Four Corners, Inc. (FCNE.PK) (Four Corners or the Company)
announced today that it has entered into an agreement to acquire
all of the common stock of three commonly owned and managed
companies: Integrity Gaming, Inc. (Integrity); Aurora Gaming Inc.
(Aurora); and Integrity Gaming of Kansas, Inc. (Integrity KS)
(collectively, the Integrity Companies). Finalization of the deal
is principally dependent on Four Corners obtaining licenses in
certain of the markets where the Integrity Companies operate.
The Company also announced its financial results for the second
quarter of fiscal year 2011.
The Integrity Companies Acquisition
Integrity and Integrity KS are state-licensed
distributors of bingo products and services in Oklahoma, Kansas and
Arkansas. Aurora is a licensed distributor (through revenue
participation agreements) of class II and class III electronic
gaming machines to certain Native American casinos in Oklahoma and
Texas. The following financial information was derived from the
Integrity Companies’ combined financial statements as of and for
the year ended December 31, 2010. These financial statements are
preliminary and unaudited; accordingly, the amounts presented below
are subject to change, and those changes could be significant.
Millions Total assets $ 15.2
Total liabilities 15.7 Operating revenue 8.5 Net loss 0.11 EBITDA
5.0
Total purchase consideration will consist of $200,000 in cash,
1,000,000 shares of the Company’s common stock and contingent
consideration of up to an additional $800,000.
“We are excited about the opportunity to acquire the Integrity
Companies. The Integrity Companies are one of the largest
distributors of gaming machines and bingo products in the Oklahoma
market, and we believe this acquisition can help position us for
future growth and success,” said John J. Schreiber, the Company’s
chairman, president and chief executive officer. “We will continue
to selectively look at strategic distribution opportunities in
other markets that leverage our expertise and relationships.”
“We are delighted for the opportunity to join Four Corners,
which we believe will help expand and enhance our business
prospects,” said Phil Bowden, president of the Integrity
Companies.
Financial Update
The Company had consolidated income from continuing operations
of $23,000, or $0.00 per basic and diluted share, for the 13-week
period ended May 1, 2011, compared to consolidated income from
continuing operations of $253,000, or $0.02 per basic and diluted
share, for the 13-week period ended May 2, 2010. The decrease in
income from continuing operations for the 2011 period was primarily
due to $431,000 of corporate expenses arising from the litigation
and settlement of a lawsuit related to discontinued operations.
The Company had consolidated income from continuing operations
of $159,000, or $0.02 per basic and diluted share, for the 26-week
period ended May 1, 2011, compared to consolidated income from
continuing operations of $401,000, or $0.04 per basic and diluted
share, for the 26-week period ended May 2, 2010. The decrease in
income from continuing operations for the 2011 period was also
primarily due to the aforementioned litigation related
expenses.
The Company had consolidated net income for the subject 13-week
and 26-week periods in 2011 of $23,000 and $159,000, respectively.
Net income attributable to the Company for the comparable 13-week
and 26-week periods in 2010 was $107,000 ($0.01 per basic and
diluted share) and $81,000 ($0.01 per basic and diluted share),
respectively. Net income for the 2010 periods was adversely
affected by the operating results of a subsidiary the Company
divested on May 7, 2010, which were included in discontinued
operations.
Balance sheets as of May 1, 2011 and October 31, 2010 and
statements of operations and cash flows for the subject 13-week and
26-week periods in 2011 and 2010 are provided below.
About Four Corners
The Company is a holding company of certain subsidiaries whose
primary focus is the gaming industry. The Company’s wholly-owned
subsidiary, K&B Sales, Inc., distributes bingo supplies and
related equipment to charity bingo licensees in Texas. FC
Distributing LLC, a wholly-owned subsidiary of the Company,
distributes gaming machines and other gaming related equipment to
the Native American casino market in Oklahoma.
Forward-Looking Statements
Certain of the statements contained herein are statements of
future expectations, particularly the pending acquisition of the
Integrity Companies. These forward-looking statements are based on
management's current views and assumptions, which involve known and
unknown risks and uncertainties that could cause actual results,
performance or events to differ materially from those expressed or
implied in such statements. In addition to statements which are
forward-looking by reason of context, the words may, can, should,
expects, plans, intends, anticipates, believes, estimates,
predicts, potential, opportunity or continue and similar
expressions identify forward-looking statements.
Four Corners, Inc. Condensed Consolidated
Balance Sheets May 1, October 31,
2011 2010
ASSETS
(unaudited)
Current assets Cash and cash equivalents $
2,319,964 $ 3,023,661 Restricted cash (Note 14) 174,771 - Trade
accounts receivable, net 1,083,871 1,104,340 Inventory, net of
valuation allowance of $380,005 at 2011 and $292,978 at 2010
918,757 980,816 Prepaid expenses and other 323,575
433,591 Total current assets 4,820,938
5,542,408
Property and equipment, net
1,761,400 1,881,955
Other 54,272
23,453 Total assets $ 6,636,610 $ 7,447,816
LIABILITIES AND
STOCKHOLDERS' DEFICIENCY
Current liabilities Maturities of notes and interest payable
to related parties $ 1,459,570 $ 879,141 Trade accounts payable
308,544 298,716 Accrued expenses and other 762,149
1,712,279 Total current liabilities 2,530,263
2,890,136
Notes and interest payable
to related parties, less current maturities and discount
4,042,151 4,626,414
Other 218,599
244,554 Total liabilities 6,791,013
7,761,104
Stockholders' deficiency
Common stock, 10,479,658 shares issued and outstanding at 2011 and
2010 10,480 10,480 Additional paid-in capital 20,323,923 20,323,923
Accumulated deficit (20,488,806 ) (20,647,691 ) Total
stockholders' deficiency (154,403 ) (313,288 ) Total
liabilities and stockholders' deficiency $ 6,636,610 $
7,447,816
Four
Corners, Inc. Consolidated Statements of Operations
For the 13-week and 26-week Periods ended May 1, 2011 and May 2,
2010 (Unaudited) 13-week period ended
26-week period ended May 1, May 2, May
1, May 2, 2011 2010 2011
2010
Revenue
Bingo supply and services $ 4,380,667 $ 4,430,048 $ 8,364,118 $
8,167,731 Game distribution 115,205 -
219,885 - Total revenue
4,495,872 4,430,048 8,584,003
8,167,731
Expenses
Cost of sales (bingo supply and services) 2,332,904 2,318,538
4,418,850 4,287,979 Bingo supply and services 1,067,878 1,202,468
2,248,796 2,244,657 Game distribution 155,243 - 306,998 - Corporate
overhead 856,201 541,998
1,322,829 1,016,521 Total expenses
4,412,226 4,063,004 8,297,473
7,549,157
Operating income 83,646
367,044 286,530 618,574
Other income
(expense)
Interest income 2,870 - 4,687 150 Interest expense (89,500 )
(105,345 ) (183,360 ) (201,283 ) Other 33,352
- 67,828 - Total other income
(expense), net (53,278 ) (105,345 ) (110,845 )
(201,133 )
Income before income taxes 30,368 261,699
175,685 417,441
Income tax expense (7,813 )
(8,400 ) (16,800 ) (16,800 )
Income from
continuing operations 22,555 253,299 158,885 400,641
Loss
from discontinued operations - (229,024 )
- (464,538 )
Net income (loss) 22,555
24,275 158,885 (63,897 )
Loss from discontinued operations
attributable to noncontrolling interest -
82,699 - 144,637
Net income
attributable to Four Corners, Inc. $ 22,555 $ 106,974
$ 158,885 $ 80,740
Income (loss) per
share attributable to Four Corners, Inc. common stockholders:
Basic and Diluted Income from continuing operations $ - $
0.02 $ 0.02 $ 0.04 Loss from discontinued operations -
(0.01 ) - (0.03 ) Net income $ -
$ 0.01 $ 0.02 $ 0.01
Weighted-average number of common shares outstanding: Basic
10,479,658 10,479,658 10,479,658
10,479,658 Diluted 10,479,658
10,533,447 10,479,658 10,517,588
Income (loss) attributable to Four Corners, Inc.
common stockholders: Income from continuing operations $ 22,555
$ 253,299 $ 158,885 $ 400,641 Loss from discontinued operations
- (146,325 ) - (319,901 )
Net income $ 22,555 $ 106,974 $ 158,885 $
80,740
Four Corners, Inc.
Condensed Consolidated Statements of Cash Flows For the
26-week Periods ended May 1, 2011 and May 2, 2010
(Unaudited) 26-week period ended May 1,
May 2, 2011 2010 Net Cash provided
by Operating Activities of Continuing Operations $ 345,757 $
301,488
Cash Flows from
Investing Activities of Continuing Operations
Acquisitions of property and equipment (212,797 ) (201,530 )
Restricted cash (174,771 ) - Other (3,060 ) 9,033
Net cash used in investing activities of continuing
operations (390,628 ) (192,497 )
Cash Flows from
Financing Activities of Continuing Operations
Repayments of notes payable to related parties (141,000 ) (69,409 )
Payments of installment purchase agreements (414,798 ) (202,442 )
Other (3,737 ) (3,476 ) Cash used in financing
activities of continuing operations (559,535 )
(275,327 )
Cash Flows from
Discontinued Operations
Net cash used in operating activities of discontinued operations
(99,291 ) (310,033 ) Net cash provided by investing activities of
discontinued operations - 193,495 Net cash used in financing
activities of discontinued operations -
(181,074 ) Net cash used in discontinued operations (99,291
) (297,612 )
Net decrease in cash and cash
equivalents (703,697 ) (463,948 )
Cash and cash equivalents
- beginning of the period 3,023,661
1,024,017
Cash and cash equivalents - end of the
period $ 2,319,964 $ 560,069
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