8-K/A 1 d85118e8-ka.txt AMENDMENT NO. 1 TO FORM 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A AMENDMENT TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) January 4, 2001 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. (Exact name of registrant as specified in its charter) Colorado 0-21736 84-1158484 ------------------------------- ------------------------ ------------------- (State or other jurisdiction of (Commission File Number) (I.R.S. Employer incorporation or organization) Identification No.) 240 Main Street Post Office Box 21 Black Hawk, Colorado 80422 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (303) 582-1117 -------------- No Change ------------------------------------------------------------------ Former name or former address if changed since date of last filing 2 Item 7. Financial Statements, Pro Forma Financial Information, and Exhibits. On January 4, 2001, the registrant acquired substantially all of the assets of the Gold Dust Motel, Inc. and reported the acquisition on Form 8-K filed January 10, 2001. The purchase price of $26.5 million was financed under the registrant's credit facility with a bank syndicate led by Wells Fargo Bank, N.A. Black Hawk Gaming & Development Company, Inc. (the Company) also incurred $696,000 in transaction costs associated with the purchase. This amendment to that filing includes the Financial Statements which were required to be filed in connection with the acquisition under this Item 7. The following unaudited pro forma condensed combined balance sheet gives affect to the acquisition of the assets and business of Gold Dust Motel, Inc. as if the transaction occurred on September 30, 2000. The following unaudited pro forma condensed combined statements of income for the year ended December 31, 1999 and nine months ended September 30, 2000, combine the historical results of operations of the Company and Gold Dust Motel, Inc. and assume that the acquisition had been effective as of the beginning of each respective period. The pro forma adjustments are based upon the estimated fair value of the assets acquired at December 31, 2000 and are based on preliminary estimates, evaluations and other data which are currently available and may change as a result of information gained subsequent to the filing of this report. The pro forma condensed statements of income are not necessarily indicative of the actual results which would have occurred had the acquisition been consummated at the beginning of such periods, or of future consolidated operations of the Company. The pro forma financial information has been prepared by the Company and all calculations have been made by the Company based upon assumptions deemed appropriate by the Company. Certain of these assumptions are set forth under the notes to the unaudited pro forma condensed combined balance sheet and combined income statements. These statements should be read in conjunction with the historical consolidated financial statements and notes thereto of the Company and Gold Dust West, Inc.
(a)(b) FINANCIAL STATEMENTS: Page No. -------- (a.) Pro Forma Condensed Combined Balance Sheet September 30, 2000 (unaudited) 2 (b.) Pro Forma Condensed Combined Statement of Income for the year ended December 31, 1999 (unaudited) 3 (c.) Pro Forma Condensed Combined Statement of Income for the nine months ended September 30, 2000 (unaudited) 4 (d.) Notes to unaudited Pro Forma Condensed Combined Financial Statements. 5 (e.) Gold Dust Motel, Inc. Financial Statements and Report of Independent Certified Public Accountants at June 30, 2000 and Balance Sheet at December 31, 2000 (unaudited) Statements of Earnings for the year ended June 30, 2000 and for the six months ended December 31, 2000 (unaudited) and 1999 (unaudited) 6 to 22
(c) Exhibits. None 1 3 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. PRO FORMA CONDENSED COMBINED BALANCE SHEET SEPTEMBER 30, 2000 (UNAUDITED)
BHWK GDW SEPTEMBER 30, DECEMBER 31, PRO FORMA PRO FORMA 2000 2000 ENTRY ADJUSTMENTS COMBINED ------------- ------------ ----- -------------- ------------- ASSETS Cash and other current assets $ 11,060,041 $ 1,756,321 (a) 141,000 $ 12,393,041 (b) (1,756,321) (d) 1,101,000 (e) 91,000 Land 15,239,426 (a) 3,560,000 18,799,426 Gaming facilities 63,063,953 5,670,084 (a) 2,091,916 70,825,953 Goodwill, net of accumulated amortization 5,486,862 (a) 15,733,000 21,219,862 Note receivable - stockholder 2,630,180 (b) (2,630,180) Leasehold property rights 926,131 (b) (926,131) Other assets 3,505,924 214,418 (c) 482,500 2,701,424 (e) (1,287,000) (b) (214,418) ------------- ------------ ------------- ------------- TOTAL $ 98,356,206 $ 11,197,134 $ 16,386,366 $ 125,939,706 ============= ============ ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Accounts Payable and other current liabilities 10,473,491 327,246 (b) (327,246) 10,473,491 Long-term debt and other liabilities 37,589,248 9,677,398 (a) 26,000,000 65,172,748 (c) 482,500 (d) 1,101,000 (b) (9,677,398) ------------- ------------ ------------- ------------- Total liabilities 48,062,739 10,004,644 17,578,856 75,646,239 Minority Interest 8,847,582 8,847,582 Stockholders' equity 41,445,885 1,192,490 (b) (1,192,490) 41,445,885 ------------- ------------ ------------- ------------- TOTAL $ 98,356,206 $ 11,197,134 $ 16,386,366 $ 125,939,706 ============= ============ ============= =============
See accompanying notes to the unaudited pro forma condensed combined financial statements. 2 4 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1999 (UNAUDITED)
BHWK GDW DECEMBER 31, DECEMBER 31, PRO FORMA PRO FORMA 1999 1999 ENTRY ADJUSTMENTS COMBINED ------------ ------------ ----- ----------- ------------ REVENUES: Casino revenue $ 81,902,996 $ 16,052,413 $ 97,955,409 Food and beverage revenue 8,827,171 1,936,035 10,763,206 Hotel revenue 1,106,287 396,048 1,502,335 Interest and other 985,051 418,494 (f) (322,197) 1,081,348 ------------ ------------ ----------- ------------ Total revenues 92,821,505 18,802,990 (322,197) 111,302,298 Promotional allowances 6,079,643 953,364 7,033,007 ------------ ------------ ------------ Net revenues 86,741,862 17,849,626 (322,197) 104,269,291 ------------ ------------ ----------- ------------ COSTS AND EXPENSES: Casino operations 25,080,864 3,481,141 28,562,005 Food and beverage operations 8,624,562 2,177,527 10,802,089 Hotel operations 596,486 205,703 802,189 Marketing, general and administrative 33,207,131 6,805,322 (g) (574,199) 39,317,145 (h) (121,109) Interest 4,287,645 1,208,744 (i) 1,135,327 6,631,716 Depreciation and amortization 4,825,659 1,107,003 (j) 743,856 6,676,518 ------------ ------------ ----------- ------------ Total costs and expenses 76,622,347 14,985,440 1,183,875 92,791,662 ------------ ------------ ----------- ------------ MINORITY INTEREST (1,767,717) (1,767,717) ------------ ------------ ----------- ------------ INCOME BEFORE INCOME TAXES 8,351,798 2,864,186 (1,506,072) 9,709,912 INCOME TAXES 2,929,000 (k) 502,502 3,431,502 ------------ ------------ ----------- ------------ NET INCOME $ 5,422,798 $ 2,864,186 $(2,008,574) $ 6,278,410 ============ ============ =========== ============ BASIC EARNINGS PER SHARE $ 1.32 $ 1.53 Dilutive effect of outstanding options (0.02) (0.03) ------------ ------------ DILUTED EARNINGS PER SHARE $ 1.30 $ 1.50 ============ ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: BASIC 4,101,075 4,101,075 Dilutive effect of outstanding options 82,444 82,444 ------------ ------------ DILUTED 4,183,519 4,183,519 ============ ============
See accompanying notes to the unaudited pro forma condensed combined financial statements. 3 5 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
BHWK GDW SEPTEMBER 30, SEPTEMBER 30, PRO FORMA PRO FORMA 2000 2000 ENTRY ADJUSTMENTS COMBINED ------------- ------------- ----- ----------- ------------ REVENUES: Casino revenue $ 63,180,345 $ 12,946,488 $ 76,126,833 Food and beverage revenue 7,023,088 1,610,863 8,633,951 Hotel revenue 826,057 346,103 1,172,160 Interest and other 719,335 312,509 (f) (241,648) 790,196 ------------ ------------ ----------- ------------ Total revenues 71,748,825 15,215,963 (241,648) 86,723,140 Promotional allowances 4,998,263 706,004 5,704,267 ------------ ------------ ------------ Net revenues 66,750,562 14,509,959 (241,648) 81,018,873 ------------ ------------ ----------- ------------ COSTS AND EXPENSES: Casino operations 19,458,361 2,904,116 22,362,477 Food and beverage operations 6,215,362 1,811,795 8,027,157 Hotel operations 539,580 179,762 719,342 Marketing, general and administrative 24,824,159 5,677,289 (g) (430,650) 30,057,298 (h) (13,500) Interest 2,610,207 786,312 (i) 971,741 4,368,260 Depreciation and amortization 3,689,808 992,916 (j) 395,228 5,077,952 ------------ ------------ ----------- ------------ Total costs and expenses 57,337,477 12,352,190 922,819 70,612,486 ------------ ------------ ----------- ------------ MINORITY INTEREST (1,843,578) (1,843,578) ------------ ------------ ----------- ------------ INCOME BEFORE INCOME TAXES 7,569,507 2,157,769 (1,164,467) 8,562,809 INCOME TAXES 2,725,023 (k) 367,522 3,092,545 ------------ ------------ ----------- ------------ NET INCOME $ 4,844,484 $ 2,157,769 $(1,531,989) $ 5,470,264 ============ ============ =========== ============ BASIC EARNINGS PER SHARE $ 1.18 $ 1.33 Dilutive effect of outstanding options (0.01) (0.01) ------------ ------------ DILUTED EARNINGS PER SHARE $ 1.17 $ 1.32 ============ ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: BASIC 4,116,407 4,116,407 Dilutive effect of outstanding options 38,705 38,705 ------------ ------------ DILUTED 4,155,112 4,155,112 ============ ============
See accompanying notes to the unaudited pro forma condensed combined financial statements. 4 6 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS The pro forma adjustments contained in the accompanying unaudited pro forma condensed combined financial statements give effect to the following: (a) Reflects the adjustment for cash, inventory, and prepaid expenses received ($141,000); adjustment for the fair value of land received (held under leasehold property rights and other leases by Gold Dust Motel, Inc.) ($3,560,000); adjustment of net book value of property and equipment to fair value ($2,091,916); the allocation to intangible assets of the excess purchase price and estimated transaction costs of $696,000 over the fair value of net assets acquired ($15,733,000); and the estimated debt incurred for the acquisition ($26,000,000). (b) Reflects the elimination of assets not acquired and liabilities and stockholders' equity not assumed. (c) To record estimated bank refinancing fees and associated debt incurred for the first amendment to the Company's credit agreement ($482,500). (d) To record the estimated cash and coin placed at the Casino and the associated draw on the Company's credit facility ($1,101,000). (e) Reflects the allocation of prepaid licensing costs of $91,000 to current assets, and the allocation of the $500,000 cash deposit paid on the purchase price, and transaction costs totaling $696,000 to goodwill. (f) Reflects the elimination of interest income associated with the note receivable from stockholder not assumed in the purchase. (g) Reflects the elimination of lease payments and rent paid to the sole stockholder under leasehold property rights and other leases. The title to the leased and rented property owned by the sole stockholder transferred to the new owner at closing. (h) Reflects the elimination of various expense allowances paid on behalf of the sole stockholder. (i) Reflects the adjustment to interest expense on borrowings from the Bank Credit Facility net of interest expense related to Gold Dust Motel, Inc. debt not assumed by the Company at an assumed interest rate of 8.375%. (j) Reflects the adjustment to depreciation of gaming facilities and amortization of goodwill and debt issue costs based on the allocation of the purchase price with assumed useful lives of 39 years for the building and improvements, 5 years for the furniture, fixtures and equipment, and 15 years for the intangible assets, and forty months for the debt issue costs. (k) Reflects the adjustment for estimated income tax expense at an assumed rate of 37%. 5 7 FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS GOLD DUST MOTEL, INC., DBA GOLD DUST WEST 6 8 CONTENTS
PAGE REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.......................... 8 FINANCIAL STATEMENTS Balance Sheets........................................................ 9 Statements of Earnings................................................ 10 Statements of Stockholder's Equity and Comprehensive Income........... 11 Statements of Cash Flows.............................................. 12 Notes to Financial Statements......................................... 13
7 9 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS BOARD OF DIRECTORS GOLD DUST MOTEL, INC., DBA GOLD DUST WEST We have audited the accompanying balance sheet of Gold Dust Motel, Inc. (a Nevada corporation), dba Gold Dust West as of June 30, 2000, and the related statements of earnings, stockholder's equity and comprehensive income, and cash flows for the year 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 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 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 Gold Dust Motel, Inc., dba Gold Dust West as of June 30, 2000, 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. /s/ Grant Thornton LLP Reno, Nevada August 11, 2000 8 10 GOLD DUST MOTEL, INC., DBA GOLD DUST WEST BALANCE SHEETS
JUNE 30, DECEMBER 31, ASSETS 2000 2000 ----------- ----------- (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 1,265,822 $ 1,218,514 Accounts receivable 112,674 108,492 Due from related parties 515 416 Inventory 83,893 71,595 Prepaid expenses 416,000 357,304 ----------- ----------- Total current assets 1,878,904 1,756,321 PROPERTY AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION 6,043,772 5,670,084 NOTE RECEIVABLE - STOCKHOLDER 2,630,180 2,630,180 LEASEHOLD PROPERTY RIGHTS 944,101 926,131 OTHER ASSETS 200,946 214,418 ----------- ----------- $11,697,903 $11,197,134 =========== =========== LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ 4,637 $ -- Current maturities of capital lease obligation 5,234 5,690 Accounts payable and accrued liabilities 322,227 267,373 Provision for progressive slot machine payoffs - current 54,183 54,183 ----------- ----------- Total current liabilities 386,281 327,246 LONG-TERM DEBT, LESS CURRENT MATURITIES 9,280,907 9,226,774 LONG-TERM CAPITAL LEASE OBLIGATION, LESS CURRENT MATURITIES 394,058 391,094 PROVISION FOR PROGRESSIVE SLOT MACHINE PAYOFFS - LONG-TERM 59,530 59,530 STOCKHOLDER'S EQUITY 1,577,127 1,192,490 ----------- ----------- $11,697,903 $11,197,134 =========== ===========
9 11 GOLD DUST MOTEL, INC., DBA GOLD DUST WEST STATEMENTS OF EARNINGS
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ---------------------------- 2000 1999 2000 ------------ ------------ ------------ (Unaudited) (Unaudited) GROSS REVENUES Casino operations $ 16,934,071 $ 8,306,761 $ 8,634,674 Food and beverage operations 1,905,909 940,423 1,182,331 Motel revenue 444,865 232,148 248,754 Other revenue 8,918 5,316 250 ------------ ------------ ------------ 19,293,763 9,484,648 10,066,009 Less promotional allowances (915,790) (537,828) (563,377) ------------ ------------ ------------ Net revenues 18,377,973 8,946,820 9,502,632 ------------ ------------ ------------ COSTS AND EXPENSES Casino operations 3,592,597 1,809,127 2,088,684 Food and beverage operations 2,133,133 1,284,318 1,566,911 Motel operations 248,911 132,579 123,351 Marketing, general and administrative 7,161,726 3,129,042 3,537,035 Depreciation and amortization 1,265,943 616,478 674,423 ------------ ------------ ------------ 14,402,310 6,971,544 7,990,404 ------------ ------------ ------------ Earnings from operations 3,975,663 1,975,276 1,512,228 ------------ ------------ ------------ OTHER INCOME (EXPENSE) Interest income 326,733 164,558 161,140 Interest expense (1,156,402) (600,134) (492,148) Other, net 83,049 53,730 60,193 ------------ ------------ ------------ (746,620) (381,846) (270,815) ------------ ------------ ------------ NET EARNINGS $ 3,229,043 $ 1,593,430 $ 1,241,413 ============ ============ ============
10 12 GOLD DUST MOTEL, INC., DBA GOLD DUST WEST STATEMENTS OF STOCKHOLDER'S EQUITY AND COMPREHENSIVE INCOME YEAR ENDED JUNE 30, 2000 AND SIX MONTHS ENDED DECEMBER 31, 2000 (UNAUDITED)
COMMON STOCK, PAR VALUE $1 PER SHARE (25,000 SHARES AUTHORIZED; ACCUMULATED 1,000 SHARES ADDITIONAL OTHER ISSUED AND PAID-IN ACCUMULATED COMPREHENSIVE OUTSTANDING) CAPITAL DEFICIT INCOME TOTAL -------------- ----------- ----------- ------------- ----------- BALANCE, JUNE 30, 1999 $ 1,000 $ 6,849,450 $(6,005,202) $ 31,736 $ 876,984 Net earnings -- -- 3,229,043 -- 3,229,043 Reclassification adjustment -- -- -- (31,736) (31,736) ----------- Total comprehensive income 3,197,307 Dividends -- -- (2,497,164) -- (2,497,164) ----------- ----------- ----------- ----------- ----------- BALANCE, JUNE 30, 2000 1,000 6,849,450 (5,273,323) -- 1,577,127 Net earnings -- -- 1,241,413 -- 1,241,413 Dividends -- -- (1,626,050) -- (1,626,050) ----------- ----------- ----------- ----------- ----------- BALANCE, DECEMBER 31, 2000 (UNAUDITED) $ 1,000 $ 6,849,450 $(5,657,960) $ -- $ 1,192,490 =========== =========== =========== =========== ===========
11 13 GOLD DUST MOTEL, INC., DBA GOLD DUST WEST STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------- 2000 1999 2000 ----------- ----------- ----------- (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 3,229,043 $ 1,593,430 $ 1,241,413 ----------- ----------- ----------- Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,265,943 616,478 674,423 (Gain) loss on sale of equipment 10,526 (179) -- (Gain) loss on sale of investments (17,677) (17,677) -- Changes in: Accounts receivable 13,495 19,942 4,182 Due from related parties (71) (39) 99 Inventory (21,906) (10,539) 12,298 Prepaids 31,919 50,996 58,696 Other assets (58,329) -- (34,424) Accounts payable and accrued liabilities 13,449 (117,824) (54,854) ----------- ----------- ----------- Total adjustments 1,237,349 541,158 660,420 ----------- ----------- ----------- Net cash provided by operating activities 4,466,392 2,134,588 1,901,833 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of investment 162,066 162,066 -- Purchase of investments (56) (56) -- Proceeds from sales of property and equipment 10,200 17,184 -- Capital expenditures (1,259,887) (931,504) (261,813) ----------- ----------- ----------- Net cash used in investing activities (1,087,677) (752,310) (261,813) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt (7,195,786) (3,551) (58,770) Principal payments on capital lease obligations (4,408) (2,112) (2,508) Proceeds from issuance of long-term debt 5,969,393 -- -- Loan fees on issuance of long-term debt (16,392) -- -- Dividend payments (2,497,164) (858,631) (1,626,050) ----------- ----------- ----------- Net cash used in financing activities (3,744,357) (864,294) (1,687,328) ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (365,642) 517,984 (47,308) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,631,464 1,631,464 1,265,822 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,265,822 $ 2,149,448 $ 1,218,514 =========== =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for interest $ 1,156,402 $ 600,134 $ 492,148 =========== =========== ===========
12 14 GOLD DUST MOTEL, INC., DBA GOLD DUST WEST NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 (DATA RELATED TO DECEMBER 31, 2000 AND 1999 IS UNAUDITED) NOTE A - SUMMARY OF ACCOUNTING POLICIES Gold Dust Motel, Inc., dba Gold Dust West (the Company) is located in Reno, Nevada, and its operations are principally in the gaming, hotel, bar and restaurant industries. The majority of the Company's revenue is derived through its gaming operations, which consists of slot machines. The primary markets served by the Company are the local area, including Northern Nevada, and Northern California. In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the accounting period. Actual results may differ from those estimates. A summary of the Company's significant accounting policies consistently applied in the preparation of the accompanying financial statements follows. 1. INTERIM FINANCIAL STATEMENTS The financial statements as of December 31, 2000 and for the six months ended December 31, 2000 and 1999 are unaudited; however, in the opinion of management, all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of the Company's financial position and results of operations for such period have been included. The results for the six months ended December 31, 2000 are not necessarily indicative of results that may be expected for the year ended June 30, 2001. 2. CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers money market accounts to be cash equivalents. 3. ACCOUNTS RECEIVABLE The Company considers accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts is required. 13 15 GOLD DUST MOTEL, INC., DBA GOLD DUST WEST NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2000 (DATA RELATED TO DECEMBER 31, 2000 AND 1999 IS UNAUDITED) NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued 4. INVESTMENT IN DEBT AND EQUITY SECURITIES Management determines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates such determination at each balance sheet date. Debt securities for which the Company does not have the intent or ability to hold to maturity are classified as available for sale, along with the Company's investment in equity securities. Securities available for sale are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income. Debt and equity securities that are bought principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings. Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized cost. At June 30, 2000, the Company had sold all of its investments (Note B). The Company uses the specific identification method to determine the cost of securities sold. 5. INVENTORY Inventory is stated at the lower of cost or market. Cost is determined principally by the first-in, first-out method. 6. DEPRECIATION AND AMORTIZATION Depreciation and amortization are provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives, principally on a straight-line basis over five to ten years. The leased motel building capitalized is amortized over the term of the lease on a straight-line basis. Leasehold improvements are amortized over the estimated service lives of the improvements on a straight-line basis. 7. LOAN COSTS Loan costs of $121,445 and $100,495 at June 30, 2000 and December 31, 2000, respectively, incurred in connection with the Company's refinancing of its long-term debt are being amortized on the effective interest method over the term of the loan and included in other assets on the Balance Sheet. 8. LEASEHOLD PROPERTY RIGHTS Leasehold property rights are being amortized on a straight-line basis over a 40-year period. 9. PROVISION FOR PROGRESSIVE SLOT MACHINE PAYOFFS Slot revenues are reduced by the provision made for the anticipated jackpots on slot machines with progressive payoffs. 14 16 GOLD DUST MOTEL, INC., DBA GOLD DUST WEST NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2000 (DATA RELATED TO DECEMBER 31, 2000 AND 1999 IS UNAUDITED) NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued 10. CASINO REVENUE AND PROMOTIONAL ALLOWANCES In accordance with industry practice, the Company recognizes as casino revenues the net win from gaming activities, which is the difference between gaming wins and losses. Promotional allowances consist principally of the retail value of complimentary rooms, food, beverage, and other promotional allowances provided to customers without charge. The estimated costs of providing such complimentary services have been classified as casino operating expenses through interdepartmental allocations as follows:
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ------------------- 2000 2000 1999 ---------- -------- -------- Food $ 64,778 $ 60,121 $ 29,560 Beverage 103,865 151,556 103,629 -------- -------- -------- $168,643 $211,677 $133,189 ======== ======== ========
11. CONCENTRATIONS OF CREDIT RISK Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash on deposit. The Company maintains its cash on deposit in bank deposit accounts which, at times, may exceed Federally insured limits. The Company believes it is not exposed to any significant risk on cash on deposit. Cash on deposit at June 30, 2000 and December 31, 2000 was $152,305 and $13,654, respectively. The Company is subject to the risks inherent in the gaming industry which include, among other things, a decline in tourism, a downturn in the economy, and increased competition from gaming properties in the area. 12. INCOME TAX No income tax provision has been included in the financial statements since income or loss and income tax credits are attributed to the stockholder pursuant to an election under Subchapter S of the Internal Revenue Code. 13. ADVERTISING COSTS The Company's policy is to expense advertising costs as they are incurred. Advertising expense for the year ended June 30, 2000 and for the six month periods ended December 31, 2000 and 1999 was $656,149, $283,008 and $294,447, respectively. 15 17 GOLD DUST MOTEL, INC., DBA GOLD DUST WEST NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2000 (DATA RELATED TO DECEMBER 31, 2000 AND 1999 IS UNAUDITED) NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued 14. IMPAIRMENT OF LONG-LIVED ASSETS The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. 15. RECENT PRONOUNCEMENTS In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements ("SAB 101"). SAB 101 provides guidance on the recognition, presentation and disclosure of revenues in financial statements and requires adoption no later than the fourth quarter of fiscal 2001. The Company has evaluated the impact of SAB 101 and its related interpretations and determined that it will not have a material effect on the Company's financial position and results of operations. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivatives and Hedging Activities ("SFAS 133"), as amended. SFAS 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS 133, as amended, establishes accounting and reporting standards of derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. We do not expect such adoption to have a material effect on our financial statements. 16. FAIR VALUE OF FINANCIAL STATEMENTS The Financial Accounting Standards Board's Statement No. 107, Disclosures about Fair Value of Financial Instruments, requires the determination of fair value of certain of the Company's assets. The following methods and assumptions were used to estimate the fair value of financial statements included in the following categories: a. CASH AND CASH EQUIVALENTS. The carrying amount approximates fair value because of the relatively short maturity of these instruments. b. LONG-TERM DEBT. The carrying amount approximates fair value based on quoted market prices for the same or similar issues or current rates offered to the Company for debt with the same or similar remaining maturities and terms. 16 18 GOLD DUST MOTEL, INC., DBA GOLD DUST WEST NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2000 (DATA RELATED TO DECEMBER 31, 2000 AND 1999 IS UNAUDITED) NOTE B - INVESTMENTS The following is a summary of available-for-sale securities:
ESTIMATED UNREALIZED FAIR COST GAIN/LOSS VALUE -------- ---------- --------- Available-for-sale securities: Debt and equity securities at: June 30, 2000 $ -0- $ -0- $ -0- ======= ======= =======
The change in the net unrealized gain for the year ended June 30, 2000 was $(31,736). For the year ended June 30, 2000, the Company did not hold any investments classified as trading securities. Accordingly, no unrealized gains or losses have been included in the determination of net earnings. NOTE C - PROPERTY AND EQUIPMENT Property and equipment consists of the following at June 30, 2000: Leased motel building capitalized $ 426,592 Gaming equipment 3,320,850 Gaming leasehold improvements 4,839,323 Furniture and equipment 1,326,016 Restaurant and bar equipment 511,980 Motel furnishings and leasehold improvements 436,238 Automobiles and trucks 28,577 Land improvements 11,850 Construction in progress 23,612 ----------- 10,925,038 ----------- Accumulated depreciation (5,425,996) Accumulated amortization on capitalized leased assets (223,855) ----------- (5,425,996) ----------- Land 768,585 ----------- $ 6,043,772 ===========
17 19 GOLD DUST MOTEL, INC., DBA GOLD DUST WEST NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2000 (DATA RELATED TO DECEMBER 31, 2000 AND 1999 IS UNAUDITED) NOTE D - NOTE RECEIVABLE - STOCKHOLDER The note receivable - stockholder is an unsecured promissory note due from the sole stock-holder of the Company. Interest is payable monthly at an annual rate of 12.25%. Any outstanding principal and accrued interest are due August 1, 2003. Approximately $322,000, $161,000, and $161,000 of interest income was attributable to this note for the year ended June 30, 2000 and the six month periods ended December 31, 2000 and 1999, respectively. NOTE E - LEASEHOLD PROPERTY RIGHTS Leasehold property rights arose from the acquisition of the assets and liabilities of a partnership and are attributable to a long-term lease by the Corporation (note G). NOTE F - LONG-TERM DEBT Long-term debt consist of the following at June 30, 2000: Wells Fargo Bank $ 6,280,907 David R. Belding 3,000,000 Equipment contracts payable 4,637 ----------- $ 9,285,544 Current maturities (4,637) ----------- $ 9,280,907 ===========
The aggregate amount of long-term obligations maturing subsequent to June 30, 2000, is as follows: Years ending June 30, 2001 $ 4,637 2002 -- 2003 9,280,907 ----------- 9,285,544 ===========
18 20 GOLD DUST MOTEL, INC., DBA GOLD DUST WEST NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2000 (DATA RELATED TO DECEMBER 31, 2000 AND 1999 IS UNAUDITED) NOTE F - LONG-TERM DEBT - Continued WELLS FARGO BANK On March 30, 1998, the Company entered into a loan agreement with Wells Fargo Bank, whereby the bank provided the Company with a $5,500,000 revolving credit facility. The loan agreement was amended April 19, 2000 to allow a $7,500,000 revolving credit facility of which $2,000,000 was paid towards the David R. Belding Term Note (see below). The advanced but unpaid principal balance under the credit facility as of June 30, 2000 was $6,280,907. The Company may borrow funds up to predetermined maximum principal balances. The annual year-end maximum principal balances are as follows:
MAXIMUM PRINCIPAL BALANCE ----------- Years ending June 30, 2001 $ 7,000,000 2002 6,625,000
Periodic principal payments are required in amounts which are sufficient to reduce the outstanding principal balance to predetermined maximum principal balances, as indicated in the schedule above. The entire unpaid advanced principal balance is due and payable on October 1, 2002. In accordance with the terms of the loan agreement, the Company was granted an option to cause portions, or all of the outstanding principal balance to accrue at a rate equal to prime plus an applicable rate or the London Inter-Bank Offering Rate (LIBOR) plus an applicable rate. The rate is determined based on the Company's ratio of funded debt to earnings before interest, depreciation and amortization as of the end of each quarter. At June 30, 2000, $3,000,000 of the outstanding balance was accruing interest at LIBOR plus 2.0%, and the remaining balance was accruing interest at prime plus .75% (8.8125% and 10.25%, respectively). At December 31, 2000, the entire balance was accruing interest at prime plus .75% (10.25% at December 31, 2000). This loan is secured by a deed of trust and assignment of certain space leases, contracts, rents, revenues, permits, licenses and contracts. The loan agreement also contains covenants which require the Company to make certain capital expenditures and require the Company to maintain certain financial ratios. The Company is in compliance with all loan covenants as of June 30, 2000 and December 31, 2000. 19 21 GOLD DUST MOTEL, INC., DBA GOLD DUST WEST NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2000 (DATA RELATED TO DECEMBER 31, 2000 AND 1999 IS UNAUDITED) NOTE F - LONG-TERM DEBT - Continued DAVID R. BELDING TERM NOTE On March 30, 1998, the Company entered into a loan agreement with David R. Belding, an unrelated third party, whereby the Company was provided $5,000,000 with payments of interest only until April 1, 2003, at which time the entire unpaid principal and any accrued interest are due. The loan agreement was amended April 19, 2000 and $2,000,000 was paid by Wells Fargo leaving an unpaid principal balance of $3,000,000 as of June 30, 2000. The loan bears interest at a fixed annual rate of 12.25%. The loan is collateralized by a deed of trust and assignment of certain space leases, contracts, rents, revenues, permits, licenses and contracts. The loan agreement is subject to the same covenants as those required by Wells Fargo Bank. NOTE G - LEASE COMMITMENTS The Company leases the motel site and facilities from the Company's sole stockholder under a long-term non-cancelable agreement, which, based on a determination made at inception of the lease, is accounted for as an operating lease on the land and a capital lease on the building. Rent payments of $12,000 per month are divided equally between the land and building lease elements. The Company leases the facilities housing its casino operations and the adjacent parking lot from the sole stockholder with monthly payments of $50,994 through 2016. The Company also leases certain slot machines from the sole stockholder with monthly payments of $9,000 on a month-to-month basis. The Company leases certain gaming equipment under operating leases, which expire through September 2001. The Company has options to extend the leases for additional periods. The leases require monthly rental payments totaling $46,304. Total rent paid by the Company during the year ended June 30, 2000 and the six month periods ended December 31, 2000 and 1999 was $1,216,650, $643,633 and $610,018, respectively. Total rent accruing to the sole stockholder for the above leases was approximately $792,000, $396,000 and $396,000 for the year ended June 30, 2000 and the six month periods ending December 31, 2000 and 1999, respectively. 20 22 GOLD DUST MOTEL, INC., DBA GOLD DUST WEST NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2000 (DATA RELATED TO DECEMBER 31, 2000 AND 1999 IS UNAUDITED) NOTE G - LEASE COMMITMENTS - Continued The following is a schedule, by years, of the future minimum lease payments under both the capital and operating leases, together with the present value of the net minimum lease payments as of June 30, 2000:
CAPITAL OPERATING LEASE LEASES ----------- ------------ Years ending June 30: 2001 $ 72,000 $ 893,604 2002 72,000 701,928 2003 72,000 701,928 2004 72,000 701,928 2005 72,000 701,928 2006 and thereafter 792,000 16,951,164 ----------- ------------ Total minimum lease payments 1,152,000 $ 20,652,480 ============ Less amount representing interest (752,708) ----------- Present value of net minimum lease payments 399,292 Less current maturities (5,234) ----------- Long-term capital lease obligation $ 394,058 ===========
NOTE H - OTHER RELATED PARTY TRANSACTIONS The amount due from related parties at June 30, 2000 and December 31, 2000 of $515 and $416 respectively, is comprised of expenses paid by the Company for related parties. During the year ended June 30, 2000 and the six month periods ended December 31, 2000 and 1999, the Company paid $38,443, $7,000 and $20,200, respectively, in professional fees to a party related through common ownership. These fees were paid for consultation on potential new slot routes and potential slot machine purchases. 21 23 GOLD DUST MOTEL, INC., DBA GOLD DUST WEST NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2000 (DATA RELATED TO DECEMBER 31, 2000 AND 1999 IS UNAUDITED) NOTE I - RETIREMENT PLAN Effective January 1, 1998, the Company implemented a 401(k) plan for its employees. Employees become eligible for the plan after one year of service and 1,000 hours of work during a year. The Company matches 100% of the employee's contribution up to 10% of compensation. The amount the Company contributed to the 401(k) plan for the year ended June 30, 2000 and the six month periods ended December 31, 2000 and 1999 was $98,043, $64,953 and $44,258, respectively. NOTE J - ASSET PURCHASE AGREEMENT The Company entered into an asset purchase agreement with Black Hawk Gaming & Development Company, Inc. (Black Hawk) whereby Black Hawk agreed to purchase substantially all of the Company's assets for approximately $26,500,000 in cash. On January 4, 2001, the asset purchase agreement with Black Hawk closed. 22 24 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to report to be signed on its behalf by the undersigned thereunto duly authorized. BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. By: /s/ Stephen R. Roark --------------------------- Stephen R. Roark, President Date: March 19, 2001 23