<PAGE>
As filed with the Securities and Exchange Commission on January 8, 1996
Registration No. 33-99380
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
___________________
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________
FLORIDA GAMING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 59-1670533
------------------------------- ------------------------------------
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
W. BENNETT COLLETT
1750 SOUTH KINGS HIGHWAY FLORIDA GAMING CORPORATION
FORT PIERCE, FLORIDA 34945-3099 1750 SOUTH KINGS HIGHWAY
(407) 469-2500 FORT PIERCE, FLORIDA 34945-3099
- ---------------------------------------- (407) 464-7500
(Address of principal executive offices) ---------------------------------------
(Name, address, including zip code, and
telephone number including area
code, of agent of service)
Copies to:
STEPHEN A. ZRENDA, JR., ESQ JAMES A. GIESEL
1520 LIBERTY TOWER ALAN K. MACDONALD
100 NORTH BROADWAY BROWN, TODD & HEYBURN PLLC
OKLAHOMA CITY, OKLAHOMA 73102-86 3200 PROVIDIAN CENTER
(405)235-2111 LOUISVILLE, KENTUCKY 40202
(502)589-5400
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement.
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED PURSUANT
TO DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING BOX. [ ]
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR INTEREST
REINVESTMENT PLANS, CHECK THE FOLLOWING BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING PURSUANT
TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX AND LIST
THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER, EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT BEING MAXIMUM OFFERING AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER UNIT(2) PRICE(2) REGISTRATION FEE
--------------------------- ------------- ----------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Common Stock, $.10 par value 1,029,480 $ 13.00 $ 13,383,240 $ 4,615
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes such additional shares of Common Stock as may be issued to the
Borrower because of future stock dividends, stock distributions, stock
splits or similar capital readjustments.
(2) Represents the average of the closing bid and asked prices of the Common
stock of the Registrant on November 14, 1995. Estimated solely for the
purpose of calculating the registration fee.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES
THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL
THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS
<PAGE>
THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
PROSPECTUS
1,029,480 SHARES
of
FLORIDA GAMING CORPORATION
COMMON STOCK
This Prospectus relates to a possible offering of shares of common stock,
$.10 par value (the "Common Stock") of Florida Gaming Corporation (the
"Company") by and for the account of a bona fide pledgee of the Common Stock by
Freedom Financial Corporation (the "Borrower"), a stockholder of the Company.
The shares of Common Stock which may be offered hereunder represent collateral
which may be pledged from time to time to certain lenders (the "Lenders") as
security for loans to the Borrower. See "Selling Stockholder and Plan of
Distribution." Although the Borrower may from time to time provide financing to
the Company, which financing may be secured by the shares of Common Stock to be
offered by this Prospectus, the Company will not receive any of the proceeds
from any sale of the shares that may be offered hereby. The Common Stock of the
Company is traded on the NASDAQ SmallCap Market under the symbol "BETS".
The Borrower has advised the Company that sales of the Common Stock may be
sold from time to time to purchasers directly by the Lenders in negotiated
transactions and in the over-the-counter market on NASDAQ. The shares may be
sold by one or more of the following: (a) a block trade in which the broker or
dealer so engaged will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus; and (c) ordinary brokerage
transactions in which the broker solicits purchasers. Alternatively, the
Lenders may from time to time offer the shares offered hereby through
underwriters, dealers or agents, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Lenders and/or the
purchasers of securities for whom they may act as agents. The shares offered
hereby may be sold from time to time in one or more transactions at a fixed
offering price, which may be changed, or at varying prices determined at the
time of sale or at negotiated prices.
The terms of any offering of the shares of Common Stock by the Lenders,
including the names of the Lenders participating in the offering, the number of
shares of Common Stock to be offered for the account of each such Lender, the
names of the Underwriters, if any, and the public offering price, underwriting
discounts and proceeds to the Lenders, will be set forth in an accompanying
Prospectus Supplement. The Lenders and any agents or broker-dealers that
participate in the distribution of the shares of Common Stock may be deemed to
be "underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"), and any commissions received by them and any profit on
the resale of the shares may be deemed to be underwriting commissions or
discounts under the Securities Act.
The Company will pay all expenses of the Offering, but not including
underwriting discounts and commissions and transfer taxes. In addition, the
Company has agreed to indemnify the Lenders, any underwriters or selling agents
and their respective controlling person against certain liabilities, including
liabilities under the Securities Act. See "Selling Stockholder and Plan of
Distribution."
---------------------
<PAGE>
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus also relates to such additional securities as may be issued
to the Borrower because of future stock dividends, stock distributions, stock
splits or similar capital readjustments.
The date of this Prospectus is ___________, 199_.
<PAGE>
IN CONNECTION WITH THIS OFFERING, AN UNDERWRITER MAY EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES OF COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ OVER-THE-COUNTER MARKET
OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company has filed with the U.S. Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with all amendments
and exhibits thereto, the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Common Stock
offered hereby. This Prospectus does not include all the information set forth
in the Registration Statement and the exhibits thereto, to which reference is
made for further information with respect to the Company.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder and in accordance therewith files periodic reports, proxy
and information statements, and other information with the Commission (File No.
0-9099). The Registration Statement and the exhibits thereto and all reports,
proxy and information statements, and other information filed by the Company
with the Commission may be inspected at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and may also be inspected and copied at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York 10048, and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials may be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Securities Act and the Exchange Act are hereby incorporated by reference
herein:
(1) The Company's Annual Report on Form 10-KSB for its
fiscal year ended December 31, 1994;
(2) The Company's Quarterly Reports on Form 10-QSB for the
quarterly periods ended March 31, 1995
and June 30, 1995;
(3) The Company's Quarterly Report on Form 10-QSB for the
quarterly period ended September 30, 1995, as amended
by Form 10-QSB/A filed January 8, 1996;
(4) The Company's Current Reports on Form 8-K dated January
9, 1995, August 14, 1995, August 28, 1995, June 21,
1995, September 15, 1995; and
(5) The description of the shares of Common Stock contained
in the Company's Registration Statement on Form 10.
3
<PAGE>
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act prior to the termination of the offering of the shares
of Common Stock hereunder shall be deemed to be incorporated by reference herein
and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom this Prospectus is delivered, on the written or oral request of such
person, a copy of any and all of the documents incorporated by reference in this
Prospectus (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into the documents that this Prospectus
incorporates). Written or oral requests for such copies should be directed to
Timothy L. Hensley of Florida Gaming Corporation, 1750 South Kings Highway, Fort
Pierce, Florida 34945-3099. Telephone requests may be directed to Mr. Hensley
at (812) 945-7211.
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
APPEARING ELSEWHERE IN OR INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
UNLESS THE CONTEXT INDICATES OTHERWISE, ALL REFERENCES IN THIS PROSPECTUS TO THE
COMPANY INCLUDE THE COMPANY AND ITS SUBSIDIARIES AND ALL REFERENCES TO THE
NUMBER OF SHARES OF COMMON STOCK (I) RELATE TO THE COMPANY'S COMMON STOCK, PAR
VALUE $.10 PER SHARE (THE "COMMON STOCK"), AND (II) ASSUME THAT OUTSTANDING
STOCK OPTIONS AND CONVERSION RIGHTS ARE NOT EXERCISED.
The Company currently owns and operates a jai-alai fronton and pari-mutuel
wagering facility located in Fort Pierce, Florida. The Company is actively
exploring other opportunities in the pari-mutuel and gaming industry, including
opportunities to develop, finance and operate gaming projects with federally
recognized Indian tribes.
Freedom Financial Corporation (the "Borrower"), an Indiana corporation, has
been a stockholder of the Company since March 1993. The Borrower presently owns
1,349,480 shares of the Common stock of the Company, and holds an option to
purchase an additional 1,330,000 shares of the Company. The Borrower is the
largest stockholder of the Company. Mr. W. Bennett Collett, the Chairman of the
Board and the Chief Executive Officer of the Company, is also the controlling
stockholder and Chief Executive Officer of the Borrower. See "Selling
Stockholder and Plan of Distribution."
4
<PAGE>
THE OFFERING
Common Stock offered by the
Lenders . . . . . . . . . . . . . . . 1,029,480
Total Outstanding Common Stock(1) . . 3,123,586
Dividend Policy . . . . . . . . . . . The Company has not paid any
dividends on its Common Stock in
the past and does not expect to
pay any dividends on the Common
Stock in the foreseeable future.
NASDAQ Symbol . . . . . . . . . . . . BETS
Limitation on Total Ownership . . . . The laws of the State of Florida
require that before any person
acquires more than five percent of
the equity securities of a pari-
mutuel operator such as the
Company (representing more than
156,179 shares of the Company's
presently issued Common Stock),
such person must receive the
approval of the Florida Department
of Business Regulation.
(1) As of December 31, 1995. Excludes 2,008,250 shares of
Common Stock issuable upon exercise of outstanding stock
options, 7,815 shares of Common Stock issuable upon the
conversion of Class A Preferred Stock, and shares of Common
Stock issuable upon the conversion of Series B Preferred
Stock based on the market price of the Common Stock
immediately prior to conversion.
SUMMARY OF SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
The selected financial data presented below for the years 1994, 1993 and
1992 have been derived from the Company's audited consolidated financial
statements. The selected financial data for the interim periods during 1994 and
1995 have been derived from the unaudited consolidated financial statements and
internal accounting records of the Company which, in the opinion of management,
contain all adjustments, consisting only of normal, recurring adjustments,
necessary to present fairly the Company's results of operations and financial
position for such periods and at such dates. The consolidated results of
operations for the nine-month periods ended September 30, 1995, are not
necessarily indicative of the results to be expected for the full year or for
future periods. The selected financial data presented below should be read in
conjunction with the financial statements of the Company and the related notes
thereto contained in annual and quarterly reports which are incorporated by
reference into this Prospectus.
<TABLE>
<CAPTION>
Four Months
Ended Year Ended Nine Months Ended
Year Ended August 31,(1) December 31, December 31, September 30,(unaudited)
------------------------ ------------ ------------ -------------------------
1992(2) 1993 1993 1994(3) 1995 1994(3)(4)
---- ---- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
HANDLE
Jai-Alai $ 0 $ 0 $ 0 $ 3,480,257 $ 4,183,844 $ 3,480,257
ITW 0 0 0 15,752,224 15,190,424 11,305,216
----- ----- ----- ---------- ---------- ----------
$ 0 $ 0 $ 0 $ 19,232,481 $ 19,374,268 $ 14,785,473
REVENUE
Pari-Mutuel Revenues, Net $ 0 $ 0 $ 0 $ 2,153,481 $ 2,440,639 $ 1,711,593
Admissions 0 0 0 122,032 118,154 91,763
Food, Beverage and Other 0 0 0 547,759 638,714 440,510
----- ----- ----- ------- ------- -------
TOTAL REVENUES $ 0 $ 0 $ 0 $ 2,823,272 $ 3,197,507 $ 2,243,866
COSTS AND EXPENSES
Operating $ 0 $ 878 $ 0 $ 2,106,923 $ 2,452,069 $ 1,855,545
General and Administrative 439,914 521,433 50,121 741,760 604,164 383,608
Depreciation 2,693 0 0 141,962 126,900 65,833
----- ----- ----- ------- ------- ------
5
<PAGE>
Four Months
Ended Year Ended Nine Months Ended
Year Ended August 31,(1) December 31, December 31, September 30,(unaudited)
------------------------ ------------ ------------ ------------------------
1992(2) 1993 1993 1994(3) 1995 1994(3)(4)
---- ---- ---- ---- ---- ----
TOTAL COSTS AND
EXPENSES $ 442,607 $ 522,311 $ 50,121 $ 2,990,645 $ 3,183,133 $ 2,304,986
-------- -------- -------- --------- --------- ---------
Net Income (loss) from
operations $ (442,607) $ (522,311) $ (50,121) $ (167,373) $ 14,374 $ (61,120)
Other Income (Expenses):
Interest Income $ 98,830 $ 63,565 $ 20,753 $ 37,090 $ 66,463 $ 17,739
Gain (loss) on sale of assets 0 (4,953) (28,095) (14,669) -- (14,669)
Realized Gain (loss) on
securities 88,747 169,333 0 0 195,939 --
Other (Expense) 79 (89,519) 0 (246,047) (379,917) (21,086)
-------- -------- -------- -------- -------- -------
Net Income (loss) from
continuing operations $ (254,951) $ (383,885) $ (57,463) $ (390,999) $ (103,141) $ (79,136)
-------- -------- -------- -------- -------- -------
Loss from discontinued
operations $ (346,715) $ 0 $ 0 $ 0 $ 0 $ 0
-------- -------- -------- -------- -------- -------
Net Income (loss) $ (601,666) $ (383,885) $ (57,463) $ (390,999) $ (103,141) $ (79,136)
-------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------
Per Share Loss 1992
continuing operations $ (0.36) $ (0.39) $ (0.04) $ (0.18) $ (0.03) $ (0.05)
Per Share Loss 1992
discontinued operations $ (0.43) $ N/A $ N/A $ N/A $ N/A $ N/A
Fully Diluted Per Share $ N/A $ N/A $ N/A $ N/A $ N/A $ N/A
Earnings
Per Common Share $ (0.79) $ (0.39) $ (0.04) $ (0.18) $ (0.03) $ (0.05)
Balance Sheet Data:
Cash $ 1,512,014 $ 1,813,251 $ 2,033,901 $ 1,363,174 $ 1,151,477 $ 1,695,629
Total Assets $ 1,954,409 $ 2,391,510 $ 2,275,055 $ 6,774,453 $ 6,275,144 $ 5,172,667
Long-term liabilities $ 0 $ 0 $ 0 $ 1,114,061 $ 1,831,337 $ 931,992
Stockholders' Equity $ 1,814,437 $ 2,244,433 $ 2,186,970 $ 4,163,047 $ 4,059,773 $ 3,887,800
</TABLE>
(1) The previous fiscal year end of the Company was August 31 of
each year. In 1994, the Company changed its fiscal year to
December 31.
(2) Before July 31, 1992, the Company's wholly owned subsidiary,
SCOPE Incorporated ("Scope"), operated as an electronic
technology company. Scope was sold by the Company to BECT
Acquisition Group, Inc. in July 1992. As a result, the
financial information regarding fiscal 1992 relates
primarily to operations that have been discontinued by the
Company.
(3) The Company did not commence its operations in the gaming
industry until February 1994.
(4) Reference is made to the Form 10-KSB for the fiscal year
ended December 31, 1994, and to the Form 10-QSB for the nine
month period ended September 30, 1995, for further financial
information regarding the Company, which have been
incorporated herein by reference.
RISK FACTORS
IN ADDITION TO REVIEWING THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1994, THE OTHER DOCUMENTS INCORPORATED HEREIN BY
REFERENCE AND THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING FACTORS
SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE
PURCHASING THE COMMON STOCK OFFERED HEREBY:
6
<PAGE>
RECENT OPERATING RESULTS
The Company had net loss of $103,141 for the nine month period ended
September 30, 1995, compared to an operating loss of $79,136 for the comparable
1994 period. The Company has implemented new strategic and operational
initiatives intended to enhance revenues by beginning to enter into the native
American Indian gaming industry. The Company's operations generally are subject
to financial, economic, legal and other factors, many of which are beyond its
control. Accordingly, there can be no assurance that the Company will be able
to implement these initiatives without delay or that these initiatives will be
profitable.
CAPITAL RESOURCES
The Company will require significant additional capital to finance
prospective ventures with Indian tribes to engage in Class II and Class III
gaming, as those terms are defined in the Indian Gaming Regulation Act of 1988
("IGRA"). See "Government Regulation--Indian Gaming Regulatory Act of 1988."
The Company plans to obtain funds to meet its present and any future obligations
to finance Indian gaming projects from a variety of potential sources, including
cash flow from operations, borrowing, proceeds from the sale of the Company's
securities, and joint venture arrangements.
The commencement of gaming operations by Indian tribes is subject to
several conditions and approvals. The Company's agreements with Indian tribes
currently provide, and will provide in the future, that the Company will be
obligated to pay only organizational, planning and predevelopment costs related
to a project until the receipt of all regulatory approvals, and that only after
such receipt will the Company become obligated to fund major development
expenses such as land acquisition, construction costs equipment expenses, and
working capital. The Company plans to fund organizational, planning and
predevelopment costs from cash flow from operations, funds made available by the
Borrower and proceeds from the placement of securities from time to time.
The Company believes funds currently available from these sources will be
sufficient to meet the Company's current obligations for ongoing predevelopment
expenditures, and its committment to loan up to $5 million to one Indian tribe
if and when the tribe is permitted to operate gaming machines at the tribe's
casino. See "The Company." In addition, although the Company has not obtained a
7
<PAGE>
committment for financing major development costs in connection with its current
agreement to develop and construct a casino for a second Indian tribe, and no
assurance can be given that the Company will obtain such financing, the Company
believes that when governmental approvals and all other material conditions for
commencement of Indian gaming operations have been satisfied, sources of
financing will be available for land acquisition, construction and equipment
costs, and working capital for the project. See "The Company -- Financing" and
"Government Regulation."
GAMING COMPETITION
The gaming industry is highly competitive. Other gaming companies have
substantially greater financial resources and larger management staffs than the
Company. Because of the growing popularity and profitability of gaming
activities, competition is significantly increasing.
The Company competes for customers with other forms of legal wagering
including video poker gaming in non-casino facilities, charitable gaming, pari-
mutuel wagering and state lotteries.
Further expansion of non-Indian gaming could also significantly and
adversely affect the Company's business. In particular, the expansion of casino
gaming in or near the geographic areas from which the Company attracts or
expects to attract a significant number of its customers, such as Florida,
California, or Nebraska could have a material adverse effect on the Company's
business.
The Company believes that its primary market area for its present
operations includes approximately 500,000 adults age 21 or over within 35 miles
of the Company's jai-alai fronton in Florida. The major population centers in
the vicinity of its fronton include Fort Pierce, Port St. Lucie, and Vero Beach,
Florida. The Company does not, however, consider itself to be in direct
competition with any other fronton or other pari-mutuel facility permitted to
operate in Florida in its market area at this time. Florida's pari-mutuel
legislation does not permit the operation of any jai-alai facility within a
geographic radius of 50 miles or closer to any other jai-alai facility. The
closest pari-mutuel facilities are dog racing facilities in West Palm Beach,
approximately 50 miles south of the fronton, and in Melbourne, approximately 53
miles north of the Fronton.
POTENTIAL DILUTION AND MARKET IMPACT FROM OUTSTANDING CAPITAL STOCK AND OPTIONS
As of December 31, 1995, the Company had 3,123,586 shares of Common Stock
issued and outstanding. In addition, as of that date, 2,008,250 shares of
Common Stock were issuable upon the exercise of outstanding shares, 7,815 shares
of Common Stock were issuable upon the conversion of outstanding shares of Class
A preferred stock, and additiional shares of Common Stock were issuable upon the
conversion of outstanding shares of preferred stock at a conversion price based
on the market price of the Common Stock at conversion. The voting power of each
holder of Common Stock would be diluted by the issuance of additional shares of
Common Stock. Moreover, the prevailing market price for the Common Stock may be
materially and adversely affected by the addition of a substantial number of
shares of Common Stock, including the shares offered hereby, into the market or
by the registration under the Securities Act of 1933 of the sale of the shares
offered hereby.
POTENTIALLY VOLATILE STOCK PRICE
Since the latter part of fiscal 1993, the Company's stock price has risen
dramatically. During the last quarter of 1993, the per share prices for the
Common Stock on NASDAQ ranged from $1-5/8 to $3-7/16, while the prices of the
Common Stock on the NASDAQ since October 1, 1995 have ranged from $8-1/2 to $14-
1/2. Factors such as the Company's operating results or other announcements by
the Company or its competitors may have a significant impact on the market price
of the Company's securities. Because the Company's expansion philosophy is
highly dependent on joint ventures and acquisitions, the price of the Common
Stock may be highly volatile and may decline at an equal or greater rate than
the rate at which it has risen over the last two years. See "Price Range of
Common Stock and Dividends."
8
<PAGE>
DIFFICULTY OF PLANNED EXPANSION; MANAGEMENT OF GROWTH
Since the change in management of the Company in March 1993, the Company
has expanded its operations rapidly, and it plans to continue to further expand
its operations through participation in Indian gaming projects and other gaming
ventures as opportunities arise. The Company's operating results will be
adversely affected if net revenues do not increase sufficiently to compensate
for the increase in operating expenses caused by such an expansion. In
addition, the Company's planned expansion of operations may exceed the Company's
present management, technical, financial and other resources. To manage its
growth effectively, the Company must continue to increase its management
information systems and must attract, train and motivate qualified managers and
employees. There can be no assurance, however, that the Company will
successfully be able to achieve these goals. If the Company is unable to manage
growth effectively, its operating results may be adversely affected.
DEPENDENCE ON KEY PERSONNEL
The success of the Company is dependent, in part, on its key management
personnel. In particular, the Company is highly dependent upon W. Bennett
Collett, W. Bennett Collett, Jr., and Timothy L. Hensley. The loss of their
services could have a material adverse effect on the Company. The Company does
not have any employment contracts with its executives, nor does the Company have
any key man life insurance policies on their lives.
NEED FOR EXPERIENCED PERSONNEL
None of the Company's present management team has experience managing a
casino operation of the type contemplated by its present agreements with Indian
tribes. Although the Company believes that it will be able to attract and train
qualified individuals to fill senior management positions supervising its casino
gaming operations, there is no assurance that the Company will
9
<PAGE>
be able to do so. In addition, in filling positions at tribal gaming casinos,
the Company will be obligated to give preference in hiring first to qualified
members of the Tribe (and qualified spouses and children of members of the
Tribe), and second to members of other Indian tribes. There is no assurance
that the Company will be able to hire qualified individuals satisfying such
criteria. These criteria may also increase the cost of filling positions at
tribal gaming casinos.
ABSENCE OF DIVIDENDS ON COMMON STOCK
The Company has not paid any dividends on its Common Stock in the past and
does not anticipate paying dividends on its Common Stock in the foreseeable
future. See "Price Range of Common Stock and Dividends."
ANTITAKEOVER EFFECTS OF CERTAIN INSTRUMENTS, AGREEMENTS OF THE COMPANY, AND LAWS
The Company's certificate of incorporation and bylaws, certain contracts to
which the Company is a party, the Delaware General Corporation Law and Florida
gaming laws contain provisions that could have the effect of delaying or
preventing a transaction that results in a change of control (as defined) of the
Company.
POTENTIAL CONFLICTS OF INTEREST AND RELATED PARTIES TRANSACTIONS
Certain relationships among the Company, its management and affiliates,
including the Borrower, create various potential and actual conflicts of
interest. It is the Company's policy that all material affiliated transactions
and loans will be made or entered into on terms that are no less favorable to
the Company than those that can be obtained from unaffiliated third parties.
All future material affiliated transactions and loans must be approved by a
majority of the independent directors who do not have an interest in the
transactions.
NEW PROJECTS
Each of the Company's projects to finance, develop, and operate gaming
facilities will be subject to the many risks inherent in the establishment of a
new business enterprise, including unanticipated design, construction,
regulatory and operating problems, and the significant risks commonly associated
with implementing a marketing strategy in new markets. There can be no
assurance that any of these projects will become operational within the
estimated time frames and projected budgets at the time the Company enters into
a particular management agreement, or at all. The Company plans to reduce the
financial significance of individual projects by focusing on small- to medium-
sized projects that can be accomplished with a smaller capital investment and
will allow a significant portion of any financing of any subsequent expansions
to be paid from operating funds whenever possible. In addition, the Company
intends to develop projects as joint ventures when possible, to reduce its
financial commitment to individual projects. There can be no assurance that the
significant expenditures required to develop a gaming project will ultimately
result in the establishment of profitable operations. See "The Company."
To the extent the Company's future gaming projects become operational, the
Company will be required to add and train personnel, expand its management
information systems and control expenses. If the Company does not successfully
address the Company's increased management needs or the Company otherwise is
unable to manage its growth effectively, the Company's operating results could
be materially adversely affected.
GOVERNMENTAL REGULATION
The Company will need to secure regulatory approvals from state and local
authorities or, in the case of Indian gaming activities, from federal and tribal
authorities for each of its prospective gaming ventures. No assurance can be
given that any of these approvals will be secured in a timely fashion or at all.
The denial of regulatory approvals would prohibit the opening of the new
facilities and any delay in securing such approvals could result in postponement
of their scheduled openings. Although it is not expected that the Company's
management agreements for gaming ventures will require expenditures for land
acquisition and construction costs before regulatory approvals are obtained, it
is anticipated that each of the Company's new gaming ventures will require the
commitment of funds for organization, planning and certain other start-up costs
before required regulatory approvals can be obtained. No assurance can be given
that the Company will be able to recoup its initial investment in these
ventures.
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Gaming on Indian lands is extensively regulated under federal law, tribal-
state compacts and tribal law. Under IGRA, management contracts for Indian
gaming facilities are subject to approval by the National Indian Gaming
Commission (the "NIGC") and generally provide for a maximum management fee of
30% of net revenues and a maximum term of five years. These provisions may be
increased to a management fee of 40% of net revenues and a term of seven years
if the Chairman of the NIGC determines that the capital investment required and
the income projections for the facility merit such terms. The NIGC has the
power to require contract modifications under certain circumstances or to void a
contract if the management company fails to comply with applicable laws and
regulations. In addition, the Company, its directors, persons with management
responsibility, certain owners of the Company and certain persons with a
financial interest in the management agreement as determined by the NIGC and the
gaming commission of the Indian tribe must provide background information and be
investigated by the NIGC and the tribal gaming commission and be approved in
order for the management contract to be approved by the NIGC and for the Company
to be issued a license to operate a gaming facility by the tribal gaming
commission. Persons who acquire beneficial ownership of the Company's stock may
be subject to certain reporting and qualification procedures established by the
NIGC and the tribal gaming commission. Such limitations could adversely affect
the marketability of the Common Stock or could affect or prevent certain
corporate transactions, including mergers or other business combinations.
Following approval, if obtained, of the Company's management contract by the
NIGC, and issuance to the Company of a management contractor's license by the
tribal gaming commission, the operation and management of tribal gaming
facilities will be subject to the regulating authority of the NIGC and the
tribal gaming commission. See "Governmental Regulation -- Indian Gaming
Regulatory Act of 1988."
TRIBAL-STATE COMPACTS; LEGAL UNCERTAINTIES
The Company's plan to participate in gaming ventures with Indian tribes is
substantially dependent on the legal status of Indian gaming in various states.
Management contracts and the operation of casinos on Indian land, including the
right to offer activities classified as Class III gaming under IGRA, will
require the negotiation and execution of a compact between the tribe and the
state in which the Indian gaming operation will be located. Certain states have
resisted entering into tribal-state compacts, and tribal-state compacts have
been the subject of litigation in several states. The issue of whether the
Eleventh Amendment to the United States Constitution immunizes states from suit
by Indian tribes in federal court without the state's consent is currently the
subject of litigation before the United States Supreme Court. The outcome of
such litigation and its effect on the Company is uncertain. Changes in state
gaming laws may limit the types of gaming that are eligible for tribal-state
compacts. The repeal of any tribal-state compact or any amendment that limits
the types of gaming that can be conducted on Indian land in the state could have
a material adverse effect on the Company. The Company cannot predict which
states, if any, will approve casino gaming on Indian land, the timing of any
such approvals or whether states will attempt to renegotiate such compacts in
the future. The Ponca Tribe of Nebraska has yet to negotiate a compact with the
State of Nebraska, and the State of California's refusal to negotiate a compact
with Indian tribes in California, where the Company has agreed to provide
financing to the casino operated by the Rincon, San Luiseno Band of Mission
Indians, is currently the subject of litigation. Therefore, the legal status of
Indian gaming in the states where the Company currently has agreements to
participate in Indian gaming ventures is uncertain. There can be no assurance
that tribal-state compacts will be reached with the States of California or
Nebraska. See "Government Regulation -- Indian Gaming Regulatory Act of 1988 --
Tribal-State Compacts."
CONSTRUCTION RISKS
The Company anticipates that its prospective gaming ventures, particularly
Indian gaming ventures, may often include the construction of a casino and other
facilities. The Company's cost estimates and projected completion dates for
construction of facilities may change significantly as the projects progress.
The Company's management contract with the Ponca Tribe of Nebraska provides for
the construction of a casino with a minimum of 20,000 square feet of gaming
space. Construction cannot begin until after the NIGC approves the management
and related financing agreements and land suitable as a site for the casino can
be acquired and placed in trust with the Secretary of the Interior for the
Tribe. There can be no assurance that these events will occur so as to permit
construction to begin in a timely manner. In addition, the Company's
development projects will entail significant construction risks, including
shortages of materials or skilled labor, unforeseen environmental or engineering
problems, work stoppages, weather interferences and unanticipated cost
increases, any of which could have a material adverse effect on the projects and
could delay their scheduled openings.
Whenever the Company's business plan for a particular project includes
Class III gaming, the operation will be governed by the terms of a tribal-state
compact, which may require compliance with state and local laws not otherwise
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applicable to Indian tribes. In addition, projects, particularly in
metropolitan areas, may rely upon the provision of utilities and services from
local governments, which may require negotiation of, and be subject to, a
compact between the tribe and the local government. Compliance with state and
local laws, when applicable, may require obtaining necessary permits, licenses
and approvals. Unexpected changes or concessions required by local, state or
federal regulatory authorities could involve significant additional costs and
delay the scheduled opening of the facilities. There can be no assurance that
the Company will receive the necessary permits, licenses and approvals or that
such permits, licenses and approvals will be obtained within the anticipated
time frame. See "The Company -- Ponca Tribe of Nebraska."
CURRENT PROJECTS; CONTINGENCIES
The Company's plan to expand its gaming business depends upon its ability
to enter into financing and management agreements with Indian tribes and to
identify and enter into additional gaming ventures. Currently, the Company has
entered into agreements with two Indian tribes to participate in gaming
ventures, which are subject to a number of contingencies. The Company's loan
agreement with the Rincon, San Luiseno Band of Mission Indians in San Diego
County, California is subject to the lifting of an injunction prohibiting the
Tribe from operating gaming machines at its casino. See "The Company -- Rincon,
San Luiseno Band of Mission Indians." The Company's management agreement with
the Ponca Tribe of Nebraska, which provides for the Company to finance, develop,
construct and operate a casino for the Ponca Tribe in the Omaha, Nebraska area,
is subject to many contingencies, including the purchase of land suitable to be
placed in trust as a site for a tribal gaming operation in accordance with the
IGRA, the approval of the terms of the management agreement by the NIGC,
procurement of additional financing, and other conditions. In addition, for the
Ponca Tribe to conduct Class III gaming under IGRA, the State of Nebraska must
permit Class III gaming activities and must enter into a compact with the Ponca
Tribe. See "The Company -- Ponca Tribe of Nebraska." There can be no assurance
that the contingencies to the operation of each project will be achieved so that
gaming operations can begin.
LIMITED RECOURSE AGAINST TRIBES AND TRIBAL ASSETS
In general, Indian tribes do not make any equity investments in the
construction, development or equipment of the casinos. The Company has made,
and will make, loans to tribes for the construction, development, equipment and
operation of casinos managed and to be managed by the Company. These loans are
not conventional real estate and construction loans subject to customary
mortgages and encumbrances. If the casinos that the Company manages do not
generate sufficient cash flow to repay such indebtedness, the Company's loans
may not be repaid. The Company's principal recourse for collection of
indebtedness from a tribe or money damages for breach or wrongful termination of
a management contract is from revenues, if any, from casino operations. The
Company may in the future subordinate the repayment of the Company's loans to a
tribe and other distributions due to the Company from a tribe to other
obligations of the casino such as indebtedness to a commercial lender.
Accordingly, in the event of a default by a tribe, the Company's loans to a
tribe may not be repaid until any senior creditors have been repaid in full. See
"Government Regulation -- Tribal Law and Legal System."
LIMITED DURATION AND POTENTIAL TERMINATION OF MANAGEMENT CONTRACTS
IGRA generally does not permit management contracts to have an initial term
that exceeds five years unless the Chairman of the NIGC determines that a longer
term not exceeding seven years is warranted by the capital investment required
and the casino's income projections. The Company's management agreement with
the Ponca Tribe of Nebraska has a term of five years from the date gaming
commences. The loan agreement with the Rincon, San Luiseno Band of Mission
Indians of San Diego, California, which is not subject to review by the NIGC or
the Bureau of Indian Affairs, has a term of seven years from the date that the
operation of gaming machines at the Tribe's present Class II casino commences.
There is no assurance that the Company's current contracts with Indian tribes
will be renewed, and that revenues will be payable to the Company upon the
expiration of the initial terms of those contracts. Further, if renewed, such
management contracts are likely to be on terms less favorable than the present
management contracts. If the Company breaches its obligations under contracts,
the Company's right to share in the revenues from such casino could be
terminated.
RELATIONSHIP WITH THE INDIAN TRIBES
Indian tribes are sovereign nations with their own governmental systems.
Tribal officials are subject to replacement by appointment or election. The
Company's relationship with a tribe could improve or deteriorate under
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new administrations. Good relationships with Indian tribes and their officials
are critical to the Company's ability to obtain, retain and renew management
contracts. Although the Company believes that its agreements with Indian tribes
contain appropriate legal protections, a deterioration in the relationship
between the Company and a tribe could have a material adverse effect on the
Company, including possible termination of the management contract. See
"Government Regulation--Tribal Law and Legal Systems."
POLITICAL UNCERTAINTIES
Historically, Congress and the states have permitted, restricted and
abolished gaming from time to time depending on prevailing public attitudes.
Congress and the states have the power to restrict or eliminate gaming on Indian
land, and Congress may amend or repeal IGRA at any time. Any federal or state
action to limit gaming on Indian land may have a material adverse effect on the
Company. In addition, legislation has recently been proposed that would subject
income earned by Indian tribes or tribal agencies from certain gaming activities
to federal income taxation. If enacted, this proposal could significantly
adversely affect the amount of net revenues from tribal gaming operations in
which the Company participates on a percentage of net revenues basis.
USE OF PROCEEDS
Although the Borrower may from time to time provide financing to the
Company, which financing may be secured by the shares of Common Stock to be
offered by this Prospectus, the Company will not receive any of the proceeds of
any sale by the Lenders of the shares of Common Stock.
The Borrower has informed the Company that it expects that the proceeds of
any sale of the shares of Common Stock upon default of any obligation to the
Lenders shall be applied first to the costs and expenses of such sale, second to
any other costs and expenses incurred by the Lenders, third to the payment of
all amounts due from the Borrower under the credit agreements and fourth to the
payment of any other obligations of the Borrower in connection therewith. Any
remaining balance shall be paid to the Borrower.
THE COMPANY
GENERAL
The Company's principal place of business and principal executive offices
are located at Fort Pierce Jai-alai, 1750 South Kings Highway, Fort Pierce,
Florida 34945-3099. The Company changed its name from Lexicon Corporation to
Florida Gaming Corporation on March 17, 1994. The Company was incorporated in
Delaware in 1976.
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JAI-ALAI FRONTON
The Company currently owns and operates a jai-alai fronton and pari-mutuel
wagering facility located in Fort Pierce, Florida (the "Fronton"). Since its
inception and prior to its acquisition of the Fronton, the Company engaged in
several other lines of business, none of which are currently now in operation.
On March 31, 1993, the Company sold 603,000 shares of Common Stock to Freedom
Financial Corporation and the present management assumed control of the Company.
After considering various business alternatives, the Company entered into an
agreement to acquire the Fronton in October 1993. On February 1, 1994, the
Company received approval from the Florida Department of Business and Federal
Regulation, Division of Pari-Mutuel Wagering to transfer the pari-mutuel permit
for the Fronton to the Company and completed the acquisition of the Fronton on
that date.
The Company's business at the Fronton consists of, among other things, live
jai-alai, inter-track pari-mutuel wagering, and the sale of food and alcoholic
beverages. For a detailed description of the Company's business at the Fronton,
see the section of the Company's 1994 Annual Report on Form 10-K titled "Item
1 -- Business."
The jai-alai industry generally has declined in the last several years. In
the State of Florida's fiscal year ended June 30, 1987, the year before an
industry-wide strike by jai-alai players and the passage of legislation
authorizing a state-wide lottery, average state-wide handle per live jai-alai
performance was approximately $213,393. Average state-wide handle per
performance for the State of Florida fiscal years ended June 30, 1995 and 1994
was approximately $102,000 and $101,000, respectively. During the State of
Florida's 1995 fiscal year, handle per performance at the Company' Fronton
increased from $31,918 to $36,090, or 13.1% compared to the 1994 fiscal year.
There can be no assurance that the jai-alai industry will improve significantly,
if at all, in the future. Because the Company's jai-alai business is tied
directly to many if not all of the factors which influence the jai-alai industry
as a whole, another players strike or the enactment of unfavorable legislation
could have an adverse impact on the Company's operations.
Inter-track wagering has grown significantly since its initiation in the
State of Florida in August 1990. The state-wide ITW handle for the State of
Florida's fiscal year ended June 30, 1991 was approximately $109 million. The
state-wide ITW handle for the State of Florida's fiscal years ended June 30,
1994 and 1995 increased to approximately $383 million and $443 million,
respectively. ITW handle at the Company's Fronton has demonstrated similar
growth in recent years, increasing from $17.2 million in the year ended December
31, 1994 ($15.8 million after the Company acquired the Fronton in February 1994)
to an estimated $20.5 million for the year ended December 31, 1995.
INDIAN GAMING
The Company is actively exploring other opportunities in the pari-mutuel
and gaming industry, including opportunities to develop, finance and operate
gaming projects with federally recognized Indian tribes in accordance with IGRA.
See "Government Regulation." According to the National Indian Gaming
Association, there are currently 557 federally recognized Indian tribes in the
United States, of which approximately 185 tribes conduct gaming activities
ranging from bingo to full scale casino gaming. In enacting IGRA, Congress
recognized that the operation of gaming by Indian tribes was a means of
promoting tribal economic development, self-sufficiency, and strong tribal
governments, which historically have been principal goals of federal Indian
policy. Based on gaming industry statistics indicating that Indian gaming is
one of the fastest growing segments of the gaming industry, the Company believes
Indian gaming presents promising business opportunities.
The Company plans to focus on developing, either alone or through joint
ventures with other parties, small- to medium-sized gaming projects that have
the potential to generate $1,000,000 to $10,000,000 in annual profits. The
Company estimates that projects generating financial returns in this range will
usually require a capital investment of from $5 million to $50 million. The
Company believes that major gaming companies are reluctant to consider a
management relationship with a tribe if the gaming project does not have the
potential to generate annual profits of at least $30,000,000. The Company
believes there are many tribes with the capability and interest to develop
gaming projects of the size targeted by the Company.
FINANCING
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The Company plans to obtain funds to meet its present and any future
obligations to finance Indian Gaming projects from a variety of potential
sources, including cash flow from operations, borrowing, proceeds from the sale
of the Company's securities, and joint venture arrangements. The commencement
of gaming operations by Indian tribes is subject to several conditions and
approvals. The Company's agreements relating to Indian gaming projects currently
provide, and will provide in the future, that the Company will be obligated to
pay only organizational, planning and predevelopment costs until the receipt of
all regulatory approvals, and that only after such receipt will the Company
become obligated to fund major development expenses such as land acquisition,
construction and equipment expenses, and working capital. The Company plans to
fund organizational, planning and predevelopment costs from cash flow from
operations, funds made available by the Borrower and proceeds from the sale of
securities. The Borrower has indicated to the Company that it plans to use the
proceeds of the loan secured by the pledged shares registered hereby to make
financing available to the Company either through loans on substantial similar
terms or through additional equity investments in the Company. In addition, the
Company recently completed a private placement of $2.4 million of convertible
preferred stock to institutional investors. The Company believes funds
currently available from these sources will be sufficient to meet the Company's
current obligations for ongoing predevelopment expenditures, and its committment
to loan up to $5 million to the Rincon, San Luiseno Band of Mission Indians if
and when the Rincon Band is permitted to operate gaming machines at its casino.
See "The Company--Rincon, San Luiseno Band of Mission Indians." In addition,
although the Company has not obtained a committment for financing major
development costs in connection with its current agreement to develop and
construct a casino for the Ponca Tribe of Nebraska, and no assurance can be
given that the Company will obtain such financing, the Company believes that
when governmental approvals and all other material conditions for commencement
of Indian gaming operations have been satisfied, sources of financing will be
available for land acquisition, construction and equipment costs, and working
capital for the project. See "The Company--Ponca Tribe of Nebraska" and
"Government Regulation."
In 1995, the Company entered into two agreements with Indian tribes
relating to gaming ventures. The terms of those agreements are summarized in
the following sections.
PONCA TRIBE OF NEBRASKA
On August 28, 1995, the Company (through a wholly owned subsidiary) entered
into a Management Agreement with the Ponca Tribe of Nebraska, providing that the
Company would provide financing for, develop, construct and manage a casino for
the Ponca Tribe to be located in the Omaha, Nebraska metropolitan area. Omaha
is the largest city in Nebraska, with a population of approximately 835,000
residing within 50 miles of the center of the city. Although the Company is
unaware of any gaming operations currently in Nebraska, gaming facilities are
currently operating in Council Bluff, Iowa, across the Missouri River from
Omaha, and in Sioux City, Iowa, approximately 50 miles north of Omaha. In
addition, two river boat gaming projects are proposed for Council Bluff. The
Company believes that the metropolitan Omaha market is large enough to support
the Ponca Tribe's casino in addition to the currently operating and proposed
gaming projects.
The Management Agreement provides that financing for start-up expenses,
land acquisition, construction, equipment and other development expenses and
working capital for the gaming operation will be provided through a development
loan by the Company to the Ponca Tribe in a principal amount up to $50,000,000.
The development loan will bear interest at an annual rate equal to the prime
rate plus two percent. The Management Agreement provides that the Company would
be entitled to receive 30% of the net revenues of the casino, including gaming
and certain non-gaming revenues, for five years beginning when gaming commences
in a permanent facility. The Ponca Tribe would receive 70% of the net revenues
from gaming and non-gaming activities at the casino, from which monthly
principal and interest payments on the development loan would be deducted,
subject to a minimum guaranteed monthly payment to the Ponca Tribe of $10,000
for Class II gaming, and an additional $25,000 per month for Class III gaming.
The developmental loan will be secured by security interests in all assets,
revenues and accounts of the Ponca Tribe's gaming operation except for land and
real property. The Company expects to finance its obligations under the
Management Agreement through a combination of funds provided by the Company from
the proceeds of debt and equity financing to the Company, and the proceeds of
commercial loans made directly to the tribal gaming operation. The Company has
not entered into any financing arrangements for its project with the Ponca
Tribe, and although there can be no assurance that it will be able to obtain
financing at reasonable rates, the Company currently has no reason to believe
that such financing will not be available.
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The opening of Omaha casino will depend upon the ability of the Company and
the Ponca Tribe to satisfying each of many preconditions. The Management
Agreement and all related financing, security and other collateral agreements
must be submitted to and approved by the National Indian Gaming Commission
("NIGC"). The Management Agreement will take effect upon NIGC approval, and
only then will the repayment and other provisions of the Management Agreement
and other collateral agreements be enforceable against the Ponca Tribe. The
Company and the Ponca Tribe must identify and acquire an option to purchase land
suitable to be placed in trust for the benefit of the Ponca Tribe as a site for
the gaming facility. Under IGRA, to approve the Ponca Tribe's application to
place land in trust as the site of a gaming operation, the Secretary of the
Interior must determine, after consultation with appropriate state and local
officials, that a gaming operation on the land would not be detrimental to the
surrounding community, and the Governor of Nebraska must concur in the
Secretary's determination. In addition, IGRA will permit the Company and the
Ponca Tribe to conduct Class III gaming activities at the casino only to the
extent that such gaming is not prohibited by Nebraska law and that the Ponca
Tribe enters into a gaming compact with the State of Nebraska. Although Class
II gaming is not currently prohibited under Nebraska law, legislation has been
proposed from time to time that would permit certain Class III gaming activities
in Nebraska. The Company believes the tax revenues received by the State of Iowa
from profitable gaming operations located in metropolitan Omaha and other Iowa
counties adjoining Nebraska may be a factor influencing the consideration of
legislation permitting Class III gaming activities in Nebraska. If Nebraska
enacts legislation permitting Class III gaming activities, there can be no
assurance that the Governor of Nebraska would enter into negotiations of a
compact with the Ponca Tribe, and the ability of Indian tribes to compel the
states to enact a compact through judicial proceedings is the subject of
litigation currently before the United States Supreme Court. See "Governmental
Regulation." There can be no assurance that any of the foregoing conditions to
the establishment of an Indian gaming operating in metropolitan Omaha can be
achieved. Until these conditions have been satisfied, the Company's financial
obligations are limited to the payment of certain predevelopment expenses of the
project, currently estimated at approximately $15,000 per month. As of
September 30, 1995, the Company has provided $64,544 for predevelopment expenses
of the project.
RINCON, SAN LUISENO BAND OF MISSION INDIANS
On September 11, 1995, the Company entered into a Loan Agreement and
related agreements with the Rincon, San Luiseno Band of Mission Indians, which
presently owns and operates the River Oaks Casino, a Class II gaming facility
approximately 40 miles from the city of San Diego, California. The Rincon Band
also intends to operate electronic gaming machines at River Oaks, a Class III
gaming activity under IGRA, if and when an injunction currently prohibiting the
operation of gaming machines at River Oaks is lifted by a federal district
court. The Loan Agreement will take effect when at least 400 gaming machines
are in operation.
Under the terms of the Loan Agreement, the Company has agreed to loan up to
$5,000,000 to the Rincon Band for working capital to renovate, improve and
expand the Tribe's gaming facilities. In lieu of interest, the Company will be
entitled to receive, during the seven-year term of the Loan Agreement, 12.5% of
the gross receipts of the facility (excluding gaming machines), and 12-1/2% of
the "drop" or "handle" from gaming machines during the
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first five years and 11% of the "drop" or "handle" during the sixth and seventh
years. The Loan is secured by security interests granted to the Company in the
equipment, accounts, revenues and other property of River Oaks other than land
and real estate. See "Government Regulation." As of December 31, 1995, the
Company had made short term working capital advances of $323,000 to the Rincon
Band, which will become repayable under the terms of the Loan Agreement if and
when the Loan Agreement takes effect. The Loan Agreement can be terminated by
the Company if it does not take effect by June 30, 1996. The Company plans to
fund its obligations to the Rincon Band from funds provided by Borrower and the
proceeds from the placement of Company securities completed in December 1995.
San Diego County, California has a population of 2.7 million people, and
the City of San Diego is the sixth largest city in the United States. Tourism
and the presence of one of the largest naval bases are major factors in the
local economy, which the Company believes contribute significantly to the
attractiveness of San Diego as a gaming market.
There are three casinos other than River Oaks currently operating in San
Diego County, all of which are owned by Indian tribes and which together operate
approximately 2,500 gaming machines. The operation of gaming machines at River
Oaks, however, is currently prohibited by a preliminary injunction issued by the
United States District Court for Southern California. The injunction was sought
by the United States Attorney for Southern California, based upon federal
circuit court decisions that the operation of gaming machines by Indian tribes
in California was prohibited by the IGRA because gaming machines were prohibited
by California law, and to date California Governor Wilson has refused to enter
into a gaming compact with California tribes. In light of the litigation, the
ability of California Indian tribes to continue to conduct Class III gaming
activities in the future is uncertain. See "Government Regulation."
The Rincon Band has filed a motion to modify the injunction based on the
Tribe's belief that it now complies with all conditions for the operation of
gaming machines under IGRA. As part of this effort, the Rincon Band has assumed
the direct management of River Oaks, entered into a settlement agreement with
the former third-party managers of River Oaks, and has entered into the Loan
Agreement with the Company. Following a hearing on December 19, 1995, the
court ordered the parties and the three other Indian tribes operating gaming
machines in San Diego County to submit briefs addressing several questions
relating to equities of the present situation, in which only the Rincon Band is
prohibited from operating gaming machines. There can be no assurance that the
injunction will be lifted. The lifting of the injunction would place the Rincon
Band in a position comparable to the three other tribes in San Diego County and
the 22 other tribes in California that already operate gaming machines.
Although no assurance can be given, the Company believes that if the injunction
is lifted, the Rincon Band's casino will be in a position to operate profitably
in the attractive San Diego market, subject to future changes in the law
governing Indian gaming in California.
OTHER AGREEMENTS
On June 21, 1995, the Company entered into a joint venture agreement with
Centrum X Corporation ("CXC"), a Boca Raton, Florida company that represents
several Indian tribes, to assist the Company in identifying and developing
tribal gaming development projects. Under the Agreement, the Company has the
right of first refusal to participate in prospective Indian gaming ventures
identified, investigated or developed by CXC. If the Company exercises its
right of first refusal, the venture would be developed by a new corporation in
which the Company would own an 80% interest and CXC and its associates would own
a 20% interest. CXC has advised the Company that it has entered into an
agreement with the Tonkawa Tribe of Oklahoma to develop a tribal gaming project.
To date, however, CXC has not presented a written proposal with respect to the
Tonkawa project or any other prospective gaming venture.
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GOVERNMENT REGULATION
GENERAL
The Company is actively exploring opportunities in the pari-mutuel and
gaming industry, including opportunities to finance, develop and operate gaming
facilities on lands held in trust for Indian tribes by the United States
Government. In addition to a variety of generally applicable state and federal
laws governing business operations, the Company's Indian gaming ventures will be
subject to extensive regulation by special federal, state and tribal laws and
regulations applicable to commercial relationships with Indians generally, as
well as Indian gaming and the management and financing of Indian casinos. In
addition, gaming ventures are regulated by federal and state laws and
regulations applicable to the gaming industry generally and to the distribution
of gaming equipment. The following description of the regulatory environment in
which the Company's Indian gaming ventures would operate is intended to be a
summary and is not intended to be a complete recitation of all applicable law.
Moreover, because the regulatory environment is dynamic and evolving, it is
impossible to predict how certain provisions will be ultimately interpreted or
how they may affect the Company. Changes in such laws or regulations could have
a material adverse impact on the Company's ability to finance, develop and
operate Indian gaming ventures. See "Risk Factors."
TRIBAL LAW AND LEGAL SYSTEMS
APPLICABILITY OF STATE AND FEDERAL LAW. Federally recognized Indian tribes
are independent governments, subordinate to the United States, with sovereign
powers, except as those powers may have been limited by treaty or by the United
States Congress. Absent tribal consent or the consent of the United States
Congress, state laws do not apply to Indian tribes or tribal agencies. Indian
tribes maintain their own governmental systems and often their own judicial
systems. Indian tribes have the right to tax persons and enterprises conducting
business on Indian lands, and also have the right to require licenses, and to
impose other forms of regulations and regulatory fees on persons and businesses
operating on their lands.
WAIVER OF SOVEREIGN IMMUNITY; JURISDICTION; EXHAUSTION OF TRIBAL REMEDIES.
Indian tribes enjoy sovereign immunity from unconsented suit similar to that of
the states and the United States. To sue an Indian tribe or a tribal agency or
instrumentality, the tribe must have effectively waived its sovereign immunity
with respect to the matter in dispute. Further, in most commercial disputes
with Indian tribes, the jurisdiction of the federal courts, which are courts of
limited jurisdiction, may be difficult or impossible to obtain. A commercial
dispute is unlikely to present a federal question, and some courts have ruled
that an Indian tribe as a party is not a citizen of any state for purposes of
establishing diversity jurisdiction in the federal courts. State courts may
also lack jurisdiction over suits brought by non-Indians against Indian tribes.
The remedies available against an Indian tribe also depend, at least in part,
upon the rules of comity requiring initial exhaustion of remedies of tribal
tribunals and, as to some judicial remedies, the tribe's consent to
jurisdictional provisions contained in the disputed agreements. The United
States Supreme Court has held that where a tribal court exists, the jurisdiction
in that forum must first be exhausted before any dispute can be properly heard
by federal courts which would otherwise have jurisdiction. Where a dispute as
to the existence of jurisdiction in the tribal forum exists, the tribal court
must first rule as to the limits of its own jurisdiction.
In its current contracts with Indian tribes, the Company has negotiated,
and intends to negotiate in any future contracts with Indian tribes, the tribe's
agreement to waive its sovereign immunity for the limited purpose of any
proceeding by the Company (or its affiliate) under certain circumstances to
enforce repayment of loans by the Company to the tribe and the Company's other
rights under the contract. If such a waiver of sovereign immunity were held to
be ineffective, the Company could be precluded from judicially enforcing its
rights and remedies against the tribe. In certain of its current contracts with
Indian tribes, the Company has negotiated, and intends to negotiate in any
future contracts with Indian tribes, the tribe's agreement to waive the rule
requiring exhaustion of tribal remedies. If a waiver of the rule requiring
exhaustion of tribal remedies were held to be ineffective, the Company could be
subjected to substantial delay, cost and expense while seeking such remedies in
tribal tribunals. In addition, unless the decisions of tribal tribunals violate
applicable state or federal law, there might be no effective right to appeal
such decisions in state or federal court.
18
<PAGE>
THE INDIAN GAMING REGULATORY ACT OF 1988
REGULATORY AUTHORITY. The terms and conditions of the contracts governing
the Company's Indian gaming ventures, as well as the operation of casinos and of
all gaming on Indian land, are subject to the Indian Gaming Regulatory Act of
1988, 25 U.S.C. 2701 ET SEQ. ("IGRA").
IGRA is administered by the National Indian Gaming Commission ("NIGC"), an
independent agency within the U.S. Department of Interior, exercising primary
federal regulatory responsibility over Indian gaming. The NIGC has exclusive
authority to issue regulations governing tribal gaming activities, approve
tribal ordinances for regulating Class II and Class III Gaming (as described
below), approve management agreements for gaming facilities, conduct
investigations, and generally monitor tribal gaming. Certain responsibilities
under IGRA (such as the approval of per capita distribution plans to tribal
members, and the approval of transfer of lands into trust status for gaming) are
retained by the Bureau of Indian Affairs ("BIA"). The BIA also has
responsibility to review and approve land leases and other agreements relating
to Indian lands. Statutory remedies enable the federal courts to find agreements
which violate these statutes to be void AB INITIO. Criminal enforcement
responsibility is shared with a state under the tribal compact with the state
and under the federal law that recognizes the Indian tribes.
The regulations and guidelines that the NIGC and the BIA use to interpret
their respective responsibilities are incomplete and evolving. Federal statutes
including IGRA have been the subject of litigation and may be subject to further
judicial or legislative interpretation.
The NIGC is empowered to inspect and audit all Indian gaming facilities, to
conduct background checks on all persons associated with Indian gaming, to hold
hearings, issue subpoenas, take depositions, adopt regulations and assess fees
and impose civil penalties for violations of IGRA. IGRA also provides for
federal criminal penalties for illegal gaming on Indian land and for theft from
Indian gaming facilities.
In 1993, the NIGC published rules implementing certain provisions of IGRA.
These rules govern, among other things, the submission and approval of tribal
gaming ordinances or resolutions, and require an Indian tribe to have the sole
proprietary interest in and responsibility for the conduct of any gaming.
Tribes are required to issue gaming licenses only under articulated
standards, to conduct or commission financial audits of their gaming
enterprises, to perform or commission background investigations for primary
management officials and key employees, and to maintain facilities in a manner
that adequately protects the environment and the public health and safety. The
1993 rules also set out a review procedure for tribal licensing of all gaming
operation employees. Reporting requirements applicable to tribes are
articulated, requiring the reporting of specified information, including that
derived from background investigations, to the NIGC.
TRIBAL ORDINANCES. Under IGRA, except to the extent otherwise provided in
a tribal-state compact, Indian tribal governments have primary regulatory
authority over Class III Gaming on land within the tribe's jurisdiction.
Therefore, tribal gaming operations that may be managed by the Company, and
Company personnel engaged in gaming activities, will be subject to tribal
ordinances and regulations regarding gaming.
IGRA requires that the NIGC review tribal gaming ordinances, and authorizes
the NIGC to approve such ordinances only if they meet certain requirements
relating to (i) the ownership, security, personnel background, recordkeeping,
and auditing of a tribe's gaming enterprises; (ii) the use of the revenues from
such gaming; and (iii) the protection of the environment and the public health
and safety.
CLASSES OF GAMING. IGRA classifies games that may be conducted on Indian
lands into three categories. "Class I Gaming" includes social games solely for
prizes of minimal value, or traditional forms of Indian gaming engaged in by
individuals a part of, or in connection with, tribal ceremonies or celebrations.
"Class II Gaming" includes bingo, pulltabs, lotto, punch boards, tip jars,
instant bingo, and certain other games similar to bingo, if those games are
played at the same location as bingo is played. "Class III Gaming" includes all
other forms of gaming, such as slot machines, video casino games (e.g., video
slots, video blackjack and video poker), so-called "table games" (e.g.,
blackjack, craps, roulette), and other commercial gaming (e.g., sports betting
and parimutuel wagering).
19
<PAGE>
Class I Gaming on Indian lands is within the exclusive jurisdiction of the
Indian tribes and is not subject to the provision of IGRA. Class II Gaming is
permitted on Indian lands if (i) the state in which the Indian lands lies
permits such gaming for any purpose by any person, organization or entity; (ii)
the gaming is not otherwise specifically prohibited on Indian lands by federal
law; (iii) the gaming is conducted in accordance with a tribal ordinance or
resolution which has been approved by the NIGC; (iv) an Indian tribe has sole
proprietary interest and responsibility for the conduct of gaming; (v) the
primary management officials and key employees are tribally licensed; and (vi)
several other requirements are met. Class III Gaming is permitted on Indian
lands if the conditions applicable to Class II Gaming are met and, in addition,
the gaming is conducted in conformance with the terms of a written agreement
between the tribal government and the government of the state within whose
boundaries the tribe's lands lie (a "Tribal-State Compact").
TRIBAL-STATE COMPACTS. IGRA requires states to negotiate in good faith
with Indian tribes that seek to enter into Tribal-State Compacts for the conduct
of Class III Gaming. Such Tribal-State Compacts may include provisions for the
allocation of criminal and civil jurisdiction between the state and the Indian
tribe necessary for the enforcement of such laws and regulations, taxation by
the Indian tribe of such activity in amounts comparable to those amounts
assessed by the state for comparable activities, remedies for breach, standards
for the operation of such activity and maintenance of the gaming facility,
including licensing, and any other subjects that are directly related to the
operation of gaming activities. The terms of Tribal-State Compacts vary from
state to state; however, Tribal-State Compacts within one state tend to be
substantially similar. Tribal-State Compacts usually specify the types of
permitted games, establish technical standards for video gaming machines, set
maximum and minimum machine payout percentages, entitle the state to inspect
casinos, require background investigations and licensing of casino employees,
and may require the tribe to pay a portion of the state's expenses for
establishing and maintaining regulatory agencies. Some Tribal-State Compacts
are for set terms, while others are for indefinite duration. No Tribal-State
Compact is in effect in Nebraska, where the Company plans to develop a gaming
project with the Ponca Tribe of Nebraska. In California, where the Company has
entered into an agreement to finance a tribal casino operation in San Diego
County, the IGRA's provisions relating to Tribal-State Compacts are currently
the subject of litigation. See "Risk Factors -- Highly Regulated Industry."
Tribal-State Compacts have been the subject of litigation in several
states, including California. Among the issues being litigated is the
constitutionality of the provision of IGRA that entitles tribes to sue in
federal court to force states to negotiate Tribal-State Compacts. Federal
district courts in Alabama, Michigan and Washington recently have held that the
Eleventh Amendment to the United States Constitution immunizes states from suit
by Indian tribes in federal court unless the state consents to such suit.
Federal appellate courts have divided over this issue. These cases presently
are under appeal, and the United States Supreme Court has granted CERTIORARI to
hear one such case in the 1995 fall term.
There has also been litigation challenging the authority of governors,
under state law, to enter into Tribal-State Compacts. Federal courts have upheld
the authority of the governors of two states to enter into compacts, while the
highest state courts of two other states have held that the governor did not
have authority to enter into such compacts without the consent or authorization
of the state legislature.
In California, where the Company has a project with the Rincon Band in San
Diego County, numerous federally recognized Indian tribes currently engage in
various gaming activities on tribal lands. Several tribes have asked the State
of California to negotiate a compact authorizing certain gaming activities,
including the operation of electronic gaming machines. The State has refused,
asserting the proposed activities were illegal under California law. The State
and seven tribes subsequently agreed to seek judicial determination of whether
the State was obligated to negotiate with the tribes under the IGRA. A federal
circuit court of appeals has held that the State was not required to negotiate
with the tribes under the IGRA because California law prohibits the operation of
the gaming activities in question. However, the federal circuit court has
agreed to review its decision in light of a California state appellate court
decision that the operation of electronic gaming machines is not prohibited by
California law because the state lottery is authorized to operate such machines.
Until the issues currently the subject of litigation have been resolved,
including an opinion of the California Supreme Court determining the status of
gaming under state law, the parameters of Indian gaming in California will
likely remain uncertain.
20
<PAGE>
POSSIBLE CHANGES IN FEDERAL LAW. Several bills have been introduced in
Congress which would amend IGRA. To this date, no such bill has passed either
house of Congress. If IGRA were amended, the amendment could change the
governmental structure and requirements within which the Tribe could conduct
gaming.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1995. The following information should be read in conjunction
with the financial statements of the Company and its subsidiaries incorporated
by reference into this Prospectus.
<TABLE>
<CAPTION>
September 30, 1995
------------------
<S> <C>
Long-term debt: (unaudited)
Secured indebtedness . . . . . . . . . . . . . . . . $ 1,957,705
Other long-term debt . . . . . . . . . . . . . . . . 0
----------
Total long-term debt . . . . . . . . . . . . . . 1,957,705
Less current maturities . . . . . . . . . . . . . . . 126,368
----------
Long-term debt, net . . . . . . . . . . . . . . . . . $ 1,831,337
Stockholders' equity . . . . . . . . . . . . . . . . . . .
Class A Preferred stock, convertible into common
stock (1,200,000 shares authorized; par value $.10;
35,235 shares issued). . . . . . . . . . . . . . . . 3,524
Common stock (15,000,000 shares authorized; par value
$.10; 3,123,474 shares issued)(1). . . . . . . . . . 312,347
Capital in excess of par value . . . . . . . . . . . 25,058,360
Retained deficit . . . . . . . . . . . . . . . . . . (21,314,458)
----------
----------
Total stockholders' equity . . . . . . . . . . . $ 4,054,773
----------
----------
Total Capitalization . . . . . . . . . . . . . . . . . . . $ 6,275,144
----------
----------
</TABLE>
(1) Does not include 2,008,250 shares of Common Stock reserved for
issuance pursuant to outstanding stock options, and up to 7,928 shares
issuable upon conversion of its outstanding preferred stock.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock of the Company trades on the NASDAQ SmallCap Market under
the symbol "BETS". The following table shows the high and low bid prices for
the Common Stock of the Company for the years ended December 31, 1995 and
December 31, 1994 as reported by NASDAQ. The following bid prices reflect
reported inter-dealer transactions and are not necessarily representative of
actual transactions which occurred. Further, the prices do not include retail
markup, markdown or commissions.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 HIGH LOW
---------------------------- ---- ---
<S> <C> <C>
Quarter Ended December 31, 1995 . . . . $ 14-1/2 $ 8-1/4
Quarter Ended September 30, 1995 . . . . $ 17-1/4 $ 7-3/4
Quarter Ended June 30, 1995 . . . . . . $ 10-1/2 $ 4
Quarter Ended March 31, 1995 . . . . . . $ 5-1/8 $ 2
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994 HIGH LOW
---------------------------- ---- ---
<S> <C> <C>
Quarter Ended December 31, 1994 . . . . $ 5 $ 2
Quarter Ended September 30, 1994 . . . . $ 6-1/4 $ 3-3/4
Quarter Ended June 30, 1994 . . . . . . $ 10-1/2 $ 4-1/2
21
<PAGE>
Quarter Ended March 31, 1994 . . . . . . $ 11-3/4 $ 1-3/4
</TABLE>
On December 29, 1995, the closing bid and asked quotations for the Common
Stock of the Company as quoted on the NASDAQ SmallCap Market was $10.50 bid and
$11.25 asked per share. As of December 29, 1995, the Company had approximately
3,750 holders of record of its Common Stock and a substantial additional number
of street-name holders held of record by brokers and depository companies.
The Company has not paid any dividends on its Common Stock in the past and
does not expect to pay any dividends on its Common Stock in the foreseeable
future. In the event the Company is not contractually prohibited from paying
dividends, the holders of Common Stock would be entitled to receive dividends
only when and as declared by the Board of Directors of the Company, subject to
the prior rights and preferences, if any, of holders of preferred stock.
SELLING STOCKHOLDER AND PLAN OF DISTRIBUTION
The following tables sets forth the aggregate number of shares of Common
Stock identified by the Borrower as being owned by it as of December 31, 1995,
and the aggregate number of shares of Common Stock being offered for sale in
this offering.
<TABLE>
<CAPTION>
Number of Number of
shares of Number of shares of Percent of
Common shares of Common Common Stock Outstanding(1)
Stock Common Stock Stock ---------------------------
owned before to be sold to be owned
Borrower Offering(1) in Offering after Offering(1) Before Offering After Offering
- -------- ------------ ----------- ----------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Freedom Financial Corporation
2669 Charleston Road
Suite D
New Albany, Indiana 47150 1,349,480 1,029,480 320,000 43.2% 10.2%
- ----------------------------------
</TABLE>
(1) Excludes an option to purchase 1,330,000 additional shares of the
Common Stock of Company, exercisable at $1.25 per share.
The Borrower has informed the Company that it expects to pledge up to
1,029,480 shares of Common Stock as collateral under certain loan agreements to
be entered into with the Lenders. The securities offered hereby may, upon
compliance with applicable "Blue Sky" law, be sold from time to time to
purchasers directly by the Lenders in negotiated transactions and in the over-
the-counter market on NASDAQ. The shares may be sold by one or more of the
following: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the shares as agent, but may position and resell a portion of
the block as principal to facilitate the transaction; (b) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus; and (c) ordinary brokerage transactions in which
the broker solicits purchasers. In addition, any securities covered by the
Prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule
144 rather than pursuant to this Prospectus. Alternatively, the Lenders may
from time to time offer the securities offered hereby through underwriters,
dealers or agents, who may receive compensation in the form of underwriting
discounts, concessions or commissions from the Lenders and/or the purchasers of
securities for whom they may act as agents. The Company has agreed that if an
event of default under the applicable loan agreements has occurred and is
continuing, the Company will, upon notice from the Lenders, update the
information contained in the Registration Statement, including this Prospectus,
to contain the information necessary to permit the Lenders to effect the offer
and sale thereunder of the shares of Common Stock. In such an event, the
Company would prepare a Prospectus Supplement to this Prospectus which would
include, among other things, the names of the Lenders participating in the
offering, the number of shares of Common Stock to be offered for the account of
each such Lender and such Lenders' intended method(s) of distribution of the
shares, including, if the shares are to be offered through underwriters, the
names of the principal underwriters and the respective amounts underwritten,
22
<PAGE>
the nature of the underwriter's obligation to take the shares, and the discounts
and commissions to be allowed or paid to the underwriters and to dealers. In
the case of an offering otherwise than through underwriters, the Prospectus
Supplement would describe such other plan of distribution. The Company has
agreed to indemnify the Lenders, any underwriters or selling agents and their
respective controlling persons against certain liabilities arising out of
information contained in or omitted from the Registration Statement, including
liabilities under the Securities Act.
The securities offered hereby may be sold from time to time in one or more
transactions at a fixed offering price, which may be changed or at varying
prices determined at the time of sale or at negotiated prices.
The Lenders and any underwriters, dealers or agents that participate in the
distribution of securities offered hereby may be deemed to be underwriters, and
any profit on the sale of such securities by them and any discounts, commissions
or concessions received by any such underwriters, dealers or agents might be
deemed to be underwriting discounts and commissions under the Securities Act.
The Borrower acquired 603,000 shares of the Common Stock of the Company
pursuant to a Stock Purchase Agreement on March 31, 1993, for a total
consideration of $874,350. An additional 96,480 shares were subsequently issued
to the Borrower under the provisions of the Stock Purchase Agreement. On August
26, 1994, and October 4, 1994, the Borrower exercised its option, in part, to
purchase 400,000 shares and 300,000 shares of Common Stock, respectively, for a
total price of $875,000.
Mr. W. Bennett Collett is the controlling stockholder, a director and an
officer of the Borrower, and also is the Chairman of the Board and the Chief
Executive Officer of the Company.
On February 28, 1990, the Borrower filed a registration statement with the
Securities and Exchange Commission (Commission File No. 33-33625)(the
"Borrower's Registration Statement") to register shares of its Common Stock,
Class A Preference. On March 5, 1990, the Borrower filed an application with
the New Jersey Bureau of Securities pursuant to the New Jersey state securities
laws to register certain of the shares to be offered. The New Jersey Bureau of
Securities indicated that the Borrower's Registration Statement may have been
materially deficient because certain civil and administrative proceedings
involving Mr. W. Bennett Collett, including an injunction prohibiting future
violations of federal securities laws, were not disclosed. Without admitting or
denying the materiality of the omitted information, which information had been
omitted following consultation with legal counsel, on June 11, 1990, the
Borrower requested withdrawal of the application for registration of securities
in New Jersey. On August 23, 1990, the State of New Jersey Bureau of Securities
issued a Consent Order IN THE MATTER OF: FREEDOM FINANCIAL CORPORATION (SR-
5587). On November 5, 1990, the Securities and Exchange Commission issued an
order consenting to the withdrawal of the Borrower's Registration Statement.
The New Jersey Consent Order granted the request for withdrawal of the
application for registration and denied the effectiveness of certain exemptions
under the New Jersey state securities laws for secondary trading in its
securities. In addition, the Borrower agreed that it would not sell, give or
otherwise distribute its securities in or from New Jersey without first
notifying and receiving written authority to do so from the New Jersey Bureau of
Securities.
The rules and regulations promulgated by the Commission pursuant to the
Securities Act and the Exchange Act generally require that proceedings involving
management similar to the injunction be disclosed only for events occurring
during the past five years. These matters have not adversely affected the
ability of the Company to obtain any required gaming licenses, nor did they in
the past adversely affect the ability of the Borrower to obtain state or federal
approvals required to operate as a bank holding company.
LEGAL MATTERS
Certain legal matters with respect to the Common Stock offered hereby will
be passed upon for the Company and the Borrower by Stephen A. Zrenda, Jr., P.C.,
Oklahoma City, Oklahoma.
EXPERTS
The audited financial statements and schedules of the Company incorporated
by reference into this Prospectus and elsewhere in the Registration Statement,
to the extent and for the periods indicated in its report, have been audited by
King & Company, PSC, independent public accountants, and are incorporated herein
in reliance upon the authority of said firm
23
<PAGE>
as experts in accounting and auditing in giving said report.
24
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN, OR INCORPORATED BY
REFERENCE IN, THIS PROSPECTUS, IN CONNECTION WITH THE OFFERING COVERED BY THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE BORROWER OR ANY
SELLING AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR
TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN
THE FACTS SET FORTH IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN OR IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
---------------------------
TABLE OF CONTENTS
PAGE
----
Available Information . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents
by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Government Regulation. . . . . . . . . . . . . . . . . . . . . . . . . 13
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Price Range of Common Stock
and Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Selling Stockholder and Plan
of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1,029,480 SHARES
OF
COMMON STOCK
FLORIDA GAMING
CORPORATION
------------------------
PROSPECTUS
------------------------
, 199
------------------------
25
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
EXPENSE AMOUNT
- ------- ------
<S> <C>
SEC registration fee . . . . . . . . . . . . $ 4,615
Legal fees and expenses(1) . . . . . . . . . 15,500
Accounting fees(1) . . . . . . . . . . . . . 1,000
Printing(2). . . . . . . . . . . . . . . . . 100
Transfer agent fees(1) . . . . . . . . . . . 100
--------
- --------------------------
(1) Estimated $ 21,315
--------
--------
</TABLE>
All itemized fees and expenses of the offering are expected to be paid by
the Registrant.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(a)(7) of the Delaware General Corporation Law authorizes
corporations to limit or eliminate the personal liability of directors to
corporations and their stockholders for monetary damages for breach of the
directors' fiduciary duty of care. The duty of care requires that, when acting
on behalf of the corporation, directors must exercise an informed business
judgment based on all material information reasonably available to them. Absent
the limitations now authorized by such legislation, directors are accountable to
corporations and their stockholders for monetary damages for conduct
constituting gross negligence in the exercise of their duty of care. Although
Section 102(a) does not change directors' duty of care, it enables corporations
to limit available relief to equitable remedies such as an injunction or
rescission. The Registrant's Restated Certificate of Incorporation limits the
liability of the directors to the Registrant or its stockholders (in their
capacity as directors but not in their capacity as officers) to the fullest
extent permitted by Section 102(a). Specifically, a director of the Registrant
will not be personally liable for monetary damages for breach of a director's
fiduciary duty as a director, except for liability: (i) for any breach of the
director's duty of loyalty to the Registrant or its stockholders; (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) for unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law; or (iv) for any transaction from which the director
derived an improper personal benefit.
Under Section 145 of the Delaware General Corporation Law, the Registrant
has the power to indemnify directors and officers under certain prescribed
circumstances and subject to certain limitations against certain costs and
expenses, including attorney's fees, actually and reasonably incurred in
connection with any action, suit or proceeding, whether civil, criminal,
administrative, or investigative, to which any of them is a party by reason of
his being a director or officer of the Registrant if it is determined that he
acted in accordance with the applicable standard of conduct set forth in such
statutory provisions. The Registrant's by-laws provide that the Registrant
shall indemnify each person who may be indemnified pursuant to Section 145, as
amended from time to time (or any successor provision thereto), to the fullest
extent permitted by Section 145.
On March 10, 1993, the Board of Directors of the Registrant authorized the
Registrant to enter into indemnification agreements with each of its directors
and executive officer to evidence the Registrant's agreement to indemnify them
to the fullest extent permitted by law.
The Company does not presently carry any officer/director liability
insurance policy.
See Item 17 below regarding indemnification.
II - 1
<PAGE>
ITEM 16. EXHIBITS.
3.1 Restated Certificate of Incorporation is hereby incorporated by
reference to Exhibit 3.1 of Form SB-2 Registration Statement No.
33-79882.
3.2 Certificate of Designations for Series 9% AA Convertible Preferred
Stock.
3.3 Certificate of Designations for Series B Preferred Stock.
3.3 Bylaws are hereby incorporated by reference to Exhibit 3.2 of Form
SB-2 Registration Statement No. 33-79882.
10.1 Stock Purchase Agreement dated July 26, 1991, between the
Registrant and Bristol Holdings, Inc. is hereby incorporated by
reference to Current Report on Form 8-K dated July 26, 1991.
10.2 Stock Purchase Agreement dated as of March 29, 1993, between
Freedom Financial Corporation and the Registrant is hereby
incorporated by reference to Current Report on Form 8-K dated March
31, 1993.
10.3 Term Note for $1,000,000 executed by the Registrant in favor of WJA
Realty Limited Partnership dated February 1, 1994 is hereby
incorporated by reference to Exhibit 10.3 of Form SB-2 Registration
Statement No. 33-79882.
10.4 Nonqualified Stock Option Plan dated April 21, 1994 is hereby
incorporated by reference to Exhibit 10.4 of Form SB-2 Registration
Statement No. 33-79882.
10.5 Totalizator Services Agreement dated September 11, 1991, between
Autotote Limited and the Registrant is hereby incorporated by
reference to Exhibit 10.5 of Form SB-2 Registration Statement No.
33-79882.
10.6 Indemnification Agreement dated February 23, 1993, between Ronald
P. Perella and the Registrant is hereby incorporated by reference
to Exhibit 10.6 of Form SB-2 Registration Statement No. 33-79882.
10.7 Directors' Stock Option Plan adopted August 9, 1994 is hereby
incorporated by reference to Exhibit 10.7 of Form SB-2 Registration
Statement No. 33-79882.
10.8 Centrum X Joint Venture Agreement dated June 21, 1995 is
incorporated by reference to the exhibit to the Form 8-K Current
Report of the Registrant dated June 21, 1995.
10.9 Ponca Indian Tribe of Nebraska Management Agreement dated August
21, 1995 is incorporated by reference to exhibit 10.1 to the Form
8-K Current Report of the Registrant dated August 28, 1995.
10.10 Rincon Loan Agreement dated September 11, 1995 is incorporated by
reference to Exhibit 10.1 to the Form 8-K Current Report of the
Registrant dated September 15, 1995.
10.11 Amendment to Rincon Loan Agreement dated November 1, 1995.*
10.12 Copies of mortgages, deeds.*
10.13 Copy of 1995 Chief Executive Officer Stock Option Grant of May 8,
1995.*
10.14 Stock option grant to Ronald P. Perella dated April 28, 1995.*
23.1 Consent of Stephen A. Zrenda, Jr., P.C. *
23.2 Consent of King & Company, PSC.
II - 2
<PAGE>
24 Power of attorney is contained in the signature page to this
Registration Statement.
- -------------------------
*Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(i) To include any material information with respect to
any plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
(ii) That, for the purpose of determining any liability
under the Securities Act of 1933, each post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(iii) To remove from registration by means of a post-
effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933,
each filing of the Company's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II - 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Louisville, Commonwealth of Kentucky.
FLORIDA GAMING CORPORATION
Date: January 4, 1996. By /s/ W. Bennett Collett
---------------------------
W. Bennett Collett
Chairman of the Board and Chief
Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints W. Bennett Collett and Timothy L. Hensley, and
each of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including post-effective
amendments, to this Form S-3 Registration Statement of Florida Gaming
Corporation, and to file the same, with all exhibits thereto, and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto same attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either or them, or their substitute
or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ W. Bennett Collett Chairman of the Board of January 4, 1996
- --------------------------- Directorsand Chief Executive
W. Bennett Collett Officer (Principal Executive
Officer)
/s/ Timothy L. Hensley Executive Vice President, January 4, 1996
- --------------------------- Treasurer and Chief Financial
Timothy L. Hensley Officer (Principal Financial and
Accounting Officer)
/s/ Gary E. Bowman Director January 4, 1996
- ---------------------------
Gary E. Bowman
<PAGE>
/s/ Robert L. Hurd President and Director January 4, 1996
- ---------------------------
Robert L. Hurd
/s/ Roland M. Howell Director January 4, 1996
- ---------------------------
Roland M. Howell
/s/ W. Bennett Collett, Jr. Director, Executive Vice January 4, 1996
- --------------------------- President and Secretary
W. Bennett Collett, Jr.
/s/ George W. Galloway, Jr. Director January 4, 1996
- ---------------------------
George W. Galloway, Jr.
F:\USERS\233\WPROC\FLORIDA.RED
cab\pg: 1/6/96
<PAGE>
Exhibit 3.2
As filed with the Delaware Secretary of State on November 29, 1995.
CERTIFICATE OF DESIGNATIONS
OF SERIES 9% AA PREFERRED STOCK
OF
FLORIDA GAMING CORPORATION
Florida Gaming Corporation (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify:
That pursuant to authority conferred upon by the Board of Directors by the
Corporation's Certificate of Incorporation, as amended, and pursuant to the
provisions of Section 151 of the General Corporation Law, said Board of
Directors, acting by a meeting of the Directors held on November 28, 1995,
hereby adopted the terms of the Series 9% AA Preferred Stock, which resolutions
are set forth on the attached pages.
Date: November 29, 1995 FLORIDA GAMING CORPORATION
By /s/ W. Bennett Collett
--------------------------------------
W. Bennett Collett
Chairman and Chief Executive Officer
ATTEST:
/s/ Timothy L. Hensley
- ---------------------------------
Timothy L. Hensley
Executive Vice President and Assistant Secretary
<PAGE>
FLORIDA GAMING CORPORATION
(the "Corporation")
RESOLUTION OF THE BOARD OF DIRECTORS
FIXING NUMBER AND DESIGNATING THE RIGHTS,
PRIVILEGES, RESTRICTIONS AND CONDITIONS ATTACHING
TO THE SERIES 9% AA PREFERRED STOCK
WHEREAS:
A. The Corporation's share capital includes 500,000 shares of preferred stock,
par value $.10 per share ("Preference Shares"), which may be issued in one
or more series with the directors of the Corporation (the "Board") being
authorized to establish by resolution the number of shares in each series
and to designate the rights, privileges, restrictions and conditions
attaching to the shares of each series; and
B. It is in the best interests of the Corporation for the Board to create a
first series of Preference Shares;
NOW, THEREFORE, BE IT RESOLVED, THAT:
The first series of the Preference Shares (the "Series 9% AA Shares") of
the Corporation shall consist of 5,000 shares and no more and shall be
designated as the Series 9% AA Preferred Stock. In addition to the
preferences, rights, privileges, restrictions and conditions attaching to
all the Preference Shares as a class, the rights, privileges, restrictions
and conditions attached to the Series 9% AA Shares shall be as follows:
PART 1 - VOTING AND PREEMPTIVE RIGHTS
1.1. Except as otherwise provided herein, in the Certificate of
Incorporation (the "Articles"), in the By-laws of the Corporation (the "By-laws)
or by the Business Corporation Law of the State of Delaware (the "BCL"), the
holders of Series 9% AA Shares, by virtue of their ownership thereof, shall not
have voting rights, except when voting rights are required by the BCL and the
provisions hereof.
1.2. The holders of Series 9% AA Shares shall not have any preemptive
rights to acquire any other securities issued by the Corporation at any time in
the future.
PART 2 - LIQUIDATION RIGHTS
2.1 The Series 9% AA Shares shall rank equal to the Corporation's Class A
Convertible Preferred Stock ("Class A Shares") with respect to priority of any
distribution of assets upon the liquidation of the Corporation.
<PAGE>
2.2. If the Corporation shall be voluntarily or involuntarily liquidated,
dissolved or wound up, at any time when any Series 9% AA Shares shall be
outstanding, the holders of the then outstanding Series 9% AA Shares shall be
entitled to receive, out of the assets of the Corporation available for
distribution, $1,000.00 per Series 9% AA Share, together with an amount, equal
to all unpaid dividends accrued thereon, if any, to the date of payment of such
distribution, whether or not declared by the Board, before any distribution
shall be made to holders of the Common Stock; PROVIDED, HOWEVER, that neither
the merger or consolidation of the Corporation with any corporation or
corporations, nor the sale nor transfer by the Corporation of all or any part of
its property, nor any reduction of the authorized or issued capital of the
Corporation of any class, whether now or hereafter authorized, shall be deemed
to be a liquidation of the Corporation within the meaning of any of the
provisions of this Part 2.
2.3. Subject to the provisions of Part 5 hereof, all amounts to be paid as
preferential distributions to the holders of Series 9% AA Shares as provided in
this Part 2 shall be paid or set apart for payment before the payment or setting
apart for payment of any amount for, or the distribution of any of the
Corporation's property to the holders of Common Stock, whether now or hereafter
authorized, in connection with such liquidation, dissolution or winding up.
PART 3 - DIVIDENDS
3.1. Holders of record of Series 9% AA Shares, out of funds legally
available therefor and to the extent permitted by law, shall be entitled to
receive dividends on their Series 9% AA Shares, which dividends shall accrue at
the rate per share of 9% per annum of consideration paid for each Series 9% AA
Share ($90.00 per share per year for each full year) commencing on the date of
the issuance thereof, payable, at the option of the Corporation, (i) in cash or
(ii) by the issuance of that number of whole shares of Common Stock computed by
dividing the amount of the dividend by the market price applicable to such
dividend.
3.2. For the purposes of this Part 3, "market price" means the average of
the daily closing prices of Common Stock for a period of five consecutive
trading days ending within 30 days preceding the date on which any dividend
becomes payable or of any notice of redemption, as the case may be. The closing
price for each trading day shall be (i) for any period during which the Common
Stock shall be listed for trading on a national securities exchange, the last
reported sale price per share of Common Stock as reported by the primary stock
exchange, or the Nasdaq Stock Market, if the Common Stock is quoted on the
Nasdaq Stock Market or (ii) if last sales price information is not available,
the average closing bid price of Common Stock as reported by the Nasdaq Stock
Market, or if not so listed or reported, then as reported by National Quotation
Bureau, Incorporated, or (iii) in the event neither clause (i) nor (ii) is
applicable, the average closing bid prices furnished by any member of the
National Association of Securities Dealers, Inc., selected from time to time by
the Corporation for that purpose.
3.3. Dividends on Series 9% AA Shares shall be cumulative. The Series 9%
AA Shares shall rank equal to the Class A Shares with respect to priority of
payment of dividends.
2
<PAGE>
No dividends or other distributions shall be paid or declared and set aside for
payment on the Common Stock until full cumulative dividends on all outstanding
Series 9% AA Shares shall have been paid or declared and set aside for payment.
3.4. Dividends shall be payable in arrears, at the rate of $22.50 per share
for each full calendar quarter on each February 28, May 31, August 31 and
November 30 of each calendar year, to the holders of record of the Series 9% AA
Shares as they appear in the securities register of the Corporation on such
record dates not more than 60 nor less than 10 days preceding the payment dates
thereof, as shall be fixed by the Board; provided, however, that the initial
dividend for the Series 9% AA Shares shall accrue for the period commencing on
the date of the issuance thereof to and including December 31, 1995.
3.5. If, in any quarter, insufficient funds are available to pay such
dividends as are then due and payable with respect to the Series 9% AA Shares
and all other classes and series in the capital of the Corporation ranking in
parity therewith (or such payment is otherwise prohibited by provisions of the
BCL), such funds as are legally available to pay such dividends shall be paid or
Common Stock will be issued as stock dividends to the holders of Series 9% AA
Shares and to the holders of any class of Preferred Stock or any other series of
Preference Shares then outstanding as provided in Part 5 hereof, in accordance
with the rights of each such holder, and the balance of accrued but undeclared
and/or unpaid dividends, if any, shall be declared and paid on the next
succeeding dividend date to the extent that funds are then legally available for
such purpose.
PART 4 - CONVERSION
4.1. For the purposes of conversion, the Series 9% AA Shares shall be
valued at $1,000.00 per share ("Value"), and, if converted, the Series 9% AA
Shares shall be converted into Common Stock (the "Conversion Shares") at the
price per share (the "Conversion Price") equal to the product of (i) the
"Discount Factor" multiplied by (ii) the "Average Stock Price," subject to
adjustment pursuant to the provisions of this Part 4. For purposes of this Part
4, (i) "Discount Factor" shall be determined according to the table below:
Number of Days between Date of Discount
Issuance and Date of Conversion Factor
------------------------------- --------
40-89 .75
90-179 .74
180-359 .73
360 or more .72
and (ii) "Average Stock Price" means the average daily closing bid prices of
Common Stock for the five consecutive trading days immediately preceding the
date of issuance of the Series 9%
3
<PAGE>
AA Shares. The closing price for each trading day shall be determined as
provided in the last sentence of Section 3.2.
4.2. Any holder of Series 9% AA Shares (an "Eligible Holder") may convert
up to 100% of his holdings of Series 9% AA Shares at any time 41 days or more
after completion of the "offshore offering" (as such term is defined by
Regulation S promulgated under the Securities Act of 1933, as amended) in which
the Eligible Holder's Series 9% AA Shares were issued.
4.3. The conversion right granted by Section 4.2 hereof may be exercised
only by an Eligible Holder of Series 9% AA Shares, in whole or in part, by the
surrender of the shares certificate or shares certificates representing the
Series 9% AA Shares to be converted at the principal office of the Corporation
(or at such other place as the Corporation may designate in a written notice
sent to the holder by first-class mail, postage prepaid, at its address shown on
the books of the Corporation) against delivery of that number of whole shares of
Common Stock as shall be computed by dividing (1) the aggregate Value of the
Series 9% AA Shares so surrendered plus any accrued but unpaid dividends
thereon, if any, by (2) the Conversion Price in effect at the time of such
surrender. At the time of conversion of Series 9% AA Shares, the Corporation
shall pay in cash to the holder thereof an amount equal to all unpaid dividends,
if any, accrued thereon to the date of conversion, or, at the Corporation's
option, issue that number of whole shares of Common Stock that is equal to the
product of dividing the amount of such unpaid dividends (whether or not declared
by the Board) by the Average Stock Price. Each stock certificate surrendered
for conversion shall be endorsed by its holder. In the event of any exercise of
the conversion right of the Series 9% AA Shares granted herein (i) share
certificates representing the Conversion Shares shall be delivered to such
holder forthwith, and (ii) unless the holder's Series 9% AA Shares have been
fully converted, a new share certificate representing the Series 9% AA Shares
not so converted, if any, shall also be delivered to such holder forthwith. The
share certificates representing the Conversion Shares shall be dated the date of
such surrender and the holder making such surrender shall be deemed for all
purposes to be the holder of the Conversion Shares as of the date of such
surrender.
4.4. All Conversion Shares will, upon issuance, be duly issued, fully paid
and nonassessable and free from all taxes, liens, and charges with respect to
the issue thereof. At all times that any Series 9% AA Shares are outstanding,
the Corporation shall have authorized, and shall have reserved for the purpose
of issuance upon such conversion, a sufficient number of shares of Common Stock
to provide for the conversion into Common Stock of all Series 9% AA Shares then
outstanding at the then effective Conversion Price. Without limiting the
generality of the foregoing, if, at any time, the Conversion Price is decreased,
the number of shares of Common Stock authorized and reserved for issuance upon
the conversion of the Series 9% AA Shares shall be proportionately increased.
4.5. The number of Conversion Shares and the Conversion Price shall be
subject to adjustment from time to time upon the happening of certain events, as
follows:
4
<PAGE>
4.5.1 Change of Designation of the Common Stock or the rights,
privileges, restrictions and conditions in respect of the Common Stock
or division of the Common Stock into Series. In the case of any
amendment to the Articles to change the designation of the Common
Stock or the rights, privileges, restrictions or conditions in respect
of the Common Stock or division of the Common Stock into series, the
rights of the holders of the Series 9% AA Shares shall be adjusted so
as to provide that upon conversion thereof the holder of the Series 9%
AA Shares being converted shall procure, in lieu of each Conversion
Share theretofore issuable, the kind and amount of shares, other
securities, money and property receivable upon such designation,
change or division by the holder of one Conversion Share had
conversion occurred immediately prior to such designation, change or
division. The Series 9% AA Shares shall be deemed thereafter to
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Part 4. The
provisions of this subsection 4.5.1. shall apply in the same manner to
successive reclassifications, changes, consolidations and mergers.
4.5.2. If the Corporation, at any time while any of the Series 9%
AA Shares are outstanding, shall amend the Articles so as to change
the Common Stock into a different number of shares, (1) the Conversion
Price shall be proportionately reduced, in case of such change
increasing the number of Conversion Shares, as of the effective date
of such increase, or if the Corporation shall take a record of holders
of its Common Stock for the purpose of such increase, as of such
record date, whichever is earlier, or (2) the Conversion Price shall
be proportionately increased, in the case of such change decreasing
the number of Conversion Shares as of the effective date of such
decrease or, if the Corporation shall take a record of holders of its
Common Stock for the purpose of such decrease, as of such record date,
whichever is earlier.
4.5.3. If the Corporation, at any time while any of the Series 9%
AA Shares are outstanding, shall pay a dividend payable in shares of
Common Stock, the Conversion Price shall be adjusted, as of the date
the Corporation shall take a record of the holders of its Common Stock
for the purpose of receiving such dividend (or if no such record is
taken, as of the date of payment of such dividend), to that price
determined by multiplying the Conversion Price therefor in effect by a
fraction (1) the numerator of which shall be the total number of
shares of Common Stock outstanding immediately prior to such dividend,
and (2) the denominator of which shall be the total number of shares
of Common Stock outstanding immediately after such dividend, plus in
the event that the Corporation paid cash for fractional shares, the
number of additional shares which would have been outstanding had the
Corporation issued fractional shares in connection with said dividend.
5
<PAGE>
4.6. Whenever the Conversion Price shall be adjusted pursuant to Section
4.5 hereof, the Corporation shall make a certificate signed by its Chairman,
President, or a Vice President and by its Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary, setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which the
Board of Directors made any determination hereunder), and the Conversion Price
after giving effect to such adjustment, and shall cause copies of such
certificates to be mailed (by first-class mail, postage prepaid) to each holder
of Series 9% AA Shares at its address shown on the books of the Corporation.
The Corporation shall make such certificate and mail it to each such holder
promptly after each adjustment.
4.7. No fractional shares of Common Stock shall be issued in connection
with any conversion of Series 9% AA Shares, but in lieu of such fractional
shares, the Corporation shall make a cash payment therefor equal in amount to
the product of the applicable fraction multiplied by the Conversion Price then
in effect.
4.8. No Series 9% AA Shares which have been converted into Common Stock
shall be reissued by the Corporation, PROVIDED, HOWEVER, that each such share,
after being retired and canceled, shall be restored to the status of an
authorized but unissued Preference Share without designation as to series and
may thereafter be issued as a Preference Share not designated a Series 9% AA
Share.
PART 5 - PARITY WITH OTHER SERIES OF PREFERENCE SHARES
If any cumulative dividends or accounts payable or return of capital in
respect to Series 9% AA Shares are not paid in full, the owners of all series of
Preference Shares shall participate rateably in respect of accumulated dividends
and return of capital.
PART 6 - AMENDMENT
In addition to any requirement for a series vote pursuant to the BCL in
respect of any amendment to the rights, privileges, restrictions and conditions
attaching to the Series 9% AA Shares, the rights, privileges, restrictions and
conditions attaching to the Series 9% AA Shares may be amended only if the
Corporation has obtained the affirmative vote at a duly called and held meeting
of holders of the Series 9% AA Shares or written consent by the holders of a
majority of the Series 9% AA Shares then outstanding.
6
<PAGE>
Exhibit 3.3
As filed with the Delaware Secretary of State on December 20, 1995.
CERTIFICATE OF DESIGNATION, NUMBER, POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL,
AND OTHER SPECIAL RIGHTS AND THE QUALIFICATIONS,
LIMITATIONS, RESTRICTIONS, AND OTHER DISTINGUISHING
CHARACTERISTICS OF SERIES B PREFERRED STOCK
OF
FLORIDA GAMING CORPORATION
Florida Gaming Corporation, a corporation organized and existing under the
laws of the State of Delaware (the "Corporation") hereby certifies that:
1. The Corporation is validly existing and incorporated under the laws of
the State of Delaware.
2. The Corporation's Certificate of Incorporation, as amended, authorizes
the issuance of 500,000 shares of Preferred Stock, par value $.10 per share, and
expressly vests in the Board of Directors the authority provided therein to
issue any or all of such shares in one or more series, and by resolution or
resolutions the designation, number, full or limited voting powers, preferences
and relative, participating, optional and other special rights, and the
qualifications, limitations, restrictions, and other distinguishing
characteristics of each series to be issued. Currently, there are authorized
for issuance 1,200,000 shares of Class A Convertible Preferred Stock, par value
$.10 per share ("Class A"), of which 35,235 are issued and outstanding, and
5,000 shares of Series AA Preferred Stock ("Series AA") a series of Preferred
Stock, of which no shares are currently issued and outstanding. The rights of
the holders of the Class A and the Series AA shares shall rank PARI PASSU with
the rights of the holders of the Series B Convertible Preferred Stock designated
hereby with respect to all preferences upon liquidation.
3. DESIGNATION OF THE SERIES. The Board of Directors of the Corporation,
pursuant to authority expressly vested in it as aforesaid, has adopted the
following, creating a series of Preferred Stock designated as Series B
Convertible Preferred Stock:
There shall be a series of Preferred Stock designated as "Series B
Convertible Preferred Stock." Each share of such series shall be referred to
herein as a "Series B Share." The consideration to be received by the
Corporation upon initial issuance of each share of the Series B Shares shall be
$1,000. The authorized number of such Series B Shares is 5,000 shares. The
Series B Shares shall be equal in rank to the Class A and Series AA shares with
respect to payment of dividends and the distribution of assets upon liquidation
of the Corporation.
A. VOTING RIGHTS. Except as otherwise required by law, the holders
of the Series B Preferred shall not be entitled to vote separately, as a series
or otherwise, on any matter submitted to a vote of the shareholders of the
Corporation. Notwithstanding the foregoing, without the prior written consent
of the holders of the Series B Shares:
<PAGE>
(i) the Corporation shall not amend, alter, or repeal (whether
by amendment, merger, or otherwise) any of the provisions of its Certificate of
Incorporation, as amended, related to the Series B Shares, any resolutions of
the board of directors or any instrument establishing and designating the Series
B Shares in determining the relative rights and preferences thereof so as to
affect any materially adverse change in the rights, privileges, powers, or
preferences of the holders of the Series B Shares; or
(ii) the Corporation shall not create or designate any
additional preferred stock senior in right as to dividends, voting rights,
redemptions or liquidation to the Series B Shares.
B. DIVIDENDS. Holders of the Series B Shares shall be entitled to
receive when, as and if declared by the Board of Directors of the Corporation,
out of funds legally available for payment of dividends, annual cumulative
dividends at the rate of 8% of the consideration paid for the purchase of the
Series B Shares for the period commencing on the Issuance Date. Such dividends
shall be payable in shares of Common Stock on the Conversion Date in accordance
with Section 3, whether or not declared and whether or not there shall be funds
legally available for the payment thereof. Interest shall not be payable on the
balance of any accrued unpaid dividends on the Series B Shares. Dividends on
the Series B Shares shall be paid before payment of any dividends on Common
Stock or any class of stock ranking junior to Series B Shares as to dividend
rights.
C. CONVERSION.
(i) CONVERSION. The holders of the outstanding Series B Shares
shall have the right, at such holders' option, without the payment of any
additional consideration by the holder thereof and at any time after 40 days
from the date the holders' Series B shares are issued, to convert all or any of
such Series B Shares into the number of shares of Common Stock for which such
Series B Shares are then convertible pursuant to Section C(ii) below (after
giving effect to any adjustments provided for under Section C(v) hereof).
(ii) CONVERSION PRICE. Upon conversion of the Series B Shares
pursuant to C(i) above, each Series B Share shall be converted into the number
of shares of Common Stock equal to a fraction, the numerator of which shall be
the Liquidation Value of such Series B Shares (as defined in Section D(i)) on
the Conversion Date and the denominator of which shall be eighty percent (80%)
of the average of the closing bid prices for the Common Stock as reported by
NASDAQ for the five (5) consecutive business days immediately preceding the
Conversion Date (the "Average Trading Price").
(iii) MECHANICS OF CONVERSION. The holder of any Series B
Shares may exercise the conversion right pursuant to Section C(i) as to any part
thereof by delivering to the Corporation, or at such other place as may be
designated by the Corporation, during regular business hours, the certificate or
certificates for the Series B Shares to be converted, duly endorsed or assigned
in blank or to the Corporation, accompanied by written notice stating that the
holder elects to convert such shares and stating the name or names (with
address) in which the certificate or certificates for the shares of Common Stock
are to be issued, including any appropriate signature guarantees (the "Notice of
Conversion"). Conversion shall be deemed to
- 2 -
<PAGE>
have been effected on the date when the aforesaid delivery is made and such date
is referred to herein as the "Conversion Date". As promptly as practicable
thereafter, the Corporation shall issue and deliver to or upon the written order
of such holder, but in no event later than two (2) business days after the
Corporation receives a written Notice of Conversion from holder, to the place
designated by such holder, a certificate or certificates for the number of full
shares of Common Stock to which such holder is entitled. The person in whose
name the certificate or certificates for Common Stock are to be issued shall be
deemed to have become a stockholder of record on the applicable Conversion Date
unless the transfer books of the Corporation are closed on that date, in which
event such person shall be deemed to have become a stockholder of record on the
next succeeding date on which the transfer books are open. Upon conversion of
only a portion of the number of shares covered by a certificate representing
Series B Shares surrendered for conversion, the Corporation shall issue and
deliver to or upon the written order of the holder of the certificate so
surrendered for conversion, at the expense of the Corporation, a new certificate
covering the number of Series B Shares representing the unconverted portion of
the certificate so surrendered.
(iv) FRACTIONAL SHARES. No fractional shares of Common Stock or
script shall be issued upon conversion of Series B Shares. If more than one
Series B Share shall be surrendered for conversion at any one time by the same
holder, the number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares of such
series to be surrendered. Instead of any fractional shares of Common Stock
which would otherwise be issuable upon conversion of any Series B Shares, the
Corporation shall pay out of funds legally available therefor a cash adjustment
in respect of such fractional interest in an amount equal to such fractional
interest multiplied by the Average Trading Price.
(v) CERTAIN ADJUSTMENTS. In the event of any change in one or
more classes of capital stock of the Corporation by reason of any stock
dividend, stock split-up, recapitalization, reclassification, or combination,
subdivision or exchange of shares or the like, or in the event of the merger or
consolidation of the Corporation or the sale or transfer by the Corporation of
all or substantially all of its assets, then all liquidation preference,
conversion and other rights and privileges appurtenant to the Series B Shares
shall be promptly and appropriately adjusted by the Board of Directors of the
Corporation so as to fully protect and preserve the same (such preservation and
protection to be to the same extent and effect as if the subject event had not
occurred, or the applicable right or privilege had been exercised immediately
prior to the occurrence of the subject event, or otherwise as the case may be),
it being the intention that, following any such adjustment, the holders of the
Series B Shares shall be in the same relative position with respect to their
rights and privileges as they possessed immediately prior to the event that
precipitated the adjustment.
(vi) COSTS. The Corporation shall pay all documentary, stamp,
transfer or other transactional taxes attributable to the issuance or delivery
of shares of Common Stock upon conversion of any Series B Shares; provided that
the Corporation shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for such shares in a name other than that of the holder of the Series B Shares
in respect of which such shares are being issued.
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(vii) RESERVATION OF SHARES. The Corporation shall reserve,
free from preemptive rights, out of its authorized but unissued shares of Common
Stock solely for the purpose of effecting the conversion of the Series B
Preferred shares sufficient shares to provide for the conversion of all
outstanding Series B Shares.
D. LIQUIDATION.
(i) SERIES B PREFERENCE. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
Series B Shares shall be entitled, before any distribution or payment is made
upon any shares of Common Stock or any Preferred Stock junior in rank to the
Series B Shares, to be paid an amount per Series B Share (the "Liquidation
Value") equal to the sum of $1,000 per Series B Share plus 8% accrued and unpaid
dividends from the date of issuance, whether or not declared.
Neither the consolidation nor merger of the Corporation with or into any other
corporation or other entities, nor the sale, transfer or lease of all or
substantially all of the assets of the Corporation shall itself be deemed to be
a liquidation, dissolution or winding-up of the Corporation within the meaning
of this Section D. Notice of liquidation, dissolution, or winding-up of the
Corporation shall be mailed, by first-class mail, postage prepaid, not less than
20 days prior to the date on which such liquidation, dissolution, or winding-up
is expected to take place or become effective, to the holders or record of the
Series B Shares at their respective addresses as the same appear on the books of
the Corporation or supplied by them in writing to the Corporation for the
purpose of such notice, but no defect in such notice or in the mailing thereof
shall affect the validity of the liquidation, dissolution or winding-up.
(ii) GENERAL.
(A) All of the preferential amounts to be paid to the
holders of the Series B Shares pursuant to Section D(i) shall be paid or set
apart for payment before the payment or setting apart for payment of any amount
for, or the distribution of any assets of the Corporation to, the holders of the
Common Stock or any preferred stock junior in rank to the Series B Shares in
connection with such liquidation, dissolution or winding-up.
(B) After setting apart or paying in full the preferential
amounts aforesaid to the holders of record of the issued and outstanding Series
B Shares as set forth in Section D(i), the holders of record of Common Stock and
any preferred stock junior in rank to the Series B Shares shall be entitled to
participate in any distribution of any remaining assets of the Corporation, and
the holders of record of the Series B Shares shall not be entitled to
participate in such distribution.
E. REACQUIRED SHARES. Any shares of Series B Shares redeemed,
purchased, converted, or otherwise acquired by the Corporation in any manner
whatsoever shall not be reissued as part of such series and shall be retired
promptly after the acquisition thereof. All such shares shall upon their
retirement and the filing of any certificate required in connection therewith
pursuant to the Delaware General Corporation Law become authorized but unissued
shares of Preferred Stock.
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F. COPIES OF AGREEMENTS, INSTRUMENTS, DOCUMENTS. Copies of any of
the agreements, instruments or other documents referred to in this Amendment
shall be furnished to any stockholder upon written request to the Corporation at
its principal place of business.
4. The statements contained in the foregoing, creating and designating
the Series B Preferred Stock and fixing the number, powers, preferences and
relative, optional, participating, and other special rights and the
qualifications, limitations, restrictions, and other distinguishing
characteristics thereof shall, upon the effective date of said series, be deemed
to be included in and be a part of the Certificate of Incorporation of the
Corporation pursuant to the provisions of Sections 104 and 151 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Certificate of Designation has been executed on
behalf of the Corporation by its Chairman and attested by its Secretary this
19th day of December, 1995, and they do hereby affirm, under penalties of
perjury, that the foregoing Certificate of Designations is the act and deed of
the Corporation and that the facts stated therein are true and accurate.
Signed and attested to on December 19, 1995.
FLORIDA GAMING CORPORATION
By /s/ W. Bennett Collett
------------------------------------
W. Bennett Collett, Its Chairman
and Chief Executive Officer duly
authorized
Attest:
By /s/ Timothy L. Hensley
----------------------------------
Timothy L. Hensley
Executive Vice President and
Assistant Secretary
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EXHIBIT NO. 23.2
ACCOUNTANTS' CONSENT
We consent to the use in this Form S-3 Registration Statement relating to
the sale of the common stock, $.10 par value, of Florida Gaming Corporation of
our report dated March 16, 1995, accompanying the December 31, 1994 financial
statements of Florida Gaming Corporation incorporated by reference in such
Registrant Statement, and to the use of our name, and the statements with
respect to us, as appearing under the heading "Experts" in the Prospectus.
KING & COMPANY, PSC
/s/ King & Company, PSC
Louisville, Kentucky
January 8, 1996
