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EXHIBIT 13.1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CROWN CASINO CORPORATION
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 annual report.
OVERVIEW
The Company owns a 50% interest in a riverboat gaming casino located in
Calcasieu Parish, Louisiana that opened in July 1995, owns an 18.6 acre tract
of land in the gaming district of Las Vegas, Nevada which is being held for
development of a hotel and casino, and in July 1995 entered into a definitive
purchase agreement to acquire the Bourbon Street Hotel and Casino located in
Las Vegas, Nevada. The Company is also actively pursuing other gaming
opportunities in these and other jurisdictions. Prior to March 1994 the Company
had been engaged in various facets of the cable and related programming
businesses.
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 with certain conditions
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 to Calcasieu
Parish in the southwest part of the state near the Texas border. In March 1995,
the Company entered into an agreement with Louisiana Riverboat Gaming
Partnership ("LRGP") to form a joint venture to develop the Calcasieu Parish
project. LRGP, a joint venture owned 50% by Casino America, Inc. ("Casino
America") and 50% by Louisiana Downs, Inc., owns the Isle of Capri(SM) dockside
riverboat casino in Bossier City, Louisiana. Pursuant to the joint venture
agreement, on June 9, 1995 the Company sold 50% of the outstanding common stock
of SCGC for (i) a five-year $20 million 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 July 1995 SCGC's riverboat casino opened for business in
Calcasieu Parish, Louisiana, as an Isle of CapriSM themed property.
In December 1993, the Company acquired 100% of the outstanding common stock
of Gaming Entertainment Management Services, Inc. ("GEMS"), a Nevada
corporation, which was organized for the purpose of developing a hotel and
casino in Las Vegas, Nevada known as the Desert Winds Hotel and Casino (the
"Desert Winds"). GEMS' primary asset was its option to purchase an 18.6 acre
tract of land in the gaming district of Las Vegas. In June 1994 the option was
exercised for $10 million and the land was purchased. The Company may develop
such property by itself or on a joint venture basis.
In July 1995, the Company entered into a definitive stock purchase
agreement to acquire the Bourbon Street Hotel and Casino (the "Bourbon Street
Casino") located in Las Vegas, Nevada for a purchase price of $10 million. The
Bourbon Street Casino has reported annual revenues of approximately $12
million. Closing is expected to occur by October 1995.
As a result of the Company's acquisition of SCGC and the resulting entry
into the gaming industry in June 1993, the Company made the decision to
discontinue operations in the cable industry and focus all its efforts on
gaming. During fiscal 1994 the Company sold all its remaining cable related
assets and operations.
RESULTS OF OPERATIONS
As a result of the Company's decision to exit the cable industry, all
revenues, costs and expenses directly related to cable operations have been
reclassified to discontinued operations. Continuing operations principally
consist of corporate general and administrative expenses, gaming pre-opening
and development costs, interest expense, and other charges related to its prior
Louisiana riverboat casino site and the buy out of its riverboat casino
management agreement.
The Company's results from discontinued operations for fiscal 1994 and 1993
are not readily comparable. Fiscal 1994 discontinued operations reflect the
loss on the sale of the Company's remaining cable assets and only nine months
of cable operations whereas fiscal 1993 discontinued operations did not include
any sales of cable assets and had a full twelve months of cable operations. The
following discussion focuses on results from continuing operations.
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FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994
General and administrative expenses for fiscal 1995 increased $583,006
compared to fiscal 1994. The increase was primarily attributable to increased
professional fees, personnel and travel costs associated with the development
of the Company's Louisiana riverboat casino project. Gaming pre-opening and
development costs for fiscal 1995 increased $7,208,553 compared to fiscal 1994.
The increase was the result of greater personnel, advertising, legal,
consulting and training costs incurred in connection with the anticipated
opening of the Louisiana riverboat casino, and development efforts outside of
Louisiana which began in fiscal 1995. In addition, fiscal 1995 reflects
development activities for a full year, whereas in fiscal 1994 the Company was
only in the early stages of developing its Louisiana riverboat casino project.
In January 1995, SCGC made the decision to abandon its site in St. Charles
Parish, Louisiana in favor of a new site in Calcasieu Parish, Louisiana. As a
result of this decision, the Company recorded a charge of approximately $3.1
million which represents the write-off of previously capitalized costs specific
to the St. Charles Parish site. Also, in March 1995, in connection with the
stock purchase agreement with LRGP, SCGC paid $4 million to buy out its casino
management agreement and entered into a new management agreement with Casino
America.
Interest expense amounted to $6,826,538 in fiscal 1995, principally
attributable to the issuance of the Senior Note in June 1994, with no
comparable amount in the prior fiscal period. Included in fiscal 1995 interest
expense is $3,376,392 of amortization of debt issuance costs and the discount
from the issuance of the Senior Note.
FISCAL YEAR 1994 COMPARED TO FISCAL YEAR 1993
General and administrative expenses for fiscal 1994 increased $814,309
compared to fiscal 1993. The increase was primarily attributable to increased
professional fees, personnel and travel costs associated with the development
of the Company's riverboat casino in St. Charles Parish, Louisiana and an
increase in bad debt expense. In addition, the Company incurred nearly $1
million of gaming pre-opening and development expenses during fiscal 1994 in
connection with the development of the riverboat casino with no comparable
amount in fiscal 1993.
Interest expense for fiscal 1994 increased $574,434 over fiscal 1993 due to
the write-off of $321,760 of deferred financing costs and the sale of certain
notes receivable at an aggregate discount of $245,086. The deferred financing
costs write-off occurred as a result of the Company's decision to abandon a
prior financing commitment in favor of a more attractive financing which closed
in June 1994. Interest income for fiscal 1994 declined $57,816 from fiscal 1993
as a result of the sale of certain notes receivable during fiscal 1994 that
were generating interest income prior to their sale.
LIQUIDITY AND CAPITAL RESOURCES
Since entering into the joint venture agreement in March 1995, LRGP and its
affiliate, Casino America, have been providing capital to develop the Calcasieu
Parish project which opened in July 1995. Subsequent to opening, the Company
anticipates an additional $45 million will be spent to (i) complete the parking
garage and permanent terminal facility, (ii) construct a 300 room hotel, and
(iii) complete certain road improvements and retire project related payables.
The Company expects that the additional capital necessary to complete the
Calcasieu Parish project will come from LRGP, Casino America or a financing
source arranged by either of them, and cash flows from operating the Calcasieu
Parish project.
During fiscal 1995, pursuant to a private placement and public equity
offering, the Company raised approximately $7.4 million, net of transaction
costs, through the sale of 1,701,700 shares of its common stock. As of July 31,
1995 the Company had an additional 1,085,000 shares of its common stock
available for sale pursuant to its registration statement.
In June 1994 SCGC completed a private placement of a $28 million Senior
Secured Increasing Rate Note (the "Senior Note") to an institutional investor.
The Senior Note was issued to finance a portion of SCGC's riverboat casino
project, to acquire certain land in Las Vegas, Nevada (which land was acquired
in June 1994) upon which an additional casino facility may be built, and for
general working capital purposes. SCGC repaid $6.5 million of the Senior Note
in October 1994. The balance of the Senior Note was repaid in August 1995 from
a portion of the proceeds from the issuance of $38.4 million of Senior Secured
Increasing Rate Notes due August 1996 (the "New
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Notes") issued jointly by SCGC and LRGP to the same institutional lender.
Neither the Company, nor any of its subsidiaries, are guarantors of the New
Notes.
In connection with the acquisition of the Bourbon Street Casino, the
Company anticipates raising the $10 million purchase price from (i) conversion
of $5 million of the LRGP Note into 416,667 shares of Casino America common
stock and the subsequent sale of such shares, (ii) the public or private sale
of the Company's common stock, including 1,085,000 shares available for sale
pursuant to the Company's registration statement, and/or (iii) the issuance of
debt.
Management of the Company is evaluating the design and scope of the Desert
Winds project and the anticipated capital requirements related thereto.
Management is considering a variety of scenarios with respect to the operation
and ownership of the proposed hotel and casino, including a potential joint
venture relationship. In connection with the joint venture agreement with LRGP,
the Company granted LRGP a right of first refusal to develop the Desert Winds
project with the Company in the event the Company chooses to develop such
project on a joint venture basis.
CHANGE IN ACCOUNTANTS
On October 26, 1993, Ernst & Young LLP, the independent auditors for the
Company, resigned. Ernst & Young LLP advised the Company that a primary reason
for their resignation was due to the Company's change in business from cable
programming to casino gaming. Ernst & Young LLP advised the Company that the
local Dallas office did not have sufficient expertise in this area and that
substantial additional educational requirements would have to be met in order
for the local office to continue the engagement.
Ernst & Young LLP's report on the financial statements of the Company for
the fiscal year ended April 30, 1993 did not contain an adverse opinion or a
disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope or accounting principles.
During the fiscal year ended April 30, 1993 and the subsequent interim
period preceding the resignation of Ernst & Young LLP, there were no
disagreements with Ernst & Young LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure. No
event listed in Paragraphs (A) through (D) of Item 304 a(1)(v) of Regulation
S-K occurred during the fiscal year ended April 30, 1993 and the subsequent
interim period prior to Ernst & Young LLP's resignation.
Ernst & Young LLP provided the Company with a letter indicating its
agreement with the foregoing statements made by the Company.
On April 28, 1994, the Company engaged Coopers & Lybrand L.L.P. as its
independent accountants. During the Company's fiscal year ended April 30, 1993
and the subsequent interim period prior to engaging Coopers & Lybrand L.L.P.,
the Company did not consult with Coopers & Lybrand L.L.P. regarding either the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements. There were no disagreements with or a
reportable event related to the engagement of the Company's prior independent
accountants.
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Consolidated Balance Sheets Crown Casino Corporation
April 30, 1995 1994
-----------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,692,440 $ 1,778,939
Receivables, net 1,041,243
Prepaid expenses 931,935 155,082
------------ -----------
Total current assets 2,624,375 2,975,264
------------ -----------
Property and equipment:
Land deposit and site costs 1,286,223
Construction in progress 1,565,739
Furniture, fixtures and equipment 8,887,241 1,842,118
Riverboat and barges 15,256,140 9,329,024
------------ -----------
Land held for development 16,608,555
42,317,675 12,457,365
Less accumulated depreciation (223,055) (75,007)
------------ -----------
42,094,620 12,382,358
------------ -----------
Other assets:
Non-compete agreement, net 316,674 416,670
Debt issuance costs, net 345,963
Land purchase option 6,075,000
License costs 9,125,000 9,125,000
------------ -----------
9,787,637 15,616,670
------------ -----------
$ 54,506,632 $30,974,292
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 999,611 $ 215,334
Accrued liabilities 1,038,587 152,809
Advances from LRGP 2,179,083
Capital lease obligations 2,876,632
Notes payable 26,511,603
------------ -----------
Total current liabilities 33,605,516 368,143
------------ -----------
Capital lease obligations, less current portion 2,271,477
Deferred income taxes 500,000 4,440,000
Common stock pending issuance 200,000 1,500,000
Common stock subject to redemption 829,500
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; 11,678,459 issued and outstanding (9,686,319 issued and
8,998,925 outstanding in 1994) 116,785 96,863
Additional paid-in capital 41,859,407 28,049,381
Accumulated deficit (24,046,553) (3,721,708)
Treasury stock, at cost (587,887)
------------ -----------
Total stockholders' equity 17,929,639 23,836,649
------------ -----------
$ 54,506,632 $30,974,292
============ ===========
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF OPERATIONS Crown Casino Corporation
Years Ended April 30, 1995 1994 1993
----------------------------------------------------------------------------------------------------------
Revenues $ -- $ -- $ --
Costs and expenses:
General and administrative 2,008,319 1,425,313 611,004
Gaming pre-opening and development 8,189,802 981,249
Buy-out of management contract 4,000,000
St. Charles Parish site abandonment 3,131,359
Depreciation and amortization 248,044 370,885 36,591
------------ ----------- ---------
17,577,524 2,777,447 647,595
------------ ----------- ---------
Net interest (income) expense:
Interest expense 6,826,538 578,320 3,886
Interest income (176,889) (197,447) (255,263)
------------ ----------- ---------
6,649,649 380,873 (251,377)
------------ ----------- ---------
Loss from continuing operations before
income taxes (24,227,173) (3,158,320) (396,218)
Benefit for income taxes (3,902,328) (1,105,933) (133,104)
------------ ----------- ---------
Loss from continuing operations (20,324,845) (2,052,387) (263,114)
------------ ----------- ---------
Discontinued operations, net of taxes:
Income (loss) from discontinued operations 2,949 (144,953)
Loss on disposition of discontinued operations (179,755)
------------ ----------- ---------
(176,806) (144,953)
------------ ----------- ---------
Net loss $(20,324,845) $(2,229,193) $(408,067)
============ =========== =========
Loss per share:
From continuing operations $ (2.01) $ (.34) $ (.07)
From discontinued operations (.03) (.04)
------------ ----------- ---------
$ (2.01) $ (.37) $ (.11)
============ =========== =========
Weighted average common and common
equivalent shares outstanding 10,103,993 5,988,963 3,611,547
------------ ----------- ---------
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS Crown Casino Corporation
YEARS ENDED APRIL 30, 1995 1994 1993
-----------------------------------------------------------------------------------------------------------
Operating activities:
Loss from continuing operations $(20,324,845) $(2,052,387) $ (263,114)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 248,044 370,885 36,591
Amortization of debt issuance costs/discount 3,376,392
Write-down of assets 3,131,359 421,760
Discount on notes sold 245,086
Deferred income taxes (3,940,000) (1,147,500) (115,000)
Equity securities issued for services 1,562,500
Changes in assets and liabilities, net of acquisitions:
Receivables, net 592,447 344,534 764,777
Prepaid expenses (902,259) (113,082)
Accounts payable and accrued liabilities 1,611,415 96,673 (245,229)
Income taxes payable (242,850)
Net effect of discontinued operations 322,357 (338,805)
------------ ----------- ----------
Net cash used by operating activities (14,644,947) (1,511,674) (403,630)
------------ ----------- ----------
Investing activities:
Purchases of assets (18,897,910) (7,452,047) (6,578)
Sale of assets 1,331,374 2,700
Acquisitions, net (869,519)
Net effect of discontinued operations 869,623 (24,060)
------------ ----------- ----------
Net cash used by investing activities (18,897,910) (6,120,569) (27,938)
------------ ----------- ----------
Financing activities:
Issuance of common stock 7,403,490 13,298,463
Purchase of common stock (55,000) (2,208,000) (77,100)
Issuance of debt and warrants 32,700,000 700,000
Debt issuance costs (1,633,407)
Advances from LRGP 2,179,083
Payments of debt and capital lease obligations (7,137,808) (2,500,000)
Net effect of discontinued operations (17,667)
------------ ----------- ----------
Net cash provided (used) by financing activities 33,456,358 9,290,463 (94,767)
------------ ----------- ----------
Increase (decrease) in cash and cash equivalents (86,499) 1,658,220 (526,335)
Cash and cash equivalents at: Beginning of year 1,778,939 120,719 647,054
------------ ----------- ----------
End of year $ 1,692,440 $ 1,778,939 $ 120,719
============ =========== ==========
See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Crown Casino Corporation
FOR THE THREE YEARS COMMON STOCK TREASURY STOCK
IN THE PERIOD ENDED APRIL 30, 1995 SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------
Balance at April 30, 1992 4,211,230 $ 42,112 522,729 $(510,787)
Purchase of common stock 164,665 (77,100)
Net loss
---------- -------- -------- ----------
Balance at April 30, 1993 4,211,230 42,112 687,394 (587,887)
Issuance of common stock 5,608,389 56,084
Issuance of warrants
Purchase of common stock (220,800) (2,208)
Stock options exercised 87,500 875
Tax benefit of stock options
Net loss
---------- -------- -------- ----------
Balance at April 30, 1994 9,686,319 96,863 687,394 (587,887)
Issuance of common stock 2,650,034 26,501
Issuance of warrants
Purchase of common stock 10,000 (55,000)
Stock options exercised 39,500 395
Cancellation of treasury stock (697,394) (6,974) (697,394) 642,887
Net loss
---------- -------- -------- ----------
Balance at April 30, 1995 11,678,459 $116,785 -- $ --
========== ======== ======== ==========
See accompanying notes to consolidated financial statements.
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RETAINED
ADDITIONAL EARNINGS TOTAL
PAID-IN (ACCUMULATED STOCKHOLDERS'
CAPITAL DEFICIT) EQUITY
-----------------------------------------------------------------------------------------------------------
Balance at April 30, 1992 $ 4,313,708 $ 350,752 $ 4,195,785
Purchase of common stock (77,100)
Net loss (408,067) (408,067)
----------- ------------ ------------
Balance at April 30, 1993 4,313,708 (57,315) 3,710,618
Issuance of common stock 23,347,585 23,403,669
Issuance of warrants 951,664 951,664
Purchase of common stock (770,592) (1,435,200) (2,208,000)
Stock options exercised 67,016 67,891
Tax benefit of stock options 140,000 140,000
Net loss (2,229,193) (2,229,193)
----------- ------------ ------------
Balance at April 30, 1994 28,049,381 (3,721,708) 23,836,649
----------- ------------ ------------
Issuance of common stock 12,418,442 12,444,943
Issuance of warrants 1,989,845 1,989,845
Purchase of common stock (55,000)
Stock options exercised 37,652 38,047
Cancellation of treasury stock (635,913)
Net loss (20,324,845) (20,324,845)
----------- ------------ ------------
Balance at April 30, 1995 $41,859,407 $(24,046,553) $ 17,929,639
=========== ============ ============
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Crown Casino Corporation
A - HISTORY AND DESCRIPTION OF BUSINESS
Crown Casino Corporation, formerly Skylink America Incorporated, and
subsidiaries (the "Company") owns a 50% interest in a riverboat gaming casino
located in Calcasieu Parish, Louisiana that opened in July 1995, owns an 18.6
acre tract of land in the gaming district of Las Vegas, Nevada which is being
held for development of a hotel and casino, and in July 1995 entered into a
definitive purchase agreement to acquire the Bourbon Street Hotel and Casino
(the "Bourbon Street Casino") located in Las Vegas, Nevada. The Company is also
actively pursuing other gaming opportunities in these and other jurisdictions.
Prior to March 1994, the Company had been engaged in various facets of the
cable programming business.
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Crown Casino
Corporation and all of its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
The Company considers cash and all highly liquid investments with an
original maturity of three months or less to be cash equivalents.
Casino Pre-opening and Development Costs
All casino pre-opening and development costs are expensed as incurred.
Pre-opening and development costs consist principally of personnel costs,
advertising, insurance, travel, consulting and professional fees.
Property and Equipment
Property and equipment are stated at cost. Expenditures for additions,
renewals and improvements are capitalized. Interest costs during construction
of facilities are capitalized. Costs of repairs and maintenance are expensed as
incurred. Depreciation will be charged on gaming related equipment and
facilities beginning in July 1995 (commencement of operations). Depreciation is
computed using the straight-line method over the following estimated useful
lives:
Furniture, fixtures and equipment 5 to 10 years
Riverboat and barges 15 years
Non-Compete Agreement
In connection with the acquisition of St. Charles Gaming Company, Inc.
("SCGC"), the seller agreed not to compete with the Company within the
Louisiana market for a period of five years. The costs allocated to such
agreement are being amortized over a five year period using the straight-line
method. At April 30, 1995 accumulated amortization amounted to $183,326.
Debt Issuance Costs
In connection with the issuance of the Senior Note and amendments to the
agreement governing the Senior Note, the Company incurred debt issuance costs
of approximately $2.5 million. These costs are being amortized over the term of
the Senior Note using the effective interest method.
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License Costs
License costs principally represent the excess purchase price of acquiring
SCGC over the net identifiable tangible assets (see Note D). These costs will
be amortized beginning in July 1995 (commencement of operations) over the
remaining license term using the straight-line method. The Louisiana license
was issued on March 29, 1994 and has a five year initial term, which is subject
to renewal.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
Treasury Stock
During fiscal 1995 the Company formally canceled all of its shares held in
treasury. The amount credited to additional paid-in capital upon the original
issuance of such shares was estimated to be equal to or greater than the
Company's cost of reacquiring such shares. Accordingly, the carrying value in
excess of the par value of such shares was charged to additional paid-in
capital upon such cancellation.
Loss Per Share
Loss per share has been calculated using the weighted average number of
shares outstanding.
Reclassifications
Certain prior year amounts in the accompanying financial statements have
been reclassified to conform to the fiscal 1995 presentation. Amounts
associated with cable activities have been reclassified to discontinued
operations.
C - SALE OF 50% OF LOUISIANA PROJECT
On June 9, 1995 pursuant to a definitive Stock Purchase Agreement ("Stock
Purchase Agreement") the Company sold a 50% interest in SCGC to Louisiana
Riverboat Gaming Partnership ("LRGP"), a joint venture owned 50% by Casino
America, Inc. ("Casino America") and 50% by Louisiana Downs, Inc. LRGP owns the
Isle of CapriSM dockside riverboat casino in Bossier City, Louisiana. The
purchase price consists of (i) a five-year $20 million 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.
The LRGP Note bears interest at 11.5% per annum, payable monthly, and is
secured by LRGP's 50% interest in SCGC. Principal is payable in seventeen equal
quarterly installments beginning in June 1996. If the distributions from SCGC
to LRGP during any quarter are less than the principal installment due for such
quarter, LRGP will only be obligated to pay the amount of such distribution and
any deficiency will be deferred to the next installment due under the LRGP
Note. All principal and interest not previously paid will be due and payable in
June 2000.
In June 1995, as a result of the sale of a 50% interest in SCGC, the
Company recorded a gain before income taxes of approximately $22 million.
However, the majority of the gain has been deferred until such time as its
realization is reasonably assured. Realization of such deferred gain is
dependent on the collection of the LRGP Note, which is principally dependent on
SCGC's future operating profits. Prior to maturity, the principal payments on
the LRGP Note are limited to the amount of distributions received by LRGP from
SCGC's operations, and principal payments on the LRGP Note are not guaranteed
by LRGP.
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Also, pursuant to the Stock Purchase Agreement, LRGP will lend funds, or
will provide a financing source for SCGC, to provide for the development of the
Calcasieu Parish project and the payment of interest on SCGC's senior debt, in
amounts to be agreed upon between LRGP and the Company. The maximum amount of
all loans funded or guaranteed by LRGP will not exceed $45 million, unless
agreed to by the parties. At April 30, 1995 Casino America and LRGP had loaned
or advanced SCGC a total of approximately $6.9 million. In August 1995 SCGC and
LRGP jointly issued $38.4 million of senior secured increasing rate notes whose
proceeds were used to retire all of SCGC's senior debt ($21.9 million) and
certain LRGP obligations ($8.4 million). The balance of the proceeds will be
used in the development of the Calcasieu Parish project (see Note G).
In connection with the Stock Purchase Agreement, SCGC bought out its prior
casino management agreement for $4 million and entered into a new casino
management agreement with Casino America. The Casino America management
agreement has a term of 99 years and provides for a management fee of (i) 2% of
"Revenues," as defined in the agreement (generally net gaming revenues less
gaming and admission taxes plus all other operating revenues), plus (ii) 10% of
"Net Operating Income," as defined in the agreement, provided however, the
total management fee shall not exceed 4% of "Revenues." In the event the LRGP
Note goes in default and the Company reacquires LRGP's 50% interest in SCGC,
SCGC will have the right to terminate the Casino America management agreement.
In addition to the foregoing, the Company granted LRGP a right of first
refusal to jointly develop its 18.6 acre tract of land in the gaming district
of Las Vegas in the event the Company chooses to develop such project on a
joint venture basis.
At April 30, 1995 SCGC had assets, liabilities and shareholder's deficit of
approximately $35 million, $38 million and $3 million, respectively. SCGC's
condensed results of operations for the year ended April 30, 1995 and the
period from June 25, 1993 (date of acquisition) through April 30, 1994 were as
follows (in thousands):
1995 1994
-----------------------------------------------------------------------------------------
Revenue $ -- $ --
Costs and expenses 21,730 1,516
Benefit for income taxes (2,828) (573)
-------- ------
Net loss $(18,902) $ (943)
======== ======
D - ACQUISITIONS
In June 1993 the Company acquired 100% of the outstanding common stock of
SCGC, a Louisiana corporation which was organized in January 1993 for the
purpose of developing a riverboat casino project in St. Charles Parish,
Louisiana. The Company paid $500,000 and issued 1.2 million shares of
restricted common stock to the seller in exchange for all of the issued and
outstanding common stock of SCGC and for the seller's agreement not to compete
with the Company. In addition, in connection with the transaction, the Company
issued 400,000 shares of restricted common stock as a finder's fee to a company
which has a principal shareholder who is a director of the Company.
In December 1993 the Company acquired 100% of the outstanding common stock
of Gaming Entertainment Management Services, Inc. ("GEMS"), a Nevada
corporation which was organized in September 1992 for the purpose of developing
a hotel and casino project in Las Vegas, Nevada known as the Desert Winds Hotel
and Casino. GEMS' primary asset was its option to purchase an 18.6 acre tract
of land in the gaming district of Las Vegas located on the southeast corner of
the intersection of Flamingo and Arville. The option was exercised and the land
was purchased in June 1994. GEMS has no operations other than its development
of the Desert Winds project. In
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connection with the transaction the Company issued 850,000 shares of restricted
common stock to the shareholders of GEMS and issued 35,000 shares of restricted
common stock to an unrelated company as a finder's fee. Prior to the
acquisition, the Company loaned GEMS $500,000 which was assumed in the
purchase.
The acquisitions have been accounted for using the purchase method of
accounting. The purchase price and purchase price allocations are as follows
(in thousands):
SCGC GEMS
-------------------------------------------------------------------------------------------
Purchase price:
Cash $ 500
Stock issued 5,600 $ 3,982
Other transaction costs 50 20
Liabilities assumed 25 585
--------- --------
$ 6,175 $ 4,587
========= ========
Purchase price allocation:
Cash $ 50 $ 80
Non-compete agreement 500
Land purchase option 6,075
License costs 9,025
Deferred income taxes (3,400) (1,568)
--------- --------
$ 6,175 $ 4,587
========= ========
The shares issued were valued based upon the trading price of the Company's
stock on the earlier of the date when all material contingencies to the
acquisition were removed or upon closing, discounted to reflect the restricted
nature of the securities. The Company recorded a deferred tax liability to
reflect the difference in basis of the acquired assets and liabilities for
income tax and financial reporting purposes. The activities of SCGC and GEMS
have been included in the Company's results of operations from their respective
dates of acquisition. Pro forma results of operations have not been presented
for the fiscal year ended April 30, 1994 as such results are not materially
different from the actual results of operations for such period.
In July 1995, the Company entered into a definitive asset purchase
agreement to acquire the Bourbon Street Hotel and Casino located in Las Vegas,
Nevada for $10 million (see Note P).
E - LICENSING
In March 1994 SCGC received a license with certain conditions from the
Louisiana Riverboat Gaming Enforcement Division (the "Enforcement Division").
The license has an initial term of five years and is thereafter subject to
renewal.
In connection with the proposed acquisition of the Bourbon Street Hotel and
Casino, the Company intends to apply for a Nevada gaming license.
F - LAND HELD FOR DEVELOPMENT
In connection with the acquisition of GEMS (see Note D) the Company
acquired an option to purchase an 18.6 acre tract of land in the gaming
district of Las Vegas, Nevada located on the southeast corner of the
intersection of Flamingo and Arville. In June 1994 the Company exercised its
option and closed the purchase of the
21
13
Las Vegas land. Upon such purchase amounts previously capitalized as land
purchase option costs were reclassified to land held for development. In
February 1994 the Las Vegas land under option was appraised for approximately
$20.3 million.
G - DEBT
At April 30, 1995 SCGC had the following debt:
---------------------------------------------------------------------------
Senior Note, net of discount of $118,397 $21,811,603
Notes payable to Casino America 4,700,000
-----------
$26,511,603
===========
In June 1994 SCGC issued a $28 million Senior Secured Increasing Rate Note
(the "Senior Note") to an institutional investor. The Senior Note was initially
due on June 3, 1995, but was subsequently extended to August 31, 1995 and
carried a 12% coupon increasing 67 basis points each quarter up to a maximum
interest rate of 14%. The Senior Note was issued with a five year warrant to
purchase 508,414 shares of the Company's common stock at an original exercise
price of $6.00 per share, which was adjusted to $3.00 per share in December
1994 pursuant to an amendment to the warrant. The proceeds from the private
placement were allocated between the Senior Note ($26.7 million) and the
warrant ($1.3 million) based upon the relative fair value of each of the
securities at the time of issuance. The resulting original issue discount has
been amortized over the life of the Senior Note using the effective interest
method.
In August 1995 the Senior Note was paid off from the proceeds of $38.4
million of Senior Secured Increasing Rate Notes (the "New Notes"), issued
jointly by SCGC and LRGP. The New Notes initially become due in August 1996,
but can be extended up to an additional twelve months at the option of the
issuers, and carry a 12% coupon increasing 25 basis points each quarter until
maturity, and provide for contingent interest beginning in June 1996 equal to
7.5% of SCGC's and LRGP's consolidated cash flow, as defined. The New Notes are
collaterlized by substantially all the assets of SCGC and LRGP and contain
covenants relating to certain business, operational and financial matters
including limitations on (i) incurring additional debt, (ii) paying dividends,
(iii) merging or consolidating with others, (iv) changes in control, (v)
capital expenditures, (vi) investments and joint ventures, and (vii) the sale
of assets. The New Notes are not guaranteed by the Company or any of its
subsidiaries.
In March 1995, pursuant to the Stock Purchase Agreement, SCGC issued
promissory notes aggregating $4.7 million to Casino America (the "Casino
America Notes"). The Casino America Notes bear interest at 11.5% per annum and
are due three business days after the New Notes are paid in full. The Casino
America Notes are not guaranteed by the Company or any of its subsidiaries.
H - SALES AND ISSUANCES OF COMMON STOCK
During fiscal 1994 the Company conducted a private placement offering under
Regulation D of the Securities Act of 1933 ("Securities Act") whereby the
Company sold 2,690,056 shares of its common stock to accredited investors which
resulted in gross proceeds of approximately $14.0 million. In connection with
such private placement, the Company paid cash finder's fees of approximately
$770,000. In May 1994 the Company sold an additional 636,700 shares of its
common stock in the private placement offering which resulted in gross proceeds
of approximately $3.7 million.
22
14
In connection with the purchase of SCGC's riverboat the Company issued
433,333 shares of its common stock during fiscal 1994 to Kehl River Boats, Inc.
("KRB"). During fiscal 1995, after KRB was found suitable by the Louisiana
gaming regulatory authorities, the Company issued KRB the remaining 623,334
shares of its common stock due under the vessel purchase agreement (see Note L).
During fiscal 1995 the Company filed a registration statement with the
Securities and Exchange Commission, which became effective in November 1994, to
register a total of 10,121,869 shares of its common stock. The registration
statement includes (i) 6,937,623 shares on behalf of certain selling
shareholders, (ii) 1,184,246 shares representing the underlying shares of
outstanding common stock purchase warrants, and (iii) 2,000,000 shares on
behalf of the Company. Through April 30, 1995 the Company had sold 915,000 of
the 2,000,000 shares included in the registration statement resulting in net
proceeds of $3,545,500. In addition, during fiscal 1995 the Company (i) sold
150,000 shares of its common stock to foreign investors under the provisions of
Regulation S under the Securities Act resulting in net proceeds of $461,406,
and (ii) issued a total of 325,000 shares of its common stock for services
rendered and the termination of a certain letter agreement pertaining to a
proposed casino site in Lake Charles, Louisiana that was ultimately not
pursued.
I - STOCK OPTIONS AND WARRANTS
Options
The Company has two stock option plans, the 1986 Incentive Stock Option
Plan ("1986 Plan") for employees covering 1,250,000 shares of common stock and
the 1991 Non-Qualified Stock Option Plan ("1991 Plan") for directors and key
employees covering 250,000 shares of common stock. Under the 1991 Plan each
non-employee director is entitled to an automatic annual grant to purchase
2,500 shares of common stock.
Under the terms of the Plans, the purchase price of the shares will not be
less than the fair market value of such shares on the date of grant. Options
granted under the Plans expire in the years 1998 through 2005 and generally are
exercisable on the date of grant, with the exception of options to purchase
325,000 shares which become exercisable from 1996 through 1999. At April 30,
1995, there were 223,575 and 135,000 shares of common stock available for grant
in the 1986 Plan and 1991 Plan, respectively.
The following is an aggregate summary of the 1986 Plan and 1991 Plan
activity since April 30, 1992:
Number Option Price Proceeds
of Shares per Share on Exercise
---------------------------------------------------------------------------------------------
Outstanding at April 30, 1992 268,143 $ .63 to $ .72 $ 174,313
Granted 7,500 $ .41 3,047
Canceled (38,500) $ .63 to $ .72 (24,547)
-------- ------------
Outstanding at April 30, 1993 237,143 $ .41 to $ .72 152,813
Granted 507,500 $1.41 to $7.38 2,903,125
Exercised (77,500) $ .63 to $1.41 (62,891)
-------- ------------
Outstanding at April 30, 1994 667,143 $ .41 to $7.38 2,993,047
Granted 480,000 $3.31 to $4.03 1,671,094
Exercised (39,500) $ .41 to $1.41 (38,047)
Canceled (310,000) $7.31 (2,266,875)
-------- ------------
Outstanding at April 30, 1995 797,643 $ .41 to $7.31 $ 2,359,219
======== ============
23
15
Warrants
During fiscal 1994 and 1995 the Company issued common stock purchase
warrants to a variety of parties in connection with (i) the issuance of debt
(558,414 underlying shares), (ii) finder's fees for private placements of
common stock (314,952 underlying shares), (iii) a commitment fee for the
issuance of a commitment letter (160,880 underlying shares), (iv) the purchase
of its riverboat (100,000 underlying shares), and (v) a certain joint venture
agreement (50,000 underlying shares). The warrants issued were valued based
upon a composite of commonly accepted warrant valuation models.
The following is an aggregate summary of warrant activity since April 30,
1993:
NUMBER OF
UNDERLYING EXERCISE PRICE PROCEEDS
SHARES PER SHARE ON EXERCISE
----------------------------------------------------------------------------------------
Outstanding at April 30, 1993 -- $ --
Issued 475,832 $6.00 to $12.00 3,327,420
--------- ----- ------ ----------
Outstanding at April 30, 1994 475,832 $6.00 to $12.00 3,327,420
Issued 708,414 $3.00 to $7.25 2,793,992
--------- ----- ------ ----------
Outstanding at April 30, 1995 1,184,246 $3.00 to $12.00 $6,121,412
--------- ----- ------ ----------
All of the warrants became exercisable upon their issuance. The warrants
expire between 1997 and 1999, contain certain anti-dilution provisions and
provide the holders with certain registration rights relative to the underlying
shares.
J - INCOME TAXES
The provision (benefit) for income taxes from continuing operations was as
follows for the three fiscal years in the period ended April 30, 1995:
FISCAL FISCAL FISCAL
1995 1994 1993
-----------------------------------------------------------------------------------------
Provision (benefit) for income taxes:
Current $ 37,672 $ (43,359) $ 125,626
Deferred (3,940,000) (1,062,574) (258,730)
----------- ----------- ---------
$(3,902,328) $(1,105,933) $(133,104)
=========== =========== =========
The provision (benefit) for income taxes from continuing operations is
different from the amount computed by applying the statutory federal income tax
rate to loss from continuing operations before income taxes for the following
reasons:
FISCAL FISCAL FISCAL
1995 1994 1993
-----------------------------------------------------------------------------------------
Federal statutory rate (34)% (34)% (34)%
State income tax, net of federal benefit (5) (3)
Valuation allowance 23
Other 2
--- --- ---
(16)% (35)% (34)%
=== === ===
24
16
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets were as follows:
APRIL 30, 1995 1994
-----------------------------------------------------------------------------------------
Deferred tax liabilities:
License costs $ 3,442,030 $3,442,030
Land held for development 1,792,255 1,792,255
Other 19,975 165,475
--------- ---------
Total deferred tax liabilities 5,254,260 5,399,760
--------- ---------
Deferred tax assets:
Pre-opening expenses 6,471,000 692,530
Net operating loss carryforward 3,589,150 195,600
Barge reserve 269,000
Bad debt expense 47,525 68,000
Other 9,779 3,630
Total deferred tax assets 10,386,454 959,760
--------- ---------
Valuation allowance (5,632,194)
---------
Net deferred tax liability $ 500,000 $4,440,000
========= =========
The Company recorded a valuation allowance for the year ended April 30,
1995 to reduce the carrying value of deferred tax assets. The valuation
allowance relates to management's estimate of the realization of such deferred
tax assets. At April 30, 1995 the Company had a net operating loss carryforward
for tax purposes of approximately $9,477,000 which expires in 2009 and 2010.
K - LEASES
In March and July 1995, SCGC entered into agreements to lease the two
parcels of land that comprise the Calcasieu Parish riverboat casino site. The
leases have an initial term of five years with seven five year renewal options.
During the initial term, the leases require annual aggregate rental payments of
$850,000 in years one through four, and $1,000,000 in year five, payable
monthly. During the first renewal term, the rent will be increased annually by
the greater of (i) 5%, or (ii) the percentage increase in the average consumer
price index for Calcasieu Parish, Louisiana for the previous twelve month
period. During the second through seventh renewal terms, the lessor and SCGC
will attempt to set the rent equal to 100% of the rent paid by other riverboat
gaming operators in Louisiana and Mississippi for comparable property usages,
or if no agreement can be made, then the parties will appoint real estate
appraisers to set the rent for such renewal term. However, in no event shall
the annual rent be less than $1.6 million during the fourth and all subsequent
renewal terms. In addition, SCGC will pay all real estate taxes, except for
taxes due on the unimproved value of the property. The Company has guaranteed
the obligations of SCGC under these leases.
In addition to the Calcasieu Parish site leases, the Company has also
entered into various operating leases for equipment and office facilities. The
aggregate rentals due under such leases were not significant at April 30, 1995.
25
17
Rent expense for all operating leases during the last three fiscal years
was as follows:
FISCAL FISCAL FISCAL
1995 1994 1993
-----------------------------------------------------------------------------------------
Continuing operations $93,888 $39,483 $35,970
Discontinued operations 23,727 46,105
------- ------- -------
$93,888 $63,210 $82,075
======= ======= =======
The Company has also entered into various capital leases for equipment. As
of April 30, 1995 future minimum lease payments under capital leases were as
follows:
FISCAL YEAR AMOUNT
-----------------------------------------------------------------
1996 $ 3,294,610
1997 2,234,605
1998 84,420
1999 79,476
2000 6,622
----------
Total minimum lease payments 5,699,733
Less amount representing interest (551,624)
----------
Present value of future minimum lease payments 5,148,109
Less current portion (2,876,632)
----------
Capital lease obligations, less current portion $ 2,271,477
==========
L - COMMITMENTS AND CONTINGENCIES
Common Stock Pending Issuance
In February, 1995 the Company made a commitment to issue 50,000 shares of
its common stock (representing $200,000) to a consultant upon commencement of
SCGC's riverboat gaming operations in Calcasieu Parish, Louisiana. In July 1995
such operations commenced and subsequently the shares due were issued.
At April 30, 1994 the Company was committed to issue 333,334 shares of its
common stock (representing $1,500,000) to KRB, the Company's riverboat
contractor, upon KRB being found suitable as a 5% or greater shareholder of the
Company by the Louisiana gaming regulatory authorities. In December 1994, KRB
was found suitable and the Company issued the total shares then due (623,334)
to KRB.
Common Stock Subject to Redemption
At April 30, 1994 the Company was required to make recission offers to
certain investors covering 151,000 shares of its common stock (representing
$829,500) to satisfy securities laws in certain states in which the Company
conducted a private placement offering of its securities. The recission offers
expired at various times through September 1994, at which time the respective
amounts included in common stock subject to redemption were reclassified to
additional paid-in capital.
26
18
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 the Company). 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. The Company intends to
vigorously contest liability in this matter.
Commitments to Calcasieu Parish
In January 1995, SCGC made a commitment to Calcasieu Parish to provide
certain payments to the Parish above and beyond the statutory admissions tax.
SCGC committed to a $1 million initial payment, which was paid upon the opening
of the casino, and a $1 million annual payment for as long as the casino is
operating at its site in the Parish, but in no event less than six years. In
June 1995 SCGC and the Parish entered into a definitive development agreement
whereby, in consideration for the payments to be made by SCGC to the Parish,
the Parish is required to cooperate with and provide assistance to SCGC in
obtaining and maintaining necessary permits and approvals to operate its
riverboat gaming casino.
Teaming Agreement
In June 1994 the Company entered into a teaming agreement with a group of
individuals for the purpose of pursuing a gaming license in the State of
Illinois. The agreement requires the Company to issue warrants to purchase up
to 250,000 shares of the Company's common stock, and to make certain payments
in cash upon the occurrence of specified events, including the issuance of a
gaming license.
M - RELATED PARTY TRANSACTIONS
During fiscal 1994, in connection with the acquisition of SCGC (see Note
D), the Company issued 400,000 shares of restricted common stock as a finder's
fee to a company whose principal shareholder is a director of the Company. In
March 1995, this director became an executive officer of the Company.
The Company incurred legal fees of approximately $259,000 and $218,000
during fiscal 1995 and 1994, respectively, from a law firm of which a director
of the Company was a partner. In March 1995, this director became an executive
officer of the Company.
During fiscal 1994 the Company paid $24,000 for investment banking services
to a company of which an outside director of the Company is an officer.
During fiscal 1994 the Company borrowed an aggregate of $700,000 on a
short-term basis from an individual who was a major beneficial shareholder of
the Company at the time of such loan.
During fiscal 1995 the Company entered into a teaming agreement (see Note
L) with an individual who subsequently became a director of the Company.
Pursuant to such agreement, the Company issued warrants to purchase 50,000
shares of the Company's common stock.
27
19
N - DISCONTINUED OPERATIONS
In July 1993 the Company made the decision to focus all its efforts in the
gaming industry and discontinue operating in the cable programming industry. As
a result, during fiscal 1994 the Company sold all its remaining cable assets
for total consideration of $1,125,000.
The loss on disposal of the Company's cable operations was as follows:
LOSS BEFORE INCOME
INCOME TAXES TAX BENEFIT NET LOSS
-----------------------------------------------------------------------------------------
Loss on disposal of cable operations $(239,925) $(81,575) $(158,350)
Operating loss from July 1993
to February 1994 (disposal date) (32,432) (11,027) (21,405)
--------- -------- ---------
$(272,357) $(92,602) $(179,755)
========= ======== =========
The identifiable revenues and expenses from cable operations have been
reclassified on the accompanying statements of operations from their historical
classification to separately identify them as the net results of discontinued
operations. Discontinued operations include allocations of general and
administrative expenses that were determined to be directly related to such
operations. The condensed statements of operations for discontinued operations
for fiscal years 1994 and 1993 were as follows:
Fiscal 1994
----------------------------------
May-June July-April
(Pre-measure- (Post-measure- Fiscal
ment Date) ment Date) 1993
-----------------------------------------------------------------------------------------
Revenues $192,313 $ 412,050 $1,346,912
Costs and expenses 187,845 444,482 1,615,248
Loss on disposal of cable operations 239,925
---------- --------- ----------
Income (loss) before income taxes 4,468 (272,357) (268,336)
Provision (benefit) for income taxes 1,519 (92,602) (123,383)
---------- --------- ----------
Net income (loss) $ 2,949 $(179,755) $ (144,953)
========== ========= ==========
28
20
O - SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow disclosures are as follows for the three fiscal
years in the period ended April 30, 1995:
FISCAL FISCAL FISCAL
1995 1994 1993
-----------------------------------------------------------------------------------------
Continuing operations:
Common stock issued in acquisitions $9,582,500
Common stock issued for equipment $1,450,000 550,000
Common stock issued for services and other 1,300,000
Equipment acquired under capital leases 5,778,767
Equipment acquired with debt 5,000,000
Note payable converted to common stock 3,000,000
Note payable exchanged for land 471,465
Retirement of debt with property 200,000
Warrants issued for equipment and services 337,500 951,664
Interest paid, net of amount capitalized 6,132,059 11,474 $ 3,886
Income taxes paid, net of refunds (124,328) (141,359) 226,351
Discontinued operations:
Cable assets sold for note receivable 250,000
P - SUBSEQUENT EVENTS
On June 9, 1995 the Company sold a 50% interest in SCGC to LRGP for
approximately $22 million total consideration (see Note C).
On July 14, 1995 the Company entered into a definitive asset purchase
agreement to acquire the Bourbon Street Casino located in Las Vegas, Nevada for
a purchase price of $10 million. The Bourbon Street Casino has approximately 430
slot machines and 15 table games over its 15,000 square feet of gaming space,
166 hotel rooms, including 16 suites, and has reported annual revenues of
approximately $12 million. Closing is expected to occur by October 1995.
On July 29, 1995 SCGC's riverboat casino commenced gaming operations in
Calcasieu Parish, Louisiana.
On August 7, 1995 SCGC and LRGP jointly issued $38.4 million of senior
secured increasing rate notes and paid off SCGC's Senior Note (see Note G).
29
21
REPORT OF INDEPENDENT AUDITORS
Crown Casino Corporation
REPORT OF INDEPENDENT ACCOUNTANTS
Stockholders and Board of Directors
Crown Casino Corporation
We have audited the accompanying consolidated balance sheets of Crown
Casino Corporation and subsidiaries as of April 30, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the two years in the period ended April 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Crown Casino Corporation and subsidiaries as of April 30, 1995 and 1994, and
the consolidated results of their operations and their cash flows for each of
the two years in the period ended April 30, 1995 in conformity with generally
accepted accounting principles.
Dallas, Texas Coopers & Lybrand L.L.P.
August 7, 1995
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Crown Casino Corporation (formerly Skylink America Incorporated)
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Crown Casino Corporation (formerly
Skylink America Incorporated) and subsidiaries for the year ended April 30,
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of
operations and cash flows of Crown Casino Corporation (formerly Skylink America
Incorporated) and subsidiaries for the year ended April 30, 1993, in conformity
with generally accepted accounting principles.
Dallas, Texas Ernst & Young LLP
June 11, 1993
30
22
COMMON STOCK INFORMATION, DIVIDENDS AND
RELATED STOCKHOLDER MATTERS Crown Casino Corporation
The Company's common stock is authorized for quotation on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") under
the NASDAQ symbol DICE. The following table sets forth, by fiscal quarter, the
high and low bid prices reported by NASDAQ for the Company's common stock for
the periods indicated. The bid quotation information presented represents
prices between dealers and does not include retail mark-ups, mark-downs, or
other fees or commissions and may not represent actual transactions.
1995 BID PRICES 1994 BID PRICES
HIGH LOW HIGH LOW
----------------------------------------------------------------------
First quarter $7 1/2 $5 5/8 $7 3/4 $ 1/2
Second quarter 8 3/8 4 1/8 8 4 3/8
Third quarter 7 2 7/8 7 1/2 5
Fourth quarter 5 3/4 3 1/4 11 6 5/8
As of July 21, 1995 there were approximately 1,866 stockholders of record.
This number excludes individual stockholders holding stock under nominee
security position listings.
Since its inception, the Company has paid no dividends on its common stock.
The Company currently intends to follow a policy of retaining earnings to
finance future growth. Payment of dividends in the future will be determined
by the Company's Board of Directors and will depend upon, among other things,
the Company's future earnings, operations, capital requirements and surplus,
general financial condition, and contractual restrictions that may exist, and
such other factors as the Board of Directors may deem relevant.
SELECTED FINANCIAL DATA
The financial data set forth below was derived from the audited
consolidated financial statements of the Company and should be read in
conjunction with the consolidated financial statements and related notes
thereto, and Management's Discussion and Analysis of Financial Condition and
Results of Operations contained elsewhere herein. (In thousands, except per
share amounts.)
YEARS ENDED APRIL 30, 1995 1994 1993 1992 1991
----------------------------------------------------------------------------------------------------------
Revenues from:
Continuing operations $ -- $ -- $ -- $ -- $ --
Discontinued operations -- 604 1,347 11,618 13,602
Income (loss) from:
Continuing operations $ (20,325) $ (2,052) $ (263) $ (380) $ (581)
Discontinued operations (177) (145) 2,701) (a) (614)
--------- -------- ------- ------- -------
$ (20,325) $ (2,229) $ (408) $ 2,321 $(1,195)
--------- -------- ------- ------- -------
Income (loss) per share:
Continuing operations $ (2.01) $ (.34) $ (.07) $ (.10) $ (.16)
Discontinued operations (.03) (.04) .73 (.16)
--------- -------- ------- ------- -------
$ (2.01) $ (.37) $ (.11) $ .63 $ (.32)
--------- --------- ------- ------- -------
Total assets (b) $ 54,507 $ 30,974 $ 4,388 $ 5,477 $ 2,148
Long-term obligations 2,271 2,330 -- -- 6,009
Stockholders' equity 17,930 23,837 3,711 4,196 1,875
Shares outstanding 11,678 8,999 3,524 3,689 3,697
(a) - Includes a gain on the sale of certain cable assets of $5.7 million
before income taxes.
(b) - Assets related to discontinued operations are shown net of related
liabilities.
31
23
CORPORATE INFORMATION Crown Casino Corporation
DIRECTORS 10-K Information
Edward R. McMurphy Additional information is included in the Company's
Chairman of the Board, Chief Executive Officer and President report to the Securities and Exchange Commission on
Crown Casino Corporation Form 10-K. Copies of Form 10-K are available at no
charge to stockholders upon written request to:
John David Simmons
President Edward R. McMurphy
Condomart, Inc. 2415 W. Northwest Hwy., Suite 103
Dallas, Texas 75220
David J. Douglas (214) 352-7561
Managing Director
Triple S Capital Corporation Corporate Offices
T. J. Falgout, III 2415 W. Northwest Hwy.
Executive Vice President and General Counsel Suite 103
Crown Casino Corporation Dallas, Texas 75220
(214) 352-7561
Gerald L. Adams
President Annual Meeting
River Development, Inc.
The annual meeting of stockholders of Crown Casino
Gerard M. Jacobs Corporation will be held at the Four Seasons Hotel and
President Resort, 4150 N. MacArthur Blvd., Irving, Texas at
Environmental Waste Funding Corporation 9:30 a.m. on Friday, September 29, 1995.
Robert J. Kehl Transfer Agent and Registrar
President
Kehl River Boats, Inc. Securities Transfer Corporation
Dallas, Texas
(214) 248-1922
OFFICERS Independent Accountants
Edward R. McMurphy Coopers & Lybrand L.L.P.
Chairman of the Board, Chief Executive Officer and President Dallas, Texas
T. J. Falgout, III General Counsel
Executive Vice President and General Counsel
Smith, Gambrell & Russell
Mark D. Slusser Atlanta, Georgia
Chief Financial Officer, Vice President Finance and Secretary
Stumpf & Falgout
Edward J. Preuss, Jr. Houston, Texas
Vice President Project Development
Leslie M. Clavir
Vice President Gaming
Michael B. Cloud
Controller and Assistant Secretary