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8-K/A - NEVADA GOLD & CASINOS INCv196715_8ka.htm
EX-23.1 - NEVADA GOLD & CASINOS INCv196715_ex23-1.htm
EX-99.3 - NEVADA GOLD & CASINOS INCv196715_ex99-3.htm
Exhibit 99.2

Gaming Consultants, Inc.
and Affiliates

Combined Financial Statements and
Independent Auditors’ Report

December 31, 2009

 
 

 

INDEPENDENT AUDITORS’ REPORT

Grant Thornton, Ltd.
Receiver of Gaming Consultants, Inc. and Affiliates
Renton, Washington

We have audited the accompanying combined balance sheet of Gaming Consultants, Inc. and Affiliates (the Company) as of December 31, 2009, and the related combined statements of income, stockholder’s equity, and cash flows for the year then ended.  These combined financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these combined financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Gaming Consultants, Inc. and Affiliates as of December 31, 2009, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Our audit was made for the purpose of forming an opinion on the combined financial statements taken as a whole.  The supplemental information on pages 15-20 is presented for purposes of additional analysis and is not a required part of the basic combined financial statements.  Such information has been subjected to the auditing procedures applied in the audit of the basic combined financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic combined financial statements taken as a whole.
 
Yakima, Washington
June 25, 2010

 
2

 

Gaming Consultants, Inc. and Affiliates


Combined Balance Sheet


Assets
           
             
CURRENT ASSETS:
           
Cash
        $ 2,988,773  
Accounts receivable
          197,114  
Prepaid expenses and other assets
          476,897  
Inventory
          212,517  
Total current assets
          3,875,301  
               
PROPERTY AND EQUIPMENT:
             
Furniture, fixtures, and equipment
  $ 4,783,728          
Leasehold improvements
    3,573,768          
      8,357,496          
Less accumulated depreciation
    6,025,841          
Total property and equipment
            2,331,655  
                 
OTHER ASSETS:
               
Note receivable
    497,985          
Deposits
    161,824          
Goodwill
    1,419,943          
Other assets, net of amortization
    1,035,009          
Total other assets
            3,114,761  
                 
            $ 9,321,717  

See accompanying notes to combined financial statements.


 
3

 

     
     
   
December 31, 2009

Liabilities and Stockholder's Equity
           
             
CURRENT LIABILITIES:
           
Accounts payable
        $ 797,291  
Accrued expenses:
             
Payroll
          1,001,130  
Sales and business taxes
          793,149  
Other accrued expenses
          252,811  
Deferred revenue
          4,632  
Chips outstanding
          109,057  
Jackpots and prize liabilities
          1,070,560  
Total current liabilities
          4,028,630  
               
LONG-TERM DEBT
          508,325  
               
Total liabilities
          4,536,955  
               
COMMITMENTS AND CONTINGENCIES
             
               
STOCKHOLDER’S EQUITY:
             
Capital
  $ 33,107,196          
Retained earnings (accumulated deficit)
    (28,322,434 )        
Total stockholder’s equity
            4,784,762  
                 
            $ 9,321,717  

 
4

 

Gaming Consultants, Inc. and Affiliates
   
     
Combined Statement of Income
 
Year Ended  December 31, 2009

REVENUE:
           
Gaming operations
        $ 32,317,098  
Food and beverage
          8,521,908  
Pull tabs
          895,944  
Other
          1,124,731  
            42,859,681  
Less promotional allowances
          4,249,196  
               
NET REVENUE
          38,610,485  
               
EXPENSES:
             
Operating costs
  $ 25,884,024          
Selling, general, and administrative
    10,611,007          
Depreciation and amortization
    849,219          
Total expenses
            37,344,250  
                 
INCOME FROM OPERATIONS
            1,266,235  
                 
OTHER INCOME (EXPENSE):
               
Interest income
    465,696          
Interest expense
    (276,548 )        
Other loss, including impairment loss on goodwill
    (15,570,521 )        
Loss on fixed asset disposal
    (166 )        
Total other income (expense)
            (15,381,539 )
                 
LOSS BEFORE INCOME TAXES
            (14,115,304 )
                 
PROVISION FOR INCOME TAXES
            74,668  
                 
NET LOSS
          $ (14,189,972 )

See accompanying notes to combined financial statements.


 
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Gaming Consultants, Inc. and Affiliates


Combined Statement of
 
Stockholder’s Equity
Year Ended December 31, 2009

         
Retained
Earnings
       
         
(Accumulated
       
   
Capital
   
Deficit)
   
Total
 
                   
BALANCES, JANUARY 1, 2009
  $ 32,619,516     $ (12,476,662 )   $ 20,142,854  
                         
ADD:
                       
Paid in capital, Washington Gaming, Inc.
    487,680       -       487,680  
                         
DEDUCT:
                       
Net loss
    -       (14,189,972 )     (14,189,972 )
Stockholder distributions
    -       (1,655,800 )     (1,655,800 )
                         
BALANCES, DECEMBER 31, 2009
  $ 33,107,196     $ (28,322,434 )   $ 4,784,762  

See accompanying notes to combined financial statements.


 
6

 

Gaming Consultants, Inc. and Affiliates
 
   
Combined Statement of Cash Flows
Year Ended December 31, 2009

Increase (Decrease) in Cash
           
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
        $ (14,189,972 )
Adjustments to reconcile net loss to net cash provided by operating activities:
             
Depreciation and amortization
  $ 849,219          
Loss on sale of fixed assets
    166          
Loss on writeoff of related-party receivable
    4,154,285          
Impairment loss on goodwill
    11,124,421          
Deferred income tax
    (606,000 )        
Change in assets:
               
Accounts receivable
    106,990          
Inventory
    12,229          
Prepaid expenses and other assets
    (192,813 )        
Change in liabilities:
               
Accounts payable and accrued expenses
    88,606          
Chips outstanding
    12,538          
Jackpots and prize liabilities
    479,953          
Deferred revenue
    (2,972 )        
Accrued interest on long-term debt
    29,704          
Total adjustments
            16,056,326  
                 
Net cash provided by operating activities
            1,866,354  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchases of property and equipment
    (154,207 )        
Increase in deposits
    (102,825 )        
Net cash used in investing activities
            (257,032 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Repayment of note payable, related party
    (146,788 )        
Repayment of principal on capital leases
    (133,614 )        
Dividends paid to Washington Gaming, Inc.
    (1,655,800 )        
Investment from Washington Gaming, Inc.
    487,680          
Net cash used in financing activities
            (1,448,522 )
                 
NET INCREASE IN CASH
            160,800  
                 
CASH, BEGINNING OF YEAR
            2,827,973  
                 
CASH, END OF YEAR
          $ 2,988,773  
                 
Supplemental Disclosures:
               
                 
Cash paid for interest
          $ 15,435  
Cash paid for income taxes
            37,529  
                 

 
7

 

Gaming Consultants, Inc. and Affiliates

 
Notes to Combined Financial Statements


NOTE 1 ¾ NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:


The combined financial statements include the accounts of Gaming Consultants, Inc. and Affiliates (“the Company”):  Big Nevada, Inc. (doing business as Silver Dollar Casino SeaTac), Little Nevada, Inc. (doing business as Silver Dollar Casino Tukwila and as Silver Dollar Casino Renton), Shoreline Gaming, Inc. (doing business as Golden Nugget Shoreline), Royal Casino Holdings, Inc. (doing business as Royal Casino Everett), Hollydrift Gaming, Inc. (doing business as Drift on Inn Casino and as Club Hollywood Casino), Silver Dollar Mill Creek, Inc. (doing business as Silver Dollar Casino Mill Creek), Golden Nugget Tukwila, Inc. (doing business as Golden Nugget Tukwila), Little Nevada II, Inc., Little Nevada III, Inc., Gaming Management, Inc., Shoreline Holdings, Inc., Snohomish Gaming, Inc., Mill Creek Gaming, Inc., and Gameco, Inc.  Gaming Consultants, Inc. (“GCI”) has a management services agreement with each of the Affiliates, acts as the service administrator for the Company, provides consulting services relating to the casino related activities and assuring compliance with local, state, and federal law.
 
The assets and stock of the combined companies were pledged as security in October 2007 when the Company’s parent, Washington Gaming, Inc. (“WGI”), became party to a loan entered into by WGI’s parent company, Evergreen Gaming Corp. (“Evergreen”).  The loan had a term of six years, with payment due in full by September 30, 2013.  The note to the principal secured creditor (“Lender”) was secured by the assets of Evergreen, WGI, and substantially all of WGI’s subsidiaries.  On March 31, 2009, the Lender made a written demand for immediate payment of the amount that was owed to them by Evergreen.  In response to the demand, on April 15, 2009, Evergreen filed with the Supreme Court of British Columbia for protection from its creditors under the Companies’ Creditors Arrangement Act (“CCAA”).  The Lender and Evergreen reached a settlement whereby the assets and operations of the Companies reported on herein were put into receivership in full settlement of the amounts owed to the Creditor by Evergreen.  On July 6, 2009, control over all of the assets of the Company were transferred to the court-appointed Receiver, while ownership of the stock remains with WGI.  The Receiver has operated the Company since July 6, 2009, and has pursued a sale of the assets and operations of the Company in order to satisfy secured and unsecured claims of creditors against the Company.  The operations of the Company were not interrupted by the court proceedings or subsequent receivership.

As the balance of the amounts payable to the Lender exceeds the expected sales proceeds from these Companies and other Evergreen assets, it is expected that unsecured creditors and trade payable balances outstanding as of April 16, 2009, will not receive payments in full satisfaction of the amounts due.  These amounts include $508,325 of unsecured notes payable and $527,000 of trade payables.  The Company continues to recognize the amounts payable on the combined balance sheet until such time as these obligations are relieved.

 
8

 

Gaming Consultants, Inc. and Affiliates

 
Notes to Combined Financial Statements


NOTE 1 ¾ NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):


All intercompany transactions between the combined entities have been eliminated in the preparation of the combined financial statements.
 
a.
Nature of operations – The major source of the Company’s revenue is derived from gaming operations, primarily house-banked card rooms and poker.  The Company also derives revenue from the sale of food and beverage sold in casino restaurants.

b.
Cash – The Washington State Gambling Commission requires that cash be on deposit to cover certain jackpots offered to gaming participants, and those monies cannot be used for any other purpose.  Included in cash are amounts restricted for jackpots at December 31, 2009, of $1,118,088.

c.
Inventory – Inventory is valued at the lower of cost or market with cost determined on a first-in, first-out basis.  The majority of inventory consists of food and beverage items.

d.
Property and equipment – Property and equipment are stated at cost.  Depreciation of property and equipment is computed using the straight-line method over estimated useful lives of 3 to 20 years.  Leasehold improvements are depreciated over the estimated useful life of the related asset or the remaining term of the lease whichever is shorter.  Depreciation expense for the year ended December 31, 2009 was $730,315.  The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of such property may not be recoverable.

e.
Other assets – Other assets as of December 31, 2009, are comprised of three noncompete agreements totaling $300,000, less accumulated amortization of $193,333.  Also included is memorabilia from Club Hollywood Casino valued at $500,000.  In addition, other assets include $428,342 related to licenses for various house bank card games to use in perpetuity.

f.
Goodwill – Goodwill is tested for impairment at least annually or whenever events or changes in circumstances have indicated that the asset may be impaired.  The first step of the impairment test compares the fair value of the reporting unit with its carrying value.  If fair value is greater than the carrying value, goodwill is not impaired, and the second step of the impairment test is not necessary.  As a result in the decline in profitability of certain of the casinos managed by Gaming Consultants, as well as the closure of the gaming operations at two of the casinos subsequent to December 31, 2009, goodwill was deemed to be impaired as of that date.  Total impairment loss recognized in 2009 was $11,124,421.  Goodwill of $1,419,943 remains on the combined balance sheet as of December 31, 2009.

 
9

 

Gaming Consultants, Inc. and Affiliates

 
Notes to Combined Financial Statements

 
NOTE 1 ¾ NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):


g.
Fair value of financial instruments – The carrying amounts of financial instruments, including cash and cash equivalents, receivables, payables, and deposits, approximate fair value due to the short maturity of these instruments.  The carrying amount of the notes payable approximates fair value because the interest rate is based on current rates offered for loans and debt with similar terms and maturities.

h.
Washington Players Club Points Program – The Company’s customer rewards program, Washington Players Club, offers incentives to customers who gamble at the Company’s casinos.  Under the program, customers are able to accumulate reward points over time, which customers may redeem at their discretion under the terms of the program.  The reward points will expire if the customer does not redeem their points within one year of being earned or if there is no activity in their account for the prior six months.  A liability is recorded for the amount of outstanding points expected to be redeemed and is included in other accrued expenses.

i.
Casino revenue – Casino revenue is the net win from gaming activities, which is the difference between gaming wins and losses.

j.
Promotional allowances – Promotional allowances represent goods and services, which would be accounted for as revenue if sold, that the Company provided to customers at a discount or at no charge.  The retail amount of promotional allowances are included in gross revenue and offset by deducting it from gross revenue to arrive at net revenue.  The cost of providing promotional allowances is included in operating costs.

k.
Advertising – The Company expenses advertising costs as they are incurred.  Advertising expenses incurred during the year ended December 31, 2009, were $50,000.

l.
Income taxes – As described previously, control over all of the assets of the Company were transferred to the court-appointed receiver, while ownership of the stock remains with WGI.  As the legal stockholder, WGI is responsible for the filing of the federal tax return as well as any associated tax liability or asset generated as part of the federal tax filing for the Company.  As such, all tax assets and associated liabilities have been written-off as part of the combined statements.

 
10

 

Gaming Consultants, Inc. and Affiliates

 
Notes to Combined Financial Statements

 
NOTE 1 ¾ NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):


l.
Income taxes (continued) –

On January 1, 2009, the Company adopted the accounting standard on accounting for uncertainty in income taxes, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under this guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.  The guidance on accounting for uncertainty in income taxes also addresses de-recognition, classification, interest and penalties on income taxes, and accounting in interim periods.

Management evaluated the Company’s tax positions and concluded that the Company had taken no uncertain tax positions that require adjustment to the combined financial statements to comply with the provisions of this guidance.  With few exceptions, the Company is no longer subject to income tax examinations by the U.S. federal tax authorities for years before 2006.

m.
Use of estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

NOTE 2 ¾ CONCENTRATIONS OF CREDIT RISK:


The Company maintains cash balances in financial institutions in Washington State.  The Federal Deposit Insurance Corporation (FDIC) insures the accounts at each of these institutions.  The aggregate funds held in one institution may exceed the FDIC insured limit from time to time and specific funds held by the institution may not be covered by FDIC insurance.
 
Management does not anticipate any material effect on the financial position of the Company as a result of these concentrations.  The Company also maintains a significant amount of cash on hand.  The total cash on hand as of December 31, 2009, was $1,128,000.

 
11

 

Gaming Consultants, Inc. and Affiliates

 
Notes to Combined Financial Statements


NOTE 3 ¾ FAIR VALUE AND FAIR VALUE MEASUREMENTS:


The Company has adopted the provisions of ASC Section 820 Subsection 10, for its goodwill.  Section 820 Subsection 10 establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosure about fair value measurements.  The framework enables a reader of the financial statements to assess the inputs used to develop the measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values.  The standard requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1:  Quoted market prices in active markets for identical assets or liabilities.
Level 2:  Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3:  Unobservable inputs that are not corroborated by market data.

As a result of the bankruptcy proceedings and the subsequent asset purchase agreement previously mentioned, goodwill was impaired at December 31, 2009.  The valuation resulted in a write off of $11,124,421 for the year ended December 31, 2009.  The valuation was performed using the market approach, based on the asset purchase agreement with Nevada Gold & Casinos, Inc. signed on April 14, 2010, see note 8.

The resulting fair value of goodwill of $1,419,943 at December 31, 2009, is based on the value assigned in the asset purchase agreement related to the actual sale of the casino, and therefore is considered to be a Level 1 item.

A reconciliation of goodwill measured at fair value on a recurring basis using subsequent sale information during the year ended December 31, 2009, is as follows:

Balance, beginning of year
  $ 12,544,364  
Impairment charge
    (11,124,421 )
         
Balance, end of year
  $ 1,419,943  

 
12

 

Gaming Consultants, Inc. and Affiliates

 
Notes to Combined Financial Statements


NOTE 4 ¾ LONG-TERM DEBT:


Long-term debt consisted of four unsecured notes payable with balances due at December 31, 2009 of $508,325, which are due for repayment between 2011 and 2015.  Management expects that the resolution of the CCAA and Receivership proceedings will result in unsecured notes being rendered worthless at the time a sale of the businesses is complete.  The Company continues to recognize the amounts payable on the combined balance sheet until such time as these obligations are relieved.

NOTE 5 ¾ RELATED PARTIES:


Gaming Consultants, Inc., acts as the service administrator for the Company, providing consulting services relating to the casino related activities and assuring compliance with local, state, and federal law.  The operating casinos pay Gaming Consultants, Inc. a service fee of 0.5% of gross revenue and a corporate overhead allocation of 2% of monthly gross revenue that is used to compensate for the costs incurred.  Total corporate overhead expense for the year ended December 31, 2009, was $2,782,000.  These expenses were eliminated during preparation of the combined statements.

NOTE 6 ¾ LEASES:


The Company has numerous cancelable operating leases for food and beverage equipment, table games, and related equipment.  Rent expense under these leases for the year ended December 31, 2009, was $1,021,000.  The Company also incurred $3,010,695 of expense for the rental of the facilities in which the Company operates.  The Company does not have any capital leases.

NOTE 7 ¾ COMMITMENTS AND CONTINGENCIES:


As discussed more fully in note 8, the Company is party to an Asset Purchase Agreement that would result in substantially all of the assets and operations of the Company being acquired by a third-party buyer.

 
13

 

Gaming Consultants, Inc. and Affiliates

 
Notes to Combined Financial Statements


NOTE 8 ¾ SUBSEQUENT EVENTS:


On February 22, 2010, the Golden Nugget Shoreline casino was closed.  The lease for the casino building was terminated by the Receiver in accordance with their duties under the court order.

On April 14, 2010, an Asset Purchase Agreement (“APA”) was signed with Nevada Gold & Casinos, Inc. (“Nevada Gold”).  The APA contemplates the sale of all of the assets of Gaming Consultants, Inc., Gaming Management, Inc., Gameco, Inc., and seven of the nine casinos, excluding the Golden Nugget Shoreline and the Drift on Inn.  Sale closing is subject to a number of contingencies, particularly Court and regulatory approval.

On April 15, 2010, gaming operations at the Drift on Inn casino were suspended.  The restaurant and its related operations continue to operate.

On May 25, 2010, an agreement was reached to sell the assets of the Drift on Inn to the current owner of the land and building on which that company is located.  The terms of the agreement include provisions that amend the lease of the Club Hollywood Casino building and parking lot in order to ensure timely and efficient assignment of the lease to Nevada Gold as noted in the APA.

On May 28, 2010, a hearing was conducted in the United States Bankruptcy Court, Western District of Washington (“the Court”), to consider the APA noted above.  The Court approved the APA, subject to the buyer being able to successfully obtain the necessary regulatory approvals.  Such approvals are expected to be obtained.

 
14

 
 
SUPPLEMENTAL INFORMATION
 


Gaming Consultants, Inc. and Affiliates
   
Combining Balance Sheet
December 31, 2009
 
   
Big
   
Silver Dollar
   
Shoreline
   
Silver Dollar
   
Silver Dollar
   
Golden Nugget
   
Balance
 
    
Nevada, Inc.
   
Tukwila
   
Gaming, Inc.
   
Mill Creek, Inc.
   
Renton
   
Tukwila, Inc.
   
Carried Forward
 
                                           
Assets
                                         
                                           
CURRENT ASSETS:
                                         
Cash
  $ 486,537     $ 113,186     $ 127,049     $ 369,250     $ 258,894     $ 502,041     $ 1,856,957  
Accounts receivable
    8,430       13,187       6,396       24,859       39,549       10,808       103,229  
Lines of credit, intercompany
    700,329       -       -       -       -       417,343       1,117,672  
Prepaid expenses and other assets
    54,924       41,418       33,927       64,793       79,606       32,428       307,096  
Inventory
    17,858       16,996       9,260       18,369       15,887       20,248       98,618  
Total current assets
    1,268,078       184,787       176,632       477,271       393,936       982,868       3,483,572  
                                                         
PROPERTY AND EQUIPMENT:
                                                       
Furniture, fixtures, and equipment
    693,892       406,321       233,142       639,076       396,158       377,395       2,745,984  
Leasehold improvements
    1,011,476       656,446       301,964       1,033,311       204,351       264,516       3,472,064  
      1,705,368       1,062,767       535,106       1,672,387       600,509       641,911       6,218,048  
Less accumulated depreciation
    1,497,099       987,052       452,122       882,677       371,954       559,520       4,750,424  
Fixed assets, net of depreciation
    208,269       75,715       82,984       789,710       228,555       82,391       1,467,624  
                                                         
OTHER ASSETS:
                                                       
Note receivable
    -       -       -       -       -       -       -  
Investments in properties
    -       -       -       -       -       -       -  
Deposits
    17,095       11,183       1,762       9,645       58,057       18,459       116,201  
Goodwill
    55,610       -       -       -       -       388,282       443,892  
Other assets, net of amortization
    -       -       -       -       -       -       -  
Total other assets
    72,705       11,183       1,762       9,645       58,057       406,741       560,093  
                                                         
Total assets
  $ 1,549,052     $ 271,685     $ 261,378     $ 1,276,626     $ 680,548     $ 1,472,000     $ 5,511,289  

See accompanying independent auditors’ report. 

 
16


Gaming Consultants, Inc. and Affiliates
   
Combining Balance Sheet (continued)
December 31, 2009
 
   
Balance
   
Royal Casino
   
Drift on Inn
   
Hollywood
               
Eliminating
       
    
Brought Forward
   
Holdings, Inc.
   
Casino Inc.
   
Casino Inc.
   
Other*
   
Subtotal
   
Entries
   
Total
 
                                                 
Assets
                                               
                                                 
CURRENT ASSETS:
                                               
Cash
  $ 1,856,957     $ 293,744     $ 154,078     $ 519,532     $ 164,462     $ 2,988,773     $ -     $ 2,988,773  
Accounts receivable
    103,229       17,819       20,782       46,685       178,427       366,942       (169,828 )     197,114  
Lines of credit, intercompany
    1,117,672       -       -       428,307       12,981,077       14,527,056       (14,527,056 )     -  
Prepaid expenses and other assets
    307,096       56,251       58,201       76,527       33,911       531,986       (55,089 )     476,897  
Inventory
    98,618       18,757       22,363       30,906       41,873       212,517       -       212,517  
Total current assets
    3,483,572       386,571       255,424       1,101,957       13,399,750       18,627,274       (14,751,973 )     3,875,301  
                                                                 
PROPERTY AND EQUIPMENT:
                                                               
Furniture, fixtures, and equipment
    2,745,984       278,852       355,636       616,676       786,580       4,783,728       -       4,783,728  
Leasehold improvements
    3,472,064       -       17,890       13,290       70,524       3,573,768       -       3,573,768  
      6,218,048       278,852       373,526       629,966       857,104       8,357,496       -       8,357,496  
Less accumulated depreciation
    4,750,424       155,338       194,192       334,494       591,393       6,025,841       -       6,025,841  
Fixed assets, net of depreciation
    1,467,624       123,514       179,334       295,472       265,711       2,331,655       -       2,331,655  
                                                                 
OTHER ASSETS:
                                                               
Note receivable
    -       -       -       -       497,985       497,985       -       497,985  
Investments in properties
    -       -       -       -       5,650,000       5,650,000       (5,650,000 )     -  
Deposits
    116,201       9,213       11,523       13,887       11,000       161,824       -       161,824  
Goodwill
    443,892       360,701       -       615,350       -       1,419,943       -       1,419,943  
Other assets, net of amortization
    -       20,000       43,333       543,333       428,343       1,035,009       -       1,035,009  
Total other assets
    560,093       389,914       54,856       1,172,570       6,587,328       8,764,761       (5,650,000 )     3,114,761  
                                                                 
Total assets
  $ 5,511,289     $ 899,999     $ 489,614     $ 2,569,999     $ 20,252,789     $ 29,723,690     $ (20,401,973 )   $ 9,321,717  

*
Other is a combination of Gaming Consultants, Inc.; Mill Creek Gaming, Inc.; Gaming Management Inc.; Little Nevada II, Inc.;
Little Nevada III, Inc.; Shoreline Holdings, Inc.; Snohomish Gaming, Inc.; and Gameco, Inc

See accompanying independent auditors’ report. 


17


Gaming Consultants, Inc. and Affiliates
 
   
Combining Balance Sheet (continued)
December 31, 2009
 
   
Big
   
Silver Dollar
   
Shoreline
   
Silver Dollar
   
Silver Dollar
   
Golden Nugget
   
Balance
 
    
Nevada, Inc.
   
Tukwila
   
Gaming, Inc.
   
Mill Creek, Inc.
   
Renton
   
Tukwila, Inc.
   
Carried Forward
 
                                           
Liabilities and Stockholder’s Equity
                                         
                                           
CURRENT LIABILITIES:
                                         
Lines of credit, intercompany
  $ -     $ 492,230     $ 1,309,116     $ 2,082,165     $ 114,651     $ -     $ 3,998,162  
Accounts payable
    86,342       42,601       32,354       74,137       79,197       91,163       405,794  
Accrued expenses:
                                                       
Payroll
    120,094       70,130       63,370       96,077       99,487       120,549       569,707  
Sales and business taxes
    144,846       44,304       (7,803 )     96,674       27,575       128,308       433,904  
Other accrued expenses
    (26,763 )     23,988       (1,795 )     46,222       46,245       (54,512 )     33,385  
Deferred revenue
    -       -       -       -       -       -       -  
Chips outstanding
    20,003       4,296       5,965       15,040       8,488       10,859       64,651  
Jackpots and prizes liabilities
    198,160       3,769       -       204,043       109,283       280,560       795,815  
Total current liabilities
    542,682       681,318       1,401,207       2,614,358       484,926       576,927       6,301,418  
                                                         
LONG-TERM DEBT
    -       -       -       -       68,829       -       68,829  
                                                         
Total liabilities
    542,682       681,318       1,401,207       2,614,358       553,755       576,927       6,370,247  
                                                         
COMMITMENTS AND CONTINGENCIES
                                                       
                                                         
STOCKHOLDER’S EQUITY:
                                                       
Capital
    100       -       62,205       -       -       2,141,256       2,203,561  
Retained earnings (accumulated deficit)
    1,006,270       (409,633 )     (1,202,034 )     (1,337,732 )     126,793       (1,246,183 )     (3,062,519 )
Total stockholder’s equity
    1,006,370       (409,633 )     (1,139,829 )     (1,337,732 )     126,793       895,073       (858,958 )
                                                         
Total liabilities and stockholder’s equity
  $ 1,549,052     $ 271,685     $ 261,378     $ 1,276,626     $ 680,548     $ 1,472,000     $ 5,511,289  

See accompanying independent auditors’ report. 

 
18


Gaming Consultants, Inc. and Affiliates
   
Combining Balance Sheet (continued)
December 31, 2009
 
   
Balance
   
Royal Casino
   
Drift on Inn
   
Hollywood
               
Eliminating
       
    
Brought Forward
   
Holdings, Inc.
   
Casino Inc.
   
Casino Inc.
   
Other*
   
Subtotal
   
Entries
   
Total
 
                                                 
Liabilities and Stockholder’s Equity
                                               
                                                 
CURRENT LIABILITIES:
                                               
Lines of credit, intercompany
  $ 3,998,162     $ 1,436,507     $ 3,278,093     $ -     $ 5,814,294     $ 4,527,056     $ (14,527,056 )   $ -  
Accounts payable
    405,794       87,610       104,643       140,778       228,294       967,119       (169,828 )     797,291  
Accrued expenses:
                                                               
Payroll
    569,707       112,860       93,920       156,079       68,564       1,001,130       -       1,001,130  
Sales and business taxes
    433,904       116,229       63,976       151,347       27,693       793,149       -       793,149  
Other accrued expenses
    33,385       12,490       38,768       7,413       160,755       252,811       -       252,811  
Deferred revenue
    -       -       -       -       59,721       59,721       (55,089 )     4,632  
Chips outstanding
    64,651       9,714       2,284       32,408       -       109,057       -       109,057  
Jackpots and prizes liabilities
    795,815       74,085       7,588       193,072       -       1,070,560       -       1,070,560  
Total current liabilities
    6,301,418       1,849,495       3,589,272       681,097       6,359,321       18,780,603       (14,751,973 )     4,028,630  
                                                                 
LONG-TERM DEBT
    68,829       -       -       -       439,496       508,325       -       508,325  
                                                                 
Total liabilities
    6,370,247       1,849,495       3,589,272       681,097       6,798,817       19,288,928       (14,751,973 )     4,536,955  
                                                                 
COMMITMENTS AND CONTINGENCIES
                                                               
                                                                 
STOCKHOLDER’S EQUITY:
                                                               
Capital
    2,203,561       -       1,050,000       4,600,000       30,903,635       38,757,196       (5,650,000 )     33,107,196  
Retained earnings (accumulated deficit)
    (3,062,519 )     (949,496 )     (4,149,658 )     (2,711,098 )     (17,449,663 )     (28,322,434 )     -       (28,322,434 )
Total stockholder’s equity
    (858,958 )     (949,496 )     (3,099,658 )     1,888,902       13,453,972       10,434,762       (5,650,000 )     4,784,762  
                                                                 
Total liabilities and stockholder’s equity
  $ 5,511,289     $ 899,999     $ 489,614     $ 2,569,999     $ 20,252,789     $ 29,723,690     $ (20,401,973 )   $ 9,321,717  

*
Other is a combination of Gaming Consultants, Inc.; Mill Creek Gaming, Inc.; Gaming Management Inc.; Little Nevada II, Inc.;
Little Nevada III, Inc.; Shoreline Holdings, Inc.; Snohomish Gaming, Inc.; and Gameco, Inc.

See accompanying independent auditors’ report. 

 
19


Gaming Consultants, Inc. and Affiliates
 
   
Combining Statement of Income
Year Ended December 31, 2009
 
   
Big
   
  
   
Shoreline
   
Silver Dollar
   
Silver
   
Golden
   
 
   
 
 
    
Nevada,
Inc.
   
Silver Dollar
Tukwila
   
Gaming,
Inc.
   
Mill Creek,
Inc.
   
Dollar
Renton
   
Nugget
Tukwila, Inc.
   
Royal Casino
Holdings, Inc.
   
Balance
Carried Forward
 
                                                 
REVENUE:
                                               
Gaming operations
  $ 4,876,841     $ 1,727,986     $ 1,893,591     $ 4,049,947     $ 3,625,627     $ 4,244,132     $ 3,978,944     $ 24,397,068  
Food and beverage
    1,266,074       354,979       210,662       860,842       922,874       1,199,963       1,000,635       5,816,029  
Pull tabs
    51,568       69,380       57,585       120,655       73,529       91,119       289,228       753,064  
Other
    107,758       37,304       34,805       115,998       214,853       81,517       106,181       698,416  
      6,302,241       2,189,649       2,196,643       5,147,442       4,836,883       5,616,731       5,374,988       31,664,577  
Less promotional allowances
    484,585       180,258       121,184       429,940       502,723       642,819       521,741       2,883,250  
                                                                 
NET REVENUE
    5,817,656       2,009,391       2,075,459       4,717,502       4,334,160       4,973,912       4,853,247       28,781,327  
                                                                 
EXPENSES:
                                                               
Operating costs
    3,003,839       1,748,605       1,556,302       2,655,642       2,732,450       3,114,042       3,055,139       17,866,019  
Selling, general, and administrative
    1,346,938       631,604       687,195       1,366,542       1,428,347       1,068,358       1,337,927       7,866,911  
Depreciation and amortization
    71,024       47,028       25,818       141,043       59,368       42,260       72,580       459,121  
Total expenses
    4,421,801       2,427,237       2,269,315       4,163,227       4,220,165       4,224,660