<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, 2000
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 14, 2000 there were
24,070,402 shares of the issuer's $.01 par value common stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE> 2
CONCORDE GAMING CORPORATION
PART 1 - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheet at June 30, 2000 (unaudited) 1-2
Consolidated Statements of Operations for Three Months Ended June 30, 2000 and 1999
and Nine Months Ended June 30, 2000 and 1999 (unaudited) 3
Consolidated Statements of Stockholders' Equity for
Nine Months Ended June 30, 2000 and 1999 (unaudited) 4
Consolidated Statements of Cash Flows for 5
Nine Months Ended June 30, 2000 and 1999 (unaudited)
Notes to Consolidated Financial Statements (unaudited) 6-10
Item 2. Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
</TABLE>
<PAGE> 3
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
June 30, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets
Cash and cash equivalents $ 1,195,035
Trade receivables - less allowance for doubtful accounts 441,963
Inventory 60,079
Prepaid expenses 598,999
Income tax refund claim 32,869
------------
Total current assets 2,328,945
------------
Property and equipment
Land 1,097,080
Vessel & improvements 9,511,354
Gaming equipment, fixtures and furniture 3,953,095
Vehicles 51,265
Leasehold improvements 251,788
------------
14,864,582
Less accumulated depreciation and amortization (1,679,805)
------------
13,184,777
------------
Intangibles and other
Dock rights, net 291,464
Deferred financing costs, net 247,881
Other assets, principally goodwill, net 1,112,770
------------
1,652,115
------------
$ 17,165,837
============
</TABLE>
See Notes to Consolidated Financial Statements.
1
<PAGE> 4
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
June 30, 2000
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
Current liabilities
Notes payable - bank $ 274,669
Current maturities of long-term debt 1,044,683
Note payable to related party 7,458,052
Accounts payable 389,240
Accrued expenses
Payroll and payroll taxes 315,166
Accrued interest 168,741
Other 552,575
------------
Total current liabilities 10,203,126
------------
Long-term debt, less current maturities 7,166,757
------------
Stockholders' equity (deficit)
Common stock, par value $.01 per share, authorized
500,000,000 shares; issued and outstanding 24,070,402 240,704
Preferred stock, par value $.01 per share,
10,000 shares authorized; no shares issued
and outstanding --
Additional paid-in capital 3,899,576
Accumulated deficit (4,344,326)
------------
(204,046)
------------
$ 17,165,837
============
</TABLE>
2
<PAGE> 5
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended June 30, 2000 and 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30 Nine Months Ended June 30
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Casino $ 5,481,134 5,066,660 13,571,323 11,820,003
Food and beverage 722,972 615,502 1,841,445 1,358,697
Other 674,870 429,531 1,785,116 1,189,906
----------- ----------- ----------- -----------
Gross revenues 6,878,976 6,111,693 17,197,884 14,368,606
Less: promotional allowance (2,241,815) (979,974) (4,121,478) (2,295,448)
----------- ----------- ----------- -----------
Net revenues 4,637,161 5,131,719 13,076,406 12,073,158
----------- ----------- ----------- -----------
Costs and expenses
Casino 2,431,008 2,070,732 6,626,501 5,090,150
Food and beverage 450,802 388,497 1,174,834 1,101,468
Management fees to minority partner -- 55,000 275,367 190,000
Selling, general and administrative 1,515,287 1,599,348 4,953,438 4,621,434
Depreciation and amortization 254,868 316,946 760,509 824,979
Pre-opening and start-up costs -- -- -- 540,952
----------- ----------- ----------- -----------
4,651,965 4,430,523 13,790,649 12,368,983
----------- ----------- ----------- -----------
Income (loss) from operations (14,804) 701,196 (714,243) (295,825)
----------- ----------- ----------- -----------
Other income (expense)
Interest income 6,437 4,251 25,714 21,218
Other income (expense) 10,415 (7,260) 4,592 49,562
Interest expense and financing costs:
Related party (326,302) (280,834) (812,716) (803,624)
Other (228,608) (236,917) (704,717) (708,734)
----------- ----------- ----------- -----------
(538,058) (520,760) (1,487,127) (1,441,578)
----------- ----------- ----------- -----------
Income (loss) before income taxes (552,862) 180,436 (2,201,370) (1,737,403)
Income tax provision (benefit) 31,200 4,200 -- (215,800)
----------- ----------- ----------- -----------
Net income (loss) $ (584,062) 176,236 (2,201,370) (1,521,603)
=========== =========== =========== ===========
Basic and diluted loss per share $ (0.02) $ 0.01 $ (0.09) $ (0.06)
=========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 6
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
Nine Months Ended June 30, 2000
<TABLE>
<CAPTION>
Retained
Additional earnings
Number Common paid-in (accumulated
of shares stock capital deficit) Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance September 30, 1999 24,010,402 $ 240,104 $ 3,887,176 $(2,142,956) $ 1,984,324
Issuance of 60,000 shares of common 60,000 600 12,400 -- 13,000
stock relating to stock options exercised
Net loss -- -- -- (2,201,370) (2,201,370)
----------- ----------- ----------- ----------- -----------
Balance June 30, 2000 24,070,402 $ 240,704 $ 3,899,576 $(4,344,326) $ (204,046)
=========== =========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 7
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine months ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (2,201,370) $ (1,521,603)
Adjustments to reconcile net (loss) to net cash flows (used in) operating
activities:
Note payable to related party incurred for payment of interest 550,299 542,511
expense
Depreciation and amortization 760,510 824,979
Loss on disposal of property and equipment 15,811 --
Provision for doubtful accounts 71,000 --
Deferred income taxes 139,000 --
Other -- 156,348
Change in assets and liabilities:
Decrease (increase) in trade receivables 146,835 (276,953)
Decrease (increase) in prepaid expenses and inventory 225,152 (485,257)
Increase (Decrease) in accounts payable and accrued expenses 190,890 (1,605,105)
Increase (decrease) in income taxes payable and receivable 155,959 (57,872)
------------ ------------
Net cash provided by (used in) operating activities 54,086 (2,422,952)
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (1,689,906) (519,991)
Purchase of intangibles (278,581) --
Decrease (increase) in other assets 16,911 (424,816)
------------ ------------
Net cash (used in) investing activities (1,951,576) (944,807)
------------ ------------
Cash flows from financing activities:
Net change in short-term borrowings - related parties -- (490,500)
Net change in short-term borrowings - other 274,669 --
Proceeds from borrowings - related parties 1,900,000 1,775,000
Proceeds from borrowings - other 19,683 10,310,586
Principal payments on long-term borrowings - related parties (519,704) --
Principal payments on long-term borrowings - other (661,963) (6,981,629)
Proceeds from sale of stock 13,000 --
Other -- (8,077)
------------ ------------
Net cash provided by financing activities 1,025,685 4,605,380
------------ ------------
Net increase (decrease) in cash and cash equivalents (871,805) 1,237,621
Cash and cash equivalents:
Beginning 2,066,840 714,764
------------ ------------
Ending $ 1,195,035 $ 1,952,385
============ ============
Supplemental disclosures of cash flow information Cash payments for:
Interest $ 1,015,693 $ 1,091,638
Supplemental disclosures of non-cash investing activities:
Loan receivable exchanged for accounts payable $ 95,000 $ --
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 8
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(unaudited)
(1) Description of Business and Consolidated Entities:
Concorde Gaming Corporation (the "Company"), through a wholly-owned
subsidiary, Concorde Cripple Creek, Inc., a Colorado corporation, owns
and operates the Golden Gates Casino ("Golden Gates Casino"), a limited
stakes casino in Black Hawk, Colorado, and, through wholly-owned
subsidiaries, Concorde Cruises, Inc., a South Dakota corporation
("Concorde Cruises") and Conami, Inc., a Florida corporation ("Conami")
owns a 100% interest in two partnerships, which own and operate an
offshore gaming vessel (the "Princesa") which sails out of Bayfront
Park, Miami, Florida. One partnership, Princesa Partners owns the
Princesa and, pursuant to a Charter Agreement (the "Charter") dated
October 2, 1998, charters the Princesa to the other partnership,
Bayfront Ventures, which does business as the "Casino Princesa" and
operates the Princesa. The Casino Princesa commenced operations in
October 1998. Prior to March 31, 2000 the company, through Concorde
Cruises and Conami, owned and operated an 80% interest in each of
Princesa Partners and Casino Princesa and the remaining 20% of each
partnership was owned by an unrelated corporation. On March 31, 2000
the Company through its subsidiary Concorde Cruises purchased the
remaining 20% interest in the partnerships.
(2) Interim Financial Statements:
The accompanying unaudited consolidated financial statements of the
Company 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 nine month period ended June 30,
2000 are not necessarily indicative of the results that may be expected
for the year ending September 30, 2000.
The accompanying 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, 1999 included in the Company's 1999 Annual Report
on Form 10-KSB.
Reclassifications:
Certain 1999 amounts in the accompanying statements have been
reclassified to conform to the 2000 presentation, including the
reclassification of certain player match betting incentives as
promotional allowance which had previously been accounted for as
operating expense.
6
<PAGE> 9
(3) Earnings Per Share
The following table sets forth the computation of basic and diluted
Earnings Per Share (EPS). Options outstanding were not included in the
EPS calculation for the nine months ending June 30, 2000, and 1999,
because their effect is anti-dilutive.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 2000 June 30, 1999
------------------------------------------- ------------------------------------------
Weighted Per Weighted Per
Average Share Average share
Loss Shares Amount Income Shares Amount
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net Earnings (Loss) $ (584,062) 24,070,402 $ (0.02) $ 176,236 24,010,402 $ 0.01
============ ============ ============ ============ ============ ============
Effect of dilutive securities:
Options
Diluted EPS -- -- -- -- 606,763 --
------------ ------------ ------------ ------------ ------------ ------------
Net Earnings ( Loss) $ (584,062) 24,070,402 $ (0.02) $ 176,236 24,617,165 $ 0.01
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
June 30, 2000 June 30, 1999
------------------------------------------- -------------------------------------------
Weighted Per Weighted Per
Average Share Average Share
Loss Shares Amount Loss Shares Amount
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net loss $ (2,201,370) 24,032,739 $ (0.09) ($ 1,521,603) 23,870,996 $ (0.06)
============ ============ ============ ============ ============ ============
Effect of dilutive securities:
Options
Diluted EPS -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net loss $ (2,201,370) 24,032,739 $ (0.09) ($ 1,521,603) 23,870,996 $ (0.06)
============ ============ ============ ============ ============ ============
</TABLE>
7
<PAGE> 10
(4) Obligations Related to the Princesa
In October 1998, Princesa Partners entered into a Loan Agreement and
Security Agreement (the "Loan Agreement") with a group of lenders,
which provided $8,400,000 in financing (the "Vessel Loan") for the
Princesa, related equipment and working capital. The Vessel Loan is
secured by a ship mortgage and all related furniture, furnishings,
machinery and equipment (including gaming equipment) owned by the
Company. In addition, the Company, and Mr. Lien the Company's majority
stockholder, guarantee the Vessel Loan. The Vessel Loan bears interest
at 10.375%, monthly payments of $130,258, including interest through
January 2004, when the remaining balance is due. The Vessel Loan also
requires mandatory prepayment of principal in an amount equal to 12% of
the amount of Excess Revenue (as defined below) for each fiscal year,
commencing January 2000. Excess Revenue as defined in the Vessel Loan
equals the excess of (i) the Casino Princesa's income from operations
before taxes, depreciation and amortization minus the principal and
interest paid on the Vessel Loan during the fiscal year, over (ii)
$4,000,000. The Vessel Loan contains typical covenants with respect to
Casino Princesa, including net worth restrictions, debt service
requirements and limitations on the amount of debt that can be
incurred.
(5) Segment Information
The Company's reportable segments are strategic business units that
offer similar products and services at separate geographical locations.
They are managed separately because each business requires different
technology and marketing strategies.
There are two reportable segments: the Casino Princesa and the Golden
Gates Casino. The Casino Princesa is an offshore gaming vessel which
sails out of Miami, Florida. The Golden Gates Casino is located in
Black Hawk, Colorado.
The accounting policies applied to determine the segment information
are the same as those described in the summary of significant
accounting policies. The interest expense of each segment is
specifically identifiable to debt directly incurred to acquire the
segment's assets. No intercompany allocations or intersegment sales and
transfers have been made.
Management evaluates the performance of each segment based on profit or
loss from operations before income taxes, exclusive of nonrecurring
gains and losses.
8
<PAGE> 11
Financial information with respect to the reportable segments is as
follows:
<TABLE>
<CAPTION>
For Three Months Ended June 30,
Casino Princesa Golden Gates
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Casino $ 4,411,159 $ 4,037,682 $ 1,069,975 $ 1,028,978
Food and Beverage 693,700 588,311 29,272 27,191
Other 651,627 419,419 23,243 10,112
----------- ----------- ----------- -----------
Gross Revenue 5,756,486 5,045,412 1,122,490 1,066,281
Less Promotional Allowance (2,161,163) (875,486) (80,652) (104,488)
----------- ----------- ----------- -----------
Net Revenue 3,595,323 4,169,926 1,041,838 961,793
Cost and Expenses
Casino 1,811,053 1,422,421 619,955 648,311
Food and Beverage 413,696 358,580 37,106 29,917
Management Fees -- 55,000 -- --
Selling, General, and Administration 1,155,803 1,291,865 146,815 145,927
Depreciation and Amortization 169,203 233,626 70,297 68,730
Interest Expense 213,632 251,320 19,669 17,400
----------- ----------- ----------- -----------
Total Costs and Expenses 3,763,387 3,612,812 893,842 910,285
----------- ----------- ----------- -----------
Segment Profit (Loss) $ (168,064) $ 557,114 $ 147,996 $ 51,508
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
For Nine Months Ended June 30,
Casino Princesa Golden Gates
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues
Casino $ 10,830,309 $ 8,649,173 $ 2,741,014 $ 3,170,830
Food and Beverage 1,762,618 1,215,317 78,827 143,380
Other 1,728,811 1,156,475 56,305 33,431
------------ ------------ ------------ ------------
Gross Revenue 14,321,738 11,020,965 2,876,146 3,347,641
Less Promotional Allowance (3,899,174) (1,975,084) (222,304) (320,364)
------------ ------------ ------------ ------------
Net Revenue 10,422,564 9,045,881 2,653,842 3,027,277
Cost and Expenses
Casino 4,833,060 3,073,310 1,793,441 2,016,840
Food and Beverage 1,080,950 947,605 93,884 153,863
Management Fees 275,367 190,000 -- --
Selling, General, and Administration 3,781,977 3,618,563 424,695 485,180
Depreciation and Amortization 501,981 573,429 212,455 201,105
Preopening Expense -- 540,952 -- --
Interest Expense 650,223 766,690 58,828 37,597
------------ ------------ ------------ ------------
Total Costs and Expenses 11,123,558 9,710,549 2,583,303 2,894,585
------------ ------------ ------------ ------------
Segment Profit (Loss) $ (700,994) $ (664,668) $ 70,539 $ 132,692
============ ============ ============ ============
</TABLE>
9
<PAGE> 12
The following schedule is presented to reconcile amounts in the
foregoing segment information to the amounts reported in the Company's
consolidated financial statements.
<TABLE>
<CAPTION>
Three Months Ended June - Nine Months Ended June -
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total Income (Loss) of Reportable Segments $ (20,068) $ 608,622 $ (630,455) $ (531,976)
Unallocated amounts - corporate level
General and administrative 212,669 161,556 746,766 517,691
Depreciation & Amortization 15,368 14,590 46,073 50,445
Corporate level interest 321,609 249,031 808,382 708,071
Other Expenses (Income) (16,852) 3,009 (30,306) (70,780)
----------- ----------- ----------- -----------
Total expense items $ 532,794 $ 428,186 $ 1,570,915 $ 1,205,427
----------- ----------- ----------- -----------
Income (loss) before income taxes $ (552,862) $ 180,436 $(2,201,370) $(1,737,403)
=========== =========== =========== ===========
</TABLE>
(6) Contingencies
On April 15, 1999, the Association for Disabled Americans, Inc., The
Coral Springs Advocacy Committee for the Handicapped, Inc., Daniel
Ruiz, Jorge Rodriquez, Ernst Rosenkrantz and Robert Cohen filed a
lawsuit against the Company and Goldcoast Entertainment Cruises, Inc.
("Goldcoast"), the former owner of a 20% interest in Princesa Partners
and Casino Princesa, in the United States District Court for the
Southern District of Florida alleging violations of the Americans with
Disabilities Act (the "ADA") with respect to the Princesa and the
facilities at which the Princesa docks. The lawsuit seeks injunctive
relief including an order requiring modifications to the Princesa and
the docking facilities to comply with the ADA, and the closure of the
Princesa and the docking facilities until such modifications are
complete. Although the Company intends to defend the lawsuit
vigorously, the impact, if any, of the lawsuit on the Company cannot at
this time be determined. The parties are currently in settlement
negotiations and the Company believes the matter will be ready for
trial in October 2000 if not settled.
10
<PAGE> 13
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, but are not
limited to, 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 herein 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
Concorde Gaming Corporation, a Colorado corporation (the "Company"), through a
wholly-owned subsidiary, Concorde Cripple Creek, Inc., a Colorado corporation,
owns and operates the Golden Gates Casino ("Golden Gates Casino"), a limited
stakes casino in Black Hawk, Colorado, and, through wholly-owned subsidiaries,
Concorde Cruises, Inc., a South Dakota corporation ("Concorde Cruises") and
Conami, Inc., a Florida corporation ("Conami") owns an 100% interest in two
joint ventures, which own and operate an offshore gaming vessel (the "Princesa")
from Bayfront Park, Miami, Florida. One joint venture, Princesa Partners, owns
the Princesa and, pursuant to a Charter Agreement (the "Charter") dated October
2, 1998, charters the Princesa to the other joint venture, Bayfront Ventures,
which does business as the "Casino Princesa". The Casino Princesa commenced
operations in October, 1998. Prior to March 31, 2000 the Company, through
Concorde Cruises and Conami, owned an 80% interest in each of Princesa Partners
and Bayfront and the remaining 20% of each joint venture was owned by Goldcoast
Entertainment Cruises, Inc. ("Goldcoast"). On March 31, 2000, the Company
acquired the 20% interest of each joint venture held by Goldcoast.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000, COMPARED TO THREE MONTHS ENDED JUNE 30, 1999:
REVENUES
Net revenues decreased 10% to $4,637,161 for the three months ended
June 30, 2000, compared to $5,131,719 for the three months ended June 30, 1999.
Casino Princesa
Casino Princesa's net revenues decreased 14% to $3,595,323 for the
three months ended June 30, 2000, compared to revenues of $4,169,926 for the
three months ended June 30, 1999, due to an increase in promotional allowances
to $2,161,163 for the three months ended June 30, 2000 compared to $875,486 for
the three months ended June 30, 1999. Increased promotional allowances were
introduced due to a new competitor entering the local gaming market. Beginning
in July of 2000, such promotions have been substantially reduced as management
believes they are no longer necessary to maintain passenger counts. To a lesser
extent, the decrease in revenue relates to a small decrease in passenger counts
in the quarter ending June 30, 2000.
Golden Gates
Golden Gates net revenues increased 8% to $1,041,838 for the three
months ended June 30, 2000, compared to revenues of $961,793 for the three
months ended June 30, 1999. A new parking lot adjacent to the casino was
partially available in March 2000, and is expected to be completed in August
2000. Due to construction, there was no such parking available in the quarter
ending June 30, 1999. Management believes that gaming revenues increased
primarily due to the additional parking availability and the resulting higher
customer counts. The gross gaming revenues reported in the Blackhawk market as a
whole increased 22% during the quarter ending June 30, 2000 compared to the
quarter ending June 30, 1999. While there has recently been an increase in
competition in Black Hawk, the casino slightly improved its market
11
<PAGE> 14
share on a "per device" basis during the three months ended June 30, 2000.
Management expects that the increased accessibility of parking will positively
impact net revenues in the fourth quarter of 2000.
COSTS AND EXPENSES
Total costs and expenses increased 5% to $4,651,965 for the three
months ended June 30, 2000, compared to $4,430,523 for the three months ended
June 30, 1999. Corporate-level general and administrative costs (not
identifiable to a segment) increased 32% to $212,669 for the three months ended
June 30, 2000, compared to $161,556 for the three months ended June 30, 1999,
primarily due to increased professional fees and investor relations expenses. In
the third fiscal quarter of 2000, management reduced corporate-level general and
administrative costs by eliminating certain management positions and
substantially eliminating investor relations expenses. These cost cutting
efforts will be fully implemented in the quarter ending September 30, 2000, with
expected cost reductions of approximately $50,000 per quarter.
Casino Princesa
Casino expenses for Casino Princesa increased 27% to $1,811,053 for
the three months ended June 30, 2000, compared to $1,422,421 for the three
months ended June 30, 1999, primarily due to increased payroll expenses, an
increase in the provision for uncollectible accounts and increased customer
transportation costs. Late in the third quarter ending June 30, 2000 management
significantly reduced staff levels at the casino which should result in reduced
expenses of approximately $100,000 per quarter beginning in the fourth quarter
ending September 30, 2000. Food and beverage expenses increased 15% to $413,696
for the three months ended June 30, 2000 compared to $358,580 for the three
months ended June 30, 1999. This increase relates to an increase in food and
beverage costs that Casino Princesa pays a third party on a per capita basis.
Management fees paid to Goldcoast in accordance with the Joint Venture
Agreement, were $0 for the three months ended June 30, 2000, compared to $55,000
for the three months ended June 30, 1999. On March 31, 2000, Concorde Gaming
acquired the 20% interest of Goldcoast in Princesa Partners and Casino Princesa
and accordingly there will be no management fees paid to Goldcoast in the
future. Selling, general and administrative expenses decreased 11% to $1,155,803
for the three months ended June 30, 2000, compared to $1,291,865 for the three
months ended June 30, 1999, primarily due to reduced advertising and promotion
expenditures.
Golden Gates
Casino expenses for Golden Gates decreased 4% to $619,955 for the three
months ended June 30, 2000, compared to $648,311 for the three months ended June
30, 1999, primarily due to general cost reduction efforts by casino management.
Selling, general and administrative expenses increased 1% to $146,815 for the
three months ended June 30, 2000, compared to $145,927 for the three months
ended June 30, 1999. As a result of these cost reduction measures the selling,
general and administrative expense did not increase in proportion to the
increase in revenues. Food and beverage expenses increased 24% to $37,106 for
the three months ended June 30, 2000 compared to $29,917 for the three months
ended June 30, 1999, primarily due to increased customer traffic.
OTHER EXPENSE. Interest expense and financing costs payable to BHL Capital
Corporation ("BHL"), a corporation controlled by Bruce H. Lien, the Company's
majority shareholder, increased 16% to $326,302, for the three months ended June
30, 2000, compared to $280,834 for the three months ended June 30, 1999. The
increase is due to additional borrowings in the nine months ending June 30,
2000. Other interest and financing costs decreased 4% to $228,608 for the three
months ended June 30, 2000, compared to $236,917 for the three months ended June
30, 1999, due to scheduled principal repayments.
FEDERAL AND STATE INCOME TAXES. The Company recorded a Federal and State income
tax provision of $31,200 for the three months ended June 30, 2000, compared to a
provision of $4,200 for the three months ended June 30, 1999. The Company
recorded the income tax provision to offset previously booked income tax
benefits that the Company determined would not be available for use by the
Company.
NINE MONTHS ENDED JUNE 30, 2000, COMPARED TO NINE MONTHS ENDED JUNE 30, 1999.
REVENUES
Net revenues increased 8% to $13,076,406 for the nine months ended
June 30, 2000, compared to $12,073,158 for the nine months ended June 30, 1999.
12
<PAGE> 15
Casino Princesa
Casino Princesa net revenues increased 15% to $10,422,564 for the
nine months ended June 30, 2000, compared to revenues of $9,045,881 for the nine
months ended June 30, 1999, as a result of increased passengers.
Golden Gates
Golden Gates net revenues decreased 12% to $2,653,842 for the nine
months ended June 30, 2000, compared to revenues of $3,027,277 for the nine
months ended June 30, 1999, primarily as a result of the parking lot
construction, which began in January of 1999 with the parking lot being
completely closed beginning in March 1999, which severely limited customer
access to the casino during five of the nine months ending June 30, 2000 as
compared with only the last four months of the nine months ending June 30, 1999
and a decrease in marketing expenditures. The parking lot was partially
available in March 2000, while completion is expected in August, 2000.
Management expects the increased accessibility of parking will positively impact
net revenues in the fourth quarter of 2000.
COSTS AND EXPENSES
Total costs and expenses increased 11% to $13,790,649 for the nine
months ended June 30, 2000, compared to $12,368,983 for the nine months ended
June 30, 1999. Except as noted below, the increase in overall expense is
primarily a function of the increased gross revenues. Corporate level general
and administrative costs (not identifiable to a segment) increased 44% to
$746,766 for the nine months ended June 30, 2000, compared to $517,691 for the
nine months ended June 30, 1999. The increase substantially relates to an
increase in investor relations expenses and professional fees. In the third
quarter ending June 30, 2000, management reduced corporate-level general and
administrative costs by eliminating certain management positions and
substantially eliminating investor relations expenses. Management believes these
cost cutting efforts will be fully implemented in the fourth quarter ending
September 30, 2000, with expected cost reductions of approximately $50,000 per
quarter.
Casino Princesa
Casino expenses for Casino Princesa were $4,833,060 for the nine
months ended June 30, 2000, compared to $3,073,310 for the Princesa's initial
nine months of operation ended June 30, 1999. As a percentage of gross casino
revenue, casino expenses increased to 45% for the nine months ended June 30,
2000 as compared to 36% for the same period ended June 30, 1999. The increased
expenses primarily relate to increased payroll, an increase in the provision for
uncollectible accounts, and increased customer transportation costs. Food and
beverage expenses for Casino Princesa increased 14% to $1,080,950 for the nine
months ended June 30, 2000, compared to $947,605 for the Princesa's initial nine
months of operation ended June 30, 1999 due to increased food and beverage
sales. As a percentage of food and beverage revenues, expenses decreased to 61%
for the nine months ended June 30, 2000 as compared to 78% for the same period
ended June 30, 1999, primarily due to operational efficiencies. Management fees
paid in accordance with the Joint Venture Agreement to Goldcoast were $295,367
for the nine months ended June 30, 2000, compared to $190,000 for the nine
months ended June 30, 1999. On March 31, 2000, Concorde Gaming acquired
Goldcoast's 20% interest in Princesa Partners and Casino Princesa and
accordingly there will be no management fees paid to Goldcoast in the future.
Selling, general and administrative expenses increased 5% to $3,781,977 for the
nine months ended June 30, 2000, compared to $3,618,563 for the nine months
ended June 30, 1999, primarily due to increased customer counts. Pre-opening and
start-up costs related to Casino Princesa, were $0 for the nine months ended
June 30, 2000, compared to $540,952 for the nine months ended June 30, 1999.
Golden Gates
Casino expenses for Golden Gates decreased 11% to $1,793,441 for the
nine months ended June 30, 2000, compared to $2,016,840 for the nine months
ended June 30, 1999, primarily due to a decrease in customer traffic and a
decrease in marketing expenditures. Food and beverage expenses decreased 39% to
$93,884 for the nine months ended June 30, 2000, compared to $153,863 for the
nine months ended June 30, 1999, primarily due to the restaurant being subleased
and operated by a third party for the entire nine month period in 2000 as
compared to three months of the nine month period ending June 30, 1999. Selling,
general and administrative expenses decreased 12% to $424,695 for the nine
months ended June 30, 2000, compared to $485,180 for the nine months ended June
30, 1999. The change is directly related to the decrease in revenues.
OTHER EXPENSE. Interest expense and financing costs to BHL increased to
$812,716, for the nine months ended June 30, 2000, compared to $803,624 for the
nine months ended June 30, 1999. The increase relates to increased borrowings
from BHL. Other interest and financing costs decreased to $704,717 for the nine
months ended June 30, 2000, compared to $708,734 for the nine months ended June
30, 1999, due to scheduled repayment of the amounts borrowed.
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<PAGE> 16
Federal and State Income Taxes. The Company recorded a Federal and State income
tax provision of $0 for the nine months ended June 30, 2000, compared to a
benefit of $215,800 for the nine months ended June 30, 1999. 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 $1,195,035 at June 30,
2000, compared to $2,066,840 at September 30, 1999, a decrease of $871,805.
During the nine months ended June 30, 2000, the Company's operating
activities provided cash of $54,086 compared to using cash of $2,422,952 during
the nine months ended June 30, 1999.
Investing activities used cash of $1,951,576 during the nine months
ended June 30, 2000, compared $944,807 during the nine months ended June 30,
1999. The Company used $1,689,906 during the nine months ended June 30, 2000,
for the acquisition of property, equipment, and intangibles, compared to
$519,991 during the nine months ended June 30, 1999. The 2000 acquisitions
primarily relate to the purchase of Goldcoast's 20% interest in Princesa
Partners and Bayfront Ventures.
Financing activities provided cash of $1,025,685 during the nine months
ended June 30, 2000, compared to cash provided of $4,605,380 during the nine
months ended June 30, 1999. Borrowings from a related party provided $1,900,000
for the nine months ended June 30, 2000, compared to $1,775,000 for the nine
months ended June 30, 1999. Long-term borrowings from other sources provided
$19,683 during the nine months ended June 30, 2000, compared to $10,310,586
during the nine months ended June 30, 1999. Short-term borrowings were increased
by $274,669 during the nine months ended June 30, 2000, while short-term
borrowings were reduced by $490,500 (all from BHL) during the nine months ended
June 30, 1999. Principal payments on long-term debt to BHL were $519,704 for the
nine months ended June 30, 2000, compared to $0 for the nine months ended June
30, 1999. Principal payments on other long-term debt were $661,963 during the
nine months ended June 30, 2000, compared to $6,981,629 during the nine months
ended June 30, 1999.
The Company has available $500,000 of financing under revolving bank credit
facilities, of which $274,669 of borrowings were outstanding at June 30, 2000.
The bank line matures on March 1, 2001, and was issued pursuant to the Loan
Agreement under which the Company has agreed to maintain typical financial
covenants (see footnote 4 to Financial Statements).
Primarily to finance the acquisition of the remaining 20% interest in Princesa
Partners and Bayfront Ventures from Goldcoast and for general working capital
requirements, the Company borrowed an additional $1,850,000 from BHL. Interest
is payable monthly at 18% per annum, however, as allowed by the financing
arrangement, the Company periodically adds any unpaid interest into the note
principal.
The notes payable to BHL of $7,458,052 as of June 30, 2000 are due as follows:
$1,850,000 is due on demand and $5,608,052 is due January 1, 2001. Management
believes these short-term borrowings will be refinanced with BHL prior to
January 1, 2001.
Management has commenced early negotiations with other financing sources to
refinance the BHL debt to achieve more favorable rates. Management is also
seeking additional financing is also being sought to renovate and expand the
Golden Gates facility. There is no assurance that such capital will be obtained.
Future Operations
The Company's ability to meet its working capital requirements is
dependent upon the future operations of the Casino Princesa and the Golden Gates
Casino. The Company believes that cash flow from the casino operations resulting
from anticipated increases in profitability relating to expense reductions,
combined with the Company's existing financing arrangements will be sufficient
to meet its current working capital requirements. The Company believes that the
acquisition of the 20% interest in Bayfront Ventures and Princesa Partners and
the subsequent change in management structure will give management better
control over the operations of Casino Princesa and that management will be able
to increase cash flows due to increased efficiencies.
14
<PAGE> 17
Factors Affecting the Company's Business and Prospects
There are many factors that affect the Company's business and the
results of its operations, some of which are beyond the control of the Company.
The following is a description of some of the important factors that may cause
the actual results of the Company's operations in future periods to differ from
those currently expected or desired.
o The Company has incurred a significant amount of indebtedness and,
currently the Company's cash flow from operations combined with existing
sources of financing is not sufficient to fund debt service costs.
o Due to the current indebtedness, the Company's ability to obtain additional
financing in the future and the Company's flexibility in reacting to
changes in the industry and economic conditions generally may be limited.
o The Company's success is partially dependent on its ability to anticipate
changing products and amenities and to efficiently develop and introduce
new products and amenities that will gain customer acceptance. If the
Company is unable to anticipate and introduce such products and amenities,
such inability may have an adverse effect on the Company's business.
o Claims have been brought against the Company and its subsidiaries in
various legal proceedings, and additional legal and tax claims arise from
time to time. It is possible that the Company's cash flows and results of
operations could be affected by the resolution of these claims.
o The Company operates in a very competitive environment. The growth in the
number of slot machines inventory in Black Hawk, Colorado, which has
historically increased annually, the introduction of competing gaming
vessels in the Miami market and the spread of legalized gaming in other
states and countries, could negatively affect our operating results.
o The Company's gaming operations in Colorado are highly regulated by
governmental authorities. The Company will also be subject to regulation in
Florida if the State of Florida decides to regulate the day-cruise
industry. If the Company conducts gaming activities in any other
jurisdiction, the authorities in that jurisdiction may also subject the
Company to additional regulation. Changes in applicable laws or regulations
could have a significant effect on our operations.
o The Company's business is affected by changes in local, national and
international general economic and market conditions in the locations where
it operates and where its customers live. The Casino Princesa is
particularly affected by the economic situation in Latin America and South
America. Changes in economic conditions could have a material adverse
effect on the Company's business.
o Any plans for future construction to the Golden Gates Casino may be
affected by a number of factors, including time delays in obtaining
necessary governmental permits and approvals and legal challenges. After
beginning such a construction project, the Company may make changes in
project scope, budgets and schedules for competitive, aesthetic or other
reasons, and these changes may also result from circumstances beyond the
Company's control. These circumstances include weather interference,
shortages of materials and labor, work stoppages, labor disputes,
unforeseen engineering, environmental or geological problems and
unanticipated cost increases. Any of these circumstances could give rise to
delays or cost overruns.
o From time to time, various state and federal legislators and officials have
proposed changes in tax laws, or in the administration of the law,
affecting the gaming industry. It is not possible to determine with
certainty the likelihood of possible changes in tax law or its
administration. These changes, if adopted, could have a material negative
effect on the Company's operating results.
o The Company's success is partially dependent on attracting and retaining
highly qualified management and gaming personnel. The Company's inability
to recruit or retain such personnel could adversely affect its business.
o The weather in Florida is a daily risk consideration. Air temperature,
rain, high seas caused by winds, hurricanes and tropical storms affect
daily passenger counts and may cause the cancellation of cruises. Based on
the Casino Princesa's
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<PAGE> 18
21-month operating history, higher levels of passenger counts are expected
in the months approximately February to July.
o The Casino Princesa, has historically earned the majority of its revenues
from various table games, while the Golden Gates derives the vast majority
of its revenues from slot machines. Slot machine revenues are generally
more consistent over time than table game revenues. Table game revenues
will vary more due to timing of wins and losses of those customers who
place large wagers.
o The Casino Princesa regularly grants credit to certain customers who play
table games. While management actively manages this credit risk, the
collectibility of these reveivables is not assured and any uncollectible
accounts may negatively effect the Company's operating results.
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<PAGE> 19
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 15, 1999, the Association for Disabled Americans, Inc., The Coral
Springs Advocacy Committee for the Handicapped, Inc., Daniel Ruiz, Jorge Luis
Rodriquez, Ernst Rosenkrantz and Robert Cohen filed a lawsuit against the
Company and Goldcoast in the United States District Court for the Southern
District of Florida alleging violations of the Americans with Disabilities Act
(the "ADA") with respect to the Princesa and the facilities at which the
Princesa docks. The lawsuit seeks injunctive relief including an order requiring
modifications to the Princesa and the docking facilities to comply with the ADA,
and the closure of the Princesa and the docking facilities until such
modifications are complete. Although the Company intends to defend the lawsuit
vigorously, the impact, if any, of the lawsuit on the Company cannot at this
time be determined. The parties are currently in settlement negotiations and the
Company believes this matter will be ready for trial in October 2000 if not
settled.
ITEM 5. OTHER INFORMATION
On August 1, 2000, the Company, Concorde Cruises, Inc. ("Concorde Cruises"), a
wholly owned subsidiary of the Company, and Michael A. Hlavsa ("Hlavsa") entered
into Amendment No. 1 to Consulting Agreement (the "Amendment") amending the
Consulting Agreement between the Company and Hlavsa dated March 31, 2000 (the
"Agreement"). Pursuant to the Amendment, Hlavsa's duties are limited and the
compensation due to Hlavsa from Concorde Cruises is decreased to $10,000 per
month. Additionally, the Amendment amends the term of the Agreement to end on
May 31, 2001. Pursuant to the Amendment, the Company guaranteed the payment
obligations of Concorde Cruises pursuant to the Agreement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1* Amendment No. 1 to Consulting Agreement between the Company,
Concorde Cruises, Inc. and Michael A. Hlavsa dated as of August 1,
2000.
27* Financial Data Schedule.
</TABLE>
----------------
* Filed herewith.
b. Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter for which
this report is filed.
17
<PAGE> 20
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 14, 2000 By: /s/ Jerry L. Baum
---------------------
Jerry L. Baum, Chief Executive Officer
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1* Amendment No. 1 to Consulting Agreement between the
Company, Concorde Cruises, Inc. and Michael A. Hlavsa dated
as of August 1, 2000.
27* Financial Data Schedule.
</TABLE>
----------------
* Filed herewith.
