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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:
JANUARY 31, 1997 0-14939
CROWN CASINO CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 63-0851141
(State or other jurisdiction (I.R.S. Employer
of 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 March 20, 1997
------------------- --------------
Common stock, par value $.01 per share 10,414,585
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PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS CROWN CASINO CORPORATION
January 31, 1997 April 30,
(Unaudited) 1996
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ASSETS
Current assets:
Cash and cash equivalents $ 21,689,268 $ 668,853
Receivables 328,566 742,246
Prepaid expenses 17,121 49,766
Land held for sale 16,169,709
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Total current assets 38,204,664 1,460,865
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Property and equipment:
Furniture, fixtures and equipment 1,610,500 1,892,666
Land held for development 16,169,709
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1,610,500 18,062,375
Less accumulated depreciation (188,414) (194,179)
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1,422,086 17,868,196
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Note receivable from LRGP 20,000,000
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$ 39,626,750 $ 39,329,061
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 87,909 $ 72,773
Accrued liabilities 336,706 819,018
Capital lease obligations 1,671 6,329
Current portion of long-term debt 62,676
Income taxes payable 435,000
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Total current liabilities 861,286 960,796
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Long-term debt, less current portion 918,564
Deferred income taxes 2,250,000 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 $.01 per share, 50,000,000 shares authorized
10,414,585 issued and outstanding (11,650,559 at April 30, 1996) 104,146 116,506
Additional paid-in capital 38,537,853 41,784,088
Accumulated deficit (2,126,535) ( 11,747,936)
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Total stockholders' equity 36,515,464 30,152,658
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$ 39,626,750 $ 39,329,061
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See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF OPERATIONS CROWN CASINO CORPORATION
(UNAUDITED)
Three Months Ended
January 31,
1997 1996
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Revenues $ - $ -
Costs and expenses:
General and administrative 659,023 657,758
Write-down of land held for sale 49,822
Depreciation and amortization 38,978 29,497
Gaming development 2,108 45,419
Gaming acquisition abandonment 696,009 652,908
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1,396,118 1,435,404
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Other income (expense):
Interest expense (18,946) (17,396)
Interest income 297,600 576,489
Equity in loss of SCGC (983,451)
Loss on sale of securities (4,728,488)
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(4,449,834) (424,358)
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Loss before income taxes (5,845,952) (1,859,762)
Benefit for income taxes (2,315,000) (331,300)
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Net loss $ (3,530,952) $ (1,528,462)
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Loss per share $ (.34) $ (.13)
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Weighted average common and common
equivalent shares outstanding 10,424,961 11,725,559
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See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF OPERATIONS CROWN CASINO CORPORATION
(UNAUDITED)
Nine Months Ended
January 31,
1997 1996
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Revenues $ - $ -
Costs and expenses:
General and administrative 2,189,476 1,895,787
Write-down of land held for sale 49,822
Depreciation and amortization 130,452 102,050
Gaming development 40,933 172,096
SCGC pre-opening and development 536,110
Gaming acquisition abandonment 696,009 652,908
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3,056,870 3,408,773
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Other income (expense):
Interest expense (68,713) (983,189)
Interest income 1,252,299 1,660,787
Gain on sale of SCGC 14,934,543 21,512,640
Equity in loss of SCGC (2,569,204)
Loss on sale of securities (5,254,858)
Other income 500,000
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11,363,271 19,621,034
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Income before income taxes 8,306,401 16,212,261
Provision (benefit) for income taxes (1,315,000) 7,723,500
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Net income $ 9,621,401 $ 8,488,761
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Earnings per share $ .86 $ .70
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Weighted average common and common
equivalent shares outstanding 11,179,023 12,106,161
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See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF OPERATIONS CROWN CASINO CORPORATION
(UNAUDITED)
Nine Months Ended
January 31,
1997 1996
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Operating activities:
Net income $ 9,621,401 $ 8,488,761
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation and amortization 130,452 102,050
Amortization of debt issuance costs/discount 389,360
Deferred income taxes (1,750,000) 7,723,500
Gain on sale of SCGC (14,934,543) (21,512,640)
Equity in loss of SCGC 2,569,204
Write-down of assets 696,009 702,730
Loss on sale of securities 5,254,858
Changes in assets and liabilities, net of disposition:
Receivables 413,680 (1,121,059)
Prepaid expenses 32,645 (614,230)
Accounts payable and accrued liabilities 15,324 (297,890)
Income taxes payable (435,000)
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Net cash used by operating activities (955,174) (3,570,214)
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Investing activities:
Purchase of assets (875,060) (4,294,133)
Sale of assets 325,000
Purchase of securities (4,023,118)
Sale of securities 11,593,260
Sale/collection of notes receivable 19,200,000
Sale of SCGC 1,000,000
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Net cash provided (used) by investing activities 26,220,082 (3,294,133)
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Financing activities:
Issuance of common stock 23,215
Purchase of common stock (3,258,595) (50,937)
Issuance of debt 1,000,000
Payments of debt and capital lease obligations (985,898) (52,769)
Advances from LRGP 4,627,897
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Net cash provided (used) by financing activities (4,244,493) 5,547,406
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Increase (decrease) in cash and cash equivalents 21,020,415 (1,316,941)
Cash and cash equivalents at: Beginning of period 668,853 1,692,440
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End of period $ 21,689,268 $ 375,499
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See accompanying notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CROWN CASINO CORPORATION
(UNAUDITED)
FOR THE NINE MONTHS ENDED JANUARY 31, 1997
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. The Board cited several
factors contributing to its decision including (i) the limited growth prospects
for casino gaming, (ii) increasing competitive 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
abandoned the proposed acquisition of the Mississippi Belle II, Inc. riverboat
casino located in Clinton, Iowa (see Note E). 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.
In December 1996 the Company entered into a definitive asset purchase agreement
to acquire substantially all the assets and operations of CH Medical, Inc.
d/b/a Cardio Systems and certain affiliated assets and operations for $40
million in cash, a $5 million subordinated note and the assumption of certain
liabilities. Cardio Systems operates in the medical industry, see Note C.
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 nine month period
ended January 31, 1997 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 - ACQUISITION OF CARDIO SYSTEMS
On December 20, 1996 the Company entered into a definitive asset purchase
agreement to acquire substantially all the assets and operations of CH Medical,
Inc. d/b/a Cardio Systems and certain affiliated assets and operations
(collectively, "Cardio Systems") for $40 million in cash, a $5 million
subordinated note and the assumption of certain liabilities. Cardio Systems
designs, manufactures, markets and distributes specialized frameless air
support therapy mattress systems used in the treatment and prevention of
decubitus ulcers and pulmonary disorders. Cardio Systems, which has been a
supplier to the medical industry since 1971, provides sales, rental and
technical assistance to hospitals, nursing homes and the home health care
market from approximately 70 offices throughout the United States, and has two
manufacturing and production facilities in Carrollton, Texas. Closing of the
transaction is subject to certain conditions including the completion of due
diligence procedures.
While the Company's agreement to acquire Cardio Systems remains in force, the
Company has also had discussions with the owner of Cardio Systems regarding the
possibility of restructuring the transaction to include a stock component,
although no agreement has been reached in that regard.
NOTE D - 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%
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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. 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 non-detachable five-year warrant 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 non- detachable five-year warrant
to purchase up to another 416,667 shares of Casino America common stock 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 senior secured notes, a portion of
the proceeds of which was used to pay off Note A. 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 $7,502,645 resulting in a loss before income taxes of $4,728,488
million.
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)
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Gain before income taxes on sale of SCGC $ 21,513 $ 14,934
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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 nine months ended January 31, 1996 the Company included
approximately $3.5 million of net costs and expenses, or approximately $.29 per
share, attributable to SCGC in its consolidated results of operations.
NOTE E - 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 seek an acquisition or merger in another field. As a result of
the Board's decision, the Company abandoned the proposed acquisition of MBII
and wrote-off $696,009 of costs, including a $500,000 non-refundable deposit.
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NOTE F - COMMON STOCK
The Company's Board of Directors has 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 January 31, 1997 the
Company had repurchased 1,260,974 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 160,392 and 389,328 common
equivalent shares for the nine months ended January 31, 1997 and 1996,
respectively.
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 the resolution of 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 its three 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 executive's
termination in connection with a change in control.
NOTE H - SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow disclosures are as follows for the nine months ended
January 31, 1997 and 1996:
Nine Months Ended
January 31,
1997 1996
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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 68,713 1,062,934
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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. As a result of the Board's decision, the Company has
abandoned the proposed 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.
In December 1996 the Company entered into a definitive asset purchase agreement
to acquire substantially all the assets and operations of CH Medical, Inc.
d/b/a Cardio Systems and certain affiliated assets and operations
(collectively, "Cardio Systems") for $40 million in cash, a $5 million
subordinated note and the assumption of certain liabilities.
GAMING HISTORY AND TRANSACTIONS
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. The purchase price
consisted of (i) a five-year $20 million non-recourse note (the "LRGP Note"),
(ii) $1 million cash, and (iii) a non-detachable five-year warrant 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.
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 non- detachable five-year warrant
to purchase up to another 416,667 shares of Casino America common stock 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 senior secured notes, a portion of
the proceeds of which was used to pay off Note A. 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 $7,502,645 resulting in a loss before income taxes of $4,728,488.
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 of the Board's decision, the Company
abandoned the proposed acquisition of MBII and wrote-off $696,009 of costs,
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 JANUARY 31, 1997 COMPARED TO THE THREE MONTHS ENDED JANUARY
31, 1996
General and administrative expenses for the three months ended January 31, 1997
remained relatively flat as compared to the same period in the prior fiscal
year. Decreases in compensation and travel costs were offset by increases in
consulting fees. Gaming development costs for the three months ended January
31, 1997 decreased $43,311 compared to the same period in the prior fiscal year
as a result of the Company's decision to exit the casino gaming industry.
Interest expense for the three months ended January 31, 1997 was substantially
unchanged compared to the same period in the prior fiscal year. Interest
income for the three months ended January 31, 1997 decreased $278,889 compared
to the same period in the prior fiscal year. The decrease was principally the
result of earning interest at 11.5% per annum on the $20 million LRGP Note in
the prior fiscal period, as compared to earning approximately 5.3% per annum in
certain money market funds during the current fiscal period.
NINE MONTHS ENDED JANUARY 31, 1997 COMPARED TO THE NINE MONTHS ENDED JANUARY
31, 1996
General and administrative expenses for the nine months ended January 31, 1997
increased $293,689 compared to the same period in the prior fiscal year. The
increase was primarily attributable to increased consulting and transportation
costs, partially offset by a decrease in compensation costs. Gaming
development costs for the nine months ended January 31, 1997 decreased $131,163
compared to the same period in the prior fiscal year as a result of the
Company's decision to exit the casino gaming industry and the elimination of
certain personnel.
Interest expense for the nine months ended January 31, 1997 decreased $914,476
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 nine months ended January 31, 1997 decreased $408,488 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 and the
sale of Note B in October 1996 both of which had been earning interest at 11.5%
per annum. The proceeds from such notes were placed in money market funds
which currently earn interest at approximately 5.3% per annum. Other income
pertains to a fee earned by the Company in assisting another company complete
an acquisition.
LIQUIDITY AND CAPITAL RESOURCES
In connection with the proposed acquisition of Cardio Systems and the Company's
payment of the $40 million cash portion of the purchase price, the Company's
sources of liquidity include (i) approximately $21.7 million of cash on hand,
(ii) the potential sale of the Company's Las Vegas land, (iii) the issuance of
bank or other debt financing, and (iv) the issuance of equity. The Company has
had discussions with certain banks and believes it can obtain debt financing
for a substantial portion of the purchase price. Furthermore, while the
Company's agreement to acquire Cardio Systems remains in force, the Company has
also had discussions with the owner of Cardio Systems regarding the possibility
of restructuring the transaction to include a stock component, although no
agreement has been reached in that regard.
The Company's Board of Directors has 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 January 31, 1997 the
Company had repurchased 1,260,974 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.
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 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
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amended. Such forward-looking statements address, among other things, the
Company's plans to acquire Cardio Systems and the potential sale of the
Company's Las Vegas land. Such forward-looking statements are based upon
management's current plans or expectations and are 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 proposed
acquisition of Cardio Systems including results to be obtained from completion
of due diligence procedures, the ability of the Company to obtain adequate
financing for such proposed acquisition, the potential unavailability of buyers
for the Company's Las Vegas land, 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 the resolution of this litigation will not
have a material adverse effect on the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
2.4 Asset Purchase Agreement dated December 20, 1996 by
and between the Company and CH Medical, Inc., d/b/a
Cardio Systems, affiliates of Cardio Systems, CH
Administration, Inc., CH Production, Inc., CH
Industries, Inc. and Charles E. Hasty (1).
10.11 Form of Severence Agreement between the Company and
Edward R. McMurphy, T.J. Falgout, III, and Mark D.
Slusser (1).
27 Financial data schedule (1).
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed in the third fiscal
quarter of the current year.
_______________________
(1) Filed herewith.
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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: March 20, 1997
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.4 Asset Purchase Agreement dated December 20, 1996 by
and between the Company and CH Medical, Inc., d/b/a
Cardio Systems, affiliates of Cardio Systems, CH
Administration, Inc., CH Production, Inc., CH
Industries, Inc. and Charles E. Hasty (1).
10.11 Form of Severence Agreement between the Company and
Edward R. McMurphy, T.J. Falgout, III, and Mark D.
Slusser (1).
27 Financial data schedule (1).
- --------------------
(1) Filed herewith.