<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
Commission File Number 0-24074
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GAMING WORLD INTERNATIONAL, LTD.
(Exact name of registrant as specified in its charter)
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DELAWARE 51-0336065
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Medure Place, Suite 100
438 Line Avenue
Ellwood City, Pennsylvania 16117
(412) 758-2461
(address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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, as of the latest practicable date.
Class Number of Shares Outstanding
----- as of March 31, 1996
----------------------------
Common Stock, $.01 par value 6,868,131 shares
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GAMING WORLD INTERNATIONAL, LTD.
INDEX
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets (Unaudited)
as of March 31, 1996 and September 30, 1995 2
Consolidated Statements of Operations (Unaudited)
for the three and six months ended March 31, 1995 and 1996 4
Consolidated Statements of Cash Flows (Unaudited)
for the six months ended March 31, 1995 and 1996 5
Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 15
ITEM 2. CHANGES IN SECURITIES 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 16
ITEM 5. OTHER INFORMATION 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 16
SIGNATURES 17
</TABLE>
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PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
GAMING WORLD INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1996 1995
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 140,520 $ 38,451
Marketable securities 3,000,000 3,650,000
Investment in management contracts 936,511 936,511
Accounts and advances receivable
Trade 388,043 278,411
Other 43,462 6,616
----------- -----------
431,505 285,027
----------- -----------
Inventories 1,360,208 1,667,421
Net investment in leases 111,813 111,813
Deposits and prepaid expenses 148,504 182,165
----------- -----------
Total current assets 6,129,061 6,871,388
----------- -----------
LAND, BUILDINGS, EQUIPMENT, AND
LEASEHOLD IMPROVEMENTS -
AT COST
Land 3,655,300 3,655,300
Buildings 7,412,908 7,412,908
Furniture and equipment 1,624,225 1,613,889
Leasehold improvements 1,101,763 1,039,893
----------- -----------
13,794,196 13,721,990
Less accumulated depreciation and
amortization (898,272) (738,082)
----------- -----------
12,895,924 12,983,908
----------- -----------
DEFERRED MANAGEMENT FEE 384,812 384,812
INVESTMENTS IN MANAGEMENT CONTRACTS AND
LAND OPTIONS 2,146,107 2,201,859
GOODWILL LESS ACCUMULATED AMORTIZATION 491,648 509,648
OTHER ASSETS 23,100 23,100
----------- -----------
Total Assets $22,070,652 $22,974,715
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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GAMING WORLD INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (CONTINUED)
(unaudited)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1996 1995
------------ -------------
<S> <C> <C>
CURRENT LIABILITIES
Notes payable (note C) $ 6,588,944 $ 6,827,084
Current maturities of capitalized lease
obligations (note D) 111,813 111,813
Related party advances payable (note I) 1,250,639 1,047,911
Accounts payable and accrued liabilities 1,120,231 1,881,535
----------- -----------
Total Current Liabilities 9,071,627 9,868,343
----------- -----------
NOTES PAYABLE, less current portion (note C) 6,339,421 5,505,003
----------- -----------
DEFERRED REVENUE (note A) 1,130,704 1,017,176
----------- -----------
STOCKHOLDERS' EQUITY (note G)
Preferred Stock - authorized 1,000,000
shares of $.01 par value; no shares issued --
Common Stock - authorized 15,000,000
shares of $.01 par value; 7,525,160 shares issued
in 1995 and 1994 and 5,650,160 shares issued in 1993;
6,868,131 shares outstanding in 1995
and 1994 and 4,993,131
shares outstanding in 1993 75,252 75,252
Additional paid in capital 11,221,419 11,221,419
Retained earnings (Accumulated deficit) (4,154,144) (3,098,851)
----------- -----------
7,142,527 $ 8,197,820
Less cost of 657,029 common shares, held in
the treasury (note E) 1,613,627 1,613,627
----------- -----------
Total Liabilities and Stockholders' Equity 5,528,900 6,584,193
----------- -----------
$22,070,652 $22,974,715
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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GAMING WORLD INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
March 31, March 31,
----------------------------- ---------------------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Management fee $ 383,478 $ -- $ 846,380 $ 146,571
Concessions 1,221,308 1,569,753 1,990,281 2,495,691
---------- ---------- ---------- ----------
1,604,786 1,569,753 2,836,661 2,642,262
Expenditures
Concessions 851,398 1,174,797 1,515,045 1,985,915
General and Administrative 467,098 571,227 903,301 1,050,698
Depreciation and Amortization 125,270 89,095 157,733 178,190
---------- ---------- ---------- ----------
1,443,766 1,835,119 2,576,079 3,214,803
---------- ---------- ---------- ----------
Earnings/(Loss) from operations 161,020 (265,366) 260,582 (572,541)
---------- ---------- ---------- ----------
Other Income and (Expenses) 95,847 41,562 247,351 101,711
Interest income (297,244) (338,097) (532,699) (584,463)
---------- ---------- ---------- ----------
Interest expense (201,397) (296,535) (285,348) (482,752)
---------- ---------- ---------- ----------
Earning/(Loss) before Income Taxes (40,377) (561,901) (24,766) (1,055,293)
---------- ---------- ---------- ----------
Income taxes (benefit) (6,057) (158,294) (3,715) (158,294)
---------- ---------- ---------- ----------
NET EARNINGS (LOSS) (34,320) (403,607) (21,051) (896,999)
========== ========== ========== ==========
Net earnings (loss) per common share $ (.01) $ (.06) $ -- $ (.13)
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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GAMING WORLD INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31,
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $(1,055,293) $ (24,766)
Adjustments to reconcile net earnings (loss)
to cash provided by (used in) operating activities:
Depreciation and amortization 178,190 157,733
(Increase) decrease in accounts, notes and advances
receivable and deferred management fee (146,478) 15,963
(Increase) decrease in inventories 307,213 (1,199,201)
(Increase) decrease in investments in management contracts
and land options 55,752 (758,950)
Increase (decrease) in prepaid expenses deposits and other 33,661 (88,870)
(Increase) decrease in accounts payable, accrued liabilities
and advanced management fee (761,304) (89,195)
Increase in deferred revenue 113,528 214,458
----------- -----------
Net cash provided by (used in) operations (1,274,731) (1,772,828)
Cash flows from investing activities:
Reduction of investment in lease -- 118,000
Capital expenditures (72,206) (615,009)
Reduction of marketable securities 650,000 789,695
----------- -----------
Net cash provided from (used in) investing
activities 577,794 292,686
Cash flows from financing activities:
Principal payments on notes payable (200,000) --
Payments on related party advances (304,875) --
Increase in short term debt -- 1,429,943
Proceeds from notes payable 796,278 --
Principal reduction of capitalized lease
obligation -- (172,294)
Related party advances 507,603 103,210
----------- -----------
Net cash provided by (used in)
financing activities 799,006 1,360,859
Net increase (decrease) in cash and cash equivalents 102,069 (119,283)
Cash and cash equivalents at Beginning of Period 38,451 308,457
----------- -----------
Cash and cash equivalents at End of Period $ 140,520 $ 189,174
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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GAMING WORLD INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - FINANCIAL STATEMENTS
The Consolidated Financial Statements are unaudited but, in the
opinion of management, reflect all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of the
financial position and results of operations for the periods included.
The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the full
year.
The accompanying consolidated financial statements should be read in
conjunction with the Company's audited financial statements, and notes
included therein, for the year ended September 30, 1995 included in
the Company's Annual Report on Form 10-K/A.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
Gaming World International, Ltd. (the "Company") develops and manages
gaming and related recreational facilities for federally-recognized Indian
tribes and currently manages two casinos. The Company developed and operates
Shooting Star Casino, located in Mahnomen, Minnesota, and the Golden Eagle
Charitable Casino and Entertainment Centre located in Kenora, Ontario, Canada.
The Company is also seeking additional opportunities to develop and manage
other gaming facilities, including riverboat and dockside casinos, which may be
on sites other than Indian Land. In particular, the Company may explore the
possible development of such facilities in the Commonwealth of Pennsylvania,
although the Company has not entered into any contracts or agreements in
principle for such other gaming facilities as of the date of this report.
The Company commenced business activity in June 1991 and to date, the
Company has devoted substantial efforts developing and managing the Shooting
Star Casino. The permanent Shooting Star Casino, which has been operating since
May 1992, is owned by the White Earth Band of Chippewa Indians (the "Band").
The Company manages the casino for the Band under the terms of a five-year
management contract (the "Shooting Star Management Contract"), which expires in
March 1997. Shooting Star Casino is located on Indian Land adjacent to Highway
59 in Mahnomen, Minnesota, approximately 60 miles east of Fargo, North
Dakota/Moorhead, Minnesota and near the resort of Detroit Lakes, Minnesota.
Shooting Star Casino contains a gaming room currently offering 24 blackjack
tables and approximately 985 video machines featuring slots, poker, blackjack
and keno. Casino patrons may place bets ranging from 5 cents to a maximum of
$1,000. Shooting Star Casino is open 24 hours a day, 365 days a year. Shooting
Star Casino was the first casino of the sixteen casinos currently operating in
Minnesota to offer both lodging and restaurant facilities adjacent to its
gaming room. The Company manages a lodge now containing 223 rooms, banquet
facilities, meeting rooms, a coffee shop, a gift shop offering Indian jewelry
and crafts, and a gourmet restaurant seating approximately 70 patrons. Live
entertainment is provided in a split-level casino lounge as well as in a
cabaret showroom that also features dinner-theatre style shows. In 1993, the
Company expanded the casino by constructing an indoor swimming pool and
expanded the lodging facility by adding a buffet room and an additional 146
rooms.
The Shooting Star Management Contract provides that net profits from
the casino and other revenue generating amenities be distributed 70% to the
Band and 30% to the Company, subject to the priority distribution of a
guaranteed minimum monthly payment to the Band. In November 1992, an amendment
to the Shooting Star Management Contract extended the expiration date of the
contract to March 1999 and adjusted the net profit distribution to 65% to the
Band and 35% to the Company. This amendment is subject to approval by and has
been submitted to the National Indian Gaming Commission
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(the "Gaming Commission") for review, which review is still pending. Although
the Company and the Band have been operating since May 1993 as if this approval
had been received, no assurance can be given that the Gaming Commission will
actually approve the amendment.
The Company has an agreement (the "Golden Eagle Management Contract")
with the Wauzhushk Onigum Nation and the Wauzhushk Onigum Foundation
(collectively, the "Nation") to develop and manage the Golden Eagle Charitable
Casino and Entertainment Centre in Kenora, Ontario, Canada. A temporary
facility opened in September 1994. The Company and the Nation believe a
permanent casino is an important part of the plan. The Company anticipates that
construction of the permanent casino is contingent upon the occurrence of two
or more events: 1) the obtaining of additional financing on commercially
reasonable terms, and 2) the government's approval of slot machines. Upon
completion, the permanent casino is expected to provide a complete gaming
complex, including lodging, restaurants, live entertainment and related
facilities. The Golden Eagle Charitable Casino offers 6 blackjack tables, 1 Big
Six Wheel, 2 roulette tables, 2 Caribbean stud games, 2 poker tables, live
keno, a bingo hall seating up to 1,000, pull tabs, and, when approved by the
provincial government of Ontario, slot machines. The Golden Eagle Management
Contract expires nine years after the opening of the Golden Eagle Charitable
Casino and provides for a management fee of 33.5% of the casino's net earnings
to be paid to the Company. The Golden Eagle Management Contract does not have
to be approved by the governments of Ontario or Canada. In accordance with the
requirements of the Ontario Gaming Control Act, Gaming World International,
Ltd. is properly registered as a Gaming Supplier.
On July 8, 1994, the Company completed the acquisition of
substantially all of the assets and liabilities of Fox Chapel Yacht Club, Inc.
("Fox Chapel"), a privately held corporation having no affiliation with any
officer or director of the Company. Fox Chapel's yacht club occupies
approximately 14 acres of land and is located on the Allegheny River
approximately one-eighth of a mile from Route 28, in Pittsburgh, Pennsylvania.
The site also includes an additional 24 contiguous acres of vacant land, on
which the Company believes a dockside and/or riverboat casino could be
constructed in the event gaming is legalized in Pennsylvania and the Company is
licensed to conduct gaming, of which no assurance can be given. Fox Chapel
operates a marina business which has approximately 800 members, 350 boat slips,
and derives revenues from membership fees, docking fees, boat sales, and its
restaurant, bar, and banquet facilities.
Pursuant to the Purchase Agreement, the Company acquired Fox Chapel
for an aggregate purchase price of $11,775,000, allocated as follows: (a) the
sum of $425,000 for substantially all of the tangible assets used in the
operation of Fox Chapel, including but not limited to all inventory, equipment,
office and restaurant equipment, boat docks, motor vehicles and boats; (b) the
sum of $100,000 for certain intangible assets, including but not limited to
licenses, liquor licenses, franchises, trademarks, trade names, customer lists
and permits; (c) the sum of $10,700,000 for approximately 38.5 acres of real
property
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and buildings constructed on such property, including but not limited to a
banquet and conference building and a boat house; and (d) the sum of $550,000
for all of the issued and outstanding shares of capital stock of Fox Chapel
(the "Fox Chapel Stock"). As a result of its purchase of the Fox Chapel Stock,
the Company also assumed all liabilities of Fox Chapel. The acquisition has
been accounted for as a purchase.
The aggregate purchase price of $11,775,000 was paid in full by the
Company at closing. Of this amount, approximately $3,000,000 was funded from
proceeds of the Company's initial public offering and the balance of $9,000,000
was financed through a $9,000,000 credit facility with S&T Bank of Indiana,
Pennsylvania ("S&T Bank"), established on July 8, 1994. Borrowings under this
facility are secured, in part, by a first mortgage on the real property
purchased from Fox Chapel, a security interest in certain of the Company's
assets, and the Company's repurchase agreement in the amount of $3,660,000.
As used in this report with respect to U.S. Indian management
contracts, the term "net profit" is not intended to mean net profits as defined
by generally accepted accounting principles or by the Indian Gaming Regulatory
Act of 1988, 25 U.S.C. ss.2701 et seq. (the "Gaming Act"). As used in this
report, the term "net profit" has the meaning ascribed to it in the management
contracts to which the discussion of net profit relates. Generally, the
management contracts define net profit as the gross revenues of a casino or a
facility less operating expenses, capital expenditures and debt service. In
addition, the amount of net profit available for distribution may be further
reduced by deduction of an amount to fund a cash contingency reserve, such as
vault cash, in the event the Company and the host tribe deem such a deduction
to be appropriate. As defined by generally accepted accounting principles, the
term "net profit" means total revenues less operating and interest expenses,
excluding principal payments of debt but, in contrast to the meanings accorded
in the management contracts, including management fees as an operating expense.
The Gaming Act defines "net revenues" as "gross revenues of an Indian
gaming activity less amounts paid out as, or paid for, prizes and total
operation expenses, excluding management fees," 25 U.S.C. ss.2703(f)(9). In
certain examples provided to tribes, the Gaming Commission is currently using a
definition of "net revenues" that does not allow deduction of debt service,
although this interpretation has not been set forth in a regulation. The
Company continues to operate under the terms of the Bureau of Indian Affairs-
("BIA-") approved Shooting Star Management Contract as such contracts are valid
unless and until disapproved by the Gaming Commission. Until such time as the
Gaming Act or other regulation promulgated thereunder amends the definition of
"net revenues" or until BIA-approved management contracts must be conformed to
some other definition of this term, the Company will operate under the terms of
the Shooting Star Management Contract.
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RESULTS OF OPERATIONS
Three and Six Months Ended March 31, 1996 Compared to Three and Six
Months Ended March 31, 1995.
Decreased Management Fee Revenues
Management fee revenues for the three and six months ended March 31,
1996 were $0 and $146,571, respectively, a decrease from management fee
revenues of $383,478 and $846,380 for the three and six months ended March 31,
1995 respectively. The primary reason for this decrease is the decreased
management fee revenue derived from the management fee under the Shooting Star
Management Contract. As the net profits of the casino fluctuate, the Company
will realize a corresponding increase or decrease in its management fees. The
Company's goal is to increase the revenues of the Shooting Star Casino as a
result of improvement in operating efficiency of the casino and attract more
patrons as a result of the recent expansion of this facility and increased
marketing efforts.
The Company believes that the decreased net profit of Shooting Star
Casino, resulting in a corresponding decrease in the management fee paid to the
Company, may be attributed to a combination of factors, but largely due to the
extremely severe winter weather conditions in Northern Minnesota causing
patronage at the Casino to drop significantly during the second quarter. Other
factors include, increased competition from other casinos as Shooting Star
Casino is no longer the only casino operating in the state of Minnesota to
offer both lodging and restaurant facilities adjacent to its gaming floor, and
a lessening of public interest that often follows the opening of a new
establishment.
Under the Golden Eagle Management Contract, the Company only receives
management fee revenues to the extent the operation is profitable. During the
second quarter of 1996, the Golden Eagle Charitable Casino was not profitable
and thus, the Company received no management fee. The Company has taken
measures to decrease costs at the Golden Eagle Charitable Casino by reducing
staff and cutting general and administrative expenses, which the Company
believes will improve operating efficiency, although no assurance can be given
that the Company will be successful in this effort.
Revenues Derived from Concessions
During the three and six months ended March 31, 1996, the Company
derived a total of $1,569,753 and $2,495,691, respectively, in revenues from
concessions at Fox Chapel and recorded expenditures of $1,174,797 and
$1,985,915 for the same periods, respectively. These concessions consist of
revenues derived from membership fees, docking fees, boat sales, and the
restaurant, bar and banquet facilities. The Company believes the increased
revenue during fiscal 1996 is directly related to the capital improvement
program the Company completed in fiscal 1995.
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Increased General and Administrative Expenses
General and administrative expenses of the Company for the three and
six months ended March 31, 1996 were $371,227 and $1,050,698, respectively,
compared to expenses of $467,098 and $903,301, respectively, for the three and
six months ended March 31, 1995. A portion of this increase can be attributed
to general and administrative expenses related to Fox Chapel, increased
business development, and travel and promotional expenses as the Company
analyzes sites for possible development.
Earnings (Loss) Before Income Taxes
Net loss before income taxes for the three and six months ended March
31, 1996 were ($403,607) and ($896,999), respectively, compared to net (losses)
of ($34,320) and ($21,051) for the three and six months ended March 31, 1995,
respectively. The primary reason for this increase was the reduction in
management fee revenue earned from the Shooting Star Casino.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has funded its daily operations through cash
provided by operating activities and its significant capital expenditures from
equity financings, debt financings, capital contributions, and loan guarantees
of Angelo Medure, the Company's President and Chief Executive Officer. Mr.
Medure is not obligated to make any loans to the Company or to guarantee any of
its obligations in the future. The Company believes that it will be able to
obtain financing from unrelated parties on terms acceptable to it and in
amounts sufficient to satisfy the Company's capital requirements, although the
Company has not obtained commitments for any such financing. No assurance can
be given that it will be able to obtain financing from unrelated third parties
on terms acceptable to it based on its having an operating history of
approximately four years, its financial position, and the experience of its
management, factors which a financing source considers in its decision to
extend financing.
In May 1994, the Company received net proceeds of approximately
$10,800,000 from the issuance of 1,875,000 shares of Common Stock, $.01 par
value per share, and 1,875,000 Redeemable Class A Common Stock Purchase
Warrants, pursuant to the Company's initial public offering. The Company
utilized approximately $3,000,000 of the proceeds towards the purchase of Fox
Chapel and has invested an additional $3,650,000 of the proceeds in a
repurchase agreement which has been pledged to S&T Bank. In addition, the
Company has used approximately $1,100,000 of the offering proceeds financing
and equipping of the Golden Eagle Charitable Casino, as well as approximately
$1,200,000 for an improvement program at the Fox Chapel Yacht Club, which
included landscaping, lighting, paving, and renovations and upgrading of the
banquet and restaurant facilities, as well as enlarging the outside pool and
deck bar.
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As of March 31, 1996, the Company entered into a $9,000,000 term loan
facility with S&T Bank. Borrowings under this loan arrangement are evidenced by
two promissory notes, one in the principal amount of $3,650,000 that bears
interest at an annual rate of 6.75%, and the other in the principal amount of
$5,350,000 that bears interest at an annual rate of S&T Bank's prime rate of
interest plus 2% (8.25% at March 31, 1996). The $5,350,000 loan is secured by
certain property and equipment, a pledge of all the issued and outstanding
common stock of Fox Chapel. The $3,650,000 is secured by a $3,650,000
repurchase agreement which originally was a $4,450,000 note secured by a
repurchase agreement in the amount of $4,450,000. The modification from the
original $4,450,000 note to a $3,650,000 note released $800,000 which was used
for working capital. Interest accrued under these notes was paid monthly, and
the maturity date of these notes was June 30, 1995. The Company negotiated a
four month extension of these notes, with the other above-stated terms
remaining the same, and which had a new maturity date of October 31, 1995. On
November 1, 1995, the $5,350,000 promissory note converted into a 15-year
mortgage amortization at S&T Bank with a rate of S&T Bank's prime rate of
interest plus 2%. The $3,650,000 promissory note secured by the repurchase
agreement was extended until December 27, 1995. Interest accrued under this
note must be paid monthly. The Company executed a further extension of this
note at a fixed rate of 7.25% until March 31, 1996. Accrued interest due to
this extension must be paid monthly. In February 1996, S&T Bank released
$650,000 of cash collateral resulting in a $650,000 term loan for a period of 5
years. The $3,650,000 promissory note was reduced to $3,000,000 and is still
secured by the repurchase agreement. The $5,350,000 mortgage remained intact
with all terms remaining the same.
In October 1994, the Company entered into a $1,200,000 term loan
facility with Miller and Schroeder Investments Corporation of Minneapolis,
Minnesota. Borrowings under this facility, which has a term of twenty-seven
months, accrue interest at an annual rate of 10.75%. The Company used this line
to finance an advance to the Golden Eagle Charitable Casino. No assurance can
be given that the Company will recover these funds in the event the development
of this facility does not proceed as currently anticipated that cash flow of
the Golden Eagle Charitable Casino, if any, will be sufficient to repay this
amount.
On March 16, 1995, the Company and Angelo Medure entered into a
$500,000 term loan arrangement with Richard Hvizdak and Perry Hvizdak,
non-related third parties ("the Note"). Borrowings under this arrangement are
evidenced by a promissory note in the principal amount of $500,000, which has a
one-year term and accrues interest at the annual rate of 12%. This debt is
secured by real property owned by Angelo Medure, and a pledge of 400,000 shares
of the Company's Common Stock held by Angelo Medure and certain trusts of which
members of Mr. Medure's family are beneficiaries. As additional consideration
for this loan, the Company issued Richard Hvizdak a five-year warrant to
purchase 10,000 shares of Common Stock at an exercise price of $3.00 per share.
The proceeds of this loan were applied towards general working capital for the
Company. In March 1996, the Company negotiated an extension of the Note in the
amount of $560,000
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which included accrued interest.
In May 1995, the Company entered into a $200,000 one year term Note
with PDS Financial Corporation, of Eden Prairie, Minnesota. Borrowings under
this arrangement are evidenced by a Note in the amount of $200,000 that bears
interest at an annual rate of 13% for the term. This Note is secured by certain
furniture and equipment of the Fox Chapel Yacht Club as well as 120,000 shares
of Gaming World International stock owned by Angelo and Charlotte Medure as
well as a personal guarantee of Angelo Medure. As of March 31, 1996, the
balance was approximately $18,000.
In July 1995, the company and Dr. James Barber, an unrelated third
party, entered into a $200,000 term loan (the "Barber Note"). Borrowings under
this arrangement are evidenced by a promissory note in the principal amount of
$200,000, which has a term of 120 days and accrues interest at an annual rate
of 16%. Consideration for this loan is a stock warrant entitling Dr. Barber the
right to purchase 10,000 shares of Company's common stock at any time within
two years of the date of the Barber Note at $2.00 per share. The debt is
secured by an Irrevocable Stock Pledge of 200,000 shares of the Company's
stock. The Barber Note was subsequently extended to mature in February 1996.
Proceeds from this loan were applied towards general working capital. In
February 1996, the Company paid in full the Barber Note with a loan from Angelo
Medure to the Company.
As of March 31, 1996, West Penn Asphalt Co., Inc., a company of which
Angelo Medure is a principal stockholder, advanced approximately $525,000 to
the Company. The advance has no set term. Although the provisions of this
advance do not specify an interest rate, the Company, for accounting purposes,
intends to impute interest on this advance at a rate of 5%.
As of March 31, 1996, Ro-Med Construction Company, Inc. had advanced
the Company approximately $297,000 for working capital purposes. This amount
bears interest at an annual rate of 5%.
As of March 31, 1996, Angelo Medure had advanced the Company
approximately $428,000 for working capital purposes. This amount bears interest
at an annual rate of 5%.
In December 1995, the Company entered into a $600,000 term loan with
Miller & Schroeder Investments Corporation. This borrowing is evidenced by a
loan agreement, a promissory note, a mortgage and security agreement, and a
lender's warrant relating to 50,000 shares of the Company's stock. The
borrowing is also personally guaranteed by Angelo Medure. The loan is for six
years and bears interest at an annual fixed rate of 13%. Accrued interest must
be paid monthly and an annual principal payment of $100,000 must be made every
December until maturity in December 2001. Proceeds from this loan were used for
working capital and $300,000 of the proceeds were used to repay a prior
13
<PAGE> 15
loan.
Under the Golden Eagle Management Contract, the Company does not have
a commitment to finance construction of the permanent casino. However, the
Company may elect to finance or to arrange financing for this construction. In
the event the Company does elect to finance the construction, it believes it
would be able to fund a portion of these costs from its working capital and
would be able to obtain financing from unrelated third parties on terms
acceptable to the Company for the balance, although the Company has obtained no
commitments for any such financing, and no assurance can be given that such
financing will be available on terms acceptable to the Company, if at all.
In the event that the Company does make advances or loans to tribes,
such advances or loans would not be conventional real estate and construction
loans subject to customary mortgages and encumbrances, and debt service of
these loans would be paid from cash flow generated by the facility. The
advances made by the Company to the tribes are not, and any loans it may make
in the future are not anticipated to be, secured by collateral of the tribe.
Although a tribe would have a legal obligation to repay amounts lent to it by
the Company, no assurance can be given that the Company would be repaid by the
tribe.
In the event that a tribe obtains financing for the gaming facility
from a bank or other lender, the Company does not believe that it could be held
liable, based on a de facto joint venture or other legal theory, for such a
loan to which the Company is not a signatory. The Company believes that its
relationship to a tribe is no different from that of any other management agent
or distributor, which would not be liable in such an instance. Moreover,
holding a management company liable would conflict with the Gaming Act, which
regards the tribe as having the sole proprietary interest in the enterprise.
Although Angelo Medure has personally guaranteed many of the Company's
obligations to date, he is not obligated to make any loans to the Company or to
guarantee any of its obligations in the future. The Company does not, as of the
date of this report, have access to unused bank lines of credit. The Company
believes that it will be able to obtain financing from unrelated parties on
terms acceptable to it and in amounts sufficient to satisfy the Company's
capital requirements, although the Company has not obtained commitments for any
such financing. No assurance can be given that such financing will be available
on terms acceptable to the Company, if at all. The Company's belief that it
will be able to obtain financing from unrelated third parties on terms
acceptable to it is based on its having an operating history of approximately
four years, its financial position, and the experience of its management,
factors which a financing source considers in its decision to extend financing.
Presently, the Company is attempting to refinance its debt on terms
commercially reasonable and acceptable to the Company and achieve a
recapitalization of the Company, although no assurances can be given that the
Company will be successful in doing so.
14
<PAGE> 16
Recording of Advances to Indian Tribes
The Company's management contracts provide, and any management
contracts it may enter into in the future would most likely require, that the
Company advance funds to the tribes, with such advances to be repaid from the
casino's or facility's cash flow. The Company records these advances as
investments. However, in the event it becomes probable that the Company will
not obtain approval of the management contract from the Gaming Commission; the
Company will elect for whatever reason not to proceed with the development of
the project; or the casino's or facility's cash flow, if any, will be
insufficient to make repayment, the Company will recognize a loss for, more
than likely, the entire amount of the advance as an expense in its financial
statements. The recognition of losses, if any, in the future could cause
significant fluctuations in the Company's quarterly or annual net income or
loss.
PART II. OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS.
In September 1993, the Company, its President and Chief Executive
Officer, Angelo Medure, and his spouse, Charlotte Medure, filed a defamation
suit against U.S. News & World Report and its Senior Editor James Popkin in
Common Pleas Court, Lawrence County, Pennsylvania at No. 973 of 1993, C.A. The
suit arises from the publication of an article (the "Article") entitled
"Gambling with the mob? Wise guys have set their sights on the booming Indian
casino business" in the August 23, 1993 issue of U.S. News & World Report
magazine. The complaint alleges that the Article consisted of falsehoods,
insinuations, innuendos and misrepresentations adversely impacting the business
and reputation of the Company and Angelo Medure by imputing criminal activity
to them and by accusing Angelo Medure of being liked to and a part of organized
crime. The complaint also seeks money damages. The Company and Angelo Medure
strongly deny any and all allegations or implications of criminal wrongdoing
and each of them intends to vigorously prosecute this action. As of the date of
this report, the lawsuit is in the discovery stage. A date for trial has not
yet been set by the Court. The Company is unable to predict the effect, if any,
of the Article or of the outcome of the litigation on the Company's business or
the trading price of the Company's securities.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
15
<PAGE> 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K.
10m Second Amendment to Master Loan Agreement.
(b) No reports on Form 8-K have been filed during the period covered
by this report.
16
<PAGE> 18
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.
GAMING WORLD INTERNATIONAL, LTD.
By: /s/ Anthony J. Medure
------------------------------------------
Anthony J. Medure, Vice President
Date: June 19, 1996 /s/ Anthony J. Medure
------------------------------------------
Anthony J. Medure, Vice President
Date: June 19, 1996 /s/ David A. Richards
------------------------------------------
David A. Richards, Chief Financial Officer
17
<PAGE> 1
SECOND AMENDMENT TO MASTER LOAN AGREEMENT
This Second Amendment to Master Loan Agreement ("Second Amendment") made
this 20th day of February, 1996, by GAMING WORLD INTERNATIONAL, LTD., a
Delaware corporation, with its principal place of business located at 438 Line
Avenue, Ellwood City, Pennsylvania 16117 ("Borrower") and S&T BANK, a state
bank and trust company organized and existing under the laws of the
Commonwealth of Pennsylvania, with its principal place of business located at
800 Philadelphia Street, Indiana, Pennsylvania 15701 ("Lender").
R E C I T A L S :
WHEREAS, Lender has extended certain term loans to Borrower pursuant to
the terms of a certain Master Loan Agreement, dated July 8, 1994, by and
between Borrower and Lender, as amended by that certain Amendment to Loan
Agreement, dated June 30, 1995 (as amended, modified, supplemented, substituted
and restated from time to time, the "Loan Agreement"), and evidenced by a
certain Amended and Restated Note, dated June 30, 1995, in the original
principal amount of $3,650,000.00 (as amended, modified, supplemented,
substituted and restated from time to time, the "Fixed Rate Note") and a
certain Amended and Restated Note, dated June 30, 1995, in the original
principal amount of $5,350,000.00 (as amended, modified, supplemented,
substituted and restated from time to time, the "Variable Rate Note"), each
executed and delivered by Borrower in favor of Lender; and
WHEREAS, as partial security for the Fixed Rate Note and the Variable Rate
Note, Borrower assigned, as collateral an interest in a repurchase agreement
("Cash Collateral") pursuant to the terms of a certain Assignment and Deposit
Account, dated Julv 8, 1994, executed and delivered by Borrower in favor of
Lender; and
WHEREAS, Borrower has requested that Lender release $650,000.00 of the
Cash Collateral for purposes of paying certain payables due and owing by
Borrower to third parties and Lender; and
WHEREAS, Lender is amenable to releasing a portion of the Cash Collateral
upon the condition, among other things, that $650,000.00 of the outstanding
principal due and owing under the terms of the Fixed Rate Note accrue interest
at the same rate and under the same terms as the principal due and owing under
the terms of the Variable Rate Note, and upon compliance with the following
terms and conditions.
<PAGE> 2
NOW, THEREFORE, in consideration of the above-referenced premises, the
mutual conditions, covenants and agreements contained herein, and intending to
be legally bound hereby, the parties hereto agree as follows:
1. Release. Upon compliance with the terms and conditions more fully set
forth herein, Lender hereby agrees to release $650,000.00 of the Cash
Collateral to Borrower for the sole purposes of paying certain accounts payable
as have been previously disclosed to Lender and to establish a reserve fund for
the payment of certain principle and interest payments due and owing under the
terms of the Variable Rate Note and the Fixed Rate Note, all as more fully
provided in Section 4 herein.
2. Conditions. The obligation of Lender to release the $650,000.00 of Cash
Collateral is expressly conditional upon Borrower's compliance with the
following terms and conditions on or prior to the date hereof:
(a) Amended and Restated Notes. Execution and delivery of the Amended
and Restated Notes for the Fixed Rate Note and the Variable Rate Note, in the
form attached hereto as Exhibits "A" and "B", respectively, Borrower
acknowledges that the sole purpose of the Amended and Restated Notes is simply
to provide for the accruing of $650,000.00 of principal otherwise bearing
interest at the rate provided in the Fixed Rate Note, to bear interest at the
rate applicable under the Variable Rate Note and to be repaid in accordance
with the terms of the Variable Rate Note;
(b) Collateral Assignment. Execution and delivery by Borrower of a
certain Collateral Assignment of Management Fees in the form attached hereto as
Exhibit "C", assigning, transferring and creating a security interest in favor
of Lender of all Borrower's right, title and interest in and to all fees and
other sums due and owing to Borrower under a certain Management Agreement for
Golden Eagle Charitable Casino and Entertainment Centre, dated September 9,
1994, by and between Wauzhushk Onigum Nation (Rat Portage 38B) and Borrower, as
amended, and that certain Management Agreement, dated March 6, 1992, by and
between the White Earth Reservation Business Committee and Borrower, as
amended, (hereinafter collectively referred to as the "Management Contracts")
and all contract rights, accounts, general intangibles and proceeds arising or
relating thereto;
(c) Review of Management Contracts. Satisfactory review by Lender of
the Management Contracts;
(d) Review of Advisory Contract. Satisfactory review by Lender of the
Financial Advisory Contract by and between Borrower and Atlantic Financial
Partners, L.L.C.;
2
<PAGE> 3
(e) Lockbox. Execution and delivery by Borrower a certain Lockbox, Cash
Transfer and Advice Agreement in the form attached hereto as Exhibit "D", and
the execution and delivery of any and all such other agreements, documents and
instruments as Lender shall require in connection therewith, into which all
fees earned from the Management Contracts shall be deposited and applied to the
outstanding indebtedness due and owing under the terms of the Variable Rate
Note and the Fixed Rate Note, as amended and restated pursuant to the terms of
this Second Amendment;
(f) Corporate Resolution. Receipt by Lender of the resolutions of
Borrower authorizing the transactions contemplated by this Second Amendment and
the agreements, documents and instruments to be executed in connection
therewith and the granting of the security as herein required, certified by the
secretary of the corporation to be true and correct:
(g) Acknowledqment and Consent. Receipt by Lender of an acknowledgment
and consent, in a form attached hereto as Exhibit "E", from Angelo and
Charlotte Medure with respect to their Guaranty and Suretyship Agreement, dated
July 8,1994, acknowledging and consenting to the transactions contemplated by
this Second Amendment and any agreements, documents and instruments to be
executed in connection herewith;
(h) West Penn Asphalt Guaranty. Receipt by Lender of Guaranty and
Suretyship Agreements by West Penn Asphalt, Inc. and Northern Paving, Inc. in
the form attached hereto as Exhibits "F" and "G", respectively, pursuant to
which West Penn Asphalt, Inc. and Northern Paving, Inc. shall absolutely and
unconditionally guaranty and become surety for the obligations, liabilities and
indebtedness of Borrower under the terms of the Variable Rate Note and the
Fixed Rate Note, as amended and restated, and receipt by Lender of the
resolutions of West Penn Asphalt, Inc. and Northern Paving, Inc. authorizing
the execution of the Guarantys, certified by West Penn Asphalt, Inc. and
Northern Paving, Inc.'s secretaries;
(i) Escrow Account. Borrower shall execute and deliver to Lender such
agreements, documents and instruments as Lender requires for purposes of
establishing an escrow account into which $70,000.00 of the proceeds will be
deposited and held in reserve to pay the March,1996, interest payments due and
owing under the terms of the Variable Rate Note and the Fixed Rate Note, as
amended and restated ("Escrow Account");
(j) Releases and Consents of Third Parties. Lender shall have received
such releases and consents as it shall require from any third party who may, in
Lender's reasonable good faith belief, maintain any lien or right, title and
interest in and to the Cash Collateral;
(k) Consents to Collateral Assignment. Receipt of consents from all
those required under the Management Contracts to consent to the assignment of
the Management Fees due Borrower under the Management Contracts;
3
<PAGE> 4
(l) Details, Proceedings and Documents. All details and proceedings in
connection with the transactions contemplated by this Second Amendment and the
agreements, documents and instruments executed in connection therewith shall be
satisfactory to Lender and Lender shall have received all such counterpart
originals or certified or other copies of such documents and proceedings in
connection with such transactions, in a form and substance satisfactory to
Lender, as Lender may from time to time request, including but not limited to,
such UCC and judgment lien searches as it shall require; and
(m) Legal Fees and Expenses. Borrower shall have reimbursed Lender for any
and all fees and costs incurred in connection with the negotiation and
preparation of the documentation, including but not limited to, attorneys' fees
and costs and any and all recording fees and judgment and UCC lien search fees
incurred by Lender.
3. Escrow Account. Borrower hereby authorizes Lender upon release of the
$650,000.00 of Cash Collateral to distribute $70,000.00 of such sums into the
Escrow Account. Borrower acknowledges and agrees that it shall have no access
to the Escrow Account and authorizes the Lender, to apply such sums held in the
Escrow Account to the payment of the March, 1996 principal and interest
payments and all other sums due and owing under the terms of the Variable Rate
Note and the Fixed Rate Note, as amended and restated, when due in accordance
with their terms. Borrower further assigns, transfers and creates in favor of
Lender a security interest in the Escrow Account and sums deposited therein as
security for the Obligations, as defined in the Loan Agreement, as amended by
this Second Amendment.
4. Use of Cash Collateral. Borrower hereby covenants and agrees that in
addition to the sums to be deposited into the Escrow Account, as provided
herein, Borrower shall use the $650,000.00 exclusively as set forth herein:
(a) Arrearages. Payment of the January, 1996 and February, 1996,
principal and/or interest payments due and owing under the terms of the
Variable Rate Note and the Fixed Rate Note, as amended and restated, to which
Borrower hereby authorizes Lender to automatically deduct from the $650,000.00
in Cash Collateral to be released a sum necessary to pay such sums;
(b) Real Estate Taxes. Payment of all outstanding real estate taxes
affecting the Mortgaged Premises, as that term is defined in the Loan
Agreement; and
(c) Payables. Payment of all such other payables due and owing by
Borrower as shall have been previously disclosed by Borrower to Lender.
4
<PAGE> 5
For purposes of this provision, Lender, at its option, may disburse such
portions of the $650,000.00 of Cash Collateral to be released directly to the
taxing authorities or to such other trade creditors as it shall elect, in its
sole discretion, or make such distributions by jointly paying to Borrower and
such third parties the sums anticipated to be paid. Upon request, Borrower
hereby agrees to provide to Lender, upon Lender's request, evidence of payment
of all taxes and/or payments to third parties of the $650,000.00 of Cash
Collateral to be released, as Lender shall require from time to time.
5. Management Fees. Borrower hereby covenants and agrees that so long as
any of the Obligations, as defined in the Loan Agreement, remain outstanding
that all fees, accounts and other rights to the payment of any sums arising
from or related to the Management Contract shall be paid into the lockbox to be
established pursuant to the terms of the Lockbox Agreement and further agrees
that to the extent that any such fees or other sums arising or relating to the
Management Contracts are paid directly to Borrower, that such sums shall be
held by Borrower in trust for the benefit of Lender and shall be immediately
turned over to Lender. All such fees and other sums arising or relating to the
Management Contracts shall be applied to the payment of all principal, interest
and any other sums due and owing under the terms of the Variable Rate Note and
the Fixed Rate Note, as amended and restated.
6. Cash Collateral Account. Borrower hereby assigns, transfers and creates
a security interest in favor of Lender in and to any sums deposited into the
cash collateral account to be established pursuant to the terms of the Lockbox
Agreement and any agreements, documents or instruments to be executed in
connection therewith as security for the Obligations, as that term is defined
in the Loan Agreement, and Lender shall be granted the same rights as a secured
party under the terms of the Uniform Commercial Code and the rights granted
under the terms of that certain Security Agreement, dated July 8, 1994, by and
between Borrower and Lender.
7. Defaults. In addition to the Events of Default specified in Section 6
of the Loan Agreement, the failure of Borrower to observe or perform any of the
terms, conditions or covenants contained in this Second Amendment, or in the
agreements, documents or instruments executed in connection herewith shall
constitute an Event of Default, as that term is defined in the Loan Agreement,
and shall permit Lender to exercise such rights and remedies as permitted under
the terms of the Loan Agreement, as amended by this Second Amendment, and any
agreements, documents or instruments executed in connection therewith or
herewith.
8. Existing Defaults. Borrower hereby represents and warrants that other
than failure to pay the interest due and owing in January, 1996 and February,
1996, there exists no other Event of Default or Potential Default, as those
terms are defined in the Loan Agreement.
9. Representations. Borrower hereby represents and warrants that all of
the representations and warranties contained in the Loan Agreement and the
Collateral Security Documents, as that term is defined in the Loan Agreement,
and contained in the agreements, documents and instruments executed in
connection with this Second
5
<PAGE> 6
Amendment continue to remain true and correct as of the date hereof with the
same force and effect as when originally made.
10. Effect of Amendment. Except as otherwise expressly modified by this
Second Amendment, all other terms, conditions and provisions contained in the
Loan Agreement shall continue to remain in full force and effect.
11. Governing Law. This Second Amendment shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
12. Binding Effect. This Second Amendment shall inure to the benefit of
and shall be binding upon the respective successors and permitted assigns of
the parties hereto provided that Borrower shall have no right to assign or
delegate any of its obligations or duties hereunder without the prior written
consent of Lender.
13. Integration. The parties hereto acknowledge that the terms and
conditions of this Second Amendment were negotiated in full by both parties in
good faith and with the benefit of counsel and constitutes the entire contract
between the parties hereto and there are no other understandings, oral or
written, relating to the subject matter hereof, other than those specifically
incorporated herein by reference.
14. Severability. Any provisions of this Second Amendment which are held
to be prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
15. Waiver of Jury Trial. BORROWER HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY CLAIMS, CAUSES OF ACTION, DAMAGES OR
LOSSES OF WHATSOEVER NATURE OR KIND ARISING OUT OF, DIRECTLY OR INDIRECTLY, THE
LOAN AGREEMENT, AS AMENDED BY THIS SECOND AMENDMENT, OR THE COLLATERAL SECURITY
DOCUMENTS, OR THE ADMINISTRATION, COLLECTION OR ENFORCEMENT THEREOF. BORROWER
FURTHER ACKNOWLEDGES THAT IT HAS READ THIS PROVISION AND HAS HAD THIS PROVISION
EXPLAINED TO IT BY ITS COUNSEL AND THAT SUCH WAIVER IS BEING GIVEN VOLUNTARILY
AND WITH FULL KNOWLEDGE AND APPRECIATION FOR THE CONSEQUENCES AND EFFECT
THEREOF.
6
<PAGE> 7
WITNESS, the due execution hereof the day and first above written.
ATTEST: GAMING WORLD INTERNATIONAL, LTd.
XXXXXXXXXXXXXXXXXXX /s/ ANGELO MEDURE (SEAL)
- --------------------------------- ---------------------------------
Angelo Medure
President
S&T BANK
By: /s/ TODD D. BRICE (SEAL)
---------------------------------
Todd D. Brice
Vice President
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
1996 REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000919229
<NAME> GAMING WORLD INTERNATIONAL, LTD.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 140,520
<SECURITIES> 3,000,000
<RECEIVABLES> 431,505
<ALLOWANCES> 0
<INVENTORY> 1,360,208
<CURRENT-ASSETS> 6,129,061
<PP&E> 13,794,196
<DEPRECIATION> 898,272
<TOTAL-ASSETS> 22,070,652
<CURRENT-LIABILITIES> 9,071,627
<BONDS> 6,339,421
<COMMON> 75,252
0
0
<OTHER-SE> 5,453,648
<TOTAL-LIABILITY-AND-EQUITY> 22,070,652
<SALES> 2,495,691
<TOTAL-REVENUES> 2,642,262
<CGS> 1,985,915
<TOTAL-COSTS> 1,985,915
<OTHER-EXPENSES> 1,050,698
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 482,752
<INCOME-PRETAX> (1,055,293)
<INCOME-TAX> (158,294)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (896,999)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
