FCNE Four Corners Inc (PK)

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