-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SsGsbXQnISljRxzJaPDHrBfh7sAe2HrXG+iPchncTFvPHEYC8T8PzDXzQ5wFZhdV F/PB97/OiiEJ6y4esBVCDg== 0000950134-97-006049.txt : 19970814 0000950134-97-006049.hdr.sgml : 19970814 ACCESSION NUMBER: 0000950134-97-006049 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19970430 FILED AS OF DATE: 19970813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CROWN CASINO CORP CENTRAL INDEX KEY: 0000799850 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 630851141 STATE OF INCORPORATION: TX FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14939 FILM NUMBER: 97658131 BUSINESS ADDRESS: STREET 1: 4040 N. MACARTHUR BLVD. STREET 2: SUITE 100 CITY: IRVING STATE: TX ZIP: 75038 BUSINESS PHONE: (972) 717-3423 MAIL ADDRESS: STREET 1: 4040 N. MACARTHUR BLVD. STREET 2: SUITE 100 CITY: IRVING STATE: TX ZIP: 75038 FORMER COMPANY: FORMER CONFORMED NAME: SKYLINK AMERICA INC DATE OF NAME CHANGE: 19920703 10-K 1 FORM 10-K FOR YEAR ENDED APRIL 30, 1997 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: Commission file number: APRIL 30, 1997 0-14939 CROWN CASINO CORPORATION (Exact name of registrant as specified in its charter) TEXAS 63-0851141 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4040 N. MACARTHUR BLVD., SUITE 100, IRVING, TEXAS (Address of principal executive office) 75038 (Zip Code) (972) 717-3423 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 par share 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 [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of August 8, 1997 the aggregate market value of the voting stock held by non-affiliates (all persons other than executive officers, directors and holder's of 5% or more of the Registrant's common stock) of the Registrant (7,465,186 shares) was $19,362,826. As of August 8, 1997 there were 9,925,785 shares of the Registrant's common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Registrant's Annual Report to Stockholders for the year ended April 30, 1997 are incorporated by reference into Part II of this report, and portions of the Registrant's definitive Proxy Statement for its Annual Meeting of Stockholders to be held in 1997 are incorporated by reference into Part III of this report, with the exception of information regarding executive officers required under Item 10 of Part III, which information is included in Part I, Item 1. 2 PART I ITEM 1. BUSINESS FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements. Certain information included in this Form 10-K and other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Company) contains statements that are forward-looking, such as statements relating to plans for future expansion and other business development activities as well as capital spending, financing sources and the effects of regulation and competition. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, those relating to the development of Concorde's mortgage lending business, competition, dependence on existing management, the stability of Argentina's government, currency exchange rate fluctuations, the repatriation of funds from Argentina, domestic or global economic conditions, changes in foreign or domestic tax laws or the administration of such laws and changes in gaming or lending laws or regulations. GENERAL AND HISTORY Crown Casino Corporation ("Crown" or the "Company") is a holding company which presently owns 79% of Concorde Acceptance Corporation ("Concorde"), a sub-prime mortgage lender, and 49% of Casino Magic Neuquen S.A. ("CMN"), a casino operator in the Province of Neuquen, Argentina. Crown also owns 100% of Gaming Entertainment Management Services, Inc. ("GEMS") which owns an 18.6 acre tract of land in the gaming district of Las Vegas, Nevada. GEMS has entered into a contract to sell the Las Vegas land for $15.25 million. The Company is presently focusing on (i) the acquisition or development of other casino gaming properties in Argentina, (ii) the development and expansion of Concorde's mortgage based lending business, and (iii) the potential acquisition or development of other businesses unrelated to casino gaming or mortgage based lending. Since its inception in 1983 through June 1993 the Company was principally engaged in various facets of the cable and related programming businesses. During fiscal 1992 management determined the Company's programming business had become increasingly competitive from a profit margin standpoint and future growth was limited. As a result, in late fiscal 1992 the Company sold the majority of its programming business and began exploring new business opportunities. In June 1993 the Company made the decision to enter the gaming business, and, as a result, proceeded to sell the balance of its cable assets. From June 1993, with the acquisition of 100% of St. Charles Gaming Company, Inc. ("SCGC"), until November 1996 the Company's primary business focus was that of owning, operating and developing casino gaming properties. SCGC owns and operates a riverboat gaming casino located in Calcasieu Parish, Louisiana which had been in the development stage until opening in July 1995. In June 1995 the Company sold a 50% interest in SCGC to Louisiana Riverboat Gaming Partnership ("LRGP") and in May 1996 sold its remaining 50% interest in SCGC to Casino America, Inc. ("Casino America"). In November 1996 the Company decided to cease pursuing gaming opportunities in the United States and began pursuing business opportunities in fields unrelated to casino gaming. As a result, in June 1997 the Company, along with certain newly hired management personnel, formed Concorde. Concorde is in the business of originating, purchasing, servicing and selling sub-prime mortgage loans which are secured primarily by first and second liens on residential properties. These loans are expected to be sold in privately negotiated transactions as well as to institutional investors in the secondary market through securitization programs. Also in June 1997 the Company acquired a 49% interest in CMN from Casino Magic Corp. ("Casino Magic"). CMN operates casinos in the cities of Neuquen and San Martin de los Andes ("San Martin") in the Province of Neuquen, Argentina under an exclusive concession contract. GAMING BUSINESS DEVELOPMENT In June 1993 the Company completed the acquisition of 100% of the outstanding common stock of SCGC, a Louisiana corporation, 1 3 which had received preliminary approval from the Louisiana Riverboat Gaming Commission to construct and operate a riverboat gaming casino. In March 1994 SCGC received a license from the Louisiana Riverboat Gaming Enforcement Division of the Office of State Police. In January 1995 SCGC made the strategic decision to relocate the site for its planned Louisiana riverboat casino from St. Charles Parish (near New Orleans) to Calcasieu Parish in the southwest part of the state near the Texas border. In July 1995 SCGC's riverboat casino opened for business in Calcasieu Parish, Louisiana, as an Isle of Capri(SM) themed property. In June 1995 the Company sold a 50% interest in SCGC to LRGP, a joint venture then owned 50% by Casino America and 50% by Louisiana Downs, Inc. The purchase price consisted of (i) a five-year $20 million non-recourse note (the "LRGP Note"), (ii) $1 million cash, and (iii) a non-detachable five-year warrant to purchase 416,667 shares of Casino America common stock at $12 per share. In connection with this transaction, in June 1995, the Company recorded a gain before income taxes of approximately $21.5 million. In May 1996 the Company sold its remaining 50% interest in SCGC to Casino America for (i) 1,850,000 shares of Casino America common stock, (ii) the exchange of the $20 million LRGP Note for LRGP Note A ("Note A") and LRGP Note B ("Note B"), each in the principal amount of $10 million, and (iii) an additional non-detachable five-year warrant to purchase up to another 416,667 shares of Casino America common stock at an exercise price of $12 per share. In connection with this transaction, in May 1996, the Company recorded a gain before income taxes of approximately $14.9 million. During fiscal 1997 Note A was paid off, and the Company sold Note B and its 1,850,000 shares of Casino America common stock for cash. In December 1993 the Company acquired 100% of the outstanding common stock of GEMS, a Nevada corporation, which was organized for the purpose of developing a hotel and casino in Las Vegas, Nevada. GEMS' primary asset was its option to purchase an 18.6 acre tract of land in the gaming district of Las Vegas. In June 1994 the option was exercised and the land was purchased for $10 million. In November 1996 the Company determined not to develop a hotel and casino on such property but rather to sell the land. In April 1997 the Company entered into an agreement, subject to certain conditions, to sell its Las Vegas land for $15.25 million. Closing is expected in September 1997. In June 1997 the Company acquired 49% of the capital stock of CMN, as well as interests in certain other assets and contracts related to CMN, from Casino Magic for a purchase price of $7 million. CMN operates casinos in the cities of Neuquen and San Martin in the Province of Neuquen, Argentina under an exclusive concession contract that expires in 2007, but can be extended by CMN for an additional five years under certain circumstances. The interests in certain other assets and contracts include (i) a demand promissory note in the amount of $4,226,473 issued by CMN, (ii) a 16.4% interest in a certain management agreement relating to CMN, and (iii) a 49% interest in (a) slot machines and a related lease agreement, and (b) a certain royalty agreement relating to CMN. The Company believes there will be additional opportunities to acquire or develop casinos in Argentina as the country continues to privatize its provincial run casinos. CASINO MAGIC NEUQUEN General CMN operates casinos in the cities of Neuquen and San Martin in the Province of Neuquen, Argentina. Prior to 1995 these casinos were operated by the provincial government. In January 1995 CMN entered into a twelve-year exclusive concession contract to operate these casinos. The concession contract can be extended by CMN for an additional five years under certain circumstances. CMN is owned 51% by Casino Magic and 49% by the Company. 2 4 Location, Facilities and Operations The Province of Neuquen is located approximately 400 miles east of Buenos Aires in central Argentina. The Neuquen facility, which is leased by CMN from the Province of Neuquen, is located at the Neuquen International Airport approximately 15 miles from downtown Neuquen City. This facility has approximately 1,000 dedicated parking spaces available to its patrons, and has an additional 3,000 parking spaces available at the adjacent airport. The San Martin facility is leased from a third party and is located in the center of the city. Certain information regarding the Neuquen and San Martin casinos is as follows:
Neuquen San Martin ------- ---------- Total square feet 37,000 2,500 Gaming square feet 28,125 1,875 Slot machines 342 55 Table games 48 10 Revenues (in millions): Calendar 1995 $12.1 $1.0 Calendar 1996 14.0 1.9
Management is in the process of installing additional slot machines at the properties (50 at Neuquen and 25 at San Martin). The casinos are open seven days a week generally from 10:00 p.m to 5:00 a.m. Monday through Thursday, 5:00 p.m. to 5:00 a.m. on Friday, and 2:00 p.m. to 5:00 a.m. on Saturday and Sunday. Peak admission occurs around 1:00 a.m. The casinos offer slot machines, table games, food, beverages and gift items, as well as live entertainment at the Neuquen casino on weekends. Table games include roulette, black jack, punto y banca and big six. Market and Marketing Strategy Greater Neuquen City has a population of approximately 220,000 with an estimated 600,000 people living within 120 miles while San Martin has a population of approximately 17,000 with an estimated 150,000 people living within 120 miles. Neuquen is one of the wealthiest Argentine provinces per capita, principally due to energy production. The Province of Neuquen holds approximately 40% of Argentina's proven oil and gas reserves. San Martin is located in the Andes Mountains near one of the country's largest ski resorts, and is well known for its trout and salmon fly fishing. CMN's marketing strategy has been to provide the customer with an American style gaming atmosphere. Most casinos in Argentina have a European style gaming atmosphere. European style casinos tend to be more formal, oftentimes with casino dealers dressed in tuxedos, little or no emphasis on slot play and rarely provide live entertainment. Since taking over operating control of the Neuquen and San Martin casinos in early 1995 CMN has substantially increased the number of slot machines (from 89 in March 1995 to 384 currently), eliminated admission fees, reduced the price of food and beverages, encouraged a casual dress code and provided live entertainment for free on the weekends. As a result of these changes, CMN has dramatically increased the customer count and revenues of its two casinos. Concession Contract In January 1995 CMN entered into a twelve-year concession contract with the Province of Neuquen providing CMN with the exclusive right to develop and operate all gaming activities within 50 kilometers (31 miles) of each of the Neuquen and San Martin casinos, within the boundaries of the Province, during the concession term. The concession term will automatically be extended an additional five years in the event CMN individually, or jointly with others, invests at least $5 million in lodging infrastructure. The transfer of the ownership of the concession is subject to the approval of the Province. In connection with the granting of the concession contract CMN paid a one-time concession fee of $9 million to the Province of Neuquen. CMN also pays the Province $220,000 per month as a combination tax/rent payment. If CMN decides to move from the Neuquen casino location, which is currently being leased from the Province, it will receive a $40,000 per month reduction in its payment to the Province. The monthly tax/rent payment is subject to increase in the event annual net gaming revenues exceed $52.8 million. In addition, CMN is obligated to pay all applicable federal and provincial taxes including a 2% provincial tax on net gaming revenue, and a 33% federal income tax on earnings. Pursuant to the concession, the Province of Neuquen guarantees that no additional municipal or provincial taxes will be levied on CMN's operations, and that existing provincial and municipal taxes will not be increased. 3 5 Shareholders' Agreement In connection with the Company's 49% purchase of CMN, the Company and Casino Magic entered into a shareholders' agreement (the "Shareholders' Agreement") which provides, among other things, that in the event either the Company or Casino Magic desires to sell its interest in CMN such shareholder must first offer to sell its interest to the other shareholder under the terms and conditions provided in the Shareholders' Agreement. Except as expressly permitted by the Shareholders' Agreement, neither the Company nor Casino Magic may sell, assign, or otherwise transfer or encumber any part of the CMN stock owned by either of them without the written consent of the other shareholder. As required by the Shareholders' Agreement CMN has four directors on its board, two of which are appointed by the Company and the other two are appointed by Casino Magic. The Shareholders' Agreement requires the unanimous approval of all shareholders prior to authorizing certain corporate actions. Those actions requiring unanimous CMN shareholder approval include matters pertaining to (i) the issuance or purchase of CMN stock, (ii) amendments to CMN's articles of incorporation or by-laws, (iii) a liquidation or merger, (iv) the sale of a substantial portion of CMN's assets, (v) material or related party contracts, (vi) incurring debt, and (vii) amendments to the concession contract with the Province of Neuquen. The Shareholders' Agreement also provides that the Company and Casino Magic may jointly develop additional casinos in Argentina on mutually satisfactory terms, and that neither the Company nor Casino Magic may own, operate or obtain any material benefit from another casino in Argentina without the prior written consent of the other shareholder. Competition CMN's two casinos are currently the only operating casinos in the Province of Neuquen. Since the concession contract restricts competition within 50 kilometers (31 miles) of CMN's two casinos, CMN does not experience significant competition in its primary market area. There are, however, approximately 44 government-operated casino properties throughout the country, including a casino in Chipolletti, across the Rio Negro River from the City of Neuquen in the Rio Negro Province, and a second casino in the Rio Negro Province approximately 30 miles southeast of the City of Neuquen. The Company's concession with the Province of Neuquen is the second out of twelve which have been or are expected to be awarded under the Argentine government's casino privatization program. Regulation The Province of Neuquen enacted a casino privatization program in order for it to issue the twelve-year exclusive concession contract to CMN to operate the Neuquen and San Martin casinos. These two casinos are the only casinos in the Province of Neuquen. The casinos had previously been operated by the provincial government. The Ministry of Finance of Argentina has adopted a modified regulatory system for casinos, based on the regulatory system utilized by the State of Nevada, and such regulatory system is being administered by the Province of Neuquen. Such modified regulatory system provides rules and regulations relating to, among other things, (i) the suitability of officers, directors and significant shareholders, (ii) maintenance of effective controls over operating and financial practices, and (iii) the submission of financial reports. CMN can not predict what effect the enactment of other laws, regulations or pronouncements that relate to casino gaming may have on the operations of CMN. REQUIRED DIVESTITURE OF COMMON STOCK The Articles of Incorporation of the Company provide that any shareholder of the Company who is found to be unsuitable by any gaming regulatory authority with jurisdiction over the Company's operations, may, in the discretion of the Board of Directors, be required to divest the shares of Company stock owned by such person within forty-five (45) days from the date on which the Company notifies the disqualified holder of the regulatory authority's determination of unsuitability, or the Company will have the right to purchase such stock at a price equal to its fair market value, as defined in the Articles of Incorporation, less twenty-five percent (25%). In addition, the Articles of Incorporation require that the Company maintain compliance under the federal Merchant Marine Act of 1936 and the federal Shipping Act of 1916, as amended, restricting the amount of shares of Company common stock which may be held by non-U.S. citizens. The Company may require foreign persons to divest their shares of Company common stock in accordance with the provisions of the Articles of Incorporation in the event that the Company determines that it is in violation of either of these Acts. 4 6 MORTGAGE BUSINESS GENERAL In June 1997 the Company, along with certain newly hired management personnel, formed Concorde. Concorde is in the business of originating, purchasing, servicing and selling sub-prime mortgage loans which are secured primarily by first and second liens on residential properties. These loans are expected to be sold in privately negotiated transactions as well as to institutional investors in the secondary market through securitization programs. Concorde focuses on lending to individuals who have impaired or unsubstantiated credit histories and/or unverifiable income. Loans made to these individuals do not qualify for purchase by government-sponsored agencies such as the Federal Home Loan Mortgage Association and the Federal Home Loan Mortgage Corporation, and thus are sometimes referred to as non-conforming or sub-prime mortgage loans. Such loans generally provide higher yields than conforming loans. The principal differences between conforming loans and non-conforming loans include the applicable loan-to-value ratios, the credit and income histories of the mortgagors, the documentation required for approval of the mortgagors, the type of properties securing the mortgage loans, the loan sizes, and the mortgagors' occupancy status with respect to the mortgaged properties. Second mortgage loans are made to borrowers owning single-family homes for the purpose of debt consolidation, home improvements, education and a variety of other purposes. These loans generally provide a higher interest rate yield than first mortgage loans, and are secured by a second lien on the property. Management believes the sub-prime mortgage loan industry is fragmented and operates inefficiently compared to the conforming loan industry, and as a result, higher interest rate yields are available to sub-prime mortgage lenders even after considering a higher rate of loan defaults. Management also believes the sub-prime mortgage loan industry is less cyclical than the conforming loan industry because the sub-prime mortgage borrower is more "payment" sensitive rather than "interest rate" sensitive. In addition, the federal tax code's preferential treatment of the interest expense deduction for home mortgage loans makes it financially advantageous for many individuals to convert their credit card and other consumer loans into a mortgage loan. LOAN ORIGINATIONS AND PURCHASES Concorde began originating and purchasing mortgage loans in July 1997. Concorde originates loans through a network of independent retail mortgage brokers and directly through telemarketing and direct mail programs. Concorde also purchases mortgage loans from a network of wholesale loan brokers and correspondents, including banks and thrift institutions. Loans purchased from wholesale loan brokers and correspondents typically require Concorde to pay a premium, whereas Concorde does not pay premiums on loans originated through retail mortgage brokers. Prior to purchasing loans through wholesale loan brokers and correspondents, Concorde reviews the loan packages to determine whether the packages are complete and adhere to Concorde's underwriting guidelines. Depending on the size of the pool of loans purchased, Concorde may engage a third-party underwriter to reunderwrite the loans, verify the borrower's employment status, determine the quality of the appraisal and assign a credit grade. Concorde also analyzes the financial condition of the mortgage banker, which includes a review of the mortgage bankers' licenses and financial statements. Upon approval, Concorde typically requires each mortgage banker to enter into a purchase and sale agreement that contains customary representations and warranties regarding the loans such mortgage banker will sell to Concorde. UNDERWRITING Concorde's underwriting guidelines are provided to mortgage loan brokers and mortgage bankers so they can create loan applications or bulk purchase packages which meet such guidelines. Upon receipt of a completed loan package from a mortgage loan broker, Concorde's underwriting staff reviews the package, which includes the loan application, a current appraisal of the underlying collateral property, a preliminary title report and a credit report to determine if the proposed loan meets its underwriting guidelines. To assess the credit quality of each loan, Concorde's underwriters consider various factors, including the appraised value of the collateral property, the applicant's debt payment history, credit profile and employment status, and the combined debt ratio and loan-to-value ratio upon completion of the proposed mortgage loan. Personal circumstances including divorce, family illnesses or deaths and temporary job loss due to layoffs and corporate downsizing often impair an applicant's credit record. On an exception basis mortgage loans may be made to individuals whose credit profile does not conform to Concorde's guidelines, but only with the approval of an officer of Concorde. Concorde does not delegate underwriting authority to any broker or correspondent. Property appraisals for loans originated or purchased by Concorde are conducted by licensed, independent appraisers who are 5 7 approved by Concorde. Upon receipt of the appraisal, Concorde's underwriting staff reviews the value of the underlying collateral based upon a full review of the appraisal. Concorde selects its appraisers based on professional experience, education, membership in related professional organizations and experience with the appraiser. For wholesale and correspondent loans purchased, Concorde will typically request a second appraisal if the original appraisal was completed by an appraiser who is not acceptable to Concorde. Prior to funding a loan, Concorde's underwriting staff determines the applicant's creditworthiness and ability to service the loan. Verification of personal financial information, credit history, and employment history is required prior to closing the loan. Concorde has established classifications with respect to its borrowers based upon the credit profile of such borrower and certain other borrower characteristics. Each loan applicant is placed into one of four letter ratings ("A" through "D", with sub-ratings within each category), depending upon a number of factors including the applicant's credit history and employment status. Terms of loans made by Concorde, as well as the maximum loan-to- value ratio and debt service-to-income ratio (calculated by dividing fixed monthly debt payments by gross monthly income), vary depending upon the classification of the borrower. Borrowers with lower credit ratings generally pay higher interest rates and loan origination fees. The criteria currently used by Concorde in classifying loan applicants is described below. Generally, loan applicants are required to have two years of employment with their current employer or two years of similar business experience. Verification of information regarding the first mortgage, if any, is also required, including balance, status and whether local taxes, interest, insurance and assessments are included in the applicant's monthly payment. All taxes and assessments not included in the payment are required to be verified as current. Upon successful completion of the underwriting process, the closing of the loan is scheduled with an independent closing attorney or title company who is responsible for closing the loan in accordance with Concorde's closing procedures. CONCORDE'S GENERAL UNDERWRITING GUIDELINES
A B C D ------------------ ---------------- ---------------- ------------------- Mortgage credit (last 12 Maximum of two 30- Maximum of three Maximum of four Maximum of four 30- mo.) day late payments 30-day late 30-day late day late payments and no 60-day payments and no payments and one and one 60-day late delinquencies. 60-day 60-day late payment, and no delinquencies. payment. 120-day delinquencies. Non-mortgage credit (last 12 Account paid as Maximum of 35% of Maximum of 50% of Maximum of 66% of mo.) agreed. Maximum of accounts with 30- accounts with accounts with 25% of accounts day late payments derogatory credit, derogatory credit, with 30-day late and one 60-day and one 90-day and no 120-day late payments, and no late payment. late payment. payments. Charge- 60-day late Small charge-offs, Charge-offs, offs, collections payments. Nominal collections or collections and and judgements isolated charge- judgements. judgements allowed allowed on a case- offs, collections on a case-by-case by-case basis. or judgements. basis. Bankruptcy filings Two years since Two years since Must be Must be discharged, discharged. discharged. discharged, active active Chapter 13 Chapter 13 allowed. allowed. Maximum debt service-to- income ratio 50% 55% 55% 55% Maximum loan-to-value ratio (1): Owner-occupied 90% 90% 85% 70% Non-owner occupied 85% 80% 75% 55%
(1) Reductions in the maximum loan-to-value ratio are made for (i) the residence being a second or vacation home, condominium, townhouse, two-to-four family residence, or located in a rural area, and (ii) the borrower qualifying under alternative documentation or a non-income based qualification. As described above, Concorde uses the foregoing categories and characteristics as underwriting guidelines only. On a case-by-case basis, Concorde's underwriters may determine that the prospective mortgagor warrants a risk category upgrade, a debt service-to-income ratio exception, a pricing exception, a loan-to-value exception or an exception from certain requirements of a particular risk category. An upgrade or exception may generally be allowed if the application reflects certain compensating factors, including among others: a low loan-to-value ratio; a maximum of one 30-day late payment on all mortgage loans during the last twelve months; stable employment; and the length of residence in the subject property. Accordingly, Concorde may classify certain mortgage loan applications in a more favorable risk category than other mortgage loan applications that, in the absence of such compensating factors, would only satisfy the criteria of a less favorable risk category. 6 8 LOAN SERVICING AND COLLECTIONS Servicing involves, among other things, collecting payments, applying such payments of principal and interest to the appropriate loan, ensuring the underlying collateral is properly insured, preparing reports relative to such loans and enforcing the lender's rights with respect to the loans, including, recovering delinquent payments, instituting foreclosures and liquidating the underlying collateral. Management believes that servicing Concorde's own portfolio enhances certain operating efficiencies and provides an additional and profitable revenue stream that is less cyclical than the business of originating and purchasing loans. Concorde's servicing portfolio is subject to reduction by normal monthly payments, prepayments and foreclosures. In general, revenue from Concorde's loan servicing portfolio may be adversely affected as interest rates decline and loan prepayments increase. In some states in which Concorde operates, prepayment fees may be limited or prohibited by applicable law. Concorde sends borrowers a monthly billing statement ten days prior to the monthly payment due date. Although borrowers generally make loan payments within ten to fifteen days after the due date (the "grace period"), if a borrower fails to pay the monthly payment within the grace period, Concorde commences collection efforts by notifying the borrower of the delinquency. If the loan remains unpaid, Concorde will contact the borrower to determine the cause of the delinquency and to obtain a commitment to cure the delinquency at the earliest possible time. As a general matter, if efforts to obtain payment have not been successful, a pre-foreclosure notice will be sent to the borrower shortly after the due date of the next subsequently scheduled installment, providing 30 days' notice of the impending foreclosure action. During the 30-day notice period, collection efforts continue. However, if no substantial progress has been made in collecting delinquent payments from the borrower, foreclosure proceedings will begin. Generally, Concorde will have commenced foreclosure proceedings when a loan is 45 to 60 days delinquent. Loans originated or purchased by Concorde are secured by mortgages, deeds of trust, security deeds or deeds to secure debt, depending upon the prevailing practice in the state in which the property securing the loan is located. Depending on local law, foreclosure is effected by judicial action or nonjudicial sale, and is subject to various notice and filing requirements. In general, the borrower, or any person having a junior encumbrance on the real estate, may cure a monetary default by paying the entire amount in arrears plus other designated costs and expenses incurred in enforcing the obligation during a statutorily prescribed reinstatement period. Generally, state law controls the amount of foreclosure expenses and costs, including attorneys' fees, which may be recovered by a lender. After the reinstatement period has expired without the default having been cured, the borrower or junior lienholder no longer has the right to reinstate the loan and must pay the loan in full to prevent the scheduled foreclosure sale. Although foreclosure sales are typically public sales, frequently no third-party purchaser bids in excess of the lender's lien because of the difficulty of determining the exact status of title to the property, the possible deterioration of the property during the foreclosure proceedings and a requirement that the purchaser pay for the property in cash or by cashier's check. Thus, it is likely the lender will purchase the property from the trustee or referee for an amount equal to the principal amount outstanding under the loan, accrued and unpaid interest and the expenses of foreclosure. Depending upon market conditions and loan-to-value ratios, the ultimate proceeds from the sale of the collateral may not equal Concorde's investment in the property. LOAN SALES AND SECURITIZATIONS It is Concorde's plan to sell the majority of the loans it originates and purchases either through wholesale loan sales or through securitization transactions. Loans will be sold periodically to provide Concorde with greater flexibility and operating leverage than that of a traditional portfolio lender. Concorde will periodically evaluate which method of loan disposition is most advantageous, with the manner of disposition varying from time to time depending upon prevailing market conditions. Loans sold on a wholesale basis are done so to third party institutions on a non-recourse basis for cash with servicing rights released. Securitizations, on the other hand, are loan sales in which the lender continues to be exposed to some prepayment and credit risk as long as the underlying loan portfolio remains outstanding. Generally, in a securitization transaction, a lender sells mortgage loans it has originated or purchased to a special purpose trust. The trust issues mortgage passthrough certificates. The senior certificates, which typically carry a coupon well below the weighted average coupon of the underlying mortgage loans, are sold in an offering and the lender retains the interest-only and residual certificates, which are amortized over the estimated average life of the loan portfolio. The cash flow realized from these interest only and residual certificates is subject to the prepayment and loss characteristics of the underlying loans. These interest only and residual certificates are valued at the time of the securitization. The valuation takes into account certain loss and prepayment assumptions, servicing and other fees to be paid and discounts the projected future net cash flow stream to its present value. Thus, to the extent loss and prepayment rates exceed the original assumptions used in recording the interest-only and residual certificates, the value of such certificates will be reduced. 7 9 Typically the special purpose trust has the benefit of a financial guaranty policy from a monoline insurance company, which insures the timely payment of interest and the ultimate payment of principal of the investor certificate. Loan losses first reduce the amounts otherwise available to the interest-only and residual certificate holders and thereafter, if necessary, the monoline insurance company will pay any further losses experienced by the holders of the senior certificates. REGULATION The operations of Concorde are subject to extensive regulation, supervision and licensing by federal, state and local government authorities. Regulated matters include, without limitation, loan origination, credit activities, maximum interest rates and finance and other charges, disclosure to customers, the terms of secured transactions, the collection, repossession and claims-handling procedures utilized by Concorde, multiple qualification and licensing requirements for doing business in various jurisdictions and other trade practices. Concorde's loan origination activities are subject to the laws and regulations in each of the states in which those activities are conducted. Concorde's activities as a lender are also subject to various federal laws including, among others, the Truth in Lending Act ("TILA"), the Real Estate Settlement Procedures Act ("RESPA"), the Equal Credit Opportunity Act of 1974, as amended ("ECOA"), the Home Mortgage Disclosure Act and the Fair Credit Reporting Act of 1970, as amended ("FCRA"). The TILA and Regulation Z promulgated thereunder contain disclosure requirements designed to provide consumers with uniform, understandable information with respect to the terms and conditions of loans and credit transactions in order to give them the ability to compare credit terms. TILA also guarantees consumers a three-day right to cancel certain credit transactions including loans of the type originated by Concorde. Management of Concorde believes that it is in compliance with TILA and Regulation Z in all material respects. In September 1994, the Riegle Community Development and Regulatory Improvement Act of 1994 (the "Riegle Act") was enacted. Among other things, the Riegle Act made certain amendments to TILA. The TILA Amendments, which became effective in October 1995, generally apply to mortgage loans with (i) total points and fees upon origination in excess of the greater of eight percent of the loan amount or $400, or (ii) an annual percentage rate of more than ten percentage points higher than comparably maturing U.S. treasury securities. Loans covered by the TILA Amendments are known as "Section 32 loans." The TILA Amendments impose additional disclosure requirements on lenders originating Section 32 loans and prohibit lenders from originating Section 32 loans that are underwritten solely on the basis of the borrower's home equity without regard to the borrower's ability to repay the loan. In accordance with the TILA Amendments, Concorde applies underwriting criteria that takes into consideration the borrower's ability to repay the loan. The TILA Amendments also prohibit lenders from including prepayment fee clauses in Section 32 loans to borrowers with a debt-to-income ratio in excess of 50%. In addition, a lender that refinances a Section 32 loan previously made by such lender will not be able to enforce any prepayment penalty clause contained in such refinanced loan. The TILA Amendments impose other restrictions on Section 32 loans, including restrictions on balloon payments and negative amortization features. Concorde is also required to comply with the ECOA, which prohibits creditors from discriminating against applicants on the basis of race, color, sex, age or marital status. Regulation B promulgated under ECOA restricts creditors from obtaining certain types of information from loan applicants. It also requires certain disclosures by the lender regarding consumer rights and requires lenders to advise applicants of the reasons for any credit denial. In instances where the applicant is denied credit or the rate or charge for a loan increases as a result of information obtained from a consumer credit agency, another statute, the FCRA, requires the lender to supply the applicant with a name and address of the reporting agency. Concorde is also subject to RESPA and is required to file an annual report with the Department of Housing and Urban Development pursuant to the Home Mortgage Disclosure Act. In the course of its business, Concorde may acquire properties as a result of foreclosure. There is a risk that hazardous or toxic waste could be found on such properties. In such event, under certain state and federal environmental laws, Concorde could be held responsible for the cost of cleaning up or removing such waste, and such cost could exceed the value of the underlying properties. The laws, rules and regulations applicable to Concorde are subject to amendment. There are currently various proposed laws, rules and regulations which, if adopted, could impact Concorde. There can be no assurance that these proposed laws, rules and regulations, or other such laws, rules or regulations, will not be adopted in the future which could make compliance much more difficult or expensive, restrict Concorde's ability to originate, purchase, broker or sell loans, further limit or restrict the amount 8 10 of commissions, interest and other charges earned on loans originated or sold by Concorde, or otherwise adversely affect the business or prospects of Concorde. COMPETITION The Company is a new entrant in the sub-prime mortgage lending industry, is small compared to many of its competitors and faces intense competition in the business of originating, purchasing and selling mortgage loans. Competition in the industry takes many forms including convenience in obtaining a loan, customer service, marketing and distribution channels, and amount and term of the loan. Traditional competitors in the financial services business include other mortgage banking companies, commercial banks, credit unions, thrift institutions, credit card issuers and finance companies. Most of these competitors in the consumer finance business are substantially larger and have considerably greater financial, technical and marketing resources than Concorde. Concorde believes that its competitive strengths include providing prompt, responsive service and flexible underwriting to independent mortgage brokers. Concorde's underwriters apply its underwriting guidelines on an individual basis but have the flexibility to deviate from them when an exception or upgrade is warranted by a particular loan applicant's situation. EMPLOYEES As of July 31, 1997 the Company, including Concorde, employed thirteen persons full time. None of the Company's employees are covered by a collective bargaining agreement and the Company believes that its employee relations are satisfactory. CMN currently employs approximately 250 persons. EXECUTIVE OFFICERS The executive officers of the Company are as follows:
NAME AGE POSITION WITH THE COMPANY - ---- --- ------------------------- Edward R. McMurphy . . . . . 46 Chairman of the Board, President and Chief Executive Officer Tilman J. Falgout, III . . . 48 Executive Vice President, General Counsel and Director Mark D. Slusser . . . . . . . 39 Chief Financial Officer, Vice President Finance and Secretary
EDWARD R. MCMURPHY, has served as President of the Company since July 1984 and as Chief Executive Officer since January 1988. He has been a director of the Company since its inception in April 1983. Prior to and during his involvement with the Company, Mr. McMurphy served as President of Marion Properties, Inc., a real estate investment and development company, from 1979 to 1986. TILMAN J. FALGOUT, III, has served as Executive Vice President and General Counsel of the Company since March 1995 and as a director of the Company since September 1992. From 1978 through June 1995, Mr. Falgout was a partner in the law firm of Stumpf & Falgout, Houston, Texas. MARK D. SLUSSER, has served as Chief Financial Officer of the Company since October 1989 and as Secretary since April 1990. From 1981 until joining the Company, Mr. Slusser was employed by Ernst & Young LLP, where he held various positions in the Audit Department including Senior Manager. ITEM 2. PROPERTIES The Company leases approximately 6,000 square feet of office space in Irving, Texas which is used for the Company's executive offices. The lease expires in February 2001, and is subject to two three-year renewal options thereafter. 9 11 The Company owns 18.6 acres of land at the southeast corner of the intersection of Flamingo Road and Arville Street in Las Vegas, Nevada. This property is presently under contract to be sold, which sale is expected to close in September 1997. ITEM 3. LEGAL PROCEEDINGS On September 21, 1994, an action was filed against the Company and SCGC in the 24th Judicial District Court for the Parish of Jefferson, Louisiana by Avondale Industries, Inc. ("Avondale"). In this action, Avondale alleges that the Company was contractually obligated to Avondale for the construction of SCGC's riverboat vessel based upon a letter of intent (allegedly reaffirming a previous agreement entered into between Avondale and SCGC). Avondale alleges that the Company breached a duty to negotiate in good faith toward the execution of a definitive vessel construction contract. Alternatively, Avondale alleges that a separate, oral contract for the construction of the vessel existed and that the Company committed unspecified unfair trade practices and misrepresentations. Avondale seeks unspecified damages including "all lost profits and lost overhead" and attorneys fees. Avondale has claimed its lost profits and lost overhead amount to approximately $2.5 million. The Company intends to vigorously contest liability in this matter. While no assurance can be given as to the ultimate outcome of this litigation, management believes its resolution will not have a material adverse effect on the Company. On July 3, 1997 an action was filed against certain officers of Concorde, along with Concorde and the Company (collectively, the "Defendants") in the 134th Judicial District Court of Dallas County, Texas by Eagle Capital Corp. ("Eagle"). In this action Eagle alleges that while such officers were employed by Eagle they disseminated confidential and proprietary information regarding Eagle to the Company in order to create a competing business. Eagle seeks to enjoin all Defendants from their alleged possession and use of Eagle's confidential business information and to recover damages in an unspecified amount. The Company believes the allegations of this action are without merit and intends to vigorously contest liability in this matter. While no assurance can be given as to the ultimate outcome of this litigation, management believes its resolution will not have a material adverse effect on the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders of the Company during the fourth quarter ended April 30, 1997. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this item is included in the Company's 1997 Annual Report to Stockholders ("1997 Annual Report") under the heading "Common Stock Information, Dividends and Related Stockholder Matters" and such information is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information required by this item is included in the Company's 1997 Annual Report under the heading "Selected Financial Data" and such information is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is included in the Company's 1997 Annual Report under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" and such information is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements included in the Company's 1997 Annual Report are incorporated herein by reference. 10 12 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III Except as to information with respect to executive officers which is contained in a separate heading under Item 1 to this Form 10-K, the information required by Part III of Form 10-K is, pursuant to General Instruction G(3) of Form 10-K, incorporated by reference from the Company's definitive proxy statement to be filed pursuant to Regulation 14A for the Company's Annual Meeting of Stockholders to be held on October 1, 1997. The Company will, within 120 days of the end of its fiscal year, file with the Securities and Exchange Commission a definitive proxy statement pursuant to Regulation 14A. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information concerning directors and executive officers of the registrant is set forth in the Proxy Statement to be delivered to stockholders in connection with the Company's Annual Meeting of Stockholders to be held on October 1, 1997 (the "Proxy Statement") under the headings "Election of Directors" and "Compliance with Section 16(a) of the Securities Exchange Act of 1934," which information is incorporated herein by reference. The name, age and position of each executive officer of the Company is set forth under the heading "Executive Officers" in Item 1 of this report. ITEM 11. EXECUTIVE COMPENSATION The information concerning executive compensation is set forth in the Proxy Statement under the heading "Executive Compensation," which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information concerning security ownership of certain beneficial owners and management is set forth in the Proxy Statement under the heading "Security Ownership of Certain Beneficial Owners and Management," which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information concerning certain relationships and related transactions is set forth in the Proxy Statement under the heading "Certain Transactions," which information is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1). FINANCIAL STATEMENTS AND ACCOUNTANT'S REPORT The following financial statements and accountant's report included in the Company's 1997 Annual Report are incorporated herein by reference in Item 8 of this report: Report of Independent Accountants Consolidated Balance Sheets as of April 30, 1996 and 1997 Consolidated Statements of Operations for the fiscal years ended April 30, 1995, 1996 and 1997 Consolidated Statements of Cash Flows for the fiscal years ended April 30, 1995, 1996 and 1997 11 13 Consolidated Statements of Stockholders' Equity for the fiscal years ended April 30, 1995, 1996 and 1997 Notes to Consolidated Financial Statements (a)(2). FINANCIAL STATEMENT SCHEDULES The financial statement schedules are omitted since the required information is not present, or is not present in amounts sufficient to require submission of the schedules, or because the information required is included in the consolidated financial statements and notes thereto. (a)(3). EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------ ---------------------- 2.1 Purchase Agreement dated as of May 31, 1997 by and among the Company and Casino Magic Corp. ("Casino Magic"). (13) 3.1 Articles of Incorporation of the Company (formerly SKAI, Inc.). (3) 3.1.1 Articles of Merger of the Company and SKAI, Inc. filed with the Secretary of State of the State of Alabama on September 29, 1989. (3) 3.1.2 Articles of Merger of the Company and SKAI, Inc. filed with the Secretary of State of the State of Texas on October 10, 1989. (3) 3.1.3 Articles of Amendment filed with the Secretary of State of the State of Texas on October 7, 1993. (8) 3.1.4 Articles of Amendment filed with the Secretary of State of the State of Texas on October 5, 1994. (8) 3.2 By-Laws dated August 24, 1989. (4) 4.1 Specimen stock certificate. (9) 4.2 Form of Registration Rights Agreement dated January 5, 1994 by and between the Company and Dabney-Resnick, Inc. (8) 4.2.1 Form of Stock Purchase Warrant dated January 5, 1994 allowing Dabney-Resnick, Inc. to purchase shares of common stock of the Company. (8) 4.3 Form of Registration Rights Agreement dated January 5, 1994 by and between the Company and Sun Life Insurance Company of America, Inc. (8) 4.3.1 Form of Stock Purchase Warrant dated January 5, 1994 allowing Sun Life Insurance Company of America, Inc. to purchase shares of common stock of the Company. (8) 4.4 Stock Purchase Warrant dated June 3, 1994, allowing Nomura Holding America, Inc. ("Nomura") to purchase shares of Common Stock of the Company. (9) 4.4.1 Amendment to Stock Purchase Warrant dated as of December 3, 1994. (8) 4.5 Form of Stock Purchase Warrant dated as of April 15, 1994 allowing the following parties to purchase shares of Common Stock of the Company: Daniel G. Goggin (38,990 shares), Gerard M. Jacobs (77,981 shares), and The Hubbard Company, Inc. (77,981 shares). (9) 4.6 Form of Stock Purchase Warrant dated March 18, 1994 granting Dabney-Resnick, Inc. the right to purchase 120,000 shares of Common Stock of the Company. (8) 4.7 Stock Purchase Warrant dated October 6, 1994 granting Don Farris the right to purchase 50,000 shares of Common Stock of the Company. (8)
12 14 4.8 Stock Purchase Warrant dated June 2, 1994 granting Gerard M. Jacobs the right to purchase 50,000 shares of Common Stock of the Company. (8) 10.1 1986 Incentive Stock Option Plan. (2) 10.1.1 Amendment to 1986 Incentive Stock Option Plan adopted September 27, 1990. (5) 10.2 1991 Non-Qualified Stock Option Plan. (6) 10.3 Form of Indemnification Agreement between the Company and Edward R. McMurphy, Mark D. Slusser, T.J. Falgout, III, David J. Douglas, J. David Simmons, Gerald L. Adams, Robert J. Kehl, Gerard M. Jacobs and Michael B. Cloud. (7) 10.4 Form of Severance Agreement dated July 2, 1996 between the Company and Edward R. McMurphy, T.J. Falgout, III and Mark D. Slusser. (12) 10.5 Shareholders Agreement dated June 9, 1995 between the Company and LRGP. (10) 10.6 Shareholders' Agreement dated as of May 31, 1997 between the Company and Casino Magic. (13) 10.7 Teaming Agreement dated June 2, 1994 between the Company and Gerard M. Jacobs. (8) 10.8 Lease (South Tract) dated March 24, 1995 by and among Port Resources, Inc. and CRU, Inc. (collectively, "Landlord"), SCGC and the Company. (10) 10.8.1 Amendment to Lease (South Tract) dated May 3, 1995 by and among Landlord, SCGC, the Company and LRGP. (10) 10.8.2 Second Amendment to Lease (South Tract) dated May 16, 1995 by and among Landlord, SCGC, the Company and LRGP. (10) 10.9 Lease (North Tract) dated July 17, 1995 by and among Landlord, SCGC and the Company. (11) 10.9.1 Amendment to Lease (North Tract) dated July 17, 1995 by and among Landlord, SCGC, the Company and LRGP. (11) 10.9.2 Second Amendment to Lease (North Tract) dated July 25, 1995 by and among Landlord, SCGC, the Company and LRGP. (11) 10.10 Lease Agreement dated May 20, 1994 between IGT-North America and SCGC. (9) 10.10.1 Modification of Lease Agreement dated December 23, 1994 between IGT-North America and SCGC. (8) 13.1 Annual Report to Stockholders for the fiscal year ended April 30, 1997. (1) 21.1 Subsidiaries of Crown Casino Corporation. (1) 23.1 Consent of Independent Accountants. (1) 24.1 Power of Attorney of Edward R. McMurphy. (1) 24.2 Power of Attorney of Tilman J. Falgout, III. (1) 24.3 Power of Attorney of David J. Douglas. (1) 24.4 Power of Attorney of J. David Simmons. (1) 24.5 Power of Attorney of Gerald L. Adams. (1)
13 15 24.6 Power of Attorney of Gerard M. Jacobs. (1) 24.7 Power of Attorney of Robert J. Kehl. (1) 27.1 Financial Data Schedule. (1)
- ---------------------- (1) Filed herewith. (2) Previously filed as an Exhibit to the Company's Registration Statement on Form 10, as amended (No. 0-14939) and incorporated herein by reference. (3) Previously filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended October 31, 1989 and incorporated herein by reference. (4) Previously filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended April 30, 1990 and incorporated herein by reference. (5) Previously filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended April 30, 1991 and incorporated herein by reference. (6) Previously filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended April 30, 1992 and incorporated herein by reference. (7) Previously filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 1993 and incorporated herein by reference. (8) Previously filed as an Exhibit to the Company's Registration Statement on Form S-1, as amended, initially filed with the Securities and Exchange Commission on May 31, 1994 (No. 33-79484) and incorporated herein by reference. (9) Previously filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended April 30, 1994 and incorporated herein by reference. (10) Previously filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended April 30, 1995 and incorporated herein by reference. (11) Previously filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 1995 and incorporated herein by reference. (12) Previously filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended January 31, 1997 and incorporated herein by reference. (13) Previously filed as an Exhibit to the Company's Current Report on Form 8-K dated June 2, 1997 and incorporated herein by reference. (b) REPORTS ON FORM 8-K No reports on Form 8-K were filed during the fourth fiscal quarter ended April 30, 1997. 14 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. CROWN CASINO CORPORATION Dated: August 11, 1997 By: /s/ Edward R. McMurphy ------------------------------- Edward R. McMurphy President and Chief Executive Officer (principal executive officer) Dated: August 11 1997 By: /s/ Mark D. Slusser ------------------------------------ Mark D. Slusser Vice President Finance and Chief Financial Officer (principal financial and accounting officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- * Chairman of the Board, President August 11, 1997 - ------------------------------------- and Chief Executive Officer Edward R. McMurphy * Executive Vice President, August 11, 1997 - -------------------------------------- General Counsel and Director Tilman J. Falgout, III * Director August 11, 1997 - -------------------------------------- David J. Douglas * Director August 11, 1997 - -------------------------------------- John David Simmons * Director August 11, 1997 - -------------------------------------- Gerald L. Adams * Director August 11, 1997 - -------------------------------------- Gerard M. Jacobs * Director August 11, 1997 - -------------------------------------- Robert J. Kehl * By /s/ Mark D. Slusser August 11, 1997 -------------------------- Mark D. Slusser As Attorney-in-Fact Pursuant to Powers of Attorney filed herewith
15 17 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------ ---------------------- 13.1 Annual Report of Stockholders for the fiscal year ended April 30, 1997. 21.1 Subsidiaries of Crown Casino Corporation. 23.1 Consent of Independent Accountants. 24.1 Power of Attorney of Edward R. McMurphy. 24.2 Power of Attorney of Tilman J. Falgout, III. 24.3 Power of Attorney of David J. Douglas. 24.4 Power of Attorney of J. David Simmons. 24.5 Power of Attorney of Gerald L. Adams. 24.6 Power of Attorney of Gerard M. Jacobs. 24.7 Power of Attorney of Robert J. Kehl. 27.1 Financial Data Schedule.
EX-13.1 2 ANNUAL REPORT TO STOCKHOLDERS 1 EXHIBIT 13.1 MANAGEMENT'S DISCUSSION AND ANALYSIS OF CROWN CASINO CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Company's consolidated financial statements appearing elsewhere in this annual report. OVERVIEW Crown Casino Corporation ("Crown" or the "Company") is a holding company which presently owns 79% of Concorde Acceptance Corporation ("Concorde"), a sub-prime mortgage lender, and 49% of Casino Magic Neuquen S.A. ("CMN"), a casino operator in the Province of Neuquen, Argentina. Crown also owns 100% of Gaming Entertainment Management Services, Inc. ("GEMS") which owns an 18.6 acre tract of land in the gaming district of Las Vegas, Nevada. GEMS has entered into a contract to sell the Las Vegas land for $15.25 million. The Company is presently focusing on (i) the acquisition or development of other casino gaming properties in Argentina, (ii) the development and expansion of Concorde's mortgage based lending business, and (iii) the potential acquisition or development of other businesses unrelated to casino gaming or mortgage based lending. Since its inception in 1983 through June 1993 the Company was principally engaged in various facets of the cable and related programming businesses. During fiscal 1992 management determined the Company's programming business had become increasingly competitive from a profit margin standpoint and future growth was limited. As a result, in late fiscal 1992 the Company sold the majority of its programming business and began exploring new business opportunities. In June 1993 the Company made the decision to enter the gaming business, and, as a result, proceeded to sell the balance of its cable assets. From June 1993, with the acquisition of 100% of St. Charles Gaming Company, Inc. ("SCGC"), until November 1996 the Company's primary business focus was that of owning, operating and developing casino gaming properties. SCGC owns and operates a riverboat gaming casino located in Calcasieu Parish, Louisiana which had been in the development stage until opening in July 1995. In June 1995 the Company sold a 50% interest in SCGC to Louisiana Riverboat Gaming Partnership ("LRGP") and in May 1996 sold its remaining 50% interest in SCGC to Casino America, Inc. ("Casino America"). In November 1996 the Company decided to cease pursuing gaming opportunities in the United States and began pursuing business opportunities in fields unrelated to casino gaming. As a result, in June 1997 the Company, along with certain newly hired management personnel, formed Concorde. Concorde is in the business of originating, purchasing, servicing and selling sub-prime mortgage loans which are secured primarily by first and second liens on residential properties. These loans are expected to be sold in privately negotiated transactions as well as to institutional investors in the secondary market through securitization programs. Also in June 1997 the Company acquired a 49% interest in CMN from Casino Magic Corp. CMN operates casinos in the cities of Neuquen and San Martin de los Andes in the Province of Neuquen, Argentina under an exclusive concession contract. RESULTS OF OPERATIONS Since its acquisition in June 1993 through June 8, 1995 SCGC was a consolidated subsidiary of the Company. From June 9, 1995 (the date the first 50% interest in SCGC was sold) through May 3, 1996 (the date the remaining 50% interest in SCGC was sold) the Company accounted for its 50% interest in SCGC using the equity method. Accordingly, operating results for fiscal year 1997, 1996 and 1995 are not entirely comparable. FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996 General and administrative expenses for fiscal 1997 decreased $245,801 compared to fiscal 1996. The decrease was primarily attributable to a reduction in compensation costs, partially offset by increases in consulting and transportation expenses. Gaming development costs for fiscal 1997 decreased $175,030 compared to fiscal 1996 as a result of the Company's decision to cease pursuing gaming opportunities in the United States and begin pursuing business opportunities in other fields. Interest expense for fiscal 1997 decreased $939,955 compared to fiscal 1996. The decrease was principally the result of the Company no longer consolidating the operating results of SCGC from and after June 9, 1995 as SCGC was formerly responsible for substantially all of the Company's consolidated interest expense. Interest income for fiscal 1997 decreased $762,272 compared to fiscal 1996. The decrease was principally the result of the prepayment of a $10 million note by Casino America in August 1996 and the sale of a second $10 million note in October 1996 both of which had been earning interest at 11.5% per annum. The F-1 2 proceeds from such notes were placed in money market funds which earned interest at approximately 5.3% per annum. Other income in fiscal 1997 pertains to a fee earned by the Company in assisting another company complete an acquisition. FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995 General and administrative expenses for fiscal 1996 increased $1,033,755 compared to fiscal 1995. The increase was primarily attributable to greater personnel, transportation, and consulting and directors fees, offset by a decrease in professional fees. Gaming development costs for fiscal 1996 decreased $297,077 compared to fiscal 1995 principally as a result of the Company ceasing to pursue a riverboat gaming license in the State of Illinois. SCGC pre-opening and development costs for fiscal 1996 decreased $14,272,011 compared to fiscal 1995 as a result of the Company no longer consolidating SCGC's operating results from and after June 9, 1995. Interest expense for fiscal 1996 decreased $5,817,826 compared to fiscal 1995. The decrease was the result of the Company no longer consolidating SCGC's operating results from and after June 9, 1995. Interest income for fiscal 1996 increased $2,115,707 compared to fiscal 1995. The increase was a result of interest being recognized in fiscal 1996 on a $20 million note issued by LRGP (the "LRGP Note") in connection with LRGP's purchase of 50% of SCGC in June 1995. The LRGP Note earned interest at the rate 11.5% per annum. During fiscal 1995 the LRGP Note was not in existence. LIQUIDITY AND CAPITAL RESOURCES As of July 31, 1997 the Company's sources of liquidity included (i) $12 million cash on hand, (ii) the sale of the Company's Las Vegas land which is under contract to be sold for $15.25 million in cash, and (iii) the issuance of debt and/or equity. While the Company is focusing on (i) the acquisition or development of other casino gaming properties in Argentina, (ii) the development and expansion of Concorde's mortgage based lending business, and (iii) the potential acquisition or development of other businesses unrelated to casino gaming or mortgage based lending, the Company has made no definitive plans for the utilization of the Company's capital resources. Presently management believes the Company's capital resources are sufficient to satisfy the capital needs of the Company for the fiscal year ending April 30, 1998. In March 1996 the Company's Board of Directors approved a program, as amended, to repurchase up to 2,000,000 shares of the Company's common stock from time to time in the open market. As of July 31, 1997 the Company had repurchased 1,739,774 shares pursuant to this program. The timing and amount of future share repurchases, if any, will depend on various factors including market conditions, available alternative investments and the Company's financial position. SEASONALITY AND INFLATION Management of the Company does not believe inflation has had a material effect on the Company's business. In addition, Concorde and CMN's businesses are not subject to significant seasonal fluctuations. F-2 3 CONSOLIDATED BALANCE SHEETS CROWN CASINO CORPORATION
April 30, 1997 1996 ----------- ------------- Assets Current assets: Cash and cash equivalents $ 21,117,960 $ 668,853 Receivables, net 345,780 742,246 Prepaid expenses 37,674 49,766 Land held for sale 15,150,000 ------------ ------------- Total current assets 36,651,414 1,460,865 ------------ ------------- Property and equipment: Furniture, fixtures and equipment 1,811,581 1,892,666 Land held for development 16,169,709 ------------ ------------- 1,811,581 18,062,375 Less accumulated depreciation (226,404) (194,179) ------------ ------------- 1,585,177 17,868,196 ------------ ------------- Note receivable from LRGP 20,000,000 ------------ ------------- $ 38,236,591 $ 39,329,061 ============ ============= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 41,284 $ 72,773 Accrued liabilities 422,609 819,018 Current portion of long-term debt 69,005 Income taxes payable 335,000 Deferred income taxes 1,325,000 ------------ ------------- Total current liabilities 2,123,893 960,796 ------------ ------------- Long-term debt, less current portion 918,564 Deferred income taxes, less current portion 400,000 4,000,000 Investment in SCGC 3,297,043 Commitments and contingencies Stockholders' equity: Preferred stock, par value $.01 per share, 1,000,000 shares authorized; none issued or outstanding Common stock, par value $.01 per share, 50,000,000 shares authorized; 10,394,585 issued and outstanding (11,650,559 in 1996) 103,946 116,506 Additional paid-in capital 38,496,803 41,784,088 Accumulated deficit (2,888,051) (11,747,936) ------------ ------------- Total stockholders' equity 35,712,698 30,152,658 ------------ ------------- $ 38,236,591 $ 39,329,061 ============ =============
See accompanying notes to consolidated financial statements. F-3 4 CONSOLIDATED STATEMENTS OF OPERATIONS Crown Casino Corporation
Years Ended April 30, 1997 1996 1995 ------------- ------------- ------------- Revenues $ - $ - $ - Costs and expenses: General and administrative 2,796,273 3,042,074 2,008,319 Write-down of land held for sale 1,019,709 SCGC pre-opening and development 536,110 14,808,121 Gaming development 40,933 215,963 513,040 Gaming acquisition abandonment 696,009 664,991 Depreciation and amortization 168,443 130,556 248,044 ------------- ------------- ------------- 4,721,367 4,589,694 17,577,524 ------------- ------------- ------------- Other income (expense): Interest expense (68,757) (1,008,712) (6,826,538) Interest income 1,530,324 2,292,596 176,889 Equity in loss of SCGC (2,408,213) Gain on sale of SCGC 14,934,543 21,512,640 Loss on sale of securities (5,254,858) Other income 500,000 ------------- ------------- ------------- 11,641,252 20,388,311 (6,649,649) ------------- ------------- ------------- Income (loss) before income taxes 6,919,885 15,798,617 (24,227,173) Provision (benefit) for income taxes (1,940,000) 3,500,000 (3,902,328) ------------- ------------- ------------- Net income (loss) $ 8,859,885 $ 12,298,617 $ (20,324,845) ============= ============= ============= Earnings (loss) per share $ .80 $ 1.03 $ (2.01) ============= ============= ============= Weighted average common and common equivalent shares outstanding 11,027,077 11,981,757 10,103,993 ============= ============= =============
See accompanying notes to consolidated financial statements. F-4 5 CONSOLIDATED STATEMENTS OF CASH FLOWS CROWN CASINO CORPORATION
Years Ended April 30, 1997 1996 1995 ------------- ------------- ------------- Operating activities: Net income (loss) $ 8,859,885 $ 12,298,617 $ (20,324,845) Adjustments to reconcile net income (loss) to net cash used by operating activities: Depreciation and amortization 168,443 130,556 248,044 Amortization of debt issuance costs/discount 389,360 3,376,392 Deferred income taxes (2,275,000) 3,500,000 (3,940,000) Equity in loss of SCGC 2,408,213 Write-down of assets 1,715,718 51,496 3,131,359 Gain on sale of SCGC (14,934,543) (21,512,640) Equity securities issued for services 1,562,500 Loss on sale of securities 5,254,858 Changes in assets and liabilities, net of transactions: Receivables, net 396,466 (780,747) 592,447 Prepaid expenses 12,092 54,347 (902,259) Accounts payable and accrued liabilities (145,398) 243,606 1,611,415 Income taxes payable (335,000) ------------- ------------- ------------- Net cash used by operating activities (1,282,479) (3,217,192) (14,644,947) ------------- ------------- ------------- Investing activities: Purchase of assets (1,076,142) (4,536,401) (18,897,910) Sale of assets 325,000 441,023 Purchase of securities (4,023,118) Sale of securities 11,593,260 Sale/collection of notes receivable 19,200,000 Sale of SCGC 1,000,000 ------------- ------------- ------------- Net cash provided (used) by investing activities 26,019,000 (3,095,378) (18,897,910) ------------- ------------- ------------- Financing activities: Issuance of common stock 23,125 7,403,490 Purchase of common stock (3,299,845) (298,723) (55,000) Issuance of debt and warrants 1,000,000 32,700,000 Debt issuance costs (1,633,407) Advances from LRGP 4,627,897 2,179,083 Payments of debt and capital lease obligations (987,569) (63,316) (7,137,808) ------------- ------------- ------------- Net cash provided (used) by financing activities (4,287,414) 5,288,983 33,456,358 ------------- ------------- ------------- Increase (decrease) in cash and cash equivalents 20,449,107 (1,023,587) (86,499) Cash and cash equivalents at: Beginning of year 668,853 1,692,440 1,778,939 ------------- ------------- ------------- End of year $ 21,117,960 $ 668,853 $ 1,692,440 ============= ============= =============
See accompanying notes to consolidated financial statements. F-5 6 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY CROWN CASINO CORPORATION For the Three Years in the Period Ended April 30, 1997
Common Stock Treasury Stock ------------------------ ------------------------ Shares Amount Shares Amount ---------- ------------ ---------- ------------ Balance at April 30, 1994 9,686,319 $ 96,863 687,394 $ (587,887) Issuance of common stock 2,650,034 26,501 Issuance of warrants Purchase of common stock 10,000 (55,000) Stock options exercised 39,500 395 Cancellation of treasury stock (697,394) (6,974) (697,394) 642,887 Net loss ---------- ------------ ---------- ------------ Balance at April 30, 1995 11,678,459 116,785 - - Issuance of common stock 50,000 500 Purchase of common stock (90,900) (909) Stock options exercised 13,000 130 Net income ---------- ------------ ---------- ------------ Balance at April 30, 1996 11,650,559 116,506 - - Purchase of common stock (1,255,974) (12,560) Net income ---------- ------------ ---------- ------------ Balance at April 30, 1997 10,394,585 $ 103,946 - $ - ========== ============ ========== ============
See accompanying notes to consolidated financial statements. F-6 7 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY CROWN CASINO CORPORATION
Additional Total Paid-in Accumulated Stockholders Capital Deficit Equity -------------- -------------- -------------- Balance at April 30, 1994 $ 28,049,381 $ (3,721,708) $ 23,836,649 Issuance of common stock 12,418,442 12,444,943 Issuance of warrants 1,989,845 1,989,845 Purchase of common stock (55,000) Stock options exercised 37,652 38,047 Cancellation of treasury stock (635,913) Net loss (20,324,845) (20,324,845) -------------- -------------- -------------- Balance at April 30, 1995 41,859,407 (24,046,553) 17,929,639 Issuance of common stock 199,500 200,000 Purchase of common stock (297,814) (298,723) Stock options exercised 22,995 23,125 Net income 12,298,617 12,298,617 -------------- -------------- -------------- Balance at April 30, 1996 41,784,088 (11,747,936) 30,152,658 Purchase of common stock (3,287,285) (3,299,845) Net income 8,859,885 8,859,885 -------------- -------------- -------------- Balance at April 30, 1997 $ 38,496,803 $ (2,888,051) $ 35,712,698 ============== ============== ==============
See accompanying notes to consolidated financial statements. F-7 8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CROWN CASINO CORPORATION A - History and Description of Business Crown Casino Corporation ("Crown" or the "Company") is a holding company which presently owns 79% of Concorde Acceptance Corporation ("Concorde"), a sub-prime mortgage lender, and 49% of Casino Magic Neuquen S.A. ("CMN"), a casino operator in the Province of Neuquen, Argentina. Crown also owns 100% of Gaming Entertainment Management Services, Inc. ("GEMS") which owns an 18.6 acre tract of land in the gaming district of Las Vegas, Nevada. GEMS has entered into a contract to sell the Las Vegas land for $15.25 million (see Note E). The Company is presently focusing on (i) the acquisition or development of other casino gaming properties in Argentina, (ii) the development and expansion of Concorde's mortgage based lending business, and (iii) the potential acquisition or development of other businesses unrelated to casino gaming or mortgage based lending. From June 1993, with the acquisition of 100% of St. Charles Gaming Company, Inc. ("SCGC"), until November 1996, the Company's primary business focus was that of owning, operating and developing casino gaming properties. SCGC owns and operates a riverboat gaming casino located in Calcasieu Parish, Louisiana which had been in the development stage until opening in July 1995. In June 1995 the Company sold a 50% interest in SCGC to Louisiana Riverboat Gaming Partnership ("LRGP") and in May 1996 sold its remaining 50% interest in SCGC to Casino America, Inc. ("Casino America") (see Note C). In November 1996 the Company decided to cease pursing gaming opportunities in the United States and began pursuing business opportunities in fields unrelated to casino gaming. As a result, in June 1997 the Company, along with certain newly hired management personnel, formed Concorde. Concorde is in the business of originating, purchasing, servicing and selling sub-prime mortgage loans which are secured primarily by first and second liens on residential properties. These loans are expected to be sold in privately negotiated transactions as well as to institutional investors in the secondary market through securitization programs. Also in June 1997 the Company acquired a 49% interest in CMN from Casino Magic Corp. ("Casino Magic"). CMN operates casinos in the cities of Neuquen and San Martin de los Andes in the Province of Neuquen, Argentina under an exclusive concession contract (see Note D). B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principals of Consolidation The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The consolidated financial statements include the accounts of Crown Casino Corporation and all of its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Since its acquisition in June 1993 through June 8, 1995 SCGC was a consolidated subsidiary of the Company. From June 9, 1995 through May 3, 1996 the Company accounted for its 50% ownership in SCGC using the equity method. Cash and Cash Equivalents The Company considers cash and all highly liquid investments with an original maturity of three months or less to be cash equivalents. Casino Pre-opening and Development Costs All casino pre-opening and development costs are expensed as incurred. Pre-opening and development costs consist principally of personnel costs, advertising, insurance, travel, consulting and professional fees. Property and Equipment Property and equipment are stated at cost. Expenditures for additions, renewals and improvements are capitalized. Interest costs during construction of facilities are capitalized. Costs of repairs and maintenance are expensed as incurred. Depreciation on furniture, fixtures and equipment is computed using the straight-line method over five to ten years. F-8 9 Concentration of Credit Risk At April 30, 1997 the majority of the Company's cash was invested in two large institutional money market funds which balances are not insured. Management believes the credit risk associated with these money market funds is nominal. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Treasury Stock During fiscal 1995 the Company formally canceled all of its shares held in treasury. Also during fiscal 1996 and 1997 the Company repurchased some of its common stock and immediately thereafter canceled the shares. The amount credited to additional paid-in capital upon the original issuance of such shares was estimated to be equal to or greater than the Company's cost of reacquiring such shares. Accordingly, the carrying value in excess of the par value of such shares was charged to additional paid-in capital upon such cancellation. Earnings (Loss) Per Share Earnings (loss) per share has been calculated using the weighted average number of shares outstanding, including common stock equivalents, if dilutive. Fully diluted per share amounts are substantially the same as primary per share amounts for the periods presented. In February 1997 the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per Share ("EPS")," which is effective in fiscal 1998 and earlier application is not permitted. SFAS No. 128 simplifies the standards for computing earnings per share. It replaces the presentation of primary EPS with a presentation of basic EPS. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period. If SFAS No. 128 had been applied to fiscal 1997 results of operations, the Company's basic EPS would have been $.82 based upon a weighted-average number of common shares outstanding of 10,868,119. Fully dilutive EPS remains the same under SFAS No. 128 but will be referred to as diluted EPS. Recent Accounting Pronouncements In June 1997 the FASB issued SFAS No. 130 "Reporting Comprehensive Income," which establishes standards for reporting comprehensive income and its components in a full set of general purpose financial statements. Also in June 1997 the FASB issued SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information," which requires public companies to disclose certain operating and financial information by business segment in their annual and interim financial statements. SFAS No. 130 and No. 131 are effective for fiscal years beginning after December 15, 1997. Reclassifications Certain prior year amounts in the accompanying financial statements have been reclassified to conform to the fiscal 1997 presentation. C - SALE OF SCGC On June 9, 1995 pursuant to a definitive stock purchase agreement, the Company sold a 50% interest in SCGC to LRGP, a joint venture then owned 50% by Casino America and 50% by Louisiana Downs, Inc. The purchase price consisted of (i) a five-year $20 million non-recourse note with interest payable monthly at 11.5% per annum (the "LRGP Note"), (ii) $1 million cash, and (iii) a non-detachable five-year warrant to purchase 416,667 shares of Casino America common stock at $12 per share. In connection with this transaction, in June 1995, the Company recorded a gain before income taxes of approximately $21.5 million. On May 3, 1996 the Company sold its remaining 50% interest in SCGC to Casino America for (i) 1,850,000 shares of Casino America common stock, which the Company valued at $6.50 per share, (ii) the exchange of the $20 million LRGP Note for LRGP Note A ("Note A") and LRGP Note B ("Note B"), each in the principal amount of $10 million and bearing interest at 11.5% per annum, and (iii) an additional non-detachable five-year warrant to purchase up to another 416,667 shares of Casino America common stock at an exercise price of $12 per share. In connection with this transaction, in May 1996, the Company recorded a gain before income taxes of approximately $14.9 million. F-9 10 In August 1996 Casino America paid off Note A in full and in October 1996 the Company sold Note B at a discount of $800,000. Also in August 1996 the Company acquired 684,786 shares of Casino America common stock for an aggregate purchase price of $4,023,118 in connection with a rights offering declared by Casino America. These shares were sold in October and November 1996 resulting in a gain before income taxes of $207,139. Also in November 1996 the Company sold the 1,850,000 shares of Casino America common stock it had received in the sale of its remaining 50% interest in SCGC for net proceeds of $7,363,003, resulting in a loss before income taxes of $4,661,997. The Company has included 100% of SCGC's operating results in its consolidated results of operations through June 8, 1995. From and after June 9, 1995 (the date of sale of the first 50% interest in SCGC), the Company has accounted for its investment in SCGC on the equity method, and accordingly has included its proportionate share of SCGC's operating results in its consolidated results of operations. The Company's gain before income taxes on the sale of SCGC is calculated as follows (in thousands):
Sale of Sale of First 50% Second 50% (June 1995) (May 1996) ----------- ---------- Consideration received in sale $ 21,000 $ 12,025 The Company's negative basis in stock sold 889 3,297 Transaction and other costs (376) (388) ------- ------ Gain before income taxes on sale of SCGC $ 21,513 $ 14,934 ======== ========
Upon closing of the sale of its remaining 50% interest in SCGC on May 3, 1996, the Company's investment in SCGC was eliminated. Other than a guarantee of certain leases, for which the Company has been indemnified by LRGP, the Company is not liable for any obligations of SCGC. At April 30, 1996 SCGC had assets, liabilities and shareholders' deficit of approximately $87 million, $94 million and $7 million, respectively. SCGC's condensed results of operations for the years ended April 30, 1996 and 1995, are as follows (in thousands):
Fiscal Fiscal 1996 1995 ---- ---- Revenues $ 57,263 $ - Costs and expenses 50,958 Pre-opening and development 4,196 14,809 Depreciation and amortization 3,289 111 Interest expense 6,210 6,810 Benefit for income taxes (1,056) (2,828) -------- -------- Net loss $ (6,334) $(18,902) ======== ========
During the year ended April 30, 1996 the Company included approximately $3.4 million of net costs and expenses, or approximately $.28 per share, attributable to SCGC in its consolidated results of operations. D - ACQUISITIONS In June 1997 the Company acquired 49% of the capital stock of CMN as well as interests in certain other assets and contracts related to CMN from Casino Magic for a purchase price of $7 million. CMN operates casinos in the cities of Neuquen and San Martin de los Andes in the Province of Neuquen, Argentina under an exclusive concession contract that expires in 2007, but can be extended by CMN for an additional five years under certain circumstances. CMN's revenues were $15.9 million and $13.0 million for the years ended December 31, 1996 and 1995, respectively. In June 1996 the Company entered into a definitive asset purchase agreement to acquire the assets and operations of Mississippi Belle II, Inc. ("MBII") which owns a riverboat casino in Clinton, Iowa for a purchase price of $40 million. In November 1996 the Company decided to cease pursuing gaming opportunities in the United States and began pursuing business opportunities in fields unrelated to casino gaming and, as a result, elected to abandon the proposed acquisition of MBII. As a result the Company wrote-off $696,009 of costs, including a $500,000 non-refundable deposit. F-10 11 In July 1995 the Company entered into a definitive asset purchase agreement to acquire the Bourbon Street Hotel and Casino located in Las Vegas, Nevada. In November 1995 the Company determined not to proceed with the acquisition due to (i) the possibility of more attractive investment opportunities, (ii) the lack of attractive financing, and (iii) declining margins at the property. In connection with this decision, the Company wrote off $664,991 of costs and expenses related to the proposed acquisition. E - LAND HELD FOR SALE In April 1997 the Company entered into an agreement, subject to certain conditions, to sell its 18.6 acre tract of land in Las Vegas, Nevada for $15.25 million. As a result of this agreement, the Company wrote down the value of such land to $15.15 million, which represents the contract selling price of the land less the estimated transaction costs. Closing is expected in September 1997. In the event the conditions to closing are satisfied and the buyer fails to close, the buyer would be required to pay the Company $250,000 as liquidated damages. F - DEBT In November 1995 the Company issued a $1 million ten year note to a bank bearing interest at prime plus 1 1/2% that was collateralized by certain equipment of the Company. The Note was paid off in December 1996. In June 1994 SCGC issued a $28 million Senior Secured Increasing Rate Note (the "Senior Note") to an institutional investor. The Senior Note carried a 12% coupon increasing 67 basis points each quarter up to a maximum interest rate of 14%. The Senior Note was issued with a five year warrant to purchase 508,414 shares of the Company's common stock. The proceeds from the private placement were allocated between the Senior Note ($26.7 million) and the warrant ($1.3 million) based upon the relative fair value of each of the securities at the time of issuance. The resulting original issue discount was amortized over the life of the Senior Note using the effective interest method. SCGC repaid $6.5 million of the Senior Note in October 1994 and the balance was repaid in August 1995. G - INCOME TAXES The provision (benefit) for income taxes for the fiscal years ended April 30, 1997, 1996 and 1995 was as follows:
Fiscal Fiscal Fiscal 1997 1996 1995 ---------- ---------- --------- Provision (benefit) for income taxes: Current $ 335,000 $ -- $ 37,672 Deferred (2,275,000) 3,500,000 (3,940,000) ------------ ----------- ------------ $ (1,940,000) $ 3,500,000 $ (3,902,328) ============ =========== ============
The provision (benefit) for income taxes is different from the amount computed by applying the statutory federal income tax rate to income (loss) before income taxes for the following reasons:
Fiscal Fiscal Fiscal 1997 1996 1995 ---------- ---------- --------- Federal statutory rate 34% 34% (34)% State income tax, net of federal benefit (5) Equity in loss of SCGC 5 Basis difference in SCGC stock (62) (22) Valuation allowance 23 Other 5 ---------- ------------ ---------- (28)% 22% (16)% ========== ============ ==========
F-11 12 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets were as follows:
April 30, 1997 1996 ----------- ----------- Deferred tax liabilities: Installment sale $ 3,768,841 Land held for sale $ 1,445,553 1,792,255 Other 395,332 460,560 ----------- ----------- Total deferred tax liabilities 1,840,885 6,021,656 ----------- ----------- Deferred tax assets: Pre-opening expenses 1,436,428 Net operating loss carryforward 466,510 Other 115,885 118,718 ----------- ----------- Total deferred tax assets 115,885 2,021,656 ----------- ----------- Net deferred tax liability $ 1,725,000 $ 4,000,000 =========== ===========
In fiscal 1997 the Company utilized approximately $1.4 million of net operating loss carryforwards in determining its federal income tax provision. H - CAPITAL STOCK In March 1996 the Company's Board of Directors approved a program, as amended, to repurchase up to 2,000,000 shares of the Company's common stock from time to time in the open market. At April 30, 1997 the Company had repurchased 1,280,974 shares pursuant to this program. The timing and amount of future share repurchases, if any, will depend on various factors including market conditions, available alternative investments and the Company's financial position. The Company is authorized to issue up to one million shares of $.01 par value preferred stock in one or more series having such respective terms, rights and preferences as are designated by the Board of Directors. No preferred stock has been issued. I - STOCK OPTIONS AND WARRANTS Options The shareholders of the Company have approved two stock option plans, the 1986 Incentive Stock Option Plan ("1986 Plan") for employees covering 1,250,000 shares of common stock and the 1991 Non-Qualified Stock Option Plan ("1991 Plan") for directors and key employees covering 250,000 shares of common stock. While previously granted options remain effective, the provisions of the 1986 and 1991 Plans permitting additional option grants have expired. As a result, in July 1997 the Board of Directors of the Company adopted the 1997 Stock Option Plan ("1997 Plan") for employees, directors and certain advisors and consultants covering 1,000,000 shares of common stock. Certain aspects of the 1997 Plan are subject to shareholder approval. Generally, stock options are granted with the exercise price equal to the market value of the Company's common stock on the date of grant. Options granted under the 1986 and 1991 Plans expire in the years 1998 through 2006. F-12 13 The following is an aggregate summary of the 1986 Plan and 1991 Plan activity since April 30, 1994:
Number Exercise Price Proceeds of Shares per Share on Exercise --------- -------------------------- ----------- Outstanding at April 30, 1994 667,143 $ .41 to $ 7.38 $ 2,993,047 Granted 480,000 $ 3.31 to $ 4.03 1,671,094 Exercised (39,500) $ .41 to $ 1.41 (38,047) Canceled (310,000) $ 7.31 (2,266,875) -------- ---------- Outstanding at April 30, 1995 797,643 $ .41 to $ 7.38 2,359,219 Exercised (18,000) $ 1.41 to $ 3.31 (53,906) Canceled (25,000) $ 7.31 (182,813) -------- ---------- Outstanding at April 30, 1996 754,643 $ .41 to $ 7.38 2,122,500 Granted 60,000 $ 2.81 168,750 -------- ---------- Outstanding at April 30, 1997 814,643 $ .41 to $ 7.38 $2,291,250 ======== ==========
A summary of stock options outstanding as of April 30, 1997 is as follows:
Weighted Average Range of Remaining Contractual Weighted Exercise Number of Life Average Prices Shares (in years) Exercise Price --------- ---------- -------------------- -------------- $ .41 to $ 1.55 254,643 4.29 $ .96 $ 2.81 to $ 4.03 525,000 7.93 3.41 $ 7.31 to $ 7.38 35,000 6.94 7.33 ------- $ .41 to $ 7.38 814,643 6.75 $ 2.81 =======
All of the above options were exercisable at April 30, 1997 with the exception of options to purchase 150,000 shares at prices ranging from $3.31 to $3.88 which become exercisable from 1998 through 1999. In October 1995 the FASB issued SFAS No. 123 "Accounting for Stock-Based Compensation," which establishes a new fair value based accounting method for stock-based compensation plans and encourages (but does not require) employers to adopt the new method in place of the provisions of Accounting Principles Board Opinion ("APB") No. 25 "Accounting for Stock Issued to Employees." Companies may continue to apply the accounting provisions of APB No. 25 in determining net income; however, they must apply the disclosure requirements of SFAS No. 123 for all grants issued after fiscal 1995. The Company elected to continue to apply the provisions of APB No. 25 in accounting for the employee stock plans described above. Accordingly, no compensation cost has been recognized. Had compensation cost for the Company's stock option plans been determined based on the fair value of the options granted in accordance with SFAS No. 123, the Company's net income and earnings per share would have been $8,800,827 and $.80, respectively, for the fiscal year ended April 30, 1997. The fair value of each option grant was determined as of the grant date using the Black-Scholes valuation model with the following weighted average assumptions: dividend yield of 0%, expected volatility of 52.5%; risk-free interest rate of 6.56%, and expected life of 5 years. Warrants The Company issued common stock purchase warrants to a variety of parties in connection with financing activities, the development of SCGC's riverboat gaming project and certain other matters. The warrants issued were valued based upon a composite of commonly accepted warrant valuation models. The following is an aggregate summary of warrants outstanding as of April 30, 1997:
Number of Underlying Exercise Price Proceeds Shares per Share on Exercise ------------ -------------- ----------- 1,184,246 $3.00 to $12.00 $6,121,412 ========= ==========
All of the warrants are presently exercisable. The warrants expire between 1997 and 1999, contain certain anti-dilution provisions and provide the holders with certain registration rights relative to the underlying shares. F-13 14 J - LEASES The Company has certain operating leases for equipment and its office facilities. As of April 30, 1997 the aggregate rentals due under such leases were as follows:
Fiscal Amount ------ ------ 1998 $ 112,968 1999 101,910 2000 79,248 2001 58,014 ---------- $ 352,140 ==========
Rent expense for all operating leases was approximately $136,000, $115,000, and $94,000 during fiscal 1997, 1996 and 1995, respectively. K - RELATED PARTY TRANSACTIONS In June 1996 the Company entered into a definitive asset purchase agreement to acquire the assets and operations of MBII, which owns and operates a riverboat casino in Clinton, Iowa. MBII is principally owned by the adult children of a director of the Company. In November 1996 the Company determined to abandon the proposed transaction (see Note D). During fiscal 1995 the Company entered into a teaming agreement with an individual who subsequently became a director of the Company. Pursuant to such agreement the Company issued warrants to purchase 50,000 shares of the Company's common stock. The Company incurred legal fees of approximately $7,000, $121,000, and $259,000 during fiscal 1997, 1996 and 1995, respectively, from a law firm of which a director of the Company was a partner. In July 1995 this director left such law firm and became a full-time executive officer of the Company. L - COMMITMENTS AND CONTINGENCIES Litigation In September 1994 an action was filed against the Company and SCGC in the 24th Judicial District Court for the Parish of Jefferson, Louisiana by Avondale Industries, Inc. ("Avondale"). In this action Avondale alleges that the Company was contractually obligated to Avondale for the construction of SCGC's riverboat vessel based upon a letter of intent (allegedly reaffirming a previous agreement entered into between Avondale and SCGC). Avondale alleges that the Company breached a duty to negotiate in good faith toward the execution of a definitive vessel construction contract. Alternatively, Avondale alleges that a separate oral contract for the construction of the vessel existed and that the Company committed unspecified unfair trade practices and made certain misrepresentations. Avondale seeks unspecified damages including "all lost profits and lost overhead" and attorneys fees. Avondale has claimed its lost profits and lost overhead amount to approximately $2.5 million. The Company intends to vigorously contest liability in this matter. While no assurance can be given as to the ultimate outcome of this litigation, management believes its resolution will not have a material adverse effect on the Company. In July 1997 an action was filed against certain officers of Concorde, along with Concorde and the Company (collectively, the "Defendants") in the 134th Judicial District Court of Dallas County, Texas by Eagle Capital Corp. ("Eagle"). In this action Eagle alleges that while such officers were employed by Eagle they disseminated confidential and proprietary information regarding Eagle to the Company in order to create a competing business. Eagle seeks to enjoin all Defendants from their alleged possession and use of Eagle's confidential business information and to recover damages in an unspecified amount. The Company believes the allegations of this action are without merit and intends to vigorously contest liability in this matter. While no assurance can be given as to the ultimate outcome of this litigation, management believes its resolution will not have a material adverse effect on the Company. F-14 15 Severance Agreements In July 1996 the Board of Directors of the Company authorized the Company to enter into severance agreements with its three executive officers which provide for payments to the executives in the event of their termination after a change in control, as defined, of the Company. The agreements provide, among other things, for a compensation payment equal to 2.99 times the annual compensation paid to the executive, as well as accelerated vesting of options under the Company's incentive stock option plan, in the event of such executive's termination in connection with a change in control. M - SUPPLEMENTAL CASH FLOW INFORMATION Supplemental cash flow disclosures for the fiscal years ended April 30, 1997, 1996 and 1995 are as follows:
Fiscal Fiscal Fiscal 1997 1996 1995 ----------- ----------- ----------- Note received for sale of first 50% interest in SCGC $20,000,000 Stock received for sale of second 50% interest in $12,025,000 Common stock issued for equipment $1,450,000 Common stock issued for services and other 1,300,000 Equipment acquired under capital leases 5,778,767 Note payable exchanged for land 471,465 Warrants issued for equipment and services 337,500 Interest paid, net of amount capitalized 68,757 922,801 6,132,059 Income taxes refunded, net (124,328)
N - SUBSEQUENT EVENTS In June 1997 the Company acquired 49% of the capital stock of CMN as well as interests in certain other assets and contracts related to CMN from Casino Magic for a purchase price of $7 million. CMN operates casinos in the cities of Neuquen and San Martin de los Andes in the Province of Neuquen, Argentina under an exclusive concession contract that expires in 2007, but can be extended by CMN for five additional years under certain circumstances. CMN's revenues were $15.9 million and $13.0 million for the years ended December 31, 1996 and 1995, respectively. In June 1997 the Company, along with certain newly hired management personnel, formed Concorde. Concorde is in the business of originating, purchasing, servicing and selling sub-prime mortgage loans which are secured primarily by first and second liens on residential properties. These loans are expected to be sold in privately negotiated transactions as well as to institutional investors in the secondary market through securitization programs. F-15 16 REPORT OF INDEPENDENT ACCOUNTANTS Crown Casino Corporation Stockholders and Board of Directors Crown Casino Corporation We have audited the accompanying consolidated balance sheets of Crown Casino Corporation and subsidiaries as of April 30, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended April 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Crown Casino Corporation and subsidiaries as of April 30, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended April 30, 1997 in conformity with generally accepted accounting principles. Dallas, Texas Coopers & Lybrand L.L.P. July 11, 1997 F-16 17 COMMON STOCK INFORMATION, DIVIDENDS AND Crown Casino Corporation RELATED STOCKHOLDER MATTERS The Company's common stock is authorized for quotation on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") Small Cap Market under the NASDAQ symbol DICE. The following table sets forth, by fiscal quarter, the high and low sale prices reported by NASDAQ for the Company's common stock for the periods indicated.
Fiscal 1997 Fiscal 1996 High Low High Low ------------------------------------------------------- First quarter $3 5/8 $1 11/16 $6 3/8 $4 3/4 Second quarter 3 1/16 2 5 3/4 2 7/8 Third quarter 3 1/4 2 3 13/64 1 11/16 Fourth quarter 2 15/16 2 2 1/4 1 7/16
As of July 1, 1997 there were approximately 1,712 stockholders of record. This number excludes individual stockholders holding stock under nominee security position listings. Since its inception the Company has paid no dividends on its common stock. The Company currently intends to follow a policy of retaining earnings to finance future growth. Payment of dividends in the future will be determined by the Company's Board of Directors and will depend upon, among other things, the Company's future earnings, operations, capital requirements and surplus, general financial condition, and contractual restrictions that may exist, and such other factors as the Board of Directors may deem relevant. F-17 18 SELECTED FINANCIAL DATA The financial data set forth below was derived from the audited consolidated financial statements of the Company and should be read in conjunction with the consolidated financial statements and related notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations contained elsewhere herein. (In thousands, except per share amounts.)
Years Ended April 30, 1997 1996 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------- Revenues from: Continuing operations $ - $ - $ - $ - $ - Discontinued operations - - - 604 1,347 Income (loss) from: Continuing operations $ 8,860 $ 12,298 $ (20,325) $ (2,052) $ (263) Discontinued operations (177) (145) ------------ ------------- ---------- --------- -------- $ 8,860 $ 12,298 $ (20,325) $ (2,229) $ (408) ------------ ------------- ---------- --------- -------- Income (loss) per share: Continuing operations $ .80 $ 1.03 $ (2.01) $ (.34) $ (.07) Discontinued operations (.03) (.04) ------------ ------------- ---------- --------- -------- $ .80 $ 1.03 $ (2.01) $ (.37) $ (.11) ------------ ------------- ---------- --------- -------- Total assets $ 38,237 $ 39,329 $ 54,507 $ 30,974 $ 4,388 Long-term obligations - 919 2,271 2,330 - Stockholders' equity 35,713 30,153 17,930 23,837 3,711 Shares outstanding 10,395 11,650 11,678 8,999 3,524
F-18 EX-21.1 3 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21.1 SUBSIDIARIES OF CROWN CASINO CORPORATION AS OF APRIL 30, 1997 Gaming Entertainment Management Services, Inc. Crown Delaware Investments Corp. Crown Casino Nevada, Inc. Crown of Nevada, Inc. Cardio Acquisition Corporation EX-23.1 4 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Crown Casino Corporation and subsidiaries on Form S-8 (File No. 33-59519 and File No. 33-59527) of our report dated July 11, 1997, on our audits of the consolidated financial statements of Crown Casino Corporation and subsidiaries as of April 30, 1997 and 1996, and for the years ended April 30, 1997, 1996 and 1995, which report is incorporated by reference in this Annual Report on Form 10-K. Dallas, Texas Coopers & Lybrand L.L.P. August 12, 1997 EX-24 5 POWER OF ATTORNEY OF EDWARD R. MCMURPHY 1 EXHIBIT 24.1 STATE OF TEXAS ) ) COUNTY OF DALLAS ) POWER OF ATTORNEY Know all men by these presents, that I, EDWARD R. MCMURPHY, a Director of CROWN CASINO CORPORATION, a Texas corporation, do constitute and appoint MARK D. SLUSSER, my true and lawful attorney-in-fact, with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for CROWN CASINO CORPORATION, for the fiscal year ended April 30, 1997, and to file the same with the Securities and Exchange Commission and the National Association of Security Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as said attorney-in-fact deems appropriate, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. In witness whereof, I have hereunto set my hand and seal this 1st day of August, 1997. /s/ Edward R. McMurphy ---------------------------------- Edward R. McMurphy ACKNOWLEDGEMENT Before me this 1st day of August , 1997, came EDWARD R. MCMURPHY, personally known to me, who in my presence did sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed. /s/ April May ---------------------------------- NOTARY PUBLIC EX-24.2 6 POWER OF ATTORNEY OF TILMAN J. FALGOUT, III 1 EXHIBIT 24.2 STATE OF TEXAS ) ) COUNTY OF DALLAS ) POWER OF ATTORNEY Know all men by these presents, that I, T.J. FALGOUT, III, a Director of CROWN CASINO CORPORATION, a Texas corporation, do constitute and appoint EDWARD R. MCMURPHY and MARK D. SLUSSER, my true and lawful attorney-in-fact, with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for CROWN CASINO CORPORATION, for the fiscal year ended April 30, 1997, and to file the same with the Securities and Exchange Commission and the National Association of Security Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as said attorney-in- fact deems appropriate, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. In witness whereof, I have hereunto set my hand and seal this 1st day of August, 1997. /s/ T.J. Falgout, III ---------------------------- T. J. FALGOUT, III ACKNOWLEDGEMENT Before me this 1st day of August, 1997, came T. J. FALGOUT, III, personally known to me, who in my presence did sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed. /s/ April May ---------------------------------- NOTARY PUBLIC EX-24.3 7 POWER OF ATTORNEY OF DAVID J. DOUGLAS 1 EXHIBIT 24.3 STATE OF TEXAS ) ) COUNTY OF DALLAS ) POWER OF ATTORNEY Know all men by these presents, that I, DAVID J. DOUGLAS, a Director of CROWN CASINO CORPORATION, a Texas corporation, do constitute and appoint EDWARD R. MCMURPHY and MARK D. SLUSSER, my true and lawful attorney-in-fact, with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for CROWN CASINO CORPORATION, for the fiscal year ended April 30, 1997, and to file the same with the Securities and Exchange Commission and the National Association of Security Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as said attorney-in- fact deems appropriate, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. In witness whereof, I have hereunto set my hand and seal this 31st day of July, 1997. /s/ David J. Douglas ------------------------------------ DAVID J. DOUGLAS ACKNOWLEDGEMENT Before me this 31st day of July, 1997, came DAVID J. DOUGLAS, personally known to me, who in my presence did sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed. /s/ Cyndi Crawford -------------------------------- NOTARY PUBLIC EX-24.4 8 POWER OF ATTORNEY OF J. DAVID SIMMONS 1 EXHIBIT 24.4 STATE OF TEXAS ) ) COUNTY OF DALLAS ) POWER OF ATTORNEY Know all men by these presents, that I, J. DAVID SIMMONS, a Director of CROWN CASINO CORPORATION, a Texas corporation, do constitute and appoint EDWARD R. MCMURPHY and MARK D. SLUSSER, my true and lawful attorney-in-fact, with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for CROWN CASINO CORPORATION, for the fiscal year ended April 30, 1997, and to file the same with the Securities and Exchange Commission and the National Association of Security Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as said attorney-in- fact deems appropriate, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. In witness whereof, I have hereunto set my hand and seal this 1st day of August, 1997. /s/ J. David Simmons -------------------------------- J. DAVID SIMMONS ACKNOWLEDGEMENT Before me this 1st day of August, 1997, came J. DAVID SIMMONS, personally known to me, who in my presence did sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed. /s/ Joyce S. Mayer ------------------------------- NOTARY PUBLIC EX-24.5 9 POWER OF ATTORNEY OF GERALD L. ADAMS 1 EXHIBIT 24.5 STATE OF TEXAS ) ) COUNTY OF DALLAS ) POWER OF ATTORNEY Know all men by these presents, that I, GERALD L. ADAMS, a Director of CROWN CASINO CORPORATION, a Texas corporation, do constitute and appoint EDWARD R. MCMURPHY and MARK D. SLUSSER, my true and lawful attorney-in-fact, with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for CROWN CASINO CORPORATION, for the fiscal year ended April 30, 1997, and to file the same with the Securities and Exchange Commission and the National Association of Security Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as said attorney-in-fact deems appropriate, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. In witness whereof, I have hereunto set my hand and seal this 4th day of August, 1997. /s/ Gerald L. Adams --------------------------------- GERALD L. ADAMS ACKNOWLEDGEMENT Before me this 4th day of August 1997, came GERALD L. ADAMS, personally known to me, who in my presence did sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed. /s/ Cyndi Crawford ----------------------------------- NOTARY PUBLIC EX-24.6 10 POWER OF ATTORNEY OF GERALD M. JACOBS 1 EXHIBIT 24.6 STATE OF TEXAS ) ) COUNTY OF DALLAS ) POWER OF ATTORNEY Know all men by these presents, that I, GERARD M. JACOBS, a Director of CROWN CASINO CORPORATION, a Texas corporation, do constitute and appoint EDWARD R. MCMURPHY and MARK D. SLUSSER, my true and lawful attorney-in-fact, with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for CROWN CASINO CORPORATION, for the fiscal year ended April 30, 1997, and to file the same with the Securities and Exchange Commission and the National Association of Security Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as said attorney-in- fact deems appropriate, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. In witness whereof, I have hereunto set my hand and seal this 7th day of August, 1997. /s/ Gerard M. Jacobs -------------------------------------- GERARD M. JACOBS ACKNOWLEDGEMENT Before me this 7th day of August, 1997, came GERARD M. JACOBS, personally known to me, who in my presence did sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed. /s/ Cyndi Crawford --------------------------------------- NOTARY PUBLIC EX-24.7 11 POWER OF ATTORNEY OF ROBERT J. KEHL 1 EXHIBIT 24.7 STATE OF TEXAS ) ) COUNTY OF DALLAS ) POWER OF ATTORNEY Know all men by these presents, that I, ROBERT J. KEHL, a Director of CROWN CASINO CORPORATION, a Texas corporation, do constitute and appoint EDWARD R. MCMURPHY and MARK D. SLUSSER, my true and lawful attorney-in-fact, with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for CROWN CASINO CORPORATION, for the fiscal year ended April 30, 1997, and to file the same with the Securities and Exchange Commission and the National Association of Security Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as said attorney-in-fact deems appropriate, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. In witness whereof, I have hereunto set my hand and seal this 31st day of July, 1997. /s/ Robert J. Kehl ------------------------------------- ROBERT J. KEHL ACKNOWLEDGEMENT Before me this 31st day of July, 1997, came ROBERT J. KEHL, personally known to me, who in my presence did sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed. /s/ Cyndi Crawford ------------------------------------- NOTARY PUBLIC EX-27.1 12 FINANCIAL DATA SCHEDULE
5 12-MOS APR-30-1997 APR-30-1997 21,117,960 0 345,780 0 0 36,651,414 1,811,581 (226,404) 38,236,591 2,123,893 0 0 0 103,946 35,608,752 38,236,591 0 0 0 0 4,721,367 0 68,757 6,919,885 (1,940,000) 8,859,885 0 0 0 8,859,885 .80 .80
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