<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
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 S. Harrison Street, Skydeck, Denver, Colorado 80210
__________________________________________________ ___________________
(Address of Principal Offices) (Zip Code)
Registrant's telephone number, including area code: (303) 756-3777
________________
__________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the last 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 / /
As of April 30, 1996, 12,518,792 shares of Common Stock of the Registrant were
outstanding.
Transitional Small Business Disclosure Format (check one) Yes / / No / X /
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INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet at March 31, 1996 (unaudited) and June 30, 1995
Statement of Operations for the Three Months Ended March 31, 1996
and March 31, 1995 (unaudited)
Statement of Operations for the Nine Months Ended March 31, 1996
and March 31, 1995 (unaudited)
Statement of Cash Flows for the Nine Months Ended March 31, 1996
and March 31, 1995 (unaudited);
Notes to Unaudited Financial Statements
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying Balance Sheet at March 31, 1996, the Statement of
Operations for the Three Months Ended March 31, 1996 and March 31, 1995, the
Statement of Operations for the Nine Months Ended March 31, 1996 and March 31,
1995, and Statement of Cash Flows for the Nine Months Ended March 31, 1996 and
March 31, 1995 are unaudited but reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the financial position
and results of operations for the interim period presented.
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GLOBAL CASINOS, INC. & SUBSIDIARIES
Consolidated Balance Sheet
<TABLE>
<CAPTION>
ASSETS March 31,
1996 June 30,
(unaudited) 1995
___________ _________
<S> <C> <C>
Current assets:
Cash $909,375 $564,996
Restricted cash 0 20,985
Receivables, related parties 75,526 132,819
Receivables, net 55,486 66,062
Inventories 26,304 24,804
Interest receivable 86,165 12,910
Prepaid expenses 27,849 15,620
Current portion of note receivables 232,871 85,669
_________ _________
Total current assets 1,413,576 923,865
Property, plant and equipment:
Land 931,672 931,672
Buildings 5,521,893 5,521,893
Equipment 2,042,871 2,734,129
_________ _________
8,496,436 9,187,694
Accumulated depreciation (987,238) (938,848)
_________ _________
Net property, plant and equipment 7,509,198 8,248,846
Other assets, net of amortization 80,493 211,603
Leasehold and contract rights, net of
amortization $623,299 at March 31,
1996 and $460,622 at June 30, 1995 2,505,101 2,469,408
Note receivables, net of current portion 1,478,315 1,482,981
Total Assets $12,986,683 $13,336,703
=========== ===========
</TABLE>
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GLOBAL CASINOS, INC. & SUBSIDIARIES
Consolidated Balance Sheet
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY March 31,
1996 June 30,
(unaudited) 1995
___________ _________
<S> <C> <C>
Current liabilities:
Accounts payable $696,829 $815,669
Accrued expenses 937,806 965,473
Accrued interest 574,799 674,321
Notes payable-related parties 52,376 54,879
Debt subject to equity conversion 0 597,500
Current portion of long-term debt,
including debt in default 6,234,812 6,649,601
Mandatory Redeemable Convertible
Preferred Stock in default 338,360 346,500
_________ __________
Total current liabilities 8,834,982 10,103,943
Long-term debt, less current portion 45,959 66,554
Minority interest 22,799 69,955
Stockholders' equity:
Preferred stock-Convertible non-voting,
$2 par value:
Authorized shares - 10,000,000
Issued and outstanding shares,
1,233,000 and 743,000 at June 30,
1995 and March 31, 1996, respectively 1,350,416 2,241,000
Common stock, $0.005 par value:
Authorized shares - 50,000,000
Issued and outstanding shares,
9,551,080 and 12,518,792 at June 30,
1995 and March 31, 1996, respectively 61,305 48,081
Additional paid in capital 7,405,575 5,390,437
Retained deficit (4,734,353) (4,583,267)
_________ __________
Total stockholders' equity 4,082,943 3,096,251
_________ __________
Total liabilities and stockholders' equity $12,986,683 $13,336,703
=========== ===========
See accompanying notes.
</TABLE> <PAGE>
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GLOBAL CASINOS, INC. & SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three months ended
March 31, March 31,
1996 1995
(unaudited) (unaudited)
_________ __________
<S> <C> <C>
Revenues:
Casino revenues $2,107,195 $2,125,944
Food and beverage 122,832 68,172
Other 1,089 9,443
_________ __________
Net revenue 2,231,116 2,203,559
Expenses:
Operating, general and administrative 1,731,776 1,920,421
Depreciation 107,365 135,800
Amortization 98,065 91,450
_________ __________
Total operating expenses 1,937,206 2,147,671
Income from operations before other expense 293,910 55,888
Other income (expense)
Interest income 41,503 105,259
Interest expense (227,955) (155,380)
_________ __________
(186,452) (50,121)
_________ __________
Income from operations 107,458 5,767
Foreign currency loss 0 (29,898)
Minority interest (10,399) (29,754)
_________ __________
Net income (loss) $97,059 $(53,885)
======= =========
Net income (loss) per share 0.01 (0.01)
==== ======
Weighted average shares outstanding 12,222,497 9,087,250
========== =========
See accompanying notes.
/TABLE
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GLOBAL CASINOS, INC. & SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Nine months ended
March 31, March 31,
1996 1995
(unaudited) (unaudited)
_________ __________
<S> <C> <C>
Revenues:
Casino revenues $5,651,222 $5,166,804
Food and beverage 302,348 132,273
Other 5,691 98,261
_________ __________
Net revenue 5,959,261 5,397,338
Expenses:
Operating, general and administrative 5,119,343 4,916,358
Depreciation 321,800 388,130
Amortization 275,445 265,950
_________ __________
Total operating expenses 5,716,588 5,570,438
Income (loss) from operations before other
expense 242,673 (173,100)
Other income (expense)
Interest income 114,615 119,773
Interest expense (522,719) (462,466)
_________ __________
(408,104) (342,693)
_________ __________
(Loss) from operations (165,431) (515,793)
Gain from debt restructuring 201,814 0
Foreign currency loss 0 (103,478)
Minority interest (187,469) 69,736
_________ __________
Net (loss) $(151,086) $(549,535)
========== ==========
Net (loss) per share (0.01) (0.06)
====== ======
Weighted average shares outstanding 10,798,397 9,087,250
========== =========
See accompanying notes.
/TABLE
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GLOBAL CASINOS, INC. & SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine months ended
March 31, March 31,
1996 1995
(unaudited) (unaudited)
_________ __________
<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES $558,673 $121,626
CASH FLOWS FROM INVESTING ACTIVITIES
Other assets (2,637) (158,466)
Purchase of equipment (133,226) (561,146)
Collections on note receivables 57,464 179,221
_________ __________
Net cash used in investing activities (78,399) (540,391)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes (266,429) (316,723)
Payments to minority interest 0 (69,736)
Borrowings against notes payable 1,160 188,500
Redemption of preferred stock (8,140) 0
Proceeds from issuance of common stock 137,514 805,000
_________ __________
Net cash (used) provided by financing
activities (135,895) 607,041
Net increase in cash 344,379 188,276
Cash at beginning of period 564,996 617,230
_________ __________
Cash at end of period $909,375 $805,506
_________ __________
Cash paid for interest $275,283 $337,925
======== ========
Cash paid for income taxes 0 0
=== ===
</TABLE>
The Statement of Cash Flows for the nine (9) months ended March 31, 1996 does
not include debt and accrued expenses in the amount of $1,104,504 that was
exchanged for equity and the following items which resulted from the exchange of
the Sochi, Russia casino for the Bishkek, Kyrgyzstan and Aruba casinos:
<TABLE>
<S> <C>
Note receivables $200,000
Net equipment exchanged (515,261)
Net leasehold and contract rights exchanged 177,391
Net change in operating assets and liabilities 137,870
/TABLE
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GLOBAL CASINOS, INC. & SUBSIDIARIES
Notes to the Consolidated Financial Statement
March 31, 1996
(unaudited)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Global Casinos, Inc. (the "Company"), Utah corporation, owns, 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. On November 10, 1993 the Company changed its name
from Morgro Chemical Company to Global Casinos, Inc.
The consolidated financial statements include the accounts of Casinos USA,
Inc., Woodbine Corporation, Lincoln Corporation, Colorado Gaming Properties,
Inc., all wholly-owned subsidiaries of the Company; B.P.J. Holding N.V. and its
wholly-owned subsidiary Global Entertainment Group, Inc. N.V., of which the
Company owns a 100% interest; and the Company owns a 61% profits interest in
the Bishkek, Kyrgyzstan casino. All significant inter-company accounts and
transactions have been eliminated in consolidation.
By an Agreement dated June 27, 1995, and effective July 15, 1995
("Dissolution Agreement"), the Company assigned its interest in the Casino
Lazurnaya to Kenneth D. Brown, President and majority shareholder of Global
Casinos Group, Inc., a joint venturer. The Company received all of the profit
interest (61%) in Casino Las Vegas, the remaining 33-1/3% interest in Casino
Masquerade, and a promissory note in the amount of $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.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. There has not been any significant change
in the Company's significant accounting policies nor has there been any
significant development in contingent liabilities and commitments.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
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included. The results for these interim periods are not necessarily indicative
of the results for the entire year. These statements should be read in
conjunction with the financial statements and footnotes thereto included in the
Form 10-KSB for the fiscal year ended June 30, 1995.
2. BANKRUPTCY OF CASINOS USA, INC.
Casinos USA is currently in default under all of its secured obligations
encumbering the Bull Durham Saloon and Casino. The efforts of the Company to
negotiate restructured terms for the repayment of the secured obligations were
unsuccessful. As a result, on October 18, 1995, Casinos USA filed a voluntary
petition under Chapter 11 of the United States Bankruptcy Code. Casinos USA
has continued to operate the Bull Durham as debtor-in-possession. On March 15,
1996 the Company filed its plan of reorganization with the Bankruptcy Court.
The Company is seeking to obtain a confirmed plan of reorganization. Summary
financial information for Casinos USA is as follows:
<TABLE>
<CAPTION>
March 31, 1996
(unaudited)
__________
<S> <C>
Balance Sheet:
Current assets $421,974
Net property, plant and equipment 3,479,179
Other assets, net 1,138,030
__________
Total assets $5,039,183
==========
Total liabilities $5,746,099
==========
<CAPTION>
12 Months 9 Months
ended ended
June 30, 1995 March 31, 1996
(unaudited) (unaudited
_________ __________
<S> <C> <C>
Operating Information:
Net revenues $1,522,471 $1,621,167
Total operating expenses 1,357,337 1,344,531
_________ __________
Income from operations 165,134 276,636
Interest expense 350,624 356,426
_________ __________
(Loss) after interest expense $(185,490) $(79,790)
========== =========
</TABLE>
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3. COLORADO GAMING PROPERTIES, INC. FORECLOSURE
On January 25, 1996 the Company reached an agreement with the first note
holder on the Gas Light property to stay the foreclosure that was initiated by
the note holder. The agreement called for certain monthly payments by the
Company to stay the foreclosure on a month-by-month basis. The Company made
the January and February payments. On March 7, 1996 a second mortgage holder
on the Nitro Club property initiated a foreclosure action. The Company
attempted to settle this obligation. The outstanding principal amount is
approximately $40,000. Since the note holder and the Company were unable to
reach an agreement, the note holder foreclosed and has assumed the obligations
of the first mortgage holder. Under the laws of Colorado, the Company has
seventy-five days from the date of the foreclosure sale to redeem the second
note holder. Because the Company was unable to settle the Nitro Club
obligations it ceased to make the mortgage payments on the Gas Light.
Therefore, the Company shall have seventy five days from March 25, 1996 to
redeem. The Company is currently investigating raising capital to redeem these
properties. If the Company is unsuccessful in redeeming or reaching new
agreements with these secured lenders, the Company shall lose these assets
which have been non-operational since January, 1993. If the Company does not
redeem these properties, it will report an approximate loss of $1,200,000,
assuming no deficiency judgment due to the fact that the current balance sheet
of Colorado Gaming Properties has assets of approximately $2,100,000 and
secured debts of approximately $900,000. For the nine (9) months ended March
31, 1996 this subsidiary reported a loss of $61,461. For the year ended June
30, 1995 this subsidiary reported a loss of $362,688.
<PAGE>
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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
document.
LIQUIDITY AND CAPITAL RESOURCES - MARCH 31, 1996 COMPARED TO JUNE 30, 1995
The Company is organized as a holding company for several entities holding
gaming-related properties. Casinos USA 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.
This casino was closed on June 30, 1995. 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. The Company held a 66.2/3% interest in B.P.J. Holding, Inc., an
Aruba Corporation, until July 15, 1995, and thereafter a 100% interest; B.P.J.
Holding, Inc. owns and operates the Casino Masquerade on the Island of Aruba.
By an Agreement dated June 27, 1995, and effective July 15, 1995
("Dissolution Agreement"), the international joint venture in which the Company
participated was dissolved. The Company assigned its interest in the Casino
Lazurnaya to Kenneth D. Brown, President and majority shareholder of Global
Casinos 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 $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.
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 continually investigates opportunities to
undertake further equity financings. 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 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.
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Colorado Gaming Properties is in default on its secured obligations
encumbering the Gas Light. A foreclosure proceeding against the Gas Light was
commenced in August, 1995, by certain subordinated note holders. The Company
reached an agreement with the foreclosing creditor whereby the Company made
payments totaling $15,000 as of January 15, 1995, and the creditor assigned the
Certificate of Purchase to Colorado Gaming Properties. The Certificate of
Purchase has since been exchanged for a Trustee's Deed; however, the property
remains encumbered by the senior deed of trust.
In November, 1995, the senior creditor commenced foreclosure proceedings
on the Gas Light. On January 25, 1996 the Company reached a tentative
agreement with the senior note holder to restructure its debt whereby the
Company was to make payments totaling $77,991.44 beginning January 26, 1996 in
consideration for the senior debt holder continuing the foreclosure action on a
month-to-month basis so long as the required payments were made. The Company
made the first two cure payments; however, in light of the foreclosure against
the adjacent Nitro Club, the Company has elected not to make further payments
on the Gas Light. The property was sold in foreclosure, and the Company has
until June 8, 1996 to cure its default or redeem.
By a letter agreement dated December 8, 1995, Colorado Gaming Properties,
Inc. reached an agreement to bring the senior secured debt holder of the Nitro
Club current. The letter agreement calls for total payments of $60,945
beginning December 15, 1995 and ending March 15, 1996. Thereafter, the letter
agreement requires monthly mortgage payments of $5,597 including principal,
interest, taxes and sewer fees. The Company made all but the March 15, 1996
payment. On January 22, 1995 the Company received a notice of foreclosure on a
second deed of trust encumbering the Nitro Club. The original principal
balance of this note was approximately $40,000. The Company attempted to reach
an agreement on this debt but was unable to do so. The property was sold in
foreclosure on March 7, 1996 to the subordinated creditor and the Company has
until May 21, 1996 to cure this debt or redeem. Because the Company has
discontinued payments to the senior creditor on the Nitro Club, the second lien
holder has taken over such payments on their senior debt as well as maintenance
of the property.
With regard to the Gas Light and Nitro Club properties, the Company is
currently negotiating with several parties to either form a joint venture or
borrow funds necessary to cure these defaults or redeem. There is no assurance
that the Company will be successful and, in the event it fails, the Company
will report a loss of approximately $1,200,000, assuming no deficiency judgment
due to the fact that the properties have a book value of approximately
$2,100,000 and secured debts of approximately $900,000.
Casinos USA is currently in default under all of its secured obligations
encumbering the Bull Durham Saloon and Casino. Civil actions were initiated to
foreclose upon the junior liens. The efforts of the Company to negotiate
restructured terms for the repayment of the secured obligations were
unsuccessful. As a result, on October 18, 1995, Casinos USA filed a voluntary
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<PAGE>
petition under Chapter 11 of the United States Bankruptcy Code. Casinos USA is
continuing to operate the Bull Durham as debtor-in-possession. On March 15,
1996, the Company filed its plan of reorganization with the Bankruptcy Court.
The Company is attempting to seek confirmation of the Bankruptcy Plan.
For the nine (9) months ended March 31, 1996, the Company's total assets
decreased from $13,336,703 at June 30, 1995 to $12,986,683 at March 31, 1996, a
decrease of $350,020. During this period, total liabilities decreased from
$10,240,452 at June 30, 1995 to $8,903,740 at March 31, 1996, a decrease of
$1,336,712.
Specifically for the nine (9) months ended March 31, 1996, current assets
increased from $923,865 at June 30, 1995 to $1,413,576 at March 31, 1996, an
increase of $489,711 or 53%. The most notable change in current assets was the
addition of $200,000 of note receivables from the Dissolution Agreement and an
increase in cash of $344,379 at the Company's operating casinos.
Cash on hand at March 31, 1996 was $909,375 which sum includes cash held
by the Company's casinos of $857,820, an increase of $344,379 or 60.9% from the
June 30, 1995 cash balance of $585,981 which included cash held by the
Company's casinos of $457,360 and $20,985 of restricted cash. The increase in
cash is primarily attributable to improved cash flow at the operating casinos.
Net property, plant and equipment decreased from $8,248,846 at June 30,
1995 to $7,509,198 at March 31, 1996, a decrease of $739,648 or 8.9%. The most
significant reason for the decrease in net property, plant and equipment is due
to the Dissolution Agreement which resulted in a decrease of assets of
$515,261. During the nine (9) months ended March 31, 1996, purchases of
equipment amounted to $133,226 and depreciation amounted to $321,800 coupled
with the return of net assets to a vendor of $35,813 in satisfaction of
canceling the debt. Net leasehold and contract rights increased from
$2,469,408 at June 30, 1995 to $2,505,101 at March 31, 1996, an increase of
$35,693 or 1.4%. These assets increased by $308,168 due to the Dissolution
Agreement and decreased $272,475 due to continued amortization. Other assets
decreased from $211,603 at June 30, 1995 to $80,493 at March 31, 1996, a
decrease of $131,110 or 61.9%. The primary decrease arose from a decrease of
$130,777 due to the Dissolution Agreement, amortization of $2,970, and an
increase of $2,637 for the nine (9) months ended March 31, 1996. Note
receivables at June 30, 1995 decreased from $1,482,981 to $1,478,315 at March
31, 1996, a decrease of $4,666 or 1.6%.
The current portion of long-term debt decreased from $6,649,601 at June
30, 1995 to $6,234,812 at March 31, 1996, a decrease of $414,789 or 6.2%.
Accounts payable decreased from $815,669 at June 30, 1995 to $696,829 at March
31, 1996, a decrease of $118,840 or 14.6%. Accrued expenses decreased from
$965,473 at June 30, 1995 to $937,806 at March 31, 1996, a decrease of $27,667
or 2.9%. Accrued interest decreased from $674,321 at June 30, 1995 to $574,799
at March 31, 1996, a decrease of $99,522 or 14.8%. This decrease resulted from
the settlement of debt restructuring of $346,958 and additional accrued
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interest of $247,436. Mandatory Convertible Preferred Stock decreased from
$346,500 at June 30, 1995 to $338,360 at March 31, 1996, a decrease of $8,140
or 2.3%. As a result, current liabilities decreased from $10,103,943 at June
30, 1995 to $8,834,982 at March 31, 1996, a decrease of $1,268,961 or 12.6%.
As a result of the foregoing, for the nine (9) months ended March 31,
1996, the working capital deficit decreased from $9,180,078 at June 30, 1995 to
$7,721,406 at March 31, 1996, a decrease of $1,758,672 or 19.2%.
Stockholders' equity increased during the nine (9) months ended March 31,
1996, increasing from $3,096,251 at June 30, 1995 to $4,082,943 at March 31,
1996, an increase of $986,692 or 31.9%. This increase is the result of a net
loss of $(151,086) for the nine (9) months ended March 31, 1996, offset by
warrants exercised totaling $137,514 and exchanges of debt and other expense
for equity of $1,000,264 during the nine (9) months ended March 31, 1996.
Net cash used by investing activities for the nine (9) months ended March
31, 1996 was $(78,399). This compares with net cash used by investing
activities of $(540,391) for the nine (9) months ended March 31, 1995.
Specifically, the Company used $(135,863) for the purchase of equipment and
other assets for the nine (9) months ended March 31, 1996, compared to
$(719,612) for the nine (9) months ended March 31, 1995. Offset against this,
the Company received $57,464 of principal payments on its note receivables for
the nine (9) months ended March 31, 1996 compared to $179,221 for the nine (9)
months ended March 31, 1995.
Net cash provided by financing activities for the nine (9) months ended
March 31, 1995 was $607,041 compared to net cash used of $(135,895) for the
nine (9) months ended March 31, 1996. Specifically, cash provided by financing
activities for the nine (9) months ended March 31, 1995, was $993,500,
comprised of $188,500 in loans, and $805,000 realized from the exercise of
Common Stock Purchase Warrants. This compares to $137,514 from the exercise of
Common Stock Purchased and $1,160 of loans for the nine (9) months ended March
31, 1996. Offset against the cash provided by financing activities were
promissory note principal reduction payments and payments to minority interest
in the amount of $(386,459) and $(266,429) for the periods ended March 31, 1995
and March 31, 1996, respectively. In addition, for the nine (9) months ended
March 31, 1996 there was an offset by financing activities of $(8,140) from the
redemption of Mandatory Convertible Preferred Stock.
As a result of a loss from operations during the nine (9) months ended
March 31, 1995 of $(549,535), together with non-cash net expenses of $654,080
(comprised of amortization and depreciation) and decreases in operating assets
and liabilities totaling $(17,081), for the nine (9) months ended March 31,
1995, the Company reported net cash provided from operations of $121,626. This
compares to a net loss for the nine (9) months ended March 31, 1996 of
$(151,086) together with net non-cash items of $462,791 (comprised of
amortization and depreciation of $597,245, stock for services of $21,762,
minority interest of $45,598 and gain from debt restructuring of $(201,814))
<PAGE>
<PAGE>
and increases in operating assets of $246,968. For the nine (9) months ended
March 31, 1996, the Company reported net cash provided by operations of
$558,673.
Management intends to continue concentrating on improving revenues at the
three operating casinos while trying to control operating expenses. Management
also intends to continue efforts to renegotiate the Company's debt burden and
thereby reduce interest expense. There can be no assurance that these efforts
will be successful. For the foreseeable future, the Company anticipates that
its principal source of funds will be derived from cash flow from casino
operations. However, the Company continually investigates opportunities to
raise capital to retire debt. In the event that the Company's net cash flow is
not sufficient to satisfy its working capital requirements, the Company may be
required to consider additional sources of funding either in the form of debt
or equity. While the Company has no current plans or arrangements with respect
to additional financing, should it become necessary, such financing could
represent further dilution to, or be on terms unfavorable to, current
stockholders of the Company.
Other than the foregoing, Management knows of no trends, events or
uncertainties that have had or that are reasonably expected to have a material
impact on the net sales or revenues of the Company.
RESULTS OF OPERATIONS - THREE (3) MONTHS ENDED MARCH 31, 1996 COMPARED TO THE
THREE (3) MONTHS ENDED MARCH 31, 1995
A comparison of the results of operations of the Company for the three (3)
months ended March 31, 1995 with the results of operations for the three (3)
months ended March 31, 1996 reflects the Company's transition from a
concentration on the acquisition of gaming properties to one of improving
operating results. Lillie's Casino in Deadwood, South Dakota, Bull Durham
Saloon and Casino in Black Hawk, Colorado, Casino Las Vegas in Bishkek,
Kyrgyzstan, Casino Masquerade in Aruba, and Casino Lazurnaya in Sochi, Russia
were all operating during the three (3) months ended March 31, 1995. In
contrast, only the Bull Durham, Casino Las Vegas and Casino Masquerade operated
for the same period in 1996.
Net revenues for the three (3) months ended March 31, 1995 were $2,203,559
for five (5) operating casinos compared to net revenues of $2,231,116 for the
three (3) months ended March 31, 1996 which had three (3) operating casinos.
This represents an increase of 1.3%.
Operating, general and administrative expenses decreased from $1,920,421
for the three (3) months ended March 31, 1995 to $1,731,776 for the three (3)
months ended March 31, 1996, a decrease of $188,645 or 9.8%. The majority of
this decrease was due to salary reductions associated with terminated employees
and continued cost reductions. Depreciation decreased from $135,800 for the
three (3) months ended March 31, 1995 to $107,365 for the three (3) months
ended March 31, 1996, a decrease of $28,435 or 20.9%. The majority of this
decrease is due to the reduction of assets in service resulting from the
<PAGE>
<PAGE>
<PAGE>
Dissolution Agreement. Amortization increased from $91,450 for the three (3)
months ended March 31, 1995 to $98,065 for the three (3) months ended March 31,
1996, an increase of $6,615 or 7.2%, reflecting increases in leasehold,
contract rights and other assets due primarily to the Dissolution Agreement.
Total operating expenses decreased from $2,147,671 for the three (3) months
ended March 31, 1995, to $1,937,206 for the three (3) months ended March 31,
1996, a decrease of 9.8%.
As a result of the increase in net revenues and the decrease in operating
expenses, income from operations before other expenses increased from $55,888
for the three (3) months ended March 31, 1995 to $293,910 for the three (3)
months ended March 31, 1996. Interest income decreased from $105,259 for the
three (3) months ended March 31, 1995 to $41,503 for the three (3) months ended
March 31, 1996. Interest expense increased from $155,380 for the three (3)
months ended March 31, 1995 to $227,955 for the three (3) months ended March
31, 1996, an increase of $72,575 or 46.7%. The majority of the increase arises
from the increase in the interest rate on the debts due to the accelerated rate
of interest on loan defaults. Income from operations increased from $5,767 for
the three (3) months ended March 31, 1995, to income of $107,458 for the three
(3) months ended March 31, 1996, an increase of 1763.3%.
The Company reported a net income for the three (3) months ended March 31,
1996 of $97,059 after a minority interest expense of $(10,399). This compares
to a net loss for the three (3) months ended March 31, 1995 of $(53,885) after
a foreign currency loss of $(29,898) and loss from minority interest of
$(29,754). Based on the foregoing, the Company reported a net loss per share
of $(0.01), based on 9,087,250 weighted average shares outstanding for the
three (3) months ended March 31, 1995, and income of $0.01 per share based on
12,222,497 weighted average shares outstanding for the three (3) months ended
March 31, 1996.
RESULTS OF OPERATIONS - NINE (9) MONTHS ENDED MARCH 31, 1996 COMPARED TO THE
NINE (9) MONTHS ENDED DECEMBER 31, 1995
Net revenues for the nine (9) months ended March 31, 1995 were $5,397,338
compared to net revenues of $5,959,261 for the nine (9) months ended March 31,
1996, an increase of $561,923 or 10.4%.
Total operating expenses for the nine (9) months ended March 31, 1995 were
$5,570,438 compared to $5,716,588 for the nine (9) months ended March 31, 1996,
an increase of $146,150 or 2.6%. Operating, general and administrative
expenses increased from $4,916,358 for the nine (9) months ended March 31, 1995
to $5,119,343 for the nine (9) months ended March 31, 1996, an increase of
$202,985 or 4.1%. The majority of this increase is attributable to increased
legal fees associated with debt negotiations and settlements with terminated
employees. Depreciation decreased from $388,130 for the nine (9) months ended
March 31, 1995 to $321,800 for the nine (9) months ended March 31, 1996, a
decrease of $66,330 or 17.1%. This decrease was due to the removal of assets
in service by the Dissolution Agreement and the closure of the Deadwood, South
<PAGE>
<PAGE>
<PAGE>
Dakota casino. Amortization increased from $265,950 at March 31, 1995 to
$275,445 at March 31, 1996, an increase of 3.5% attributable to increased
leasehold and contract rights from the Dissolution Agreement. Interest expense
increased from $462,466 for the nine (9) months ended March 31, 1995 to
$522,719 for the nine (9) months ended March 31, 1996, an increase of $60,253
or 13.0%. The majority of this increase is attributable to increased interest
rates on the debt in default. Interest income decreased from $119,773 at March
31, 1995 to $114,615 at March 31, 1996, a decrease of 4.3% due to a decrease in
outstanding principal balance on note receivables.
Based upon the foregoing, the Company reported a loss from operations of
$(515,793) for the nine (9) months ended March 31, 1995, compared to an
operating loss of $(165,431) for the nine (9) months ended March 31, 1996, a
decrease in the operating loss of $(350,362) or 67.9%. The Company also
reported income from minority interest of $69,736 and a foreign currency loss
of $(103,478) for the nine (9) months ended March 31, 1995, compared to a
minority interest loss of $(187,469) and a gain from debt restructuring of
$201,814 for the nine (9) months ended March 31, 1996.
As a result of the above, the Company reported a net loss for the nine (9)
months ended March 31, 1995 of $(549,535) which translates into a net loss per
share of $(0.06) based on 9,087,250 weighted average shares outstanding,
compared to a net loss of $(151,086) for the period ended March 31, 1996 which
translates into a net loss per share of $(0.01) based on 10,798,397 weighted
average shares outstanding.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. 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 that Casinos made the promissory notes to the
Plaintiff which has the approximate principal balance of $680,000,
although the Company believes it may have some defenses and offsets.
The litigation is stayed as to Casinos due to the Bankruptcy
Proceeding described below. As to the Company's liability as
guarantor, 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. 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.
This matter was 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 matured and the Company was in
default. On February 28, 1995, a default judgment was entered against
the Company and in favor of the Plaintiff in the amount of
<PAGE>
<PAGE>
$170,346.25, representing principal balance due, accrued and unpaid
interest, attorneys' fees and court costs. The Company has since paid
the full amount of the judgment.
3) Lisa Paige Montrose Promissory Note.
Lisa Paige Montrose is the holder of a promissory note made by Casinos
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 July, 1995, Ms. Montrose commenced a foreclosure proceeding against
the Bull Durham Saloon and Casino by the Gilpin County Public Trustee.
Ms. Montrose 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 foreclosure sale was scheduled to take place
October 19, 1995. Negotiations to resolve the dispute and restructure
the debt failed, and Casinos filed a voluntary petition under Chapter
11 of the United States Bankruptcy Code on October 19, 1995
("Bankruptcy Proceeding"). As a result of the bankruptcy filing, the
foreclosure proceeding and all other actions against Casinos have been
stayed. Casinos continues to operate the Bull Durham as debtor in
possession.
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 and Casinos are named defendants 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. 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. The litigation is
stayed as to Casinos due to the Bankruptcy Proceeding. All parties
<PAGE>
<PAGE>
have reached a conditional settlement whereby Casinos U.S.A. has
agreed to an allowed unsecured claim for the plaintiff in the
bankruptcy proceeding in the amount of $30,000. The Company has
purchased this claim in consideration for initial payment of $10,000
and a guarantee of future payments out of the proposed plan of
reorganization totalling $20,000. The lawsuit pending in the Colorado
District Court would be dismissed with prejudice. The entire
settlement agreement is conditional upon the approval of the
Bankruptcy Court which is pending. Should the settlement agreement
not be so approved, the plaintiff is likely to request a relief from
stay from the Bankruptcy Court, and trial in the Colorado District
Court would be rescheduled.
5) In Re Casinos U.S.A., Inc., Case No. 95-20864 MSK, in the United
States District Court for the District of Colorado.
Casinos is currently in default under all of its secured obligations
encumbering the Bull Durham. Civil actions were initiated to
foreclose upon the junior liens. The efforts of the Company to
negotiate restructured terms for the repayment of the foregoing
secured obligations were unsuccessful. As a result, on October 18,
1995, Casinos U.S.A. filed a voluntary petition under Chapter 11 of
the United States Bankruptcy Code. Casinos U.S.A. intends to continue
to operate the Bull Durham as debtor-in-possession.
The Company believes that the approximate $4,700,000 in secured debt
encumbering the Bull Durham property is substantially greater than the
property's current fair market value. As a result, there can be no
assurance that the Company will be successful in achieving a plan of
reorganization which will result in the Company's ability to continue
to own and operate the Bull Durham.
6) Pioneer Group, Inc. Foreclosure.
Colorado Gaming Properties, Inc., as owner of the Gas Light, was also
party to a foreclosure proceeding against the Gas Light by the Gilpin
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 property was sold to the
creditor, and the Certificate of Purchase was subsequently assigned to
Colorado Gaming Properties, Inc. in consideration for payments
totalling $15,000 to the Pioneer Group, Inc. The redemption period
has expired, and the Certificate of Purchase has been exchanged for a
Trustee's Deed. However, the property remains encumbered by the
senior deed of trust.
7) Estate of Eric B. Bayless Foreclosure.
The Company's wholly-owned subsidiary, Colorado Gaming Properties,
Inc., as owner of the Gas Light, is presently a party to a foreclosure
<PAGE>
<PAGE>
<PAGE>
proceeding against the Gas Light by the Gilpin County Public Trustee.
The action was commenced in November, 1995, by the Estate of Eric B.
Bayless as beneficiary on a first deed of trust securing a promissory
note in default. The Company negotiated a settlement whereby it would
make payments totalling $77,991.44 to cure defaults on the promissory
note in consideration for continuing the foreclosure proceedings on a
month-to-month basis until all cure payments are received at which
point the foreclosure proceeding would be dismissed. The first two
cure payments were made; however, in light of the foreclosure against
the adjacent Nitro Club, the Company has elected not to make further
payments on the Gas Light. The property was sold in foreclosure, and
the Company has until June 8, 1996 to cure the default or redeem. The
Company is considering options to redeem this debt; however, there can
be no assurance that such efforts will be successful.
8) Shaw Construction, LLC Foreclosure.
The Company's wholly-owned subsidiary, Colorado Gaming Properties,
Inc., as owner of the Nitro Club, is presently a party to a
foreclosure proceeding against the Nitro Club by the Gilpin County
Public Trustee. The action was commenced in January, 1996, by the
Shaw Construction LLC as beneficiary on a subordinated deed of trust
securing a promissory note in default. The property was sold in
foreclosure on March 7, 1996, and the Company has until May 21, 1996
to cure this default or redeem. The Company is considering options to
redeem this debt; however, there can be no assurance that such efforts
will be successful. In the interim, the Company has discontinued
payments to the senior creditor on the Nitro Club, and Shaw
Construction has taken over such payments as well as maintenance of
the property.
9) SEC Investigation.
During 1995, the Company received requests for information from the
U.S. Securities and Exchange Commission ("SEC") related to an
investigation begun by the SEC during 1994 into various matters,
including certain transactions in securities by the Company and one of
its officers and directors. As of March 31, 1996, neither management
of the Company nor the Company's legal counsel have been informed of
the results, if any, of the SEC's investigation or of any timetable
for the SEC to complete its investigation. There is no way to predict
what, if any, effect the outcome of this matter will have on the
financial position of the Company.
Item 2. Changes in Securities
None
<PAGE>
<PAGE>
ITEM 3. DEFAULT UPON SENIOR SECURITIES
1) Convertible Preferred Stock.
The Company has issued and outstanding 1,406,250 shares of Series A
Convertible Preferred Stock (the "Convertible Preferred Stock"), which
was sold in connection with a private offering which closed on May 31,
1994. The Company was required to redeem all then outstanding shares
of the Convertible Preferred Stock on May 31, 1995 (the "Mandatory
Redemption Date"). The redemption price payable by the Company was
originally $2.00 per share. 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 prior to the Mandatory Redemption
Date, and the Company was obligated to complete the mandatory
redemption on or before May 31, 1995, representing an aggregate
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 continues to be issued and
outstanding 169,180 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 $338,360, all of
which is matured and currently in default.
2) Astraea Investment Management, L.P.
Astraea Investment Management, L.P. holds certain promissory notes
made by Casinos. The notes held by this creditor are secured by a
senior deed of trust against the Bull Durham. The notes are presently
in default due to nonpayment. The present balance due is
approximately $790,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the three
months ended March 31, 1996.
ITEM 5. OTHER INFORMATION
None
<PAGE>
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GLOBAL CASINOS, INC.
Dated: May 13, 1996 By: /s/ Stephen G. Calandrella
________________ ____________________________
Stephen G. Calandrella, Interim President
Dated: May 13, 1996 By: /s/ Pete Bloomquist
________________ ____________________________
Pete Bloomquist, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTANS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET & CONSOLIDATED STATEMENT OF OPERATIONS FOUND ON
PAGES 4 AND 5 OF THE COMPANY'S FORM 10-QSB FOR THE NINE MONTHS ENDED
MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1996
<CASH> 909,375
<SECURITIES> 0
<RECEIVABLES> 1,930,863
<ALLOWANCES> 2,500
<INVENTORY> 26,304
<CURRENT-ASSETS> 1,413,576
<PP&E> 8,496,436
<DEPRECIATION> (987,238)
<TOTAL-ASSETS> 12,986,683
<CURRENT-LIABILITIES> 8,834,982
<BONDS> 0
0
1,350,416
<COMMON> 61,305
<OTHER-SE> 2,671,222
<TOTAL-LIABILITY-AND-EQUITY> 12,286,683
<SALES> 5,953,570
<TOTAL-REVENUES> 5,959,261
<CGS> 5,716,588
<TOTAL-COSTS> 5,716,588
<OTHER-EXPENSES> (408,104)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (522,719)
<INCOME-PRETAX> (165,431)
<INCOME-TAX> 0
<INCOME-CONTINUING> (165,431)
<DISCONTINUED> 0
<EXTRAORDINARY> 14,345
<CHANGES> 0
<NET-INCOME> (151,086)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
