The accompanying notes are an integral
part of these condensed consolidated financial statements.
The accompanying notes are an integral
part of these condensed consolidated financial statements.
The accompanying notes are an integral
part of these condensed consolidated financial statements.
Notes to Condensed Consolidated
Financial Statements
Note 1.
Basis of Presentation
The interim financial information
included herein is unaudited. However, the accompanying condensed consolidated financial statements include all adjustments of
a normal recurring nature which, in the opinion of management, are necessary to present fairly our condensed consolidated balance
sheets at October 31, 2017 and April 30, 2017, condensed consolidated statements of operations for the three and six months ended
October 31, 2017 and 2016, and condensed consolidated statements of cash flows for the six months ended October 31, 2017 and 2016.
Although we believe the disclosures in these financial statements are adequate to make the interim information presented not misleading,
certain information relating to our organization and footnote disclosures normally included in financial statements prepared in
accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted in this Form
10-Q pursuant to Securities and Exchange Commission (“SEC”) rules and regulations. These financial statements should
be read in conjunction with the audited consolidated financial statements for the year ended April 30, 2017 and the notes thereto
included in our Annual Report on Form 10-K. The results of operations for the three and six months ended October 31, 2017 are not
necessarily indicative of the results expected for the full year.
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
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period and disclosure
of contingent liabilities. On an ongoing basis, we evaluate our estimates, including those related to bad debts, investments, intangible
assets and goodwill, property, plant and equipment, income taxes, employment benefits and contingent liabilities. We base our 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 assets and liabilities that are not readily apparent
from other sources. Actual results could differ from those estimates.
Certain reclassifications have
been made to conform prior year financial information to the current period presentation. Those reclassifications did not impact
operating income, net income, working capital or stockholders’ equity.
Note 2.
Critical Accounting Policies
Revenue
Recognition
We record revenues from casino
operations. The retail value of food and beverage and other services furnished to guests without charge is included in gross revenue
and deducted as promotional allowances. Net revenues do not include the retail amount of food, beverage and other items provided
gratuitously to customers. These amounts are included in promotional allowances in the accompanying condensed consolidated statements
of operations. We record the redemption of coupons and points for cash as a reduction of revenue. The estimated retail value of
providing such promotional allowances is as follows:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 31, 2017
|
|
|
October 31, 2016
|
|
|
October 31, 2017
|
|
|
October 31, 2016
|
|
Food and beverage
|
|
$
|
1,566,112
|
|
|
$
|
1,692,025
|
|
|
$
|
3,093,257
|
|
|
$
|
3,413,598
|
|
Other
|
|
|
67,401
|
|
|
|
55,044
|
|
|
|
132,967
|
|
|
|
116,304
|
|
Promotional allowances
|
|
$
|
1,633,513
|
|
|
$
|
1,747,069
|
|
|
$
|
3,226,224
|
|
|
$
|
3,529,902
|
|
The estimated cost of providing such complimentary services
that is included in casino expense in the condensed consolidated statements of operations was as follows:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 31, 2017
|
|
|
October 31, 2016
|
|
|
October 31, 2017
|
|
|
October 31, 2016
|
|
Food and beverage
|
|
$
|
1,447,070
|
|
|
$
|
1,600,587
|
|
|
$
|
2,929,417
|
|
|
$
|
3,137,705
|
|
Other
|
|
|
64,349
|
|
|
|
53,004
|
|
|
|
127,708
|
|
|
|
111,249
|
|
Total cost of complimentary services
|
|
$
|
1,511,419
|
|
|
$
|
1,653,591
|
|
|
$
|
3,057,125
|
|
|
$
|
3,248,954
|
|
Fair Value
U.S. generally accepted accounting
principles defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date and establishes a three-level valuation hierarchy for disclosure
of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three
different levels depending on the observability of the inputs employed in the measurement. The three levels are as follows:
Level 1 – Observable inputs
such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities.
Level 2 – Other inputs
that are observable directly or indirectly such as quoted prices in markets that are not active, or inputs which are observable,
either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 –
Unobservable inputs for which there is little or no market data and for which we make our own assumptions about how market
participants would price the assets and liabilities.
The following describes the valuation
methodologies used by us to measure fair value:
Real estate held for sale is
recorded at fair value less selling costs.
Goodwill and indefinite lived
intangible assets are recorded at carrying value and tested for impairment annually, or more frequently, using projections of discounted
future cash flows.
Interest rate swaps are adjusted
on a recurring basis pursuant to accounting standards for fair value measurements. We categorize our interest rate swap as Level
2 for fair value measurement.
Concentrations of Credit Risk
Financial instruments that potentially
subject us to concentrations of credit risk are primarily notes receivable, cash and cash equivalents, accounts receivable and
payable, and long term debt. Management performs periodic evaluations of the collectability of these notes and accounts receivable.
Our cash deposits are held with large, well-known financial institutions, and, at times, such deposits may be in excess of the
federally insured limit. The recorded value of cash, accounts receivable and payable, approximate fair value based on their short
term nature; the recorded value of long term debt approximates fair value as interest rates approximate current market rates.
New Accounting Pronouncements
and Legislation Issued
In February 2016, the Financial
Accounting Standards Board (“FASB”) issued amended accounting guidance that changes the accounting for leases and requires
expanded disclosures about leasing activities. Under the new guidance, lessees will be required to recognize a right-of-use asset
and a lease liability, measured on a discounted basis, at the commencement date for all leases with terms greater than twelve months.
Lessor accounting will remain largely unchanged, other than certain targeted improvements intended to align lessor accounting with
the lessee accounting model and with the updated revenue recognition guidance. Lessees and lessors must apply a modified retrospective
transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in
the financial statements. The amended guidance is effective for annual reporting periods (including interim periods within those
periods) beginning after December 15, 2018, and early application is permitted. The Company is currently evaluating the impact
this guidance will have on its financial position and results of operations.
In May 2014, the FASB issued a new accounting standard for revenue recognition which requires entities
to recognize revenue when it transfers promised goods or services to customers, in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those goods or services. The new standard supersedes the existing accounting
guidance for revenue recognition, including industry-specific guidance, and amends certain accounting guidance for recognition
of gains and losses on the transfer of non-financial assets. For public companies, the new guidance is effective for annual reporting
periods (including interim periods within those periods) beginning after December 15, 2017. The Company plans to adopt this standard
in the first quarter of fiscal 2019. This standard will affect the Company’s accounting policy in relation to the non-discretionary
loyalty program transactions. Based on a clarification from the FASB, complementary revenue represents a consideration payable
to a customer and therefore is to be treated as a deduction to revenue at the time of the transaction and at the price of the complementary
being offered. The Company expects the majority of such amounts will offset casino revenues. The standard also changes the presentation
of promotional allowances to be shown as a direct reduction of gross revenues instead of being presented as a separate line on
the Statement of Operations. The Company also expects the accounting for our player program to be impacted, with possible changes
to the timing and/or classification of certain transactions within revenues and between revenues and operating expenses as we transition
from the immediate revenue/cost accrual model to the deferred revenue model. The quantitative effects of these changes have not
yet been determined and are still being analyzed. The Company is currently evaluating the impact this guidance will have on its
financial position and results of operations, and has not yet determined which adoption method it will elect.
In January 2017, the FASB issued
Accounting Standards Update No. 2017-04 ("ASU 2017-04") "Intangibles - Goodwill and Other (Topic 350): Simplifying
the Accounting for Goodwill Impairment." ASU 2017-04 removes the requirement to perform a hypothetical purchase price allocation
to measure goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds
its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for annual periods and interim periods
within those annual periods beginning after 15 December 2019, and early adoption is permitted. The Company adopted this guidance
in the first quarter of fiscal 2018 and with no material impact on its financial position or results of operations.
A variety of proposed or otherwise
potential accounting guidance is currently under study by standard-setting organizations and certain regulatory agencies. Due to
the tentative and preliminary nature of such proposed accounting guidance, the Company has not yet determined the effect, if any,
that the implementation of such proposed accounting guidance would have on its consolidated financial statements.
Note 3.
Restricted
Cash
As of October 31, 2017 and April
30, 2017, we maintained $2,043,806 and $1,994,312, respectively, in restricted cash, which consists of player-supported jackpot
funds for our Washington operations.
Note 4.
Notes
Receivable
G Investments, LLC
As of October 31, 2017 and April
30, 2017, we had a note receivable of $191,757 and $383,093, respectively, with no valuation allowance, due from G Investments,
LLC resulting from the sale of the Colorado Grande Casino on May 25, 2012. The initial amount was $2,300,000, requiring $40,000
monthly payments, bearing interest at 6% per annum through the amended maturity date of February of 2018, and is secured with the
assets of the Colorado Grande Casino, pledge of membership interest in G Investments, LLC (“GI”), and a personal guaranty
by GI’s principal.
Note 5.
Goodwill
and Intangible Assets
In connection with our acquisitions
of the Washington mini-casinos on May 12, 2009, July 23, 2010 and July 18, 2011, the South Dakota slot route on January 27, 2012,
and the Club Fortune Casino in Nevada on December 1, 2015, we have goodwill and intangible assets of $20,724,660, net of amortization
for intangible assets with finite lives.
The change in the carrying amount
of goodwill and other intangible assets for the six months ended October 31, 2017, is as follows:
|
|
Total
|
|
|
Goodwill
|
|
|
Other
Intangibles, net
|
|
Balance as of April 30, 2017
|
|
$
|
21,030,916
|
|
|
$
|
16,923,588
|
|
|
$
|
4,107,328
|
|
Current year amortization
|
|
|
(306,254
|
)
|
|
|
-
|
|
|
|
(306,254
|
)
|
Balance as of October 31, 2017
|
|
$
|
20,724,662
|
|
|
$
|
16,923,588
|
|
|
$
|
3,801,074
|
|
Goodwill and net intangibles assets
by segment as of October 31, 2017, are as follows:
|
|
Total
|
|
|
Goodwill
|
|
|
Other
Intangibles, net
|
|
Washington
|
|
$
|
15,999,097
|
|
|
$
|
14,092,154
|
|
|
$
|
1,906,943
|
|
South Dakota
|
|
|
196,429
|
|
|
|
-
|
|
|
|
196,429
|
|
Nevada
|
|
|
4,116,632
|
|
|
|
2,831,434
|
|
|
|
1,285,198
|
|
Corporate
|
|
|
412,504
|
|
|
|
-
|
|
|
|
412,504
|
|
Total
|
|
$
|
20,724,662
|
|
|
$
|
16,923,588
|
|
|
$
|
3,801,074
|
|
Intangible assets are generally
amortized on a straight line basis over the useful lives of the assets. State gaming registration and trade names are not amortizable.
A summary of intangible assets and accumulated amortization as of October 31, 2017, are as follows:
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
Customer relationships
|
|
$
|
8,673,321
|
|
|
$
|
(7,836,473
|
)
|
|
$
|
836,848
|
|
Non-compete agreements
|
|
|
1,379,000
|
|
|
|
(1,339,278
|
)
|
|
|
39,722
|
|
State gaming registration
|
|
|
412,504
|
|
|
|
-
|
|
|
|
412,504
|
|
Trade names
|
|
|
2,512,000
|
|
|
|
-
|
|
|
|
2,512,000
|
|
Total
|
|
$
|
12,976,825
|
|
|
$
|
(9,175,751
|
)
|
|
$
|
3,801,074
|
|
The remaining weighted average
useful life of acquired intangibles is 3.8 years for customer relationships and 1.1 years for non-compete agreements. The estimated
future annual amortization of intangible assets, which excludes trade names and state gaming registration, is as follows:
Period
|
|
Amount
|
|
November 2017-October 2018
|
|
$
|
355,896
|
|
November 2018-October 2019
|
|
|
159,484
|
|
November 2019-October 2020
|
|
|
117,143
|
|
November 2020-October 2021
|
|
|
117,143
|
|
Thereafter
|
|
|
126,904
|
|
Total
|
|
$
|
876,570
|
|
Note 6.
Property and Equipment
Property and equipment at October 31, 2017 and April 30, 2017,
consist of the following:
|
|
|
|
|
|
|
|
Estimated
|
|
|
October 31,
|
|
|
April 30,
|
|
|
Service Life
|
|
|
2017
|
|
|
2017
|
|
|
in Years
|
Leasehold improvements
|
|
$
|
1,686,673
|
|
|
$
|
1,556,824
|
|
|
7-20
|
Gaming equipment
|
|
|
5,450,022
|
|
|
|
5,300,898
|
|
|
3-5
|
Furniture and office equipment
|
|
|
4,653,591
|
|
|
|
4,506,639
|
|
|
3-7
|
Building and improvements
|
|
|
7,786,338
|
|
|
|
7,762,201
|
|
|
15-30
|
Land
|
|
|
2,387,750
|
|
|
|
2,387,750
|
|
|
|
Construction in progress
|
|
|
142,066
|
|
|
|
80,023
|
|
|
|
|
|
|
22,106,440
|
|
|
|
21,594,335
|
|
|
|
Less accumulated depreciation
|
|
|
(8,592,914
|
)
|
|
|
(7,635,620
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
13,513,526
|
|
|
$
|
13,958,715
|
|
|
|
Note 7.
Long-Term Debt
Our long-term financing obligations are as follows:
|
|
October 31,
|
|
|
April 30,
|
|
|
|
2017
|
|
|
2017
|
|
$23.0 million reducing revolving credit agreement, LIBOR plus an Applicable Margin, $625,000 quarterly reductions beginning January 31, 2016 through November 30, 2020, and the remaining principal due on the maturity date of November 30, 2020.
|
|
$
|
10,410,310
|
|
|
$
|
12,061,411
|
|
Less: current portion
|
|
|
-
|
|
|
|
-
|
|
Total long-term financing obligations
|
|
$
|
10,410,310
|
|
|
$
|
12,061,411
|
|
On November 30, 2015, the
Company amended its existing credit agreement with Mutual of Omaha Bank to increase the lending commitment to $23 million.
The Amended and Restated Credit Agreement (“Credit Facility”) matures on November 30, 2020, and is secured by
liens on substantially all of the real and personal property of the Company and its subsidiaries. The interest rate on the borrowing
is based on LIBOR plus an Applicable Margin, determined quarterly beginning April 1, 2016, based on the total leverage ratio for
the trailing twelve months. The interest rate on the balance as of October 31, 2017, is 3.74%. In addition, the Company was required
to fix the interest rate on at least 50% of the credit facility through a swap agreement.
As of October 31, 2017, principal
reductions due on the Credit Facility are as follows:
November 1, 2017 – October 31, 2018
|
|
$
|
-
|
|
November 1, 2018 – October 31, 2019
|
|
|
-
|
|
November 1, 2019 – October 31, 2020
|
|
|
-
|
|
November 1, 2020 – November 30, 2020
|
|
|
10,600,000
|
|
Total payments
|
|
|
10,600,000
|
|
Unamortized debt discount
|
|
|
(189,690
|
)
|
Total long-term debt
|
|
$
|
10,410,310
|
|
The unamortized debt discount above
consists of debt costs paid directly to the lender. The discount is amortized using the effective interest method over the period
of the Credit Facility through interest expense.
During the quarter, we paid $1.7
million to reduce the outstanding balance of the Credit Facility. As of October 31, 2017, we have $7.3 million available to borrow
per the Credit Agreement.
The Credit Facility contains
customary covenants for a facility of this nature, including, but not limited to, covenants requiring the preservation and maintenance
of the Company’s assets and covenants restricting our ability to merge, transfer ownership, incur additional indebtedness,
encumber assets and make certain investments. The Credit Facility also contains covenants requiring the Company to maintain
certain financial ratios including a maximum total leverage ratio ranging from 3.00 to 1.00 through January 31, 2017, 2.75 to 1.00
from February 1, 2017 through January 31, 2018, and 2.50 to 1.00 from February 1, 2018 until maturity; and lease adjusted fixed
charge coverage ratio of no less than 1.15 to 1.00. We are in compliance with the covenant requirements of the Credit Facility
as of October 31, 2017.
Note 8.
Interest Rate Swap
We are required by the Credit
Facility to have a secured interest rate swap for at least 50% of the Credit Facility commitment. On December 28, 2015, the Company
entered into a swap transaction with Mutual of Omaha Bank (“MOOB”), which has a calculation period as of the tenth
day of each month through the maturity date of the Credit Facility. As of October 31, 2017, the Company had one outstanding interest
rate swap with MOOB with a notional amount of $9,000,000 at a swap rate of 1.77%, which as of October 31, 2017, effectively converts
$9,000,000 of our floating-rate debt to a synthetic fixed rate of 4.27%. Under the terms of the swap agreement, the Company pays
a fixed rate of 1.77% and receives variable rate based on one-month LIBOR as of the first day of each floating-rate calculation
period. Under the International Swap Dealers Association, Inc. (“ISDA”) confirmation, the floating index as of October
31, 2017 is set at 1.235%.
The Company did not designate
the interest rate swap as a cash flow hedge and the interest rate swap did not qualify for hedge accounting under ASC Topic 815.
Changes in our interest rate swap fair value are recorded in our condensed consolidated statements of operations. Each quarter,
the Company receives fair value statements from the counterparty, MOOB. The fair value of the interest rate swap is determined
using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivative.
This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based
inputs, including forward interest rate curves. To comply with the provisions of ASC Topic 820, Fair Value Measurements and Disclosures,
the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective
counterparty’s nonperformance risk in the fair value measurements. As a result of our evaluation of our interest rate swap
as of October 31, 2017, we recorded a $45,422 and $41,458 increase in our interest rate swap fair value for the three and six months
ended October 31, 2017, respectively. As of October 31, 2017 and April 30, 2017, our interest rate swap fair value is a $5,111
asset and $36,346 liability, respectively, which is included in other assets as of October 31, 2017 and other long-term liabilities
as of April 30, 2017 on the condensed consolidated balance sheets.
Note 9.
Equity
Transactions and Stock Option Plans
We have obligations under two employee
stock plans: (1) the 2009 Equity Incentive Plan (the “2009 Plan”), and (2) the 2010 Employee Stock Purchase Plan, as
amended (the “2010 Plan”).
The 2009 Plan
On April 14, 2009, our shareholders
approved the 2009 Plan providing for the granting of awards to our directors, officers, employees and independent contractors.
The number of common stock shares reserved for issuance under the 2009 Plan is 1,750,000 shares. The 2009 Plan is administered
by the Compensation Committee (the “Committee”) of the Board of Directors. The Committee has complete discretion under
the plan regarding the vesting and service requirements, exercise price and other conditions. Under the 2009 Plan, the Committee
is authorized to grant the following types of awards:
|
·
|
Stock Options including Incentive Stock Options (“ISO”),
|
|
·
|
Options not intended to qualify as ISOs,
|
|
·
|
Stock Appreciation Rights, and
|
|
·
|
Restricted Stock Grants.
|
Our practice has been to issue
new or treasury shares upon the exercise of stock options. Stock option rights granted under the 2009 Plan generally have 5 or
10 year terms and vest in two or three equal annual installments, with some options grants providing for immediate vesting for
a portion of the grant.
In October of 2017, the Committee
granted 26,430 shares of stock to the board of directors as $10,000 per director in annual compensation paid in the form of a
stock grant with immediate vesting. The Committee also granted 57,000 shares of restricted stock in October 2017 to certain management
to vest over three years. As of October 31, 2017, there was $150,038 of unamortized compensation cost related to stock grants,
which is expected to be recognized over approximately 3.0 years. A summary of stock grant activity under our share-based payment
plan for the six months ended October 31, 2017 is presented below:
For the Six Months Ended October 31, 2017
|
Grants
|
|
Shares
|
|
|
Weighted
Average Grant
Date Value
(per share)
|
|
Unvested at beginning of year
|
|
|
20,400
|
|
|
$
|
1.98
|
|
Issued
|
|
|
83,430
|
|
|
$
|
2.27
|
|
Vested
|
|
|
(34,630
|
)
|
|
$
|
2.19
|
|
Forfeited
|
|
|
-
|
|
|
|
|
|
Unvested at end of year
|
|
|
69,200
|
|
|
$
|
2.23
|
|
A summary of stock option activity
under our share-based payment plan for the six months ended October 31, 2017 is presented below:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Price
|
|
|
Term (Year)
|
|
|
Value
|
|
Outstanding at April 30, 2017
|
|
|
693,500
|
|
|
$
|
1.10
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(7,500
|
)
|
|
$
|
0.82
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at October 31, 2017
|
|
|
686,000
|
|
|
$
|
1.10
|
|
|
|
4.8
|
|
|
$
|
727,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at October 31, 2017
|
|
|
686,000
|
|
|
$
|
1.10
|
|
|
|
4.8
|
|
|
$
|
727,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for grant at October 31, 2017
|
|
|
507,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation cost for stock options
granted is based on the fair value of each award, measured by applying the Black-Scholes model. As of October 31, 2017, there was
no unamortized compensation cost related to stock options.
Treasury Stock
In July 2016, our board of directors
approved a $2.0 million stock repurchase program to purchase our common stock in the open market or in privately negotiated transactions
from time to time, in compliance with Rule 10b-18 of the Securities and Exchange Act of 1934, subject to market conditions,
applicable legal requirements, loan covenants and other factors. The repurchase plan does not obligate the Company to acquire any
specified number or value of common stock. During the three months ended October 31, 2017, the Company repurchased 32,657
shares at a weighted average price of $2.32 per share, costing $76,963 (including commissions). During the six months ended October 31,
2017, the Company repurchased 788,301 shares at a weighted average price of $2.16 per share, costing $1,701,597 (including commissions).
As of October 31, 2017, $1.7 million remains available under the share repurchase authorization.
Warrants
On November 7, 2011, we closed
on the sale of 2,625,652 shares of our common stock to certain investors through a registered direct offering. In addition, for
each share of our common stock purchased by an investor, we issued to such investor a warrant to purchase 0.75 shares of our common
stock. The warrants had an exercise price of $2.18 per share and were exercisable for five years from the initial exercise date.
During the first week of May 2017, warrants were exercised in cashless transactions and the Company issued 36,689 shares as a result.
The remaining warrants expired on May 7, 2017.
Note 10.
Computation
of Earnings Per Share
The following is presented as a
reconciliation of the numerators and denominators of basic and diluted earnings per share computations:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 31,
|
|
|
October 31,
|
|
|
October 31,
|
|
|
October 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
638,977
|
|
|
$
|
150,022
|
|
|
$
|
762,978
|
|
|
$
|
50,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of common shares outstanding
|
|
|
16,831,048
|
|
|
|
17,770,013
|
|
|
|
17,125,734
|
|
|
|
17,765,367
|
|
Dilutive effect of common stock options and warrants
|
|
|
364,894
|
|
|
|
292,842
|
|
|
|
362,137
|
|
|
|
297,036
|
|
Diluted weighted average number of common shares outstanding
|
|
|
17,195,942
|
|
|
|
18,062,855
|
|
|
|
17,487,871
|
|
|
|
18,062,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share - basic and diluted
|
|
$
|
0.04
|
|
|
$
|
0.01
|
|
|
$
|
0.04
|
|
|
$
|
0.00
|
|
Note 11.
Commitments
and Contingencies
We are party to contracts in the
ordinary course of business, including leases for real property and operating leases for equipment.
The expected remaining future annual
minimum lease payments as of October 31, 2017, are as follows:
Period
|
|
Total
|
|
November 2017-October 2018
|
|
$
|
3,139,160
|
|
November 2018-October 2019
|
|
|
2,838,539
|
|
November 2019-October 2020
|
|
|
2,520,787
|
|
November 2020-October 2021
|
|
|
2,248,294
|
|
Thereafter
|
|
|
935,630
|
|
|
|
$
|
11,682,410
|
|
We continue to pursue additional
development opportunities that may require, individually and in the aggregate, significant commitments of capital, extensions of
credit, up-front payments to third parties and guarantees by us of third-party debt.
We indemnified our officers and
directors for certain events or occurrences while the director or officer is or was serving at our request in such capacity. The
maximum potential amount of future payments we could be required to make under these indemnification obligations is unlimited;
however, we have a Directors and Officers Liability Insurance policy that limits our exposure and enables us to recover a portion
of any future amounts paid, provided that such insurance policy provides coverage.
Note 12. Income Taxes
For the three months ended October
31, 2017 and 2016, our effective tax rates were 29% and 32%, respectively. For the six months ended October 31, 2017 and 2016,
our effective tax rates were 30% and 31%, respectively. The difference between the federal statutory rate of 34% and the
2018 fiscal year to date’s effective tax rate is primarily due to utilization of general business credits.
At October 31, 2017, we have $1.2 million in net deferred tax assets, which is primarily a result of the
$6.3 million (gross, not tax effected) amount in receivables that have been fully reserved for book purposes.
We
believe that it is more-likely-than-not that the deferred tax assets will be realized prior to any expiration and therefore we
have not applied a valuation allowance on our deferred tax assets.
We filed income tax returns in
the United States federal jurisdiction. No jurisdiction is currently examining our tax filings for any tax years. All of the Company’s
tax positions are considered more likely than not to be sustained upon an IRS examination.
Note 13.
Segment
Reporting
We have three business segments:
(i) Washington, (ii) South Dakota and (iii) Nevada, as well as the Company’s corporate location. For the three months ended
October 31, 2017, the Washington segment consists of the Washington mini-casinos, the South Dakota segment consists of our slot
route operation in South Dakota, the Nevada segment consists of Club Fortune casino and the Corporate column includes the vacant
land in Colorado and its taxes and maintenance expenses. The Corporate column also includes corporate-related items, results of
insignificant operations, and income and expenses not allocated to other reportable segments.
Summarized financial information for our reportable
segments is shown in the following table:
|
|
As of, and for the Three Months Ended, October 31, 2017
|
|
|
|
Washington
|
|
|
South Dakota
|
|
|
Nevada
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
13,902,500
|
|
|
$
|
2,199,901
|
|
|
$
|
3,377,822
|
|
|
$
|
-
|
|
|
$
|
19,480,223
|
|
Casino and food and beverage expense
|
|
|
7,389,151
|
|
|
|
1,878,215
|
|
|
|
2,047,861
|
|
|
|
-
|
|
|
|
11,315,227
|
|
Marketing, administrative and corporate expense
|
|
|
4,320,397
|
|
|
|
118,972
|
|
|
|
856,394
|
|
|
|
691,976
|
|
|
|
5,987,739
|
|
Facility and other expenses
|
|
|
463,510
|
|
|
|
22,371
|
|
|
|
84,296
|
|
|
|
-
|
|
|
|
570,177
|
|
Depreciation and amortization
|
|
|
113,897
|
|
|
|
104,080
|
|
|
|
373,498
|
|
|
|
6,673
|
|
|
|
598,148
|
|
Operating income (loss)
|
|
|
1,609,959
|
|
|
|
76,384
|
|
|
|
15,773
|
|
|
|
(698,649
|
)
|
|
|
1,003,467
|
|
Assets
|
|
|
27,898,267
|
|
|
|
1,830,836
|
|
|
|
16,461,792
|
|
|
|
4,355,118
|
|
|
|
50,546,013
|
|
Purchase of property and equipment
|
|
|
251,426
|
|
|
|
-
|
|
|
|
46,546
|
|
|
|
10,026
|
|
|
|
307,998
|
|
|
|
As of, and for the Three Months Ended, October 31, 2016
|
|
|
|
Washington
|
|
|
South Dakota
|
|
|
Nevada
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
13,194,471
|
|
|
$
|
2,220,368
|
|
|
$
|
3,062,047
|
|
|
$
|
-
|
|
|
$
|
18,476,886
|
|
Casino and food and beverage expense
|
|
|
7,082,474
|
|
|
|
1,859,135
|
|
|
|
1,984,086
|
|
|
|
-
|
|
|
|
10,925,695
|
|
Marketing, administrative and corporate expense
|
|
|
4,115,482
|
|
|
|
114,710
|
|
|
|
933,684
|
|
|
|
724,136
|
|
|
|
5,888,012
|
|
Facility and other expenses
|
|
|
486,482
|
|
|
|
33,658
|
|
|
|
79,016
|
|
|
|
-
|
|
|
|
599,156
|
|
Depreciation and amortization
|
|
|
231,443
|
|
|
|
156,444
|
|
|
|
379,780
|
|
|
|
5,843
|
|
|
|
773,510
|
|
Operating income (loss)
|
|
|
1,278,380
|
|
|
|
56,127
|
|
|
|
(319,561
|
)
|
|
|
(729,979
|
)
|
|
|
284,967
|
|
Assets
|
|
|
27,524,144
|
|
|
|
3,254,896
|
|
|
|
18,255,491
|
|
|
|
6,310,327
|
|
|
|
55,344,858
|
|
Purchase of property and equipment
|
|
|
49,582
|
|
|
|
21,463
|
|
|
|
89,561
|
|
|
|
7,154
|
|
|
|
167,760
|
|
|
|
As of, and for the Six Months Ended, October 31, 2017
|
|
|
|
Washington
|
|
|
South Dakota
|
|
|
Nevada
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
27,092,442
|
|
|
$
|
4,072,839
|
|
|
$
|
6,803,466
|
|
|
$
|
-
|
|
|
$
|
37,968,747
|
|
Casino and food and beverage expense
|
|
|
14,702,652
|
|
|
|
3,523,306
|
|
|
|
4,084,651
|
|
|
|
-
|
|
|
|
22,310,609
|
|
Marketing, administrative and corporate expense
|
|
|
8,626,427
|
|
|
|
233,322
|
|
|
|
1,722,736
|
|
|
|
1,331,361
|
|
|
|
11,913,846
|
|
Facility and other expenses
|
|
|
886,400
|
|
|
|
45,118
|
|
|
|
157,910
|
|
|
|
-
|
|
|
|
1,089,428
|
|
Depreciation and amortization
|
|
|
346,879
|
|
|
|
202,365
|
|
|
|
746,995
|
|
|
|
13,345
|
|
|
|
1,309,584
|
|
Operating income (loss)
|
|
|
2,524,498
|
|
|
|
68,849
|
|
|
|
91,174
|
|
|
|
(1,344,706
|
)
|
|
|
1,339,815
|
|
Assets
|
|
|
27,898,267
|
|
|
|
1,830,836
|
|
|
|
16,461,792
|
|
|
|
4,355,118
|
|
|
|
50,546,013
|
|
Purchase of property and equipment
|
|
|
357,840
|
|
|
|
107,033
|
|
|
|
78,170
|
|
|
|
22,562
|
|
|
|
565,605
|
|
|
|
As of, and for the Six Months Ended, October 31, 2016
|
|
|
|
Washington
|
|
|
South Dakota
|
|
|
Nevada
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
26,264,288
|
|
|
$
|
4,149,231
|
|
|
$
|
6,293,145
|
|
|
$
|
-
|
|
|
$
|
36,706,664
|
|
Casino and food and beverage expense
|
|
|
14,220,502
|
|
|
|
3,535,487
|
|
|
|
3,889,146
|
|
|
|
-
|
|
|
|
21,645,135
|
|
Marketing, administrative and corporate expense
|
|
|
8,161,153
|
|
|
|
235,980
|
|
|
|
2,037,023
|
|
|
|
1,520,869
|
|
|
|
11,955,025
|
|
Facility and other expenses
|
|
|
960,930
|
|
|
|
69,610
|
|
|
|
156,889
|
|
|
|
-
|
|
|
|
1,187,429
|
|
Depreciation and amortization
|
|
|
486,623
|
|
|
|
312,657
|
|
|
|
738,662
|
|
|
|
12,080
|
|
|
|
1,550,022
|
|
Operating income (loss)
|
|
|
2,434,870
|
|
|
|
(13,168
|
)
|
|
|
(533,616
|
)
|
|
|
(1,532,949
|
)
|
|
|
355,137
|
|
Assets
|
|
|
27,524,144
|
|
|
|
3,254,896
|
|
|
|
18,255,491
|
|
|
|
6,310,327
|
|
|
|
55,344,858
|
|
Purchase of property and equipment
|
|
|
239,100
|
|
|
|
21,463
|
|
|
|
507,126
|
|
|
|
55,188
|
|
|
|
822,877
|
|