FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO 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
ofincorporation or organization) Identification number
5373 N. Union Blvd., Suite 100 Colorado Springs, Colorado 80918
(Address of Principal Offices) (Zip Code)
Registrant's telephone number, including area code:(719) 590-4900
(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 February 19, 1999 1,546,360 shares of Common Stock of the
Registrant were outstanding.
Transitional Small Business Disclosure Format (check one)
Yes [ ] No [ X ]
INDEX
PART 1. FINANCIAL INFORMATION:
Item 1. Financial Statements
Balance Sheets at December 31, 1998
(unaudited) and June 30, 1998
Statements of Operations for the Three Months
Ended December 31, 1998 (unaudited) and December 31,
1997 (unaudited)
Statements of Operations for the Six Months Ended
December 31, 1998 (unaudited) and December 31, 1997
(unaudited)
Statements of Cash Flows for the Six Months Ended
December 31, 1998 (unaudited) and December 31, 1997
(unaudited)
Notes to Unaudited Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
The consolidated financial statements included herein have been
prepared by Global Casinos, Inc. (the Company) without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been omitted pursuant to such SEC rules and regulations. In the
opinion of management of the Company the foregoing statements
contain all adjustments necessary to present fairly the financial
position of the Company as of December 31, 1998, and its results
of operations for the three and six-month periods ended December
31, 1998 and 1997 and its cash flows for the six-month periods
ended December 31, 1998 and 1997. The Company's balance sheet as
of June 30, 1998 included herein has been derived from the
Company's audited financial statements as of that date included
in the Company's annual report on Form 10-KSB. The results for
these interim periods are not necessarily indicative of the
results for the entire year. The accompanying financial
statements should be read in conjunction with the financial
statements and the notes thereto filed as a part of the Company's
annual report on Form 10-KSB.
Global Casinos, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, June 30,
1998 1998
(unaudited)
ASSETS
Current assets:
Cash 699,436 722,893
Restricted cash 140,450 140,450
Accounts receivable:
Trade, net of allowance for doubtful accounts of
$23,140 and $26,140 at December 31, 1998
and June 30, 1998 316,367 371,602
Related parties 187,004 16,282
Inventory 282,508 284,978
Prepaid rent 167,187 192,800
Current portion of notes receivable 64,973 60,623
Marketable trading securities 104,915 12,980
Other 100,261 95,870
Total current assets 2,063,101 1,898,478
Land, buildings and equipment:
Land 526,550 526,550
Buildings 4,348,375 4,043,870
Equipment 2,000,468 2,040,944
6,875,393 6,611,364
Accumulated depreciation (1,558,193) (1,460,096)
5,317,200 5,151,268
Other assets:
Leasehold rights and interests and contract
rights, net of amortization of $634,530 and
$1,199,095 at December 31, 1998 and June 30,1998 1,655,410 2,643,348
Goodwill, net of amortization of $170,355
and $110,230 at December 31, 1998 and
June 30, 1998 1,994,150 2,054,275
Hotel credits 477,770
Notes receivable, net of current portion,
including receivables in default 276,216 290,340
Other assets, net of amortization of $31,850 and
$23,700 at December 31, 1998 and June 30, 1998 18,825 24,197
4,422,371 5,012,160
11,802,672 12,061,906
(Continued)
Global Casinos, Inc. and Subsidiaries
Consolidated Balance Sheets
(Continued)
Decembe 31, June 30,
1998 1998
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 554,563 673,381
Accrued expenses 1,458,369 1,344,466
Accrued interest, including $40,431 to
related parties at June 30, 1998 232,705 294,131
Note payable 341,692 245,000
Current portion of long-term debt,
including debt in default and $174,589
and $367,351 to related parties
at December 31, 1998 and June 30, 1998 1,726,890 1,920,950
Mandatory redeemable convertible Class A
preferred stock, in default 27,500 33,500
Other 40,000 40,000
Total current liabilities 4,381,719 4,551,428
Long-term debt, less current portion 2,757,739 3,212,472
Other 12,056 12,056
2,769,795 3,224,528
Commitments and contingencies
Stockholders' equity:
Preferred stock - convertible, nonvoting:
10,000,000 shares authorized
Class A - $2 par value; 96,500 and 109,000
shares issued and outstanding at December 31,
1998 and June 30, 1998 193,000 218,000
Class B - $.01 par value; 320,690 and 329,178
shares issued and outstanding at December 31,
1998 and June 30, 1998 3,207 3,292
Class C - $.01 par value; 487,172 shares
issued and outststanding 4,872
Common stock - $.05 par value; 50,000
shares authorized; 1,543,410 and 1,504,344
shares issued and outstanding at
December 31, 1998 and June 30, 1998 77,170 75,217
Additional paid-in capital 13,152,125 12,551,458
Accumulated deficit (8,779,216) (8,562,017)
4,651,158 4,285,950
11,802,672 12,061,906
See accompanying notes.
Global Casinos, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For the three months ended December 31,
1998 1997
Revenues:
Casino 1,280,394 2,332,033
Bingo 975,661 913,567
Food and beverage 27,823 40,734
Other 24,998 56,613
2,308,876 3,342,947
Expenses:
Cost of sales 526,555 538,051
Operating, general, and administrative 1,582,230 2,428,540
Depreciation and amortization 192,227 299,788
Gain on sale of investment in subsidiaries (189,250)
2,111,762 3,266,379
Income from operations 197,114 76,568
Other income (expense):
Interest income 7,710 8,114
Interest expense, including $10,583 and
$9,786 to related parties at December 31,
1998 and 1997 (120,514) (97,878)
Unrealized net gain on marketable
trading securities 57,340
(55,464) (89,764)
Income (loss) before minority interest and
extraordinary item 141,650 (13,196)
Minority interest in income of subsidiary 25,005
Income before extraordinary item 141,650 11,809
Extraordinary item - gain from restructuring
of debt 66,101
Net income 207,751 11,809
Dividends on Class B preferred stock (62,165)
Net income available to common stockholders 145,586 11,809
Earnings per common share:
Income from continuing operations 0.09 0.01
Extraordinary item 0.01
Net income available to common stockholders 0.10 0.01
Earnings per common share - assuming dilution:
Income from continuing operations 0.07 0.01
Extraordinary item
Net income available to common stockholders 0.07 0.01
See accompanying notes.
Global Casinos, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For the six months ended December 31,
1998 1997
Revenues:
Casino 2,585,081 4,363,576
Bingo 1,790,807 1,460,090
Food and beverage 55,273 79,977
Other 142,354 128,800
4,573,515 6,032,443
Expenses:
Cost of sales 963,484 881,811
Operating, general, and administrative 3,411,562 4,642,325
Depreciation and amortization 372,873 567,295
Gain on sale of investment in subsidiaries (189,250)
4,558,669 6,091,431
Income (loss) from operations 14,846 (58,988)
Other income (expense):
Interest income 15,158 15,936
Interest expense, including $23,029 and
$19,573 to related parties at December 31,
1998 and 1997 (236,540) (263,898)
Unrealized net gain on marketable
trading securities 50,615
(170,767) (247,962)
Loss before minority interest and
extraordinary item (155,921) (306,950)
Minority interest in income of subsidiary (24,603)
Loss before extraordinary item (155,921) (331,553)
Extraordinary item - gain from
restructuring of debt 66,101 190,930
Net loss (89,820) (140,623)
Dividends on Class B preferred stock (127,380)
Net loss available to common stockholders (217,200) (140,623)
Loss per common share - basic and diluted:
Loss from continuing operations (0.10) (0.22)
Extraordinary item (0.04) 0.12
Net loss available to common stockholders (0.14) (0.10)
See accompanying notes.
Global Casinos, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
For the six months ended December 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating activities 502,321 679,489
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (320,783) (383,452)
Collections on notes receivable 29,774 18,203
Purchase of marketable securities (35,820)
Acquisition of Alaska Bingo Supply,
net of cash acquired (383,090)
Other assets (131,032)
Distribution to minority interest (55,716)
Net cash used in investing activities (326,829) (935,087)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments of long-term debt (111,959)
Issuances of long-term debt 170,349 67,623
Principal payments of notes payable (53,308)
Borrowings against notes payable 150,000 425,657
Issuance of common stock 187,500
Payment of mandatory redeemable
preferred stock (2,500) (10,000)
Redemption of Class B preferred stock (234,871)
Payment of dividends on Class B
preferred stock (116,660)
Net cash (used in) provided by
financing activities (198,949) 670,780
Net (decrease) increase in cash (23,457) 415,182
Cash at beginning of year 722,893 1,048,371
Cash at end of year 699,436 1,463,553
(Continued)
Global Casinos, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Continued)
(Unaudited)
For the six months ended December 31,
1998 1997
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest 69,693 177,902
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Mandatory redeemable preferred stock
converted to common stock 3,500
Debt and accrued interest converted
to common stock 116,722 89,000
Debt converted to Class B preferred stock 150,000
Debt and accrued interest converted to
Class C preferred stock, including
$364,663 to related parties 584,605
Class A preferred stock converted to
common stock 25,000
Dividends accrued on Class B
preferred stock 10,443
Acquisition of Alaska Bingo Supply:
Fair value of assets acquired 620,587
Intangible assets 3,863,614
Liabilities assumed (101,111)
Fair value of assets exchanged (4,000,000)
Cash received, net of cash acquired 383,090
See accompanying notes.
Global Casinos, Inc. & Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1998
(Unaudited)
1. Organization
At December 31, 1998, and for the three and six months ended
December 31, 1998 and 1997, the consolidated financial statements
of the Company include the accounts of the following wholly-
owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Casinos USA, Inc. ("Casinos USA"), a Colorado corporation,
which owns and operates the Bull Durham Saloon and Casino
("Bull Durham"), located in the limited stakes gaming
district of Black Hawk, Colorado.
Global Pelican N.V. ("Pelican"), a St. Maarten Limited
Liability Company located on the island of St. Maarten in
the Netherland Antilles.
Global Alaska Corporation ("Global Alaska"), which operates
Alaska Bingo Supply, Inc. ("ABS") located in Anchorage, Alaska.
The Company acquired ABS on August 1, 1997.
BPJ Holdings N.V. ("BPJ"), a Curacao Limited Liability
Company, which operated the Casino Masquerade on the
Caribbean resort island of Aruba through February 1998.
The Company disposed of its investment in BPJ in December
1998 (Note 3).
Global Casinos International,Inc. ("Global International"),
a Delaware corporation, which through an International Joint
Venture ("IJV") operated Casino Las Vegas in Bishkek, Kyrgyzstan.
The Company transferred its interest in Casino Las Vegas to
its IJV partner in April 1998.
Woodbine Corporation ("Woodbine"), a South Dakota corporation,
which operated Lillie's Casino in Deadwood, South Dakota through
June 30, 1995. Beginning in July 1996, Woodbine began leasing
this property and related equipment to a third party.
Destination Marketing Services ("DMS"), a Colorado corporation,
which acquired the net assets of a Colorado travel services
company in January 1998. The Company disposed of its investment
in DMS in October 1998 (Note 3).
2. Equity conversion
In January 1999, the Board of Directors of the Company ratified
the issuance of the newly designated Series C preferred stock.
The stock has a par value of $.01, is non-voting, and is
convertible into common stock at a rate of $1.20. Holders of
Series C preferred stock are entitled to receive dividends at the
annual rate of 7% based on the stated value per share. The
dividends are cumulative, with any outstanding unpaid dividends
bearing interest at an annual rate of 10%. The Certificate of
Designations, Preferences, and Rights of the Series C
Convertible Preferred Stock will be filed with the State of
Utah in February 1999.
In January 1999, several creditors agreed to convert their debt
to Series C preferred stock, with the conversion to be effective
December 31, 1998. As of December 31, 1998 principal of $487,220
and accrued interest of $97,385 were converted to 487,172 shares
of Series C preferred stock. Included in the conversion were
$258,869.89 and $46,394.90 in principal and accrued interest,
respectively, to related parties.
3. Dispositions
Casino Masquerade
On December 23, 1998, the Company completed the dissolution
of Casino Masquerade. The Company had operated the casino
located in the Radisson Aruba Caribbean Hotel on the island
of Aruba through February 28, 1998, at which time the hotel
was closed for major repairs and renovations. Due to
protracted delays in completing the renovations and other
adverse business circumstances, the Company was able to
negotiate an early termination of the remaining term of the
casino lease. In consideration, the Company received a cash
payment of $400,000 and the issuance of hotel trade credits
having a face value of $600,000.
Effective December 31, 1998, the Company agreed to sell all
of the outstanding shares of BPJ to an unaffiliated third
party. The Company recognized a gain of $183,856 in
connection with the disposition.
Destination Marketing Services, Inc.
Effective October 1, 1998 the Company sold in a management
buy-out all of the outstanding shares of common stock to
DMS's president. The Company had acquired the common stock
in January 1998 in exchange for $10,000 cash and a $69,000 10%
note payable due in 1999. Under the terms of the buy-out, the Company
will receive an aggregate of $20,000 over three years and will
be indemnified against certain liabilities, including payroll
taxes. DMS was not considered to be a significant subsidiary
of the Company. The Company recognized a gain of $5,394 in
connection with the disposition.
The following unaudited proforma consolidated results of
operations for the six months ended December 31, 1998 have
been prepared as if the dispositions had occurred on July 1,
1998 and 1997:
1998 1997
Total revenues $ 4,215,767 $ 4,195,262
Income (loss) before
extraordinary item 495,407 (1,299,152)
Net income (loss) 495,407 (1,108,222)
Income (loss) per share
before extraordinary item $.33 $(.87)
Net income (loss) per share $.33 $(.86)
4. Earnings per share
During the year ended June 30,1998, the Company adopted SFAS
No. 128, Earnings Per Share. This statement replaces the
presentation of primary earnings or loss per share (EPS)
with a presentation of basic EPS. It also requires dual
presentation of basic and diluted EPS for all entities with
complex capital structures and requires reconciliation of
the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS
computation. Basic EPS excludes dilution; diluted EPS
reflects the potential dilution that could occur if securities
or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity.
The adoption of SFAS No. 128 did not result in a change in
previously presented EPS for the three and six months ended
December 31,1997.
Net income (loss) per share of common stock is computed based
on the weighted average number of common shares outstanding
during the year. Dividends on Class B preferrd stock were
not considered for any of the periods as they would be
antidilutive.
The computations of basic and diluted earnings per share for
the periods ended December 31 are as follows:
Numerator for basic and dilued EPS: 1998 1997
Income (loss) available to common 3ME 6ME 3ME 6ME
stockholders $ 145,586 (217,200) 11,809 (140,623)
Denominator:
Weighted average shares 1,516,724 1,510,560 1,480,811 1,480,811
Convertible debt
securities 22,500
Preferred stock:
Mandatory redeemable 2,750
Convertible Class A 17,156
Convertible Class C 405,977
Stock-based compensation
32,267
1,997,374 1,510,560 1,480,811 1,480,811
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Certain statements in this Management's Discussion and Analysis
of Financial Condition and Results of Operations which are not
historical facts are forward-looking statements such as
statements relating to future operating results, existing and
expected competition, financing and refinancing sources and
availability and plans for future development or expansion
activities and capita expenditures. Such forward-looking
statements involve a number of risks and uncertainties that may
significantly affect the Company's liquidity and results in the
future and, accordingly, actual results may differ materially
from those expressed in any forward-looking statements. Such
risks and uncertainties include, but are not limited to, those
related to effects of competition, leverage and debt service
financing and refinancing efforts, general economic conditions,
changes in gaming laws or regulations (including the legalization
of gaming in various jurisdictions) and risks related to development
and construction activities. The following discussion and analysis
should be read in conjunction with the consolidated financial statements
and notes thereto appearing elsewhere in this report.
Overview
Global Casinos, Inc. and its wholly-owned subsidiaries operate in
the domestic and international gaming industry. The Company is
organized as a holding company for the purpose of acquiring and
operating casinos, gaming properties and other related interests.
At December 31, 1998, the Company's consolidated financial
statements consisted of the corporate office in Colorado Springs,
Colorado; The Bull Durham Saloon & Casino in Black Hawk, Colorado;
the Pelican Casino on the island of St. Maarten, Netherland Antilles;
and Alaska Bingo Supply in Anchorage, Alaska.
The operations of the Company are seasonal. St. Maarten experiences
a higher concentration of tourists from December through April.
The Pelican Casino's busy season counters the slow seasons of the
Company's domestic operations. The Bull Durham experiences a
significant increase in tourists` from May through September. ABS's
operations are strongly influenced by the amount of daylight and
snow received. Consequently, its operations are the strongest from
September through April when people do not tend to be outdoors.
Bull Durham Saloon and Casino
The Bull Durham is located approximately one hour from Denver,
Colorado in the town of Black Hawk. In November, the casino
completed its expansion project that increased the gaming space
approximately 2,100 square feet. The casino now operates with
144 slot machines and three tables, and plans to open a fourth
table in summer 1999. The Bull Durham employs an average of 56
full-time employees.
Pelican Casino
The Pelican Casino is located on the Dutch side of St. Maarten.
Casino operations are prohibited on the French side of the
island. The Pelican's customer base consists mainly of American
and European tourists. The casino is located in one of the largest
time-share complexes on the island, the Pelican Resort, which has
over 700 rooms. The casino occupies 7,000 square feet and features
130 slot machines, eight black jack tables, three Caribbean Stud
tables, two roulette wheels, one Let-it-Ride table, and one craps
table. The Pelican employs an average of 66 full-time employees.
Alaska Bingo Supply
ABS is primarily engaged in the distribution of a full line of
bingo related products. ABS products are sold in Alaska to non-
profit organizations and municipalities that use the products for
fund-raising purposes. Charitable bingo is currently the sole
form of legalized gaming in Alaska. With an approximate 30%
market share, ABS is the largest distributor of bingo products in
the state. ABS also receives rent income from the leasing of
space to two bingo hall operators. ABS employs seven full-time
employees.
Results of Operations - Six Months Ended December 31, 1998
Compared to the Six months Ended December 31, 1997
Although the Company incurred a net loss of $89,820 for the six
months ended December 31, 1998, it was $50,803 lower than the
loss for the same period in 1997 of $140,623. The net loss
available to common stockholders was $217,200 for the six months
ended December 31, 1998 compared to $140,623 for the period in
1997. The $76,577 increase in the loss was due to dividends paid
on Class B preferred stock during the six months ended
December 31, 1998.
The results of operations for the six months ended December 31,
1998 were comprised of Bull Durham, Pelican Casino, Alaska Bingo
Supply, and Destination Marketing (through September 30, 1998).
The period in 1997 was comprised of Bull Durham, Pelican Casino,
two months of Alaska Bingo Supply operations, Casino Las Vegas,
and Casino Masquerade.
During the six months ended December 31, 1998, the Company sold
its investments in Casino Masquerade and Destination Marketing.
Destination Marketing was not a material subsidiary of the Company.
The Company had operated Casino Masquerade through February 1998,
at which time the hotel in which it was located was closed for major
repairs and renovations. Due to protracted delays in completing
the renovations and other adverse business circumstances, the
Company was able to negotiate an early termination of the remaining
term of the casino lease. In consideration, the Company received
a cash payment of $400,000 and the issuance of hotel trade credits
having a face value of $600,000. Effective December 31, 1998, the
Company agreed to sell all of the outstanding shares of BPJ to an
unaffiliated third party.
Revenues
The Company's revenues are generated from casino operations,
sales of bingo products, and miscellaneous income that is
comprised of food and beverage sales at the casinos and rental of
bingo halls. Revenues for the six months ended December 31, 1998
were $4,753,515 compared to $6,032,443 for the 1997 period, a
decrease of $1,458,928 or 24%. The decrease is due to the 1998
period not containing any revenues from Casino Masquerade and
Casino Las Vegas. Casino Masquerade's operations ceased March
1998 in conjunction with the renovation of the hotel in which it
was located, and the Company transferred its interest in Casino
Las Vegas to its minority interest partner in April 1998. Revenues
from these two sources for the six months ended December 31, 1997
were $2,155,272.
Bull Durham's revenues increased $102,758 to $1,324,445 for the
six months ended December 31, 1998 compared to $1,221,687 for the
period in 1997. The increase is largely due to the expansion
that opened November 1998. The Pelican Casino's revenues
decreased $66,347 to $1,090,650 for the six months ended December
31, 1998 compared to $1,156,997 for the same period in the prior
year. The decrease is due primarily to the occurrence of
Hurricane George in September 1998 that caused the casino to be
closed for three days and effected island tourism in general.
Alaska Bingo Supply's revenues increased $336,082 to $1,800,672
for the six months ended December 31, 1998 compared to $1,464,590
for the five months ended December 31, 1997. Besides including
one more month of operations, Alaska Bingo's sales were 5% higher
for the period in 1998 compared to the same period in 1997.
Expenses
Cost of sales increased $81,673 to $963,484 for the six months
ended December 31, 1998 compared to $881,811 for the period in
1997. The increase is due to the period in 1998 including an
additional month of Alaska Bingo operations. Alaska Bingo's
gross profit is the same for both the six months ended December
31, 1998 and 1997.
Operating, general, and administrative expenses decreased $1,230,763
to $3,411,562 for the six months ended December 31, 1998 compared
to $4,642,325 for the period in 1997. The decrease is primarily due
to Casino Masquerade and Casino Las Vegas being fully operational
during the six months ended December 31, 1997. Expenses for those
two properties totaled $2,025,371 for the six months ended
December 31, 1997.
Depreciation and amortization costs decreased $194,422 to $372,873
for the six months ended December 31, 1998 compared to $567,295 for
1997. The decrease is due predominantly once again to Casino
Masquerade and Casino Las Vegas being fully operational during the
six months ended December 31, 1997. Bull Durham's depreciation
increased 27% as it begins depreciating the fixed assets acquired
through its expansion.
Other income net of expenses decreased $77,195 to $(170,767) for
the six months ended December 31, 1998 compared to $(247,962) in
1997. Interest expense decreased approximately $27,358 due primarily
to the conversion of the promissory note issued to the seller of ABS
to Series B preferred stock in March 1998. In addition, the Company
recognized $50,615 in unrealized gains on its marketable trading securities.
Extraordinary items decreased $124,829 to $66,101 for the six
months ended December 31, 1998 compared to $190,930 in 1997. In
1998, the Company negotiated the reduction of principal and
interest payments of two outstanding notes.
Management knows of no trends or uncertainties that will have, or
are reasonably likely to have, a material impact on the income
and expenses of the Company.
Liquidity and Capital Resources - December 31, 1998 compared to
June 30, 1998
The Company's primary source of cash is internally generated
through operations. Historically, cash generated from operations
has not been sufficient to satisfy working capital requirements
and capital expenditures. Consequently, the Company has depended
on funding through debt and equity financing to address these
shortfalls.
While the Company continues to face a shortage of working capital,
the deficiency decreased by $334,332 to $(2,318,618) at December 31,
1998 from $(2,652,950) at June 30, 1998. Current assets increased
to $2,063,101 at December 31, 1998 from $1,898,478 at June 30, 1998,
an increase of $164,623 or 9%. Current liabilities decreased to
$4,381,719 at December 31, 1998 from $4,551,428 at June 30, 1998,
a decrease of $169,709 4%. The decrease in the working capital
deficit was due to conversions of debt to equity and management's
continued efforts to reduce operating costs.
Effective December 1998, the Company issued a new series of Class
C preferred stock. The stock has a par value of $.01, is non-
voting, and is convertible into common stock at a rate of $1.20.
Holders of Class C preferred stock are entitled to receive
dividends at the annual rate of 7% based on the stated value per
share. The dividends are cumulative, with any outstanding unpaid
dividends bearing interest at an annual rate of 10%. As of
December 31, 1998 principal of $487,220 and accrued interest of
$97,385 were converted to 487,172 shares of Class C preferred
stock. Included in this transaction were principal and interest
of $299,720 and $64,943, respectively, to related parties which
were converted into 303,886 shares of Class C preferred stock.
Also occurring during December 1998 was the conversion of $100,000
in principal and $16,722 in accrued interest into 36,669 shares of
common stock, at a gain of $37,549. Principal of $150,000 was
converted into 15,000 shares of Class B preferred stock. A creditor
accepted payment of $15,000 for $43,552 in principal and accrued
interest, resulting in a $28,552 gain. The Company will continue
to work towards renegotiating its current debts to extend their
maturities or obtain reduced payments.
In conjunction with the dissolution of Casino Masquerade, the
Company received $400,000 in cash and hotel credits at the renovated
Radisson Aruba Caribbean Hotel with a face value of $600,000. The
Company used the cash proceeds to acquire marketable trading
securities and make payments towards various accounts payable and
debt. The hotel credits, being carried at $477,770, can be used
for a six-year period commencing January 1, 2000. The Company
intends to use the hotel credits for marketing purposes and as
consideration for debt payments.
Net cash used in investing activities decreased $608,258 to
$326,829 for the six months ended December 31, 1998 from $935,087
for the six months ended December 31, 1997. The main reason for
the decrease is that during the six months ended December 31, 1997,
the Company used approximately $383,090, net of cash acquired, for
the purchase of Alaska Bingo Supply. The Company purchased $320,783
in fixed assets during the six months ended December 31, 1998,
primarily for the expansion of Bull Durham, which opened November 1998.
Management has established capital expenditure budgets for each subsidiary
to facilitate cash management. The Company purchased $62,669 less in
capital expenditures for the six months ended December 31, 1998 compared
to the period in 1997.
The Company used $198,979 in cash for financing activities during
the six months ended December 31, 1998 compared to financing
activities providing $670,780 during the same period in the prior
year. During 1998, $351,531 was used to pay dividends on and
redeem shares of Series B preferred stock. Proceeds net of
payments of long term debt and notes payable was $155,082 for the
six months ended December 31, 1998 compared to $493,280 for the
same period in the prior year, a decrease of $338,198. The
Company is striving to reduce debt through cash flow from more
efficient operations.
As of December 31, 1998 none the Company's subsidiaries have
commercial bank credit facilities. Management is currently
negotiating with several financial institutions to obtain
revolving lines of credit for the operating subsidiaries to use
for working capital during slow seasons.
The Company continues its efforts to formulate plans and
strategies to address the Company's financial condition and
increase profitability. Management continues to negotiate with
creditors of debt that remain in default. The Company also
continues to explore acquisition opportunities. Management
believes that these plans will result in increased liquidity and
future profitability.
Year 2000 Conversion
The Company recognizes the need to ensure its operations
will not be adversely impacted by Year 2000 software failures.
Software failures due to processing errors potentially arising
from calculations using the Year 2000 date are a known risk. The
Company is addressing this risk to the availability and integrity
of financial systems and the reliability of the operational
systems. The Company has established processes for evaluating
and managing the risks and cost associated with this problem,
including communicating with suppliers, dealers, and others with
which it does business to coordinate Year 2000 conversion. The
total cost of compliance and its effect on the Company's future
results of operations is being determined as part of the detailed
conversion planning process.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None, except as previously disclosed.
Item 2(a). Changes in Securities
Effective December 1998, the Company issued a new
series of Class C preferred stock. The stock has a
par value of $.01, is non-voting, and is convertible
into common stock at a rate of $1.20. Holders of
Class C preferred stock are entitled to receive
dividends at the annual rate of 7% based on the
stated value per share. The dividends are cumulative,
with any outstanding unpaid dividends bearing interest
at an annual rate of 10%. As of December 31, 1998
principal of $487,220 and accrued interest of $97,385
were converted to 487,172 shares of Class C preferred
stock.
Item 3. Defaults Upon Senior Securities
None, except as previously disclosed.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
The Company received notification from the Nasdaq
Stock Market of its possible delisting from Nasdaq
due to several factors, including the Company's
history of operating losses and its failure to
satisfy Nasdaq's minimum net tangible asset
requirement. The Company has taken steps to cure
its net tangible asset deficiency and intends to
adopt further measures in an effort to maintain its
Nasdaq listing.
Item 6(a). Exhibits
The following exhibit is filed as a part of this
Form 10-QSB pursuant to Item 601 of Regulation S-B:
A Certificate of Designations,
Preferences, and Rights of Series C Convertible
Preferred Stock of Global Casinos, Inc.
B Stock Purchase Agreement-Global Casinos, Inc. and
Equitas, Corp
Item 6(b). Reports on Form 8-K
The following reports on Form 8-K were filed during
the second quarter ended December 31, 1998:
Pro Forma
Date Item Financial
Statements
December 23,1998 Disposition of BPJ Balance sheet as
and DMS of September 30,
1998
Statements of
Operations for the
Three Months Ended
September 30, 1998
and 1997
January 4, 1999 Resignation of Auditors
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: February 19, 1999 By: /s/ Stephen G.Calandrella
Stephen G. Calandrella, President
Date: February 19, 1999 By: /s/ Barbara G.Chacon
Barbara C. Chacon, Chief Financial Officer
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 699,436
<SECURITIES> 104,915
<RECEIVABLES> 503,371
<ALLOWANCES> 23,140
<INVENTORY> 282,508
<CURRENT-ASSETS> 2,063,101
<PP&E> 6,875,393
<DEPRECIATION> 1,558,193
<TOTAL-ASSETS> 11,802,672
<CURRENT-LIABILITIES> 4,381,719
<BONDS> 0
27,500
201,079
<COMMON> 77,170
<OTHER-SE> 13,152,125
<TOTAL-LIABILITY-AND-EQUITY> 11,802,672
<SALES> 4,573,515
<TOTAL-REVENUES> 4,573,515
<CGS> 963,484
<TOTAL-COSTS> 4,558,669
<OTHER-EXPENSES> 170,767
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 236,540
<INCOME-PRETAX> (155,921)
<INCOME-TAX> 0
<INCOME-CONTINUING> (155,921)
<DISCONTINUED> 0
<EXTRAORDINARY> 66,101
<CHANGES> 0
<NET-INCOME> (217,200)
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</TABLE>
EXHIBIT "A"
CERTIFICATE OF DESIGNATIONS, PREFERENCES,
AND RIGHTS OF SERIES C CONVERTIBLE PREFERRED STOCK
OF GLOBAL CASINOS, INC.
Pursuant to the
General Corporation Law of the State of Utah
GLOBAL CASINOS, INC., a corporation organized and existing
under the laws of the State of Utah (the "Company"), DOES HEREBY
CERTIFY that pursuant to the authority contained in Article IV of
its Articles of Incorporation, and in accordance with the provisions
of the General Corporation Law of the State of Utah, the Company's
Board of Directors has duly adopted the following resolution creating
a series of the class of its authorized Preferred Stock, designated
as Series C Convertible Preferred Stock:
RESOLVED THAT:
Whereas, by virtue of Article IV of its Articles of
Incorporation, the Company has the authority to issue ten
million (10,000,000) shares of Preferred Stock of the par
value of $0.01 per share, the designation and amount thereof
and series, together with the powers, preferences, rights,
qualifications, limitations or restrictions thereof, to be
determined by the Board of Directors pursuant to the
applicable law of the State of Utah;
Now therefore, the Company's Board of Directors hereby
establishes a series of the class of Preferred Stock
authorized to be issued by the Company as above stated, with
the designations and amounts thereof, together with the
voting powers, preferences and relative, participating,
optional and other special rights of the shares of each such
series, and the qualifications, limitations or restrictions
thereof, to be as follows:
1. Designations and Amounts. Six hundred thousand (600,000)
shares of the Company's authorized Preferred Stock are designated
as Series C Convertible Preferred Stock, having a face value of
$1.20 per share.
2. Definitions.
For the purposes of this Resolution the following definitions
shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Company" shall mean Global Casinos, Inc., a Utah
corporation formed on June 8, 1978.
(c) "Original Issue Date" for a series of Preferred
Stock shall mean the date on which the first share of
such series of Preferred Stock was originally issued.
(d) "Preferred Stock" shall refer to Series C
Convertible Preferred Stock.
(e) "Stated Value" shall mean $1.20 per share.
(f) "Subsidiary" shall mean any corporation at least
fifty percent (50%) of whose outstanding voting stock
shall at the time be owned directly or indirectly by
the Company or by one or more Subsidiaries.
(g) "Securities Act" shall mean the Securities Act of
1933, as amended.
(h) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
3. Dividends.
(a) The holders of outstanding Preferred Stock shall
be entitled to receive dividends at the annual rate of
seven percent (7%) based on the Stated Value per share
computed on the basis of a 360-day year and twelve 30-
day months. Dividends shall be calculated from the
date of issue and payable, in each case monthly on the
fifteenth day of each month for the preceding month
(the "Dividend Payment Date"). Dividends shall be paid
to recordholders of shares of Preferred Stock as of the
date one business day prior to the Dividend Payment
Date (the "Dividend Record Date"). The right of the
holder of shares of Preferred Stock as of the Dividend
Record Date to the relevant dividend shall not be
affected by the subsequent transfer or cancellation of
such shares; such dividend being payable to to the holder
as of the Dividend Record Date notwithstanding such
transfer or cancellation.
(b) Dividends on the shares of Preferred Stock shall
be cumulative; therefore, a full dividend on the shares
of this series with respect to any dividend period
shall be declared by the Board of Directors of the
Company and the Company shall be obligated to pay full
dividend on the shares of this series with respect to
such dividend period. Any outstanding and unpaid
dividends shall bear interest at the rate of ten (10%)
per annum.
(c) In addition to the Preferred Stock dividend, the
holders of outstanding Preferred Stock shall be entitled
to participate, pro rata, in dividends paid on outstanding
shares of Common Stock, if, when and as the Board of
Directors shall in their sole discretion deem advisable,
and only from the net profits or surplus of the Company
as such shall be fixed and determined by the Board of
Directors. The determination of the Board of Directors
at any time of the amount of net profits or surplus
available for dividend shall be binding and conclusive
on the holders of all the stock of the Company at the
time outstanding.
4. Liquidation Rights.
(a) In the event of any liquidation, dissolution, or
winding up of the Company, whether voluntary or
involuntary, the holders of each share of Preferred
Stock then outstanding shall be entitled to be paid out
of the assets of the Company available for distribution
to its shareholders, after payment or declaration and
setting apart for payment amounts that must be paid
with respect to outstanding shares of Series A
Convertible Preferred Stock and Series B Convertible
Preferred Stock which rank senior to the Preferred
Stock, but before any payment or declaration and
setting apart for payment of any amount shall be made
in respect of any outstanding Preferred Stock ranking
junior to the Preferred Stock or the Common Stock, an
amount equal to the Stated Value per share plus an
amount equal to all accrued and unpaid dividends
thereon, whether or not earned or declared, to and
including the date full payment shall be tendered to
the holders of the Preferred Stock with respect to such
liquidation, dissolution, or winding up, and no more.
If upon any liquidation, dissolution, or winding up of
the Company, whether voluntary or involuntary, the
assets to be distributed to the holders of the
Preferred Stock shall be insufficient to permit the
payment to such shareholders of the full preferential
amount aforesaid, then all of the assets of the Company
available to be distributed shall be distributed
ratably to the holders of the Preferred Stock.
(b) After the payment or distribution to the holders
of the Preferred Stock of the full preferential amounts
aforesaid, the holders of any preferred stock ranked
junior to be Preferred Stock and the Common Stock then
outstanding shall be entitled to receive all the
remaining assets of the Company.
(c) Neither a consolidation, merger or reorganization
of the Company, a sale or other transfer of all or
substantially all of its assets, nor a sale of fifty
percent (50%) or more of the Company's capital stock
then issued and outstanding nor the purchase or
redemption by the Company of stock of any class, nor
the payment of a dividend or distribution from net
profits or surplus of the Company shall not be treated
as or deemed to be a liquidation hereunder.
5. Redemption.
(a) Subject to the conditions set forth herein, the
Company, by action of its Board of Directors, may at
its sole option and discretion redeem all or any
portion of the Preferred Stock, at any time, or from
time to time, in accordance with the provisions of this
Paragraph 5 (the "Optional Redemption"). Holders of
the Preferred Stock shall have no right to demand or
compel the redemption of any outstanding shares of
Preferred Stock.
(b) In the event the Board of Directors elects to
redeem the Preferred Stock, on and after the date
specified in the notice provided for in Paragraph 5(d)
below, each holder of the Preferred Stock called for
redemption, upon presentation and surrender at the
place designated in such notice of the certificate or
certificates evidencing said Preferred Stock held by
him, her or it, properly endorsed in blank for transfer
or accompanied by proper instruments of assignment in
blank, shall be entitled to receive therefor the
redemption price thereof.
(c) If redeemed pursuant to this Paragraph 5, the
redemption price for each share of Preferred Stock (the
"Redemption Price") shall be an amount in cash equal to
the sum of (i) the Stated Value per share of Preferred
Stock plus (ii) the amount of all accrued and unpaid
dividends thereon, whether or not earned or declared,
to and including the date fixed for redemption.
(d) In the case of any Optional Redemption pursuant to
this Paragraph 5, at least thirty (30) days and not
more than forty (40) days prior to the date fixed for
any such redemption of the Preferred Stock (hereinafter
referred to as the "Redemption Date"), written notice
(hereinafter referred to as the "Redemption Notice")
shall be mailed, first class postage prepaid, to each
holder of record to the Preferred Stock to be redeemed
at his post office address last shown on the records of
the Company, and if the holder has provided the Company
with a facsimile number for notices, also by facsimile
transmission. The Redemption Notice shall state:
(i) That all of the holder's outstanding shares
of Preferred Stock are being called for redemption;
(ii) The number of shares of Preferred Stock held
by the holder that the Company intends to redeem;
(iii) The Redemption Date and the Redemption Price; and
(iv) That the holder is to surrender to the
Company, in the manner and at the place
designated, his certificate or certificates
representing the shares of Preferred Stock to be
redeemed.
(e) Each holder of Preferred Stock to be redeemed
shall surrender the certificate or certificates
representing such shares to the Company, in the manner
and at the place designated in the Redemption Notice,
and thereupon the Redemption Price for such shares
shall be payable to the order of the person whose name
appears on such certificate or certificates as the
owner thereof, and each surrendered certificate shall
be cancelled and retired.
(f) If the Redemption Notice shall have been duly
given and, if on the Redemption Date the Redemption
Price is either paid or irrevocably made available for
payment through the deposit arrangement specified in
Subparagraph 5(g) below, then notwithstanding that the
certificates evidencing any of the shares of Preferred
Stock so called for redemption shall not have been
surrendered, the dividends with respect to such shares
shall cease to accrue after the Redemption Date and all
rights with respect to such shares shall forthwith
after the Redemption Date terminate, except only the
right of the holders to receive the Redemption Price,
without interest upon surrender of their certificate or
certificates therefor.
(g) At least ten (10) days prior to the Redemption
Date, the Company may deposit with any bank or trust
company in Boulder, Colorado Springs or Denver,
Colorado, a sum (or an irrevocable letter of credit)
equal to the aggregate Redemption Price of all shares
of Preferred Stock called for redemption and not yet
redeemed, with irrevocable instructions and authority
to the bank or trust company to pay, on or after the
Redemption Date or prior thereto, the Redemption Price
to the respective holders entitled thereto upon the
surrender of their share certificates. From and after
the Redemption Date, the shares so called for redemption
shall be redeemed if deposit shall have been made with
such instructions or authority on or before the tenth
(10th) day prior to the Redemption Date. The deposit
shall on the Redemption Date constitute full payment of
the shares to their holders, and from and after the
Redemption Date the shares shall be deemed to be no longer
outstanding, and the holders thereof shall cease to be
shareholders with respect to such shares and shall have
no rights with respect thereto except the rights to receive
from the bank or trust company payment of the Redemption
Price of the shares, without interest, upon surrender of
their certificates therefor. Any funds so deposit and
unclaimed at the end of one (1) year from the Redemption
Date by any holder of shares called for redemption shall
be released or repaid to the Company, after which the
holders of such shares called for redemption shall be
entitled to receive payment of the Redemption Price for
such shares only from the Company.
6. Voting Rights.
Upon issuance, holders of shares of this series of
Preferred Stock shall be entitled to vote with the
holders of shares of Common Stock as a single class on
all matters presented for a vote to the shareholders of
the Company. The number of votes per share of this
series of Preferred Stock which can be cast shall be
adjusted at such time or times as the conversion price
is adjusted so that the number of votes per share of
this Series of Preferred Stock which may be cast shall
always be equal to the full number of shares of Common
Stock into which each share of this series of Preferred
Stock may be converted when voting with the holders of
Common Stock as a single class.
7. Conversion.
The following of the Preferred Stock shall have the
following conversion rights (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock
shall be convertible, at the option of the holder
thereof, at any time commencing the earlier of (i) one
hundred twenty (120) days from the date of issue or
(ii) upon the effective date of a Registration
Statement registering for sale under the Securities Act
of 1933, as amended (the "Securities Act"), the shares
of the Company's Common Stock issuable upon such
conversion (the "Conversion Stock"), (and, if the
Company has exercised its redemption right as described
in Paragraph 5 hereof with respect to all or any of the
Preferred Stock, in the case of the Preferred Stock
called for redemption, up to the date prior to the
Redemption Date as fixed in any Redemption Notice), at
the office of the Company or any transfer agent for the
Preferred Stock or Common Stock, into one fully paid
and nonassessable share of Common Stock.
(b) Conversion Rate. Each share of Preferred Stock
shall be convertible into one share of Common Stock, at
a conversion value of $1.20 per share of Common Stock
(the "Conversion Date").
(c) Mechanics of Conversion. Before any holder of
Preferred Stock shall be entitled to convert the same
into shares of Common Stock, he shall surrender the
certificate or certificates therefor, duly endorsed, at
the office of the Company or of any transfer agent for
the Common Stock, and shall give written notice to the
Company at such office that he elects to convert the
same and shall state therein the number of shares of
Preferred Stock being converted. Thereupon the Company
shall promptly issue and deliver at such office to such
holder of Preferred Stock a certificate or certificates
for the number of shares of Common Stock to which he
shall be entitled. Such conversion shall be deemed to
have been made immediately prior to the close of
business on the date of such surrender of the shares of
Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
(d) Adjustment for Stock Splits and Combinations. If
the Company shall at any time or from time to time after
the Original Issue Date for a series of the Preferred
Stock effect a subdivision of the outstanding Common Stock,
the Conversion Rate then in effect immediately before
that subdivision shall be proportionately decreased, and
conversely, if the Company shall at any time or from time
to time after the Original Issue Date for a series of the
Preferred Stock combine the outstanding shares of Common
Stock, the Conversion Rate then in effect immediately before
the combination shall be proportionately increased. Any
adjustment under this paragraph 7(d) shall become effective
at the close of business on the date the subdivision or
combination becomes effective.
(e) Adjustment for Certain Dividends and
Distributions. In the event the Company at any time,
or from time to time after the Original Issue Date for
a series of Preferred Stock shall make or issue, or fix
a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other
distribution payable in additional shares of Common
Stock, then and in each such event the Conversion Price
for such series of Preferred Stock then in effect shall
be decreased as of the time of such issuance or, in the
event such a record date shall have been fixed, as of
the close of business on such record date, by
multiplying the Conversion Rate for such series of
Preferred Stock then in effect by a fraction:
(1) the numerator of which shall be the total
number of shares of Common Stock issued and
outstanding immediately prior to the time of such
issuance or the close of business on such record
date, and
(2) the denominator of which shall be the total
number of shares of Common Stock issued and
outstanding immediately prior to the time of such
issuance or the close of business on such record
date plus the number of shares of Common Stock
issuable in payment of such dividend or distribution;
provided, however, if such record date shall have
been fixed and such dividend is not fully made on
the date fixed therefor, the Conversion Rate for
such series of Preferred Stock shall be recomputed
accordingly as of the close of business on such record
date and thereafter the Conversion Rate for such series
of Preferred Stock shall be adjusted pursuant to this
Paragraph 7(e) as of the time of actual payment of such
dividends or distributions.
(f) Adjustment for Reclassification, Exchange, or
Substitution. If the Common Stock issuable upon the
conversion of the Preferred Stock shall be changed into
the same or a different number of shares of any class
or classes of stock, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision
or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation, or
sale of assets provided for elsewhere in this Paragraph 7),
then and in each such event the holder of each share of
Preferred Stock shall have the right thereafter to convert
such share into the kind and amount of shares of stock and
other securities and property receivable upon such reorganization,
reclassification, or other change, by holders of the
number of shares of Common Stock into which such shares
of Preferred Stock might have been converted immediately
prior to such reorganization, reclassification, or change,
all subject to further adjustments as provided herein.
(g) Reorganization, Mergers, Consolidations, or Sales
of Assets. If at any time or from time to time there
shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification,
or exchange of shares provided for elsewhere in this
Paragraph 7) or a merger or consolidation of the Company
with or into another corporation, or the sale of all or
substantially all of the company's assets to any other
person, then, as a part of such reorganization, merger,
consolidation, or sale, provision shall be made so that
the holders of the Preferred Stock shall thereafter be
entitled to receive upon conversion of the Preferred Stock,
the number of shares of stock or other securities or
property of the Company, or of the successor corporation
resulting form such merger or consolidation or sale, to
which a holder of Common Stock deliverable upon conversion
would have been entitled on such capital reorganization,
merger, consolidation, or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions
of this Paragraph 7 with respect to the rights of the holders
of the Preferred Stock after the reorganization, merger,
consolidation, or sale to the end that the provisions
of this Paragraph 7 (including adjustment of the
Conversion Rate then in effect and the number of shares
purchasable upon conversion of the Preferred Stock)
shall be applicable after that event as nearly
equivalent as may be practicable.
(h) Notices of Record Date. In the event of (i) any
taking by the Company of a record of the holders of any
class or series of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend
or other distribution or (ii) any reclassification or
recapitalization of the capital stock of the Company, any
merger or consolidation of the Company, or any transfer
of all or substantially all of the assets of the Company
to any other corporation, entity, or person, or any voluntary
or involuntary dissolution, liquidation, or winding up of
the Company, the Company shall mail to each holder of
Preferred Stock at least thirty (30) days prior to the
record date specified therein, a notice specifying (A)
the date on which any such record is to be taken for
the purpose of such dividend or distribution and a
description of such dividend or distribution, (B) the
date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation,
or winding up is expected to become effective, and (C) the
time, if any is to be fixed, as to when the holders of
record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or
other securities) for securities or other property deliverable
upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation, or
winding up.
(i) Fractional Shares. No fractional shares of Common
Stock shall be issued upon conversion of Preferred Stock.
In lieu of any fractional shares to which the holder would
otherwise be entitled, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market
value of one share of the Company's Common Stock on the date
of conversion, as determined in good faith by the Board.
(j) Reservation of Stock Issuable Upon Conversion.
The Company shall at at times reserve and keep available
out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the
shares of the Preferred Stock, such number of its shares
of Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding shares of the
Preferred Stock, and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the
Preferred Stock, the Company will take such corporate
action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for
such purpose.
(k) Notices. Any notice required by the provisions of
this Paragraph 7 to be given to the holder of shares of
the Preferred Stock shall be deemed given when personally
delivered to such holder or five (5) business days after
the same has been deposited in the United States mail,
certified or registered mail, return receipt requested,
postage prepaid, and addressed to each holder of record
at his address appearing on the books of the Company.
(l) Payment of Taxes. The Company will pay all taxes
and other governmental charges that may be imposed in
respect of the issue or delivery of shares of Common
Stock upon conversion of shares of Preferred Stock.
(m) No Dilution or Impairment. The Company shall not
amend its Articles of Incorporation or participate in
any reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or
any other voluntary action, for the purpose of avoiding
or seeking to avoid the observance or performance of
any of the terms to be observed or performed hereunder
by the Company, but will at all times in good faith
assist in carrying out all such action as may be
reasonably necessary or appropriate in order to protect
the conversion rights of the holders of the Preferred
Stock against dilution or other impairment.
8. No Preemptive Rights.
No holder of the Series C Preferred Stock of the
Corporation shall be entitled, as of right, to purchase
or subscribe for any part of the unissued stock of the
Corporation or of any stock of the Corporation to be
issued by reason of any increase of the authorized
capital stock of the Corporation, or to purchase or
subscribe for any bonds, certificates of indebtedness,
debentures or other securities convertible into or
carrying options or warrants to purchase stock or other
securities of the Corporation or to purchase or subscribe
for any stock of the Corporation purchased by the Corporation
or by its nominee or nominees, or to have any other preemptive
rights now or hereafter defined by the laws of the State of Utah.
9. No Reissuance of Preferred Stock.
No share or shares of Preferred Stock acquired by the
Company by reason of redemption, purchase, conversion,
or otherwise shall be reissued, and all such shares
shall be canceled, retired, and eliminated from the
shares which the Company shall be authorized to issue.
IN WITNESS WHEREOF, said GLOBAL CASINOS, INC., has
caused this Certificate of Designations, Preferences and Rights
of Series C Convertible Preferred Stock to be duly executed by
its President and attested by its Secretary and has caused its
corporate seal to be affixed hereto, this 12th day of January,1999.
Attest GLOBAL CASINOS, INC.
By: /s/ Barbara G.Chacon By: /s/ Stephen G.Calandrella
Barbara G. Chacon Stephen G. Calandrella
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered
into effective as of the 12th day of January, 1999, by and between
EQUITAS, CORP., a Panama corporation, ("Buyer"), and GLOBAL CASINOS,
INC., a Utah corporation ("Seller").
WHEREAS, Seller owns 30 shares of the issued and outstanding
shares of the Common Stock (the "Common Stock" or "Shares") of B.P.J.
Holding, N.V., a Curacao corporation, (the "Company" or "BPJ").
NOW, THEREFORE, in consideration of the premises, the mutual
benefits to be derived from this Agreement and the representations,
warranties, and covenants contained hereinafter, Buyer and Sellers
hereby agree as follows:
1. Purchase and Sale of Shares. Subject to the terms and
conditions herein stated, Seller shall sell, assign, transfer and
deliver to Buyer on the Closing Date (as hereinafter defined),
and Buyer shall purchase and acquire from Seller on the Closing
Date, 30 shares of the Common Stock of the Company (the "Shares").
The purchase price to be paid by Buyer to Seller on the Closing
Date for the Shares is the sum of $1.00, to be paid at Closing.
2. The Closing and Effective Date. The closing of the
purchase and sale of the Shares shall take place on January 12,
1999 or at such later date which is mutually agreed upon by the
parties hereto (the "Closing Date"). The Effective Date of the
transaction shall for all purposes shall be December 31, 1998
(the "Effective Date").
3. Representations and Warranties of Seller. Seller
hereby represents and warrants to Buyer as follows:
(a) The Shares represent 100% of the issued and
outstanding shares of the Company.
(b) The sole tangible asset of BPJ consists of 20
shares of the capital stock of Global Entertainment Group, N.V.,
an Aruba corporation, ("Global Entertainment"), which constitute
100% of the issued and outstanding shares of capital stock of
Global Entertainment.
(c) The execution and the delivery of this Agreement
and the consummation of the transactions contemplated hereby by
Seller do not conflict with or result in a breach or violation
of, or default under (or an event that, with notice or lapse of
time, or both, would constitute a default), any of the terms,
provisions or conditions of the Articles of Incorporation or By-
Laws of the Company, or any material agreement or instrument to
which Seller is a party or by which Seller is bound.
(d) This Agreement has been duly authorized by all
necessary corporate action on behalf of Seller and has been duly
executed and delivered by authorized officers of Seller and is a
valid and binding agreement on the part of the Seller that is
enforceable against the Seller in accordance with its terms,
except as the enforceability hereof may be limited by bankruptcy,
insolvency, moratorium, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and to
judicial limitations on the enforcement of the remedy of specific
performance and other equitable remedies.
(e) Seller owns the Shares, both beneficially and of
record, subject to no liens, encumbrances or rights of others,
and has the right to transfer to Buyer the entire right, title
and interest in and to the Shares. The Shares are validly issued
and nonassessable.
(f) Seller is not a party to any voting trust or voting
agreement, stockholder's agreement, pledge agreement, buy-sell
agreement, or first refusal agreement relative to the Shares.
(g) Seller makes and expressly disclaims any and all
representation or warranty with respect to the financial condition
of the Company or its subsidiary of Global Entertainment, its business
operations, assets or the value of the Shares.
4. Representation and Warranties of Buyer. Buyer hereby
represents and warrants to Seller as follows:
(a) Buyer is acquiring the Shares for Buyer's own
account for the purpose of investment and not with a view to, or
for sale in connection with, any distribution of such Shares, nor
with any present intention of distributing or selling such Shares,
except insofar as such Shares are included in a public offering
registered pursuant to the Securities Act of 1933 (as amended)
or the disposition thereof is exempt from such registration.
Buyer understands that the Shares have not been registered under
federal or state securities laws and that such Shares are being
offered and sold to Buyer pursuant to a claimed exemption from
the registration requirements of such laws.
(b) Buyer has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and
risk of its purchase of the Shares and has the ability to bear the
economic risk of the purchase of the Shares. Buyer has had access
to such information concerning the Company, which the Company has
made available to Buyer, and has had the opportunity to ask questions
of, and receive answers from, officials of the Company concerning the
business, operations, financial condition, assets, liabilities and
other matters pertaining to the Company.
(c) Buyer understands that the Shares being acquired
by its hereunder may not be sold, transferred or otherwise disposed
of without registration under the Securities Act of 1933 (as amended)
or pursuant to an exemption therefrom, in which case, the Company
may require that it be furnished with an opinion of counsel for Buyer
reasonably satisfactory to the Company that such registration is not
required, or Buyer may present to the Company a letter from the
Securities and Exchange Commission to the effect that, in the event
the Shares are transferred by Buyer without registration, the
Commission or the staff thereof will not recommend any action.
Buyer consents that any transfer agent of the Company may be
instructed not to transfer any of such stock unless it receives
satisfactory evidence of compliance with the foregoing provisions.
5. Agreements of Buyer.
(a) Buyer agrees with Seller that in entering into
this transaction with Seller and buying the Shares from Seller,
Buyer is not relying upon any statement by Seller about the
Company or its stock or the value thereof, nor is Buyer relying
upon Seller as a source of information pertaining to the Company
or its stock or the value thereof.
(b) Buyer accepts the Shares and control of the
Company "as is" and "where is" and acknowledges that Seller makes
no and expressly disclaims any and all representation or warranty
regarding the Shares, the Company, Global Entertainment, or its
financial condition, assets or business operations.
6. Agreements of Seller. Seller agrees with Buyer that in
entering into this transaction with Buyer and selling the Shares
to Buyer, Seller is not relying upon any statement by Buyer about
the Company or its stock or the value thereof, nor is Seller
relying upon Buyer as a source of information pertaining to the
Company or its stock or the value thereof.
7. Payment of Expenses. Each party will be liable for its
own costs and expenses incurred in connection with the negotiation,
preparation, execution or performance of this Agreement, including
without limitation, any legal, accounting, and other professional
fees and expenses.
8. Attorney's Fees for Claims. In the event that a claim
is brought by one party hereto against the other party hereto for
breach of any provision hereof or otherwise arising out of the
transaction to which this Agreement relates, the prevailing party
shall be entitled to payment or reimbursement of the expenses
incurred by it in connection with the litigation or the portion
thereof as to which it prevails, including but not limited to,
attorneys' fees and costs.
9. Waiver. Any of the terms or conditions of this
Agreement may be waived at any time and from time to time in
writing by the party entitled to the benefits thereof without
affecting any other terms or conditions of this Agreement. The
waiver by any party hereto of any condition or breach of any
provision of this Agreement shall not operate as a waiver of any
other condition or other or subsequent breach.
10. Amendment. This Agreement may be amended or modified
only by a written instrument executed by the parties hereto.
11. Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties in respect of the
transactions contemplated hereby and supersedes all prior agreements,
arrangements and understandings, oral or written, relating to the
subject matter hereof. No representation, promise, inducement or
statement of intention has been made by either party which is not
embodied in this Agreement and no party shall be bound by or liable
for any alleged representation, promise, inducement or statement
of intention not so set forth.
12. Survival of Representations, Warranties and Agreements.
All representations and warranties contained in this Agreement
shall survive the consummation of the transaction contemplated
hereby for a period of two years immediately following the Closing
Date. All agreements and covenants contained in this Agreement
not fully performed as of the Closing Date shall survive the
Closing Date and continue thereafter until fully performed or
until the time for further performance has expired.
13. Severability. In case any provision in this Agreement
shall be held invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions hereof
shall not in any way be affected or impaired thereby.
14. Third Party Beneficiaries. Each party hereto intends
that this Agreement shall not benefit or create any right or cause
of action in or on behalf of any person other than the parties hereto.
15. Fax/Counterparts. This Agreement may be executed by
telex, telecopy or other facsimile transmission, and may be executed
in counterparts, each of which shall be deemed an original, but all
of which shall together constitute one agreement.
16. Litigation. Any litigation commenced which is based in
whole or in part upon claims under or in connection with this
Agreement or the transaction contemplated hereby shall be brought
in a court of competent jurisdiction (state or federal) in the
United States of America.
17. General. This Agreement shall be construed and enforced
in accordance with the laws of the State of Colorado; may not be
transferred or assigned by any party hereto, other than by operation
of law, and shall inure to the benefit of and be binding upon Buyer
and Seller and their respective successors and assigns; and may be
executed in two or more counterparts, each of which shall be deemed
an original but all of which together shall constitute one and the
same instrument. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date and year first above written.
EQUITAS, CORP., a Panama corporation
By: /s/Jose Brega
Jose Brega, President
GLOBAL CASINOS,INC., a Utah corporation
By: /s/ Stephen G.Calandrella
Stephen G. Calandrella,President
