<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 33-79484
[LOGO]
SUPPLEMENT NO. 1 TO PROSPECTUS DATED MARCH 15, 1996
OF CROWN CASINO CORPORATION
PUBLIC OFFERING OF
10,121,869 SHARES OF COMMON STOCK
Form 10-Q of Crown Casino Corporation for the fiscal quarter ended
January 31, 1996.
The date of this Prospectus Supplement is March 20, 1996.
<PAGE> 2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal quarter ended January 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-14939
Crown Casino Corporation
(Exact name of registrant as specified in its charter)
Texas 63-0851141
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
2415 West Northwest Highway
Suite 103
Dallas, Texas 75220-4446
(Address of principal executive offices,
including zip code)
(214) 352-7561
(Registrant's telephone number,
including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Outstanding at
Title of Each Class March 15, 1996
------------------- --------------
<S> <C>
Common stock, par value $.01 per share 11,725,559
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements
CONSOLIDATED BALANCE SHEETS Crown Casino Corporation
<TABLE>
<CAPTION>
January 31,
1996 April 30,
(Unaudited) 1995
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 375,499 $ 1,692,440
Receivables 1,021,059
Prepaid expenses and other 506,459 931,935
------------- -----------
Total current assets 1,903,017 2,624,375
------------- -----------
Property and equipment:
Construction in progress 1,565,739
Furniture, fixtures and equipment 1,714,587 8,887,241
Riverboat and barges 15,256,140
Land held for development 16,169,709 16,608,555
------------- -----------
17,884,296 42,317,675
Less accumulated depreciation (166,689) (223,055)
------------- -----------
17,717,607 42,094,620
------------- -----------
Other assets:
Note receivable 20,000,000
Non-compete agreement, net 316,674
Debt issuance costs, net 345,963
License costs 9,125,000
------------- -----------
20,000,000 9,787,637
------------- -----------
$ 39,620,624 $54,506,632
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 32,407 $ 999,611
Accrued liabilities 317,889 1,038,587
Advances from LRGP 2,179,083
Capital lease obligations 6,100 2,876,632
Current portion of long term debt 61,516 26,511,603
------------- -----------
Total current liabilities 417,912 33,605,516
------------- -----------
Capital lease obligations, less current portion 1,671 2,271,477
Long term debt, less current portion 928,829
Deferred income taxes 8,223,500 500,000
Investment in SCGC 3,458,034
Common stock pending issuance 200,000
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.01 per share, 1,000,000 shares
authorized; none issued or outstanding
Common stock, par value $.01 per share, 50,000,000 shares authorized
11,725,559 issued and outstanding (11,678,459 at April 30, 1995) 117,256 116,785
Additional paid-in capital 42,031,214 41,859,407
Accumulated deficit (15,557,792) (24,046,553)
------------- -----------
Total stockholders' equity 26,590,678 17,929,639
------------- -----------
$ 39,620,624 $54,506,632
============= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
CONSOLIDATED STATEMENTS OF OPERATIONS Crown Casino Corporation
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
January 31,
1996 1995
------------ ------------
<S> <C> <C>
Revenues $ - $ -
Costs and expenses:
General and administrative 657,758 457,929
Gaming pre-opening and development 45,419 1,724,115
Depreciation and amortization 29,497 62,793
Write-down of land held for sale 49,822
Bourbon Street acquisition abandonment 652,908
St. Charles Parish site abandonment 3,131,359
------------ ------------
1,435,404 5,376,196
------------ ------------
Other income (expense):
Interest expense (17,396) (1,756,523)
Interest income 576,489 14,855
Equity in loss of SCGC (983,451)
------------ ------------
(424,358) (1,741,668)
------------ ------------
Loss before income taxes (1,859,762) (7,117,864)
Benefit for income taxes (331,300) (1,603,478)
------------ ------------
Net loss $ (1,528,462) $ (5,514,386)
============ ============
Loss per share $ (.13) $ (.54)
============ ============
Weighted average common and common
equivalent shares outstanding 11,725,559 10,284,658
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
CONSOLIDATED STATEMENTS OF OPERATIONS Crown Casino Corporation
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
1996 1995
------------- -----------
<S> <C> <C>
Revenues $ - $ -
Costs and expenses:
General and administrative 1,895,787 1,398,296
Gaming pre-opening and development 708,206 5,120,524
Depreciation and amortization 102,050 186,257
Write-down of land held for sale 49,822
Bourbon Street acquisition abandonment 652,908
St. Charles Parish site abandonment 3,131,359
----------- ------------
3,408,773 9,836,436
----------- ------------
Other income (expense):
Interest expense (983,189) (4,799,569)
Interest income 1,660,787 172,895
Equity in loss of SCGC (2,569,204)
Gain on sale of 50% of SCGC 21,512,640
----------- ------------
19,621,034 (4,626,674)
----------- ------------
Income (loss) before income taxes 16,212,261 (14,463,110)
Provision (benefit) for income taxes 7,723,500 (4,402,328)
----------- ------------
Net income (loss) $ 8,488,761 $(10,060,782)
=========== ============
Income (loss) per share $ .70 $ (1.03)
=========== ============
Weighted average common and common
equivalent shares outstanding 12,106,161 9,799,176
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS Crown Casino Corporation
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
1996 1995
------------ ------------
<S> <C> <C>
Operating activities:
Net income (loss) $ 8,488,761 $(10,060,782)
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation and amortization 102,050 186,257
Amortization of debt issuance costs/discount 389,360 2,298,499
Write down of assets 702,730 3,131,359
Warrant issued for services 62,500
Deferred income taxes 7,723,500 (4,440,000)
Equity in loss of SCGC 2,569,204
Gain on sale of 50% of SCGC ( 21,512,640)
Changes in assets and liabilities:
Receivables, net (1,121,059) 436,902
Prepaid expenses (614,230) (1,053,827)
Accounts payable and accrued liabilities (297,890) 1,198,095
------------ ------------
Net cash used by operating activities (3,570,214) (8,240,997)
------------ ------------
Investing activities:
Purchases of property and equipment (4,294,133) ( 17,270,420)
Sale of 50% of SCGC 1,000,000
------------ ------------
Net cash used by investing activities (3,294,133) ( 17,270,420)
------------ ------------
Financing activities:
Issuance of common stock 23,215 5,350,522
Purchase of common stock (50,937) (55,000)
Issuance of debt and warrants 1,000,000 28,000,000
Debt issuance costs (1,558,407)
Advances from LRGP 4,627,897
Payments of debt and capital lease obligations (52,769) (7,101,781)
------------ ------------
Net cash provided by financing activities 5,547,406 24,635,334
------------ ------------
Decrease in cash and cash equivalents (1,316,941) (876,083)
Cash and cash equivalents at: Beginning of period 1,692,440 1,778,939
------------ ------------
End of period $ 375,499 $ 902,856
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CROWN CASINO CORPORATION
(Unaudited)
FOR THE NINE MONTHS ENDED JANUARY 31, 1996
NOTE A - BASIS OF PRESENTATION
Crown Casino Corporation and subsidiaries ("Crown" or the "Company") currently
owns a 50% interest in St. Charles Gaming Company, Inc. ("SCGC"), which owns
and operates a riverboat gaming casino located in Calcasieu Parish, Louisiana;
however, the Company recently entered into an agreement to sell its remaining
interest in SCGC (see Note C). The Company also owns an 18.6 acre tract of
land in the gaming district of Las Vegas, Nevada which is being held for
possible development of a hotel and casino. The Company is also actively
pursuing other gaming opportunities in these and other jurisdictions.
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 of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine month period
ended January 31, 1996 are not necessarily indicative of the results that may
be expected for the year ended April 30, 1996. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended April 30, 1995.
NOTE B - SALE OF 50% OF SCGC
On June 9, 1995 pursuant to a definitive Stock Purchase Agreement ("Stock
Purchase Agreement") the Company sold a 50% interest in SCGC to Louisiana
Riverboat Gaming Partnership ("LRGP"), a joint venture owned 50% by Casino
America, Inc. ("Casino America") and 50% by Louisiana Downs, Inc. LRGP owns
the Isle of Capri(SM) dockside riverboat casino in Bossier City, Louisiana.
The purchase price consisted of (i) a five-year $20 million note (the "LRGP
Note"), (ii) $1 million cash, and (iii) a warrant (which may only be exercised
by converting a portion of the LRGP Note) to purchase 416,667 shares of Casino
America common stock at $12 per share.
The LRGP Note bears interest at 11.5% per annum, payable monthly, and is
secured by LRGP's 50% interest in SCGC. Principal is payable in seventeen
equal quarterly installments beginning in June 1996. If the distributions from
SCGC to LRGP during any quarter are less than the principal installment due for
such quarter, LRGP will only be obligated to pay the amount of such
distribution and any deficiency will be deferred to the next installment due
under the LRGP Note. All principal and interest not previously paid will be
due and payable in June 2000. At January 31, 1996 the entire LRGP Note is
classified as non-current since LRGP is not permitted to make principal
payments on said note until the New Notes issued jointly by LRGP and SCGC are
retired (see Note D). The New Notes initially become due in July 1996, but may
be extended up to twelve additional months at the option of the issuers
providing no event of default has occurred and is continuing. Also, during any
period an event of default has occurred and is continuing under the New Notes,
the Company is not entitled to receive interest payments on the LRGP Note, and
in the event of foreclosure on the New Notes, it is anticipated that the
collectibility of the LRGP Note would be jeopardized.
In connection with the Stock Purchase Agreement, SCGC bought out its prior
casino management agreement and entered into a new casino management agreement
with Casino America. The Casino America management agreement has a term of 99
years and provides for a management fee of (i) 2% of "Revenues," as defined in
the agreement (generally net gaming revenues less gaming and admission taxes
plus all other operating revenues) plus (ii) 10% of "Net Operating Income," as
defined in the agreement, provided however, the total management fee shall not
exceed 4% of "Revenues." In the event the LRGP Note goes into default and the
Company reacquires LRGP's 50% interest in SCGC, SCGC will have the right to
terminate the Casino America management agreement.
In addition to the foregoing, the Company granted LRGP a right of first refusal
to jointly develop its 18.6 acre tract of land in the gaming district of Las
Vegas in the event the Company chooses to develop such project on a joint
venture basis.
The Company has included 100% of SCGC's operating results in its consolidated
results of operations through June 8, 1995. From and after June 9, 1995 (the
date of sale of 50% of SCGC), the Company has accounted for its investment in
SCGC on the equity method, and accordingly has included its proportionate share
of SCGC's operating results in its consolidated results of operations.
6
<PAGE> 8
The gain on the sale of 50% of SCGC was recognized in the first quarter of
fiscal 1996 as (i) the transaction occurred in such quarter, and (ii)
collection of the LRGP Note was determined to be reasonably assured.
The Company's gain on the sale of 50% of SCGC is calculated as follows (in
thousands):
<TABLE>
<S> <C> <C>
Consideration for sale of a 50% interest in SCGC $ 21,000
Crown's negative basis in SCGC stock sold:
Deficit in SCGC at June 9, 1995 1,778
Percentage sold 50%
-----
889
Transaction and other costs (376)
---------
Gain on sale of 50% of SCGC $ 21,513
=========
At January 31, 1996 the Company's investment in SCGC is calculated as follows (in thousands):
Remaining negative basis in SCGC on June 9, 1995 after sale of 50% $ (889)
Crown's portion of SCGC's loss from June 9, 1995 to January 31, 1996 (2,569)
---------
Crown's investment in SCGC $ (3,458)
=========
</TABLE>
Since the Company anticipates SCGC will have future income (operations
commenced on July 29, 1995), its investment in SCGC is carried below zero and
is shown as a liability at January 31, 1996. Other than a guarantee of certain
leases, the Company is not contractually obligated to fund any deficits or
other obligations of SCGC.
SCGC's summarized unaudited operating results for the nine month periods ended
January 31, 1996 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
1996 1995
--------- ----------
<S> <C> <C>
Revenues:
Casino $ 35,194 $ --
Food, beverage and other 2,393
--------- ----------
37,587 --
--------- ----------
Costs and expenses:
Casino 26,014
Food, beverage and other 913
Gaming taxes 8,458
Gaming pre-opening and development 4,196 4,668
St. Charles Parish site abandonment 3,131
Depreciation and amortization 1,951 83
Interest expense 4,078 4,784
--------- ----------
45,610 (12,666)
--------- ----------
Loss before income taxes (8,023) (12,666)
Benefit for income taxes 1,367 2,966
--------- ----------
Net loss $ (6,656) $ (9,700)
========= ==========
</TABLE>
7
<PAGE> 9
NOTE C - PENDING AGREEMENT TO SELL SECOND 50% OF SCGC
In January 1996, the Company signed an agreement with Casino America to sell
the Company's remaining 50% interest in SCGC to Casino America in exchange for
1,850,000 shares of Casino America common stock. Casino America has agreed to
register the shares to be issued to the Company for resale prior to closing in
order that, providing such registration statement is effective, the Company may
sell such shares in the open market. In addition, Casino America will issue an
additional five-year warrant to the Company to purchase up to another 416,667
shares of Casino America common stock (bringing the total number of shares
purchasable pursuant to warrants by the Company to 833,334 shares) at an
exercise price of $12.00 per share. Based upon a closing price of $6.25 of
Casino America's common stock on January 31, 1996 as reported by Nasdaq, the
total value of consideration to be received by the Company in this transaction
is estimated to be approximately $11.6 million. In management's opinion, the
value of SCGC declined from June 1995 (when the Company sold 50% of SCGC for
approximately $21 million) to January 1996 (when the Company agreed to sell the
remaining 50% interest in SCGC for approximately $11.6 million) because
operating results since the opening of SCGC's riverboat casino in July 1995
were less than the projected results.
The Company's decisions to sell the first 50% interest in SCGC and then the
remaining 50% interest in SCGC were unrelated and based upon differing
considerations. The Company determined to sell the first 50% interest because
it needed additional financing to complete the development of the Louisiana
project but desired to retain an interest in the project due to management's
belief that the value of the operating casino would appreciate over the amount
received by the Company for the sale of the first 50% interest. The Company's
decision to sell the remaining 50% interest in SCGC resulted from management's
belief that SCGC needs a second riverboat at the site to effectively compete in
the Lake Charles market, and the Company and the other 50% shareholder, LRGP,
as well as LRGP's affiliates, were unable to reach an agreement with respect to
the ownership structure of the second riverboat. SCGC's principle competition
comes from (i) a two riverboat operation in the City of Lake Charles that
alternates the cruising schedules of its riverboats such that one riverboat is
always at the dock, and (ii) a land-based Indian-owned casino in Kinder,
Louisiana, approximately 39 miles to the northeast of SCGC's operation. Since
Louisiana law requires casino riverboats to cruise, SCGC is at a competitive
disadvantage since its single riverboat is away from the dock each time it
makes a cruise, thus prohibiting patrons from boarding.
There will be certain modifications made to the $20 million LRGP Note upon
closing the proposed transaction. The parties have agreed that the LRGP Note
will be divided into Note A and Note B, each of which shall be in the amount of
$10 million. Interest on Note A shall be paid monthly for the full five year
term, with principal due in seventeen equal fully amortizing quarterly
payments beginning on the first anniversary of the closing date, with a final
maturity five years after the closing date. Note B (which may be converted
into Casino America common stock by exercising the stock purchase warrants),
carries interest payments which shall be payable monthly for five years from
the closing date with principal to be paid at the end of the five-year period.
The Company will give Casino America an irrevocable proxy on the Casino America
stock held by the Company, and the right of first refusal to purchase any
Casino America stock the Company plans to sell in a single transaction of
500,000 shares or more, or in a series of related transactions to a single
purchaser within a 120 day period.
Currently, the existing warrant, which was issued in June 1995, is exercisable
only by converting up to a $5 million portion of the LRGP Note. However, upon
closing the sale of Casino America's purchase of the Company's remaining 50%
interest in SCGC, the existing warrant shall be amended such that it may be
exercised only by converting up to a $5 million portion of Note B and its
expiration date shall be extended to five years after the closing date.
Similarly, the new warrant may only be exercised by converting up to a $5
million portion of Note B, but must be exercised concurrently with or after the
exercise of the existing warrant held by the Company.
Casino America has an option to purchase the 50% interest in LRGP it does not
already own. In the event Casino America or an affiliate thereof purchases all
or substantially all of such LRGP interest then, immediately upon the later to
occur of Casino America's purchase of (a) the Company's remaining interest in
SCGC, or (b) the remaining LRGP interest, (i) Casino America shall cause LRGP
to guarantee and be personally liable for the payment of both principal and
interest on Note A and Note B, and (ii) the payment terms of Note B shall be
amended to conform to the payment terms of Note A. Furthermore, if Casino
America completes the purchase of the Company's remaining interest in SCGC,
purchases the remaining LRGP interest and refinances LRGP's existing
indebtedness, then Casino America shall cause either (i) Note A and Note B to
not be subordinate to any indebtedness and continue to be secured by the 50%
interest in SCGC owned by LRGP, (ii) Note A to be paid and Note B shall then
become an unsecured, subordinated note of Casino America, or (iii) any
combination of (i) and (ii) above, provided that at least $5 million of Note A
be paid and the balance not be subordinate to any indebtedness and continue to
be secured.
Closing of this transaction is subject to a number of conditions, including the
acquisition by Casino America of Grand Palais Riverboat, Inc. ("GPRI") from
bankruptcy and relocating its riverboat casino to SCGC's site in Calcasieu
Parish, Louisiana, and the procurement of required regulatory and lender
approvals. A plan of reorganization pertaining to Casino America's acquisition
of GPRI was filed in the United States Bankruptcy Court in late January 1996.
Such plan has not as yet been confirmed by the court,
8
<PAGE> 10
however a confirmation hearing has been scheduled for March 26, 1996. In
addition, Casino America, GPRI and the Company have filed various petitions
with the Louisiana Riverboat Gaming Commission ("Gaming Commission") to approve
the above transactions, but the Gaming Commission has not as yet taken any
action on such petitions. The parties made a presentation to the Gaming
Commission regarding the transaction on or about January 23, 1996. While the
Gaming Commission has not given any indication when it will make a decision
regarding the parties petitions, the Company anticipates that decisions will be
forthcoming in the late March to early April 1996 time frame. The Company does
not presently intend to be a long-term holder of Casino America common stock.
The Company may exchange its Casino America stock in the course of acquiring
another casino gaming project, or sell such shares for cash, which may then be
used for acquiring or developing another casino gaming project, or used for
general corporate purposes. In the event the Company is unable to identify
attractive acquisition or development opportunities in gaming, it may choose to
pursue other business opportunities. See "Pro Forma Financial Information"
contained elsewhere herein.
In the event Casino America completes the purchase of GPRI and either the
Gaming Commission or the Enforcement Division does not approve of Casino
America's purchase of the Company's remaining 50% interest in SCGC, then the
Company has agreed to enter into a joint venture agreement which provides for,
among other things, (i) the GPRI riverboat casino to dock at SCGC's site in
Calcasieu Parish, (ii) the payment of an annual docking fee of $2 million to
the Company and $3 million to SCGC, and (iii) the allocation of all revenues
and operating expenses (exclusive of the docking fee) of the joint venture to
be distributed 52.5% to GPRI and 47.5% to SCGC.
NOTE D - SCGC DEBT
In June 1994 SCGC completed a private placement of a $28 million Senior Secured
Increasing Rate Note (the "Senior Note") to an institutional investor. The
Senior Note was initially due on June 3, 1995, but was subsequently extended to
August 31, 1995 and carried a 12% coupon increasing 67 basis points each
quarter up to a maximum interest rate of 14%. SCGC repaid $6.5 million of the
Senior Note in October 1994. The balance of the Senior Note was repaid in
August 1995 from a portion of the proceeds from the issuance of $38.4 million
of Senior Secured Increasing Rate Notes (the "New Notes") issued jointly by
SCGC and LRGP (collectively, the "Issuers") to the same institutional investor
(the "Lender"). The New Notes initially become due on July 27, 1996, but can
be extended up to an additional twelve months at the option of the Issuers
provided no event of default has occurred and is continuing, carry a 12% coupon
increasing 25 basis points each quarter until maturity, and provide for
contingent interest beginning in May 1996 equal to 7.5% of the Issuers'
consolidated cash flow, as defined. The New Notes are collateralized by
substantially all the assets of the Issuers and the agreement governing the New
Notes contains covenants relating to certain business, operational and
financial matters including limitations on (i) incurring additional debt, (ii)
paying dividends, (iii) merging or consolidating with others, (iv) changes in
control, (v) capital expenditures, (vi) investments and joint ventures, and
(vii) the sale of assets, and financial covenants pertaining to (a) minimum
cash flow, (b) minimum fixed charge ratio, (c) maximum leverage ratio, and (d)
minimum net worth. Events of default occurred in September 1995 due to the
failure to meet certain of the financial covenants. SCGC and LRGP are
presently negotiating with the Lender to obtain a waiver of such defaults, but
no waiver has yet been executed by the Lender. No assurance can be given that
a satisfactory waiver will be forthcoming. During the pendency of an event of
default, the Lender is entitled to accelerate the maturity of the New Notes and
to foreclose on the collateral securing the New Notes. The Company believes
(i) the collective cash flow of LRGP and SCGC is more than sufficient to
support the level of debt that the New Notes represent, and (ii) the Lender is
well collateralized. Accordingly, while no assurance can be given, the Company
does not expect that the Lender will accelerate the maturity of the New Notes
and seek to foreclose on the collateral.
The New Notes are not guaranteed by the Company or any of its consolidated
subsidiaries. However, during any period an event of default has occurred and
is continuing under the New Notes, the Company is not entitled to receive
interest payments on the $20 million LRGP Note, and in the event of foreclosure
on the New Notes, it is anticipated that the collectibility of the LRGP Note
would be jeopardized.
NOTE E - CROWN DEBT
In November 1995 the Company issued a $1 million ten year note to a bank which
bears interest at prime plus 1 1/2%, and is secured by certain equipment of the
Company. Principal and interest payments of $13,364 are due monthly for the
full ten year term. The proceeds are being used for general corporate
purposes.
9
<PAGE> 11
NOTE F - LAND HELD FOR DEVELOPMENT
In connection with the acquisition of Gaming Entertainment Management Services,
Inc. in December 1993, the Company acquired an option to purchase an 18.6 acre
tract of land in the gaming district of Las Vegas, Nevada located on the
southeast corner of the intersection of Flamingo and Arville. In June 1994 the
Company exercised its option and closed the purchase of the Las Vegas land. In
February 1994 the Las Vegas land under option was appraised for approximately
$20.3 million.
NOTE G - ABANDONMENT OF BOURBON STREET ACQUISITION
In July 1995 the Company entered into a definitive asset purchase agreement to
acquire the Bourbon Street Hotel and Casino (the "Bourbon Street Casino")
located in Las Vegas, Nevada for a purchase price of $10 million. The Bourbon
Street Casino has reported annual revenues of approximately $12 million.
In November 1995 the Company determined not to proceed with the acquisition of
the Bourbon Street Casino due to (i) the possibility of more attractive
investment opportunities, (ii) the lack of attractive financing, and (iii)
declining margins at the property. In connection with this decision, in
November 1995 the Company wrote-off $652,908 of costs and expenses related to
the proposed acquisition, including a $500,000 non-refundable deposit.
NOTE H - CONTINGENCIES
On September 21, 1994, an action was filed against the Company and SCGC in the
24th Judicial District Court for the Parish of Jefferson, Louisiana by Avondale
Industries, Inc. ("Avondale"). In this action, Avondale alleges that the
Company was contractually obligated to Avondale for the construction of SCGC's
riverboat vessel based upon a letter of intent (allegedly reaffirming a
previous agreement entered into between Avondale and SCGC). Avondale alleges
that the Company breached a duty to negotiate in good faith toward the
execution of a definitive vessel construction contract. Alternatively,
Avondale alleges that a separate oral contract for the construction of the
vessel existed and that the Company committed unspecified unfair trade
practices and made certain misrepresentations. Avondale seeks unspecified
damages including "all lost profits and lost overhead" and attorneys' fees.
Avondale has claimed its lost profits and lost overhead amount to approximately
$2.5 million. While no assurance can be given as to the ultimate outcome of
this litigation, management believes that this litigation will not have a
material adverse effect on the financial position of the Company. The Company
intends to vigorously contest liability in this matter.
In October 1995, an action was filed against the Company, Casino America,
Louisiana Downs, Inc. and W.S. Bellows Construction Co. (the "Defendants") in
the U.S. District Court for the Western District of Louisiana, Lake Charles
Division, by Marvin D. Vincent and the National Black Chamber of Commerce, Inc.
(the "Plaintiffs"). In this action the Plaintiffs alleged that the Defendants
desecrated the alleged grave sites of their ancestors during the course of
construction of the Calcasieu Parish land-based facilities. The Plaintiffs
were seeking damages of $2 million per Defendant, plus $10 million in punitive
damages, costs and attorneys' fees. On March 13, 1996, the court dismissed the
lawsuit without prejudice in response to a motion for dismissal filed by the
Plaintiffs' counsel.
NOTE I - SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow disclosures are as follows for the nine months ended
January 31, 1996 and 1995:
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
1996 1995
------ ------
<S> <C> <C>
Note received for sale of 50% of SCGC stock $20,000,000
Equipment acquired under capital leases $5,764,838
Common stock issued for equipment 1,450,000
Property acquired in exchange for note receivable 471,465
Warrants issued for property and services 337,500
Interest paid, net of amount capitalized 1,062,934 1,953,951
</TABLE>
10
<PAGE> 12
CROWN CASINO CORPORATION
PRO-FORMA FINANCIAL INFORMATION
(UNAUDITED)
SALE OF FIRST 50% OF SCGC
On June 9, 1995 pursuant to a definitive stock purchase agreement Crown Casino
Corporation ("Crown" or the "Company") sold a 50% interest in St. Charles
Gaming Company, Inc. ("SCGC") to Louisiana Riverboat Gaming Partnership
("LRGP"), a joint venture owned 50% by Casino America, Inc. ("Casino America")
and 50% by Louisiana Downs, Inc. LRGP owns the Isle of Capri(SM) dockside
riverboat casino in Bossier City, Louisiana. The purchase price consisted of
(i) a five-year $20 million note (the "LRGP Note"), (ii) $1 million cash, and
(iii) a warrant (which may only be exercised by converting a portion of the
LRGP Note) to purchase 416,667 shares of Casino America common stock at $12 per
share. The LRGP Note bears interest at 11.5% per annum, payable monthly, and
is secured by LRGP's 50% interest in SCGC. On July 29, 1995 SCGC's riverboat
casino commenced gaming operations in Calcasieu Parish, Louisiana.
PROPOSED SALE OF REMAINING 50% INTEREST IN SCGC
In January 1996, the Company signed an agreement with Casino America to sell
the Company's remaining 50% interest in SCGC to Casino America in exchange for
(i) 1,850,000 registered shares of Casino America common stock, (ii) an
additional warrant (which may only be exercised by converting a portion of the
LRGP Note) to purchase 416,667 shares of Casino America common stock at $12 per
share, and (iii) certain modifications to the payment terms of the LRGP Note.
Closing of this transaction is subject to the satisfaction of a number of
conditions including Casino America acquiring Grand Palais Riverboat, Inc. out
of bankruptcy and relocating its riverboat casino to SCGC's site in Calcasieu
Parish, Louisiana, and obtaining necessary lender and regulatory approvals.
PRO-FORMA FINANCIAL STATEMENTS
The following pro-forma consolidated balance sheet as of January 31, 1996 gives
effect to the proposed sale of the Company's remaining 50% interest in SCGC.
The sale of the first 50% of SCGC has already been reflected in Crown's
historical consolidated balance sheet at January 31, 1996.
The following pro-forma consolidated statement of operations of Crown for the
nine months ended January 31, 1996 gives effect to (i) Crown's sale of 50% of
SCGC to LRGP, and (ii) the proposed sale of Crown's remaining 50% interest in
SCGC to Casino America as if such transactions had occurred on May 1, 1995.
The pro-forma information is based on the historical financial statements of
Crown and SCGC giving effect to the transactions described above and the
adjustments described in the accompanying notes to pro-forma consolidated
financial statements and may not be indicative of the results that actually
would have occurred had the transactions taken place on the date indicated or
the results which may be obtained in the future.
11
<PAGE> 13
CROWN CASINO CORPORATION
PRO-FORMA CONSOLIDATED BALANCE SHEET
UNAUDITED
JANUARY 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Record Sale of
Historical Remaining 50% Pro-Forma
Assets Crown Interest in SCGC Consolidated
---------- ---------------- ------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 376 $ 376
Receivables 1,021 1,021
Prepaid expenses and other 506 506
Marketable securities $ 11,563 (a) 11,563
--------- ---------- ---------
1,903 11,563 13,466
--------- ---------- ---------
Property and equipment:
Furniture, fixtures and equipment 1,715 1,715
Land held for development 16,170 16,170
--------- ---------
17,885 17,885
(167) (167)
--------- ---------
17,718 17,718
--------- ---------
Note receivable 20,000 20,000
--------- ---------
$ 39,621 $ 11,563 $ 51,184
========= ========== =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 32 $ 32
Accrued liabilities 318 $ 4,394 (b) 4,712
Current debt and capital lease obligations 68 68
--------- ---------- ---------
418 4,394 4,812
--------- ---------- ---------
Debt and capital lease obligations, non-current 931 931
Deferred income taxes 8,223 8,223
Investment in SCGC 3,458 (3,458) (c)
Stockholders' equity 26,591 10,627 37,218
--------- ---------- ---------
$ 39,621 $ 11,563 $ 51,184
========= ========== =========
</TABLE>
See accompanying Notes to Pro-Forma Consolidated Financial Statements.
12
<PAGE> 14
CROWN CASINO CORPORATION
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JANUARY 31, 1996
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Historical Deconsolidate Pro-Forma
Crown SCGC Adjustments Consolidated
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues: $ - $ -
Costs and expenses:
General and administrative 1,896 1,896
Gaming pre-opening and development 708 $ (536) 172
Depreciation and amortization 102 (16) 86
Write-down of land held for sale 50 50
Bourbon Street acquisition abandonment 653 653
--------- ------------ ---------
3,409 (552) 2,857
--------- ------------ ---------
Other income (expense):
Interest expense (983) 965 (18)
Interest income 1,661 $ 95 (d) 1,756
Equity in loss of SCGC (2,569) 2,569 (e)
Gain on sale of first 50% of SCGC 21,513 (755) (f) 20,758
Gain on sale of remaining 50% of SCGC 11,697 (g) 11,697
--------- ------------ --------- ---------
19,622 965 13,606 34,193
--------- ------------ --------- ---------
Income before taxes 16,213 1,517 13,606 31,336
Provision for income taxes 7,724 4,194 (h) 11,918
--------- ------------ --------- ---------
Net income $ 8,489 $ 1,517 $ 9,412 $ 19,418
========= ============ ========= =========
Income per share $ .70 $ 1.60
========= =========
Weighted average common and common
equivalent shares outstanding 12,106 12,106
========= =========
</TABLE>
See accompanying Notes to Pro-Forma Consolidated Financial Statements.
13
<PAGE> 15
CROWN CASINO CORPORATION
NOTES TO PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS AND PERCENTAGES)
BALANCE SHEET
a - To record the receipt of 1,850,000 shares of Casino America common
stock at the estimated fair value of $6.25 per share. On January 31,
1996 the closing bid price for Casino America common stock was $6.25
per share.
b - To record the impact of income taxes on the sale of the remaining 50%
interest in SCGC based upon a 38% effective income tax rate.
c - To eliminate the investment in SCGC account.
STATEMENT OF OPERATIONS
d - To record interest income at a rate of 11.5% per annum on the $20,000
LRGP Note received in the sale of the 50% interest in SCGC from the
beginning of the period to the point when interest on such LRGP Note
has been included in the historical financial statements.
e - To eliminate Crown's proportionate share of the equity in net loss of
SCGC.
f - To adjust the gain on the sale of the first 50% of SCGC to reflect a
May 1, 1995 sale date calculated as follows:
<TABLE>
<S> <C>
Deficit in 50% of SCGC at June 9, 1995 $ 889
Deficit in 50% of SCGC at May 1, 1995 134
-----
$ 755
=====
</TABLE>
g - To record the sale of Crown's remaining 50% interest in SCGC and the
receipt of 1,850,000 shares of Casino America common stock presumed to
have occurred at the beginning of the period. The gain on such
transaction is calculated as follows:
<TABLE>
<S> <C> <C>
Consideration received:
Shares of Casino America common stock 1,850,000
Closing bid price on January 31, 1996 x $6.25
----------
$11,563
Crown's negative basis in SCGC stock sold at May 1, 1995 134
-------
$11,697
=======
</TABLE>
h - To record the impact of income taxes on the adjustments described
above based upon a 38% effective income tax rate.
14
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements and the related notes thereto appearing
elsewhere in this report.
OVERVIEW
The Company currently owns a 50% interest in St. Charles Gaming Company, Inc.
("SCGC"), which owns and operates a riverboat gaming casino located in
Calcasieu Parish, Louisiana that opened for business on July 29, 1995; however,
the Company recently entered into an agreement to sell its remaining interest
in SCGC, as described more fully below under "Recent Developments". The
Company also owns an 18.6 acre tract of land in the gaming district of Las
Vegas, Nevada which is being held for possible development of a hotel and
casino. The Company is also actively pursuing other gaming opportunities in
these and other jurisdictions.
On June 9, 1995 pursuant to a definitive Stock Purchase Agreement ("Stock
Purchase Agreement") the Company sold a 50% interest in SCGC to Louisiana
Riverboat Gaming Partnership ("LRGP"), a joint venture owned 50% by Casino
America, Inc. ("Casino America") and 50% by Louisiana Downs, Inc. LRGP owns
the Isle of Capri(SM) dockside riverboat casino in Bossier City, Louisiana.
The purchase price consisted of (i) a five-year $20 million note (the "LRGP
Note"), (ii) $1 million cash, and (iii) a warrant (which may only be exercised
by converting a portion of the LRGP Note) to purchase 416,667 shares of Casino
America common stock at $12 per share.
In July 1995, the Company entered into a definitive stock purchase agreement to
acquire the Bourbon Street Hotel and Casino (the "Bourbon Street Casino")
located in Las Vegas, Nevada for a purchase price of $10 million. The Bourbon
Street Casino has reported annual revenues of approximately $12 million.
However, in November 1995 the Company determined not to proceed with the
acquisition of the Bourbon Street Casino due to (i) the possibility of more
attractive investment opportunities, (ii) the lack of attractive financing, and
(iii) declining margins at the property. In connection with this decision, in
November 1995 the Company wrote-off $652,908 of costs and expenses related to
the proposed acquisition, including a $500,000 non-refundable deposit.
RESULTS OF OPERATIONS
As a result of the Company's sale of 50% of SCGC on June 9, 1995, from and
after such date SCGC's operating results are no longer consolidated with the
Company, but rather are accounted for on the equity method. Accordingly,
operating results for the current and prior fiscal periods are not entirely
comparable.
THREE MONTHS ENDED JANUARY 31, 1996 COMPARED TO THE THREE MONTHS ENDED JANUARY
31, 1995
Gaming pre-opening and development costs for the three months ended January 31,
1996 decreased $1,678,696 compared to the same period in the prior fiscal year.
The decrease was attributable to the Company no longer consolidating SCGC's
operating results from and after June 9, 1995. General and administrative
expenses for the three months ended January 31, 1996 increased $199,829
compared to the same period in the prior fiscal year. The increase was
primarily attributable to increased compensation, partially as a result of
additional staff, and consulting expenses. In February 1996 the Company sold
approximately 6.5 acres of vacant land in St. Charles Parish, Louisiana for net
proceeds of approximately $441,000 in cash. As a result of this transaction,
during the three months ended January 31, 1996 the Company wrote down the basis
of such land by approximately $50,000 to adjust such basis to its net
realizable value. Interest expense for the three months ended January 31, 1996
decreased $1,739,127 compared to the same period in the prior fiscal year.
The decrease was the result of the Company no longer consolidating SCGC's
operating results from and after June 9, 1995 as SCGC was formerly responsible
for substantially all of the Company's consolidated interest expense. Interest
income for the three months ended January 31, 1996 increased $561,634 compared
to the same period in the prior fiscal year. The increase was the result of
interest being recognized in the current fiscal quarter on the $20 million LRGP
Note at the rate of 11.5% per annum, whereas in the prior fiscal quarter the
LRGP Note was not in existence.
NINE MONTHS ENDED JANUARY 31, 1996 COMPARED TO THE NINE MONTHS ENDED JANUARY
31, 1995
Gaming pre-opening and development costs for the nine months ended January 31,
1996 decreased $4,412,318 compared to the same period in the prior fiscal year.
The decrease was attributable to the Company no longer consolidating SCGC's
operating results from
15
<PAGE> 17
and after June 9, 1995. General and administrative expenses for the nine
months ended January 31, 1996 increased $497,491 compared to the same period in
the prior fiscal year. The increase was primarily attributable to increased
compensation, partially as a result of additional staff, and consulting
expense. In February 1996 the Company sold approximately 6.5 acres of vacant
land in St. Charles Parish, Louisiana for net proceeds of approximately
$441,000 in cash. As a result of this transaction, during the nine months
ended January 31, 1996 the Company wrote down the basis of such land by
approximately $50,000 to adjust such basis to its net realizable value.
Interest expense for the nine months ended January 31, 1996 decreased
$3,816,380 compared to the same period in the prior fiscal year. The decrease
was the result of the Company no longer consolidating SCGC's operating results
from and after June 9, 1995 as SCGC was formerly responsible for substantially
all of the Company's consolidated interest expense. Interest income for the
nine months ended January 31, 1996 increased $1,487,892 compared to the same
period in the prior fiscal year. The increase was the result of interest being
recognized in the current fiscal period on the $20 million LRGP Note at the
rate of 11.5% per annum, whereas in the prior fiscal period the LRGP Note was
not in existence, however interest income on a portion of the proceeds from the
issuance of the $28 million Senior Note was being held in escrow and earning
interest at the rate of 3% to 4% in a money market fund.
LIQUIDITY AND CAPITAL RESOURCES
THE COMPANY
The Calcasieu Parish riverboat casino opened for business on July 29, 1995. In
the near term, revenues generated by the casino are not expected to have an
impact on the Company, as cash flows generated will be used to service the debt
obligations of SCGC and LRGP (see "SCGC" below). The Company has no capital
expenditure commitments with respect to the Calcasieu Parish project. The
impact of the riverboat casino on the Company's financial condition in the long
term cannot be predicted with any certainty, and will depend upon the
profitability of the casino's operations.
Management of the Company continues to evaluate its proposed hotel and casino
project which may be built on the Company's 18.6 acre tract of land in Las
Vegas. Management is considering a variety of scenarios with respect to the
operation and ownership of the proposed hotel and casino, including a potential
joint venture relationship, but currently has no definitive development plan in
place. In connection with the Stock Purchase Agreement with LRGP, the Company
granted LRGP a right of first refusal to develop such project with the Company
in the event the Company chooses to develop such project on a joint venture
basis. In addition to seeking an acceptable joint venture arrangement, the
Company has considered selling its 18.6 acre tract of land in Las Vegas and has
had discussions with certain parties in that regard, although no agreement has
been reached with any party respecting such a sale.
As a source of liquidity, the Company receives interest monthly on the LRGP
Note, provided no event of default has occurred and is continuing on the New
Notes issued by SCGC and LRGP to the Lender (see "SCGC" below). Also, in
November 1995, the Company issued a $1 million ten year note to a bank which
bears interest at prime plus 1 1/2%, and is secured by certain equipment. The
proceeds are being used for general corporate purposes. In February 1996, the
Company sold approximately 6.5 acres of vacant land in St. Charles Parish,
Louisiana for net proceeds of approximately $441,000 in cash.
As discussed below under "Recent Developments" the Company has entered into an
agreement to sell its remaining interest in SCGC to Casino America for
1,850,000 shares of Casino America common stock and certain other
consideration. Casino America has agreed to register the shares to be issued
to the Company for resale prior to closing in order that, providing such
registration statement is effective, the Company may sell such shares in the
open market. Closing of such transaction is subject to a variety of conditions
(see "Recent Developments").
SCGC
Since March 1995, LRGP and its affiliate, Casino America, have been providing
capital to develop the Calcasieu Parish project which opened in July 1995. As
of February 29, 1996, SCGC management anticipates an additional $8 million will
be spent to complete the permanent terminal facility and retire project-related
payables. In addition, SCGC plans to construct a 300 room hotel at an
estimated cost of $15 million. The Company expects that the additional capital
necessary to complete the Calcasieu Parish project will come from LRGP or a
financing source arranged by LRGP, and cash flows from operating the Calcasieu
Parish project. However, LRGP does not have a contractual obligation to
provide such capital and no assurance can be given that LRGP, or another
financing source, will provide the capital necessary to complete the planned
improvements.
In June 1994, SCGC completed a private placement of a $28,000,000 Senior
Secured Increasing Rate Note (the "Senior Note") to an institutional investor.
SCGC repaid $6.5 million of the Senior Note in October 1994. The balance of
the Senior Note was repaid in August 1995 from a portion of the proceeds from
the issuance of $38.4 million of Senior Secured Increasing Rate Notes (the "New
16
<PAGE> 18
Notes") issued jointly by SCGC and LRGP (collectively, the "Issuers") to the
same institutional investor (the "Lender"). The New Notes initially become due
on July 27, 1996, but can be extended up to an additional twelve months at the
option of the Issuers provided no event of default has occurred and is
continuing, carry a 12% coupon increasing 25 basis points each quarter until
maturity, and provide for contingent interest beginning in May 1996 equal to
7.5% of the Issuers' consolidated cash flow, as defined. The New Notes are
collateralized by substantially all the assets of the Issuers and the agreement
governing the New Notes contains covenants relating to certain business,
operational and financial matters including limitations on (i) incurring
additional debt, (ii) paying dividends, (iii) merging or consolidating with
others, (iv) changes in control, (v) capital expenditures, (vi) investments and
joint ventures, and (vii) the sale of assets, and financial covenants
pertaining to (a) minimum cash flow, (b) minimum fixed charge ratio, (c)
maximum leverage ratio, and (d) minimum net worth. Events of default occurred
in September 1995 due to the failure to meet certain of the financial
covenants. SCGC and LRGP are presently negotiating with the Lender to obtain a
waiver of such defaults, but no waiver has yet been executed by the Lender. No
assurance can be given that a satisfactory waiver will be forthcoming. During
the pendency of an event of default, the Lender is entitled to accelerate the
maturity of the New Notes and to foreclose on the collateral securing the New
Notes. The Company believes (i) the collective cash flow of LRGP and SCGC is
more than sufficient to support the level of debt that the New Notes represent,
and (ii) the Lender is well collateralized. Accordingly, while no assurance
can be given, the Company does not expect that the Lender will accelerate the
maturity of the New Notes and seek to foreclose on the collateral.
The New Notes are not guaranteed by the Company or any of its consolidated
subsidiaries. However, during any period an event of default has occurred and
is continuing under the New Notes, the Company is not entitled to receive
interest payments on the $20 million LRGP Note, and in the event of foreclosure
on the New Notes, it is anticipated that the collectibility of the LRGP Note
would be jeopardized.
RECENT DEVELOPMENTS
In January 1996, the Company signed an agreement with Casino America to sell
the Company's remaining 50% interest in SCGC to Casino America in exchange for
1,850,000 shares of Casino America common stock. Casino America has agreed to
register the shares to be issued to the Company for resale prior to closing in
order that, providing such registration statement is effective, the Company may
sell such shares in the open market. In addition, Casino America will issue an
additional five-year warrant to the Company to purchase up to another 416,667
shares of Casino America common stock (bringing the total number of shares
purchasable pursuant to warrants by the Company to 833,334 shares) at an
exercise price of $12.00 per share. Based upon a closing price of $6.25 of
Casino America's common stock on January 31, 1996 as reported by Nasdaq, the
total value of consideration to be received by the Company in this transaction
is estimated to be approximately $11.6 million. In management's opinion, the
value of SCGC declined from June 1995 (when the Company sold 50% of SCGC for
approximately $21 million) to January 1996 (when the Company agreed to sell the
remaining 50% interest in SCGC for approximately $11.6 million) because
operating results since the opening of SCGC's riverboat casino in July 1995
were less than the projected results.
The Company's decisions to sell the first 50% interest in SCGC and then the
remaining 50% interest in SCGC were unrelated and based upon differing
considerations. The Company determined to sell the first 50% interest because
it needed additional financing to complete the development of the Louisiana
project but desired to retain an interest in the project due to management's
belief that the value of the operating casino would appreciate over the amount
received by the Company for the sale of the first 50% interest. The Company's
decision to sell the remaining 50% interest in SCGC resulted from management's
belief that SCGC needs a second riverboat at the site to effectively compete in
the Lake Charles market, and the Company and the other 50% shareholder, LRGP,
as well as LRGP's affiliates, were unable to reach an agreement with respect to
the ownership structure of the second riverboat. SCGC's principle competition
comes from (i) a two riverboat operation in the City of Lake Charles that
alternates the cruising schedules of its riverboats such that one riverboat is
always at the dock, and (ii) a land-based Indian-owned casino in Kinder,
Louisiana, approximately 39 miles to the northeast of SCGC's operation. Since
Louisiana law requires casino riverboats to cruise, SCGC is at a competitive
disadvantage since its single riverboat is away from the dock each time it
makes a cruise, thus prohibiting patrons from boarding.
There will be certain modifications made to the $20 million LRGP Note upon
closing the proposed transaction. The parties have agreed that the LRGP Note
will be divided into Note A and Note B, each of which shall be in the amount of
$10 million. Interest on Note A shall be paid monthly for the full five year
term, with principal due in seventeen equal fully amortizing quarterly
payments beginning on the first anniversary of the closing date, with a final
maturity five years after the closing date. Note B (which may be converted
into Casino America common stock by exercising the stock purchase warrants),
carries interest payments which shall be payable monthly for five years from
the closing date with principal to be paid at the end of the five-year period.
The Company will give Casino America an irrevocable proxy on the Casino America
stock held by the Company, and the right of first refusal to purchase any
Casino America stock the Company plans to sell in a single transaction of
500,000 shares or more, or in a series of related transactions to a single
purchaser within a 120 day period.
17
<PAGE> 19
Currently, the existing warrant, which was issued in June 1995, is exercisable
only by converting up to a $5 million portion of the LRGP Note. However, upon
closing the sale of Casino America's purchase of the Company's remaining 50%
interest in SCGC, the existing warrant shall be amended such that it may be
exercised only by converting up to a $5 million portion of Note B and its
expiration date shall be extended to five years after the closing date.
Similarly, the new warrant may only be exercised by converting up to a $5
million portion of Note B, but must be exercised concurrently with or after the
exercise of the existing warrant held by the Company.
Casino America has an option to purchase the 50% interest in LRGP it does not
already own. In the event Casino America or an affiliate thereof purchases all
or substantially all of such LRGP interest then, immediately upon the later to
occur of Casino America's purchase of (a) the Company's remaining interest in
SCGC, or (b) the remaining LRGP interest, (i) Casino America shall cause LRGP
to guarantee and be personally liable for the payment of both principal and
interest on Note A and Note B, and (ii) the payment terms of Note B shall be
amended to conform to the payment terms of Note A. Furthermore, if Casino
America completes the purchase of the Company's remaining interest in SCGC,
purchases the remaining LRGP interest and refinances LRGP's existing
indebtedness, then Casino America shall cause either (i) Note A and Note B to
not be subordinate to any indebtedness and continue to be secured by the 50%
interest in SCGC owned by LRGP, (ii) Note A to be paid and Note B shall then
become an unsecured, subordinated note of Casino America, or (iii) any
combination of (i) and (ii) above, provided that at least $5 million of Note A
be paid and the balance not be subordinate to any indebtedness and continue to
be secured.
Closing of this transaction is subject to a number of conditions, including the
acquisition by Casino America of Grand Palais Riverboat, Inc. ("GPRI") from
bankruptcy and relocating its riverboat casino to SCGC's site in Calcasieu
Parish, Louisiana, and the procurement of required regulatory and lender
approvals. A plan of reorganization pertaining to Casino America's acquisition
of GPRI was filed in the United States Bankruptcy Court in late January 1996.
Such plan has not as yet been confirmed by the court, however a confirmation
hearing has been scheduled for March 26, 1996. In addition, Casino America,
GPRI and the Company have filed various petitions with the Louisiana Riverboat
Gaming Commission ("Gaming Commission") to approve the above transactions, but
the Gaming Commission has not as yet taken any action on such petitions. The
parties made a presentation to the Gaming Commission regarding the transaction
on or about January 23, 1996. While the Gaming Commission has not given any
indication when it will make a decision regarding the parties petitions, the
Company anticipates that decisions will be forthcoming in the late March to
early April 1996 time frame. The Company does not presently intend to be a
long-term holder of Casino America common stock. The Company may exchange its
Casino America stock in the course of acquiring another casino gaming project,
or sell such shares for cash, which may then be used for acquiring or
developing another casino gaming project, or used for general corporate
purposes. In the event the Company is unable to identify attractive
acquisition or development opportunities in gaming, it may choose to pursue
other business opportunities. See "Pro Forma Financial Information" contained
elsewhere herein.
In the event Casino America completes the purchase of GPRI and either the
Gaming Commission or the Enforcement Division does not approve of Casino
America's purchase of the Company's remaining 50% interest in SCGC, then the
Company has agreed to enter into a joint venture agreement which provides for,
among other things, (i) the GPRI riverboat casino to dock at SCGC's site in
Calcasieu Parish, (ii) the payment of an annual docking fee of $2 million to
the Company and $3 million to SCGC, and (iii) the allocation of all revenues
and operating expenses (exclusive of the docking fee) of the joint venture to
be distributed 52.5% to GPRI and 47.5% to SCGC.
18
<PAGE> 20
CROWN CASINO CORPORATION
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
On September 21, 1994, an action was filed against the Company and SCGC in the
24th Judicial District Court for the Parish of Jefferson, Louisiana by Avondale
Industries, Inc. ("Avondale"). In this action, Avondale alleges that the
Company was contractually obligated to Avondale for the construction of SCGC's
riverboat vessel based upon a letter of intent (allegedly reaffirming a
previous agreement entered into between Avondale and SCGC). Avondale alleges
that the Company breached a duty to negotiate in good faith toward the
execution of a definitive Vessel Construction Contract. Alternatively,
Avondale alleges that a separate oral contract for the construction of the
vessel existed and that the Company committed unspecified unfair trade
practices and misrepresentations. Avondale seeks unspecified damages including
"all lost profits and lost overhead" and attorneys' fees. Avondale has claimed
its lost profits and lost overhead amount to approximately $2.5 million. While
no assurance can be given as to the ultimate outcome of this litigation,
management believes that this litigation will not have a material adverse
effect on the financial position of the Company. The Company intends to
vigorously contest liability in this matter.
In October 1995 an action was filed against the Company, Casino America,
Louisiana Downs, Inc., and W.S. Bellows Construction Co. (the "Defendants") in
the U.S. District Court for the Western District of Louisiana, Lake Charles
Division, by Marvin D. Vincent and the National Black Chamber of Commerce, Inc.
(the "Plaintiffs"). In this action the Plaintiffs alleged that the Defendants
desecrated the alleged grave sites of their ancestors during the course of
construction of the Calcasieu Parish land-based facilities. The Plaintiffs
were seeking damages of $2 million per Defendant, plus $10 million in punitive
damages, costs and attorneys' fees. On March 13, 1996, the court dismissed the
lawsuit without prejudice in response to a motion for dismissal filed by the
Plaintiffs' counsel.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.17 Stock Purchase Agreement dated January 18, 1996 by and between
the Registrant and Casino America, Inc., including form of
Registration Agreement, Promissory Notes and Warrants in favor
of the Registrant to purchase common stock of Casino America,
Inc. (2)
27 Financial data schedule (1)
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed in the third fiscal quarter
of the current year.
_________________
(1) Filed herewith.
(2) Previously filed as an Exhibit to the Registrant's Registration Statement
on Form S-1, as amended, initially filed with the Securities and Exchange
Commission on May 31, 1994 (No. 33-79484) and incorporated herein by
reference.
19
<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Crown Casino Corporation
By: \s\ Mark D. Slusser
------------------------------------
Mark D. Slusser
Vice President Finance, Chief
Financial Officer and Secretary
(Principal Financial and Accounting
Officer)
Dated: March 18, 1996
20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> JAN-31-1996
<CASH> 375,499
<SECURITIES> 0
<RECEIVABLES> 21,021,059
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,903,017
<PP&E> 17,884,296
<DEPRECIATION> (166,689)
<TOTAL-ASSETS> 39,620,624
<CURRENT-LIABILITIES> 417,912
<BONDS> 0
0
0
<COMMON> 117,256
<OTHER-SE> 26,473,422
<TOTAL-LIABILITY-AND-EQUITY> 39,620,624
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,408,773
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 983,189
<INCOME-PRETAX> 16,212,261
<INCOME-TAX> 7,723,500
<INCOME-CONTINUING> 8,488,761
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,488,761
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
</TABLE>
