September 23, 2011
Via Fax & Email
Securities and Exchange Commission
Washington, DC 20546
| Re: | Nevada Gold & Casinos, Inc |
Form 10-K for fiscal year ended April 30, 2010
Filed July 29, 2010
File No. 001-15517
Attn: Linda Cvrkel
Dear Ms. Cvrkel:
This is in response to your comment letter dated July 28, 2011 regarding the Form 8-K/A filed by our company on September 15, 2010. In summary, we have filed a Form 8-K/A to include the name and signature of the independent auditor and the changes in format of the pro-formas requested by your Division of Corporation Finance Office of Chief Accountant. Below is a recap of how this evolved.
Please feel free to contact me at (713) 621-2245 if you have any questions.
Form 8-K filed September 15, 2010
SEC Comment:
| 1. | We note from your responses to our prior comments 14 and 15 that the results of the income test for the year ended December 31, 2009 indicate that two years of audited financial statements should be filed. You also indicate that you will request a waiver as you are unable to obtain two years of appropriate financials for the revised form 8-K/A. Please note that any exception requests to the requirements of Rule 8-04 of Regulation S-X must be made directly to the Division of Corporation Finance Office of Chief Accountant. Please file your revised Form 8-K/A to include the appropriate audited financial statements or file a request for waiver of such financial statements as soon as possible. Also, as previously indicated in our prior comment 5, these audited financial statements should include only the acquired businesses and exclude the continuing operations retained by the larger entity. Please ensure your revised Form 8-K/A includes a note explaining how the April 30, 2010 financial statements were prepared or calculated. |
Additionally, when this revised Form 8-K/A is filed, please include the name and electronic signature of the independent auditor’s report. Please file this report as soon as possible.
Response:
As directed by the SEC, we sent an exception request to the Division of Corporation Finance Office of Chief Accountant (“DCF” or “Staff”) on August 3, 2011. Approximately two weeks later we received a telephone response from the Associate Chief Accountant of the DCF. She provided further guidance regarding the appropriate content of our request and we re-submitted a letter on September 1, 2011 requesting they accept our request for waiver. On September 1, 2011 we wrote to the Division of Corporation Finance Office of Chief Accountant (“DCF” or “Staff”) requesting they accept one year of audited pre-acquisition financial statements for the acquired card room operations and the audited post-acquisition financial statements of the card rooms included in our audited financial statements for the year ended April 30, 2011, to satisfy the requirements of Rule S-X Rule 3-05 in our SEC filing. We received the attached response dated September 13, 2011 from the DCF. Although their response states “the Staff is unable to waive the requirements of Rule S-X Rule 3-05 to provide two years of pre-acquisition historical financial statements for the acquired card rooms in the Form 8-K” they did state “For purposes of the S-3 only we would not object to your request that the Staff accept one year of audited pre-acquisition financial statements for the acquired card room operations and the audited post-acquisition financial statements of the card rooms included in the Company’s audited financial statements for the year ended April 30, 2011, to satisfy the requirements of Rule S-X Rule 3-05.” In addition, the Staff provided specific instructions of how we are to present the pro-forma financial statements in the Company’s Form 8-K/A (see attached letter dated September 13, 2011).
On September 14, 2011 we filed Form 8-K/A, Amendment No. 2, (see attached). As requested per your letter dated July 28, 2011, and the instructions given by the DCF in their letter dated September 13, 2011. The 8-K/A, Amendment No. 2, incorporates a paragraph stating how the April 30, 2010, pro-forma financial statements were prepared, the electronic signature of LeMaster Daniels, PLLC, on the independent auditor’s report, and we added a column to the pro-forma financial information to eliminate the operation of the three card rooms that we did not acquire.
We filed a Form S-3 on September 15, 2011 after being advised by the DCF that for purposes of the S-3 only they would not object to our request that the Staff accept one year of audited pre-acquisition financial statements for the acquired card room operations and the audited post-acquisition financial statements of the card rooms included in the Company’s audited financial statements for the year ended April 30, 2011, to satisfy the requirements of Rule S-X Rule 3-05.
Please acknowledge that filing of the Form 8-K/A Amendment No. 2 completes our response to your SEC letter dated July 28, 2011, and there are no remaining open items in regards to File No. 001-15517.
The Company acknowledges that:
| · | the Company is responsible for the adequacy and accuracy in the disclosure of the filing; |
| · | staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and |
| · | the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. |
| Sincerely, | |
| James J. Kohn | |
| Chief Financial Officer | |
| Nevada Gold and Casinos, Inc. | |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Amendment No. 2
CURRENT REPORT
Pursuant To Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
July 23, 2010
NEVADA GOLD & CASINOS, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 1-15517 | 88-0142032 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
50 Briar Hollow Lane, Suite 500W | 77027 | |
| (Address of principal executive offices) | (Zip Code) |
(713) 621-2245
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.01. Completion of Acquisition
On July 29, 2010, Nevada Gold & Casinos, Inc. (the “Company”) filed a Current Report on Form 8-K (the “Current Report”) announcing that, on July 23, 2010, the Company’s wholly-owned subsidiary, NG Washington II, LLC, completed the acquisition (the “Acquisition”) of six mini-casinos located in western Washington State, namely, the Silver Dollar Casino in SeaTac, Silver Dollar Casino in Renton, Silver Dollar Casino in Bothell, Club Hollywood Casino in Shoreline, Royal Casino in Everett and Golden Nugget Casino in Tukwila. On September 15, 2010, the Company filed the financial statements and pro-forma information required by Item 9.01 by filing an amendment to the Current Report (“Amendment No. 1”). The purpose of this Amendment No. 2 to the Current Report is to amend Amendment No. 1 solely in order to include (1) the name and electronic signature of the independent auditor of the acquired assets on the independent auditor’s report page which was inadvertently omitted in Amendment No. 1 and (2) in the pro-forma financial statements, filed as Exhibit 99.3 to Amendment No. 1, additional columns to eliminate the result of operations of the three card rooms not acquired by NG Washington II, LLC but which were included in the December 31, 2009 audited financial statements of Gaming Consultants, Inc. and Affiliates (“GCI”).
The audited financial statements of GCI included in this Amendment No. 2 to the Current Report as Exhibit 99.2 include the financial position and results of operations of three casinos not acquired by NG Washington II, LLC. The unaudited pro-forma balance sheet as of the fiscal year ended April 30, 2010 gives effect to the Acquisition as if it had occurred on April 30, 2010 and is derived by combining the individual unaudited balance sheets of the casinos acquired with the audited balance sheet of the Company as of April 30, 2010. The unaudited pro forma statement of operations for the fiscal year ended April 30, 2010 gives effect to the Acquisition as if it occurred on May 1, 2009 and is derived by combining the individual unaudited monthly statements of operations of the six casinos acquired for the period of May 1, 2009 through December 31, 2009 with the individual unaudited statements of operations of the six casinos acquired for the period of January 1, 2010 through April 30, 2010, along with the audited statement of operations of the Company for the year ended April 30, 2010.
(a) Financial Statements of Businesses Acquired
The following financial statements are attached hereto as Exhibit 99.2 and incorporated herein by reference:
| • | Independent Auditors’ Report |
| • | Combined Balance Sheet of Gaming Consultants, Inc. and its Affiliates for the year ended December 31, 2009 |
| • | Combined Statement of Income of Gaming Consultants, Inc. and its Affiliates for the year ended December 31, 2009 |
| • | Combined Statement of Stockholder’s Equity of Gaming Consultants, Inc. and its Affiliates for the year ended December 31, 2009 |
| • | Combined Statement of Cash Flows of Gaming Consultants, Inc. and its Affiliates for the year ended December 31, 2009 |
| • | Notes to Combined Financial Statements of Gaming Consultants, Inc. and its Affiliates for the year ended December 31, 2009 |
(b) Unaudited Pro Forma Financial Information
The following pro forma financial information is attached hereto as Exhibit 99.3 and incorporated herein by reference.
| • | Unaudited Pro Forma Balance Sheet as of the fiscal year April 30, 2010 |
| • | Unaudited Pro Forma Statement of Operations for the fiscal year ended April 30, 2010 |
(d) Exhibits
| 2.1(a)* | 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. |
| 2.1(b)** | 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. |
| Consent of LeMaster Daniels PLLC | |
| 99.1*** | Press Release dated July 26, 2010 reporting the completion of the Acquisition |
| 99.2 | Financial Statements listed in Item 9.01(a) |
| 99.3 | Unaudited Pro Forma Financial Information listed in Item 9.01(b) |
| * | Incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed with the Securities and Exchange Commission on April 14, 2010. |
| ** | Incorporated by reference from Exhibit 10.15 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2010. |
| *** | Previously furnished as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2010. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned who is duly authorized.
| NEVADA GOLD & CASINOS, INC. | ||
| Date: September 14, 2011 | By: | /s/ James J. Kohn |
| James J. Kohn | ||
| Executive Vice President and CFO | ||
| Exhibit | |
| 2.1(a)* | 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. |
| 2.1(b)** | 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. |
| 23.1 | Consent of LeMaster Daniels PLLC |
| 99.1*** | Press Release dated July 26, 2010 reporting the completion of the Acquisition |
| 99.2 | Financial Statements listed in Item 9.01(a) |
| 99.3 | Unaudited Pro Forma Financial Information listed in Item 9.01(b) |
| * | Incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed with the Securities and Exchange Commission on April 14, 2010. |
| ** | Incorporated by reference from Exhibit 10.15 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2010. |
| *** | Previously furnished as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2010. |
Exhibit 23.1
We consent to the incorporation of our reports, dated June 25, 2010, with respect to the financial statements of Gaming Consultants, Inc. and Affiliates, as of December 31, 2009, included in this Current Report on Form 8-K/A of Nevada Gold & Casinos, Inc. dated September 15, 2010.
/s/ LEMASTER DANIELS PLLC
Yakima, Washington
September 15, 2010
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.
/s/ LeMaster & Daniels PLLC
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. |
15
| 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. |
16
| 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. |
17
| 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. |
18
| 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. |
19
| 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. |
20
Exhibit 99.3
| Nevada Gold & Casinos, Inc. |
| Pro-forma Balance Sheet as of the Fiscal Year Ended April 30, 2010 |
Nevada Gold as reported in Form 10-K | Consolidated Silver Dollar Casinos reported at April 30, 2010 (unaudited) | Silver Dollar Pro-forma Adjustments to elim assets not acquired | Acquired Silver Dollar Casinos at April 30, 2010 (unaudited) | Pro-forma Adjustments | Pro-forma Balance Sheet | |||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||
| Current assets: | ||||||||||||||||||||||||
| Cash and cash equivalents | $ | 3,155,736 | $ | 2,026,970 | (72,766 | ) | 1,954,204 | $ | - | $ | 5,109,940 | |||||||||||||
| Restricted cash | 5,266,938 | - | (5,000,000 | ) | 266,938 | |||||||||||||||||||
| Accounts receivable | 66,822 | 207,861 | (207,861 | ) | - | 66,822 | ||||||||||||||||||
| Prepaid expenses | 475,262 | 145,663 | (147,143 | ) | (1,480 | ) | - | 473,782 | ||||||||||||||||
| Income tax receivable | 1,750,374 | - | - | 1,750,374 | ||||||||||||||||||||
| Other current assets | 155,796 | 196,028 | (34,460 | ) | 161,568 | 70,000 | 387,364 | |||||||||||||||||
| Total current assets | 10,870,928 | 2,576,522 | (462,230 | ) | 2,114,292 | (4,930,000 | ) | 8,055,220 | ||||||||||||||||
| Investments in development projects | 1,418,789 | (1,273,649 | ) | 145,140 | ||||||||||||||||||||
| Investments in development projects held for sale | 3,437,932 | 3,437,932 | ||||||||||||||||||||||
| Notes receivable | - | 497,985 | (497,985 | ) | - | - | ||||||||||||||||||
| Notes receivable - development projects, net of allowances | 1,700,000 | 1,700,000 | ||||||||||||||||||||||
| Goodwill | 10,243,362 | 1,419,943 | (1,419,943 | ) | - | 3,993,643 | 14,237,005 | |||||||||||||||||
| Identifiable intangiable assets , net of accumulated amortization of $1,025,300 at April 30, 2010 | 5,101,800 | 3,382,851 | 8,484,651 | |||||||||||||||||||||
| Property and equipment, net of accumulated depreciation | - | |||||||||||||||||||||||
| of $2,978,679 at April 30, 2010 | 3,473,051 | 2,056,483 | (167,620 | ) | 1,888,863 | 5,361,914 | ||||||||||||||||||
| Deferred tax asset | 1,848,419 | 419,900 | (419,900 | ) | - | 1,848,419 | ||||||||||||||||||
| BVO receivable | 4,000,000 | 4,000,000 | ||||||||||||||||||||||
| Other assets | 376,938 | 1,173,177 | (1,173,177 | ) | - | 376,938 | ||||||||||||||||||
| Total assets | $ | 42,471,219 | $ | 8,144,011 | $ | (4,140,855 | ) | $ | 4,003,155 | $ | 1,172,845 | $ | 47,647,219 | |||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||
| Current liabilities: | ||||||||||||||||||||||||
| Accounts payable and accrued liabilities | $ | 1,060,017 | $ | 1,941,361 | (1,835,361 | ) | 106,000 | $ | 1,166,017 | |||||||||||||||
| Accrued interest payable | 70,000 | 39,423 | (39,423 | ) | - | 70,000 | ||||||||||||||||||
| Other accrued liabilities | 687,819 | 1,050,670 | (1,050,670 | ) | - | 687,819 | ||||||||||||||||||
| Taxes payable | - | 340,432 | (340,432 | ) | - | - | ||||||||||||||||||
| Long-term debt, current portion | - | |||||||||||||||||||||||
| Total current liabilities | 1,817,836 | 3,371,886 | (3,265,886 | ) | 106,000 | - | 1,923,836 | |||||||||||||||||
| Long-term debt, net of current portion | 10,000,000 | 508,325 | (508,325 | ) | - | 5,070,000 | 15,070,000 | |||||||||||||||||
| Other liabilities | 30,944 | (0 | ) | - | (0 | ) | 30,944 | |||||||||||||||||
| Total liabilities | 11,848,780 | 3,880,212 | (3,774,211 | ) | 106,000 | 5,070,000 | 17,024,780 | |||||||||||||||||
| 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 and 12,939,130 shares outstanding at | ||||||||||||||||||||||||
| April 30, 2010, and April 30, 2009, respectively | 1,672,240 | - | - | - | - | 1,672,240 | ||||||||||||||||||
| Additional paid-in capital | 19,859,966 | 33,107,196 | (33,107,196 | ) | - | 19,859,966 | ||||||||||||||||||
| Dividends | - | (130,000 | ) | 130,000 | - | - | - | |||||||||||||||||
| Retained earnings | 19,464,972 | (28,713,397 | ) | 32,610,553 | 3,897,155 | (3,897,155 | ) | 19,464,972 | ||||||||||||||||
| Treasury stock, 1,171,200 and 996,200 shares at April 30, 2010 and April 30, 2009, respectively, at cost | (10,369,200 | ) | - | - | - | - | (10,369,200 | ) | ||||||||||||||||
| Accumulated other comprehensive income | (5,539 | ) | - | - | - | - | (5,539 | ) | ||||||||||||||||
| Total stockholders' equity | 30,622,439 | 4,263,799 | (366,644 | ) | 3,897,155 | (3,897,155 | ) | 30,622,439 | ||||||||||||||||
| Total liabilities and stockholders' equity | $ | 42,471,219 | $ | 8,144,011 | $ | (4,140,854 | ) | $ | 4,003,155 | $ | 1,172,845 | $ | 47,647,219 | |||||||||||
Nevada Gold & Casinos, Inc.
Pro-forma Statement of Operations for the Fiscal Year Ended April 30, 2010
Nevada Gold as reported in Form 10-K | Consolidated Silver Dollar Casinos reported for the year ended April 30, 2010 (unaudited) | Silver Dollar Pro-forma Adjustments to elim assets not acquired | Operating Results of the acquired Silver Dollar Casinos for the twelve months ended April 30, 2010 (unaudited) | Pro-forma Adjustments | Pro-forma Statement of Operations | |||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||
| Casino | $ | 18,822,900 | $ | 30,907,006 | (4,510,724 | ) | 26,396,282 | $ | - | $ | 45,219,182 | |||||||||||||
| Food and beverage | 4,534,744 | 8,846,188 | (1,682,367 | ) | 7,163,821 | - | 11,698,565 | |||||||||||||||||
| Other | 865,264 | 1,901,071 | (522,447 | ) | 1,378,624 | - | 2,243,888 | |||||||||||||||||
| Management fees | 620,968 | - | - | - | 620,968 | |||||||||||||||||||
| Gross revenues | 24,843,876 | 41,654,265 | (6,715,538 | ) | 34,938,727 | - | 59,782,603 | |||||||||||||||||
| Less promotional allowances | (2,817,888 | ) | (4,653,560 | ) | 748,125 | (3,905,435 | ) | (6,723,323 | ) | |||||||||||||||
| Net revenues | 22,025,988 | 37,000,705 | (5,967,413 | ) | 31,033,292 | - | 53,059,280 | |||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Casino | 8,562,284 | 21,102,219 | (4,535,594 | ) | 16,566,625 | - | 25,128,909 | |||||||||||||||||
| Food and beverage | 2,851,635 | 7,370,536 | (1,657,335 | ) | 5,713,201 | - | 8,564,836 | |||||||||||||||||
| Marketing and administrative | 5,564,288 | 813,348 | (211,685 | ) | 601,663 | - | 6,165,951 | |||||||||||||||||
| Facility | 1,070,933 | 4,091,271 | (1,002,986 | ) | 3,088,285 | 4,159,218 | ||||||||||||||||||
| Corporate expense | 4,216,475 | 2,483,908 | (160,316 | ) | 2,323,592 | - | 6,540,067 | |||||||||||||||||
| Legal expenses | 241,468 | 7,795 | (5,945 | ) | 1,850 | - | 243,318 | |||||||||||||||||
| Depreciation and amortization | 1,344,323 | 795,863 | (155,047 | ) | 640,816 | 2,228,443 | ||||||||||||||||||
| Impairment of assets | 4,347,183 | - | - | 4,347,183 | ||||||||||||||||||||
| Write-off of project development cost | 50,486 | - | - | - | - | 50,486 | ||||||||||||||||||
| Other | 476,395 | 638,964 | (135,934 | ) | 503,030 | - | 979,425 | |||||||||||||||||
| Total operating expenses | 28,725,470 | 37,303,904 | (7,864,842 | ) | 29,439,062 | 296,304 | 58,460,836 | |||||||||||||||||
| Operating income (loss) | (6,699,482 | ) | (303,199 | ) | 1,897,429 | 1,594,230 | (296,304 | ) | (5,401,556 | ) | ||||||||||||||
| Non-operating income (expenses): | ||||||||||||||||||||||||
| Loss from unconsolidated affiliates | - | - | - | - | - | - | ||||||||||||||||||
| Gain (loss) on sale equity investees and assets | 16,511 | (127,821 | ) | 122,648 | (5,173 | ) | - | 11,338 | ||||||||||||||||
| Other non-operating expenses | (15,723,669 | ) | 15,723,669 | - | - | |||||||||||||||||||
| Interest income | 192,708 | 303,767 | (303,767 | ) | - | (10,721 | ) | 181,987 | ||||||||||||||||
| Interest expense | (866,034 | ) | (264,685 | ) | 264,685 | - | (557,700 | ) | (1,423,734 | ) | ||||||||||||||
| Amortization of loan issue costs | (58,972 | ) | - | - | - | - | (58,972 | ) | ||||||||||||||||
| Loss on extinguishment of debt | (128,834 | ) | - | - | - | - | (128,834 | ) | ||||||||||||||||
| Income (loss) before income tax expense (benefit) | (7,544,103 | ) | (16,115,607 | ) | 17,704,664 | 1,589,057 | (864,726 | ) | (6,819,772 | ) | ||||||||||||||
| Income tax expense (benefit) | ||||||||||||||||||||||||
| Current | (1,546,698 | ) | (31,893 | ) | 69,293 | 37,400 | 246,273 | (1,263,025 | ) | |||||||||||||||
| Deferred and change in valuation allowance | (1,248,623 | ) | - | - | - | - | (1,248,623 | ) | ||||||||||||||||
| Total income tax benefit | (2,795,321 | ) | (31,893 | ) | 69,293 | 37,400 | 246,273 | (2,511,648 | ) | |||||||||||||||
| Net income (loss) | $ | (4,748,782 | ) | $ | (16,083,714 | ) | $ | 17,635,371 | $ | 1,551,657 | $ | (1,110,998 | ) | $ | (4,308,123 | ) | ||||||||
| Per share information: | ||||||||||||||||||||||||
| Net income (loss) per common share - basic | $ | (0.37 | ) | $ | (1.25 | ) | $ | 1.37 | $ | 0.12 | $ | (0.09 | ) | $ | (0.33 | ) | ||||||||
| Net income (loss) per common share - diluted | $ | (0.37 | ) | $ | (1.25 | ) | $ | 1.37 | $ | 0.12 | $ | (0.09 | ) | $ | (0.33 | ) | ||||||||
| Basic weighted average number of shares outstanding | 12,878,240 | 12,878,240 | 12,878,240 | 12,878,240 | 12,878,240 | 12,878,240 | ||||||||||||||||||
| Diluted weighted average number of shares outstanding | 12,878,240 | 12,878,240 | 12,878,240 | 12,878,240 | 12,878,240 | 12,878,240 | ||||||||||||||||||
| Nevada Gold & Casinos, Inc. | |||||||||
| Pro-forma Balance Sheet as of the Fiscal Year Ended April 30, 2010 | |||||||||
| Pro-forma adjustments to give effect to the acquisition as if it occurred April 30, 2010 (the last day of fiscal 2010) | |||||||||
| JE #1: Eliminate assets/liabilities not acquired | Debit | Credit | |||||||
| Drift on Inn | |||||||||
| Cash | 14,291 | ||||||||
| Accounts receivable | 14,904 | ||||||||
| Prepaid expenses | 4,097 | ||||||||
| Other current assets | 17,784 | ||||||||
| PPE | 102,436 | ||||||||
| Other assets | 48,190 | ||||||||
| Accounts payable and accrued liabilities | 226,662 | ||||||||
| Other accrued liabilities | 2,376 | ||||||||
| Taxes payable | 64,000 | ||||||||
| Other liabilities | 3,625,179 | ||||||||
| Paid in capital | 1,050,000 | ||||||||
| Retained earnings | 4,766,515 | ||||||||
| Golden Nugget Shoreline | |||||||||
| Cash | 29,203 | ||||||||
| Accounts receivable | 16,526 | ||||||||
| Deferred tax asset | 57,000 | ||||||||
| Other assets | 2,085 | ||||||||
| Accounts payable and accrued liabilities | 44,900 | ||||||||
| Other liabilities | 1,326,182 | ||||||||
| Paid in capital | 62,205 | ||||||||
| Retained earnings | 1,297,079 | ||||||||
| Little Nevada 2 (LN2) | |||||||||
| Accounts payable and accrued liabilities | 17,464 | ||||||||
| Taxes payable | 458,000 | ||||||||
| Other liabilities | 1,158,305 | ||||||||
| Paid in capital | 1,000 | ||||||||
| Retained earnings | 718,769 | ||||||||
| Little Nevada 3 (LN3) | |||||||||
| Accounts payable and accrued liabilities | 27,167 | ||||||||
| Accrued interest payable | 33,255 | ||||||||
| Taxes payable | 253,000 | ||||||||
| Long-term debt, net of current portion | 439,496 | ||||||||
| Other liabilities | 2,293,848 | ||||||||
| Paid in capital | 16,000 | ||||||||
| Retained earnings | 2,556,766 | ||||||||
| SHI | |||||||||
| Cash | 9 | ||||||||
| Other assets | 5,650,000 | ||||||||
| Taxes payable | 1,000 | ||||||||
| Other liabilities | 4,014 | ||||||||
| Paid in capital | 5,650,000 | ||||||||
| Retained earnings | 3,005 | ||||||||
| SNO | |||||||||
| Other liabilities | 172 | ||||||||
| Retained earnings | 172 | ||||||||
| GAI | |||||||||
| Cash | 278 | ||||||||
| Accounts receivable | 2,977 | ||||||||
| Prepaid expenses | 439 | ||||||||
| Accounts payable and accrued liabilities | 520 | ||||||||
| Other liabilities | 19,341 | ||||||||
| Retained earnings | 16,167 | ||||||||
| Silver Dollar Tukwila | |||||||||
| Cash | 87,391 | ||||||||
| Accounts receivable | 7,542 | ||||||||
| Prepaid expenses | 9,735 | ||||||||
| Other current assets | 16,676 | ||||||||
| PPE | 65,184 | ||||||||
| Deffered tax asset | 85,000 | ||||||||
| Other assets | 11,183 | ||||||||
| Accounts payable and accrued liabilities | 139,677 | ||||||||
| Other accrued liabilities | 8,147 | ||||||||
| Taxes payable | 112,000 | ||||||||
| Other liabilities | 710,653 | ||||||||
| Retained earnings | 687,766 | ||||||||
| JE #2: Eliminate assets and liabilities NGWAII is not acquiring from the remaining/acquired Silver Dollar Casinos | |||||||||
| Accounts receivable | 165,912 | None to be acquired | |||||||
| Prepaid expenses | 132,872 | MAS annual fee balance of $1,480 | |||||||
| Notes receivable | 497,985 | None to be acquired | |||||||
| Goodwill | 1,419,943 | None to be acquired | |||||||
| Deferred tax asset | 277,900 | None to be acquired | |||||||
| Other assets | 4,538,281 | None to be acquired | |||||||
| Accounts payable and accrued liabilities | 1,468,771 | $106,000 to be transferred | |||||||
| Accrued interest payable | 6,168 | None to be acquired | |||||||
| Other accrued liabilities | 1,040,147 | None to be acquired | |||||||
| Taxes payable | 876,432 | None to be acquired | |||||||
| Long-term debt, net of current portion | 68,829 | None to be acquired | |||||||
| Other liabilities | 9,137,694 | None to be acquired | |||||||
| Paid in capital | 26,327,991 | None to be acquired | |||||||
| Dividends | 130,000 | None to be acquired | |||||||
| Retained earnings | 18,667,158 | None to be acquired | |||||||
| Goodwill | 3,897,155 | Difference | |||||||
| To give effect to the acquisition as if it occurred April 30, 2010 (last day of fiscal 2010) | |||||||||
| Restricted cash | 5,000,000 | Remaining cash to be paid for acquisition | |||||||
| Long-term debt, net of current protion | 5,070,000 | New credit agreement | |||||||
| Investments in development projects | 1,273,649 | Reclass | |||||||
| Memorabilia inventory | 70,000 | Hollywood Casino memorabilia | |||||||
| Customer relationships | 2,074,131 | Used same % as NGWA acquisition | |||||||
| Trade names | 1,308,720 | Used same % as NGWA acquisition | |||||||
| Retained earnings | 3,897,155 | Eliminate remaining Retained Earnings of Silver Dollar Casinos | |||||||
| Goodwill | 3,993,643 | ||||||||
| Nevada Gold & Casinos, Inc. | |||||||||
| Pro-forma Statement of Operations for the Fiscal Year Ended April 30, 2010 | |||||||||
| Debit | Credit | ||||||||
| Reduce interest income for the use of cash to purchase casinos for one year at 0.18% | |||||||||
| Interest income | 10,800 | ||||||||
| Cash | 10,800 | ||||||||
| To account for interest expense on $5,070,000 long-term debt at 11.0% | |||||||||
| Interest expense | 557,700 | ||||||||
| Cash | 557,700 | ||||||||
| To amortize Customer Relationship intangible asset over 7 years | |||||||||
| Amortization of intangible assets expense | 296,304 | ||||||||
| Accumulated amortization of intangible assets | 296,304 | ||||||||
| To account for interest on $1 million deposit made to acquire casinos for 16 days at 0.18% | |||||||||
| Cash | 79 | ||||||||
| Interest income | 79 | ||||||||
| JE #8: Eliminate operating results of casinos/operating units not acquired | |||||||||
| DOI | |||||||||
| Casino revenues | 1,578,128 | ||||||||
| Food and beverage revenues | 1,110,430 | ||||||||
| Other revenues | 353,985 | ||||||||
| Promotional allowances | 433,885 | ||||||||
| Casino expenses | 1,687,482 | ||||||||
| Food and beverage expenses | 1,000,560 | ||||||||
| Marketing and administrative | 124,591 | ||||||||
| Facility | 516,727 | ||||||||
| Corporate expenses | 75,945 | ||||||||
| Legal expenses | 997 | ||||||||
| Depreciation and amortization | 91,423 | ||||||||
| Other expenses | 83,383 | ||||||||
| Loss on sale of assets | 51,898 | ||||||||
| Interest expense | 313,863 | ||||||||
| Other non-operating expenses | 2,776,225 | ||||||||
| Golden Nugget Shoreline | |||||||||
| Casino revenues | 1,419,669 | ||||||||
| Food and beverage revenues | 173,450 | ||||||||
| Other revenues | 77,145 | ||||||||
| Promotional allowances | 102,058 | ||||||||
| Casino expenses | 1,264,415 | ||||||||
| Food and beverage expenses | 226,125 | ||||||||
| Marketing and administrative | 54,536 | ||||||||
| Facility | 222,074 | ||||||||
| Corporate expenses | 33,221 | ||||||||
| Depreciation and amortization | 21,552 | ||||||||
| Other expenses | 22,269 | ||||||||
| Loss on sale of assets | 70,750 | ||||||||
| Interest expense | 109,609 | ||||||||
| Other non-operating expenses | 45,372 | ||||||||
| Income tax benefit | 69,293 | ||||||||
| Gaming Management, Inc. | |||||||||
| Corporate expenses | 1,252 | ||||||||
| Little Nevada 2 (LN2) | |||||||||
| Other revenues | 500 | ||||||||
| Casino expenses | 5,839 | ||||||||
| Marketing and administrative | 931 | ||||||||
| Facility | 422 | ||||||||
| Interest expense | 73,328 | ||||||||
| Other non-operating expenses | 4,828 | ||||||||
| Little Nevada 3 (LN3) | |||||||||
| Casino expenses | 1,936 | ||||||||
| Legal expenses | 4,948 | ||||||||
| Interest expense | 178,554 | ||||||||
| Other non-operating expenses | 335,907 | ||||||||
| SHI | |||||||||
| Interest expense | 573 | ||||||||
| Silver Dollar Tukwila | |||||||||
| Casino revenues | 1,512,927 | ||||||||
| Food and beverage revenues | 398,487 | ||||||||
| Other revenues | 90,817 | ||||||||
| Promotional allowances | 212,182 | ||||||||
| Casino expenses | 1,591,472 | ||||||||
| Food and beverage expenses | 430,650 | ||||||||
| Marketing and administrative | 31,627 | ||||||||
| Facility | 263,763 | ||||||||
| Corporate expenses | 49,898 | ||||||||
| Depreciation and amortization | 42,072 | ||||||||
| Other expenses | 30,282 | ||||||||
| Interest expense | 36,673 | ||||||||
| Other non-operating expenses | 24,050 | ||||||||
| JE#9: Eliminate non-recurring transactions related to the Receivership/Restructuring and write off of intercompany lines of credit | |||||||||
| Other non-operating expenses SD-Mill Creek | 1,429,591 | ||||||||
| Other non-operating expenses Club Hollywood | 2,896,650 | ||||||||
| Other non-operating expenses Royal Casino | 1,459,981 | ||||||||
| Other non-operating expenses Golden Nugget Tukwila | 2,516,431 | ||||||||
| Other non-operating expenses Gaming Consultants Inc. | 4,916,104 | ||||||||
| JE#10: Eliminate interest income and expense as recorded for acquired operations (including intercompany transctions) | |||||||||
| Interest income | 303,767 | ||||||||
| Interest expense | 446,769 | ||||||||
| Retained earnings | 750,536 | (through change of Stmt of Ops) | |||||||
| To account for Federal income tax at 34% of pro-forma pre-tax operating adjustments | |||||||||
| Income tax receivable | 294,007 | ||||||||
| Income tax expense-current | 294,007 | ||||||||
| To account for Federal income tax at 34% of pre-tax operating results of acquired casinos | |||||||||
| Income tax expense-current | 540,279 | ||||||||
| Income tax receivable | 540,279 | ||||||||