Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarterly period ended March 31, 2001
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 No. 0-1607
------
MID-STATE RACEWAY, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrants as specified in their respective charters)
New York 15-0555258
- --------------------------------- ---------------------------------
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
PO Box 860, Vernon, New York 13476
- --------------------------------- ---------------------------------
(Address of Principal Executive (Zip Code)
Offices)
Registrant's Telephone Number, Including Area Code: (315) 829-2201
--------------
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[ ] YES [X] NO
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).
[ ] YES [X] NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Outstanding March 31, 2001
----- --------------------------
common stock, $0.10 par value 442,766 shares
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
-March 31, 2001 and December 31, 2000.....................................................3
Consolidated Statements of Operations
-Three months ended March 31, 2001 and March 31, 2000.....................................5
Consolidated Statements of Cash Flows
-Three months ended March 31, 2001 and March 31, 2000.....................................6
Notes to Consolidated Financial Statements................................................7
Item 2. Management's Discussion and Analysis of the Financial
Condition and Results of Operations.................................................9
Item 3. Quantitative and Qualitative Disclosures About Market Risk...............................10
Item 4. Controls and Procedures..................................................................10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................................................11
Item 2. Changes in Securities and Use of Proceeds................................................11
Item 3. Defaults Upon Senior Securities..........................................................11
Item 4. Submission of Matters to a Vote of Security Holders......................................11
Item 5. Other Information........................................................................11
Item 6. Exhibits and Reports on Form 8-K.........................................................11
Signatures
Certifications
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MID-STATE RACEWAY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
(UNAUDITED)
MARCH 31, DECEMBER 31,
ASSETS 2001 2000
------------------------- -------------------------
CURRENT ASSETS
Cash and cash equivalents $ 200,569 $ 146,180
Cash restricted for purses, capital improvements and
uncashed winning tickets 133,214 127,568
Accounts receivable, net of allowance for doubtful
accounts of $10,000 in 2001 and 2000 375,756 311,372
Investments 219,326 501,475
Other current assets 195,139 164,429
------------------------- -------------------------
Total current assets 1,124,004 1,251,024
PROPERTY, PLANT AND EQUIPMENT
Land, racing plant and equipment 17,218,199 17,162,848
Other Properties 121,671 121,671
------------------------- -------------------------
17,339,870 17,284,519
Less accumulated depreciation 11,631,111 11,551,072
------------------------- -------------------------
5,708,759 5,733,447
OTHER ASSETS 4,946 8,904
------------------------- -------------------------
$ 6,837,709 $ 6,993,375
========================= =========================
See notes to unaudited consolidated financial statements
3
MID-STATE RACEWAY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
- -------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY (UNAUDITED)
MARCH 31, DECEMBER 31,
CURRENT LIABILITIES 2001 2000
------------------------- -------------------------
Accounts payable and accrued expenses $ 1,373,260 $ 1,576,262
Line of credit 351,970 347,333
Current portion of long term debt 4,485,894 1,963,622
Current portion of real estate taxes payable 70,918 60,000
Uncashed winning tickets 90,753 82,921
Retention for capital improvements 40,191 39,892
------------------------- -------------------------
Total current liabilities 6,412,986 4,070,030
REAL ESTATE TAXES PAYABLE, LESS CURRENT PORTION - -
LONG-TERM DEBT, NET OF CURRENT PORTION 363,348 2,847,000
SHAREHOLDERS' EQUITY
Common stock, par value $.10 per share;authorized 10,000,000 shares;
issued and outstanding 442,766 in 2001 and 2000 44,277 44,277
Additional paid-in-capital 2,084,909 2,084,909
Accumulated deficit (2,091,257) (2,061,867)
Accumulated other comprehensive income 23,446 9,026
------------------------- -------------------------
Total shareholders' equity 61,375 76,345
------------------------- -------------------------
$ 6,837,709 $ 6,993,375
========================= =========================
See notes to unaudited consolidated financial statements
4
MID-STATE RACEWAY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
Three Months Ended
March 31, 2001 March 31, 2000
0 Racing Days 0 Racing Days
-------------------------- --------------------------
(Unaudited)
Operating Revenues $ 1,650,390 $ 1,001,582
Operating Expenses 1,624,338 878,846
-------------------------- --------------------------
Income (loss) from operations 26,052 122,736
-------------------------- --------------------------
Other income (loss):
Special events income (loss), net 70,206 -
Investment income 911 20,479
Interest expense (123,803) (42,281)
--------------------------
--------------------------
Total other income (loss) (52,686) (21,802)
-------------------------- --------------------------
Income (loss) before provision for taxes on
income and extraordinary item (26,634) 100,934
-------------------------- --------------------------
Provision for taxes on income:
Currently payable (2,756) -
Deferred benefit - 376,800
-------------------------- --------------------------
(2,756) 376,800
-------------------------- --------------------------
Income (loss) before extraordinary item (29,390) 477,734
Extraordinary item-Gain on extinguishment
of deferred retirement benefit liability, net
of deferred income taxes - 593,261
-------------------------- --------------------------
Net income (loss) $ (29,390) $ 1,070,995
========================== ==========================
Income (loss) per common share - basic and diluted:
Income (loss) before extraordinary item (0.07) 1.08
========================== ==========================
Extraordinary item 0.00 1.34
========================== ==========================
Net income (loss) (0.07) 2.42
========================== ==========================
Cash dividend per share 0.00 0.00
========================== ==========================
See notes to unaudited consolidated financial statements
5
MID-STATE RACEWAY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31, MARCH 31,
2001 2000
------------------- -------------------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (29,390) $ 1,070,995
Adjustments to reconcile net income (loss) to net cash
provided by (used) in operating activities:
Settlement of lawsuits 0 (991,961)
Deferred tax benefit 0 0
Depreciation 80,039 43,215
Change in allowance for doubtful accounts 0 (87,000)
Realized and unrealized (gain) loss on investments 3,569 0
Imputed interest expense 61,647 0
Changes in:
Restricted cash (5,646) 54,068
Accounts and grants receivable (64,384) 320,756
Other current assets (30,710) 19,858
Other assets 3,958 22,129
Real estate taxes payable 10,918 106,000
Accounts payable (203,002) (212,363)
Uncashed winning tickets 7,832 (54,538)
Retention for capital improvements 299 630
------------------- ------------------------
Net cash provided by (used) in operating activities (164,870) 291,789
------------------- ------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and sales of available-for-sale
investment securities 293,000 0
Purchase of available-for-sale investment securities 0 (129,250)
Purchase of properties and equipment (55,351) (260,352)
------------------- ------------------------
Net cash used in investing activities 237,649 (389,602)
------------------- ------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 4,637 -
Principal payments on capital leases (23,027) -
------------------- ------------------------
Net cash provided by financing activities (18,390) -
------------------- ------------------------
Net increase (decrease) in cash 54,389 (97,813)
Cash, beginning of period 146,180 1,113,529
------------------- ------------------------
Cash, end of period $200,569 $ 1,015,716
=================== ========================
See notes to unaudited consolidated financial statements
6
MID-STATE RACEWAY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements of Mid-State Raceway, Inc.
and Subsidiary (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements. The balance sheet as of December 31, 2000 has been derived
from the audited balance sheet included in the Company's annual report filed on
Form 10-K. In the opinion of management, quarterly results include all
adjustments (consisting of only normal recurring adjustments) that the Company
considers necessary for a fair presentation of such information for interim
periods. Results shown for the latest interim period are not necessarily
indicative of the results to be obtained for a full fiscal year.
The unaudited financial statements include the accounts of the Company and its
subsidiary. These financial statements have not been reviewed by independent
accountants as required. Upon completion of a review, an amendment to this
Form 10Q will be filed if necessary. All material intercompany transactions
and balances have been eliminated in consolidation.
2. COMPREHENSIVE INCOME
The components of comprehensive income (loss) were as follows:
Three Months ended Three Months ended
March 31, 2001 March 31, 2000
-------------- --------------
Net Income (loss) ($ 29,390) $ 1,049,026
Other comprehensive income (loss):
Unrealized gain (loss) on securities available for sale, net of
tax effect of $9,613 in 2001 and $14,168 in 2000 14,420 (21,252)
-------------- --------------
Comprehensive income (loss) ($ 14,970) $ 1,027,774
============== ==============
3. REAL ESTATE TAXES PAYABLE
Amounts recorded for real estate taxes at December 31, 2000 were not paid in
2001 and became delinquent. Certain of these amounts were repaid in 2002 and the
remaining amounts will be paid in monthly instalments of $10,000 per month from
March 2003 to December 2003 and $16,974 per month from January 2004 to December
2005 pursuant to an agreement with the County of Oneida.
4. LINE OF CREDIT
The revolving line of credit in the amount of $351,000 was terminated in October
2001 and fully repaid in January 2002.
7
MID-STATE RACEWAY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
5. LONG-TERM DEBT
During 2001 the Company was in default on certain long-term debt due to
non-payment of interest and/or principal. In March 2002 substantially all of the
Company's long-term debt was refinanced through a $8,500,000 mortgage loan
agreement with ALL Capital, LLC (an unaffiliated company). The refinancing
included repayment of a $700,000 line of credit agreement which was initiated in
2001.
6. PURCHASE OPTION AGREEMENT
In September 2001 the Board of Director's authorized its President and Chief
Executive Officer to execute an exclusive option agreement for the sale of the
Company to a group of private purchasers. Consistent with the execution of the
option agreement the purchasers provided a $700,000 line of credit previously
discussed. In June 2002 management notified the group of purchasers that option
agreement had been terminated. As a result of the termination the Company may be
required to pay $130,000 to the group.
7. WARRANTS
In March 2001 warrants to purchase 12,700 shares of common stock at $10 per
share were authorized. These warrants expire in March 2005.
8. DELINQUENT SECURITIES AND EXCHANGE COMMISSION (SEC) FILINGS
The Company is delinquent in filing a number of periodic reports, including
annual and quarterly financial information, required to be filed with the SEC.
The consequences of the Company's failure to file these reports and the actions,
if any, that the SEC might initiate against the Company in this connection, are
not presently determinable.
9. NEW YORK STATE RACING AND WAGERING BOARD COMPLIANCE AUDIT
During early 2001, the New York State Racing and Wagering Board (the Board)
reviewed the Company's compliance with the Board's policies and procedures. In
March 2001, the Board issued a report documenting numerous instances of
non-compliance with applicable Board statutes, rules, and regulations. This
report was also critical of certain business and managerial practices. The Board
also fined the Company's President and CEO $5,000 for non-compliance. On March
28, 2001, the Board granted a limited 90-day track and simulcast license.
Further, the Board required the Company to demonstrate compliance and continued
financial viability over the 90-day period in order to receive a racing license
for the 2001 live racing season. On June 21, 2001, the Board approved the
Company's track and simulcast license for the remainder of 2001.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OPERATING REVENUES
During the quarter ended March 31, 2001, operating revenue increased by $648,808
or 65% when compared to the quarter ended March 31, 2000. The main reason for
the increase in operating revenue is that the period ended March 31, 2001
includes the operating revenue related to the operations of the hotel acquired
in June 2000 for the entire period, which amounted to $326,000. There was no
such revenue in the period ended March 31, 2000.
In addition, simulcast revenues increased by $238,430 due to additional
simulcast connections as well as increased wagering.
OPERATING EXPENSES
Operating expenses increased by $745,492 or 85% and consisted mainly of
increases in payroll and benefits, simulcast expenses, utilities, and food and
beverage costs due to the increased operating revenues discussed above.
INTEREST EXPENSE
Increase in interest expense of $81,522 in the quarter ended March 31, 2001
compared to the quarter ended March 31, 2000 is due to the increase in the
amount of long-term debt in the prior twelve months to provide funds for
operations.
INCOME TAXES
Income tax expense was not significant in the quarter ended March 31, 2001 due
to the loss incurred from operations. Income tax expense of $376,800 in the
quarter ended March 31, 2000 represents the tax effect of the extraordinary gain
on the extinguishment of the deferred retirement benefit liability recognized in
2000.
NET INCOME (LOSS)
The net income for the quarter ended March 31, 2000 was $1,100,385 higher than
the net loss in the quarter ended March 31, 2001. This is the result of the
extraordinary gain of $970,061 recognized in 2000 for the extinguishment of the
deferred retirement liability as well as increased interest expense of $81,522
in 2001. The increased operating revenues in 2001 were offset by increased
expenses and did not provide substantial increases in profitability in 2001.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2001 the Company had $200,569 of cash and cash equivalents versus
$146,186 at December 31, 2000. Operating loss for the quarter ended March 31,
2001 was funded by sales of investments in the amount of $293,000. Remaining
investments at fair market value are $219,326 at March 31, 2001.
9
The Company's current portion of long-term debt has increased from $1,963,622 at
December 31, 2000 to $4,485,894 at March 31, 2001. The increase is due to
$2,816,000 due to a third party bankruptcy trustee and the Company for the
purchase of the hotel in June 2000. This amount was due on February 18, 2002 and
was subsequently paid through the $8,500,000 mortgage debt refinancing in March
2002 as discussed in the notes to the financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no material changes in the Company's market risk or related
strategies during the quarter ended March 31, 2001.
ITEM 4. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures.
Within the 90 days before the date of this Form 10-Q, we evaluated the
effectiveness of the design and operation of our "disclosure controls and
procedures". Mid-State Raceway, Inc. and Subsidiary conducted this evaluation
under the supervision and with the participation of management, including our
Chief Executive Officer and Principal Financial and Accounting Officer.
(i) Definition of Disclosure Controls and Procedures.
Disclosure controls and procedures are controls and other procedures that are
designed with the objective of ensuring that information required to be
disclosed in our periodic reports filed under the Exchange Act, such as this
report, is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms. As defined by the SEC, such disclosure
controls and procedures are also designed with the objective of ensuring that
such information is accumulated and communicated to our management, including
the Chief Executive Officer and Principal Financial and Accounting Officer, in
such a manner as to allow timely disclosure decisions.
(ii) Limitations on the Effectiveness of Disclosure Controls and Procedures and
Internal Controls.
The Company recognizes that a system of disclosure controls
and procedures (as well as a system of internal controls), no matter how well
conceived and operated, cannot provide absolute assurance that the objectives of
the system are met. Further, the design of such a system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. Additionally, controls can be
circumvented in a number of ways. Because of the inherent limitations in a
cost-effective control system, system failures may occur and not be detected.
(iii) Conclusions with Respect to Our Evaluation of Disclosure Controls and
Procedures.
Subject to the limitations described above, our Chief Executive Officer and
Principal Financial and Accounting Officer have concluded that our disclosure
controls and procedures are effective in timely alerting them to material
information relating to Mid-State Raceway, Inc. and subsidiary required to be
included in The Company's periodic SEC filings.
(b) Changes in Internal Controls.
There have been no significant changes in The Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation.
10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There were no material changes to any legal proceedings during the quarter ended
March 31, 2001.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
See Note 5 of Notes to Consolidated Financial Statements.
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
Exhibit 31.1 Certification of Chief Executive Officer
Exhibit 31.2 Certification of Principal Financial and Accounting Officer
Exhibit 32.1 Sarbanes-Oxley Chief Executive Officer
Exhibit 32.2 Sarbanes-Oxley Principal Financial and Accounting Officer
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly caused this Report
to be signed on its behalf by the undersigned, thereunto duly authorized.
MID-STATE RACEWAY, INC.
DATE: JANUARY 10, 2004 BY: /S/ DAVID E. WILSON
----------------------------------------
David E. Wilson
Chief Operating Officer
BY: /S/ ROSE FRAWERT
----------------------------------------
Rose Frawert
Principal Financial and Accounting
Officer
11