project will expire or be released within two years.
(See Note 10, Subsequent Events)
During the quarter ended September 30, 2003, our guarantees on debt of
SI for the performance of the payment obligations decreased from $656,000 to
$552,000. In the event of SI's nonperformance under the terms of the
obligation, our maximum potential future payments under these guarantees will
be equal to the carrying amount of the liabilities.
We indemnified our officers and directors for certain events or
occurrences while the director or officer is or was serving at our request in
such capacity. The maximum potential amount of future payments we could be
required to make under these indemnification obligations is unlimited; however,
we have a directors and officers liability insurance policy that limits our
exposure and enables us to recover a portion of any future amounts paid,
provided that such insurance policy provides coverage.
NOTE 10. SUBSEQUENT EVENTS
River Rock Casino Refinancing
-----------------------------
In November 2003, the River Rock Casino borrowed $200 million to repay
a majority of the tribe's indebtedness, to fund the completion of three parking
structures and related infrastructure improvements, and to fund the settlement
of litigation involving the Dry Creek Rancheria Band of Pomo Indians and a
prior developer. In connection therewith, the River Rock Casino (i) reduced the
$32.6 of indebtedness owed to the Dry Creek Casino, L.L.C. to $10 million, and
the Dry Creek Casino, L.L.C. reduced the $31.1 of indebtedness owed to us to
$10 million, (ii) paid the accrued credit enhancement fee through October 2003
to the Dry Creek Casino, L.L.C. in the amount of $2.2 million, and (iii) paid
accrued interest through November 7, 2003 to the Dry Creek Casino, L.L.C. in
the amount of $1.1 million. As part of River Rock Casino's repayment of
indebtedness, our guarantees with respect to River Rock Casino's indebtedness
were reduced from $13.3 million to $1.2 million. The $10 million loan from the
Dry Creek Casino, L.L.C. to the River Rock Casino has been amended with
interest payable monthly at a rate of 9% per annum and will mature upon the
earlier of (i) the completion of the River Rock Casino parking garage
structures, if such loan proceeds are not needed to fund parking garage
(anticipated to occur in late 2004), or (ii) if the amount of such loan is
needed to complete such construction, the balance of the loan will be repaid
from River Rock Casino's excess cash flow (anticipated to begin in 2005). An
identical loan agreement has been entered into between us and the Dry Creek
Casino, L.L.C. Certain of the debt proceeds were used by the River Rock Casino
to settle its litigation with a prior developer which resulted in settlement of
the lawsuit filed by such prior development against us and the Dry Creek
Casino, L.L.C.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of our results of operations and financial
position should be read in conjunction with the financial statements and notes
pertaining to them that appear elsewhere in this Form 10-Q. Management is of
the opinion that inflation and changing prices, including foreign exchange
fluctuations, will have little, if any, effect on our financial position or
results of our operations.
The information in this discussion contains forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Such statements are based upon current expectations that
17
involve risks and uncertainties. Any statements contained herein that are not
statements of historical facts may be deemed to be forward-looking statements.
For example, words such as, "may," "will," "should," "estimates," "predicts,"
"potential," "continue," "strategy," "believes," "anticipates," "plans,"
"expects," "intends," and similar expressions are intended to identify
forward-looking statements. Our actual results and the timing of certain events
may differ significantly from the results discussed in the forward-looking
statement. Factors that might cause or contribute to such a discrepancy
include, but are not limited to the risks discussed in our other SEC filings,
including those in our annual report on Form 10-KSB for the year ended March
31, 2003. These forward-looking statements speak only as of the date hereof. We
expressly disclaim any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in our expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement are based.
Critical Accounting Policies
In December 2001, the SEC requested that companies discuss their most
"critical accounting policies" in the Management's Discussion and Analysis
section of their reports. The SEC indicated that a "critical accounting policy"
is one that is important to the portrayal of a company's financial condition
and operating results and requires management's most difficult, subjective or
complex judgments, often as a result of the need to make estimates about the
effects of matters that are inherently uncertain.
We have identified the policies below as critical to our business
operations and the understanding of our results of operations. The impact and
any associated risks related to these policies on our business operations are
discussed throughout this section where such policies affect our reported and
expected financial results. Our preparation of this report requires us to make
estimates and assumptions that affect the reported amount of assets and
liabilities, and that affect the disclosure of contingent assets and
liabilities. There is no assurance that actual results will not differ from
those estimates and assumptions.
Equity Method of Accounting
---------------------------
Our investments in IC-BH, RCI and Sunrise Land and Minerals
Corporation ("Sunrise") are accounted for using the equity method of accounting
because the investment gives us the ability to exercise significant influence,
but not control, over the investees. Significant influence is generally deemed
to exist where we have an ownership interest in the investee of between 20% and
50%, although other factors such as representation on the investee's Board of
Directors or similar oversight body are considered in determining whether the
equity method of accounting is appropriate. We record our equity in the income
or losses of our investees three months in arrears for RCI and one month in
advance for IC-BH, based on their respective fiscal year ends. Deferred tax
assets or liabilities are recorded for allocated earnings or losses of our
equity investments that are not currently reportable or deductible for federal
income tax purposes.
Revenue Recognition
-------------------
A substantial portion of our revenues for the quarter
consisted of interest income. We recognize revenues from interest income as
such interest accrues on outstanding note receivables. The dates on which
interest income is actually collected is dependent upon the terms of the
particular debt agreement, and may not correspond to the date such interest
income is recorded.
Income Taxes
------------
Income taxes are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." An asset and liability approach is used for financial accounting and
reporting for income taxes. Under this approach, deferred tax assets and
liabilities are recognized based on anticipated future tax consequences, using
currently enacted tax laws, attributable to differences between financial
statement carrying amounts of assets and liabilities and their respective tax
basis.
General
We are primarily a developer of gaming properties. We reported net
income of $2.1 million for the quarter ended September 30, 2003 compared to net
income of $1.9 million for the quarter ended September 30, 2002.
18
Our 43% ownership of the IC-BH is accounted for using the equity
method of accounting. Our investment in the joint venture is stated at cost,
adjusted for our equity in the undistributed earnings or losses of the project.
During the quarter ended September 30, 2003, our allocable income from IC-BH
through October 26, 2003, IC-BH's quarter end, totaled $2.7 million, compared
to $2.4 million for the same period in fiscal 2003. During the quarter, we
received a cash distribution of $1.1 million from IC-BH and our basis in the
project through October 26, 2003 is $13 million, including an other
comprehensive gain of $77,000, net of taxes of $39,000, related to an interest
rate swap transaction.
Our ownership of RCI is accounted for using the equity method of
accounting. Our investment in RCI is stated at cost, adjusted for our equity in
the undistributed earnings or losses of RCI. Our portion of RCI's undistributed
gain through June 30, 2003 totaled $25,000. In accordance with the equity
method of accounting, our investment account balance was reduced to zero and
the remaining allocated loss of $873,000 is not reflected in our financial
statements.
During the quarter ended September 30, 2003, Sunrise entered into a
business combination with a third party in which Sunrise received certain
mining interests. As of September 30, 2003, we hold 50% of Sunrise's equity
interest. Our ownership of Sunrise is accounted for using the equity method of
accounting. Our investment in Sunrise is stated at cost of $372,000, adjusted
for our equity in the undistributed earnings or losses of Sunrise. During the
quarter ended September 30, 2003, Sunrise did not record a gain or a loss.
We own majority interests in Dry Creek Casino, L.L.C. and Route 66
Casinos, L.L.C., of 69% and 51%, respectively. For financial reporting
purposes, the assets, liabilities, and earnings of the partnership entities are
included in our consolidated financial statements. The interests of the other
members of both entities have been recorded as minority interest totaling $ 1.6
million at September 30, 2003.
We have made loans to the Dry Creek Casino, L.L.C., which has in turn
made loans to the River Rock Casino. We will be repaid these loans, as the Dry
Creek Casino, L.L.C. is repaid. Excluding, the repayments on these loans, as a
member of the Dry Creek Casino, L.L.C., we will also receive income from the
River Rock Casino. This income is referred to in this report as "credit
enhancement fees" and equal 20% of River Rock Casino's earnings before
depreciation and amortization for a period of five years starting June 1, 2003
and ending May 31, 2008.
Property held for development consists of undeveloped acreage and
improvements located in and around Black Hawk, Colorado, and Nevada County,
California. We have capitalized certain direct costs of pre-development
activities together with capitalized interest. Property held for development is
carried at the lower of cost or net realizable value.
River Rock Casino Debt Refinancing
In November 2003, the River Rock Casino borrowed $200 million to repay
a majority of the tribe's indebtedness, to fund the completion of three parking
structures and related infrastructure improvements, and to fund the settlement
of litigation involving the Dry Creek Rancheria Band of Pomo Indians and a prior
developer. In connection therewith, the River Rock Casino (i) reduced the $32.6
of indebtedness owed to the Dry Creek Casino, L.L.C. to $10 million, and the Dry
Creek Casino, L.L.C. reduced the $31.1 of indebtedness owed to us to $10
million, (ii) paid the accrued credit enhancement fee through October 2003 to
the Dry Creek Casino, L.L.C. in the amount of $2.2 million, and (iii) paid
accrued interest through November 7, 2003 to the Dry Creek Casino, L.L.C. in the
amount of $1.1 million. As part of River Rock Casino's repayment of
indebtedness, our guarantees with respect to River Rock Casino's indebtedness
were reduced from $13.3 million to $1.2 million. The $10 million loan from the
Dry Creek Casino, L.L.C. to the River Rock Casino has been amended with interest
payable monthly at a rate of 9% per annum and will mature upon the earlier of
(i) the completion of the River Rock Casino parking garage structures, if such
loan proceeds are not needed to fund parking garage (anticipated to occur in
late 2004), or (ii) if the amount of such loan is needed to complete such
construction, the balance of the loan will be repaid from River Rock Casino's
excess cash flow (anticipated to begin in 2005). An identical loan agreement
will be entered into between us and the Dry Creek Casino, L.L.C. Certain of the
debt proceeds were used by the River Rock Casino to settle its litigation with a
prior developer which resulted in settlement of the lawsuit filed by such prior
development against us and the Dry Creek Casino, L.L.C.
Results of Operations
Comparison of the quarter ended September 30, 2003 and 2002
-----------------------------------------------------------
19
REVENUES. Revenues increased 171%, or $2.3 million, to $3.7 million
for the quarter ended September 30, 2003. Our revenue primarily consists of the
following income streams:
Gaming Assets Participations
DRY CREEK CASINO, L.L.C. Starting in June 2003, the Dry Creek
Casino, L.L.C. began earning a credit enhancement fee from River Rock
Casino which is equal to 20% of River Rock Casino's earnings before
depreciation and amortization. During the quarter ended September 30,
2003, the credit enhancement fee income was $1.4 million.
ROUTE 66 CASINOS, L.L.C. The gaming lease income of $972,000
for the three months ended September 30, 2003, compared to $146,000
for the three months ended September 30, 2002. The increase is
primarily related to estimated rental revenues from the gaming
equipment lease with the Route 66 Casino's permanent facility which
opened on September 4, 2003. We are in litigation and arbitration with
our co-member on this project, and accordingly, we have estimated
these amounts.
Other Revenues
INTEREST INCOME. Our interest income consists primarily of
interest due on loans we have made in connection with the River Rock
Casino project. Interest income increased 101%, or $625,000 to $1.2
million for the quarter ended September 30, 2003. The majority of the
increase is attributable to the $14.4 million increase in the loans
made in connection with the River Rock Casino project over the
comparable quarter of the prior year. In November 2003, we received
$22.6 million of principal payment, and accordingly, our interest
income in the future will significantly decrease in connection with
this project.
ROYALTY INCOME. Royalty income increased 21% to $15,000 for
the quarter ended September 30, 2003. This income is derived solely
from our mining agreement with Romarco Nevada, Inc. Based on our
agreement with Romarco, we anticipate receiving $58,000 during fiscal
2004. However, our agreement with Romarco is terminable at any time,
and as such there is no assurance we will receive these revenues in
the future.
EQUITY IN EARNINGS OF ISLE OF CAPRI BLACK HAWK. Equity in earnings of
IC-BH increased 13% to $2.7 million for the quarter ended September 30, 2003
compared to $ 2.4 million for the quarter ended September 30, 2002. The
increase is primarily attributable to an increase in pre-tax income from IC-BH.
TOTAL EXPENSES. Total expenses increased 102%, or $1.4 million to $2.8
million for the quarter ended September 30, 2003, compared to $1.4 million for
the quarter ended September 30, 2002. The increase is related primarily to an
increase in general and administrative expenses, interest expense, salaries,
legal and professional fees and estimated Route 66 operating expense as
discussed below:
GENERAL AND ADMINISTRATIVE EXPENSES. General and
administrative expenses increased 80%, or $128,000, to $288,000 for
the quarter ended September 30, 2003, compared to $160,000 in the
quarter ended September 30, 2002. The increase is primarily
attributable to $43,000 of amortization of development cost related to
the River Rock Casino project and increases in amortization of loan
issue cost, and general corporate administrative cost.
INTEREST EXPENSE. Interest expense increased 93%, or
$483,000, to $1 million for the quarter ended September 30, 2003,
compared to $518,000 for the quarter ended September 30, 2002 related
to additional borrowings from our credit facility during the fiscal
year ended March 31, 2003. In November 2003, we repaid our $23 million
credit facility and accordingly, our interest expense will
significantly decrease in the future.
SALARIES. Salaries increased 30%, or $67,000, to $287,000 for
the quarter ended September 30, 2003, compared to $220,000 in the
quarter ended September 30, 2002 related to increase in salaries and
the number of personnel.
20
LEGAL AND PROFESSIONAL FEES. Legal and professional fees
increased 238%, or $372,000, to $528,000 for the quarter ended June
30, 2003, compared to $156,000 in the quarter ended September 30, 2002
primarily related to increased fees related to contract disputes,
further discussed at Part 2, Item I.
ROUTE 66 OPERATING EXPENSE. Route 66 operating expense
increased 529%, or $500,000, to $595,000 for the quarter ended
September 30, 2003, compared to $95,000 in the quarter ended September
30, 2002 related to an increase in gaming machines placed in Route 66
Casino which opened on September 4, 2003. We are in litigation and
arbitration with our co-member on this project, and accordingly, we
have estimated these amounts.
NET INCOME. Net income before federal income tax provision increased
38% or $867,000 to $3.1 million for the quarter ended September 30, 2003 as
compared to $2.3 million. This increase is primarily the result of increases in
equity in earnings of IC-BH and gaming asset participations. Net income
increased 8% or $151,000 to $2.1 million for the quarter ended September 30,
2003 as compared to net income of $1.9 million in the quarter ended September
30, 2002. This increase is primarily the result of increases equity in earnings
of IC-BH , gaming asset participations, and federal income tax. The effective
tax rate for the quarter ended September 30, 2003 was 34% compared to 15.5% for
the quarter ended September 30, 2003. Such increase in the effective tax rate
related to tax benefits of $421,735 from IC-BH for fiscal year ended April 25,
1999 which was recognized in the quarter ended September 30, 2002.
Comparison of the six months ended September 30, 2003 and 2002
--------------------------------------------------------------
REVENUES. Revenues increased 196%, or $3.6 million, to $5.4 million
for the quarter ended September 30, 2003. Our revenue primarily consists of the
following income streams:
Gaming Assets Participations
DRY CREEK CASINO, L.L.C. Starting in June 2003, the Dry Creek
Casino, L.L.C. began earning a credit enhancement fee from River Rock
Casino equal to 20% of River Rock Casino's earnings before
depreciation and amortization. During the six months ended September
30, 2003, the credit enhancement fee income was $1.7 million.
ROUTE 66 CASINOS, L.L.C. The gaming lease income of $1.1
million for the six months ended September 30, 2003, compared to
$203,000 for the six months ended September 30, 2002. The increase is
primarily related to estimated rental revenues from the gaming
equipment lease with the Route 66 Casino's permanent facility which
opened on September 4, 2003. We are in litigation and arbitration with
our co-member on this project, and as such, we have estimated these
amounts.
Other Revenues
INTEREST INCOME. Our interest income consists primarily of
interest due on loans we have made in connection with the River Rock
Casino project. Interest income increased 157%, or $1.6, to $2.6
million for the six months ended September 30, 2003. The majority of
the increase is attributable to the $14.4 million increase in the
loans made in connection with the River Rock Casino project over the
comparable six months of the prior year. In November 2003, we received
$22.6 million of principal payment, and accordingly, our interest
income in the future will significantly decrease in connection with
this project.
ROYALTY INCOME. Royalty income increased 24% to 29,000 for
the six months ended September 30, 2003. This income is derived solely
from our mining agreement with Romarco Nevada, Inc. Based on our
agreement with Romarco, we anticipate receiving $58,000 during fiscal
2004. However, our agreement with Romarco is terminable at any time,
and as such there is no assurance we will receive these revenues in
the future.
21
EQUITY IN EARNINGS OF ISLE OF CAPRI BLACK HAWK. Equity in earnings of
IC-BH increased 12% to $5.5 million for the quarter ended September 30, 2003
compared to $4.9 million for the six months ended September 30, 2002. The
increase is primarily attributable to an increase in pre-tax income from IC-BH.
TOTAL EXPENSES. Total expenses increased 115%, or $2.5 million to $4.7
million for the six months ended September 30, 2003, compared to $2.2 million
for the six months ended September 30, 2002. The increase is related primarily
to an increase in general and administrative expenses, interest expense, other
expense, salaries, legal and professional fees, and estimated Route 66 expense
as discussed below:
GENERAL AND ADMINISTRATIVE EXPENSES. General and
administrative expenses increased 66%, or $207,000, to $520,000 for
the six months ended September 30, 2003, compared to $313,000 for the
six months ended September 30, 2002. The increase is primarily
attributable to $58,000 of amortization of development cost related to
the River Rock Casino project, and increases in amortization of loan
issue cost and general corporate administrative cost.
INTEREST EXPENSE. Interest expense increased 153%, or $1.2
million, to $2 million for the six months ended September 30, 2003,
compared to $780,000 in the six months ended September 30, 2002
related to additional borrowings from our credit facility during the
fiscal year ended March 31, 2003. In November 2003, we repaid our $23
million credit facility, and accordingly, our interest expense will
significantly decrease in the future.
SALARIES. Salaries increased 27%, or $121,000, to $560,000
for the six months ended September 30, 2003, compared to $439,000 in
the six months ended September 30, 2002 related to increase in
salaries and number of staffs.
LEGAL AND PROFESSIONAL FEES. Legal and professional fees
increased 315%, or $639,000, to $842,000 for the six months ended
September 30, 2003, compared to $203,000 in the six months ended
September 30, 2002 primarily related to increased fees related to
contract disputes, further discussed at Part 2, Item I.
ROUTE 66 OPERATING EXPENSE. Route 66 operating expense
increased 417%, or $556,000, to $689,000 for the six months ended
September 30, 2003, compared to $133,000 in the six months ended
September 30, 2002 related to an increase in gaming machines placed in
Route 66 Casino which opened on September 4, 2003. We are in
litigation and arbitration with our co-member on this project, and as
such, we have estimated these amounts.
NET INCOME. Net income before federal income tax provision increased
34% or $1.3 million to $5.8 million for the six months ended September 30, 2003
as compared to $4.5 million. This increase is primarily the result of increases
in equity in earnings of IC-BH and gaming asset participations. Net income
increased 16% or $533,000 to $3.8 million for the six months ended September
30, 2003 as compared to net income of $3.3 million in the six months ended
September 30, 2002. This increase is primarily the result of increases equity
in earnings of IC-BH, gaming asset participations, and federal income tax. The
effective tax rate for the six ended September 30, 2003 was 33% compared to 26%
for the six months ended September 30, 2003. Such increase in the effective tax
rate related to tax benefits of $421,735 from IC-BH for fiscal year ended April
25, 1999 which was recognized in the six ended September 30, 2002.
Liquidity and Capital Resources
OPERATING ACTIVITIES. Net cash used by operating activities during the
six months ended September 30, 2003, amounted to $726,000 an increase of $2.6
million, over the $1.8 million of net cash provided by operating activities
during the six months ended September 30, 2002. The decrease is primarily
related to a decrease of $1.7 million in cash distributions from IC-BH during
the six months ended September 30, 2003, the result of IC-BH utilizing excess
cash flow to pay down debt. We expect that this strategy will continue for the
foreseeable future. Also, $1.7 million of credit enhancement fee income from
River Rock Casino was accrued during the six months ended
22
September 30, 2003. In November 2003, we received $2.2 million of credit
enhancement fee income earned through October 2003 from River Rock Casino.
INVESTING ACTIVITIES. Net cash used in investing activities during the
six months ended September 30, 2003, amounted to $977,000, a decrease of $9.6
million, over the $10.5 million of net cash used in investing activities in the
six months ended September 30, 2002. The decrease is primarily related to a
decrease in loans made to the River Rock Casino project.
FINANCING ACTIVITIES. Net cash used by financing activities during the
six months ended September 30, 2003, amounted to $356,000, a decrease of $11.1
million, over $10.7 million of net cash provided by financing activities in the
six months ended September 30, 2002. The decrease was primarily related to the
absence of borrowing during the six months ended September 30, 2003. During the
six months ended September 30, 2003, we repaid $610,000 of our outstanding
debt. During the six months ended September 30, 2003, we issued 138,800 shares
of common stock for receiving an aggregate proceeds of $308,000 upon the
exercise of common stock options.
In November 2003, we repaid our $23 million credit facility that was
outstanding at September 30, 2003 from proceeds received from the River Rock
Casino's debt financing. At September 30, 2003, we had drawn down on our entire
$13 million long-term credit facility that bears interest at 11% per annum,
payable monthly, with principal maturing during December 2005. This credit
facility is secured by our interest in the IC-BH Casino. As of September 30,
2003, we had cash available of $1.9 million. The repayment of our $23 million
credit facility in November 2003 substantially repaid all of our current
portion of long term debt, as well as a substantial portion of long term notes
payable, net of current portion, at September 30, 2003. During the next twelve
months, we expect to receive cash distributions from IC-BH of approximately $3
million based on our current estimates, and loan repayments of $1.2 million
from affiliate companies. In addition, the Dry Creek Casino, L.L.C. will
receive its credit enhancement fee from River Rock Casino, provided the casino
is in compliance with its debt covenants with respect to its $200 million debt
financing. We no longer have any funds available to us from any credit
facilities or other external financing sources, and as such we will be
depending on the monies received from IC-BH, the credit enhancement fee to be
paid to the Dry Creek Casino, L.L.C., and loan repayments of $1.2 million from
affiliate companies to fund our operations for the next twelve months.
At November 10, 2003, we are leveraged with $13 million in corporate
debt and lease guarantees of approximately $1.2 million for the River Rock
Casino project. We also have guaranteed debt of $552,000 of an affiliated
company that may mature during the next fiscal year. To date, cash
distributions from IC-BH and loan repayments and credit enhancement fees from
the River Rock Casino project have been sufficient to satisfy our current
obligations. However, if the River Rock Casino project is closed due to
litigation, governmental inquiries or other reasons beyond our control, if we
are required to perform on our outstanding guarantees, or if the debt covenants
ratios of the River Rock Casino debt financing preclude the payment to us of
our credit enhancement fee or outstanding loans to River Rock Casino, we may
have insufficient cash flow to satisfy our obligations without raising
additional financing. There is no assurance that we will be able to obtain
additional financing if required to fund working capital needs or debt
repayment obligations, the failure of which could have a material effect on our
operations.
Recent Accounting Pronouncements
In May 2003, the Financial Accounting Standards Board (the "FASB")
issued SFAS No. 150, "Accounting for Certain Instruments with Characteristics
of Both Liabilities and Equity." SFAS No. 150 clarifies the accounting for
certain financial instruments with characteristics of both liabilities and
equity and requires that those instruments be classified as liabilities in
statements of financial position. Previously, many of those financial
instruments were classified as equity. SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003 and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. The adoption of SFAS No. 150 did not have a significant impact on our
financial statements.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
No. 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends
and clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
23
Activities." This Statement is effective for contracts entered into or modified
after June 30, 2003. We did not participate in any applicable activities as of
and for the quarter ended September 30, 2003.
In January 2003, the FASB issued Financial Interpretation ("FIN")
No. 46, "Consolidation of Variable Interest Entities." In general, a variable
interest entity is a corporation, partnership, trust, or any other legal entity
used for business purposes that either (a) does not have equity investors with
voting rights or (b) has equity investors that do not provide sufficient
financial resources for the entity to support its activities. FIN No. 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. The consolidation
requirements of FIN No. 46 apply immediately to variable interest entities
created after January 31, 2003. The consolidation requirements apply to older
entities in the first fiscal year or interim period beginning after June 15,
2003. Certain of the disclosure requirements apply to all financial statements
issued after January 31, 2003, regardless of when the variable interest entity
was established. We did not participate in any applicable activities as of and
for the quarter ended September 30, 2003.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to our operations result primarily from credit
risk concentrations. We do not believe we are subject to material interest rate
risk or foreign currency risk.
We have utilized the majority of our credit facilities to make loans
to Dry Creek Casino, L.L.C., which has made loans to the River Rock Casino. If
the River Rock Casino is unable to make its debt payments to the Dry Creek
Casino, L.L.C. for any reason, the Dry Creek Casino L.L.C. will be unable to
make its required debt repayment to us, which will affect our ability to repay
our credit facility. As discussed in Item 2 above, if the River Rock Casino
project is closed for any reason, we may have difficulty meeting our short-term
and long-term obligations. We currently believe that this is our primary credit
risk.
As our credit facilities are fixed interest rate instruments, an
interest rate change would not have any impact on our operations. Our interest
in RCI is dependent on RCI's valuation, which is subject to the value of the
Real, the Brazilian currency, which has been subject to rapid fluctuations.
However, we do not believe the results of RCI's operations have a material
effect on our financial operations.
ITEM 4. CONTROLS AND PROCEDURES
In accordance with the Exchange Act, we carried out an evaluation,
under the supervision and with the participation of management, including our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of
our disclosure controls and procedures as of the end of the period covered by
this report. Based on that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures were
effective as of September 30, 2003 to provide reasonable assurance that
information required to be disclosed in our reports filed or submitted under
the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms. There has been no change in our internal controls over financial
reporting that occurred during the three months ended September 30, 2003 that
has materially affected, or is reasonably likely to materially affect, our
internal controls over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In May 2002, we were sued in case 2002-22278, Corporate Strategies,
Inc., vs. Nevada Gold & Casinos, Inc., in the 189th Judicial District Court of
Harris County, Texas. Corporate Strategies, Inc. seeks damages and other relief
for alleged breach of a consulting agreement entered into during December 1997.
Discovery is ongoing. We are vigorously defending the suit and have asserted
counterclaims, as well as cross-claims against the individual actors within
Corporate Strategies (Harold Finstad, Arthur Porcari, Stephen Porcari, and
Martin R. Nathan). Our counter and cross-claims seek rescission and damages.
The claims against and
24
between us and Nathan have been referred to binding
arbitration in accordance with the parties' agreement. We are actively pursuing
our claims in arbitration.
In September 2002, we asserted a claim for damages, specific
performance and other relief against American Heritage, Inc. (d/b/a The
Gillmann Group), a member with us in Route 66 Casinos, L.L.C. Route 66 Casinos,
L.L.C. was formed to develop gaming facilities on lands of the Pueblo of
Laguna, 11 miles west of Albuquerque, New Mexico. In October 2002, we
instituted suit in Harris County, Texas District Court, case 2002-51378, Nevada
Gold & Casinos, Inc. v. American Heritage, Inc. d/b/a The Gillman Group, and
Frederick Gillman. Subsequently, The Gillmann Group and its principal sought a
declaratory judgment and damages in the District Court of Clark County, Nevada,
case A457315, American Heritage, Inc., and Fred Gillmann v. Nevada Gold &
Casinos, Inc. and Route 66 Casinos, L.L.C. in the District Court, Clark County,
Nevada. That litigation has been stayed, and the Texas lawsuit is expected to
be resolved by trial in the first quarter of 2004.
In January 2003, we were named as a defendant, along with several
other parties, including Dry Creek Casino, L.L.C. (collectively, the
"defendants"), in the Superior Court of California by Sonoma Falls Developer,
L.L.C., Sonoma Falls Manager, L.L.C., and Sonoma Falls Lender, L.L.C. ("Sonoma
Falls"). In November 2003, this matter was settled without the payment of any
money or other consideration by either Dry Creek Casino, L.L.C. or Nevada Gold.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held our annual meeting of shareholders on September 22, 2003, in
which we:
(a) Elected the following directors: Messrs. William G. Jayroe, Joseph
Juliano, Francis M. Ricci, and Wayne H. White. Each of the foregoing directors
received 9,124,070 votes for their re-election and 3,200 votes against (such
votes being withheld).
(b) Ratified the appointment of our auditors Pannell Kerr & Forster of
Texas, P.C. by the following vote: 9,122,775 votes for, 3,640 votes against,
and 855 votes abstained.
25
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are to be filed as part of this report:
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
Exhibit 3.1 Amended and Restated Articles of Incorporation of Nevada Gold & Casinos, Inc. (filed previously
as Appendix A to the company's definitive proxy statement filed on Schedule 14A on July 30,
2001)
Exhibit 3.2 Amended and Restated Bylaws of Nevada Gold & Casinos, Inc. (filed previously as Exhibit 3.2 to
the company's Form 10-QSB, Filed August 14, 2002)
Exhibit 4.1 Common Stock Certificate of Nevada Gold & Casinos, Inc. (filed previously as Exhibit 4.1 to the
company's Form S-8/A, file no. 333-79867)
Exhibit 10.1 Amended and Restated Operating Agreement of Isle of Capri Blackhawk L.L.C. (filed previously as
Exhibit 10.3 to the company's Form 10-QSB, filed November 14, 1997)
Exhibit 10.2 Members Agreement dated July 29, 1997 by and between Casino America of Colorado, Inc., Casino
America, Inc., Blackhawk Gold, Ltd., and Nevada Gold & Casinos, Inc. (filed previously as
Exhibit 10.4 to the company's Form 10-QSB, filed November 14, 1997)
Exhibit 10.3 License Agreement dated July 29, 1997 by and between Casino America, Inc. and Isle of Capri
Black Hawk L.L.C. (filed previously as Exhibit 10.5 to the company's Form 10-QSB, filed
November 14, 1997)
Exhibit 10.4 Nevada Gold & Casinos, Inc. 1999 Stock Option Plan (filed previously as Exhibit 10.1 to the
company's Form S-8/A, file no. 333-79867)
Exhibit 10.5 Form of Indemnification Agreement between Nevada Gold & Casinos, Inc. and each officer and
director (filed previously as Exhibit 10.5 to the company's Form 10-QSB, filed February 14,
2002)
Exhibit 31.1(*) Chief Executive Officer Certification Pursuant to Section 13a-14 of the Securities Exchange Act.
Exhibit 31.2(*) Chief Financial Officer Certification Pursuant to Section 13a-14 of the Securities Exchange Act.
Exhibit 32.1(*) Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.2(*) Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(*) filed herewith
(b) Reports on Form 8-K - During the quarter ended September 30,
2003, we filed one Form 8-K on August 20, 2003, in which we
announced our financial results for the quarter ended June
30, 2003, pursuant to Item 12 of the form.
26
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Nevada Gold & Casinos, Inc.
- --------------------------
By: /s/ Christopher Domijan
- ---------------------------
Christopher Domijan, Chief Financial Officer
Date: November 14, 2003
27
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
Exhibit 3.1 Amended and Restated Articles of Incorporation of Nevada Gold & Casinos, Inc. (filed previously
as Appendix A to the company's definitive proxy statement filed on Schedule 14A on July 30,
2001)
Exhibit 3.2 Amended and Restated Bylaws of Nevada Gold & Casinos, Inc. (filed previously as Exhibit 3.2 to
the company's Form 10-QSB, Filed August 14, 2002)
Exhibit 4.1 Common Stock Certificate of Nevada Gold & Casinos, Inc. (filed previously as Exhibit 4.1 to the
company's Form S-8/A, file no. 333-79867)
Exhibit 10.1 Amended and Restated Operating Agreement of Isle of Capri Blackhawk L.L.C. (filed previously as
Exhibit 10.3 to the company's Form 10-QSB, filed November 14, 1997)
Exhibit 10.2 Members Agreement dated July 29, 1997 by and between Casino America of Colorado, Inc., Casino
America, Inc., Blackhawk Gold, Ltd., and Nevada Gold & Casinos, Inc. (filed previously as
Exhibit 10.4 to the company's Form 10-QSB, filed November 14, 1997)
Exhibit 10.3 License Agreement dated July 29, 1997 by and between Casino America, Inc. and Isle of Capri
Black Hawk L.L.C. (filed previously as Exhibit 10.5 to the company's Form 10-QSB, filed
November 14, 1997)
Exhibit 10.4 Nevada Gold & Casinos, Inc. 1999 Stock Option Plan (filed previously as Exhibit 10.1 to the
company's Form S-8/A, file no. 333-79867)
Exhibit 10.5 Form of Indemnification Agreement between Nevada Gold & Casinos, Inc. and each officer and
director (filed previously as Exhibit 10.5 to the company's Form 10-QSB, filed February 14,
2002)
Exhibit 31.1(*) Chief Executive Officer Certification Pursuant to Section 13a-14 of the Securities Exchange Act.
Exhibit 31.2(*) Chief Financial Officer Certification Pursuant to Section 13a-14 of the Securities Exchange Act.
Exhibit 32.1(*) Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.2(*) Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(*) filed herewith