UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1995
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM ____ TO ____
Commission file number 33-33556-D
CLASSIC RESTAURANTS INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1122431
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3091 GOVERNORS LAKE DRIVE, BUILDING 100, SUITE 500, NORCROSS, GA 30071
(Address of principal executive offices)
(770) 729-9010
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and
former fiscal year, if changed since last report)
Check whether the registrant (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|_| No|X|
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
8,117,042 SHARES OF CLASS A COMMON STOCK, NO PAR VALUE
300,000 SHARES OF CLASS B COMMON STOCK, NO PAR VALUE
AS OF MARCH 31, 1996
Transitional Small Business Disclosure Format (Check one): Yes|_| No|X|
Exhibit Index on page 11 Page 1 of 12 pages
<PAGE>
CASINOS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
1995 1995
(UNAUDITED) (AUDITED)
----------- ---------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 2,929 $ 3,160
Accounts receivable 3,142 29,227
Due from affiliate 402,158 -
Other current assets 35,317 -
------- ------
Total current assets 443,546 32,387
-------- -------
PROPERTY & EQUIPMENT:
Hotel & Improvements 3,632,250 3,371,907
Furniture & Equipment 403,278 398,036
Land 289,938 289,938
-------- --------
Total property & equipment 4,325,466 4,059,881
Less accumulated depreciation (128,152) (63,550)
--------- --------
4,197,314 3,996,331
--------- ---------
OTHER ASSETS:
Advances receivable 327,507 80,000
Organization costs, net of accumulated
amortization of $1,641 and $1,004 5,734 5,715
-------- --------
333,241 85,715
-------- --------
TOTAL ASSETS $4,974,101 $4,114,433
========= =========
The accompanying notes are an integral part of these balance sheets.
2
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
December 31, June 30,
1995 1995
(UNAUDITED) (AUDITED)
----------- ---------
CURRENT LIABILITIES:
Accounts payable $ 56,490 $ 39,517
Accrued expenses 27,567 20,775
Mortgage note payable, current portion 400,000 275,629
-------- --------
Total current liabilities 484,057 335,921
-------- --------
NON-CURRENT LIABILITIES:
Mortgage note payable, net of current portion 2,456,800 2,716,301
Stockholder payable 1,567,389 534,865
Prepayments & deposits 37,500 -
--------- ---------
4,061,689 3,251,166
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock:
(no par value; 100,000,000 shares
authorized; no shares issued or outstanding) - -
Common stock:
Class A, (no par value; 1,800,000,000 shares
authorized; 8,117,042 shares issued and
outstanding) 979,464 749,464
Common Stock:
Class B, (no par value; 200,000,000 shares
authorized; 300,000 shares issued and
outstanding) 200 200
Accumulated deficit (551,309) (222,318)
--------- ---------
428,355 527,346
--------- ---------
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $4,974,101 $4,114,433
========= =========
The accompanying notes are an integral part of these balance sheets.
3
<PAGE>
CASINOS INTERNATIONAL, INC.
CONSOLIDATED INCOME STATEMENT
Three Months Ended Six Months Ended
December 31, December 31,
1995 1995
(UNAUDITED) (UNAUDITED)
----------- -----------
REVENUES:
Rental income $ 90,393 $ 231,868
Other 23,282 45,782
-------- --------
Total revenue 113,675 277,650
-------- --------
EXPENSES:
Operating 154,876 314,363
General and administrative 14,470 98,147
Depreciation & amortization 32,938 65,239
-------- --------
Total expenses 202,284 477,749
-------- --------
LOSS FROM OPERATIONS (88,609) (200,099)
-------- ----------
OTHER INCOME (EXPENSE):
Interest expense (60,000) (122,549)
-------- ---------
NET LOSS $ (148,609) $ (322,648)
========== ==========
The accompanying notes are an integral part of this statement.
4
<PAGE>
CASINOS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Six Months Ended
December 31,
1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (322,648)
---------
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities -
Depreciation expense 65,239
Net changes in assets and liabilities -
Decrease in trade accounts receivable 26,085
Increase in accounts payable 16,973
Increase in accrued expenses 6,792
Increase in prepayments & deposits 2,183
---------
Total adjustments 117,272
Net cash used in operating activities (205,376)
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to affiliates (247,507)
Stockholder receivable (402,158)
Organization costs (656)
Capital expenditures (265,585)
---------
Net cash used in investing activities (915,906)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipt of stock subscription 230,000
Proceeds from related party transaction 1,026,181
Repayment of long-term debt (135,130)
---------
Net cash provided by financing activities 1,121,051
---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (231)
CASH AND CASH EQUIVALENTS, beginning of period 3,160
---------
CASH AND CASH EQUIVALENTS, end of period $ 2,929
---------
The accompanying notes are an integral part of this statement.
5
<PAGE>
CASINOS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited financial
statements do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles. However, in the
opinion of Casinos International, Inc. (the "Company"), the financial statements
contain all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial position as of December 31, 1995, and
the results of operations and changes in cash flows for the period then ended.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION COSTS - Organization costs include professional fees
relating to incorporating and organizing the Company. These costs will be
amortized over a five-year period.
INCOME TAXES - Income taxes are computed based upon the provisions of
SFAS 109, Accounting for Income Taxes. Deferred tax assets and liabilities are
recognized for the estimated future tax effects attributed to temporary
differences between book and tax bases of assets and liabilities and for
carryforward items. The measurement of current and deferred tax liabilities and
assets is based upon enacted tax law. Deferred tax assets are reduced by a
valuation allowance for the amount of tax benefits that are not expected to be
realized.
FIXED ASSETS - Property and equipment are recorded at cost.
Expenditures for repairs and maintenance are charged to expense as incurred and
additions and improvements that significantly extend the lives of assets are
capitalized. Upon sale or other retirement of depreciable property, the cost and
accumulated depreciation are removed from the related accounts and any gain or
loss is reflected in operations. Depreciation is calculated using the
straight-line method over the estimated useful lives of the depreciable asset
ranging from five to thirty-nine years.
NET INCOME (LOSS) PER SHARE OF CLASS A AND CLASS B COMMON STOCK - Net
income (loss) per share is computed by dividing the net income (loss) for the
period by the weighted-average number of shares of common stock outstanding
during the period. Class A and Class B Common Stock is considered outstanding
upon issuance of the certificates by the stock transfer agent. Common equivalent
shares from stock warrants were excluded from the computation because their
effect is antidilutive for the period presented.
ISSUE AND AGREEMENT TO SUBSCRIBE FOR CLASS A COMMON STOCK - The Company
issued 180,000 shares of Class A Common Stock to a purchaser under an agreement
to sell stock at $2.67 per share. The purchaser has until September 30, 1997 to
complete the purchase at this price.
CONSOLIDATION - As of December 31, 1995, the Company had one
wholly-owned subsidiary Great American Casinos, Inc. ("GACI"). The accompanying
balance sheets, statements of operations and cash flows include the accounts of
the Company and GACI.
6
<PAGE>
CASINOS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(UNAUDITED)
3. LOANS FROM GREAT AMERICAN RESORTS, INC.
During the period from July 1, 1995 to December 31, 1995, the Company
received additional loans from Great American Resorts, Inc. ("GARI") increasing
the amounts due to $1,567,389. The loan was not evidenced by a promissory note
owing to the controlling stockholder position held by GARI. This amount
reflected investment by the Company of funds in the ownership of GACI except for
$57,127 which was loaned to GACI on a temporary basis. GACI holds the Company's
interest in the Cheers Hotel and Casino in Reno, Nevada, which was previously
acquired in January 1995 and has been under renovation since July 1995.
4. IRISH LAND PURCHASE
On August 21, 1994, the Company entered into a contract to purchase two
tracts of land in Ireland from Caragh Holdings Limited ("Caragh") which the
Company intended to develop into a resort. The contract provided that one tract
of land would be purchased on or before December 31, 1994 for 27,500 Irish
Pounds ($44,005 as of December 31, 1995) and 180,000 shares of Class A Common
Stock (post-split), and the other tract of land would be purchased on or before
December 31, 1996 for 150,000 Irish Pounds ($240,030 as of December 31, 1995)
and 820,000 shares of Class A Common Stock (post-split). As an earnest deposit,
the Company issued all of the stock to the seller, but the seller was prohibited
from selling the stock until the Company completed its purchase of the tract of
land to which the stock related. In the event a tract of land is not purchased,
the seller was obligated to return the stock to the Company, less 15,000 shares
as liquidated damages in the event the closing did not occur due to a default by
the Company.
In October 1994, the Company completed its purchase of the first tract
of land under the contract. Thereafter, the Company assigned its rights in the
first tract to GARI for $384,877, which consisted of purchase price paid by the
Company for the tract plus $50,077 to the Company as reimbursement for the
expense and management time incurred to purchase the tract. In July 1995, the
Company entered into a subsequent agreement with Caragh terminating the contract
on the second parcel of land. Under this agreement, Caragh returned 1,080,000 of
the 1,230,000 shares of stock which had been previously issued. The remaining
180,000 shares were subject to an agreement by Caragh to pay $2.67 per share at
any time until September 30, 1997.
5. THE CHEERS HOTEL/CASINO
On January 20, 1995, the Company, through a wholly-owned subsidiary,
purchased the Cheers Hotel and Casino (the "Cheers Hotel") in Reno, Nevada.
The Cheers Hotel is a ten story, 113 room hotel, with a casino,
cabaret, restaurant and bar facilities, which is located in the downtown section
of Reno, Nevada. The purchase price of the Cheers Hotel was $3,750,000 plus
closing costs and prorations. The Cheers Hotel was purchased from Baylocq Nevada
Corp., which is not affiliated with the Company.
7
<PAGE>
CASINOS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(UNAUDITED)
A portion of the purchase price was paid by the assumption of an
existing first mortgage held by American Federal Savings Bank against the Cheers
Hotel in the amount of $1,919,804. In addition, a $25,000 assumption fee was
paid to American Federal. The note to American Federal, as modified in
connection with the assumption, bears interest at the rate of 9% per annum until
October 31, 1996. Beginning November 1, 1996, the interest rate will be adjusted
annually to a rate which is one and one-half percent (1.5%) over the prime rate,
subject to a floor of 9% per annum. The note is payable initially in monthly
installments of principal and interest in the amount of $15,834. The monthly
installments will be adjusted any time the interest rate is adjusted to provide
for monthly payments sufficient to repay the balance of the note over thirty
years from the initial date of the note (December 1, 1988). The entire balance
of the principal and interest on the note is due and payable on December 1,
2008. The balance due on this note on December 31, 1995 was approximately
$1,930,000.
The remainder of the purchase price was paid $750,000 in cash and by
executing a note payable to the seller in the amount of $1,055,196. The note to
the seller is secured by a second mortgage on the Cheers Hotel. The note bears
interest at the rate of 7% per annum until October 31, 1999. Beginning on
November 1, 1999, the note will bear interest at the rate of 2% over the rate
set forth in the most recent publication of the Federal Home Loan Bank of San
Francisco Monthly Weighted Average Cost of Funds Index for Eleventh District
Savings Institutions, subject to a floor of 3% per annum and a ceiling of 11%
per annum. The note provides for monthly payments of principal and interest
sufficient to repay the entire principal of the note over 30 years from the date
of the note. In addition, the note provides for principal payments in the amount
of $125,000 on August 1, 1995, and February 1, 1996. Subsequent to each
principal reduction payment, the monthly installments will be recalculated to an
amount sufficient to repay the remaining balance of the note over 30 years from
the date of the note. The Company paid the required $125,000 plus interest of
$7,020 on August 1, 1995 and reduced the principal to $926,000 at December 31,
1995.
Contemporaneous with the purchase of the Cheers Hotel, the Company
entered into a lease agreement with the seller under which the seller leased
approximately 7,600 square feet of space in the Cheers Hotel for two years for
lease payments of $15,000 per month. The parties agreed to modify the lease
reducing the rent to $7,500 per month on July 1, 1995 and the seller was
required to stop using the second level of the lease eliminating the cabaret.
The seller is using the leased space to operate a casino. In addition, the
Company is obligated to provide the seller with two offices at the Cheers Hotel
to be utilized as a "count" room and office. Both the lease agreement and the
note between the Company and the seller provide a right of offset in the event
either does not make a payment to the other under the respective agreements.
The Company entered into a management agreement with Cornerstone
Management, Inc. to manage the Cheers Hotel. The management agreement was to
expire on January 1, 2000, but was to be terminated by the Company on September
29, 1995, for cause. The Company has since retained its own management. Prior
negative operating results were considered due to inadequate marketing by
Cornerstone, inadequate collections and a number of rooms being out of service
and in need of
8
<PAGE>
CASINOS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(UNAUDITED)
renovations. The low quality of the market segment served by the existing casino
operator was believed responsible in some part for the negative operating
results of the hotel.
6. CLASSIC MERGER AND SPIN-OFF
On June 30, 1995 the Company entered into an Agreement and Plan of
Share Exchange, as amended on September 6, 1995 and December 22, 1995, with
Classic Restaurants International, Inc. ("CRI"). providing that the Company
acquire all the issued and outstanding common stock of Classic by issuing one
share of its Class A Common Stock for each share of Class A Common Stock and
Class A Preferred Stock of CRI, and one share of its Class B Common stock for
each share of CRI Class B Common Stock. The Company has also agreed with GARI to
convey all the Company's present interest in GACI, which owns the Cheers Hotel,
in exchange for the return of all of the Common Stock held by GARI, the
cancellation of all intercompany indebtedness, and a mutual release of
liability. In addition, two directors of the Company -- Dr. Edward L. Bates and
M. James Herbic -- agreed to return any shares of Company stock for cancellation
as part of the transaction. This transaction was completed upon the close of
business on January 31, 1996. As part of the transaction, the Company changed
its name to Classic Restaurants International, Inc.
7. RAMADA INN FRANCHISE
On March 1, 1996, GACI became a Ramada Inn franchisee and the hotel
became part of the Ramada Inn national reservation system. In the Fall of 1995,
the Company began renovating the hotel. Under Phase I of the renovation plan,
the Company has upgraded the guest rooms with new carpet, wallpaper, painting,
draperies, bath hardware and refurbishment of many tubs and tiling. Under Phase
II of the renovation plan, which is projected to begin in June 1996, the Company
intends to completely remove the existing exterior of the hotel and replace it
with a stucco treatment, new outside lighting, renovation of the pool area and
new Las Vegas-style signage. The operating results of the hotel have improved
significantly since the hotel became part of the Ramada Inn franchise network.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
See Note 6 of Notes to Financial Statements regarding the Share Exchange with
Classic Restaurants International, Inc. The "Company" in this discussion refers
to the entity formerly known as Casinos International, Inc. and its wholly-owned
subsidiary, Great American Casinos, Inc.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at December 31, 1995 was a deficit of $40,511, as
compared to a deficit of $303,534 at June 30, 1995. The significant increase in
working capital was attributable to an increase in amounts due from affiliate in
the amount of $402,158. During the period ended December 31, 1995, the Company
remained dependent on loans from its majority shareholder, Great American
Resorts, Inc.
RESULTS OF OPERATIONS
The Company acquired the Cheers Hotel and Casino on January 20, 1995, and
therefore the quarter ended March 31, 1995 constituted the first quarter in
which the Company conducted active operations. During the six months ended
December 31, 1995, the Company had revenues of $277,650, and incurred a loss
from operations of $200,099 and a net loss of $322,648. Former management of the
Company expected that the hotel would continue to incur losses in the near
future.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
REGULATION SEQUENTIAL
S-B NUMBER EXHIBIT PAGE NUMBER
27 Financial Data Schedule 12
(b) The Company filed no reports on Form 8-K during the quarter
ended December 31, 1995.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CLASSIC RESTAURANTS INTERNATIONAL, INC.
Date: July 1, 1996 By:/S/ CAROLINE P. ANDERSON
------------------------
Caroline P. Anderson,
Executive Vice President and
Chief Financial Officer
11
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED INCOME STATEMENT FOUND ON PAGES 2
THROUGH 4 OF THE COMPANY'S FORM 10-QSB FOR THE PERIOD OF JULY 1, 1995 TO
DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 2,929
<SECURITIES> 0
<RECEIVABLES> 3,142
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 443,546
<PP&E> 4,325,466
<DEPRECIATION> 128,152
<TOTAL-ASSETS> 4,974,101
<CURRENT-LIABILITIES> 484,057
<BONDS> 2,456,800
0
0
<COMMON> 979,664
<OTHER-SE> (551,309)
<TOTAL-LIABILITY-AND-EQUITY> 4,974,101
<SALES> 0
<TOTAL-REVENUES> 277,650
<CGS> 0
<TOTAL-COSTS> 314,363
<OTHER-EXPENSES> 163,386
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 122,549
<INCOME-PRETAX> (322,648)
<INCOME-TAX> 0
<INCOME-CONTINUING> (322,648)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (322,648)
<EPS-PRIMARY> (0.038)
<EPS-DILUTED> (0.038)
</TABLE>
