<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(D) OF THE EXCHANGE ACT
Commission file number: 0-22242
CASINO RESOURCE CORPORATION
Minnesota 41-0950482
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
707 Bienville Boulevard
Ocean Springs, Mississippi 39564
(Address of principal executive officers)
228-872-5558
(Issuer's telephone number)
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.
[X] Yes [ ] No
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. [ ] Yes [ ] No
As of August 5, 1998, 9,589,114 Shares of Common Stock and 2,760,000 of
Redeemable Class A Warrants of the Company were outstanding.
1
<PAGE>
INDEX TO QUARTERLY REPORT
ON FORM 10-QSB
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 5 Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CASINO RESOURCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, September 30,
ASSETS 1998 1997*
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 2,747 $ 2,878
Accounts receivable-net 252 356
Inventory 336 286
Prepaid expenses 476 1,088
Net assets of discontinued operation - 2,607
------- -------
Total Current Assets 3,811 7,215
------- -------
Property and Equipment 14,385 13,531
Less accumulated depreciation (3,170) (2,371)
------- -------
Net Property and Equipment 11,215 11,160
------- -------
Other Assets
Related parties assets 599 754
Deferred development cost 1,236 1,230
Note receivable 237 221
Intangibles, net 515 551
Pre-opening and Other 1,648 2,386
------- -------
Total Other Assets 4,235 5,142
------- -------
$19,261 $23,517
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 726 $ 831
Accrued expenses 1,158 940
Line-of-credit and current maturities of
long-term debt 9,441 1,060
------- -------
Total Current Liabilities 11,325 2,831
Long-term debt 1,080 11,100
------- -------
Total Liabilities 12,405 13,931
Minority Interest in Subsidiary - -
Commitments and Contingencies
Stockholders' Equity
Capital shares 96 97
Paid in Capital 22,669 22,793
Deficit (15,909) (13,304)
------- -------
Total Stockholders' Equity 6,856 9,586
------- -------
$19,261 $23,517
------- -------
------- -------
</TABLE>
*Condensed from restated audited financial statements
The accompanying notes are an integral part of these condensed financial
statements.
3
<PAGE>
CASINO RESOURCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30
(unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
1998 1997
(as restated)
<S> <C> <C>
Entertainment revenues $ 6,836 $ 7,722
Gaming revenues 2,160 -
Operating costs - entertainment 6,074 6,188
Operating costs - gaming 4,383 -
General and administrative expenses 1,996 1,452
Loss on gaming project - 404
Other expense-net 812 539
Minority interest in operations of subsidiary (313) (175)
---------- -----------
Loss from continuing operations $ (3,956) $ (686)
Income from discontinued operation 697 649
Gain on sale of discontinued operation 654 -
---------- -----------
---------- -----------
Net loss (2,605) (37)
Earnings(Loss) per Common Share:
Loss from continuing operations (0.40) (0.06)
Income from discontinued operation 0.14 0.06
---------- -----------
---------- -----------
Net Income(loss) per share (0.26) 0.00
Weighted average shares, common stock 9,797,036 10,006,609
---------- -----------
---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss from continuing operations $ (3,956) $ (686)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization 2,040 571
Minority Interest in subsidiary (313) (175)
Discount upon conversion of debentures
Changes in assets and liabilities
Accounts receivable 104 (256)
Prepaid expenses and inventory 561 (192)
Other (251) (155)
Accounts payable (105) (526)
Accrued expenses 218 183
---------- -----------
Net Cash Used In Continuing
Operating Activities (1,702) (1,236)
Income From Discontinued Operations 1,351 649
---------- -----------
Net Cash Used In Operating Activities (351) (587)
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in restricted cash - 339
Decreases in net assets of discontinued Operations 2,604 114
Increase in minority interest - 240
Purchase of property and equipment (854) (689)
Increase in deferred development costs - net (6) (577)
Repurchases of common stock (40)
(Increase) decrease in due to/from related
parties-net 155 4
---------- -----------
Net Cash Provided By (Used In) Investing Activities 1,859 (569)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock
and other equity transactions - -
Issuance of debentures and draws on line
of credit - 1,863
Payments on line-of-credit and long-term
debt (1,639) (625)
---------- -----------
4
<PAGE>
Net Cash Provided By (Used In)
Financing Activities (1,639) 1,238
---------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents (131) 82
CASH AND CASH EQUIVALENTS
At beginning of period 2,878 1,332
---------- -----------
At end of period $ 2,747 $ 1,414
---------- -----------
---------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
5
<PAGE>
CASINO RESOURCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30
(unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
1998 1997
(as restated)
<S> <C> <C>
Entertainment revenues $ 2,662 $ 3,635
Gaming revenues 1,084 -
Operating costs - entertainment 2,021 3,058
Operating costs - gaming 1,612 -
General and administrative expenses 511 421
Other expense-net 219 260
Minority interest in operations of subsidiary (18) (144)
---------- -----------
Income (Loss) from continuing operations (599) 40
Income from operation of discontinued operation 325 231
Gain on sale of discontinued operation 654 -
---------- -----------
---------- -----------
Net income 380 271
---------- -----------
---------- -----------
Weighted average shares, common stock 9,698,375 10,043,364
---------- -----------
---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) from continuing operations (599) 40
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization 676 183
Minority Interest in Subsidiary (18) 40
Changes in assets and liabilities
Accounts receivable 252 873
Prepaid expenses and inventory (69) (106)
Other 179 (218)
Accounts payable (245) (148)
Accrued expenses (422) 198
---------- -----------
Net Cash Provided by (Used in)
Operating Activities (246) 862
Income from Discontinued Operations 979 231
---------- -----------
Net Cash Provided By (Used In) Operating
Activities 733 1,093
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) Decrease in net assets of discontinued
Operations 2,328 (7)
Purchase of property and equipment (5) (624)
Increase in deferred development
costs - net (4) 123
Repurchase of Common Stock (6) -
Decrease in due to/from related
parties - net 114 19
---------- -----------
Net Cash Provided By (Used in)
Investing Activities 2,427 (489)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock and
other equity transactions - -
Issuance of long-term debt and draws on line
of credit - 525
Payments on line-of-credit and long-term
debt (948) (297)
---------- -----------
Net Cash Provided by (Used in)
Financing Activities (948) 228
---------- -----------
Net Increase in Cash and Cash
Equivalents 2,212 832
6
<PAGE>
CASH AND CASH EQUIVALENTS
At beginning of period 535 583
---------- -----------
At end of period $ 2,747 $ 1,415
---------- -----------
---------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
7
<PAGE>
CASINO RESOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which, in the opinion of management, are necessary for a fair
statement of results for the interim periods. The balance sheet for September
30, 1997 and the statements of operations and cash flows for the nine months
and three months ended June 30, 1997 have been restated.
Certain reclassifications of prior period amounts have been made to
conform to current period presentation.
The results of operations for the three-month period ended June 30, 1998
are not necessarily indicative of the results to be expected for the full
year.
NOTE 2 DEBT
The Company's debt at June 30, 1998 consists primarily of a first
lien mortgage on the Country Tonite Theatre ($7,275,000); a debenture with a
face value of $1,500,000 bearing a 6% interest rate; a note payable of
$1,000,000 with interest at 10% of operating income, as defined, of the
subsidiary that operates the Tunisian casino; and a convertible debenture
totaling $400,000 with interest at 13%.
NOTE 3 CAPITAL STOCK
During the three months ended June 30, 1998, the Company purchased and
retired 9,350 shares of common stock in the open market under a stock
repurchase plan.
The Company is required to maintain a $1.00 bid price, among other
requirements, for a NASDAQ National Market listing. The Company's common
stock has closed below the $1.00 bid on several occasions. The Company's
stock must close below a $1.00 bid price for thirty consecutive trading days
before any action would be required by NASDAQ.
8
<PAGE>
NOTE 4 DEFERRED DEVELOPMENT COSTS
Deferred development costs consist principally of externally incurred
charges principally related to a casino project in Tunisia and the Pokagon
Indian Gaming award in Indiana and Michigan.
NOTE 5 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash expended during the nine months ended June 30, 1998 and 1997 for
interest was $889,000 and $628,000, respectively. The Company has federal
and state tax loss carryforwards of approximately $11.0 million.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying condensed
consolidated financial statements.
NINE MONTHS ENDED JUNE 30, 1998 COMPARED TO NINE MONTHS ENDED JUNE 30, 1997
CONSOLIDATED
The Company's revenues from continuing operations for the nine months
ended June 30, 1998 were $8,996,000, an increase of $1,274,000 or 17% from
$7,722,000 in the prior year period. The gaming segment accounted for an
increase of $2,160,000 offset by a decline of $886,000 in the entertainment
segment caused primarily by the loss of the Las Vegas show venue.
ENTERTAINMENT
COUNTRY TONITE PRODUCTION SHOW
Country Tonite Production Show revenues totaled $1,518,000 for the nine
months ended June 30, 1998 (including $1,243,000 eliminated in
consolidation), a decrease of $1,044,000 from the comparable fiscal 1997
period revenues of $2,562,000. The decrease in revenues is due to the loss
of the Aladdin Hotel and Casino in Las Vegas, NV in November, 1997 and a
touring show which appeared in Biloxi, Mississippi during fiscal 1997 only.
Operating income decreased to $199,000 for the nine months ended June 30,
1998 (including $1,243,000 eliminated in consolidation) from $573,000 in the
comparable prior year period due to the aforementioned reasons.
Operating expenses (including project, general and administrative costs)
decreased to $1,319,000 for the nine months ended June 30, 1998 from
$1,989,000 in the prior year period due principally to the elimination of
1997 Biloxi show production expenses and the loss of the Aladdin venue in Las
Vegas.
To date, management has not found a suitable replacement for the
Aladdin contract.
9
<PAGE>
COUNTRY TONITE THEATRE - BRANSON
The Country Tonite Theatre in Branson reopened on March 9, 1998, the
beginning of the Branson tourist season. Paid attendance for the Country
Tonite Show totaled 33% at an average ticket price of $16.99 for the nine
months ended June 30, 1998 compared to paid attendance of 38% at an average
ticket price of $16.87 for the comparable prior year period. Revenues
declined $306,000 or 6% from the fiscal 1997 nine month total of $4,709,000
to $4,403,000 for the comparable 1998 period. The decline in attendance in
the third quarter is attributed to the absence of the Golden Girls morning
show from April to June 1998 and it is management's contention that there is
a general shift of tour bus volume from spring to the fall.
Operating expenses (including project, general and administrative
expenses) decreased $351,000 or 11% to $2,960,000 for the first nine months
of fiscal 1998 from $3,311,000 in the first nine months of fiscal 1997
principally due to the fact that third quarter of fiscal 1998 did not have a
morning show and due to lower staffing costs and other operating
efficiencies. Operating income increased by $45,000 or 3% to $1,443,000 in
the first nine months of fiscal 1998 from $1,398,000 in the first nine months
of fiscal 1997.
COUNTRY TONITE THEATRE-PIGEON FORGE
The Country Tonite Theatre in Pigeon Forge reopened for business on
March 17, 1998. Revenues for the nine months ended June 30, 1998 totaled
$2,159,000 compared to $1,074,000 in 1997 as the show opened for the first
time in March 1997. Operating expenses for the 1998 period totaled $2,942,000
for the nine months ended June 30, 1998(including $1,243,000 eliminated in
consolidation) generating an operating loss of $783,000 before a minority
interest allocation of $313,000 compared to the 1997 period where operating
expenses totaled $1,511,000 (including $623,000 eliminated in consolidation)
generating an operating loss of $438,000 before a minority interest
allocation of $175,000. The Company anticipates an overall operating loss for
the 1998 fiscal year.
The Company is negotiating an amendment to the theatre joint venture
agreement that will provide for early termination of the agreement by either
partner if certain performance criteria are not met.
GAMING
CASINO CARAIBE
The Company's first casino operation opened on October 18, 1997 in
Sousse, Tunisia. Revenues from Casino Caraibe for the nine months ended June
30, 1998 were $2,160,000. Operating costs totaled $4,383,000 resulting in an
operating loss of $2,223,000. An operating loss was anticipated due to
construction and licensing delays that pushed the opening into Tunisia's
slowest tourist season and due to the amortization of pre-opening costs over
a one year period. While management has significantly cut operating
expenses during 1998, it anticipates an operating loss for the year.
10
<PAGE>
On February 5, 1997, the Company sold its interest in the Palace Casino
back to its joint venture partner. In connection with the sale, the
Company's escrow deposit of $400,000 was refunded and, in addition, the
Company received proceeds of $1,000,000 for the $1,500,000 debenture. An
additional $250,000 is payable without interest in two years. The $250,000
receivable was discounted to an effective interest rate of 10%. A loss of
approximately $404,000 was recorded in the nine months and three months ended
June 30, 1997 relating to the sale of the Company's interest in the Palace.
GENERAL AND ADMINISTRATIVE
The Company's general and administrative expenses aggregated $1,996,000
for the nine months ended June 30, 1998 compared to $1,685,000 for the
comparable 1997 period. The overall increase is due principally to higher
legal and professional costs and costs related to the startup and support of
the Company's new ventures.
OTHER
Interest expense totaled $941,000 for the nine months ended June 30,
1998 compared to $627,000 for the 1997 period. The increase is due to a
higher level of indebtedness related to the casino project.
THREE MONTHS ENDED JUNE 30,1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
CONSOLIDATED
The Company's revenues from continuing operations for the three months
ended June 30, 1998 were $3,746,000, an increase of $111,000 or 3% over
revenues of $3,635,000 recorded in the fiscal 1997 period. The increase is
due principally from the addition of the new gaming segment offset by
decreases in the entertainment segment
ENTERTAINMENT
COUNTRY TONITE PRODUCTION SHOW
Country Tonite Production Show revenues totaled $562,000 for the quarter
ended June 30, 1998 (including $561,000 eliminated in consolidation), a
decrease of $548,000 from the comparable 1997 period revenues of $1,110,000.
Operating costs (including project, general and administrative) decreased to
$401,000 for the quarter ended June 30, 1998 from $868,000 in the prior year
period. The decrease in revenues and operating costs is the result of the
Country Tonite Show appearing at the Biloxi Grand Theatre in 1997 and the
closing of the Aladdin Hotel & Casino in November, 1997. Operating income
decreased from $242,000 in the quarter ended June 30,1997 to $161,000 for the
1998 quarter (including $561,000 eliminated in consolidation).
11
<PAGE>
COUNTRY TONITE THEATRE - BRANSON
The Country Tonite Theatre in Branson revenues for the quarter ended
June 30, 1998 totaled $1,712,000 a decrease of $372,000 from the comparable
1997 quarter total of $2,084,000 due to a decline in attendance from 34%
occupancy in the third quarter of fiscal 1997 to 27% occupancy in the
comparable 1998 quarter and a decrease in the average ticket price from
$17.38 in the third quarter of fiscal 1997 to $17.28 in the comparable 1998
period. This decline is due to the absence of a morning show from April to
June 1998 and it is management's contention that there is a general shift of
tour group revenue from spring to fall. Operating costs for the quarter ended
June 30, 1998 totaled $1,051,000 a decrease of $308,000 from the comparable
1997 period total of $1,359,000. The Company was able to reduce staffing
costs as well as gain other operating efficiencies in addition to not having
a morning show in the 1998 quarter.
COUNTRY TONITE THEATRE-PIGEON FORGE
Revenues for the three months ended June 30, 1998 totaled $951,000 a
decrease of $42,000 from the comparable 1997 quarter total of $993,000.
Operating expenses totaled $997,000 resulting in an operating loss of $46,000
(including $561,000 eliminated in consolidation) before the minority interest
share of the loss ($18,000) compared to operating expenses of $1,383,000
resulting in an operating loss of $390,000 (including $552,000 eliminated in
consolidation) before the minority interest share of the loss ($144,000) in
the comparable 1997 quarter. The reduction in operating expenses was due to
an amendment to the lease agreement providing for changes in rent expense.
GAMING
CASINO CARAIBE
Revenues for the three months ended totaled $1,084,000. Operating costs
was $1,611,000 resulting in an operating loss of $527,000 for the quarter.
Revenues for the quarter were negatively impacted by a general decrease in
tourism during the later part of the quarter especially in June, 1998.
GENERAL AND ADMINISTRATIVE
The Company's general and administrative expenses totaled $512,000 for
the three months ended June 30, 1998 compared to $421,000 for the three
months ended June 30, 1997. The increase is due principally to higher
professional and legal expenses.
OTHER
12
<PAGE>
Interest expense for the three months ended June 30, 1998 totaled
$287,000 compared to $222,000 for the 1997 quarter. The increase is due to
higher levels of indebtedness.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased from $535,000 at March 31, 1998 to
$2,540,000 at June 30, 1998. In addition to operations,the Company's
principal source of funds during the three months ended June 30, 1998 were
funds provided by the sale( for $5.5 million) of the Grand Hinckley Inn. The
Company's principal use of funds other than operations consisted of debt
repayments totaling $942,000 and capital expenditures of $5,000.
The mortgage note on the Branson theatre matures in April, 1999.
The Company is currently reviewing refinancing alternatives.
On August 11, 1998, the Company amended its 13% convertible
debenture agreement to provide for an immediate $250,000 payment ($171,674
principal) with the remaining principal balance plus interest payable in four
equal installments, in cash or stock at the Company's discretion, beginning
January, 1999.
CAPITAL EXPENDITURES
Capital expenditures by the Company were $5,000 for the three months
ended June 30, 1998 compared to $638,000 for the comparable period in the
prior year. The decrease was principally attributable to purchases of gaming
equipment for the Company's casino in Tunisia in 1997.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income". The new Standard discusses how to
report and display comprehensive income and its components. The standard is
effective for years beginning after December 15, 1997. When the Company
adopts this statement, it is not expected to have a material impact on the
Company's financial statements.
In June 1997 the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information."
This standard requires enterprises to report certain information about
operating segments, their products and services, geographic areas, and major
customers. This standard is effective for years beginning after December 15,
1997. When the Company adopts this statement, it is not expected to have a
material impact on the Company's financial statements.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
13
<PAGE>
All statements contained herein that are not historical facts are based
on current expectations. These statements are forward looking in nature and
involve a number of risks and uncertainties. Actual results may differ
materially. Among the factors that could cause actual results to differ
materially are the following: the availability of sufficient capital to
finance the Company's business plan on terms satisfactory to the Company;
competitive factors, failure to find a replacement venue for the Country
Tonite Las Vegas Show; changes in travel patterns which could affect demand
for the Company's , theaters or casino; changes in development and operating
costs, including labor, construction, land, equipment, and capital costs;
general business and economic conditions; political unrest in Tunisia or the
region; and other risk factors described from time to time in the Company's
reports filed with the Securities and Exchange Commission. The Company
wishes to caution readers not to place undue reliance on any such forward
looking statements, which statements are made pursuant to the Private
Securities Litigation Reform Act of 1995, and as such, speak only as to the
date made.
SEASONALITY
The theatre operations in Branson, Missouri and Pigeon Forge, Tennessee,
will also be affected by seasonal factors. The Branson theatre will close on
December 19, 1998 and the Pigeon Forge theatre will close on January 1, 1999.
This period is historically when theatres like the Company's normally close
in Branson and Pigeon Forge. The theatres reopen in March. The casino in
Tunisia is also subject to seasonal factors as the October to April period is
considered the slowest.
IMPACT OF INFLATION
Management does not believe that inflation has had any significant
adverse impact on the Company's financial condition or results of operations
for the periods presented. An increase in the rate of inflation could
adversely affect the Company's future operations and expansion plans.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is party to various legal proceedings as described in its
Annual Report on Form 10-KSB for the year ended September 30, 1997. There
have been no further developments regarding such proceedings during the three
months ended June 30, 1998, except as described below.
James Barnes and Prudence Barnes, two former officers of a subsidiary of
the Company, have brought suit in the State District Court, Clark County,
Nevada, against the Company in connection with their employment termination
in June 1995. No specific amount of damages has been claimed. The Company
intends to vigorously defend itself in this matter and is seeking a summary
judgement. Trial is scheduled for January, 1999.
On December 31, 1997, the Company's former chairman defaulted on repaying
the $1,232,000 (principal) of notes receivable due the Company. The Company
filed suit
14
<PAGE>
against the individual on January 2, 1998. The Company held 150,000 shares
of the Company's stock as collateral. On January 15, 1998, the Company
signed an agreement with the individual. Under the agreement, 220,000
additional shares of the Company's stock would be canceled along with the
150,000 shares held at the market price of $1.19 per share. The shares to be
cancelled were not treated as outstanding as of September 30, 1997.
Additionally, the Company and the individual entered into a new note
agreement. The new note of $1,196,885, including approximately $143,000 of
previously reserved interest, bears interest at 7%, payable on maturity on
January 15, 2001. The note is collateralized by the individual's 5% interest
in the Company's Pokagon management fee. Solely at the Company's discretion,
at any time prior to maturity, the Company can take the collateral as payment
in full for the note. Since the individual's ability to pay the note is not
known, the Company has provided an impairment reserve for $791,900, which
represents the remaining principal balance after stock cancellations.
Generally accepted accounting principles do not permit the recording of
contingent assets until realized and as the individual's ability to pay the
note is not known, the Company provided an impairment reserve of $791,900.
In January 1998, this individual failed to deliver the 220,000 shares of
stock required under the agreement. Accordingly, the Company recorded an
impairment charge in the first quarter of fiscal 1998 of $260,000. In the
second quarter of fiscal 1998, the default was cured and the impairment
charge of $260,000 was reversed.
ITEM 5. OTHER INFORMATION
The deadline date for receipt of shareholder proposals for inclusion
in management's proxy statement for the 1999 annual meeting of stockholders
is September 30, 1998. The deadline date for giving notice to the Company of
an intention to present a Non-Rule 14(a)-8 shareholder proposal at the 1999
Annual Meeting of Stockholders is March 13, 1999.
The Company does not anticipate that year 2000 compliance issues will
materially affect its operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) Exhibits
Exhibit 27 - Financial Data Schedule
B) The following Forms 8-K have been filed during the three months ended
June 30, 1998:
1) 8-K filed on June 30, 1998 reporting the sale of the Grand
Hinckley Inn
SIGNATURES
In accordance with requirements of the Exchange Act, the registrant
caused this report to be signed on behalf by the undersigned, hereunto duly
authorized.
CASINO RESOURCE CORPORATION
15
<PAGE>
Date: August 14, 1998 s/ John J. Pilger
-----------------
John J. Pilger, President & CEO
Date: August 14, 1998 s/ Maurice P. Gaudet
--------------------
Maurice P. Gaudet, Chief Financial Officer
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S QUARTERLY REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 2747
<SECURITIES> 0
<RECEIVABLES> 252
<ALLOWANCES> 0
<INVENTORY> 336
<CURRENT-ASSETS> 3811
<PP&E> 14385
<DEPRECIATION> 3170
<TOTAL-ASSETS> 19261
<CURRENT-LIABILITIES> 11325
<BONDS> 0
0
0
<COMMON> 96
<OTHER-SE> 6760
<TOTAL-LIABILITY-AND-EQUITY> 19261
<SALES> 3746
<TOTAL-REVENUES> 3746
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3404
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 941
<INCOME-PRETAX> (599)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 1351
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 380
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
