<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(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
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________ to ___________
Commission File Number: 0-11532
INLAND CASINO CORPORATION
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(Exact name of small business issuer as specified in its charter)
Utah 33-0618806
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4225 Executive Square, Suite 1650, La Jolla, California 92037
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(Address of principal executive offices)
Issuer's telephone number, including area code: (619) 546-9383
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
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APPLICABLE ONLY TO CORPORATE ISSUERS
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State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: as of May 12, 1997,
3,854,548 shares of common stock, $.001 par value per share, were outstanding.
Transitional Small Business Disclosure Format (check one) Yes No X
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INLAND CASINO CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited):
Balance Sheets -
June 30, 1996 and March 31, 1997................................. 1
Statements of Operations -
Three months ended March 31, 1996 and 1997....................... 2
Nine months ended March 31, 1996 and 1997........................ 3
Statements of Cash Flows -
Nine months ended March 31, 1996 and 1997........................ 4
Notes to Interim Financial Statements............................ 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION........ 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS................................................ 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................. 16
</TABLE>
(i)
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19
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
INLAND CASINO CORPORATION
BALANCE SHEETS
JUNE 30, 1996 AND MARCH 31, 1997
<TABLE>
<CAPTION>
June 30, 1996 March 31, 1997
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(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 4,347,985 $ 5,486,015
Accounts receivable 91,154 189,607
Deposits and prepaid expenses 53,130 140,220
----------- -----------
Total current assets 4,492,269 5,815,842
RESTRICTED CASH AND OTHER INVESTMENTS 2,203,191
PROPERTY AND EQUIPMENT, NET 167,213 173,757
DEFERRED CONTRACT COSTS, NET 6,505,327 5,932,662
DEFERRED INCOME TAXES 462,126 309,126
DEPOSITS AND OTHER ASSETS 145,074 97,174
----------- -----------
Total assets $11,772,009 $14,531,752
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Advances of future consulting fees $ 2,385,814 $ 2,729,245
Current portion of long-term debt 279,946 299,543
Accounts payable and accrued expenses 449,289 820,725
Income taxes payable 210,880 241,680
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Total current liabilities 3,325,929 4,091,193
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LONG TERM DEBT:
Notes payable, less current portion 620,054 3,820,511
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.001 par, 100,000,000 shares
authorized, 10,632,792 and 3,854,548 shares
outstanding at June 30, 1996 and March 31,
1997, respectively 2,352,554 3,855
Retained earnings 5,473,472 6,616,193
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Total shareholders' equity 7,826,026 6,620,048
----------- -----------
Total liabilities and shareholders' equity $11,772,009 $14,531,752
=========== ===========
</TABLE>
1
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INLAND CASINO CORPORATION
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1997
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<S> <C> <C>
Revenue $ 3,324,574 $ 4,301,663
Costs and expenses:
General and administrative expenses 1,446,576 1,707,361
Amortization of deferred contract costs 721,992 705,869
------------ ------------
2,168,568 2,413,230
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Operating profit 1,156,006 1,888,433
Other income and (expense):
Interest income 1,252 93,737
Interest expense (79) (103,250)
------------ ------------
1,173 (9,513)
------------ ------------
Income before income taxes 1,157,179 1,878,920
Income tax provision 466,000 734,000
------------ ------------
Net income $ 691,179 $ 1,144,920
============ ============
Earnings per share $ 0.06 $ 0.22
============ ============
Shares used in the computation of income per common
and common equivalent share 12,086,058 5,191,538
============ ============
</TABLE>
2
<PAGE> 5
INLAND CASINO CORPORATION
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Revenue $ 7,665,790 $ 12,059,980
Costs and expenses:
General and administrative expenses 5,027,359 5,773,983
Amortization of deferred contract costs 1,824,499 1,945,960
------------ ------------
6,851,858 7,719,943
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Operating profit 813,932 4,340,037
Other income and (expense):
Interest income 1,548 227,233
Interest expense (3,001) (222,250)
------------ ------------
(1,453) 4,983
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Income before income taxes 812,479 4,354,020
Income tax provision 334,000 1,851,000
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Net income $ 478,479 $ 2,494,020
============ ============
Earnings per share $ 0.04 $ 0.34
============ ============
Shares used in the computation of income per common
and common equivalent share 12,493,457 7,423,856
============ ============
</TABLE>
3
<PAGE> 6
INLAND CASINO CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1997
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<S> <C> <C>
Net cash generated by (used in) operating activities:
Net income $ 478,479 $ 2,494,020
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization and depreciation 1,850,327 1,984,403
Deferred taxes 95,001 153,000
Changes in assets and liabilities:
Accounts receivable (54,517) (98,453)
Prepaid expenses, deposits and other assets (70,632) (39,190)
Accounts payable and accrued expenses 89,814 371,436
Income taxes payable 115,164 30,800
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Net cash generated by operating activities 2,503,636 4,896,016
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Cash used in investing activities:
Acquisition of revenue bonds and restricted cash (2,397,993)
Purchases of furniture and equipment (74,629) (45,767)
Deferred contract costs (1,449,641) (1,373,295)
----------- -----------
Net cash used in investing activities (1,524,270) (3,817,055)
----------- -----------
Cash flows provided by (used in) financing activities:
Increase (decrease) in advances of future
consulting fees (129,679) 343,431
Issuance of promissory note 900,000
Payment of notes payable (29,187) (279,944)
Sale of revenue bonds 195,582
Repurchase and cancellation of common stock (1,401,321) (200,000)
----------- -----------
Net cash provided by (used in) financing activities (660,187) 59,069
----------- -----------
Increase in cash 319,179 1,138,030
Cash, beginning of period 1,423,826 4,347,985
----------- -----------
Cash, end of period $ 1,743,005 $ 5,486,015
=========== ===========
Supplemental disclosures of cash flow information:
Interest expense paid $ 3,001 $ 63,000
=========== ===========
Interest income received $ 1,548 $ 198,765
=========== ===========
Income taxes paid $ 316,152 $ 1,668,000
=========== ===========
Income tax refund received $ 192,316 $ 800
=========== ===========
Repurchase of common stock by issuance of
notes payable $ -- $ 3,500,000
=========== ===========
</TABLE>
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INLAND CASINO CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS
MARCH 31, 1997
1. PRESENTATION OF INTERIM FINANCIAL INFORMATION.
Basis of Presentation - The accompanying interim unaudited financial statements
have been prepared by Inland Casino Corporation, a Utah corporation (the
"Company" or "Inland Casino"), in conformity with generally accepted accounting
principles for interim financial information and with the rules and regulations
of the U.S. Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such regulations. The interim unaudited financial statements reflect
all normal, recurring adjustments and disclosures which are, in the opinion of
management, necessary for a fair presentation. The results of operations for the
interim periods are not necessarily indicative of the results of the full fiscal
year. The interim financial statements should be read in conjunction with the
Company's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1996.
Earnings per share - Earnings per common and common equivalent share are
computed using the weighted average number of shares outstanding for the three
and nine month periods ended March 31, 1996 and 1997. Equivalent shares are
those issuable upon the assumed exercise of stock options reflected under the
treasury stock method using the average market price of the Company's shares
during the periods when their effect is dilutive.
2. REORGANIZATION AND MERGER. Effective July 1, 1994, Inland Casino Partners, a
California general partnership ("ICP"), and its partners, Inland Casino
Corporation, a Nevada Corporation ("ICC I"), and Eagle Edge Partners ("EEP"),
combined to form a new Delaware Corporation, Inland Casino Corporation ("ICC
II"). Such transaction is hereinafter referred to as the "Roll-Up Transaction".
On May 22, 1995, the merger of ICC II into and with Twin Creek Exploration Co.,
Inc. ("Twin Creek"), a Utah corporation, became effective (the "Merger"). To
effect the merger, the common stock of Twin Creek was reverse split 1 for 100
and the shareholders of ICC II received 11,930,406 shares, representing
approximately 95% of the shares outstanding after the merger. The surviving
company was renamed Inland Casino Corporation ("Inland Casino"), and the fiscal
year end was changed from September 30 to June 30. The transaction was accounted
for as a recapitalization using the carryover basis of the assets and
liabilities of ICC II. Accordingly, the financial statements reflect the
financial condition, results of operations and cash flows of ICC II, and its
predecessors, for periods prior to the merger date, and combined with Twin Creek
from that date forward.
3. BUSINESS AND BASIS OF ACCOUNTING. The Company provides consulting services
for gaming operations under consulting agreements with Native American Indian
Tribes. Currently, the Company provides services to The Barona Group of Capitan
Grande Band of Mission Indians (the "Barona Tribe") in connection with the
Barona Tribe's operation of a gaming facility located north of Lakeside,
California, in eastern San Diego County. The Company reports revenues and
expenses using the accrual method of accounting. All of the Company's fee
revenue for the three and nine months ended March 31, 1996 and 1997 was
generated from services provided to the Barona Tribe, with the exception of
$117,480 in fees earned for work performed for a tribe in New Mexico during the
nine months ended March 31, 1997.
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INLAND CASINO CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
4. AGREEMENTS WITH THE BARONA TRIBE. Prior to April 1, 1996, the Company
managed, operated and maintained certain gaming and food and beverage operations
in California on behalf of the Barona Tribe in accordance with the terms and
conditions of a certain Gaming Management Agreement (the "Operations Agreement")
with the Barona Tribe, under a grant of authority from the Barona General
Council. The Company's revenue from fees under the Operations Agreement was
based upon a percentage of profits or the excess of revenue over certain
expenses generated from the gaming operations as defined in the Operations
Agreement. In March 1996, the Company entered into a Consulting Agreement with
the Barona Tribe, with an effective date of April 1, 1996, relating to the
operations of the Barona Casino (the "Initial Consulting Agreement"). In May
1996, after the parties recognized an inadvertent mistake in the provision
relating to consulting fees had been made, the Company and the Barona Tribe
agreed to an Amended and Restated Consulting Agreement (the "Barona Consulting
Agreement" or "Consulting Agreement"). In addition, the Company and the Barona
Tribe entered into a Mutual Release releasing each other from certain rights,
duties and obligations set forth in the Operations Agreement (the "Release").
The Barona Consulting Agreement and the Release have effective dates of April 1,
1996.
The Barona Consulting Agreement provides for an initial term of three years,
with an option to extend the Consulting Agreement for an additional five year
period. Under the terms of the Barona Consulting Agreement, the Barona Tribe
has the right to draw from the gross revenues of the Barona Casino an annual
income stream at least equal to the distributions received by the Barona Tribe
for the twelve month period ended December 31, 1995, and fees paid or payable
to the Company may accordingly be reduced.
In March 1996, the Barona Tribe submitted the Initial Consulting Agreement to
the National Indian Gaming Commission (the "NIGC") and in May 1996 the NIGC
determined that the Initial Consulting Agreement was not a management agreement
and, therefore, not subject to NIGC approval, and forwarded such agreement to
the Bureau of Indian Affairs (the "BIA").
In January 1997, the Company entered into a settlement agreement with the NIGC
regarding the Company's relationship with the Barona Tribe. Under the terms of
the settlement agreement, the NIGC held, among other things, that the
relationship between the Barona Tribe and the Company had benefitted the Barona
Tribe, and that the Company had not violated any law. The Company agreed to
reimburse the NIGC for administrative, investigative and legal expenses in the
aggregate amount of $250,000. In addition, the Company agreed to contribute $2
million to the Barona Tribe for general improvements on the reservation, payable
in five equal annual installments, commencing in January 1997. The Company will
account for the $2 million in payments as deferred contract costs, which will be
amortized over the remaining initial term of the Consulting Agreement with the
Barona Tribe.
In January 1997, the Company submitted the Consulting Agreement to the NIGC. In
April 1997, the Company received a letter from the NIGC questioning whether the
Consulting Agreement was in fact a management contract. The Company believes
that the NIGC will ultimately determine that the Consulting Agreement is not a
management contract, based on (i) the May 1996 determination of the NIGC with
respect to the Initial Consulting Agreement, (ii) the NIGC's findings in the
January 1997 settlement agreement and (iii) the actual elements of the
relationship between the Barona Casino and the Company. However, there is no
assurance that the NIGC will determine that the Consulting Agreement is not a
management contract. If such a determination was made by the NIGC, failure of
the NIGC to approve the Consulting Agreement could have a material adverse
effect on the business and financial condition of the Company. If the NIGC
concludes that the Consulting Agreement is not a management agreement, the
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INLAND CASINO CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
NIGC will forward the Agreement to the BIA. If the BIA determines that the
Initial Consulting Agreement and/or the Consulting Agreement is subject to its
review, there can be no assurance that such Agreements will be approved by the
BIA. Failure to approve the Initial Consulting Agreement or the Consulting
Agreement may have a material adverse effect on the business and financial
condition of the Company.
5. CONSULTING AGREEMENT WITH THE KLAMATH TRIBES. In June 1996, the Company
entered into a consulting agreement (the "Klamath Agreement") with the Klamath
and Modoc Tribes and the Yahooskin Band of Snake Indians (collectively, the
"Klamath Tribes"). The Klamath Tribes plan to build and operate the Kla-Mo-Ya
Casino to be constructed near Chiloquin, in south-central Oregon. The opening
date of the facility is scheduled for mid-summer of 1997.
In May 1997, the Klamath Agreement was terminated by mutual agreement of the
Klamath Tribes and the Company.
The Kla-Mo-Ya Casino project is to be constructed on a 42-acre site which has
been acquired by the Klamath Tribes, and which is in the process of being
converted to fee simple property and transferred to the U. S. Government to be
held in trust for the benefit of the Tribes. The Klamath Tribes plan to
construct a temporary gaming facility on the site, at an estimated cost of
approximately $9.5 million. Funding for the land purchase and construction of
the facility has been obtained by the sale and issuance of $4,735,000 in revenue
bonds issued by the Klamath Tribes. In connection with such bond financing, the
Company expended $879,933 to purchase revenue bonds with a face amount of
$900,000. As a condition of the bond financing, the Company agreed to purchase
and hold at least $500,000 face amount of the such bonds for a five year period.
In January 1997, the Company sold $200,000 face amount of such bonds for
$195,582. Preopening costs and expenses of approximately $1.5 million are being
financed by loans made pursuant to a third-party bank credit agreement with the
Klamath Tribes. The Company has pledged to such bank a certificate of deposit
for $1,518,000 as collateral for such loans. In addition, the Klamath Tribes
plan to obtain lease financing for approximately $3.4 million in gaming and
other equipment, signage, furniture and fixtures.
Under the terms of the Tribal State Compact for Regulation of Class III Gaming
between The Klamath Tribes and the State of Oregon (the "Compact"), the Klamath
Tribes plan to open the Kla-Mo-Ya Casino initially as a temporary facility which
will permit the operation of 300 video lottery terminals for a twenty-four-month
period. Under the terms of the Compact, at the end of the twenty-four-month
period, the Klamath Tribes must either increase the square footage of the casino
facility to provide that the video lottery terminal area comprises no more than
fifteen percent (15%) of the total square footage of the casino facility, or
reduce the video lottery terminal area (and therefore the number of terminals or
machines) to equal fifteen percent (15%) of the square footage of the temporary
facility.
The Company has signed contracts for the construction of the Kla-Mo-Ya Casino
totalling approximately $1,250,000 as of March 31, 1997. The Company is
currently in the process of assigning those contracts to the Klamath Tribes.
While the Company believes that all liabilities under the construction contracts
will be assumed directly by the Klamath Tribes, payments, if any, that the
Company is required to make which are not reimbursed by the Klamath Tribes,
could result in losses to the Company, which could have a material adverse
effect on the Company's financial condition.
If the Klamath Tribes are unable to open the Kla-Mo-Ya Casino or experience long
delays in its opening, additional financing will be required. At this time,
there is no assurance that such additional financing can
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INLAND CASINO CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
be obtained by the Klamath Tribes to complete either the construction of a
permanent facility or the conversion of the temporary facility to a permanent
facility.
In addition, if the Klamath Tribes are unable to open the Kla-Mo-Ya Casino or
experience long delays in its opening, or if cash flow from its operations is
not adequate to pay its obligations, the Company may lose all or a portion of
its investment in the revenue bonds it purchased and its certificate of deposit
pledged as collateral for bank loans to the Klamath Tribes, which could have a
material adverse effect on the financial condition of the Company.
6. DEFERRED CONTRACT COSTS. Pursuant to oral agreements with the Barona Tribe,
the Company has agreed to fund, or to arrange acceptable financing for, the
construction of facility improvements, furniture and equipment, the
establishment of initial working capital and the losses, if any, of the Barona
Casino's operations. Because the Barona Tribe will not allow its land to be
encumbered and has not assumed liability for any of these obligations, the
Company has capitalized those costs incurred as deferred contract costs, since
(i) the Company had the ultimate responsibility for such costs incurred in
connection with developing the Barona Casino and (ii) management believes that
these costs are fully recoverable over the life of the Operations Agreement and
the Consulting Agreement through receipt of fee income from the Barona Casino.
However, given the nature of the asset, if the recoverability is determined to
be not probable, the Company will expense the unamortized portion. On an ongoing
basis, the Company reviews the valuation and recoverability of these unamortized
deferred contract costs. As part of this review, the Company estimates the
discounted present value of the future projected net income generated by the
Barona Casino and the resulting revenue to the Company to determine whether
impairment has occurred.
Through March 31, 1996, amortization of these deferred costs was calculated as
the greater of the amortization using (i) the straight-line method over the
remaining term of the Operations Agreement or (ii) an accelerated method,
whichever is greater. The accelerated amortization was equal to the excess of
fees earned over 30% of the Barona Casino's operating income. Beginning April 1,
1996, amortization of the deferred costs is calculated using the straight-line
method over the remaining term of the Consulting Agreement. Under the terms of
the Operations Agreement and the Consulting Agreement, title to the Barona
Casino facilities, furniture and equipment rests solely with the Barona Tribe,
unless the Barona Tribe agrees otherwise. The Consulting Agreement can be
terminated by the Barona Tribe for any material breach by the Company, as
defined in such Agreement. Management is not aware of any material breach of the
Consulting Agreement.
7. COMMON STOCK REPURCHASES. On March 4, 1996, the Company repurchased 1,908,865
shares of its common stock and an option to purchase 894,780 shares of its
common stock from Jack R. Smith, a former executive officer, director, and
principal shareholder of the Company, for consideration totaling $1,400,000. The
purchase price consisted of a $500,000 cash payment and issuance of a $900,000,
7% unsecured promissory note, payable in three equal annual installments of
principal and interest of $342,947. In addition, if the Company's common stock
reaches certain levels during measurement periods prior to March 1998 and 1999,
Mr. Smith will be entitled to receive up to $250,000 for each measurement
period. On September 30, 1996, pursuant to a Stock Purchase and Settlement and
Release Agreement dated September 27, 1996 (the "Stock Purchase Agreement") by
and among Jonathan Ungar, Alan Henry Woods and the Company, the Company
purchased 3,424,913 shares of its common stock from Mr. Ungar, a former director
of the Company, and 3,353,331 shares of its common stock from Mr. Woods. The
terms of the Stock Purchase Agreement include (i) a cash payment of $200,000
upon closing, (ii) the issuance of unsecured promissory notes in the principal
amount of $3,500,000, with
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INLAND CASINO CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
interest at the rate of 10% per annum, payments of interest only for the first
three years, followed by three equal annual installments of principal repayment,
with interest on the remaining balance commencing September 30, 1997, (iii) a
contingent obligation (the "Initial Contingent Obligations") to issue a total of
$9,856,488 in unsecured promissory notes ($4,981,276 in principal amount to Mr.
Ungar and $4,875,212 in principal amount to Mr. Woods) including $2,000,000 in
principal amount of notes each year for four years and $1,856,488 in principal
amount of notes to be issued in a fifth year, each note with interest at 10%,
payment of interest only for three years, followed by three equal annual
installments of principal plus interest on the remaining principal balance, and
(iv) another contingent obligation to issue an additional $3,000,000 in
principal amount ($1,515,000 to Mr. Ungar and $1,485,000 to Mr. Woods) in
unsecured promissory notes (or cash, if the Company has closed a firm commitment
underwritten public offering of securities of not less than $35 million prior to
the contingencies being met) when and if certain conditions are met, with
interest at the then "preferred" or "prime" rate of interest charged to the
Company by the Company's principal bank, with interest only for three years from
the date of issuance, followed by two equal annual installments of principal,
plus interest on the remaining principal balances.
The obligations to issue the Initial Contingent Obligations (i.e., $2,000,000 in
notes for four years and $1,856,488 in notes for a fifth year) are contingent
upon the Company's retained earnings balance being at least $4,000,000 for the
fiscal year ending immediately prior to the date the notes are to be issued.
Dividends paid by the Company and certain other payments, if any, are to be
added back to the retained earnings balance for purposes of this contingency
calculation. The period for determining the Company's obligation to issue each
of the $2,000,000 and $1,856,488 in principal amount of notes is an eight year
period commencing with the fiscal year ending June 30, 1997. If the $4,000,000
retained earnings test is not met in one year, the Company is not obligated to
issue the notes in that year. However, the test is to be made each year for
eight successive years commencing with the fiscal year ending June 30, 1997, but
each year can be used only once during the eight year period, and only five out
of the eight years may be used. The Second Contingent Obligation is subject to
the following conditions: (i) the Barona Tribe enters into a Class III Gaming
Compact (the "Compact") with the State of California which permits the operation
of video gaming machines at the Barona Casino in San Diego County; (ii) at the
time that the Barona Tribe enters into the Compact, the Company has a consulting
agreement or similar contractual arrangement with the Barona Tribe: and (iii)
consulting fees paid to the Company by the Barona Tribe relating to the Barona
Casino for any consecutive 12-month period within five years after the Barona
Tribe has entered into the Compact, equals or exceeds one and one-half times
such consulting fees for the year ended June 30, 1996. The Company intends to
record as the additional cost of the repurchase of its common stock, each
contingent obligation as each contingency or condition is met. All payments
pursuant to the Stock Purchase Agreement are further subject to compliance with
certain state law provisions and the Company's Articles of Incorporation
concerning repurchase transactions.
8. COMMITMENTS AND CONTINGENCIES - LITIGATION. Indian Gaming is the subject of
numerous lawsuits in various court jurisdictions at both federal and state
levels. These court cases are attempting to define the permissible gaming
activities on Indian reservations, the states' rights or limitations on control
of gaming, and numerous other issues. While the Barona Tribe is a party to
certain of these cases, it is not a party to many of these cases, nor is the
Barona Reservation within the jurisdiction of certain courts in which many of
these cases will be decided; therefore, the impact, if any, on the operations of
the Barona Casino cannot be determined at this time.
The impact of decisions in various cases, however, could have a significant
impact on the operations of Barona Casino and the Company when decided.
Specifically, current cases are addressing the legality of
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INLAND CASINO CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
electronic gaming equipment and certain card games in California (currently used
in the Barona Casino) and the enforcement rights applicable to Federal and State
governments. Various courts have ruled in different cases, or in different
hearings on the same case, both in the states' favor and in tribes' favor on the
same or similar issues. There are appeals remaining in a number of cases and
other cases may rise. Until there are definitive rulings by the courts, the
legality of the gaming activities in California will not be known.
On June 30, 1994, the U.S. Attorney of the Southern District of California
announced a verbal understanding with a number of Southern California tribes,
including the Barona Tribe, that would allow the Barona Tribe to continue to
operate without expansion of gaming activities until one or more of the
following occurs:
- A compact with the State of California is negotiated or the Secretary of
the Interior expressly authorizes gaming, such as certain card or
electronic/video gaming, which have not been previously addressed;
- Entry of final judgments and exhaustion of all appellate remedies in
certain suits pending before federal courts;
- Enactment of federal legislation that authorizes the operation of the
electronic/video games at issue without a tribal-state compact;
- Amendment of the NIGC's regulations to include the electronic/video games
within the definition of gaming or permissible technologic aids thereto
which are not subject to State compact; or
- Material breach of the understanding by the tribes.
Management is not aware of any violations of the verbal understanding by the
Barona Tribe or any other Indian tribe which is a party to such understandings.
9. SUBSEQUENT EVENT - TERMINATION OF CONSULTING AGREEMENT. In May 1997, the
consulting agreement with the Klamath Tribes was terminated by mutual agreement
of the Klamath Tribes and the Company. (See Note 5, Consulting Agreement with
the Klamath Tribes.)
10
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
From its formation through March 31, 1996, Inland Casino Corporation and its
predecessors (the "Company") provided services for The Barona Group of Capitan
Grande Band of Mission Indians (the "Barona Tribe") at the Barona Casino under
the terms of the Operations Agreement, including providing assistance to the
Barona Tribe in the development and expansion of the "Big Top" facility at the
Barona Casino. Through March 31, 1996, the Company earned fees based upon a
percentage of the "net profits" generated by the Barona Casino. As used in this
Report, the term "net profits" is not intended to mean net profits as defined by
generally accepted accounting principles or by the Indian Gaming Regulatory Act
("IGRA"). Generally, the Operations Agreement defined "net profit" as the total
amount of moneys remaining from monthly gross receipts after payment of the
operating expenses for such month which amount shall be calculated on a cash
basis. The Company provided certain personnel, at its expense, to operate the
activities at the Barona Casino, and it entered into agreements such as leases
or other contracts for the Barona Casino in which the Company was the obligor
(e.g., leases for gaming equipment, the Big Top lease, etc.).
Effective April 1, 1996, the Company commenced providing consulting services to
the Barona Tribe pursuant to the Consulting Agreement. The Company and the
Barona Tribe also entered into a Mutual Release, effective April 1, 1996,
releasing each other from their respective duties and obligations under the
Operations Agreement.
As part of its obligation to the Barona Tribe under the Operations Agreement,
Inland Casino provided significant financing for the construction and expansion
of the Barona Casino. The financing costs have been recognized as an asset in
the financial statements of the Company, designated as deferred contract costs,
and are being amortized to expense over the combined lives of the Operations and
Consulting Agreements through March 1999. The recovery of these deferred costs
is achieved through the fees earned by Inland Casino pursuant to the agreements
with the Barona Tribe.
In addition to its obligations under the Consulting Agreement and collateral
contracts for the benefit of the Barona Tribe, the Company's consulting
activities include assisting clients in arranging financing to support casino
construction projects and monitoring of Indian Gaming legislative and litigation
matters.
In June 1996, the Company began providing consulting services for the
Confederated Tribes of Siletz Indians of Oregon (the "Siletz Tribes") at the
Chinook Winds Gaming and Convention Center in Lincoln City, Oregon, and with the
Associated Tribes of Northwest Indians in Oregon. In October 1996, the
consulting agreement with the Siletz Tribes was terminated.
Also in June 1996, the Company entered into a consulting agreement with the
Klamath and Modoc Tribes and the Yahooskin Band of Snake Indians (collectively,
the "Klamath Tribes") to assist with the development, construction and eventual
operation of the Kla-Mo-Ya Casino, to be constructed near Chiloquin, in
south-central Oregon. In May 1997, the consulting agreement with the Klamath
Tribes was terminated.
In connection with the financing of the Kla-Mo-Ya Casino project, the Company
expended $879,933 to purchase revenue bonds with a face amount of $900,000, as
part of a $4,735,000 face amount of bond financing. In January 1997, the Company
sold $200,000 face amount of such bonds for $195,582. In addition to the bond
financing, the Company pledged a certificate of deposit for $1,518,000 as
collateral for third-party bank loans to the Klamath Tribes, and signed
contracts for the construction of the Kla-Mo-Ya Casino totalling approximately
$1,250,000 as of March 31, 1997. The Company is currently in the process of
assigning the construction contracts to the Klamath Tribes. While the Company
believes that all liabilities under the construction contracts will be assumed
by the Klamath Tribes, payments, if any, that the Company is required to make
which are not reimbursed to the Company by the Klamath Tribes could result in
losses to the Company, which could have a material adverse effect on the
Company's financial condition. In addition, if the Klamath Tribes are unable to
complete the construction of the Kla-Mo-Ya Casino, or for any other reason are
unable to open and operate the Kla-Mo-Ya Casino, or if the Kla-Mo-Ya Casino
sustains operating losses after opening, the Company may lose a portion or all
of its
11
<PAGE> 14
approximately $700,000 investment in revenue bonds and its pledged $1,518,000
certificate of deposit, which could have a material adverse effect on the
Company's liquidity and financial condition.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THE THREE MONTHS ENDED
MARCH 31, 1997.
REVENUE. Revenue increased 29.4% from $3,324,574 for the three months ended
March 31, 1996 to $4,301,663 for the three months ended March 31, 1997, as a
result of higher profit margins at the Barona Casino. The Company's revenue was
solely from fees earned under agreements with the Barona Tribe; namely, the
Operations Agreement during the three months ended March 31, 1996, and the
Consulting Agreement during the three months ended March 31, 1997, with the
exception of $51,663 in fees earned from consulting services provided to a tribe
in New Mexico during the three months ended March 31, 1997.
OPERATING EXPENSES. General and administrative expenses increased 18.0% from
$1,446,576 for the three months ended March 31, 1996 to $1,707,361 for the three
months ended March 31, 1997, resulting primarily from increases in consulting
and legal fees, an increase in compensation expense as a result of increases in
salaries and other benefits, an increase in the provision for doubtful accounts
to cover anticipated losses resulting from certain consulting engagements, and
increases in charitable contributions. The increases were partially offset by
decreases in business development costs, sponsorship costs, accounting fees and
other administrative expenses.
Amortization of deferred contract costs decreased 2.2% from $721,992 for the
three months ended March 31, 1996 to $705,869 for the three months ended March
31, 1997, primarily as a result of use of an accelerated method of computing
amortization in the three months ended March 31, 1996, compared with use of a
straight-line method for the three months ended March 31, 1997.
OTHER INCOME AND EXPENSE. For the three months ended March 31, 1997, interest
income was $93,737 compared to $1,252 for the three months ended March 31, 1996.
Prior to April 1, 1996, while the Company performed services at the Barona
Casino under the terms of the Operations Agreement with the Barona Tribe, it was
determined by management that as long as the Company had outstanding advances of
future fees due to the Barona Casino, interest earned on excess cash balances
would be paid to the Barona Casino. Commencing April 1, 1996, the effective date
of the Consulting Agreement, the Company began to realize interest income on its
cash balances available for investment.
Interest expense increased from $79 for the three months ended March 31, 1996 to
$103,250 for the three months ended March 31, 1997, primarily as a result of
interest expense incurred on notes payable issued in March 1996 in connection
with the repurchase of 1,908,865 shares of the Company's common stock from a
former officer and director of the Company, and in September 1996 in connection
with the repurchase of 6,778,244 shares of the Company's common stock from two
major shareholders, including a former director of the Company.
INCOME TAX PROVISION. The income tax provision increased 57.5% from $466,000 for
the three months ended March 31, 1996 to $734,000 for the three months ended
March 31, 1997, based on increased operating income in the current quarter.
NINE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THE NINE MONTHS ENDED MARCH 31,
1997.
REVENUE. Revenue increased 57.3% from $7,665,790 for the nine months ended March
31, 1996 to $12,059,980 for the nine months ended March 31, 1997, as a result of
higher profit margins at the Barona Casino. With the exception of $117,480 in
fees earned from consulting services provided to a tribe in New Mexico, the
Company's revenue was solely from fees earned under agreements with the Barona
Tribe.
OPERATING EXPENSES. General and administrative expenses increased 14.9% from
$5,027,359 for the nine months ended March 31, 1996 to $5,773,983 for the nine
months ended March 31, 1997, resulting
12
<PAGE> 15
primarily from an increase in the provision for doubtful accounts to cover
anticipated losses resulting from certain consulting engagements, an increase in
compensation expense (reflecting a net increase in the number of full-time
employees and increases in salaries and other benefits), increases in consulting
and legal fees, increases in allowable political contributions, and increases in
costs incurred in connection with the settlement agreement with the
National Indian Gaming Commission (the "NIGC"). (See Notes to Interim
Financial Statements, Note 4, Agreements with the Barona Tribe.) The increases
were partially offset by decreases in sponsorship costs, charitable
contributions and accounting fees.
Amortization of deferred contract costs increased 6.7% from $1,824,499 for the
nine months ended March 31, 1996 to $1,945,960 for the nine months ended March
31, 1997, resulting primarily from calculating amortization on a higher asset
value for the nine months ended March 31, 1997.
OTHER INCOME AND EXPENSE. For the nine months ended March 31, 1997, interest
income was $227,233 compared to $1,548 for the nine months ended March 31, 1996.
Prior to April 1, 1996, while the Company performed services at the Barona
Casino under the terms of the Operations Agreement with the Barona Tribe, it was
determined by management that as long as the Company had outstanding advances of
future fees due to the Barona Casino, interest earned on excess cash balances
would be paid to the Barona Casino. Commencing April 1, 1996, the effective date
of the Consulting Agreement, the Company began to realize interest income on its
cash balances available for investment.
Interest expense increased from $3,001 for the nine months ended March 31, 1996
to $222,250 for the nine months ended March 31, 1997, primarily as a result of
interest expense incurred on notes payable issued in March 1996 and in September
1996 in connection with the repurchase of the Company's common stock.
INCOME TAX PROVISION. The Company recorded an income tax provision $1,851,000
for the nine months ended March 31, 1997, based on income before income taxes of
$4,345,020 for the period, compared to an income tax provision of $334,000 based
on income before income taxes of $812,479 for the nine months ended March 31,
1996.
LIQUIDITY AND CAPITAL RESOURCES.
The Company's principal source of liquididty at March 31, 1997 consisted of cash
of $5,486,015, future revenues generated from operations and advances of future
fees under the Consulting Agreement with the Barona Tribe. The Company finances
its operations through cash provided by its operations and advances of future
fees, all (in the case of future fees) or substantially all (in the case of cash
provided by operations) derived from agreements with the Barona Tribe. The
Company believes that these sources of liquidity will be sufficient to meet the
Company's operating and capital requirements for the foreseeable future.
During the nine months ended March 31, 1997, the Company's cash position
increased $1,138,030 from the June 30, 1996 balance of $4,347,985, to $5,486,015
at March 31, 1997. The increase was provided by net cash generated by operating
activities of $4,896,016 during the period and by cash flows generated by
financing activities of $59,069, partially reduced by the use of cash for
investing activities of $3,817,055.
Deferred income taxes decreased $153,000 as the amortization of deferred
contract costs for tax purposes exceeded amortization of such costs for
financial statement purposes during the nine months ended March 31, 1997.
Accounts receivable increased $98,453 during the nine months ended March 31,
1997 primarily as a result of construction and other costs paid on behalf of the
Klamath Tribes in connection with the development of the Kla-Mo-Ya Casino.
Accounts payable and accrued expenses increased $371,436 primarily as a result
of increases in accrued expenses incurred in connection with consulting
contracts and accrued interest on notes payable issued in connection with
repurchases of common stock.
13
<PAGE> 16
From the inception of the Company, deferred contract costs have been financed
principally by cash generated from operations, advances of future fees from the
Barona Casino, working capital and advances and capital contributions from
shareholders. Also from the inception of the Company through March 31, 1997, in
addition to its general and administrative expenses, the Company's most
significant expenditure has been the funding of the deferred contract costs
related to an expansion of the facilities at the Barona Casino. Net cash
provided by operations from fees earned during this same period was insufficient
by itself to fund the deferred contract costs. In addition to fees earned under
the Operations and Consulting Agreements, the Company also has received advances
against future fees from the Barona Tribe and received capital contributions
from its shareholders. The increase of $1,373,295 in deferred contract costs
from $13,160,953 at June 30, 1996 to $14,534,248 at March 31, 1997, was financed
by cash generated from operations and by an increase of $343,431 in advances of
future fees from the Barona Casino during the same period. At March 31, 1997,
outstanding advances of future fees from the Barona Casino totalled $2,729,245.
Advances do not bear interest and are due on demand.
Cash flows used in investing activities for the nine months ended March 31, 1997
include the purchase of a bank certificate of deposit for $1,518,000, which has
been pledged as collateral by the Company to secure loans made pursuant to a
bank credit agreement with the Klamath Tribes to finance preopening costs and
expenses of approximately $1.5 million, in connection with the development of
the Kla-Mo-Ya Casino by the Klamath Tribes, and an $879,993 investment in
$900,000 face amount of revenue bonds issued by the Klamath Tribes. In January
1997, the Company sold $200,000 face amount of the revenue bonds for $195,582,
reducing its net investment in the bonds to $684,411. Restricted cash and other
investments of $2,203,191 is comprised of the pledged bank certificate of
deposit of $1,518,000, the Company's net investment of $684,411 in revenue bonds
issued by the Klamath Tribes and bond discount amortization of $780. (See Notes
to Interim Financial Statements, Note 5, Consulting Agreement with the Klamath
Tribes.)
Cash flows used in financing activities also include $200,000 in payments
related to the repurchase of shares of common stock. Cash flows generated by
financing activities during the nine months ended March 31, 1997 included an
increase of $343,431 in advances of future fees from the Barona Casino.
Long term debt increased $3,500,000, as a result of the issuance of notes
payable in connection with the repurchase of shares of common stock. (See Notes
to Interim Financial Statements, Note 7, Common Stock Repurchases.)
It is the Company's intention to assist the Barona Tribe in funding, or finding
acceptable sources of funding, for future improvements in the Barona Casino.
Depending on the nature and extent of the improvement project and to the extent
practicable, it is the Company's intent to first explore funding such
improvement projects from the Company's working capital and through advances of
future fees, before seeking outside debt or equity financing. However, outside
sources of financing may be required or sought at any time.
The Barona Casino and all of the related facilities are capital improvements
upon land which belongs to the Barona Tribe. As such, the Company has no
ownership whatsoever in any of the improvements to such land. All of these
improvements belong to the Barona Tribe.
In October, 1996, the Company cancelled a bank credit agreement. Pursuant to
such agreement, among other things, the Company granted to the bank a security
interest in the Company's assets and an immediately exerciseable warrant to
purchase 40,000 shares of the Company's common stock at a price of $5.00 per
share. Pursuant to such cancellation, the bank agreed to cancel the credit
agreement and terminate its security interest in the Company's assets, but
retained the warrant. During the nine months ended March 31, 1997 and all prior
periods, the Company did not utilize such credit facility.
SEASONALITY.
The Barona Casino is located approximately 30 miles east of downtown San Diego,
California where the population is relatively stable throughout the year,
although it peaks to some extent due to tourism during
14
<PAGE> 17
the summer months and to a lesser extent during the winter months. On the basis
of its experience to date, the Company anticipates that the Barona Casino's
business may peak in summer and, to some extent, in winter, and may decline
somewhat in early spring and late fall. However, at this time, the Company
cannot accurately predict the continued effect of seasonality on its business.
INFLATION.
To date, inflation has not had a material impact on the Company's financial
condition or its results of operations.
SUBSEQUENT EVENT.
In May 1997, the consulting agreement with the Klamath Tribes was terminated by
mutual agreement of the Klamath Tribes and the Company.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS AND FORWARD-LOOKING
STATEMENTS.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS.
- --------------------------------------------------
Gaming on Indian land is extensively regulated by Federal, State and Tribal
governments. The present regulatory environment is extremely uncertain because
of certain pending litigation and legislation. Adverse findings for any of the
Indian tribes in any of the pending actions could have a material adverse effect
on the operations of the Company, as would criminal and civil enforcement
actions taken by federal agencies which could be commenced before the outcome of
such litigation is known.
In addition, the Company's Consulting Agreement with the Barona Tribe has not
yet been approved by all regulatory authorities. If the Consulting Agreement is
not approved or is significantly modified from the standpoint of consulting
revenue, such action would have a material adverse effect on the business and
financial condition of the Company. (See Notes to Interim Financial Statements,
Note 4, Agreements with the Barona Tribe.)
In any event, any material reduction in fees payable to the Company, whether as
a result of (i) a modification to the Consulting Agreement between the Company
and the Barona Tribe as a result of regulatory compliance requirements or (ii)
weakness in the operations of the Barona Casino, could have a material adverse
effect on the business and financial condition of the Company, if the Company
could not either reduce expenses or increase revenues from other sources.
FORWARD-LOOKING STATEMENTS.
- ---------------------------
Included in the Notes to the Interim Financial Statements, this Item 2.
Management's Discussion and Analysis or Plan of Operation and elsewhere in this
Report are certain forward-looking statements reflecting the Company's current
expectations. Although the Company believes that its expectations are based on
reasonable assumptions, there can be no assurance that the Company's financial
goals or expectations will be realized. Numerous factors may affect the
Company's actual results and may cause results to differ materially from that
expressed in forward-looking statements made by or on behalf of the Company.
Some of these factors include the uncertainty involved in the regulatory
approval process relating to the Consulting Agreement, the outcome of a variety
of pending litigation and legislation at the federal and state levels regarding
Indian gaming; the developments relating to the construction and operation of
the Kla-Mo-Ya Casino and the possible loss of the Company's various investments
and guaranties related thereto; the availability of funding alternatives to
fulfill development projects at the Barona Casino, and general economic factors
affecting the gaming industry in general and Indian gaming in particular in the
respective geographic markets within which the Company competes.
15
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 3, 1997, the Company entered into a settlement agreement (the
"Settlement Agreement") with the NIGC concerning issues raised by the operation
of the Barona Casino under a gaming management agreement with the Barona Tribe
from February 1992 to March 27, 1996, and under a consulting agreement with the
Barona Tribe from March 28, 1996 to the date of the Settlement Agreement.
Under the Settlement Agreement, the NIGC agreed not to conduct any further
inquiries or institute proceedings of any kind against the Company or the Barona
Tribe relating to the Company's acting as a manager or consultant to the Barona
Tribe prior to the date of the Settlement Agreement. In return, the Company
agreed to make payments to the NIGC in the aggregate amount of $250,000 for
administrative, investigative and legal expenses incurred by the NIGC, and the
Company also agreed to contribute $2 million to the Barona Tribe in five equal
annual installments, commencing within thirty business days of the date of the
Settlement Agreement. In addition, the Settlement Agreement specifically states
that (i) the NIGC has made no finding that the Company violated any law, (ii)
nothing in the Settlement Agreement shall be construed as an admission of any
wrongdoing by the Company or the Barona Tribe, and (iii) the relationship
between the Company and the Barona Tribe has benefitted the interests of the
Barona Tribe.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The Exhibits listed below are filed herewith as part of this
Quarterly Report on Form 10-QSB.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule.
99 Settlement Agreement dated January 3, 1997, by and between Inland Casino Corporation
and the National Indian Gaming Commission, previously filed as Exhibit 99 to the
Company's Current Report on Form 8-K dated January 7, 1997 with the U. S. Securities
and Exchange Commission on January 7, 1997 (File No. 0-11532), which is incorporated
herein by reference.
</TABLE>
(b) Reports on Form 8-K.
During the three months ended March 31, 1997, a Current Report on Form 8-K dated
January 7, 1997 was filed by the Company, disclosing under Item 5. Other Events,
the terms of the Settlement Agreement. The Settlement Agreement is described in
this Report in Part II, Item 1. Legal Proceedings, and is filed as an Exhibit to
this Report.
16
<PAGE> 19
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INLAND CASINO CORPORATION,
a Utah Corporation (Registrant)
Date: May 15, 1997 By: /s/ Duane M. Eberlein
-----------------------------
Duane M. Eberlein
Vice President, Chief
Financial Officer and
Secretary
(Principal Financial and
and Accounting Officer)
17
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
<S> <C>
27 Financial Data Schedule.
99 Settlement Agreement dated January 3, 1997, by and between Inland Casino Corporation
and the National Indian Gaming Commission, previously filed as Exhibit 99 to the
Company's Current Report on Form 8-K dated January 7, 1997 with the U. S. Securities
and Exchange Commission on January 7, 1997 (File No. 0-11532), which is incorporated
herein by reference.
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1997
<CASH> 5,486,015
<SECURITIES> 0
<RECEIVABLES> 189,607
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,815,842
<PP&E> 248,804
<DEPRECIATION> 75,047
<TOTAL-ASSETS> 14,531,752
<CURRENT-LIABILITIES> 4,091,193
<BONDS> 3,820,511
0
0
<COMMON> 3,855
<OTHER-SE> 6,616,193
<TOTAL-LIABILITY-AND-EQUITY> 14,531,752
<SALES> 12,059,980
<TOTAL-REVENUES> 12,059,980
<CGS> 0
<TOTAL-COSTS> 7,719,943
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 444,143
<INTEREST-EXPENSE> 222,250
<INCOME-PRETAX> 4,354,020
<INCOME-TAX> 1,851,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,494,020
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
