<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
Commission File Number: 0-8698
------
CONCORDE GAMING CORPORATION
---------------------------
(Exact name of small business issuer as specified in its charter)
COLORADO 84-0716683
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3290 LIEN STREET
RAPID CITY, SOUTH DAKOTA 57702
---------------------------------------
(Address of principal executive offices)
(605) 341-7738
---------------------------------------
(Issuer's telephone number)
Not Applicable
-------------------------------------------------------------
(Former name, former address and former fiscal year, 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 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 X No
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of May 13, 1997, there
were 21,929,793 shares of the issuer's $.01 par value common stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE> 2
INDEX
CONCORDE GAMING CORPORATION
AND SUBSIDIARIES
PART 1 - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements Page No.
--------
<S> <C>
Condensed Consolidated Balance Sheet
at March 31, 1997 (unaudited)........................................ 1
Condensed Consolidated Statements of Operations for
Three Months Ended March 31, 1997 and 1996 and
for Six Months Ended March 31, 1997 and 1996 (unaudited)..............3
Condensed Consolidated Statements of Stockholders'
Equity for the Periods Ended March 31, 1997,
September 30, 1996 and March 31, 1996 (unaudited).....................4
Condensed Consolidated Statements of Cash Flows for
Six Months Ended March 31, 1997 and 1996 (unaudited)..................5
Notes to Condensed Consolidated Financial Statements
(unaudited)....................................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................13
</TABLE>
<PAGE> 3
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1997
(unaudited)
<TABLE>
<S> <C>
Assets
Current assets:
Cash $ 4,886,550
Receivables:
Trade 11,579
Interest 37
Current maturities of notes receivable 27,301
Prepaid expenses 62,986
-------------
Total current assets $ 4,988,453
-------------
Investments and long-term receivables:
Notes receivable, less current maturities $ 2,542
Other 233,789
-------------
$ 236,331
-------------
Property and equipment, at cost:
Land $ 50,000
Building and improvements 205,511
Video lottery equipment 2,405,550
Furniture and equipment 274,200
Leasehold improvements 301,447
Vehicles 103,425
-------------
$ 3,340,133
Less accumulated depreciation (1,654,690)
-------------
$ 1,685,443
-------------
Intangibles:
Noncompetition agreements, net $ 27,261
Other, principally goodwill, net 341,632
Casino development and financing costs, net 304,451
-------------
$ 673,344
-------------
$ 7,583,571
=============
</TABLE>
The accompanying notes are an integral part of these statements.
1
<PAGE> 4
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
March 31, 1997
(unaudited)
<TABLE>
<S> <C>
Liabilities and Stockholder's Equity
Current liabilities:
Current maturities of long-term debt $ 492,857
Accounts payable 105,910
Accrued expenses:
Lottery state share 153,272
Other 106,231
Income tax payable 841,200
-----------
Total current liabilities $ 1,699,470
-----------
Long-term debt, less current maturities $ 333,412
-----------
Deferred income taxes $ 46,600
-----------
Stockholders' equity:
Common stock, par value $.01 per share; authorized
500,000,000 shares; issued 21,929,793 at March 31, 1997 $ 219,298
Preferred stock, par value $.01 per share; authorized
10,000,000 shares; no shares issued and outstanding 0
Additional paid-in capital 3,653,731
Retained earnings 1,790,806
-----------
$ 5,663,835
Less stock subscription in the form of a note
and related accrued interest receivable (159,746)
-----------
$ 5,504,089
-----------
$ 7,583,571
===========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 5
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 1997 and 1996, and
Six Months Ended March 31, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, 1997 and 1996 March 31, 1997 and 1996
------------------------------ ------------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Video lottery $ 1,872,243 $ 2,172,860 $ 3,836,937 $ 4,643,656
Management agreement 0 391,143 208,371 914,553
Other 12,078 38,424 25,901 44,916
------------ ------------ ------------ ------------
$ 1,884,321 $ 2,602,427 $ 4,071,209 $ 5,603,125
------------ ------------ ------------ ------------
Costs and expenses:
Video lottery state share $ 930,420 $ 1,081,389 $ 1,907,536 $ 2,307,847
Video lottery location share 619,370 681,861 1,279,291 1,497,411
Compensation expenses 247,079 241,928 482,122 437,890
Business development costs 43,385 22,345 66,402 36,286
Depreciation and amortization 165,649 150,429 331,330 302,234
Operating expenses 234,773 339,100 447,857 620,699
------------ ------------ ------------ ------------
Total costs and expenses $ 2,240,676 $ 2,517,052 $ 4,514,538 $ 5,202,367
------------ ------------ ------------ ------------
Operating income (loss) $ (356,355) $ 85,375 $ (443,329) $ 400,758
------------ ------------ ------------ ------------
Other income (expense):
Interest income $ 31,967 $ 153,858 $ 32,549 $ 293,361
Gain/(loss) on sale of equipment 14,536 (6,274) 19,909 (6,731)
Gain on termination of
management agreement 2,819,750 0 2,819,750 0
Other income 6,812 1,662 24,205 2,883
Interest expense and financing costs (85,928) (219,079) (243,716) (446,314)
------------ ------------ ------------ ------------
$ 2,787,137 $ (69,833) $ 2,652,697 $ (156,801)
------------ ------------ ------------ ------------
Income before income taxes $ 2,430,782 $ 15,542 $ 2,209,368 $ 243,957
Federal and state income taxes $ 850,300 $ 4,950 $ 769,100 $ 87,800
------------ ------------ ------------ ------------
Net income $ 1,580,482 $ 10,592 $ 1,440,268 $ 156,157
============ ============ ============ ============
Net income per common and
common equivalent share $0.07 $0 $0.06 $0.01
============ ============ ============ ============
Weighted average number of common and
common equivalent shares outstanding 22,587,776 21,938,246 22,180,524 21,958,489
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 6
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Periods Ended March 31, 1997, September 30, 1996 and March 31, 1996
(unaudited)
<TABLE>
<CAPTION>
Number of
Common Additional
Shares Common paid-in Retained
Outstanding stock capital earnings
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, September 30, 1995 26,755,193 $ 267,552 $ 3,868,775 $ (207,121)
Net income 0 0 0 156,157
Issuance of warrant for 80,000 shares of common
stock in connection with note payable 0 0 1,600 0
Interest earned on note receivable 0 0 19,543 0
Principal payments received on note receivable 0 0 0 0
----------- ----------- ----------- -----------
Balance, March 31, 1996 26,755,193 267,552 3,889,918 (50,964)
Net income 0 0 0 401,502
Interest earned on note receivable 0 0 17,629 0
Principal payments received on note receivable 0 0 0 0
----------- ----------- ----------- -----------
Balance, September 30, 1996 26,755,193 267,552 3,907,547 350,538
Net income 0 0 0 1,440,268
Cancellation of 4,825,400 shares of common stock
related to liquidation of subsidiary into parent (4,825,400) (48,254) (269,348) 0
Interest earned on note receivable 0 0 15,532 0
Principal payments received on note receivable 0 0 0 0
----------- ----------- ----------- -----------
Balance, March 31, 1997 21,929,793 $ 219,298 $ 3,653,731 $ 1,790,806
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Stock
subscription
in the form
of a note
and related
interest Treasury
receivable stock Total
----------- ----------- -----------
<S> <C> <C> <C>
Balance, September 30, 1995 $(226,032) $(317,602) &3,385,572
Net income 0 0 156,157
Issuance of warrant for 80,000 shares of common
stock in connection with note payable 0 0 1,600
Interest earned on note receivable 202 0 19,745
Principal payments received on note receivable 19,918 0 19,918
----------- ----------- -----------
Balance, March 31, 1996 (205,912) (317,602) 3,582,992
Net income 0 0 401,502
Interest earned on note receivable 0 0 17,629
Principal payments received on note receivable 22,035 0 22,035
----------- ----------- -----------
Balance, September 30, 1996 (183,877) (317,602) 4,024,158
Net income 0 0 1,440,268
Cancellation of 4,825,400 shares of common stock
related to liquidation of subsidiary into parent 0 317,602 0
Interest earned on note receivable 0 0 15,532
Principal payments received on note receivable 24,131 0 24,131
----------- ----------- -----------
Balance, March 31, 1997 $ (159,746) $ 0 $ 5,504,089
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 7
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months
Ended March 31, 1997 and 1996 (unaudited)
<TABLE>
1997 1996
------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,440,268 $ 156,157
Adjustments to reconcile net income to net cash flows
provided by operating activities:
Depreciation and amortization 331,330 302,234
Warrants issued 0 1,600
(Gain) on termination of management agreement (2,819,750) 0
(Gain) loss on sale of property and equipment, real estate (19,909) 6,733
Proceeds from termination of management agreement 2,851,061 0
Other 8,794 0
Changes in assets and liabilities:
Receivables - trade, management agreement, and interest 269,102 56,539
Prepaid expenses 18,227 (37,347)
Accounts payable and accrued expenses (119,259) 169,932
Income taxes payable 714,600 (16,954)
------------- -----------
Net cash provided by operating activities $ 2,674,464 $ 638,894
------------- -----------
Cash flows from investing activities:
Advances on long-term receivables $ (17,835) $ (84,500)
Principal payments received on long-term receivables 5,760,495 1,004,733
Proceeds from sale of property and equipment, real estate 70,764 40,304
Purchase of property and equipment (8,842) (329,910)
Payments for casino development costs (40,770) (164,790)
Other (3,474) 0
------------- -----------
Net cash provided by investing activities $ 5,760,338 $ 465,837
------------- -----------
Cash flows from financing activities:
Proceeds from long-term borrowing $ 0 $12,992
Principal payments on long-term debt (3,113,486) (1,496,277)
Net change in short-term borrowings (595,000) (15,000)
Payments received on stock subscription in the form of a
note and related interest receivable 39,662 39,663
------------- -----------
Net cash (used in) financing activities $ (3,668,824) $(1,458,622)
------------- -----------
Net increase (decrease) in cash $ 4,765,978 $ (353,891)
Cash:
Beginning 12,0572 520,438
------------- -----------
Ending $ 4,886,550 $ 166,547
============= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 8
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Six Months Ended March 31, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash payments for:
Interest $371,264 $448,623
======== ========
Income taxes $ 50,000 $105,000
======== ========
Supplemental schedule of noncash investing and financing activities:
Property and equipment acquired by issuance of long-term debt $190,000
========
Property and equipment acquired by incurring accounts payable $ 67,174
========
Cancellation of treasury stock $317,602
========
The accompanying notes are an integral part of these statements.
</TABLE>
6
<PAGE> 9
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(unaudited)
(1) Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements
of Concorde Gaming Corporation and its majority-owned subsidiaries
(the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and
the rules and regulations of the U.S. Securities and Exchange
Commission. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the six month period ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the
year ending September 30, 1997.
The accompanying condensed consolidated financial statements, and
related notes thereto, should be read in conjunction with the audited
financial statements of the Company, and notes thereto, for the year
ended September 30, 1996 included in the Company's 1996 Annual Report
on Form 10-KSB.
(2) Termination of Casino Management Agreement
On February 13, 1997, Bruce H. Lien Company ("BHL"), a wholly owned
subsidiary of the Company closed the settlement agreement (the
"Settlement Agreement") between BHL and the Three Affiliated Tribes
("TAT"). The Settlement Agreement provided that in consideration for
the termination of the Management Agreement (the "Management
Agreement") between BHL and TAT, whereby BHL managed the 4 Bears
Casino & Lodge (the "Casino"), TAT would pay BHL $8.65 million and the
parties would dismiss, with prejudice, all litigation between BHL and
TAT. Approximately $5.6 million of the proceeds represented the
payment of notes and accounts receivable due to BHL that were related
to the Management Agreement. BHL reported a gain on the termination of
the Management Agreement of approximately $2.82 million.
The proceeds from the Settlement Agreement were used to pay off
substantially all of the Company's debt, other than approximately
$900,000 related to its video lottery operations, with the balance
held for working capital purposes and to fund future projects. See
"Liquidity and Capital Resources."
7
<PAGE> 10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(unaudited)
(3) Asset Purchase Agreement
On March 14, 1997, the Company entered into an Asset Purchase
Agreement (the "Agreement") with Cripple Creek Development Corporation
("CCDC"), a Colorado corporation with its principal business being the
"Gold Rush Hotel & Casino" in Cripple Creek, Colorado. The Agreement
provides that the Company will purchase certain assets of CCDC,
including the Gold Rush Hotel & Casino, for $8,000,000 in cash, the
assumption of $3,700,000 in liabilities and the issuance of 2,500,000
shares of the Company's common stock. Conditions to the Agreement
include licensing of the Company by the Colorado Gaming Commission,
the Company obtaining all necessary financing, a satisfactory due
diligence review and bankruptcy court approval. CCDC filed for Chapter
11 bankruptcy protection on October 17, 1996 as a result of a dispute
among its shareholders and currently is operating as a debtor in
possession.
On April 30, 1997, CCDC filed a motion in United States Bankruptcy
Court to dismiss the Chapter 11 bankruptcy case and to have the
Agreement declared unenforceable against CCDC after the dismissal of
the Chapter 11 bankruptcy case. The Company intends to oppose CCDC's
motion with respect to the enforceability of the Agreement. However,
there can be no assurances that the Company will be successful.
8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The statements contained in this report, if not historical, are
forward looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, and involve risks and uncertainties that could
cause actual results to differ materially from the financial results described
in such forward looking statements. These risks and uncertainties include,
among others, the level and rate of growth in the Company's operations. The
success of the Company's business operations is in turn dependent on factors
such as the effectiveness of the Company's marketing strategies to grow its
customer base, retention of video lottery space lease agreements, general
competitive conditions within the gaming industry and general economic
conditions. Further, any forward looking statement or statements speak only as
of the date on which such statement was made, and the Company undertakes no
obligation to update any forward looking statement or statements to reflect
events or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events. Therefore, forward-looking
statements should not be relied upon as a prediction of actual future results.
OVERVIEW
The Settlement Agreement closed on February 13, 1997 and BHL received
a payment of $8,650,000. See "Note 2 to Notes to Condensed Consolidated
Financial Statements." As a result of the closing of the Settlement Agreement,
the Company did not record any revenues from the Management Agreement for the
second quarter ended March 31, 1997.
RESULTS OF OPERATIONS
Three Months ended March 31, 1997 Compared to Three Months ended March 31, 1996
Revenues. Total revenues decreased 27.6% to $1,884,321 for the three
months ended March 31, 1997, compared to $2,602,427 for the three months ended
March 31, 1996 as a result of decreases in revenues from the Management
Agreement and video lottery operations. As a result of the closing of the
Settlement Agreement the Company did not record any revenues from the
Management Agreement for the three months ended March 31, 1997, compared to
$391,143 for the three months ended March 31, 1996. Video lottery revenues
decreased 13.8% to $1,872,243 for the three months ended March 31, 1997,
compared to $2,172,860 for the three months ended March 31, 1996 primarily due
to a 5.3% decrease in the average number of machines placed in locations, and a
9.1% decrease in the revenue generated by each video lottery machine, during
the three months ended March 31, 1997 compared to the three months ended March
31, 1996. These decreases were the result of a continuing trend where certain
locations that generate higher revenues are purchasing their own video lottery
machines and not renewing their lease agreements. As a result, the Company has
had to place its machines in lower revenue-per-machine locations.
Costs and expenses. Total costs and expenses decreased 11% to
$2,240,676 for the three months ended March 31, 1997, compared to $2,517,052
for the three months ended March 31,
9
<PAGE> 12
1996. The decrease was primarily attributable to decreases in video lottery
state share, video lottery location share and reduced operating expenses. Due
to the decrease in video lottery revenues, video lottery state share decreased
14% to $930,420 for the three months ended March 31, 1997, compared to
$1,081,389 for the three months ended March 31, 1996 and video lottery location
share decreased 9.2% to $619,370 for the three months ended March 31, 1997,
compared to $681,861 for the three months ended March 31, 1996. Operating
expenses decreased 30.8% to $234,773 for the three months ended March 31, 1997,
compared to $339,100 for the three months ended March 31, 1996 primarily as a
result of a reduction in legal expenses related to the arbitration with TAT,
and a decrease in repairs and maintenance expense. These decreases were
partially offset by an increase in compensation expense of 2.1% to $247,079 for
the three months ended March 31, 1997, compared to $241,928 for the three
months ended March 31, 1996.
Other Income and Expense. Interest expense and financing costs
decreased 60.8% to $85,928 for the three months ended March 31, 1997, compared
to $219,079 for the three months ended March 31, 1996. This decrease was the
result of the Company having reduced its notes payable to $826,269 as of March
31, 1997, compared to $6,291,429 at March 31, 1996. Interest income decreased
79.2% to $31,967 for the three months ended March 31, 1997, compared to
$153,858 for the three months ended March 31, 1996, as the Company did not
record any interest income on the amounts due from TAT since September 30, 1996
in accordance with the terms of the Settlement Agreement.
Federal and State Income Taxes. The Company recorded Federal and State
income taxes of $850,300 for the three months ended March 31, 1997, compared to
$4,950 for the three months ended March 31, 1996, an increase of $845,350, due
primarily to the gain on termination of the Management Agreement. The Company
records income tax expense using the estimated effective tax rate for the
fiscal year.
Six Months ended March 31, 1997 Compared to Six Months ended March 31, 1996
Revenues. Total revenues decreased 27.3% to $4,071,209 for the six
months ended March 31, 1997, compared to $5,603,125 for the six months ended
March 31, 1996 as a result of decreases in revenue from the Management Agreement
and video lottery operations. Revenues from the Management Agreement decreased
to $208,371 for the six months ended March 31, 1997, compared to $914,553 for
the six months ended March 31, 1996, due to the closing of the Settlement
Agreement in February 1997 and the decreased profitability of the Casino due to
extreme winter weather in the North Dakota are. Video lottery revenues decreased
17.4% to $3,836,937 for the six months ended March 31, 1997, compared to
$4,643,656 for the six months ended March 31, 1996 primarily due to a 6%
decrease in the average number of machines placed in locations, and a 11.9%
decrease in the revenue generated by each video lottery machine, during the six
months ended March 31, 1997 compared to the six months ended March 31, 1996.
These decreases were the result of a continuing trend where certain locations
that generate higher revenues are purchasing their own video lottery machines
and not renewing their lease agreements. As a result, the Company has had to
place its machines in lower revenue-per-machine locations.
10
<PAGE> 13
Costs and expenses. Total costs and expenses decreased 13.2% to
$4,514,538 for the six months ended March 31, 1997, compared to $5,202,367 for
the six months ended March 31, 1996. The decrease was primarily attributable to
decreases in video lottery state share, video lottery location share, and
operating expenses. Due to the decrease in video lottery revenues, video
lottery state share decreased 17.4% to $1,907,536 for the six months ended
March 31, 1997, compared to $2,307,847 for the six months ended March 31, 1996
and video lottery location share decreased 14.6% to $1,279,291 for the six
months ended March 31, 1997, compared to $1,497,411 for the six months ended
March 31, 1996. Operating expenses decreased 27.9% to $447,857 for the six
months ended March 31, 1997, compared to $620,699 for the six months ended
March 31, 1996. The decrease in operating expenses was primarily related to a
reduction in legal expenses related to the arbitration with TAT and decreases
in travel and miscellaneous expenses. These decreases were partially offset by
an increase in compensation expense of 10.1% to $482,122 for the six months
ended March 31, 1997, compared to $437,890 for the six months ended March 31,
1996.
Other Income and Expense. Interest expense and financing costs
decreased 45.4% to $243,716 for the six months ended March 31, 1997, compared
to $446,314 for the six months ended March 31, 1996. This decrease was the
result of the Company having reduced its notes payable to $826,269 as of March
31, 1997, compared to $6,291,429 at March 31, 1996. Interest income decreased
88.9% to $32,549 for the six months ended March 31, 1997, compared to $293,361
for the six months ended March 31, 1996, as the Company did not record any
interest income on the amounts due from TAT since September 30, 1996 in
accordance with the terms of the Settlement Agreement.
Federal and State Income Taxes. The Company recorded Federal and State
income taxes of $769,100 for the six months ended March 31, 1997, compared to
$87,800 for the six month ended March 31, 1996, an increase of $681,300, due
primarily to the gain on termination of the Management Agreement. The Company
records income tax expense using the estimated effective tax rate for the
fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $4,886,550 at March 31,
1997, compared to $120,572 at September 30, 1996, an increase of $4,765,978.
The increase was the result of the cash received from the closing of the
Settlement Agreement after reduction for payment of substantially all the
Company's notes payable. During the six months ended March 31, 1997, cash flow
from operating activities was $2,674,464 compared to $638,894 during the six
months ended March 31, 1996. The increase in cash flow from operating
activities is due primarily to the closing of the Settlement Agreement and the
resulting proceeds received from the termination of the Management Agreement.
See "Note 2 to Notes to Consolidated Financial Statements."
11
<PAGE> 14
Investing activities provided cash of $5,760,338 during the six months
ended March 31, 1997, compared to $465,837 during the six months ended March
31, 1996. Principal payments on long-term receivables, which primarily
represent payments made in connection with the Settlement Agreement, provided
cash of $5,760,495 during the six months ended March 31, 1997, compared to
$1,004,733 during the six months ended March 31, 1996. Purchases of property
and equipment used cash of $8,842 during the six months ended March 31, 1997,
compared to $329,910 during the six months ended March 31, 1996. See "Note 2 to
Notes to Consolidated Financial Statements."
Financing activities used cash of $3,668,824 during the six months
ended March 31, 1997, compared to $1,458,622 during the six months ended March
31, 1996. Principal payments on long-term debt used cash of $3,113,486 during
the six months ended March 31, 1997, compared to $1,496,277 during the six
months ended March 31, 1996. The Company reduced its short-term borrowings by
$595,000 during the six months ended March 31, 1997, compared to $15,000 during
the six months ended March 31, 1996. See "Note 2 to Notes to Consolidated
Financial Statements."
FUTURE OPERATIONS
The Company's only source of revenues is its video lottery operations.
Revenues generated from the Company's video lottery operations are currently
not sufficient to meet its working capital requirements, and the Company will
be required to use a portion of the proceeds from the Settlement Agreement for
working capital purposes. In addition, the Company's video lottery space lease
agreements with establishments are for limited terms. There is no assurance
that the Company will be able to renew the space lease agreements with existing
establishments, or if the agreements are renewed, that the terms will be as
favorable to the Company as the current agreements. If the agreements are not
renewed, or renewed on less favorable terms, the Company's revenues, net income
and cash flow would be adversely impacted. Also, the trend in current years has
been a decrease in video lottery profits due to increased state share, higher
percentages paid to location owners and a decrease in revenues-per-machine due
to video lottery machines being placed in lower revenue-per-machine locations.
The Company intends to actively pursue strategic acquisitions or
alliances in the gaming industry. The Company's plan also is to evaluate and
investigate expanding or acquiring additional interests in the video lottery
and gaming industries in states likely to legalize or expand in these
industries in the future, the acquisition or expansion of which may result in
increased profitability and cash flow. See "Note 3 to Condensed Consolidated
Financial Statements." There is no assurance that the Company will be
successful in such an acquisition or expansion, be able to obtain additional
financing, or that increased profitability and cash flow would result. The
Company anticipates incurring additional expenses in order to investigate these
possible future business opportunities.
12
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
11. Computation of Per Share Earnings
27. Financial Data Schedule (for EDGAR purposes only)
b. Reports on Form 8-K
A Form 8-K dated February 13, 1997 was filed under Item 2.
13
<PAGE> 16
Signatures:
In accordance with the requirements of the Exchange Act, the
registrant caused the report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CONCORDE GAMING CORPORATION
Date: May 12, 1997 By: /s/ DAVID L. CRABB
-----------------------
David L. Crabb,
Chief Financial Officer
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
11 Computation of Per Share Earnings
27 Financial Data Schedule (for EDGAR purposes only)
</TABLE>
<PAGE> 1
EXHIBIT 11
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended March 31, Six Months Ended March 31,
--------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Weighted average shares outstanding, net of
treasury stock, beginning of period 21,929,793 21,929,793 21,929,793 21,929,793
Shares cancelled in accordance with a
lookback provision of a merger 0 0 0 0
Adjustments for common stock equivalents (1) 657,983 8,453 250,731 28,696
----------- ----------- ----------- -----------
Weighted average common and common equivalent
shares outstanding, end of period 22,587,776 21,938,246 22,180,524 21,958,489
=========== =========== =========== ===========
Net earnings $ 1,580,482 $ 10,592 $ 1,440,268 $ 156,157
=========== =========== =========== ===========
Net earnings per common and common equivalent share $ 0.07 $ 0.00 $ 0.06 $ 0.01
=========== =========== =========== ===========
</TABLE>
(1) Represents adjustments computed under the treasury stock method for stock
options and warrants granted at fair market value at date of grant.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,886,550
<SECURITIES> 0
<RECEIVABLES> 38,917
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,988,453
<PP&E> 3,340,133
<DEPRECIATION> 1,654,690
<TOTAL-ASSETS> 7,583,571
<CURRENT-LIABILITIES> 1,699,470
<BONDS> 0
0
0
<COMMON> 219,298
<OTHER-SE> 5,284,791
<TOTAL-LIABILITY-AND-EQUITY> 7,583,571
<SALES> 25,901
<TOTAL-REVENUES> 4,071,209
<CGS> 0
<TOTAL-COSTS> 4,514,538
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 243,716
<INCOME-PRETAX> 2,209,368
<INCOME-TAX> 769,100
<INCOME-CONTINUING> 1,440,268
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,440,268
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
