================================================================================
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM 10-QSB
- --------------------------------------------------------------------------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For fiscal quarter ended July 31, 1999
Commission File Number: 0-24846
COLORADO CASINO RESORTS, INC.
(Exact name of Registrant as specified in its Charter)
Texas 84-1303693
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One South Nevada Street
Suite 200
Colorado Springs, CO 80903
(719) 635-7047
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:
Common Stock, $0.001 Par Value
(Title of Class)
- --------------------------------------------------------------------------------
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date: 38,740,632 shares of common
stock, $0.001 par value per share.
Transitional Small Business Disclosure Format: Yes [X] No [ ]
DOCUMENTS INCORPORATED BY REFERENCE:
None.
================================================================================
<PAGE>
Colorado Casino Resorts, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (Unaudited)
July 31, October 31,
1999 1998
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash & cash equivalents ........................ $ 2,592,163 $ 1,573,519
Inventory ...................................... 62,137 96,429
Advances to officers ........................... 110,443 125,443
Other .......................................... 339,519 349,781
----------- -----------
TOTAL CURRENT ASSETS ........................ 3,104,263 2,145,172
----------- -----------
REAL ESTATE HELD FOR FUTURE DEVELOPMENT ........ 3,250,000 3,250,000
----------- -----------
LAND, BUILDING AND EQUIPMENT - NET ............. 38,297,350 40,459,018
----------- -----------
OTHER ASSETS
Debt issue cost ............................. 240,177 359,819
Debt extension cost ......................... -- 158,100
Deposits .................................... 63,108 63,108
----------- -----------
TOTAL OTHER ASSETS ............................. 303,285 581,027
----------- -----------
TOTAL ASSETS ................................ $44,954,898 $46,435,217
=========== ===========
</TABLE>
[THIS SECTION INTENTIONALLY LEFT BLANK]
The accompanying notes are an integral part of these consolidated financial
statements
-2-
<PAGE>
<TABLE>
<CAPTION>
July 31, October 31,
1999 1998
---------- ----------
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY [DEFICIENCY]
CURRENT LIABILITIES
Revolving Credit Facility .............................. 15,297,133 13,655,296
Accounts payable ....................................... 1,527,436 349,320
Accrued expenses ....................................... 910,160 1,303,328
Slot club liability .................................... 446,686 348,949
Incremental progressive slot liability ................. 311,842 374,264
Current maturities - long term debt .................... 5,124,967 10,819,963
Current maturities - long term debt, related party ..... -- 7,796,411
Convertible debenture, related party ................... 26,402 4,500,000
Current maturities - capital lease obligations ......... 629,787
5,044,745
Interest payable ....................................... 3,083,649 1,252,825
Interest payable - related party ....................... 2,051,746 1,953,240
Interest payable - convertible debentures, related party 684,507 909,261
Due to officers ........................................ -- 30,000
Other current liabilities .............................. 169,095 99,711
------------ ------------
TOTAL CURRENT LIABILITIES .............................. 31,594,718 44,022,355
LONG-TERM DEBT-LESS CURRENT PORTION ....................... 20,367,754 3,908,702
CAPITAL LEASE OBLIGATIONS-LESS CURRENT PORTION ............ 493,417 667,437
------------ ------------
TOTAL LIABILITIES ...................................... 52,455,889 48,598,494
------------ ------------
STOCKHOLDERS' EQUITY [DEFICIENCY]
Preferred convertible stock, Series One, $10 par value
5,000,000 shares authorized, None and None
issued and outstanding, respectively ................. -- --
Common stock, $0.001 par value, 100,000,000
shares authorized, 38,740,632 and 38,740,632
issued and outstanding, respectively ................. 38,741 38,741
Paid-in capital ........................................ 19,025,188 19,025,188
Deferred compensation .................................. (81,500) (81,500)
Accumulated deficit .................................... (26,483,420) (21,145,706)
------------ ------------
TOTAL STOCKHOLDERS' DEFICIENCY ......................... (7,500,991) (2,163,277)
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIENCY ........... $ 44,954,898 $ 46,435,217
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
-3-
<PAGE>
Colorado Casino Resorts, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Nine Months Quarter Nine Months Quarter
Ended Ended Ended Ended
July 31, July 31, July 31, July 31,
1999 1999 1998 1998
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Casino .................... 15,930,996 6,232,483 12,953,010 4,955,845
Rooms ..................... 1,678,946 669,105 1,677,149 771,244
Food & Beverage ........... 1,674,468 676,379 1,566,947 663,228
Other ..................... 240,846 63,947 415,087 208,116
----------- ----------- ----------- -----------
TOTAL OPERATING REVENUE 19,525,256 7,641,914 16,612,194 6,598,433
----------- ----------- ----------- -----------
OPERATING EXPENSES
Casino .................... 5,812,941 1,520,609 6,035,558 2,034,051
Rooms ..................... 781,303 266,463 801,270 271,863
Food & Beverage ........... 2,141,247 788,033 2,070,939 780,556
Marketing ................. 4,480,476 1,783,698 2,922,258 1,144,764
General & Administrative .. 4,358,624 1,549,107 3,388,809 1,864,773
Depreciation & Amortization 3,036,395 957,916 1,613,478 516,704
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSE 20,610,986 6,865,826 16,832,312 6,612,711
----------- ----------- ----------- -----------
INCOME/(LOSS FROM OPERATIONS (1,085,730) 776,088 (220,118) (14,278)
----------- ----------- ----------- -----------
NONOPERATING INCOME (EXPENSE)
Interest Expense ......... 4,251,986 1,367,053 4,324,465 2,068,203
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAXES .... (5,337,716) (590,965) (4,544,583) (2,082,481)
INCOME TAXES ................ 0 0 0 0
----------- ----------- ----------- -----------
NET LOSS .................... (5,337,716) (590,965) (4,544,583) (2,082,481)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE ... (0.1378) (0.0153) (0.1175) (0.0539)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING .. 38,740,642 38,740,642 38,666,000 38,666,000
=========== =========== =========== ===========
</TABLE>
[THIS SECTION INTENTIONALLY LEFT BLANK]
The accompanying notes are an integral part of these consolidated financial
statements
-4-
<PAGE>
Colorado Casino Resorts, Inc.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASHFLOWS (Unaudited)
Nine Months Ended Nine Months Ended
July 31, July 31,
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ................................................... $ (5,337,716) $ (4,544,583)
Noncash Items
Depreciation & Amortization .......................... 2,916,753 1,613,478
Amortization of Debt Issue Costs ..................... 119,642 593,675
(Increase) Decrease in:
Inventory ............................................ (34,292) 51,560
Other Current Assets ................................. (10,262) 121,100
Other Assets ......................................... 247,211 (419,023)
(Decrease) Increase In:
Accounts Payable ..................................... 1,178,116 --
Incremental Progressive Slot Liability ............... (62,422) --
Slot Club Liability .................................. 97,737 --
Interest Payable ..................................... 1,704,576 714,966
Accrued Other Expenses ............................... (393,168) 603,305
Other Current Liabilities ............................ 69,384 --
------------ ------------
Net Cash Provided (Used) By Operating Activities 495,558 (1,265,522)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Land, Building & Equipment ..................... (755,085) (3,917,387)
Advances to Officers ....................................... (15,000) --
------------ ------------
Net Cash Provided (Used) By Investing Activities (770,085) 51,850
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances From Officers ..................................... -- (62,745)
Borrowings, Long-Term Debt ................................. 1,725,530 16,792,873
Repayments, Long-Term Debt ................................. (266,028) (11,667,028)
Repayments, Long-Term Debt, Related Party .................. (166,330) (145,701)
------------ ------------
Net Cash Provided (Used) By Financing Activities 1,293,172 4,917,399
------------ ------------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS ................ 1,018,644 (265,510)
CASH AND EQUIVALENTS, BEGINNING ............................ 1,573,519 1,962,486
------------ ------------
CASH AND EQUIVALENTS, ENDING ............................... $ 2,592,163 $ 1,696,976
============ ============
</TABLE>
[THIS SECTION INTENTIONALLY LEFT BLANK]
The accompanying notes are an integral part of these consolidated financial
statements
-5-
<PAGE>
COLORADO CASINO RESORTS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A: Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine month period ended July 31, 1999 are
not necessarily indicative of the results that may be expected for the year
ended October 31, 1999. The unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the footnotes thereto included in the Company's annual report on
Form 10-KSB for the year ended October 31, 1998.
Note B: Long Term Debt
On May 19, 1999 the Company executed note modification agreements for its
outstanding unsecured debt of $18,646,411. These agreements reduced the annual
interest rates from a weighted average of 15.47% to a new average rate of 7.39%.
In addition, the agreements extended the maturity date for the payment of
principal and accrued interest to December 31, 2001. As a result of these
modifications, there is a substantial reduction in interest expense for the
quarter ended July 31, 1999, and this debt is reclassified on the balance sheet
from current debt to long-term debt.
-6-
<PAGE>
COLORADO CASINO RESORTS, INC. & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
PLANS FOR FUTURE OPERATIONS
RESULTS OF OPERATIONS
The Company has made several restatements and reclassifications to the Company's
1997 and 1996 fiscal year financial statements. The restatements relate
principally from: (i) the reclassification and accounting for the Company's slot
machines, other leased assets and its licensed software; (ii) interest and other
expenses related to the Company's convertible preferred stock, stock warrants,
convertible debentures, tokens and chips and computer player tracking system;
and (iii) the reclassification of certain one-time casino revenue to
extraordinary gain. The financial information contained herein for the fiscal
quarter ended July 31, 1998 has not been amended to reflect such restatement and
reclassifications; therefore, the comparability of this period to the fiscal
quarter ended July 31, 1999 may be affected.
Quarter Ended July 31, 1999 Compared to Quarter Ended July 31, 1999
The Company reported total operating revenues for the quarter ended July 31,
1999 of $7,641,914, an increase of $1,043,481, or 15.8%, from revenues of
$6,598,433 reported for the same quarter in 1998. Total operating expenses for
the quarter were $6,865,826 for the quarter ended July 31, 1999, increasing by
$253,115, or 3.8% from $6,612,711 reported for the same quarter in 1998. Total
operating expenses as a percentage of total revenues decreased to 89.8% from
100.2% reported in the comparable period of 1998, as result of higher slot
machine revenue and significant cost control measures. There were no
acquisitions or any sale of stock during this quarter.
Casino. Casino revenues accounted for approximately 82% of the total operating
revenues in third quarter of 1999. For the quarter ended July 31, 1999, casino
revenues were $6,232,483, representing an increase of $1,276,638 from the
$4,955,845 reported during the same period in 1998. Management attributes the
increase in casino revenue to improved customer patronage resulting from the
increased payout percentages and the marketing campaign deployed during the fall
and winter of 1998 to advertise this fact, as well as the addition of a new
delicatessen and the paving of the parking area at the Double Eagle Hotel &
Casino.
Costs and expenses of casino operations were $1,520,609 for the quarter ended
July 31, 1999, a decrease of $513,442, or 25.2%, from the $2,034,051 reported in
1998. The net decrease in costs and expenses of casino operations is
attributable to the reclassification of $400,323 of slot department
complimentary expenses to the marketing department, and significantly lower
costs for equipment rental and outside contractual services. Casino costs and
expenses as a percentage of casino revenues decreased to 24.4% for the quarter
ended July 31, 1999 compared to 41.0% for the comparable period in 1998.
Rooms. Room revenues accounted for approximately 8.8% of total operating
revenues for the quarter ended July 31, 1999. During this period, room revenues
were $669,105, representing a decrease of $102,139, or 13.2%, from the $771,244
reported in the same period in 1998. The decline in revenues is primarily
attributable to fewer marketing and incentive offers directed at the Company's
rated players during the 1999 period, and less cash sales due to a more
competitive environment. Despite the decrease in revenue, costs and expenses of
hotel operations for the quarter ended July 31, 1999 were essentially flat,
decreasing $5,400, or 2.0%, to $266,463, from $271,863 reported in the same
period in 1998. Costs and expenses as a percentage of room revenues increased to
39.8% in the quarter ended July 31, 1999 from 35.2% during the comparable period
in 1998.
Food and Beverage. Food and beverage revenues accounted for 8.9% of total
revenues for the quarter ended July 31, 1999. During this period, food and
beverage revenues were $676,379, representing an increase of $13,151, or 2.0%,
from the $663,228 reported in the 1998 period. Costs and expenses of food and
beverage were $788,033 for the 1999 period, up $7,477, or 1.0%, from $780,556
recorded in the 1998 period. Costs and expenses as a percentage of food and
beverage revenues decreased slightly to 116.5% in the 1999 period from 117.7% in
the 1998 period.
Other. Other revenues consists of revenues generated from the Company's gift
shop and parking lot operations. During the quarter ended July 31, 1999, other
revenues were $63,947, down by $144,169, or 69.3%, from $208,116 reported in the
1998 period. This decrease is mainly attributable to the Company's decision to
eliminate parking fees for casino customers. The fee was discontinued in April
1999 as a result of competitive pressure.
-7-
<PAGE>
Marketing. Marketing expenses were $1,783,698 for the quarter ended July 31,
1999, up significantly by $638,934 or 55.8% from the $1,144,764 reported in the
1998 period. However, the increase is primarily due to complimentary expenses of
$770,756 that were charged to individual departments in the prior year and are
now being charged to the marketing department. Expenditures were down from the
prior year as media advertising and other expenditures were reduced during the
quarter. Marketing expenses as a percentage of total revenues increased to 23.3%
for the quarter ended July 31, 1999 compared to 17.3% reported in 1998.
General and Administrative. General and administrative expenses were $1,549,107
for the quarter ended July 31, 1999, down $315,666 or 16.9% from the $1,864,773
reported in the 1998 period. This decrease is due primarily to higher than
normal legal and accounting fees in the prior year related to the Foothill
Credit Facility loan execution. General and administrative expenses as a
percentage of total revenues decreased to 20.3% for the quarter ended July 31,
1999 from 28.3% for the comparable period in 1998.
Depreciation and Amortization. Depreciation and amortization increased by
$441,212, or 85.4% to $957,916 for the quarter ended July 31, 1999, compared to
$516,704 reported in 1998. This difference is the result of a change in the
estimated lives of many of the Company's assets, specifically in the reduction
of the slot machine lives from five years to three years.
Income from Operations. As a result of the factors discussed above, the Company
recognized income from operations of $776,088 for the quarter ended July 31,
1999 as compared to a loss from operations of $14,278 recorded in the 1998
period.
Interest Expense. Interest expense was $1,367,053 for the quarter ended July 31,
1999, a decrease of $701,150, or 33.9%, from the $2.068,203 reported for the
comparable period in 1998. This decrease is due to the re-negotiation of the
terms of the unsecured debt at the parent level, yielding a significant
reduction in interest rates (See Note B).
Net Loss. The net loss for the Company was $590,965 for the quarter ended July
31, 1999, a decrease of $1,491,516, or 71.6%, from the net loss of $2,082,481
reported in the 1998 period.
Nine Months Ended July 31, 1999 Compared to Nine Months Ended July 31, 1999
The Company reported total operating revenues for the nine months ended July 31,
1999 of $19,525,256, an increase of $2,913,062, or 17.5%, from revenues of
$16,612,194 reported for the same period in 1998. Total operating expenses as a
percentage of total revenues increased to 105.6% from 101.3% reported in the
comparable period of 1998, due to an increase in marketing, general and
administrative, and depreciation expenses.
Casino. Casino revenues accounted for approximately 82% of the total operating
revenues in the nine months ended July 31, 1999. Casino revenues for this period
were $15,930,996 representing an increase of $2,977,985, or 23.0%, from the
$12,953,011 reported during the same period in 1998. This increase in casino
revenue is due to improved customer patronage resulting from the increased
payout percentages and the marketing campaign deployed to advertise this fact,
as well as the addition of a new delicatessen and the paving of the parking
area.
Costs and expenses of casino operations were $5,812,941 for the nine months
ended July 31, 1999, a decrease of $222,617, or 3.7%, from the $6,035,558
reported in 1998. The net decrease in costs and expenses of casino operations is
attributable to the reclassification of $400,323 of slot department
complimentary expenses to the marketing department, and significantly lower
costs for equipment rental and outside contractual services. Casino costs and
expenses as a percentage of casino revenues decreased to 36.5% for the nine
months ended July 31, 1999, compared to 46.6% for the comparable period in 1998.
Rooms. Room revenues accounted for approximately 8.6% of total operating
revenues for the nine months ended July 31, 1999. During this period, room
revenues were $1,678,946, a slight increase of $1,797, or .1% from the
$1,677,149 reported in the same period in 1998. The lack of growth in revenues
is primarily attributable to fewer marketing and incentive offers directed at
the Company's rated players during the 1999 period, and less cash sales due to a
more competitive environment. Costs and expenses of hotel operations for the
nine month period ended July 31, 1999 were down slightly, decreasing $19,967, or
2.5%, to $781,303, from $801,270 reported in the same period in 1998. Costs and
expenses as a percentage of room revenues decreased to 46.5% in the nine months
ended July 31, 1999 from 47.8% during the comparable period in 1998.
Food and Beverage. Food and beverage revenues accounted for approximately 8.6%
of total revenues for the nine months ended July 31, 1999. During this period,
food and beverage revenues were $1,674,468, representing an increase of
$107,251, or 6.9%, from the $1,566,947 reported in the 1998 period. This
increase is primarily attributable to additional casino customer patronage
during the period. Costs and expenses of food and beverage were $2,141,247 for
the 1999 period, up $70,308, or 3.4%, from $2,070,939 recorded in the 1998
period. Costs and expenses as a percentage of food and
-8-
<PAGE>
beverage revenues decreased to 127.9% in the 1999 period from 132.2% in the 1998
period, reflecting the cost savings derived from the conversion of the Double
Eagle restaurant to a buffet format.
Other. Other consists of revenues generated from the Company's gift shop and
parking lot operations. During the nine months ended July 31, 1999, other
revenues were $240,846, down by $174,241, or 42.0%, from the $415,087 reported
in the 1998 period. This decrease is mainly attributable to the Company's
decision to eliminate parking fees for casino customers. The fee was
discontinued in April 1999 as a result of competitive pressure.
Marketing. Marketing expenses were $4,480,476 for the nine months ended July 31,
1999, up significantly by $1,832,087 or 69.2% from the $2,648,389 reported in
the 1998 period. The increase in marketing expense reflects increases in slot
club point awards and cash disbursements made to patrons upon the redemption of
bus coupons. In addition, most complimentary expenses that were charged to
individual departments in the prior year are now being charged to the marketing
department. Marketing expenses as a percentage of total revenues increased
slightly to 22.9% for the nine months ended July 31, 1999 compared to 22.05%
reported in 1998.
General and Administrative. General and administrative expenses were $4,358,624
for the nine months ended July 31, 1999, up $695,946, or 19.0% from the
$3,662,678 reported in the 1998 period. This increase is due to higher payroll
expenses due to staff growth, and an increase in legal fees. General and
administrative expenses as a percentage of total revenues increased slightly to
22.3% for the nine months ended July 31, 1999 from 22.0% for the comparable
period in 1998.
Depreciation and Amortization. Depreciation and amortization increased to
$3,036,395 for the nine months ended July 31, 1999, compared to $1,613,478
reported in 1998. This increase is the result of a change in the estimated lives
of many of the Company's assets, specifically in the reduction of the slot
machine lives from five years to three years.
Loss from Operations. As a result of the factors discussed above, the Company
recognized a loss from operations of $1,085,730 for the nine months ended July
31, 1999 as compared to a loss from operations of $220,118 recorded in the 1998
period.
Interest Expense. Interest expense was $4,251,986 for the nine months ended July
31, 1999, a decrease of $72,479, or 1.7%, from the $4,324,465 reported for the
comparable period in 1998. This decrease is due to the re-negotiation of the
terms of the unsecured debt at the parent level, through which a significant
reduction in interest rates was realized, as well as an extension of the
maturity dates to December 31, 2001. These amendments were effective April 30,
1999 (See Note B).
Net Loss. The net loss for the Company was $5,337,716 for the nine months ended
July 31, 1999, an increase of $793,133, or 17.5% from the net loss of $4,544,583
reported in the 1998 period.
Liquidity and Capital Resources
The Company has historically financed its operations and capital expenditures
with borrowings from private investors, the sale of equity securities and
private transactions and financial institution borrowing. The Company does not
believe that it will be able to continue to finance its operations in this
manner without first restructuring its existing indebtedness.
As of July 31, 1999, the Company was in default under its credit facility with
Foothill Corporation for not maintaining EBITDA (earnings before interest,
taxes, depreciation and amortization, as defined) of at least $4 million
measured on a rolling 12-month basis. The Company was also in default of certain
other indebtedness. As a result of those defaults, Foothill Corporation has put
certain restrictions on the Company's operations and has no obligation to make
additional loans for working capital purposes.
As a result of the Company's default on its indebtedness, the Company had, at
July 31, 1999, liabilities in excess of $31 million due within one year and
current assets of only approximately $3.1 million. Unless the Company is able to
restructure its indebtedness, the Company will not be able to pay its
indebtedness when due, with the result that the Company may be forced to cease
operations. The Company is in active negotiations with its creditors to
restructure its indebtedness. Any restructuring may involve the filing by the
Company of a voluntary bankruptcy petition. It is likely that any bankruptcy
proceeding involving the Company will result in a very substantial dilution or
elimination of the interests of the Company's current stockholders.
-9-
<PAGE>
YEAR 2000 COMPLIANCE
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a
two-digit year is commonly referred to as the Year 2000 compliance issue. As the
Year 2000 approaches, such systems may be unable to accurately process certain
date-based information.
The Company is in the process of identifying and modifying all significant
hardware and software applications that will require modification to ensure Year
2000 compliance. Relying primarily on internal resources, the Company has
completed a preliminary audit of its significant hardware and software
applications. This audit revealed that the player tracking software that the
Company licenses from IGT and certain personal computers used in the Company's
casino operations may not presently be Year 2000 compliant. The Company has been
advised by IGT and its personal computer manufacturer that such systems will be
Year 2000 compliant as of October 1999. The estimated cost to address the
Company's Year 2000 issues is not expected to have a material impact on the
Company's business, operations or financial condition. If the modification of
the Company's hardware and software compliance is not timely completed or is not
fully effective, the Year 2000 problem may have a serious negative impact on the
operations of the Company.
Although the Company has communicated with its external service providers and
vendors to ensure that the providers and vendors are taking the appropriate
action to address Year 2000 issues and has not received any notice from such
persons that their operations will not be Year 2000 compliant, there can be no
assurance that the systems of third parties on which the Company's systems rely
will be timely converted.
-10-
<PAGE>
FORWARD-LOOKING STATEMENTS
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), the Company is hereby
providing cautionary statements identifying important factors that could cause
the Company's actual results to differ materially from those projected in
forward-looking statements (as such term is defined in the Reform Act) made by
or on behalf of the Company herein or orally, whether in presentations, in
response to questions or otherwise. Any statements that express, or involve
discussions as to, expectations, beliefs, plans, objectives, assumptions or
future events or performance (often, but not always, through the use of words or
phrases such as "intends," "plans," "will result," "are expected to," "will
continue," "is anticipated," "estimated," "projection" and "outlook") are not
historical facts and may be forward-looking and, accordingly, such statements
involve estimates, assumptions, and uncertainties which could cause actual
results to differ materially from those expressed in the forward-looking
statements. Such uncertainties include the risk factors set forth in the
Company's Annual Report on Form 10-KSB for the fiscal year ended October 31,
1998. They also include the following conditions or uncertainties: (i) risk
associated with real estate ownership, operations and development, including
environmental liabilities, worker's strikes, construction delays, obtaining
building permits and necessary zoning changes; (ii) illiquidity of real estate
holdings; (iii) imposition of new regulatory requirements affecting the Company;
(iv) the delay or failure to properly manage growth; (v) effect of uninsured
loss; and (vi) breakdown of water, sewage or other municipal services in Cripple
Creek and other conditions beyond the control of the Company. The Company
cautions that actual results or outcomes could differ materially from those
expressed in any forward-looking statements made by or on behalf of the Company.
Any forward-looking statement speaks only as of the date on which such statement
is made, and the Company undertakes no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for
management to predict all of such factors. Further, management cannot assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normally recurring accruals) considered necessary for a fair presentation
have been included.
Operating results for the quarter ending July 31, 1999 are not necessarily
indicative of the results that may be expected for the year ending October 31,
1999. For further information, refer to the consolidated statements and
footnotes included in the Registrant's annual report on Form 10-KSB for the year
ending October 31, 1998.
-11-
<PAGE>
COLORADO CASINO RESORTS, INC. & SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 10th day of September,
1999.
COLORADO CASINO RESORTS, INC.
September 10, 1999 By: /s/ Michael S. Smith
--------------------------------------------
Michael S. Smith
Interim President and Chief Executive Officer,
Secretary and General Counsel, Director
September 10, 1999 /s/ Christopher H. Taylor
--------------------------------------------
Christopher H. Taylor
Chief Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> MAY-01-1999
<PERIOD-END> JUL-31-1999
<EXCHANGE-RATE> 1
<CASH> 2,592,163
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 62,137
<CURRENT-ASSETS> 3,104,263
<PP&E> 38,297,350
<DEPRECIATION> 1,549,107
<TOTAL-ASSETS> 44,954,898
<CURRENT-LIABILITIES> 31,594,710
<BONDS> 0
0
0
<COMMON> 38,741
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 44,954,898
<SALES> 7,641,911
<TOTAL-REVENUES> 7,641,911
<CGS> 338,190
<TOTAL-COSTS> 6,865,826
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,367,053
<INCOME-PRETAX> (590,965)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,337,716)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,337,716)
<EPS-BASIC> (.015)
<EPS-DILUTED> (.015)
</TABLE>
