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 December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(D) OF THE EXCHANGE ACT
Commission file number: 0-22242
CASINO RESOURCE CORPORATION
(Exact Name of Small Business Issuer as Specified in Its Charter)
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 February 12, 1998, 9,632,399 Shares of Common Stock and 2,760,000 of
Redeemable Class A Warrants (the "Warrants") of Casino Resource Corporation (the
"Company") were outstanding.
1
<PAGE>
INDEX TO QUARTERLY REPORT
ON FORM 10-QSB
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Related Stockholder Information
Item 3. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Exhibits and Reports on Form 8-K
SIGNATURES
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CASINO RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Dec. 31, 1998 Sept. 30, 1998
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 1,051,830 $ 1,151,925
Accounts receivable - trade and other 38,938 108,183
Inventory 22,953 36,431
Prepaid expenses (Note 1) 178,245 59,013
Deferred tax asset (Note 2) 2,000,000 2,000,000
Net assets held for sale - entertainment (Note 3) 2,011,691 2,384,615
---------------------------------
Total Current Assets 5,303,657 5,740,167
---------------------------------
Property and Equipment
Less accumulated depreciation & amortization (Note 4) 2,512,477 2,663,107
---------------------------------
Noncurrent Assets
Notes and advances receivable - related parties, net of allowance 494,969 473,891
Note receivable, Palace Casino 248,189 242,766
Other assets - net 124,201 24,201
---------------------------------
Total Noncurrent Assets 867,359 740,858
---------------------------------
8,683,493 9,144,132
=================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable 725,149 732,984
Current maturities of long-term debt 125,489 188,344
Accrued expenses and other liabilities 1,191,636 1,412,407
---------------------------------
Total Current Liabilities 2,042,274 2,333,735
---------------------------------
Long-Term Liabilities
Long-term debt, less current maturities (Note 5) 2,495,351 2,481,405
Subordinated convertible debentures (Note 6) 228,326 228,326
---------------------------------
Total Long-Term Liabilities 2,723,677 2,709,731
---------------------------------
Total Liabilities 4,765,951 5,043,466
---------------------------------
Stockholders' Equity
Preferred stock, 8% cumulatives; $.01 par value; authorized
5,000,000 shares; none issued
Common stock, $.01 par value; authorized 30,000,000 shares; 94,823 94,893
9,482,349 shares issued and outstanding as of 12/31/98
Additional paid-in capital [check this number] 22,627,409 22,630,909
Cumulative translation adjustment (310,000) (310,000)
Deficit (18,333,357) (13,644,520)
Net Loss (161,333) (5,011,822)
---------------------------------
Total Stockholders' Equity 3,917,542 4,100,666
---------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,683,493 $ 9,144,132
=================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CASINO RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31
(unaudited)
<TABLE>
<CAPTION>
1998 1997
REVENUE
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
Gaming $ 561,022 $ 534,619
- ---------------------------------------------------------------------------------------------------
Cost and Expenses
Operating costs - gaming 901,370 1,410,642
General and administrative expense 683,095 1,241,126
Total Cost and Expenses 1,584,465 2,651,768
-------------------------------
Loss from continuing operations: (1,023,443) (2,117,149)
Income from Discontinued Operations - Entertainment (Note 3) 862,110 837,333
Income from Discontinued Operations - Hospitality -- 282,825
-------------------------------
NET LOSS $ (161,333) $ (996,987)
- ---------------------------------------------------------------------------------------------------
Basic and Fully Diluted Income (Loss) Per Common Share
Continuing operations $ (.11) $ (.21)
Discontinued operations .09 .11
- ---------------------------------------------------------------------------------------------------
NET LOSS PER COMMON SHARE $ (.02) $ (.10)
===================================================================================================
Weighted Average Number of Common Shares Outstanding 9,485,814 9,893,364
===============================
</TABLE>
4
<PAGE>
CASINO RESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE THREE MONTHS ENDED DECEMBER 31
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net (loss) $(1,023,443) $(2,117,149)
Adjustments to reconcile net loss to net cash
Depreciation 155,791 81,050
Amortization -- 306,603
Discount on Conv Deb 13,946 53,079
Minority interest in net loss 18,804 101,012
Accretion of Note Payable (5,423) (5,423)
Changes in Assets and Liabilities
Accounts receivable 69,245 (76,919)
Prepaid expenses (119,233) 68,409
Inventory 13,478 (60,559)
Deposits and Other Assets (100,000) --
Accounts payable (11,729) (515,836)
Accrued expenses (220,771) 135,010
Deferred rent -- (109,389)
-------------------------------
Net Cash Used In Operating Activities (1,209,333) (2,134,462)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (5,161) (1,019,919)
Increase in deferred development costs -- (137,020)
Increase in pre-opening cost -- 119,124
(Increase) decrease in due to/from related parties - net (21,078) 78,279
-------------------------------
Net Cash Used in Investing Activities (26,240) (959,536)
-------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Redemption cost -- 4,500
Payments on line-of-credit and long-term debt (62,857) (388,395)
-------------------------------
Net Cash Used In Financing Activities (62,857) (383,895)
-------------------------------
Effect of exchange rate changes on cash (36,700)
Cash provided by discontinued operations - Enter 1,235,034 1,689,541
Cash provided by discontinued operations - Hosp -- 468,463
-------------------------------
Net Decrease in Cash and Cash Equivalents (100,096) (1,319,889)
CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents, at beginning of period 1,151,925 2,254,295
===============================
Cash and Cash Equivalents, at end of period $ 1,051,830 $ 934,406
===============================
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
5
<PAGE>
CASINO RESOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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.
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 December 31,
1998 are not necessarily indicative of the results to be expected for the full
year.
NOTE 1 Prepaid Expenses
As of December 31, 1998, prepaid expenses reflect prepayment of Tunisian
management fees for fiscal 1999.
NOTE 2 Deferred Tax Asset
The Company recognized a $2,000,000 income tax benefit in fiscal 1998. The
benefit relates to the adjustment of the valuation allowance as it is now more
likely than not, that the Company will realize the deferred tax asset upon the
sale of its entertainment segment in fiscal 1999.
NOTE 3 Net Assets Held for Sale - Entertainment
The Company entered into an asset purchase agreement (the "Agreement") with
On Stage Entertainment, Inc. ("On Stage"), to sell substantially all of the
Company's assets relating to the Country Tonite Theatre in Branson, Missouri,
and the production show, Country Tonite. The purchase price is $13.8 million, of
which $12.5 million is payable in cash and the balance is payable by a 9.5%
subordinated note. The Agreement is subject to, among other things, On Stage's
obtaining financing of the purchase price and approval of the sales transaction
by a majority of the shareholders of On Stage and the Company. Upon the sale of
the entertainment division assets, the Company will still have its casino in
Tunisia, North Africa, however the Company will have no other entertainment
assets.
The assets held for sale are those for the Country Tonite Theatre, Branson,
Missouri, and Country Tonite Entertainment, Inc. production show. The components
of these assets are as follows:
1998 1997
Current Assets 1,102,398 1,699,782
Fixed Assets 8,083,519 8,710,319
Long Term Debt (7,174,225) (7,371,292)
-----------------------------
Total Assets held for Sale 2,011,692 3,038,809
6
<PAGE>
NOTE 4 Supplemental Disclosure of Cash Flow Information
Cash expended during the three months ended December 31, 1998 and 1997 for
interest was $267,078 and $237,119, respectively, and income tax payments for
the same periods were $0 and $22,000, respectively. The Company has federal and
state tax loss carry forwards of approximately $11.0 million.
NOTE 5 Debt
The Company's debt at December 31, 1998 consists primarily of a debenture
in the 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; a first lien mortgage of $90,217
on a residence located in Ocean Springs, Mississippi; and an equipment note of
$35,271. NOTE 6 Capital Stock Subsequent to December 31, 1998 the Company issued
150,050 shares of stock on February 11, 1999 in satisfaction of a portion of the
outstanding convertible debenture and 70,000 shares of common stock to satisfy
an outstanding payable obligation of $35,000 due a vendor.
Item 2. Related Stockholder Information
The Company has received two letters from NASD warning that if the Company
does not achieve minimum maintenance requirements under NASD rules the Company's
common stock will be delisted from the National Market System. Among other
things, the rules require that the publicly held shares have an aggregate market
capitalization of at least $5 million, and a minimum bid price per share of $1.
The Company satisfies neither requirement. The Company has requested an NASD
hearing, and is actively planning and working to attain the minimum maintenance
standards. If the Company's Common Stock is delisted the Warrants will also be
delisted. Delisting of securities could have an adverse effect on the common
stock or the Warrants. If the Company's common stock is delisted from the NASDAQ
National Market System, the Company can seek listing on the NASDAQ "Small Cap"
market; however, the Company's common stock must also maintain a minimum bid
price of $1 to satisfy the listing requirements for the Small Cap market. If the
$1 minimum bid price cannot be maintained, the Company's common stock can trade
on the OTC Bulletin Board. Such an occurrence could significantly affect the
marketability of the Company's common stock, and subject it to additional
requirements under the "Penny Stock" rules of the Securities Exchange Act of
1934.
Item 3. 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 period included in the accompanying condensed
consolidated financial statements.
7
<PAGE>
THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1997.
CONSOLIDATED
The Company's revenues for the three months ended December 31, 1998 were
$561,022 an increase of $26,403 or 5% from the $534,619 recorded for the same
period 1997. Because the Company carries its entertainment assets as
discontinued operations, all Company revenues are attributable to the Company's
gaming operations. The Tunisia casino did not open until October 18, 1997,
accordingly, 1997 reflects approximately ten operating weeks versus twelve
operating weeks in 1998.
Continuing Operations
GAMING, TUNISIA
First quarter fiscal 1999, ending December 31, 1998, recorded revenues of
$561,022 an increase of $26,403 or 5% from $534,619 for the same period ending
December 31, 1997. First quarter 1998 reflects ten weeks of operation while
first quarter 1999 reflects twelve weeks of operation. Through cost containment
efforts operating expenses for the period ending December 31, 1998 totaled
$901,370 as compared to $1,410,642 for the same period ending December 31, 1997,
a $509,272 or a 36% reduction. Operating losses were reduced from $882,746 for
the period ending December 31, 1997 to a loss of $340,348 for the period ending
December 31, 1998. Management has implemented cost containment measures to
decrease general and administrative expenses as an overall percent of revenue.
GENERAL AND ADMINISTRATIVE
The Company's general and administrative expenses aggregated $631,987 in
the first quarter of 1999 compared to $1,016,914 in the first quarter of 1998.
In total, general and administrative expenses decreased by $384,927. The
decrease is primarily related to decrease in professional fees, administrative
overhead, amortization expense and bad debt expense which was slightly offset by
increased legal fees.
INTEREST EXPENSE
Interest expense totaled $267,078 for the first quarter of fiscal 1999
compared to $237,119 for the first quarter of fiscal 1998. Interest expense
reflects interest on the convertible debenture issue; SeaMar Note; and $1.5
million Palace Debenture.
OTHER Other expense for the quarter ending December 31, 1997 included a
$260,000 charge for write-off of a note receivable from a principal shareholder,
which was subsequently reversed in the second quarter of 1998.
8
<PAGE>
Discontinued Operations
ENTERTAINMENT
Country Tonite Theatre LLC - Pigeon Forge
Revenues for the first quarter fiscal 1999, ending December 31, 1998
totaled $1,354,796 an increase of $261,796 or 24% from $1,093,000 revenue
generated same period ending December 31, 1997. Operating expenses including
project, general and administrative costs and depreciation totaled $1,346,463
for period ending December 31, 1998 versus $1,345,529 for the same period ending
December 31, 1997. Increased revenues and cost containment resulted in an
operating loss of $47,011 (before the minority interest share of the loss of
$18,804) for period ending December 31, 1998 versus an operating loss of
$252,529 for the same period ending December 31, 1997. The Company was the
operating manager and owned 60% of the CTT, LLC Joint Venture, which was sold to
Burkhart Ventures effective December 31, 1998.
Country Tonite Production Show
Country Tonite Production show revenues totaled $597,057 for fiscal first
quarter 1999, ending December 31, 1998, (all of which is eliminated in
consolidation) a decrease of $257,033 or 31% from $854,090 revenues generated
for the same period ending December 31, 1997. Lower revenues resulted from
maintaining only a Pigeon Forge operation during the first quarter of 1999
whereas first quarter 1998 revenues included Pigeon Forge and Las Vegas, Nevada.
Operating expenses (including project, general and administrative costs and
depreciation) decreased from $684,484 for the three months ending December 31,
1997 to $396,193 for the same period ending December 31,1998. This decrease was
principally due to significant reductions in salaries and wages as 1997 includes
Pigeon Forge operation and eight weeks of operations in Las Vegas, whereas 1998
includes only Pigeon Forge operations and cost containment by management. While
revenues decreased, this decrease was more than offset by lower operating
expenses resulting in an operating income increase to $200,864 for first quarter
1999 from $169,606 for same period l998.
Country Tonite Theatre
First quarter fiscal 1999, ending December 31, 1998, revenue of $2,078,434
decreased $201,870 or 8.8% from $2,280,304, from same period ending December 31,
1997. Paid attendance for the Country Tonite show totaled 31.3% of capacity for
first quarter 1999 compared to 43.9% of capacity in the period 1998. Average
ticket prices totaled $17.84 in first quarter fiscal 1999, compared to $17.56
for the same period fiscal 1998. While revenues slightly decreased due to lower
attendance, revenue was partially supported by the addition of approximately 25
shows, from a total of 127 shows the first quarter of fiscal 1998 to 152 shows
for the same period 1999. Through cost containment efforts by Company
management, operating expenses (including project, general and administrative
costs and depreciation) fell $238,711 or 16.4% to $1,217,333 for first quarter
fiscal 1999, from $1,456,044 for the same period 1998. Operating income
decreased by $129,891 or 15% to $689,452 for first quarter fiscal 1999, from
$819,343 for first quarter fiscal 1998.
9
<PAGE>
The Company entered into an Asset Purchase Agreement to sell substantially
all of the assets used in connection with the operation of the Country Tonite
Show to On Stage Entertainment, Inc. The closing is subject to, among other
things, On Stage's obtaining acceptable financing of the purchase price and
approval of the sales transaction by a majority of the shareholders of On Stage
and the Company. LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased from $1,151,925 at September 30, 1998
to $1,051,830 at December 31, 1998. Cash and cash equivalents does not reflect
any funds from the anticipated sale of the entertainment division.
In the 10-month period ending October 31, 1999, the Company will be
required to repay or refinance obligations aggregating approximately $8,894,786
in principal amount (plus interest and premium). Three of the obligations,
aggregating approximately $1.7 million in principal amount may be repaid by the
Company in cash or common stock. The largest obligation, approximating $7.0
million in principal amount, is secured by a mortgage on the Company's property
in Branson, Missouri. If the Company closes its sale transaction for certain of
its entertainment division assets with On Stage, it will have the cash resources
to repay from the cash proceeds of the sale, the mortgage loan on the Branson
property. However, if the sale is not consummated, the Company will be obliged
to try to refinance the mortgage obligation. If the Company retires the mortgage
on or before May 1, 1999, the Company will be given a $300,000 discount.
Subject to the foregoing, the Company expects that available cash from
future operations will be sufficient to meet the capital expenditures, debt
service and working capital requirements of its existing businesses for the next
fiscal year.
The Company has entered a Letter of Intent Agreement with a standstill
component to build a state of the art spring water bottling plant in
Bentonville, Arkansas. The agreement is comprised of the Company and Mark
McKinney, an entrepreneur. The Company retains a 60% interest in consideration
for investing $5 million in the bottling plant. The business will spend an
estimated $27 million on the facility, which will be equipped with
state-of-the-art bottle blow molding equipment, to be competitive with the
larger bottled water companies. The Company intends to produce and distribute
premium natural spring water taking advantage of location, efficiency, and
capacity of a natural spring source. At the same time the Company expects to
fill a void by meeting the demand for bottled water and at the lowest price in
the market today. Completion of the water bottling plant is contingent upon,
among other things, the Company procuring $25 million in acceptable debt and
equity financing. The Company has advanced Mark McKinney $150,000 through
January 1999.
CAPITAL EXPENDITURES
Capital expenditures by the Company were $5,100 for the period ending
December 31, 1998 compared to $1,019,919 for the same 1997 period. While they
consisted principally of purchases and expenditures for the casino in 1998.
10
<PAGE>
SEASONALITY
The casino in Tunisia will be affected by seasonal factors, as the primary
tourist season in Tunisia ranges from May through October each year.
IMPACT OF INFLATION
Management of the Company 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. However, an increase in the rate of
inflation could adversely affect the Company's future operations and expansion
plans.
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 financial statements.
In April 1998, the Accounting Standard Executive Committee issued Statement
of Position ("SOP") 98-5 "Reporting on the Costs of Start-up Activities." The
SOP requires that all costs of start-up activities should be expensed as
incurred. The SOP is effective for years beginning after December 15, 1998. When
the Company adopts this SOP, it is not expected to have a material impact on the
Company's financial statements.
In June 1998, the Financial Accounting Standard Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities." This standard
established accounting and reporting standards for derivatives and for hedging
contracts. This standard is effective for all fiscal quarters of all fiscal
years beginning after June 15, 1999. When the Company adopts this statement, it
is not expected to have a material impact on the Company's financial statements
or their presentation.
11
<PAGE>
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
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 as it pertains to development
and start up of the Bottled Water business; failure by On Stage to obtain
satisfactory financing underlying the purchase of CTE and CRC of Branson;
changes in travel patterns which could affect demand for the Company's theatres
or casinos; 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.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In 1995, a suit was brought against the Company in Federal District Court
of New Jersey, which venue was later transferred to the Federal District Court
for Southern Mississippi. Plaintiff (Gelb Productions, Inc., a New Jersey
corporation) asserts it had a contract with the Company to provide eight
professional boxing events at the Company's former Biloxi Star Theater. The
complaint was thereafter amended by plaintiff to reflect additional allegations
that defendant tortuously harmed plaintiff's business reputation and maliciously
interfered with existing and prospective economic relationships. Settlement was
reached with the plaintiff in December 1997, for $100,000 plus attorney's fees
and expenses, totally $81,726.24 which was satisfied in November 1998, and
claims were dismissed with prejudice.
The Company commenced an arbitration action in November 1994, with the
Arbitration Association in Minneapolis, Minnesota, against Cunningham Hamilton
Quiter, P.A. (CHQ), the architect the Company retained in connection with the
construction of the Biloxi theater. On December 30, 1994, the architectural firm
commenced a suit in a Mississippi state court seeking a foreclosure on a
mechanics' lien it had filed on the Biloxi theater project in the amount of
approximately $321,000, which sum the Company escrowed. On December 26, 1996,
the Arbitration Association announced the Company was entitled to an award of
approximately $142,000, which sum was a portion of previously escrowed $321,000.
The decision resulted in a gain to the Company of approximately $122,000 in
fiscal 1997.
The Company has received notice that the action of CHQ against John J.
Pilger (CEO of the Company) in Jackson County Circuit Court, Mississippi
originally set in abeyance pending completion of arbitration proceeding, is now
reconstituted. Cunningham alleges that Mr. Pilger and the Company owes CHQ
approximately $40,000 for services rendered in 1994. The Company and Mr. Pilger
deny these charges and plant to vigorously defend themselves in this matter.
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. The Barnes have alleged the Company breached their contracts based on
the termination of the Barnes employment; intentional misrepresentation; and a
breach of contract based on the untimely registration of their stock. No
specific amount of damages has been claimed, however the plaintiffs have
informally indicated that they would entertain a settlement offer of between
$250,000 and $350,000. The Company intends to vigorously defend itself in this
matter.
In March 1996, PDC, a Minnesota limited liability company, and two of its
officers filed suit against the Company, Harrah's Entertainment and Monarch
Casinos, in the Fourth Judicial District Court of Minnesota, and in Michigan,
which venue was later dropped, alleging defamation, violation of the Lanham Act,
violation of the Michigan Consumer Protection Act, tortuous interference with
its business relations and prospective economic advantage, as well as false
light invasion of privacy in connection with the Pokagon Indian Gaming Award.
The suit
13
<PAGE>
was dismissed with prejudice and a judgment of dismissal entered on September 1,
1998 in the Fourth District Court, State of Minnesota.
The Company initiated a civil suit against Harrah's on September 4, 1998,
in Federal District Court for the District of Minnesota. The Company alleges
that Harrah's breached the Technical Assistance and Consulting Agreement and
tortuously interfered with the Company's contractual and prospective economic
advantage associated with the Pokagon Band of Potawatomi Indians. The suit
further alleges that Harrah's withheld vital business information from the
Company. Harrah's has filed a motion to dismiss based on denial that Harrah's is
a proper party to the lawsuit and that the Technical Assistance and Consulting
Agreements do not create a partnership or Joint Venture relationship with the
Company. The Company filed its response to Harrah's Motion for Summary Judgment
in late December 1998. The Company plans to vigorously pursue its claims and
seeks a judgment against Harrah's plus interest and legal fees.
The Company initiated a civil suit against Willard Smith and Monarch
Casino, Inc., (Monarch) on December 19, 1998, in the Circuit Court of Jackson,
Mississippi. The Company alleges that Mr. Smith and Monarch have breached the
terms of the Memorandum of Understanding, Amendment and Modification Agreement,
and Consulting Agreement by failing to provide the services required under the
terms of the agreements, breaching their obligations of good faith to the
Company, and by attempting to secure the termination of the Company's interest
in the Pokagon project. The suit further alleges that Mr. Smith has defaulted on
his obligations to pay rent and maintain the up-keep of the Company's
residential property located at 303 LaSalle Street, Ocean Springs, Mississippi.
The Company seeks a judgment against Monarch Casino, Inc. and Willard Smith,
plus interest and attorneys' fees for notes due and material breach of
agreements; removal of Mr. Smith from the rental property and punitive damages.
Item 2. Exhibits and Reports on Form 8-K
A) Exhibits
Exhibit - Financial Data Schedule
o There have been no current reports on Form 8-K filing during
the three months ended December 31, 1998:
14
<PAGE>
SIGNATURES
In accordance with requirements of the Securities and Exchange Act, the
registrant caused this report to be signed on behalf by the undersigned,
hereunto duly authorized.
CASINO RESOURCE CORPORATION
Date: February 12, 1998 s/ John J. Pilger
-----------------------------------
John J. Pilger, President & CEO
Date: February 12, 1998 s/ Karla Schlett
-----------------------------------
Karla Schlett, Financial Controller
15
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000899778
<NAME> CASINO RESOURCE CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,051,830
<SECURITIES> 0
<RECEIVABLES> 38,938
<ALLOWANCES> 0
<INVENTORY> 22,953
<CURRENT-ASSETS> 5,303,657
<PP&E> 3,411,370
<DEPRECIATION> 898,893
<TOTAL-ASSETS> 8,683,493
<CURRENT-LIABILITIES> 2,042,274
<BONDS> 0
0
0
<COMMON> 94,823
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<INCOME-PRETAX> (1,023,443)
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<INCOME-CONTINUING> (1,023,443)
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<NET-INCOME> (161,333)
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</TABLE>
