<PAGE>
FORM 10-KSB/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
--------- ---------
Commission file number 0-15415
GLOBAL CASINOS, INC.
-------------------
(Exact Name of Registrant as Specified in its Charter)
Utah 87-0340206
- ------------------- -----------------------------------------------
- --
(State or other jurisdiction I.R.S.
Employer
of incorporation or organization) Identification number
1777 South Harrison Street, The Skydeck, Denver, Colorado 80210
---------------------------------------------------------------------
(Address of Principal Offices) (Zip
Code)
Registrant's telephone number, including area code: (303) 756-3777
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.005
------------------------------
(Title of Class)
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B (Section 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form
10-KSB. / X /
The Registrant's revenues for the year ended June 30, 1995 were
$7,303,386.
<PAGE>
<PAGE>
As of September 27, 1995, the aggregate market value of the Common Stock
of the Registrant based upon the average of the closing bid and asked
prices of the Common Stock, as quoted on NASDAQ, held by non-affiliates of
the Registrant was approximately $5,296,507.
As of September 27, 1995, 9,829,867 shares of Common Stock of the
Registrant were outstanding.
<PAGE>
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant incorporates by this reference the following:
Part III
--------
Item 9 Directors, Executive Officers, Promoters and Control
Persons, Compliance With Section 16(a) of the Exchange
Act.
Item 10 Executive Compensation.
Item 11 Security Ownership of Certain Beneficial Owners and
Management.
Item 12 Certain Relationships and Related Transactions.
The foregoing are incorporated by reference from the Registrant's
definitive Proxy Statement relating to its annual meeting of stockholders,
which will be filed in an amendment within 120 days of June 30, 1995.
Part IV - Exhibits
------------------
1. Incorporated by reference from the Company's Registration Statement
on Form 10, as amended, SEC file number 0-15415.
2. Incorporated by reference from the Company's Registration Statement
on Form S-2, as amended, SEC File No. 33-46060, declared effective
May 15, 1992.
3. Incorporated by reference from the Company's Registration Statement
on Form S-8, filed with the Commission and effective December 8,
1995.
4. Incorporated by reference from the Company's Registration Statement
on Form SB-2, as amended, SEC File No. 33-76204, declared effective
August 12, 1994.
5. Incorporated by reference from the Company's Current Report on Form
8-K, dated July 15, 1995, as filed with the Commission on July 31,
1995, as amended on Form 8-K/A-1 filed with the Commission on
August 31, 1995;
6. Incorporated by reference from the Company's Current Report on Form
8-K, dated November 19, 1993, as filed with the Commission on
December 3, 1993;
7. Incorporated by reference from the Company's Current Report on Form
8-K, dated February 18, 1994, as filed with the Commission on March
3, 1994;
8. Incorporated by reference from the Company's Current Report on Form
8-K, dated April 29, 1994, as filed with the Commission on May 13,
1994;
9. Incorporated by reference from the Company's Current Report on Form
8-K, dated June 3, 1994, as filed with the Commission on June 10,
1994;
<PAGE>
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
Global Casinos, Inc. (the "Company" or "Global Casinos") and its wholly-
owned subsidiaries, operate in the rapidly developing and expanding
domestic and international gaming industry. The Company is organized as a
holding company for the purpose of acquiring operating casinos, gaming
properties and other related interests.
HISTORY
Global Casinos, Inc., f/k/a Morgro Chemical Company, was organized under
the laws of the State of Utah on June 8, 1978. From 1978 until February,
1994, it manufactured and marketed a line of garden fertilizers and
chemicals, as well as a retail ice melter.
In the fall of 1993, the Company embarked upon an aggressive plan to
acquire and develop casino properties both nationally and internationally.
On September 20, 1993, the Company acquired 100% of the outstanding Common
Stock of Colorado Gaming Properties, Inc., a Colorado corporation ("CGP").
CGP was acquired from Premier Concepts, Inc., f/k/a Silver State Casinos,
Inc., a Colorado corporation ("Silver State") in a tax-free exchange in
which the Company issued to Silver State 2,500,000 shares of its Common
Stock. The shares of the Company's common stock issued to Silver State
represented 51% of the total issued and outstanding shares of the
Company's common stock immediately following the exchange. CGP owns two
(2) real estate properties located in the limited stakes gaming district
in Central City, Colorado. The properties, known as the Nitro Club and
the Gas Light, are not currently operational and are being held for
investment. (SEE ITEM 2. DESCRIPTION OF PROPERTIES.)
On November 19, 1993, the Company acquired 100% of the outstanding
Common Stock of Casinos U.S.A., Inc., a Colorado corporation ("Casinos
U.S.A."), Lincoln Corporation, a South Dakota corporation ("Lincoln"), and
Woodbine Corporation, a South Dakota corporation ("Woodbine"). In this
transaction, 2,535,000 shares of the Company's Common Stock were issued to
the shareholders of Casinos U.S.A., Lincoln and Woodbine, pro rata.
Casinos U.S.A. owns and operates the Bull Durham Saloon and Casino,
located in Black Hawk, Colorado. Lincoln and Woodbine each operated
casinos located in Deadwood, South Dakota. The Company permanently closed
the Last Chance Saloon owned and operated by Lincoln Corporation on May
31, 1994. Lillie's, the casino operated by Woodbine Corporation, was
closed effective June 30, 1995 due to unprofitable operations. (SEE ITEM
2. DESCRIPTION OF PROPERTIES.)
Casinos U.S.A. also held an 80% interest in a joint venture
("International Joint Venture") which developed and operated gaming
casinos in several international locations. Through the International
Joint Venture, casinos have been developed and operated in Sochi, Russia,
and Bishkek, Kyrgyzstan. In Sochi, the International Joint Venture
developed and operated Casino Lazurnaya located in a four-star Radisson
Hotel, named Hotel Radisson Lazurnaya. In Bishkek, the International
Joint Venture has developed and operates the Casino Las Vegas located on
the second floor of the Restaurant Naryn.
In February, 1994, the Company sold to a management group all of the
assets, subject to all of the liabilities, utilized in the chemical and
<PAGE>
<PAGE>
fertilizer business which it formerly operated under the name "Morgro
Chemical Company." The Company received approximately $854,000 in cash and
promissory notes, and the purchasers assumed $1,200,000 in liabilities.
The purchase price represented the net book value of the assets disposed
of in excess of the liabilities assumed.
In April, 1994, the Company successfully purchased for $1,381,274 in
cash a 66-2/3% interest in a holding company which, through a wholly-owned
subsidiary, owns and operates Casino Masquerade located in the Radisson
Aruba Resort and Casino located on the Caribbean island of Aruba,
Netherland Antilles.
By an Agreement dated June 27, 1995, and effective July 15, 1995
("Dissolution Agreement"), the International Joint Venture was dissolved.
The Company assigned its interest in the Casino Lazurnaya to Kenneth D.
Brown, President and majority shareholder of Global Casino Group, Inc., a
joint venturer. The Company received all of the International Joint
Venture's profit interest (61%) in Casino Las Vegas, the remaining 33-1/3%
interest in Casino Masquerade, and a promissory note in the amount of two
hundred thousand dollars ($200,000) from Kenneth D. Brown secured by
200,000 shares of the Company's common stock held by Mr. Brown and his
affiliates. Giving effect to this transaction, the Company owns a 61%
profit interest in Casino Las Vegas, 100% of the Casino Masquerade, and no
residual interest in Casino Lazurnaya.
FINANCING
On August 12, 1994 the Company's Registration Statement on Form SB-2 was
declared effective by the Securities and Exchange Commission. The
Registration Statement registered for sale under the Securities Act of
1933, as amended (the "Securities Act") 427,800 shares held by existing
shareholders, 1,957,500 shares issuable upon exercise of Class A Common
Stock Purchase Warrants ("A Warrants"), 2,033,750 shares issuable upon
exercise of Class B Common Stock Purchase Warrants ("B Warrants"), and
651,438 shares issuable upon exercise of Class C Common Stock Purchase
Warrants ("C Warrants"). During the period of time that the Registration
Statement was effective. A Warrants were exercised to purchase an
aggregate of 675,000 shares of Common Stock at an exercise price of $1.00
per share, B Warrants were exercised to purchase an aggregate of 65,000
shares of Common Stock at an exercise price of $2.00 per share, and C
Warrants were exercised to purchase an aggregate of 45,000 shares of
Common Stock at an exercise price of $2.00 per share. As a result of
those Warrant exercises, the Company received aggregate gross proceeds of
$850,000.
On May 31, 1994, the Company successfully closed a private placement of
9% Convertible Notes in which it sold, in the aggregate, $2,812,500 in
Convertible Notes to a total of 33 accredited investors. The Convertible
Notes were automatically converted into one (1) share of Convertible
Preferred Stock and one-half (1/2) Class D Common Stock Purchase Warrant
("D Warrant") for every $2.00 in principal amount of Note. Each Class D
Warrant was exercisable to purchase one (1) share of the Company's Common
Stock at a purchase price of $3.00 per share. The Convertible Preferred
Stock is convertible into Common Stock of the Company at a conversion
value of $2.00 per share. The Company had the obligation to redeem any
Class A Preferred Stock not yet converted at the rate of $2.00 per share
on May 31, 1995. Due to a significant decline in the public trading price
of the Company's Common Stock, none of the shares of Preferred Stock were
converted, and the Company was obligated to complete the mandatory
redemption on or before May 31, 1995, representing an aggregate
<PAGE>
<PAGE>
redemption price of $2,812,500. As the Company lacked the capital
necessary to redeem the outstanding shares of Preferred Stock, the Company
entered into agreements with the holders of 1,233,000 of the outstanding
shares of Preferred Stock, modifying the redemption and conversion terms
of the Preferred Stock, such that the Company was released from its
obligation to redeem the 1,233,000 shares of Preferred Stock, the
conversion value was reduced from $2.00 per share to $1.125 per share, and
the exercise price of D Warrants was reduced from $3.00 per share to $.50
per share if exercised on or before June 30, 1995, and if exercised after
June 30, 1995, to $1.75 per share, in consideration of which the holders
of such Preferred Stock agreed to release the Company of its mandatory
redemption obligation. The foregoing modifications are applicable only to
shares of Preferred Stock and D Warrants owned by holders who voluntarily
agreed to such modifications. As a result, there continued to be issued
and
outstanding 173,250 shares of Preferred Stock as to which the Company
continues to be in default in its mandatory redemption obligation,
representing an aggregate redemption obligation of $346,500, all of which
is matured and currently in default.
In June, 1995, the Company consummated the purchase of an aggregate of
$937,204 in subordinated secured promissory notes held by sixteen (16)
creditors of Casinos U.S.A. Pursuant to the terms of the Promissory Note
Purchase Agreements, the Company purchased the promissory notes and
collateral security in consideration for the issuance of an aggregate of
1,249,605 shares of the Company's Common Stock, valued at $.75 per share.
The shares of Common Stock were issued by the Company in reliance upon an
exemption from the registration requirements of the Securities Act
contained in Section 4(2) thereof. In connection with the Promissory Note
Purchase Agreements, the Company has agreed to register for resale under
the Securities Act the shares of Common Stock issued in consideration of
the Casinos U.S.A. Debt Purchase. Should the Company fail to so register
the common stock by December 31, 1995, the promissory notes must be
returned to the creditors, and the common stock issued shall be deemed
null and void.
INTERNATIONAL GAMING INTERESTS
CASINO LAZURNAYA: SOCHI, RUSSIA
Through the International Joint Venture, the Company's subsidiary,
Global Casinos International, Inc., a Delaware corporation ("Global
International"), developed and operated the Casino Lazurnaya in the Hotel
Radisson Lazurnaya, located in Sochi, Russia. Under the terms of the
International Joint Venture, Global International (as assignee of Casinos
U.S.A.) agreed to provide the capital necessary to develop Casino
Lazurnaya in consideration of an eighty percent (80%) undivided interest
in the International Joint Venture, as well as its profits and losses.
Casino Lazurnaya has been open and operational since January, 1994.
Pursuant to the Dissolution Agreement, effective July 15, 1995, the
International Joint Venture was dissolved, the Company assigned all of its
interest in Global International to Kenneth D. Brown. The Company has no
further interest in the Casino Lazurnaya.
CASINO LAS VEGAS: BISHKEK, KYRGYZSTAN
Through the International Joint Venture, the Company's subsidiary,
Global International, developed and operated the Casino Las Vegas located
in the Naryn Restaurant, in Bishkek, Kyrgyzstan. Global International
held an 80% interest in the International Joint Venture which in turn held
a 61% profit interest in the Casino Las Vegas. Casino Las Vegas is
operated under a lease with the Naryn
<PAGE>
<PAGE>
Restaurant pursuant to which the restaurant owner retains the remaining
39% profit interest. Under the terms of the Dissolution Agreement, Global
Group and Global International both assigned their interests in Casino Las
Vegas and the lease under which the casino operates to the Company. As a
result, the Company holds a net 61% profit interest in Casino Las Vegas.
CASINO MASQUERADE: ARUBA, NETHERLAND ANTILLES
In April, 1994, the Company purchased a 66-2/3% interest in a holding
company which, through a wholly-owned subsidiary, owns and operates a
casino located in the Radisson Aruba Resort and Casino located on the
Caribbean island of Aruba, Netherland Antilles. Casino Masquerade is open
and operational, and the Company has upgraded many of the gaming devices
on location and invested in additional leasehold improvements. Pursuant
to the Dissolution Agreement, the Company acquired the remaining 33-1/3%
interest in Casino Masquerade. As a result, the Company presently owns
100% of the Casino Masquerade. (SEE ITEM 2. DESCRIPTION OF PROPERTY.)
DOMESTIC GAMING INTERESTS
BULL DURHAM SALOON AND CASINO: BLACK HAWK, COLORADO
The Company, through its wholly-owned subsidiary Casinos U.S.A., owns
the Bull Durham Saloon and Casino (the "Bull Durham"). The Bull Durham is
located in Black Hawk, Colorado and currently operates as a Class B Gaming
Casino, which limits the casino to four (4) gaming tables and fewer than
two hundred fifty (250) slot machines. Under limited stakes gaming
regulations in Colorado, maximum wagers are limited to $5.00 per bet. The
Bull Durham commenced gaming operations in February, 1993. The Bull
Durham operates under a license issued to the Company. (SEE ITEM 2.
DESCRIPTION OF PROPERTIES.)
NITRO CLUB - GAS LIGHT: CENTRAL CITY, COLORADO
The Company, through its subsidiary Colorado Gaming Properties, owns the
Nitro Club and Gas Light properties located in the limited stakes gaming
district in Central City, Colorado. The Nitro Club was developed and
operated by its prior owners as a gaming casino from December, 1991 until
January, 1993, when it ceased operations due to lack of working capital
resulting from unprofitable operations, and non-renewal of its gaming
license due to delinquent filing of gaming tax reports and payment of
gaming taxes. Currently, the Nitro Club is not operational, but contains
substantial leasehold improvements as well as some valuable fixtures,
including restaurant and bar equipment. The Company has been granted by
the Colorado Division of Gaming a license to reopen and operate the Nitro
Club as a limited stakes gaming casino.
The Gas Light was operated as a restaurant until 1991, and has never
been developed as a gaming casino. As of the date of this Report, it is
gutted, vacant and being held for investment purposes. While the Company
has no immediate or identified plans to develop the property either as a
restaurant or as a casino, the license issued to the Company by the
Colorado Division of Gaming on June 16, 1994 included all necessary
regulatory approvals to operate the Gas Light as a limited stakes gaming
casino. (SEE ITEM 2. DESCRIPTION OF PROPERTY.)
<PAGE>
<PAGE>
LAST CHANCE SALOON: DEADWOOD, SOUTH DAKOTA
The Last Chance Saloon was located in the limited stakes gaming district
in the City of Deadwood, South Dakota. Owned by the Company's subsidiary,
Lincoln Corporation, the Last Chance Saloon was operated under a month-to-
month lease. Due to unprofitable operations, the Last Chance Saloon was
permanently closed effective May 31, 1994, and the lease was terminated.
LILLIE'S: DEADWOOD, SOUTH DAKOTA
Lillie's was also a limited stakes gaming casino located in Deadwood,
South Dakota. Lillie's is owned by the Company's subsidiary, Woodbine
Corporation. Lillie's was permanently closed effective June 30, 1995, due
to unprofitable operations. The property is owned by Woodbine Corporation
and is being held for investment.
EMPLOYEES
The Company presently has six (6) full time employees: William P.
Martindale, Chairman; Stephen G. Calandrella, interim CEO; Peter
Bloomquist, Chief Financial Officer; George C. Garman, General Manager of
Casino Masquerade; and two clerical staff.
Mr. Martindale is employed by the Company pursuant to the terms of a
three-year employment contract which provides for payment of base salary
in the amount of $8,000 per month, subject to certain increases. Mr.
Martindale is also entitled to receive further incentive compensation
based upon the Company's net income from international gaming operations.
During the year ended June 30, 1995, Nathan Y. Katz served as President
and CEO of the Company. Effective October 12, 1995, Mr. Katz resigned as
President, CEO and director of the Company. Mr. Katz and the Company have
mutually agreed to the early termination of Mr. Katz's employment contract
in consideration for present and future payments to Mr. Katz totalling
$25,000. Effective October 12, 1995, Mr. Calandrella was elected to serve
as interim CEO without compensation until a successor is identified and
elected. There are currently no candidates identified for the permanent
position of President and CEO.
Mr. Bloomquist is employed by the Company pursuant to the terms of a
three (3) year employment contract which provides for payment of base
compensation in the amount of $7,500 per month. Mr. Bloomquist is also
eligible to receive incentive stock options, subject to vesting, under the
Company's 1993 Stock Incentive Plan.
Mr. Garman is employed by the Company as General Manager of Casino
Masquerade pursuant to a one (1) year employment contract which provides
for payment of a base annual compensation of $68,000. In the first year,
Mr. Garman is also entitled to receive five percent (5%) of the net income
of the Casino Masquerade. Mr. Garman's contract automatically renews from
year to year, absent termination by either party.
Casino Masquerade currently operates with a total of 70 employees,
including one manager. Because of the requirements of Aruban law, the
staffing levels cannot be decreased during the slower summer season, and
as a result the company expects the size of the labor force to remain
relatively constant year round.
<PAGE>
<PAGE>
The Bull Durham currently employs 20 persons, including one manager.
During the peak summer season, employment typically increases to a total
of 30 employees.
Casino Las Vegas currently employs 18 persons.
CONSULTANTS
The Company relies heavily upon the services of independent consultants,
including its outside accountants and local attorneys in the jurisdictions
in which the Company holds or plans to develop its international gaming
interests.
COMPETITION
INTERNATIONAL
There are numerous national and international corporations and entities
engaged in the business of attempting to develop casinos throughout the
world. There are currently ten (10) casinos on the Caribbean resort
island of Aruba, Netherland Antilles and few barriers to entry of new
participants in this market. The Company is aware of two other operating
casinos in Bishkek, Kyrgyzstan. The Company expects that it will have to
operate competitively in these markets and to respond to challenges from
competitors that have substantially greater financial and personnel
resources than the Company.
DOMESTIC
Competition in the gaming industry in the United States is intense. The
Company presently estimates that gaming is permitted in most states in
some form. There are numerous competitors engaged in the same or similar
business as the Company, and competition has increased substantially in
recent years with more competitors entering the market. Competition from
these entities will continue to affect the operations of the Company and
other operators in the gaming industry. Competition in Central City and
Black Hawk, Colorado is particularly intense with numerous competitors in
very close proximity and new competitors entering the market. There can
be no assurance that the Company can obtain the resources necessary to
compete successfully in the industry or that the Company can operate
profitably given the existing level of competition.
The Company's operations also compete with other forms of gaming
conducted throughout the United States and the world. Other gaming
activities include Bingo, Lotto, table games, sports betting and pari-
mutuel wagering.
REGULATION
INTERNATIONAL
Ownership and operation of gaming establishments in each foreign
jurisdiction where the Company has operations are extensively regulated by
local authorities. In virtually all jurisdictions in which the Company
plans to operate casinos, the Company will be required to obtain a
Certificate of Authority to conduct business in that jurisdiction, as well
as numerous licenses, including gaming licenses, tax licenses, liquor
licenses and the like. Each jurisdiction maintains its separate
regulatory environment with discrete requirements and approvals necessary.
<PAGE>
<PAGE>
In each jurisdiction in which the Company has an opportunity to develop
a casino, the Company has consulted with local officials as well as local
advisors, including attorneys, accountants, bankers and other
professionals whose services are or will be retained in order to ensure
that the Company complies with all applicable regulatory requirements.
The Company will, of necessity, rely upon the consultation of such
advisors in order to ensure compliance.
DOMESTIC: FEDERAL AND STATE LAW
Ownership and operation of gaming establishments are extensively
regulated by states in which such activities are permitted. Colorado has
adopted numerous statutes and regulations covering limited stakes gaming
operations. Existing regulation includes various aspects of the gaming
industry, including ownership, operation and employment in all limited
stakes gaming operations, taxation of revenues and regulation of equipment
utilized in connection with such activities. Virtually all aspects of
ownership and operation of gaming facilities require licensing by the
state. Operators, machine manufacturers and distributors, employees and
retailers are all subject to extensive investigation and regulation prior
to licensing to engage in gaming activities. The procedure for obtaining
these licenses is time consuming and costly.
Because the Company is a publicly traded corporation, each of the
officers, directors and shareholders owning 5% or more of the equity
interest must be approved under existing statutes and regulations. The
criteria established in determining fitness to conduct such operations
include financial history, criminal record and character, in addition to
satisfaction of application procedures set forth in the existing
regulations. As a result of these regulations, any investor in the
company who becomes a holder of 5% or more of the Company's Common Shares
may be required to submit to a background investigation, provide financial
statements and respond to inquiries from gaming regulators in accordance
with licensing procedures. Such restrictions may discourage acquisition
of large blocks of the Company's Common Shares and depress the price of
the Company's Common Shares in any market which has or may develop.
Under current regulations promulgated by the Colorado Limited Gaming
Commission (the "Gaming Commission"), no gaming licensee may issue shares
except in accordance with Colorado gaming laws and regulations; and any
such issuances will be ineffective and such stock shall not be deemed
issued until compliance is obtained; no shares of the licensee may be
transferred except in accordance with Colorado Gaming Laws and
regulations; and if the Gaming Commission determines that a holder of a
licensee's securities is unsuitable, the licensee or a suitable person
must, within sixty (60) days, purchase such securities at the lesser of
the unsuitable person's investment or the current market price of such
securities. Any person who becomes a beneficial owner of five percent
(5%) or more of the Company's Common Stock must notify the Division of
Gaming within ten (10) days after such person acquires such securities and
must provide such additional information and be subject to a finding of
suitability as required by the Division of Gaming Commission. The Company
must notify each person who is subject to this regulation of its
requirements as soon as it becomes aware of the acquisition. Further,
each person who becomes a beneficial owner of more than ten percent (10%)
of any class of voting securities of the Company must apply to the
Commission for a finding of suitability within ten (10) days after
acquiring such securities. The Company must notify each person who is
subject to this regulation and its requirements as soon as it becomes
aware of the acquisition.
<PAGE>
<PAGE>
Existing Federal and state regulations may also impose civil and
criminal sanctions for various activities prohibited in connection with
gaming operations. State statutes and regulations also prohibit various
acts in connection with gaming operations, including false statements on
applications and failure or refusal to obtain necessary licenses described
in such regulations. Violation of any of these existing or newly adopted
regulations may have a substantial adverse effect on the operations of the
Company and its subsidiaries.
DOMESTIC: LIQUOR LICENSE
The Company has been granted a casino tavern license issued under the
Colorado Liquor Code for the Bull Durham. The Company has applied for a
casino tavern license for the Nitro Club. The Company does not foresee
any problems with the application and anticipates that it will be
approved. As revised in 1993, the Colorado Liquor Code now includes a
casino tavern license which is issuable to duly licensed and operating
limited gaming casinos.
TAXATION
INTERNATIONAL
All jurisdictions in which the Company has the opportunity to develop
casino operations impose tax on revenues and income generated as a
permitted gaming licensee. The Company has consulted extensively with tax
experts in each jurisdiction, as well as international tax experts in the
United States, for the purpose of familiarizing itself with the tax laws
of each such jurisdiction, as well as developing plans to take advantage
of any and all opportunities available to companies which operate foreign
businesses on a multi-jurisdictional basis. It is possible that the
Company may form and organize controlled corporations under the laws of
foreign jurisdictions in order to maximize the advantages available under
the circumstances.
DOMESTIC
The operations of the Company and its subsidiaries will be subject to
taxation at both the Federal and state level. Any net profits derived
from the operations of the Company or its subsidiaries will be subject to
United States Federal Income Tax and state income tax imposed by states in
which they operate. These provisions regarding Federal and state income
tax are generally applicable to all entities.
The operations of the Company and its gaming subsidiaries in the gaming
industry will also be subject to special taxes imposed by the states which
permit such activities. Colorado imposes a variable tax on "adjusted
gross proceeds" obtained within its boundaries. Adjusted gross proceeds
is defined to include the total amount of all wagers made by players on
limited stakes gaming, less all payments received by such players. With
regard to games of poker, adjusted gross proceeds means any sums wagered
in the poker hand, which may be retained by the operator of the gaming
establishment. The tax ranges from 2% of all adjusted gross proceeds up
to $2,000,000, to a rate of 18% for all amounts in excess of $2,000,000.
In addition, the Cities of Black Hawk and Central City, as well as the
State of Colorado, assess annual taxes, called "device fees", on each
gaming unit utilized in a casino. Finally, the Cities of Black Hawk and
Central City also impose an annual parking assessment on each casino.
<PAGE>
<PAGE>
The cumulative impact of all the taxes, fees and assessments is
substantial, and there can be no assurance that future increases in those
taxes will not have a material adverse effect on the Company's gaming
interests and operations.
All regulations affecting the operations of the Company's limited gaming
properties and businesses are subject to change by the respective
regulatory authorities. Accordingly, there can be no assurance that there
will not be enacted future amendments to those regulations which
materially and adversely affect the business and profitability of the
Company.
SERVICE MARKS
The Company has filed an application in the United States Patent and
Trademark Office to register "Global Casinos", including both the name and
the Company's logo, as a federally protected service mark for use in
connection with the Company's business. The Company may seek to register
or file intent to use applications for additional service marks or
trademarks in the future. Although the Company regards its service marks
as valuable assets and intends to vigorously defend its service marks
against infringements, the Company does not believe that the failure to
obtain the service mark registrations for which it may apply, or the
infringement by another entity of its service marks, would have a material
adverse effect on the Company at the present time.
SEASONALITY
INTERNATIONAL
Bishkek is the capital city of the newly independent State of
Kyrgyzstan, located on the western border of the Peoples' Republic of
China. Bishkek has a population of approximately 900,000, with local
economy based primarily on agriculture and natural resource development,
including mining and oil and gas exploration. The local economy is
experiencing the same difficulties shared with its other CIS members in
evolving from a predominantly socialist economy to a free market economy,
including low productivity and high inflation. Management anticipates
that the principal clientele of the casino will be drawn largely from the
local population without any significant dependence upon tourism.
Moreover, the restaurant Naryn is the principal entertainment facility
located in the central business district of Bishkek. Therefore, the
Company does not expect Casino Las Vegas to experience significant
seasonal fluctuations in business or revenues.
Aruba is an independent nation comprising part of the Netherland
Antilles along with Curacao and Bonnaire. The island has experienced
accelerated international recognition as a premier Caribbean resort
destination, hosting millions of tourists each winter season. An
advantage to be gained by the Company acquiring the Casino on Aruba is the
counter-cyclic effect that its high winter season would have with the
Company's domestic operations. Typically, Caribbean destination resorts
experience the highest concentration of tourism from December through
April of each year.
DOMESTIC
The Company's casino in Colorado, while not seasonal in the conventional
sense, experiences a significant increase in tourist traffic which occurs
from May through September. The Bull Durham will generally realize more
than half of
<PAGE>
<PAGE>
its annual revenues during the tourist season. Based on historical
precedent, the Bull Durham should not be expected to perform better than
on a "break-even" basis during the winter months.
ITEM 2. DESCRIPTION OF PROPERTIES
CORPORATE OFFICES: DENVER, COLORADO
The Company's corporate headquarters are located at 1777 South Harrison,
Skydeck, Denver, Colorado 80210. This property is currently leased at
$3,424 per month, expiring September 30, 1999. These facilities are
believed by the Company to be suitable and adequate to meet the Company's
needs for the foreseeable future.
CASINO LAZURNAYA: SOCHI, RUSSIA
The Casino Lazurnaya, which opened in January, 1994, was developed and
is operating under a lease with the Joint Venture "Lazurnaya", a Russian-
Turkish group which developed and owns the recently completed four-star
Hotel Radisson Lazurnaya, located in the Black Sea resort city of Sochi,
Russia. Under the terms of the lease, the casino occupies 5,400 square
feet on the hotel's third floor. The initial lease under which the casino
operated provided for a nominal base monthly rental plus 10% of the net
profits generated by the casino. Effective January 1, 1995, the terms of
the lease were renegotiated to eliminate rent based upon a percent of the
casino's net profit but substantially increase the fixed guaranteed base
monthly rental. Under the terms of the renegotiated lease, the base rent
for 1995 was increased to $250,000, with future annual increases up to a
maximum of $500,000 beginning in the seventh year. Until July 15, 1995,
rights under the lease were held by the International Joint Venture, of
which the Company's wholly-owned subsidiary, Global International, held an
80% undivided interest. Effective July 15, 1995, the International Joint
Venture was dissolved and the Company has no further interest in Casino
Lazurnaya.
CASINO LAS VEGAS: BISHKEK, KYRGYZSTAN
The Company's right to operate the Casino Las Vegas in the Naryn
Restaurant located in the City of Bishkek, Kyrgyzstan, is derived from an
agreement initially entered into in 1992 (the "Naryn Contract") between
Corporation Restaurant Naryn and Aztec-Talas-Four Star, Inc., a Nevada
corporation ("ATF"). The Naryn Contract was assigned by ATF, with the
consent of Corporation Restaurant Naryn, to Global Group, the Company's
international joint venture partner. Global Group, in turn, assigned the
Naryn Contract to the International Joint Venture. Pursuant to the
Dissolution Agreement, effective July 15, 1995, the International Joint
Venture assigned all rights in Casino Las Vegas and the Naryn Contract
with Corporation Restaurant Naryn to the Company.
Pursuant to the terms of the Naryn Contract, the Company has the right
to develop and operate the Casino Las Vegas on the second floor of the
Restaurant Naryn in Bishkek. The casino opened in July, 1994. Casino Las
Vegas occupies approximately 4,000 square feet, and contains fifty (50)
slot machines, four (4) black jack tables, four (4) Caribbean stud poker
tables and two (2) roulette wheels. The restaurant occupies the first
floor and is of comparable size. The Agreement has a term of twenty (20)
years, expiring on April 12, 2013.
<PAGE>
<PAGE>
Net income generated from gaming operations at the casino is divided 61%
to the Company and 39% to the Corporation Restaurant Naryn until such time
as the Company has recouped its capital investment in the casino plus
interest at the rate of 18.0% on such capital; thereafter, revenues will
be shared on a 50%-50% basis. The Company expended approximately $500,000
in the development of the Casino Las Vegas. Under the terms of the
Company's agreement with ATF, after the Company has received profit
distributions equal to its capital expenditure of approximately $500,000,
ATF will be entitled to receive 10% of the net profits of the casino
generated thereafter.
CASINO MASQUERADE: ARUBA, NETHERLAND ANTILLES
On April 29, 1994, the Company closed upon a definitive Stock Purchase
Agreement purchasing a net 66-2/3% interest in the Casino Masquerade which
is located in the recently renovated Radisson Aruba Caribbean Resort and
Casino on the Caribbean resort island of Aruba, Netherland Antilles. The
Aruba Caribbean Resort and Casino (the "Hotel") is owned by the Dutch
Hotel and Casino Development Corporation N.V., an Aruba corporation
("Dutchco") and operates under an October 11, 1992 Management Agreement
with Radisson Hotel Corporation. Dutchco holds a gaming permit issued by
the Nation of Aruba which authorizes it to operate a gaming casino on the
premises. Under the authority of its Gaming License, Dutchco has leased
the casino to Global Entertainment Group N.V., an Aruba corporation
("Global Entertainment") which, since 1993, has operated the casino under
an exclusive lease which has a term of five (5) years with automatic one-
year extensions thereafter.
Global Entertainment is wholly-owned by B.P.J. Holding N.V., a Curacao
corporation. The definitive Stock Purchase Agreement provided for the
purchase by the Company of sixty-six and two-thirds percent (66-2/3%) of
the issued and outstanding shares of the capital stock of B.P.J. Holding
N.V. Until July 15, 1995, the remaining thirty-three and one-third
percent (33-1/3%) of B.P.J. Holding N.V. was owned by Broho Holding N.V.,
an unaffiliated company controlled by Kenneth D. Brown. Effective July
15, 1995, Broho Holding N.V. assigned its interest to the Company. The
Company presently holds 100% of the issued and outstanding stock of B.P.J.
Holding N.V.
The Casino occupies approximately 8,500 square feet in the Hotel under
the lease agreement between Dutchco and Global Entertainment. As rent
under the lease, Global Entertainment is obligated to pay Dutchco
percentage rent based upon the gross gaming revenues (net of all
government taxes and fees) of the casino equal to ten percent (10%) of the
gross gaming revenues for the years 1994 and 1995, fifteen percent (15%)
for the year 1996, and thereafter twenty percent (20%) of gross gaming
revenues. Under the lease, "gross gaming revenue" is defined to mean (i)
the net win from gaming activities, which is the difference between gaming
wins and losses before deducting cost and expenses which shall include all
markers, promises to pay and checks received, less (ii) the Aruba gaming
tax and the expenditures related to the employment of government
inspectors for the casino operation.
The Casino has been fully operational since December, 1993, when
extensive renovations to the Hotel were completed. Operations at the
casino currently consist of one hundred fifty nine (159) slot machines,
eight (8) blackjack tables, two (2) roulette wheels, three (3) Caribbean
Stud tables, one (1) craps table and one (1) mini Baccarat table. The
casino also serves liquor and provides a limited food service.
<PAGE>
<PAGE>
BULL DURHAM SALOON AND CASINO: BLACK HAWK, COLORADO
The Bull Durham Saloon and Casino was acquired by Casinos U.S.A. in 1992
for a purchase price of $3.5 million. Casinos U.S.A. owns the real
property and improvements subject to numerous security interests. The
Bull Durham consists of approximately 4,700 square feet and currently
operates one hundred and six (106) slot machines and three (3) black jack
tables. The casino also holds a retail liquor license issued by the State
of Colorado, and offers a limited food service in addition to beverages.
The Company has no current plans to renovate this property.
The Bull Durham is currently encumbered by mortgages securing the
following loans in order of priority: $671,603 promissory note accruing
interest at the rate of 7.0% with $5,996 monthly payments and a balance of
$686,290 on June 30, 1995; $737,500 promissory note accruing interest at
7.0% with monthly payments of $2,998 and a balance of $737,500 on June 30,
1995, of which $597,590 in principal have agreed to convert to equity of
the Company; $2,546,260 promissory note to Lisa Paige Montrose accruing
interest at the rate of 7.0% with monthly payments of $19,741, a balance
of $2,420,732 on June 30, 1995, and final payment due in 1998 of
$2,196,317; $444,650 promissory note accruing interest at the rate of 7.0%
with monthly payments of $3,447, a balance of $419,768 on June 30, 1995,
and a final payment due in 1998 of $379,888; and a $462,090 promissory
note accruing interest at the rate of 7.0% with monthly payments of
$3,582, a balance of $439,310 on June 30, 1995, and a final payment due in
1998 of $398,583. The first two promissory notes are owed by Ms. Montrose
to Astraea and related creditors. The third promissory note is owed by
Casino U.S.A to Ms. Montrose as a "wrap" around the first two promissory
notes. The deeds of trust securing the last three promissory notes are
all subordinated to the security interests of the first two promissory
notes. As of June 30, 1995, all of the foregoing debts were in default.
The holders of the last three promissory notes have commenced foreclosure
proceedings. (SEE, ITEM 3, LEGAL PROCEEDINGS.)
GAS LIGHT - NITRO CLUB: CENTRAL CITY, COLORADO
The Gas Light, built in the 1880's, is located at 114 Lawrence Street.
Consisting of approximately 2,800 square feet, with 1,400 square feet on
each of its two floors, the property was purchased by the Company's
predecessor in 1992 for $850,000. The property is owned by Colorado
Gaming Properties subject to mortgages securing the following debts:
$350,000 promissory note accruing interest at the rate of 10.0% with
monthly payments of $3,378, and a final payment of $314,306 due in 1997;
$50,000 promissory note accruing interest at the rate of 10.0%, and which
is past due and in default with $47,850 due as of June 30, 1995. The
holder of the second promissory note has commenced foreclosure
proceedings. (SEE, ITEM 3, LEGAL PROCEEDINGS.) The Company has no
current plans to renovate this property or commence operations there.
The Nitro Club, located adjacent to the Gas Light, was built in 1881 and
consists of approximately 7,300 square feet on three floors. The Colorado
Gaming Properties owns the Nitro Club subject to mortgages in the
aggregate principal amount of $450,000, payable in monthly installments of
approximately $5,151 with a principal balloon payment of approximately
$346,355 due in 2001. The company plans to relocate 29 slot machines and
other miscellaneous casino equipment formerly utilized in the Last Chance
Saloon in Deadwood, South Dakota for use in the Nitro Club. Management
hopes to have the Nitro Club reopened in 1996, although no assurance can
be given that the casino will be operational or that the Company will have
the capital to make the casino operational by that date. The Company has
no current plans to renovate the property.
<PAGE>
<PAGE>
LILLIE'S: DEADWOOD, SOUTH DAKOTA
Lillie's was purchased in 1993 for $225,000, and is owned by Woodbine
Corporation subject to a mortgage with a principal balance of
approximately $79,514, semiannual payments of $10,297 accruing interest
at the rate of 10.0% and maturing in the year 2000. Lillie's was a fully-
licensed Gaming Casino, consisting of 2,500 square feet, of which 2,000
square feet were devoted to gaming; the balance to food and beverage
service or gaming support. The casino contained twenty-eight (28) slot
machines. Lillie's was closed effective June 30, 1995, and the property
is being held for investment. The Company has no plans to renovate this
property.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently involved in the following pending legal
proceedings:
1) ASTRAEA INVESTMENT MANAGEMENT, L.P., AS TRUSTEE VS. GLOBAL CASINOS,
-------------------------------------------------------------------
INC., et. al,
------------
Cause Number 94-02487 in the District Court of Dallas County,
Texas, 116th Judicial District.
As previously reported, this matter had been brought by the holder
of certain promissory notes made by the Company's wholly-owned
subsidiary, Casinos U.S.A., Inc. ("Casinos") prior to its
acquisition by the Company. The notes held by the Plaintiff are
secured by a senior deed of trust against the Bull Durham Saloon
and Casino located in Black Hawk, Colorado. The Company had
previously negotiated a settlement accord in which it guaranteed
the obligation of Casinos and which resulted in a dismissal of the
lawsuit. However, the Company was unable to meet a balloon payment
which was due on August 31, 1994. As a result of that default, the
Plaintiff filed a motion to reinstate the case in October, 1994.
The Company admits making the promissory notes to the Plaintiff
which has the approximate principal balance of $680,000, although
believes it may have some defenses and offsets. The Company is in
the process of attempting to renegotiate and restructure this
indebtedness to amortize it within the parameters of projected
future cash flow. However, there can be no assurance that the
creditors will agree to any such restructuring. As of the date of
this report, the matter is still pending and in the opinion of
management there exists a high probability that if the matter goes
to trial it will result in the entry of an adverse judgment against
the Company for the full amount of the outstanding principal
balance due on the note, accrued default interest, attorneys' fees
and other costs of collection. Such a judgment would have a
material adverse impact upon the Company, its assets and
operations.
2) William Kunzweiler vs. Global Casinos, Inc.,
-------------------------------------------
Civil Action Number 94-13107-M in the District Court of Dallas
County, Texas, 298th Judicial District.
<PAGE>
<PAGE>
This matter has been brought to collect the outstanding balance of
$150,000.00 due on a promissory note which was given by the Company
in March, 1994. The promissory note has matured and the Company is
in default. The Company's failure to repay the note is due solely
to its lack of available funds to do so. The Company does not
dispute the outstanding balance due on the note or its liability
thereunder.
On February 28, 1995, a default judgment was entered against the
Company and in favor of the Plaintiff in the amount of $170,346.25,
representing principal balance due, accrued and unpaid interest,
attorneys' fees and court costs. Since that date, the Company has
made four payments totalling, in the aggregate, $100,000 to be
applied towards the satisfaction of this judgment. The Company has
a tacit arrangement with the Plaintiff that it will retire the
judgment at the rate of $25,000 per month, although there exists no
firm commitment on the part of the Plaintiff to forebear from
collection efforts even if the Company amortizes the judgment at
this rate.
3) Lisa Paige Montrose Promissory Note.
-----------------------------------
Lisa Paige Montrose is the holder of a promissory note made by
Casinos U.S.A., Inc., a wholly-owned subsidiary of the Company, in
the original principal amount of $2,546,260, which note was given
in connection with the acquisition and purchase of the Bull Durham
Saloon and Casino in Black Hawk, Colorado. The obligation to repay
the note is secured by a subordinated deed of trust against the
Bull Durham Saloon and Casino. The Company has been served notice
by Lisa Paige Montrose's legal representatives that she has
construed the acquisition of Casinos U.S.A., Inc. by the Company in
November 1993 as a "transfer of control" under applicable
provisions of her deed of trust which would grant her the right to
accelerate the entire indebtedness represented by the promissory
note. The Company denies that Ms. Montrose has any basis in law or
fact to accelerate the balance of the indebtedness, which the
Company has been retiring in monthly installments paid in
accordance with its terms. No civil action has been filed in this
matter. If such an action is filed, the Company will vigorously
defend. In the meantime, the Company has been in active
negotiations with the legal representatives of Ms. Montrose in an
effort to reach a mutually satisfactory resolution to the areas of
disagreement.
Casinos U.S.A., Inc. is presently a party to a foreclosure
proceeding against the Bull Durham Saloon and Casino by the Gilpin
County Public Trustee. The action was commenced by Lisa Paige
Montrose and was joined by Long & Jaudon, P.C., Richard C. Frajola,
Francine M. Frajola, Marian Johnson, Mary E. Goodwin and Virginia
G. Norris, all as beneficiaries of deeds of trust securing
promissory notes in default. The action was commenced on July 14,
1995, and has been designated proceeding No. 95-17. The
foreclosure sale is presently scheduled to take place October 19,
1995. The Company disputes the right to foreclose inasmuch as cure
payments were made as negotiated. Negotiations continue in an
effort to resolve this matter prior to any foreclosure sale.
<PAGE>
<PAGE>
4) Angell & Deering v. Casinos, U.S.A., Inc. and Global Casinos, Inc.,
------------------------------------------------------------------
Case No. 95-CV-3289, in the Colorado District Court for the City
and County of Denver.
The Company is a named defendant in a civil action filed on July
20, 1995, in the Colorado District Court for the City and County of
Denver. The Plaintiff is claiming amounts due for breach of
contract and QUANTUM MERUIT based upon accounting services provided
to Casinos U.S.A., Inc., the Company's wholly-owned subsidiary.
The Plaintiff seeks damages in the amount of $60,099 plus interest
and attorney's fees. The Company disputes its liability, and
Casinos U.S.A., Inc. disputes the damages claimed. Nevertheless,
the parties are attempting to negotiate a resolution to the
dispute.
5) Pioneer Group, Inc. Foreclosure.
-------------------------------
The Company's wholly-owned subsidiary, Colorado Gaming Properties,
Inc., as owner of the Gas Light, is presently a party to a
foreclosure proceeding against the Gas Light by the Summit County
Public Trustee. The action was commenced in August, 1995, by
Pioneer Group, Inc. as beneficiary on a subordinated deed of trust
securing a promissory note in default. The Company has not yet
determined whether it should cure the default or allow the property
to be sold.
6) Denver Fire Reporter & Protective Co., d/b/a Denver Burglar Alarm
-----------------------------------------------------------------
v. Colorado Gaming Properties, Inc.,
-----------------------------------
Case No. 95-C-1411, in the Colorado District Court for Jefferson
County.
The Company's wholly-owned subsidiary, Colorado Gaming Properties,
Inc., as owner of the Nitro Club, was named in a lawsuit filed on
or about March 21, 1995. The Plaintiff sought recovery of its
security equipment which had been installed in the Nitro Club by
Colorado Gaming Properties, Inc.'s predecessor. The parties
commenced negotiations to resolve the dispute which resulted in an
agreement whereby the suit was dismissed without prejudice, and the
equipment was left on the premises with the intent to utilize the
equipment when and if the
Nitro Club is opened for business in the Spring of 1996.
7) Securities and Exchange Commission Investigation.
The Company was served with a subpoena duces tecum issued by the
Securities and Exchange Commission in connection with its
investigation of certain companies other than the Company. The
Company has complied with the subpoena and supplied documents in
response thereto and believes that it has cooperated fully in the
investigation. The subpoena contains an admonishment that no
inference should be drawn that any violation of federal securities
laws has occurred, and management of the Company is not aware of
any facts which would suggest that it has violated any federal or
state
<PAGE>
<PAGE>
securities laws. The interim Chief Executive Officer of the
Company serves as president of one of the subject companies.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during
the quarter ended June 30, 1995.
<PAGE>
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The outstanding shares of Common Stock are traded over-the-counter and
traded on the NASDAQ Small-Cap Market under the symbol "GBCS". The
reported high and low bid and ask prices for the Common Stock are shown
below for the period from July 1, 1993 through September 30, 1995:
<TABLE>
<CAPTION>
Bid Ask
--- ---
High Low High Low
---- --- ---- ---
<C> <C> <C> <C>
<S>
1993 Fiscal Year
First Quarter 1 5/8 1-1/8 13/16
Second Quarter 1 9/16 1-1/4 7/8
Third Quarter 2-3/8 11/16 2-11/16 7/8
Fourth Quarter 5 1-15/16 5-1/16 2
1994 Fiscal Year
First Quarter 4-1/16 2-1/2 4-3/16 2-9/16
Second Quarter 3-3/8 2-1/4 3-5/8 2-3/8
Third Quarter 2-9/16 1-15/16 2-11/16 2-1/16
Fourth Quarter 3-3/8 2-1/4 3-5/8 2-3/8
1995 Fiscal Year
First Quarter 2-9/16 1-15/16 2-11/16 2-1/16
Second Quarter 2-5/16 1 2-7/16 1-3/16
Third Quarter 1-5/8 1-1/32 1-23/32 1-1/8
Fourth Quarter 1-5/16 15/32 1-3/8 9/16
1996 Fiscal Year
First Quarter 3/4 13/32 25/32 17/32
</TABLE>
<PAGE>
<PAGE>
The bid and ask prices of the Company's Common Stock as of September
29, 1995 were 9/16 and 11/16 respectively, as reported on NASDAQ. The
prices represented above are bid and ask prices which represent prices
between broker-dealers and do not include retail mark-ups and mark-downs
or any commissions to the broker-dealer. The prices do not reflect prices
in actual transactions. As of September 29, 1995, there were
approximately 917 record owners of the Company's Common Stock.
The Company's Board of Directors may declare and pay dividends on
outstanding shares of Common Stock out of funds legally available therefor
in its sole discretion; however, to date no dividends have been paid and
the Company does not anticipate the payment of dividends in the
foreseeable future. Further, under the terms of the Convertible Preferred
Stock issued by the Company, the Company is restricted from paying cash
dividends on Common Stock during the period that the Convertible Preferred
Stock is outstanding. The Company was obligated to redeem any outstanding
shares of Convertible Preferred Stock on or before May 31, 1995, and the
Company is in default on this obligation with holders of Preferred Stock
representing an aggregate redemption value of $346,500, such holders
having not entered into letter agreements with the Company in May 1995
described elsewhere in this report. (SEE ITEM 1. DESCRIPTION OF BUSINESS,
FINANCING.)
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction
with the Financial Statements and Notes thereto appearing elsewhere in
this Prospectus.
LIQUIDITY AND CAPITAL RESOURCES - JUNE 30, 1995 COMPARED TO JUNE 30, 1994
The Company is organized as a holding company for several entities
holding gaming-related properties. Casinos U.S.A. owns and operates the
Bull Durham Saloon and Casino, located in Black Hawk, Colorado. During
the year ended June 30, 1995, Woodbine operated Lillie's Casino located in
Deadwood, South Dakota. During the year ended June 30, 1995, Global
International held an 80% interest in the International Joint Venture
which held certain interests in Casino Lazurnaya in Sochi, Russia, and
Casino Las Vegas in Bishkek, Kyrgyzstan. Colorado Gaming Properties owns
the Nitro Club and Gas Light properties in the limited gaming district of
Central City, Colorado. BPJ Holding, Inc., a Aruba corporation, owns and
operates the Casino Masquerade on the Island of Aruba, in which
corporation the Company held a sixty-six and two/thirds percent (66.2/3%)
interest until July 15, 1995, and thereafter a one hundred percent (100%)
interest.
The Company has recurring operating losses and a working capital
deficiency. In addition, the Company is in default on substantially all
of its loan agreements, and foreclosure proceedings are pending on two of
the Company's properties. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. Management is
currently in the process of renegotiating its current debts in order to
extend the maturities. Also, the Company is negotiating with an
underwriter to undertake an offering of the Company's securities. If
these efforts are successful, of which there can be no assurance,
management believes that it will have the necessary capital to continue
operations.
The Company is currently in default under both senior and
subordinated promissory notes secured by the Bull Durham Saloon and
Casino. The Company also has a note receivable from one of the
subordinated promissory note holders which is secured by a first deed of
trust on the Bull Durham Saloon and Casino's real estate. This note
receivable came into existence in 1992 as part of a management agreement
entered into between the Company and the subordinated note
<PAGE>
<PAGE>
holder. The agreement called for the Company to make improvements to the
property and to receive a first deed of trust secured by the real estate
in consideration of these improvements. In June, 1993 the Company agreed
to purchase the real estate and improvements for a wrap-around note in the
approximate amount of $3,450,000. Later in 1993, the Company's note
receivable was restructured so that the total payment on the wrap-around
note would be made to the subordinated note holder who would then, in
turn, make payments to various individuals that the Company had assigned a
collateral interest in the note receivable as security for loans these
individuals had made to the Company. The note receivable calls for
monthly principal and interest payments of $8,993 at 7% until June 21,
1999 when the entire unpaid balance is due. As of June 30, 1995 the note
was two months in arrears. As the note is a first deed of trust, the
Company believes that the value of the real estate is sufficient to cover
the entire amount of the note receivable. The note is assigned as
collateral to certain note holders of the Company. If the Company is
unable to collect the note receivable or pay the note holders in full, the
note receivable would be foreclosed upon by the note holders. The Company
is also in default on subordinated debt secured by the Gas Light property.
Both of these properties are the subject of pending foreclosure
proceedings. Although the Company is in the process of attempting to
negotiate settlements of these proceedings, there can be no assurance that
settlements will be reached or that the properties will not be sold,
resulting in a total loss of the Company's investments.
The Company has experienced a significant decrease in working
capital. The majority of this decline is due to the increase in the
current portion of long-term debt. Substantially all of the Company's
long-term debt is in default and, as such, is classified as a current
liability. The Company is subject to two foreclosure proceedings
involving the Bull Durham and Gas Light properties.
The Company believes it has reached an agreement in principle to
renegotiate the debt agreement which is secured by the Bull Durham.
Subsequent to June 30, 1995, the Company made all required payments under
the proposed renegotiated debt agreement. Negotiations continue in an
effort to resolve this matter prior to any foreclosure sale.
A foreclosure proceeding against the Gas Light has been brought by
certain subordinated note holders. Negotiations continue in an effort to
resolve this matter prior to any foreclosure sale.
The Company is attempting to renegotiate it current debts.
Management believes that improved casino operating results at its
international locations will provide working capital to sustain the
Company. Revenues for the three (3) months ended September 30, 1995 are
approximately $1,650,000 (unaudited) as compared to $1,450,000 (unaudited)
for the comparable three (3) month period of the prior year. This
increase is driven by an increase in revenues of approximately $613,000
(unaudited) from the Company's Aruba and Kyrgyzstan locations, offset by a
decrease of approximately $375,000 (unaudited) resulting from the
disposition of the Russian operation. The remaining decrease of $38,000
(unaudited) results from the closure of Lillie's and decreased revenue at
the Bull Durham.
The Company's balance sheet reflects a slight decrease in current
assets, a modest decrease in total assets, and a drastic impairment in
working capital. Specifically, during the twelve (12) months ended June
30, 1995, current assets decreased from $945,322 at June 30, 1994, to
$923,865 at June 30, 1995, a decrease of $21,457 or 2.3%. Decreases in
cash of $52,234, or 8.5%, and restricted cash of $2,950, or 12.3%, were
more than offset by increases in receivables from related parties of
$69,482, or 109.7%, and net receivables of $62,004, or fourteen times the
$4,058 reported June 30, 1994. Other factors include a decrease in
prepaid expenses of $50,696, or 76.4%, and the increase in current portion
of notes receivable of $13,187, or 18.2%.
<PAGE>
<PAGE>
The Company's investment in net property, plant and equipment
remained relatively stable, dropping 3.1%, with a $553,855 or 24.7%
increase in investment in equipment and leasehold being more than offset
by accumulated depreciation. Leasehold and contract rights decreased
12.0% reflecting amortization of $338,300. Total assets declined 4.9%
from $14,021,496 on June 30, 1994 to $13,336,703 on June 30, 1995.
Current liabilities increased 154% from $3,974,878 on June 30, 1994,
to $10,103,943 on June 30, 1995. This increase reflects a $4,685,435, or
238.5%, increase in the current portion of long-term debt, and a $29,262,
or 4.5%, increase in accrued interest. The majority of this decline is
due to the increase in the current portion of long-term debt.
Substantially all of the Company's long-term debt is in default and, as
such, is classified as a current liability. Also there are substantial
increases in accounts payable of $158,994, or 24.2%, and accrued expenses
of $264,584, or 37.7%, which reflect the Company's increased level of
operations, and a five times increase in notes payable to related parties
of $46,790, and a $346,500 increase in Series A Preferred Stock in
default.
As a result of the foregoing decrease in current assets and increase
in current liabilities, the Company's working capital deficit increased
drastically from $(3,029,556) on June 30, 1994, to $(9,180,078) on June
30, 1995, or a 203.0% decline. The current ratio decreased from .24 to
.09. This substantial decline is attributable to the dramatic increase in
the current portion of long-term debt. The Company continues to face a
severe shortage of working capital, and there can be no assurance that the
Company will be able to raise the capital necessary to overcome the
deficit.
During the fiscal year ended June 30, 1995, the Company sold an
aggregate of 1,011,124 shares of Common Stock pursuant to the exercise of
outstanding Warrants or private placements, realizing gross proceeds from
the sale of these securities of $971,812. The majority of the Warrant
exercises were undertaken pursuant to a Registration Statement which was
declared effective by the Securities and Exchange Commission. The Warrant
exercises contributed $850,000 to the stockholders' equity of the Company.
The Company also issued 17,500 shares of stock to employees of the Company
and was able to negotiate $141,480 of debt to accept 62,000 shares of
Common Stock in satisfaction of this debt. Also the Company was able to
negotiate 1,233,000 shares of Preferred Stock to make the redemption in
exchange for a lower conversion price. This added 2,241,000 of Preferred
Stock to the Company's equity. As a result of the foregoing,
stockholders' equity increased from $1,755,333 on June 30, 1994, to
$3,096,251 on June 30, 1995, an increase of $1,340,918, or 76%.
Effective June 30, 1995, the Company consummated the purchase of
approximately $937,204 promissory notes held by sixteen (16) creditors of
Casinos U.S.A. The promissory notes are secured by a collateral
assignment of an undivided interest in a senior deed of trust against the
Bull Durham Saloon and Casino in Black Hawk, Colorado. In consideration
of the assignment of the notes and collateral security, the Company issued
to the Casinos U.S.A. note holders an aggregate of 1,249,605 shares of
Common Stock, valued at $.75 per share. Since the transaction is
contingent upon the Company filing a Registration Statement, the notes are
shown as debt outstanding until the Registration Statement is filed.
However, by virtue of the Company continuing to hold the notes and
collateral as a secured creditor of Casinos U.S.A., the Company has gained
a priority over subordinated secured creditors of Casinos U.S.A. Such
priority could have a benefit to the Company in the event of a foreclosure
or forced liquidation of Casinos U.S.A. by junior lien holders.
As a result of a loss from continuing operations during the year
ended June 30, 1995, of $(2,085,919), together with non-cash net expenses
of $1,205,538 (comprised of amortization of $366,302, depreciation of
$616,188, stock for services of $23,048, and impairment of gaming facility
of $(200,000)), and increases in operating assets and liabilities totaling
$576,731 (primarily
<PAGE>
<PAGE>
due to increases in accounts payable and accrued expenses), at the year
ended June 30, 1995, the Company reported net cash used by operations of
$306,651. This compares with net cash used in operations of $(1,470,737)
for the year ended June 30, 1994, based on a loss from continuing
operations of $2,572,060, non-cash items of $591,405 (comprised of
$139,037 of amortization, $373,412 of depreciation, and $78,956 of
warrants issued for services), and an increase in operating assets and
liabilities of $509,918 (comprised mainly of increases in accounts payable
and accrued expenses).
Net cash used by investing activities for the year ended June 30,
1995 was $(532,341). This compares with net cash used by investing
activities of $(2,024,264) for the year ended June 30, 1994. For the year
ended June 30, 1995, the Company used $553,858 for the purchase of
equipment and $127,065 for additions to other assets. This compares to
$809,246 for the purchase of equipment and $95,193 for additions to other
assets for the year ended June 30, 1994. Offset against this, the Company
received $148,582 and $127,827 of principal payments on its note
receivable for the years ended June 30, 1995 and 1994, respectively.
Net cash provided by financing activities for the year ended June 30,
1995 was $783,757. This compares with net cash provided by financing
activities of $3,826,576 for the year ended June 30, 1994. Specifically,
cash provided by financing activities for the year ended June 30, 1995 was
$783,757, comprised of $215,500 in loans and $971,812 realized from the
exercise of Common Stock Purchase Warrants and stock offerings. Offset
against the cash provided by financing activities were promissory note
principal reduction payments in the amount of $403,554. This compares to
borrowings of $548,034, proceeds from the issuance of Common Stock of
$886,000, proceeds from the issuance of Preferred Stock of $2,587,500,
offset by note payments of $174,958 for the year ended June 30, 1994.
Neither the Company nor any of its subsidiaries have any commercial
bank credit facilities.
By letter agreement dated June 27, 1995, and effective July 15, 1995,
the International Joint Venture was dissolved, the Company assigned its
interest in Casino Lazurnaya in Sochi, Russia to a third party, the
Company received the remaining one third interest in Casino Masquerade in
Aruba, the Company received an additional 12.2% profit interest in Casino
Las Vegas in Bishkek, Kyrgyzstan, the Company received a promissory note
from the third party in the amount of $200,000 with a maturity date of
December 31, 1995, and such third party forgave amounts due and owing from
the Company in the approximate amount of $45,459 and contract rights for
future payments. As a result of this transaction, The Company has no
further interest in Casino Lazurnaya, a 100% ownership interest in Casino
Masquerade, and a 61% profit interest in Casino Las Vegas. It is not
expected that the foregoing acquisition and disposition of the Company's
interests in the various operating casinos will have a material effect
upon the Company's working capital, either positively or negatively.
Other than the foregoing, Management knows of no other trends, events
or uncertainties that have or are reasonably likely to have a material
impact on the Company's short-term or long-term liquidity.
<PAGE>
<PAGE>
RESULTS OF OPERATIONS - TWELVE (12) MONTHS ENDED JUNE 30, 1995 COMPARED
TO TWELVE (12) MONTHS ENDED JUNE 30, 1994
A comparison of the results of operations of the Company for the year
ended June 30, 1994 with the results of operations for the year ended June
30, 1995 demonstrates a dramatic change due to the Company's acquisition
of additional operating properties. For the year ended June 30, 1994,
only Lillie's Casino in South Dakota and the Bull Durham Saloon and Casino
in Black Hawk, Colorado operated for the entire twelve-month period. Last
Chance Casino in South Dakota was closed effective May 31, 1994, and the
Casino Masquerade in Aruba, acquired in April 1994, only operated for two
(2) months. In contrast, during the fiscal year ended June 30, 1995, the
Casino Masquerade operated for a full year, the Company opened the Casino
Las Vegas in Bishkek in July, 1994 and the Casino Lazurnaya in Sochi,
Russia operated for a full year.
Net revenues for the twelve (12) months ended June 30, 1995 were
$7,303,386 based on casino revenues of $7,059,714, revenues from the sale
of food of $243,672. Net revenues nearly tripled from $1,870,710 for the
year ended June 30, 1994.
The foregoing changes in operations also resulted in substantial
increases in operating, general and administrative expenses which
increased from $3,307,736 for the year ended June 30, 1994 to $7,554,550
for the year ended June 30, 1995, an increase of 128%. Depreciation
increased 65.0% and amortization increased 163.5% over the same period
reflecting additional investments in equipment and other assets associated
with the new operations. Also the Company recorded an impairment of
gaming facilities of $200,000 based upon actual and proposed sales of
comparable property in the area. Total operating expenses increased from
$3,820,185 for the year ended June 30, 1994, to $8,853,931 for the year
ended June 30, 1995, an increase of 131.8%.
As a result of the dramatic increase in net revenues, and the somewhat
more modest increase in operating expenses, losses from operations were
reduced 20.5% from a loss of $(1,949,475) for the year ended June 30,
1994, to a loss of $(1,550,545) for the year ended June 30, 1995.
Interest income increased 4.3% while interest expense was reduced 11.6%
over the same period. Losses from continuing operations were reduced
18.9% from a loss of $(2,572,060) for the year ended June 30, 1994, to a
loss of $(2,085,919) for the year ended June 30, 1995.
The Company had no income or loss from discontinued operations for the
year ended June 30, 1995; however, as a result of the Company's
international operations, the Company reported a foreign currency loss of
$(116,891).
As a result of the foregoing, the Company reported a net loss for the
twelve (12) months ended June 30, 1995, of $(2,036,422), a decrease of
26.5% from the loss for the year ended June 30, 1994 of $(2,771,440),
which translates into a net loss per share of $(.22), based on 9,156,894
weighted average shares outstanding.
Other than the foregoing, management knows of no trends, or other
demands, commitments, events or uncertainties that will result in, or that
are reasonably likely to result in, a material impact on the income and
expenses of the Company.
<PAGE>
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The following financial statements are filed as part of this report:
1. Report of Independent Auditors;
2. Audited Balance Sheet as of June 30, 1995;
3. Audited Statements of Operations as of June 30, 1995 and 1994;
4. Audited Statements of Cash Flows for the years ended June 30, 1995
and 1994;
5. Audited Statement of Changes in Stockholders' Equity for the year
June 30, 1995 and 1994;
6. Notes to Financial Statements.
All schedules are omitted since the required information is not present
or is not in amounts sufficient to require submission of the schedule, or
because the information required is included in the financial statements
and notes thereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
On June 3, 1994, the Company's Board of Directors approved a change in
the Company's certifying accountant. The change was effective June 3,
1994.
The independent accountant who was previously engaged as the principal
accountant to audit the Company's financial statements was Tanner + Co.
None of Tanner + Co.'s reports over the past two (2) years and the
financial statements of the Company contained any adverse opinion or
disclaimer of opinion, or was qualified or modified as to uncertainty,
audit scope, or accounting principles. Nor has there been any
disagreement between the Company and Tanner + Co. on any matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure.
The Company has retained the accounting firm of Ernst & Young LLP to
serve as the Company's principal accountants to audit the Company's
financial statements. This engagement was effective June 3, 1994. Prior
to its engagement as the Company's principal independent accountant, Ernst
& Young LLP had not been consulted by the Company either with respect to
the application of accounting principles to a specified transaction or the
type of audit opinion that might be rendered on the Company's financial
statements or any matter which was the subject of any prior disagreement
between the Company and its previous certifying accountant.
<PAGE>
<PAGE>
PART III
Part III, Items 9, 10, 11 and 12, are incorporated herein by reference
from the Registrant's definitive proxy statement relating to its Annual
Meeting of Shareholders which will be filed in an amendment within 120
days of June 30, 1995.
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
Financial Statements
--------------------
The following financial statements are filed as part of this report:
1. Report of Independent Auditors;
2. Audited Balance Sheet as of June 30, 1995;
3. Audited Statements of Operations as of June 30, 1995 and 1994;
4. Audited Statements of Cash Flow for the years ended June 30, 1995
and 1994;
5. Audited Statement of Changes in Stockholders' Equity for the year
June 30, 1995; and
6. Notes to Financial Statements.
Exhibits
--------
a. The following Exhibits are filed as part of this Report pursuant to
Item 601 of Regulation S-B:
Exhibit No. Title
- ----------- -----
* 1.0 Articles of Amendment to the Articles of Incorporation dated
June 22, 1994
* 3.1 Amended and Restated Articles of Incorporation
* 3.2 Bylaws
* 3.3 Certificate of Designations, Preferences, and Rights of Series
A Convertible Preferred Stock
* 4.1 Specimen Certificate of Common Stock
* 4.2 Specimen Class A Common Stock Purchase Warrant
* 4.3 Specimen Class B Common Stock Purchase Warrant
* 4.4 Specimen Class C Common Stock Purchase Warrant
* 4.5 Warrant Agreement
<PAGE>
<PAGE>
* 5.0 Opinion of Neuman & Cobb regarding the legality of the
securities being registered
* 10.1 Selling Agent Agreement
* 10.2 The Casino-Global Venture I Joint Venture Agreement
* 10.3 Assignment of Casino-Global Joint Venture Agreement dated
January 31, 1994
* 10.4 Nonresidential Lease Agreement between Russian-Turkish Joint
Venture Partnership with Hotel Lazurnaya and Global Casino
Group, Inc. dated September 22, 1993
* 10.5 Contract by and between Aztec-Talas-Four Star, Inc. and Global
Casinos Group, Inc. dated April 12, 1993, and Addendum to
Agreement by and between Aztec-Talas-Four Star, Inc., Global
Casinos Group, Inc. and Restaurant "Naryn" dated June 29,
1993.
* 10.6 Agreement and Plan of Reorganization among Silver State
Casinos, Inc., Colorado Gaming Properties, Inc. and Morgro
Chemical Company, dated September 8, 1993, incorporated by
reference from the Company's Current Report on Form 8-K, dated
September 20, 1993
* 10.7 Agreement and Plan of Reorganization among Casinos U.S.A.,
Lincoln Corporation, Woodbine Corporation and Morgro Chemical
Company, dated October 15, 1993, incorporated by reference
from the Company's Current Report on Form 8-K, dated November
19, 1993
* 10.8 Stock Pooling and Voting Agreement, incorporated by reference
from the Company's Current Report on Form 8-K, dated November
19, 1993
* 10.9 Employment Agreement, dated September 28, 1993, between Morgro
Chemical Company and Nathan Katz, incorporated by reference
from the Company's Current Report on Form 8-K, dated November
19, 1993
* 10.10 Employment Agreement, dated October 15, 1993, between Morgro
Chemical Company and William P. Martindale, incorporated by
reference from the Company's Current Report on Form 8-K, dated
November 19, 1993
* 10.11 Asset Acquisition Agreement by and among Global Casinos, Inc.,
Morgro, Inc. and MDO, L.L.C., dated as of February 18, 1994,
incorporated by reference from the Company's Current Report on
Form 8-K, dated February 18, 1994
* 10.12 Stock Purchase Agreement, dated March 25, 1994, incorporated
by reference from the Company's Current Report on Form 8-K,
dated April 29, 1994
* 10.13 Articles of Incorporation of BPJ Holding N.V., incorporated by
reference from the Company's Current Report on Form 8-K, dated
April 29, 1994
<PAGE>
<PAGE>
* 10.14 Aruba Caribbean Resort and Casino Lease Agreement, dated
January 18, 1993, incorporated by reference from the Company's
Current Report on Form 8-K, dated April 29, 1994
* 10.15 Aruba Gaming Permit issued to Dutch Hotel and Casino
Development Corporation, incorporated by reference from the
Company's Current Report on Form 8-K, dated April 29, 1994
* 10.16 Letter Agreement between Astraea Investment Management, L.P.
and Global Casinos, Inc. dated May 11, 1994
* 10.17 Guaranty from Global Casinos, Inc. to Astraea
Investment Management, L.P. dated May 19, 1994
* 10.18 Secured Convertible Promissory Note in favor of
Global Casinos, Inc. from Astraea Investment
Management, L.P. dated May 19, 1994
* 10.19 Registration Rights Agreement between Global
Casinos, Inc. and Astraea Investment Management,
L.P. dated May 11, 1994
* 10.20 Employment Agreement, dated July 1,1994 , between
Global Casinos, Inc. and Peter Bloomquist
** 10.21 Letter of Agreement, dated September 16, 1994 between Astraea
Management Services, L.P., Casinos U.S.A., Inc. and Global
Casinos, Inc.
***10.23 Letter of Agreement dated June 27, 1995, between Global
Casinos, Inc., Global Casinos International, Inc., Global
Casinos Group, Inc., Broho Holding, N.V., and Kenneth D. Brown
individually.
* 23.1 Consent of Neuman & Cobb
* 23.2 Consent of Tanner + Co., Certified Public Accountants
* 23.3 Consent of Schumacher & Bruce, Inc., Certified Public
Accountants
* 23.4 Consents of Angell & Deering, Certified Public Accountants for
Casinos U.S.A., Inc., Lincoln Corporation and Woodbine
Corporation
* 23.5 Consent of Ernst & Young, independent auditors
- ------------------------------
* Incorporated by reference to the Registrant's Registration
Statement on Form SB-2, Registration No. 33-76204, on file with the
Commission on August 11, 1994.
** Incorporated by reference to the Registrant's Annual Report on Form
10-KSB for year ended June 30, 1994.
*** Incorporated by reference to the Registrant's Current Report on
Form 8-K dated July 15, 1995.
<PAGE>
<PAGE>
Reports on Form 8-K
-------------------
The Registrant did not file any Current Reports on Form 8-K during the
Fourth Quarter ended June 30, 1995.
<PAGE>
<TABLE>
<CAPTION>
Global Casinos, Inc. and Subsidiaries
Consolidated Balance Sheet
June 30, 1995
<C>
<S>
ASSETS
Current assets:
Cash $ 564,996
Restricted Cash 20,295
Receivables, related parties 132,819
Receivables, net 66,062
Inventories 24,804
Interest receivable 12,910
Prepaid expenses 15,620
Current portion of notes receivable,
including receivables in default 85,669
-------------
Total current assets 932,865
Land, buildings and equipment:
Land 931,672
Buildings 5,521,893
Equipment 2,734,129
------------
9,187,694
Accumulated depreciation (938,848)
-------------
Net land, buildings and equipment 8,248,846
Other assets, net of amortization of $28,002 211,603
Leasehold and contract rights, net of
amortization of $460,662 2,469,408
Notes receivable, net of current portion,
including receivables in default 1,482,981
-------------
Total assets 13,336,703
=============
<PAGE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: $ 815,669
Accounts payable 965,473
Accrued expenses 674,321
Accrued interest 54,879
Notes payable - related parties 54,879
Debt subject to equity conversion 597,500
Current portion of long-term debt, including
debt in default 6,649,601
Mandatory Redeemable Convertible Preferred Stock,
in default 346,500
-------------
Total current liabilities 10,103,943
Long-term debt, less current portion 66,554
Minority interest 69,955
Stockholders' equity:
Preferred stock - Convertible nonvoting,
$2 par value:
Authorized - 10,000,000 shares
Issued and outstanding - 1,233,000 shares 2,241,000
Common stock - $.005 par value:
Authorized - 50,000,000 shares
Issued and outstanding - 9,551,080 shares 48,081
Additional paid-in capital 5,390,437
Retained deficit (4,583,267)
-------------
Total stockholders' equity 3,096,251
-------------
Total liabilities and stockholders' equity $13,336,703
=============
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Global Casinos, Inc. and Subsidiaries
Consolidated Statements of Operations
Year ended June 30
1995 1994
--------------------------
<C> <C>
<S>
Revenues:
Casino $7,059,714 $1,706,683
Food and beverage 243,672 95,641
Other - 68,386
--------------------------
Net revenues 7,303,386 1,870,710
Expenses:
Operating, general
and administrative 7,554,550 3,307,736
Depreciation 616,188 373,412
Amortization 366,302 139,037
Impairment of gaming facility 200,000 -
Loss on foreign currency 116,891 -
---------------------------
Total operating expenses 8,853,931 3,820,185
--------------------------
Loss from operations (1,550,545) (1,949,475)
Other income (expense):
Interest income 96,854 92,833
Interest expense (632,228) (715,418)
--------------------------
(535,374) (622,585)
--------------------------
Loss from continuing operations (2,085,919) (2,572,060)
Discontinued operations:
Income from discontinued operations - 72,919
Loss on disposal of discontinued
operations - (320,662)
--------------------------
- (247,743)
--------------------------
Loss before minority interest (2,085,919) (2,819,803)
Minority interest in losses of
subsidiaries 49,497 48,363
--------------------------
Net loss $(2,036,422) $(2,771,440)
==========================
Net loss per share $(0.22) $(0.40)
==========================
Weighted average shares outstanding 9,156,894 6,871,974
==========================
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Global Casinos, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Common
Stock Additional
Preferred Stock Common Stock Subscription Paid-in
---------------------------------------
Shares Amount Shares Amount Receivable Capital
----------------------------------------------------------------
- -
<C> <C> <C> <C> <C> <C>
<S>
Balance at June 30, 1993 2,408,120 $12,040 $(15,000) $977,102
Subscription cancellation 15,000 (15,000)
Shares issued for acquisition
of Colorado Gaming Properties,
September, 1993 2,500,000 12,500 956,580
Shares issued for acquisition
of Casinos U.S.A. transaction
November, 1993 2,535,000 12,675 1,001,325
Shares issued for debt exchange,
December, 1993 200,000 1,000 399,000
Shares issued in private placement
of stock and Class B warrants 137,500 688 274,312
Shares issued upon exercise of
Class C warrants, March, 1994 155,000 775 464,225
Exercise of outstanding options 504,000 2,520 199,080
Tender of options at fair market
value for exercise price (65,032) (201,600)
Shares issued upon exercise of
Class C warrants, June 1994 42,000 210 125,790
Warrants issued as compensation 78,956
Loss for the year
--------------------------------------------------------------
Balance at June 30, 1994 8,416,588 42,408 - 4,259,770
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Global Casinos, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Retained
Deficit Total
--------------------------------
<C> <C>
<S>
Balance at June 30, 1993 $224,595 $1,198,737
Subscription cancellation
Shares issued for acquisition
of Colorado Gaming Properties,
September, 1993 969,080
Shares issued for acquisition
of Casinos U.S.A. transaction
November, 1993 1,014,000
Shares issued for debt exchange,
December, 1993 400,000
Shares issued in private placement
of stock and Class B warrants 275,000
Shares issued upon exercise of
Class C warrants, March, 1994 465,000
Exercise of outstanding options 201,600
Tender of options at fair market
value for exercise price (201,600)
Shares issued upon exercise of
Class C warrants, June 1994 126,000
Warrants issued as compensation 78,956
Loss for the year (2,771,440) (2,771,440)
--------------------------------
Balance at June 30, 1994 (2,546,845) 1,755,333
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Global Casinos, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity (continued)
Common
Stock
Preferred Stock Common Stock Subscription Paid-in
----------------------------------------------
Shares Amount Shares Amount Receivable Capital
-------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
<S>
Shares issued upon
exercise of
A warrants 675,000 $3,375 $671,625
Shares issued upon
exercise of
B warrants 65,000 325 129,675
Shares issued upon
exercise of
C warrants 45,000 225 44,775
Shares issued upon
exercise of
D warrants 193,625 968 95,844
Shares issued
for cash 32,500 163 24,837
Shares issued for
services 17,500 88 22,960
Shares issued in
debt conversion 105,867 529 140,951
Preferred stock 1,233,000 $2,241,000
Loss for the year
--------------------------------------------------------------------------
Balance at
June 30,1995 1,233,000 $2,241,000 9,551,080 $48,081 $ - $5,390,437
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Global Casinos, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity (continued)
Additional
Retained
Deficit Total
------------------------------
<C> <C>
<S>
Shares issued upon
exercise of
A warrants $675,000
Shares issued upon
exercise of
B warrants 130,000
Shares issued upon
exercise of
C warrants 45,000
Shares issued upon
exercise of
D warrants 96,812
Shares issued
for cash 25,000
Shares issued for
services 23,048
Shares issued in
debt conversion 141,480
Preferred stock 2,241,480
Loss for the year $(2,036,422) (2,036,422)
-----------------------------------
Balance at
June 30, 1995 $(4,583,267) $ 3,096,251
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Global Casinos, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
YEAR ENDED JUNE 30
1995 1994
------------------------
<C> <C>
<S>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from continuing operations $(2,085,919) $ (2,572,060)
From continuing operations:
Adjustments to reconcile loss from
continuing operations to net cash
used by operating activities:
Amortization 366,302 139,037
Depreciation 616,188 373,412
Stock and warrants issued as
compensation 23,048 78,956
Impairment of gaming facility 200,000 -
Changes in operating assets and
liabilities:
Receivables (70,465) 13,618
Inventories 2,178 1,856
Prepaid expenses 50,696 17,728
Accounts payable 300,474 212,626
Accrued expenses 293,848 264,090
--------------------------------
(303,650) (1,470,737)
Loss on discontinued operations - (247,743)
Net change in working capital items
for discontinued operations - 38,151
--------------------------------
Net cash used by operating activities (303,650) (1,680,329)
CASH FLOWS FROM INVESTING ACTIVITIES
Other assets (127,065) (95,193)
Purchase of equipment (553,858) (809,246)
Collections on notes receivable 148,582 125,827
Purchase of leasehold and contract rights,
net of minority interest - (1,245,652)
--------------------------------
Net cash used by investing activities (532,341) (2,024,264)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes (403,555) (174,958)
Borrowings against notes payable 215,500 548,034
Proceeds from issuance of common stock 971,812 866,000
Proceeds from issuance of preferred
stock - 2,587,500
--------------------------------
Net cash provided by financing
activities 783,757 3,826,576
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Global Casinos, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
YEAR ENDED JUNE 30
1995 1994
------------------------
<C> <C>
<S>
Net (decrease) in cash $ (52,234) $ 121,983
Cash at beginning of year 617,230 495,247
-----------
Cash at end of year $ 564,996 $ 617,230
============ ===========
Supplemental cash flow information:
Cash paid for interest $ 564,996 $ 617,230
============ ===========
The consolidated statements of cash flows do not include the following items that were acquired in stock
transactions or debt conversions:
YEAR ENDED JUNE 30
1995 1994
---------------------
COLORADO GAMING PROPERTIES ACQUISITION
(Note 1) Net assets acquired from
acquisition of Colorado Gaming
Properties, Inc. for stock $ - $ (969,080)
CASINOS USA TRANSACTION (Note 1)
Net assets acquired from acquisition of
the Casinos USA transaction for stock - (1,014,000)
Notes payable converted to equity - (400,000)
Accounts payable converted to equity 141,480 -
SALE OF MORGRO DIVISION (Note 1)
Note receivable from sale of chemical
division - (754,041)
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
<PAGE>
Global Casinos, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 1995
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND MANAGEMENT'S PLANS
The accompanying financial statements have been prepared assuming that
Global Casinos, Inc. (the "Company") will continue as a going concern.
The Company has recurring operating losses and a working capital
deficiency. In addition, the Company is in default on substantially all
of its loan agreements and foreclosure proceedings are pending on two of
the Company's properties. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. The financial
statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of
these uncertainties.
Management is currently in the process of renegotiating its current debts
in order to extend the maturities and has filed motions to prevent the
foreclosure of certain of its gaming properties. Also, the Company is
negotiating with an underwriter to undertake an offering of the Company's
securities. Management believes that between the improved casino
operations, the proposed offering and debt restructuring, it will have the
necessary capital to continue operations.
ORGANIZATION
Global Casinos, Inc., a Utah corporation, develops and operates gaming
casinos domestically and internationally. The Company commenced gaming
operations through acquisitions of gaming entities during the year ended
June 30, 1994. Previously, the Company was engaged in the manufacturing
and sales of chemical products for domestic and commercial use. The
Company sold the net assets of its chemical products business to the prior
management of the Company.
Effective September 20, 1993, the Company acquired 100% of the outstanding
common stock of Colorado Gaming Properties, Inc., a Colorado corporation
("CGP") in exchange for 2,500,000 shares of its common stock. CGP owns
the Nitro Club and the Gas Light, two nonoperating real estate properties
located in the limited stakes gaming district in Central City, Colorado.
Effective October 1, 1993, the Company acquired 100% of the outstanding
common stock of Casinos USA, Inc., a Colorado corporation ("Casinos USA"),
Lincoln Corporation, a South Dakota corporation ("Lincoln"), and Woodbine
Corporation, a South Dakota corporation ("Woodbine") in exchange for
2,535,000 shares of its common stock. Casinos USA owns and operates the
Bull Durham Saloon and Casino ("Bull Durham"), located in the limited
stakes gaming district in Black Hawk, Colorado. At the date of
acquisition, Lincoln and Woodbine owned casino properties in Deadwood,
South Dakota. These casinos have subsequently been closed. The Woodbine
casino property is held for sale and is carried at estimated realizable
value. In addition, Casinos USA held an 80% interest in an international
joint venture (the "IJV") which held certain rights to develop and operate
gaming casinos in several international locations. Through the IJV,
<PAGE>
<PAGE>
Global Casinos, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
June 30, 1995
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Casino Lazurnaya was opened in Sochi, Russia, located on the Black Sea,
and Casino Las Vegas was opened in Bishkek, Kyrgyzstan.
Effective May 1, 1994, the Company acquired a net 66-2/3% interest in
b.P.J. Holdings N.V., a Curacao Limited Liability Company("BPJ"). BPJ
operates the Casino Masquerade on the Caribbean resort island of Aruba.
Effective July 15, 1995, the Company exchanged its 80% interest in Casino
Lazurnaya and assumed an estimated $70,000 in liabilities, for (a) the
remaining one-third interest in Casino Masquerade, (b) an additional 12.2%
profits interest in Casino Las Vegas, and (c) a note from a third party in
the principal amount of $200,000 due December 31, 1995. In addition, such
third party forgave an estimated $45,000 due to him from the Company.
After the above exchange, the Company owns 100% of Casino masquerade and a
61% profits interest in Casino Las Vegas. The Company recorded a loss of
$38,675 on this exchange at June 30, 1995.
CASH
Cash consists of demand deposits and vault cash used in casino operations.
RESTRICTED CASH
Restricted cash consists of cash held in escrow for future payment of a
note payable. The subordinated note holders will be paid from escrow
funds once the principal note holder is paid in full. If the Company
defaults on its payments to the principal note holder, the principal note
holder has the option to use these funds to satisfy required principal and
interest payments.
CASINO REVENUES
In accordance with industry practice, the Company recognizes as gaming
revenue the net win from gaming activities, which is the difference
between gaming wins and losses.
PROMOTIONAL ALLOWANCES
The cost of food and beverages provided on a complimentary basis to
customers and other promotional allowances are charged to operating
expenses. The cost of such items was $138,901.00 for the year ended June
30, 1994. The cost for such items was $400,966.00 for the year ended June
30, 1995. The retail value approximates the cost.
<PAGE>
<PAGE>
Global Casinos, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
June 30, 1995
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN
During 1994, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 114, "Accounting by
Creditors for Impairment of a Loan." The Company has reviewed the
potential impact of the adoption SFAS 114, and believes that it will not
have a material impact on the financial statements.
INVENTORIES
Inventories are valued at the lower of cost (on a first-in, first-out
basis) or market.
LEASEHOLD AND CONTRACT RIGHTS
Leasehold and contract rights represent the excess of the purchase price
over the book value of casino projects. These costs are amortized over
the terms of the agreements, which generally are ten years.
LOSS PER SHARE
Loss per share of common stock is computed based on the weighted average
number of common shares outstanding during the year, including common
stock equivalents resulting from dilutive stock options and warrants.
Because of the Company's net loss, these equivalents are antidilutive.
CONSOLIDATION
At June 30, 1995, the consolidated financial statements include the
accounts of Casinos USA, Woodbine, Lincoln, and CGP, which are all wholly-
owned subsidiaries of the Company; and BPJ (of which the Company owned a
66-2/3% interest) and its wholly-owned subsidiary Global Entertainment
Group Inc. N.V., and the IJV (of which the Company owned an 80% interest).
All significant intercompany accounts and transactions have been
eliminated in consolidation.
LAND, BUILDINGS AND EQUIPMENT
Land, buildings and equipment and property under capital leases are
carried at cost. Depreciation is computed using the straight-line method
over lives ranging from five to 31 years. During the year ended June 30,
1995, the Company evaluated the carrying value of its real property in
Central City, Colorado. Based upon this evaluation, the Company
determined that the assets, with a carrying value of approximately
$2,300,000, were impaired and reduced the asset by $200,000. Fair value
was based on management's estimates considering actual sales and listed
sales of comparable real estate in the area.
<PAGE>
<PAGE>
Global Casinos, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
June 30, 1995
2. NOTES RECEIVABLE
At June 30, 1995, the Company had the following notes receivable:
7% note secured by a first deed of trust
on gaming real estate, monthly
principal and interest payments of
$8,993 until June 21, 1999, at which
time the unpaid balance is due in full.
Through agreements between the parties,
the maker of the note renders payments
to third parties on behalf of the Company.
In default. $ 1,107,896
6.5% secured note, monthly interest and
principal payments of $6,569 until
January 2009, at which time the unpaid
balance is due. The note is secured
by a deed of trust o the real property,
fixtures and improvements of the Morgro
operations. 460,754
------------
1,568,650
Less current portion (85,669)
------------
Net long-term receivable, including amount
in default $ 1,482,981
3. LONG-TERM DEBT
At June 30, 1995, debt consisted of the following:
7% unsecured note receivable, monthly
principal and interest payments of
$8,993 until June 21, 1999, at which
time the unpaid balance is due in full.
Through agreements between the parties,
the maker of the note renders payments
to third parties on behalf of the Company.
In default. $ 1,107,896
6.5% secured note, monthly interest and
principal payments of $6,569 until
January 2009, at which time the unpaid
balance is due. The note is secured by
a deed of trust on the real property,
fixtures and improvements of the Morgro
operations. 460,754
------------
1,568,650
<PAGE>
<PAGE>
Global Casinos, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
June 30, 1995
3. LONG-TERM DEBT (CONTINUED)
Less current portion (85,669)
------------
Net long-term receivable, including amount
in default $ 1,482,981
At June 30, 1995, debt consisted of the following:
Mortgages payable to third parties with interest
ranging from 10% to 12% secured by real estate.
In default $ 237,688
Mortgages payable to individuals with interest
ranging from 7% to 10%, principal and interest
payments payable monthly with maturities from
1996 to 2001. The notes are collateralized by
deeds of trust on real estate. In default. 4,031,891
Notes to a partnership bearing interest at 7%.
Secured by a first deed of trust on real estate,
due October 15, 1994. In default. 686,289
Mortgages payable to individuals with interest at
10%, semiannual payments with maturity in 2000. 79,514
Notes bearing interest of 30% collateralized by a
second deed of trust on real estate. The notes
are due the earlier of 1999 or as proceeds are
received from the exercise of A and B warrants,
from which a portion thereof will be applied to
the notes. In default. (Note 6) 115,000
Notes bearing interest of 7% collateralized by
assignment of deed of trust on real estate.
The notes are due the earlier of 1999 or as
proceeds are received from the exercise of A and
B warrants, from which a portion thereof will be
applied to the notes. In default. (Note 6) 25,000
Unsecured loans to third parties bearing interest
at rates from 10% to 12%. In default. 230,260
Secured convertible note bearing interest of 9%,
interest only due quarterly. All principal and
unpaid interest due May 1999. The note is
secured by a profits interest in the Bull Durham.
The note may be convertible in whole or in part
at the option of the holder at any time prior to
its maturity to common stock at a conversion price
of $3.00 per share. In default. 750,000
Capital least obligations in default 560,513
------------
6,716,155
Less current portion, including debt in default (6,649,601)
------------
Net long-term debt $ 66,554
<PAGE>
<PAGE>
Global Casinos, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
June 30, 1995
3. LONG-TERM DEBT (CONTINUED)
Casinos USA is a party to a foreclosure proceeding against the Bull Durham
brought by certain subordinated note holders. The foreclosure sale is
scheduled for October 19, 1995, the Company made all required payments
under the proposed renegotiated debt agreement. Negotiations continue in
an effort to resolve this matter prior to any foreclosure sale.
CGP is a party to a foreclosure proceeding against the Gas Light, brought
by certain subordinated note holders, securing a promissory note in
default. Negotiations continue in an effort to resolve this matter prior
to any foreclosure sale.
Effective June 30, 1995, the Company purchased promissory notes held by
creditors of Casinos USA with principal and interest of $597,500 and
$339,704, respectively. The promissory notes are secured by a collateral
assignment against the Bull Durham. In consideration of the assignment of
the notes and collateral security, the Company issued to the Casinos USA
note holders an aggregate of 1,249,605 shares of common stock, valued at
$.75 per share. Although these shares are deemed to be issued,
outstanding and have all rights as common stock, the transaction is
contingent upon the Company filing a registration statement by December
31, 1995 with the Securities and Exchange Commission for the underlying
securities and using its best effort to cause such registration statement
to become effective. Until such time as the Company fulfills this
obligation, these promissory notes have been accounted for as a current
liability.
Scheduled maturities of long-term debt and capital lease obligations for
the years ending June 30:
1996 $ 6,649,601
1997 14,287
1998 15,752
1999 17,367
2000 19,148
------------
Total $ 6,716,155
The Company's assets held under capital leases consist of certain gaming
equipment and office equipment with an aggregate cost and accumulated
depreciation of $639,580 and $216,643, respectively.
<PAGE>
<PAGE>
Global Casinos, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
June 30, 1995
4. INCOME TAXES
At June 30, 1995, the Company has available net operating loss
carryforwards of approximately $5,286,000 expiring in years 2007 through
2009. Of these losses, $1,455,000 is attributable to Casinos USA and can
only be used to offset future taxable income of Casinos USA.
Additionally, Casinos USA net operating loss carryforwards may be subject
to further limitations imposed as a result of the change in ownership as a
result of the acquisition.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the deferred tax assets at June 30, 1995, are as
follows:
Deferred tax assets:
Vacation accrual $ 19,600
Net operating loss carryforwards 1,850,100
------------
Total deferred tax assets 1,869,700
Valuation allowance (1,869,700)
------------
Net deferred tax assets $ -
5. COMMITMENTS AND CONTINGENCIES
INTERNATIONAL GAMING INTERESTS
As discussed in Note 1, the Company has various operating casinos and
gaming interests in international jurisdictions. due to distance and
cultural differences, there are risks and uncertainties from operating in
foreign jurisdictions. These risks include but are not limited to
currency devaluation, governmental intervention, statutory regulation and
political instability.
OPERATING LEASES
The Company leases the Casino Masquerade facility under an operating lease
which expires in December 2002 with an option to renew for 10 years. Rent
is based upon a percentage of casino win, adjusted for certain gaming
taxes and license fees. Percentages throughout the term of the lease are
as follows: 10 percent through December 31, 1995, 15% through December
31, 1996, and 20% through December 31, 1997. Rental expense under this
agreement was $293,439 and $17,902 for the years ended June 30, 1995 and
1994, respectively. during August 1995, the Company reached an agreement
in principle to modify the terms of the facility lease whereby beginning
January 1, 1996, the rent will be calculated as $400,000 per year plus 15%
of the adjusted win over $4,000,000.
<PAGE>
<PAGE>
Global Casinos, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
June 30, 1995
5. COMMITMENTS AND CONTINGENCIES
The Company, through IJV, leases the Casino Las Vegas from a joint venture
partner ("JVP"). The Company pays 39% of the net casino profits to the
JVP until the Company has recouped its original investment plus interest,
at which time the Company will pay 50% of the net casino profits to the
JVP. In addition, the Company has an agreement with an unrelated Nevada
corporation whereby after the Company has received $500,000 in profits, it
shall pay 10% of its share of the net profits to this Nevada corporation.
Through the IJV, the Company leased the Casino Lazurnaya facility under an
operating lease. Rent expense was $201,000 and $12,000 for the years
ended June 30, 1995 and 1994, respectively. Effective July 15, 1995, the
Company disposed of this property (see Note 1).
During the year ended June 30, 1995, the Company entered into various
noncancelable operating leases for corporate office space and equipment.
Lease expense for the year ended June 30, 1995 was $17,632.
Future minimum lease payments, by year and in the aggregate, under
operating leases consist of the following (exclusive of contingent
rentals):
1996 $ 281,526
1997 459,977
1998 459,138
1999 460,438
2000 420,898
Thereafter 1,000,000
------------
$3,081,977
============
Minimum lease payments of $400,000 per year under the proposed
modification to the Casino Masquerade lease have been included in the
above table.
SEC MATTER
The Company was served with a subpoena issued by the Securities and
Exchange Commission (the "SEC") in connection with its investigation of
certain companies other than the Company. The interim Chief Executive
Officer of the Company serves as president of one of the subject
companies. The Company has complied with the subpoena and supplied
documents in response thereto and believes it has cooperated fully in the
investigation. Management of the Company does not believe that the
Company is the subject of the SEC inquiry and is ont aware of any areas of
the inquiry by the SEC which represent a material contingency to the
Company.
<PAGE>
<PAGE>
Global Casinos, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
June 30, 1995
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
ARUBAN CONTROLLER COSTS
The Aruban government provides "government controllers" for each gaming
property operating in the country. The government recoups the expenses of
these controllers through a per square meter charge. The Casino
Masquerade and other Aruban casinos are disputing the per meter charge.
The Company has paid all government controller costs it believes are due
and owing through December 31, 1993. It has accrued controller costs
through June 30, 1995 at the same rate paid as of December 31, 1993. The
Aruban casinos argue that the rate charged by the government exceeds the
cost of providing the controllers. The difference in the rate charged by
the government and accrued by the Company is approximately $102,000.
6. STOCKHOLDERS' EQUITY
PREFERRED STOCK
In June 1994, the Company issued 1,406,250 units comprised of one share of
Series A Redeemable Convertible Preferred Stock with a mandatory
redemption date of May 31, 1995 and one-half Class D common stock purchase
warrant with an exercise price of $3.00 per share. Net proceeds from this
offering were $2,587,500. The redemption price of $2.00 per share is
subject to adjustment for certain events such as splits and dividends.
Holders of the Redeemable Convertible Preferred Stock have the option to
convert each share of the preferred stock into one share of the Company's
common stock. On May 31, 1995, holders of 1,233,000 shares of the
Company's Series A Preferred Stock agreed to waive the mandatory
redemption in consideration of a lower conversion price, from $2,00 to
$1.125 per share, and a reduction in the exercise price of D warrants from
$3.00 per share to $.50 per share, if exercised on or before June 30,
1995, and $1.75 per share, if exercised after June 30, 1995. On June 30,
1995, D warrants totaling 193,625 shares were exercised at $.50 per share.
The foregoing modifications are applicable only to shares of preferred
stock and D warrants owned by holders who voluntarily agreed to such
modifications. As a result, there continue to be issued and outstanding,
173,250 shares of preferred stock as to which the Company continues to be
in default of its mandatory redemption obligation of the following common
stock warrants.
WARRANTS
At June 30, 1995, the Company had 1,282,500 Class A warrants at $1.00 per
share, 2,068,750 Class B warrants at $2.00 per share, 114,250 Class C
warrants at $3.00 per share, and 422,875 are exercisable at $1.75 per
share. The Class A, B and C warrants expire on December 31, 1995. The
Class D warrants expire in May 1997.
<PAGE>
<PAGE>
Global Casinos, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
June 30, 1995
6. STOCKHOLDERS' EQUITY (CONTINUED)
The Company issued to an underwriter a warrant to purchase 28,125 units at
an exercise price of $2.40 per unit. This warrant expires in April 1999.
7. RELATED PARTIES
At June 30, 1995, the Company had receivables from employees and officers
of $75,239 and a receivable from a corporation controlled by a related
party of $57,580. during the year, the Company borrowed $64,500 from
officers shareholders and directors of the Company of which $54,879 was
unpaid at June 30, 1995. In december 1993, certain directors and officers
invested $145,000 in a private placement of units of the Company's
securities. The Company, through a subsidiary, owes directors and
officers $115,000 plus accrued interest, which has been agreed to be
exchanged for equity of the Company at $.75 per share. The Company paid
and accrued legal fees of $88,437 to firms of which certain officers and
directors are employed by the Company for the period ended June 30, 1995.
The Company has accrued consultation fees of $45,549 to its joint venture
partner in the IJV for the period ended June 30, 1995. These consulting
fees were forgiven as part of the casino exchange detailed in Note 1.
8. INCENTIVE STOCK PLAN
During the year ended June 30, 1994, the Company adopted the Global
Casinos, Inc. Stock Incentive Plan (the "Incentive Plan"). The Incentive
Plan allows the Company to grant incentive stock options and/or purchase
rights (collectively "Rights") to officers, employees, former employees
and consultants of the Company and its subsidiaries. During the year
ended June 30, 1995, 710,000 options to purchase common stock at a
weighted average exercise price of $2.50 per share were granted, of which
565,000 are subject to future vesting requirements.
9. SEGMENTS OF BUSINESS
The Company owns, operates, and develops domestic and international casino
projects in several geographical areas. The following table sets forth
financial information for the Company's foreign and domestic segments for
the year ended June 30, 1995:
<PAGE>
<PAGE>
Global Casinos, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
June 30, 1995
9. SEGMENTS OF BUSINESS (CONTINUED)
<TABLE>
<CAPTION>
Kyrgyzstan Russia Aruba Domestic Total
----------------------------------------------------------------
<C> <C> <C> <C> <C>
<S>
Net revenue $358,531 $1,559,332 $3,452,052 $1,933,471 $7,303,386
DepreciatioN 50,150 133,130 137,208 295,700 616,188
Amortization 3,000 16,900 67,500 278,902 366,302
Income (loss)
from continuing
operations 36,816 (59,118) (25,246) (2,038,371) (2,085,919)
Identifiable
assets 333,431 1,267,224 1,754,199 9,981,849 13,336,703
Capital
expenditures 33,885 37,662 402,557 79,754 553,858
</TABLE>
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
GLOBAL CASINOS, INC.
Date: 10/12/95 By: /s/ Stephen G. Calandrella
---------------- ---------------------------------
Stephen G. Calandrella
Interim Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature Position Date
- --------- -------- ----
/s/ William P. Martindale Chairman of the Board 10/12/95
- ----------------------------------- --------------
William P. Martindale
/s/ Stephen G. Calandrella Interim Chief Executive Officer 10/12/95
- ----------------------------------- --------------
Stephen G. Calandrella Director
Director
- ----------------------------------- --------------
Steven F. Bright
/s/ Gerald Jacobs Director 10/12/95
- ----------------------------------- --------------
Gerald Jacobs
/s/ Pete Bloomquist Chief Financial Officer, 10/12/95
- ----------------------------------- --------------
Pete Bloomquist Chief Accounting Officer
