Leasing News

CDC IXIS Capital Markets North America (CDC IXIS CMNA) announces it has selected Portfolio Financial Servicing Company (PFSC) to provide complete portfolio management and servicing for its lease and loan portfolio. Headquartered in New York, CDC IXIS Capital Markets North America is an indirect subsidiary of CDC IXIS, a fully licensed French bank with over €231 billion in balance sheet assets and a member of one of the largest financial groups in France. CDC IXIS CMNA finances and securitizes equipment lease and loan transactions of $1 million to $500 million.

“We are very pleased to partner with PFSC, the industry’s leader in portfolio management and commercial lease and loan servicing,” said David Arzi, Director at CDC IXIS CMNA We believe our industry expertise, available capital and cost of funds coupled with PFSC’s capabilities, reputation and experience creates a formidable and dynamic industry force. The complexity level of our transaction structures dictate that we partner with a portfolio manager and servicer that has the sophisticated systems and the flexibility and detail in reporting that our investments require.”

Portfolio Financial Servicing Company’s President, Jerry Hudspeth, commented, “PFSC is very pleased to establish a business partnership with CDC IXIS CMNA. CDC’s experience, quality, and commitment to their clients, lessors and vendors will create a successful business model for the industry to emulate.”

About PFSC

PFSC is the largest independent commercial lease and loan servicing company

in the U.S. and is headquartered in Portland, Oregon. PFSC provides primary/master servicing, backup/successor servicing, and consulting for leasing portfolios. It currently services over $2.0 billion in assets. More information can be found at www.pfsc.com.

Jerry Hudspeth, PFSC, (800) 547-4905

jhudspeth@pfsc.com

David Arzi , CDC

IXIS Capital Markets North America, (212) 891-5824

d.arzi@cdcixis-cmna.com

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CLP Foundation Looks for former GE Capital Colonial Pacific CLP’s

The CLP Foundation would like readers to assist us in locating former GE Capital Colonial Pacific Leasing CLP's.

The following are on our missing list:

Carri Bell, CLP

Jodi Chrisman, CLP

Meloney Clark, CLP

Craig Cochran, CLP

Paul Jacobellis, CLP

Jeff Hollister, CLP

Curt Lysne, CLP

Phil McGuigan, CLP

Gary Parker, CLP

Any information would be greatly appreciated.

Thank you,

Cindy

Cindy Spurdle

Executive Director

CLP Foundation

Cindy@clpfoundation.org

PH: 610/687-0213

FAX:610/687-4111

(Several are on our mailing list, but I assume you are also looking for street addresses.

If you know the address or e-mail to any of these CLP’s, please contact Cindy Spurdle directly. editor )

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Tax on Discount Leases When Title is Passed

My experience has been that borrowing on a nonrecourse basis does NOT result

in taxable income. If it did, there would be no leveraged leases! On the

other hand, if a lessor wants to accelerate income, then it should SELL the

rents, not borrow.

Just to be clear, one does not "sell the stream on a non recourse basis".

You sell or you borrow. So be careful that your document is a nonrecourse

loan and not a sales and assignment without recourse.

The sales tax implications should be similar, although one has to be very

careful since sales tax laws and regulations are sometimes not logical and

form tends to be extremely important.

Mark

___________________________

Mark S. Bazrod, President

LPI Software Funding Group, Inc.

Four Glenhardie Corporate Center

1255 Drummers Lane, Wayne, PA. 19087

PHONE: 610.341.6100 FAX: 610.687.4215

E-MAIL: msb@lpilease.com WEB SITE: www.lpilease.com

Nearly Half Of U.S. Suffers Drought

WASHINGTON (AP) - Persistent and worsening drought has spread to nearly half the contiguous United States, the government reported Wednesday.

The National Climatic Data Center said that as of the end of July, 49 percent of the 48 contiguous states were affected by moderate to extreme drought.

Areas of extreme drought stretched from the Southwest to Montana and Nebraska and from Georgia to Virginia, the center reported.

The greatest area of drought coverage to date occurred in July 1934, when moderate to extreme drought covered 80 percent of the contiguous United States.

There was significantly below average rainfall in 27 states in July, according to the Center, a division of the National Oceanic and Atmospheric Administration.

New York had its second driest July on record, and it was the third driest July in New Hampshire and Colorado, the center said.

``Drier-than-average conditions have persisted in many areas for several seasons - in some parts of the country for several years,'' the agency said.

The past 12 months were the driest August through July on record in Georgia, South Carolina, North Carolina, Virginia, Colorado and Wyoming. They were the second driest in Arizona, Nevada and Delaware.

Parts of the Southeast and West have been in various stages of drought since 1998.

The Agriculture Department said more than 75 percent of range and pastures were classified as poor to very poor in five western states - Nebraska, Colorado, California, Wyoming and South Dakota - in early August; more than 50 percent had that classification in 13 other states.

The average temperature in July for the contiguous United States was 76.4 degrees Fahrenheit, 2.2 degrees above average for the period 1895-2001. That made it the fifth warmest July since national records began in 1895.

Worldwide, the average temperature for combined land and ocean surfaces during July was 0.9 degree Fahrenheit above the 1880-2001 average, the second warmest July since 1880. The warmest globally-averaged temperature for July occurred four years ago, also during an El Nino episode in the Pacific Ocean.

On the Net:

National Climatic Data Center: http://lwf.ncdc.noaa.gov/oa/ ncdc.html

Record heat bakes Bay State

By Trudy Tynan

SPRINGFIELD, Mass. (AP) Maryanne Carpentier usually eats her lunch outdoors on sunny summer days.

Not Wednesday.

''I normally like the heat, but this is too much,'' said Carpentier, an office worker, as she grabbed her book and sandwich and abandoned her shady lunchtime perch in a Springfield plaza to eat at her desk in her air conditioned office to beat the 97 degree heat.

With 100-degree temperatures forecast and high humidity making it feel more like 105, the National Weather Service issued a heat advisory for most of Massachusetts on Wednesday and warned people to avoid strenuous outdoor exercise.

In Boston, the mercury soared to 101 degrees at Logan International Airport, exceeding the record of 97 degrees set on Aug. 14, 1947, according to the weather service. It was 97 in Fitchburg, 92 in Worcester and 91 in Pittsfield. Cape Cod was the coolest spot in the state, with temperatures mostly in the 80s.

The heat wasn't the only bad news.

As the heat wave stretched into a fourth day, the federal Environmental Protection Agency warned the combination of heat and pollution made the air unhealthy and suggested that people with health problems stay indoors.

The agency responsible for the region's power grid asked customers to voluntarily conserve electricity.

By mid-afternoon power demand had reached a new high of 25,700 megawatts, exceeding the record of 25,033 megawatts set a day earlier, according to preliminary numbers provided by ISO New England spokeswoman Erin O'Brien.

Until this week, the high had been 24,967 megawatts, set on Aug. 9, 2001.

''We are continuing to meet the demand on the system,'' she said, but the power grid was dipping into its power reserves by early afternoon.

At the Berkshire Visitors Bureau, the switchboard lit up with mountain vacationers who had suddenly developed a desire to find a place to swim.

Bureau president William Wilson was ready with a list of list of lakes. Still, he loyally pointed out that one of the coolest spots you could find outdoors Wednesday was a shady trail high in the mountains.

New England gets one or two days each summer that are hot and sticky enough for the weather service to issue a heat advisory, said Charles Foley, a meteorologist at the service's Taunton office.

When the combination of heat and humidity makes it feel like 105 degrees ''it's hot enough to make anyone suffer,'' Foley said.

And there is no sign of a break in the heat through the weekend, he said.

Still, the weather has been worse in August.

The all-time heat record for the month was set in 1975 when the mercury reach 102 degrees in Boston. The longest heat wave was in 1944 when the temperature stayed above 90 degrees for eight straight days.

In 1955, back-to-back August hurricanes caused flooding across the state.

(Critics about Fleming having an Eastern Leasing Association

meeting in Santa Fe, Mexico---look again----

Thusday, Santa Fe, New Mexico Aug 22Partly Cloudy

81°/51° 10 % humidity-- slight wind, feels five degrees cooler.

(I’m not bragging about California, high 90’s, was over 100 the week before.

Very dry, fire danger, but certain parts of the state are “very nice.” editor )

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American Airlines Don Carty Memo to Employees

---A SPECIAL MESSAGE FROM CHAIRMAN DON CARTY---

Dear Colleague,

As we've discussed many times, we are in the midst of a comprehensive review of everything we do at American in an effort to sharply improve our current and future operating climate. To that end, we have rolled out over many months, and again today, a whole series of changes.

Some are structural and fundamental change - that is, they reflect long-term, lasting modifications to our business.

Others are more short-term and responsive - surgical reactions to our serious financial situation that are intended to help improve our immediate business outlook.

We have previously announced a number of initiatives that fall into both categories - retiring seven of 14 fleet types, de-peaking the Chicago hub, changing in-flight product features, new approaches to distribution and the increasing introduction of automation.

Regarding today's announcements, clearly the DFW de-peaking, B777 and B767- 300 reconfigurations and Fokker 100 retirements are structural and fundamental change - consistent with our goals of greater simplification, efficiency, productivity, and cost reduction.

On the other hand, our 9 percent fall capacity reduction is more short-term and responsive. It certainly helps address our current financial situation, especially given the continued sluggish recovery of the U.S. economy and the weaker-than-expected demand in business travel. The early retirement of our remaining nine TWA 767s provide an immediate way we can draw down capacity. We will reassess our flying for the spring and summer months of 2003, but you should know that some flying may not return until we see unmistakable signs of an economic recovery.

I have attached a page that discusses each of these changes in more detail. You can also log onto Jetnet for a more detailed list of the changes we are making in each of your departments. I would encourage you to do so. Take the time to understand where we are going, and talk to your managers, supervisors or department heads about how it all ties together.

An unfortunate and regrettable result of both the structural and short-term initiatives, especially the capacity and fleet changes, is that there will be a need for fewer people to operate the airline, both in the short- and long-term

The reductions we make between now and March 2003 will reduce the workforce by about 7,000 jobs overall and will vary by location and workgroup, depending on what we do with the fall schedule. Once your department heads evaluate that schedule, they can get specific information to you about how your workgroup may be affected.

I know these reductions are painful to everyone involved - as they are to me - and that is precisely why we have worked hard to ensure that our people are treated fairly.

As we make decisions about specific locations and workgroups, I intend to honor my personal pledge to you to make voluntary options as available as possible. We have already implemented age 60 retirement, and we have fashioned voluntary packages that will be made available to managers to use as appropriate, according to locations and workgroups affected. Each workgroup will be affected differently, and your own department managers will be outlining those impacts shortly.

As I have said many times, there are no magic wands we can wave to solve our problems. The bankruptcy this week of US Airways, the recent failure of other airlines and the hiring of bankruptcy attorneys at one of our major competitors underscore the precarious position our industry faces. They also spotlight the need for just the kind of fundamental changes we are announcing today and the need for further change in the months ahead.

And thank you for all you have done and continue to do for American. Your professionalism and spirit are a constant, especially in uncertain times, and are very much appeciated.

ELA Municipal Leasing Forum

Expanding Leasing Opportunities in State and Local Government

September 25-27 ~ Westin Tabor Center ~ Denver, CO

http://www.elaonline.com/events/2002/municipal/ELA2002municipal.pdf

Benefits of Attending:

Review the basics of the tax-exempt leasing market

Explore the differences between commercial and municipal leases, including residual value and appropriations issues

Expand your understanding of tax-exempt municipal leasing marketplace trends

Participate in a free exchange among seasoned lessors

Gain new insights into this unique marketplace

Who Should Attend?

The Municipal Leasing Forum helps to expand the understanding of trends in the municipal leasing marketplace, and fosters exploration of public sector equipment leasing transactions. From experienced municipal lessors to those new to the market, industry representatives attend the ELA Municipal Leasing Forum to augment basic knowledge while acquiring insights into new business development opportunities.

Sponsorship Opportunities

Sponsoring events and functions at ELA meetings provides excellent exposure for your company. To become a sponsor, please contact Sally Maloney smaloney@elamail.com or (703) 516-8362.

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From boom ... to bust

Silicon Valley's venture capitalists have traded in their soapbox-derby dueling for an even bigger test: helping their portfolio companies survive

By Chris Gaither, Boston Globe Staff

MENLO PARK, Calif. - Once a year during the height of the Internet run-up, venture capitalists would nestle into custom built soapbox derby cars here and zip down Sand Hill Road, which is to their industry what Wall Street is to banking.

The annual Sand Hill Challenge, started as a lark by a local restaurateur in 1997, raised hundreds of thousands of dollars for local charities. But more important to the participants, the event gave very rich men a great excuse to spend money in pursuit of besting their peers from rival venture capital firms.

The event reflected the heady exuberance of the times. Firms and the companies they did business with recruited industrial designers to build their racers. Ringers were brought in to push the cars - former San Francisco 49ers football star Roger Craig, a world champion soapbox derby racer, even a US Olympic bobsled team.

But just like some of the more unfortunate derby cars, the economy crashed. With its organizers unable to raise the $75,000 in sponsorship fees, this June the Sand Hill Challenge perished alongside so many of the misguided start-ups the firms had funded.

Now, there is a new Sand Hill challenge: trying guide portfolio companies through the worst environment for start-ups in decades.

Venture firms pumped $1.97 billion into Silicon Valley companies during the second quarter, leading the nation with 34.6 percent of the total US funding, according to the MoneyTree Survey, prepared exclusively for The Boston Globe by PricewaterhouseCoopers, Venture Economics, and the National Venture Capital Association. Funding here fell a crushing 46 percent from the same period last year and 5 percent from the first three months of this year, though it declined less than the national average.

Venture capitalists are optimists by trade - their job is to see business opportunities where others don't. In interviews on Sand Hill Road last week, partners from several firms discussed how economic slumps have produced some of the most successful high-tech companies; how valuations are better than ever; how talented engineers looking for work are plentiful; and how the shakeout has sent the ''quick- buck artists'' home from Silicon Valley, leaving only the most dedicated entrepreneurs and venture capitalists to drive the next wave of innovation.

''I tell my portfolio companies, if you can survive these times and come out a market leader, you win big,'' said David J. Ladd, a general partner with Mayfield Fund, a prominent Sand Hill Road firm.

But in private, venture capitalists acknowledge that the sharp downturn has stung badly. Younger partners are losing their jobs as firms pare back their funds or fail to raise new funds. While firms such as Mayfield, US Venture Partners, and New Enterprise Associates have used the downturn to find bargains, many firms have scaled back drastically on new deals. And while some partners are working harder than ever to scrounge up worthwhile investments, many partners have chosen to largely sit out the last year, managing their portfolio companies and playing more golf.

''The mood is one of depression, puzzlement, apathy, and hard work,'' said Craig Johnson, chairman of Venture Law Group, a Sand Hill Road-based law firm specializing in start-ups, initial public offerings, and mergers and acquisitions. ''It's a game of survival at this point.''

And in a potentially bad sign for high-tech companies in New England, venture capitalists here say they are much less likely to travel far outside of Silicon Valley to find deals than they were during the boom. Only an extraordinary opportunity and a partnership with a local venture capital firm would entice Ladd to invest in a Northeast company, he said.

Silicon Valley was crawling with venture capitalists when Rob Coneybeer first started with New Enterprise Associates on Sand Hill Road in 1996. An engineer by training, the rookie venture capitalist began hunting for deals in the Boston area, where the Net bubble was slower to inflate. He found success there with such companies as Chelmsford-based Astral Point Communications, which sold to Alcatel for $135 million in stock. He still sits on the board of Coriolis Networks Inc. in Boxborough.

Now Coneybeer is staying closer to home. After averaging two investments a year, he has refrained from any deals in the last year, but he is sniffing around companies he says excite him more than any others in the last 18 months. ''The tourists have left the business, and there's hope again,'' he said.

But many venture capitalists have left the business as well. Some are content to cash in and sit out the downturn; others were forced out of downsizing firms. Mayfield, for example, has seven general partners and two associates, down from 10 general partners and four associates at its peak.

Phil Sanderson, a general partner with San Francisco-based WaldenVC, said fewer partners are attending meetings of the Venture Capital Network and the Young Venture Capital Association because partners are being laid off and firms are more reluctant to pay membership dues. ''That's a trend I think we're just at the beginning of,'' he said.

At their retreats during the boom, the seven general partners of Foundation Capital, a firm located a few blocks from Sand Hill Road, debated whether they should hire partners and staffers. In the end, they decided to stay the course. Though he admits feeling ''a little like dinosaurs for a while,'' Paul Koontz, a general partner, says he is glad now that the firm chose the more conservative path. ''Across the industry, everyone is beginning to stick their heads out of the bunker and see what it's like out there again,'' he said.

The demands they place on entrepreneurs are much different now, too, with a focus on cash conservation and customers instead of growth potential. But the institutional investors and other limited partners who provide money to venture capital funds are placing similar demands on the partners who manage their money.

''It's no longer, `Here's a check, I hope everything goes well,''' said Matthew J. Cherry, president of Intelex Ltd., a Greenwich, Conn., firm that performs due diligence for investors. ''You're starting to see limited partners take a more active role before they give the money. That certainly has to give the general partners pause.''

Waltham's Charles River Ventures is one of the firms that has given money back to its limited partners, cutting its $1.2 billion fund by 63 percent, to $450 million. But at its Sand Hill Road offices last week, general partner Bill Tai offered a positive excuse for arriving 25 minutes late for an interview: He was in a meeting with a start-up whose business plan was so intriguing that he was strongly considering offering it a term sheet.

In a sign that level-headedness has returned to the industry, Tai said he could afford to wait longer than 24 hours without fearing another venture capital firm would beat him to a deal with the start-up. ''We're back to the way it was the other 99 years of the century,'' he said. ''I love that.''

With the days of whirlwind investments, 30 percent returns, and Sand Hill Challenge races long behind them, venture capitalists are having to reset their expectations. But ever the optimists, they know that reputations are built during times like these.

''It's definitely not as fun as it was, but it was too easy then,'' said Sanderson of WaldenVC. ''Things were just handed to you. Now it's more of a business.''

Chris Gaither can be reached at gaither@globe.com.

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The Rich Get Rich and Poor Get Poorer. But not necessarily....

By VIRGINIA POSTREL

(Standard of Living increasing/others such as Nigeria falling—gap widens)

To critics of economic liberalization and international trade, it is an article of faith that the rich are getting richer and the poor poorer.

"Inequality is soaring through the globalization period — within countries and across countries," Noam Chomsky told a conference last fall, summarizing this common view.

Antiglobalization activists are not just making up this idea. They have taken it from seemingly authoritative sources, notably the 1999 United Nations Human Development Report.

That widely cited report stated: "Gaps in income between the poorest and richest countries have continued to widen. In 1960 the 20 percent of the world's people in the richest countries had 30 times the income of the poorest 20 percent — in 1997, 74 times as much." It added that "gaps are widening both between and within countries."

Fortunately, this scary portrait is highly misleading.

"When I started looking at the numbers, I saw a lot of mistakes," says Xavier Sala-i-Martin, an economist at Columbia. Some were departures from standard economic procedures, like not correcting for price levels from country to country.

"Some agencies didn't adjust for the fact that Ethiopia is cheaper than the U.S.," he said. "Some of them were hiding numbers that we know exist." For instance, the report included data from only 19 of the 29 industrialized countries then in the Organization for Economic Cooperation and Development.

But the biggest problem was not so technical. It was hidden in plain sight. The United Nations report and others looked at gaps in income of the richest and poorest countries — not rich and poor individuals.

That means the formerly poor citizens of giant countries could become a lot richer and still barely show up in the data.

"Treating countries like China and Grenada as two data points with equal weight does not seem reasonable because there are about 12,000 Chinese citizens for each person living in Grenada," writes Professor Sala-i-Martin in "The World Distribution of Income (Estimated from Individual Country Distributions)." That is one of two related working papers for the National Bureau of Economic Research. (The papers are available on Professor Sala- i-Martin's Web site at www.columbia.edu/~xs23/home

.html.)

Counting by countries misses the biggest economic advance in history, completely distorting the record of the globalization period.

Over the last three decades, and especially since the 1980's, the world's two largest countries, China and India, have raced ahead economically. So have other Asian countries with relatively large populations.

The result is that 2.5 billion people have seen their standards of living rise toward those of the billion people in the already developed countries — decreasing global poverty and increasing global equality. From the point of view of individuals, economic liberalization has been a huge success.

"You have to look at people," says Professor Sala-i-Martin. "Because if you look at countries, we do have lots and lots of little countries that are doing very poorly, namely Africa — 35 African countries." But all Africa has only about half as many people as China.

In his paper, "The Disturbing `Rise' of Global Income Inequality," he estimates the worldwide distribution of income by individuals rather than countries. The results are striking.

In 1970, global income distribution peaked at about $1,000 in today's dollars, a common measure of poverty ($2 a day in 1985 dollars). In 1998, by contrast, the largest number of people earned about $8,000 — a standard of living equivalent to Portugal's.

"That's what I call a new world middle class," says Professor Sala-i-Martin. It is mostly made up of the top 40 percent of Chinese and Indians, and the effect of their economic rise is big.

What about the argument that income gaps are widening within these rapidly advancing countries? With a few exceptions, it is true, but still misleading.

The rich did get richer faster than the poor did. But for the most part the poor did not get poorer. They got richer, too. In exchange for significantly rising living standards, a little more internal inequality is not such a bad thing.

"One would like to think that it is unambiguously good that more than a third of the poorest citizens see their incomes grow and converge to the levels enjoyed by the richest people in the world," writes Professor Sala-i-Martin. "And if our indexes say that inequality rises, then rising inequality must be good, and we should not worry about it!"

There is, however, one large country where the poor really are getting poorer while the rich grow richer: Nigeria, the most populous country in Africa.

Nigeria's economy has actually shrunk over the last three decades, and the absolute poverty rate — the percentage of the population living on less than $1 a day in 1985 dollars — skyrocketed to 46 percent in 1998 from 9 percent in 1970.

While most Nigerians were falling further into destitution, the political and economic elite grew richer. The problem is not too much liberalization but too little, a politicized economy with widespread corruption.

"The rich guys are doing well, therefore reforms will not come," says a pessimistic Professor Sala-i-Martin. He has begun studying Nigeria, trying to come up with ways around the political problem.

That country is typical of Africa, which is growing ever poorer. Fully 95 percent of the world's "one-dollar poor" live in Africa, and in many countries they make up the vast majority of the population. That poverty, not the rising wealth of Asian countries, is the global economy's real problem.

"The welfare implications of finding how to turn around the growth performance of Africa are so staggering," he writes, "that this has probably become the most important question in economics."

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Greg Jaros Named Chief Information Officer at PAYNET, Inc.

Skokie, IL, -- PAYNET, Inc. announces that Greg Jaros has been named to the position of Chief Information Officer. Greg was chosen for this position based on his success at PAYNET combined with his more than 15 years of experience in program management and implementation of data warehousing projects. Greg began his career with PAYNET as Director of Integrations, providing significant process improvements and management expertise to the extraction of data from PAYNET Members into the PAYNET data repository.

"Greg has proven to be effective at getting things done," said PAYNET's CEO Tom Butler. "His experience developing and managing databases has been important to helping us implement our service and deliver a quality information product to our customers."

"It's exciting for me to contribute my skills to creating this repository of proprietary data on lease and loan payment history," said Greg. "Information is the key to success in business and I am glad my talents can be put to work at a leading information provider for the leasing industry."

Previously, Greg served as Principal at DiamondCluster International and was one of it's original founders. At DiamondCluster, Greg was a member of their Solutions Delivery Practice where he worked on large scale database projects. Greg has an undergraduate degree from DePaul University and an M.B.A. from The University of Chicago.

About PAYNET:

PAYNET, Inc. delivers the nation's largest online database of current and historical lease and loan payment information on commercial borrowers used for credit decision purposes. In exclusive partnership with the Equipment Leasing Association (ELA), PAYNET currently has over 35 signed Members including eight of the ten largest leasing companies, representing a majority of the net assets in the industry. PAYNET uses its proprietary technology and the power of shared data to increase profitability, to improve operational efficiency, and to reduce credit losses for commercial finance companies. Founded in 1999, PAYNET Inc. is headquartered in suburban Chicago. For more information, visit eee.psynryonline.com

Contact: Bill Phelan PAYNET, Inc. 847-965-9800 ext. 12 BPhelan@paynetonline.com
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PDS Gaming Corporation 2002 Second Quarter Earnings

LAS VEGAS----PDS Gaming Corporation (Nasdaq:PDSG), a diversified gaming company that finances, leases and sells gaming equipment for the casino industry and operates Rocky's Sports Pub and Grill in Reno, Nevada, today reported its operating results for the second quarter and first half of 2002.

For the three month period ended June 30, 2002 ("the second quarter 2002"), the Company reported a loss from continuing operations of $29,000, or $0.01 per diluted share, compared with income of $1,238,000, or $0.32 per diluted share, for the three months ended June 30, 2001 ("the second quarter 2001"). Revenues from continuing operations were $8.8 million and $13.4 million in the second quarters 2002 and 2001, respectively. The Company completed $20.4 million in originations during the second quarter 2002, compared with $14.9 million in the year-earlier quarter (the year-earlier quarter also included the purchase of a lease transaction from a third party for $17 million).

The decrease in revenue primarily reflects a decline in finance income of approximately $5 million resulting from non-recurring transactions in the second quarter 2001 with the Company's then-largest customer. Excluding the effect of those transactions, margin from leasing activities increased by approximately $1.5 million during the second quarter 2002 compared to the year-earlier period.

Selling, general and administrative costs declined approximately $800,000 in the second quarter 2002, reflecting headcount reductions, a decrease in accrued bonuses, the impact of higher origination volume on capitalization of overhead as initial direct costs and the nonrecurring expenses of the 2001 exchange offering related to the Company's subordinated debt.

Casino operations resulted in a pre-tax loss of approximately $200,000 in the quarter, compared to pre-tax income of $100,000 in the comparable year-earlier period. The loss from casino operations reflects higher payroll and promotional costs, which were only partially offset by a 16% increase in revenue.

At the end of the first quarter 2002, the Company discontinued operations of its Table Games division and certain components of its Casino Slot Exchange division, due to unacceptable operating results. Accordingly, the Company has reclassified these activities as discontinued operations in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. For the second quarter 2002, the results of discontinued operations were a loss of $484,000, or $0.13 per diluted share, compared to a loss of $710,000, or $0.19 per diluted share, in the same quarter 2001.

For the six month period ended June 30, 2002, the Company reported a loss from continuing operations of $510,000, or $0.13 per diluted share, compared to income of $1,869,000, or $0.47 per diluted share, in the first half of 2001. Revenues from continuing operations approximated $18.3 million in the first half of 2002, compared with $20.9 million in the same period last year. The Company completed $29.9 million in originations in the first six months of 2002, compared with $21.2 million in the same period of 2001 (the year earlier period also included a purchase of a lease transaction from a third party for $17 million). Approximately 3,100 and 3,400 gaming devices were shipped to customers in the six-month periods ended June 30, 2002 and 2001, respectively.

For the six months ended June 30, 2002, the results of discontinued operations were a loss of $1,876,000, or $0.50 per diluted share, compared to a loss of $877,000, or $0.23 per diluted share, in the same period in 2001.

"The results for the quarter reflect our increased focus on the finance and leasing area. Originations of lease and financing transactions were higher than the comparable year-earlier period, and as a result our portfolio has grown to $76.5 million at June 30, 2002 from $66.1 million at the beginning of the year. This has yielded increasing levels of finance and operating lease income. Looking forward, we continue to see attractive opportunities to add finance and lease transactions to our portfolio over the next several months," stated Peter Cleary, President, Chief Operating Officer and Interim Chief Financial Officer and Treasurer of PDS Gaming Corporation.

The Company will host an investor conference call at 12:00 p.m. Eastern Standard Time (9:00 a.m. Pacific) on August 14, 2002 to discuss its second quarter and current outlook. To participate in the conference call, please dial (800) 230-1766 a few minutes before 12:00 p.m. EST. Replays of the conference call will be available beginning August 14, 2002, until August 28, 2002, accessable by dialing (800) 475-6701, and entering access code 648757.

PDS Gaming Corporation provides customized finance and leasing solutions to the casino industry in the United States. The Company also operates Rocky's Sport Pub and Grill in Reno, Nevada. PDS Gaming Corporation is headquartered in Las Vegas, Nevada, and its common stock trades on The Nasdaq Stock Market under the symbol "PDSG".

Chief Operating Officer and

Interim Chief Financial Officer and Treasurer

Peter D. Cleary, 702/736-0700

SOURCE: PDS Gaming Corporation

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News Briefs----

Most Businesses Certify Financial Books

Hundreds of executives meet the deadline to vouch for company accounting, raising hopes of a return of investor confidence.

French Media giant revealed a $12-billion loss for the first half of the year and said it would sell its prized U.S. publishing house Houghton Mifflin and other assets to help stem a deepening cash crisis.

Vivendi's new chief executive, Jean-Rene Fourtou, acknowledged that the company "is facing a liquidity problem," but said he had reached a tentative agreement for a $2.9-billion loan from French banks by the end of this month. He also vowed to raise $9.8 billion from asset sales in the next two yearrs to lower it sizeable debt.

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United threatens fall bankruptcy filing if cost-cutting fails

CHICAGO (AP) United Airlines says it's in danger of flying to an undesirable new destination bankruptcy court as soon as this fall.

Airline capacity cuts not expected to boost fares

DALLAS (AP) American Airlines and some rivals are cutting capacity, but analysts don't expect fewer seats to translate into higher prices because carriers will keep prices down to avoid losing the passengers they have left.

Some companies restate finances as deadline falls for executives to certify reports

WASHINGTON (AP) Investors jarred by a wave of accounting scandals appeared unfazed by smaller ripples Wednesday as several big companies restated their finances against a deadline to swear to the accuracy of financial reports.

Arthur Andersen sells off corporate art collection

ROSWELL, Ga. (AP) Arthur Andersen LLP will sell 400 original pieces from its corporate art collection, taken from seven of the company's offices in the Southeast, including Atlanta.

Ames plans to close all stores

ROCKY HILL, Conn. (AP) A year after seeking bankruptcy protection, Ames Department Stores Inc. is giving up, becoming the latest victim in the struggle to survive against such titans as Wal-Mart Stores Inc. and Target Corp.

Record bankruptcies reflect '90s debt, great deals

WASHINGTON (AP) Consumers and businesses amassed so much debt in recent years that record numbers filed for bankruptcy protection for the second year in a row, the Administrative Office of the U.S. Courts said Wednesday.

Accounting Board Proposes a New Rule on a Hot Topic: Options.

Investors will soon be able to decide for themselves whether the value of stock options as an expense is an important figure.

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Baseball Strike Date Most Likely August 30

RONALD BLUM

AP Sports Writer

NEW YORK (AP) - Baseball's labor talks hit a snag when the sides delved deeper into the key

economic issues, leaving the union's executive board on track to set a strike date Friday.

Rob Manfred, the owners' top labor lawyer, has repeatedly expressed optimism, but even he admitted little headway was made at the bargaining table Wednesday.

"Occasionally in this process, you have bumps in the road. Today probably would be a bump in the road," he said.

When it met Monday in Chicago, the union's executive board deferred a decision on a strike date, preferring not to add pressure to talks when they were at a delicate stage.

The board is to hold a telephone call Friday, and without progress probably would set a strike date, most likely Aug. 30, according to a person familiar with the players' deliberations who spoke on the condition he not be identified.

"I think Friday is a big day," Seattle pitcher Paul Abbott said. "Setting a date would spark some negotiating."

Union officials did not comment after the day's second bargaining session. Players and owners moved only slightly on the key issues, according to several people on both sides of the talks. Thursday's bargaining will determine what the board does Friday.

"I'm hopeful we'll get back at it tomorrow and move the process ahead," Manfred said.

Management's proposal for a luxury tax on the payrolls of high-spending teams, as expected, is a divisive issue, one that could cause baseball's ninth work stoppage since 1972.

Owners have proposed a 50 percent tax that would start with teams over $100 million, including 40- man rosters and benefits, with the full rate phased for the very highest spenders.

The union has discussed a tax that would start with teams over about $140 million - only the New York Yankees project to be above that next year - with a much lower tax rate.

Management wants the tax to restrain spending and salaries, while the union maintains a tax must be looked at in conjunction with revenue-sharing, both part of a system to transfer money from high- revenue teams to low-revenue teams.

"I don't believe that difference is an impediment to an agreement at this point," Manfred said.

But the difference in numbers is. Players fear that a large increase among the teams in the amount of shared locally generated revenue, when combined with a stiff luxury tax, would drain so much money from the high-revenue teams that it would cause a significant drop in salaries.

"Negotiations are never easy. You work every day to make steady progress," said Boston's Tony Clark, the AL player representative. "I'm cautiously optimistic. It's touch and go."

Manfred said the sides moved closer on drug testing Wednesday. While the union has proposed mandatory random resting for steroids only, owners also want testing for nutritional supplements like the testosterone-booster androstenedione and for "recreational" drugs such as cocaine.

The sides, who spent part of Wednesday discussing licensing rules, also have unresolved differences on changes owners want in the amateur draft and salary arbitration, plus management's desire for a $45 million minimum payroll - a figure only Montreal and Tampa Bay were below this year.

"They have been opposed philosophically to the minimum club payroll and have maintained that position," Manfred said.

On Tuesday, Manfred had said he thought an agreement was possible "in the next several days."

"My overall view has not changed," he said Wednesday, "despite that I recognize that today was somewhat of a bump in the road."

Fehr has refused to gauge the daily mood of the talks.

"I know Rob is out there preaching whatever he preaches," Fehr said Wednesday. "When I have something to say, everyone will know."

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