-----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, KiinShqNmnEdHg1mF6ORsxQBKA6a91vuGSkj2E2BcuL+fvnUG7rhOH755Oa3/xcr FNkEXxfACYvrCx9n4anCPQ== 0001024432-97-000028.txt : 19971223 0001024432-97-000028.hdr.sgml : 19971223 ACCESSION NUMBER: 0001024432-97-000028 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19971222 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOLLY HOLDINGS INC CENTRAL INDEX KEY: 0000909753 STANDARD INDUSTRIAL CLASSIFICATION: PARTITIONS, SHELVING, LOCKERS & OFFICE AND STORE FIXTURES [2540] IRS NUMBER: 223172149 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 001-12668 FILM NUMBER: 97742169 BUSINESS ADDRESS: STREET 1: 200 MONUMENT RD STREET 2: SUITE 10 CITY: BALA CYNWYD STATE: PA ZIP: 19004 BUSINESS PHONE: 6106170400 MAIL ADDRESS: STREET 1: 200 MONUMENT ROAD STREET 2: SUITE 10 CITY: BALA CYNWYD STATE: PA ZIP: 19004 FORMER COMPANY: FORMER CONFORMED NAME: HOLLY PRODUCTS INC DATE OF NAME CHANGE: 19930726 10QSB/A 1 Form 10-QSB/A-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 Commission file number 1-12668 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_________to_________ For Quarter Ended_______________Commission File Number________ HOLLY HOLDINGS, INC. (Name of Small Business Issuer in its charter) New Jersey 22-3172149 (State of jurisdiction of incorporation) (I.R.S. Employer I.D. Number) 200 Monument Road, Suite 10, Bala Cynwyd, Pennsylvania 19004 (Address of principal executive offices) Registrant's telephone number (610) 617-0400 Check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No X Indicate the number of shares outstanding of each of the issuer's classes of common stock. The Registrant had 23,106,492 shares of its common stock outstanding as of December 22, 1997. HOLLY HOLDINGS, INC. AND SUBSIDIARIES INDEX Part I: FINANCIAL INFORMATION Item 1: Financial Statements: Consolidated Balance Sheet as of June 30, 1997 (Unaudited) 1-2 Consolidated Statements of Operations for the Three Months Ended June 30, 1997 and 1996 (Unaudited) 3 Consolidated Statements of Cash Flows for the Three Months Ended June 30, 1997 and 1996 (Unaudited) 4-5 Notes to Consolidated Financial Statements (Unaudited) 6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 7-11 Part II: OTHER INFORMATION Item 1: Legal Proceedings 12-14 Item 2: Changes In the Rights of the Company's Security Holders 14 Item 3: Defaults by the Company on its Senior Securities 14 Item 4: Results of Votes of Shareholders 14 Item 5: Other Information 14 Item 6: Exhibits & Reports on Form 8-K 15 Signature Page 16 HOLLY HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 (UNAUDITED) ASSETS: Current Assets: Cash and Cash Equivalents $ 6,935 Prepaid Expenses 115,587 Total Current Assets 122,522 Property and Equipment - [Net of Accumulated Depreciation and Amortization of $52,937] 10,462,889 Deposits 630 Deferred Financing Costs 42,028 Total Assets $10,628,069 See Notes to Consolidated Financial Statements -1- HOLLY HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 (UNAUDITED) Liabilities and Stockholders' Deficit: Current Liabilities: Accounts Payable $ 234,098 Payroll Taxes Payable 33,876 Accrued Expenses 189,896 Accrued Interest - Related Parties 175,943 Notes Payable - Related Parties (Net of Deferred Financing Costs of $45,000) 880,000 Current Portion of Long-Term Debt 122,198 Net Liabilities of Discontinued Operations 6,452,547 Current Portion of Capital Lease Obligations 4,976 Total Current Liabilities 8,093,534 Long-Term Liabilities: Note Payable 2,905,000 Note Payable - Related Party 2,350,000 Other Liability 4,199 Total Long-Term Liabilities 5,259,199 Minority Interest 2,247,023 Commitments and Contingencies -- Stockholders' Equity: Preferred Stock - Authorized 2,000,000 Shares: Series D: Convertible $10.00 Par Value, $1.00 Per Share Per Annum Cumulative Dividends, 384,639 Shares Issued and Outstanding 3,846,390 Series E: Convertible $10.00 Par Value, 137,500 Shares Issued and Outstanding 1,375,000 Series Z: Convertible $0.25 Par Value, 1,013,628 Shares Issued and Outstanding 253,407 Additional Paid-in Capital (Preferred) (1,331,063) Common Stock - No Par Value, Authorized 150,000,000 Shares, 8,519,427 Shares Issued and Outstanding 19,224,118 Additional Paid-in Capital (Common) (83,947) Accumulated [Deficit] (28,255,582) Total Stockholders' Deficit (4,971,687) Total Liabilities and Stockholders' Deficit $ 10,628,069 See Notes to Consolidated Financial Statements -2- HOLLY HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three months ended June 30, 1997 1996 Costs and Expenses: General and Administrative Expenses $ 528,156 $ 758,694 Depreciation 5,629 34,441 Totals 533,785 793,135 Other Income (Expense): Interest Income 1,464 -- Interest Expense (130,579) (36,908) Other Income 20,232 4,495 Totals (108,883) (32,413) Minority Interest Share in Loss of Subsidiary 84,979 59,127 (Loss)Income from Continuing Operations (557,689) (766,421) Discontinued Operations: Income (Loss) from Operations of Woodworking Business and Electronic Components Manufacturing Business (142,480) (24,233) Net (Loss) $ (700,169) $ (790,654) Per Share Data: (Loss) from Continuing Operations $ (.09) $ (.39) Income [Loss] from Discontinued Operations $ (.03) $ (.01) Net [Loss] Per Common Share $ (.12) $ (.40) Weighted Average Number of Shares 5,927,074 1,994,438 See Notes to Consolidated Financial Statements -3- HOLLY HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three months ended June 30, 1997 1996 Operating Activities: (Loss) From Continuing Operations $ (557,689) $ (766,421) Adjustments to Reconcile Net (Loss) to Net Cash (Used for) Operating Activities: Depreciation and Amortization 5,629 34,441 Amortization of Deferred Financing Activities 3,856 18,933 Minority Interest 84,979 (59,127) Changes in Assets and Liabilities: (Increase) Decrease in: Other Current Assets -- (1,716) Prepaid Expenses 20,508 (144,034) Deposits (190) -- Other Assets 82,972 -- Increase (Decrease) in: Accounts Payable and Accrued Expenses 47,829 (125,545) Payroll Taxes Payable 18,710 4,426 Other Current Liabilities -- (14,182) Total Adjustments 264,293 (286,804) Net Cash - Continuing Operations - Forward (293,396) (1,053,225) Discontinued Operations: Changes in Net Assets, Liabilities and Losses (142,480) (221,708) Net Cash - Discontinued Operations - Forward (142,480) (221,708) Investing Activities - Continuing Operations: Payment of Casino Development Costs (216,426) (8,810) Net Cash - Investing Activities - Continuing Operations - Forward $(216,426) $ (8,810) See Notes to Consolidated Financial Statements -4- HOLLY HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three months ended June 30, 1997 1996 Net Cash - Continuing Operations - Forwarded $(293,396) $(1,053,225) Net Cash - Discontinued Operations - Forwarded (142,480) (221,708) Net Cash - Investing Activities - Continuing Operations - Forwarded (216,426) (8,810) Financing Activities - Continuing Operations: Proceeds from Notes Payable-Other 289,250 3,940,980 Payment of Notes Payable - Other (11,817) 150,000 Payment of Demand Note Payable - Stockholders and Related Parties 60,000 (1,753,028) Proceeds from Issuance of Preferred Stock -- 172,000 Proceeds from Exercise of Warrants 465,000 -- Net Cash - Financing Activities - Continuing Operations 682,433 2,210,012 Net Increase (Decrease) in Cash and Cash Equivalents 30,131 926,269 Cash and Cash Equivalents - Beginning of Periods (23,196) 934,462 Cash and Cash Equivalents - End of Periods $ 6,935 $ 1,860,731 Supplemental Disclosures of Cash Flow Information: Interest paid during the three months ended June 30, 1997 and 1996 was $100,820 and $84,173 respectively, net of capitalized interest. No income taxes were paid during The three months ended June 30, 1997 and 1996. Supplemental Schedule of Non-Cash Investing and Financing Activities: See notes to consolidated financial statements for details of certain non-cash investing and financing activities. See Notes to Consolidated Financial Statements. -5- HOLLY HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED] [1] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies of Holly Holdings, Inc. are set forth in the Company's Form 10-KSB for the period ended March 31, 1997, as filed with the Securities and Exchange Commission. [2] BUSINESS OF REPORTING The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, such statements include all adjustments (consisting of normal recurring items) which are considered necessary for a fair presentation. As of March 31, 1997 the Company determined to discontinue its electronic components manufacturing business. Accordingly, the financial statements for prior periods have been restated to reflect this change retroactively. Operating results for the three months ended June 30, 1997 and 1996 are not necessarily indicative of the results that may be expected for the year ended March 31, 1998. It is suggested that these financial statements be read in conjunction with the financial statements and notes for the period ended March 31, 1997, included in the Holly Holdings, Inc. Form 10-KSB/A1. [3] INVENTORY At June 30, 1997, the Company had no inventory. [4] EARNINGS PER SHARE Earnings per share are based on 5,927,074 and 1,994,434 shares outstanding for the three months ended June 30, 1997 and 1996, respectively. Such amounts of shares represent the weighted average number of shares outstanding for the periods. Shares in escrow and the effect of outstanding warrants were not inclu ded in the calculations, as their effect would be anti-dilutive. [5] EQUITY TRANSACTIONS During the quarter, 200,000 shares of Series E Preferred Stock were converted pursuant to the terms thereof into 684,703 shares of Company common stock. During the quarter, the Company issued 147,500 shares of Series E Preferred Stock resulting in gross proceeds of $1,475,000. During the quarter, the Company issued 800,000 shares of its Common Stock to Sparta Capital Ltd. for the exercise of warrants. During the quarter the Company sold Debentures totaling $350,000 of which $95,000 worth were converted to 470,689 shares of Common Stock. -6- HOLLY HOLDINGS, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CERTAIN STATEMENTS INCLUDED HEREIN OR INCORPORATED BY REFERENCE CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE "REFORM ACT"). THE COMPANY DESIRES TO TAKE ADVANTAGE OF CERTAIN "SAFE HARBOR" PROVISIONS OF THE REFORM ACT AND IS INCLUDING THIS SPECIAL NOTE TO ENABLE THE COMPANY TO DO SO. FORWARD-LOOKING STATEMENTS INCLUDED OR INCORPORATED BY REFERENCE IN THIS PART INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH WOULD CAUSE THE COMPANY'S ACTUAL RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS TO DIFFER MATERIALLY FROM THE FUTURE RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD LOOKING STATEMENTS. GENERAL The Company is focusing all its attention in assisting its majority owned subsidiary, Country World Casinos, Inc., ("Country World") in completing its plan to build the largest casino and hotel complex in the state of Colorado, as well as completing its financials and settling outstanding indebtedness so that it can plan for new acquisitions in the future. In order to begin the process of timely completing the goals, Country World has contracted with Colorado Gaming Development Company, Inc., Semple Brown Roberts, P.C. and PCL Construction Services, Inc., all of Denver, Colorado to design and construct the planned casino and hotel complex. In addition, Country World has signed a management agreement with Signature Hospitality Resources, Inc. of Denver, Colorado to manage the Radisson Black Hawk Hotel, a separate agreement to use the national flag of Radisson on the hotel and a management agreement with Luciani & Associates, LLC. and Casino Research and Planning Corp., joint venture of Atlantic City, New Jersey, to manage the casino operations. All parties will assist the architect in design of their respective operations. The casino level of the project, at approximately 75,000 square feet, will be the largest in Colorado and will be capable of accommodating 1,800 slot machines and 32 gaming tables. Country World will open the facility with 1,000 slot machines, 20 blackjack tables and 12 poker tables, and may add up to 800 additional slot machines if management determines that the additional gaming devices will produce equal per square foot revenue and will not create excess capacity. Country World expects that slot machines will be the greatest source of its gaming revenues. Slot machines are less labor intensive and require less square footage than table games, and also generate higher profit margins. The Casino's atmosphere will feature a country western music theme similar to the rock and roll music theme successfully employed by the Hard Rock Cafe. The Casino decor will include memorabilia from the great country singers, both past and present, with a star walk of their own. The country western music theme has not been established in the Black Hawk/Central City, Colorado gaming market, and therefore will give the Country World Casino its own unique identity. Management believes that as -7- HOLLY HOLDINGS, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS casinos have become more numerous, the gaming industry has begun to recognize that popular themes and amenities such as quality dining and hotel accommodations play an important role in attracting customers to casinos. The theme is intended to appeal to the Hotel Casino's target customer base, which consists primarily of residents of the Denver metropolitan area as well as other Colorado communities located within driving distance of Black Hawk. The Radisson Black Hawk Hotel will provide overnight accommodations with 290 standard rooms and 35 suites, making it the first destination resort of its kind in Black Hawk. Complimenting both the casino and hotel will be a three story underground parking facility for 865 cars featuring both valet and self parking options, and the only covered on-site bus turnaround currently available in Black Hawk for the convenience of day trip customers. Black Hawk is a picturesque mountain town approximately 40 miles west of Denver. In the past year, Black Hawk hosted approximately 3 million visitors and generated almost 60% of the state's gaming revenues. The 112,000 square foot Hotel Casino site on the northern most end of the Black Hawk gaming district is in a most highly visible location as it is in a direct line of site to all visitors approaching Black Hawk's main intersection on State Highway 119. The seven story structure will tower high above all existing facilities. The Black Hawk and nearby Central City casino market includes many small, privately held gaming facilities that Country World believes offer limited amenities and are characterized by a shortage of convenient on-site parking. There are a few large facilities currently operating with varying levels of services and amenities, as well as new facilities planned. The Casino's country western music theme, country hospitality, ample parking, modern hotel accommodations and a full line of amenities, will set it apart from, and should give it a competitive advantage over, the other casinos in the Black Hawk/Central City market. The Hotel Casino complex will be designed and constructed pursuant to a guaranteed maximum price agreement which is to be finalized prior to construction. The design and construction team consists of Semple Brown Roberts, P.C., a Denver based architectural firm (the "Architect") and PCL Construction Services, Inc., a multi-billion dollar North American construction firm with U.S. headquarters located in Denver. The Architect is the designer of Fitzgerald's Casino in Black Hawk, while the Contractor's gaming credits include the MGM Grand Hotel Casino and Stratosphere Tower in Las Vegas, Nevada, as well as the Chinook Winds Gaming and Convention Center in Lincoln City, Oregon. Gaming operations at the Casino will be under the management of a joint venture between Luciani & Associates, LLC and Casino Research and Planning Corp. of Atlantic City, New Jersey (the "Casino Manager"), who are leaders in casino design, management and security services. Hotel operations will be under the management of Signature Hospitality Resources, Inc. of Denver, Colorado (the "Hotel Manager'), which provides a full range of hotel and resort support services including operations, sales, marketing, food, beverage, human resources, MIS and technical services. -8- HOLLY HOLDINGS, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996 Based upon the results of operations, and the substantial losses attributed to Navtech Industries, Inc.,, the Company decided to cease ongoing operations of this segment of the Company's business as of March 31, 1997. Due to the plan of discontinuance for Navtech, revenues and net losses have been eliminated from the statement of operations. The following comparisons, therefore, does not include the results attributable to Navtech, but contains the costs of discontinued operations. Due to the discontinuance of Navtech, the Company had no revenue, cost of sales or gross profit, for the three months ended June 30, 1997 and, retroactively, no revenue for the three months ended June 30, 1996. Total costs and expenses for the three months ended June 30, 1997 were $533,785 as compared to $793,694 for the three months ended June 30, 1996. This decrease were primarily attributed to the reduction in salaries for the parent company. Other income (expense) for the three months ended June 30, 1997 was a net expense of $108,883 as compared to a net expense of $32,413 for the comparable period in 1996. This increase was primarily due to higher interest costs in 1997, resulting from the increase in notes payable as compared to 1996. The loss from discontinued operations was $142,480 for the three months ended June 30, 1997 as compared to $24,233 for the three months ended June 30, 1996 due to the cost of winding-down Navtech in the current period as compared to a small loss last year at Navtech and a loss of $8,603 for the Company's woodworking business which was discontinued in 1995. LIQUIDITY AND CAPITAL RESOURCES To the extent the Company has ceased operations of its woodworking business, its cash requirements diminished accordingly. Navtech had a line of credit with The First National Bank of Farmington in Farmington, New Mexico. The terms of this facility were for a receivable and inventory line of credit in an amount not to exceed $1,500,000 with a monthly floating interest rate of 1.5% over prime. Navtech pledged all of its assets as security for this loan. As of June 30, 1997, Navtech was indebted to the bank in the amount of approximately $1.2 million. This loan became due on March 15, 1997, and was extended to June 1997. In June 1997, the bank informed Navtech that it would not renew the loan. Navtech was unable to replace First National Bank of Farmington and the bank subsequently forced Navtech to cease ongoing operations. In January 1995, the Company borrowed, on an unsecured basis, an aggregate of $1,000,000 from three individuals and entities at 15% annual interest. In lieu of such interest, the Company issued to such note holders an aggregate of 150,000 shares of Common Stock. The principal amount of such notes was due and payable on January 13, 1996, and in March 1996, the Company entered into an extension -9- HOLLY HOLDINGS, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS agreement with the three individuals whereas the Company made a partial payment of $500,000 and Mr. Larry Berman, the Company's Chairman, gave 370,000 shares of his personal stock for an extension until August 9, 1996 at which time a balance payment of $400,000 was due. The Company made a partial payment for interest, as well as an extension fee in the amount of $200,000. The Noteholders agreed to extend the final payment due date until after funding of the Country World Casino project. The Company utilized the $1,000,000 to make a loan to Country World, which indebtedness was canceled in exchange for the issuance of 5,000,000 shares of Country World common stock to the Company. Country World Casinos, Inc. plans to invest up to an additional $70 to $80 million to develop and construct the casino and hotel complex in Black Hawk, Colorado. During 1996 and early 1997, the Company consummated a series of Private Placements of an aggregate of 1,162,000 shares of its Series E Convertible Preferred Stock, resulting in gross and net proceeds of $11,620,000 and $9,751,000, respectively. The proceeds of this offering were utilized for repayment of debt, settlement of litigation fees associated with securing financing for Country World Casinos, Inc. and working capital for the Company and Navtech. Each share of Series E Preferred Stock is convertible into shares of the Company's Common Stock at the rate determined by dividing $10.00 by the lesser of 75% of the closing bid price as reported, of the Company's Common Stock on the date of the closing of the subscription or 65% of the average closing bid price for the five (5) trading days immediately preceding the date of conversion. As of September 1997, 87,500 shares are yet to be converted. In April 1996, the State of New Jersey approved the issuance of 555,000 shares of Series Z Preferred Stock in accordance with the Company's Certificate of Designation. In September 1996, such authorization was increased to 1,050,000 shares and issued in exchange for debt. In July 1997, the shares of Series Z preferred stock were converted into 5,068,140 shares of common Stock. In June 1996, the Company issued an aggregate of 1,300,000 shares of its common stock to Messrs. Irwin Schneider, Eugene Lombardo and Scott Schneider in return for certain services performed by these individuals on behalf of the Company. In September 1996, the Company issued 573,333 shares of common stock to N & A Promotions in return for certain services performed for the Company. In September 1996, a debt of $30,000 owed to Sunrise, Inc. was converted into 30,000 shares of Series C Preferred Stock and pursuant to the terms thereof, into 120,000 shares of common stock. In October 1996, the Company issued 450,000 shares of common stock to Sparta Capital Ltd. for the exercise of its warrants. In March 1997, the Company issued 100,000 shares of common stock to Sparta Capital Ltd. for the exercise of its warrants. -10- HOLLY HOLDINGS, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In April 1997, the Company issued 250,000 shares of common stock to Sparta Capital Ltd. for the exercise of its warrants. In April 1997, the Company issued 555,000 shares of common stock to Sparta Capital Ltd. for the exercise of its warrants. Unless and until the Company improves its financial results sufficiently and maintains such improved results, the Company may have to borrow or raise additional capital to fund any cash shortage, in the need should arise. At March 31, 1996, the Company had owed $250,000 plus accrued interest and legal fees as required under the default provisions of the note, to the Calvin Black Trust. During the current period, the Company liquidated this note by payments and by the exchange of equity a subsidiary had in another company, terminating the legal action brought upon the default. -11- HOLLY HOLDINGS, INC AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS On May 26, 1995, the Company's majority owned subsidiary Country World Casinos, Inc. ("CWC") commenced a lawsuit against Tommyknocker Casino Corp. ("Tommyknocker") and New Allied Development Corporation ("New Allied") in the District Court of Denver, County of Denver, Colorado, case number 95CV 2310. This action is primarily for breach of contract in connection with the acquisition of certain real property by CWC from the defendants. CWC is seeking monetary damages and declaratory relief. On August 15, 1995, Tommyknocker and New Allied filed a counterclaim in the aforementioned action against CWC, the Company, Ronald Nathan, Sal Lauria and David Singer who are former board members of CWC, Roger LeClerc, President of CWC and William Patrowicz director of CWC. The counterclaim alleges that CWC is in default under the Promissory Note issued by CWC to Tommyknocker in connection with the acquisition of the real property, CWC failed to register stock on behalf of Tommyknocker and that the Company has acquired control of CWC to the detriment of Tommyknocker and New Allied. In a related action on June 28, 1995, Tommyknocker filed a Rule 120 Motion in the District Court, City and County of Denver, Colorado, case number 95CV 2799. This motion sought foreclosure of the real property discussed above. On October 4, 1995, the magistrate in this case granted Tommyknocker's motion and authorized the sale of the property pursuant to the foreclosure on October 12, 1995. On October 12, 1995, CWC filed a bankruptcy petition under Chapter 11 of Title 11 of the United States Code. The case was filed in the United States Bankruptcy Court, District of Colorado, case number 95-20563rjb. Pursuant to the filing of the Bankruptcy, an automatic stay went into effect pursuant to 11 U.S.C. Section 362 prohibiting the foreclosure sale. Tommyknocker filed a Motion for Relief from the stay and a hearing on this matter was held on December 22, 1995. On January 3, 1996, the Court ruled that CWC should be given an opportunity to proceed with its Bankruptcy proceedings in a diligent and timely fashion. The Court conditioned continuation of the stay pending the approval or denial as the case may be of CWC's financing proposal and certain other conditions. In March 1996, the Court approved CWC's financing proposal and in May 1996, Country World closed on such financing. In September 1996, the Court heard testimony in a claims hearing between the parties. In early November 1996, the Company received final rulings from the Court. The Court's order found that Tommyknocker Casino Corporation/New Allied was not entitled to default interest at the rate of 18%, however Country World is ordered to pay 8% per annum on the unpaid balance due Tommyknocker. Additionally, the Court ordered that both parties were obligated to pay their own expenses related to this matter. The Court further found that Country World Casinos, Inc. was not in default of its Agreement with Tommyknocker/New Allied with regard to filing a registration statement for its preferred stock and until Tommyknocker/New Allied files such registration statement and Country World fails to pay for its cost, Country World is not in breach of the agreement. -12- HOLLY HOLDINGS, INC AND SUBSIDIARIES PART II - OTHER INFORMATION The Court upheld Tommyknocker's/New Allied's claim that Country World was not entitled to an offset on the environmental clean up as the work had been completed and Country World paid all clean up costs without objection prior to the Company's acquisition of a majority ownership in Country World. The Company, on behalf of Country World, obtained a 5 million dollars ($5,000,000) financing package, which enabled Country World to repay all of its outstanding indebtedness and emerge from Bankruptcy. This financing package had been approved by the Bankruptcy Court and the Company utilized the funds in accordance with the Court's order. With all issues completed in March 1997, the U.S. Bankruptcy Court ruled that Country World Casinos, Inc. be dismissed from Chapter 11. On October 10, 1995, Phil B. Acton, Trustee of the Calvin Black Trust commenced a lawsuit against the Company in the United States District Court for the District of Utah, Central Division, case number 95CV 09305. This action sought repayment of a promissory note in the principal amount of $500,000. As discussed in the Company's earlier filings in August 1996, this action was settled. The Company is the defendant in a lawsuit pending in United States District Court, District of Arizona, Case No. CIV97-212PHXROS entitled Holly Products, Inc. and Navtech Industries, Inc., Defendants v. Semisystems, Inc., Plaintiff. This lawsuit was commenced by Semisystems, Inc. on January 30, 1997. The complaint asserted six claims against Navtech for among other things, misrepresentation, breach of contract, breach of warranty, fraud, etc. and as the owner of 100% of the outstanding stock of Navtech, the Company should be held jointly and severally liable for all acts and obligations of its subsidiary Navtech. Navtech has ceased operations and is without resources, accordingly it was unable to defend itself in this matter and the Court awarded a judgement against Navtech in the amount of $3,280,630 in October of 1997. The Company was not served in this action until August 1997. The Company immediately filed an order to show cause which vacated any possible default judgement and filed its answer to the allegations made by Semisystems in September 1997. In an accompanying motion, the Company filed a motion to dismiss on the grounds that there is no personal jurisdiction over the Company in this District of Arizona. Oral argument on the Motion is set for February 20, 1998. The Company was a defendant in a lawsuit in the Fifth Judicial District Court, in Iron County, Utah, Case No. 970500004 entitled Lloyd & Myra Kartchner, Plaintiffs v. Holly Products, Inc. and Navtech Industries, Inc., Defendants. This lawsuit was commenced in January 1997. The complaint, alleges that both companies failed to live up to the terms of a resignation agreement dated February 28, 1996 between the Company, Navtech and the Plaintiff. In August 1997, the Court found the resignation agreement valid and enforceable and issued an order granting Plaintiffs' Motion for summary judgement in the amount of $52,955.91. The Company is a defendant in a lawsuit pending in the Eleventh Judicial District Court, County of San Juan, State of New Mexico, Case No. CV-97-443-6 entitled First National Bank of Farmington, Plaintiffs v. Navtech of New Mexico, Inc., Navtech Industries, Inc., Holly Products, Inc., n/k/a, Holly -13- HOLLY HOLDINGS, INC AND SUBSIDIARIES PART II - OTHER INFORMATION Holdings, Inc., Defendants. This lawsuit was commenced on June 9, 1997 and amended on August 9, 1997. The complaint alleges four claims against Navtech for debt and money due, one claim for personal property foreclosure against Navtech and two claims based on the guaranty of the Company. Navtech has ceased operations and is without resource, based on the foregoing it was unable to defend itself in this matter and in June 1997, the Court appointed a receiver to Marshall the inventory, assemble the orders, collect the receivables and contract for the completion of work in process to maximize return. As of this date, that process has not been completed and accordingly, there is no way to determine the balance due to the bank and the case remains open. In 1996, the Company was a Defendant in a lawsuit in Superior Court of New Jersey, Burlington County, Case No. BUR-L-3467-95 entitled Pennsylvania Manufacturers Association Insurance Company, Plaintiff v. Holly Products, Inc., Defendant. This lawsuit resulted in a summary judgement being issued against the Company in the amount of $63, 897.00 on November 8, 1996. In February 1997, the Company reached an agreement with Pennsylvania Manufacturers Association Insurance Company and filed a stipulation of settlement with the Court at which time the Company began making payments in accordance with a payout schedule over a 20 month period. The Company made payments totaling $13,000 through April 1997 at which time payments ceased due to a cash flow shortage. In September 1997, the Pennsylvania Manufacturers Association Insurance Company has re-instituted steps to enforce the outstanding judgement against the Company Item 2 - Changes In the Rights of the Company's Security Holders None Item 3 - Defaults by the Company on its Senior Securities None Item 4 - Results of Votes of Shareholders None Item 5 - Other Information None -14- HOLLY HOLDINGS, INC AND SUBSIDIARIES PART II - OTHER INFORMATION Item 6- Exhibits & Reports on Form 8-K (A)There are no exhibits to be filed at this time. (B)No reports on Form 8-K were filed during the quarter for which this report is filed. -15- HOLLY HOLDINGS, INC. AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HOLLY HOLDINGS, INC. ____/s/_William_H._Patrowicz_______________ By: William H. Patrowicz President, Chief Operating Officer, Treasurer (Principal Financial and Accounting Officer) and Director Date: December 22, 1997 -16- EX-27 2
5 3-MOS MAR-31-1998 JUN-30-1997 6,395 0 0 0 0 122,522 10,462,889 52,937 10,628,069 8,093,534 0 5,474,797 4,143,734 19,224,118 0 10,628,069 0 0 0 533,785 (21,696) 0 130,579 (557,689) 0 (557,689) (142,480) 0 0 (700,169) (.12) (.12)
-----END PRIVACY-ENHANCED MESSAGE-----