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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
F O R M 10-QSB/A
(AMENDMENT NO. 1)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1995
Commission file number 0-9099
FLORIDA GAMING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 59-1670533
- ------------------------------- -------------------------------
(State or other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1750 SOUTH KINGS HIGHWAY, FT. PIERCE, FLORIDA 34945-3099
- -------------------------------------------------- ------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (407)464-7500
--------------------------
Former name, former address and former fiscal year,
if changed since last report N/A
---------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
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3,123,586 shares of the issuer's Common Stock were outstanding as of the
- ------------
latest practicable date, NOVEMBER 13, 1995 .
----------------------
Transitional Small Business Disclosure Format:
YES NO X
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<PAGE>
T I. FINANCIAL INFORMATION
ITEM 1.
FLORIDA GAMING CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
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(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 1,151,477 $ 1,363,174
Investment securities . . . . . . . . . . . . . . . . . . . -- 1,618,250
Accounts receivable & current portion of notes receivable. . 18,338 20,258
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 22,445 22,123
Prepaid expense and other . . . . . . . . . . . . . . . . . 26,068 7,387
------------- ------------
Total current assets . . . . . . . . . . . . . . . . . 1,218,328 3,031,192
PROPERTY AND EQUIPMENT:
Land (Notes 2,5, and 9) . . . . . . . . . . . . . . . . . . 2,719,495 1,631,865
Building and Improvements (Note 5) . . . . . . . . . . . . . 1,914,101 1,799,962
Furniture, fixtures and equipment (Note 5) . . . . . . . . . 504,864 422,596
------------- ------------
5,138,460 3,854,423
Less accumulated depreciation . . . . . . . . . . . . . . . (268,862) (141,962)
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4,869,598 3,712,461
OTHER NOTES RECEIVABLE, NET . . . . . . . . . . . . . . . . 120,000 --
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 67,218 30,800
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$ 6,275,144 $ 6,774,453
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . $ 91,617 $ 1,196,666
Accrued payroll and related expenses . . . . . . . . . . . . 8,449 15,415
Other accrued expenses . . . . . . . . . . . . . . . . . . . 157,600 176,879
Short-term borrowing and current portion of long-term debt . 126,368 108,385
------------- ------------
Total current liabilities . . . . . . . . . . . . . . 384,034 1,497,345
LONG-TERM LIABILITIES
Long-term portion notes payable (Notes 6,and 7) . . . . . . 1,831,337 1,114,061
STOCKHOLDERS' EQUITY (Notes 2,4,8 and 9):
Class A preferred stock, convertible to common stock, $.10
par value, authorized 1,200,000 shares, 35,235 shares
issued and outstanding, aggregate liquidation preference
of $352,350 at September 30, 1995; 43,664 shares issued
and outstanding at December 31, 1994, aggregate
liquidation preferences of $477,000. . . . . . . . . . . . 3,524 4,366
Common stock, $.10 par value, authorized 15,000,000 shares,
3,123,474 issued and outstanding at September 30,
1995, and 3,119,246 shares issued and outstanding
at December 31, 1994 . . . . . . . . . . . . . . . . . . . 312,347 311,924
Capital in excess of par value . . . . . . . . . . . . . . . 25,058,360 25,026,362
Accumulated deficit . . . . . . . . . . . . . . . . . . . . (21,314,458) (21,179,605)
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Total stockholders' equity . . . . . . . . . . . . . . 4,059,773 4,163,047
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$ 6,275,144 $ 6,774,453
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</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
FLORIDA GAMING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
HANDLE:
Jai-Alai $ -- $ -- $ 4,183,844 $ 3,480,257
ITW 4,638,923 4,040,406 15,190,424 11,305,216
------------- ------------- ------------- -------------
Total Pari-Mutuel Handle 4,638,923 4,040,406 19,374,268 14,785,473
REVENUE:
Pari-Mutuel Revenues, net of $24,727, $ 486,323 $ 416,968 $ 2,440,639 $ 1,711,593
$-0-, $126,900 and $144,384 pari-
mutuel taxes paid to the State of
Florida, respectively
Admissions, net of $2,144, $1,683, $22,732, 29,671 27,441 118,154 91,763
and $18,812 of Admissions & Sale Taxes paid
to the State of Florida, respectively
Food, Beverage and Other 98,028 84,521 638,714 440,510
------------- ------------- ------------- -------------
Total Revenues 614,022 528,930 3,197,507 2,243,866
COSTS AND EXPENSES:
Operating 472,318 392,807 2,452,069 1,855,545
General and Administrative 204,404 130,180 604,164 383,608
Depreciation 42,300 24,000 126,900 65,833
------------- ------------- ------------- -------------
Total Costs and Expenses 719,022 546,987 3,183,133 2,304,986
------------- ------------- ------------- -------------
Net Income (loss) from operations (105,000) (18,057) 14,374 (61,120)
OTHER INCOME (EXPENSES):
Interest Dividend Income, net 14,452 8,628 66,463 17,739
Gain (loss) on Net Sale of Assets -- -- -- (14,669)
Realized Gain on Marketable Securities -- -- 195,939 --
Other (Expense) (337,108) (7,023) (379,917) (21,086)
------------- ------------- ------------- -------------
Net Income (Loss) $ (427,656) $ (16,452) $ (103,141) $ (79,136)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Earnings (loss) per common share ($.13) ($.01) ($.03) ($.05)
(See Note 7)
Weighted average common shares outstanding 3,120,670 1,761,136 3,119,726 1,693,971
(See Note 7)
Fully diluted per share earnings (See Note 7) N/A N/A N/A N/A
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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FLORIDA GAMING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
------------- -------------
<S> <C> <C>
Operating activities:
Net Income $ (103,141) $ (79,136)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 126,900 65,833
Loss on sale of assets -- 14,669
Realized gain on sale of marketable securities (195,939) --
Decrease (increase) in -
Accounts receivable, net (126,143) (6,457)
Prepaid and other current assets (18,681) 21,181
Other assets (36,418) --
Inventories (322) (20,807)
Increase (decrease) in -
Accounts payable (20,508) (3,950)
Accrued expenses (26,245) 208,846
------------- -------------
Total adjustments (632,616) 279,315
Net cash provided (used) by operating activities $ (400,497) $ 200,179
Investing activities:
Proceeds from sale of assets -0- 95,000
Proceeds from sales and maturities of marketable securities 1,814,189 --
Capital Expenditures (Note 8) (1,284,037) (2,978,318)
------------- -------------
Net cash provided from (used in) investing activities $ 530,152 $(2,883,318)
Financing activities:
Proceeds from payments on notes receivable 8,063 10,515
Net proceeds from borrowing (Note 8) 735,259 1,034,423
Repayment of margin account (1,084,541) --
Stockholders Equity:
Proceeds from issuance of common stock -- 1,300,000
Conversion of Preferred to Common and Preferred
Dividend Payments (87) (71)
Common stock repurchased (46) --
------------- -------------
Net cash provided (used) from financing activities $ (341,352) $ 2,344,867
NET INCREASE (DECREASE) IN CASH $ (211,697) $ (338,272)
CASH AND EQUIVALENTS AT BEGINNING OF YEAR $ 1,363,174 $ 2,033,901
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 1,151,477 $ 1,695,629
------------- -------------
------------- -------------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 126,084 $ 34,601
Income Taxes -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
FLORIDA GAMING CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
(1) BASIS OF PRESENTATION
The financial statements of Florida Gaming Corporation (the "Company") have
been prepared without audit for filing with the Securities and Exchange
Commission. The accompanying unaudited financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission for interim financial information. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. Therefore, it is
suggested that the accompanying financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's
latest annual report on Form 10-KSB.
Certain information and notes have been condensed or omitted pursuant to the
rules and regulations of the Commission. The financial information presented
herein, while not necessarily indicative of results to be expected for the
year, reflects all adjustments of a normal recurring nature, which, in the
opinion of the Company, are necessary to a fair statement of the results for
the periods indicated.
(2) SIGNIFICANT ACCOUNTING POLICIES
For purposes of these statements, the Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
The Company's investment in undeveloped land ($1,612,001 at September 30,
1995) is carried at cost and is included with land under property, plant and
equipment in the balance sheet.
The Company's inventory, comprising food and beverage products and souvenirs,
is stated at the lower of cost or market.
Revenue is derived from acceptance of wagers under a pari-mutuel wagering
system. The Company accepts wagers on both on-site and ITW events. On-site
wagers are accumulated in pools with a portion being returned to winning
bettors, a portion paid to the State of Florida and a portion retained by the
Company. ITW wagers are also accepted and forwarded to the "host" facility
after retention of the Company's commissions. The Company's liability to
host tracks for ITW collections totaled $43,572 and are included in accounts
payable at September 30, 1995. Unclaimed winnings totaled $48,045 at
September 30, 1995.
(3) INCOME TAXES
The provision for income taxes is based on income for financial statement
purposes. Deferred income taxes, which arise from timing differences between
the period in which certain income and expenses are recognized for financial
reporting purposes and the period in which they affect taxable income, are
included in the amounts provided for income taxes. Tax credits are recorded
as a reduction in the provision for federal income taxes in the year the
credits are utilized.
At December 31, 1994, the Company had net operating loss (NOL) carryforwards
of approximately $10,766,000 available to offset future taxable income. This
amount includes approximately $3,924,000 representing losses incurred by a
former subsidiary while it was owned by the Company. Such losses were
reattributed to the Company by agreement in accordance with Section
1.1502-20(g)(1) of the Internal Revenue Code (IRC).
These NOL carryforwards expire fifteen years from the year in which the
losses were incurred or at various intervals through fiscal 2009. However,
virtually all of the Company's NOL carryforwards which can be utilized to
offset future taxable income are limited to approximately $95,000 per fiscal
year under section 382 of the IRC. Operating losses of approximately $386,000
are not subject to the Section 382 limitation.
(4) INCOME PER COMMON SHARE
The net income (loss) per common share was calculated based upon net income
and the weighted average number of outstanding common shares (3,120,670 for
the three months ended September 30, 1995, 3,119,726 for the nine months
ended September 30, 1995, 1,761,136 for the quarter ended September 30, 1994,
and 1,693,971 for the nine months ended September 30, 1994). Options and
warrants were included in the computations of income per share on a fully
diluted basis for the nine months ended September 30, 1995. Weighted average
equivalent shares on a fully diluted basis for the nine months ended
September 30, 1995 were 5,135,904 shares, consisting of 74,250 options held
by two former directors, 54,000 in options held by Vice President Ron
Perella, 7,928 shares of equivalent converted Preferred Class A Stock,
250,000 in options held by directors and an executive officer under
Nonqualified Stock Option Plans and 16B plans, 300,000 in nonqualified
options granted to Chairman Collett at the July, 7, 1995 shareholders'
meeting, 1,330,000 in options held by Freedom Financial Corporation, and the
3,119,726 weighted average common shares. Options and warrants were not
considered in the computations of loss per share for the other periods
presented herein as they were anti-dilutive.
5
<PAGE>
(5) FT. PIERCE ACQUISITION
As set forth in its Report on Form 8-K dated February 1, 1994, Florida Gaming
received approval from the Florida Department of Business Regulation to
transfer the pari-mutuel permit for the Ft. Pierce, Florida, Jai-Alai and
Inter-Track Wagering facility (the "Fronton"), and also closed the purchase
transaction that date. The business consists of, among other things, live
jai-alai, inter-track pari-mutuel wagering and the sale of food and alcoholic
beverages.
Common stock issued to the seller (WJA Realty, LTD.) was valued at 2 and 3/16
(the closing price of the Company's common stock as of the transaction date).
The Company also purchased certain inventories and assumed certain
pari-mutuel liabilities to patrons as part of the transaction.
(6) PREFERRED STOCK
The Company's Class A preferred stock bears annual dividends at the rate of
$.90 per share payable in cash, property or common stock, which are
cumulative and have priority over dividends on the common stock. There were
no accrued or unpaid dividends on Class A preferred stock as of September 30,
1995 and December 31, 1994.
Each share of Class A preferred is convertible into .225 shares of common
stock at the holder's option. December 31, 1994, there were 43,664 shares of
Class A preferred outstanding convertible into 9,824 shares of common stock.
At September 30, 1995, there were 35,235 shares of Class A preferred
outstanding convertible into 7,928 shares of common stock. The Class A
preferred is redeemable at the option to the Company at $10.60 per share. In
the event of dissolution, the holders of Class A preferred shall be entitled
to receive $10.00 per share plus accrued dividends, prior to any distribution
to holders of commons stock. Subsequent to the quarter ended September 30,
1995, on October 25, 1995, a preferred shareholder exercised the conversion
rights which resulted in the cancellation of 500 Class A preferred shares and
the issuance of 112 common shares.
(7) RELATED PARTY TRANSACTIONS
On August 26, 1994, Freedom Financial Corporation exercised its option in
part to purchase 400,000 shares of the Company's common stock at an exercise
price of $1.25 per share. On October 12, 1994, Freedom exercised its option
to acquire an additional 300,000 shares. These purchases resulted in
approximately $875,000 in additional equity capital for the Company. Freedom
retains an option to purchase 1,330,000 shares at an exercise price of $1.25
per share. See also Note (8) Commitments and Contingencies - Casino America.
The Company has various non-qualified stock option plans and agreements which
grant options with Board approval to employees, officers, and directors.
Under each plan or agreement, the exercise price for each option granted must
be at least 100% of the fair market value of the Company's common stock on
the date the option is granted.
Under three separate agreements during fiscal 1993 the Company entered into
stock option agreements with a former director who is now vice president of
the Company and two former directors of the Company whereby the Company
granted to these individuals non-qualified options to purchase an aggregate
84,250 shares of the Company's common stock at an exercise price of $2.50 per
share. These options are currently exercisable, expire December 31, 1997,
and include certain registration rights for all shares issued upon exercise.
On April 21, 1994, the Company adopted a new Nonqualified Stock Option Plan,
subject to shareholder approval, under which options up to an amount equal to
5% of the Company's issued and outstanding shares of Common Stock can be
issued to the Company's non-director employees. On April 21, 1994, pursuant
to this plan options for 50,000 shares of Common Stock were granted to the
Company's Executive Vice-President (prior to his becoming a director) and
options for 25,000 shares were granted to the Company's Chief Financial
Officer, each with an exercise price per share of $7.50. This plan was
approved at the July 7, 1995 Annual Stockholders Meeting.
During August, 1994, the Company initiated a new stock option plan for
directors pursuant to which each current and future director will receive a
one-time grant of options of 25,000 Common Shares. Options for 150,000
shares were granted under this plan in 1994. The option prices for these
shares are the market value at the respective dates of grant (range of $5.50
to $5.75 in 1994). The options are not exercisable until one year from the
date of election to the Board. On April 28, 1995, options for 25,000 were
granted to a new director at $5.188 per common share.
On November 7, 1994, the Board of Directors granted the Company's Chief
Financial Officer an option to purchase an additional 25,000 shares of common
stock at an exercise price of $5.50 per share, exercisable one year from the
date of grant.
On April 28, 1995, the Board of Directors granted Vice President, Ron
Perella, an option to purchase an additional 19,000 shares of common stock at
an exercise price of $5.188 per share, exercisable from the date of grant.
Also on April 28, 1995, the Board of Directors granted Chairman & CEO, W.B.
Collett, an option effective May 8, 1995, to purchase 300,000 shares of
common stock at an exercise price equal to mean of the high and low market
price quoted on NASDAQ as of May 8, 1995 ($5.00 per share), subject to
shareholder approval at the July 7, 1995, annual shareholders meeting. Mr.
Collett has not received any renumeration from Florida Gaming since
involvement with the Company in March of 1993. The Board of Directors'
intention was to compensate Mr. Collett for his efforts through these
options. The shareholders
6
<PAGE>
approved the grant to Chairman and CEO,Collett at that meeting.
(8) COMMITMENTS AND CONTINGENCIES
On May 13, 1994, American Jai-Alai, Inc. ("American Jai-Alai") filed suit in
the Circuit Court of the Fifteenth Circuit in Florida, Palm Beach County,
against the Company. American Jai-Alai alleges that in August 1993 the
Company entered into a contract with American Jai-Alai that American Jai-Alai
would manage the Fronton if the Company acquired it. American Jai-Alai
alleges that the Company and American Jai-Alai agreed to enter into a
five-year renewable management contract pursuant to which American Jai-Alai
would guarantee a $480,000 annual payment to the Company, $270,000 of the
Fronton's net operating income above $480,000 would be paid to the Company,
with American Jai-Alai receiving 25% of all net operating income above
$750,000 annually. In addition, American Jai-Alai alleges that it has a
first right of refusal if the Company desires to sell the Fronton at anytime
during the alleged management contract. American Jai-Alai also alleges that
the Company granted it an option to purchase 100,000 shares of Common Stock
at $2.50 throughout the alleged management contract, but not to exceed 1997.
In addition, American Jai-Alai alleges that the Company agreed to pay
American Jai-Alai 25% of any profit realized from the sale of the Fronton, if
such sale was not to American Jai-Alai pursuant to its alleged right of first
refusal. In the Complaint, American Jai-Alai alleges, among other claims,
breaches of fiduciary duty, breach of contract and fraud. On May 20, 1994,
counsel for American Jai-Alai stated that American Jai-Alai was exercising
its alleged right to purchase the 100,000 shares of Common Stock for $2.50.
The Company has not issued any shares of Common Stock pursuant to this
demand. The Company has filed an Answer to the Complaint and also filed a
motion to move the suit from Palm Beach County to St. Lucie County, which was
granted by the circuit court. The Company denies the allegations and believes
that this proceeding is not likely to result in an adverse judgement that is
material to the results of its operations and financial condition.
On December 16, 1994, General Realty and Finance Co. filed suit in Palm Beach
County against the Company alleging a breach of a commission agreement for
the purchase of the Ft. Pierce Jai Alai fronton. The Complaint was filed on
December 16, 1994, and a Motion to Transfer Venue was filed January 30, 1995,
seeking to have venue transferred to St. Lucie County. The Company has
previously paid out a commission to Ronald Hayes and has attempted to pay the
principal of General Realty, Ed Fielding, for a commission; Mr. Fielding
initially rejected payment. The Company denies the allegations and believes
the proceedings are not likely to result in an adverse judgement that is
material to the results of this operation and financial condition.
On October 4, 1994, the Company entered into a letter of intent dated October
4, 1994 (the "Letter of Intent") with Casino America, Inc. ("Casino
America") to form a Joint Venture (the "Joint Venture") to build and operate
a casino at the Fronton. Casino America owns and operates three riverboat
and dockside casinos located in Mississippi and Louisiana. If the Joint
Venture is formed before passage of an amendment to the Florida Constitution
to permit casino gaming at the Company's Fronton in Fort Pierce, Florida, the
Company will contribute its interest in the Fronton to the Joint Venture with
a credit to its joint venture capital account of $5,000,000. Casino America
will contribute up to $2,500,000, as needed, to construct a 100,000 square
foot indoor facility suitable for a casino or flea market. If casino gaming
is not permitted in Florida within six years, Casino America has a continuing
option to convert the money contributed to the Joint Venture to a promissory
note from the Joint Venture payable in equal payments over a ten year period
with interest at 8% per annum. If casino gaming is permitted at the Fronton
within six years, the value of the assets contributed by the Company to the
Joint Venture will be adjusted to increase the Company's capital account up
to $22,500,000. Casino America would fund its capital account on an as
needed basis up to $22,500,000. All profits and losses of the Joint Venture
will be allocated between the partners based upon capital accounts.
The Letter of Intent provides that Casino America will be the manager of the
casino and all casino-related improvements. The Company will manage the
operation of the jai-alai fronton, inter-track wagering and all other
non-casino related activities. Each corporation will receive a management
fee based on costs. The Letter of Intent provides that Casino America has
the exclusive right to enter into a Joint Venture with the Company for six
years and Casino America has a right of first refusal to enter into other
potential gaming opportunities in Florida with the Company for such period
and during the term of the Joint Venture. The formation of the Joint Venture
is subject to certain conditions, including the satisfactory completion of
due diligence by Casino America, the receipt of all required regulatory
approvals, the approval of each partner's board of directors, the execution
of a definitive joint venture agreement, and the approval of the Company's
stockholders, if required by law. The Letter of Intent provides that if no
definitive Joint Venture agreement were executed by March 31, 1995, and the
Letter of Intent was not extended by either party no later than June 30,
1995, either party could terminate discussion in connection with the Joint
Venture and neither party would have any liability to the other, except as
otherwise specified in the Letter of Intent. The Letter of Intent was
extended to July 31, 1995. No definitive Joint Venture agreement has yet
been executed and but negotiations are continuing as of this date.
Freedom Financial Corporation ("Freedom") has informed the Company that
Casino America has purchased 22,500 shares of Freedom's 7% Series AA
Mandatorily Redeemable Preferred Stock (the "Freedom Preferred Stock"). The
Freedom Preferred Stock is convertible into shares of the Company's Common
Stock owned by Freedom at prices ranging from $7.50 per share of Common Stock
to $15.00 per share of Common Stock, depending upon the timing of the
conversion and possible passage of an amendment to the Florida Constitution
permitting casino gaming at the Fronton. The Freedom Preferred Stock is
convertible into a minimum of 150,000 shares and a maximum of 300,000 shares
of the Common Stock. On October 12, 1994, Freedom purchased 300,000 shares
of Common Stock from the Company by partial exercise of its option to
purchase up to 1,630,000 shares (at that date) of the Company's Common Stock
at an exercise price of $1.25 per share. In addition to its remaining option
to purchase 1,330,000 shares of the Company's Common Stock, Freedom now owns
directly 1,349,480 shares of the Company's 3,123,586 shares of presently
issued and outstanding Common Stock.
7
<PAGE>
In connection with the purchase of certain real estate described in Note 9,
the Company issued 47,336 shares of its $.10 par value stock having a quoted
market value of $3.10 on the date of issue.
In the course of its business, the Company has had numerous discussions, and
continues to have discussions, regarding joint ventures and business
combinations related to the pari-mutuel and gaming industry, including the
acquisition of other jai-alai frontons and joint ventures with Native
American Tribes related to the operation of gaming facilities. No assurances
can be given about the likelihood or timing of any such transaction. The
Company has entered into certain arrangements with potential co-venturers to
explore possible opportunities for gaming ventures. In connection with one
such project, the Company has agreed, contingent upon another co-venturer's
procurement of approval from regulatory authorities of an application to
qualify to operate a gaming venture and of a business plan and site for the
venture, to provide up to $15 million in financing to construct a gaming
facility. The Company may terminate this arrangement upon its sole
discretion, if it determines the project is no longer feasible. There can be
no assurance that the conditions to the Company's obligations will be met.
The Company has retained consultants and other advisors to assist the Company
in the evaluation of the proposed project and has financed certain
organizational costs of the venture. These organizational costs totaling
approximately $335,000 have been expensed through September 30, 1995.
As set forth in its Report on Form 8-K dated June 21, 1995, Florida Gaming
entered into an agreement with Centrum X Corporation of Boca Raton, Florida,
which gives Florida Gaming the right of first refusal to enter into joint
ventures with Centrum X for the development and management of casinos on
Native American lands. Centrum X is a consulting firm specializing in Native
American affairs. It is principally owned by Robert Fredericks, who also
serves as its president. Mr. Fredericks has been active in the
representation of Native American tribes throughout the United States for
more than 25 years. This agreement contemplates Florida Gaming and Centrum X
forming joint ventures to manage class II, and class III gaming facilities
for Native American Tribes.
As set forth in its Report 8-K dated August 14, 1995, Florida Gaming
announced an Agreement in Principle to acquire EagleVisions Gaming Group of
the Americas, Inc. of Minneapolis, Minnesota. EagleVisions is headed by
Leonard Prescott, former CEO of the Mystic Lake Casino Complex near
Minneapolis, the second largest Native American Casino in the United States.
Since that date the Company and EagleVisions have reviewed the original
concept and have concluded that a joint venture would be more appropriate and
just as successful for both entities. Management of the Company and key
members of Eaglevisions are currently negotiating such an agreement.
Also as set forth on its Report 8-K dated August 28, 1995, Florida Gaming
signed a Management Agreement with the Ponca Indian Tribe of Nebraska to
build and operate a casino in Douglas County (Omaha) for Class II and Class
II gaming as authorized by the Indian Gaming Regulatory Act. Under the
Agreement, the Ponca Tribe will receive 70% of the net revenues from gaming,
with Florida Gaming receiving 30%. The Management Agreement has a 5 year
term beginning upon the commencement of gaming at the facility. The
Agreement, is subject to approval by the National Indian Gaming Commission,
the acquisition of land that can be taken in trust under the Indian Gaming
Regulatory Act as the site for the facility, the execution of definitive
financing agreements, and certain other conditions. Under the Indiana Gaming
Regulatory Act, certain gaming activities are also subject to the negotiation
of a compact between the Ponca Tribe and the State of Nebraska.
On September 18, 1995, as set forth on its Report 8-K, Florida Gaming agreed
to provide up to $5,000,000 in financing to the Rincon, San Luiseno Band of
Mission Indians. Proceeds of the loan will be used for working capital for
the River Oaks Casino, which the Rincon Band currently owns and operates in
San Diego County, California. The Loan Agreement will take effect when at
least 400 gaming machines are in operation at the Casino. Florida Gaming has
agreed to make up to $5 million available to the Rincon Band during the seven
year term of the Agreement. In lieu of interest on the loan, Florida Gaming
will receive a royalty during the term of the Loan agreement equal to 12 1/2%
of all gaming revenues of the Casino other than from gaming machines, plus
12 1/2% of the "Drop" or "Handle" from gaming machines during the first five
years and 11% during the sixth and seventh years of the Loan Agreement.
Florida Gaming has also agreed to grant the Rincon Band 25,000 shares of its
common stock in two annual installments when the Loan Agreement takes effect.
Florida also agreed to advance short term working capital funds, which will
represent initial draws when the Loan Agreement takes effect. $120,000 has
been advanced through September, 1995, and $248,000 has been advanced through
the date of this filing. On November 1, 1995 the Company and the Rincon Band
extended the expiration date of the Agreement to June 30, 1996.
The operation of gaming machines at the Rincon Casino 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 Native American tribes in California was
prohibited by the Indian Gaming Regulatory Act, because gaming machines were
prohibited by California law and to date, California Governor Wilson has
refused to enter into gaming compacts with California tribes. Since the date
that the preliminary injunction was imposed on the Rincon Band, the United
states Court of Appeals has agreed to review its prior decisions in light of
a recent California appellate court decision that California law permits the
operation of gaming machines by the California Lottery, contributing to the
uncertain parameters of Indian gaming in California.
The Rincon Band has requested a hearing to consider lifting of the injunction
based on its belief that it now complies with all conditions for the
operation of gaming machines under the Indian Gaming Regulatory Act. As part
of this effort, the Rincon Band has now assumed direct management of the
casino, and has entered the Loan Agreement with Florida Gaming. The U.S.
Attorney has until November 8th to respond to the Rincon Band's pleading and
the Rincon Band will have until
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the 15th of November to comment on the U.S. Attorney's response. No hearing
date has been set, and 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 other three Native American tribes in San Diego
County and the 22 other tribes in California that already operate Casinos
with gaming machines.
(9) LAND ACQUISITION
In addition to the purchase of the Ft. Pierce Jai Alai, on November 3, 1994,
the Company made three other purchases of undeveloped land during 1994. The
three purchases comprised approximately 20 acres, all of which are adjacent
to the Jai Alai property. The amounts paid for this property totaled
$529,864 including debt assumptions, cash payments,and the issuance of 47,336
shares of the Company's common stock.
In January 1995, the Company acquired an additional 79 acres of undeveloped
land adjacent to its other properties in Florida at a cost of $1,082,000
through cash payments of $237,000 and the issuance of first mortgage debt of
$845,000. The $845,000 consists of three separate mortgages with interest
rates from 8% to 9.5%, each with a balloon payment due in January, 2000. In
aggregate these balloon payments total approximately $740,000. The Company's
plans for this additional property held for future expansion are still in the
formative stages and could include the construction of a flea market and the
expansion of ITW facilities. The possibilities of billboards along the
adjacent Interstate 95 right of way, a recreational vehicle park, and a golf
driving range have also been discussed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment No. 1 to its Form 10-QSB to be
signed on its behalf by the undersigned thereunto duly authorized.
FLORIDA GAMING CORPORATION
(Registrant)
Date: January 4, 1996 By: /s/ Timothy L. Hensley
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Timothy L. Hensley
Executive Vice President and
Chief Financial Officer
