Attached files
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EX-32.2 - NEVADA GOLD & CASINOS INC | v196413_ex32-2.htm |
EX-32.1 - NEVADA GOLD & CASINOS INC | v196413_ex32-1.htm |
EX-31.1 - NEVADA GOLD & CASINOS INC | v196413_ex31-1.htm |
EX-31.2 - NEVADA GOLD & CASINOS INC | v196413_ex31-2.htm |
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 July 31, 2010
¨
|
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 1-15517
Nevada
Gold & Casinos, Inc.
(Name of
issuer in its charter)
Nevada
|
88-0142032
|
|
(State or other jurisdiction of Incorporation or organization)
|
|
(IRS Employer Identification No.)
|
50
Briar Hollow
|
|||
Suite
500W
|
|||
Houston,
Texas
|
77027
|
||
(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
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
twelve months (or for such shorter period that the registrant was required to
submit and post such files).
x Yes ¨ No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of
the Exchange Act. (Check one):
Large
accelerated filer ¨ Accelerated
filer ¨ Non-accelerated
filer ¨ Smaller
Reporting Company x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.).
¨ Yes
x
No
The
number of common shares outstanding was 12,764,130 as of September 7,
2010.
TABLE
OF CONTENTS
Page
|
|||
PART I. FINANCIAL
INFORMATION
|
|||
Item 1.
|
Consolidated
Financial Statements
|
2
|
|
|
Consolidated
Balance Sheets - July 31, 2010 (unaudited) and April 30,
2010
|
2
|
|
|
Consolidated
Statements of Operations - Three Months Ended July 31, 2010 (unaudited)
and July 31, 2009 (unaudited)
|
3
|
|
|
Consolidated
Statements of Cash Flows - Three Months Ended July 31, 2010 (unaudited)
and July 31, 2009 (unaudited)
|
4
|
|
|
Notes
to Consolidated Financial Statements
|
5
|
|
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
18
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
20
|
|
Item 4.
|
Controls
and Procedures
|
20
|
|
PART II. OTHER INFORMATION
|
|||
Item 1.
|
Legal
Proceedings
|
20
|
|
Item 1A.
|
Risk
Factors
|
20
|
|
Item 2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
20
|
|
Item 3.
|
Defaults
Upon Senior Securities
|
20
|
|
Item 4.
|
Removed
and Reserved
|
21
|
|
Item 5.
|
Other
Information
|
21
|
|
Item 6.
|
Exhibits
|
21
|
FORWARD-LOOKING
STATEMENTS
Factors
that May Affect Future Results
(Cautionary
Statements Under the Private Securities Litigation Reform Act of
1995)
Certain
information included in this Form 10-Q and other materials filed or to be filed
by the Company with the Securities and Exchange Commission (as well as
information included in oral statements or other written statements made or to
be made by the Company or its representatives) contains or may contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These statements can be identified by the fact that they do not
relate strictly to historical or current facts. Statements that include the
words “may,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,”
“estimate,” “intend,” “plan,” or other words or expressions of similar meaning,
may identify forward-looking statements. We have based these forward-looking
statements on our current expectations about future events. Forward-looking
statements include statements that reflect management’s beliefs, plans,
objectives, goals, expectations, anticipations, intentions with respect to the
financial condition, results of operations, future performance and the business
of the Company, including statements relating to our business strategy and our
current and future development plans. These statements may also involve other
factors which are detailed in the “Risk Factors” and other sections of the
Company’s Annual Report on Form 10-K for the year ended April 30, 2010 and other
filings with the Securities and Exchange Commission.
Although
we believe that the assumptions underlying these forward-looking statements are
reasonable, any or all of the forward-looking statements in this report and in
any other public statements that are made may prove to be incorrect. This may
occur as a result of inaccurate assumptions or as a consequence of known or
unknown risks and uncertainties. Many factors discussed in this report will be
important in determining the Company’s future performance. Consequently, actual
results may differ materially from those that might be anticipated from
forward-looking statements. In light of these and other uncertainties, you
should not regard the inclusion of a forward-looking statement in this report or
other public communications that we might make as a representation by us that
our plans and objectives will be achieved, and you should not place undue
reliance on such forward-looking statements.
We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Any further disclosures made on related subjects in the Company’s subsequent
reports filed with the Securities and Exchange Commission should be
consulted.
1
Part
I. Financial Information
Item
1. Consolidated Financial Statements
Nevada
Gold & Casinos, Inc.
Consolidated
Balance Sheets
July
31,
|
April
30,
|
|||||||
2010
|
2010
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 3,452,635 | $ | 3,155,736 | ||||
Restricted
cash
|
441,101 | 5,266,938 | ||||||
Accounts
receivable
|
462,150 | 66,822 | ||||||
Prepaid
expenses
|
876,092 | 475,262 | ||||||
Income
tax receivable
|
1,750,374 | 1,750,374 | ||||||
Other
current assets
|
268,491 | 155,796 | ||||||
Total
current assets
|
7,250,843 | 10,870,928 | ||||||
Investments
in development projects
|
174,764 | 1,418,789 | ||||||
Investments
in development projects held for sale
|
3,373,966 | 3,437,932 | ||||||
Note
receivable - development projects, net of current portion and
allowances
|
1,700,000 | 1,700,000 | ||||||
Goodwill
|
15,953,660 | 10,243,362 | ||||||
Identifiable
intangible assets, net of accumulated amortization of $919,426 and
$729,000 at July 31, 2010 and April 30, 2010
|
8,294,425 | 5,101,800 | ||||||
Property
and equipment, net of accumulated depreciation of $3,081,291 and
$2,978,679 at July 31, 2010 and April 30, 2010,
respectively
|
5,416,866 | 3,473,051 | ||||||
Deferred
tax asset
|
2,087,943 | 1,848,419 | ||||||
BVO
receivable
|
4,000,000 | 4,000,000 | ||||||
Other
assets, net of allowances
|
478,538 | 376,938 | ||||||
Total
assets
|
$ | 48,731,005 | $ | 42,471,219 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued liabilities
|
$ | 2,388,296 | $ | 1,060,017 | ||||
Accrued
interest payable
|
70,000 | 70,000 | ||||||
Other
accrued liabilities
|
678,443 | 687,819 | ||||||
Long-term
debt, current portion
|
69,263 | — | ||||||
Total
current liabilities
|
3,206,002 | 1,817,836 | ||||||
Long-term
debt, net of current portion
|
15,118,166 | 10,000,000 | ||||||
Other
liabilities
|
177,310 | 30,944 | ||||||
Total
liabilities
|
18,501,478 | 11,848,780 | ||||||
Commitments
and contingencies
|
— | — | ||||||
Stockholders'
equity:
|
||||||||
Common
stock, $0.12 par value per share; 50,000,000 shares authorized; 13,935,330
shares issued and 12,764,130 shares outstanding at July 31, 2010 and April
30, 2010, respectively
|
1,672,240 | 1,672,240 | ||||||
Additional
paid-in capital
|
19,976,126 | 19,859,966 | ||||||
Retained
earnings
|
18,955,900 | 19,464,972 | ||||||
Treasury
stock, 1,171,200 shares at July 31, 2010 and April 30, 2010, respectively,
at cost
|
(10,369,200 | ) | (10,369,200 | ) | ||||
Accumulated
other comprehensive income
|
(5,539 | ) | (5,539 | ) | ||||
Total
stockholders' equity
|
30,229,527 | 30,622,439 | ||||||
Total
liabilities and stockholders' equity
|
$ | 48,731,005 | $ | 42,471,219 |
The
accompanying notes are an integral part of these consolidated financial
statements.
2
Nevada
Gold & Casinos, Inc.
Consolidated
Statements of Operations
(unaudited)
Three Months Ended
|
||||||||
July
31,
|
July
31,
|
|||||||
2010
|
2009
|
|||||||
Revenues:
|
||||||||
Casino
|
$ | 5,759,854 | $ | 4,185,063 | ||||
Food
and beverage
|
1,341,621 | 1,113,766 | ||||||
Management
fees
|
- | 250,000 | ||||||
Other
|
225,509 | 184,034 | ||||||
Gross
revenues
|
7,326,984 | 5,732,863 | ||||||
Less
promotional allowances
|
(800,484 | ) | (675,644 | ) | ||||
Net
revenues
|
6,526,500 | 5,057,219 | ||||||
Expenses:
|
||||||||
Casino
|
2,635,552 | 1,910,945 | ||||||
Food
and beverage
|
674,769 | 833,582 | ||||||
Casino
marketing and administrative
|
1,772,255 | 1,240,779 | ||||||
Facility
|
347,674 | 260,848 | ||||||
Corporate
expense
|
1,169,179 | 1,431,698 | ||||||
Legal
expense
|
396,156 | 64,293 | ||||||
Depreciation
and amortization
|
313,839 | 145,167 | ||||||
Other
|
155,973 | 83,220 | ||||||
Total
operating expenses
|
7,465,397 | 5,970,532 | ||||||
Operating
loss
|
(938,897 | ) | (913,313 | ) | ||||
Non-operating
income (expenses):
|
||||||||
Gain
on sale of assets
|
384,414 | - | ||||||
Interest
income
|
44,925 | 58,509 | ||||||
Interest
expense
|
(227,788 | ) | (152,981 | ) | ||||
Amortization
of loan issue costs
|
(11,250 | ) | (32,209 | ) | ||||
Loss
before income tax benefit
|
(748,596 | ) | (1,039,994 | ) | ||||
Income
tax benefit
|
239,524 | 339,285 | ||||||
Net
loss
|
$ | (509,072 | ) | $ | (700,709 | ) | ||
Per
share information:
|
||||||||
Net
loss per common share - basic
|
$ | (0.04 | ) | $ | (0.05 | ) | ||
Net
loss per common share - diluted
|
$ | (0.04 | ) | $ | (0.05 | ) | ||
Basic
weighted average number of shares outstanding
|
12,764,130 | 12,939,130 | ||||||
Diluted
weighted average number of shares outstanding
|
12,764,130 | 12,939,130 |
The
accompanying notes are an integral part of these consolidated financial
statements.
3
Nevada
Gold & Casinos, Inc.
Consolidated
Statements of Cash Flows
(unaudited)
Three Months Ended
|
||||||||
July
31,
|
July
31,
|
|||||||
2010
|
2009
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (509,072 | ) | $ | (700,709 | ) | ||
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
|
||||||||
Depreciation
and amortization
|
313,839 | 145,167 | ||||||
Stock-based
compensation
|
116,160 | 515,040 | ||||||
Amortization
of deferred loan issuance costs
|
11,250 | 32,209 | ||||||
Gain
on sale/settlement of assets
|
(384,414 | ) | - | |||||
Deferred
income tax benefit
|
(239,524 | ) | (40,873 | ) | ||||
Changes
in operating assets and liabilities:
|
||||||||
Receivables
and other assets
|
(951,704 | ) | (455,679 | ) | ||||
Accounts
payable and accrued liabilities
|
1,336,905 | 607,448 | ||||||
Net
cash provided by (used in) operating activities
|
(306,560 | ) | 102,603 | |||||
Cash
flows from investing activities:
|
||||||||
Capitalized
development costs
|
(29,707 | ) | (8,073 | ) | ||||
Collections
on notes receivable
|
- | 1,100,000 | ||||||
Purchase
of property and equipment
|
(4,787,416 | ) | (11,521,832 | ) | ||||
Proceeds
from the sale of assets
|
448,379 | - | ||||||
Net
additions and deductions from restricted cash
|
4,825,837 | - | ||||||
Net
cash provided by (used in) investing activities
|
457,093 | (10,429,905 | ) | |||||
Cash
flows from financing activities:
|
||||||||
Payments
on capital lease
|
(3,634 | ) | (4,325 | ) | ||||
Borrowings
on line of credit
|
150,000 | 150,000 | ||||||
Net
cash provided by financing activities
|
146,366 | 145,675 | ||||||
Net
increase (decrease) in cash and cash equivalents
|
296,899 | (10,181,627 | ) | |||||
Cash
and cash equivalents at beginning of period
|
3,155,736 | 13,834,544 | ||||||
Cash
and cash equivalents at end of period
|
$ | 3,452,635 | $ | 3,652,917 | ||||
Supplemental
cash flow information:
|
||||||||
Cash
paid for interest
|
$ | 226,329 | $ | 151,233 | ||||
Non-cash
investing and financing activities:
|
||||||||
Non-cash
purchase of property and equipment
|
$ | 5,187,429 | $ | 4,000,000 |
The
accompanying notes are an integral part of these consolidated financial
statements.
4
Nevada
Gold & Casinos, Inc.
Notes
to Consolidated Financial Statements
Note 1. Basis of
Presentation
The
interim financial information included herein is unaudited. However, the
accompanying consolidated financial statements include all adjustments of a
normal recurring nature which, in the opinion of management, are necessary to
present fairly our Consolidated Balance Sheets at July 31, 2010 and April 30,
2010, Consolidated Statements of Operations for the three
months ended July 31, 2010 and July 31, 2009, and Consolidated
Statements of Cash Flows for the three months ended July 31, 2010 and July 31,
2009. Although we believe the disclosures in these financial statements are
adequate to make the interim information presented not misleading, certain
information relating to our organization and footnote disclosures normally
included in financial statements prepared in accordance with U.S. generally
accepted accounting principles have been condensed or omitted in this Form 10-Q
pursuant to Securities and Exchange Commission rules and regulations. These
financial statements should be read in conjunction with the audited consolidated
financial statements for the year ended April 30, 2010 and the notes thereto
included in our Annual Report on Form 10-K. The results of operations for the
three months ended July 31, 2010 are not necessarily indicative of the results
expected for the full year.
The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period and disclosure of contingent liabilities. On an ongoing
basis, we evaluate our estimates, including those related to bad debts,
investments, intangible assets and goodwill, property, plant and equipment,
income taxes, insurance, employment benefits and contingent liabilities. We base
our estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results could differ
from those estimates.
Certain
reclassifications have been made to conform prior year financial information to
the current period presentation. Those reclassifications did not
impact working capital, total assets, total liabilities, net loss or
stockholders’ equity.
Note 2. Critical Accounting
Policies
Revenue
Recognition
In
accordance with gaming industry practice, we recognize casino revenues as the
net win from gaming activities, which is the difference between gaming wins and
losses. Casino revenues are net of accruals for anticipated payouts of
progressive slot jackpots which are recorded as a progressive slot jackpot
liability. Revenues from food, beverage, entertainment, and the gift shop are
recognized at the time the related service or sale is performed or
made.
The
retail value of food and beverage and other services furnished to guests without
charge is included in gross revenue and deducted as promotional allowances. We
record the redemption of coupons and points for cash as a reduction of revenue.
These amounts are included in promotional allowances in the accompanying
consolidated statements of operations. The estimated cost of providing such
complimentary services that is included in casino expense in the accompanying
consolidated statements of operations was as follows:
Three Months Ended
|
||||||||
July 31,
2010
|
July 31,
2009
|
|||||||
Food
and beverage
|
$ | 402,434 | $ | 199,278 | ||||
Other
|
5,801 | 3,365 | ||||||
Total
cost of complimentary services
|
$ | 408,235 | $ | 202,643 |
Fair
Value of Financial Instruments and Concentrations of Credit Risk
U.S.
generally accepted accounting principles defines fair value as the price that
would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date and establishes
a three-level valuation hierarchy for disclosure of fair value measurements. The
valuation hierarchy categorizes assets and liabilities measured at fair value
into one of three different levels depending on the observability of the inputs
employed in the measurement. The three levels are defined as
follows:
5
Level 1 -
Observable inputs such as quoted prices in active markets at the measurement
date for identical, unrestricted assets or liabilities.
Level
2 - Other inputs that are observable directly or indirectly such as quoted
prices in markets that are not active, or inputs which are observable, either
directly or indirectly, for substantially the full term of the asset or
liability.
Level
3 - Unobservable inputs for which there is little or no market data and which
the Company makes its own assumptions about how market participants would price
the assets and liabilities.
Financial
instruments that potentially subject the Company to concentrations of credit
risk are primarily notes receivable, cash and cash equivalents, accounts
receivable and payable, and long term debt. At July 31, 2010 the Company had one
note receivable outstanding. This note was issued in connection with a potential
gaming project. Management performs periodic evaluations of the collectibility
of this note. The Company’s cash deposits are held with large, well-known
financial institutions, and, at times, such deposits may be in excess of the
federally insured limit. The recorded value of cash, accounts
receivable and payable, approximate fair value based on their short term nature;
the recorded value of long term debt approximates fair value as interest
rates approximates current market rates.
New
Accounting Pronouncements Issued
As of
July 31, 2010, there are several new accounting standards and interpretations
effective. Below is a discussion of significant standards that may impact
us.
Improving
Disclosures about Fair Value Measurements
In
January 2010, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update (“ASU”) No. 2010-06, “Improving Disclosures about Fair
Value Measurements” (ASU 2010-06). This update provides amendments to
Topic 820 and requires new disclosures for 1) significant transfers in and out
of Level 1 and Level 2 and the reasons for such transfers and 2) activity in
Level 3 fair value measurements to show separate information about purchases,
sales, issuances and settlements. In addition, this update amends Topic 820 to
clarify existing disclosures around the disaggregation level of fair value
measurements and disclosures for the valuation techniques and inputs utilized
(for Level 2 and Level 3 fair value measurements). The provisions in ASU 2010-06
are applicable to interim and annual reporting periods beginning subsequent to
December 15, 2009, with the exception of Level 3 disclosures of purchases,
sales, issuances and settlements, which will be required in reporting periods
beginning after December 15, 2010. The adoption of ASU 2010-06 did not impact
the Company’s consolidated financial statements.
Exemption
from Sarbanes Oxley 404(b)
On July
31, 2010, President Obama signed into law the exemption from Sarbanes Oxley
404(b) for public companies with less than $75 million in market
capitalization.
Note
3. Restricted Cash
During
the three months ended July 31, 2010, we maintained approximately $379,000 in
Player Supported Jackpot funds which are progressive games that customers fund
and when a jackpot is hit it is paid from these funds. We also
maintain approximately $62,000 of insurance and tax reserve funds in accordance
with a lending agreement. During the three months ended July 31,
2010, we used the $5,000,000 Project Fund for the acquisition of six
mini-casinos in Washington State.
Note 4. Notes Receivable and BVO
Receivable
Notes
Receivable
Southern
Tier Acquisition II, LLC and Oneida Entertainment, LLC
On June
14, 2007, we sold our membership interest of American Racing to two of our
former partners, Southern Tier Acquisition II, LLC (“Southern Tier”) and Oneida
Entertainment, LLC (“Oneida”). At April 30, 2009, we had notes receivable of
$550,000 from both Southern Tier and Oneida. The notes receivable and accrued
interest were paid in full on June 15, 2009.
Notes
Receivable - Development Projects
From time
to time, we make advances to third parties related to the development of
gaming/entertainment projects. We make these advances after undertaking
extensive due diligence. On a quarterly basis, we review each of our notes
receivable to evaluate whether the collection of our note receivable is still
probable. In our analysis, we review the economic feasibility and the current
financial, legislative and development status of the project. If our analysis
indicates that the project is no longer economically feasible, the note
receivable will be written down to its estimated fair value.
6
Big City
Capital, LLC
During
fiscal 2008, we determined that our ability to collect $859,000 of accrued
interest and $1.5 million of the original $3.2 million notes receivable from Big
City Capital, LLC (“Big City Capital”) had been impaired. As a result we wrote
down the notes receivable to $1.7 million, by establishing a $1.5 million
allowance, and we wrote off the accrued interest. At July 31, 2010, we had notes
receivable of $1.7 million related to the development of gaming/entertainment
projects, net of a $1.5 million allowance, which is represented by notes
receivable from Big City Capital.
The
repayment of these loans will be largely dependent upon the ability to obtain
financing for the development project and/or the performance of the development
project.
BVO
Receivable
As of May
2007, we owned a 40% interest in Buena Vista Development Company, LLC (“Buena
Vista Development”) which is developing a casino for a Native American tribe in
Amador County, California. Effective November 25, 2008, through our
wholly- owned subsidiary, Nevada Gold BVR, LLC, we sold our 40% interest in
Buena Vista Development, LLC (BVR) to B. V. Oro, LLC (BVO), which is owned by
our former partner and related parties for $16 million cash and a $4 million
receivable from BVD which is due no later than two years after the opening of a
gaming/entertainment facility to be built by BVD for the Buena Vista Rancheria
of Me-Wuk Indians. This receivable bears interest at the rate of
prime plus 1% and is guaranteed by our former partner and related
parties. In addition we are entitled to a 5% carried interest in the
Class B membership interest. Should the facility not be developed,
the collectibility of this receivable cannot be assured.
Note 5. Long-Term Debt
Our
long-term financing obligations are as follows:
July
31,
|
April
30,
|
|||||||
2010
|
2010
|
|||||||
$6.0
million promissory note, 10% through June 30, 2010, 11% interest until
maturity at June 30, 2013
|
$ | 6,000,000 | $ | 6,000,000 | ||||
$5.1
million note payable, LIBOR plus 9% interest, maturing
|
||||||||
Monday,
July 23, 2012
|
5,070,000 | - | ||||||
$4.0
million promissory note, 7% interest, maturing May 12,
2012
|
4,000,000 | 4,000,000 | ||||||
IGT
note, 8% interest, maturing May 16, 2012
|
39,144 | - | ||||||
Williams
Gaming note, 8% imputed interest, maturing November 18,
2011
|
78,285 | - | ||||||
Total
|
15,187,429 | 10,000,000 | ||||||
Less:
current maturities
|
(69,263 | ) | - | |||||
Total
long-term financing obligations
|
$ | 15,118,166 | $ | 10,000,000 |
The $6.0
million promissory note matures June 30, 2013. The interest rate on
the note was fixed at 10% through June 2010, then changed to 11% on the unpaid
balance for the remainder of the term. The $5.1 million promissory
note matures July 23, 2012 and the interest rate is based on the 30 day LIBOR at
the end of each calendar month, plus 9%, with a 30 day LIBOR floor of
2.0%. The $4.0 million promissory note matures May 12, 2012 and the
interest rate is fixed for the term at 7%.
Note 6. Stock-Based
Compensation
Information
about our share-based plans
Our 1999
Stock Option Plan, as amended (the “Stock Option Plan”), provided for the
granting of awards to our directors, officers, employees and independent
contractors. The Stock Option Plan expired in January, 2009 and was
replaced with a new plan described below. The number of shares of
common stock reserved for issuance under the Stock Option Plan was 3,250,000
shares. The plan was administered by the Compensation Committee (the
“Committee”) of the Board of Directors. The Committee had discretion under the
plan regarding the vesting and service requirements, exercise price and other
conditions.
7
On April
14, 2009, the shareholders of the Company approved the Company’s 2009 Equity
Incentive Plan (the “2009 Plan”). The number of shares with respect
to which awards may be granted under the 2009 Plan is 1,750,000
shares. The 2009 Plan is similar to the 1999 Stock Option Plan in
most respects and continues to provide for awards which may be made subject to
time based or performance based vesting. Under the 2009 Plan the
Committee is authorized to grant the following types of awards:
|
·
|
Stock
Options including Incentive Stock Options
(“ISO”)
|
|
·
|
Options
not intended to qualify as ISO’s
|
|
·
|
Stock
Appreciation Rights
|
|
·
|
Restricted
Stock Grants.
|
To date,
the Committee has only awarded stock options and restricted stock under both
plans. Our practice has been to issue new shares upon the exercise of stock
options. Stock option rights granted prior to fiscal year 2006 under the Stock
Option Plan generally have 5-year terms and are fully vested and exercisable
immediately. Subsequent option rights granted generally have 3, 5 or 10 year
terms and are exercisable in three or five equal annual installments, with some
options grants providing for immediate vesting for a portion of the
grant.
A summary
of activity under the Company’s share-based payment plans for the three months
ended July 31, 2010 is presented below:
Weighted
|
||||||||||||||||
Weighted
|
Average
|
Aggregate
|
||||||||||||||
Average
|
Remaining
|
Intrinsic
|
||||||||||||||
Shares
|
Exercise
|
Contractual
|
Value
|
|||||||||||||
(000’s)
|
Price
|
Term
|
($000’s)
|
|||||||||||||
Outstanding
at April 30, 2010
|
1,456,000 | $ | 1.77 | |||||||||||||
Granted
|
340,000 | 0.98 | ||||||||||||||
Exercised
|
- | - | ||||||||||||||
Forfeited
or expired
|
- | - | ||||||||||||||
Outstanding
at July 31, 2010
|
1,796,000 | $ | 1.62 | 5.7 | $ | - | ||||||||||
Exercisable
at July 31, 2010
|
1,504,333 | $ | 1.70 | 5.1 | $ | - |
As of
July 31, 2010, there was a total of $241,307 of unamortized compensation
related to stock, which cost is expected to be recognized over a
weighted-average period of 2.0 years.
Compensation
cost for stock options was based on the fair value of each award, measured by
applying the Black-Scholes model on the date of grant, using the following
weighted-average:
Three
Months Ended
|
||||||||
July
31, 2010
|
July
31, 2009
|
|||||||
Expected
volatility
|
195.9 | % | 143.5 | % | ||||
Expected
term
|
10.0 | 8.0 | ||||||
Expected
dividend yield
|
- | - | ||||||
Risk-free
interest rate
|
3.08 | % | 1.63 | % | ||||
Forfeiture
rate
|
- | - |
Expected
volatility is based on historical volatility on the Company’s stock. The
expected term considers the contractual term of the option as well as historical
exercise and forfeiture behavior. The risk-free interest rate is based on the
rates in effect on the grant date for U.S. Treasury instruments with maturities
matching the relevant expected term of the award. The weighted
average grant date fair value of options granted during the three months ended
July 31, 2010, was $0.98.
Note
7. Comprehensive Loss
Comprehensive
loss consists of the following:
8
Three Months Ended
|
||||||||
July 31,
2010
|
July 31,
2009
|
|||||||
Net
loss
|
$ | (509,072 | ) | $ | (700,709 | ) | ||
Other
comprehensive income (loss)
|
- | - | ||||||
Comprehensive
loss
|
$ | (509,072 | ) | $ | (700,709 | ) |
Note 8. Computation of Earnings Per
Share
The
following is presented as a reconciliation of the numerators and denominators of
basic and diluted earnings per share computations:
Three Months Ended
|
||||||||
July
31,
|
July
31,
|
|||||||
2010
|
2009
|
|||||||
Numerator:
|
||||||||
Basic
and Diluted:
|
||||||||
Net
loss available to common stockholders
|
$ | (509,072 | ) | $ | (700,709 | ) | ||
Denominator:
|
||||||||
Basic
weighted average number of common shares outstanding
|
12,764,130 | 12,939,130 | ||||||
Dilutive
effect of common stock options and warrants
|
— | — | ||||||
Diluted
weighted average number of common shares outstanding
|
12,764,130 | 12,939,130 | ||||||
Loss
per share:
|
||||||||
Net
loss per common share - basic
|
$ | (0.04 | ) | $ | (0.05 | ) | ||
Net
loss per common share - diluted
|
$ | (0.04 | ) | $ | (0.05 | ) |
For the
three months ended July 31, 2010 and July 31, 2009, potential dilutive common
shares issuable under options of 1,504,333 and 1,165,999, respectively, were not
included in the calculation of diluted earnings per share as they were
anti-dilutive.
Note 9. Segment Reporting
We
operate in two major business segments (i) gaming and (ii) non-core. The gaming
segment for the periods ended July 31, 2010 and July 31, 2009, consists of
Colorado Grande Casino and the Washington mini casinos.
Summarized
financial information for our reportable segments is shown in the following
table. The “non-core” column includes corporate-related items, results of
insignificant operations, and segment profit (loss) and income and expenses not
allocated to reportable segments.
9
As of and for the Three Months Ended
July 31, 2010
|
||||||||||||
Gaming
|
Non-Core
|
Totals
|
||||||||||
Net
revenue
|
$ | 7,326,984 | $ | - | $ | 7,326,984 | ||||||
Segment
loss
|
(742,791 | ) | (5,805 | ) | (748,596 | ) | ||||||
Segment
assets
|
37,491,736 | 3,507,216 | 40,998,952 | |||||||||
Depreciation
and amortization
|
312,805 | 1,034 | 313,839 | |||||||||
Addition
to property and equipment
|
9,974,845 | — | 9,974,845 | |||||||||
Interest
expense, net
|
194,113 | — | 194,113 | |||||||||
Income
tax benefit
|
237,666 | 1,858 | 239,524 |
As of and for the Three Months Ended
July 31, 2009
|
||||||||||||
Gaming
|
Non-Core
|
Totals
|
||||||||||
Net
revenue
|
$ | 5,057,219 | $ | - | $ | 5,057,219 | ||||||
Segment
loss
|
(1,035,225 | ) | (4,769 | ) | (1,039,994 | ) | ||||||
Segment
assets
|
30,595,024 | 3,563,049 | 34,158,073 | |||||||||
Depreciation
and amortization
|
144,102 | 1,065 | 145,167 | |||||||||
Addition
to property and equipment
|
15,521,832 | — | 15,521,832 | |||||||||
Interest
expense, net
|
126,681 | — | 126,681 | |||||||||
Income
tax benefit
|
337,729 | 1,556 | 339,285 |
Reconciliation
of reportable segment assets to our consolidated totals is as
follows:
July 31,
|
||||
2010
|
||||
Total
assets for reportable segments
|
$ | 40,998,952 | ||
Cash
not allocated to segments
|
3,893,736 | |||
Other
assets not allocated to segments
|
3,838,317 | |||
Total
assets
|
$ | 48,731,005 |
Note
10. Other Assets
Other
assets consist of the following at July 31, 2010 and April 30, 2010,
respectively:
July 31,
2010
|
April 30,
2010
|
|||||||
Accrued
interest receivable
|
$ | 277,288 | $ | 234,438 | ||||
Other
assets
|
70,000 | - | ||||||
Deferred
loan issue cost, net
|
131,250 | 142,500 | ||||||
Other
assets
|
$ | 478,538 | $ | 376,938 |
Note 11. Commitments and Contingencies
We rent
office space in Houston, Texas, under a non-cancelable operating lease which
expires on March 31, 2011. Also, we lease (through our wholly-owned subsidiary,
Colorado Grande Enterprises, Inc.) a portion of a building in Cripple Creek,
Colorado, and an adjacent parking lot, for use in connection with the Colorado
Grande Casino facilities. We lease this property at an annual rent of the
greater of $144,000 or 5% of Colorado Grande-Cripple Creek’s adjusted gross
gaming revenues, as defined, with an annual cap of $400,000. This lease is for
an initial term of sixteen years with an option to renew for fifteen years with
the final option period concluding January 31, 2021. On July 7, 2005, we
exercised the option to extend the lease to January 2021. On April 1, 2008 we
extended the lease to January 2033 at a flat annual rent of $400,000 from
February 2021 through January 2033.
10
As a
result of acquiring six card-room facilities in the State of Washington on July
23, 2010 (see note 13), the Silver Dollar Casino in SeaTac has a building lease
which expires in May 2022, with an annual rent of $238,000 and an option to
renew for an additional 10-year term; the Silver Dollar Casino in Renton has a
building lease which expires in March 2019, with an annual rent of $480,000 and
an option to renew for up to two additional 10-year terms, the Silver Dollar
Casino Mill Creek in Bothell has a building lease which expires in April 2012,
with an annual rent of $286,000 and an option to renew for up to two additional
10-year terms; the Club Hollywood Casino in Shoreline has building and parking
lot leases which expire in March 2017, with annual rents of $660,000 and
$11,350, respectively, and options to renew each of them for up to four 5-year
terms; the Golden Nugget Casino in Tukwila has a building lease which expires in
November 2014, with an annual rent of $166,000 and an option to renew for an
additional 10-year term; and the Royal Casino in Everett has a building lease
which expires in January 2016 with an annual rent of $360,600 and an option to
renew for up to four 5-year terms. The administrative office in Renton, WA has
entered into a lease agreement, effective September 1, 2010, which expires in
December 2014 with an annual rent of $53,000. This represents a 46% reduction of
square footage and annual rent.
As a
result of acquiring facilities in Washington on May 12, 2009 (see note 13), the
Crazy Moose Casino in Mountlake Terrace has a building lease which expires in
May 2011, with an annual rent of $192,000. The administrative office in Auburn,
WA has a lease which expires in February 2011, with an annual rent of $28,800
and an option to renew for one additional 3-year term. In addition, the Crazy
Moose Casino in Pasco has a parking lot lease which expires in January, 2011,
with an annual rent of $6,300 and an option to renew for an additional 23-month
term.
We
continue to pursue additional development opportunities that may require,
individually and in the aggregate, significant commitments of capital,
extensions of credit, up-front payments to third parties and guarantees by the
Company of third-party debt.
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
12. Legal Proceedings
The
Company is not currently involved in any material legal
proceedings.
Note
13. Acquisition
NG
Washington II, LLC
On July
23, 2010, the Company, through NG Washington II, LLC, its wholly-owned
subsidiary, acquired six additional casinos, and the leasehold to their related
operating center, in the state of Washington. The casinos are the Silver Dollar
Casino in SeaTac, the Silver Dollar Casino in Renton, the Silver Dollar Casino
Mill Creek in Bothell, the Club Hollywood Casino, located in Shoreline, the
Royal Casino, located in Everett, and the Golden Nugget Casino, located in
Tukwila (collectively, “Silver Dollar Casinos”). All of the Silver Dollar
Casinos are located in western Washington State. The Company acquired the Silver
Dollar Casinos through bankruptcy proceedings. The casinos were previously owned
by subsidiaries of Evergreen Gaming Corporation, a British Columbia Corporation,
which is under bankruptcy court protection. The Company purchased the six
casinos from Grant-Thornton, Ltd. (the “Receiver”), in its capacity as a
court-appointed receiver for Big Nevada, Inc., Gameco, Inc., Gaming Consultants,
Inc., Gaming Management, Inc., Golden Nugget Tukwila, Hollydrift Gaming, Inc.,
Little Nevada, Inc., Mill Creek Gaming, Inc., Royal Casino Holdings, Inc., and
Silver Dollar Mill Creek, Inc., for $11.07 million, $6.0 million which was
paid in cash to the Receiver and $5.07 million financed pursuant to a credit
agreement between NG Washington II Holdings, LLC, and Fortress Credit Corp., as
an agent for the lenders. Two promissory notes, issued pursuant to the
credit agreement, are due July 23, 2012, and bear an interest rate based on the
30-day LIBOR at the end of each calendar month, plus 9%, with a 30-day LIBOR
floor of 2.0%. Interest is due monthly. The terms of the
credit agreement contain, among others, customary events of default, including
nonpayment when due of principal or any interest or fees or other amounts owing
within specified grace periods, and failure to comply with certain affirmative
or negative covenants, including certain financial covenants. The
preliminary purchase price was allocated to the assets acquired and liabilities
assumed based on management’s estimate of their fair value on the date of
acquisition. A summary of the preliminary purchase price allocation
is as follows:
(000’s)
|
||||
Current
assets
|
$ | 88 | ||
Property
and equipment
|
1,889 | |||
Customer
relationships
|
3,383 | |||
Goodwill
|
5,710 | |||
Purchase
price
|
$ | 11,070 |
11
Due to
lower than anticipated hold percentage, the results of operations of ($27,000),
which includes costs related to the acquisition, specifically closing costs and
severance pay, for eight days of operation in the quarter have been included in
the consolidated statements of operations since the date of the acquisition. At
July 31, 2010 goodwill acquired was $5,710,000, all of which is expected to be
deductible for tax purposes.
NG
Washington, LLC
On May
12, 2009, the Company, through NG Washington, LLC, its wholly-owned subsidiary,
acquired certain assets and liabilities of Crazy Moose Casino, Inc., Crazy Moose
II, Inc., Coyote Bob’s, Inc., and Gullwing III, LLC for a purchase price of
$15,962,200, including $212,000 of costs directly associated with the
acquisition that were expensed at the end of fiscal year 2009. The acquisition
was financed with cash and a note to the sellers for $4 million. The acquisition
was accounted for as a purchase business combination in accordance with SFAS No.
141R. The purchase price was allocated to the assets acquired and liabilities
assumed based on management’s estimate of their fair value on the date of
acquisition. A summary of the remaining purchase price allocation is as
follows:
(000’s)
|
||||
Current
assets and payroll liabilities
|
$ | (11 | ) | |
Property
and equipment
|
2,400 | |||
Customer
relationships
|
2,951 | |||
Trade
names
|
1,862 | |||
Noncompete
|
1,018 | |||
Goodwill
|
7,530 | |||
Purchase
price
|
$ | 15,750 |
The
results of operations of $2,170,000, which includes depreciation and
amortization of $1,177,000, have been included in the consolidated statements of
operations since the date of the acquisition of May 12, 2009. At July 31, 2009
goodwill acquired was $7,530,000, all of which is expected to be deductible for
tax purposes.
Note
14. Goodwill and Other Intangible Assets
In
connection with our acquisition of the Colorado Grande casino on April 25, 2005,
and the acquisition of the Washington casinos on May 12, 2009 and on July 23,
2010 (see Note 13), we have goodwill and identifiable intangible assets with an
indefinite useful life of $24.2 million, net of amortization.
The
change in the carrying amount of goodwill and other intangibles for the first
quarter of 2011 is as follows (in thousands):
Total
|
Goodwill
|
Other
Intangibles
|
||||||||||
Balance
as of April 30, 2010
|
$ | 16,074 | $ | 10,243 | $ | 5,831 | ||||||
Acquired
during the quarter ended July 31, 2010
|
9,095 | 5,711 | 3,384 | |||||||||
Accumulated
amortization
|
(920 | ) | - | (920 | ) | |||||||
Balance
as of July 31, 2010
|
$ | 24,249 | $ | 15,954 | $ | 8,295 |
The $5.7
million increase in goodwill and $3.4 million increase in
intangibles from April 30, 2010 to July 31, 2010 results from
recording the estimated intangibles for the acquisition of the six additional
Washington mini-casinos during fiscal 2011. Other intangible assets
are generally amortized on a straight line basis over the useful lives of the
assets. All goodwill and other intangible assets pertain to the
gaming segment.
A summary
of other intangible assets follows (in thousands):
12
As of July
31, 2010
|
||||||||
Amortizable
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
||||||
Customer
relationships
|
$ | 6,334 | $ | (527 | ) | |||
Non-compete
agreements
|
1,018 | (393 | ) | |||||
Subtotal
|
7,352 | (920 | ) | |||||
Non-amortizable
|
||||||||
Trade
names
|
1,862 | 0 | ||||||
Total
|
$ | 9,214 | $ | (920 | ) |
The
estimated future annual amortization of intangible assets for each of the next
five years follows (in thousands):
2011
|
$ | 1,123 | ||
2012
|
$ | 1,244 | ||
2013
|
$ | 904 | ||
2014
|
$ | 904 | ||
2015
|
$ | 904 | ||
Thereafter
|
$ | 1,353 |
The
weighted average useful lives of acquired intangibles related to customer
relationships and non-compete agreements are 7.0 years and 3.0 years,
respectively. The weighted average useful life of amortizable
intangible assets in total is 5.0 years.
Goodwill
and intangible assets with indefinite useful lives are tested for impairment
annually, or more frequently if an event occurs or circumstances change that may
reduce the fair value of our goodwill below its carrying value.
We review
goodwill at the reporting level unit, which is one level below an operating
segment. We review the carrying value of the net assets of each reporting
unit to the estimated fair value of the reporting unit, based upon a
multiple of estimated earnings. If the carrying value exceeds the estimated fair
value of the reporting unit, an impairment indicator exists and an estimate of
the impairment loss is calculated. The fair value calculation uses level 3
inputs and includes multiple assumptions and estimates, including the projected
cash flows and discount rates applied. Changes in these assumptions and
estimates could result in goodwill impairment that could materially adversely
impact our financial position or results of operations. All of our goodwill is
attributable to reporting units within our gaming
segment.
We use
earnings before interest, taxes, depreciation, and amortization (“EBITDA”) as
the measure for future earnings in our impairment test. Management
estimates future EBITDA based primarily on its projections of future revenues.
We utilized comparable industry average multiples of EBITDA rates based on
industry standards ranging from 5.5 to 7.5 times EBITDA when we estimated fair
values of our casinos as of July 31, 2010.
Long-lived
assets, including property, plant and equipment and amortizable intangible
assets, also comprise a significant portion of our total assets. We evaluate the
carrying value of long-lived assets when impairment indicators are present or
when circumstances indicate that impairment may exist under authoritative
guidance. When management believes impairment indicators may exist, projections
of the undiscounted future cash flows associated with the use of and eventual
disposition of long-lived assets held for use are prepared. If the projections
indicate that the carrying values of the long-lived assets are not recoverable,
we reduce the carrying values to fair value. For long-lived assets held for
sale, we compare the carrying values to an estimate of fair value less selling
costs to determine potential impairment. We test for impairment of long-lived
assets at the lowest level for which cash flows are measurable. These impairment
tests are heavily influenced by assumptions and estimates that are subject to
change as additional information becomes available.
13
Note
15. State Gaming Laws
Washington
The
gaming legislation in Washington State is codified in chapter 9.46 of the
Revised Code of Washington. The gaming legislation stipulates the Washington
State Gambling Commission (the “Commission”) to be the regulator of gambling
activities in this state. The Commission enforces its authority through an
extensive set of rules and regulations promulgated in Title 230 of the
Washington Administrative Code. The state of Washington allows certain
gambling activities, such as amusement games, bingo, raffles, punch boards,
pull-tabs, card-rooms, and public card games. In order to be considered
legal, these activities must be operated by either non-profit organizations or
by commercial food and drink establishments. Some activities may be
operated solely by non-profit organizations, such as raffles. Traditional
casino games, such as craps, roulette and keno, are prohibited.
House-banked card-rooms have been authorized in Washington State since 1997 and,
under current law, each establishment is allowed to have up to 15 tables
offering games, such as Blackjack, Ultimate Texas Hold’em, Three Card Poker,
Four Card Poker, Spanish Poker, Texas Shootout, Spanish 21, Pai Gow Poker, and
others. The law allows both player-sponsored and house-banked
card-rooms. As of January 1, 2009, the Commission increased the maximum
bet for house-banked card-rooms’ table game wager limit to $300 and allowed
card-rooms to offer Mini-Baccarat. In addition, these establishments are allowed
to be open 24 hours per day, provided they close for at least four continuous
hours two times per week.
In order
to operate our nine “mini casinos,” Crazy Moose Casino in Pasco, Crazy Moose
Casino in Mountlake Terrace, Coyote Bob’s Roadhouse Casino in Kennewick, Silver
Dollar Casino in SeaTac, Silver Dollar Casino in Renton, Silver Dollar Casino in
Bothell, Club Hollywood Casino in Shoreline, Royal Casino located in Everett and
Golden Nugget Casino located in Tukwila, each of them is required to maintain a
Public Card-room license and Punch Board/Pull-Tab Commercial Stimulant
license. These licenses are renewable annually, subject to continued
compliance with applicable gaming regulations. In addition, the Commission
requires, prior to the licenses being issued, each substantial interest holder
in the licensees (including our officers, directors and owners of five percent
or more of any class of our stock) to submit to the Commission certain
disclosure forms and be subject to background investigations. The failure
or inability of our “mini-casinos” to maintain their respective licenses would
have a material adverse effect on our operations.
RCW 9.46.110 allows local
governments (including cities, counties and towns) to prohibit any or all
gambling activities for which licenses are required as well as tax such
activities. The maximum tax limitations imposed by law include 20% of
gross receipt for public card-room games and either 5% of gross receipts or 10%
of net receipt (as chosen by a local authority) for pull-tabs activities.
The current gaming tax rate for public card-room games in the cities of Pasco,
Mountlake Terrace, Kennewick, SeaTac, Renton, Tukwila and Shoreline, as well as
in Snohomish County, is 10% of table games gross receipts. The
current gaming tax rate for pull-tabs in the cities of Pasco and Kennewick is
10% of pull-tabs net receipts, while in the cities of Mountlake Terrace, SeaTac,
Renton, Tukwila and Shoreline, as well as in Snohomish County, the tax rate is
5% of pull-tabs gross receipts. In addition, Washington State charges a
business and occupational tax in the amount of 1.63% of all gaming activities’
net receipts in order to promote responsible gaming.
Colorado
The
ownership and operation of gaming facilities in Colorado are subject to
extensive state and local regulations. No gaming may be conducted in Colorado
unless licenses are obtained from the Colorado Limited Gaming Control Commission
(the “Gaming Commission”). In addition, the State of Colorado created the
Division of Gaming (the “CDG”) within its Department of Revenue to license,
implement, regulate, and supervise the conduct of limited stakes gaming. The
Director of the CDG (“CDG Director”), under the supervision of the Gaming
Commission, has been granted broad powers to ensure compliance with the laws and
regulations. The Gaming Commission, CDG and CDG Director that have
responsibility for regulation of gaming are collectively referred to as the
“Colorado Gaming Authorities.”
The laws,
regulations, and supervisory procedures of the Colorado Gaming Authorities seek
to maintain public confidence and trust that licensed limited gaming is
conducted honestly and competitively, that the rights of the creditors of
licensees are protected, and that gaming is free from criminal and corruptive
elements. The Colorado Gaming Authorities’ stated policy is that public
confidence and trust can be maintained only by strict regulation of all persons,
locations, practices, associations, and activities related to the operation of
the licensed gaming establishments and the manufacture and distribution of
gaming devices and equipment.
The
Gaming Commission is empowered to issue five types of gaming and related
licenses. To operate our Colorado casino we are required to maintain a retail
gaming license, which must be renewed each year, and the Colorado Commission has
broad discretion to revoke, suspend, condition, limit, or restrict the licensee
at any time. Under Colorado gaming regulations, no person or entity can have an
ownership interest in more than three retail licenses, and our business
opportunities will be limited accordingly. The Colorado Casinos’ licenses are
renewable annually, subject to continued compliance with gaming regulations. The
failure or inability of the Colorado Grande-Cripple Creek (the "Colorado
Casino"), or the failure or inability of others associated with the Colorado
Casino to maintain necessary gaming licenses or approvals would have a material
adverse effect on our operations.
The
Colorado Casino must meet specified architectural requirements, fire safety
standards and standards for access for disabled persons. It also must not exceed
specified gaming square footage limits as a total of each floor and the full
building. Casinos may operate 24 hours daily. Colorado casinos are permitted to
operate slot machines and various types of table games, such as blackjack,
poker, craps and roulette. Casino patrons must be 21 or older to
gamble in the casino. Effective July 2, 2009, the casino is permitted
to operate 24 hours per day and the maximum bet limit was increased $5 to $100.
No Colorado Casino may provide credit to its gaming patrons.
14
The
Colorado Constitution permits a gaming tax of up to 20% on adjusted gross gaming
proceeds, and authorizes the Gaming Commission to change the rate annually. As
of July 2, 2009, any increase in the gaming tax rate requires statewide voter
approval. The current gaming tax rate is 0.25% on adjusted gross
gaming proceeds of up to and including $2 million, 2% over $2 million up to and
including $5 million, 9% over $5 million up to and including $8 million, 11%
over $8 million up to and including $10 million, 16% over $10 million up to and
including $13 million and 20% on adjusted gross proceeds in excess of $13
million.
Colorado
law requires that every officer, director or stockholder holding either a 5% or
greater interest or controlling interest of a publicly traded corporation, or
owners of an applicant or licensee, shall be a person of good moral character
and submit to a full background investigation conducted by the Gaming
Commission. The Gaming Commission may require any person having an interest in a
license or a licensee to undergo a full background investigation and pay the
cost of investigation in the same manner as an applicant. Persons found
unsuitable by the Gaming Commission may be required to immediately terminate any
interest in, association or agreement with, or relationship to, a licensee. A
finding of unsuitability with respect to any officer, director, employee,
associate, lender or beneficial owner of a licensee or applicant may also
jeopardize the licensee’s license or applicant’s license application. Licenses
may be conditioned upon termination of any relationship with unsuitable
persons.
The rules
impose certain additional restrictions and reporting and filing requirements on
publicly traded entities holding gaming licenses in Colorado. A licensee or
affiliated company or any controlling person of a licensee or affiliated
company, which commences a public offering of voting securities, must notify the
Gaming Commission with regard to a public offering to be registered with the
Securities and Exchange Commission ("SEC"), no later than ten business days
after the initial filing of a registration statement with the SEC, or, with
regard to any other type of public offering, no later than ten business days
prior to the public use or distribution of any offering document, if: 1) the
licensee, affiliated company or a controlling person thereof, intending to issue
the voting securities is not a publicly traded corporation; or 2) if the
licensee, affiliated company or controlling person thereof, intending to issue
the voting securities is a publicly traded corporation, and if the proceeds of
the offering, in whole or in part, are intended to be used: a) to pay for
construction of gaming facilities in Colorado to be owned and operated by the
licensee; b) to acquire any direct or indirect interest in gaming facilities in
Colorado; c) to finance the operation by the licensee of gaming facilities in
Colorado; or d) to retire or extend obligations incurred for one or more of the
purposes set forth in subsections a, b, or c above.
We may
not issue any voting securities except in accordance with the provisions of the
Colorado Limited Gaming Act and the regulations promulgated thereunder. The
issuance of any voting securities in violation will be void and the voting
securities will be deemed not to be issued and outstanding. No voting securities
may be transferred, except in accordance with the provisions of the Colorado
Limited Gaming Act and the regulations promulgated thereunder. Any transfer in
violation of these provisions will be void. If the Colorado Limited Gaming
Control Commission at any time determines that a holder of our voting securities
is unsuitable to hold the securities, then we may, within sixty (60) days after
the finding of unsuitability, purchase the voting securities of the unsuitable
person at the lesser of (a) the cash equivalent of such person’s investment, or
(b) the current market price as of the date of the finding of unsuitability,
unless such voting securities are transferred to a suitable person within sixty
(60) days after the finding of unsuitability. Until our voting securities are
owned by persons found by the Commission to be suitable to own them, (a) we are
not permitted to pay any dividends or interest with regard to the voting
securities, (b) the holder of such voting securities will not be entitled to
vote and the voting securities will not for any purposes be included in the
voting securities entitled to vote, and (c) we may not pay any remuneration in
any form to the holder of the voting securities, except in exchange for the
voting securities.
Note
16. Pro forma financials
The
following pro-forma combined statement of operations of the Company and Silver
Dollar Casinos are presented to give effect to the acquisition as if it occurred
May 1, 2010. Although we believe that the unaudited financial
information provided to the Company by the Sellers are reasonably accurate, any
and all of the pro-forma statements in this report and any other public
statements that are made may prove to be incorrect. This may occur as
a result of inaccurate information provided by the Sellers or a consequence of
known or unknown risks and uncertainties. Consequently, actual
numbers may differ materially from those presented in the pro-forma
statements. In light of these and other uncertainties, you should not
regard the inclusion of the pro-forma statements in this report or other public
communications that the Company might make as a representation of audited
financial information, and you should not place undue reliance on such pro-forma
statements.
15
Nevada Gold & Casinos,
Inc.
|
Pro-forma Statement of Operations
for the Period Ended July 31,
2010
|
Nevada Gold as
reported in
Form 10-Q
|
Operating Results of the acquired
Silver Dollar Casinos for the three months ended
July 31, 2010
(unaudited)
|
Pro-forma
Adjustments
|
Pro-forma
Statement of
Operations
|
|||||||||||||
Revenues:
|
||||||||||||||||
Casino
|
$ | 5,759,854 | $ | 5,950,401 | $ | $ | 11,710,255 | |||||||||
Food and
beverage
|
1,341,621 | 1,546,625 | 2,888,246 | |||||||||||||
Other
|
225,509 | 282,465 | 507,974 | |||||||||||||
Gross
revenues
|
7,326,984 | 7,779,491 | - | 15,106,475 | ||||||||||||
Less promotional
allowances
|
(800,484 | ) | (960,334 | ) | (1,760,818 | ) | ||||||||||
Net
revenues
|
6,526,500 | 6,819,157 | - |
13,345,657
|
||||||||||||
Operating
expenses:
|
||||||||||||||||
Casino
|
2,635,552 | 4,042,868 | 6,678,420 | |||||||||||||
Food and
beverage
|
674,769 | 1,331,879 | 2,006,648 | |||||||||||||
Casino marketing and
administrative
|
1,772,255 | 125,267 | 1,897,522 | |||||||||||||
Facility
|
347,674 | 698,926 | 1,046,600 | |||||||||||||
Corporate
expense
|
1,169,179 | 447,599 | 1,616,778 | |||||||||||||
Legal
expenses
|
396,156 | 5,000 | 401,156 | |||||||||||||
Depreciation and
amortization
|
313,839 | 143,207 | 109,893 | 566,939 | ||||||||||||
Other
|
155,973 | 81,132 | 237,105 | |||||||||||||
Total operating
expenses
|
7,465,397 | 6,875,878 | 109,893 | 14,451,168 | ||||||||||||
Operating
loss
|
(938,897 | ) | (56,721 | ) | (109,893 | ) | (1,105,511 | ) | ||||||||
Non-operating income
(expenses):
|
||||||||||||||||
Gain (loss) on sale equity
investees and assets
|
384,414 | - | 384,414 | |||||||||||||
Interest
income
|
44,925 | - | (1,637 | ) | 43,288 | |||||||||||
Interest
expense
|
(227,788 | ) | - | (126,819 | ) | (354,607 | ) | |||||||||
Amortization of loan issue
costs
|
(11,250 | ) | - | (11,250 | ) | |||||||||||
Loss before income tax
benefit
|
(748,596 | ) | (56,721 | ) | (238,349 | ) | (1,043,666 | ) | ||||||||
Income tax
benefit
|
||||||||||||||||
Deferred
|
239,524 | - | 81,039 | 320,563 | ||||||||||||
Net loss
|
$ | (509,072 | ) | $ | (56,721 | ) | $ | (157,310 | ) | $ | (723,103 | ) | ||||
Per share
information:
|
||||||||||||||||
Net loss per common share -
basic
|
$ | (0.04 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.05 | ) | ||||
Net loss per common share -
diluted
|
$ | (0.04 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.05 | ) | ||||
Basic weighted average number of
shares outstanding
|
12,764,130 | 12,764,130 | 12,764,130 | 12,764,130 | ||||||||||||
Diluted weighted average number of
shares outstanding
|
12,764,130 | 12,764,130 | 12,764,130 | 12,764,130 |
16
Nevada Gold & Casinos,
Inc.
|
Pro-forma Statement of Operations
for three month period ended July 31,
2010
|
Pro-forma adjustments to give
effect to the acquisition as if it occurred as of May 1, 2010 (the first
day of fiscal 2011)
|
||||||||
Debit
|
Credit
|
|||||||
Reduce interest income for the use
of cash to purchase casinos for 83 days at 0.18%
|
||||||||
Interest
income
|
2,047 | |||||||
Cash
|
2,047 | |||||||
To account for interest expense on
$5,070,000 long-term debt at 11.0% for 83 days
|
||||||||
Interest
expense
|
126,819 | |||||||
Cash
|
126,819 | |||||||
To amortize customer relationship
intangible asset over 7 years for 83 days
|
||||||||
Amortization of intangible assets
expense
|
109,893 | |||||||
Accumulated amortization of
intangible assets
|
109,893 | |||||||
To account for interest on $1
million deposit made to acquire casinos for 83 days at
0.18%
|
||||||||
Cash
|
409 | |||||||
Interest
income
|
409 | |||||||
To account for Federal income tax
at 34% of pro-forma pre-tax operating
adjustments
|
||||||||
Deferred tax
asset
|
81,039 | |||||||
Income tax
expense-deferred
|
81,039 |
17
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations
The
following discussion and analysis (“MD&A”) should be read in conjunction
with our Consolidated Financial Statements and Notes thereto included in Item 1
of this Quarterly Report and with Management’s Discussion and Analysis of
Financial Condition and Results of Operations contained in our Annual Report for
the year ended April 30, 2010 filed on Form 10-K with the Securities and
Exchange Commission.
Critical
Accounting Policies
Our
discussion and analysis of our financial condition and results of operations is
based upon our consolidated financial statements. We prepare these financial
statements in conformity with U.S. generally accepted accounting principles. As
such, we are required to make certain estimates, judgments and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the periods presented. We base our estimates on historical experience and on
various other assumptions that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments. On an
on-going basis, we evaluate our estimates; however, actual results may differ
from these estimates under different assumptions or conditions. There have been
no material changes or developments in our evaluation of the accounting
estimates and the underlying assumptions or methodologies that we believe to be
Critical Accounting Policies and Estimates as disclosed in our Annual Report for
the year ended April 30, 2010 filed on Form 10-K with the Securities and
Exchange Commission.
Executive
Overview
We were
formed in 1977 and since 1994, have primarily been a gaming company involved in
financing, developing, owning and operating commercial gaming projects and
financing and developing Native American owned gaming projects. Our gaming
facility operations are located in the United States of America (“U.S.”),
specifically in the states of Colorado and Washington. Our business strategy
will continue to focus on owning and operating gaming establishments. If we are
successful, our future revenues, costs and profitability can be expected to
increase. Our net revenues were $6.5 million and $5.1 million for the three
months ended July 31, 2010 and July 31, 2009, respectively.
When
compared to the three months ended July 31, 2009, the three month period ended
July 31, 2010 was impacted by the following items:
-
Addition of three mini casinos in Washington state effective May 12,
2009;
-
Addition of six additional mini casinos in Washington state effective July 23,
2010;
-
Addition of table games at Colorado Grande Casino effective July 2,
2009;
- Loss of
management fees from Oceans Casino Cruises, Inc., (“SunCruz”); and
- Reduced
interest income and increased interest expense.
COMPARISON
OF THE THREE MONTHS ENDED JULY 31, 2010 AND JULY 31, 2009
Net revenues. Net revenues
increased 29.1% or $1.5 million, for the three month period ended July 31, 2010
compared to the period ended July 31, 2009. Casino revenues increased $1.6
million with the addition of the Washington casinos and increased drop and hold
percentages at the three existing Washington mini-casinos. Food and beverage
revenues increased $0.2 million with the additional restaurants in the
Washington casinos, and other revenues increased $41,000 with the addition of
Pull Tab revenue from the Washington casinos. We have no management
fees in the current year, compared to $250,000 due to the SunCruz bankruptcy.
Our promotional allowances increased $125,000 for the three month period ended
July 31, 2010 compared to the period ended July 31, 2009 in proportion to the
additions in revenue.
Total operating expenses.
Total operating expenses increased 25% or $1.5 million, for the three
month period ended July 31, 2010 compared to the period ended July 31, 2009. Of
the increase, $0.7 million is the result of increased casino operating expenses,
$0.5 million increased marketing and administrative expenses, $0.3 million
increase in legal expenses related to the July 2010 acquisition, and $0.2
million increased facility and depreciation expense related to the six new
properties. This was offset by decreased corporate
expenses of $0.3 million mainly due to decreased stock option expenses of $0.4
million offset by increased expenses of $0.1 million related to closing costs
and travel expenses related to the acquisition.
18
Interest income (expense), net.
Interest income (expense), net, consists of a net balance of interest
expense and amortization of loan issue cost, offset by interest income from our
various notes receivable and investments. Interest expense increased 48.9%, or
$75,000, for the three month period ended July 31, 2010 compared to the three
month period ended July 31, 2009. The increase is primarily due to increased
debt balances related to our acquisitions in Washington State. Interest income
decreased 23.2%, or $14,000, for the three month period ended July 31, 2010
compared to the three month period ended July 31, 2009. The decrease is
primarily due to repayment of notes receivable and decreased return
on bank interest. Amortization of loan issue cost was $11,250 and $32,209 for
the three month periods ended July 31, 2010 and July 31, 2009,
respectively.
Net income (loss). Net loss
was ($509,072) and ($700,709) for the three month periods ended July 31, 2010
and July 31, 2009, respectively. The improvement of $192,000 is primarily
related to the addition of the new Washington casinos revenue and the increased
hold percentage and an additional after tax gain of $263,000 net from the Isle
of Capri, offset by a reduced tax benefit of $100,000 and an additional legal
accrual of $225,000 related to the new Washington casinos acquisition. The
effective tax rate for the three month periods ended July 31, 2010 and July 31,
2009 was a benefit of (32%) and a benefit of (32.6%), respectively. The decrease
in the effective tax rate is due primarily to the non-deductible stock option
expense recorded during the three months ended July 31, 2010.
Liquidity
and Capital Resources
Historical
Cash Flows
The
following table sets forth our consolidated net cash provided by (used in)
operating, investing and financing activities for the three month periods ended
July 31, 2010 and July 31, 2009:
July 31,
|
July 31,
|
|||||||
2010
|
2009
|
|||||||
Net
cash provided by (used in):
|
||||||||
Operating
activities
|
$ | (306,560 | ) | $ | 102,603 | |||
Investing
activities
|
457,093 | (109,429,905 | ) | |||||
Financing
activities
|
146,366 | 145,675 |
Operating activities. Net cash
used in operating activities during the three month period ended July 31, 2010
increased to $0.3 million compared to $0.1 million cash provided by in the
period ended July 31, 2009. The difference is primarily due to expenses incurred
in connection with the mini-casino acquisition.
Investing activities. Net cash
provided by investing activities during the three month period ended July 31,
2010 increased to $0.5 million compared to net cash used of $10.4 million for
the three month period ended July 31, 2009. The increase of funds provided is
primarily due to the use of $11.1 million to acquire the three mini casinos in
fiscal 2010 versus $4.6 million to acquire the six additional mini casinos in
fiscal 2011 paid from restricted cash, and the receipt of $392,000 from the
final tax filing related to our fiscal year 2008 sale of our ownership in the
Isle of Capri Black Hawk (“Isle of Capri”) and $63,000 from the sale of a right
of way of land in Colorado, which is currently held for sale.
Financing
activities. Net cash provided by financing activities during
the three month period ended July 31, 2010 was $0.1 million compared to cash
provided of $0.1 million for the three month period ended July 31,
2009.
Future
Sources and Uses of Cash
We expect
that our future liquidity and capital requirements will be affected
by:
- capital requirements related
to future acquisitions;
- cash flow from
acquisitions;
- new management
contracts;
- working capital
requirements;
-
obtaining funds via long-term debt instruments;
- debt
service requirements; and
- disposition of non-gaming related
assets.
At July
31, 2010, outstanding indebtedness was $15.2 million, of which $6.0 million is
due June 30, 2013, $5.1 million is due July 23, 2012, $0.1 million is due by May
16, 2012, and $4.0 million is due May 12, 2012. We anticipate that cash flow
from the Colorado Grande Casino and the recently acquired mini-casinos in
Washington State will generate sufficient cash flow to pay for corporate
overhead, net interest expense and anticipated capital
improvements.
The 260
acres in Black Hawk, CO is available for sale. If the acreage is sold we will
use the proceeds to pay operating expenses or debt or, reinvest the funds into
acquisition opportunities.
19
On July
31, 2010, excluding restricted cash of $0.4 million, we had cash and cash
equivalents of $3.5 million.
Our
Consolidated Financial Statements have been prepared assuming we will have
adequate availability of cash resources to satisfy our liabilities in the normal
course of business. We have made, and are in the process of making, arrangements
to ensure that we have sufficient working capital to fund our obligations as
they come due. These potential funding transactions include divesting of
non-core assets and obtaining long-term financing. We believe that some or all
of these sources of funds will be funded in a timely manner and will provide
sufficient working capital for us to meet our obligations as they come due;
however, there can be no assurance that we will be successful in divesting our
non-core assets or achieving the desired level of working capital at terms that
are favorable to us. Should cash resources not be sufficient to meet our current
obligations as they come due, if we are unable to repay or refinance our
long-term debts due on May 12, 2012, July 23, 2012, and June 30, 2013 and, if we
are unable to acquire operations that generate positive cash flow, we would be
required to curtail our activities and grow at a pace that cash resources could
support which may require a restructuring of our debt or selling core assets of
the Company.
Off-Balance
Sheet Arrangements
None.
Item 3. Quantitative and Qualitative
Disclosures about Market Risk
Market
risk is the risk of loss arising from adverse changes in market rates and
prices, including interest rates, foreign currency exchange rates, credit risk,
commodity price and equity prices. Our primary exposure to market risk is credit
risk concentrations. We do not believe we are subject to material interest
risk.
Item 4. Controls and
Procedures
Disclosure Controls and
Procedures. We maintain disclosure controls and procedures that are
designed to provide reasonable assurance that information required to be
disclosed by us in the reports that we file or submit to the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), is recorded, processed, summarized and reported within the time
periods specified by the Commission’s rules and forms, and that information is
accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
In
accordance with Exchange Act Rules 13a-15 and 15d-15, 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. As a result of our evaluation, we concluded that
our disclosure controls and procedures were effective as of July 31,
2010. There have not been any changes in our control over financial
reporting during the three months ended July 31, 2010 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
Part
II. Other Information
Item 1. Legal Proceedings
The
Company is not currently involved in any material legal
proceedings.
Item
1A. Risk Factors
There
have been no material changes in our risk factors as previously
disclosed in our Annual Report on Form 10-K for the fiscal year ended April 30,
2010.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior
Securities
None.
20
Item 4. Removed and
reserved
None.
Item 5. Other Information
None.
Item 6. Exhibits
See the
Index to Exhibits following the signature page hereto for a list of the
exhibits filed pursuant to Item 601 of Regulation S-K
21
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/ James J. Kohn
|
James
J. Kohn, Chief Financial Officer
|
|
Date:
September 13,
2010
|
22
INDEX
TO EXHIBITS
EXHIBIT
NUMBER
|
DESCRIPTION
|
|
3.1A
|
Amended
and Restated Articles of Incorporation of Nevada Gold & Casinos, Inc.
(filed previously as Exhibit A to the Company's definitive proxy statement
filed on Schedule 14A on July 30, 2001)
|
|
3.1B
|
Certificate
of Amendment to the Articles of Incorporation of Nevada Gold &
Casinos, Inc. (filed previously as Exhibit 4.2 to the Company’s Form S-8
filed October 11, 2002)
|
|
3.1C
|
Certificate
of Amendment to the Articles of Incorporation of Nevada Gold &
Casinos, Inc. (filed previously as Exhibit 3.3 to the Company’s Form 10-Q
filed November 9, 2004)
|
|
3.1D
|
Certificate
of Amendment to the Articles of Incorporation of Nevada Gold &
Casinos, Inc. (filed previously as Exhibit 3.1 to the Company’s Form 8-K
filed October 17, 2007)
|
|
3.2
|
Amended
and Restated Bylaws of Nevada Gold & Casinos, Inc. (filed previously
as Exhibit 3.2 to the Company’s From 10-QSB filed August 14,
2002)
|
|
3.3
|
Amended
and Restated Bylaws of Nevada Gold & Casinos, Inc., effective July 24,
2007 (filed previously as Exhibit 3.2 to the Company’s From 8-K filed July
27, 2007)
|
|
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)
|
|
4.2
|
Second
Amended and Restated Nevada Gold & Casinos, Inc. 1999 Stock Option
Plan (filed previously as Exhibit 4.6 to the Company’s Form S-8, file no.
333-126027)
|
|
4.3
|
Nevada
Gold & Casinos, Inc.’s 2009 Equity Incentive Plan (filed previously as
Exhibit 10.1 to the Company’s Form S-8, file no.
333-158576)
|
|
10.1
|
Stock
Purchase Agreement dated as of April 25, 2005 among Isle of Capri Black
Hawk, L.L.C., IC Holdings Colorado, Inc., Colorado Grande Enterprise,
Inc., and CGC Holdings, L.L.C. (filed previously as Exhibit 2.1 to the
Company’s Form 8-K filed April 29, 2005)
|
|
10.2
|
Purchase
Agreement dated November 25, 2009 between Nevada Gold BVR, LLC and B.V.
Oro, LLC (filed previously as Exhibit 10.1 to the Company’s Form 8-K filed
December 12, 2009)
|
|
10.3
|
Asset
Purchase Agreement dated March 12, 2009 among Crazy Moose Casino, Inc.,
Crazy Moose Casino II, Inc., Coyote Bob’s, Inc. and Gullwing III, LLC, as
sellers, and NG Washington, LLC, as purchaser (filed previously as Exhibit
10.1 to the Company’s Form 8-K filed March 13, 2009)
|
|
10.4
|
Agreement
Regarding Loans effective March 1, 2009 between Nevada Gold & Casinos,
Inc. and Louise H. Rogers (filed previously as Exhibit 10.1 to the
Company’s Form 8-K filed June 17, 2009)
|
|
10.5
|
Amended
and Restated Security Agreement effective March 1, 2009 between Nevada
Gold & Casinos, Inc. and Louise H. Rogers (filed previously as Exhibit
10.2 to the Company’s Form 8-K filed June 17, 2009)
|
|
10.6
|
Schedule
of Collateral, Notes, Security Interests and Ownership Interests effective
March 1, 2009 between Nevada Gold & Casinos, Inc. and Louise H. Rogers
(filed previously as Exhibit 10.3 to the Company’s Form 8-K filed June 17,
2009)
|
|
10.7
|
Promissory
Note issued by Nevada Gold & Casinos, Inc. to Louise H. Rogers
effective March 1, 2009 (filed previously as Exhibit 10.4 to the Company’s
Form 8-K filed June 17, 2009)
|
|
10.8
|
July
2009 Amended and Restated Security Agreement among Nevada Gold &
Casinos, Inc., Gold Mountain Development, LLC, CGC Holdings, LLC, Colorado
Grande Enterprises, Inc., Nevada Gold BVR, LLC and Louise H. Rogers dated
July 7, 2009 (filed previously as Exhibit 10.1 to the Company’s Form 8-K
filed July 7, 2009)
|
|
10.9
|
Schedule
of Collateral, Notes, Security Interests and Ownership Interests dated
July 7, 2009 among Nevada Gold & Casinos, Inc., Gold Mountain
Development, LLC, CGC Holdings, LLC, Colorado Grande Enterprises, Inc.,
Nevada Gold BVR, LLC and Louise H. Rogers dated July 7, 2009 (filed
previously as Exhibit 10.2 to the Company’s Form 8-K filed July 7,
2009)
|
23
10.10
|
Collateral
Assignment of Notes, Contractual Rights, Security Interests, and Ownership
Interests dated July 7, 2009 among Nevada Gold & Casinos, Inc., Gold
Mountain Development, LLC, CGC Holdings, LLC, Colorado Grande Enterprises,
Inc., Nevada Gold BVR, LLC and Louise H. Rogers dated July 7, 2009 (filed
previously as Exhibit 10.3 to the Company’s Form 8-K filed July 7,
2009)
|
|
10.11
|
Promissory
Note issued by Nevada Gold & Casinos, Inc. to the senior lender dated
July 7, 2009 between Nevada Gold & Casinos, Inc. and Louise H. Rogers
dated July 7, 2009 (filed previously as Exhibit 10.4 to the Company’s Form
8-K filed July 7, 2009)
|
|
10.12
|
Loan
Guaranty Agreement dated July 7, 2009 among Nevada Gold & Casinos,
Inc., Gold Mountain Development, LLC, CGC Holdings, LLC, Colorado Grande
Enterprises, Inc., NG Washington, LLC, Nevada Gold BVR, LLC and Louise H.
Rogers dated July 7, 2009 (filed previously as Exhibit 10.5 to the
Company’s Form 8-K filed July 7, 2009)
|
|
10.13
|
Asset
Purchase Agreement dated April 14, 2010 between NG Washington II, LLC, as
buyer, and Grant Thornton, Ltd, as receiver for Big Nevada, Inc., Gameco,
Inc., Gaming Consultants, Inc., Gaming Management, Inc., Golden Nugget
Tukwila, Inc., Hollydrift Gaming, Inc., Little Nevada, Inc., Mill Creek
Gaming, Inc., Royal Casino Holdings, Inc., and Silver Dollar Mill Creek,
Inc. (filed previously as Exhibit 10.1 to the Company’s Form 8-K/A filed
April 23, 2010)
|
|
10.14
|
Amendment
to the Asset Purchase Agreement dated April 14, 2010 between NG Washington
II, LLC, as buyer, and Grant Thornton, Ltd, in its capacity as
court-appointed receiver for Big Nevada, Inc., Gameco, Inc., Gaming
Consultants, Inc., Gaming Management, Inc., Golden Nugget Tukwila, Inc.,
Hollydrift Gaming, Inc., Little Nevada, Inc., Mill Creek Gaming, Inc.,
Royal Casino Holdings, Inc. and Silver Dollar Mill Creek, Inc. (filed
previously as Exhibit 10.1 to the Company’s Form 8-K filed July 28,
2010)
|
|
10.15
|
Credit
Agreement dated July 23, 2010 between NG Washington II Holdings, LLC, as
Borrower, and Fortress Credit Corp., as agent for the lenders (filed
previously as Exhibit 10.1 to the Company’s Form 8-K filed July 28,
2010)
|
|
10.16
|
Membership
Interest Pledge Agreement dated July 23, 2010 between Nevada Gold &
Casinos, Inc., as grantor, and Fortress Credit Corp., as agent for the
lenders (filed previously as Exhibit 10.1 to the Company’s Form 8-K filed
July 28, 2010)
|
|
10.17
|
Pledge
and Security Agreement dated July 23, 2010 among NG Washington II
Holdings, LLC and NG Washington II, LLC, as grantors, and Fortress Credit
Corp., as agent for the lenders (filed previously as Exhibit 10.1 to the
Company’s Form 8-K filed July 28, 2010)
|
|
10.18
|
Promissory
Note dated July 23, 2010 issued by NG Washington II Holdings, LLC to
Fortress Credit Funding II LP (filed previously as Exhibit 10.1 to the
Company’s Form 8-K filed July 28, 2010)
|
|
10.19
|
Promissory
Note dated July 23, 2010 issued by NG Washington II Holdings, LLC to
Fortress Credit Opportunities I LP (filed previously as Exhibit 10.1 to
the Company’s Form 8-K filed July 28, 2010)
|
|
10.20
|
Guaranty
dated July 23, 2010 among NG Washington, LLC and NG Washington II, LLC, as
guarantors, and Fortress Credit Corp., as agent for the lenders (filed
previously as Exhibit 10.1 to the Company’s Form 8-K filed July 28,
2010)
|
|
10.21A
(+)
|
Employment
Agreement dated November 27, 2006 by and between Robert B. Sturges and
Nevada Gold & Casinos, Inc. (filed previously as Exhibit 10.27 to the
Company’s Form 10-Q filed December 15, 2006)
|
|
10.21B (+)
|
Amendment
to the Employment Agreement dated August 30, 2007 by and between Robert B.
Sturges and Nevada Gold & Casinos, Inc. (filed previously as Exhibit
99.1 to the Company’s Form 8-K filed August 31, 2007)
|
|
10.21C (+)
|
Amendment
to the Employment Agreement dated October 30, 2007 by and between Robert
B. Sturges and Nevada Gold & Casinos, Inc. (filed previously as
Exhibit 99.1 to the Company’s Form 8-K filed October 30,
2007)
|
|
10.21D (+)
|
Second
Amendment to the Employment Agreement dated January 23, 2009 by and
between Robert B. Sturges and Nevada Gold & Casinos, Inc. (filed
previously as Exhibit 10.1 to the Company’s Form 8-K filed January 24,
2009)
|
|
10.22A (+)
|
Employment
Agreement dated October 24, 2006 by and between James J. Kohn and Nevada
Gold & Casinos, Inc. (filed previously as Exhibit 10.28 to the
Company’s Form 10-Q filed March 9, 2007)
|
|
10.22B(+)
|
First
Amendment to the Employment Agreement dated April 14, 2009 by and between
James J. Kohn and Nevada Gold & Casinos, Inc. (filed previously as
Exhibit 10.24B to the Company’s Form 10-Q filed September 9,
2009)
|
24
10.23A (+)
|
Employment
Agreement dated December 29, 2006 by and between Ernest E. East and Nevada
Gold & Casinos, Inc. (filed previously as Exhibit 10.28 to the
Company’s Form 10-Q filed March 9, 2007)
|
|
10.23B
(+)
|
First
Amendment to the Employment Agreement dated April 14, 2009 by and between
Ernest E. East and Nevada Gold & Casinos, Inc. (filed previously as
Exhibit 10.25B to the Company’s Form 10-Q filed September 9,
2009)
|
|
10.23C
(+)
|
Second
Amendment to Employment Agreement between Nevada Gold & Casinos, Inc.
and Ernest E. East dated June 8, 2010 (filed previously as Exhibit 10.1 to
the Company’s Form 8-K filed June 8, 2010)
|
|
23.1(*)
|
Consent
of Independent Registered Public Accounting Firm
|
|
31.1(*)
|
Chief
Executive Officer Certification Pursuant to Section 13a-14 of the
Securities Exchange Act.
|
|
31.2(*)
|
Chief
Financial Officer Certification Pursuant to Section 13a-14 of the
Securities Exchange Act.
|
|
32.1(*)
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
32.2(*)
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
+
|
Management
contract or compensatory plan, or arrangement.
|
*
|
Filed
herewith.
|
25