Filed
pursuant to Rule 424(b)(3)
File No. 333-131946
Prospectus
Supplement No. 1
(To Prospectus dated June 6,
2006)
CHILCO RIVER HOLDINGS, INC.
6,481,334 shares of common stock
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This prospectus supplement supplements the Prospectus dated June 6, 2006, relating to the sale of up to of 6,481,334 shares of our common stock. This prospectus supplement should be read in conjunction with the Prospectus.
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Quarterly Report on Form 10-QSB
On August 16, 2006, we filed with the Securities and Exchange Commission the attached Quarterly Report on Form 10-QSB for the quarter ended June 30, 2006. The text of the 10-QSB is attached hereto.
| _________________ |
Investing in our
common stock involves a high degree of risk.
See Risk Factors
beginning on page 6 of the
Prospectus.
| _________________ |
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus supplement. Any representation to the contrary is a criminal offense.
| _________________ |
The date of this prospectus supplement is August 28, 2006
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended: June 30, 2006 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number:
CHILCO RIVER HOLDINGS INC.
(Exact name of small business issuer as specified in
its charter)
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Nevada
(State or other jurisdiction of incorporation or organization) |
98-0419129
(I.R.S. Employer Identification No.) |
|
355 Lemon Avenue, Suite C
Walnut, CA 91789 (Address of principal executive offices) |
91789
(zip code) |
Issuer’s Telephone Number: (909) 869-7933
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
No
As of August 15, 2006 there were 47,348,000 shares of common stock outstanding.
Transitional Small Business Disclosure Format (check one)
Yes
No
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Part I – FINANCIAL INFORMATION |
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| Item 1 | Unaudited Condensed Consolidated Financial Statements | 1 | |||
| Condensed Consolidated Balance Sheet as of June 30, 2006 | 1 | ||||
| Condensed Consolidated Statement of Operations for three and six months ended June 30, 2006 and 2005 of Operations | 2 | ||||
| Condensed Consolidated Statement of Cash Flows for six months ended June 30, 2006 and 2005 | 3 | ||||
| Notes to Unaudited Condensed Consolidated Financial Statements | 4 | ||||
| Item 2 | Plan of Operation | 14 | |||
| Item 3 | Controls and Procedures | 21 | |||
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Part II – OTHER INFORMATION |
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| Item 1. | Legal Proceedings | 22 | |||
| Item 1A. | Risk Factors | 22 | |||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 22 | |||
| Item 3. | Defaults Upon Senior Securities | 22 | |||
| Item 4. | Submissions of Matters to a Vote of Security Holders | 22 | |||
| Item 5 | Other Information | 22 | |||
| Item 6 | Exhibits | 22 | |||
| Signatures | 22 | ||||
i
Explanatory Note: On July 5, 2007, Chilco River Holdings Inc. effected a two-for-one split by way of stock dividend. Each shareholder of record on July 5, 2006 at 5:00 p.m. (Eastern Time) received one additional share of common stock. On July 5, 2006, there were 21,840,667 shares of common stock issued and outstanding. After giving effect to the stock dividend, the Company had 43,681,334 shares. Information contained in this quarterly report gives retroactive effect to the stock dividend.
CHILCO RIVER HOLDINGS INC.
CONSOLIDATED BALANCE SHEET
(Expressed in US$)
(Unaudited — See Accompanying Notes)
1
CHILCO RIVER HOLDINGS INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Expressed in US$)
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Three Months Ending
June 30, |
Six Months Ending
June 30, |
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| 2006 | 2005 | 2006 | 2005 | |||||||||||
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| Revenues | ||||||||||||||
| Casino | $ | 117,108 | $ | 778,564 | $ | 172,376 | $ | 1,749,867 | ||||||
| Rooms | 272,857 | 345,463 | 543,883 | 614,583 | ||||||||||
| Food and Beverage | 25,303 | 96,563 | 50,968 | 234,975 | ||||||||||
| Other | — | 32,988 | — | 62,270 | ||||||||||
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| Less: Promotional Allowances | — | — | — | — | ||||||||||
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| Total Revenues | 415,268 | 1,253,578 | 767,227 | 2,661,695 | ||||||||||
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| Operating Expenses | ||||||||||||||
| Operating departments | 148,549 | 238,991 | 253,246 | 584,015 | ||||||||||
| General and administrative | 659,778 | 209,831 | 1,063,211 | 366,310 | ||||||||||
| Depreciation | 185,628 | 144,322 | 370,686 | 382,032 | ||||||||||
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| Total Operating Expenses | 993,955 | 593,144 | 1,687,143 | 1,332,357 | ||||||||||
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| Income from Operations | (578,687 | ) | 660,434 | (919,916 | ) | 1,329,338 | ||||||||
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| Other Income and Expenses | ||||||||||||||
| Interest income | 7,530 | 24,898 | 13,289 | 62,654 | ||||||||||
| Other income/gains | 64 | 6,265 | 162 | 5,077 | ||||||||||
| Other expenses/losses | — | (34,969 | ) | — | (34,969 | ) | ||||||||
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| 7,594 | (3,806 | ) | 13,451 | 32,762 | ||||||||||
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| Income before income tax | (571,093 | ) | 656,628 | (906,465 | ) | 1,362,100 | ||||||||
| Provision for income tax | (17,008 | ) | (100,010 | ) | (29,670 | ) | (407,058 | ) | ||||||
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| Net Income (Loss) | (588,101 | ) | 556,618 | (936,135 | ) | 955,042 | ||||||||
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| Other Comprehensive Income | ||||||||||||||
| Unrealized gain (loss) on | ||||||||||||||
| Foreign Currency Translation, net of tax - Note | (362 | ) | 262,443 | (7,581 | ) | 53,691 | ||||||||
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| Total Comprehensive Income | $ | (588,463 | ) | $ | 819,061 | $ | (943,716 | ) | $ | 1,008,733 | ||||
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| Basic Earnings Per Share | $ | (0.01 | ) | $ | 0.01 | $ | (0.02 | ) | $ | 0.02 | ||||
| Diluted Earnings Per Share | $ | (0.01 | ) | $ | 0.01 | $ | (0.02 | ) | $ | 0.02 | ||||
| Weighted Average Shares Outstanding | 43,681,334 | 38,500,000 | 44,683,807 | 38,500,000 | ||||||||||
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(Unaudited — See Accompanying Notes)
2
CHILCO RIVER HOLDINGS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in US$)
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For the Six Months
Ended June 30, |
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| 2006 | 2005 | |||||||
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| Cash Flows from Operating Activities | ||||||||
| Net Income | $ | (936,135 | ) | $ | 955,042 | |||
| Adjustments to reconcile net income to cash flows | ||||||||
| from operating activities | ||||||||
| Depreciation | 370,680 | 151,000 | ||||||
| Prepaid expense via stock issuance | 230,000 | — | ||||||
| (Increase)/Decrease in account balances of: | ||||||||
| Accounts receivable | (61,085 | ) | (380,881 | ) | ||||
| Other receivable | — | (116,265 | ) | |||||
| Inventory | (9,510 | ) | (83,194 | ) | ||||
| Prepaid expense & other current assets | (92,151 | ) | 836,182 | |||||
| Other assets | 48,648 | 851 | ||||||
| Increase/(Decrease) in account balances of: | ||||||||
| Accounts payable | (31,331 | ) | (121,170 | ) | ||||
| Accrued expenses and other payables | 247,489 | (56,300 | ) | |||||
| Foreign Taxes Payable | (61,995 | ) | — | |||||
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| Cash Flows from Operating Activities | (295,390 | ) | 1,185,265 | |||||
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| Cash Flows Used by Investing Activities | ||||||||
| Purchase of properties and equipment | — | (404,983 | ) | |||||
| Cash paid for construction in progress | (904,637 | ) | — | |||||
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| Cash Used by Investing Activities | (904,637 | ) | (404,983 | ) | ||||
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| Cash Flows from Financing Activities | ||||||||
| Cash lent to affiliate company | (60,000 | ) | — | |||||
| Cash repayment for shareholder loans | (190,887 | ) | (47,989 | ) | ||||
| Cash paid for dividend | — | (2,753,086 | ) | |||||
| Proceeds from issuance of common stock-Kubuk Investment | — | 1,022,041 | ||||||
| Proceeds from issuance of common stock-Kubuk Gaming | — | 6,144 | ||||||
| Cash proceeds from subscribed capital | 817,150 | — | ||||||
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| Cash Used in Financing Activities | 566,263 | (1,772,890 | ) | |||||
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| Other comprehensive income from current year | (7,582 | ) | 1,181,575 | |||||
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| Net Change in cash and cash equivalents | (641,346 | ) | 188,967 | |||||
| Cash and cash equivalents at the beginning of year | 1,435,683 | 1,425,999 | ||||||
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| Cash and cash equivalents at the end of year | $ | 794,337 | $ | 1,614,966 | ||||
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| Supplemental Disclosure Information: | ||||||||
| Cash paid during the year for interest | — | — | ||||||
| Cash paid during the year for income taxes | $ | 133,946 | $ | 407,058 | ||||
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(Unaudited — See Accompanying Notes)
3
Chilco River Holdings, Inc.
Notes To The Consolidated Financial Statements
June 30, 2006
Unaudited
June 30, 2006
Unaudited
Preliminary Note
The accompanying condensed consolidated financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. In the opinion of the management, the accompanying interim financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation have been included. The results of operations for the three and six-month periods ended June 30, 2006, are not necessarily indicative of the results for a full-year period. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s annual audited financial statements for the year ended December 31, 2005.
| 1. | Business Organization and Reorganization |
| Chilco River Holdings, Inc. (CRH, or the Company) was incorporated in the State of Nevada on May 8, 2003. The Company acquired a 100% interest in 16 mineral claim units located in British Columbia, Canada in November 2003. After the completion of a preliminary exploration report on the claim, the Company has suspended any mineral exploration effort. The Company holds no mineral property interests at June 30, 2006. |
| Bruce Grupo Diversion SAC (BGD) was formed on March 1, 1996 and registered at the Registry for Legal Persons of Lima, Peru on April 28, 1996. BGD owned a fourteen-story building and a four-story adjacent structure that are operated as a casino and a hotel (the Bruce Hotel/Casino). Bruce Hotel/Casino is licensed to operate slot machines, a night club, discothèques, and a restaurant. As of February 2005, the casino consisted of traditional gaming tables (blackjack, roulette, craps and poker) in the second floor (the gaming floor) of the main building and of about 220 slot machines in the ground floor (the slot room). |
| Kubuk International, Inc. (KII) is a California corporation and was incorporated on January 7, 2002. The majority shareholders of KII also control 99% of total voting stock of BGD. |
| Kubuk Investment S.A.C. (KISAC) was formed in year 2001 by the majority shareholders of KII in Peru. KII’s majority shareholders also formed Kubuk Gaming S.A.C. (KGSAC) in year 2005 in Peru. |
| Starting on August 4, 2001, BGD and KISAC entered into a series of sale and purchase agreements (Sale and Purchase Agreements) of the hotel assets and certain casino properties owned and operated by BGD for purpose of transferring these properties to KISAC. Total consideration for all Sale and Purchase Agreements was in the amount of S/. 62,970,744 (US$19,357,745 using spot rate of 3.253:1 on May 21, 2005). On May 21, 2005, all assets subject to the scope of the sale and purchase agreements were transferred to and received by KISAC, which then commenced to carry on the hotel lodging businesses of Bruce Hotel/Casino. The only assets that were transferred to KISAC are the assets as listed under “Property, Furniture, and Equipment” on the balance sheet. All other assets and liabilities continue to belong to BGD and will subsequently be distributed to its current shareholder. The accounting treatment used by KISAC to record the transfer of the assets followed the guidance for transactions between entities under common control as described in FAS 141, Business Combinations. This standard requires that the receiving entity use the carrying amount of the assets of the transferring entity. Therefore, no fair market value adjustments were |
4
Chilco River Holdings, Inc.
Notes To The Consolidated Financial Statements
June 30, 2006
Unaudited
| made to the transferred assets. Furthermore, in accordance with Article 11-01(d) of Regulation S-X, this transaction was treated as a business acquisition since the revenue-producing activity remained generally the same as before the transaction. Specifically, KISAC retained the following: physical facilities, employee base, customer base, operating rights, operation techniques, and trade name. |
| The gaming floor of Bruce Hotel/Casino has been temporarily closed for renovation since March 2005. During the renovation, BGD continued to operate slot machines in the casino until July 1, 2005, when MINCETUR, the gaming authority of Peru, issued gaming licenses to KGSAC. KGSAC then took over the slot machine operations and conducts all other gaming activities of Bruce Hotel/Casino until the renovation project is completed. In anticipation of the start of the planned renovation, the Company suspended the slot room operation and closed the restaurant to the general public in November 2005. As of December 31, 2005, the Company carried out only the hotel lodging operations. |
| On June 15, 2005, KII and the shareholders of KISAC and KGSAC entered into an Agreement and Plan of Reorganization (the Reorganization Agreement), under which KII issued 50,920,000 shares of common stock to the shareholders of KISAC and KGSAC in exchange for their entire ownership holdings of KISAC and KGSAC. As of June 30, 2005, both KISAC and KGSAC were 100% owned by KII. |
| On July 15, 2005, CRH entered into a Share Exchange Agreement with KII and certain representatives of its shareholders. Under the terms of the Share Exchange Agreement, CRH agreed to acquire all of the issued and outstanding capital stock of KII from KII’s shareholders. On August 3, 2005, CRH completed the acquisition of KII in accordance with the terms of the Share Exchange Agreement by issuing 19,250,000 Exchange Shares to shareholders of KII as consideration. KII had 51,000,400 shares of common stock issued and outstanding at the time of acquisition. Its shareholders received 0.3749970588 Exchange Shares for each share of KII common stock tendered. In connection with the closing of the Share Exchange, the founding shareholder and two former officers and directors of CRH agreed to contribute an aggregate of 3,964,000 shares of the CRH common stock to the Company as an additional capital contribution. The shares were cancelled effective as of August 3, 2005. See Note 6 for information regarding the related escrow agreements and share contribution agreement. |
| The Company established a software development center in Shenzhen, China in April 2006 for the purposes of developing an online poker software and other devices related to online gaming activities. The Company intends to, after |
5
Chilco River Holdings, Inc.
Notes To The Consolidated Financial Statements
June 30, 2006
Unaudited
| successful software development and testing, license the online gaming software to third parties qualified to conduct licensed online gaming activities outside of the United States in jurisdictions where on-line gaming is legal. The Company has applied to the local government in China for the foreign business branch office status for its Chinese software development center. |
| On July 5, 2007, the Company effected a two-for-one split by way of stock dividend. Each shareholder of record on July 5, 2006 at 5:00 p.m. (eastern time) received one additional share of common stock. On July 5, 2006, there were 21,840,667 shares of common stock issued and outstanding. After giving effect to the stock dividend, the Company had 43,681,334 shares of common stock outstanding. These financial statements give retroactive effect to the stock dividend. |
| 2. | Significant Accounting Policies |
| (a) | Principles of Consolidation |
| The financial statements include the accounts of CRH and KII, as well as the accounts of the latter’s wholly-owned Peruvian subsidiaries, KISAC and KGSAC, formerly Bruce Grupo Diversion SAC. All significant inter-company balances and transactions have been eliminated in consolidation. |
| (b) | Use of Estimates |
| The preparation of the Company’s financial statements in conformity with generally accepted accounting principles in the United States requires management of the Company to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. |
| (c) | Cash and Cash Equivalents |
| The Company considers all highly liquid debt instruments purchased with a maturity of three months or less when purchased to be cash equivalents. |
| (d) | Accounts Receivable |
| Trade receivables, including casino and hotel receivables, are typically non-interest bearing and are initially recorded at cost. Accounts are written off when management deems the account to be uncollectible. Recoveries of accounts previously written off are recorded when received. An estimated allowance for doubtful accounts is maintained to reduce the Company’s receivables to their carrying amount, which approximates fair value. The allowance is estimated based on specific re |