EMPIRE
RESORTS, INC. AND SUBSIDIARIES
PART I
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FINANCIAL INFORMATION
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PAGE NO.
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2
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3
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4-11
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11-15
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15
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15
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PART II
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OTHER INFORMATION
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16
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16
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17
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PART
I—FINANCIAL INFORMATION
Item 1.—FINANCIAL STATEMENTS
EMPIRE RESORTS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
thousands, except for per share data)
|
|
March
31,
2009
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ASSETS
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Current
assets:
|
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Cash
and cash equivalents
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$ |
5,983 |
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$ |
9,687 |
|
Restricted
cash
|
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|
1,590 |
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|
969 |
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Accounts
receivable
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|
1,705 |
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|
1,570 |
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Prepaid
expenses and other current assets
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|
3,094 |
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|
3,500 |
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Total
current assets
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12,372 |
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15,726 |
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Property
and equipment, net
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|
29,597 |
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29,908 |
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Deferred
financing costs, net of accumulated amortization of $2,295 in
2009 and $2,193 in 2008
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|
2,185 |
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|
2,287 |
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Other
assets
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|
1,330 |
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|
1,175 |
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TOTAL
ASSETS
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$ |
45,484 |
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$ |
49,096 |
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LIABILITIES
AND STOCKHOLDERS’ DEFICIT
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Current
liabilities:
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Revolving
credit facility
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$ |
7,617 |
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|
$ |
7,617 |
|
Senior
convertible notes
|
|
|
65,000 |
|
|
|
65,000 |
|
Accounts
payable
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|
|
2,547 |
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|
2,969 |
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Accrued
expenses and other current liabilities
|
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|
4,374 |
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|
5,881 |
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Total
current liabilities
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79,538 |
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81,467 |
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Commitments
and contingencies
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Stockholders’
deficit:
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Preferred
stock, 5,000 shares authorized; $0.01 par value -
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Series
A, $1,000 per share liquidation value, none issued and outstanding
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---- |
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---- |
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Series
B, $29 per share liquidation value, 44 shares issued and
outstanding
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|
---- |
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---- |
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Series
E, $10 per share redemption value, 1,731 shares issued and
outstanding
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|
6,855 |
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6,855 |
|
Common
stock, $0.01 par value, 75,000 shares authorized, 34,038 and 33,913 shares
issued and outstanding in 2009 and 2008, respectively
|
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|
340 |
|
|
|
339 |
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Additional
paid-in capital
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|
59,901 |
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59,379 |
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Accumulated
deficit
|
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|
(101,150 |
) |
|
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(98,944 |
) |
Total
stockholders’ deficit
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|
(34,054 |
) |
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|
(32,371 |
) |
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TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
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|
$ |
45,484 |
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|
$ |
49,096 |
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In
thousands, except for per share data) (Unaudited)
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Three
Months Ended March 31,
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REVENUES:
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Racing
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$ |
1,924 |
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$ |
1,925 |
|
Gaming
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|
12,199 |
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|
13,215 |
|
Food,
beverage and other
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|
939 |
|
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|
1,007 |
|
Gross
revenues
|
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|
15,062 |
|
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|
16,147 |
|
Less:
Promotional allowances
|
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|
(691 |
) |
|
|
(495 |
) |
Net
revenues
|
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|
14,371 |
|
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|
15,652 |
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COSTS
AND EXPENSES:
|
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Racing
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|
1,642 |
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1,764 |
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Gaming
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|
9,765 |
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|
12,189 |
|
Food,
beverage and other
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|
362 |
|
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|
412 |
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Selling,
general and administrative
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|
2,904 |
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3,364 |
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Depreciation
|
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|
311 |
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|
303 |
|
Total
costs and expenses
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|
14,984 |
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|
18,032 |
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Loss
from operations
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(613 |
) |
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|
(2,380 |
) |
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Amortization
of deferred financing costs
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|
(102 |
) |
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(102 |
) |
Interest
expense
|
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|
(1,391 |
) |
|
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(1,446 |
) |
Interest
income
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|
11 |
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|
88 |
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NET
LOSS
|
|
|
(2,095 |
) |
|
|
(3,840 |
) |
Undeclared
dividends on preferred stock
|
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|
(388 |
) |
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(388 |
) |
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NET
LOSS APPLICABLE TO COMMON SHARES
|
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$ |
(2,483 |
) |
|
$ |
(4,228 |
) |
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Weighted
average common shares outstanding, basic and diluted
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|
33,945 |
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|
29,630 |
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Loss
per common share, basic and diluted
|
|
$ |
(0.07 |
) |
|
$ |
(0.14 |
) |
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands) (Unaudited)
|
|
Three
Months Ended
March
31,
|
|
|
|
|
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|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(2,095 |
) |
|
$ |
(3,840 |
) |
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
311 |
|
|
|
303 |
|
Amortization
of deferred financing costs
|
|
|
102 |
|
|
|
102 |
|
Stock-based
compensation
|
|
|
412 |
|
|
|
326 |
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Restricted
cash - VGM Marketing and Purse Account
|
|
|
(595 |
) |
|
|
163 |
|
Accounts
receivable
|
|
|
(135 |
) |
|
|
(212 |
) |
Prepaid
expenses and other current assets
|
|
|
406 |
|
|
|
(1,067 |
) |
Accounts
payable
|
|
|
(422 |
) |
|
|
95 |
|
Accrued
expenses and other current liabilities
|
|
|
(1,507 |
) |
|
|
(1,346 |
) |
Other
assets
|
|
|
(155 |
) |
|
|
361 |
|
|
|
|
|
|
|
|
|
|
NET
CASH USED IN OPERATING ACTIVITIES
|
|
|
(3,678 |
) |
|
|
(5,115 |
) |
|
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|
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CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
--- |
|
|
|
(26 |
) |
Restricted
cash - Racing capital improvement
|
|
|
(26 |
) |
|
|
294 |
|
|
|
|
|
|
|
|
|
|
NET
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
|
|
(26 |
) |
|
|
268 |
|
|
|
|
|
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|
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CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds
from exercise of stock options
|
|
|
--- |
|
|
|
14 |
|
Restricted
cash - Revolving credit facility
|
|
|
--- |
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
--- |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
NET
DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(3,704 |
) |
|
|
(4,837 |
) |
CASH
AND CASH EQUIVALENTS, beginning of period
|
|
|
9,687 |
|
|
|
15,008 |
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, end of period
|
|
$ |
5,983 |
|
|
$ |
10,171 |
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
Cash
paid for interest during the period
|
|
$ |
2,691 |
|
|
$ |
2,746 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
SCHEDULE OF NONCASH INVESTING AND
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Common
stock issued in settlement of preferred stock dividends
|
|
$ |
111 |
|
|
$ |
261 |
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
EMPIRE RESORTS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
A. Summary of Business and Basis for Presentation
Basis
for Presentation
The
condensed consolidated financial statements and notes as of March 31, 2009 and
for the three-month periods ended March 31, 2009 and 2008 are
unaudited and include the accounts of Empire Resorts, Inc. and subsidiaries
(“Empire” or the “Company” or “we”).
The
condensed consolidated financial statements have been prepared in accordance
with the instructions to Form 10-Q and do not include all the information and
the footnotes required by accounting principles generally accepted in the United
States of America (“GAAP”) for complete financial statements. These condensed
consolidated financial statements reflect all adjustments (consisting of normal
recurring accruals) which are, in the opinion of management, necessary for the
fair presentation of the financial position, results of operations and cash
flows for the interim periods. These condensed consolidated financial
statements and notes should be read in conjunction with the consolidated
financial statements and notes thereto included in our Annual Report on Form
10-K for the year ended December 31, 2008. The results of operations
for the interim period are not indicative of results to be expected for the full
year.
Going
Concern
Our
credit facility with the Bank of Scotland requires repayment of approximately
$7,150,000 (outstanding balance of $7,617,000 less restricted cash on deposit of
$467,000) on May 29, 2009. The holders of our Senior Convertible Notes
($65,000,000 principal balance due) have the right to demand repayment of the
principal amount due on July 31, 2009. We do not presently have a
source of repayment for this credit facility or for these notes and our
operations will not provide sufficient cash flow to repay these
obligations.
On April
21, 2009, we received a letter from Bank of Scotland in which Bank of Scotland
stated that it had received information that one or more defaults or events of
default exist within the credit agreement with Bank of Scotland and that
although the parties will engage in good faith discussions to address the
situations that resulted in such defaults or events of default, Bank of Scotland
reserves its rights and remedies under the credit agreement.
On April
15, 2009, we received a letter from Plainfield Asset Management LLC
(“Plainfield”), a holder of $22.5 million in principal amount of the Company’s
Senior Convertible Notes, pursuant to which Plainfield stated that, among other
things, it is a member of an ad hoc group of holders of our Senior Convertible
Notes and that each of the members of the ad hoc group intends to exercise its
put right in accordance with the terms of the indenture.
A failure
to repurchase the Senior Convertible Notes when required will result in an event
of default under the indenture and could result in a cross-default under any
other credit agreement to which we may be a party at such time. In
addition, an event that may constitute a change in control under the indenture
may also be an event of default under any credit agreement or other agreement
governing future debt. These events permit the lenders under such
credit agreement or other agreement to accelerate the debt outstanding
thereunder and, if such debt is not paid, to enforce security interests in the
collateral securing such debt or result in our becoming involved in an
insolvency proceeding.
The
accompanying condensed consolidated financial statements have been prepared on a
basis which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. The Company’s
ability to continue as a going concern is dependent upon our ability to
negotiate a renewal or extension of the maturity dates or to arrange financing
with other sources to repay our credit facility with the Bank of Scotland on
maturity and the holders of the Senior Convertible Notes if they demand
repayment of the notes on July 31, 2009. Although we continue to pursue these
plans, there is no assurance that we will be successful in obtaining financing.
These factors, as well as continuing net losses and negative cash flows from
operating activities, raise substantial doubt about our ability to continue as a
going concern. These condensed consolidated financial statements do not include
any adjustments to the amounts and classification of assets and liabilities that
may be necessary should the Company be unable to continue as a going
concern.
Nature
of Business
We have
concentrated on developing gaming operations in New York
State. Through our subsidiaries, we currently own and operate
Monticello Casino and Raceway, a VGM and harness horseracing facility located in
Monticello, New York.
On
February 8, 2008, we entered into an Agreement to Form Limited Liability Company
and Contribution Agreement (the “Contribution Agreement”) with Concord
Associates, L.P. (“Concord”), pursuant to which we and Concord were to form a
limited liability company (the “LLC”) to develop an entertainment complex
consisting of a hotel, convention center, VGM facility and harness horseracing
track on 160 acres of land located in Kiamesha Lake, New York.
On March
23, 2009, we entered into a new agreement (the “Agreement”), with Concord,
pursuant to which we (or a wholly-owned subsidiary reasonably acceptable to
Concord) shall be retained by Concord Empire Raceway Corp. (“Raceway Corp.”), a
subsidiary of Concord, to provide advice and general managerial oversight with
respect to the operations at the harness track (the “Track”) to be constructed
at that certain parcel of land located in the Town of Thompson, New York and
commonly known as the Concord Hotel and Resort (the “Concord
Property”). The Agreement has a term of forty (40) years (the
“Term”).
As a
result of the execution of the Agreement, the Contribution Agreement, dated
February 8, 2008, as amended on December 30, 2008 and January 30, 2009, and
which became terminable by either party in accordance with its terms on February
28, 2009, terminated and became of no further force and effect.
The
closing of the transactions contemplated by the Agreement is to take place on
the date that Concord or its subsidiary secures and closes on (but not
necessarily funds under) financing (the “Financing”) in the minimum aggregate
amount of $500 million (including existing equity) from certain third-party
lenders in connection with the development of the Track and certain gaming
facilities (the “Concord Gaming Facilities”) on the Concord Property (the
“Closing Date”).
Upon the
commencement of operations at the Concord Gaming Facilities (the “Operations
Date”) and for the duration of the Term, Concord shall cause Raceway Corp. to
pay to the Company an annual management fee in the amount of $2 million, such
management fee to be increased by five percent on each five year anniversary of
the Operations Date (the “Empire Management Fee”). The Empire
Management Fee shall be prorated for the initial year in which the Track is open
for business by the number of months in which the Track is open to the
public. Concord agreed that the Empire Management Fee to be paid to
us will be senior to payments due in connection with the Financing.
In
addition to the Empire Management Fee, commencing on the Operations Date and for
the duration of the Term, Concord shall cause Raceway Corp. to pay us an annual
fee in the amount of two percent of the total revenue wagered with respect to
video gaming machines and/or other alternative gaming located at the
Concord Property after payout for prizes, less certain fees payable to the State
of New York, the Monticello Harness Horsemen’s Association, Inc. and the New
York State Horse Breeding Fund (“Adjusted Gross Gaming Revenue
Payment”). Commencing upon the Operations Date and for the duration
of the Term, in the event that the Adjusted Gross Gaming Revenue Payment paid to
us is less than $2 million per annum, Concord shall guaranty and pay to us the
difference between $2 million and the Adjusted Gross Gaming Revenue Payment
distributed to us with respect to such calendar year.
Upon a
sale or other voluntary transfer of the Concord Gaming Facilities to any person
or entity who is not an affiliate of Concord (the “Buyer”), Raceway Corp. may
terminate the Agreement upon payment to us of $25 million; provided, that the
Buyer shall enter into an agreement with us whereby the Buyer shall agree to pay
the greater of (i) the Adjusted Gross Gaming Revenue Payment or (ii) $2 million
per annum to the Company for the duration of the Term of the
Agreement.
In the
event that the Closing Date has not occurred on or before July 31, 2010, the
Agreement may be terminated by either Concord or us by written
notice.
In
the past, we have also made efforts to develop a 29.31 acre parcel of land
adjacent to Monticello Casino and Raceway as the site for the development of a
Class III casino and may pursue additional commercial and entertainment projects
on the remaining 200 acres of land owned by the Company that encompass the site
of our current gaming and racing facility. We will also continue to explore
other possible development projects.
We
operate through three principal subsidiaries, Monticello Raceway Management,
Inc. (“Monticello Raceway Management”), Monticello Casino Management, LLC
(“Monticello Casino Management”) and Monticello Raceway Development Company, LLC
(“Monticello Raceway Development”). Currently, only Monticello
Raceway Management has operations which generate revenue. During
2008, for administrative purposes, we merged eight of our inactive subsidiaries
into one entity.
Raceway
and VGM Operations
Monticello
Raceway Management, a wholly owned subsidiary, is a New York corporation that
operates Monticello Raceway (the “Raceway”), a harness horse racing facility and
a VGM facility (Monticello Casino and Raceway) in Monticello, New
York.
The
Raceway began operation in 1958 and offers pari-mutuel wagering, live harness
racing and simulcasting from various harness and thoroughbred racetracks across
the country. The Raceway derives its revenue principally from (i)
wagering at the Raceway on live races run at the Raceway; (ii) fees from
wagering at out-of-state locations on races simulcast from the Raceway using
export simulcasting; (iii) revenue allocations, as prescribed by law, from
betting activity at New York City, Nassau County and Catskill Off Track Betting
facilities; (iv) wagering at the Raceway on races broadcast from out-of-state
racetracks using import simulcasting; and (v) admission fees, program and racing
form sales, the sale of food and beverages and certain other ancillary
activities.
A VGM is
an electronic gaming device which allows a patron to play electronic versions of
various lottery games of chance and is similar in appearance to a traditional
slot machine. On October 31, 2001, the State of New York enacted a
bill designating seven racetracks, including the Raceway, to install and operate
VGMs. Under the program, the New York State Lottery has authorized an
allocation of up to 1,800 VGMs to the Raceway. Currently, Monticello
Raceway Management operates 1,587 VGMs on 45,000 square feet of floor space at
the Raceway.
Note
B. Summary of Significant Accounting Policies
Loss Per Common
Share. We compute basic loss per share by dividing loss
applicable to common shares by the weighted-average common shares outstanding
for the period. Diluted loss per share reflects the potential
dilution of earnings that could occur if securities or contracts to issue common
stock were exercised or converted into common stock or resulted in the issuance
of common stock that then shared in the loss of the entity. Since the
effect of outstanding options and warrants is anti-dilutive with respect to
losses, they have been excluded from our computation of loss per common
share. Therefore, basic and diluted losses per common share for the
three months ended March 31, 2009 and 2008 were the same.
The
following table shows the approximate number of securities outstanding at March
31, 2009 and 2008 that could potentially dilute basic income per share in the
future, but were not included in the calculation of diluted loss per share
because their inclusion would have been anti-dilutive.
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
3,039,000 |
|
|
|
2,565,000 |
|
Warrants
|
|
|
250,000 |
|
|
|
250,000 |
|
Shares
to be issued upon conversion of convertible debt
|
|
|
5,175,000 |
|
|
|
5,175,000 |
|
Total
|
|
|
8,464,000 |
|
|
|
7,990,000 |
|
Fair Value. In the
first quarter of 2008, we adopted Statement of Financial Accounting Standards
(“SFAS”) No. 157, “Fair Value Measurements”, for financial assets and
liabilities and elected the deferral option available for one year for
non-financial assets and liabilities. This standard defines fair value, provides
guidance for measuring fair value and requires certain disclosures. This
standard does not require any new fair value measurements, but discusses
valuation techniques, such as the market approach (comparable market prices),
the income approach (present value of future income or cash flow), and the cost
approach (cost to replace the service capacity of an asset or replacement
cost).
As
permitted, we chose not to elect the fair value option as prescribed by
Financial Accounting Standards Board (“FASB”) SFAS No. 159, “The Fair Value
Option For Financial Assets and Financial Liabilities—Including an Amendment of
FASB Statement No. 115”, for our financial assets and liabilities that had not
been previously carried at fair value.
Our
financial instruments are comprised of current assets and current liabilities,
which include our revolving credit facility and senior convertible notes at
March 31, 2009 and December 31, 2008. Current assets and current liabilities
approximate fair value due to their short term nature.
Estimates and
Assumptions. The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. We use significant estimates including those related to fair
value, customer incentives, bad debts, estimated useful lives for depreciable
and amortizable assets, valuation reserves, estimated cash flows in assessing
the recoverability of long-lived assets and estimated liabilities for point
based customer loyalty programs, income taxes and
contingencies. Actual results may differ from estimates.
Reclassifications. Certain
prior period amounts have been reclassified to conform to the current period
presentation.
Recent Accounting
Pronouncements.
In
April 2009, the Securities and Exchange Commission issued Staff Accounting
Bulletin (“SAB”) No. 111 (“SAB 111”). SAB 111 amends Topic 5.M. in the SAB
series entitled “Other Than Temporary Impairment of Certain Investments Debt and
Equity Securities”. On April 9, 2009, the FASB issued FASB Staff Position
(“FSP”) No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments”. SAB 111 maintains the previous views related
to equity securities and amends Topic 5.M. to exclude debt securities from its
scope. SAB 111 was effective for the Company as of March 31, 2009. There
was no material impact on our consolidated financial position or results of
operations upon adoption.
In
April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments”. This FASB staff position
amends FASB Statement No. 107 to require disclosures about fair values of
financial instruments for interim reporting periods as well as in annual
financial statements. The staff position also amends APB Opinion No. 28 to
require those disclosures in summarized financial information at interim
reporting periods. This FASB staff position becomes effective for interim
reporting periods ending after June 15, 2009, with early adoption permitted
for periods ending after March 15, 2009. We adopted this FSP for the
interim reporting period ending March 31, 2009.
In
April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2,
“Recognition and Presentation of Other-Than-Temporary Impairments”. This FSP
amends the other-than-temporary impairment guidance in GAAP for debt securities.
If an entity determines that it has an other-than-temporary impairment on a
security, it must recognize the credit loss on the security in the income
statement. The credit loss is defined as the difference between the present
value of the cash flows expected to be collected and the amortized cost basis.
The staff position expands disclosures about other-than-temporary impairment and
requires that the annual disclosures in FASB Statement No. 115 and FSP FAS
115-1 and FAS 124-1 be made for interim reporting periods. This FSP becomes
effective for interim reporting periods ending after June 15, 2009, with
early adoption permitted for periods ending after March 15, 2009. We
adopted this FSP for the interim reporting period ending March 31, 2009.
There was no material impact on our consolidated financial position or results
of operations upon adoption.
In
April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value
When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly”. This
FSP provides additional guidance on determining fair value when the volume and
level of activity for the asset or liability have significantly decreased when
compared with normal market activity for the asset or liability. A significant
decrease in the volume or level of activity for the asset of liability is an
indication that transactions or quoted prices may not be determinative of fair
value because transactions may not be orderly. In that circumstance, further
analysis of transactions or quoted prices is needed, and an adjustment to the
transactions or quoted prices may be necessary to estimate fair value. This FSP
becomes effective for interim reporting periods ending after June 15, 2009,
with early adoption permitted for periods ending after March 15, 2009. We
adopted this FSP for the interim reporting period ending March 31, 2009 and
it did not have a material impact on our consolidated financial position or
results of operations.
In
February 2008, the FASB issued FSP No. 157-2. The staff position
delays the effective date of SFAS No. 157 for nonfinancial assets and
nonfinancial liabilities, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis. The delay expired
January 1, 2009, and the expiration of the delay did not have a material
impact on our consolidated financial position or results of
operations.
Note
C. Accrued Expenses and Other Current Liabilities
Accrued
expenses and other current liabilities are comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
Liability
for horseracing purses
|
|
$ |
1,556 |
|
|
$ |
1,297 |
|
Accrued
interest
|
|
|
867 |
|
|
|
2,167 |
|
Accrued
payroll
|
|
|
612 |
|
|
|
895 |
|
Accrued
other
|
|
|
1,339 |
|
|
|
1,522 |
|
Total
accrued expenses and other current liabilities
|
|
$ |
4,374 |
|
|
$ |
5,881 |
|
Note
D. Senior Convertible Notes
On July
26, 2004, we issued $65 million of 5.5% senior convertible notes (the “notes”),
which are currently convertible into approximately 5.2 million shares of common
stock, subject to adjustment upon the occurrence or non-occurrence of certain
events. The notes were issued with a maturity date of July 31, 2014
and the holders have the right to demand that we repurchase the notes at par
plus accrued interest on July 31, 2009. Interest is payable
semi-annually on January 31 and July 31.
The notes
are our senior obligations and those of our subsidiaries, ranking senior in
right of payment to all of our existing and future subordinated indebtedness and
ranking equally in right of payment with existing and future senior
indebtedness. The notes are secured by our tangible and intangible
assets and by a pledge of the equity interests of each of our subsidiaries and a
mortgage on our property in Monticello, New York.
The notes
initially accrued interest at an annual rate of 5.5%, which would be maintained
with the occurrence of the “Trigger Event”, as defined. Since the
events that constitute the “Trigger Event” have not occurred, the notes have
accrued interest from and after July 31, 2005 at an annual rate of
8%. The interest rate will return to 5.5% upon the occurrence of the
Trigger Event. The holders of the notes have the option to convert the notes
into shares of our common stock at any time prior to maturity, redemption or
repurchase. The initial conversion rate is 72.727 shares per each
$1,000 principal amount of notes. This conversion rate was equivalent
to an initial conversion price of $13.75 per share. Since the Trigger Event did
not occur on or prior to July 31, 2005, the initial conversion rate per each
$1,000 principal amount of notes was reset to $12.56 per share. This rate would
result in the issuance of 5,175,159 shares upon conversion.
The
holders of our senior secured convertible notes are entitled to demand repayment
of the notes on July 31, 2009. We will not have sufficient financial
resources and may be unable to arrange financing to pay the purchase price for
all of such notes tendered by the holders in connection with any such
repurchase. On April 15, 2009, the Company received a letter from
Plainfield, a holder of $22.5 million in principal amount of the Company’s
senior secured convertible notes, pursuant to which Plainfield stated that,
among other things, it is a member of an ad hoc group of holders of the
Company’s senior secured convertible notes and that each of the members of the
ad hoc group intends to exercise its put right in accordance with the terms of
the indenture.
A failure
to repurchase the notes when required will result in an event of default under
the indenture and could result in a cross-default under any other credit
agreement to which we may be a party at such time. In addition, an
event that may constitute a change in control under the indenture may also be an
event of default under any credit agreement or other agreement governing future
debt. These events permit the lenders under such credit agreement or
other agreement to accelerate the debt outstanding thereunder and, if such debt
is not paid, to enforce security interests in the collateral securing such debt
or result in our becoming involved in an insolvency proceeding.
We
recognized interest expense associated with the notes of approximately $1.3
million in each of the three-month periods ended March 31, 2009 and
2008.
Note
E. Revolving Credit Facility
On
January 11, 2005, we entered into a credit facility with Bank of
Scotland. The credit facility provides for a $10 million senior
secured revolving loan (subject to certain reserves) that matures on May 29,
2009. As security for borrowings under the facility, we agreed to have our
wholly owned subsidiary, Monticello Raceway Management, grant a mortgage on the
Raceway property and our subsidiaries guarantee its obligations under the credit
facility. We also agreed to pledge our equity interests in all of our
current and future subsidiaries, maintain certain reserves, and grant a first
priority secured interest in all of our assets, now owned or later
acquired. This arrangement contains financial
covenants. The credit facility also contains an acceleration clause
which states that Bank of Scotland may accelerate the maturity in the event of a
default by the Company.
In
connection with this credit facility, the Bank of Scotland has also entered into
an Inter-creditor Agreement with The Bank of New York so that Bank of Scotland
will be entitled to a first priority position notwithstanding the Indenture and
security documents entered into on July 26, 2004 in connection with our issuance
of $65 million of senior convertible notes.
On June
21, 2007, we entered into an amendment to our credit facility with Bank of
Scotland. The amendment, among other things, (i) extended the maturity date of
the loan agreement from January 11, 2008 to January 7, 2009, (ii) amended the
interest rates of loans under the credit facility to a rate of prime plus 1.5%
until July 31, 2008 and prime plus 2.0% thereafter or LIBOR plus 3.5% until July
31, 2008 and LIBOR plus 4.0% thereafter and (iii) deleted all references to
Interest Advances and Line of Credit Cash Collateral Advances such that the Loan
Agreement now provides for total loans of up to $10 million. We have
the right to elect the method of determining the interest rate to be
applied. In addition, pursuant to this amendment, we are required to
maintain an unrestricted cash balance of an amount that, when added to the
unused balance available under the credit facility, is not less than $5
million. On March 14, 2008, we entered into an additional amendment
to our credit facility with Bank of Scotland that extends the maturity date of
the loan agreement from January 7, 2009 to May 29, 2009.
We cannot
provide any assurance that we will have sufficient financial resources, or will
be able to arrange financing, to repay our credit facility when it matures on
May 29, 2009. If we fail to repay the Bank of Scotland credit facility when it
is due, it will result in an event of default under our credit
agreement. In addition, an event that may constitute a change
in control under the indenture may also be an event of default under any credit
agreement or other agreement governing future debt. These events
permit the lenders under our credit agreement or other agreement to accelerate
the debt outstanding thereunder and, if such debt is not paid, to enforce
security interests in the collateral securing such debt or result in our
becoming involved in an insolvency proceeding. On April 21, 2009, the
Company received a letter from Bank of Scotland in which Bank of Scotland stated
that it had received information that one or more defaults or events of default
exist within the credit agreement with Bank of Scotland and that although the
parties will engage in good faith discussions to address the situations that
resulted in such defaults or events of default, Bank of Scotland reserves its
rights and remedies under the credit agreement.
We recognized interest expense for the credit facility of
approximately $91,000 and $146,000 in the three months ended March 31, 2009 and
2008, respectively. At March 31, 2009, we were in compliance with the financial
covenants contained in our agreement with the Bank of Scotland.
Note
F. Stockholders’ Equity
Stock-based
compensation expense included in selling, general and administrative expenses is
approximately $412,000 and $326,000 for the three months ended March 31, 2009
and 2008, respectively. As of March 31, 2009, there was approximately $261,000
of total unrecognized compensation cost related to non-vested share-based
compensation awards granted under our plans. That cost is expected to be
recognized over the remaining vesting period of 2 years. This expected cost does
not include the impact of any future stock-based compensation
awards.
Options
that were granted to four directors, who have resigned in March 2009, would have
expired on the date of termination or in thirty days based on the equity
incentive plan under which the options were issued, but were extended to the
original expiration dates set forth for the respective options. The
modification resulted in stock-based compensation expense of approximately
$123,000 in the three months ended March 31, 2009.
On March
9, 2009, we authorized issuance of 124,610 shares of our common stock as payment
of dividends due for the year ended December 31, 2008 on our Series B preferred
stock. The approximate value of these shares when issued was
$111,000.
On
February 24, 2008, we authorized issuance of 117,419 shares of our common stock
as payment of dividends due for the year ended December 31, 2007 on our Series B
preferred stock. The approximate value of these shares when issued
was $261,000.
Note
G. Concentration
Two
debtors, New York Off-Track Betting Corporation (“OTB”) and Nassau OTB,
represented approximately 45% and 17%, respectively, of the total outstanding
accounts receivable as of March 31, 2009. Two debtors, New York OTB
and Nassau OTB, represented approximately 41% and 18%, respectively, of the
total outstanding accounts receivable as of December 31, 2008.
Note
H. Employee Benefit Plan
Effective with the payroll period
beginning March 23, 2009, the Company amended its sponsored 401(k) Plan to
discontinue Company matching contributions for salaried employees.
On April 23, 2009, the Company’s union
employees agreed to, among other things, the removal of the Company’s 401(k)
contribution match. As a result, the Company plans to discontinue
matching contributions for both union employees and non-union hourly employees
during May 2009 (see Note J).
Note
I. Commitments and Contingencies
Legal
Proceedings. We are a party to various non-environmental legal
proceedings and administrative actions, all arising from the ordinary course of
business. Although it is impossible to predict the outcome of any
legal proceeding, we believe any liability that may finally be determined with
respect to such legal proceedings should not have a material effect on our
consolidated financial position, results of operations or cash
flows.
Note
J. Subsequent Events
On April
8, 2009, the Company entered into an agreement with Eric Reehl pursuant to which
Mr. Reehl was appointed to serve as chief restructuring officer of the Company
effective as of April 13, 2009. Mr. Reehl will assist in the
Company’s efforts to identify, negotiate and secure additional debt and/or
equity capital and coordinates the Company’s restructuring
efforts.
On April
13, 2009, David P. Hanlon, President and Chief Executive Officer of the Company
and a member of its board of directors, entered into a separation agreement with
the Company pursuant to which Mr. Hanlon’s employment with the Company
terminated as of April 13, 2009.
On April
14, 2009, Ronald Radcliffe, Chief Financial Officer of the Company, tendered his
resignation, effective June 30, 2009 pursuant to a separation and release
agreement.
On April
15, 2009, the Company received a letter from Plainfield, a holder of $22.5
million in principal amount of the Company’s senior secured convertible notes,
pursuant to which Plainfield stated that, among other things, it is a member of
an ad hoc group of holders of the Company’s senior secured convertible notes and
that each of the members of the ad hoc group intends to exercise its put right
in accordance with the terms of the indenture.
On April
21, 2009, the Company received a letter from Bank of Scotland in which Bank of
Scotland stated that it had received information that one or more defaults or
events of default exist within the credit agreement with Bank of Scotland and
that although the parties will engage in good faith discussions to address the
situations that resulted in such defaults or events of default, Bank of Scotland
reserves its rights and remedies under the credit agreement.
On April
23, 2009, the Company’s union employees agreed to a 5% salary reduction
(corresponding to a 5% salary reduction for non-union employees), a delay of its
3 ½% scheduled salary increase, the removal of the Company’s 401(k) contribution
match and the elimination of a paid 30 minute break. As a result, the
Company plans to discontinue matching contributions for both union employees and
non-union hourly employees during May 2009.
On April
30, 2009, Hilda A. Manuel, Senior Vice President of Native American Affairs of
the Company, entered into a separation agreement with the Company pursuant to
which Ms. Manuel’s employment with the Company terminated as of April 30,
2009.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
Management's Discussion and Analysis of the Financial Condition and Results of
Operations should be read together with the Management's Discussion and Analysis
of Financial Condition and Results of Operations and the Consolidated Financial
Statements and related notes thereto in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2008.
Forward-Looking
Statements
This
Quarterly Report on Form 10-Q contains statements which constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements generally relate to our
strategies, plans and objectives for future operations and are based upon
management’s current plans and beliefs or estimates of future results or
trends. Forward-looking statements also involve risks and
uncertainties, including, but not restricted to, the risks and uncertainties
described in Item 1A of the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008, which could cause actual results to differ materially
from those contained in any forward-looking statement. Many of these
factors are beyond our ability to control or predict.
You
should not place undue reliance on any forward-looking statements, which are
based on current expectations. Further, forward-looking statements
speak only as of the date they are made, and we will not update these
forward-looking statements, even if our situation changes in the
future. We caution the reader that a number of important factors
discussed herein, and in other reports filed with the Securities and Exchange
Commission, could affect our actual results and cause actual results to differ
materially from those discussed in forward-looking statements.
Liquidity
and Going Concern
The
accompanying condensed consolidated financial statements have been prepared on a
basis that contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. The Company’s
ability to continue as a going concern is dependent upon our ability to
negotiate a renewal or extension of the maturity dates or to arrange financing
with other sources to repay our credit facility with the Bank of Scotland when
it matures on May 29, 2009 and the holders of the Senior Convertible Notes if
they demand repayment of the notes on July 31, 2009. Although we
continue to pursue these plans, there is no assurance that we will be successful
in obtaining financing. On April 15, 2009, we received a letter from
Plainfield Asset Management LLC (“Plainfield”), a holder of $22.5 million in
principal amount of our Senior Convertible Notes, pursuant to which Plainfield
stated that, among other things, it is a member of an ad hoc group of holders of
the Company’s Senior Convertible Notes and that each of the members of the ad
hoc group intends to exercise its put right in accordance with the terms of the
indenture. On April 21, 2009, we received a letter from Bank of
Scotland in which Bank of Scotland stated that it had received information that
one or more defaults or events of default exist within the credit agreement with
Bank of Scotland and that although the parties will engage in good faith
discussions to address the situations that resulted in such defaults or events
of default, Bank of Scotland reserves its rights and remedies under the credit
agreement. These factors, as well as continuing net losses and
negative cash flows from operating activities as well as an uncertain economic
environment, raise substantial doubt about our ability to continue as a going
concern. These condensed consolidated financial statements do not
include any adjustments to the amounts and classification of assets and
liabilities that may be necessary should the Company be unable to continue as a
going concern. These circumstances caused our independent registered
public accounting firm to include an explanatory paragraph in their report dated
March 13, 2009 on our consolidated financial statements at December 31, 2008 and
for the year then ended regarding their concerns about our ability to continue
as a going concern. Substantial doubt about our ability to continue
as a going concern may create negative reactions to the price of the common
shares of our stock and we may have a more difficult time obtaining
financing.
Overview
Empire
Resorts, Inc. (“Empire,” the “Company,” “us” or “we”) was organized as a
Delaware corporation on March 19, 1993, and since that time has served as a
holding company for various subsidiaries engaged in the hospitality and gaming
industries.
Through
our wholly-owned subsidiary, Monticello Raceway Management, Inc., we currently
own and operate Monticello Casino and Raceway, a video gaming machine (“VGM”)
and harness horseracing facility located in Monticello, New York, 90 miles
Northwest of New York City. At Monticello Casino and Raceway, we
operate more than 1,500 VGMs as an agent for the New York State Lottery and
conduct pari-mutuel wagering through the running of live harness horse races,
the import simulcasting of harness and thoroughbred horse races from racetracks
across the country and the export simulcasting of our races to offsite
pari-mutuel wagering facilities.
We also
plan to grow and diversify our current business operations by marketing our
management and consulting services to gaming and hospitality clients and
pursuing joint ventures or other growth opportunities, including the commercial
development of our existing real estate holdings. We have an
agreement, subject to certain conditions, with Concord Empire Raceway Corp.
(“Raceway Corp.”), a subsidiary of Concord Associates, L.P, to provide advice
and general managerial oversight with respect to the operations at a harness to
be constructed at that certain parcel of land located in the Town of Thompson,
New York and commonly known as the Concord Hotel and Resort. No
assurance can be given that the conditions to the closing of the transaction
will be satisfied in order to complete the transaction, as planned.
We have
been working since 1996 to develop a Class III casino on a site 29.31 acre owned
by us adjacent to our Monticello, New York facility. As used herein,
Class III gaming means a full casino including slot machines, on which the
outcome of play is based upon randomness, and various table games including, but
not limited to, poker, blackjack and craps. Initially, this effort was pursued
through agreements with various Indian tribes. Our most recent
efforts were pursuant to agreements with the St. Regis Mohawk
Tribe. We were advised, however, that on January 4, 2008, the St.
Regis Mohawk Tribe received a letter from the BIA denying the St. Regis Mohawk
Tribe's request to take 29.31 acres into trust for the purpose of building a
Class III gaming facility to be located at Monticello Casino and
Raceway.
On July
18, 2008, our subsidiaries, Monticello Raceway Management, Inc., Monticello
Raceway Development Company, LLC and Monticello Casino Management, LLC entered
into a settlement agreement with the St. Regis Mohawk Gaming Authority and the
St. Regis Mohawk Tribe pursuant to which the parties agreed to release all
claims against the other parties. The settlement was amended on October 10, 2008
to eliminate any remaining unfulfilled conditions and included our agreement to
reimburse the St. Regis Mohawk Tribe approximately $444,000 for expenses
incurred by them in connection with the project.
Much of
our ability to develop a successful business plan is now dependent on our
efforts to develop our interests in the Catskills region of the State of New
York, and our financial results in the future will be based on different
activities than those from our prior fiscal years, assuming that we continue as
a going concern.
Competition
We
continue to face significant competition for our VGM operation from a VGM
facility at Yonkers Raceway. In addition, several slot machine
facilities have opened in Pennsylvania and one, operated by the Mohegan Tribal
Gaming Authority, is within 65 miles of our Monticello property. The
Yonkers facility, which is much closer to New York City, has a harness
horseracing facility, approximately 5,500 VGMs, food and beverage outlets and
other amenities.
A number
of states are currently considering or implementing legislation to legalize or
expand gaming. Such legislation presents both potential opportunities
to establish new properties and potential competitive threats to business at our
existing property. The timing and occurrence of these events remain
uncertain.
Results
of Operations
Three
Months Ended March 31, 2009 Compared to Three Months Ended March 31,
2008.
Revenues. Net
revenues decreased approximately $1.3 million (or 8%) for the quarter ended
March 31,2009 compared to the quarter ended March 31, 2008. Revenue
from racing operations was unchanged; revenue from VGM operations decreased by
approximately $1.0 million (or 7%) and food, beverage and other revenue
decreased by approximately $68,000 (or 7%). Complimentary expenses
(“Promotional allowances”) increased by approximately $196,000 (or
40%).
We
believe that our VGM operations continue to be adversely affected by the
competing VGM facility at Yonkers Raceway and slot machine facilities in
Pennsylvania. Our number of daily visits decreased approximately 11% and the
daily win per unit fell from $91.51 for the three months ended March 31, 2008 to
$85.41 for the three months ended March 31, 2009 (or 7%). The average
number of machines in service was 1,587 in both periods.
Food,
beverage and other revenue decreased primarily as a result of lower patron
visits. The percentage decrease was less than the reduction in head count partly
because we used complimentary food and beverage as part of marketing
promotions.
The
increase in complimentary expenses (“Promotional allowances”) is almost entirely
attributable to increased utilization of “free play” coupons as a marketing and
promotional technique.
Racing
costs. Racing costs decreased by approximately $122,000 (or
7%) to approximately $1.6 million for the three months ended March 31,
2009. We have been able to reduce some operating expenses at
our facility while our revenues derived from sources other than live racing at
our facility remained comparable to the corresponding quarter in the prior
year.
Gaming
costs. Gaming (VGM) costs decreased by approximately $2.4
million (or 20%) to approximately $9.8 million for the three months ended March
31, 2009 compared with the corresponding period in 2008. Of this amount,
approximately $1.2 million (or 12%) is attributable to a change in the law which
allows VGM operators to pay a lower percentage of VGM revenues to the New York
State Lottery. The remainder of the decrease of approximately $1.2 million (or
8%) reflects cost reductions to adjust to lower levels of customer
visits.
Food, beverage and other
costs. Food, beverage and other costs decreased approximately
$50,000 (or 12%) to approximately $362,000 primarily as a result of continuing
cost control initiatives in 2009.
Selling, General and Administrative
expenses. Selling, general and administrative expenses
decreased approximately $460,000 (or 14%) for the three months ended March 31,
2009 as compared to the three months ended March 31, 2008. This
decrease was primarily a result of reduced direct marketing expenses (excluding
promotion allowances) and reduced professional fees.
Interest
expense and
income. Interest expense decreased approximately $55,000 as a
result of lower interest rates on our bank line of credit during 2009 and
interest income decreased by approximately $77,000 as a result of lesser amounts
invested at lower rates in 2009.
Liquidity
and Capital Resources
Our
credit facility with the Bank of Scotland requires repayment of approximately
$7,150,000 (outstanding balance of $7,617,000 less restricted cash on deposit of
$467,000) on May 29, 2009. The holders of our Senior Convertible Notes
($65,000,000 principal balance due) have the right to demand repayment of the
principal amount due on July 31, 2009. We do not presently have a
source of repayment for this credit facility or for these notes and our
operations will not provide sufficient cash flow to repay these
obligations.
On April
21, 2009, the Company received a letter from Bank of Scotland in which Bank of
Scotland stated that it had received information that one or more defaults or
events of default exist within the credit agreement with Bank of Scotland and
that although the parties will engage in good faith discussions to address the
situations that resulted in such defaults or events of default, Bank of Scotland
reserves its rights and remedies under the credit agreement.
On April
15, 2009, the Company received a letter from Plainfield, a holder of $22.5
million in principal amount of the Company’s senior secured convertible notes,
pursuant to which Plainfield stated that, among other things, it is a member of
an ad hoc group of holders of the Company’s senior secured convertible notes and
that each of the members of the ad hoc group intends to exercise its put right
in accordance with the terms of the indenture.
A failure
to repurchase the notes when required will result in an event of default under
the indenture and could result in a cross-default under any other credit
agreement to which we may be a party at such time. In addition, an
event that may constitute a change in control under the indenture may also be an
event of default under any credit agreement or other agreement governing future
debt. These events permit the lenders under such credit agreement or
other agreement to accelerate the debt outstanding thereunder and, if such debt
is not paid, to enforce security interests in the collateral securing such debt
or result in our becoming involved in an insolvency proceeding.
Net cash
used in operating activities during the three months ended March 31, 2009 was
approximately $3.7 million compared to net cash used in operating activities for
the three months ended March 31, 2008 of approximately $5.1 million, a decrease
of approximately $1.4 million.
The
reduction of net loss of approximately $1.7 million was the primary cause of
that decrease in cash used in operating activities. Net working capital changes,
including an increase in restricted cash for our racing purses, account for the
remaining change.
Net cash
used by investing activities was approximately $26,000 for three months ended
March 31, 2009 compared with net cash provided of approximately $268,000 in the
corresponding period in 2008. In 2008, we benefited from collections of
restricted cash from the Racing Capital Improvement account of approximately
$294,000.
On March
9, 2009, we authorized issuance of 124,610 shares of our common stock as payment
of dividends due for the year ended December 31, 2008 on our Series B preferred
stock. The approximate value of these shares when issued was
$111,000.
On
February 24, 2008, we authorized issuance of 117,419 shares of our common stock
as payment of dividends due for the year ended December 31, 2007 on our Series B
preferred stock. The recorded value of these shares was approximately
$261,000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
We do not
utilize financial instruments for trading purposes and hold no derivative
financial instruments which could expose us to market risk. Our
exposure to market risks related to fluctuations in interest rates is limited to
our variable rate borrowings of $7.6 million at March 31, 2009 under our
revolving credit facility. A change in interest rates of one percent
on the balance outstanding at March 31, 2009 would cause a change in total
annual interest costs of $76,000. The carrying values of these
borrowings approximate their fair values at March 31, 2009.
ITEM 4. CONTROLS AND PROCEDURES
We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission’s rules and
forms, and that such information is accumulated and communicated to our
management, including our Principal Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and
procedures, management recognized that any controls and procedures, no matter
how well designed and operated can provide only reasonable assurance of
achieving the desired control objectives, and management is required to apply
its judgment in evaluating the cost-benefit relationship of possible controls
and procedures. Management believes, however, that a controls system,
no matter how well designed and operated, cannot provide absolute assurance that
the objectives of the controls system are met, and no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within a company have been detected.
We
carried out an evaluation as of March 31, 2009 under the supervision and with
the participation of management, including our Principal Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of its
disclosure controls and procedures as required by Rule 13a-15 of the Securities
Exchange Act of 1934, as amended. Based upon that evaluation, our
Principal Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective to timely alert them to any
material information (including our consolidated subsidiaries) that must be
included in our periodic Securities and Exchange Commission
filings.
Changes
in Our Financial Reporting Internal Controls.
There has
been no change in our internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of
1934, as amended) during the fiscal quarter ended March 31, 2009 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
PART
II
OTHER
INFORMATION
Our
failure to replace our Chief Executive Officer or Chief Financial Officer with
individuals with the required level of experience and expertise in a timely
manner could have an adverse impact on our operations and business
strategy.
Our
success depends to a significant degree upon the continued contributions of our
top management. On April 13, 2009, David P. Hanlon, our former Chief Executive
Officer and a director of the Company, resigned effective April 13, 2009. On
April 14, 2009, Ronald Radcliffe, our Chief Financial Officer, resigned
effective June 30, 2009. The loss of the services of Mr. Hanlon and
Mr. Radcliffe could adversely affect our business. We may not be able
to retain our other key personnel and searching for replacements for Mr. Hanlon
and Mr. Radcliffe could divert the attention of other senior management and
increase our operating expenses. Our future performance will depend
on our ability to recruit and retain individuals to serve as Chief Executive
Officer and Chief Financial Officer of the Company. Competition for
qualified executives is intense and our business could suffer if we are not able
to attract additional qualified executives in a timely manner.
31.1 Certification
of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
31.2 Certification
of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
32.1 Certification
of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
32.2 Certification
of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
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Empire
Resorts, Inc.
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Dated: May
8, 2009
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/s/
Charles Degliomini
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Charles
Degliomini, Senior Vice President of Governmental Relations and Corporate
Communication (Principal Executive Officer)
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Dated: May
8, 2009
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/s/
Ronald J. Radcliffe
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Ronald
J. Radcliffe
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Chief
Financial Officer
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