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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2002
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ____________________
Commission File Number 0-1365
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SCIOTO DOWNS, INC.
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(Exact name of registrant as specified in its charter)
OHIO 31-4440550
- -------------------------------- ----------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6000 SOUTH HIGH STREET, COLUMBUS, OHIO 43207
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(Address of principal executive offices) (Zip Code)
(614) 491-2515
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--------- ---------
The number of common shares outstanding at September 16, 2002:
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595,767, par value $1.05
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SCIOTO DOWNS, INC.
INDEX
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PAGES
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at July 31, 2002, October 31, 2001
and July 31, 2001 1-2
Consolidated Statements of Operations for the three-month and
nine-month periods ended July 31, 2002 and 2001 3
Consolidated Statements of Cash Flows for the nine-month periods ended
July 31, 2002 and 2001 4
Notes to Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
SCIOTO DOWNS, INC.
CONSOLIDATED BALANCE SHEETS
AT JULY 31, 2002, OCTOBER 31, 2001 AND JULY 31, 2001
- --------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JULY 31, OCTOBER 31, JULY 31,
2002 2001 2001
------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents $ 632,042 $ 418,688 $ 374,287
Restricted cash 142,065 42,693 12,792
Accounts receivable, net of allowance for
doubtful accounts of $4,000, $0, and
$802 at July 31, 2002, October 31, 2001
and July 31, 2001, respectively 333,738 548,371 372,788
Prepaid expenses and other 69,408 58,628 48,155
------------ ------------ ------------
Total current assets 1,177,253 1,068,380 808,022
------------ ------------ ------------
Property and equipment, at cost 20,700,269 20,688,018 20,669,002
Less accumulated depreciation (15,431,966) (15,008,085) (14,861,505)
------------ ------------ ------------
Total property and equipment, net 5,268,303 5,679,933 5,807,497
------------ ------------ ------------
Accounts receivable--related party, net of
allowance for doubtful accounts of $292,169
at July 31, 2001 - - 253,072
Other noncurrent assets 32,421 38,053 62,341
Racing permit 755,760 755,760 -
------------ ------------ ------------
Total assets $ 7,233,737 $ 7,542,126 $ 6,930,932
============ ============ ============
CONTINUED
-1-
SCIOTO DOWNS, INC.
CONSOLIDATED BALANCE SHEETS
AT JULY 31, 2002, OCTOBER 31, 2001 AND JULY 31, 2001
- --------------------------------------------------------------------------------
JULY 31, OCTOBER 31, JULY 31,
2002 2001 2001
----------- ----------- -----------
(unaudited) (unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable, trade $ 611,482 $ 465,579 $ 275,142
Current maturities, term debt 251,978 193,083 144,004
Line of credit 130,000 200,000 -
Accrued expenses 368,900 378,010 304,489
Deferred revenue 61,179 - -
Purses payable and simulcast purse fund 1,279,592 363,355 425,001
Dividends payable - 29,788 -
----------- ----------- -----------
Total current liabilities 2,703,131 1,629,815 1,148,636
----------- ----------- -----------
Minimum pension liability 335,458 335,458 136,025
Accrued pension 274,374 274,374 -
Term debt, net of current maturities 2,512,403 2,674,371 2,666,523
Stockholders' equity
Common stock, $1.05 par value per share,
authorized: 3,600,000 shares, issued and
outstanding: 595,767 shares 625,555 625,555 625,555
Capital in excess of par value of stock 2,037,300 2,037,300 2,037,300
Accumulated (deficit) earnings (919,026) 300,711 406,669
Accumulated other comprehensive loss (335,458) (335,458) (89,776)
----------- ----------- -----------
Total stockholders' equity 1,408,371 2,628,108 2,979,748
----------- ----------- -----------
Total liabilities and stockholders' equity $ 7,233,737 $ 7,542,126 $ 6,930,932
=========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
-2-
SCIOTO DOWNS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED JULY 31, 2002 AND 2001
(UNAUDITED)
- --------------------------------------------------------------------------------
FOR THE THREE-MONTH FOR THE NINE-MONTH
PERIODS ENDED PERIODS ENDED
JULY 31, JULY 31,
---------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
OPERATING REVENUES
Pari-mutuel commissions and breakage $ 4,286,694 $ 4,477,017 $ 8,820,444 $ 7,331,782
Less pari-mutuel taxes 638,841 597,108 1,331,515 996,547
------------ ------------ ------------ ------------
3,647,853 3,879,909 7,488,929 6,335,235
Export signal revenue 296,910 229,721 337,417 229,721
Admissions 86,513 79,137 86,513 79,137
Concessions, program, parking and other 365,777 288,129 514,221 420,284
Entry fees and purse monies added by others 1,086,088 760,563 1,086,088 760,563
Rental income 36,290 103,930 105,199 103,930
Pari-mutuel tax abatement earned - 81,642 - 170,118
------------ ------------ ------------ ------------
5,519,431 5,423,031 9,618,367 8,098,988
------------ ------------ ------------ ------------
OPERATING EXPENSES
Purses 2,650,145 2,413,993 4,366,644 3,504,538
Salaries and wages 972,093 848,788 1,858,906 1,361,920
Simulcasting fees 534,024 482,567 1,206,373 949,474
Depreciation 144,642 146,581 427,037 431,502
Other operating and general expenses 1,324,265 1,424,221 2,800,260 2,867,809
------------ ------------ ------------ ------------
5,625,169 5,316,150 10,659,220 9,115,243
------------ ------------ ------------ ------------
Income (loss) from operations (105,738) 106,881 (1,040,853) (1,016,255)
Other (expense) income (5,632) - (6,323) 46,012
Net interest expense (59,085) (54,104) (172,561) (139,439)
------------ ------------ ------------ ------------
Net (loss) income before income tax
(expense) benefit (170,455) 52,777 (1,219,737) (1,109,682)
Income tax (expense) benefit - (140,459) - 33,541
------------ ------------ ------------ ------------
Net loss $ (170,455) $ (87,682) $ (1,219,737) $ (1,076,141)
============ ============ ============ ============
Net loss per common share--basic
and diluted $ (.29) $ (.15) $ (2.05) $ (1.81)
============ ============ ============ ============
Weighted average common shares
outstanding--basic and diluted 595,767 595,767 595,767 595,767
============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
-3-
SCIOTO DOWNS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIODS ENDED JULY 31, 2002 AND 2001 (UNAUDITED)
- --------------------------------------------------------------------------------
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,219,737) $(1,076,141)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 427,037 431,502
Provision for losses on accounts receivable 4,000 292,971
Deferred income taxes - (33,541)
Write-down of investment 5,632 -
Loss (gain) on disposal of assets and settlement 691 (62,198)
Changes in current assets and liabilities:
Accounts receivable, trade and related party 210,633 (742,388)
Prepaid expenses and other (10,780) (9,769)
Accrued expenses (9,110) (35,412)
Deferred revenue 61,179 -
Accounts and purses payable and simulcast purse fund 1,062,140 507,060
----------- -----------
Net cash provided by (used in) operating activities 531,685 (727,916)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net restricted cash (receipts) payments (99,372) 3,012
Purchase of property and equipment (16,098) (312,595)
Proceeds from sale of equipment - 3,526
----------- -----------
Net cash used in investing activities (115,470) (306,057)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on term debt (173,073) (102,394)
Dividends paid (29,788) -
----------- -----------
Net cash used in financing activities (202,861) (102,394)
----------- -----------
Net increase (decrease) in cash and cash equivalents 213,354 (1,136,367)
Cash and cash equivalents, beginning of period 418,688 1,510,654
----------- -----------
Cash and cash equivalents, end of period $ 632,042 $ 374,287
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
-4-
SCIOTO DOWNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE-MONTH
AND NINE-MONTH PERIODS ENDED JULY 31, 2002 AND 2001 (UNAUDITED)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include
the accounts of Scioto Downs, Inc. and its wholly owned subsidiary,
Mid-America Racing Association, Inc. (Mid-America) from its acquisition
date of August 1, 2001, collectively referred to as Scioto Downs or the
Company. All significant intercompany accounts and transactions have
been eliminated in consolidation.
The financial information furnished reflects all adjustments which are,
in the opinion of management, necessary to present a fair statement of
the results for the interim periods on a basis consistent with that of
prior periods. All such adjustments are of a normal recurring nature.
The accompanying unaudited consolidated financial statements are
presented in accordance with the requirements of Form 10-Q and,
consequently, do not include all the disclosures normally required by
accounting principles generally accepted in the United States of
America, or those normally made in the Company's annual report on Form
10-K. The year-end consolidated balance sheet was derived from audited
consolidated financial statements, but does not include all disclosures
required by accounting principles generally accepted in the Untied
States of America. Reference should be made to the Company's 2001 Form
10-K for additional disclosures, including a summary of the Company's
accounting policies.
The accompanying consolidated financial statements have been prepared
assuming that Scioto Downs will continue as a going concern. The
Company has incurred recurring losses from operations and has a working
capital deficit at July 31, 2002.
Management has implemented plans to reduce expenses and improve
operating results. However, these plans depended on a successful live
racing season, which has not occurred due primarily to a decline in the
racing industry in Ohio. As a result, management's plans have not
produced the desired results, and the Company's consolidated financial
position has not improved. The Company is considering other sources of
liquidity to support its operations, but there is no assurance that
other sources can be obtained. Failure to obtain other sources of
funding make the ability to continue future operations uncertain.
2. INCOME TAXES
The Company provides for income taxes in interim periods based on its
estimated annual effective tax rate. The estimated annual effective tax
rate differs from the statutory rate due to the application of surtax
exemptions. Valuation allowances are established when necessary to
reduce deferred tax assets to the amounts expected to be realized. The
Company has determined at July 31, 2002 and 2001 that it is more likely
than not that the deferred tax assets will not be realized and,
therefore, has recorded a full valuation allowance.
-5-
SCIOTO DOWNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE-MONTH
AND NINE-MONTH PERIODS ENDED JULY 31, 2002 AND 2001 (UNAUDITED)
- --------------------------------------------------------------------------------
3. DEFERRED REVENUE
Deferred revenue represents cash received for advance ticket sales.
Deferred revenue of approximately $61,000 at July 31, 2002 relates to
cash received for a special event scheduled to occur in September 2002.
4. COMMITMENTS AND CONTINGENCIES
At October 31, 2000, the Company had an outstanding receivable from its
former concessionaire of $127,864. The Company was in dispute with the
former concessionaire and had fully reserved the receivable as of
October 31, 2000. During the second quarter ended April 30, 2001, the
Company reached a settlement agreement with the concessionaire. The
settlement resulted in the receipt of equipment from the concessionaire
and forgiveness by the Company of the outstanding receivable. The
Company recognized a gain on settlement of $58,670 during the
nine-month period ended July 31, 2001.
5. RELATED-PARTY ACCOUNTS RECEIVABLE
At July 31, 2001, Scioto Downs, Inc. had an outstanding receivable from
Mid-America Racing Association, Inc., a related party prior to its
acquisition on August 1, 2001, of $517,169. Scioto Downs, Inc. had
reserved approximately $292,000 of this amount as of July 31, 2001 due
to uncertainty of its collectibility.
6. ACQUISITION
On August 1, 2001, Scioto Downs, Inc. acquired all of the outstanding
common shares of Mid-America. The assets, liabilities, and results of
Mid-America's operations have been reflected in the consolidated
financial statements of Scioto Downs from the acquisition date. The
consideration was $150,000, for which Scioto Downs, Inc. issued
non-interest-bearing promissory notes, which were due $50,000 at
closing and $50,000 each in August 2002 and 2003. Mid-America owns a
racing permit entitling it to conduct harness horseracing, typically
immediately following the live racing season of Scioto Downs, Inc. The
lease of racing facilities between Mid-America and Scioto Downs, Inc.
was terminated as of the acquisition date.
The acquisition was accounted for under the purchase method. The total
purchase price has been allocated to the tangible and intangible assets
and liabilities of Mid-America based upon their estimated fair values.
-6-
SCIOTO DOWNS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE-MONTH
AND NINE-MONTH PERIODS ENDED JULY 31, 2002 AND 2001 (UNAUDITED)
- --------------------------------------------------------------------------------
The following unaudited pro forma information is presented as if the
August 1, 2001 acquisition of Mid-America had occurred on November 1,
2000:
THREE MONTHS NINE MONTHS
ENDED ENDED
JULY 31, JULY 31,
2001 2001
----------- -----------
Net operating revenue $ 6,315,669 $ 9,015,703
Net loss (206,211) (1,658,336)
Earnings per common share:
Basic and diluted (.35) (2.78)
This unaudited pro forma financial information is not necessarily
indicative of the operating results that would have occurred had the
transaction been consummated as of November 1, 2000, nor is it
necessarily indicative of future operating results.
7. DEBT FINANCING ARRANGEMENTS
The Company has a line of credit and a term loan agreement. Subsequent
to July 31, 2002, the Company was notified by its lender that it no
longer has availability under the line of credit and the outstanding
balance is due on October 31, 2002.
The Company's term loan agreement contains an acceleration clause
whereby the lender has the right to declare the loan immediately due
and payable in full if, in the lender's judgment, an event has occurred
which is likely to have a material adverse effect on the Company.
-7-
SCIOTO DOWNS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION, CONT.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis is concerned with
material changes in financial condition and results of
operations for the Company's consolidated balance sheets
at July 31, 2002, October 31, 2001, and July 31, 2001 and
for the consolidated statements of operations for the
three-and nine-month periods ended July 31, 2002 and 2001.
This discussion and analysis should be read together with
management's discussion and analysis included in the
Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 2001.
This report may contain various "forward-looking
statements" within the meaning of applicable securities
law. The use of forward-looking words such as "believe",
"expect", "anticipate", "project", "estimate", "intend",
"hope" and similar words identify "forward-looking
statements" which speak only as of the date the statement
was made. Such forward-looking statements are subject to
risk, uncertainties and other factors, which could cause
actual results to materially differ from those made,
projected or implied. Such risks and uncertainties would
include such matters as the national and local general
economic business and other conditions, the availability
of financing, the impact of federal and state legislation
and of governmental regulation, the impact of competition
and other risks and uncertainties that are described in
our Securities and Exchange Commission filings. The
Company disclaims any obligation to update any
forward-looking statement.
OVERVIEW
The racing industry in general in Ohio is experiencing an
overall decline in business. Attendance is down, and the
amount wagered on racing in Ohio is down approximately 7%
from the previous year. Purses paid to winning horses are
also down approximately 24%. Several developments in the
racing industry have contributed to this result.
One factor is the rapid growth of what is known as account
wagering. This system allows an individual to place a
wager on a horserace while at home by telephone or over
the Internet using an account established with the
telephone or Internet entity. Commissions received by the
racetrack from account wagering are significantly less
than if the person places a wager at the racetrack, thus,
causing a decline in the racetrack's revenue.
Another factor adversely affecting horseracing in Ohio is
increased gambling competition from surrounding states.
West Virginia, for example, has authorized electronic
gaming machines at its racetracks. Indiana has riverboat
gambling. Casino gambling is now in operation in Michigan.
These out-of-state gambling facilities patronized by Ohio
residents take business away from the Ohio racetracks and
also provide the racetracks in those states which have
these other forms of gambling with
-8-
SCIOTO DOWNS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
additional funds to pay higher purses and, thus, attract
the more popular horses. Generally, the customers at Ohio
tracks do not wager as much on a less popular class of
horses, so this situation also causes the handle to
decline. At the present time, it is extremely difficult
for the Ohio racetracks to compete with racetracks in
other states that have alternate forms of gambling. As a
result, the racing industry in Ohio is in decline which
has adversely affecting the Company's operations.
GENERAL
Due to the seasonal nature of the business, the Company
experiences net operating losses during the first two
quarters of the fiscal year. In addition, the Company uses
this period to perform routine repairs and maintenance and
facility improvements. The live racing season at Scioto
Downs annually falls within the third and fourth quarters,
ending in September. As a result of the overall decline in
the horse racing business in the state of Ohio, the
Company has experienced a loss in its third quarter of
operations ending July 31, 2002.
Management has implemented plans to reduce expenses and
improve operating results. However, these plans depended
in part on a successful live racing season. That has not
occurred primarily because of a decline in the racing
industry. Therefore, management's plans have not produced
the desired results and the Company's financial position
has not improved. The Company is considering other sources
of liquidity to support its operations, but there is no
assurance that other sources can be obtained. Failure to
obtain other sources of funding make the ability to
continue future operations uncertain.
Beginning January 1, 2001, the Company commenced
year-round simulcasting.
On August 1, 2001, Scioto Downs, Inc. purchased all of the
outstanding shares of Mid-America. The lease of the racing
facilities between Mid-America and Scioto Downs, Inc. was
terminated as of the acquisition date. The results of
operations of Mid-America from November 1, 2001 through
July 31, 2002 are included in the results of operations
discussed below.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Scioto Downs' discussion and analysis of its financial
condition and results of operations are based upon Scioto
Downs' consolidated financial statements, which have been
prepared in accordance with accounting principles
generally accepted in the United States of America. The
preparation of these financial statements requires Scioto
Downs to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and
liabilities. On an ongoing basis, Scioto Downs evaluates
its estimates, including those related to unclaimed
purses, unclaimed winning tickets, bad debts, intangible
assets, income taxes, pensions and other postretirement
benefits, and contingencies and litigation. Scioto Downs
bases its estimates on historical experience and on
various other assumptions that are believed to be
reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying
values of
-9-
SCIOTO DOWNS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these
estimates under different assumptions or conditions.
Scioto Downs believes the following critical accounting
policies affect its more significant judgments and
estimates used in the preparation of its consolidated
financial statements. Scioto Downs will perform impairment
tests on the racing permit on an annual basis and between
annual tests in certain circumstances. Such circumstances
may include changes in industry and market conditions,
including the potential for changes in Ohio gaming
regulations. Management's impairment tests may determine
that the value of this asset has been impaired and this
would require a write-down of the recorded asset value.
Scioto Downs records a valuation allowance to reduce its
deferred tax assets to the amount that is more likely than
not to be realized. Scioto Downs has considered future
taxable income and ongoing prudent and feasible tax
planning strategies in assessing the need for the
valuation allowance. In the event that the Company were to
determine that it would be able to realize its deferred
tax assets in the future in excess of its net recorded
amount, an adjustment to the deferred tax asset would
increase income in the period such determination was made.
THREE MONTHS ENDED JULY 31, 2002 COMPARED TO THREE MONTHS
ENDED JULY 31, 2001
A decrease in handle resulted in a decrease in pari-mutuel
commissions and breakage. Purses and simulcasting fees
increased as a result of the inclusion of Mid-America in
the current period.
Entry fees and purse monies added by others increased by
$325,525 to $1,086,088 for the three months ended July 31,
2002 due to a change in the timing of the Ohio State Fair
race, an increase in entry fees and an increase in monies
added for the Sire Stakes.
Salaries and wages increased by $123,305 to $972,093 for
the three months ended July 31, 2002. The increase was due
primarily to the inclusion of salaries for Mid-America
employees. Operating and general expense decreased by
$99,956 due mainly to a related-party receivable reserve
of $64,207 recognized during the three months ended July
31, 2001.
The income tax expense decreased to $0 from $140,459 for
the three months ended July 31, 2002 as a result of
losses in the 2002 quarter, which were fully offset by
recording a valuation allowance on deferred tax assets at
July 31, 2002. The Company provides for income taxes in
interim periods based on the effective tax rate expected
for the full year.
-10-
SCIOTO DOWNS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
NINE MONTHS ENDED JULY 31, 2002 COMPARED TO NINE MONTHS
ENDED JULY 31, 2001
Year-round simulcasting resulted in an increase in
pari-mutuel commissions and breakage, pari-mutuel taxes,
purses and simulcasting fees. Purse expense during the
non-live racing season represents payments to the state
simulcasting fund.
Entry fees and monies added by others increased by
$325,525 to $1,086,088 for the nine months ended July 31,
2002 due to a change in the timing of the Ohio State Fair
race, an increase in entry fees and an increase in monies
added for the Sire Stakes.
Salaries and wages increased by $496,986 to $1,858,906 for
the nine months ended July 31, 2002 as compared to the
nine months ended July 31, 2001. The increase was due
primarily to the inclusion of salaries for Mid-America
employees and to additional staffing needed for year-round
simulcasting. Operating and general expense decreased by
$67,549. The decrease is primarily due to the inclusion in
general expense for the nine months ended July 31, 2001 of
a reserve of approximately $292,000 for a related-party
receivable balance. This decrease was offset by increases
in expenses because of the inclusion of Mid-America for
the nine months ended July 31, 2002.
The income tax benefit decreased to $0 from $33,541 for
the nine months ended July 31, 2002 and 2001,
respectively, as a result of recording a valuation
allowance on deferred tax assets at July 31, 2002. The
Company provides for income taxes in interim periods based
on the effective tax rate expected for the full year.
LIQUIDITY AND CAPITAL RESOURCES
Net cash of $531,685 provided by operating activities for
the nine months ended July 31, 2002 consisted primarily of
a decrease in accounts receivable and increases in
accounts payable, deferred revenue, purses payable, and
simulcast purse fund.
Net cash used in investing activities was $115,470 for the
nine months ended July 31, 2002, resulting from net
receipts of restricted cash.
Net cash used in financing activities of $202,861
consisted primarily of dividends paid of $29,788 and
payments on term debt and the line of credit of $173,073.
Subsequent to July 31, 2002, the Company was notified by
its lender that it no longer has availability under the
line of credit and the outstanding balance is due on
October 31, 2002.
As discussed in the General section of Management's
Discussion and Analysis, the Company is considering other
sources of liquidity to support its operations.
-11-
SCIOTO DOWNS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
-12-
SCIOTO DOWNS, INC.
OTHER INFORMATION
- --------------------------------------------------------------------------------
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings--None
ITEM 2. Changes in Securities--None
ITEM 3. Defaults Upon Senior Securities--None
ITEM 4. Submission of Matters to a Vote of Security Holders--None
ITEM 5. Other Information--None
ITEM 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
Exhibit No. 99.1--Sarbanes-Oxley Certification of
Chief Executive Officer and Chief Financial
Officer Filed Herewith
(b) Reports on Form 8-K--No reports on Form 8-K were
filed during the quarter ended July 31, 2002.
-13-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SCIOTO DOWNS, INC.
----------------------------------
Registrant
DATE: September 16, 2002 BY: /s/ Edward T. Ryan
----------------------------- ------------------------
Edward T. Ryan, President
DATE: September 16, 2002 BY: /s/ Richard J. Fiore
----------------------------- ------------------------------
Richard J. Fiore
Chief Financial Officer
CERTIFICATIONS
I, Edward T. Ryan, President of Scioto Downs, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Scioto Downs, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.
Date: September 16, 2002
/s/ Edward T. Ryan
President
I, Richard J. Fiore, Chief Financial Officer of Scioto Downs, Inc., certify
that:
1. I have reviewed this quarterly report on Form 10-Q of Scioto Downs, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.
Date: September 16, 2002
/s/ Richard J. Fiore
Chief Financial Officer
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