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 March 31, 1997 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 Street, 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 May 1, 1997
Common Stock, $.50 par value 6,375,096 shares
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 1997
INDEX
PAGE
Part I. Financial Information
ITEM 1. FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets
March 31, 1997 and December 31, 1996 3
Consolidated Condensed Statements of Loss
for the three months ended March 31, 1997
and 1996 5
Consolidated Condensed Statements of Cash Flows
for the three months ended March 31, 1997
and 1996 7
Notes to Consolidated Condensed Financial
Statements, March 31, 1997 and 1996 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 14
Part II. Other Information
ITEM 1. LEGAL PROCEEDINGS 19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 19
Signatures 20
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
ASSETS
March December
31, 1997 31, 1996
(Unaudited)
(Dollars in thousands)
Cash and cash equivalents $ 1,064 $ 1,283
Marketable securities 880 527
Receivables
Trade, less allowance 1997, $91; 1996, $141 102 133
Related party, less allowance of $2,049 in
1997 and 1996 342 397
Real estate sales, less allowance of $158 in 1997 517 928
Other 35 47
Inventory of real estate held for sale 10,756 10,919
Inventory, other 38 38
Prepaid expenses 75 116
Property and equipment, less accumulated depreciation
and amortization, 1997, $442; 1996, $424 1,612 1,678
Investments 1,049 1,049
Deferred costs and other 12 11
$ 16,482 $ 17,126
(continued)
3
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
March December
31, 1997 31, 1996
(Unaudited)
(Dollars in thousands)
Accounts payable $ 42 $ 98
Accrued expenses 249 246
Deferred income 134 70
Income taxes 307 247
Short-term debt 27 69
Long-term debt and capitalized lease obligations 1,867 1,955
Accrued preferred stock dividends 1,119 1,101
Total liabilities 3,745 3,786
Minority interest 2,912 2,897
Shareholders' equity
Preferred stock - authorized 10,750,000 shares
($.50 par); issued 10,512 shares Series B $7.50
cumulative preferred stock, outstanding 9,250
shares in 1997 and 1996, aggregate liquidation
value $2,319 including dividends in arrears 5 5
Common stock - authorized 25,000,000 shares
($.50 par); issued 7,799,780 shares, outstanding
6,375,906 shares in 1997 and 1996 3,900 3,900
Capital in excess of par 25,881 25,881
Deficit (17,961) (17,343)
11,825 12,443
Treasury stock at cost; Preferred - Series B,
902 shares Common 1,424,684 shares in 1997
and 1996 2,000 2,000
Total shareholders' equity 9,825 10,443
$ 16,482 $ 17,126
The accompanying notes are an integral part of these condensed
financial statements.
4
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
(Dollars in thousands,
Operating revenues: except per share)
Sales of real estate $ 183 $ 214
Cost of real estate sold 171 192
12 22
Rental income - agricultural properties 110 209
Cost and expense of rental income 47 101
63 108
Rice drying and storage revenues 35 35
Cost of rice drying and storage 104 125
(69) (90)
Miscellaneous income - net 13 45
19 85
Operating expenses:
Selling, administrative and general
Corporate 270 331
Real estate operations 54 46
Bad debts, net of recoveries 123 (34)
Depreciation 17 24
464 367
Loss before other credits (charges), income taxes and
minority interest (445) (282)
Other credits (charges):
Interest and dividend income 50 82
Interest expense (46) (59)
Partnership income (loss) (85)
Securities gains (losses), net (7)
Other (84) (70)
(87) (132)
(continued)
5
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
(Dollars in thousands,
except per share)
Loss before income taxes and minority interest (532) (414)
Income taxes (53)
Loss before minority interest (585) (414)
Minority interest in income of the White Ranch (15)
Net income (loss) $ (600) $ (414)
Income (loss) per common share: $ (0.09) $ (0.07)
The accompanying notes are an integral part of these condensed
financial statements.
6
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
UNAUDITED
1997 1996
(Dollars in thousands)
Cash flows from operating activities:
Net cash provided by (used in) operating
activities $ (115) $ (55)
Cash flows from investing activities:
Decrease (increase) in investments (353) 517
Decrease (increase) in notes receivable 379 12
Purchase of equipment (2)
26 527
Cash flows from financing activities:
Decrease in long-term debt (88) (45)
Decrease in short-term debt (42) (208)
(130) (253)
Increase (decrease) in cash and cash equivalents (219) 219
Cash and cash equivalents, beginning of period 1,283 495
Cash and cash equivalents, end of period $ 1,064 $ 714
The accompanying notes are an integral part of these condensed
financial statements.
7
DUNES HOTELS AND CASINOS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
UNAUDITED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CONSOLIDATION:
The accompanying consolidated condensed financial statements
include the accounts of the Company and its wholly-owned
subsidiaries Continental California Corporation
(Continental), 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).
DESCRIPTION OF BUSINESS:
The Company operates in two principal business segments:
Real estate investments (development and sale of residential
lots and rental of agricultural land), and agricultural
(rice drying and storage).
The Company's real estate segment sells completed
residential lots primarily to builders of custom homes and
to the general public located in and around the greater
Sacramento, California area. The agricultural properties
are leased to farmers in the area where the agricultural
properties are located.
The agricultural segment dries harvested rice over a two
month period (approximately September 15 to November 15) and
stores, for a fee, the dried rice (or other grains) until it
is removed by the owner. The Company dries and stores rice
principally for one customer, Farmers Rice Co-operative
(Farmers). Farmers accounts for approximately 98% of the
Company's rice drying and storage revenues. If the Company
were to lose Farmers as a customer, it would have a material
adverse effect on the Company's drying and storage
operation.
BASIS OF PRESENTATION:
The financial information included herein is unaudited;
however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair
statement of results for the interim periods.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
The results of operations for the three months ended March
31, 1997, are not necessarily indicative of the results to
be expected for the full year.
RECLASSIFICATIONS:
For the three months ended March 31, 1996, the Company has
changed the format of its Consolidated Condensed Statement
of Loss to conform to the March 31, 1997 presentation. The
Company believes this change better reflects the revenues
and expenses of the segments within which the Company
operates.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Estimated fair value of the Company's financial instruments
(all of which are held for non-trading purposes) are as
follows:
Carrying Fair
Amount Value
(Dollars in thousands)
Cash, and cash equivalents $ 1,064 $ 1,064 (a)
Marketable securities 880 880 (a)
Notes receivable, real estate
sales, net of allowance 517 517 (b)
Note receivable, related party,
net of allowance 342 (c)
Solano County Option 1,043 1,043 (d)
Long-term debt (1,867) (e)
(a) The carrying amount approximates fair value of cash,
cash equivalents and marketable securities. For
marketable securities, fair values are estimated based
on quoted market prices as of March 31, 1997.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED):
(b) The fair value of the notes receivable are based on
their outstanding balances, net of allowances of
$158,000, their respective interest rates and the fair
value, based on comparable sales in the area, of the
real property which serves as collateral for the note.
In the event any purchaser were to default on the real
estate notes, the Company could institute foreclosure
proceedings and reacquire the property which serves as
the collateral for the note.
(c) It is not possible to determine the fair value of the
Baby Grand Corp. note (the BGC Note) because the
Company is unable to predict whether Baby Grand Corp.
will be able to pay it first lien note on its due date,
which is the same date that the BGC Note payable to the
Company comes due. See Footnote 5d of Notes to
Consolidated Condensed Financial Statements. The BGC
Note is more fully described in detail in the Company's
Form 10-K for the year ended December 31,1996, see
"Item 1. Business - Other Activities - Certain Loans -
Baby Grand Corp.", Form 8-K, "Item 5. Other Events,"
dated February 4, 1997 and Form 8-K, "Item 5. Other
Events," dated March 26, 1997.
(d) The fair value of the Solano County Option is estimated
based on an appraisal of the real property, and
subsequent discussions with local Realtors, to which
the option relates and the length of the option period
which enables the Company to have some flexibility as
to when and if the option should be exercisable. The
Company can only recover the fair value of the option
(i) by exercising the option and selling the property
or (ii) selling the option. However, if the fair value
of the real property should drop below the option
purchase price, the Company would not be able to
recover all of its investment in the Solano County
Option. The owner of the property under option has
informed the Company that it has not made the current
payment due on the first mortgage lien which had a
balance due of approximately $1,356,000 as of December
31,1996. The Company and the owner are continuing to
attempt to negotiate a solution, which could include
the Company exercising its option at a price that is
less than the option price stated in the Option
Agreement. If the Company is unable to renegotiate the
option price, the Company may make the payment to the
mortgage lien holder in order to protect its investment
in the Solano County Option. The Company is unable
to predict
2. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED):
what the outcome of this matter will be. The Solano
County Option is more fully described in the Company's
Form 10-K for the year ended December 31, 1996, see
"Item 1. Business - Real Estate Segment - Solano County
Option."
(e) The fair value of long-term debt is not subject to
reasonable estimation because the debt arose
principally as a result of the settlement of a dispute.
The settlement is described in detail in the Company's
Form 10-K for the year ended December 31, 1996, see
"Item 1. Business - Resolution of SASA Dispute."
3. INVENTORY OF REAL ESTATE HELD FOR DEVELOPMENT AND SALE:
1997 1996
(Dollars in thousands)
The Fairways (a) $ 4,501 $ 4,664
Residential lots, North Las Vegas 469 469
White Ranch (b) 5,600 5,600
Sam Hamburg Farm (c) 146 146
Other 40 40
$10,756 $10,919
(a) On October 7, 1996, the Company entered into a Purchase
and Option Agreement regarding the sale of certain lots
at The Fairways. The Purchase and Option Agreement is
described in the Company's report on Form 10-K for the
year ended December 31, 1996, see "Item 1. Business -
Real Estate Segment - The Fairways."
(b) In February 1997, the Company entered into a Purchase
Agreement (the Agreement) to sell the White Ranch for
$6,000,000. The Agreement is described in detail in
the Company"s report on Form 10-K for the year ended
December 31, 1996, see "Item 1. Business - Real Estate
Segment - White Ranch."
(c) See footnote 5b of Notes to Consolidated Condensed
Financial Statements regarding the chemical cleanup at
Sam Hamburg Farm.
4. RELATED PARTY TRANSACTIONS:
John B. 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 67.2% of the Company's common stock as of May
1, 1997.
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,
1996.
5. CONTINGENCIES:
a. As of March 31, 1997, there were no material legal
proceedings pending against the Company.
b. SHF was advised of possible contamination on two sites
at Sam Hamburg Farm, 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.
The Company has disposed of a large amount of the
contaminated earth at an approved site for the storage
of toxic wastes. However, 5,000 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 of the contaminated earth in
toxic dump sites. 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.
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. However,
if on-site remediation can be achieved, it is estimated
that the aggregate cost of disposal will be between
$90,000 and $115,000. The Company is unable to predict
when the ongoing testing will be complete or what the
outcome of these tests will be.
5. CONTINGENCIES (CONTINUED):
As of March 31, 1997, the Company has paid
approximately $500,000, including the $100,000 expended
for the diesel storage tank, and accrued an estimated
$174,000 relating to the balance of the clean-up of the
contaminated earth. That estimate could change as the
remediation work takes place.
c. The Company received a notice from the 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
$563,800. The tax arose out of a gain in 1988
resulting from a foreclosure sale of certain real
property owned by the subsidiary. It is the FTB's
position that the gain is non-business income to the
subsidiary and therefore should be allocated 100% to
California without the benefit of any of the losses of
the Company. The Company has exhausted all of its
appeals with the FTB and therefore this matter has been
referred to the California State Board of Equalization
(SBE). The Company has until May 12, 1997 to respond
to this matter. Because of the likelihood of either
litigation or a settlement, the Company has provided in
its balance sheet, $300,000 relating to this matter.
d. John B. Anderson, Edith Anderson, Cedar Development
Company, J.A. Inc. and J.B.A. Investments, Inc.
(collectively the Anderson Parties) are involved in
litigation with the Federal Deposit Insurance
Corporation (the FDIC). This matter is more fully
described in the Company's Form 10-K for the year
ended December 31, 1996, see "Item 3. Legal Proceedings
- Federal Deposit Insurance Corporation, et al v. John
B. Anderson et al." On March 26, 1997, the Company
received a copy of letters from the FDIC to Baby Grand
Corp. and J.B.A. Investments, Inc. stating , among
other things, that all rights of Baby Grand Corp. and
J.B.A. Investments, Inc. pertaining to the pledged
collateral, including the pledged Company's common
stock, shall thereby cease, and all such rights are
thereby vested in the FDIC, which shall have the sole
right to exercise such voting and other consensual
rights and to receive such dividends, distributions and
other payments with respect to the pledged collateral,
including the pledged Company's common stock. Pursuant
to letters dated March 28, 1997, Anderson, on behalf of
himself, Cedar Development Co., Baby Grand Corp., and
J.B.A. Investments,
5. CONTINGENCIES (CONTINUED):
Inc., advised the FDIC that they disagreed with the
FDIC's contention that the FDIC holds the right to
assert voting control over the pledged Company's common
stock, as well as certain other pledged stock, and that
the Anderson entities will continue to conduct their
business, including ownership of the pledged Company's
common stock, as they deemed appropriate under the
circumstances. Depending upon the resolution of the
foregoing, should the FDIC successfully assert voting
rights over the pledged Company's common stock, there
will be a change in control of the Company. This
matter is more fully discussed in the Company's Current
Report on Form 8-K, " Item 5. Other Events," dated
March 26, 1997.
6. LOSS PER COMMON SHARE:
Loss per common share has been computed using the number of
shares outstanding (6,375,096) at March 31, 1997 and 1996.
Dividends on non-convertible preferred stock, Series B, have
ben deducted from income or added to the loss applicable to
common shares. Dividends on the Company's Series B
Preferred stock have not been paid since the first quarter
of 1982. The Company is in arrears on such dividends in the
amount of approximately $1,119,000 as of March 31, 1997.
DUNES HOTELS AND CASINOS INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Section 21E of the Securities Exchange Act of 1934 provides
a "safe harbor" for forward-looking statements. Certain
information included herein contains statements that are forward-
looking, such as anticipated liquidity requirements for the
coming fiscal year, anticipated sources of liquidity for the
coming fiscal year, the impact of anticipated asset sales,
proposed facilities construction and potential changes in control
of the Company. Such forward-looking information involves
important risks and uncertainties that could significantly affect
the Company's financial condition and future results of
operations, and, accordingly, such future financial condition and
results of operations may differ from those expressed in any
forward-looking statements made herein. These risks and
uncertainties include, but are not limited to, those risks
relating to actual costs necessary to clean-up certain real
property chemical contamination, actual construction costs and
construction contingencies in connection with construction of new
facilities, real estate market conditions and general economic
conditions, the abilities of certain third parties to obtain
financing and otherwise perform under real estate purchase
agreements, and the outcome of certain litigation and other
risks. The Company cautions readers not to place undue reliance
on any such forward-looking statements, and, such statements
speak only as of the date made.
OVERVIEW
On February 21, 1997, the Company signed two agreements for
the sale of all of the 57 residential lots in North Las Vegas,
Nevada. The first Agreement provided for the sale of 53 lots for
$561,000 plus reimbursement of water fees paid in the amount of
$72,597. The second agreement provided for the sale of 4 lots at
$25,000 per lot. Because the costs associated with completing
the 4 lots are higher than anticipated, principally costs imposed
by the City of North Las Vegas, the purchaser has requested a
reduction in the purchase price. Since any other purchaser would
be required to pay the increased improvements fees, the Company
has agreed to reduce the purchase price of the 4 lots to $65,000.
The sale of all 57 lots is expected to close in the second
quarter of 1997.
The Company still anticipates constructing a new rice dryer
in Yolo County, California. However, finalizing the financing
for the rice dryer has taken longer than anticipated. The
Company expects the financing documents to be completed in May
1997. Because of the delay in finalizing the loan documents, the
Company is unable to predict whether or not construction of the
new rice dryer will be completed in time for the 1997 rice drying
season (approximately September 15 to November 15). If the new
rice dryer cannot be completed on time the Company may attempt to
negotiate a new lease on the West Sacramento rice dryer.
In February 1997, the Company and the other 50% owner of the
White Ranch entered into a Purchase Agreement (the Agreement) to
sell the White Ranch for $6,000,000. The Agreement is described
in detail in the Company's Form 10-K for the year ended December
31, 1996, see "Item 1. Business - Real Estate Segment - The White
Ranch".
The Company previously reported the matter known as FEDERAL
DEPOSIT INSURANCE CORPORATION (FDIC), ET. AL., V. JOHN B.
ANDERSON ET. AL., United States District Court, District of
Nevada, Case No. CV-S-95-00679-PMP (LRL). Mr. Anderson, through
his ownership of Cedar Development Co. (Cedar), the parent of
Baby Grand Corp., and J.B.A. Investments, Inc (JBA), owns
approximately 4,280,756 shares or 67.2% of the outstanding voting
shares of the Company. This matter is described in detail in the
Company's Form 10-K for the year ended December, 31,1996 in "Item
3. Legal Proceedings -Federal Deposit Insurance Corporation, et
al. v. John B. Anderson et al. and in the Company's Form 8-K,
Item 5. Other Events, dated March 26, 1997. In April 1997, the
Company was informed that the FDIC had filed applications with
the Nevada Gaming Control Board and with the Nevada Gaming
Commission for permission to enforce the FDIC's security interest
in, including the right to vote, the Cedar stock, the Baby Grand
Corp. stock and the stock of J.A. Inc. The successful
enforcement of security interests by the FDIC in the stock of the
foregoing companies could, among other things, result in a
change of control of such companies. In the case of Baby Grand
Corp., such change in control could deprive Mr. Anderson of any
management role in Baby Grand Corp. and could trigger an
acceleration of the first deed of trust indebtedness on Baby
Grand's primary asset. An acceleration and foreclosure
thereafter could render uncollectible the BGC Note. See Part I,
Notes to Consolidated Condensed Financial Statements, Note 2(c).
The Company is unable to predict what the outcome of the matters
described above will have on the Company.
The Company received a notice from the 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 $563,800. The Company has exhausted
all of its appeals with the FTB and therefore this matter has
been referred to the California State Board of Equalization. The
Company is unable to predict what the outcome of this matter will
be. As of March 31, 1997, the Company has recorded a liability
of $300,000 relating to this matter.
The Company has no present intentions to pay dividends on
either its common or preferred stock.
OPERATING RESULTS
Results of operations for the three months ended March 31,
1997, were impacted by a write down of approximately $157,000
relating to real estate notes resulting from sales at The
Fairways. This was a result of two of the original purchasers of
lots at The Fairways asking to have their loans reduced so that
their total investment in their lots would be closer to their
current market value. Although the Company could have foreclosed
on the lots and resold them, it was management's decision to
grant the reduction rather than go through a lengthy and costly
foreclosure proceeding.
THREE MONTHS ENDED MARCH 31, 1997 VS. THE THREE MONTHS ENDED
MARCH 31, 1996
REAL ESTATE
The decrease in revenues from the sale of real estate for
the three months ended March 31, 1997 when compared with the
three months ended March 31, 1996 resulted from a reduction in
the sale prices of lots sold at The Fairways in the quarter
ended March 31, 1997 when compared with the quarter ended March
31, 1996. The reduction in sale prices was necessitated in order
for the Fairway lots to be competitive with other similar
properties in the surrounding area. Cost of real estate sold
decreased because of a write down of the carrying value of the
Fairway lots in a prior period.
Net rental income from agricultural properties for the three
months ended March 31, 1997 decreased by approximately $45,000
when compared with the three months ended March 31, 1996. The
decrease was a result of approximately $99,000 of gross rental
income for the three months ended March 31, 1997 being deferred
to future periods. The decrease in gross rental income reported
in the three month period ended March 31, 1997, was partially
offset by a decrease in water assessment expense.
AGRICULTURAL
The loss from the rice drying and storage operations for the
three months ended March 31, 1997 decreased by $21,000 when
compared with the three months ended March 31, 1996. The
decrease was primarily attributable to the termination of the
lease of the West Sacramento rice dryer and the agreement to use
the Cal-Dehy name, which also included a Covenant Not to Compete.
GENERAL
When compared with the three months ended March 31, 1996,
corporate selling, general and administrative expenses decreased
by approximately $61,000; bad debts increased by approximately
$157,000; partnership losses decreased by approximately $85,000;
interest income decreased by approximately $32,000; interest
expense decreased by approximately $13,000 and income tax expense
increased by $53,000.
The decrease in corporate selling, general and
administrative expenses was due primarily to a decrease in legal
and accounting fees ($28,000), a decrease in salaries ($15,000)
and a decrease in officers and directors liability insurance
premiums of approximately $6,000.
The increase in bad debt expense relates to the reduction in
certain notes receivable resulting from sales of lots at The
Fairways which is described above.
The decrease in partnership losses was due to the
termination of the Pine Ridge Joint Venture and Steadfast Cattle
Company in 1996.
The decrease in interest income and interest expense was due
to principal collections on notes receivable and a reduction in
the principal balance owing on the RTC note.
The increase in income tax expense was a result of the
Company increasing its accrual for income taxes relating to the
matter between the California State Board of Equalization and one
of the Company's subsidiaries.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended March 31, 1997, cash, cash
equivalents and marketable securities increased by $134,000 from
$1,810,000 at December 31, 1996, to $1,944,000 at March 31, 1997.
The most significant source of cash during the three months ended
March 31, 1997, was the collection of loans made to others,
including related parties, of $379,000. The most significant
uses of cash during the three months ended March 31, 1997,
consisted of cash used in operating activities ($115,000),
payments on long-term debt ($88,000) and payments on short term
debt of $42,000.
The Company believes that its primary requirements for
liquidity in the coming fiscal year will be to fund ongoing
expenses at The Fairways, which include, among other things,
association dues, water and sewer fees and property taxes; to
fund the required payments on the note to the RTC; to fund a
portion of the construction and carrying costs of the new rice
dryer; to fund costs that may be incurred relating to the toxic
clean-up at Sam Hamburg Farm; to fund amounts, if any, that may
be due to the California Franchise Tax Board and to fund general
and administrative expenses. In addition, the Company may be
required to fund certain mortgage payments relating to the Solano
County Option if the current owner is unable to do so.
The Company believes that sources of required liquidity will
be cash generated from the rice drying and storage facilities,
anticipated lots sales at The Fairways, collections of notes
receivable resulting from sales at The Fairways, collection of
rents at the White Ranch and/or the sale of the White Ranch if
such sale is consummated, Success Payments related to the venture
with Murieta Investors and the sale of the 57 lots in North Las
Vegas. Based on known commitments, the Company believes that the
sources of cash described will be adequate to fund known
liquidity requirements. However, if the sources of required
liquidity prove to be insufficient to cover the Company's primary
liquidity requirements, it will be necessary to sell some of the
Company's non-income producing assets.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
None, except for the discussion contained in "Part I, Item
2, Management's Discussion and Analysis of Financial Condition
and Results of Operations."
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Dividends in arrears. See Note 6 of Notes to Consolidated
Condensed Financial Statements.
ITEM 5. OTHER EVENTS
The Company will move its executive offices to Sacramento,
California effective June 1, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.01 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K, Item 5, dated February 4, 1997, wherein the
Company reported that a special liquidating master was
appointed to sell the assets of certain Anderson Entities,
including shares of the Company's common stock.
Form 8-K, Item 5, Dated March 26, 1997, wherein the Company
reported receiving copies of letters to certain Anderson
Entities from the Federal Deposit Insurance Corporation
relating to the voting rights of 4,280,756 shares of the
Company's common stock.
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: May 13, 1997 By: /s/ James H. Dale
James H. Dale
Duly Authorized Officer
and Chief Financial
Officer
EXHIBIT INDEX
ITEM DESCRIPTION PAGE NO.
27.01 Financial Data Schedule
EXHIBIT 27.01
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,064
<SECURITIES> 880
<RECEIVABLES> 3,294
<ALLOWANCES> 2,298
<INVENTORY> 38
<CURRENT-ASSETS> 0
<PP&E> 2,054
<DEPRECIATION> 442
<TOTAL-ASSETS> 16,482
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
5
<COMMON> 3,900
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 16,482
<SALES> 183
<TOTAL-REVENUES> 341
<CGS> 171
<TOTAL-COSTS> 786
<OTHER-EXPENSES> 91
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> (532)
<INCOME-TAX> (53)
<INCOME-CONTINUING> (600)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (600)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>