Attached files
file | filename |
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8-K/A - NEVADA GOLD & CASINOS INC | v196715_8ka.htm |
EX-23.1 - NEVADA GOLD & CASINOS INC | v196715_ex23-1.htm |
EX-99.3 - NEVADA GOLD & CASINOS INC | v196715_ex99-3.htm |
Exhibit
99.2
Gaming
Consultants, Inc.
and
Affiliates
Combined
Financial Statements and
Independent
Auditors’ Report
December
31, 2009
INDEPENDENT
AUDITORS’ REPORT
Grant
Thornton, Ltd.
Receiver
of Gaming Consultants, Inc. and Affiliates
Renton,
Washington
We have
audited the accompanying combined balance sheet of Gaming Consultants, Inc. and
Affiliates (the Company) as of December 31, 2009, and the related combined
statements of income, stockholder’s equity, and cash flows for the year then
ended. These combined financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these
combined financial statements based on our audit.
We
conducted our audit in accordance with auditing standards generally accepted in
the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the combined
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the combined financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our
opinion, the combined financial statements referred to above present fairly, in
all material respects, the financial position of Gaming Consultants, Inc. and
Affiliates as of December 31, 2009, and the results of its operations and its
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.
Our audit
was made for the purpose of forming an opinion on the combined financial
statements taken as a whole. The supplemental information on pages 15-20
is presented for purposes of additional analysis and is not a required part of
the basic combined financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic combined
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic combined financial statements taken as a
whole.
Yakima,
Washington
June 25,
2010
2
Gaming
Consultants, Inc. and Affiliates
Combined
Balance Sheet
Assets
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
|
$ | 2,988,773 | ||||||
Accounts
receivable
|
197,114 | |||||||
Prepaid
expenses and other assets
|
476,897 | |||||||
Inventory
|
212,517 | |||||||
Total
current assets
|
3,875,301 | |||||||
PROPERTY
AND EQUIPMENT:
|
||||||||
Furniture,
fixtures, and equipment
|
$ | 4,783,728 | ||||||
Leasehold
improvements
|
3,573,768 | |||||||
8,357,496 | ||||||||
Less
accumulated depreciation
|
6,025,841 | |||||||
Total
property and equipment
|
2,331,655 | |||||||
OTHER
ASSETS:
|
||||||||
Note
receivable
|
497,985 | |||||||
Deposits
|
161,824 | |||||||
Goodwill
|
1,419,943 | |||||||
Other
assets, net of amortization
|
1,035,009 | |||||||
Total
other assets
|
3,114,761 | |||||||
$ | 9,321,717 |
See
accompanying notes to combined financial statements.
3
December 31,
2009
|
Liabilities
and Stockholder's Equity
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable
|
$ | 797,291 | ||||||
Accrued
expenses:
|
||||||||
Payroll
|
1,001,130 | |||||||
Sales
and business taxes
|
793,149 | |||||||
Other
accrued expenses
|
252,811 | |||||||
Deferred
revenue
|
4,632 | |||||||
Chips
outstanding
|
109,057 | |||||||
Jackpots
and prize liabilities
|
1,070,560 | |||||||
Total
current liabilities
|
4,028,630 | |||||||
LONG-TERM
DEBT
|
508,325 | |||||||
Total
liabilities
|
4,536,955 | |||||||
COMMITMENTS
AND CONTINGENCIES
|
||||||||
STOCKHOLDER’S
EQUITY:
|
||||||||
Capital
|
$ | 33,107,196 | ||||||
Retained
earnings (accumulated deficit)
|
(28,322,434 | ) | ||||||
Total
stockholder’s equity
|
4,784,762 | |||||||
$ | 9,321,717 |
4
Gaming Consultants, Inc. and
Affiliates
|
||
Combined Statement of
Income
|
Year Ended December 31,
2009
|
REVENUE:
|
||||||||
Gaming
operations
|
$ | 32,317,098 | ||||||
Food
and beverage
|
8,521,908 | |||||||
Pull
tabs
|
895,944 | |||||||
Other
|
1,124,731 | |||||||
42,859,681 | ||||||||
Less
promotional allowances
|
4,249,196 | |||||||
NET
REVENUE
|
38,610,485 | |||||||
EXPENSES:
|
||||||||
Operating
costs
|
$ | 25,884,024 | ||||||
Selling,
general, and administrative
|
10,611,007 | |||||||
Depreciation
and amortization
|
849,219 | |||||||
Total
expenses
|
37,344,250 | |||||||
INCOME
FROM OPERATIONS
|
1,266,235 | |||||||
OTHER
INCOME (EXPENSE):
|
||||||||
Interest
income
|
465,696 | |||||||
Interest
expense
|
(276,548 | ) | ||||||
Other
loss, including impairment loss on goodwill
|
(15,570,521 | ) | ||||||
Loss
on fixed asset disposal
|
(166 | ) | ||||||
Total
other income (expense)
|
(15,381,539 | ) | ||||||
LOSS
BEFORE INCOME TAXES
|
(14,115,304 | ) | ||||||
PROVISION
FOR INCOME TAXES
|
74,668 | |||||||
NET
LOSS
|
$ | (14,189,972 | ) |
See accompanying notes to combined financial statements.
5
Gaming
Consultants, Inc. and Affiliates
Combined
Statement of
|
|
Stockholder’s Equity
|
Year Ended December 31,
2009
|
Retained
Earnings
|
||||||||||||
(Accumulated
|
||||||||||||
Capital
|
Deficit)
|
Total
|
||||||||||
BALANCES,
JANUARY 1, 2009
|
$ | 32,619,516 | $ | (12,476,662 | ) | $ | 20,142,854 | |||||
ADD:
|
||||||||||||
Paid
in capital, Washington Gaming, Inc.
|
487,680 | - | 487,680 | |||||||||
DEDUCT:
|
||||||||||||
Net
loss
|
- | (14,189,972 | ) | (14,189,972 | ) | |||||||
Stockholder
distributions
|
- | (1,655,800 | ) | (1,655,800 | ) | |||||||
BALANCES,
DECEMBER 31, 2009
|
$ | 33,107,196 | $ | (28,322,434 | ) | $ | 4,784,762 |
See accompanying notes to combined financial statements.
6
Gaming Consultants, Inc. and
Affiliates
|
|
Combined Statement of Cash
Flows
|
Year Ended December 31,
2009
|
Increase
(Decrease) in Cash
|
||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
loss
|
$ | (14,189,972 | ) | |||||
Adjustments
to reconcile net loss to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
$ | 849,219 | ||||||
Loss
on sale of fixed assets
|
166 | |||||||
Loss
on writeoff of related-party receivable
|
4,154,285 | |||||||
Impairment
loss on goodwill
|
11,124,421 | |||||||
Deferred
income tax
|
(606,000 | ) | ||||||
Change
in assets:
|
||||||||
Accounts
receivable
|
106,990 | |||||||
Inventory
|
12,229 | |||||||
Prepaid
expenses and other assets
|
(192,813 | ) | ||||||
Change
in liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
88,606 | |||||||
Chips
outstanding
|
12,538 | |||||||
Jackpots
and prize liabilities
|
479,953 | |||||||
Deferred
revenue
|
(2,972 | ) | ||||||
Accrued
interest on long-term debt
|
29,704 | |||||||
Total
adjustments
|
16,056,326 | |||||||
Net
cash provided by operating activities
|
1,866,354 | |||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases
of property and equipment
|
(154,207 | ) | ||||||
Increase
in deposits
|
(102,825 | ) | ||||||
Net
cash used in investing activities
|
(257,032 | ) | ||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Repayment
of note payable, related party
|
(146,788 | ) | ||||||
Repayment
of principal on capital leases
|
(133,614 | ) | ||||||
Dividends
paid to Washington Gaming, Inc.
|
(1,655,800 | ) | ||||||
Investment
from Washington Gaming, Inc.
|
487,680 | |||||||
Net
cash used in financing activities
|
(1,448,522 | ) | ||||||
NET
INCREASE IN CASH
|
160,800 | |||||||
CASH,
BEGINNING OF YEAR
|
2,827,973 | |||||||
CASH,
END OF YEAR
|
$ | 2,988,773 | ||||||
Supplemental
Disclosures:
|
||||||||
Cash
paid for interest
|
$ | 15,435 | ||||||
Cash
paid for income taxes
|
37,529 | |||||||
7
Gaming
Consultants, Inc. and Affiliates
Notes
to Combined Financial Statements
NOTE
1 ¾ NATURE OF
OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The
combined financial statements include the accounts of Gaming Consultants, Inc.
and Affiliates (“the Company”): Big Nevada, Inc. (doing business as Silver
Dollar Casino SeaTac), Little Nevada, Inc. (doing business as Silver Dollar
Casino Tukwila and as Silver Dollar Casino Renton), Shoreline Gaming, Inc.
(doing business as Golden Nugget Shoreline), Royal Casino Holdings, Inc. (doing
business as Royal Casino Everett), Hollydrift Gaming, Inc. (doing business as
Drift on Inn Casino and as Club Hollywood Casino), Silver Dollar Mill Creek,
Inc. (doing business as Silver Dollar Casino Mill Creek), Golden Nugget Tukwila,
Inc. (doing business as Golden Nugget Tukwila), Little Nevada II, Inc., Little
Nevada III, Inc., Gaming Management, Inc., Shoreline Holdings, Inc., Snohomish
Gaming, Inc., Mill Creek Gaming, Inc., and Gameco, Inc. Gaming
Consultants, Inc. (“GCI”) has a management services agreement with each of the
Affiliates, acts as the service administrator for the Company, provides
consulting services relating to the casino related activities and assuring
compliance with local, state, and federal law.
The
assets and stock of the combined companies were pledged as security in October
2007 when the Company’s parent, Washington Gaming, Inc. (“WGI”), became party to
a loan entered into by WGI’s parent company, Evergreen Gaming Corp.
(“Evergreen”). The loan had a term of six years, with payment due in full
by September 30, 2013. The note to the principal secured creditor
(“Lender”) was secured by the assets of Evergreen, WGI, and substantially all of
WGI’s subsidiaries. On March 31, 2009, the Lender made a written demand
for immediate payment of the amount that was owed to them by Evergreen. In
response to the demand, on April 15, 2009, Evergreen filed with the Supreme
Court of British Columbia for protection from its creditors under the Companies’
Creditors Arrangement Act (“CCAA”). The Lender and Evergreen reached a
settlement whereby the assets and operations of the Companies reported on herein
were put into receivership in full settlement of the amounts owed to the
Creditor by Evergreen. On July 6, 2009, control over all of the assets of
the Company were transferred to the court-appointed Receiver, while ownership of
the stock remains with WGI. The Receiver has operated the Company since
July 6, 2009, and has pursued a sale of the assets and operations of the Company
in order to satisfy secured and unsecured claims of creditors against the
Company. The operations of the Company were not interrupted by the court
proceedings or subsequent receivership.
As the
balance of the amounts payable to the Lender exceeds the expected sales proceeds
from these Companies and other Evergreen assets, it is expected that unsecured
creditors and trade payable balances outstanding as of April 16, 2009, will not
receive payments in full satisfaction of the amounts due. These amounts
include $508,325 of unsecured notes payable and $527,000 of trade
payables. The Company continues to recognize the amounts payable on the
combined balance sheet until such time as these obligations are
relieved.
8
Gaming
Consultants, Inc. and Affiliates
Notes
to Combined Financial Statements
NOTE
1 ¾ NATURE OF
OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
All
intercompany transactions between the combined entities have been eliminated in
the preparation of the combined financial statements.
a.
|
Nature of operations –
The major source of the Company’s revenue is derived from gaming operations,
primarily house-banked card rooms and poker. The Company also
derives revenue from the sale of food and beverage sold in casino
restaurants.
|
b.
|
Cash – The Washington
State Gambling Commission requires that cash be on deposit to cover
certain jackpots offered to gaming participants, and those monies cannot
be used for any other purpose. Included in cash are amounts
restricted for jackpots at December 31, 2009, of
$1,118,088.
|
c.
|
Inventory – Inventory
is valued at the lower of cost or market with cost determined on a
first-in, first-out basis. The majority of inventory consists of
food and beverage items.
|
d.
|
Property and equipment –
Property and equipment are stated at cost. Depreciation of
property and equipment is computed using the straight-line method over
estimated useful lives of 3 to 20 years. Leasehold improvements are
depreciated over the estimated useful life of the related asset or the
remaining term of the lease whichever is shorter. Depreciation
expense for the year ended December 31, 2009 was $730,315. The
Company reviews its property and equipment for impairment whenever events
or changes in circumstances indicate that the carrying value of such
property may not be recoverable.
|
e.
|
Other assets – Other
assets as of December 31, 2009, are comprised of three noncompete
agreements totaling $300,000, less accumulated amortization of
$193,333. Also included is memorabilia from Club Hollywood Casino
valued at $500,000. In addition, other assets include $428,342
related to licenses for various house bank card games to use in
perpetuity.
|
f.
|
Goodwill – Goodwill is
tested for impairment at least annually or whenever events or changes in
circumstances have indicated that the asset may be impaired. The
first step of the impairment test compares the fair value of the reporting
unit with its carrying value. If fair value is greater than the
carrying value, goodwill is not impaired, and the second step of the
impairment test is not necessary. As a result in the decline in
profitability of certain of the casinos managed by Gaming Consultants, as
well as the closure of the gaming operations at two of the casinos
subsequent to December 31, 2009, goodwill was deemed to be impaired as of
that date. Total impairment loss recognized in 2009 was
$11,124,421. Goodwill of $1,419,943 remains on the combined balance
sheet as of December 31, 2009.
|
9
Gaming
Consultants, Inc. and Affiliates
Notes
to Combined Financial Statements
NOTE
1 ¾ NATURE OF
OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
g.
|
Fair value of financial
instruments – The carrying amounts of financial instruments,
including cash and cash equivalents, receivables, payables, and deposits,
approximate fair value due to the short maturity of these
instruments. The carrying amount of the notes payable approximates
fair value because the interest rate is based on current rates offered for
loans and debt with similar terms and
maturities.
|
h.
|
Washington Players Club Points
Program – The Company’s customer rewards program, Washington
Players Club, offers incentives to customers who gamble at the Company’s
casinos. Under the program, customers are able to accumulate reward
points over time, which customers may redeem at their discretion under the
terms of the program. The reward points will expire if the customer
does not redeem their points within one year of being earned or if there
is no activity in their account for the prior six months. A
liability is recorded for the amount of outstanding points expected to be
redeemed and is included in other accrued
expenses.
|
i.
|
Casino revenue – Casino
revenue is the net win from gaming activities, which is the difference
between gaming wins and losses.
|
j.
|
Promotional allowances
– Promotional allowances represent goods and services, which would
be accounted for as revenue if sold, that the Company provided to
customers at a discount or at no charge. The retail amount of
promotional allowances are included in gross revenue and offset by
deducting it from gross revenue to arrive at net revenue. The cost
of providing promotional allowances is included in operating
costs.
|
k.
|
Advertising – The
Company expenses advertising costs as they are incurred. Advertising
expenses incurred during the year ended December 31, 2009, were
$50,000.
|
l.
|
Income taxes – As
described previously, control over all of the assets of the Company were
transferred to the court-appointed receiver, while ownership of the stock
remains with WGI. As the legal stockholder, WGI is responsible for
the filing of the federal tax return as well as any associated tax
liability or asset generated as part of the federal tax filing for the
Company. As such, all tax assets and associated liabilities have
been written-off as part of the combined
statements.
|
10
Gaming
Consultants, Inc. and Affiliates
Notes
to Combined Financial Statements
NOTE
1 ¾ NATURE OF
OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
l.
|
Income taxes (continued)
–
|
On
January 1, 2009, the Company adopted the accounting standard on accounting for
uncertainty in income taxes, which addresses the determination of whether tax
benefits claimed or expected to be claimed on a tax return should be recorded in
the financial statements. Under this guidance, the Company may recognize
the tax benefit from an uncertain tax position only if it is more likely than
not that the tax position will be sustained on examination by taxing
authorities, based on the technical merits of the position. The tax
benefits recognized in the financial statements from such a position are
measured based on the largest benefit that has a greater than 50% likelihood of
being realized upon ultimate settlement. The guidance on accounting for
uncertainty in income taxes also addresses de-recognition, classification,
interest and penalties on income taxes, and accounting in interim
periods.
Management
evaluated the Company’s tax positions and concluded that the Company had taken
no uncertain tax positions that require adjustment to the combined financial
statements to comply with the provisions of this guidance. With few
exceptions, the Company is no longer subject to income tax examinations by the
U.S. federal tax authorities for years before 2006.
m.
|
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 the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from those
estimates.
|
NOTE
2 ¾ CONCENTRATIONS OF
CREDIT RISK:
The
Company maintains cash balances in financial institutions in Washington
State. The Federal Deposit Insurance Corporation (FDIC) insures the
accounts at each of these institutions. The aggregate funds held in one
institution may exceed the FDIC insured limit from time to time and specific
funds held by the institution may not be covered by FDIC insurance.
Management
does not anticipate any material effect on the financial position of the Company
as a result of these concentrations. The Company also maintains a
significant amount of cash on hand. The total cash on hand as of December
31, 2009, was $1,128,000.
11
Gaming
Consultants, Inc. and Affiliates
Notes
to Combined Financial Statements
NOTE
3 ¾ FAIR VALUE AND
FAIR VALUE MEASUREMENTS:
The
Company has adopted the provisions of ASC Section 820 Subsection 10, for its
goodwill. Section 820 Subsection 10 establishes a framework for measuring
fair value under generally accepted accounting principles, and expands
disclosure about fair value measurements. The framework enables a reader
of the financial statements to assess the inputs used to develop the
measurements by establishing a hierarchy for ranking the quality and reliability
of the information used to determine fair values. The standard requires
that assets and liabilities carried at fair value be classified and disclosed in
one of the following three categories:
Level
1: Quoted market prices in active markets for identical assets or
liabilities.
Level
2: Observable market based inputs or unobservable inputs that are
corroborated by market data.
Level
3: Unobservable inputs that are not corroborated by market
data.
As a
result of the bankruptcy proceedings and the subsequent asset purchase agreement
previously mentioned, goodwill was impaired at December 31, 2009. The
valuation resulted in a write off of $11,124,421 for the year ended December 31,
2009. The valuation was performed using the market approach, based on the
asset purchase agreement with Nevada Gold & Casinos, Inc. signed on April
14, 2010, see note 8.
The
resulting fair value of goodwill of $1,419,943 at December 31, 2009, is based on
the value assigned in the asset purchase agreement related to the actual sale of
the casino, and therefore is considered to be a Level 1 item.
A
reconciliation of goodwill measured at fair value on a recurring basis using
subsequent sale information during the year ended December 31, 2009, is as
follows:
Balance,
beginning of year
|
$ | 12,544,364 | ||
Impairment
charge
|
(11,124,421 | ) | ||
Balance,
end of year
|
$ | 1,419,943 |
12
Gaming
Consultants, Inc. and Affiliates
Notes
to Combined Financial Statements
NOTE
4 ¾ LONG-TERM DEBT:
Long-term
debt consisted of four unsecured notes payable with balances due at December 31,
2009 of $508,325, which are due for repayment between 2011 and 2015.
Management expects that the resolution of the CCAA and Receivership proceedings
will result in unsecured notes being rendered worthless at the time a sale of
the businesses is complete. The Company continues to recognize the amounts
payable on the combined balance sheet until such time as these obligations are
relieved.
NOTE
5 ¾ RELATED PARTIES:
Gaming
Consultants, Inc., acts as the service administrator for the Company, providing
consulting services relating to the casino related activities and assuring
compliance with local, state, and federal law. The operating casinos pay
Gaming Consultants, Inc. a service fee of 0.5% of gross revenue and a corporate
overhead allocation of 2% of monthly gross revenue that is used to compensate
for the costs incurred. Total corporate overhead expense for the year
ended December 31, 2009, was $2,782,000. These expenses were eliminated
during preparation of the combined statements.
NOTE
6 ¾ LEASES:
The
Company has numerous cancelable operating leases for food and beverage
equipment, table games, and related equipment. Rent expense under these
leases for the year ended December 31, 2009, was $1,021,000. The Company
also incurred $3,010,695 of expense for the rental of the facilities in which
the Company operates. The Company does not have any capital
leases.
NOTE
7 ¾ COMMITMENTS AND
CONTINGENCIES:
As
discussed more fully in note 8, the Company is party to an Asset Purchase
Agreement that would result in substantially all of the assets and operations of
the Company being acquired by a third-party buyer.
13
Gaming
Consultants, Inc. and Affiliates
Notes
to Combined Financial Statements
NOTE
8 ¾ SUBSEQUENT EVENTS:
On
February 22, 2010, the Golden Nugget Shoreline casino was closed. The
lease for the casino building was terminated by the Receiver in accordance with
their duties under the court order.
On April
14, 2010, an Asset Purchase Agreement (“APA”) was signed with Nevada Gold &
Casinos, Inc. (“Nevada Gold”). The APA contemplates the sale of all of the
assets of Gaming Consultants, Inc., Gaming Management, Inc., Gameco, Inc., and
seven of the nine casinos, excluding the Golden Nugget Shoreline and the Drift
on Inn. Sale closing is subject to a number of contingencies, particularly
Court and regulatory approval.
On April
15, 2010, gaming operations at the Drift on Inn casino were suspended. The
restaurant and its related operations continue to operate.
On May
25, 2010, an agreement was reached to sell the assets of the Drift on Inn to the
current owner of the land and building on which that company is located.
The terms of the agreement include provisions that amend the lease of the Club
Hollywood Casino building and parking lot in order to ensure timely and
efficient assignment of the lease to Nevada Gold as noted in the
APA.
On May
28, 2010, a hearing was conducted in the United States Bankruptcy Court, Western
District of Washington (“the Court”), to consider the APA noted above. The
Court approved the APA, subject to the buyer being able to successfully obtain
the necessary regulatory approvals. Such approvals are expected to be
obtained.
14
SUPPLEMENTAL
INFORMATION
Gaming
Consultants, Inc. and Affiliates
|
|
Combining
Balance Sheet
|
December
31,
2009
|
Big
|
Silver Dollar
|
Shoreline
|
Silver Dollar
|
Silver Dollar
|
Golden Nugget
|
Balance
|
||||||||||||||||||||||
Nevada, Inc.
|
Tukwila
|
Gaming, Inc.
|
Mill Creek, Inc.
|
Renton
|
Tukwila, Inc.
|
Carried Forward
|
||||||||||||||||||||||
Assets
|
||||||||||||||||||||||||||||
CURRENT
ASSETS:
|
||||||||||||||||||||||||||||
Cash
|
$ | 486,537 | $ | 113,186 | $ | 127,049 | $ | 369,250 | $ | 258,894 | $ | 502,041 | $ | 1,856,957 | ||||||||||||||
Accounts
receivable
|
8,430 | 13,187 | 6,396 | 24,859 | 39,549 | 10,808 | 103,229 | |||||||||||||||||||||
Lines
of credit, intercompany
|
700,329 | - | - | - | - | 417,343 | 1,117,672 | |||||||||||||||||||||
Prepaid
expenses and other assets
|
54,924 | 41,418 | 33,927 | 64,793 | 79,606 | 32,428 | 307,096 | |||||||||||||||||||||
Inventory
|
17,858 | 16,996 | 9,260 | 18,369 | 15,887 | 20,248 | 98,618 | |||||||||||||||||||||
Total
current assets
|
1,268,078 | 184,787 | 176,632 | 477,271 | 393,936 | 982,868 | 3,483,572 | |||||||||||||||||||||
PROPERTY
AND EQUIPMENT:
|
||||||||||||||||||||||||||||
Furniture,
fixtures, and equipment
|
693,892 | 406,321 | 233,142 | 639,076 | 396,158 | 377,395 | 2,745,984 | |||||||||||||||||||||
Leasehold
improvements
|
1,011,476 | 656,446 | 301,964 | 1,033,311 | 204,351 | 264,516 | 3,472,064 | |||||||||||||||||||||
1,705,368 | 1,062,767 | 535,106 | 1,672,387 | 600,509 | 641,911 | 6,218,048 | ||||||||||||||||||||||
Less
accumulated depreciation
|
1,497,099 | 987,052 | 452,122 | 882,677 | 371,954 | 559,520 | 4,750,424 | |||||||||||||||||||||
Fixed
assets, net of depreciation
|
208,269 | 75,715 | 82,984 | 789,710 | 228,555 | 82,391 | 1,467,624 | |||||||||||||||||||||
OTHER
ASSETS:
|
||||||||||||||||||||||||||||
Note
receivable
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Investments
in properties
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Deposits
|
17,095 | 11,183 | 1,762 | 9,645 | 58,057 | 18,459 | 116,201 | |||||||||||||||||||||
Goodwill
|
55,610 | - | - | - | - | 388,282 | 443,892 | |||||||||||||||||||||
Other
assets, net of amortization
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Total
other assets
|
72,705 | 11,183 | 1,762 | 9,645 | 58,057 | 406,741 | 560,093 | |||||||||||||||||||||
Total
assets
|
$ | 1,549,052 | $ | 271,685 | $ | 261,378 | $ | 1,276,626 | $ | 680,548 | $ | 1,472,000 | $ | 5,511,289 |
See
accompanying independent auditors’ report.
16
Gaming
Consultants, Inc. and Affiliates
|
|
Combining
Balance Sheet (continued)
|
December
31,
2009
|
Balance
|
Royal Casino
|
Drift on Inn
|
Hollywood
|
Eliminating
|
||||||||||||||||||||||||||||
Brought Forward
|
Holdings, Inc.
|
Casino Inc.
|
Casino Inc.
|
Other*
|
Subtotal
|
Entries
|
Total
|
|||||||||||||||||||||||||
Assets
|
||||||||||||||||||||||||||||||||
CURRENT
ASSETS:
|
||||||||||||||||||||||||||||||||
Cash
|
$ | 1,856,957 | $ | 293,744 | $ | 154,078 | $ | 519,532 | $ | 164,462 | $ | 2,988,773 | $ | - | $ | 2,988,773 | ||||||||||||||||
Accounts
receivable
|
103,229 | 17,819 | 20,782 | 46,685 | 178,427 | 366,942 | (169,828 | ) | 197,114 | |||||||||||||||||||||||
Lines
of credit, intercompany
|
1,117,672 | - | - | 428,307 | 12,981,077 | 14,527,056 | (14,527,056 | ) | - | |||||||||||||||||||||||
Prepaid
expenses and other assets
|
307,096 | 56,251 | 58,201 | 76,527 | 33,911 | 531,986 | (55,089 | ) | 476,897 | |||||||||||||||||||||||
Inventory
|
98,618 | 18,757 | 22,363 | 30,906 | 41,873 | 212,517 | - | 212,517 | ||||||||||||||||||||||||
Total
current assets
|
3,483,572 | 386,571 | 255,424 | 1,101,957 | 13,399,750 | 18,627,274 | (14,751,973 | ) | 3,875,301 | |||||||||||||||||||||||
PROPERTY
AND EQUIPMENT:
|
||||||||||||||||||||||||||||||||
Furniture,
fixtures, and equipment
|
2,745,984 | 278,852 | 355,636 | 616,676 | 786,580 | 4,783,728 | - | 4,783,728 | ||||||||||||||||||||||||
Leasehold
improvements
|
3,472,064 | - | 17,890 | 13,290 | 70,524 | 3,573,768 | - | 3,573,768 | ||||||||||||||||||||||||
6,218,048 | 278,852 | 373,526 | 629,966 | 857,104 | 8,357,496 | - | 8,357,496 | |||||||||||||||||||||||||
Less
accumulated depreciation
|
4,750,424 | 155,338 | 194,192 | 334,494 | 591,393 | 6,025,841 | - | 6,025,841 | ||||||||||||||||||||||||
Fixed
assets, net of depreciation
|
1,467,624 | 123,514 | 179,334 | 295,472 | 265,711 | 2,331,655 | - | 2,331,655 | ||||||||||||||||||||||||
OTHER
ASSETS:
|
||||||||||||||||||||||||||||||||
Note
receivable
|
- | - | - | - | 497,985 | 497,985 | - | 497,985 | ||||||||||||||||||||||||
Investments
in properties
|
- | - | - | - | 5,650,000 | 5,650,000 | (5,650,000 | ) | - | |||||||||||||||||||||||
Deposits
|
116,201 | 9,213 | 11,523 | 13,887 | 11,000 | 161,824 | - | 161,824 | ||||||||||||||||||||||||
Goodwill
|
443,892 | 360,701 | - | 615,350 | - | 1,419,943 | - | 1,419,943 | ||||||||||||||||||||||||
Other
assets, net of amortization
|
- | 20,000 | 43,333 | 543,333 | 428,343 | 1,035,009 | - | 1,035,009 | ||||||||||||||||||||||||
Total
other assets
|
560,093 | 389,914 | 54,856 | 1,172,570 | 6,587,328 | 8,764,761 | (5,650,000 | ) | 3,114,761 | |||||||||||||||||||||||
Total
assets
|
$ | 5,511,289 | $ | 899,999 | $ | 489,614 | $ | 2,569,999 | $ | 20,252,789 | $ | 29,723,690 | $ | (20,401,973 | ) | $ | 9,321,717 |
*
|
Other
is a combination of Gaming Consultants, Inc.; Mill Creek Gaming, Inc.;
Gaming Management Inc.; Little Nevada II, Inc.;
Little
Nevada III, Inc.; Shoreline Holdings, Inc.; Snohomish Gaming, Inc.; and
Gameco, Inc
|
See
accompanying independent auditors’ report.
17
Gaming
Consultants, Inc. and Affiliates
|
|
Combining
Balance Sheet (continued)
|
December 31,
2009
|
Big
|
Silver Dollar
|
Shoreline
|
Silver Dollar
|
Silver Dollar
|
Golden Nugget
|
Balance
|
||||||||||||||||||||||
Nevada, Inc.
|
Tukwila
|
Gaming, Inc.
|
Mill Creek, Inc.
|
Renton
|
Tukwila, Inc.
|
Carried Forward
|
||||||||||||||||||||||
Liabilities
and Stockholder’s Equity
|
||||||||||||||||||||||||||||
CURRENT
LIABILITIES:
|
||||||||||||||||||||||||||||
Lines
of credit, intercompany
|
$ | - | $ | 492,230 | $ | 1,309,116 | $ | 2,082,165 | $ | 114,651 | $ | - | $ | 3,998,162 | ||||||||||||||
Accounts
payable
|
86,342 | 42,601 | 32,354 | 74,137 | 79,197 | 91,163 | 405,794 | |||||||||||||||||||||
Accrued
expenses:
|
||||||||||||||||||||||||||||
Payroll
|
120,094 | 70,130 | 63,370 | 96,077 | 99,487 | 120,549 | 569,707 | |||||||||||||||||||||
Sales
and business taxes
|
144,846 | 44,304 | (7,803 | ) | 96,674 | 27,575 | 128,308 | 433,904 | ||||||||||||||||||||
Other
accrued expenses
|
(26,763 | ) | 23,988 | (1,795 | ) | 46,222 | 46,245 | (54,512 | ) | 33,385 | ||||||||||||||||||
Deferred
revenue
|
- | - | - | - | - | - | - | |||||||||||||||||||||
Chips
outstanding
|
20,003 | 4,296 | 5,965 | 15,040 | 8,488 | 10,859 | 64,651 | |||||||||||||||||||||
Jackpots
and prizes liabilities
|
198,160 | 3,769 | - | 204,043 | 109,283 | 280,560 | 795,815 | |||||||||||||||||||||
Total
current liabilities
|
542,682 | 681,318 | 1,401,207 | 2,614,358 | 484,926 | 576,927 | 6,301,418 | |||||||||||||||||||||
LONG-TERM
DEBT
|
- | - | - | - | 68,829 | - | 68,829 | |||||||||||||||||||||
Total
liabilities
|
542,682 | 681,318 | 1,401,207 | 2,614,358 | 553,755 | 576,927 | 6,370,247 | |||||||||||||||||||||
COMMITMENTS
AND CONTINGENCIES
|
||||||||||||||||||||||||||||
STOCKHOLDER’S
EQUITY:
|
||||||||||||||||||||||||||||
Capital
|
100 | - | 62,205 | - | - | 2,141,256 | 2,203,561 | |||||||||||||||||||||
Retained
earnings (accumulated deficit)
|
1,006,270 | (409,633 | ) | (1,202,034 | ) | (1,337,732 | ) | 126,793 | (1,246,183 | ) | (3,062,519 | ) | ||||||||||||||||
Total
stockholder’s equity
|
1,006,370 | (409,633 | ) | (1,139,829 | ) | (1,337,732 | ) | 126,793 | 895,073 | (858,958 | ) | |||||||||||||||||
Total
liabilities and stockholder’s equity
|
$ | 1,549,052 | $ | 271,685 | $ | 261,378 | $ | 1,276,626 | $ | 680,548 | $ | 1,472,000 | $ | 5,511,289 |
See
accompanying independent auditors’ report.
18
Gaming
Consultants, Inc. and Affiliates
|
|
Combining
Balance Sheet (continued)
|
December
31,
2009
|
Balance
|
Royal Casino
|
Drift on Inn
|
Hollywood
|
Eliminating
|
||||||||||||||||||||||||||||
Brought Forward
|
Holdings, Inc.
|
Casino Inc.
|
Casino Inc.
|
Other*
|
Subtotal
|
Entries
|
Total
|
|||||||||||||||||||||||||
Liabilities
and Stockholder’s Equity
|
||||||||||||||||||||||||||||||||
CURRENT
LIABILITIES:
|
||||||||||||||||||||||||||||||||
Lines
of credit, intercompany
|
$ | 3,998,162 | $ | 1,436,507 | $ | 3,278,093 | $ | - | $ | 5,814,294 | $ | 4,527,056 | $ | (14,527,056 | ) | $ | - | |||||||||||||||
Accounts
payable
|
405,794 | 87,610 | 104,643 | 140,778 | 228,294 | 967,119 | (169,828 | ) | 797,291 | |||||||||||||||||||||||
Accrued
expenses:
|
||||||||||||||||||||||||||||||||
Payroll
|
569,707 | 112,860 | 93,920 | 156,079 | 68,564 | 1,001,130 | - | 1,001,130 | ||||||||||||||||||||||||
Sales
and business taxes
|
433,904 | 116,229 | 63,976 | 151,347 | 27,693 | 793,149 | - | 793,149 | ||||||||||||||||||||||||
Other
accrued expenses
|
33,385 | 12,490 | 38,768 | 7,413 | 160,755 | 252,811 | - | 252,811 | ||||||||||||||||||||||||
Deferred
revenue
|
- | - | - | - | 59,721 | 59,721 | (55,089 | ) | 4,632 | |||||||||||||||||||||||
Chips
outstanding
|
64,651 | 9,714 | 2,284 | 32,408 | - | 109,057 | - | 109,057 | ||||||||||||||||||||||||
Jackpots
and prizes liabilities
|
795,815 | 74,085 | 7,588 | 193,072 | - | 1,070,560 | - | 1,070,560 | ||||||||||||||||||||||||
Total
current liabilities
|
6,301,418 | 1,849,495 | 3,589,272 | 681,097 | 6,359,321 | 18,780,603 | (14,751,973 | ) | 4,028,630 | |||||||||||||||||||||||
LONG-TERM
DEBT
|
68,829 | - | - | - | 439,496 | 508,325 | - | 508,325 | ||||||||||||||||||||||||
Total
liabilities
|
6,370,247 | 1,849,495 | 3,589,272 | 681,097 | 6,798,817 | 19,288,928 | (14,751,973 | ) | 4,536,955 | |||||||||||||||||||||||
COMMITMENTS
AND CONTINGENCIES
|
||||||||||||||||||||||||||||||||
STOCKHOLDER’S
EQUITY:
|
||||||||||||||||||||||||||||||||
Capital
|
2,203,561 | - | 1,050,000 | 4,600,000 | 30,903,635 | 38,757,196 | (5,650,000 | ) | 33,107,196 | |||||||||||||||||||||||
Retained
earnings (accumulated deficit)
|
(3,062,519 | ) | (949,496 | ) | (4,149,658 | ) | (2,711,098 | ) | (17,449,663 | ) | (28,322,434 | ) | - | (28,322,434 | ) | |||||||||||||||||
Total
stockholder’s equity
|
(858,958 | ) | (949,496 | ) | (3,099,658 | ) | 1,888,902 | 13,453,972 | 10,434,762 | (5,650,000 | ) | 4,784,762 | ||||||||||||||||||||
Total
liabilities and stockholder’s equity
|
$ | 5,511,289 | $ | 899,999 | $ | 489,614 | $ | 2,569,999 | $ | 20,252,789 | $ | 29,723,690 | $ | (20,401,973 | ) | $ | 9,321,717 |
*
|
Other
is a combination of Gaming Consultants, Inc.; Mill Creek Gaming, Inc.;
Gaming Management Inc.; Little Nevada II,
Inc.;
|
Little
Nevada III, Inc.; Shoreline Holdings, Inc.; Snohomish Gaming, Inc.; and Gameco,
Inc.
See
accompanying independent auditors’ report.
19
Gaming
Consultants, Inc. and Affiliates
|
|
Combining
Statement of Income
|
Year Ended December 31,
2009
|
Big
|
|
Shoreline
|
Silver Dollar
|
Silver
|
Golden
|
|
|
|||||||||||||||||||||||||
Nevada,
Inc. |
Silver Dollar Tukwila |
Gaming,
Inc. |
Mill Creek,
Inc. |
Dollar
Renton |
Nugget
Tukwila, Inc. |
Royal Casino Holdings, Inc. |
Balance
Carried Forward |
|||||||||||||||||||||||||
REVENUE:
|
||||||||||||||||||||||||||||||||
Gaming
operations
|
$ | 4,876,841 | $ | 1,727,986 | $ | 1,893,591 | $ | 4,049,947 | $ | 3,625,627 | $ | 4,244,132 | $ | 3,978,944 | $ | 24,397,068 | ||||||||||||||||
Food
and beverage
|
1,266,074 | 354,979 | 210,662 | 860,842 | 922,874 | 1,199,963 | 1,000,635 | 5,816,029 | ||||||||||||||||||||||||
Pull
tabs
|
51,568 | 69,380 | 57,585 | 120,655 | 73,529 | 91,119 | 289,228 | 753,064 | ||||||||||||||||||||||||
Other
|
107,758 | 37,304 | 34,805 | 115,998 | 214,853 | 81,517 | 106,181 | 698,416 | ||||||||||||||||||||||||
6,302,241 | 2,189,649 | 2,196,643 | 5,147,442 | 4,836,883 | 5,616,731 | 5,374,988 | 31,664,577 | |||||||||||||||||||||||||
Less
promotional allowances
|
484,585 | 180,258 | 121,184 | 429,940 | 502,723 | 642,819 | 521,741 | 2,883,250 | ||||||||||||||||||||||||
NET
REVENUE
|
5,817,656 | 2,009,391 | 2,075,459 | 4,717,502 | 4,334,160 | 4,973,912 | 4,853,247 | 28,781,327 | ||||||||||||||||||||||||
EXPENSES:
|
||||||||||||||||||||||||||||||||
Operating
costs
|
3,003,839 | 1,748,605 | 1,556,302 | 2,655,642 | 2,732,450 | 3,114,042 | 3,055,139 | 17,866,019 | ||||||||||||||||||||||||
Selling,
general, and administrative
|
1,346,938 | 631,604 | 687,195 | 1,366,542 | 1,428,347 | 1,068,358 | 1,337,927 | 7,866,911 | ||||||||||||||||||||||||
Depreciation
and amortization
|
71,024 | 47,028 | 25,818 | 141,043 | 59,368 | 42,260 | 72,580 | 459,121 | ||||||||||||||||||||||||
Total
expenses
|
4,421,801 | 2,427,237 | 2,269,315 | 4,163,227 | 4,220,165 | 4,224,660 | 4,465,646 | 26,192,051 | ||||||||||||||||||||||||
INCOME
(LOSS) FROM OPERATIONS
|
1,395,855 | (417,846 | ) | (193,856 | ) | 554,275 | 113,995 | 749,252 | 387,601 | 2,589,276 | ||||||||||||||||||||||
OTHER
INCOME (EXPENSE):
|
||||||||||||||||||||||||||||||||
Interest
income
|
1,166 | - | - | - | - | 695 | - | 1,861 | ||||||||||||||||||||||||
Other
income (expense)
|
- | (22,750 | ) | (40,000 | ) | (1,429,591 | ) | - | (2,516,431 | ) | (1,459,981 | ) | (5,468,753 | ) | ||||||||||||||||||
Interest
expense
|
(1,518 | ) | (19,663 | ) | (110,511 | ) | (226,468 | ) | (10,679 | ) | (1,409 | ) | (157,817 | ) | (528,065 | ) | ||||||||||||||||
Loss
on fixed asset disposal
|
- | - | - | (167 | ) | - | - | - | (167 | ) | ||||||||||||||||||||||
Total
other income (expense)
|
(352 | ) | (42,413 | ) | (150,511 | ) | (1,656,226 | ) | (10,679 | ) | (2,517,145 | ) | (1,617,798 | ) | (5,995,124 | ) | ||||||||||||||||
INCOME
(LOSS) BEFORE INCOME TAXES
|
1,395,503 | (460,259 | ) | (344,367 | ) | (1,101,951 | ) | 103,316 | (1,767,893 | ) | (1,230,197 | ) | (3,405,848 | ) | ||||||||||||||||||
PROVISION
(BENEFIT)
|
||||||||||||||||||||||||||||||||
FOR
INCOME TAXES
|
(70,000 | ) | (27,000 | ) | (3,900 | ) | (230,000 | ) | (22,000 | ) | (279,000 | ) | (121,000 | ) | (752,900 | ) | ||||||||||||||||
NET
INCOME (LOSS)
|
$ | 1,465,503 | $ | (433,259 | ) | $ | (340,467 | ) | $ | (871,951 | ) | $ | 125,316 | $ | (1,488,893 | ) | $ | (1,109,197 | ) | $ | (2,652,948 | ) |
See
accompanying independent auditors’ report.
20
Gaming
Consultants, Inc. and Affiliates
|
|
Combining
Statement of Income (continued)
|
Year
Ended December 31,
2009
|
Balance
|
Drift on Inn
|
Hollywood
|
Eliminating
|
|||||||||||||||||||||||||
Brought Forward
|
Casino Inc.
|
Casino Inc.
|
Other*
|
Subtotal
|
Entries
|
Total
|
||||||||||||||||||||||
REVENUE:
|
||||||||||||||||||||||||||||
Gaming
operations
|
$ | 24,397,068 | $ | 1,546,446 | $ | 6,373,584 | $ | - | $ | 32,317,098 | $ | - | $ | 32,317,098 | ||||||||||||||
Food
and beverage
|
5,816,029 | 1,080,691 | 1,625,188 | - | 8,521,908 | - | 8,521,908 | |||||||||||||||||||||
Pull
tabs
|
753,064 | 142,880 | - | - | 895,944 | - | 895,944 | |||||||||||||||||||||
Other
|
698,416 | 190,979 | 118,222 | 514,914 | 1,522,531 | (397,800 | ) | 1,124,731 | ||||||||||||||||||||
31,664,577 | 2,960,996 | 8,116,994 | 514,914 | 43,257,481 | (397,800 | ) | 42,859,681 | |||||||||||||||||||||
Less
promotional allowances
|
2,883,250 | 384,409 | 981,537 | - | 4,249,196 | - | 4,249,196 | |||||||||||||||||||||
NET
REVENUE
|
28,781,327 | 2,576,587 | 7,135,457 | 514,914 | 39,008,285 | (397,800 | ) | 38,610,485 | ||||||||||||||||||||
EXPENSES:
|
||||||||||||||||||||||||||||
Operating
costs
|
17,866,019 | 2,306,437 | 3,909,194 | 1,991,099 | 26,072,749 | (188,725 | ) | 25,884,024 | ||||||||||||||||||||
Selling,
general, and administrative
|
7,866,911 | 1,015,934 | 2,243,850 | (306,613 | ) | 10,820,082 | (209,075 | ) | 10,611,007 | |||||||||||||||||||
Depreciation
and amortization
|
459,121 | 93,231 | 141,811 | 155,056 | 849,219 | - | 849,219 | |||||||||||||||||||||
Total
expenses
|
26,192,051 | 3,415,602 | 6,294,855 | 1,839,542 | 37,742,050 | (397,800 | ) | 37,344,250 | ||||||||||||||||||||
INCOME
(LOSS) FROM OPERATIONS
|
2,589,276 | (839,015 | ) | 840,602 | (1,324,628 | ) | 1,266,235 | - | 1,266,235 | |||||||||||||||||||
OTHER
INCOME (EXPENSE):
|
||||||||||||||||||||||||||||
Interest
income
|
1,861 | - | 720 | 1,457,391 | 1,459,972 | (994,276 | ) | 465,696 | ||||||||||||||||||||
Other
income (expense)
|
(5,468,753 | ) | (2,768,700 | ) | (2,896,650 | ) | (4,436,418 | ) | (15,570,521 | ) | - | (15,570,521 | ) | |||||||||||||||
Interest
expense
|
(528,065 | ) | (286,871 | ) | (3,474 | ) | (452,414 | ) | (1,270,824 | ) | 994,276 | (276,548 | ) | |||||||||||||||
Loss
on fixed asset disposal
|
(167 | ) | - | - | 1 | (166 | ) | - | (166 | ) | ||||||||||||||||||
Total
other income (expense)
|
(5,995,124 | ) | (3,055,571 | ) | (2,899,404 | ) | (3,431,440 | ) | (15,381,539 | ) | - | (15,381,539 | ) | |||||||||||||||
INCOME
(LOSS) BEFORE INCOME TAXES
|
(3,405,848 | ) | (3,894,586 | ) | (2,058,802 | ) | (4,756,068 | ) | (14,115,304 | ) | - | (14,115,304 | ) | |||||||||||||||
PROVISION
(BENEFIT) FOR INCOME TAXES
|
(752,900 | ) | (64,000 | ) | 168,000 | 723,568 | 74,668 | - | 74,668 | |||||||||||||||||||
NET
INCOME (LOSS)
|
$ | (2,652,948 | ) | $ | (3,830,586 | ) | $ | (2,226,802 | ) | $ | (5,479,636 | ) | $ | (14,189,972 | ) | $ | - | $ | (14,189,972 | ) |
*
|
Other
is a combination of Gaming Consultants, Inc.; Mill Creek Gaming, Inc.;
Gaming Management Inc.; Little Nevada II,
Inc.;
|
Little
Nevada III, Inc.; Shoreline Holdings, Inc.; Snohomish Gaming, Inc.; and Gameco,
Inc.
See
accompanying independent auditors’ report.
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