-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UxBgJ/9FH44ioShPLh5tud+aIA9q2Vq48LUN6HDYcQGZTB1m8RVehrp2VJveKyX8 ru2tRw0PQgtVxlAFdRfHsg== 0000916641-98-000942.txt : 19980817 0000916641-98-000942.hdr.sgml : 19980817 ACCESSION NUMBER: 0000916641-98-000942 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLONIAL DOWNS HOLDINGS INC CENTRAL INDEX KEY: 0001027430 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-RACING, INCLUDING TRACK OPERATION [7948] IRS NUMBER: 541826807 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22213 FILM NUMBER: 98690295 BUSINESS ADDRESS: STREET 1: 10515 COLONIAL DOWNS PARKWAY CITY: NEW KENT STATE: VA ZIP: 23124 BUSINESS PHONE: 8049667223 MAIL ADDRESS: STREET 1: 10515 COLONIAL DOWNS PARKWAY CITY: NEW KENT STATE: VA ZIP: 23124 10-Q 1 COLONIAL DOWNS 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 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 333-18295 COLONIAL DOWNS HOLDINGS, INC. (Exact name of registrant as specified in its charter) Virginia 54-1826807 (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) 10515 Colonial Downs Parkway New Kent, Virginia 23124 (Address of principal executive offices including zip code) Registrant's telephone number, including area code: (804) 966-7223 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 the number of shares outstanding of each of the issuer's classes of common stock. Class Outstanding at August 10, 1998 Class A Common Stock, $.01 par value 5,000,000 Class B Common Stock, $.01 par value 2,250,000 COLONIAL DOWNS HOLDINGS, INC. AND SUBSIDIARIES INDEX
Page Number Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets -- June 30, 1998 (unaudited) and December 31, 1997 3 Consolidated Statements of Earnings (Loss)-- Three and Six Month Periods Ended June 30, 1998 and 1997 (unaudited) 4 Consolidated Statements of Cash Flows -- Six Months Ended June 30, 1998 and 1997 (unaudited) 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 8 Part II. Other Information Item 1. Legal Proceedings 12 Item 4. Submission of Matter to Vote of Security Holders 12 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 13
Part I. Financial Information COLONIAL DOWNS HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
June 30, 1998 December 31, 1997 ----------------- --------------------- (unaudited) Assets Current assets Cash and cash equivalents $ 1,629 $ 3,348 Horsemen's deposits 2,762 1,657 Accounts receivable 400 293 Prepaid expenses 558 497 Refundable income taxes 34 218 ----------------- --------------------- Total current assets 5,383 6,013 Property and equipment 62,301 61,275 Less accumulated depreciation and amortization 1,326 660 ----------------- --------------------- Net property and equipment 60,975 60,615 Other Licensing costs, net of amortization 805 841 Miscellaneous 341 406 ----------------- --------------------- Total other 1,146 1,247 ----------------- --------------------- Total assets $ 67,504 $ 67,875 ================= ===================== Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 4,255 $ 9,276 Accounts payable - arbitration 3,474 2,402 Accrued expenses 1,105 637 Current maturities of long-term debt and capital lease obligations 1,969 1,373 Deferred revenue 135 195 Purses due horsemen 2,484 1,597 ----------------- --------------------- Total current liabilities 13,422 15,480 Long-term liabilities Long-term debt and capital lease obligations, net of current maturities 14,216 9,890 Notes payable - related parties 5,500 5,500 Other long-term liabilities 240 - Deferred income taxes 84 84 ----------------- --------------------- Total long-term liabilities 20,040 15,474 Stockholders' equity Common stock Class A, $.01 par value, 12,000,000 shares Authorized; 5,000,000 outstanding 50 50 Class B, $.01 par value, 3,000,000 shares Authorized; 2,250,000 shares outstanding 22 22 Additional paid in capital 37,842 37,842 Retained earnings (deficit) (3,872) (993) ----------------- --------------------- Total stockholders' equity 34,042 36,921 ----------------- --------------------- Total liabilities and stockholders' equity $ 67,504 $ 67,875 ================= =====================
See accompanying notes to consolidated financial statements. COLONIAL DOWNS HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (In thousands, except per share data) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, -------------------------------- ----------------------------- 1998 1997 1998 1997 Revenues Pari-mutuel and simulcasting commissions $ 6,722 $ 4,675 $ 13,167 $ 9,672 Other 1,046 369 1,373 789 ------- ------ ------- ------- Total revenues 7,768 5,044 14,540 10,461 ------- ------ ------- ------- Operating expenses Direct operating expenses Purses, fees and pari-mutuel taxes 3,323 2,245 6,374 4,790 Simulcast and other direct expenses 4,280 1,863 7,402 3,708 Depreciation and amortization 445 105 888 207 ------- ------ ------- ------- Total direct operating expenses 8,048 4,213 14,664 8,705 Selling, general and administrative expenses 1,165 436 1,829 883 ------- ------ ------- ------- Total operating expenses 9,213 4,649 16,493 9,588 ------- ------ ------- ------- Earnings (loss) from operations (1,445) 395 (1,953) 873 Other income (expense) Interest expense (492) (46) (957) (84) Interest income 10 414 31 439 ------- ------ ------- ------- Earnings (loss) before income taxes (1,927) 763 (2,879) 1,228 Income taxes - 290 - 326 ------- ------ ------- ------- Net earnings (loss) $ (1,927) $ 473 $ (2,879) $ 902 ======= ======== ======== ======= Earnings per share data Basic and diluted earnings per share $ (0.27) $ 0.07 $ (0.40) $ 0.17 ======= ======= ======== ======= Weighted average number of shares Outstanding 7,250 7,250 7,250 5,442 ======= ======= ======== =======
See accompanying notes to consolidated financial statements. COLONIAL DOWNS HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Six Months Ended June 30, -------------------------------------- 1998 1997 ---------------- ---------------- Operating activities Net earnings (loss) $ (2,879) $ 902 Adjustments to net earnings (loss) Depreciation and amortization 888 207 (Increase) in accounts receivable and other assets (106) (598) Increase in accounts payable 605 822 Increase in accrued expenses and other 409 211 (Decrease) increase in horsemen's deposits and purses (net) (218) 50 ----------------- ---------------- Net cash (used in) provided by operating activities (1,301) 1,594 Investing activities Purchases of property and equipment (1,025) (19,206) (Decrease) increase in construction payables (4,316) 2,129 Investment in other assets - (97) ---------------- ----------------- Net cash used in investing activities (5,341) (17,174) Financing activities Proceeds from long-term debt and capital leases 5,287 110 Payments on long-term debt and capital leases (364) - Net proceeds from stock offering - 36,192 Funding of purse account promissory notes - (1,620) Payments on stockholders' advances and notes payable - (699) Proceeds from stockholder notes payable - 4,613 ---------------- ---------------- Net cash provided by financing activities 4,923 38,596 ---------------- ---------------- Net (decrease) increase in cash and cash equivalents (1,719) 23,016 Cash and cash equivalents, beginning of year 3,348 1,380 ---------------- ---------------- Cash and cash equivalents, end of period $ 1,629 $ 24,396 ================ ================
See accompanying notes to consolidated financial statements. COLONIAL DOWNS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. In the opinion of management, the accompanying consolidated financial statements of Colonial Downs Holdings, Inc. ( the "Company") have been prepared in accordance with generally accepted accounting principles for interim reporting, with applicable reporting regulations of the Securities and Exchange Commission, and present fairly, in all material respects, the Company's financial position as of June 30, 1998 and the results of operations and the consolidated cash flows for the three and six month periods ended June 30, 1998 and 1997. All adjustments are of a normal, recurring nature. The financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and, accordingly, should be read in conjunction with the consolidated financial statements and related footnotes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilutive effect of securities that could share in earnings of an entity. At June 30, 1998, there was no material dilutive effect on earnings (loss) per share.
2. Long-term debt consists of the following (in thousands):
June 30, 1998 December 31, 1997 ------------------ ------------------- Note payable to a Bank maturing June 2000, with two one year extensions, bearing interest at a variable rate (8.63% at June 30, 1998), with a $1,000,000 principal payment due in December 1998 and quarterly principal payments of $500,000 commencing in April 1999, collateralized by substantially all assets of the Company and guaranteed by certain shareholders and related parties. $ 10,000 $ 10,000 Convertible subordinated note payable to CD Entertainment, Ltd., maturing March 2000, with interest payable quarterly at a rate of 7.25%, collateralized by a second deed of trust on the racetrack facility. 5,500 5,500 Line of credit facility with a Bank, maturing June 2000, with two one year extensions, bearing interest at a variable rate (ranging from 8.63% to 8.75% at June 30, 1998), collateralized by substantially all assets of the Company and guaranteed by certain shareholders and related parties. 5,000 - Note payable to a Bank, maturing August 1999, bearing interest at prime plus 1%, with monthly principal payments of $15,000, collateralized by certain fixed assets. 750 840 Note payable to an Insurance Company, maturing October 1998, bearing interest at 7.30%, with monthly payments of $32,933 including interest. 98 - Note payable to an Insurance Company, maturing October 1999, bearing interest at 6.83%, with monthly payments of $8,622 including interest. 124 170 Installment notes and capitalized leases collateralized by certain vehicles, machinery and equipment, maturing at various dates through September 2000, at interest rates ranging from 3% to 9%. 213 253 ------------------ ------------- 21,685 16,763 Less current maturities 1,969 1,373 ------------------ ------------- Long-term debt $ 19,716 $ 15,390 ================== =============
3. Accounts payable-arbitration - Pursuant to the terms of the Company's construction contract with Norglass, the general contractor engaged to manage the construction of the Company's racetrack, the Company is proceeding before the American Arbitration Association ("AAA"). In the proceeding, the Company is seeking reimbursement for amounts paid directly to subcontractors as well as elimination of all mechanic liens placed by Norglass against the Company. Approximately $1.9 million in construction costs has been included in accounts payable--arbitration at June 30, 1998 and December 31, 1997. In January 1998, the Company filed a demand for arbitration against Maryland-Virginia Racing Circuit ("MVRC"), before the Virginia Racing Commission, which demand was referred to an arbitrator in May 1988. In its arbitration demand, the Company is challenging a management fee claimed to be due to MVRC pursuant to a Management and Consulting Agreement dated as of April 22, 1996. At June 30, 1998 and December 31, 1997, approximately $1.6 and $.5 million, respectively, has been included in accounts payable - arbitration. 4. Certain reclassifications have been made in the prior years' financial statements to conform to the June 30, 1998 presentation. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Overview Colonial Downs Holdings, Inc. (the "Company") was organized to pursue opportunities for horse racing and pari-mutuel wagering and holds the only licenses to own and operate a racetrack and racing centers ("Racing Centers") in Virginia. The Company currently operates Racing Centers in Chesapeake, Richmond, Hampton, and Brunswick, and may apply for licenses for up to two additional Racing Centers if suitable opportunities are identified. In September and October 1997, the Company completed its inaugural thirty-day thoroughbred live meet at its newly constructed racetrack (the "Track") located in New Kent County, Virginia. In addition, the Company recently completed its first standardbred racing meet which ran from April through July, 1998. The Company's next thoroughbred meet of twenty-five days will commence September 7, 1998 and run through October 11, 1998, and will include the inaugural Virginia Derby, a race for three year old thoroughbreds, on October 3. Then, the Company will conclude its first full year of live racing in November 1998 by hosting the Breeders Crown, one of the premier North American standardbred racing events. Both the Breeders Crown and the Virginia Derby are expected to be televised on national cable networks. Results of Operations The following table presents the major components from the Company's Consolidated Statements of Earnings (Loss) as a percent of total revenues:
Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 -------------- -------------- ------------- ------------ Revenues: Pari-mutuel and simulcasting commissions 86.5% 92.7% 90.6% 92.5% Other 13.5 7.3 9.4 7.5 -------------- -------------- ------------- ------------ Total revenues 100.0 100.0 100.0 100.0 Direct operating expenses: Purses, fees, and pari-mutuel taxes 42.8 44.5 43.8 45.8 Simulcast and other direct expenses 55.1 37.0 50.9 35.4 Depreciation and amortization 5.7 2.1 6.1 2.0 -------------- -------------- ------------- ------------ Total direct operating expenses 103.6 83.6 100.8 83.2 Selling, general, and administrative expenses 15.0 8.6 12.6 8.4 -------------- -------------- ------------- ------------ Total operating expenses 118.6 92.2 113.4 91.6 -------------- -------------- ------------- ------------ Earnings (loss) from operations (18.6) 7.8 (13.4) 8.4 Interest (expense) income (6.2) 7.3 (6.3) 3.4 -------------- -------------- ------------- ------------ Earnings (loss) before taxes (24.8%) 15.1% (19.7%) 11.8% ================ =============== ============= ============
Three months ended June 30, 1998 compared to three months ended June 30, 1997 Total revenues for the second quarter of 1998 amounted to $7.8 million, up $2.8 million (54%) from $5.0 million in the second quarter of 1997. Approximately $2.0 million of this increase was attributable to the operation of the Hampton and Brunswick Racing Centers ("Racing Centers") which were not opened until December 1997. An additional increase of $1.4 million resulted from revenues generated from the Company's inaugural live harness racing meet, which ran from April 24 to July 5, 1998. Excluding the impact of the new Racing Centers and the harness racing meet, total revenues decreased by about $.6 million, primarily reflecting the anticipated effect of the new Hampton Racing Center on the existing Chesapeake Racing Center, both of which attract customers from the Tidewater region. Although revenues from the Chesapeake facility decreased from the same period of the prior year, the combined operation of the Chesapeake and Hampton Racing Centers increased revenue in the Tidewater region by approximately $1.0 million. Total operating expenses of $9.2 million for the second quarter of 1998 increased $4.6 million (100%) from $4.6 million in the second quarter of 1997. The increase primarily resulted from both fixed and live racing variable costs associated with the operation of the Company's racetrack ($3.1 million), which opened in September 1997, and the operation of the Hampton and Brunswick Racing Centers ($1.9 million) in the second quarter of 1998 versus no operations in the same period of the prior year. Additionally, corporate overhead increased $400,000. Excluding the impact of the Track, the new Racing Centers, and increased corporate overhead, operating expenses decreased by about $.8 million compared to the second quarter of 1997. This reduction is primarily due to the reduction in handle at the Chesapeake Racing Center caused by the opening of the Hampton Racing Center as well as improved operating efficiencies. Due to the factors discussed above, the Company incurred a loss from operations of $1.4 million compared to earnings of $395,000 in the second quarter of 1997. All Racing Centers with the exception of Brunswick operated at a profit for the second quarter of 1998. Earnings at the Richmond and Chesapeake Racing Centers increased by approximately $150,000 compared to the same period of the prior year. In order to maximize profitability and efficiency at the Brunswick Racing Center, the facility changed its operating hours from seven days to five days a week effective April 27, 1998. This change brought the facility close to breakeven for the last two months of the second quarter. Other expenses increased to $482,000 in the second quarter of 1998 compared to income of $368,000 in the same period of the prior year. This change of $850,000 reflects the additional interest expense incurred from increased borrowings by the Company to complete construction of the Track and Hampton and Brunswick Racing Centers as well as the treatment of interest as an expense item in the second quarter of 1998 versus as a capitalizable cost of construction in the same period of the prior year. In addition, the Company earned interest on the invested initial public offering proceeds during the same period in 1997. Six months ended June 30, 1998 compared to six months ended June 30, 1997 Total revenues for the six months of 1998 amounted to $14.5 million, up $4.0 million (39%) from $10.5 million for the six months of 1997. Approximately $4.0 million of this increase was attributable to the operation of the Hampton and Brunswick Racing Centers which were not opened until December 1997. An additional increase of $1.4 million resulted from revenues generated from the Company's inaugural live harness racing meet, and was offset by $1.4 million in lower revenues at the Richmond and Chesapeake Racing Centers. Although revenues from the Chesapeake facility decreased from the same period of the prior year, the combined operation of the Chesapeake and Hampton Racing Centers increased revenue in the Tidewater region by approximately $1.9 million. Total operating expenses of $16.5 million for the six months of 1998 increased $6.9 million (72%) from $9.6 million in the first six months of 1997. The increase primarily resulted from both fixed and live racing variable costs associated with the operation of the Company's racetrack ($4.1 million), which opened in September 1997, and the operation of the Hampton and Brunswick Racing Centers ($4.0 million) in the second quarter of 1998 versus no operations in the same period of the prior year. Additionally, corporate overhead increased $500,000. Excluding the impact of the Track, the new Racing Centers, and increased corporate overhead, operating expenses decreased by about $1.7 million compared to the first half of 1997. This reduction is primarily due to the reduction in handle at the Chesapeake Racing Center caused by the opening of the Hampton Racing Center as well as improved operating efficiencies. Due to the factors discussed above, the Company incurred a loss from operations of $2.0 million compared to earnings of $873,000 in the first half of 1997. All Racing Centers with the exception of Brunswick operated at a profit for the first six months of 1998. Earnings from the Richmond and Chesapeake Racing Centers increased by approximately $200,000 compared to the same period of the prior year. Operations at the Brunswick facility have improved since the operating hours were reduced in late April. Other expenses increased to $926,000 in the first half of 1998 compared to income of $355,000 in the same period of the prior year. This change of $1.3 million reflects the additional interest expense incurred from increased borrowings by the Company to complete construction of the Track and Hampton and Brunswick Racing Centers as well as the treatment of interest as an expense item in 1998 versus as a capitalizable cost of construction in the same period of the prior year. In addition, the Company earned interest on the invested initial public offering proceeds during the same period in 1997. Liquidity and Capital Resources. The Company's primary sources of liquidity and capital resources have been proceeds from the initial public offering of the Company's stock, long-term debt, and stockholders loans. The Company believes that its cash on hand, cash generated from operations, a $1 million loan from a shareholder, and access to other capital and financial resources will be sufficient to cover its operating expenses and other cash requirements for 1998. Net cash used in operating activities totaled $1.3 million for the first six months of fiscal 1998, representing a $2.9 million decrease from $1.6 million provided by operating activities in the first half of the prior year. The decrease primarily reflected the Company's net loss of $2.9 million in the first half of 1998 versus net earnings of $902,000 in the same period of the prior year, offset by an increase in depreciation and amortization of $681,000. Net cash used in investing activities totaled $5.3 million for the six months of 1998 and included property and equipment primarily for the completion of the Track as well as the Hampton and Brunswick Racing Centers. Investing activities were comprised of $1.0 million in 1998 capital expenditures and approximately $4.3 million related to the payment of construction payables accrued at December 31, 1997. Net cash used in investing activities in the first half of 1997 totaled $17.2 million, and reflected higher capital expenditures related to constructing and preparing the Track for the inaugural live meet in September 1997. The Company anticipates that its capital spending in fiscal 1998 will approximate $1.3 million. Net cash provided by financing activities was $4.9 million for the six months of 1998. The Company borrowed $5 million on its line of credit facility and financed $287,000 of its insurance premiums. The Company used $4.3 million of its $5.0 million line of credit facility to pay construction payables related to the completion of the Track and Hampton and Brunswick Racing Centers as mentioned above. The Company is currently assessing the impact of the year 2000 on the processing of date-sensitive information by the Company's computerized information systems and products purchased by the Company. The Company believes that its internal information systems are either year 2000 compliant or will be so prior to the year 2000 without incurring material costs. There can be no assurance, however, that the Company will not experience unexpected costs and delays in achieving year 2000 compliance for its internal information systems and current products, which could result in a material adverse effect on the Company's future results of operations. Forward Looking Statements This report contains forward-looking statements that inherently involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors. Statements regarding results of operations, the opening of additional Racing Centers, the Company's expectations, hopes, intentions, beliefs, strategies,and certain other statements contained in this report are forward-looking statements and, as such, involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements, expressed or implied by such forward-looking statements. Such potential risks, uncertainties, and factors include, but are not limited to, acts by parties outside the control of the Company, including the Maryland Jockey Club and the Virginia Racing Commission, political trends, the effects of adverse general economic conditions, and governmental regulation, including licensing of additional Racing Centers. The forward-looking statements contained herein speak only as of the date of this report, and the Company assumes no obligation to update any such forward looking statements. Part II. Other Information Item 1. Legal Proceedings Norglass, Inc. Colonial Downs, L.P. (the "Partnership") is engaged in a contract dispute under the Construction Agreement, dated February 10, 1997 (the "Construction Contract"), between the Partnership and Norglass, Inc. ("Norglass") the general contractor engaged to manage the construction of Colonial Downs' racetrack. Pursuant to the terms of the Construction Contract, the Partnership filed a demand for arbitration with the American Arbitration Association ("AAA") against Norglass in November, 1997 to resolve its dispute. In the proceeding, the Partnership challenges the validity of Norglass' mechanic's liens for approximately $6.5 million and asserts a damage claim against Norglass in an amount not less than $4.4 million. James Leadbetter, who owns more than 5% of the Company's outstanding stock, is a shareholder of Norglass, Inc. Hearings before the arbitration panel are scheduled to commence prior to the end of the year. Maryland-Virginia Racing Circuit, Inc. On January 8, 1998, Colonial Downs filed a demand for arbitration against the Maryland-Virginia Racing Circuit, Inc. ("MVRC") before the Virginia Racing Commission (the "Commission"). In its arbitration demand, Colonial Downs challenged the management fee claimed to be due by MVRC pursuant to a Management and Consulting Agreement, dated as of April 22, 1996 (the "Consulting Agreement"), between Colonial Downs and MVRC. The arbitration is based upon the fact that the demanded compensation under the Consulting Agreement has failed to consider certain changed circumstances as well as the original intent of the parties. Although the Commission initially declined Colonial Downs' request that it arbitrate the dispute, the Commission appointed John H. Shenefield, the former chairman of the Commission in May, 1998, as the arbitrator to hear the dispute. The arbitration is proceeding and is expected to be resolved in the next 60 to 90 days. Item 4. Submission of Matter to Vote of Security Holders The Company held its annual meeting of shareholders on June 5, 1998. At the meeting, Stephen Peskoff and Patrick J. McKinley were re-elected as directors to serve for three years. They received the following votes:
Votes Cast For Votes Withheld -------------- -------------- Stephen Peskoff 12,033,610 55,630 Patrick J. McKinley 12,044,717 44,680
In addition, Mr. Robert M. "Sam" Hazelwood was nominated for consideration as a director by motion of a shareholder. He received 31,697 votes and was not elected. Messrs. Jeffrey P. Jacobs, Arnold W. Stansley, Robert H. Hughes, William J. Koslo, Jr., and David C. Grunenwald continue to serve as directors of the Company. No other matters were voted upon by the shareholders. Item 5. Other Information An affiliate of the Company's Chairman, President and Chief Executive Officer has agreed to loan the Company $1,000,000. The loan will have a term of one year and bear interest at 8.50% payable upon maturity. The principal and accrued interest are convertible into Class B common shares of the Company at a conversion price of $2.50 per share. Item 6. Exhibits and Reports on Form 8-K a. Exhibit: Exhibit Description Exhibit 27 Financial Data Schedule b. Reports on Form 8-K No reports on Form 8-K have been filed during the quarter for which this report is filed. 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. Colonial Downs Holdings, Inc. Date: August 14, 1998 /s/ Ian M. Stewart ------------------ Ian M. Stewart, Vice President, Chief Operating Officer and Chief Financial Officer EX-27 2 COLONIAL DOWNS FDS
5 This schedule contains summary financial information extracted from the Company's Consolidated Balance Sheets and Consolidated Statements of Earnings (Loss) and is qualified in its entirety by reference to such financial statements. 6-MOS DEC-31-1997 JUN-30-1998 1,629 0 400 0 0 5,383 62,301 1,326 67,504 13,422 0 0 0 72 33,970 67,504 0 14,540 0 16,493 (31) 0 957 (2,879) 0 (2,879) 0 0 0 (2,879) (0.40) (0.40)
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