FORM 10-QSB

10QSB 1 global.htm FORM 10-QSB FORM 10-QSB

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 March 31, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from _______ to ______

Commission file number 0-15415

GLOBAL CASINOS, INC.
(Exact Name of Registrant as Specified in its Charter)

	Utah		87-0340206
	(State or other jurisdiction of incorporation or organization)		I.R.S. Employer Identification number

6560 Gunpark Drive, Suite E, Boulder, Colorado 80301
(Address of Principal Offices) (Zip Code)

Registrant's telephone number, including area code: (303) 527-3230

5373 N. Union Blvd., Suite 100 Colorado Springs, Colorado 80918
(Former Name or Address if Changed Since Last Report)

Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the last 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 [ ]

As of May 15, 2001, the Registrant had 1,546,360 shares of its Common Stock outstanding.

Transitional Small Business Disclosure Format (check one) Yes [ ] No [ X ]

INDEX

PART I -- FINANCIAL INFORMATION

Item 1.	Financial Statements	Page
	Consolidated Balance Sheets as of March 31, 2001 and June 30, 2000	4
	Consolidated Statements of Operations for the three months ended March 31, 2001 and March 31, 2000	6
	Consolidated Statements of Operations for the nine months ended March 31, 2001 and March 31, 2000	7
	Consolidated Statements of Cash Flows for the nine months ended March 31, 2001 and March 31, 2000	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management's discussion and analysis of financial condition and results of operations
	Overview	11
	Results of Operations	12
	Liquidity and Capital Resources	14
	PART II -- OTHER INFORMATION
Item 1.	Legal Proceedings	16
Item 2.	Changes in Securities	16
Item 3.	Defaults Upon Senior Securities	16
Item 4.	Submission of Matters to a Vote of Security Holders	16
Item 5.	Other Information	16
Item 6.	Exhibits and Reports on Form 8-K	16

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

The consolidated financial statements included herein have been prepared by Global Casinos, Inc. (the "Company") without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such SEC rules and regulations. In the opinion of management of the Company the accompanying statements contain all adjustments necessary to present fairly the financial position of the Company as of March 31, 2001, and its results of operations for the three-month and nine-month periods ended March 31, 2001 and 2000 and its cash flows for the nine-month periods ended March 31, 2001 and 2000. The Company's balance sheet as of June 30, 2000 included herein has been derived from the Company's audited financial statements as of that date included in the Company's annual report on Form 10-KSB. The results for these interim periods are not necessarily indicative of the results for the entire year. The accompanying financial statements should be read in conjunction with the financial statements and the notes thereto filed as a part of the Company's annual report on Form 10-KSB.

GLOBAL CASINOS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS as of March 31, 2001 and June 30, 2000 (In thousands, except share data)
				March 31,	June 30,
				2001	2000
				(unaudited)
			ASSETS
Current assets:
	Cash and cash equivalents			$ 98	$ 174
	Cash in escrow			120	-
	Trade receivables, net of allowance for doubtful accounts of $89			239	265
	Inventory			301	285
	Current portion of notes receivable			73	69
	Marketable trading securities			271	800
	Other			107	107
			Total current assets	1,209	1,700

Land, building and improvements and equipment:
	Land			518	518
	Building and improvements			4,072	4,072
	Equipment			1,396	1,726
				5,986	6,316
	Accumulated depreciation			(1,961)	(1,965)
				4,025	4,351
Other assets:
	Leasehold rights and interests and contract rights, net of
		amortization of $1,290 and $1,122, respectively		1,000	1,168
	Goodwill, net of amortization of $505 and $421, respectively			1,660	1,744
	Hotel and barter credits, net of impairment allowance of $468 and $284			184	189
	Notes receivable, net of current portion, including receivables in default
		and allowance for doubtful accounts of $166		72	113
	Other			10	21
				2,742	3,235
				$ 7,976	$ 9,286

			LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable, including $115 and $96 to related parties			$ 765	$ 721
	Accrued expenses			201	203
	Accrued interest, including $11 and $21 to related parties			483	414
	Other accrued liabilities			219	644
	Notes payable			-	192
	Current portion of long-term debt:
		Related Parties		422	727
		Debt in default		1,135	772
		Other Debt		30	432
	Other			40	40
			Total current liabilities	3,295	4,145
Long-term debt, less current portion				3,112	2,713
Deferred sales proceeds				195	-
Mandatory redeemable, voting, Class C preferred stock,
	487,171 shares issued and outstanding			585	585
Commitments and contingencies
Stockholders' equity:
	Preferred stock - convertible: 10,000,000 shares authorized
		Class A - $2 par value, nonvoting, 96,500 shares issued and outstanding		193	193
		Class B - $.01 par value, nonvoting, 202,866 and 244,572 shares issued
			and outstanding at March 31, 2001 and June 30, 2000	2	2
	Common stock - $.05 par value; 50,000,000 shares authorized;
		1,546,360 shares issued and outstanding		77	7
	Additional paid-in capital			11,401	11,818
	Accumulated deficit			(10,884)	(10,247)
				789	1,843
				$ 7,976	$ 9,286

GLOBAL CASINOS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS for the Three Months ended March 31, 2001 and 2000 (in thousands, except share data) (Unaudited)
		Three Months Ended
		March 31,	March 31,
		2001	2000
Revenues:
	Casino	$ 622	$ 889
	Bingo	666	884
	Food and beverage	51	173
	Other	3	41
		1,342	1,987
Expenses:
	Cost of sales	392	604
	Operating, general, and administrative	745	1,423
	Depreciation and amortization	182	224
	Other	-	26
		1,319	2,277
Income (loss) from operations		23	(290)
Other income (expense):
	Interest income	3	4
	Interest expense	(85)	(115)
	Gain on sale of subsidiary	-	-
	Gain on disposal of asset	9	-
	Realized gain on sale of marketable securities	96	282
	Adjustment to market value of marketable securities	(162)	1
	Impairment of hotel credits	184)	-
		(323)	172
Income (loss) before extraordinary item		(300)	(118)
Extraordinary item - gain from restructuring of debt		-	-
Net income (loss)		(300)	(118)
Dividends on Class B and C preferred stock		(52)	(63)
Net income (loss) available to common stockholders		$ (352)	$ (181)
Earnings (loss) per common share - basic and diluted:
	Income (loss) before extraordinary item	$ (0.23)	$ (0.12)
	Extraordinary item	-	-
	Net income (loss) available to common stockholders	$ (0.23)	$ (0.12)
	Weighted average shares outstanding	1,546,360	1,546,360

GLOBAL CASINOS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS for the Nine Months ended March 31, 2001 and 2000 (in thousands, except share data) (Unaudited)
		Nine Months Ended
		March 31,	March 31,
		2001	2000
Revenues:
	Casino	$ 1,837	$ 3,259
	Bingo	2,084	2,847
	Food and beverage	171	239
	Other	16	91
		4,108	6,436
Expenses:
	Cost of sales	1,209	1,693
	Operating, general, and administrative	2,350	4,672
	Depreciation and amortization	575	723
	Other	-	26
		4,134	7,114
Income (loss) from operations		(26)	(678)
Other income (expense):
	Interest income	9	28
	Interest expense	(324)	(333)
	Gain on sale of subsidiary	-	1,176
	Gain on disposal of asset	15	-
	Realized gain on sale of marketable securities	226	417
	Adjustment to market value of marketable securities	(187)	(89)
	Impairment of hotel credits	(184)	-
		(445)	1,199

Income (loss) before extraordinary item		(471)	521
Extraordinary item - gain from restructuring of debt		-	55
Net income (loss)		(471)	576
Dividends on Class B and C preferred stock		(166)	(202)
Net income (loss) available to common stockholders		$ (637)	$ 374
Earnings (loss) per common share - basic and diluted:
	Income (loss) before extraordinary item	$ (0.41)	$ 0.20
	Extraordinary item	-	0.04
	Net income (loss) available to common stockholders	$ (0.41)	$ 0.24
	Weighted average shares outstanding	1,546,360	1,546,360

GLOBAL CASINOS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the Nine Months ended March 31, 2001 and 2000 (in thousands, except share data) (Unaudited)
			Nine Months Ended
			March 31,	March 31,
			2001	2000
CASH FLOWS FROM OPERATING ACTIVITIES
		Net cash provided (used) by operating activities	$ (64)	$ 334
CASH FLOWS FROM INVESTING ACTIVITIES
	Purchase of equipment		(5)	(214)
	Deferred sale proceeds		194	-
	Collections on note receivable		37	48
	Purchases of marketable trading securities		(962)	(1,176)
	Sales of marketable trading securities		1,521	786
		Net cash provided by investing activities	785	(556)
CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from issuance of debt		248	1,177
	Debt principal payments		(373)	(674)
	Redemption of Class B preferred stock		(417)	(261)
	Payment of dividends on Class B preferred stock		(135)	(179)
		Net cash used in financing activities	(677)	63
Net increase (decrease) in cash			44	(159)
Cash at beginning of period			174	506
Cash at end of period			$ 218	$ 347
SUPPLEMENTAL CASH FLOW INFORMATION:
	Cash paid for interest		$ 203	$ 145
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
	Fixed assets acquired through debt		$ -	$ 376
	Dividends accrued on Class B and Class C preferred stock		$ 10	$ 31

GLOBAL CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED STATEMENTS

ORGANIZATION and SIGNIFICANT ACCOUNTING POLICIES

The Consolidated Financial Statements for the three months and nine months ended March 31, 2001 and 2000 have been prepared in accordance with the accounting policies described in the Company's annual report on Form 10-KSB. Management believes the statements include all adjustments of a normal recurring nature necessary to present fairly the results of operations for the interim periods.

At March 31, 2001, and for the three months and nine months ended March 31, 2001 and 2000, the consolidated financial statements of the Company include the accounts of the following wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

CASINOS USA, INC. ("Casinos USA"), a Colorado corporation, which owns and operates the Bull Durham Saloon and Casino ("Bull Durham"), located in the limited stakes gaming district of Black Hawk, Colorado.

GLOBAL CENTRAL, INC., a Colorado corporation, which owns and operates the Tollgate Saloon & Casino ("Tollgate"), located in the limited stakes gaming district of Central City, Colorado. On August 1, 2000, the Company ceased operating the Tollgate Saloon & Casino and transferred essentially all of the assets and liabilities to the Bull Durham Saloon & Casino.

GLOBAL ALASKA INDUSTRIES ("Global Alaska"), which operates Alaska Bingo Supply, Inc. ("ABS") located in Anchorage, Alaska.

GLOBAL PELICAN N.V. ("Pelican"), a St. Maarten Limited Liability company located on the island of St. Maarten in the Dutch Netherlands Antilles. The Company disposed of its investment in Pelican in December 1999.

WOODBINE CORPORATION ("Woodbine"), a South Dakota corporation, which operated Lillie's Casino in Deadwood, South Dakota through June 30, 1995.

SALE OF WOODBINE PROPERTY RIGHTS

During the quarter ended December 31, 2000, Global sold its Woodbine property rights. Proceeds of the sale were utilized to satisfy outstanding liens against the property and the remainder was placed in an escrow account. Recognition of the proceeds has been deferred pending final resolution.

EARNINGS PER SHARE

Basic income or loss per share (Basic EPS) represents the net income or loss available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted income or loss per share (Diluted EPS) reflects the potential dilution that could occur if derivative instruments to issue common stock (e.g. options, warrants, or convertible debt) were exercised or converted into common stock. After conversion or exercise, such instruments would share in the income or loss of the entity.

The Company's operating history of losses has resulted in an average market price per common share that is lower than the conversion or exercise prices on the existing convertible preferred stock, stock options, stock warrants, and convertible promissory notes. Under these conditions, we assume that these derivative instruments will not be exercised or converted.

Convertible preferred stock, stock options, stock warrants and convertible promissory notes are not considered in the calculation for the three months or nine months ended March 31, 2001 and 2000, as the impact of the potential common shares would be anti-dilutive. Therefore, Diluted EPS equals Basic EPS for those periods.

SEGMENT INFORMATION

          The Company operates in three significant lines of business: the casino gaming industry, the distribution
          of bingo products, and the leasing of a bingo hall. Each reportable segment is a strategic business unit
          that offers different products and services. The bingo-related segments are managed together to realize
          synergies in employment and marketing strategies.

          The accounting policies of the segments are the same as those described in the summary of significant
          accounting policies. The Company evaluates the performance of each segment based on profit or loss
          from operations.

Following is a tabulation of business segment information for the nine months ended March 31, 2001
and 2000 (in thousands):

	Casino	Bingo Products	Bingo Hall Leasing	Other	Total
2001
Revenue	$2,019	$1,706	$378	$ 5	$4,108
Interest expense	200	22	0	102	324
Depreciation and amortization	197	338	0	40	575
Realized and unrealized gains	0	0	0	39	39
Net income (loss)	(266)	(59)	180	(326)	(471)
Identifiable assets	4,330	3,302	0	344	7,976
Capital expenditures	0	5	0	0	5

	Casino	Bingo Products	Bingo Hall Leasing	Other	Total
2000
Revenue	$3,589	$2,234	$513	0	$6,436
Interest revenue	0	2	0	26	28
Interest expense	188	19	0	126	333
Depreciation and amortization	353	336	0	34	723
Realized and unrealized gains	0	0	0	328	328
Extraordinary items	0	0	0	55	55
Net income (loss)	457	111	135	(329)	374
Identifiable assets	6,108	1,045	0	4,292	11,445
Capital expenditures	214	0	0	0	214

        The Company's operation of the Pelican Casino in St. Maarten of the Dutch Netherlands Antilles was
        considered a foreign operation. The Company disposed of its Pelican investment in December 1999. All
        of the Company's remaining assets and operations are domestic.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Certain statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations which are not historical facts are forward-looking statements such as statements relating to future operating results, existing and expected competition, financing and refinancing sources and availability and plans for future development or expansion activities and capital expenditures. Such forward-looking statements involve a number of risks and uncertainties that may significantly affect our liquidity and results in the future and, accordingly, actual results may differ materially from those expressed in any forward-looking statements. Such risks and uncertainties include, but are not limited to, those related to effects of competition, leverage and debt service financing and refinancing efforts, general economic conditions, changes in gaming laws or regulations (including the legalization of gaming in various jurisdictions) and risks related to development and construction activities. The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report.

Overview

We operate in the domestic gaming industry. We were organized as a holding company for the purpose of acquiring and operating casinos, gaming properties and other related interests. At March 31, 2001, our consolidated financial statements consisted mainly of the Bull Durham Saloon & Casino in Black Hawk, Colorado; and Alaska Bingo Supply ("ABS") in Anchorage, Alaska. The Pelican Casino in St. Maarten was sold effective December 30, 1999, and the Tollgate Saloon & Casino in Central City ceased operations on August 1, 2000.

Our operations are seasonal. The Bull Durham casino experiences a significant increase in tourists from May through September. ABS's operations are strongly influenced by the amount of daylight and snow received. Consequently, ABS's operations are the strongest from September through April when people spend more time indoors.

Bull Durham Saloon & Casino

The Bull Durham is located approximately one hour from Denver, Colorado in the town of Black Hawk. In November 1998, the casino completed its expansion project that increased the gaming space approximately 2,500 square feet to a total of 7,200 square feet. The casino now operates with 159 slot machines and three black jack tables. The Bull Durham employs an average of 37 full-time employees.

Tollgate Saloon & Casino

The Tollgate was located approximately one mile from Bull Durham in the historic mining town of Central City. In August 1999, the Company entered into a lease and option agreement to lease the Tollgate for a term of 24 months with the option to purchase the casino and associated real estate and equipment at any time prior to the expiration of the lease agreement at a purchase price of $1,400,000. The Tollgate consisted of 19,233 square feet on three levels in a restored historic commercial building. The casino operated with four black jack tables, 121 slot machines, and employed approximately 16 full-time employees. The Company ceased operations at the Tollgate effective August 1, 2000.

Alaska Bingo Supply

ABS is primarily engaged in the distribution of a full line of bingo related products. ABS products are sold in Alaska to non-profit organizations and municipalities that use the products for fund-raising purposes. Charitable bingo is currently the sole form of legalized gaming in Alaska. ABS also receives rent income from the leasing of space to one bingo hall operator. ABS employs seven full-time employees.

Results of Operations - Nine Months Ended March 31, 2001 Compared to the Nine Months ended March 31, 2000

We recognized a net loss of $(471,000) for the nine months ended March 31, 2001 compared to net income of $526,000 for the same period in 2000. Net loss attributable to common stockholders was $(637,000) for the nine months ended March 31, 2001, compared to a net income of $374,000 for the same period in 2000. In 2000, we recognized a $1,176,000 gain from the sale of our Global Pelican NV subsidiary. There was no similar gain in 2001. Furthermore, our operations in 2000 included operation of the Pelican Casino (disposed in December 1999) and the Tollgate Casino (ceased operations August 1, 2000). The restructuring of our operations impacts the comparison of the 2001 period verses the 2000 period.

Revenues

Our revenues are generated from casino operations, sales of bingo products, rental income from the leasing of bingo halls, and miscellaneous income that is comprised of food and beverage sales at the casino. Revenues for the nine months ended March 31, 2001 were $4,108,000 compared to $6,436,000 for the 2000 period, a decrease of $2,328,000 or 36%.

Bull Durham's revenues decreased $298,000 to $1,750,000 for the nine months ended March 31, 2001 compared to $2,048,000 for the same period in 2000. The decrease is largely due to increased competition experienced by Bull Durham from larger, better- capitalized casinos. We are evaluating new marketing programs that may result in an increase in revenues; however, we cannot be sure that any new marketing program will be successful.

Alaska Bingo's revenues decreased $763,000 to $2,084,000 for the nine months ended March 31, 2001 compared to $2,847,000 for the period in 2000, or a decrease of 27%. The decrease is primarily related to increased competition in our marketplace and the termination of one bingo hall leasing arrangement. We believe that in the near term our operating profit will be less than we have been able to achieve historically, as we experience increasing competitive pressures in Alaska.

Expenses

Cost of sales decreased $484,000 to $1,209,000 for the nine months ended March 31, 2001 compared to $1,693,000 for the same period in 2000. The decrease corresponds with our decreased revenues. The gross margin percent declined from 74% in 2000 to 71% in 2001. The decline is a result of the competitive pressures previously discussed.

Operating, general, and administrative expenses decreased $2,322,000 to $2,350,000 for the nine months ended March 31, 2001 compared to $4,672,000 for the same period in 2000. The decrease is primarily due to costs incurred by Global Pelican and Tollgate Saloon & Casino during 2000. We continue to monitor our general and administrative expenses related to the operation of the Bull Durham and Alaska Bingo Supply. We are attempting to further reduce our general and administrative expenses by evaluating operational efficiencies; however, we can make no assurances that we will be successful in these endeavors.

Depreciation and amortization costs decreased $148,000 to $575,000 for the nine months ended March 31, 2001 compared to $723,000 for 2000. The decrease is due largely to the sale of the Pelican Casino and the closing of the Tollgate Saloon & Casino.

Other

Other income, net of expenses, decreased $(1,644,000) to $(445,000) for the nine months ended March 31, 2001 from $1,199,000 for the same period in 2000. In 2000, we recognized a gain from the sale of Global Pelican NV. In 2001, we recorded an impairment of $184,000 to reduce the carrying value of hotel credits. In 2001, we recorded gains (both realized and unrealized) of $39,000 from our portfolio of marketable securities. In 2000, the similar gain was $328,000. We believe that the changes in the current stock market may have an unfavorable effect on our marketable trading securities. We rely on the profits from the sales of marketable trading securities to fund a portion of our working capital needs. If we are unable to realize gains from these temporary investments, it could have a material adverse impact on our financial condition. Interest expense remained relatively constant for the nine months ended March 31, 2001 compared to the same period in 2000.

During December 2000, we sold our interest in the Woodbine property rights. A portion of the sales proceeds was used to pay expenses of the sale and to satisfy outstanding liens against the property. The remaining proceeds have been placed into an escrow account pending final resolution of the transaction.

We recognized an extraordinary item of $55,000 for the nine months ended March 31, 2000 related to gains from debt restructuring and extinguishments. No similar gains were recorded during the nine months ended March 31, 2001; however we continue to pursue such restructuring.

For federal income tax purposes, Global has a net operating loss of carryover (NOL) approximating $6,114,000, which can be used to offset future taxable income. Under the Tax Reform Act of 1986, the amounts of and the benefits from NOL's are subject to certain limitations including restrictions imposed when ownership changes in excess of 50% of outstanding shares. Thus, there is no guarantee that Global will be able to utilize its NOL before it expires.

Inflation did not have a material impact on the Company's operations for the period.

Other than the foregoing, management knows of no trends, demands, or uncertainties that are reasonably likely to have a material impact on the Company's results of operations.

Liquidity and Capital Resources

Our primary source of cash is internally generated through operations. Historically, cash generated from operations has not been sufficient to satisfy working capital requirements and capital expenditures. Consequently, we have depended on funds received through debt and equity financing to address these shortfalls. We have also relied, from time to time, upon loans from affiliates to meet immediate cash demands. There can be no assurance that these affiliates or other related parties will continue to provide funds to us in the future as there is no legal obligation on these parties parts to provide such loans.

We constantly monitor stock market conditions as we rely on realized gains from our marketable securities to fund our working capital needs. We invest in selected marketable securities as a short-term investment strategy to generate profits. Generally, these investments are limited to equity stocks that present a value or growth opportunity for the portfolio. Purchases are made with the intention that the securities purchased will be held for 12 months or less, and are monitored closely to minimize the inherent risks of market fluctuations. At March 31, 2001, we had marketable trading securities that totaled approximately $271,000. Should there be a sudden downturn in the stock market, we could experience a significant adverse impact on our financial condition.

We continue to address debt currently in default by evaluating converting debt to equity, restructuring of amounts due and we attempt to obtain extended payment terms. There can be no assurances, however, that we will be successful in these endeavors. Should we be unsuccessful in these endeavors, it would have a significant impact on our operations. Additionally, we are faced with renewing our gaming license with the Colorado Gaming Commission in the near term. Should we be unsuccessful in obtaining this renewal, it would have a material adverse impact on our operations.

Our working capital deficiency decreased by $359,000 to $(2,086,000) at March 31, 2001, from $(2,445,000) at June 30, 2000.

During the nine months ended March 31, 2001, related parties made working capital loans to us in the amount of $248,000. The loans accrue interest at 8% and 9%. We paid $373,000 toward the principal of the outstanding working capital loans and long-term debt. At March 31, 2001, we owed $919,000 to the related parties. Additionally, at March 31, 2001, we owed debt in the amount of approximately $1,135,000 to individuals and entities that, by the terms of these notes, was in default. Should any of these note holders make demand for payment, we would not have the financial resources to pay these notes that could have a material adverse impact on our financial condition.

Cash used by operating activities was $(64,000) for the nine months ended March 31, 2001. For the same period in 2000, operating activities provided net cash of $334,000.

We were able to compensate for the operating cash shortfall by generating net cash from investing activities of $785,000, compared to usage of $(556,000) for the same period in 2000. Most of the cash was provided by sales of marketable securities. The sale of our Woodbine property rights provided net cash of $195,000, most of which remains in an escrow account.

Cash flows used in financing activities increased $740,000 to $(677,000) for the nine months ended March 31, 2001, compared to cash provided of $63,000 in 2000. Most of the net cash used in financing activities went to the redemption of Class B preferred stock and payment of dividends thereon.

We continue our efforts to formulate plans and strategies to address our financial condition and increase profitability. We will continue to address debt currently in default by negotiating with creditors to convert debt to equity, extend maturity dates of debt, and accept reduced payment terms. We are evaluating methods to reduce costs and enhance our operating results. We cannot, however, provide any assurances that we will be successful in these endeavors.

Other than the foregoing, management knows of no trends, demands, or uncertainties that are reasonably likely to have a material impact on the Company's results of operations.

PART II. OTHER INFORMATION
Item 1. Legal Proceedings