<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-KSBA
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the fiscal year ended December 31, 1994
COMMISSION FILE NO: 0-17529
-------
EUROPA CRUISES CORPORATION
(name of small business issuer in its charter)
DELAWARE 59-2935476
-------- ----------
(State of Incorporation) (I.R.S. Employer
Identification Number)
150-153rd Avenue East, Suite 200, Madeira Beach, Florida 33708
- --------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: 813/393-2885
------------------
Securities registered pursuant to Section 12 (b) of the Act: None
---------------
Securities registered pursuant to Section 12 (g) of the Act: Common Stock,
par value $.001
------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by references in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $19,888,301.
-----------
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of March 31, 1995: $13,120,000.
-----------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of March 31, 1995: 17,496,707 shares.
------------
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS. COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE YEAR FIRST DIRECTOR
---- --- -------------------
<S> <C> <C>
Lester E. Bullock 41 1995
Ernst G. Walter 48 1992
Deborah A. Vitale 45 1992
Chuck Kleim 60
</TABLE>
LESTER E. BULLOCK has served as President of the Company since July 18, 1994,
and served as a director of the Company since March, 1995. From January, 1994 to
June, 1994 Mr. Bullock was Vice President of Operations at the Company. From
January 1, 1992 through December 31, 1993, Mr. Bullock was General Manager of
the Company responsible for all port operations. In 1991, Mr. Bullock was Casino
Pit Manager in Ft. Myers, Florida for Casinos Austria Maritime Corporation. From
1989 to 1990, Mr. Bullock was General Manager of the Sonesta Beach Resort and
Crystal Casino in Oranjestead, Aruba. From 1984 through 1989, Mr. Bullock held
various managerial and administrative positions at the Tropicana Resort and
Casino in Las Vegas, Nevada and the Dunes Hotel Casino and Country Club in Las
Vegas, Nevada. Mr. Bullock received a B.S. in Business, Marketing and Finance
from Arizona State University in 1974.
ERNST G. WALTER - Dr. Walter is Executive Vice President and a Director of
Europa. From August, 1993 through January, 1994, Dr. Walter served as Chief
Financial Officer of the Company. Dr. Walter has been President and Director of
Serco since 1990 and Director of Serco Finanzbeteiligung und Beratungs
Gesellschaft M.B.H., Vienna and Klagenfurt, Austria since 1975, where he has
been engaged in providing financing and investment advice.
DEBORAH A. VITALE is Chairman of the Board of Directors and Secretary of the
Company. Ms. Vitale is an attorney currently engaged in the private practice of
law in Washington, D.C., Maryland and Virginia. Ms. Vitale was a partner in the
firm of Miller & Vitale, P.C. from November 1990 - September 1992. From 1986 to
1990, Ms. Vitale was Of Counsel to the firm of Jacobi & Miller in Alexandria,
Virginia. Ms. Vitale has, in the past, served as a staff attorney at the Federal
Communications Commission and has served as Listing Official for the
Environmental Protection Agency.
CHARLES M. KLEIM, CPA, is Chief Financial Officer of the Company and has served
in that capacity since October, 1994. From September, 1991 through October,
1994, Mr. Kleim was Controller of Life Sciences, Inc., a publicly-held
manufacturer of biochemical products and enzymes. From December, 1989 through
September, 1991, Mr. Kleim was self-employed as a certified public accountant in
Hobart, Indiana.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
Through December 31, 1994, Mr. Bullock received approximately $101,852 in
salary and bonuses. In addition, the Company rents a car for Mr. Bullock at a
cost of approximately $350.00 per month.
Through December 31, 1994, Mr. Reddien received approximately $125,000 in
salary from Europa and Casino World, Inc., a wholly-owned subsidiary of Europa.
In addition, the company rents a car for Mr. Reddien at a cost of approximately
$360.00 per month.
During 1994 directors did not receive compensation for serving on Europa's
Board of Directors. Commencing January 1, 1995, directors of Europa Cruises
Corporation will be paid $1,500 per month for serving as a director of the
Company.
The following table provides information concerning the compensation of the
named executive officers of the Company and its wholly-owned subsidiaries.
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
NAME AND ------------ NUMBER OF
PRINCIPAL FISCAL OPTIONS ALL OTHER
POSITION YEAR SALARY BONUS GRANTED COMPENSATION
- ---------------------- ------ -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Lester E. Bullock(1) 1994 $ 85,352 $16,500 100,000 $2,100(4)
President and Director 1993 45,000 9,798 None None
1992 11,685 None 50,000 None
Charles H. Reddien(1) 1994 125,000 None 100,000 $ 216(3)
President, CEO, and 1993 125,000 None None 216(3)
Chairman 1992 7,211 None None None
Sharon E. Petty (2) 1994 107,500 None None $ 216(3)
Vice President - 1993 115,000 22,500 100,000 216(3)
Finance, Corporate 1992 70,000 None 30,000 None
Secretary, Director
Ernst G. Walter 1994 53,308 None 100,000 None
Executive Vice 1993 None None 100,000 None
President and Director 1992 None None None None
</TABLE>
- --------------------
(1) On July 18, 1994, Mr. Bullock became President of the Company and Mr.
Reddien resigned as President and Chief Executive Officer of the Company. Mr.
Reddien remained President and Chief Executive Officer of Casino World, Inc. and
Mississippi Gaming Corporation, wholly-owned subsidiaries of the Company.
(2) Terminated in 1995.
(3) Includes insurance premiums paid by the Company on a policy in excess of
$50,000.
(4) Automobile allowance
<PAGE>
Stock Options
The Company's 1988 Stock Option Plan (the "Plan") was adopted by the Board
of Directors and approved by the stockholders of the Company on December 19,
1988. The purpose of the Plan is to assist the Company and its subsidiaries to
retain the services of and to motivate selected key management employees by
providing the opportunity for such personnel to acquire a proprietary interest
in the Company and thus share in its growth and success. A total of 1,000,000
shares of Common Stock are reserved for issuance under the Plan. The Plan
provides for the granting of non-qualified stock options and "incentive stock
options" within the meaning of Section 422A of the Internal Revenue Code of 1986
to any employee, officer or director of the Company and its subsidiaries (any
company in which the Company owns, directly or indirectly, stock possessing 50%
or more of the total combined voting power of all classes of stock). A
committee of two (2) members of the Company's Board of Directors (the
"Committee") administers the Plan. The Committee designates optionees, the
exercise price of options, which may not be less than 100% of the market value
of the shares on the date of grants, the date of grant and the period of the
option, which may not be longer than ten (10) years from the date of grant.
Because federal, state or local law may require the withholding of taxes
applicable to gains resulting from the exercise of non-qualified stock options
granted under the plan, the Plan provides that an optionee may, in lieu of
tendering cash payment to satisfy any such liability, satisfy all or a portion
of any such liability by delivering to the Company, or by requesting the Company
to withhold in connection with the option exercise, shares of Common Stock.
Such shares will be valued at fair market value at the date the withholding tax
obligation arises and will reduce such obligation by an equivalent amount.
Officers of the Company may not exercise any non-qualified stock option earlier
than six months following the date of its grant. Options under the Plan are
non-transferable other than by will or the laws of the descent and distribution.
The right of an optionee or optionee's successor in interest to exercise an
option granted under the Plan following the termination of employment of, or the
death of, an optionee is dependent upon the circumstances relating to the
optionee's termination of employment. Upon the termination of employment of an
optionee who is disabled (as defined in the Plan), such optionee may exercise
any option which was exercisable on the date of the termination, within the
earlier of three (3) years from termination or the original expiration date of
the option. In the event of an optionee's death during the course of employment
or within three years following the date of termination of employment (by an
optionee that was not disabled), any option which was exercisable on the date of
death may be exercised until the earlier of one year following the date of
death, or the original expiration date of the option. If an optionee's
employment is terminated for cause, any option previously granted shall
terminate and may not be exercised following the date of such termination of
employment. Upon the termination of employment of an optionee for reasons other
than retirement, disability, death or cause, the optionee may exercise any
option which was exercisable on the date of termination of employment within
three months following termination of employment or such additional period as
the Board may determine but in no event later than the original expiration date
of the option.
<PAGE>
During 1994 the following non-qualifying options of Europa Cruises
Corporation Common Stock par value $.001 were issued to the Officers or Board of
Directors of the Company:
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARs EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARs EMPLOYEES PRICE EXPIRATION
NAME GRANTED (#) IN FISCAL YEAR ($/SH) DATE
- -------------------- ------------- -------------- --------- ----------
<S> <C> <C> <C> <C>
Lester E. Bullock 100000 20 1.5 8/31/99
Charles H. Reddien 100000 20 1.5 8/31/99
Ernst G. Walter 100000 20 1.5 8/31/99
Stephen M. Turner 100000 20 1.5 8/31/99
Deborah A. Vitale 100000 20 1.5 8/31/99
Sharon E. Petty 0 0 0 8/31/99
</TABLE>
As of March 31, 1995, a total of 2,766,250 options were outstanding.
On April 28, 1989, immediately prior to the Company's filing a registration
statement with the Securities and Exchange Commission in connection with its
original public offering, the underwriter required Mr. Liberis, the then
President and Chief Executive Officer of the Company and Mr. Krick, the then
Vice President of the Company, to cancel, for no consideration, 1,575,000 shares
of Common Stock of the Company owned by them. Mr. Liberis and Mr. Krick were
issued such shares for an aggregate of 1,575 or $.001 per share, in connection
with the organization of the Company in 1988. In addition, the underwriter
required Mr. Liberis to place 1,125,000 shares in escrow which were to be
released to Mr. Liberis if the Company earned $1,000,000 before taxes and
extraordinary items in 1989 (such amount was not earned and the shares were
returned to the Company). On August 29, 1989, Mr. Liberis reached an agreement
with the Board of Directors and the underwriter for the issuance of non-
qualified options to purchase up to 1,417,500 shares of the Company's Common
Stock at $1.40625 per share, the market price of the Common Stock on the date of
grant. The options vested based on tenure and performance with options on
360,000 shares vesting upon two (2) years of service with the Company, and
options on 180,000 and 877,500 shares vesting upon the Company realizing
$1,200,000 and $1,500,000 respectively, of income before income taxes and
extraordinary items over any four (4) consecutive calendar quarters during the
option period which expires on August 29, 1999. Of such options, 540,000 had
vested as of December 31, 1991. No additional options vested during 1992. On
December 28, 1990, Mr. Liberis contends that the Board of Directors cancelled
the above mentioned options together with all other outstanding options and
issued replacement options at the then closing bid price of $.15625. The term
and conditions of the replacement option remained the same as the original
issuances. The December 28, 1990 Board Meeting at which the repricing of these
options took place is the subject of litigation between Mr. Liberis and the
Company. See "ITEM 3. LEGAL PROCEEDINGS".
<PAGE>
On March 30, 1990, the Company issued to Mr. Liberis and Harlan Allen, Jr.,
a former officer and director, options to acquire 250,000 shares each of Common
Stock at $1.50 per share each in connection with their purchase from the Company
of its twenty percent (20%) interest in Sea Lane and Marne. Mr. Liberis and Mr.
Allen contend these options were cancelled effective December 31, 1990, in
connection with the recision of the sale of the interest in Sea Lane and Marne
and options of the like amount at $.16 per share were granted to replace those
granted on December 30, 1990. These options were exercised by Mr. Liberis and
Mr. Allen during the year ended December 31, 1992. The repricing of these
options and the recision of the sale to Liberis and Allen of the Company's
interest in Marne are the subjects of litigation between Mr. Liberis, and the
Company. The dispute between the Company and Allen has been settled. See "ITEM
3. LEGAL PROCEEDINGS".
In connection with a settlement agreement between Mr. Liberis, the previous
President and Chief Executive Officer of the Company and Serco, a major
shareholder dated December 2, 1992, the exercise price of the remaining options
held by Mr. Liberis was repriced at $1.50 per share. In addition, Mr. Liberis
was granted an option to purchase 200,000 shares at a price of $5.00 per share.
As of March 31, 1995, 1,617,500 of such options had not been exercised. An
attempt by Mr. Liberis to exercise 1,417,500 options at $.15625 per share was
refused by the Company. See "ITEM 3. LEGAL PROCEEDINGS".
AGGREGATED FISCAL YEAR-END OPTION VALUE TABLE. The following table sets forth
certain information concerning unexercised stock options held by the Named
Executive Officers as of the end of 1994.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT 1994 FISCAL OPTIONS AT 1994 FISCAL
YEAR-END YEAR END
EXERCISABLE (E) EXERCISABLE (E)
NAME UNEXERCISABLE (U) UNEXERCISABLE (U)
- ------------------- ------------------------ --------------------------
<S> <C> <C>
Lester E. Bullock 120,000 (E) $ 1,250(E)
30,000 (U) $ 1,875(U)
Deborah A. Vitale 200,000 (E) $ 6,250(E)
Ernst G. Walter 200,000 (E) $ 6,250(E)
Sharon E. Petty 130,000 (E)
Stephen M. Turner 200,000 (E)
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely upon a review of Section 16(a) reports furnished to the
Company for the fiscal year ended December 31, 1994 and representations by
reporting persons that no other reports were required for the fiscal year, Serco
International Limited ("Serco"), Austroinvest International Limited
("Austroinvest") and Dr. Ernst G. Walter ("Walter") each filed four Form 4
reports late during fiscal year 1994.
<PAGE>
On May 25, 1994, the Commission entered a Cease and Desist Order against
Charles S. Liberis, finding Liberis violated Section 16(a) of the Exchange Act
and Rules 16a-2 and 16a-3 promulgated thereunder when during the period from
August 12, 1991 through October 9, 1993, Liberis filed late eleven Form 4
reports with the SEC.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The only persons who owned of record or were known by the Company to own
beneficially on March 31, 1995, more than five percent (5%) of the outstanding
shares of Common Stock of the Company, each officer and director and the
ownership by all directors and officers as a group were as follows:
<TABLE>
<CAPTION>
NAME & ADDRESS NUMBER OF SHARES OWNED PERCENT(1)
<S> <C> <C>
Serco International Limited 3,312,570 (3) 13.7%
P.O. Box - CB 12765
Nassau, Bahamas
Austriinvest International 3,312,570 (3) 13.7%
P.O. Box - CB 12765
Nassau, Bahamas
Europa Cruises Corporation
Employee Stock Ownership
Plan-Trust Agreement
150 153rd Avenue East,
Madiera Beach, FL 33708 5,000,000 (4) 20.7%
Charles S. Liberis
909 East Cervantes St,
Pensacola, FL 32501 1,441,688 (5)(7) 6.0%
Lagoon Cruise Line Inc.
2200 Nelson Street
Panama City, FL 32402 1,200,000 (6) 5.0%
Lester E. Bullock
6160 Sundown Drive
St. Petersburg, FL 33708 120,000 (7) (8)
Deborah A. Vitale, Esq.
1013 Princess Street
Alexandria, VA 22314 203,500 (7) (8)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Ernst G. Walter
150 153rd Ave E,
Madeira Beach, FL 33708 3,512,570 (7)(9) 13.7%
All directors and officers
as a group (4 persons) 5,712,570 23.7%
Charles H. Reddien 100,000 (8)
Sharon E. Petty 130,000 (8)
</TABLE>
- -----------------------------------------
(1) Common Stock and Preferred Stock amounts have been combined for the purpose
of calculating percentages.
(2) Includes 926,000 shares of Series S Preferred Stock, 900,000 shares of
Series S-NR Preferred Stock and 1,486,570 shares of Common Stock. Serco
International Limited ("Serco") has assigned its beneficial interest in
202,600 shares of Common Stock to Mr. Rudolf Magyar. Serco has also
assigned 150,000 shares of Common Stock to East Invest Group. Serco has
advised the Company that Serco has retained the right to vote such assigned
shares.
(3) Represents shares owned by both Serco and Austroinvest International
Limited ("Austroinvest"). Austroinvest is a publicly held investment
company and the parent company of Serco.
(4) The initial trustees of the Europa Cruises Corporation Employee Stock
Ownership Plan, Trust Agreement ("ESOP") were Deborah A. Vitale, Esq., a
director of the Company, Stephen M. Turner, a former director of the
Company and Victor B.Gersh, Esq., Counsel to the Company, On or about March
31, 1995, Lester E. Bullock, President and director of the Company was
selected by the Board of Directors as a Trustee replacing Stephen M.
Turner. The ESOP was established on August 18, 1994. The participants in
the ESOP are entitled to direct the Trustees as to the manner in which the
stock of the Company allocated to their accounts in ESOP is to be voted.
Unallocated shares are voted by the Trustees. There are no restrictions or
agreements among the Trustees with respect to the voting of ESOP shares.
As of March 31, 1995, no shares of Common Stock have been allocated to
participants in the ESOP.
(5) Common Stock. Includes 740,000 shares of Common Stock underlying options
currently exercisable and 400,000 shares of Common Stock owned jointly with
Ginger Liberis, his wife. Mr. Liberis contends that his options are
exercisable for 877,500 additional shares which the Company believes failed
to vest. The Company also contends that the Company is entitled to cancel
540,000 of the exercisable options. See ITEM 3. LEGAL PROCEEDINGS".
(6) Represents 1,200,000 shares of Common Stock beneficially owned by Lagoon
Cruise Line, Inc. ("Lagoon") issued by the Company in connection with the
purchase of the vessel StarDancer. The 1,200,000 shares are to be sold
pursuant to a Registration Statement under the Securities Act of 1933. The
value attributed to such shares by the Company and Lagoon Cruise Line, Inc.
("Lagoon") at the time the vessel Stardancer was
<PAGE>
purchased was $1.25 per share. Europa has guaranteed to Lagoon that the
gross selling price received by Lagoon in the aggregate for all sales of
Stock (as "Stock" is defined below) during a period of nine (9) months from
the date of this Prospectus (the "Selling Period"), plus the value of the
Stock not sold by Lagoon upon expiration of the Selling Period, ("Remaining
Stock") shall not be less than One Million Five Hundred Thousand Dollars
($1,500,000). For this purpose, the term "Stock" includes the 1,200,000
Shares of Common Stock in Europa offered by Lagoon and all shares of Common
Stock of Casino World, Inc. when and if distributed to shareholders of
Europa. At the end of the Selling Period, the Remaining Stock shall be
valued at an amount equal to the average price as reported in the Wall
----
Street Journal at which such shares were traded on the NASDAQ Market System
--------------
or as reported by any other stock quotation system for the immediately
preceding five business days. If the value of said Remaining Stock plus
the gross selling price for all Stock sold by Lagoon during the Selling
Period is less than $1,500,000, then, within 30 days after the expiration
of the Selling Period, Europa is obligated to pay to Lagoon, the
difference, if any, between $1,500,000 and the combined amount of the gross
selling price of Stock sold plus the value of the Remaining Stock. If the
value of said Remaining Stock plus the gross selling price for all Stock
sold by Lagoon during the Selling Period is equal to or greater than
$1,500,000, no further amounts are due from Europa to Lagoon under the
Guaranty. If the value of said Remaining Stock plus the gross selling
price from the sale of Stock sold by Lagoon during the Selling Period is
equal to or greater than $1,750,000, the Promissory Note executed by Europa
Stardancer Corporation, payable to Lagoon shall accrue interest at the rate
of zero percent (0%) per annum. Lagoon has also granted an irrevocable
proxy to Stephen M. Turner, a former director of the Company to vote the
shares. The Proxy granted to Mr. Turner will terminate on the earlier to
occur of the sale of the shares by Lagoon or February 26, 1996.
(7) Includes shares underlying options for Common Stock exercised or
exercisable within the next sixty days.
(8) Less than one percent.
(9) Represents 926,000 shares of S Preferred Stock, 900,000 shares of NR
Preferred Stock, 1,486,570 shares of Common Stock owned by Serco and
200,000 shares of Common Stock Dr. Walter has the current right to acquire
pursuant to exercise of stock options. Dr. Walter is the president of Serco
and holds a general power of attorney from Austroinvest and accordingly may
be deemed to have a beneficial ownership interest in the shares owned by
Serco.
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Contents
================================================================================
Page
----
Report of Independent Certified
Public Accountants....................................................F-2
Consolidated Balance Sheet as of
December 31, 1994.....................................................F-3
Consolidated Statements of Operations
for the Year Ended
December 31, 1994 and 1993.....................................F-4 to F-5
Consolidated Statements of Stockholders' Equity
for the Year Ended
December 31, 1994 and 1993............................................F-6
Consolidated Statements of Cash Flows
for the Year Ended
December 31, 1994 and 1993.....................................F-7 to F-8
Notes to Consolidated Financial
Statements....................................................F-9 to F-29
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors
of Europa Cruises Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheet of Europa Cruises
Corporation and Subsidiaries as of December 31, 1994 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Europa Cruises
Corporation and Subsidiaries at December 31, 1994, and the results of their
operations and their cash flows for each of the two years in the period then
ended in conformity with generally accepted accounting principles.
As discussed in Note 9(c) to the consolidated financial statements, the Company
is a defendant in lawsuits filed by the principal stockholder/former CEO and
Chairman of the Board of Directors. These lawsuits are in their early stages and
the ultimate outcome is not presently determinable. In addition, as discussed in
note 9(d) to the consolidated
<PAGE>
financial statements, the State of Florida is seeking to assess the Company
significant amounts of sales and use taxes. The Company strongly disagrees with
the proposed assessment, but the ultimate outcome of this matter is not
presently determinable. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
Miami, Florida BDO Seidman
April 10, 1995, except for notes 2(a) and
4 which are as of April 13, 1995
<PAGE>
================================================================================
<TABLE>
<CAPTION>
December 31, 1994
- --------------------------------------------------------------------------------
<S> <C>
Assets
Current
Cash and cash equivalents $ 3,121,794
Accounts receivable 83,721
Prepaid insurance and other 1,468,777
- --------------------------------------------------------------------------------
Total current assets 4,674,292
Vessels, equipment and fixtures, less accumulated
depreciation (Note 2) 14,026,531
Investment in and advances to unconsolidated affiliate
(Note 3) 271,022
Land under development for dockside gaming
(Note 4) 4,100,000
Dockside gaming development costs (Note 4) 455,455
- --------------------------------------------------------------------------------
$23,527,300
================================================================================
</TABLE>
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Consolidated Balance Sheet
================================================================================
<TABLE>
<CAPTION>
December 31, 1994
- --------------------------------------------------------------------------------
<S> <C>
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses $ 2,306,594
Current maturities of long-term debt (Notes 5 and 12) 4,631,383
Unearned cruise revenues 192,621
- --------------------------------------------------------------------------------
Total current liabilities 7,130,598
Long-term debt, less current maturities (Notes 5 and 12) 5,288,723
- --------------------------------------------------------------------------------
Total liabilities 12,419,321
- --------------------------------------------------------------------------------
Commitments, contingencies and subsequent event (Notes 3, 9 and 12)
- --------------------------------------------------------------------------------
Stockholders' equity (Notes 6 and 7):
Preferred stock, $.01 par value; shares authorized
5,000,000; outstanding 3,216,000 ($5,126,580 aggregate
liquidation preference) 32,160
Common stock, $.001 par value - shares authorized
50,000,000; issued 23,517,314; outstanding 17,403,615 23,517
Additional paid-in capital 23,523,724
Unearned ESOP shares (7,175,548)
Deficit (5,105,718)
Treasury stock, at cost, 1,300,000 shares (190,156)
- --------------------------------------------------------------------------------
Total stockholders' equity 11,107,979
- --------------------------------------------------------------------------------
$23,527,300
</TABLE>
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Consolidated Balance Sheet
================================================================================
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Consolidated Statements of Operations
================================================================================
<TABLE>
<CAPTION>
Year ended December 31, 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenues
Gaming revenue (Note 9(b)) $ 8,839,194 $ 5,184,620
Passenger fares 5,881,942 5,390,225
Beverage 2,402,701 1,468,378
Gain on sale of land (Note 4) 2,253,124 -
Other 275,350 335,822
Subcharter fees 235,990 242,000
- --------------------------------------------------------------------------------
19,888,301 12,621,045
- --------------------------------------------------------------------------------
Costs and Expenses
Vessel operating 11,061,844 9,426,819
Administrative and general 3,372,009 2,211,484
Advertising and promotion 2,042,215 1,638,192
Depreciation and amortization (Note 2) 873,393 655,178
Other operating (Note 11) 735,160 2,520,138
Interest, net (Note 5) 724,240 480,685
- --------------------------------------------------------------------------------
18,808,861 16,932,496
- --------------------------------------------------------------------------------
Net Income (Loss) 1,079,440 (4,311,451)
Preferred Stock Dividends 198,972 25,390
- --------------------------------------------------------------------------------
Net Income (Loss) Applicable To Common Stock $ 880,468 $(4,336,841)
================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Consolidated Statements of Operations
(Continued)
================================================================================
<TABLE>
<CAPTION>
Year ended December 31, 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Net income (loss) per common and common
equivalent share - primary and fully-diluted $.05 $(.33)
- --------------------------------------------------------------------------------
Weighted average number of common and common
equivalent shares outstanding - primary
and fully diluted 16,076,858 13,213,064
================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Consolidated Statements of Stockholders' Equity
(Notes 6 and 7)
================================================================================
<TABLE>
<CAPTION>
Additional
Preferred Common Paid-in Unearned Treasury
Stock Stock Capital ESOP Shares (Deficit) Stock Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $ - $14,406 $ 6,853,617 $ - $(1,649,345) $(148,750) $ 5,069,928
Issuance of preferred stock 18,260 - 1,980,820 - - - 1,999,080
Exercise of options and warrants - 79 33,234 - - - 33,313
Preferred stock dividends - - - - (25,390) - (25,390)
Net loss for the year - - - - (4,311,451) - (4,311,451)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 18,260 14,485 8,867,671 - (5,986,186) (148,750) 2,765,480
Issuance of units 13,900 695 3,384,702 - - - 3,399,297
Issuances of common stock - 8,323 11,132,365 (7,455,000) - - 3,685,688
Acquisition of treasury stock - - - - - (41,406) (41,406)
ESOP compensation - - - 279,452 - - 279,452
Preferred stock dividends - 14 138,986 - (198,972) - (59,972)
Net income for the year - - - - 1,079,440 - 1,079,440
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 $32,160 $23,517 $23,523,724 $(7,175,548) $(5,105,718) $(190,156) $11,107,979
=================================================================================================================================
</TABLE>
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Consolidated Statements of Stockholders' Equity
(Notes 6 and 7)
================================================================================
See accompanying notes to consolidated financial statements.
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Consolidated Statements of Cash Flows
(Note 10)
================================================================================
<TABLE>
<CAPTION>
Year ended December 31, 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities:
Net income (loss) $1,079,440 $(4,311,451)
- ---------------------------------------------------------------------------------------
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Expenses paid in shares of common stock 158,904 -
Depreciation and amortization 873,393 689,619
Bad debt expense 115,395 39,137
Gain on sale of dockside gaming property (2,253,124) -
Release of ESOP shares 279,452 -
Loss (gain) on sale of marketable securities - 5,130
Provision to reduce gaming equipment
held for sale to market value - 249,138
Dockside gaming costs - 660,000
Decrease (increase) in:
Accounts receivable 452,075 (317,647)
Prepaid insurance and other (194,956) 306,324
Vessel lease deposit 252,000 -
Increase (decrease) in:
Accounts payable and accrued expenses (1,650,923) 2,527,370
Unearned cruise revenues 110,824 (46,256)
- ---------------------------------------------------------------------------------------
Total adjustments (1,856,960) 4,112,815
- ---------------------------------------------------------------------------------------
Cash provided by (used in) operating activities (777,520) (198,636)
- ---------------------------------------------------------------------------------------
Investing Activities:
Purchases of property and equipment (1,550,403) (1,507,955)
Deposit on sale of gaming equipment (300,000) 300,000
Development costs for dockside gaming (26,068) (318,082)
Proceeds from sale of gaming equipment 1,100,326 -
Proceeds from sale of dockside gaming property 2,487,781 -
</TABLE>
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Consolidated Statements of Cash Flows
(Note 10)
================================================================================
<TABLE>
<S> <C> <C>
Purchase of land for dockside gaming - (4,661,600)
Sale of marketable equity securities, net - 107,951
- ---------------------------------------------------------------------------------------
Cash (used in) investing activities 1,711,636 (6,079,686)
- ---------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Consolidated Statements of Cash Flows
(Note 10)
================================================================================
<TABLE>
<CAPTION>
Year ended December 31, 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C>
Financing Activities:
Proceeds from:
Issuance of common stock $ 1,711,389 $ -
Conversion of options - 33,313
Issuance of units 3,399,297 1,999,080
Notes payable and long-term debt 771,624 5,933,150
Repayment of:
Notes payable and long-term debt (3,822,169) (2,455,756)
Preferred stock dividends (59,972) (25,390)
Purchase of treasury stock (41,406) -
- ------------------------------------------------------------------------------------
Cash provided by financing activities 1,958,763 5,484,397
- ------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 2,892,879 (793,925)
Cash and cash equivalents, beginning of year 228,915 1,022,840
- ------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 3,121,794 $ 228,915
====================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
1. Summary of Organization and Business
Significant -------------------------
Accounting
Policies Europa Cruises Corporation and Subsidiaries (the Company)
principally owns, operates and promotes four cruise vessels
offering day and evening cruises. The Company's cruises
include a variety of shipboard activities such as dining,
casino operations, sightseeing, live music and other
entertainment.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of
Europa Cruises Corporation and all of its subsidiaries. All
material intercompany balances and transactions have been
eliminated.
Cash Equivalents
----------------
The Company considers all liquid debt instruments with
original maturities of three months or less to be cash
equivalents. Cash equivalents include investments in money
market accounts and overnight repurchase agreements.
Vessels, Equipment and Fixtures
-------------------------------
Vessels and vessel improvements are depreciated over 20 years
using the straight-line method. Furniture, fixtures and
equipment are recorded at cost and are depreciated over their
estimated useful lives (which range from five to seven years)
using the straight-line method.
Expenditures for repairs and maintenance including major
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
dry-docking costs are charged to expense. Renovations and
improvements which extend estimated useful lives are
capitalized and depreciated.
Land Held for Development
-------------------------
Land held for development is carried at lower of costs or
market which at December 31, 1994 was at costs.
Dockside Development Costs
--------------------------
Pre-opening costs related to the assets acquired, such as
licensing and permits, engineering and other costs are
deferred and will be amortized over the period of expected
future benefit. Other soft costs, such as employees salaries,
marketing and promotion are expensed as incurred.
Drydocking
----------
Drydocking costs are accrued evenly over the period to the
next scheduled drydocking and are included in accounts payable
and accrued expenses.
Passenger Fare Revenue and Unearned Cruise Revenues
---------------------------------------------------
Unearned cruise revenues, which represent customer cruise
deposits, are included in the balance sheet when received and
are recognized as passenger fare revenue upon completion of
the voyage.
Casino Revenue
--------------
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
Casino revenue is the net win from gaming activities, which is
the difference between gaming wins and losses. Revenue does
not include the retail amount of fares, food, and beverage
provided gratuitously to customers, which was $960,000 and
$830,795 in 1994 and 1993 respectively.
Employee Stock Ownership Plan
-----------------------------
Effective in 1994, the Company established a leveraged
Employee Stock Ownership Plan (ESOP). Compensation expense is
measured at the fair market value of shares committed-to-be-
released. Shares are committed-to-be-released ratably over the
repayment period of the related loans from the Company.
Dividends, if any; 1) on unallocated shares used to pay debt
service are reported as a reduction of the indebtedness to the
Company; 2) on unallocated shares paid to participants are
reported as compensation cost and; 3) on allocated shares are
charged to retained earnings. The Company has not paid any
dividends.
Taxes on Income
---------------
The Company accounts for income taxes pursuant to the
provisions of the Financial Accounting Standards Board
Statement No. 109, "Accounting for Income Taxes", which
requires, among other things, a liability approach to
calculating deferred income taxes. The asset and liability
approach requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of
temporary differences between the carrying amounts and the tax
bases of assets and liabilities.
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
Net Income (Loss) Per Share
---------------------------
Net income (loss) per share is based on net income (loss)
after preferred stock dividend requirements and the weighted
average number of common shares outstanding during each year
after giving effect to stock options and warrants considered
to be dilutive common stock equivalents. It is assumed that
all dilutive stock options and warrants are exercised at the
beginning of each year and that the proceeds are used to
purchase up to 20 percent of the outstanding shares of the
Company's common stock with any remaining proceeds utilized to
repay indebtedness.
Common shares outstanding includes issued shares less shares
held in treasury and the 4,813,699 unallocated and uncommitted
shares held by the ESOP trust for 1994. Fully diluted net
income (loss) per common and common equivalent share is not
materially different from primary net income (loss) per share.
Reclassifications
-----------------
Certain 1993 amounts have been reclassified to conform to the
classifications for 1994.
2. Vessels, Vessels, equipment and fixtures consist of the following:
Equipment
and Fixtures 1994
--------------------------------------------------------------
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
<TABLE>
<S> <C>
Vessels $13,236,901
Vessel improvements 941,296
Gaming equipment under capital lease 1,600,000
Office and vessel equipment 978,089
Furniture, fixtures and other 340,225
--------------------------------------------------------------
17,096,511
Less accumulated depreciation and
amortization 3,069,980
--------------------------------------------------------------
$14,026,531
==============================================================
</TABLE>
a) In connection with the 1994 purchase of a vessel, the
Company issued 1,200,000 shares of common stock to the
seller as a portion of the purchase price. The shares were
valued at $1.25 per share ($1,500,000) which approximated
fair market value. If the fair market value of the shares
at the end of one year from the date of purchase is less
than $1.25 per share the Company is obligated to pay the
difference between the fair market value of the shares and
$1.25 per share. The fair market value of the shares at
December 31, 1994 approximated $1,500,000 ($975,000 at
April 13,1995). The Company will receive credit for the
fair market value of any shares of Casino World, Inc.
distributed to the seller pursuant to the planned spin-off
of Casino World, Inc. shares to the Company's shareholders.
3. Investment On December 31, 1990, the Company rescinded a transaction in
In And which it had previously sold its 20% ownership interest in
Advances To Marne (Delaware), Inc. (Marne) by reacquiring its investment
Unconsolidat- and a $340,000 note receivable in exchange for $541,620 of
ed Affiliate promissory notes payable to a principal stockholder and a
former officer. The Company
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
has not received delivery of title in its name reflecting its
equity interest in Marne, has ceased payments on the notes
payable and is seeking to have the transaction rescinded. It
is the Company's position that title cannot be properly
transferred since Marne (an S-Corporation) is not permitted to
have C-Corporation shareholders. In connection with the 1994
settlement of a lawsuit against a former officer of the
Company, the Company transferred its ownership interest in 10%
of Marne to the former officer and recorded an expense of
$115,395. The Company has discontinued recording its equity
share of earnings in Marne due to the title uncertainties
noted above and believes its investment in and advances to
Marne at December 31, 1994 of $271,022 will be recovered
through offsets against $140,948 of notes payable to principal
stockholders and cash payments from Marne and such
stockholders for the remainder. This matter is currently in
litigation and the ultimate outcome of this litigation cannot
be presently determined.
4. Land Under The Company plans to spin-off to its shareholders, two wholly-
Development owned subsidiaries, Casino World, Inc. (CWI) and Mississippi
for Gaming Corporation (MGC). CWI plans to develop and operate a
Dockside casino and hotel at Diamondhead, Mississippi. CWI will acquire
Gaming and from the Company all the issued and outstanding shares of MGC
Dockside which owns the land under development for proposed
Gaming Diamondhead, Mississippi gaming site. The proposed gaming
Development operations in Mississippi are subject to numerous risks and
Costs uncertainties including but not limited to the availability of
financing, licensing, site approval by the Mississippi Gaming
Commission and the receipt of permits from the Mississippi
Department of Marine Resources and the U.S. Army Corps of
Engineers. Litigation brought by environmental groups and
casino operations opposed to
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
further development of gaming in Mississippi is likely to
delay regulatory approvals and the issuance of permits
necessary for the construction of a casino at the Company's
proposed gaming operations in Mississippi. On April 13, 1995,
the Mississippi Supreme Court I Mississippi Casino Operators
----------------------------
Association v. Mississippi Gaming Commission, et al held that
---------------------------------------------------
a Commission order approving a site adjacent to the Company's
proposed Diamondhead site was unlawful because the proposed
adjacent site was not on water, but on an artifical inlet.
While the Company does not intend to construct an artifical
inlet, the ruling of the Mississippi Supreme Court against the
Commission and in favor of the position taken by the
Mississippi Casino Operators Association may have the effect
of further delaying site approval and permitting of the
Company's proposed Diamondhead gaming site. There are no
assurances that the necessary regulatory approvals can be
obtained or that financing will be available. The Company does
not have the financial resources to develop its proposed
Mississippi dockside gaming facility. Accordingly, there are
no assurances that the spin-off will be successfully
completed.
In view of the foregoing, the Company is proceeding forward at
the same time minimizing its efforts until such time as these
uncertainties are mitigated. The Company discontinued
capitalizing interest on the land effective for 1994. In the
event, the Company is not licensed it will seek a buyer of the
property for gaming or an alternative use, which may result in
the sale of the land for an amount materially less than the
Company's carrying value of such asset.
During the year ended December 31, 1994, the Company exercised
its option to acquire a parcel of land intended for dockside
gaming and simultaneously sold the property to
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
an unrelated third party at a gain of $2,253,124. Upon closing
of the transaction, the purchaser paid the $6,150,000 sales
price in cash and the Company has no further involvement with
the property.
Dockside gaming development costs consist of the following:
<TABLE>
<CAPTION>
1994
-------------------------------------------------------------
<S> <C>
Licenses $ 77,000
Capitalized interest 156,090
Other site development costs 222,365
-------------------------------------------------------------
$455,455
=============================================================
</TABLE>
During the year ended December 31, 1993, the Company decided
not to pursue further development of three potential dockside
gaming sites and accordingly expensed the $660,000 carrying
value of such sites.
5. Long-term Long-term debt consists of:
Debt
1994
------------------------------------------------------------
Mortgages, payable $19,350 monthly, plus interest at 11 3/4%,
to March 1996, with the remaining principal balance of
$1,151,404 due in 1996, collateralized by vessels with a book
value
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
of $2,600,000 $ 1,431,610
Mortgage, payable $36,198 monthly with a $1.6 million balance
due in July 1997, including interest at the prime rate plus
2% (10.5% at December 31, 1994), collateralized by vessel
with a book value of $5,500,000 and guaranteed by Casino
World, Inc. 2,425,294
Capital lease obligation on gaming equipment, payable $46,398
monthly to February 1998, including interest at 9% 1,529,190
Mortgage, payable to Casinos Austria Maritime Corporation,
principal and interest at 8% due June 30, 1995,
collateralized by land with a book value of $4,100,000
2,000,000
Convertible promissory note, payable to Casinos Austria
Maritime Corporation $7,320 weekly plus interest at 9% to
February 29, 1996, collateralized by a vessel with a book
value of $1,300,000, convertible, at the holders option, into
shares of the Company's common stock at $4.00 per share
437,355
Purchase money mortgage, payable $17,847 monthly to March
1998, including interest at 8%, collateralized by a vessel
with a book value of $3,500,000 613,983
8% purchase money second mortgage, payable in quarterly
installments through August 1995, collateralized by a vessel
with a book value of $3,500,000 300,000
Mortgage payable to Casino Austria Maritime
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
<TABLE>
<S> <C>
Corporation, payable $13,114 monthly to March 1998, including
interest at 9%, collateralized by a vessel with a book value
of $3,500,000 442,000
Notes payable to principal stockholder and former
officer/director, principal and interest at 10% payable
monthly, collateralized by stock, advance and note receivable
of unconsolidated affiliate, with a book value of $271,022
140,948
6.50% insurance financing arrangement,
payable $62,464 per month 562,179
Other 37,547
-------------------------------------------------------------
Total 9,920,106
Less current maturities 4,631,383
-------------------------------------------------------------
$5,288,723
=============================================================
</TABLE>
The aggregate amounts of long-term debt maturing in each of
the next five years are as follows:
<TABLE>
<S> <C>
1995 $4,631,383
1996 2,653,199
1997 2,435,940
1998 196,700
1999 2,884
-------------------------------------------------------------
$9,920,106
=============================================================
</TABLE>
Interest expense consists of:
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
<TABLE>
<CAPTION>
1994 1993
-------------------------------------------------------------
<S> <C> <C>
Interest cost incurred $809,644 $715,174
Less: Amount capitalized to casino
gaming sites under development
and vessel under refurbishment - (221,047)
Interest income (85,404) (13,442)
-------------------------------------------------------------
Interest expense (net) $724,240 $480,685
=============================================================
</TABLE>
6. Stockholders' In June 1989, the Company issued, in connection with the
Equity initial public offering, and the underwriter purchased, for
$100, five-year warrants to purchase 400,000 shares of common
stock at a price of $1.20 per share. During the year ended
December 31, 1994, the Company redeemed the then outstanding
142,250 warrants in exchange for 57,008 unregistered shares of
common stock. In connection with the redemption, the Company
recorded an expense of $40,704 representing the estimated fair
market value of the shares issued.
In connection with its purchase of the EuropaSky vessel 1992,
the Company issued to the seller 125,000 shares of its common
stock at a price of $4 per share and 500,000 warrants to
purchase its common stock at a price of $5.25, expiring in
1994. In 1993, the Company repriced these warrants to an
exercise price of $2.00 per share which approximated fair
market value and extended the expiration date to July 1995 to
induce the lender to modify the related note payable. As of
December 31, 1994, all of the warrants were outstanding.
On December 19, 1988, the Company adopted a stock option plan
(the "Plan") for its officers and management personnel under
which options could be granted to
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
purchase up to 1,000,000 shares of the Company's common stock.
Accordingly, the Company reserved for issuance 1,000,000
shares under the Plan. The option price may not be less than
100% of the market value of the shares on the date of the
grant and expire within ten years from the date of grant;
1,430,000 options have been granted since the adoption of the
Plan, 105,556 have been exercised, and 440,000 have lapsed.
In connection with a 1992 settlement agreement between the
Company's former Chairman of the Board and a major
stockholder, the exercise price of the remaining options that
had been issued to the Company's former Chairman were repriced
during 1992 to $1.50 per share (fair market value). As of
December 31, 1994, 1,417,500 of such options had not been
exercised.
In December 1993, the Company granted immediately exercisable
options to acquire an aggregate 600,000 shares of common stock
to members of the Company's Board of Directors, and an
attorney. The options expire in December 1998 and are
exercisable at an exercise price of $1.0625 (fair market value
at date of grant) per share. No options have been exercised.
In August 1994, the Company granted immediately exercisable
options to acquire an aggregate 400,000 shares of common stock
to members of the Company's Board of Directors, and the
President. The options expire in August 1999 and are
exercisable at an exercise price of $1.50 (fair market value
at date of grant) per share. No options have been exercised.
Outstanding stock options are summarized as follows:
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
<TABLE>
<CAPTION>
1994 1993
-------------------------------------------------------------
Numbers Of Price Per Number Of Price Per
Shares Share Shares Share
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding, January 1 2,326,250 $.16 - 4.00 1,941,944 $.16 - 4.00
Options issued 400,000 1.50 810,000 1.00 - 2.25
Options exercised - - (77,916) .18 2.00
Options cancelled - - (347,778) .18 - 3.31
- ------------------------------------------------------------------------------------------
Outstanding, December 31 2,726,250 $.16 - 4.00 2,326,250 $.16 - 4.00
==========================================================================================
</TABLE>
On June 14, 1993 the Company issued to AustroInvest
International Inc. 926,000 shares of $.01 par value Series S
Voting, Non-Convertible, Redeemable Preferred Stock in
exchange for proceeds of $1,000,080. Cumulative 3% per annum
dividends are payable quarterly. These shares may be redeemed
at the option of the Company at $1.08 per share plus $1.08
cents per share for each quarter that such shares are
outstanding and have a $1.08 per share preference in
involuntary liquidation.
On September 13, 1993, the Company issued to Serco
International Limited (SERCO) (a wholly-owned subsidiary of
AustroInvest International Inc. and a stockholder of the
Company) 900,000 shares of its $.01 par value Series S-NR
Voting, Non-Convertible, Non-Redeemable, Preferred Stock, in
exchange for proceeds of $999,000. Non-cumulative 3% per
annum dividends are payable quarterly. Upon involuntary
liquidation of the Company, the liquidation preference of each
share is $1.11.
In January 1994, the Company issued, in a Regulation S
offering 1,100,000 shares of its $0.01 par value common stock
at $1 per share to various foreign investors in exchange for
net proceeds of approximately $990,000. Other subsequent
private placements of 365,000 shares of the Company's common
stock at $1 per share generated net proceeds to the company of
approximately $328,500.
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
In March 1994, the Company offered, pursuant to Regulation S,
one million units at $5.50 per unit, each unit consisting of
one share of the Company's $.001 par value common stock and
two shares of the Company's Series S-PIK Junior, cumulative,
convertible, non-redeemable, non-voting $.01 par value
preferred stock. Each share of Series S-PIK preferred stock
is convertible into one share of the Company's voting common
stock, at any time after February 15, 1995. The Series S-PIK
preferred stock ranks junior to the Series S and Series S-NR
preferred shares as to the distribution of assets upon
liquidation, dissolution or winding up of the Company. Upon
liquidation of the Company, the S-PIK preferred stock will
have a liquidation preference of $2.00 per share. A
cumulative quarterly dividend of $0.04 per share is payable on
the Series S-PIK preferred stock. At the option of the
Company, for a period of three years, dividends may be paid by
issuing shares of the Company's common stock. In connection
with this offering, the Company sold 695 units aggregating
695,000 shares of common stock and 1,390,000 shares of
preferred stock and collected approximately $3,399,297, net of
costs of approximately $423,203. During 1994, the Company
elected to pay a portion of the dividends in common stock, of
which 13,540 shares valued at $27,800 were issued and 101,090
additional shares valued at $111,200 were issued in 1995.
In June, 1994, 300,000 shares of the Company's common stock
were offered pursuant to a Regulation S offering at a price of
$1.50 net of commissions. All of these shares were sold and
the Company collected $450,000.
In connection with the Regulation S offerings during 1994, the
Company agreed to grant an underwriter warrants to purchase
145,000 shares of the Company's common stock at $1.50 per
share, expiring February 28, 1997 and
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
warrants to purchase 208,500 shares of the Company's common
stock at $1.933 per share, expiring June 30, 1997. No warrants
have been exercised.
On August 4, 1994, Casinos Austria Maritime Corporation
("CAMC"), holder of the first mortgage of the Company's
Diamondhead, Mississippi property, extended the due date of
the first mortgage from September 19, 1994 to June 30, 1995.
In connection with the granting of the extension, Casinos
Austria International, parent of CAMC, was granted an option
to purchase up to 2,000,000 shares of Casino World Inc.
nonvoting convertible common stock at prices ranging from
$6.00 to $6.90 per share. The option expires on June 30, 1995.
Warrants to acquire 125,000 shares of Casino World Inc. common
stock were granted in 1993 to a creditor. The warrants are
exercisable at $2.25 per share.
During 1994, the Company issued 100,000 shares of common stock
to an attorney in consideration for services rendered and
recorded an expense of $90,000.
On November 11, 1993, the Company issued a convertible
promissory note in the amount of $200,000 to Serco. On or
about September 15, 1994, Serco sold the Note to Gaming-Invest
Inc., an investment fund. Gaming-Invest converted the
principal of the Note into 200,000 shares of the Company's
common stock.
7. Employee On August 18, 1994, the Company established the Europa Cruises
Stock Corporation Employee Stock Ownership Plan (the "ESOP"). The
Ownership ESOP, which is intended to be a qualified retirement plan
Plan under provisions of Section 401(a) of the Internal Revenue
Code and an employee stock ownership plan pursuant to Section
4975(3)(7) of the Internal Revenue Code, was established
primarily to invest in stock
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
of the Company. All employees as of December 31, 1994 and
subsequent new employees having completed one year of service
are eligible to participate in the ESOP. The Company also
established a trust called Europa Cruises Corporation Employee
Stock Ownership Plan Trust Agreement to serve as the funding
vehicle for the ESOP. On August 21, 1994, the Company loaned
$4,275,000 to the ESOP in exchange for a ten-year promissory
note bearing interest at eight percent per annum. On August
24, 1994, the ESOP purchased 2,880,000 shares of the Company's
common stock with the proceeds of the loan. On August 25,
1994, the Company loaned an additional $3,180,000 to the ESOP
in exchange for a ten year promissory note bearing interest at
eight percent per annum. On August 26, 1994, the ESOP
purchased an additional 2,120,000 shares of the Company's
common stock with the proceeds of the loan. The shares of
common stock are pledged to the Company as security for the
loans. The promissory notes are payable from the proceeds of
annual contributions made by the Company to the ESOP.
Subsequent to December 31, 1994, the Company agreed to extend
the maturity of the loans to twenty years.
Shares are allocated to the participants' accounts in relation
to repayments of the loans from the Company. Cash dividends
paid by the Company, are used to repay the loans from the
Company or allocated to the participants' accounts at the
discretion of the plan administrator and stock dividends are
allocated to the participants' accounts. No dividends have
been paid by the Company.
Compensation expense for the year ended December 31, 1994
aggregated $279,000. As of December 31, 1994, no shares have
been allocated to the participants' accounts,
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
186,301 shares have been committed-to-be-released and
4,813,699 shares with a fair market value of $5,868,000 are
unearned.
8. Income At December 31, 1994, the Company had net operating loss
Taxes carryforwards for income taxes of approximately $7,900,000
which expire substantially in 2005. Changes in ownership of
greater than 50% which occurred as a result of the Company's
issuances of common and preferred stock may result in a
substantial annual limitation being imposed upon the future
utilization of the net operating losses for tax purposes. The
amount of such limitation has not yet been determined.
The 1994 provision for income taxes of approximately $406,000
has been offset by utilization of approximately $1,080,000 of
book net operating loss carryforwards.
Deferred income taxes are comprised of the following at
December 31, 1994:
<TABLE>
<CAPTION>
1994
--------------------------------------------------------------
<S> <C>
Depreciation $886,000
Income from unconsolidated affiliate 72,000
--------------------------------------------------------------
Gross deferred tax liability 958,000
--------------------------------------------------------------
Loss carryforwards (2,969,000)
</TABLE>
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
<TABLE>
<S> <C>
Other (10,000)
--------------------------------------------------------------
Gross deferred tax asset (2,979,000)
Deferred tax asset valuation allowance (2,021,000)
--------------------------------------------------------------
Net deferred tax asset $ -
==============================================================
</TABLE>
Realization of any portion of the Company's deferred tax asset
at December 31, 1994 is not considered to be more likely than
not and accordingly a $2,021,000 valuation allowance has been
provided.
9. Commitments (a) Leases
And ------
Contingencies
The Company leases certain port facilities, sales and office
space and office equipment under lease agreements which expire
in less than one year. The leases generally contain renewal
options and require that the Company pay for utilities,
insurance, property taxes, rental expense and maintenance. The
Company currently leases office space and dockage in Florida
at Madeira Beach, Ft. Myers and Key West. Rental expense,
which is primarily based on a per passenger basis, aggregated
approximately $583,000 and $271,000 in 1994 and 1993,
respectively.
Through December 31, 1993, the Company leased a vessel (the
EuropaJet) under a bareboat charterparty agreement with Sea
Lane Bahamas (Marne), an entity in which the Company
previously owned a 20% interest. As a result of continued
unprofitable operations of the EuropaJet during the first
quarter of 1993, the Company negotiated a lease settlement
with Marne, whereby, the lease was terminated
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
as of December 31, 1993 in exchange for payment of outstanding
lease charges of $888,000, of which $90,450 is outstanding at
December 31, 1994. The lessor has sought, subject to court
determination, to have a security interest placed upon a
vessel as collateral for repayment of the lease settlement.
Rental expense on this vessel aggregated $1,022,000 for 1993.
The Company's liability, for alleged damages arising out of
the condition of the EuropaJet upon its redelivery is in
dispute. The lessor claims the liability for damages to the
EuropaJet under the charterparty agreement is approximately
$750,000. If the Company and the lessor are unable to settle
this dispute with respect to the condition of the EuropaJet
when it was redelivered, the amount of the Company's remaining
obligation will be determined in arbitration. The Company has
accrued approximately $150,000 in anticipated settlement and
based upon the report of an independent surveyor believes that
its ultimate liability, with respect to this matter will be
immaterial to its consolidated financial condition.
(b) Gaming Concession Agreements
----------------------------
On September 16, 1994, the Company terminated a Gaming
Concession Agreement and entered into a consulting agreement
with CAMC. Under the consulting agreement, the Company manages
and operates all casinos onboard its vessels and CAMC provides
consulting services through December 31, 1997. As a consultant
to the company, CAMC receives $37,500 per month or 3.5% of
gross gaming revenue, whichever is greater, CAMC also receives
$140 per cruise for the services of a Purser
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
onboard each vessel. Prior to termination of the agreement,
CAMC managed and operated the Casinos in exchange for 35% of
gross gaming revenue. CAMC waived a termination fee of
approximately $1,400,000 which the Company would have been
required to pay for early termination.
On June 19, 1994, CWI and a Company's wholly-owned subsidiary,
Mississippi Gaming Corporation (MGC) entered into a
Management Agreement with CAMC. Under the Management
Agreement, CAMC will operate on an exclusive basis all of the
proposed dockside gaming casinos in the State of Mississippi.
The Management Agreement is for a term of five (5) years and
provides for the payment of an operational term management fee
of 1.2% of all gross gaming revenues between zero and one
hundred million dollars ($100,000,000); plus 0.75% of gross
gaming revenue between $100,000,000 and $140,000,000; plus
0.5% of gross gaming revenue above $140,000,000; plus two
percent (2%) of the net gaming revenue between zero and
twenty-five million dollars ($25,000,000); plus three percent
(3%) of the net gaming revenue above twenty-five million
dollars ($25,000,000).
(c) Litigation
---------------
On April 22, 1993, Charles S. Liberis, a director and
principal stockholder of Europa, brought an action in Delaware
against Europa, Casino World, Inc. ("CWI"), a subsidiary of
Europa, Casinos Austria Maritime Corporation ("CAMC"), a
Florida corporation, and Serco International Limited
("Serco"), a Bahamian corporation, and Charles H. Reddien,
Stephen M. Turner, Deborah A.
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
Vitale, William A. Herold and Sharon E. Petty, directors of
Europa and CWI. In the action, Liberis alleged a scheme on the
part of CAMC and Serco acting with Petty, Reddien and others
to seize control of Europa by changing the membership of the
Europa Board and transferring power to the directors nominated
by Serco, an alleged entrenchment by that Board by means of a
proposed issuance of Preferred Stock of Europa and an alleged
scheme by that Board to entrench itself in CWI by spinning off
CWI to the stockholders of Europa and selling 60% of CWI to
outside investors and improper actions relating to the
retention of the services of CAMC. Count I seeks the removal
of allegedly wrongfully elected directors and two officers and
the reinstatement of Liberis as Chief Executive Officer.
Counts II and III seek relief against the issuance of the
Europa Preferred Stock. Count IV seeks injunctive relief as to
the proposed spinoff of CWI and Count V seeks relief against
CAMC and Serco for a civil conspiracy. Liberis sought a
preliminary injunction to enjoin three directors elected at
Europa's Board Meeting on December 12, 1992 from acting on
behalf of Europa and CWI and to enjoin Reddien, the then Chief
Executive Officer of both Europa and CWI from taking any
action on behalf of those entities. On May 17, 1993, the Court
denied Liberis' application for a preliminary injunction. On
February 10, 1994, Mr. Liberis advised the Court that this
action should be dismissed without prejudice so that he could
pursue these claims in parallel litigation pending in Florida.
The Company believes that it has meritorious defenses to the
claims asserted by Mr. Liberis in this action and intends to
contest them vigorously. Due to the inherent risk preset in
any litigation, and the present uncertainty as to whether
these claims will proceed in
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
Delaware or Florida, counsel is unable to render an opinion
with respect to the outcome of this litigation or a range of
potential loss.
On May 5, 1993, Mr. Liberis also filed a civil action in
Florida seeking unspecified damages against Europa, Charles H.
Reddien, Sharon E. Petty, Ernst G. Walter, Deborah A. Vitale,
Stephen M. Turner, William A. Herold, Victor B. Gersh, CAMC,
Serco, AustroInvest International Ltd., and others challenging
the settlement agreements between Mr. Liberis and Serco
entered into on December 12, and 14, 1992. On November 23,
1993, the Court granted a motion by the defendants to stay
this action pending a resolution of certain litigation
pending.
On May 11, 1993, the Company filed a civil action in Florida
against Charles S. Liberis and Harlan G. Allen, Jr., seeking
compensatory and punitive damages. The Complaint alleges
violations of Sections 10(b) and 16(b) of the Securities
Exchange Act of 1934, and violations of the Racketeer
Influenced and Corrupt Organizations Act ("RICO"). The
Complaint also alleges that Messrs. Liberis and Allen engaged
in schemes to defraud Europa, breached their fiduciary duties
to Europa, and converted corporate assets of the Company. On
October 18, 1994, the United States District Court for the
Northern District of Florida entered an Order which granted in
part and denied in part a motion to dismiss the Florida
federal civil action filed by Europa against Liberis and Allen
and gave Europa leave to amend it's complaint. The Court
denied Liberis' motion to dismiss Count III alleging a
violation of Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 (fraud in the sale of securities) and also
denied Defendant's
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
motion to dismiss Court XI alleging civil theft pursuant to
Section 772.11, Florida statutes. On October 29, 1994, Europa
Filed a fourth Amended Complaint against Liberis and Allen. A
further motion by Liberis to dismiss Europa's fourth Amended
Complaint was denied by the U.S. District Court on December
17, 1994. In May 1994, the Company settled the action and Mr.
Allen contributed a note payable having an outstanding
principal balance of $115,395 to additional paid-in-capital of
the Company.
On July 30, 1993, Charles S. Liberis attempted to exercise
1,417,500 Europa common stock purchase options at $.15625. The
Company refused Liberis's attempt to exercise these options.
On August 30, 1994, Charles S. Liberis filed a Complaint for
specific performance of Stock Options against the Company in
Delaware Chancery Court. The Court denied Europa's motion to
dismiss or stay this action and the parties have commenced
discovery.
On November 4, 1993, Charles S. Liberis filed a complaint
seeking to set aside the election of directors at the Annual
Shareholder's meeting held on October 29, 1994, to schedule a
new election of directors, to set aside the issuance of
Preferred shares by Europa to Serco and for an award of
unspecified damages. At that meeting the shareholders voted
7.3 million shares for current management and 3.75 million
shares for a slate of directors which include Charles S.
Liberis and other Liberis nominees. Liberis asserts in this
action that management utilized misleading proxy materials and
issued preferred shares to Serco at below market prices to
entrench current management. Liberis has withdrawn this
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
action in favor of proceeding by way of an Amended
Counterclaim in the Florida federal action.
On January 4, 1994, Charles Liberis filed an Amended
Counterclaim in the Florida federal action Europa, Charles H.
Reddien, Sharon E. Petty, Ernst G. Walter, Stephen M. Turner,
Deborah A. Vitale, William Herold, Victor B. Gersh, Serco and
CAM ("counterclaim defendants"). In Count I of Liberis'
Amended Counterclaim, Liberis seeks specific performance of
1,417,500 stock options at $0.15625 per share. In Count II of
Liberis' Amended Counterclaim, Liberis alleges that the
counterclaim defendants, including Europa, that Liberis was
forced to resign his position as President and Chief Executive
Officer of Europa in December of 1992, through fraud and
misrepresentations, and that Liberis was prevented from
regaining control of Europa through false and misleading proxy
materials utilized by Europa and certain individual
counterclaim defendants during a proxy contest in October of
1993. In Count III, Liberis requests that the Court declare
that no valid election of directors was held at and
permanently enjoin the voting in a new election. Liberis seeks
unspecified damages against Europa and other counterclaim
defendants. Motions to dismiss Liberis' Amended Counterclaim
have been filed by Europa and other counterclaim defendants.
The proceedings with respect to Liberis' Amended Counterclaim
are in early stages and it is not possible to predict the
outcome or future course of this litigation. The parties are
continuing to undertake discovery of this action.
These matters are in their early stages and discovery
proceedings have not yet commenced. The litigation
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
brought by Mr. Liberis may have an adverse impact on the
Company's ability to secure financing for its planned
Mississippi expansion and on the licensing by the Mississippi
Gaming Commission. The ultimate outcome of these matters
cannot presently be determined. Accordingly, the financial
statements do not include any adjustments that might result
from this uncertainty.
On March 7, 1995, Shoney's, Inc. filed suit against Europa and
LoneStar Hospitality Corporation, a former subsidiary of the
company, in the United States District Court for the Middle
District of Tennessee seeking unspecified damages. The
Complaint alleges that Lone Star has failed to make certain
rental payments of approximately $110,000 under certain leases
with respect to property located in Texas and has also allowed
certain liens to be placed against the properties and failed
to remove these liens as required by the lease agreements.
Shoney further alleges that Europa is obligated to indemnify
and hold Shoney's harmless from and against all costs,
damages, claims, liabilities and expenses, including
reasonable attorney's fees, resulting from or arising out of
any breach or default under the Agreements. The Company has
not yet formulated a defense to this action, but intends to
defend the claim and seek contribution from Lone Star, the
primary obligor under the leases and such other persons
affiliated with Lone Star who maybe liable for any amounts due
and owing to Shoney's, Inc. The ultimate outcome of this
matter cannot presently be determined.
(d) Sales and Use Taxes
------------------------
On November 28, 1994, the Florida Department of
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
Revenue (DOR) issued to the Company a Notice of Intent to make
Sales and Use Tax Audit Changes for the period February 1,
1989 through June 30, 1994. The proposed audit changes,
including penalties and interest total $6,515,681. The DOR
seeks to assess sales tax on gaming revenue, passenger fares,
the purchase and sale of fixed assets, repairs and other
items. The Company strongly disagrees with the proposed audit
changes and intends to vigorously contest the factual,
statutory, and regulatory issues which form the basis for the
proposed audit changes. However, if the Company is not
successful in challenging the proposed audit changes, the
additional tax the Company would be required to pay, would
have a major substantial adverse impact on the Company's
financial condition.
(e) Casino Industry Litigation
-------------------------------
On March 15 1995, two of the Company's subsidiaries that
operate vessels were named as defendants along with thirty-one
other defendants in a class action against the owners,
operators and distributors to cruise ship casinos which
utilized casino video poker machines which and electronic slot
machines alleging violations of the Federal Civil RICO
statute, common law fraud and deceit, unjust enrichment and
negligent misrepresentation. The plaintiff contends that the
defendants, owners and operators of cruise ship casinos along
with the distributors and manufacturers of video poker
machines and electronic slot machines have engaged in a course
of fraudulent and misleading conduct intended to induce people
to play their machines based on a false understanding that
these machines operate in a truly random fashion. The
plaintiff
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
alleges these machines actually follow fixed, preordained
sequences that are not random, but rather are both predictable
and subject to manipulation by defendants and others. The
plaintiff seeks damages in excess of $1 billion dollars
against all defendants. The Company believes that there is no
factual support for the claim and that the ultimate outcome
will not have a material adverse effect on the Company's
financial condition.
10. Supplemental Supplemental schedules of interest paid are as follows:
Cash Flow
Information
<TABLE>
<CAPTION>
1994 1993
--------------------------------------------------------------
<S> <C> <C>
Interest $ 897,000 $ 440,000
Non-cash transactions are as follows:
1994 1993
--------------------------------------------------------------
Gaming equipment financed by seller $1,600,000 $ -
Vessel financed by seller 1,017,452 -
Common stock issued to seller in
connection with vessel purchase 1,500,000 -
Expenses paid in shares of common 158,904 -
Contribution of note payable to
additional paid-in capital 115,395 -
Unearned ESOP shares (net of
186,301 shares committed to be
released) 7,175,548 -
Exercise of option to purchase land 3,000,000 -
</TABLE>
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
<TABLE>
<S> <C> <C>
Conversion of promissory note into
200,000 shares of Company's common
stock 200,000 -
Financed insurance premiums 594,048 798,000
Preferred stock dividends 27,800 25,390
</TABLE>
11. Other Other operating costs consist of the following:
Operating
Costs
<TABLE>
<S> <C> <C>
1994 1993
-------------------------------------------------------------
ESOP compensation $ 279,000 $ -
Write-off of deferred dockside
gaming costs - 660,000
Shareholder litigation 161,000 623,000
Terminated spinoff - 513,000
Other 295,160 249,138
Proxy dispute - 475,000
-------------------------------------------------------------
$ 735,160 $2,250,138
=============================================================
</TABLE>
12. Subsequent On March 22, 1995, the Company received a letter of intent
Event from a financial institution to loan the Company a maximum of
$6,764,000. The letter of intent provides for repayment of the
loan in equal monthly payments over eight years at an interest
rate of Libor plus 325 basis points (9.25% at December 31,
1994). The loan is to be collateralized by substantially all
assets and the proceeds of the loan are required to be used to
retire an equal amount of specified existing debt of the
Company, of which approximately $2,626,000 is classified as a
current
<PAGE>
Europa Cruises Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
liability in the accompanying consolidated balance sheet.
Closing of the loan is subject to, among other things,
negotiation of final terms and conditions.
13. Fourth Year end adjustments made in the fourth quarter of 1994 had
Quarter the effect of decreasing net income for the quarter by
Adjustments approximately $1,600,000. The adjustments related
(Unaudited) principally to the carrying amount of certain assets, expense
accruals and common stock transactions associated with prior
quarters of 1994.
