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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal quarter ended: Commission file number:
OCTOBER 31, 1996 0-14939
CROWN CASINO CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 63-0851141
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4040 N. MACARTHUR BLVD., SUITE 100, IRVING, TEXAS
(Address of principal executive offices)
75038-6424
(Zip Code)
(972) 717-3423
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has 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 [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Title of Each Class December 10, 1996
------------------- -----------------
Common stock, par value $.01 per share 10,414,608
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PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS CROWN CASINO CORPORATION
October 31, 1996 April 30,
(Unaudited) 1996
---------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 6,243,730 $ 668,853
Receivables 9,838,652 742,246
Prepaid expenses 273,381 49,766
Marketable equity securities 8,550,380
------------ ------------
Total current assets 24,906,143 1,460,865
------------ ------------
Property and equipment:
Furniture, fixtures and equipment 2,062,231 1,892,666
Land held for development 16,169,709 16,169,709
------------ ------------
18,231,940 18,062,375
Less accumulated depreciation (285,654) (194,179)
------------ ------------
17,946,286 17,868,196
------------ ------------
Deferred transactions costs 565,650
Note receivable from LRGP 20,000,000
------------ ------------
565,650 20,000,000
------------ ------------
$ 43,418,079 $ 39,329,061
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 181,645 $ 72,773
Accrued liabilities 340,169 819,018
Capital lease obligations 3,281 6,329
Current portion of long-term debt 69,763 62,676
Income taxes payable 2,586,000
------------ ------------
Total current liabilities 3,180,858 960,796
------------ ------------
Long-term debt, less current portion 875,695 918,564
Deferred income taxes 1,300,000 4,000,000
Investment in SCGC 3,297,043
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.01 per share, 1,000,000 shares
authorized; none issued or outstanding
Common stock, par value $.01 per share, 50,000,000 shares authorized
10,499,508 issued and outstanding (11,650,559 at April 30, 1996) 104,995 116,506
Additional paid-in capital 38,715,114 41,784,088
Unrealized loss on securities (2,163,000)
Retained earnings (accumulated deficit) 1,404,417 (11,747,936)
------------ ------------
Total stockholders' equity 38,061,526 30,152,658
------------ ------------
$ 43,418,079 $ 39,329,061
============ ============
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF OPERATIONS CROWN CASINO CORPORATION
(UNAUDITED)
Three Months Ended
October 31,
1996 1995
------------ ------------
Revenues $ -- $ --
Costs and expenses:
General and administrative 928,535 623,235
Gaming development 20,269 61,723
Depreciation and amortization 46,939 29,026
------------ ------------
995,743 713,984
------------ ------------
Other income (expense):
Interest expense (24,656) (376)
Interest income 353,604 588,619
Equity in loss of SCGC (645,718)
Loss on sale of securities (526,370)
Other income 500,000
------------ ------------
302,578 (57,475)
------------ ------------
Loss before income taxes (693,165) (771,459)
Benefit for income taxes (225,000) (43,200)
------------ ------------
Net loss $ (468,165) $ (728,259)
============ ============
Loss per share $ (.04) $ (.06)
============ ============
Weighted average common and common
equivalent shares outstanding 11,006,604 11,741,286
============ ============
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF OPERATIONS CROWN CASINO CORPORATION
(UNAUDITED)
Six Months Ended
October 31,
1996 1995
------------ ------------
Revenues $ -- $ --
Costs and expenses:
General and administrative 1,530,453 1,238,029
Gaming development 38,825 126,677
SCGC pre-opening and development 536,110
Depreciation and amortization 91,474 72,553
------------ ------------
1,660,752 1,973,369
------------ ------------
Other income (expense):
Interest expense (49,767) (965,793)
Interest income 954,699 1,084,298
Equity in loss of SCGC (1,585,753)
Gain on sale of SCGC 14,934,543 21,512,640
Loss on sale of securities (526,370)
Other income 500,000
------------ ------------
15,813,105 20,045,392
------------ ------------
Income before income taxes 14,152,353 18,072,023
Provision for income taxes 1,000,000 8,054,800
------------ ------------
Net income $ 13,152,353 $ 10,017,223
============ ============
Earnings per share $ 1.15 $ .82
============ ============
Weighted average common and common
equivalent shares outstanding 11,475,228 12,263,377
============ ============
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS CROWN CASINO CORPORATION
(UNAUDITED)
Six Months Ended
October 31,
1996 1995
------------ ------------
Operating activities:
Net income $ 13,152,353 $ 10,017,223
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation and amortization 91,474 72,553
Amortization of debt issuance costs/discount 389,360
Deferred income taxes (2,700,000) 8,054,800
Equity in loss of SCGC 1,585,753
Gain on sale of SCGC (14,934,543) (21,512,640)
Loss on sale of securities 526,370
Changes in assets and liabilities, net of disposition:
Receivables 103,597 (364,784)
Prepaid expenses (223,615) (801,474)
Accounts payable and accrued liabilities (757,477) (195,840)
Income taxes payable 3,700,000
------------ ------------
Net cash used by operating activities (1,041,841) (2,755,049)
------------ ------------
Investing activities:
Purchase of assets (169,564) (4,160,168)
Deferred transaction costs (161,900)
Sale of SCGC 1,000,000
Purchase of securities (4,023,118)
Sale of securities 4,090,615
Collection of note receivable 10,000,000
------------ ------------
Net cash provided (used) by investing activities 9,736,033 (3,160,168)
------------ ------------
Financing activities:
Issuance of common stock 23,215
Purchase of common stock (3,080,485) (50,937)
Advances from LRGP 4,627,897
Payments of debt and capital lease obligations (38,830) (41,725)
------------ ------------
Net cash provided (used) by financing activities (3,119,315) 4,558,450
------------ ------------
Increase (decrease) in cash and cash equivalents 5,574,877 (1,356,767)
Cash and cash equivalents at: Beginning of period 668,853 1,692,440
------------ ------------
End of period $ 6,243,730 $ 335,673
============ ============
See accompanying notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CROWN CASINO CORPORATION
(UNAUDITED)
FOR THE SIX MONTHS ENDED OCTOBER 31, 1996
NOTE A - CHANGE IN BUSINESS OF THE COMPANY
Through October 1996 Crown Casino Corporation and subsidiaries (the "Company")
had been engaged in the business of owning, operating and developing casino
gaming properties. In November 1996 the Board of Directors of the Company
reached a decision to discontinue operating in the casino gaming industry and
seek an acquisition or merger in another field which has yet to be determined.
The Board cited several factors contributing to its decision including (i) the
limited growth prospects for casino gaming, (ii) increasing competetive
pressures in virtually all gaming markets, (iii) the low valuation small and
mid cap gaming companies receive in the public market, and (iv) the risk of
increasing federal and state regulation and taxes. As a result of the Board's
decision, the Company will not complete the planned acquisition of the
Mississippi Belle II, Inc. riverboat casino located in Clinton, Iowa (see Note
D). Further, the Company now plans to sell its 18.6 acre tract of land in the
gaming district of Las Vegas, Nevada which had previously been held for
development. The Company is actively pursuing potential acquisition and/or
merger possibilities, but can not predict if and when any agreement may be
reached.
NOTE B - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six month period
ended October 31, 1996 are not necessarily indicative of the results that may
be expected for the year ended April 30, 1997. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended April 30, 1996.
NOTE C - SALE OF SCGC
On June 9, 1995 pursuant to a definitive stock purchase agreement, the Company
sold a 50% interest in St. Charles Gaming Company, Inc. ("SCGC"), which owns
and operates a riverboat casino located in Calcasieu Parish, Louisiana, to
Louisiana Riverboat Gaming Partnership ("LRGP"), a joint venture then owned 50%
by Casino America, Inc. ("Casino America") and 50% by Louisiana Downs, Inc.
SCGC was originally acquired by the Company in June 1993 and remained in the
development stage until opening its riverboat casino in July 1995. LRGP owns
the Isle of Capri(SM) dockside riverboat casino in Bossier City, Louisiana.
The purchase price consisted of (i) a five-year $20 million non-recourse note
with interest payable monthly at 11.5% per annum and secured by LRGP's 50%
interest in SCGC (the "LRGP Note"), (ii) $1 million cash, and (iii) a warrant
(which may only be exercised by converting a portion of the LRGP Note) to
purchase 416,667 shares of Casino America common stock at $12 per share. In
connection with this transaction the Company recorded a gain before income
taxes of approximately $21.5 million.
On May 3, 1996 the Company sold its remaining 50% interest in SCGC to Casino
America for (i) 1,850,000 shares of Casino America common stock, (ii) the
exchange of the $20 million LRGP Note for LRGP Note A ("Note A") and LRGP Note
B ("Note B"), each in the principal amount of $10 million and bearing interest
at 11.5% per annum, and (iii) an additional five- year warrant to purchase up
to another 416,667 shares of Casino America common stock (bringing the total
number of shares purchasable pursuant to warrants by the Company to 833,334) at
an exercise price of $12 per share. In connection with this transaction, in
May 1996, the Company recorded a gain before income taxes of approximately
$14.9 million.
In connection with a rights offering declared by Casino America, the Company
was granted the right to purchase 684,786 shares of Casino America common stock
at a price of $5.875 per share. In August 1996 the Company exercised its right
and purchased 684,786 shares of Casino America common stock for an aggregate
exercise price of $4,023,118. In October 1996 the Company sold 649,700 shares
of the Casino America common stock it had acquired in the rights offering for
net proceeds of $4,090,615 (or approximately $6.30 per share) resulting in a
gain before income taxes of $273,630. The balance of the Casino America common
stock owned by the Company (1,885,086 shares) was sold in November 1996 for net
proceeds of approximately $7.5 million
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resulting in a loss before income taxes of approximately $4.7 million. This
loss will be included in the Company's fiscal quarter ended January 31, 1997.
In August 1996 Casino America acquired the remaining interest in LRGP it did
not already own and issued $315 million of 12 1/2% senior secured notes due
2003 (the "Casino America Bonds"), a portion of the proceeds of which was used
to pay off Note A. As a result of the Casino America transactions, Note B
became an unsecured, subordinated obligation of Casino America. Late in
October 1996 the Company sold Note B at a discount of $800,000, resulting in
net proceeds of $9,200,000 which was received in November 1996. At October 31,
1996 the $9,200,000 net sales price of Note B was included in receivables on
the accompanying balance sheet.
Prior to June 9, 1995 SCGC's operating results were consolidated with the
Company. From June 9, 1995 (the date of sale of the first 50% interest in
SCGC) through May 2, 1996 (the day prior to the sale of the Company's remaining
50% interest in SCGC) the Company accounted for its investment in SCGC on the
equity method, and accordingly has included its proportionate share of SCGC's
operating results in its consolidated results of operations. SCGC's operating
results for the two days ended May 2, 1996 were not material. The Company's
gain before income taxes on the sale of SCGC is calculated as follows (in
thousands):
Sale of Sale of
First 50% Second 50%
(June 1995) (May 1996)
----------- ----------
Consideration received in sale $ 21,000 $ 12,025
The Company's negative basis in stock sold 889 3,297
Transaction and other costs (376) (388)
-------- --------
Gain before income taxes on sale of SCGC $ 21,513 $ 14,934
======== ========
Upon closing of the sale of its remaining 50% interest in SCGC on May 3, 1996,
the Company's investment in SCGC was eliminated. Other than a guarantee of
certain leases, for which the Company has been indemnified by LRGP and Casino
America, the Company is not liable for any obligations of SCGC.
During the six months ended October 31, 1995 the Company included approximately
$2.6 million of net costs and expenses, or approximately $.21 per share,
attributable to SCGC in its consolidated results of operations.
NOTE D - ABANDONED ACQUISITION OF MBII
In June 1996 the Company entered into a definitive asset purchase agreement to
acquire the assets and operations of Mississippi Belle II, Inc. ("MBII") for a
purchase price of $40 million. As discussed in Note A, in November 1996 the
Board of Directors of the Company made the decision to exit the casino gaming
industry and explore acquisition or merger opportunities in other fields. As a
result of the Board's decision, the Company will not complete the planned
acquisition of MBII. In November 1996, the Company wrote-off approximately
$680,000 of costs pertaining to such proposed acquisition, including a $500,000
non-refundable deposit. This loss will be included in the Company's fiscal
quarter ended January 31, 1997.
NOTE E - COMMON STOCK
The Company's Board of Directors have approved a stock repurchase program
which, as amended, provides authorization for the Company to repurchase up to
2,000,000 shares of the Company's common stock from time to time in the open
market, or in negotiated private transactions. Through October 31, 1996 the
Company had repurchased 1,176,051 shares pursuant to this program. The timing
and amount of future share repurchases, if any, will depend on various factors
including market conditions, available alternative investments and the
Company's financial position.
The weighted average common and common equivalent shares outstanding used in
the calculation of earnings per share includes 164,012 and 550,907 common
equivalent shares for the six months ended October 31, 1996 and 1995,
respectively.
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NOTE F - MARKETABLE EQUITY SECURITIES
Marketable equity securities consisted of the following at October 31, 1996:
Fair Market Unrealized
Value Cost Basis Loss
----------- -------------- ------------
Casino America common stock (1,885,086 shares) $ 8,954,130 $ 12,231,130 $ (3,277,000)
Tax benefit related to unrealized loss at 34% 1,114,000
------------
Net unrealized loss included in stockholders' equity $ (2,163,000)
============
The cost basis of the 1,850,000 shares of Casino America common stock received
by the Company in the sale of its remaining 50% interest in SCGC was determined
based upon the average of the high and low bid prices of such stock as quoted
on the NASDAQ National Market System on the date of closing (May 3, 1996),
discounted to reflect that such shares were not registered on such date. The
fair market value of the 1,885,086 shares of Casino America common stock at
October 31, 1996 was determined based upon the average of the high and low bid
prices of such stock as quoted on the NASDAQ National Market System, with no
discount as all such shares had been registered for resale on such date.
Included in the 1,885,086 shares of Casino America common stock owned by the
Company at October 31, 1996 are 85,000 shares which are included in deferred
transaction costs in the accompanying balance sheet. Such shares were being
held by an escrow agent as a deposit in connection with the proposed
acquisition of MBII which was abandoned in November 1996 (see Note D).
In November 1996 the Company sold all of its Casino America common stock
(1,885,086 shares) for net proceeds of approximately $7.5 million resulting in
a realized loss before income taxes of approximately $4.7 million. This loss
will be recognized in the Company's fiscal quarter ended January 31, 1997.
NOTE G - COMMITMENTS AND CONTINGENCIES
Litigation
On September 21, 1994 an action was filed against the Company and SCGC in the
24th Judicial District Court for the Parish of Jefferson, Louisiana by Avondale
Industries, Inc. ("Avondale"). In this action Avondale alleges that the
Company was contractually obligated to Avondale for the construction of SCGC's
riverboat vessel based upon a letter of intent (allegedly reaffirming a
previous agreement entered into between Avondale and SCGC). Avondale alleges
that the Company breached a duty to negotiate in good faith toward the
execution of a definitive vessel construction contract. Alternatively,
Avondale alleges that a separate oral contract for the construction of the
vessel existed and that the Company committed unspecified unfair trade
practices and made certain misrepresentations. Avondale seeks unspecified
damages including "all lost profits and lost overhead" and attorneys fees.
Avondale has claimed its lost profits and lost overhead amount to approximately
$2.5 million. The Company intends to vigorously contest liability in this
matter. While no assurance can be given as to the ultimate outcome of this
litigation, management believes that this litigation will not have a material
adverse effect on the Company.
Severance Agreements
In July 1996 the Board of Directors of the Company authorized the Company to
enter into severance agreements with three of its executive officers which
provide for payments to the executives in the event of their termination after
a change in control, as defined, of the Company. The agreements provide, among
other things, for a compensation payment equal to 2.99 times the annual
compensation paid to the executive, as well as accelerated vesting of options
under the Company's incentive stock option plan, in the event of such
executives termination in connection with a change in control.
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NOTE H - SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow disclosures are as follows for the six months ended
October 31, 1996 and 1995:
Six Months Ended
October 31,
1996 1995
------ ------
Note received for sale of first 50% interest in SCGC $20,000,000
Stock received for sale of second 50% interest in SCGC $12,025,000
Interest paid, net of amount capitalized 49,767 1,045,538
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements appearing elsewhere in this report.
OVERVIEW
In November 1996 the Board of Directors of the Company reached a decision to
discontinue operating in the casino gaming industry and seek an acquisition or
merger in another field which has yet to be determined. As a result of the
Board's decision, the Company will not complete the planned acquisition of the
Mississippi Belle II, Inc. ("MBII") riverboat casino located in Clinton, Iowa.
Further, the Company now plans to sell its 18.6 acre tract of land in the
gaming district of Las Vegas, Nevada which had previously been held for
development. The Company is actively pursuing potential acquisition and/or
merger possibilities, but can not predict if and when any agreement may be
reached.
RECENT HISTORY
In June 1993 the Company completed the acquisition of 100% of the outstanding
common stock of St. Charles Gaming Company, Inc. ("SCGC"), a Louisiana
corporation, which had received preliminary approval from the Louisiana
Riverboat Gaming Commission to construct and operate a riverboat gaming casino.
In March 1994 SCGC received a license from the Louisiana Riverboat Gaming
Enforcement Division of the Office of State Police. In January 1995 SCGC made
the strategic decision to relocate the site for its planned Louisiana riverboat
casino from St. Charles Parish (near New Orleans) to Calcasieu Parish in the
southwest part of the state near the Texas border.
In June 1995 the Company sold a 50% interest in SCGC to Louisiana Riverboat
Gaming Partnership ("LRGP"), a joint venture then owned 50% by Casino America,
Inc. ("Casino America") and 50% by Louisiana Downs, Inc. LRGP owns the Isle of
Capri(SM) dockside riverboat casino in Bossier City, Louisiana. The purchase
price consisted of (i) a five-year $20 million non-recourse note (the "LRGP
Note"), (ii) $1 million cash, and (iii) a warrant (which may only be exercised
by converting a portion of the LRGP Note) to purchase 416,667 shares of Casino
America common stock at $12 per share. In connection with this transaction the
Company recorded a gain before income taxes of approximately $21.5 million. In
July 1995 SCGC's riverboat casino opened for business in Calcasieu Parish,
Louisiana as an Isle of Capri(SM) themed property.
In May 1996 the Company sold its remaining 50% interest in SCGC to Casino
America for (i) 1,850,000 shares of Casino America common stock, (ii) the
exchange of the $20 million LRGP Note for LRGP Note A ("Note A") and LRGP Note
B ("Note B"), each in the principal amount of $10 million and bearing interest
at 11.5% per annum, and (iii) an additional five- year warrant to purchase up
to another 416,667 shares of Casino America common stock (bringing the total
number of shares purchasable pursuant to warrants by the Company to 833,334) at
an exercise price of $12 per share. In connection with this transaction, in
May 1996, the Company recorded a gain before income taxes of approximately
$14.9 million.
In August 1996 Casino America acquired the remaining interest in LRGP it did
not already own and issued $315 million of 12 1/2% senior secured notes due
2003 (the "Casino America Bonds"), a portion of the proceeds of which was used
to pay off Note A. As a result of the Casino America transactions, Note B
became an unsecured, subordinated obligation of Casino America. Late in
October 1996 the Company sold Note B at a discount of $800,000, resulting in
net proceeds of $9,200,000 which was received in November 1996.
In connection with a rights offering declared by Casino America, the Company
was granted the right to purchase 684,786 shares of Casino America common stock
at a price of $5.875 per share. In August 1996 the Company exercised its right
and purchased 684,786 shares of Casino America common stock for an aggregate
exercise price of $4,023,118. In October 1996 the Company sold 649,700 shares
of the Casino America common stock it had acquired in the rights offering for
net proceeds of $4,090,615 (or approximately $6.30 per share), resulting in a
gain before income taxes of $273,630. The balance of the Casino America common
stock owned by the Company (1,885,086 shares) was sold in November 1996 for net
proceeds of approximately $7.5 million resulting in a loss before income taxes
of approximately $4.7 million.
In June 1996 the Company entered into a definitive asset purchase agreement to
acquire the assets and operations of the MBII riverboat casino located in
Clinton, Iowa for a purchase price of $40 million. As discussed above, in
November 1996 the Board of Directors of the Company reached a decision to
discontinue operating in the casino gaming industry and seek an acquisition or
merger in another field. As a result the Company will not complete the planned
acquisition of MBII. In November 1996, the Company wrote-off approximately
$680,000 of costs pertaining to such proposed acquisition, including a $500,000
non-refundable deposit.
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RESULTS OF OPERATIONS
Prior to June 9, 1995 SCGC's operating results were consolidated with the
Company. From June 9, 1995 (the date of sale of the first 50% interest in
SCGC) to May 2, 1996 (the day prior to the sale of the Company's remaining 50%
interest in SCGC), the Company accounted for its investment in SCGC on the
equity method, and accordingly has included its proportionate share of SCGC's
operating results in its consolidated results of operations. As a result,
operating results for the current and prior fiscal periods are not entirely
comparable.
THREE MONTHS ENDED OCTOBER 31, 1996 COMPARED TO THE THREE MONTHS ENDED OCTOBER
31, 1995
General and administrative expenses for the three months ended October 31, 1996
increased $305,300 compared to the same period in the prior fiscal year. The
increase was a result of higher consulting and transportation costs. Gaming
development costs for the three months ended October 31, 1996 decreased $41,454
compared to the same period in the prior fiscal year principally as a result of
the elimination of certain personnel.
Interest expense for the three months ended October 31, 1996 increased $24,280
compared to the same period in the prior fiscal year. The increase was the
result of the Company's issuance of a $1.0 million note to a bank in November
1995. Interest income for the three months ended October 31, 1996 decreased
$235,015 compared to the same period in the prior fiscal year. The decrease
was principally the result of the prepayment of Note A by Casino America in
August 1996 that had been earning interest at 11.5% per annum, which resulted
in a lesser amount of notes receivable outstanding during the current fiscal
period in comparison to the prior fiscal period. Other income pertains to a
fee earned by the Company in assisting another company complete an acquisition.
SIX MONTHS ENDED OCTOBER 31, 1996 COMPARED TO THE SIX MONTHS ENDED OCTOBER 31,
1995
General and administrative expenses for the six months ended October 31, 1996
increased $292,424 compared to the same period in the prior fiscal year. The
increase was primarily attributable to increased consulting and transportation
costs. Gaming development costs for the six months ended October 31, 1996
decreased $87,852 compared to the same period in the prior fiscal year
principally as a result of the elimination of certain personnel.
Interest expense for the six months ended October 31, 1996 decreased $916,026
compared to the same period in the prior fiscal year. The decrease was
principally the result of the Company no longer consolidating the operating
results of SCGC from and after June 9, 1995 as SCGC was formerly responsible
for substantially all of the Company's consolidated interest expense. Interest
income for the six months ended October 31, 1996 decreased $129,599 compared to
the same period in the prior fiscal year. The decrease was principally the
result of the prepayment of Note A by Casino America in August 1996 that had
been earning interest at 11.5% per annum, which resulted in a lesser amount of
notes receivable outstanding during the current fiscal period in comparison to
the prior fiscal period. Other income pertains to a fee earned by the Company
in assisting another company complete an acquisition.
LIQUIDITY AND CAPITAL RESOURCES
As of November 30, 1996 after (i) the sale of the balance of the Company's
Casino America common stock (1,885,086 shares) and (ii) collection of the
proceeds from the sale of Note B in late October 1996, the Company's sources of
liquidity included (a) approximately $22.3 million of cash on hand, (b) the
anticipated sale of the Company's Las Vegas land, and (c) the potential
issuance of debt and/or equity. See "Overview".
The Company's Board of Directors have approved a stock repurchase program
which, as amended, provides authorization for the Company to repurchase up to
2,000,000 shares of the Company's common stock from time to time in the open
market, or in negotiated private transactions. Through October 31, 1996 the
Company had repurchased 1,176,051 shares pursuant to this program. The timing
and amount of future share repurchases, if any, will depend on various factors
including market conditions, available alternative investments and the
Company's financial position.
The Company is actively pursuing potential acquisitions and/or merger
possibilities, but can not predict if and when any agreement may be reached.
Should some future agreement be reached, it is not presently determinable
whether or not the Company would have, or have access to, adequate financial
resources to consumate any such proposed acquisition.
FORWARD-LOOKING INFORMATION
Certain information included in this Quarterly Report on Form 10-Q contains,
and other materials filed or to be filed by the Company with the Securities and
Exchange Commission (as well as information included in oral statements or
other written
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statements made or to be made by the Company or its management) contain or will
contain forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, and Section 27A of the Securities
Act of 1933, as amended. Such forward-looking statements address, among other
things, the Company's plans to acquire and/or merge with another company. Such
forward-looking statements are based upon management's current plans or
expectations and is subject to a number of uncertainties and risks that could
significantly affect current plans, anticipated actions and the Company's
future financial condition and results. As a consequence, current plans,
anticipated actions and future financial condition and results may differ from
those expressed in any forward-looking statements made by or on behalf of the
Company. These uncertainties and risks include, but are not limited to, those
relating to the Company's ability to acquire and/or merge with another company,
the ability of the Company to obtain adequate financing for any proposed
acquisition, and the impact of litigation. Any forward-looking statements are
made pursuant to the Private Securities Litigation Reform Act of 1995 and, as
such, speak only as of the date made.
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CROWN CASINO CORPORATION
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On September 21, 1994 an action was filed against the Company and SCGC in the
24th Judicial District Court for the Parish of Jefferson, Louisiana by Avondale
Industries, Inc. ("Avondale"). In this action, Avondale alleges that the
Company was contractually obligated to Avondale for the construction of SCGC's
riverboat vessel based upon a letter of intent (allegedly reaffirming a
previous agreement entered into between Avondale and SCGC). Avondale alleges
that the Company breached a duty to negotiate in good faith toward the
execution of a definitive vessel construction contract. Alternatively,
Avondale alleges that a separate oral contract for the construction of the
vessel existed and that the Company committed unspecified unfair trade
practices and made certain misrepresentations. Avondale seeks unspecified
damages including "all lost profits and lost overhead" and attorneys fees.
Avondale has claimed its lost profits and lost overhead amount to approximately
$2.5 million. The Company intends to vigorously contest liability in this
matter. While no assurance can be given as to the ultimate outcome of this
litigation, management believes that this litigation will not have a material
adverse effect on the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
27 Financial data schedule (filed herewith)
(b) Reports on Form 8-K:
During the fiscal quarter ended October 31, 1996 the Company
filed a report on Form 8-K dated October 8, 1996 respecting
the proposed acquisition of MBII.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CROWN CASINO CORPORATION
By: /s/ Mark D. Slusser
----------------------------------
Mark D. Slusser
Chief Financial Officer, Vice
President Finance and Secretary
(Principal Financial and Accounting
Officer)
Dated: December 10, 1996
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
27 - Financial Data Schedule