-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QFR63wl5NOQsuaOls4fm1gunyI8HfFD3vh87+tqx8QJtV2VSMbNSrvx2cUemKbTh xq+E4PDA5wzGm5uxwElWHQ== 0000898430-02-003197.txt : 20020815 0000898430-02-003197.hdr.sgml : 20020815 20020815163535 ACCESSION NUMBER: 0000898430-02-003197 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020601 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANDS REGENT CENTRAL INDEX KEY: 0000753899 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880201135 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-14050 FILM NUMBER: 02740071 BUSINESS ADDRESS: STREET 1: 345 N ARLINGTON AVE CITY: RENO STATE: NV ZIP: 89501 BUSINESS PHONE: 7023482210 MAIL ADDRESS: STREET 1: 345 N ARLINGTON AVE CITY: RENO STATE: NV ZIP: 89501 8-K/A 1 d8ka.htm FORM 8-K/A Prepared by R.R. Donnelley Financial -- Form 8-K/A
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM 8-K/A
 
CURRENT REPORT
 
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
June 1, 2002
Date of Report (Date of earliest event reported)
 
 
THE SANDS REGENT
 
(Exact name of registrant as specified in its charter)
 
Nevada
   
0-14050
   
88-0201135
(State or other Jurisdiction
of Incorporation)
   
(Commission File Number)
   
(IRS Employer
Identification Number)
345 Arlington Ave. Reno, Nevada
(Address of principal
executive offices)
        
89501
(Zip Code)
 
(775) 348-2200
(Registrant’s telephone number, including area code)
 
N/A
(Former Name or Former Address, if Changed Since Last Report)

 
On June 1, 2002, Last Chance, Inc., a Nevada corporation and wholly-owned subsidiary of The Sands Regent, a Nevada corporation (“Last Chance”), completed the acquisition of certain assets (the “Acquired Assets”) of Prospector Gaming Enterprises, Inc., a Nevada corporation (“PGE”), pursuant to an Asset Purchase Agreement, dated as of December 27, 2001 (the “Purchase Agreement”). Further, the member’s interest in California Prospectors, Ltd., a Nevada limited liability company (“California Prospectors”), was also acquired by Last Chance pursuant to the Member’s Interest Purchase and Sale Agreement, dated as of December 27, 2001. This transaction was initially reported on a Current Report on Form 8-K (the “8-K”) dated June 1, 2002. By this Current Report on Form 8-K/A, the Company is updating the 8-K to include financial statements and pro forma financial information for PGE and PGE and California Prospectors, combined.
 
Item 7.    Financial Statements, Pro Forma Financial Information and Exhibits.
 
 
(a)
 
Financial statements of business acquired.
 
 
(i)
 
Unaudited Combined Financial Statements of PGE and California Prospectors as of March 31, 2002 and for the nine month periods ended March 31, 2001 and 2002 and for PGE (not combined with California Prospectors) as of June 30, 2001
 
 
(ii)
 
Financial Statements of PGE as of and for the years ended June 30, 2001 and 2000
 
 
(b)
 
Pro forma financial information.
 
 
(i)
 
Unaudited Pro forma Consolidated Financial Statements as of and for the nine month period ended March 31, 2002
 
 
(ii)
 
Unaudited Pro forma Consolidated Statement of Operations for the year ended June 30, 2001
 
 
(c)
 
Exhibits. See Exhibit Index.

1

PROSPECTOR GAMING ENTERPRISES, INC. AND CALIFORNIA PROSPECTORS, LTD.
 
COMBINED STATEMENTS OF OPERATIONS (Unaudited)
 
    
NINE MONTHS
ENDED MARCH 31
  
(Dollars in thousands)
   
2001
     
2002
  
Operating revenues:
                  
Gaming
   
$
3,523
 
   
$
4,135
 
Fuel and convenience store
   
 
11,439
 
   
 
9,967
 
RV park
   
 
—  
 
   
 
107
 
Food and beverage
   
 
1,043
 
   
 
1,199
 
Other
   
 
153
 
   
 
157
 
    
  
    
 
16,158
 
   
 
15,565
 
Less complimentary lodging, food
    and beverage included above
   
 
286
 
   
 
364
 
    
  
    
 
15,872
 
   
 
15,201
 
    
  
Operating costs and expenses:
                  
Gaming
   
 
990
 
   
 
1,099
 
Fuel and convenience store
   
 
10,982
 
   
 
9,370
 
RV park
   
 
11
 
   
 
153
 
Food and beverage
   
 
1,053
 
   
 
1,151
 
Other
                  
Maintenance and utilities
   
 
425
 
   
 
450
 
General and administrative
   
 
707
 
   
 
815
 
Depreciation and amortization
   
 
602
 
   
 
533
 
    
  
    
 
14,770
 
   
 
13,571
 
    
  
Income from operations
   
 
1,102
 
   
 
1,630
 
    
  
Other income (deductions) :
                  
Interest and other expense
   
 
(497
)
   
 
(464
)
Gain (loss) on disposition of
    property and equipment
   
 
(15
)
   
 
(1
)
    
  
    
 
(512
)
   
 
(465
)
    
  
Net income
   
$
590
 
   
$
1,165
 
    
  
 
See notes to unaudited combined financial statements

 
PROSPECTOR GAMING ENTERPRISES, INC. AND CALIFORNIA PROSPECTORS, LTD.
 
BALANCE SHEETS
 
(Dollars in thousands)
     
(Uncombined)
PGE
JUNE 30,
2001
     
(Combined) (Unaudited)
MARCH 31,
2002
  
ASSETS
                    
CURRENT ASSETS:
                    
Cash and cash equivalents
     
$
323
 
   
$
652
 
Accounts receivable
     
 
85
 
   
 
218
 
Inventories
     
 
186
 
   
 
194
 
Prepaid expenses and other assets
     
 
227
 
   
 
158
 
      
  
Total current assets
     
 
821
 
   
 
1,222
 
      
  
PROPERTY AND EQUIPMENT:
                    
Land
     
 
262
 
   
 
262
 
Building and land improvements
     
 
6,049
 
   
 
6,082
 
Equipment, furniture and fixtures
     
 
4,469
 
   
 
4,578
 
      
  
      
 
10,780
 
   
 
10,922
 
Less accumulated depreciation
    and amortization
     
 
(3,695
)
   
 
(4,225
)
      
  
Property and equipment, net
     
 
7,085
 
   
 
6,697
 
      
  
OTHER ASSETS
                    
Due from shareholders
     
 
683
 
   
 
981
 
Other
     
 
114
 
   
 
117
 
      
  
Total other assets
     
 
797
 
   
 
1,098
 
      
  
Total assets
     
$
8,703
 
   
$
9,017
 
      
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                    
CURRENT LIABILITIES:
                    
Bank overdraft
     
$
68
 
   
$
—  
 
Accounts payable
     
 
189
 
   
 
420
 
Other accrued expenses
     
 
201
 
   
 
151
 
Current maturities of long-term debt
     
 
290
 
   
 
63
 
      
  
Total current liabilities
     
 
748
 
   
 
634
 
      
  
LONG TERM DEBT
     
 
6,738
 
   
 
5,987
 
      
  
Total liabilities
     
 
7,486
 
   
 
6,621
 
      
  
STOCKHOLDERS’ EQUITY:
                    
Common stock, par value $.10 per share;
    authorized and issued 25,000 shares
     
 
3
 
   
 
3
 
Addition paid-in capital
     
 
2,580
 
   
 
2,580
 
Retained earnings (deficit)
     
 
(1,366
)
   
 
(187
)
      
  
Total stockholders’ equity
     
 
1,217
 
   
 
2,396
 
      
  
Total liabilities and stockholders’ equity
     
$
8,703
 
   
$
9,017
 
      
  
 
See notes to unaudited combined financial statements
 

 
PROSPECTOR GAMING ENTERPRISES, INC. AND CALIFORNIA PROSPECTORS, LTD.
 
COMBINED STATEMENTS OF CASH FLOWS (Unaudited)
 
(Dollars in thousands)
   
NINE MONTHS
ENDED MARCH 31
  
    
2001
     
2002
  
OPERATING ACTIVITIES:
                  
Net income
   
$
590
 
   
$
1,165
 
Adjustments to reconcile net income
    to net cash provided by
    operating activities:
                  
Depreciation and amortization
   
 
602
 
   
 
533
 
Loss on disposal of property
    and equipment
   
 
15
 
   
 
1
 
(Increase) decrease in accounts receivable
   
 
35
 
   
 
(133
)
(Increase) in inventories
   
 
(12
)
   
 
(7
)
Decrease in prepaid expenses
    and other current assets
   
 
42
 
   
 
70
 
(Increase) decrease in other assets
   
 
3
 
   
 
(3
)
Decrease in bank overdraft
   
 
—  
 
   
 
(68
)
Increase in accounts payable
   
 
136
 
   
 
230
 
(Decrease) in accrued expenses
   
 
(76
)
   
 
(50
)
    
  
NET CASH PROVIDED BY OPERATING ACTIVITIES
   
 
1,335
 
   
 
1,738
 
    
  
INVESTING ACTIVITIES:
                  
Additions to property and equipment
   
 
(1,228
)
   
 
(137
)
    
  
NET CASH USED IN INVESTING ACTIVITIES
   
 
(1,228
)
   
 
(137
)
    
  
FINANCING ACTIVITIES:
                  
Payments on long-term debt
   
 
(546
)
   
 
(978
)
Increase in long-term debt
   
 
1,155
 
   
 
—  
 
Increase in due from stockholders
   
 
(531
)
   
 
(298
)
    
  
NET CASH PROVIDED BY (USED IN)
    FINANCING ACTIVITIES
   
 
78
 
   
 
(1,276
)
    
  
INCREASE IN CASH AND CASH EQUIVALENTS
   
 
185
 
   
 
325
 
CASH AND CASH EQUIVALENTS, BEGINNING OF
    PERIOD
   
 
299
 
   
 
327
 
    
  
CASH AND CASH EQUIVALENTS, END OF PERIOD
   
$
484
 
   
$
652
 
    
  
SUPPLEMENTAL CASH FLOW INFORMATION:
                  
Interest paid, net of amount capitalized
   
$
497
 
   
$
463
 
    
  
 
See notes to unaudited combined financial statements
 

 
PROSPECTOR GAMING ENTERPRISES, INC. AND CALIFORNIA PROSPECTORS, LTD.
 
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
NINE MONTHS ENDED March 31, 2002 and 2001
 
NOTE 1—BASIS OF PREPARATION
 
These statements should be read in connection with the audited financial statements for Prospector Gaming Enterprises, Inc. as of June 30, 2001 and 2000 and for the years then ended as contained in this Form 8-K/A. The accounting policies utilized in the preparation of the financial information herein are the same as set forth in such audited financial statements except as modified for interim accounting policies which are within the guidelines set forth in Accounting Principles Board Opinion No. 28.
 
The Balance Sheet at June 30, 2001 has been taken from the audited financial statements of Prospector Gaming Enterprises, Inc. as of that date. The Balance Sheet of California Prospectors, Ltd. at June 30, 2001 has not been included and consists of the following (in thousands):
 
ASSETS
CURRENT ASSETS:
       
Cash and cash equivalents
   
$
4
Inventories
   
 
1
Prepaid expenses and other assets
   
 
1
    
Total current assets
   
 
6
    
PROPERTY AND EQUIPMENT, net
   
 
9
    
Total assets
   
$
15
    
LIABILITIES AND MEMBERS’ EQUITY
CURRENT LIABILITIES:
       
Accounts payable
   
$
1
    
Total current liabilities
   
 
1
    
MEMBERS’ EQUITY
   
 
14
    
Total liabilities and members’ equity
   
$
15
    
 
The Balance Sheet at March 31, 2002 and the interim combined financial information for the nine months ended March 31, 2002 and 2001 is unaudited and combines the accounts of both Prospector Gaming Enterprises, Inc. and California Prospectors, Ltd. Prospector Gaming Enterprises, Inc. owns and operates Gold Ranch Casino and RV Park in Verdi, Nevada. California Prospectors, Ltd. owns and operates a California Lottery Station juxtapositional to Gold Ranch Casino and RV Resort.
 
In the opinion of management, all adjustments necessary to present fairly the financial condition as of March 31, 2002 and the results of operations and cash flows for the nine months ended March 31, 2002 and 2001 have been included. Interim results of operations are not necessarily indicative of the results of operations for the full year.

 
PROSPECTOR GAMING ENTERPRISES, INC. AND CALIFORNIA PROSPECTORS, LTD.
 
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
NINE MONTHS ENDED March 31, 2002 and 2001
 
NOTE 2—INCOME TAXES
 
Prospector Gaming Enterprises, Inc. and its shareholders have elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code, which provides that, in lieu of Corporate income taxes, the shareholders are taxed on their proportionate share of the Company’s taxable income, or receive the benefit of any taxable losses and tax credits. California Prospectors, Ltd. is a Nevada limited liability company and not subject to income taxation. All income, losses and tax credits are passed through to the member owners.

 
 
PROSPECTOR GAMING ENTERPRISES, INC.,
 
DBA GOLD RANCH
 
FINANCIAL STATEMENTS
 
JUNE 30, 2001 AND 2000

 
PROSPECTOR GAMING ENTERPRISES, INC.,
DBA GOLD RANCH
 
TABLE OF CONTENTS
 
 

INDEPENDENT AUDITOR’S REPORT
 
To the Board of Directors and Stockholders
Prospector Gaming Enterprises, Inc.,
dba Gold Ranch
 
We have audited the accompanying balance sheets of Prospector Gaming Enterprises, Inc., dba Gold Ranch as of June 30, 2001 and June 30, 2000, and the related statements of income, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Prospector Gaming Enterprises, Inc., dba Gold Ranch as of June 30, 2001 and June 30, 2000, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
 
/s/    DIPIETRO & THORNTON    
DiPietro & Thornton
 
Reno, Nevada
September 11, 2001
 

-1-

Exhibit A
Page 1 of 2
 
PROSPECTOR GAMING ENTERPRISES, INC.,
DBA GOLD RANCH
BALANCE SHEETS
JUNE 30, 2001 AND 2000
 
    
6/30/01    
     
6/30/00    
ASSETS
                
CURRENT ASSETS
                
Cash
   
$
 323,228
 
   
$
 292,176
Receivables
   
 
84,459
 
   
 
131,151
Inventories
   
 
185,872
 
   
 
158,160
Prepaid expenses
   
 
227,398
 
   
 
182,124
    
  
    
 
820,957
 
   
 
763,611
    
  
PROPERTY AND EQUIPMENT
                
Equipment and furniture
   
 
4,468,871
 
   
 
3,986,188
Land and building
   
 
6,311,101
 
   
 
5,494,911
Construction in progress
   
 
—  
 
   
 
39,284
    
  
    
 
10,779,972
 
   
 
9,520,383
Less accumulated depreciation
   
 
(3,695,188
)
   
 
2,985,703
    
  
    
 
7,084,784
 
   
 
6,534,680
    
  
OTHER ASSETS
                
Due from shareholders
   
 
683,240
 
   
 
36,559
Deposits
   
 
13,824
 
   
 
58,278
Loan acqusitions costs, net
   
 
89,649
 
   
 
77,930
Franchise fee—Arco, net
   
 
10,166
 
   
 
12,166
    
  
    
 
796,879
 
   
 
184,933
    
  
Total assets
   
$
8,702,620
 
   
$
 7,483,224
    
  
 
 
 
 
 
 
 
 
See accompanying notes and accountant’s report.
 

-2-

Exhibit A
Page 2 of 2
 
PROSPECTOR GAMING ENTERPRISES, INC.,
DBA GOLD RANCH
BALANCE SHEETS
JUNE 30, 2001 AND 2000
 
    
6/30/01
     
6/30/00
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
CURRENT LIABILITIES
                  
Bank overdraft
   
$
67,754
 
   
 
$           -0-
 
Accounts payable
   
 
188,851
 
   
 
350,470
 
Accrued liabilities
   
 
201,063
 
   
 
131,631
 
Current maturities of long-term debt
   
 
290,453
 
   
 
684,026
 
Accrued Arco settlement
   
 
—
 
   
 
100,000
 
    
  
    
 
748,121
 
   
 
1,266,127
 
    
  
LONG-TERM DEBT
                  
Notes and contracts payable, less current maturities
   
 
6,737,559
 
   
 
5,852,125
 
    
  
STOCKHOLDERS’ EQUITY
                  
Common stock, par value $.10 per share;
authorized and issued 25,000 shares
   
 
2,500
 
   
 
2,500
 
Paid in capital
   
 
2,579,979
 
   
 
2,579,979
 
Retained earnings (deficit)
   
 
(1,365,539
)
   
 
(2,217,507
)
    
  
    
 
1,216,940
 
   
 
364,972
 
    
  
    
$
8,702,620
 
   
$
7,483,224
 
    
  
 
 
 
 
 
 
See accompanying notes and accountant’s report.
 
 

-3-

Exhibit B
 
PROSPECTOR GAMING ENTERPRISES, INC.,
DBA GOLD RANCH
STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
 
    
6/30/01
     
6/30/00
  
REVENUES
                  
Station and store
   
$
15,415,832
 
   
$
12,212,562
 
Casino
   
 
5,188,591
 
   
 
4,470,319
 
Restaurant
   
 
1,120,054
 
   
 
1,122,320
 
Bar
   
 
297,570
 
   
 
282,325
 
Other income
   
 
204,532
 
   
 
187,774
 
    
  
    
 
22,226,579
 
   
 
18,275,300
 
Less: Complimentary food and beverage
  
 
389,858
 
   
 
351,935
 
    
  
    
 
21,836,721
 
   
 
17,923,365
 
    
  
OPERATING COSTS AND EXPENSES
                  
Station and store
   
 
14,778,265
 
   
 
11,646,536
 
Casino
   
 
1,693,149
 
   
 
1,581,660
 
Restaurant
   
 
1,173,294
 
   
 
1,236,595
 
Bar
   
 
239,531
 
   
 
217,436
 
RV Park
   
 
33,165
 
   
 
—  
 
Maintenance and utilities
   
 
563,850
 
   
 
559,430
 
General administrative
   
 
1,060,949
 
   
 
896,189
 
Depreciation and amortization
   
 
800,385
 
   
 
691,771
 
    
  
    
 
20,342,588
 
   
 
16,829,617
 
    
  
INCOME FROM OPERATIONS
   
 
1,494,133
 
   
 
1,093,748
 
    
  
OTHER INCOME (EXPENSES)
                  
Miscellaneous
   
 
3,517
 
   
 
17,532
 
Rental income
   
 
51,491
 
   
 
35,625
 
Loss on sale and abandoned assets
   
 
(23,974
)
   
 
(220,689
)
Interest
   
 
(673,199
)
   
 
(647,579
)
    
  
    
 
(642,165
)
   
 
(815,111
)
    
  
NET INCOME
   
$
851,968
 
   
$
278,637
 
    
  
 
 
 
See accompanying notes and accountant’s report.
 

-4-

Exhibit C
 
PROSPECTOR GAMING ENTERPRISES, INC.,
DBA GOLD RANCH
STATEMENTS OF RETAINED EARNINGS
YEARS ENDED JUNE 30, 2001 AND 2000
 
    
6/30/01
     
6/30/00
  
ACCUMULATED ADJUSTMENT ACCOUNT, BEGINNING
   
$
(2,217,507
)
   
$
(2,496,144
)
NET INCOME
   
 
851,968
 
   
 
278,637
 
    
  
ACCUMULATED ADJUSTMENTS ACCOUNT, ENDING
   
$
(1,365,539
)
   
$
(2,217,507
)
    
  
 
 
 
 
 
See accompanying notes and accountant’s report.
 

-5-

Exhibit D
 
PROSPECTOR GAMING ENTERPRISES, INC.,
DBA GOLD RANCH
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
 
    
6/30/01
     
6/30/00
  
CASH FLOWS FROM OPERATING ACTIVITIES
                  
Net income (loss)
   
$
851,968
 
   
$
278,637
 
Adjustments to reconcile net income to net cash provided by operating activities:
                  
Depreciation and amortization
   
 
800,385
 
   
 
691,771
 
Loss on sale (abandonment) of assets
   
 
23,974
 
   
 
220,689
 
(Increase) decrease in accounts receivable
   
 
46,692
 
   
 
164,890
 
(Increase) decrease in inventories
   
 
(27,712
)
   
 
(33,764
)
(Increase) decrease in prepaid expenses
   
 
(45,274
)
   
 
(40,363
)
(Increase) decrease in other assets
   
 
34,735
 
   
 
(35,835
)
Increase (decrease) in accounts payable
   
 
(93,865
)
   
 
(167,813
)
Increase (decrease) in accrued expenses
   
 
(30,568
)
   
 
(18,873
)
    
  
Net cash provided by operating activities
   
 
1,560,335
 
   
 
1,059,339
 
    
  
CASH FLOWS FROM INVESTING ACTIVITIES
                  
Proceeds sale of fixed assets
   
 
31,600
 
   
 
12,000
 
Purchase of fixed assets
   
 
(1,116,322
)
   
 
(700,029
)
    
  
Net cash used for investing activities
   
 
(1,084,722
)
   
 
(688,029
)
    
  
CASH FROM FINANCING ACTIVITIES
                  
Net borrowings on line of credit
   
 
625,000
 
   
 
95,000
 
Proceeds from borrowings
   
 
-0-
 
   
 
805,000
 
Repayment of long-term debt
   
 
(282,880
)
   
 
(738,370
)
Repayment of stockholder loans
   
 
(140,000
)
   
 
-0-
 
Advances to stockholders
   
 
(646,681
)
   
 
(36,559
)
    
  
Net cash provided (used) for financing activities
   
 
(444,561
)
   
 
125,071
 
    
  
NET CHANGE IN CASH AND CASH EQUIVALENTS
   
 
31,052
 
   
 
496,381
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
   
 
292,176
 
   
 
(204,205
)
    
  
CASH AND CASH EQUIVALENTS AT END OF YEAR
   
$
323,228
 
   
$
292,176
 
    
  
SUPPLEMENTAL CASH FLOW INFORMATION:
                  
Purchase of fixed assets on contract
   
$
281,012
 
   
$
574,780
 
    
  
Interest paid
   
$
661,028
 
   
$
639,788
 
    
  
 
See accompanying notes and accountant’s report.

-6-

Exhibit E
Page 1 of 6
 
PROSPECTOR GAMING ENTERPRISES, INC.,
DBA GOLD RANCH
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001 AND 2000
 
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
This summary of significant accounting policies of Prospector Gaming Enterprises, Inc., dba Gold Ranch (the Company) is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.
 
Business Activity
 
The Company operates the Gold Ranch Casino located in Verdi Nevada. The Gold Ranch Casino includes a gas station, restaurant, bar, casino and convenience store.
 
Accounts Receivable
 
The Company uses the direct write-off method for bad debts. All anticipated uncollectible accounts have been written off as of the balance sheet date. Management does not anticipate any material collection loss with respect to the remaining balance, therefore no allowance for doubtful accounts is included in the financial statements.
 
Inventories
 
Inventories are stated at cost on the first-in, first-out method.
 
Depreciation
 
Property and equipment are stated at cost and are depreciated using the straight-line method and modified accelerated cost recovery system over the estimated useful lives, ranging from five to thirty-nine years.
 
Casino Revenue
 
In accordance with industry practices, the Company recognizes as casino revenue the net win from gaming activities, which is the difference between gaming wins and losses.
 
Food and beverage furnished without charge to customers are included in gross revenues at a value which approximates retail and then deducted as complimentary services to arrive at net revenues. The cost of such complimentary services is charged to gaming operating costs and expenses.
 

-7-

Exhibit E
Page 2 of 6
 
PROSPECTOR GAMING ENTERPRISES, INC.,
DBA GOLD RANCH
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001 AND 2000
 
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
Current Maturities and Long-Term Debt
 
Notes payable that are demand notes that have alternate payment terms exceeding one year are recorded as long-term debt, where the note has not been demanded.
 
Income Tax
 
The Company and its shareholders have elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code, which provides that, in lieu of corporation income taxes, the shareholders are taxed on their proportionate share of the Company’s taxable income, or receive the benefit of any taxable losses and tax credits.
 
Use of Estimates
 
The preparation of financial statements in conformity with generally accepted accounting principles requires the proprietor to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates
 
Concentration of Credit Risk
 
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and short-term investments. The Company maintains cash in bank accounts with balances, at times, in excess of federally insured limits. The Company has not experienced any losses in such accounts.
 
NOTE B—TRANSACTIONS WITH RELATED PARTY
 
The Company has advanced funds for the construction of an RV Park on land adjacent to the Company. The owner of the RV Park, Gold Ranch RV Park Resort, LLC., is wholly owned by the Company’s shareholders. The amounts receivable at June 30, 2001 and June 30, 2000 were:
 
    
2001
   
2000
Due from shareholder
   
$
683,240
   
$
36,559
    
  
 
In addition, the Company has an agreement to operate the RV Park which opened in 2001.

-8-

Exhibit E
Page 3 of 6
 
PROSPECTOR GAMING ENTERPRISES, INC.,
DBA GOLD RANCH
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001 AND 2000
 
NOTE C—LOAN ACQUISITION COSTS
 
Loan acquisition costs are capitalized and amortized over the term of the loan. Loan acquisition costs consist of the following:
 
             
Net of Accumulated
Amortization
      
Original   Cost
     
6/30/01
     
6/30/00
      
$
115,585
              
$
77,930
      
$
139,475
     
$
89,649
         
               
    
 
NOTE D—LONG-TERM DEBT
    
6/30/01
   
6/30/00
NOTES AND CONTRACTS PAYABLE
              
Contract payable, VLC, Inc., original amount
$62,435, payable monthly at $5,203, no interest,
secured by slot equipment.
   
$
-0-
   
$
36,421
Contract payable, Imperial Premium Finance,
original amount $34,134, payable in monthly
installments of $3,793 including interest at
9.75%, through December 2001.
   
 
22,756
   
 
-0-
Note payable, Colonial Bank, Revolving line of
credit, original amount $500,000, interest payable
monthly at prime plus 2%. All principal and
accrued interest is due October 15, 2000.
   
 
-0-
   
 
280,000
Note payable, Colonial Bank, revolving line of
credit in the amount of $150,000, interest payable
monthly at prime plus 2%. All principal and
accrued interest is due November 2000.
   
 
-0-
   
 
95,000
Note payable, Atlantic Richfield Corporation,
original amount $548,000, payable in monthly
principal installments of $4,566 with no
interest. The payments will be waived by
Arco if certain sales quotas are attained
annually. (See Note E)
   
 
383,600
   
 
438,416
Contract payable, International Game Technology,
original amount $17,751, payable monthly at $1,479,
no interest, through November 2001, secured by slot
equipment.
   
 
7,396
   
 
-0-
 

-9-

Exhibit E
Page 4 of 6
 
PROSPECTOR GAMING ENTERPRISES, INC.,
DBA GOLD RANCH
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001 AND 2000
 
NOTE D—LONG-TERM DEBT (CONTINUED)
    
6/30/01
   
6/30/00
NOTES AND CONTRACTS PAYABLE
              
Contract payable, International Game Technology,
original amount $145,982, payable monthly at $12,165,
no interest, through February 2002, secured by slot
equipment.
   
 
97,322
   
 
-0-
Contract payable, International Game Technology,
original amount $20,810, payable monthly at $1,734,
no interest, through March 2002, secured by slot
equipment.
   
 
15,607
   
 
-0-
Contract payable, International Game Technology,
original amount $96,470, payable monthly at $8,039,
no interest, through May 2002, secured by slot
equipment.
   
 
88,430
   
 
-0-
Note payable, Wells Fargo Bank, reducing revolving
line of credit in the original amount of $1,250,000.
The maximum permitted balance declines annually by
$250,000 in the first three years. Interest is
based on the bank’s prime rate plus an adjustable
amount ranging .5 to 1.0%. The outstanding balance
is due August 2005.
   
 
1,000,000
   
 
-0-
Contract payable, Caterpillar Financial
Services, original amount $25,157, payable
in monthly installments of $712 including
interest at 8.5% through July 2001.
   
 
-0-
   
 
8,815
Contract payable, International Game Technology,
original amount $212,634, payable monthly at
$17,719, no interest, through September 2000,
secured by slot equipment.
   
 
-0-
   
 
70,878
Note payable, Wells Fargo Equipment Leasing,
original amount $299,711, payable in monthly
installments of $6,294 including interest at 9.5%,
through July 2004, secured by sign.
   
 
201,202
   
 
254,922
Note payable, Stonefield, Inc., interest payable
monthly at prime plus 1.7% through August 2010.
Principal and any accrued interest are due
August 2010.
   
 
5,211,699
   
 
5,211,699
    
  
    
 
7,028,012
   
 
6,396,151
Less current maturities
   
 
290,453
   
 
544,026
    
  
Total long-term debt
   
$
6,737,559
   
$
5,852,125
    
  

-10-

Exhibit E
Page 5 of 6
 
PROSPECTOR GAMING ENTERPRISES, INC.,
DBA GOLD RANCH
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001 AND 2000
 
NOTE D—LONG-TERM DEBT (CONTINUED)
 
Aggregate maturities on long-term debt over the next five years are as follows:
 
Year Ended June 30,
   
Amount
2002
   
$
290,453
2003
   
 
314,792
2004
   
 
321,222
2005
   
 
6,246
After 2005
   
 
6,095,299
    
    
$
7,028,012
    
 
NOTE E—ARCO SETTLEMENT
 
Prospector Gaming Enterprises, Inc. terminated its franchise agreement with AM/PM Mini Markets and has removed the brand name from the store. A claim for liquidated damages resulted in the amount of $200,000 for amounts that would have been paid over the remaining eight plus years of the agreement for franchise fees. During the year ended June 30, 2000 the company paid the $100,000 balance of accrued liability due Atlantic Richfield Corporation under the agreement for mutual termination of the Mini Market agreement.
 
For the years ended June 30, 2001 and June 30, 2000, respectively, total payments of $54,792 due on the outstanding loan balance (Note D) were waived by Arco due to sales quotas which were achieved and are reflected in miscellaneous income.
 
NOTE F—DESCRIPTION OF LEASING ARRANGEMENT
 
The Company leases two automobiles under noncancelable operating leases.
 
The following is a schedule of future minimum lease payments required under the leases:
 
Year Ended June 30,
     
2002
   
$
10,913
2003
   
 
10,913
2004
   
 
7,984
2005
   
 
543
    
    
$
30,353
    
 
NOTE G—RETIREMENT PLAN
 
The Company has a 401-K Profit-Sharing Plan covering substantially all of its employees. At its discretion, the Company may make matching contributions to the Plan. The Company’s contributions were $9,604 and $5,334 for the years ended June 30, 2001, and 2000, respectively.
 

-11-

Exhibit E
Page 6 of 6
 
PROSPECTOR GAMING ENTERPRISES, INC.,
DBA GOLD RANCH
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001 AND 2000
 
NOTE H—COMMITMENTS AND CONTINGENCIES
 
The Company is party to a legal action in which the plaintiffs allege their civil rights were violated. Management believes that the case is defensible and will ultimately be dismissed without payment. The Company’s legal representative believes the potential exposure in this matter is minimal.
 

-12-

THE SANDS REGENT AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
The accompanying pro forma condensed consolidated financial statements present pro forma information for The Sands Regent (the “Company”) and those assets and liabilities of Prospector Gaming Enterprises, Inc. (“PGE”) as acquired by Last Chance, Inc.(“Last Chance”), a wholly owned subsidiary of the Company, and California Prospectors, Ltd (“California Prespectors”), a limited liability company, acquired by Last Chance. Such transaction is accounted for using the purchase method of accounting.
 
The pro forma condensed consolidated financial statements of the Company are based on the historical consolidated financial statements of the Company, PGE and California Prospectors as of and for the nine months ended March 31, 2002 and for the year ended June 30, 2001. The pro forma financial information for the nine months ended March 31, 2002 and the year ended June 30, 2001 has been presented as if the PGE and California Prospectors acquisition had occurred on July 1, 2000. The accompanying pro forma condensed consolidated balance sheet as of March 31, 2002 has been presented as if the aforementioned acquisition had occurred on March 31, 2002.
 
The accompanying pro forma condensed consolidated financial statements are provided for informational purposes only and are not necessarily indicative of the results that will be achieved in future periods. The pro forma adjustments are based on currently available information and upon certain assumptions that management of the Company believes are reasonable under the circumstances. The accompanying pro forma condensed consolidated financial statements do not purport to represent what the Company’s results of operations or financial position would actually have been if the PGE and California Prospectors acquisition had in fact occurred at July 1, 2000 or March 31, 2002. The accompanying pro forma condensed consolidated financial statements and the related notes thereto should be read in conjunction with the Company’s audited financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2001 and the financial statements of PGE, and PGE and California Prospectors combined, as included in this filing.
 
The final purchase price consisted of $2.6 million in cash, 377,083 shares of Common Stock of The Sands Regent, valued at $1,142,000, the issuance of a note payable to seller in the amount of $5,619,000 and the payoff of certain long-term debt of PGE.
 
A final determination of required purchase accounting adjustments, including the allocation of the purchase price to the acquired assets and assumed liabilities, has not been made, and the allocation reflected in the unaudited pro forma condensed consolidated financial statements should be considered as preliminary.

 
THE SANDS REGENT AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, 2002
 
 
(Dollars in thousands)
     
COMPANY HISTORICAL
       
PROSPECTOR GAMING AND CALIFORNIA PROSPECTORS HISTORICAL
             
Adjustments
       
Pro Forma
  
 
ASSETS
                                                              
CURRENT ASSETS:
                                                                         
Cash and cash equivalents
     
$
9,129
 
     
$
652
 
   
$
—  
 
     
$
—  
 
   
$
(2,340
)(d)
     
$
929
(e)
     
$
8,370
 
Short-term investments
     
 
20
 
     
 
—  
 
                                             
 
20
 
Accounts receivable, net
     
 
279
 
     
 
218
 
   
 
(145
)(a)
                                    
 
352
 
Note receivable, sale of subsidiaries
     
 
180
 
     
 
—  
 
                                             
 
180
 
Inventories
     
 
549
 
     
 
194
 
                                             
 
743
 
Federal income tax refund receivable
     
 
261
 
     
 
—  
 
                                             
 
261
 
Prepaid expenses and other assets
     
 
925
 
     
 
158
 
   
 
(108
)(a)
                                    
 
975
 
      
    
    
Total current assets
     
 
11,343
 
     
 
1,222
 
   
 
(253
)
     
 
—  
 
   
 
(2,340
)
     
 
929
 
     
 
10,901
 
      
    
    
PROPERTY AND EQUIPMENT:
                                                              
Land
     
 
8,487
 
     
 
262
 
   
 
(262
)(a)
                                    
 
8,487
 
Building and improvements
     
 
38,944
 
     
 
6,082
 
   
 
(5,000
)(a)
     
 
(287
)(b)
                         
 
39,739
 
Equipment, furniture and fixtures
     
 
18,198
 
     
 
4,578
 
   
 
(1,304
)(a)
     
 
(1,498
)(b)
                         
 
19,974
 
Construction in progress
     
 
1,503
 
     
 
—  
 
              
 
13
(b)
                         
 
1,516
 
      
    
    
      
 
67,132
 
     
 
10,922
 
   
 
(6,566
)
     
 
(1,772
)
   
 
—  
 
     
 
—  
 
     
 
69,716
 
Less accumulated depreciation and amortization
     
 
(32,718
)
     
 
(4,225
)
   
 
1,788
(a)
     
 
2,437
(b)
                         
 
(32,718
)
      
    
    
Property and equipment, net
     
 
34,414
 
     
 
6,697
 
   
 
(4,778
)
     
 
665
 
   
 
—  
 
     
 
—  
 
     
 
36,998
 
      
    
    
OTHER ASSETS
                                                                         
Due from shareholders
     
 
—  
 
     
 
981
 
   
 
(981
)(a)
                                    
 
—  
 
Note receivable, sale of subsidiaries, net
     
 
279
 
     
 
—  
 
                                             
 
279
 
Investment in subsidiaries
     
 
—  
 
     
 
—  
 
   
 
—  
 
     
 
—  
 
   
 
4,184
(d)
     
 
(4,184
)(f)
     
 
—  
 
Goodwill
     
 
—  
 
     
 
—  
 
              
 
11,250
(b)
                         
 
11,250
 
Other intangibles
     
 
—  
 
     
 
—  
 
              
 
1,356
(b)
                         
 
1,356
 
Other
     
 
981
 
     
 
117
 
   
 
(80
) (a)
     
 
339
(c)
   
 
(617
)(d)
                
 
740
 
      
    
    
Total other assets
     
 
1,260
 
     
 
1,098
 
   
 
(1,061
)
     
 
12,945
 
   
 
3,567
 
     
 
(4,184
)
     
 
13,625
 
      
    
    
Total assets
     
$
47,017
 
     
$
9,017
 
   
$
(6,092
)
     
$
13,610
 
   
$
1,227
 
     
$
(3,255
)
     
$
61,524
 
      
    
    
 
The accompanying notes are an integral part of these
pro forma condensed consolidated financial statements.

2

THE SANDS REGENT AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, 2002
 
        (continued)
 
(Dollars in thousands)
   
 
 
COMPANY
HISTORICAL
 
 
   
 
 
 
 
 
PROSPECTOR
GAMING AND
CALIFORNIA
PROSPECTORS
HISTORICAL
 
 
 
 
 
              
Adjustments
     
 
Pro Forma
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                                                     
CURRENT LIABILITIES:
                                                                       
Accounts payable
   
$
2,071
 
   
$
420
 
   
$
—  
 
     
$
—  
 
     
$
—  
 
     
$
—  
 
     
$
2,491
 
Accrued Expenses
   
 
1,293
 
   
 
151
 
              
 
339
(c)
                
 
(164
)(e)
     
 
1,619
 
Deferred federal income tax liability
   
 
143
 
   
 
—  
 
                                               
 
143
 
Current maturities of long-term debt
   
 
3
 
   
 
63
 
              
 
(55
)(b)
     
 
803
(d)
     
 
1,692
(e)
     
 
2,506
 
    
    
Total current liabilities
   
 
3,510
 
   
 
634
 
   
 
—  
 
     
 
284
 
     
 
803
 
     
 
1,528
 
     
 
6,759
 
    
    
LONG TERM DEBT
   
 
10,011
 
   
 
5,987
 
              
 
(288
)(b)
     
 
4,816
(d)
     
 
(399
)(e)
     
 
20,127
 
    
    
DEFERRED FEDERAL INCOME TAX LIABILITY
   
 
1,040
 
   
 
—  
 
                                               
 
1,040
 
    
    
Total liabilities
   
 
14,561
 
   
 
6,621
 
   
 
—  
 
     
 
(4
)
     
 
5,619
 
     
 
1,129
 
     
 
27,926
 
    
    
STOCKHOLDERS’ EQUITY:
                                                              
Preferred stock
   
 
—  
 
   
 
—  
 
                                               
 
—  
 
Common stock
   
 
693
 
   
 
3
 
                         
 
38
(d)
     
 
(3
)(f)
    
 
731
 
Addition paid-in capital
   
 
12,777
 
   
 
2,580
 
                         
 
2,705
(d)
     
 
(4,181
)(f)
     
 
13,881
 
Retained earnings (deficit)
   
 
41,344
 
   
 
(187
)
   
 
(6,092
)(a)
     
 
13,614
(c)
     
 
(7,135
)(d)
     
 
(200
)(e)
     
 
41,344
 
    
    
    
 
54,814
 
   
 
2,396
 
   
 
(6,092
)
     
 
13,614
 
     
 
(4,392
)
     
 
(4,384
)
     
 
55,956
 
Treasury Stock, at cost
   
 
(22,358
)
   
 
—  
 
   
 
—  
 
     
 
—  
 
     
 
—  
 
     
 
—  
 
     
 
(22,358
)
    
    
Total stockholders’ equity
   
 
32,456
 
   
 
2,396
 
   
 
(6,092
)
     
 
13,614
 
     
 
(4,392
)
     
 
(4,384
)
     
 
33,598
 
    
    
Total liabilities and stockholders’ equity
   
$
47,017
 
   
$
9,017
 
   
$
(6,092
)
     
$
13,610
 
     
$
1,227
 
     
$
(3,255
)
     
$
61,524
 
    
    
 
The accompanying notes are an integral part of these
pro forma condensed consolidated financial statements.

3

 
THE SANDS REGENT AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
FOR THE NINE MONTHS ENDED MARCH 31, 2002
 
(Dollars in thousands, except per share data)
   
 
 
COMPANY
HISTORICAL
 
 
   
 
 
 
 
 
PROSPECTOR
GAMING AND
CALIFORNIA
PROSPECTORS
HISTORICAL
 
 
 
 
 
   
ADJUSTMENTS
   
 
PRO FORMA
 
 
Operating revenues:
                                               
Gaming
   
$
15,376
 
   
$
4,135
 
   
$
(145
)(a)
     
$
—  
 
   
$
19,366
 
Fuel and convenience store
   
 
—  
 
   
 
9,967
 
                       
 
9,967
 
Lodging
   
 
5,934
 
   
 
107
 
                       
 
6,041
 
Food and beverage
   
 
4,063
 
   
 
1,199
 
                       
 
5,262
 
Other
   
 
1,061
 
   
 
157
 
   
 
(41
)(i)
              
 
1,177
 
    
    
  
    
 
26,434
 
   
 
15,565
 
   
 
(186
)
     
 
—  
 
   
 
41,813
 
Less complimentary lodging, food and beverage included above
   
 
2,366
 
   
 
364
 
                       
 
2,730
 
    
    
  
    
 
24,068
 
   
 
15,201
 
   
 
(186
)
     
 
—  
 
   
 
39,083
 
    
    
  
Operating costs and expenses:
                                               
Gaming
   
 
7,628
 
   
 
1,099
 
                       
 
8,727
 
Fuel and convenience store
   
 
—  
 
   
 
9,370
 
                       
 
9,370
 
Lodging
   
 
2,970
 
   
 
153
 
                       
 
3,123
 
Food and beverage
   
 
2,418
 
   
 
1,151
 
                       
 
3,569
 
Other
   
 
434
 
                                
 
434
 
Maintenance and utilities
   
 
2,599
 
   
 
450
 
                       
 
3,049
 
General and administrative
   
 
5,170
 
   
 
815
 
   
 
(162
)(g)
              
 
5,823
 
Rent and management fee
   
 
—  
 
   
 
—  
 
   
 
572
(l)
              
 
572
 
Depreciation and amortization
   
 
2,316
 
   
 
533
 
   
 
(269
)(h)
              
 
2,580
 
    
    
  
    
 
23,535
 
   
 
13,571
 
   
 
141
 
     
 
—  
 
   
 
37,247
 
    
    
  
Income from operations
   
 
533
 
   
 
1,630
 
   
 
(327
)
     
 
—  
 
   
 
1,836
 
    
    
  
Other income (deductions):
                                               
Interest and other income
   
 
156
 
   
 
—  
 
                       
 
156
 
Interest and other expense
   
 
(843
)
   
 
(464
)
   
 
281
(j)
              
 
(1,026
)
Gain (loss) on disposition of property and equipment
   
 
(119
)
   
 
(1
)
                       
 
(120
)
    
    
  
    
 
(806
)
   
 
(465
)
   
 
281
 
     
 
—  
 
   
 
(990
)
    
    
  
Income (loss) before income taxes
   
 
(273
)
   
 
1,165
 
   
 
(46
)
     
 
—  
 
   
 
846
 
Income tax (provision) benefit
   
 
110
 
   
 
—  
 
   
 
(380
)(m)
              
 
(270
)
    
    
  
Net income (loss)
   
$
(163
)
   
$
1,165
 
   
$
(426
)
              
$
576
 
    
    
  
Net income (loss) per share: Basic
   
$
(0.04
)
                                
$
0.12
 
    
                               
Diluted
   
$
(0.04
)
                                
$
0.11
 
    
                               
Weighted average shares outstanding: Basic
   
 
4,525,722
 
            
 
377,083
(n)
              
 
4,902,805
 
    
                               
    
                               
Diluted
   
 
4,525,722
 
            
 
377,083
(n)
     
 
249,356
(o)
   
 
5,152,161
 
    
                               
 
The accompanying notes are an integral part of these
pro forma condensed consolidated financial statements.

4

 
THE SANDS REGENT AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
FOR THE YEAR ENDED JUNE 30, 2001
 
(Dollars in thousands, except per share data)
   
COMPANY HISTORICAL
       
PROSPECTOR GAMING ENTERPRISES INC., HISTORICAL
     
ADJUSTMENTS
       
Pro Forma
  
 
Operating revenues:
                                          
Gaming
   
$
22,219
 
     
$
5,189
 
   
$
—  
 
     
$
—
 
     
$
27,408
 
Fuel and convenience store
   
 
—  
 
     
 
15,416
 
                         
 
15,416
 
Lodging
   
 
9,074
 
     
 
—  
 
                         
 
9,074
 
Food and beverage
   
 
5,356
 
     
 
1,418
 
                         
 
6,774
 
Other
   
 
1,429
 
     
 
204
 
   
 
(55
)(i)
                
 
1,578
 
    
    
    
    
 
38,078
 
     
 
22,227
 
   
 
(55
)
     
 
—  
 
     
 
60,250
 
Less complimentary lodging, food and beverage included above
                                                   
    
 
2,315
 
     
 
390
 
                         
 
2,705
 
    
    
    
    
 
35,763
 
     
 
21,837
 
   
 
(55
)
     
 
—  
 
     
 
57,545
 
    
    
    
Operating costs and expenses:
                                          
Gaming
  
 
10,389
 
     
 
1,693
 
                         
 
12,082
 
Fuel and convenience store
   
 
—  
 
     
 
14,778
 
                         
 
14,778
 
Lodging
   
 
4,419
 
     
 
33
 
                         
 
4,452
 
Food and beverage
   
 
4,226
 
     
 
1,413
 
                         
 
5,639
 
Other
   
 
583
 
     
 
—  
 
                         
 
583
 
Maintenance and utilities
   
 
3,303
 
     
 
564
 
                         
 
3,867
 
General and administrative
  
 
6,924
 
     
 
1,061
 
   
 
(297
)(g)
                
 
7,688
 
Rent and management fee
   
 
—  
 
     
 
—  
 
   
 
729
(l)
                
 
729
 
Depreciation and amortization
   
 
2,973
 
     
 
801
 
   
 
(443
)(h)
                
 
3,331
 
    
    
    
    
 
32,817
 
     
 
20,343
 
   
 
(11
)
     
 
—  
 
     
 
53,149
 
    
    
    
Income from operations
   
 
2,946
 
     
 
1,494
 
   
 
(44
)
     
 
—  
 
     
 
4,396
 
    
    
    
Other income (deductions) :
                                          
Interest and other income
   
 
427
 
     
 
55
 
                         
 
482
 
Interest and other expense
  
 
(1,155
)
     
 
(673
)
   
 
294
(j)
     
 
(501
)(k)
     
 
(2,035
)
Gain (loss) on disposition of property and equipment
  
 
(391
)
     
 
(24
)
                         
 
(415
)
    
    
    
    
 
(1,119
)
     
 
(642
)
   
 
294
 
     
 
(501
)
     
 
(1,968
)
    
    
    
Income before income taxes
   
 
1,827
 
     
 
852
 
   
 
250
 
     
 
(501
)
     
 
2,428
 
Income tax (provision) benefit
   
 
(595
)
     
 
—  
 
   
 
—  
 
     
 
(204
)(m)
     
 
(799
)
    
    
    
Net income
   
$
1,232
 
     
$
852
 
   
$
250
 
     
$
(705
)
     
$
1,629
 
    
    
    
Net income (loss) per share: Basic
   
$
0.27
 
                                    
$
0.33
 
    
                                   
Diluted
   
$
0.26
 
                                    
$
0.32
 
    
                                   
Weighted average shares outstanding:    Basic
   
 
4,500,614
 
              
 
377,083
(n)
                
 
4,877,697
 
    
                                   
Diluted
   
 
4,751,774
 
              
 
377,083
(n)
                
 
5,128,857
 
    
                                   
The accompanying notes are an integral part of these
pro forma condensed consolidated financial statements.
 
 

5

THE SANDS REGENT AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2002
 
The pro forma adjustments contained in the accompanying pro forma condensed consolidated financial statements reflect:
 
(a) The elimination of PGE assets and liabilities not being acquired by the Company including the income statement impact of a receivable not assumed by the Company.
 
(b) Adjust assets and liabilities to fair market value: other intangibles include customer data base—$10,000, grandfathered gaming location—$861,400 and Tradename/trademarks—$485,000.
 
(c) Accrue additional investment acquisition costs and deferred loan costs from March 31, 2002 to date of purchase of approximately $339,000 so as to recognize the entire purchase price.
 
(d) Recognize the purchase of certain assets of PGE and California Prospectors by Last Chance, Inc. a wholly owned subsidiary of The Sands Regent, Including payment of cash( $2.3 million), issuance of 377,083 shares of common stock ($1,142,000), issuance of debt ($5,619,000) and the previous payment through escrow reflected as a deposit of $260,000. Capitalize costs of acquisition into purchase of $357,000 otherwise included in other assets.
 
(e) The net change in long-term debt is due to debt refinancing at the Company ($10 million) and long-term debt payoff for PGE and California Prospectors ($ 5,715,000). Further a prepayment penalty of the Company was paid in the amount of $200,000 for the early pay-off of the $10 million debt and certain accrued costs were paid of $164,000. Net cash went to the bank in the approximate amount of $929,000.
 
(f) Eliminate investment in subsidiary.
 
(g) Eliminate PGE major stockholders’ compensation and benefits.
 
(h) Adjust PGE and California Prospectors depreciation and amortization expense based on the new values and revised useful lives of property and equipment acquired by Last Chance.
 
(i) Eliminate debt forgiveness income to PGE from ARCO loan which forgiveness is based upon meeting a minimum level of fuel sales. Such minimum level has historically always been met and, as such, the value of the assumed debt obligation by Last Chance is valued at zero.
 
(j) Record net reduction in interest expenses due to the $17 million refinancing (at 7.17%) of the Company $10 million debt obligation (10.75%) and the pay-off of various PGE long-term debt obligations (various interest rates) in connection with the acquisition of PGE and California Prospectors. Further includes Interest expense on long-term debt payable to former owners ($5.6 million at prime plus 2.5%, presently 7.25%) and a reduction in the amortization of the new deferred loan fee costs, over the ten year term of the new $17 million financing.
 
(k) Record write-off of unamortized deferred loan costs of the Company of $301,000 and a $200,000 prepayment penalty on the Company’s refinancing and pay-off of the $10 million long-term debt obligation.

THE SANDS REGENT AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2002
 
(l) Record minimum rent and management fee due by Last Chance to former owners and landlords for the Gold Ranch Casino and RV Resort Land and buildings.
 
(m) Record income tax expense relative to PGE and California Prospectors (not otherwise tax paying entities) and on the impact of the proforma changes utilizing a tax rate of 34%.
 
(n) Record issuance of 377,083 shares of common stock of the Company in association with the overall purchase transaction, as of the beginning of the period presented.
 
(o) Record dilutive effect of stock options not previously included due to the net loss as previously reported

 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
       
THE SANDS REGENT
Date:  August 14, 2002
      
By:
  
/s/    DAVID R. WOOD        
               
Name:  David R. Wood
Title:    Executive Vice President and
             Chief Financial Officer
 

S-1

EXHIBIT INDEX
 
Exhibit No.
   
Document Description
23.1
   
Consent of DiPietro & Thornton Independent Public Accountants.
 
 EX-23.1 3 dex231.htm CONSENT OF DIPIETRO & THORNTON Prepared by R.R. Donnelley Financial -- Consent of DiPietro & Thornton
Exhibit 23.1
 
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
As independent public accountants, we hereby consent to the inclusion in this form 8-K/A of our report dated September 11, 2001. It should be noted that we have not audited any financial statements of Prospector Gaming Enterprises, Inc. subsequent to June 30, 2001 or performed any audit procedures subsequent to September 11, 2001.
 
DiPietro & Thornton
 
August 12, 2002
Reno, Nevada
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