UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended
June 30, 1995 or
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from to .
Commission File No. 1-4385
DUNES HOTELS AND CASINOS INC.
(Exact name of registrant as specified in its charter)
NEW YORK 11-1687244
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4045 SOUTH SPENCER, SUITE 206, LAS VEGAS, NEVADA 89119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (702) 732-7474
NOT APPLICABLE
Former name, former address and former fiscal year, if changed
since last report
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
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Outstanding at
CLASS AUGUST 10, 1995
Common Stock, $.50 par value 6,460,096 shares
This document consists of 24 pages with exhibits, 23 pages
without exhibits.
<PAGE>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1995
INDEX
PAGE
Part I. Financial Information
ITEM 1. FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets
June 30, 1995 and December 31, 1994 3
Consolidated Condensed Statements of Loss
for the three months ended June 30, 1995 and 1994 5
Consolidated Condensed Statements of Loss
for the six months ended June 30, 1995 and 1994 6
Consolidated Condensed Statements of Cash Flows
for the six months ended June 30, 1995 and 1994 7
Notes to Consolidated Condensed Financial
Statements, June 30, 1995 and 1994 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 16
Part II. Other Information
ITEM 1. LEGAL PROCEEDING 20
ITEM 2. CHANGES IN SECURITIES 20
ITEM 3. DEFAULT UPON SENIOR SECURITIES 20
ITEM 5. OTHER INFORMATION 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 21
Signatures 22
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
ASSETS
June December
30, 1995 31, 1994
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 946 $ 874
Marketable securities 504 855
Receivables:
Trade, less allowance of $87 in 1995 366 514
Notes:
Related parties 357
Real estate sales, current portion 383 335
Current maturities of long-term notes receivable 536 655
Growing crop inventory 228
Prepaid expenses 233 249
---------- ----------
Total current assets 3,196 3,839
---------- ----------
Real estate held for development and sale 7,087 7,951
---------- ----------
Property and equipment, less accumulated depreciation
and amortization, 1995, $293; 1994, $261 4,527 4,744
---------- ----------
Other assets:
Long-term notes receivable, less current maturities:
Related parties, including interest, less allowance
of $2,649 in 1995 and $2,968 in 1994 953 1,123
Director, less allowance of $500 in 1995 and
$427 in 1994 397 421
Other, less allowance of $1,214 in 1995 and
$1,174 in 1994 885 530
Deferred tax asset, net of allowance of $16,427
in 1995 and 1994
Investments 1,822 1,346
Deferred costs and other 8 8
---------- ----------
4,065 3,428
---------- ----------
$ 18,875 $ 19,962
========== ==========
</TABLE>
(continued)
<PAGE>
<TABLE>
<CAPTION>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
June December
30, 1995 31, 1994
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Current liabilities:
Short-term debt, contract payable $ $ 76
Current portion of long-term debt 22 22
San Antonio Savings Association (SASA) 11,985 11,985
Trade payables 66 174
Accrued expenses and other 100 58
Accrued preferred stock dividend 992 956
Deferred income 48 23
Income taxes, current 247 247
---------- ----------
Total current liabilities 13,460 13,541
---------- ----------
Other liabilities:
Long-term debt, net of current portion 127 146
---------- ----------
127 146
---------- ----------
Contingencies - Note 9
Shareholders' equity:
Preferred stock - authorized 10,750,000 shares
($.50 par); issued 10,512 shares, Series B
$7.50 cumulative Preferred stock, aggregate
liquidation value $2,193 5 5
Common stock, $.50 par; authorized 25,000,000
shares; issued 7,799,780 shares, outstanding
6,460,096 shares 3,900 3,900
Capital in excess of par 25,881 25,881
Deficit (22,668) (21,681)
----------- -----------
7,118 8,105
Treasury stock at cost; Preferred - Series B,
902 shares, Common 1,339,684 shares (1,830) (1,830)
----------- -----------
Total shareholders' equity 5,288 6,275
---------- ----------
$ 18,875 $ 19,962
========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF LOSS
THREE MONTHS ENDED JUNE 30, 1995 AND 1994
UNAUDITED
1995 1994
(Dollars in thousands,
except per share)
<S> <C> <C>
Income from real estate operations:
Sales $ 882 $ 100
Cost of sales 774 93
----------- -----------
108 7
----------- -----------
Rental income 131 227
Storage and drying income 124
----------- -----------
255 227
----------- -----------
363 234
Operating expenses, including depreciation
expense of $16,000 in 1995 and 1994 661 579
----------- -----------
Loss from operations before other (charges) credits (298) (345)
----------- -----------
Other (charges) credits:
Interest and dividend income, less allowance
of $53 in 1994 137 112
Interest expense (1) (1)
Partnership loss (325)
Other (14) 47
----------- -----------
(203) 158
----------- -----------
Net loss $ (501) $ (187)
=========== ===========
Net loss per common share $ (0.08) $ (0.02)
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF LOSS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
UNAUDITED
1995 1994
(Dollars in thousands
except per share)
<S> <C> <C>
Income from real estate operations:
Sales $ 1,339 $ 304
Cost of sales 1,252 283
----------- -----------
87 21
----------- -----------
Rental income 266 319
Storage and drying income 167
----------- -----------
433 319
----------- -----------
520 340
Operating expenses, including depreciation
expense of $32,000 in 1995 and 1994 1,386 1,249
----------- -----------
Loss from operations before other (charges) credits (866) (909)
----------- -----------
Other (charges) credits:
Interest and dividend income, less allowance
of $102 in 1994 293 222
Interest expense (5) (3)
Partnership loss (450)
Other 75 86
----------- -----------
(87) 305
----------- -----------
Net loss $ (953) $ (604)
=========== ===========
Net loss per common share $ (0.15) $ (0.09)
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
UNAUDITED
1995 1994
(Dollars in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net cash provided by (used in) operating
activities $ 1,473 $ (58)
----------- -----------
Cash flows from investing activities:
Decrease in cash held in escrow 132
Increase in real estate held for sale (427) (198)
Increase in investments (1,043) (363)
(Increase) decrease in notes receivable 88 188
Sale of securities 249
----------- -----------
(1,382) 8
----------- -----------
Cash flows from financing activities:
Decrease in long-term debt (19)
(Decrease) increase in short-term debt (100)
----------- -----------
(19) (100)
----------- -----------
Increase (decrease) in cash and cash
equivalents 72 (150)
Cash and cash equivalents, beginning
of period 874 520
----------- -----------
Cash and cash equivalents, end of period $ 946 $ 370
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
DUNES HOTELS AND CASINOS INC. AND SUBSIDARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
UNAUDITED
1. Summary of significant accounting policies:
The accompanying consolidated financial statements include
the accounts of the Company and its wholly-owned
subsidiaries Continental California Corporation
(Continental), Dunes, Inc., Dunes Hotel and Casino of
Atlantic City, Inc. (DAC), M & R Corporation (MRC) and
MRC's subsidiary M & R Investment Company, Inc. (MRI) and
MRI's subsidiaries SHF Acquisition Corporation (SHF) and
Southlake Acquisition Corporation (Southlake). The Company
has been advised by the State of New Jersey, Department of
State, Division of Commercial Recording that neither Dunes,
Inc. nor DAC filed reports required by state statute for
two consecutive years. As a result, as of February 8,
1995, the State of New Jersey revoked the active status of
Dunes, Inc. and DAC, which can result in denial of their
privilege of doing business under their respective current
names. The Company has no current plans to resume
operations or pursue business opportunities in New Jersey
and does not intend to contest the action.
The Company did not consolidate Pine Ridge Joint Venture
(PRJV), a joint venture in which the Company has a 51%
interest at June 30, 1995, because the Company intends to
liquidate its interest in 1995. PRJV is accounted for on
the equity method.
By the terms of the settlement agreement with San Antonio
Savings Association, MRI is prohibited from paying
dividends to MRC which, in turn, is prohibited from paying
dividends to the Company (See Note 2 - Bankruptcy
proceeding and Note 8 - San Antonio Savings Association
(SASA)/Resolution Trust Corporation (RTC) ).
The nature of the Company's operations is such that
estimates must be used in the preparation of unaudited
interim financial statements. In the opinion of
management, all adjustments, which consisted of normal
recurring entries, which are necessary to a fair statement
of the results for the interim periods have been made. All
intercompany accounts have been eliminated.
2. Bankruptcy Proceeding:
Continental owns four parcels of unimproved land located
northwest of the city of San Diego, California.
Continental's land is encumbered by a Deed of Trust in
favor of The Resolution Trust Corporation (RTC) as Receiver
for San Antonio Savings Association (SASA).
<PAGE>
2. Bankruptcy Proceeding (continued):
On November 28, 1994, the RTC recorded a Notice of Default
and Election to Sell. On April 26, 1995, Continental
received a "Notice of Trustee's Sale Under Deed of Trust"
scheduling a trustee sale of the Continental property for
May 19, 1995. The Notice of Trustee's Sale Under Deed of
Trust stated that "the total amount of the unpaid balance
of the obligation secured by the property to be sold and
reasonable estimated costs, expenses and advances at the
time of the initial publication of the Notice of Sale is:
$20,483,558.30 ESTIMATED."
The Company, which had previously commenced an action
against SASA/RTC in the United States District Court,
Southern District of California (Case No. 95-0139R (RBB)),
sought a Preliminary Injunction against the Trustee's Sale
on Continental's property. On April 3, 1995, the United
States District Court denied the Motion for Preliminary
Injunction and, again, on May 8, 1995, denied the Company's
Motion for Injunction Pending Appeal. The Company then
sought stay relief from the United States Court of Appeals
for the Ninth Circuit. On May 18, 1995, the United States
Court of Appeals denied the Company's stay relief request.
Because the Trustee's Sale was scheduled for May 19, 1995,
and Continental's land would otherwise be subject to sale
on that date, Continental filed a Petition for Relief Under
Chapter 11 of the United States Bankruptcy Code on May 18,
1995. The Petition for Relief was filed in the United
States District Court, District of Nevada, Case No. 95-
21992 LBR.
On June 19, 1995, the RTC filed, in the United States
Bankruptcy Court, District of Nevada, a Motion to Dismiss
or, alternatively, to Transfer Venue. On July 13, 1995,
the Bankruptcy Court ruled that Continental's Bankruptcy
Case be moved to The United States Bankruptcy Court for the
Southern District of California. The Bankruptcy Court did
not rule on the Motion to Dismiss.
The Company has been notified that Continental's bankruptcy
case was received by the United States Bankruptcy Court,
Southern District of California on July 27, 1995 and was
assigned case number 95-07973-A11.
<PAGE>
3. Description of business:
The Company is engaged principally in real estate investment
and lending activities and with respect to certain
properties, limited agricultural and certain development
operations, the most significant of which has been retail
land sales. The Company considers its business to be
comprised of one segment, the acquisition and development
and sale of real estate.
4. Related party transactions:
John B. Anderson (Anderson), the Company's controlling
stockholder and Chairman of the Board of Directors of the
Company and entities owned or controlled by him (Anderson
Entities) own approximately 67.6% of the Company's common
stock as of August 10, 1995 (See Note 11 - Subsequent
event).
From time to time the Company has made loans to various
Anderson Entities and to Directors and Executive Officers
of the Company, details of which are more fully described
in the Company's Form 10-K for the year ended December 31,
1994.
During 1990 and 1991, the Company, through certain of its
subsidiaries, made loans to Rancho Murieta Properties, Inc.
(RMPI) and to CBC Builders, Inc. (CBC) each of which are
Anderson Entities located in Rancho Murieta, California,
details of which are more fully described in the Company's
Form 10-K for the year ended December 31, 1994. See "Item
1. Business - Other Activities - Certain Loans - Rancho
Murieta Properties, Inc./CBC Builders, Inc." In connection
with a settlement agreement (the Agreement) between RMPI,
the Pension Trust Fund for Operating Engineers and Rancho
Murieta Country Club, the Agreement provides for a payment
in satisfaction of certain of the obligations that have
been pledged to SHF and MRI. Pursuant to the terms of an
Inter-Creditor Agreement entered into between SHF, MRI and
RMPI's and CBC's legal counsel, MRI and SHF received, on
July 7, 1995, $345,337 of the final settlement payment.
The balance of the amounts due from RMPI and CBC have been
fully reserved as of June 30, 1995.
In connection with MRI's loan to Baby Grand Corp. (BGC), an
Anderson Entity, and pursuant to the terms of a related
settlement agreement among MRI, Bank One, Arizona, NA, and
BGC, MRI purchased from BGC an option to acquire
approximately 1,690 acres of farm land located in Solano
County, California, for a price of $1,043,902, all of which
is more
<PAGE>
4. Related party transactions (continued):
fully described in the Company's Form 10-K for the year
ended December 31, 1994. See "Item 1. Business - Other
Activities - Certain Loans - Baby Grand Corp."
The loan from the Company to El Dorado Vineyards, Inc., an
entity wholly owned by Andrew Marincovich, a member of the
Company's Board of Directors and Chairman of the Company's
Audit Committee, is described in detail in the Company's
Form 10-K for the year ended December 31, 1994. See "Item
1. Business - Other Activities - Certain Loans -
Directors."
5. Investment - Pine Ridge Joint Venture:
The Company's investment in PRJV is described in detail in
the Company's Form 10-K for the year ended December 31,
1994, "Item 1. - Business - Real Estate and Related
Activities - AJD Joint Venture."
Summarized condensed financial information of PRJV as of
June 30, 1995 and for the six months then ended is as
follows:
(Dollars in thousands)
INCOME STATEMENT DATA
Sales $ 1,019
Cost of sales 1,470
Loss from operations 546
Net loss 546
BALANCE SHEET DATA
Assets
Cash $ 4
Work in progress, including
land held for sale 795
Other 59
Liabilities and Equity
Accounts payable $ 319
Construction and land loans payable 723
Equity (Deficit) (184)
<PAGE>
6. Real Estate Held for Investment and Sale:
Included in Real Estate Held for Investment and Sale are 53
single family residential lots located in the city of North
Las Vegas. The Company acquired the lots through a
foreclosure sale, by bidding in indebtedness owed to one of
its subsidiaries. The lots were previously owned by PRJV.
7. Drying facility:
On March 1, 1995, the Company signed a two year lease with
the new owner of the drying facility located in Davis,
California. Annual rental is $54,000. The Company will
pay to California Dehydrating Company (Cal Dehy), an
Anderson Entity, $25,000, payable $5,000 monthly, for use
of the Cal Dehy name.
8. San Antonio Savings Association (SASA)/Resolution Trust
Corporation (RTC):
On February 2, 1995, the Company, along with two of its
subsidiaries, filed a complaint in the United States
District Court, Southern District of California, Case No.
95-0139R (RBB) against the RTC and SASA. Subsequent to the
Company's filing its complaint, the RTC filed a Motion To
Dismiss For Improper Venue. The hearing on the RTC's
motion is scheduled for August 14, 1995.
The RTC alleges the amount due to be $23,654,783 as of July
1, 1995.
The Company's obligation to SASA/RTC is described in detail
in the Company's Form 10-K for the year ended December 31,
1994, "Item 7. - Management's Discussion and Analysis of
Financial Condition and Results of Operations", and in the
Company's reports on Form 8-K dated February 2, 1995, April
3, 1995, April 26, 1995 and May 18, 1995 (See Note 2 -
Bankruptcy proceeding and Part I, "Item 2. Management's
Discussion and Analysis of Financial Condition and Results
of Operations").
9. Contingencies:
a. The Company is involved in various legal proceedings
which are considered to be ordinary routine
litigation incident to its business. The Company
believes that the
<PAGE>
9. Contingencies (continued):
impact, if any, will not materially affect the
Company's operating results or consolidated financial
position.
b. The Company's general liability insurance carrier for
the period August 1982 to November 1983 is in
receivership. The Company's general liability
insurance carrier for the period August 1979 to August
1982 is also in receivership. Insurance coverage for
certain claims pending against the Company are
dependent upon the financial condition of these
insurance companies. Several claims are pending
against the Company for which the Company claims
coverage under policies issued to it by these two
carriers. The potential liability to the Company
cannot be determined. However, the Nevada Insurance
Guaranty Association provides coverage to the Company
similar to that provided under policies by these
general liability carriers subject to certain
limitations, including a limitation of $300,000 for
each covered claim, as set forth in the Nevada
Insurance Guaranty Association Act. The Company
believes that final resolution will not materially
affect its consolidated financial position or operating
results.
c. SHF was advised of possible contamination on two sites
at Hamburg Farms, a storage facility for diesel fuels
and an old airstrip which had been used for the loading
and fueling of aircraft applying agricultural chemicals
to the surrounding farm lands. The Company has
completed the cleanup relating to the diesel storage
tanks at a cost of approximately $100,000. Clean up of
the airstrip has required major excavation of
contaminated earth and the treatment and disposal
thereof.
The Company has disposed of a large amount of the
contaminated earth at an approved site for the storage
of toxic wastes. However, 4,000 cubic yards of
contaminated earth still remain to be disposed of. The
Company, through its chemical and toxic clean-up
consultant, has been working with the California State
Environmental Protection Agency, in seeking alternate
means to the disposal in toxic dump sites of chemical
and toxics-laden soil. The State has participated in
the funding of several projects by a number of chemical
treatment firms in efforts to try other detoxification
methods on the soil.
<PAGE>
9. Contingencies (continued):
c. (continued)
Because of the ongoing testing, the State has not
imposed a disposal date upon the Company. Cost of
disposal is estimated at $100 per cubic yard. The
Company is unable to predict when the ongoing testing
will be complete or what the outcome of these tests
will be. As of June 30, 1995, the Company has paid
$446,000 and accrued $62,000 relating to the clean up,
including the $100,000 expended for the diesel storage
tank. The Company has not made an accrual for the
cost, if any, of removing the contaminated earth
pending the results of the various ongoing tests.
d. The Company has received a notice from the State of
California Franchise Tax Board (FTB) wherein the FTB
alleges that one of the Company's subsidiaries owes
California franchise tax, penalties and interest of
approximately $500,000. The FTB claims that the
Company is not permitted to file a unitary tax return
in California. The Company has retained legal counsel
to resolve the matter with the FTB. The matter is
currently being appealed to the California State Board
of Equalization.
e. In connection with a loan to El Dorado Vineyards, Inc.,
a company wholly-owned by Andrew Marincovich, a member
of the Company's Board of Directors and member of the
Company's Audit Committee, the Company is currently
evaluating whether the loan transaction adversely
impacts Mr. Marincovich's independence as a Director
serving on the Audit Committee. If Mr. Marincovich
were found not to be independent, the Company may not
be in compliance with the Consent Decree issued by the
Securities and Exchange Commission. The Company is
unable to predict the outcome of this matter.
<PAGE>
10. Earnings per share:
Earnings per common share has been computed using the number
of common shares outstanding as of June 30, 1995.
Dividends on non-convertible preferred stock Series B have
been deducted from income or added to the loss applicable
to common shares. Dividends accrued on preferred shares,
in arrears since the second quarter 1982, amount to
$992,000 as of June 30, 1995.
11. Subsequent event.
A substantial portion of the shares of the Company's common
stock beneficially owned by John B. Anderson, the Company's
Chairman of the Board and controlling stockholder, are the
subject of a pledge in favor of Eurekabank, formerly Eureka
Federal Savings and Loan Association. The Federal Deposit
Insurance Corporation (FDIC), the successor-in-interest to
Eurekabank, has previously asserted beneficial ownership as
to such shares pursuant to SEC Schedule 13D dated February
12, 1993.
In July 1995, FDIC, as successor and assignee to Eurekabank,
filed an action in the United States District Court for the
District of Nevada seeking various legal remedies,
including the possession and injunction and sale of
collateral, which collateral includes the Company's shares
beneficially owned by Mr. Anderson which are subject to the
Eurekabank pledge. Should the Court grant
FDIC/Eurekabank's requested relief with respect to the
Company's shares beneficially owned by Mr. Anderson, a
change of control of the Company may occur.
<PAGE>
DUNES HOTELS AND CASINOS INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1995
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MATERIAL CHANGES IN FINANCIAL CONDITION. As of June 30,
1995, the Company had a deficit working capital of $10,264,000 as
compared to a deficit working capital of $9,702,000 as of
December 31, 1994. During the quarter ended June 30, 1995, cash
and cash equivalents increased by $72,000 from $874,000 at
December 31, 1994 to $946,000 at June 30, 1995. The most
significant sources of cash were provided by operations
($1,473,000). The most significant uses of cash during the six
months ended June 30, 1995 were the purchase of the Solano County
Option ($1,043,00) and the acquisition of the 53 residential lots
in North Las Vegas ($427,000).
The principal demands on the Company's liquidity continue to
be to fund, when resolved, the obligation owing to San Antonio
Savings Association/Resolution Trust Corporation (SASA/RTC) and
legal fees related to the litigation arising thereunder; to fund
ongoing expenses at The Fairways, a subdivision of estate lots in
Rancho Murieta, California, developed and being sold by the
Company; to fund the costs of operations of Pine Ridge Joint
Venture (PRJV); to fund the costs of farming at El Dorado
Vineyards; to fund any payments that may be required by the first
lien holder on the El Dorado Vineyard property; to fund the
required repurchase for $170,000 of certain shares of the
Company's stock from the Shenker Estate; and to fund general and
administrative expenses.
The Company believes that the sources of required liquidity
will be cash generated from the storage and drying facility in
Davis, California; operation of El Dorado Vineyards; anticipated
lot sales at The Fairways; sale of the El Dorado Vineyards land
and the recovery of a portion of its investment in PRJV. Based
on known commitments, but, however, subject to the possible
adverse effects of SASA/RTC collecting the amount claimed due by
SASA/RTC under the SASA Obligation (as defined and described in
more detail below), the Company believes that the sources of cash
described above will be adequate to fund known liquidity
requirements. The occurrence of any other presently unknown
material adverse event could hinder the Company's ability to
generate sufficient cash to meet its actual liquidity
requirements. Depending on the magnitude, timing and related
circumstances of any such foregoing events, the Company may be
required to liquidate certain or substantially all of its assets
or to take other steps to respond to cash demands and preserve
the Company's assets and operations.
SASA obtained a judgment (the SASA Obligation) against the
Company in 1988 arising from the Company's guarantee of a
$15,000,000 loan secured by real property in Atlantic City, New
Jersey. The Company and SASA entered into a settlement agreement
effective June 28, 1988, in connection with the SASA Obligation
(the settlement agreement and the SASA Obligation are
<PAGE>
collectively referred to herein as the SASA Obligation). A
detailed discussion of the events leading up to the declaration
of default by SASA and RTC under the SASA Obligation is contained
in "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations," Form 10-K for the year
ended December 31, 1994.
On November 28, 1994, the RTC recorded a notice of default
and election to sell under a deed of trust securing certain real
property located in San Diego, California, owned by Continental
California Corporation, (Continental) a wholly owned subsidiary
of the Company which real property was pledged as collateral for
the SASA Obligation, which obligation was alleged by SASA/RTC to
be $19,613,288 as of September 22, 1994.
On February 2, 1995, the Company, along with two of its
subsidiaries, filed a complaint in the United States District
Court, Southern District of California, Case No. 95-0139R (RBB),
against the RTC and SASA. The complaint alleged that the RTC and
SASA have (i) breached their duties under the settlement
agreement, as amended, (ii) breached their duty of good faith and
fair dealing to the Company, and (iii) breached their fiduciary
duties to the Company. Among other things, the Company, and its
subsidiaries, seek relief against the RTC and SASA, as follows:
(i) for an injunction enjoining the RTC and SASA from foreclosing
on, and selling the San Diego real property; (ii) for damages in
excess of $50,000; and (iii) for an accounting by the RTC and
SASA. On April 3, 1995, the United States District Court,
Southern District of California, denied the Company's Motion for
Preliminary Injunction. Subsequent to the Company's filing its
complaint, the RTC filed a Motion To Dismiss For Improper Venue.
The hearing on the RTC's motion is scheduled for August 14, 1995.
On April 26, 1995, Continental received a "Notice of
Trustee's Sale Under Deed of Trust" scheduling a trustee's sale
for May 19, 1995 at 9:00 a.m. of the real property owned by
Continental located in San Diego, California. The trustee's sale
was scheduled at the direction of "RTC as Receiver for San
Antonio Savings" and stated that said sale was to be made "to
satisfy the indebtedness secured by said deed of trust, advances
thereunder, with interest as provided therein, and the unpaid
principal balance due under the Settlement Agreement Dated June
18, 1988." The Notice of Trustee's Sale Under Deed of Trust
stated that "the total amount of the unpaid balance of the
obligation secured by the property to be sold and reasonable
estimated costs, expenses and advances at the time of the initial
publication of the Notice of Sale is: $20,483,558.50 ESTIMATED."
The Company filed a notice appealing the District Court's
order denying the Motion for Preliminary Injunction.
Additionally, the Company filed a Motion for Injunction Pending
Appeal with the Federal District Court scheduled by the Federal
District Court for May 8, 1995, which was denied. The Company
<PAGE>
then sought stay relief from the United States Court of Appeals
for the Ninth Circuit. On May 18, 1995, the United States Court
of Appeals denied the Company's stay relief request.
Because the Trustee's Sale was scheduled for May 19, 1995,
and Continental's land would otherwise be subject to sale on that
date, Continental filed a Petition for Relief Under Chapter 11 of
the United States Bankruptcy Code on May 18, 1995. The Petition
for Relief was filed in the United States District Court,
District of Nevada, Case No. 95-21992 LBR.
On June 19, 1995, the RTC filed, in the United States
Bankruptcy Court, District of Nevada, a Motion to Dismiss or,
alternatively, to Transfer Venue. On July 13, 1995, the
Bankruptcy Court ruled that Continental's Bankruptcy Case be
moved to The United States Bankruptcy Court for the Southern
District of California. The Bankruptcy Court did not rule on the
Motion to Dismiss. The Company has been notified that
Continental's bankruptcy case was received by the United States
Bankruptcy Court, Southern District of California on July 27,
1995 and assigned case number 95-07973-A11.
As described in more detail in the Company's Annual Report
on Form 10-K for the Year Ended December 31, 1994, the Company
believes, among other things, that the amount sought to be
collected by SASA/RTC is substantially in excess of the amount
actually due. See the Company's Annual Report on Form 10-K for
the Year Ended December 31, 1994, Part I, "Item 7, Management's
Discussion and Analysis of Financial Condition and Result of
Operations - Liquidity and Capital Resources." Should SASA/RTC
successfully foreclose on Continental's real property, the
Company's assets and the SASA Obligation will be diminished to
that extent. The magnitude of the difference between the amount
of the SASA/RTC claim under the SASA Obligation and the amount
believed by the Company to be due is so material as to make a
reasonable estimation of the liquidity demands of satisfying the
SASA Obligation unfeasible. If the full amount claimed due by
SASA/RTC, which is alleged by SASA/RTC to be $23,654,783 as of
July 1, 1995, is actually found by a court to be due, the Company
does not have the assets or sources of capital to satisfy said
amount within any reasonable short-term time frame. Depending on
the amount that is finally determined to be due the SASA/RTC,
either by a court, or through settlement, management will then be
able to assess the requirements for and the potential sources of
repayment, if any. Therefore, the Company cannot, at this time,
accurately predict the impact of the SASA Obligation on the
financial condition of the Company.
On June 30, 1995, the Company paid the interest payment that
was due on the El Dorado Vineyard loan. At the same time the
Company is in the process of renegotiating, on behalf of
<PAGE>
Mr. Marincovich, the loan on the El Dorado Vineyard property on
terms that are acceptable to the Company. There is no agreement
in place with the lender. The Company is not expected to be a
party to the loan. However, the Company has obtained financing
for the picking, packing and selling of the El Dorado Vineyard
crop.
In connection with its loan to Rancho Murieta Properties,
Inc. (RMPI) and CBC Builders, Inc. (CBC), SHF Acquisition
Corporation (SHF) entered into a settlement agreement between
RMPI, CBC, Rancho Murieta Country Club (RMCC) and the Pension
Trust Fund for Operating Engineers. The settlement agreement
confirmed SHF's right to receive payment of the settlement
proceeds which have been pledged to SHF and others. Under terms
of an Inter-Creditor Agreement between MRI, SHF and RMPI's and
CBC's legal counsel, SHF received $345,337 on July 7, 1995.
The Company continues to have ongoing cash requirements,
which may be as much as $400,000 in the next twelve month period,
arising out of environmental cleanup costs at its Hamburg Farm
property. The Company has not made an accrual for the cost, if
any, of removing the contaminated earth pending the results of
the various ongoing tests.
Certain of the matters discussed above are more fully
described in the Company's Annual Report on Form 10-K for the
year ended December 31, 1994. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
MATERIAL CHANGES IN RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1995, COMPARED WITH THE THREE
MONTHS ENDED JUNE 30, 1994. When compared with the three months
ended June 30, 1994, net loss for the three months ended June 30,
1995 increased by $314,000. The increases in sales, cost of
sales and income from real estate operations were due in large
part to a sale of one of the Hamburg Farms parcels. The increase
in operating expense was due primarily to an increase in legal
fees resulting from the SASA/RTC litigation.
SIX MONTHS ENDED JUNE 30, 1995, COMPARED WITH THE SIX MONTHS
ENDED JUNE 30, 1994. When compared to the six months ended June
30, 1994, net loss for the six months ended June 30, 1995
increased by $349,000. The increases in sales, cost of sales and
income from real estate operations were due in large part to a
sale of one of the Hamburg Farms parcels. The increase in
operating expense was due primarily to an increase in legal fees
resulting from the RTC/SASA litigation.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
See "Part I, Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a discussion
of recent events with SASA/RTC.
ITEM 2. CHANGES IN SECURITIES
The Company's second tier subsidiary, MRI, is prohibited
from paying dividends to MRC which in turn is prohibited from
paying dividends to the Company during the term of the settlement
agreement with San Antonio Savings Association.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Dividends in arrears. See Note 10 of Notes to Consolidated
Condensed Financial Statements.
ITEM 5. OTHER INFORMATION
As previously reported, a substantial portion of the shares
of the Company's common stock beneficially owned by John B.
Anderson, the Company's Chairman of the Board and controlling
stockholder, are the subject of a pledge in favor of Eurekabank,
formerly Eureka Federal Savings and Loan Association. The
Federal Deposit Insurance Corporation (FDIC), the successor-in-
interest to Eurekabank, has previously asserted beneficial
ownership as to such shares pursuant to SEC Schedule 13D dated
February 12, 1993. See, the Company's Annual Report on Form 10-K
for year ended December 31, 1994, "Item 12. Security Ownership
of Certain Beneficial Owners and Management."
In July 1995, FDIC, as successor and assignee to Eurekabank,
filed an action in the United States District Court for the
District of Nevada seeking various legal remedies, including the
possession and injunction and sale of collateral, which
collateral includes the Company's shares beneficially owned by
Mr. Anderson which are subject to the Eurekabank pledge. Should
the Court grant FDIC/Eurekabank's requested relief with respect
to the Company's shares beneficially owned by Mr. Anderson, a
change of control of the Company may occur.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
ITEM DESCRIPTION
27.01 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K, Item 5, dated April 3, 1995.
Form 8-K, Item 5, dated April 26, 1995.
Form 8-K, Item 5, dated May 18, 1995.
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT
OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
DUNES HOTELS AND CASINOS INC.
Registrant
Date: August 11, 1995 By: /s/ James H. Dale
James H. Dale
Duly Authorized Officer
and Chief Financial
Officer
<PAGE>
EXHIBIT INDEX
ITEM DESCRIPTION PAGE NO.
27.01 Financial Data Schedule 24
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 946
<SECURITIES> 504
<RECEIVABLES> 1,372
<ALLOWANCES> 87
<INVENTORY> 228
<CURRENT-ASSETS> 3,196
<PP&E> 4,820
<DEPRECIATION> 293
<TOTAL-ASSETS> 18,875
<CURRENT-LIABILITIES> 13,460
<BONDS> 0
<COMMON> 3,900
0
5
<OTHER-SE> 3,213
<TOTAL-LIABILITY-AND-EQUITY> 18,875
<SALES> 882
<TOTAL-REVENUES> 1,137
<CGS> 774
<TOTAL-COSTS> 774
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 125
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> (501)
<INCOME-TAX> 0
<INCOME-CONTINUING> (501)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (501)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
