<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 JUNE 30, 1998
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 57709
(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 August 7, 1998, there were
23,673,126 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
PART 1 - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements Page No.
--------
<S> <C>
Condensed Consolidated Balance Sheet at June 30, 1998 (unaudited) 1
Condensed Consolidated Statements of Operations for 2
Three Months Ended June 30, 1998 and 1997 and for
Nine Months Ended June 30, 1998 and 1997 (unaudited)
Condensed Consolidated Statements of Cash Flows for 3
Nine Months Ended June 30, 1998 and 1997 (unaudited)
Notes to Condensed Consolidated Financial Statements (unaudited) 4
Item 2. Management's Discussion and Analysis of Financial 6
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
</TABLE>
<PAGE> 3
CONCORDE GAMING CORPORATION
Condensed Consolidated Balance Sheet
June 30, 1998
(unaudited)
<TABLE>
<S> <C>
Assets
Current assets:
Cash $ 846,603
Trade and other receivables 38,719
Prepaid expenses 178,443
Other 983,935
-------------------
Total current assets 2,047,700
Property and equipment, net 10,242,826
Intangibles, net 995,931
Deferred income taxes 144,000
Other 259,796
===================
$ 13,690,253
===================
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable, related party $ 2,741,000
Notes payable, bank 3,202,505
Current maturities of long-term debt 104,262
Accounts payable - trade 47,501
Accounts payable - property and equipment related 1,894,473
Accrued payroll and related costs 85,128
Other 457,117
-------------------
Total current liabilities 8,531,986
-------------------
Long-term debt, less current maturities 397,334
-------------------
Stockholders' equity:
Common stock, $.01 par value; authorized 500,000,000 shares,
issued 23,673,126 at June 30, 1998 236,731
Preferred stock, $.01 par value; authorized 10,000,000 shares,
no shares issued and outstanding 0
Additional paid-in capital 3,855,246
Retained earnings 668,956
-------------------
4,760,933
-------------------
$ 13,690,253
===================
</TABLE>
The accompanying notes are an integral part of these statements.
1
<PAGE> 4
CONCORDE GAMING CORPORATION
Condensed Consolidated Statements Of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Nine Months Ended June 30,
1998 1997 1998 1997
---------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Casino $ 1,058,881 - $ 2,815,213 -
Food and beverage 79,141 13,500 216,009 37,509
Video lottery - 1,795,371 53,499 5,632,308
Management agreement - - - 208,371
Other 4,645 1,297 15,714 3,189
---------------- -------------- ---------------- ---------------
Gross revenues 1,142,667 1,810,168 3,100,435 5,881,377
Less: promotional allowances (22,991) - (64,385) -
---------------- -------------- ---------------- ---------------
Net revenues 1,119,676 1,810,168 3,036,050 5,881,377
---------------- -------------- ---------------- ---------------
Costs and expenses:
Casino 666,729 - 1,810,807 -
Food and beverage 52,953 7,925 139,013 21,123
Video lottery - 1,637,340 69,498 5,277,075
Other operating expense - - - 74,603
Selling, general and administrative 353,692 173,182 1,074,929 562,452
Business development 123,418 50,824 496,543 117,226
Depreciation and amortization 92,068 99,970 264,344 431,300
---------------- -------------- ---------------- ---------------
Total costs and expenses 1,288,860 1,969,241 3,855,134 6,483,779
---------------- -------------- ---------------- ---------------
Loss from operations (169,184) (159,073) (819,084) (602,402)
---------------- -------------- ---------------- ---------------
Other income (expense):
Interest income 2,206 62,157 14,444 94,706
Gain on termination of management agreement - - - 2,819,750
Other income 5,012 31,962 10,026 76,076
Interest expense and financing costs (59,773) (16,059) (147,169) (259,775)
---------------- -------------- ---------------- ---------------
(52,555) 78,060 (122,699) 2,730,757
---------------- -------------- ---------------- ---------------
Income (loss) before income taxes (221,739) (81,013) (941,783) 2,128,355
Federal and state income taxes (benefit) (76,800) (27,400) (330,000) 741,700
---------------- -------------- ---------------- ---------------
Net income (loss) $ (144,939) (53,613) $ (611,783) 1,386,655
================ ============== ================ ===============
Basic and diluted earnings (loss) per share $ (0.01) 0.00 $ (0.03) 0.06
================ ============== ================ ===============
Weighted-average common shares outstanding 23,673,126 21,929,793 23,673,126 21,929,793
================ ============== ================ ===============
Weighted-average common and
common equivalent shares outstanding 23,673,126 21,929,793 23,673,126 22,096,947
================ ============== ================ ===============
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 5
CONCORDE GAMING CORPORATION
Condensed Consolidated Statements Of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
1998 1997
------------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (611,783 1,386,655
Adjustments to reconcile net income (loss) to net cash flows
from operating activities:
Depreciation and amortization 264,344 431,300
(Gain) on termination of management agreement -- (2,819,750)
Deferred income tax (78,000) --
Other 95,410 (34,152)
Changes in assets and liabilities:
Receivables 21,752 250,292
Prepaid expenses and other 187,506 9,795
Accounts payable and accrued expenses 178,884 (346,505)
Income taxes payable (206,471) 186,290
------------------- ------------------
Net cash used in operating activities (148,358) (936,075)
------------------- ------------------
Cash flows from investing activities:
Principal payments received on long-term receivables 51,000 5,766,985
Proceeds from termination of management agreement -- 2,851,061
Purchase of property and equipment (5,381,882) (45,525)
Payments for casino development costs (473,555) (71,240)
Other 197,278 93,185
------------------- ------------------
Net cash provided by (used in) investing activities (5,607,159) 8,594,466
------------------- ------------------
Cash flows from financing activities:
Principal payments on long-term debt (545,127) (3,388,967)
Net change in short-term borrowings 5,943,505 (595,000)
Payments received on stock subscription 129,832 59,495
------------------- ------------------
Net cash provided by (used in) financing activities 5,528,210 (3,924,472)
------------------- ------------------
Net increase (decrease) in cash (227,307) 3,733,919
Cash, beginning of period 1,073,910 120,572
------------------- ------------------
Cash, end of period $ 846,603 3,854,491
=================== ==================
Supplemental disclosures of cash flow information: Cash payments for:
Interest $ 153,148 388,849
=================== ==================
Income taxes $ 90,000 545,000
=================== ==================
Supplemental schedule of noncash investing and financing activities:
Cancellation of treasury stock $ 317,602
==================
Note receivable equal to the book value of video lottery assets that
were exchanged for casino assets subsequent to June 30, 1997 $ 1,593,133
==================
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 6
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(unaudited)
(1) Summary of Significant Accounting Policies:
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 three
month period ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the year ending September 30, 1998.
The accompanying condensed consolidated financial statements, and
related notes thereto, should be read in conjunction with the audited
consolidated financial statements of the Company, and notes thereto,
for the year ended September 30, 1997 included in the Company's 1997
Annual Report on Form 10-KSB.
Earnings Per Share
The Company adopted Statement of Financial Accounting Standard No. 128,
Earnings Per Share, in the current fiscal year. This statement
established standards for computing and presenting earnings per share
and required restatement of all prior-period earnings per share data
presented. A reconciliation of income and shares for basic and diluted
earnings per share ("EPS") is as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1998 June 30, 1997
---------------------------------------------- ------------------------------------------------
Loss Loss
Loss Shares Per Loss Shares Per
(Numerator) (Denominator) Share (Numerator) (Denominator) Share
---------------- ----------------- ----------- --------------- ------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS ($144,939) 23,673,126 ($0.01) ($53,613) 21,929,793 ($0.00)
Effect of
Dilutive
Securities:
Options
---------------- ----------------- ----------- --------------- ------------------- ------------
Diluted EPS ($144,939) 23,673,126 ($0.01) ($53,613) 21,929,793 ($0.00)
================ ================= =========== =============== =================== ============
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
June 30, 1998 June 30, 1997
---------------------------------------------- ------------------------------------------------
Loss Earnings
Loss Shares Per Earnings Shares Per
(Numerator) (Denominator) Share (Numerator) (Denominator) Share
---------------- ----------------- ----------- --------------- ------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS ($611,783) 23,673,126 ($0.03) $1,386,655 21,929,793 $0.06
Effect of
Dilutive
Securities:
Options 167,154
---------------- ----------------- ----------- --------------- ------------------- ------------
Diluted EPS ($611,783) 23,673,126 ($0.03) $1,386,655 22,096,947 $0.06
================ ================= =========== =============== =================== ============
</TABLE>
4
<PAGE> 7
(2) Obligations to Bayfront Ventures
The Company is a party to a joint venture agreement ("JV Agreement")
dated August 27, 1997 with Goldcoast Entertainment Cruises, Inc.
("Goldcoast"). The joint venture ("Bayfront Ventures") was formed for
the purpose of constructing, owning, operating and managing an offshore
gaming vessel (the "Vessel") from dockage at Bayfront Park in Miami,
Florida. The JV Agreement requires a capital contribution of $6,405,000
(the "Capital Contribution") from the Company payable in accordance
with the construction and capital outlay needs of Bayfront Ventures. At
June 30, 1998, the Company had contributed approximately $4,160,000 to
Bayfront Ventures.
On April 20, 1998, the Company entered into an option agreement (the
"Option Agreement") with Bruce H. Lien, the majority shareholder of the
Company, under which the Company granted Mr. Lien an option (the
"Option") to purchase all or a portion of the Company's interest in
Bayfront Ventures in consideration for Mr. Lien, or an entity
controlled by him, providing the Company with the Project Line of
Credit (defined below), the Working Capital Line of Credit (see
"Management's Discussion and Analysis or Plan of Operations--Liquidity
and Capital Resources") and the guaranty of Mr. Lien of the Line of
Credit (defined below). The Option may be exercised by Mr. Lien at any
time on or prior to April 20, 1999 ("Option Expiration Date"). The
exercise price shall be equal to the total Capital Contribution made by
the Company up to the exercise date, plus certain costs incurred by the
Company in connection with Bayfront Ventures, and financing costs
incurred by the Company on all obligations related to Bayfront
Ventures, less any advances made under the Project Line of Credit, each
as of the date of exercise. In addition, Mr. Lien shall be required to
assume all of the Company's obligations related to Bayfront Ventures.
In accordance with the Option Agreement, the Company entered into an
agreement with BHL Capital Corporation ("BHL Capital"), a company
controlled by Mr. Lien, whereby BHL Capital agreed to provide the
Company with a line of credit in the amount of $3,000,000 (the "Project
Line of Credit"), which Project Line of Credit may be used by the
Company to fund the balance of the Capital Contribution. Advances under
the Project Line of Credit will bear interest at a rate of 18% per
annum, which interest shall accrue until the earlier of the date the
Option is exercised or the Option Expiration Date (the "Payment Start
Date"), and principal and interest shall be payable over three years
beginning on the Payment Start Date. As of June 30, 1998, the Company
had borrowed $835,000 under the Project Line of Credit.
In March 1998, Bayfront Ventures obtained a line of credit equal to the
lesser of $5.0 million or 70% of the lesser of the cost of the Vessel
or its estimated fair market value (the "Line of Credit") in order to
complete the construction of the Vessel. The Line of Credit bears
interest at an adjustable rate equal to 3.75% per annum above the prime
rate, as published in the Wall Street Journal. The Line of Credit is
secured by, among other things, the guarantees of Mr. Lien, Mrs. Lien,
the Company, Goldcoast and certain other individuals (the
"Guarantors"), and a First Preferred Ship Mortgage on the Vessel, the
execution and delivery of which shall be determined by the lender at
its sole discretion. The Line of Credit is due and payable upon the
initial funding of the Permanent Financing (defined below).
In March 1998, Bayfront Ventures also received a commitment for
permanent financing (the "Permanent Financing") of the Vessel. The
Permanent Financing will be the lesser of $5,200,000 or 70% of the
lesser of the cost of the Vessel or its estimated fair market value at
the time of delivery. The Permanent Financing will be evidenced by a
promissory note payable in fifty-nine (59) equal payments calculated on
an eight (8) year amortization, along with accrued interest, with a
final balloon payment equal to the outstanding principal and interest
at maturity. The interest rate will be fixed at the five-year U.S.
Treasury Note Rate plus 4% as determined ten (10) business days prior
to the funding date. The Permanent Financing will be secured by, among
other things, a First Preferred Ship Mortgage on the Vessel; a first
priority security interest in the Vessel's gear, equipment and
property, excluding gaming equipment; and guarantees of the Company,
Mr. Lien, Mrs. Lien and certain other individuals.
5
<PAGE> 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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, but are not
limited to, Mr. Lien's right to exercise the Option, delays in construction of
the Vessel, changes in gaming regulations and tax rates in Colorado, Florida,
and other jurisdictions that could impact the Company's operations, changes in
economic conditions, declining popularity of gaming, competition in Colorado and
Florida and other jurisdictions, and 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 and improve customer response rates,
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 management agreement ("Management Agreement") between the Company
and the Three Affiliated Tribes pursuant to which it managed the 4 Bears Casino
& Lodge was terminated upon the closing of an agreement (the "Settlement
Agreement") effective February 13, 1997. In addition, in 1997 the Company
exchanged substantially all of the assets related to its video lottery route
operations in South Dakota ("Video Lottery Assets") for substantially all of the
assets used in the operation of the Golden Gates Casino ("Golden Gates"),
located in Black Hawk, Colorado. The exchange of the Video Lottery Assets was
completed in June 1997 and the Golden Gates assets were transferred to the
Company effective July 21, 1997. As a result of these transactions, the Company
will not receive any future revenues pursuant to the Management Agreement or
from the Video Lottery Assets. Currently, Golden Gates is the Company's sole
source of revenue.
RESULTS OF OPERATIONS
Three Months ended June 30, 1998 Compared to Three Months ended June 30, 1997
Revenues. Total revenues decreased 38.1% to $1,119,676 for the three
months ended June 30, 1998, compared to $1,810,168 for the three months ended
June 30, 1997, primarily as a result of the transfer of the Video Lottery Assets
in June 1997. The loss of video lottery revenues for the three months ended June
30, 1998, compared to the three months ended June 30, 1997, was partially offset
by gaming revenues of $1,058,881 and other revenues, primarily food and beverage
of $60,795, generated by Golden Gates for the three months ended June 30, 1998.
Costs and Expenses. Total costs and expenses decreased 34.6% to
$1,288,860 for the three months ended June 30, 1998, compared to $1,969,241 for
the three months ended June 30, 1997, primarily as a result of the transfer of
the Video Lottery Assets. Selling, general and administrative expenses increased
104.2% to $353,692 for the three months ended June 30, 1998, compared to
$173,182 for the three months ended June 30, 1997, due primarily to costs
associated with Golden Gates. Business development expenses increased to
$123,418 for the three months ended June 30, 1998, compared to $50,824 for the
three months ended June 30, 1997, primarily as a result of costs related to the
development and management of Bayfront Ventures.
Other Income and Expense. Interest expense and financing costs
increased to $59,773 for the three months ended June 30, 1998, compared to
$16,059 for the three months ended June 30, 1997. The increase is primarily
related to interest on real estate mortgages on property owned by Golden Gates.
In addition, the Company capitalized $168,996 of interest expense related to the
construction of the Vessel during the three months ended June 30, 1998.
Federal and State Income Taxes. The Company recorded a Federal and
State income tax benefit of $76,800 for the three months ended June 30, 1998,
compared to $27,400 for the three months ended June 30, 1997. The Company
records an income tax benefit using the estimated effective tax rate for the
fiscal year if the amount of loss incurred is reasonably expected to be offset
by future income or is available for carry back to previous years.
6
<PAGE> 9
Nine Months ended June 30, 1998 Compared to Nine Months ended June 30, 1997
Revenues. Total revenues decreased 48.4% to $3,036,050 for the nine
months ended June 30, 1998, compared to $5,881,377 for the nine months ended
June 30, 1997, primarily as a result of the transfer of the Video Lottery Assets
in June 1997. Video lottery revenues decreased to $53,499 for the nine months
ended June 30, 1998, compared to $5,632,308 for the nine months ended June 30,
1997. The Company ceased operating its remaining video lottery casino in
December 1997. The loss of video lottery revenues was partially offset by gaming
revenues of $2,815,213 and other revenues, primarily food and beverage, of
$159,205 generated by Golden Gates for the nine months ended June 30, 1998.
Costs and Expenses. Total costs and expenses decreased 40.5% to
$3,855,134 for the nine months ended June 30, 1998, compared to $6,483,779 for
the nine months ended June 30, 1997, primarily as a result of the transfer of
the Video Lottery Assets in June 1997. Selling, general and administrative
expenses increased 91.1% to $1,074,929 for the nine months ended June 30, 1998,
compared to $562,452 for the nine months ended June 30, 1997, due primarily to
costs associated with Golden Gates. Business development expenses increased to
$496,543 for the nine months ended June 30, 1998, compared to $117,226 for the
nine months ended June 30, 1997, primarily as a result of costs related to the
development and management of Bayfront Ventures. Depreciation and amortization
decreased 38.7% to $264,344 for the nine months ended June 30, 1998, compared to
$431,300 for the nine months ended June 30, 1997, due primarily to the transfer
of the Video Lottery Assets in June 1997. In addition food and beverage expenses
increased to $139,013 for the nine months ended June 30, 1998, compared to
$21,123 for the nine months ended June 30, 1997, due to the operation of Golden
Gates.
Other Income and Expense. Interest expense and financing costs
decreased to $147,169 for the nine months ended June 30, 1998, compared to
$259,775 for the nine months ended June 30, 1997. This decrease is attributable
to the Company using the proceeds from the Settlement Agreement to payoff the
majority of its notes payable in February 1997 and the capitalization of
$235,557 of interest expense related to the construction of the Vessel during
the nine months ended June 30, 1998. The proceeds from the Settlement Agreement
resulted in a $2,819,750 gain on the termination of the Management Agreement
during the nine months ended June 30, 1997.
Federal and State Income Taxes. The Company recorded a Federal and
State income tax benefit of $330,000 for the nine months ended June 30, 1998,
compared to income tax expense of $741,700 for the nine months ended June 30,
1997 that was due primarily to the gain on termination of the Management
Agreement. The Company records an income tax benefit using the estimated
effective tax rate for the fiscal year if the amount of loss incurred is
reasonably expected to be offset by future income or is available for carry back
to previous years.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $846,603 at June 30, 1998,
compared to $1,073,910 at September 30, 1997, a decrease of $227,307. The
Company did not have any restrictions on cash at June 30, 1998, compared to
restricted cash of $288,894 at September 30, 1997, which was released in March
1998 when a bank term note was retired. The decrease in cash reflects the use of
funds primarily for the construction of the Vessel.
During the nine months ended June 30, 1998, the Company used cash for
operating activities of $148,358, compared to $936,075 during the nine months
ended June 30, 1997, a decrease of $787,717.
Investing activities used cash of $5,607,159 during the nine months
ended June 30, 1998, compared to cash provided by investing activities of
$8,594,466 during the nine months ended June 30, 1997. The Company used
$5,381,882 during the nine months ended June 30, 1998 for the acquisition of
property and equipment (primarily for the construction of the Vessel), compared
to $45,525 during the nine months ended June 30, 1997. Principal payments
received on long-term receivables were $51,000 during the nine months ended June
30, 1998, compared to $5,766,985 during the nine months ended June 30, 1997,
which primarily represents payments made in connection with the Settlement
Agreement. During the nine months ended June 30, 1997, the Company received
additional proceeds of $2,851,061 from the closing of the Settlement Agreement.
7
<PAGE> 10
Financing activities provided cash of $5,528,210 during the nine months
ended June 30, 1998, compared to cash used in financing activities of $3,924,472
during the nine months ended June 30, 1997. Short-term borrowings provided cash
of $5,943,505 during the nine months ended June 30, 1998, while short-term
borrowings were reduced by $595,000 during the nine months ended June 30, 1997.
Principal payments on long-term debt were $545,127 during the nine months ended
June 30, 1998, compared to $3,388,967 during the nine months ended June 30,
1997. Payments received on stock subscription provided cash of $129,832 during
the nine months ended June 30, 1998, compared to $59,495 during the nine months
ended June 30, 1997, an increase of $70,337. This increase is a result of the
sale of the promissory note reported as a stock subscription for $110,000 to BHL
Capital. The sales price of the promissory note (the "Note") was approximately
$8,000 less than the remaining principal balance and as a result, Additional
Paid-In Capital was reduced by this amount. The sales price for the sale of the
Note was determined on an arms length basis.
The Company had a working capital deficit of $6,484,286 at June 30,
1998. The working capital deficit is a result of the Company using short-term
borrowings for the construction of the Vessel.
From November 1997 through March 1998, the Company borrowed $1,440,000
from Mr. Lien and BHL Capital in order to meet its obligations under the JV
Agreement and for working capital. The amounts were borrowed pursuant to
promissory notes that are due on demand and bear interest at 18%. In March 1998,
the Company borrowed an additional $500,000 from Mr. Lien to repay the bank term
note that was due in June 1998 and for working capital. This loan is evidenced
by a promissory note which requires monthly payments of $8,500 plus accrued
interest at 12% per annum, with the balance due on March 5, 1999. In connection
with this loan, the Company pledged all of Golden Gates' assets to a third party
lender of Mr. Lien, as consideration for the third party lender's loan of
$500,000 to Mr. Lien, who then loaned such amount to the Company. In April 1998,
Mr. Lien signed a commitment letter whereby he agreed to provide additional
working capital to the Company in an amount not to exceed $500,000 (the "Working
Capital Line of Credit"), the terms of which will be negotiated in the event
advances are made under the Working Capital Line of Credit. In addition, on
April 20, 1998 BHL Capital agreed to provide the Company with the Project Line
of Credit for $3,000,000 which may be used to fund the Capital Contribution
under the JV Agreement. At June 30, 1998, the Company has borrowed $835,000
under the Project Line of Credit. See "Note 2 to Condensed Consolidated
Financial Statements" for a more detailed description of Bayfront Ventures.
Future Operations
As of June 30, 1998, the Company's cash flow from operations was not
sufficient to meet the Company's current working capital requirements. However,
due to increased cash flow from Golden Gates, combined with Vessel financing and
the financing commitments from Mr. Lien and BHL Capital, the Company believes it
will have sufficient cash flow to meet its current working capital requirements
and current capital commitments. See "Note 2 to Condensed Consolidated Financial
Statements." However, in the event commercial operations of the Vessel do not
commence in October 1998, or the operating results of the Vessel do not
substantially meet Bayfront Ventures' projections, the Company may need to seek
additional financing to satisfy its debt payment obligations as they become due
and fund its operations. The Company can provide no assurances that additional
financing will be available on acceptable terms or at all.
8
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
Exhibit No. Description
- ----------- -----------
10.1(1) Option Agreement dated April 20, 1998 between Concorde
Gaming Corporation and Bruce H. Lien
10.2(1) Promissory Note dated April 20, 1998 in the aggregate
principal amount of $3,000,000 executed by Concorde Gaming
Corporation and BHL Capital Corporation
27* Financial Data Schedule.
- ----------------
* Filed herewith.
(1) Previously filed with the Securities and Exchange Commission as an exhibit
to the Company's Annual Report on Form 10-KSB for the year ended September 30,
1997.
b. Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter for which
this report is filed.
9
<PAGE> 12
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: August 11, 1998 By: /s/ David L. Crabb
David L. Crabb, Chief Financial Officer
<PAGE> 13
Exhibit Index
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 846,603
<SECURITIES> 0
<RECEIVABLES> 38,719
<ALLOWANCES> 0
<INVENTORY> 36,931
<CURRENT-ASSETS> 2,047,700
<PP&E> 10,486,412
<DEPRECIATION> 243,586
<TOTAL-ASSETS> 13,690,253
<CURRENT-LIABILITIES> 8,531,986
<BONDS> 0
0
0
<COMMON> 236,731
<OTHER-SE> 4,524,202
<TOTAL-LIABILITY-AND-EQUITY> 13,690,253
<SALES> 216,009
<TOTAL-REVENUES> 3,036,050
<CGS> 0
<TOTAL-COSTS> 3,855,134
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 147,169
<INCOME-PRETAX> (941,783)
<INCOME-TAX> (330,000)
<INCOME-CONTINUING> (611,783)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (611,783)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
