Form 10-QSB/A-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission file number 1-12668
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_________to_________
For Quarter Ended_______________Commission File Number________
HOLLY HOLDINGS, INC.
(Name of Small Business Issuer in its charter)
New Jersey 22-3172149
(State of jurisdiction of incorporation) (I.R.S. Employer I.D. Number)
200 Monument Road, Suite 10, Bala Cynwyd, Pennsylvania 19004
(Address of principal executive offices)
Registrant's telephone number (610) 617-0400
Check whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Securities 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock. The Registrant had 23,106,492 shares of its common stock
outstanding as of December 22, 1997.
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HOLLY HOLDINGS, INC. AND SUBSIDIARIES
INDEX
Part I: FINANCIAL INFORMATION
Item 1: Financial Statements:
Consolidated Balance Sheet as of June 30, 1997 (Unaudited) 1-2
Consolidated Statements of Operations for the Three Months
Ended June 30, 1997 and 1996 (Unaudited) 3
Consolidated Statements of Cash Flows for the Three Months
Ended June 30, 1997 and 1996 (Unaudited) 4-5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-11
Part II: OTHER INFORMATION
Item 1: Legal Proceedings 12-14
Item 2: Changes In the Rights of the Company's Security
Holders 14
Item 3: Defaults by the Company on its Senior Securities 14
Item 4: Results of Votes of Shareholders 14
Item 5: Other Information 14
Item 6: Exhibits & Reports on Form 8-K 15
Signature Page 16
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HOLLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 (UNAUDITED)
ASSETS:
Current Assets:
Cash and Cash Equivalents $ 6,935
Prepaid Expenses 115,587
Total Current Assets 122,522
Property and Equipment - [Net of Accumulated
Depreciation and Amortization of $52,937] 10,462,889
Deposits 630
Deferred Financing Costs 42,028
Total Assets $10,628,069
See Notes to Consolidated Financial Statements
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HOLLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 (UNAUDITED)
Liabilities and Stockholders' Deficit:
Current Liabilities:
Accounts Payable $ 234,098
Payroll Taxes Payable 33,876
Accrued Expenses 189,896
Accrued Interest - Related Parties 175,943
Notes Payable - Related Parties
(Net of Deferred Financing Costs of $45,000) 880,000
Current Portion of Long-Term Debt 122,198
Net Liabilities of Discontinued Operations 6,452,547
Current Portion of Capital Lease Obligations 4,976
Total Current Liabilities 8,093,534
Long-Term Liabilities:
Note Payable 2,905,000
Note Payable - Related Party 2,350,000
Other Liability 4,199
Total Long-Term Liabilities 5,259,199
Minority Interest 2,247,023
Commitments and Contingencies --
Stockholders' Equity:
Preferred Stock - Authorized 2,000,000 Shares:
Series D: Convertible $10.00 Par Value, $1.00 Per
Share Per Annum Cumulative Dividends, 384,639
Shares Issued and Outstanding 3,846,390
Series E: Convertible $10.00 Par Value, 137,500
Shares Issued and Outstanding 1,375,000
Series Z: Convertible $0.25 Par Value, 1,013,628
Shares Issued and Outstanding 253,407
Additional Paid-in Capital (Preferred) (1,331,063)
Common Stock - No Par Value, Authorized 150,000,000
Shares, 8,519,427 Shares Issued and Outstanding 19,224,118
Additional Paid-in Capital (Common) (83,947)
Accumulated [Deficit] (28,255,582)
Total Stockholders' Deficit (4,971,687)
Total Liabilities and Stockholders' Deficit $ 10,628,069
See Notes to Consolidated Financial Statements
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HOLLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended
June 30,
1997 1996
Costs and Expenses:
General and Administrative Expenses $ 528,156 $ 758,694
Depreciation 5,629 34,441
Totals 533,785 793,135
Other Income (Expense):
Interest Income 1,464 --
Interest Expense (130,579) (36,908)
Other Income 20,232 4,495
Totals (108,883) (32,413)
Minority Interest Share in Loss of Subsidiary 84,979 59,127
(Loss)Income from Continuing Operations (557,689) (766,421)
Discontinued Operations:
Income (Loss) from Operations of
Woodworking Business and Electronic
Components Manufacturing Business (142,480) (24,233)
Net (Loss) $ (700,169) $ (790,654)
Per Share Data:
(Loss) from Continuing Operations $ (.09) $ (.39)
Income [Loss] from Discontinued
Operations $ (.03) $ (.01)
Net [Loss] Per Common Share $ (.12) $ (.40)
Weighted Average Number of Shares 5,927,074 1,994,438
See Notes to Consolidated Financial Statements
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HOLLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended
June 30,
1997 1996
Operating Activities:
(Loss) From Continuing Operations $ (557,689) $ (766,421)
Adjustments to Reconcile Net (Loss) to
Net Cash (Used for) Operating Activities:
Depreciation and Amortization 5,629 34,441
Amortization of Deferred Financing
Activities 3,856 18,933
Minority Interest 84,979 (59,127)
Changes in Assets and Liabilities:
(Increase) Decrease in:
Other Current Assets -- (1,716)
Prepaid Expenses 20,508 (144,034)
Deposits (190) --
Other Assets 82,972 --
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 47,829 (125,545)
Payroll Taxes Payable 18,710 4,426
Other Current Liabilities -- (14,182)
Total Adjustments 264,293 (286,804)
Net Cash - Continuing Operations - Forward (293,396) (1,053,225)
Discontinued Operations:
Changes in Net Assets, Liabilities and Losses (142,480) (221,708)
Net Cash - Discontinued Operations - Forward (142,480) (221,708)
Investing Activities - Continuing Operations:
Payment of Casino Development Costs (216,426) (8,810)
Net Cash - Investing Activities - Continuing
Operations - Forward $(216,426) $ (8,810)
See Notes to Consolidated Financial Statements
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HOLLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended
June 30,
1997 1996
Net Cash - Continuing Operations - Forwarded $(293,396) $(1,053,225)
Net Cash - Discontinued Operations - Forwarded (142,480) (221,708)
Net Cash - Investing Activities - Continuing
Operations - Forwarded (216,426) (8,810)
Financing Activities - Continuing Operations:
Proceeds from Notes Payable-Other 289,250 3,940,980
Payment of Notes Payable - Other (11,817) 150,000
Payment of Demand Note Payable - Stockholders
and Related Parties 60,000 (1,753,028)
Proceeds from Issuance of Preferred Stock -- 172,000
Proceeds from Exercise of Warrants 465,000 --
Net Cash - Financing Activities - Continuing
Operations 682,433 2,210,012
Net Increase (Decrease) in Cash and Cash
Equivalents 30,131 926,269
Cash and Cash Equivalents - Beginning of Periods (23,196) 934,462
Cash and Cash Equivalents - End of Periods $ 6,935 $ 1,860,731
Supplemental Disclosures of Cash Flow Information:
Interest paid during the three months ended June 30, 1997 and 1996 was
$100,820 and $84,173 respectively, net of capitalized interest. No
income taxes were paid during The three months ended June 30, 1997 and
1996.
Supplemental Schedule of Non-Cash Investing and Financing Activities:
See notes to consolidated financial statements for details of certain
non-cash investing and financing activities.
See Notes to Consolidated Financial Statements.
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HOLLY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]
[1] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of Holly Holdings, Inc. are set forth in the
Company's Form 10-KSB for the period ended March 31, 1997, as filed with the
Securities and Exchange Commission.
[2] BUSINESS OF REPORTING
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, such statements include
all adjustments (consisting of normal recurring items) which are considered
necessary for a fair presentation.
As of March 31, 1997 the Company determined to discontinue its electronic
components manufacturing business. Accordingly, the financial statements for
prior periods have been restated to reflect this change retroactively.
Operating results for the three months ended June 30, 1997 and 1996 are not
necessarily indicative of the results that may be expected for the year ended
March 31, 1998. It is suggested that these financial statements be read in
conjunction with the financial statements and notes for the period ended March
31, 1997, included in the Holly Holdings, Inc. Form 10-KSB/A1.
[3] INVENTORY
At June 30, 1997, the Company had no inventory.
[4] EARNINGS PER SHARE
Earnings per share are based on 5,927,074 and 1,994,434 shares outstanding for
the three months ended June 30, 1997 and 1996, respectively. Such amounts of
shares represent the weighted average number of shares outstanding for the
periods. Shares in escrow and the effect of outstanding warrants were not inclu
ded in the calculations, as their effect would be anti-dilutive.
[5] EQUITY TRANSACTIONS
During the quarter, 200,000 shares of Series E Preferred Stock were converted
pursuant to the terms thereof into 684,703 shares of Company common stock.
During the quarter, the Company issued 147,500 shares of Series E Preferred
Stock resulting in gross proceeds of $1,475,000. During the quarter, the
Company issued 800,000 shares of its Common Stock to Sparta Capital Ltd. for
the exercise of warrants. During the quarter the Company sold Debentures
totaling $350,000 of which $95,000 worth were converted to 470,689 shares of
Common Stock.
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HOLLY HOLDINGS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CERTAIN STATEMENTS INCLUDED HEREIN OR INCORPORATED BY REFERENCE CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 (THE "REFORM ACT"). THE COMPANY DESIRES TO TAKE
ADVANTAGE OF CERTAIN "SAFE HARBOR" PROVISIONS OF THE REFORM ACT AND IS
INCLUDING THIS SPECIAL NOTE TO ENABLE THE COMPANY TO DO SO. FORWARD-LOOKING
STATEMENTS INCLUDED OR INCORPORATED BY REFERENCE IN THIS PART INVOLVE KNOWN
AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH WOULD CAUSE THE
COMPANY'S ACTUAL RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS
TO DIFFER MATERIALLY FROM THE FUTURE RESULTS, PERFORMANCE (FINANCIAL OR
OPERATING) OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD LOOKING
STATEMENTS.
GENERAL
The Company is focusing all its attention in assisting its majority owned
subsidiary, Country World Casinos, Inc., ("Country World") in completing its
plan to build the largest casino and hotel complex in the state of Colorado,
as well as completing its financials and settling outstanding indebtedness so
that it can plan for new acquisitions in the future.
In order to begin the process of timely completing the goals, Country
World has contracted with Colorado Gaming Development Company, Inc., Semple
Brown Roberts, P.C. and PCL Construction Services, Inc., all of Denver,
Colorado to design and construct the planned casino and hotel complex. In
addition, Country World has signed a management agreement with Signature
Hospitality Resources, Inc. of Denver, Colorado to manage the Radisson Black
Hawk Hotel, a separate agreement to use the national flag of Radisson on the
hotel and a management agreement with Luciani & Associates, LLC. and Casino
Research and Planning Corp., joint venture of Atlantic City, New Jersey, to
manage the casino operations. All parties will assist the architect in design
of their respective operations.
The casino level of the project, at approximately 75,000 square feet,
will be the largest in Colorado and will be capable of accommodating 1,800
slot machines and 32 gaming tables. Country World will open the facility with
1,000 slot machines, 20 blackjack tables and 12 poker tables, and may add up
to 800 additional slot machines if management determines that the additional
gaming devices will produce equal per square foot revenue and will not create
excess capacity. Country World expects that slot machines will be the
greatest source of its gaming revenues. Slot machines are less labor
intensive and require less square footage than table games, and also generate
higher profit margins.
The Casino's atmosphere will feature a country western music theme
similar to the rock and roll music theme successfully employed by the Hard
Rock Cafe. The Casino decor will include memorabilia from the great country
singers, both past and present, with a star walk of their own. The country
western music theme has not been established in the Black Hawk/Central City,
Colorado gaming market, and therefore will give the Country World Casino its
own unique identity. Management believes that as
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HOLLY HOLDINGS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
casinos have become more numerous, the gaming industry has begun to recognize
that popular themes and amenities such as quality dining and hotel
accommodations play an important role in attracting
customers to casinos. The theme is intended to appeal to the Hotel Casino's
target customer base, which consists primarily of residents of the Denver
metropolitan area as well as other Colorado communities located within driving
distance of Black Hawk.
The Radisson Black Hawk Hotel will provide overnight accommodations with
290 standard rooms and 35 suites, making it the first destination resort of
its kind in Black Hawk. Complimenting both the casino and hotel will be a
three story underground parking facility for 865 cars featuring both valet and
self parking options, and the only covered on-site bus turnaround currently
available in Black Hawk for the convenience of day trip customers.
Black Hawk is a picturesque mountain town approximately 40 miles west of
Denver. In the past year, Black Hawk hosted approximately 3 million visitors
and generated almost 60% of the state's gaming revenues. The 112,000 square
foot Hotel Casino site on the northern most end of the Black Hawk gaming
district is in a most highly visible location as it is in a direct line of
site to all visitors approaching Black Hawk's main intersection on State
Highway 119. The seven story structure will tower high above all existing
facilities. The Black Hawk and nearby Central City casino market includes
many small, privately held gaming facilities that Country World believes offer
limited amenities and are characterized by a shortage of convenient on-site
parking. There are a few large facilities currently operating with varying
levels of services and amenities, as well as new facilities planned. The
Casino's country western music theme, country hospitality, ample parking,
modern hotel accommodations and a full line of amenities, will set it apart
from, and should give it a competitive advantage over, the other casinos in
the Black Hawk/Central City market.
The Hotel Casino complex will be designed and constructed pursuant to a
guaranteed maximum price agreement which is to be finalized prior to
construction. The design and construction team consists of Semple Brown
Roberts, P.C., a Denver based architectural firm (the "Architect") and PCL
Construction Services, Inc., a multi-billion dollar North American
construction firm with U.S. headquarters located in Denver. The Architect is
the designer of Fitzgerald's Casino in Black Hawk, while the Contractor's
gaming credits include the MGM Grand Hotel Casino and Stratosphere Tower in
Las Vegas, Nevada, as well as the Chinook Winds Gaming and Convention Center
in Lincoln City, Oregon.
Gaming operations at the Casino will be under the management of a joint
venture between Luciani & Associates, LLC and Casino Research and Planning
Corp. of Atlantic City, New Jersey (the "Casino Manager"), who are leaders in
casino design, management and security services.
Hotel operations will be under the management of Signature Hospitality
Resources, Inc. of Denver, Colorado (the "Hotel Manager'), which provides a
full range of hotel and resort support services including operations, sales,
marketing, food, beverage, human resources, MIS and technical services.
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HOLLY HOLDINGS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996
Based upon the results of operations, and the substantial losses
attributed to Navtech Industries, Inc.,, the Company decided to cease ongoing
operations of this segment of the Company's business as of March 31, 1997.
Due to the plan of discontinuance for Navtech, revenues and net losses have
been eliminated from the statement of operations. The following comparisons,
therefore, does not include the results attributable to Navtech, but contains
the costs of discontinued operations.
Due to the discontinuance of Navtech, the Company had no revenue, cost of
sales or gross profit, for the three months ended June 30, 1997 and,
retroactively, no revenue for the three months ended June 30, 1996.
Total costs and expenses for the three months ended June 30, 1997 were
$533,785 as compared to $793,694 for the three months ended June 30, 1996.
This decrease were primarily attributed to the reduction in salaries for the
parent company.
Other income (expense) for the three months ended June 30, 1997 was a net
expense of $108,883 as compared to a net expense of $32,413 for the comparable
period in 1996. This increase was primarily due to higher interest costs in
1997, resulting from the increase in notes payable as compared to 1996.
The loss from discontinued operations was $142,480 for the three months
ended June 30, 1997 as compared to $24,233 for the three months ended June 30,
1996 due to the cost of winding-down Navtech in the current period as compared
to a small loss last year at Navtech and a loss of $8,603 for the Company's
woodworking business which was discontinued in 1995.
LIQUIDITY AND CAPITAL RESOURCES
To the extent the Company has ceased operations of its woodworking
business, its cash requirements diminished accordingly. Navtech had a line
of credit with The First National Bank of Farmington in Farmington, New
Mexico. The terms of this facility were for a receivable and inventory line
of credit in an amount not to exceed $1,500,000 with a monthly floating
interest rate of 1.5% over prime. Navtech pledged all of its assets as
security for this loan. As of June 30, 1997, Navtech was indebted to the bank
in the amount of approximately $1.2 million. This loan became due on March
15, 1997, and was extended to June 1997. In June 1997, the bank informed
Navtech that it would not renew the loan. Navtech was unable to replace First
National Bank of Farmington and the bank subsequently forced Navtech to cease
ongoing operations.
In January 1995, the Company borrowed, on an unsecured basis, an
aggregate of $1,000,000 from three individuals and entities at 15% annual
interest. In lieu of such interest, the Company issued to such note holders an
aggregate of 150,000 shares of Common Stock. The principal amount of such
notes was due and payable on January 13, 1996, and in March 1996, the
Company entered into an extension
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HOLLY HOLDINGS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
agreement with the three individuals whereas the Company made a partial
payment of $500,000 and Mr. Larry Berman, the Company's Chairman, gave 370,000
shares of his personal stock for an extension until August 9, 1996 at which
time a balance payment of $400,000 was due. The Company made a partial payment
for interest, as well as an extension fee in the amount of $200,000. The
Noteholders agreed to extend the final payment due date until after funding of
the Country World Casino project. The Company utilized the $1,000,000 to make
a loan to Country World, which indebtedness was canceled in exchange for the
issuance of 5,000,000 shares of Country World common stock to the Company.
Country World Casinos, Inc. plans to invest up to an additional $70 to $80
million to develop and construct the casino and hotel complex in Black Hawk,
Colorado.
During 1996 and early 1997, the Company consummated a series of Private
Placements of an aggregate of 1,162,000 shares of its Series E Convertible
Preferred Stock, resulting in gross and net proceeds of $11,620,000 and
$9,751,000, respectively. The proceeds of this offering were utilized for
repayment of debt, settlement of litigation fees associated with securing
financing for Country World Casinos, Inc. and working capital for the Company
and Navtech. Each share of Series E Preferred Stock is convertible into
shares of the Company's Common Stock at the rate determined by dividing $10.00
by the lesser of 75% of the closing bid price as reported, of the Company's
Common Stock on the date of the closing of the subscription or 65% of the
average closing bid price for the five (5) trading days immediately preceding
the date of conversion. As of September 1997, 87,500 shares are yet to be
converted.
In April 1996, the State of New Jersey approved the issuance of 555,000
shares of Series Z Preferred Stock in accordance with the Company's
Certificate of Designation. In September 1996, such authorization was
increased to 1,050,000 shares and issued in exchange for debt. In July 1997,
the shares of Series Z preferred stock were converted into 5,068,140 shares of
common Stock.
In June 1996, the Company issued an aggregate of 1,300,000 shares of its
common stock to Messrs. Irwin Schneider, Eugene Lombardo and Scott Schneider
in return for certain services performed by these
individuals on behalf of the Company.
In September 1996, the Company issued 573,333 shares of common stock to N
& A Promotions in return for certain services performed for the Company.
In September 1996, a debt of $30,000 owed to Sunrise, Inc. was converted
into 30,000 shares of Series C Preferred Stock and pursuant to the terms
thereof, into 120,000 shares of common stock.
In October 1996, the Company issued 450,000 shares of common stock to
Sparta Capital Ltd. for the exercise of its warrants.
In March 1997, the Company issued 100,000 shares of common stock to
Sparta Capital Ltd. for the exercise of its warrants.
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HOLLY HOLDINGS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
In April 1997, the Company issued 250,000 shares of common stock to
Sparta Capital Ltd. for the exercise of its warrants.
In April 1997, the Company issued 555,000 shares of common stock to
Sparta Capital Ltd. for the exercise of its warrants.
Unless and until the Company improves its financial results sufficiently
and maintains such improved results, the Company may have to borrow or raise
additional capital to fund any cash shortage, in the need should arise.
At March 31, 1996, the Company had owed $250,000 plus accrued interest
and legal fees as required under the default provisions of the note, to the
Calvin Black Trust. During the current period, the Company liquidated this
note by payments and by the exchange of equity a subsidiary had in another
company, terminating the legal action brought upon the default.
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HOLLY HOLDINGS, INC AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On May 26, 1995, the Company's majority owned subsidiary Country World
Casinos, Inc. ("CWC") commenced a lawsuit against Tommyknocker Casino Corp.
("Tommyknocker") and New Allied Development Corporation ("New Allied") in the
District Court of Denver, County of Denver, Colorado, case number 95CV 2310.
This action is primarily for breach of contract in connection with the
acquisition of certain real property by CWC from the defendants. CWC is
seeking monetary damages and declaratory relief.
On August 15, 1995, Tommyknocker and New Allied filed a counterclaim in
the aforementioned action against CWC, the Company, Ronald Nathan, Sal Lauria
and David Singer who are former board members of CWC, Roger LeClerc, President
of CWC and William Patrowicz director of CWC. The counterclaim alleges that
CWC is in default under the Promissory Note issued by CWC to Tommyknocker in
connection with the acquisition of the real property, CWC failed to register
stock on behalf of Tommyknocker and that the Company has acquired control of
CWC to the detriment of Tommyknocker and New Allied.
In a related action on June 28, 1995, Tommyknocker filed a Rule 120
Motion in the District Court, City and County of Denver, Colorado, case number
95CV 2799. This motion sought foreclosure of the real property discussed
above. On October 4, 1995, the magistrate in this case granted Tommyknocker's
motion and authorized the sale of the property pursuant to the foreclosure on
October 12, 1995.
On October 12, 1995, CWC filed a bankruptcy petition under Chapter 11 of
Title 11 of the United States Code. The case was filed in the United States
Bankruptcy Court, District of Colorado, case number 95-20563rjb. Pursuant to
the filing of the Bankruptcy, an automatic stay went into effect pursuant to
11 U.S.C. Section 362 prohibiting the foreclosure sale. Tommyknocker filed a
Motion for Relief from the stay and a hearing on this matter was held on
December 22, 1995. On January 3, 1996, the Court ruled that CWC should be
given an opportunity to proceed with its Bankruptcy proceedings in a diligent
and timely fashion. The Court conditioned continuation of the stay pending
the approval or denial as the case may be of CWC's financing proposal and
certain other conditions. In March 1996, the Court approved CWC's financing
proposal and in May 1996, Country World closed on such financing. In
September 1996, the Court heard testimony in a claims hearing between the
parties. In early November 1996, the Company received final rulings from the
Court.
The Court's order found that Tommyknocker Casino Corporation/New Allied
was not entitled to default interest at the rate of 18%, however Country World
is ordered to pay 8% per annum on the unpaid balance due Tommyknocker.
Additionally, the Court ordered that both parties were obligated to pay their
own expenses related to this matter.
The Court further found that Country World Casinos, Inc. was not in
default of its Agreement with Tommyknocker/New Allied with regard to filing a
registration statement for its preferred stock and until Tommyknocker/New
Allied files such registration statement and Country World fails to pay for
its cost, Country World is not in breach of the agreement.
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HOLLY HOLDINGS, INC AND SUBSIDIARIES
PART II - OTHER INFORMATION
The Court upheld Tommyknocker's/New Allied's claim that Country World was
not entitled to an offset on the environmental clean up as the work had been
completed and Country World paid all clean up costs without objection prior to
the Company's acquisition of a majority ownership in Country World.
The Company, on behalf of Country World, obtained a 5 million dollars
($5,000,000) financing package, which enabled Country World to repay all of
its outstanding indebtedness and emerge from Bankruptcy. This financing
package had been approved by the Bankruptcy Court and the Company utilized the
funds in accordance with the Court's order. With all issues completed in
March 1997, the U.S. Bankruptcy Court ruled that Country World Casinos, Inc.
be dismissed from Chapter 11.
On October 10, 1995, Phil B. Acton, Trustee of the Calvin Black Trust
commenced a lawsuit against the Company in the United States District Court
for the District of Utah, Central Division, case number 95CV 09305. This
action sought repayment of a promissory note in the principal amount of
$500,000. As discussed in the Company's earlier filings in August 1996, this
action was settled.
The Company is the defendant in a lawsuit pending in United States
District Court, District of Arizona, Case No. CIV97-212PHXROS entitled Holly
Products, Inc. and Navtech Industries, Inc., Defendants v. Semisystems, Inc.,
Plaintiff. This lawsuit was commenced by Semisystems, Inc. on January 30,
1997. The complaint asserted six claims against Navtech for among other
things, misrepresentation, breach of contract, breach of warranty, fraud, etc.
and as the owner of 100% of the outstanding stock of Navtech, the Company
should be held jointly and severally liable for all acts and obligations of
its subsidiary Navtech.
Navtech has ceased operations and is without resources, accordingly it
was unable to defend itself in this matter and the Court awarded a judgement
against Navtech in the amount of $3,280,630 in October of 1997.
The Company was not served in this action until August 1997. The Company
immediately filed an order to show cause which vacated any possible default
judgement and filed its answer to the allegations made by Semisystems in
September 1997. In an accompanying motion, the Company filed a motion to
dismiss on the grounds that there is no personal jurisdiction over the Company
in this District of Arizona. Oral argument on the Motion is set for February
20, 1998.
The Company was a defendant in a lawsuit in the Fifth Judicial District
Court, in Iron County, Utah, Case No. 970500004 entitled Lloyd & Myra
Kartchner, Plaintiffs v. Holly Products, Inc. and Navtech Industries, Inc.,
Defendants. This lawsuit was commenced in January 1997. The complaint,
alleges that both companies failed to live up to the terms of a resignation
agreement dated February 28, 1996
between the Company, Navtech and the Plaintiff. In August 1997, the Court
found the resignation
agreement valid and enforceable and issued an order granting Plaintiffs'
Motion for summary judgement in the amount of $52,955.91.
The Company is a defendant in a lawsuit pending in the Eleventh Judicial
District Court, County of San Juan, State of New Mexico, Case No. CV-97-443-6
entitled First National Bank of Farmington, Plaintiffs v. Navtech of New
Mexico, Inc., Navtech Industries, Inc., Holly Products, Inc., n/k/a, Holly
-13-
<PAGE>
HOLLY HOLDINGS, INC AND SUBSIDIARIES
PART II - OTHER INFORMATION
Holdings, Inc., Defendants. This lawsuit was commenced on June 9, 1997 and
amended on August 9, 1997. The complaint alleges four claims against Navtech
for debt and money due, one claim for personal property foreclosure against
Navtech and two claims based on the guaranty of the Company.
Navtech has ceased operations and is without resource, based on the
foregoing it was unable to defend itself in this matter and in June 1997, the
Court appointed a receiver to Marshall the inventory, assemble the orders,
collect the receivables and contract for the completion of work in process to
maximize return. As of this date, that process has not been completed and
accordingly, there is no way to determine the balance due to the bank and the
case remains open.
In 1996, the Company was a Defendant in a lawsuit in Superior Court of
New Jersey, Burlington County, Case No. BUR-L-3467-95 entitled Pennsylvania
Manufacturers Association Insurance Company, Plaintiff v. Holly Products,
Inc., Defendant. This lawsuit resulted in a summary judgement being issued
against the Company in the amount of $63, 897.00 on November 8, 1996.
In February 1997, the Company reached an agreement with Pennsylvania
Manufacturers Association Insurance Company and filed a stipulation of
settlement with the Court at which time the Company began making payments in
accordance with a payout schedule over a 20 month period. The Company made
payments totaling $13,000 through April 1997 at which time payments ceased due
to a cash flow shortage.
In September 1997, the Pennsylvania Manufacturers Association Insurance
Company has re-instituted steps to enforce the outstanding judgement against
the Company
Item 2 - Changes In the Rights of the Company's Security Holders
None
Item 3 - Defaults by the Company on its Senior Securities
None
Item 4 - Results of Votes of Shareholders
None
Item 5 - Other Information
None
-14-
<PAGE>
HOLLY HOLDINGS, INC AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6- Exhibits & Reports on Form 8-K
(A)There are no exhibits to be filed at this time.
(B)No reports on Form 8-K were filed during the quarter for which this
report is filed.
-15-
<PAGE>
HOLLY HOLDINGS, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOLLY HOLDINGS, INC.
____/s/_William_H._Patrowicz_______________
By: William H. Patrowicz
President, Chief Operating Officer, Treasurer
(Principal Financial and Accounting Officer)
and Director
Date: December 22, 1997
-16-
<PAGE>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 6,395
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 122,522
<PP&E> 10,462,889
<DEPRECIATION> 52,937
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<CURRENT-LIABILITIES> 8,093,534
<BONDS> 0
5,474,797
4,143,734
<COMMON> 19,224,118
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,628,069
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 533,785
<OTHER-EXPENSES> (21,696)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 130,579
<INCOME-PRETAX> (557,689)
<INCOME-TAX> 0
<INCOME-CONTINUING> (557,689)
<DISCONTINUED> (142,480)
<EXTRAORDINARY> 0
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<NET-INCOME> (700,169)
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