<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
F O R M 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
Commission file number 0-9099
FLORIDA GAMING CORPORATION
--------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 59-1670533
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(State or other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
1750 SOUTH KINGS HIGHWAY, FT. PIERCE, FLORIDA 34945-3099
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (407) 464-7500
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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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4,948,121 shares of the issuer's Common Stock were outstanding as of the
latest practicable date, MAY 14, 1997 .
Transitional Small Business Disclosure Format:
YES NO X
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<PAGE>
FLORIDA GAMING
CORPORATION
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
PAGE NUMBER
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of March 31, 1997 (unaudited) and December 31, 1996. . . . . . . . . . 3
Statements of Operations (unaudited) Three Months ended March 31, 1997 and 1996. . . . . 5
Statements of Cash Flows (unaudited) Three Months ended March 31, 1997 and 1996. . . . . 6
Notes to Financial Statements (unaudited). . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . . . . . . . . . . . . . . . 14
PART II. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1.
FLORIDA GAMING CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
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<S> <C> <C>
ASSETS
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CURRENT ASSETS:
Cash and cash equivalents (Note 2). . . . . . . . . . . . . . . . . . . . . . $794,039 $907,527
Accounts receivable & current portion of notes receivable (Note 6) . . . . . . 2,473,681 2,100,259
Inventory (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,666 169,419
Prepaid expense and other. . . . . . . . . . . . . . . . . . . . . . . . . . . 445,081 103,200
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Total current assets 3,863,467 3,280,405
PROPERTY AND EQUIPMENT:
Land (Notes 2 and 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,900,810 11,457,495
Building and Improvements (Notes 2 and 8). . . . . . . . . . . . . . . . . . . 9,509,330 9,747,978
Furniture, fixtures and equipment (Notes 2 and 8). . . . . . . . . . . . . . . 2,165,801 1,717,520
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23,575,941 22,922,993
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . (740,461) (528,700)
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22,835,480 22,394,293
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GAMING VENTURE INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310,000 310,000
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313,779 320,351
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$27,322,726 $26,305,049
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</TABLE>
continued
3
<PAGE>
FLORIDA GAMING CORPORATION
CONSOLIDATED BALANCE SHEETS
(continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
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<S> <C> <C>
CURRENT LIABILITIES
Accounts payable (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. $ 3,412,008 $ 970,664
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,259,869 3,333,885
Short-term borrowing and current portion of long-term debt . . . . . . . . . . . . . . 1,834,801 1,423,703
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Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,506,678 5,728,252
LONG-TERM LIABILITIES
Long-term portion note payable.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,677,947 7,095,289
STOCKHOLDER'S EQUITY (See Notes 2,4,5, and 7):
Class A convertible preferred stock, convertible to common stock; $.10 par value,
1,200,000 shares authorized, 34,435 shares issued and outstanding at March 31, 1997,
and December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,443 3,443
Class B convertible preferred stock; convertible to common stock, 5,000 shares
authorized; 612.5 and 1,990 shares issued and outstanding at March 31, 1997 and
December 31, 1996, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 199
Class C 8% cumulative convertible preferred stock, convertible to common stock,
5,000 shares authorized; 550 shares issued and outstanding at March 31, 1997
and December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 55
Class D 8% cumulative convertible preferred stock, 5,000 shares authorized; 650 shares
issued and outstanding at March 31, 1997 and December 31, 1996 . . . . . . . . . . . 117 65
Common stock, $.10 par value, authorized 15,000,000 shares, 4,598,524 issued and
outstanding at March 31, 1997, and 4,340,626 shares issued and outstanding at
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459,852 434,063
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,087,640 35,276,095
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,413,067) (22,232,412)
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Total stockholders equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,138,101 13,481,508
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Total liabilities and stockholders equity . . . . . . . . . . . . . . . . . . . . . $ 27,322,726 $ 26,305,049
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</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
FLORIDA GAMING CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
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March 31, 1997 March 31, 1996
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<S> <C> <C>
HANDLE:
Jai-Alai. $ 29,189,610 $ 2,870,125
Inter- Track Wagering (ITW) 14,690,520 6,126,142
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Total Pari-Mutuel Handle 43,880,130 8,996,267
-------------- --------------
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REVENUE:
On Site Mutuel Revenue, Net of
Pari-Mutuel taxes to State of Florida $ 4,878,415 $ 631,983
Inter-Track Mutuel Commissions 1,366,829 606,750
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Net Pari-Mutuel Revenue 6,245,244 1,238,733
Admissions Income 176,775 44,513
Programs, Food, Beverage and Other 1,263,897 336,379
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Total Operating Revenue $ 7,685,916 $ 1,619,625
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COSTS AND EXPENSE:
Operating $ 5,134,468 $ 1,381,307
General and Administrative 2,410,114 426,227
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Total Costs and Expense 7,544,582 1,807,534
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Net Income (Loss) From Operations $ 141,334 $ (187,909)
-------------- --------------
-------------- --------------
OTHER INCOME (EXPENSES)
Interest and Dividend Income 67,169 44,698
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Net Income (loss) $ 208,503 $ (143,211)
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-------------- --------------
Earnings (loss) per Common Share $ 0.05 $ (0.04)
Earnings (loss) per Common Share (fully diluted) $ 0.03 N/A
Weighted Avg. Common Shares Outstanding 4,458,166 3,199,518
Fully diluted per share earnings (See Note 4)
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
FLORIDA GAMING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
-----------------------------
March 31, March 31,
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net Income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 208,503 $ (143,211)
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . 218,011 48,600
Loss on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . 0 0
Realized gain on sale of marketable securities . . . . . . . . . . . . 0 0
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . (373,422) (15,648)
Prepaid expenses and other current assets. . . . . . . . . . . . . . . (96,989) (23,666)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318 (8,495)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,752 (2,443)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 287,582 9,890
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,747 39,860
---------- ----------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . 133,999 48,098
Net cash provided (used) by operating activities . . . . . . . . . $ 342,502 $ (95,113)
Investing activities:
Loan to affiliated company. . . . . . . . . . . . . . . . . . . . (244,892) (135,000)
Capital Expenditures (Note 8). . . . . . . . . . . . . . . . . . . (652,943) (100,142)
---------- ----------
Net cash provided from (used in) investing activities. . . . . . . $ (897,835) $ (235,142)
Financing activities:
Net proceeds from borrowing/Repayment of Borrowings. . . . . . . . (6,244) (111,023)
Stockholders Equity:
Issuance of Preferred Stock, net proceeds . . . . . . . . . . . 448,089 2,112,624
---------- ----------
Net cash provided (used) from financing activities . . . . . . . . $ 441,845 $2,001,601
NET INCREASE (DECREASE) IN CASH. . . . . . . . . . . . . . . . . . . . . . . . $ (113,488) $1,671,346
CASH AND EQUIVALENT AT BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . . $ 907,527 $2,721,865
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF QUARTER. . . . . . . . . . . . . . . . . . $ 794,039 $4,393,211
---------- ----------
---------- ----------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,151 42,802
Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0
</TABLE>
The accompanying notes are an integral part of these financial statements
6
<PAGE>
FLORIDA GAMING CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(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
DISCLOSURE: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
COMPANY BACKGROUND: Florida Gaming Corporation (the Company) operates live Jai
Alai games and Inter-Track Wagering ("ITW') on Jai-Alai, horse racing and dog
racing in Miami, Tampa, Ocala, and Ft. Pierce Florida.
Approximately 45% of the Company's common stock is controlled by the Company's
Chairman either directly or beneficially through his ownership of Freedom
Financial Corporation (Freedom) a closely held corporation.
CASH AND CASH EQUIVALENTS: The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at
cost. Depreciation is provided using the straight-line and accelerated methods
over the estimated useful life of the related assets.
REAL ESTATE HELD FOR EXPANSION: The Company's investment in undeveloped land
($1,617,495 at December 31, 1996 and 1995, respectively) is carried at cost and
is included with land under property, plant and equipment in the accompanying
balance sheet.
INVENTORY: The Company's inventory, comprising food and beverage products and
souvenirs, is stated at the lower of cost or market.
PARI-MUTUEL WAGERING: Revenue is derived from acceptance of wagers under a
pari-mutuel wagering system. The Company accepts wagers on both on-site and
off-site ITW events. On-site live Jai-Alai 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. Off-site 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
$44,555 and $40,646 at March 31, 1997 and December 31, 1996, respectively.
Unclaimed winnings totaled $799,408 and $930,017 at March 31, 1997 and December
31, 1996, respectively, including $851,163 assumed in connection with the
Company's purchase of three (3) Jai Alai facilities on December 31, 1996 (See
Note 8).
INCOME TAXES: In February 1992, the Financial Accounting Standards Board (FASB)
adopted Statement of Financial Accounting Standards (SFAS) No. 109 "Accounting
for Income Taxes". SFAS No. 109 was required to be implemented during the first
quarter of fiscal year 1994. The Company adopted the standard as a cumulative
change in accounting principle during 1994. There was no material impact on the
Company's financial position or results of operations related to the
implementation of the new standard.
STOCK OPTIONS: The Company accounts for stock-based employee compensation
arrangements using the intrinsic value method provided in APB 25. Under this
method, the cost of compensation is measured by the excess of the quoted market
price of the stock over the option price on the grant date (measurement date).
The Company's stock option plans require the issuance of all options at a price
equal to the market price of the stock on the grant date. Stock options issued
for non-compensation purposes are accounted for at fair value pursuant to FASB
123.
RECLASSIFICATION: Certain 1996 amounts have been reclassified to conform with
their 1997 presentation.
(3) INCOME TAXES
7
<PAGE>
At December 31, 1996, the Company had tax net operating loss (NOL) carryforwards
of approximately $11,752,000 available to offset future taxable income. These
NOL carryforwards expire fifteen years from the year in which the losses were
incurred or at various intervals through fiscal year 2011. 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 because Freedom's stock purchase discussed in Note D was
considered a change in ownership under the "deemed exercise rule" of IRC Section
382. As a result, only the net operating losses attributable to the period
after the "change in ownership" (approximately $1,381,000 are not subject to the
Section 382 limitation).
The Company has unused general business tax credits of approximately $137,000.
These credits expire at various dates through the year 2001 to offset any future
tax liabilities of the Company.
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.
(4) INCOME PER COMMON SHARE
The income per common share was calculated based upon net income and the
weighted average number of outstanding common shares (4,458,166 and 3,199,518
for the three months ended March 31, 1997, and 1996, respectively). Options and
convertible securities were included in the computations of income per share on
a fully diluted basis for the period ended March 31, 1997. Options and
convertible securities were not included in the computations of loss per shares
for the period ended March 31. 1996, because their inclusion would be
anti-dilutive. Weighted average equivalent shares on a fully diluted basis for
the three months ended March 31, 1997 were 7,473,089 shares, consisting of
84,250 options held by three former directors, 19,000 in options held by a
former officer of the Company, 506,673 shares of equivalent converted Preferred
Stock, 1,075,000 in options held by directors and an executive officer under
Qualified and Non-qualified Stock Option Plans, 1,330,000 in options held by
Freedom Financial Corporation, and the 4,458,1666 weighted average common
shares. Refer to the Company's latest annual report on Form 10-KSB for more
information on outstanding options, warrants, and conversion features of
preferred stock.
(5) PREFERRED STOCK
The Company's Series B convertible preferred stock provides annual cumulative
dividends at the rate of 8% to 10% of the consideration paid for the stock.
Such dividends are payable in shares of the Company's common stock. The
consideration to be received by the Company upon initial issuance of each share
of the Series B shares is $1,000. Holders of Series B shares may convert all or
any of such Series B shares to the Company's common stock using a ratio based on
the consideration paid for the stock and 80% of the market value of the common
stock. On December 15, 1995, the Board of Directors reserved 600,000 shares of
the Company's common stock for issuance upon conversion of the Series B
preferred stock. Upon liquidation, the holders of Series B preferred shares
shall be entitled to be paid $1,000 per share plus 8% to 10% accrued dividends
before any distribution to holders of common stock. During the year ended
December 31, 1995, 2,400 Series B preferred shares were issued for $2,400,000 to
three unrelated parties. During 1996, the Company issued an additional 2,300
Series B shares at $925 per share and 2,707.5 Series B shares were converted to
473,588 shares of common stock.
The Company is authorized to issue 5,000 shares of Series C 8% Cumulative
Convertible Preferred Stock, $.10 par value (the "Series C Preferred Stock"),
which provides annual dividends at the rate of 8% of the share's Stated Value.
The Stated Value per share equals $1,000 (as adjusted for any stock dividends,
combination or split). At the discretion of the Company's Board of Directors,
such dividends may be paid in shares of the Series C Preferred Stock.
Holders of Series C Preferred Stock may convert all or any of such shares to the
Company's Common Stock (the "Series C Conversion Shares") beginning 90 days
after the issuance of the Series C Preferred Stock. If not converted earlier by
the holder, the Series C Preferred Stock shall be converted automatically on
December 31, 1998. In general, the number of Series C Conversion Shares
issuable on conversion of each share of Series C Preferred Stock shall equal the
consideration paid for such share together with accrued and unpaid dividends on
such share, if any, divided by the lesser of (i) $7.50 or (ii) 80% of the
closing bid price of the Common Stock on the five trading days before
conversion. A holder of Series C Conversion Shares may not sell more than 33%
of such shares between 90 and 120 days of his purchase of Series C Preferred
Stock converted into such shares and 67% of such shares between 121 and 150 days
of his purchase; a holder may generally sell all of his Series C Conversion
Shares 151 days after his purchase.
8
<PAGE>
All shares of Series C Preferred Stock have been sold pursuant to offshore
transactions exempt from registration pursuant to Regulation S promulgated under
the Securities Act. The Series C Conversion Shares must be resold in
transactions exempt under Regulation S or another applicable exemption under the
Securities Act, or (if the exemption under Regulation S becomes unavailable at
any time before the third anniversary of the purchase of the Series D Preferred
Stock) pursuant to the registration of the Series C Conversion Shares by the
Company.
Upon liquidation, the holders of Series C Preferred Shares shall be entitled to
be paid $1,000 per share plus 8% accrued dividends before any distribution to
holders of Common Stock. The Company has the right to redeem the shares of
Series C Preferred Stock if a holder of such shares exercises his right of
conversion at a time when the conversion price is below $5.00. The redemption
price to be paid by the Company is 125% of the Stated Value of such shares
together with all accrued and unpaid dividends thereon.
During 1996, the Company issued 550 Series C shares at $1,000 per share.
The Company is also authorized to issue up to 5,000 shares of Series D 8%
Cumulative Convertible Preferred Stock (the "Series D Preferred Stock"), which
provides annual dividends at the rate of 8% of the shares' Stated Value. The
Stated Value per share equals $1,000 (as adjusted for any stock dividends,
combination or split). At the discretion of the Company's Board of Directors,
such dividends may be paid in shares of the Series D Preferred Stock.
Holders of Series D Preferred Stock may convert all or any of such shares to the
Company's Common Stock beginning 90 days after the issuance of the Series D
Preferred Stock. If not converted earlier by the holder, the Series D Preferred
Stock shall be converted automatically on December 31, 1998. The Company is
obligated to file a registration statement (the "Series D Registration
Statement") covering the shares of Common Stock issuable on conversion of the
Series D Preferred Stock (the "Series D Conversion Shares") and to use its best
efforts to cause the Series D Registration Statement to become effective. In
general, the number of Series D Conversion Shares issuable on conversion of each
share of Series D Preferred Stock shall equal the Stated Value together with
accrued and unpaid dividends on such shares, if any, divided by the Conversion
Price, which is defined as the lesser of (i) $7.50 or (ii) 80% of the closing
bid price of the Common Stock on the five trading days before conversion. If
the Series D Registration Statement has not been declared effective within 120
days from December 31, 1996 (the "Initial Issuance Date"), the Conversion Price
shall be reduced by an amount between 3% and 20% (resulting in the issuance of a
larger number of Series D Conversion Shares) based on the extent of such delay.
No Series D Conversion Shares may be sold before the earlier of March 13, 1997
or the date on which the Series D Registration Statement becomes effective.
Notwithstanding the effectiveness of the Series D Registration Statement,
generally a holder of Series D Conversion Shares may not sell more than 33% of
such shares between March 13, 1997 and April 12, 1997, and 67% of such shares
between April 13, 1997 and May 22, 1997, a holder may generally sell all of the
Series D Conversion Shares after May 13, 1997.
If the Series D Registration Statement has not been declared effective within
365 days of the Initial Issuance Date, a holder of Series D Preferred Stock
shall receive a preferential dividend equal to 10% of the Stated Value on the
Stated Value on the 366th day after the Initial Issuance Date and preferential
dividends of either 3% or 10% of the Stated Value every 30 days thereafter until
the 726th day after the Initial Issuance Date.
Upon liquidation, the holders of Series D Preferred Shares shall be entitled to
be paid $1,000 per share plus 8% accrued dividends before any distribution to
holders of Common Stock. The Company has the right to redeem the shares of
Series D Preferred Stock if a holder of such shares exercises his right of
conversion at a time when the Conversion Price is below $5.00 or if the Series D
Registration Statement has not become effective within 120 days of the Initial
Issuance Date. The redemption price to be paid by the Company is determined
using a ratio based on the trading price of the Company's Common Stock and the
Stated Value.
During 1996, the Company issued 650 Series D shares at $1,000 per share and on
January 16, 1997 the Company issued another 525 shares.
The Class A Convertible Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock, and the Series D Preferred Stock are all equal in
rank with respect to the payment of dividends and the distribution of assets
upon liquidation of the Company.
(6) 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
9
<PAGE>
300,000 shares. These purchases resulted in approximately $875,000 in
additional equity capital for the Company. Freedom retains an option to
purchase 1,030,000 shares at an exercise price of $1.25 per share. On April 21,
1997, the independent Directors of the Company adopted a resolution extending
Freedom's options to March 31, 2000. On May 1, 1997 Freedom exercised its
option to acquire an additional 300,000 shares for $375,000. See also Note (7)
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, prior to the transaction
that resulted in current management assuming control of the Company, the Company
entered into stock option agreements with an independent director 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 Non-qualified 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.
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 from $5.50 to $5.75 in 1994). The
options are not exercisable until one year from the date of election to the
Board.
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 Company granted a former Director an option to purchase
19,000 common shares at $5.19 per share. The option was exercisable after
October 29, 1995 and expires five years from date of grant. On the same date
the Company granted its Chairman an additional option to purchase 300,000 common
shares at $5.00 per share. The option is exercisable after November 8, 1995 and
also expires five years from date of grant.
On February 26 and 27 of 1997 the Company granted 390,000 Non-qualified options
to Chairman Collett and the other Directors pursuant to and consisting of 25,000
shares under the existing Directors Plan, 240,000 shares under newly adopted
grants for Directors based on years of service to the Company, and additional
grant of 125,000 shares for Chairman/CEO Collett. (See Exhibits to this 10QSB
listed in Item #6).
Included in notes receivable is an approximately $2,000,000 line of credit
granted to Freedom Financial Corporation in December of 1995. The credit
facility, which is secured by real property owned by Freedom, is due on demand
and bears interest at 2% above prime. Freedom Financial is owned substantially
by the Company's Chairman.
(7) COMMITMENTS AND CONTINGENCIES
LITIGATION: On May 13, 1994, American Jai-Alai, Inc. ("American") filed suit in
the Circuit Court of the Fifteenth Circuit in Florida, Palm Beach County,
against the Company. American alleges that in August 1993, the Company entered
into a contract with American that American would manage the Fronton if the
Company acquired it. American alleges that the Company and American agreed to
enter into a five-year renewable management contract pursuant to which American
would guarantee a $480,000 annual payment to the Company. An additional sum of
the Fronton's net operating income above $480,000 would be paid to the Company,
with American receiving 25% of all net operating income above $750,000 annually.
In addition, American 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 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 alleges that the Company agreed to pay American 25% of any
profit realized from the sale of the Fronton, if
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such sale was not to American pursuant to its alleged right of first refusal.
In the Complaint, American alleges, among other claims, breaches of fiduciary
duty, breach of contract and fraud. On May 20, 1994, counsel for American
stated that American 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 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. An Amended Complaint was
filed on January 25, 1995, and the Company filed its responsive pleading on
April 25, 1995, denying the allegations in the Amended Complaint. The Company
filed a Motion for Summary Judgment on February 20, 1996, in which the Company
asserts that, as a matter of law, no written management agreement exists between
the parties.
On or about October 22, 1996, authorized representatives of the Company and
American entered into a letter agreement of settlement in this matter, which is
referred to as the "Memorandum of Understanding" or "MOU". Since that date, the
parties have been attempting to memorialize the MOU in final settlement
documents and the Company has filed a motion to compel settlement. If that
motion is successful, the case should be settled and, therefore, dismissed. The
Company denies the allegations and believes that this proceeding is not likely
to result in an adverse judgment that is material to the results of its
operations and financial condition.
Subsequent to December 31, 1996, as part of an agreement to settle this
litigation, the Company negotiated an option agreement with the principal of
American providing American with a 6 month option to acquire the Company's Ocala
Jai Alai for $2,000,000 and the right to receive 15,000 shares of the Company's
common stock. This agreement was finalized and the suit voluntarily dismissed
on March 26, 1997. The 15,000 shares were issued by the Company on April 28,
1997. These shares carry certain "piggyback" registration rights.
On December 16, 1994, General Realty and Finance Co. filed in Palm Beach County,
against the Company alleging a breach of a commission agreement for the purchase
of the Ft. Pierce Jai Alai fronton. A Motion to Transfer Venue was filed
January 30, 1995, seeking to have venue transferred to St. Lucie County. The
Company previously paid a commission to a party to the suit and has attempted to
pay the principal of General Realty, for the commission; however, the payment
was rejected. On January 3, 1996, the Company filed a Motion for Partial
Summary Judgment as to the allegations that the Company breached a written
commission agreement. On January 29, 1996, the court issued an Order granting
the Company's Motion for Partial Summary Judgment finding, as a matter of law,
that there was no written commission agreement between General Realty and the
Company. General Realty filed its Second Amended Complaint on February 13,
1996, adding allegations that General Realty and the Company had an oral or
implied commission agreement which had been breached by the Company. The
Company filed a responsive pleading to the Amended Complaint, and again moved
from, and was granted, a summary judgment finding, as a matter of law, that
there was no oral commission agreement between General Realty and the Company.
That summary judgment left only equitable theories of recovery available to
General Realty. On or about December 12, 1996, the parties reached a settlement
in mediation. On April 16, 1997, a final settlement was agreed to and the suit
was voluntarily dismissed. Per the settlement agreement Florida Gaming issued
7,000 in common stock, paid $30,000 in cash and issued a $30,000 promissory
Note to General Realty and Finance payable in equal installments through
December 1, 1997.
CASINO AMERICA: On October 4, 1994, the Company entered into a letter of intent
(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 Fort
Pierce 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 by 2000, 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 by 2000, 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
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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. Either party may
terminate discussions in connection with the Joint Venture and neither party
shall have any liability to the other, except as otherwise specified in the
Letter of Intent.
Freedom Financial Corporation ("Freedom") has informed the Company that Casino
America has purchased 22,500 shares of Freedom's 7% Series AA Mandatory
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. Casino
America is the sole holder of Freedom Preferred 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 1,030,000 shares of the Company's Common Stock,
Freedom now owns directly 1,649,480 shares of the Company's 4,948,121 shares of
issued and outstanding Common Stock. On May 1, 1997 Freedom exercised its option
to acquire an additional 300,000 shares for $375,000.
REGISTRATION RIGHTS: The Company has committed upon certain terms and
conditions, to include certain shares held by other parties, in a future
registration statement it files on its own behalf, allowing those shares to be
publicly traded.
LEASES: The Company rents totalizator (Autotote) and other equipment under
leases which expire at various dates through 1999. The totalizator leases
require a minimum annual rental plus contingent rentals based on a percentage of
the handle in excess of the minimum annual rental.
STOCK APPRECIATION GUARANTEES: In connection with the purchase of certain real
estate, 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. The real estate purchase
agreement included the Company's guarantee of the appreciation in value of such
stock as follows:
* If the seller holds the stock for at least three years from the date of
closing, (the "$10.00 Guaranty Date") the market value of the stock at the end
of the three year period will be at least $10.00 per share.
* If the Company or its successors or assigns or any entity in which the
Company has an interest is approved as a casino permit holder within three years
from the date of closing this transaction, and in fact does open a casino, then
in that event the Company guarantees that the market value of the stock will be
at least $20.00 per share, two years from the date that the Company or its
successors or assigns or any entity in which the Company has an interest
actually opens and is operating a casino, (the "$20.00 Guaranty Date").
* For the purpose of the agreement, the price per share on the $10.00
Guaranty Date and the $20.00 Guaranty Date shall be the over the counter bid
price, ("Market Value"). On the $10.00 and $20.00 Guaranty Date, Seller shall
request in writing to the Company to reimburse Seller for the difference between
the market value of the shares and the guaranteed price. Seller shall remit
with said request evidence that Seller is still in ownership and possession of
said stock. The Company shall pay the difference to Seller within ninety (90)
days from receipt of Seller's request.
In addition to the Company's guarantee, Freedom Financial Corporation provided a
similar guarantee as a further inducement to the seller of the real estate.
Based on the December 31, 1996 closing price of the Company's common stock
($5.31), a payment of $222,006, the equivalent of 41,809 shares would be due
under the $10 guarantee and a payment of $695,366, the equivalent of 130,954
shares, would have had to be made at that date to satisfy the terms of the $20
guarantees.
COLLECTIVE BARGAINING AGREEMENT: The Company is a party to a collective
bargaining agreement with the International Jai Alai Players Association U.A.W.
Local 8868, AFL-CIO. The agreement allows the Company to negotiate individual
contracts with players and provides for minimum salaries and bonuses based on
pari-mutuel handle, certain cesta allowances and retirement benefits. The
agreement continues from year to year unless timely notice of termination is
given by either party to the agreement.
CONCENTRATION OF CREDIT: The Company maintains significant cash balances with
financial institutions in excess of the insurance provided by the Federal
Deposit Insurance Corporation (FDIC).
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(8) ACQUISITION OF WJA ASSETS
On September 12, 1996, the Company acquired notes (the "WJA Notes") of WJA
Realty Limited Partnership ("WJA"), with balances aggregating about $20,000,000
from the Bank of Oklahoma, N.A., Tulsa, Oklahoma. The WJA Notes were secured
by, among other collateral, real estate and improvements consisting of three
jai-alai and ITW facilities located in Miami, Tampa and Ocala, Florida (the "WJA
Frontons"). Consideration for the WJA Notes was a combination of $2,000,000 in
cash, a $6,000,000 promissory note bearing interest at the prime rate, 703,297
shares of the Company's Common Stock and a $1,000,000 non-interest bearing
contingent note.
On November 25, 1996, the Company entered into an agreement with WJA and Florida
Gaming Centers, Inc. a wholly-owned subsidiary of the Company (the
"Subsidiary"), pursuant to which the Subsidiary agreed to acquire the WJA
properties. The acquisition was consummated as of December 31, 1996 for
accounting purposes. The WJA Frontons acquired have been combined with the Fort
Pierce Fronton into a new Subsidiary, Florida Gaming Centers, Inc.
The consideration for the acquisition included (i) the cancellation of WJA Notes
and related obligations acquired by the Company from the Bank of Oklahoma, NA,
(ii) the retention by WJA of 200,000 shares of the Company's common stock owned
by WJA, and (iii) a profit sharing arrangement described in more detail below.
The Company also assumed the principal amount outstanding under a $500,000
promissory note owed to Wheeler-Phoenix, Inc., with the terms amended to provide
for repayment of principal over a ten year period following the closing in equal
annual installments and an annual interest rate of 6%.
The profit sharing arrangement is based on the Subsidiary's net profits from Jai
Alai operations as defined, before income taxes. The Company will pay WJA 20%
of the defined cumulative net profits of the Subsidiary for each of the ten full
calendar years 1997 through 2006, subject to a cumulative $1,000,000 per year
cap described below. The cumulative $1,000,000 cap is equal to the product of
$1,000,000 multiplied by the number of years in the ten-year period completed,
minus the sum of all amounts previously paid under the 20% profit sharing
arrangement. In addition, if the Subsidiary has net profits in any calendar
year during the ten-year period in excess of $5,000,000, but does not receive a
20% payment on the entire amount because of the cumulative $1,000,000 per year
cap, the Subsidiary shall pay WJA 5% of the portion of the net profits on which
the 20% payment is not made. No net profit payments will be due after the ten
year period. If during the ten year period, the Subsidiary disposes of any of
its significant assets or operations, then WJA would be entitled to receive an
amount equal to ten percent of the Subsidiary's gain, if any, on the asset or
operations disposition.
Two principals of WJA, also entered into consulting arrangements with the
Subsidiary. One principal entered into a ten-year consulting agreement with the
Subsidiary, with annual compensation of $100,000 during the first five years of
the agreement and annual compensation of $50,000 during the second five years of
the agreement. The other principal entered into a five-year consulting
agreement with the Subsidiary, with annual compensation of $240,000, plus
certain benefits. These two individuals were also granted stock options on the
Company's stock with a fair value of $150,298.
A summary of the WJA assets acquired and consideration therefor is as follows:
ALLOCATED
ASSETS ACQUIRED AMOUNT
--------------- ------------
Jai Alai Frontons in Miami, Tampa,
and Ocala, $17,428,059
Cash 381,997
Notes receivable 167,934
Inventory 134,974
Other assets 308,279
-----------
$18,421,243
-----------
-----------
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Management allocated the purchase price to the basis of the assets acquired
based on available appraisals or other fair value information.
CONSIDERATION PAID AMOUNT
------------------ -----------
Cancellation of notes and interest
receivable from WJA at Company
carrying value $14,692,298
Accounts payable and other accrued
expenses assumed 3,078,647
Assumption of Wheeler-Phoenix note 500,000
Fair value of stock options issued 150,298
-----------
$18,421,243
-----------
-----------
(9) GAMING VENTURE INVESTMENTS
During 1995, the Company entered into several arrangements with different Native
American Tribes to explore possible opportunities for gaming ventures. The
arrangements generally provide the Company the right to receive compensation
from the Tribe's share of the potential gaming profits for supplying the
management services and/or financing necessary for the construction and
operation of the gaming facilities. The Company's commitment to provide
construction financing and working capital is contingent upon the Tribes'
procurement of judicial or regulatory approval to operate a gaming venture. At
December 31, 1996, the Company's contingent commitment to provide financing to
potential gaming ventures totaled $5,000,000. Management expects the funds
necessary to meet this commitment to be obtained through the issuance of
additional debt or equity instruments should the gaming operations materialize.
The Company expended $21,000 and $729,347 during 1996 and 1995, respectively
related to these gaming venture arrangements of which $-0- and $406,347 are
included in Other Expense in the accompanying 1996 and 1995 Statements of
Operations, respectively. $21,000 and $323,000 of the funds expended in 1996
and 1995, respectively were made to one Tribe as working capital loans and are
carried as an Investment on the accompanying Balance Sheets based on the
Company's financing ("loan") agreement with the recipient Tribe. Recovery of
these funds under the "loan" agreement is contingent upon such agreement
becoming effective after the Tribe receives judicial approval to establish the
intended gaming operation. The Tribe has not been able to obtain the necessary
regulatory or judicial approval to operate the contemplated gaming ventures.
The financing agreement which is carried as an investment on the accompanying
balance sheet expires on June 30, 1997, unless extended. Management has
provided a reserve of $34,000 against the investment to reflect the diminished
expectation of success in the short-term.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Florida Gaming Corporation (the "Company") currently owns and operates four
jai-alai fronton and inter-track pari-mutuel wagering facilities (each, a
"Fronton," and collectively, the "Frontons") located in South and Central
Florida. The Company's business at this time consists primarily of its
operations at the Frontons, which include, among other things, live jai-alai,
inter-track pari-mutuel wagering ("ITW") on jai-alai, thoroughbred racing,
harness racing, and dog racing, and the sale of food and alcoholic beverages.
The Company's Fort Pierce, Tampa and Ocala locations provide audio, video and
wagering on live inter-track and interstate broadcasting of horse racing, dog
racing and jai-alai from around the State of Florida as well as the rest of the
country. The Miami location offers more limited ITW broadcasts, but broadcasts
its jai-alai performances to other gaming facilities in Florida, the rest of the
United States, and Mexico. ITW provides significant additional revenue as well
as providing varying entertainment for customers.
The term "pari-mutuel wagering," which refers to the betting by members of the
public against each other, as used in this report includes wagering on both live
Jai-Alai performances and ITW.
Since its inception and before the acquisition of the Fort Pierce, Fronton in
February 1994, the Company engaged in several other lines of business, none of
which are currently in operation. In March, 1993, the Company sold 699,480
shares of common stock to Freedom Financial Corporation ("Freedom") and the
present management assumed control of the Company.
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The Company's principal place of business and 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.
ACQUISITION OF FRONTONS/DEVELOPMENT OF CARDROOMS
ACQUISITION OF THE FT. PIERCE FRONTON. The Company acquired the Ft. Pierce
Fronton from WJA Realty Limited Partnership ("WJA") pursuant to an agreement
with WJA dated October 6, 1993. On February 1, 1994, the Company received
approval from the Florida Department of Business and Professional Regulation,
Division of Pari-Mutuel Wagering (the "DPMW") to transfer the pari-mutuel permit
for the Ft. Pierce Fronton from WJA to the Company and also closed the purchase
transaction with WJA on that date. Consideration for the acquisition consisted
of 200,000 shares of Company Common Stock and $1,500,000 paid in cash at the
closing (including $100,000 previously deposited in an escrow account) and
$1,000,000 which was in the form of a ten-year 8% mortgage.
ACQUISITION OF THE MIAMI, TAMPA AND OCALA FRONTONS. On September 12, 1996, the
Company acquired notes (the "WJA Notes") of WJA, with balances aggregating
$20,000,000 from the Bank of Oklahoma, N.A., Tulsa, Oklahoma. The WJA Notes
were secured by, among other collateral, real estate and improvements consisting
of three jai-alai and ITW facilities located in Miami, Tampa and Ocala, Florida
(the "WJA Frontons"). Consideration for the WJA Notes was a combination of
$2,000,000 in cash, a $6,000,000 promissory note bearing interest at the prime
rate, 703,297 shares of the Company's Common Stock and a $1,000,000 non-interest
bearing note.
On November 25, 1996, the Company entered into an agreement with WJA and Florida
Gaming Centers, Inc., a wholly-owned subsidiary of the Company (the
"Subsidiary"), pursuant to which the Subsidiary agreed to acquire the WJA
assets. The acquisition was consummated as of January 1, 1997. The WJA
Frontons acquired have been combined with the Fort Pierce Fronton into the
Subsidiary.
The consideration for the acquisition included (i) the cancellation of WJA Notes
and related obligations acquired by the Company from the Bank of Oklahoma, NA,
(ii) the retention by WJA of 200,000 shares of the Company's common stock owned
by WJA, and (iii) a profit sharing arrangement described in more detail below.
The Company assumed all liabilities of WJA arising in the ordinary course of the
business, subject to certain limitations and exceptions. The Company also
assumed the principal amount outstanding under a $500,000 promissory note owed
to Wheeler-Phoenix, Inc., with the terms amended to provide for repayment of
principal over a ten year period following the closing in equal annual
installments of $50,000 and an annual interest rate of 6%.
The profit sharing arrangement is based on the Subsidiary's net profits, as
defined, before income taxes. The Company will pay WJA 20% of the cumulative
net profits of the Subsidiary for each of the ten full calendar years 1997
through 2006, subject to a cumulative $1,000,000 per year cap described below.
The cumulative $1,000,000 cap is equal to the product of $1,000,000 multiplied
by the number of years in the ten-year period completed, minus the sum of all
amounts previously paid under the 20% profit sharing arrangement. In addition,
if the Subsidiary has net profits in any calendar year during the ten-year
period in excess of $5,000,000, but does not receive a 20% payment on the entire
amount because of the cumulative $1,000,000 per year cap, the Subsidiary shall
pay WJA 5% of the portion of the net profits on which the 20% payment is not
made. No net profit payments will be due after the ten year period. If during
the ten year period, the Subsidiary disposes of any of its significant assets or
operations, then WJA would be entitled to receive an amount equal to ten percent
of the Subsidiary's gain, if any, on the disposition.
Two principals of WJA, Roger M. Wheeler, Jr. and Richard P. Donovan, have
entered into consulting arrangements with the Subsidiary. Mr. Wheeler has
entered into a ten-year consulting agreement with the Subsidiary, with annual
compensation of $100,000 during the first five years of the agreement and annual
compensation of $50,000 during the second five years of the agreement. Mr.
Donovan has entered into a five-year consulting agreement with the Subsidiary,
with annual compensation of $240,000, plus certain benefits.
In 1980, WJA and three other pari-mutuel permit holders formed Summer Jai-Alai
("SJA"), a Florida general partnership, to conduct pari-mutuel jai-alai
operations at the Miami Fronton during the summer months ("Summer Operations").
Following the acquisition of the WJA assets, the Company currently owns a 21%
interest in SJA. Under the terms of the partnership agreement, certain of the
Company's costs and expenses will be allocated to Summer Operations based upon
specific formulas set forth in the agreement. In addition, pursuant to a lease
agreement which expires in the year 2004, SJA rents the Miami Fronton for the
time in which the summer jai-alai season is conducted. The rental is based upon
1% of handle, plus applicable Florida sales tax. The
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Company's 21% interest in SJA is accounted for under the equity method.
CARDROOM DEVELOPMENT. Florida House Bill No. 337 (now known as section 849.086
of the Florida Statutes) became effective June 1, 1996. This legislation
authorized cardrooms at licensed pari-mutuel facilities beginning in January
1997. The cardrooms will be administered and regulated by the DPMW. Games will
be limited to non-banked poker games. Cardroom operation is also subject to
approval by the county commission in which the pari-mutuel facility is located.
This same bill also authorized full-card--simulcasting of races from out of
state tracks such as Belmont, Meadowlands, Philadelphia Park, and Monmouth. The
Frontons in Fort Pierce, Tampa and Ocala are currently carrying several of these
signals. This legislation also reduced the pari-mutuel tax on handle from 5% to
4.25% at the Tampa, Fort Pierce, and Ocala frontons. The pari-mutuel tax at
Miami was reduced from 5% to 3.85%.
In late 1996, the county governments of Dade County and Hillsborough County,
Florida, passed legislation permitting poker rooms to be operated by all
pari-mutuel facilities located in those counties. As a result, the Company now
plans to open poker rooms in Miami (with 60 tables initially) and Tampa (with 40
tables initially) during the second quarter of 1997. License applications have
been filed, and the Company is in the final phases of construction and employee
training. As authorized by House Bill No. 337, the Miami and Tampa facilities
will conduct low stakes ($10 per hand) poker at these facilities two hours prior
to, during and two hours following live jai-alai performances. A rake of $.25
per person will be the pari-mutuel's revenue from each hand dealt. State taxes
will be paid at 10% of this revenue and 4% of the poker revenue will be paid to
the Jai-Alai players.
The Jai-Alai industry generally has declined in the last several years due to an
industry-wide strike by jai-alai players and the passage of legislation
authorizing a state-wide lottery in 1987. Average state-wide on-track handle
per performance for the state of Florida fiscal years ended June 30, 1996 and
1995 was approximately $79,004 and $87,512, respectively. Aggregate handle for
the fiscal year ended June 30, 1996 decreased approximately $10 million or 5%.
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,
1995 and 1996 increased to approximately $443 million and $480 million,
respectively. ITW handle at the Company's Frontons (including the newly
acquired Miami, Tampa and Ocala facilities) have demonstrated similar growth in
recent years, increasing from $46.8 million in the year ended December 31, 1995
to approximately $50.3 million for the year ended December 31, 1996.
RESULTS OF OPERATIONS -- FIRST QUARTER 1997 COMPARED WITH FIRST QUARTER 1996
During the quarter ended March 31, 1997, the Company's operations reflects three
months' operation of live Jai-Alai performances at the Miami, Tampa, and Ft.
Pierce Frontons. A full schedule of inter-track wagering was also conducted at
all facilities with the exception of Miami, which offers limited ITW product due
to blackouts imposed as a result of its close proximity to other South Florida
pari-mutuels. The Miami facility, however, broadcasts its jai-alai performances
to other gaming facilities in Florida, the rest of the United States, and
Mexico. The Ocala Fronton only operated inter-track wagering during the first
quarter. This facility's live season is scheduled to begin May 25, 1997.
The Company's pari-mutuel handles for the three months ended March 31, 1997, and
March 31, 1996, were $43,880,130, and $8,996,267, respectively. These
consisted of $29,189,610 in live Jai-Alai wagering and $14,690,520 in ITW
handle, for the three months ended March 31, 1997, and $2,870,125 in live
Jai-Alai wagering and $6,126,142 in ITW handle for the three months ended March
31, 1996. The $34,883,863 increase in total handle consisted of an increase of
$26,319,485 in live Jai-Alai handle and a $8,564,378 increase attributable to
ITW handle. The Company's pari-mutuel revenues net of state pari-mutuel taxes,
for the three months ended March 31, 1997 and 1996 were $6,245,244 and
$1,238,733 respectively. Of the $6,245,244, $4,878,4150 was attributable to
commissions earned on live Jai-Alai and $1,366,829 was attributable to
commissions on inter-track wagering. Of the $1,238,733, $631,983 was
attributable to commissions earned on live jai-Alai and $606,750 was
attributable to commissions on inter-track wagering. These increases were
primarily the result of the expanded pari-mutuel operations described above due
to acquisition of the assets of Florida based World Jai-Alai.
Admissions income for the three months ended March 31, 1997 increased $132,262
from $44,513 to $176,775, for the three months ended March 31, 1996, net of
state taxes. Food, beverage and other income for the three months ended March
31, 1997 and March
16
<PAGE>
31, 1996, were $1,263,897 and $336,379, respectively. Again, these increases
were primarily the result of the asset acquisition. Actual attendance for live
jai-alai performances and ITW performances was approximately 362,000 for the
quarter ended March 31, 1997.
The Company's general and administrative expenses were $2,410,114 and $426,227
for the three months ended March 31, 1997 and March 31, 1996, respectively. The
increase of $1,983,887 in general and administrative costs resulted from taking
on the cost of administration for three additional Jai-Alai facilities in Miami,
Tampa, and Ocala, Florida, net of staff reductions and consolidations. Some of
the significant categories of general and administrative expenses and their
comparison to last year are as follows. Executive salaries were $328,963 for
the first quarter of 1997 compared to $144,913 for 1996. Advertising increased
$309,053 to $376,636. Professional fees were $65,664 compared to $54,776 for
the same three month period in 1996. Consulting fees increased from $77,019 to
$87,900. Former executives of World Jai-Alai were paid $85,000, pursuant to the
purchase agreement. Travel and entertainment expense totaled $91,537 compared
to $40,364 for the first quarter of 1996. Another significant cost included is
approximately $366,000 in payroll taxes. Insurance and property taxes increased
significantly to $163,172 and $174,666, respectively, as a result of the
company's expanded operations.
The Company's operating expenses for the three months ended March 31, 1997 and
March 31, 1996, were $5,134,468 and $1,381,307, respectively. Depreciation and
amortization expenses for the three months ended March 31, 1997, and March 31,
1996, was $218,011 and $48,600, respectively. The 1997 total depreciation and
amortization consisted of $211,761 in depreciation and $6,250 in amortization of
organization costs associated with the asset acquisition, while 1996's cost was
solely depreciation. Player costs, which include salaries, benefits, and
support staff, represent a significant portion of operational expenses. Player
costs for the three months ending March 31, 1997 and March 31, 1996, were
$1,677,298 and $492,002, respectively, reflecting the expanded operation of two
year-round schedules in Miami and Tampa. Rental and service costs for
totalizator wagering equipment and satellite receiving/television equipment also
represent a significant portion of operating expenses. These expenses totaled
$566,796, for the three months ended March 31, 1997, compared to $126,649 for
three months ended March 31, 1996. The components of the 1997 total were
$67,219 in ITW tote, interface, and telephone charges; $230,679 in totalizator
equipment rental; $141,000 in satellite charges and $127,898 in
camera/television rental. Utilities expense totaled $237,545 and $34,549
respectively, for the three months periods ended March 31, 1997 and March 31,
1996. Program costs totaling $167,065 and $39,981, respectively, are also
included in the total operating expenses for the three month periods ended March
31, 1997 and 1996. Interest expense totaled $153,151 and $42,802, for the three
months periods ended March 31, 1997 and March 31, 1996, respectively. The
$111,860 increase in interest expense was primarily the result of the bank debt
incurred which was related to the purchase of the WJA Notes described earlier.
Operating expenses, including payroll costs, for the bar, restaurant and
concessions were $722,415 and $160,617 for the three month periods which ended
March 31, 1997 and March 31, 1996, respectively. Operating payrolls and related
costs totaled $1,080,298 and $340,991 for the three month periods ended March
31, 1997 and March 31, 1996, respectively, excluding player costs and payroll
costs included in the bar, restaurant and concessions areas. Also contract
services for maintenance and security totaled $133,980 and $59,112,
respectively, for the quarter ended March 31, 1997. These increases were
primarily the result of the expanded pari-mutuel operations due to acquisition
of the assets of Florida based World Jai-Alai.
The Company had net interest and dividend income of $67,169 and $44,698 for the
three months ended March 31, 1997 and March 31, 1996, an increase of $22,471.
The increase in interest and dividend income was the result of an increase of
funds invested in short term cash equivalent funds due to additional equity
capital being injected during the first quarter of 1997 and an increase in the
credit line with Freedom Financial Corporation (See Liquidity and Capital
Resources).
At December 31, 1996, the Company had approximately $11,752,000 in net operating
loss carryforwards. However, because of IRC section 382 limitations due to the
change of control that occurred in March, 1993, the bulk of these carryforwards
are limited to approximately $95,000 per year. Operating losses of approximately
$1,173,000 attributed to the period after the change of ownership are not
subject to the Section 382 limitation. Thus, there was no federal tax accrual
for the first quarter of 1997.
The Company had a net income of $208,503 or $0.05 per common share ($.03 per
share on a fully diluted basis), for the three months ended March 31, 1997, and
a net loss of $143,211 or $0.04 per common share, for the three months ended
March 31, 1996. The increase in net income for the quarter ended March 31, 1997
was primarily caused by the factors discussed above. The most dramatic was the
approximate $5 million increase in pari-mutuel revenues that resulted from the
business expansion due to the acquisition of the World Jai-Alai properties.
The Company has expended approximately $649,000 during the first quarter of 1997
in capital expenditures related primarily to the construction of Poker Room
facilities at Miami and Tampa. Total renovation costs are anticipated to be
approximately $1.5 million.
17
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The balance of the Company's cash and cash equivalents at March 31, 1997 was
$794,039. At March 31, 1997 the Company had a decrease in working capital of
approximately $195,000 from December 31, 1996. The decrease was primarily the
result of the construction and pre-opening costs associated with the cardrooms
in Tampa and Miami, net of $448,000 in additional funds received January 16,
1997, in connection with a Regulation D Convertible Preferred Stock offering.
During the three months ended March 31, 1997, net cash provided by in the
Company's operating activities was $342,502. The Company's continuing operating
expenses consisted principally of office expenses, general and administrative
expenses, and costs associated with Fronton operations. Principal revenues were
from net pari-mutuel wagering commissions on live jai-alai and ITW events. The
Company expects that net cash flows from the operation of current business
activities will be adequate to meet operational needs.
During the three months ended March 31, 1997, cash flow used by investing
activities was $897,835. Of this $652,943 was the result of additions to plant
and equipment, the bulk of which was attributable to cardroom construction.
During the fourth quarter of 1995, the Company lent an affiliated company
(Freedom Financial) funds on a demand secured credit line, which bears interest
at the prime rate plus 2% (10.50%). Funds advanced during the quarter ended
March 31, 1997 under this agreement totaled $244,892.
During the three months ended March 31, 1997, cash flow from financing
activities was $441,845. Cash flow from financing activities consisted of
approximately $448,000 in net funds generated from the sale of convertible
preferred stock. The company had a net reduction of $6,244 in borrowings for
the quarter ended March 31, 1997. Subsequent to March 31, 1997, the Company
raised $1.9 million in funds via the sale of Class E Preferred Stock. (Also
See Note 5 to Consolidated Financial Statements).
The Company has terminated discussions relative to gaming ventures with all
Native American tribes except for the Rincon Luiseno Band of the Mission Indians
in San Diego County, California. Due to adverse decisions in other Courts in
related cases in California and the opinion issued by the U.S. Supreme Court in
the Seminole case and continuing delays in the opening of the Rincon Casino with
gaming machines, both Florida Gaming and the Rincon tribe have requested
arbitration relative to the Company's Loan Agreement. The outstanding balance
on the loan to the Rincon tribe was $310,000 as of March 31, 1997.
Additional capital will be required for expansion of facilities to accommodate
the newly authorized cardrooms at Miami, Tampa, and potentially Ft. Pierce.
Cardroom license applications have been filed for the Miami and Tampa locations
with anticipated openings about May 31, 1997. On January 16, 1997, the Company
closed on $483,000 of net additional funds in connection with the December 31,
1996, Regulation D offering. On April 4, 1997, the Company closed on an
additional $1.9 million in net funds raised pursuant to a Regulation S offering.
Construction and improvement costs related to the initial opening of cardrooms
are estimated to be about $1.5 million. The company has substantial mortgage
debt repayments of $1.83 million due over the next twelve months. The total
amount due to the Bank of Oklahoma ("BOK") during this period is $1.58 million.
The Company is currently evaluating sources of funding including long-term
equity and debt financing. These include mortgage debt utilizing the values of
the existing and recently acquired real estate (see Note 8 to the Financial
Statements - Acquisition of WJA Assets). Also Freedom Financial (the Company's
largest shareholder) is in the process of obtaining funding and plans to inject
funds into Florida Gaming via the exercise of its options and/or repayment of
credit line advances. On May 1, 1997 Freedom exercised 300,000 of its options
for $375,000. The company believes that its current financial condition
provides adequate capital reserves and liquidity for present operations.
18
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
On May 13, 1994, American Jai-Alai, Inc. ("American") filed suit in the Circuit
Court of the Fifteenth Circuit in Florida, Palm Beach County, against the
Company. American alleges that in August 1993, the Company entered into a
contract with American that American would manage the Fronton if the Company
acquired it. American alleges that the Company and American agreed to enter
into a five-year renewable management contract pursuant to which American would
guarantee a $480,000 annual payment to the Company. An additional sum of the
Fronton's net operating income above $480,000 would be paid to the Company, with
American receiving 25% of all net operating income above $750,000 annually. In
addition, American 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 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 alleges that the Company agreed to pay
American 25% of any profit realized from the sale of the Fronton, if such sale
was not to American pursuant to its alleged right of first refusal. In the
Complaint, American alleges, among other claims, breaches of fiduciary duty,
breach of contract and fraud. On May 20, 1994, counsel for American stated that
American 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 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. An Amended Complaint was filed on
January 25, 1995, and the Company filed its responsive pleading on April 25,
1995, denying the allegations in the Amended Complaint. The Company filed a
Motion for Summary Judgment on February 20, 1996, in which the Company asserts
that, as a matter of law, no written management agreement exists between the
parties. On or about October 22, 1996, authorized representatives of the
Company and American entered into a letter agreement of settlement in this
matter, which is referred to as the "Memorandum of Understanding" or "MOU".
Since that date, the parties have been attempting to memorialize the MOU in
final settlement documents and the Company has filed a motion to compel
settlement. If that motion is successful, the case should be settled and,
therefore, dismissed. The Company denies the allegations and believes that this
proceeding is not likely to result in an adverse judgment that is material to
the results of its operations and financial condition. Subsequent to December
31, 1996, as part of an agreement to settle this litigation, the Company
negotiated an option agreement with the principal of American providing American
with a 6 month option to acquire the Company's Ocala Jai Alai property for
$2,000,000 and the right to receive 15,000 shares of the Company's common stock.
Any such shares issued would carry "piggyback" registration rights. This
agreement was finalized and the suit voluntarily dismissed on March 26, 1997.
The 15,000 shares were issued by the Company on April 28, 1997. These shares
carry certain "piggyback" registration rights.
On December 16, 1994, General Realty and Finance Co. filed in Palm Beach County,
against the Company alleging a breach of a commission agreement for the purchase
of the Ft. Pierce Jai Alai fronton. A Motion to Transfer Venue was filed
January 30, 1995, seeking to have venue transferred to St. Lucie County. The
Company has previously paid a commission to a party to the suit and has
attempted to pay the principal of General Realty, for the commission; however,
the payment was rejected. On January 3, 1996, the Company filed a Motion for
Partial Summary Judgment as to the allegations that the Company breached a
written commission agreement. On January 29, 1996, the court issued an Order
granting the Company's Motion for Partial Summary Judgment finding, as a matter
of law, that there was no written commission agreement between General Realty
and the Company. General Realty filed its Second Amended Complaint on February
13, 1996, adding allegations that General Realty and the Company had an oral or
implied commission agreement which has been breached by the Company. The
Company filed a responsive pleading to the Amended Complaint, and again moved
from, and was granted, a summary judgment finding, as a matter of law, that
there was no oral commission agreement between General Realty and the Company.
That summary judgment left only equitable theories of recovery available to
General Realty. On or about December 12, 1996, the parties reached a settlement
in mediation. On April 16, 1997, a final settlement was agreed to and the suit
was voluntarily dismissed. Per the settlement agreement Florida Gaming issued
7,000 in common stock , paid $30,000 in cash and issued at $30,000 promissory
Note to General Realty and Finance payable in equal installments through
December 1, 1997.
Item 2. CHANGES IN SECURITIES.
(a) Not applicable.
19
<PAGE>
(b) Not applicable.
(c) On January 16, 1997, the Company concluded a private
placement of shares (the "Series D Shares") of its Series D
8% Cumulative Convertible Preferred Stock ("Series D
Preferred Stock"). The Company issued a total of 1,175
Series D Shares at a price per share of $1,000, with 650
shares issued on December 31, 1996, and 525 shares issued on
January 16, 1997. The Company did not engage an underwriter
in connection with the issuance of the Series D Shares. The
Series D Shares were issued to a total of 12 "accredited
investors," as defined in Rule 501 under the Securities Act.
The Company issued the Series D Shares for cash
consideration. The Company is obligated to pay First
Capital Partners, Inc., a finders fee in the amount of 8% of
the gross proceeds, plus warrants to purchase the Company's
Common Stock having a market value equal to 5% of the gross
proceeds, with an exercise price equal to the market price
per share of Common Stock at each of the closings. The
Series D Shares were issued in accordance with the
provisions of Regulation D under the Securities Act in a
private placement solely to accredited investors.
Holders of Series D Preferred Stock may convert all or any
of such shares to the Company's Common Stock beginning 90
days after the issuance of the Series D Preferred Stock. If
not converted earlier by the holder, the Series D Preferred
Stock shall be converted automatically on December 31, 1998.
The Company was obligated to file a registration statement
(the "Series D Registration Statement") covering the shares
of Common Stock issuable on conversion of the Series D
Preferred Stock (the "Series D Conversion Shares"); the
Series D Registration Statement was declared effective
February 14, 1997. In general, the number of Series D
Conversion Shares issuable on conversion of each share of
Series D Preferred Stock shall equal the Stated Value
together with accrued and unpaid dividends on such share, if
any, divided by the Conversion Price, which is defined as
the lesser of (i) $7.50 or (ii) 80% of the closing bid price
of the Common Stock on the five trading days before
conversion.
Upon liquidation, the holders of Series D Preferred Shares
shall be entitled to be paid $1,000 per share plus 8%
accrued dividends before any distribution to holders of
Common Stock. The Company has the right to redeem the
shares of Series D Preferred Stock if a holder of such
shares exercise his right of conversion at a time when the
Conversion Price is below $5.00. The redemption price to be
paid by the Company is determined using a ratio based on the
trading price of the Company's Common Stock and the Stated
Value.
On January 17, 1997, the Company issued 30,341 shares of
Common Stock upon the conversion of 177.5 shares of Series B
Preferred Stock. On January 22, 1997, the Company issued
19,144 shares of Common Stock upon the conversion of 100
shares of Series B Preferred Stock. On January 28, 1997,
the Company issued 45,849 shares of Common Stock upon the
conversion of 250 shares of Series B Preferred Stock. On
February 14, 1997, the Company issued 45,525 shares of
Common Stock upon the conversion 250 shares Series B
Preferred Stock. On February 17, 1997, the Company issued
15,929 shares of Common Stock upon the conversion of 110
shares of Series B Preferred Stock. On March 7, 1997, the
Company issued 4,844 shares of Common Stock upon the
conversion of 22.5 shares of Series B Preferred Stock. On
March 17, 1997, the Company issued 16,030 shares of Common
Stock upon the conversion of 110 shares of Series B
Preferred Stock. On March 18, 1997, the Company issued
70,236 shares of Common Stock upon the conversion of 360
shares of Series B Preferred Stock. On April 4, 1997, the
Company issued 4,938 shares of Common Stock upon the
conversion of 22.5 shares Series B Preferred Stock. On
April 17, 1997, the Company issued 12,670 shares of Common
Stock upon the conversion of 50 shares of Series D Preferred
Stock. On April 21, 1997, the Company issued 19,989 shares
of Common Stock upon the conversion of 78 shares of Series D
Preferred Stock. No underwriters were used in any of these
conversions. The shares were issued in accordance with
Section 3(a)(9) of the Securities Act of 1933.
On April 18, 1997, the Company issued 7,000 shares of Common
Stock to General Realty and Financial Corporation in
settlement of litigation as described in Item 1 of Part II
above. On April 28, 1997, the Company issued 15,000 shares
of Common Stock to American Jai-Alai, Inc. in settlement of
litigation as described in Item 1 of Part II above. On May
1, 1997, the Company issued 300,000 shares of its common
stock to Freedom Financial Corporation ("Freedom") for cash
consideration of $375,000. The issuance was in connection
with the exercise in part of the options previously issued
to Freedom pursuant to a
20
<PAGE>
Stock Purchase Agreement dated March 31, 1993. Freedom
retains an option to purchase 830,000 shares of common stock
at an exercise price of $1.25 per share. No underwriters
were used in these transactions. The shares of common Stock
were issued in transactions not involving a public offering
in accordance with Section 4(2) of the Securities Act of
1933, as amended.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
Item 5. OTHER INFORMATION.
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) LIST OF EXHIBITS FILED.
Exhibit 99.1- Stock Option Grant to W.Bennett Collet
Exhibit 99.2- Continuing Stock Option Grant to W.Bennett
Collett
Exhibit 99.3- Continuing Stock Option Grant to Robert L. Hurd
Exhibit 99.4- Continuing Stock Option Grant to W.Bennett
Collett, Jr.
Exhibit 99.5- Stock Option Grant to Timothy L. Hensley
Exhibit 99.6- Continuing Stock Option Grant to George W.
Galloway, Jr.
Exhibit 99.7- Continuing Stock Option Grant to
Roland M. Howell
Exhibit 99.8- Continuing Stock Option Grant to Gary E. Bowman
Exhibit 27- Financial Data Schedule
(b) REPORTS ON FORM 8-K.
During the quarter ended March 31, 1997, the Company filed a Form
8-K Current Report dated December 31, 1996, as amended by
Amendment No. 1 and Amendment No. 2, concerning Item 2,
ACQUISITION OR DISPOSITION OF ASSETS reporting the acquisition of
the property and assets of WJA Realty Limited Partnership. The
Form 8-K included the following financial statements:
(i) The financial statements of the Company:
Report of Independent Auditors.
Balance Sheets as of December 31, 1996 and 1995.
Statements of Operations for the years ended December
31, 1996 and 1995.
Statements of Stockholders' Equity for the two years
ended December 31, 1996.
Statements of Cash Flows for the years ended December
31, 1996 and 1995.
21
<PAGE>
Notes to Financial Statements.
(ii) The financial statements of WJA Realty Limited
Partnership:
Report of Independent Auditors.
WJA Realty Limited Partnership Balance Sheet as of
December 31, 1996 and 1995.
WJA Realty Limited Partnership Statements of Operations
for the years ended December 31, 1996 and 1995.
WJA Realty Limited Partnership Statements of Partners'
Deficit for the years ended December 31, 1996 and 1995.
WJA Realty Limited Partnership Statements of Cash Flows
for the years ended December 31, 1996 and 1995.
WJA Realty Limited Partnership Notes to Financial
Statements as of December 31, 1996 and 1995.
(iii) The following pro forma financial information:
Florida Gaming Corporation Pro Forma Consolidating
Balance Sheet as of December 31, 1996 (unaudited).
Florida Gaming Corporation Pro Forma Consolidating
Statements of Operations for the years ended December
31, 1996 and 1995 (unaudited).
Florida Gaming Corporation Notes to Pro Forma
Consolidating Financial Statement(unaudited).
During the quarter ended March 31, 1997, the Company filed a Form 8-K
Current Report dated January 16, 1997, reporting the conclusion of a
private placement of Series D Preferred Stock as described in Item 2(c) of
Part II above. No financial statements were filed as a part of this Form
8-K Current Report.
Following the quarter ended March 31, 1997, the Company filed a Form 8-K
Current Report dated April 4, 1997, concerning Item 9, SALES OF EQUITY
SECURITIES PURSUANT TO REGULATION S, reporting the issuance of 200 shares
of the Company's Series E 8% Cumulative Convertible Preferred Stock and a
Form 8-K Current Report dated May 1, 1997, concerning Item 5, OTHER EVENTS,
reporting Freedom Financial Corporation's exercise of its options to
purchase 300,000 shares of the Company's Common Stock at a per share
exercise price of $1.25. No financial statements were filed as a part of
these Form 8-K Current Reports.
22
<PAGE>
FLORIDA GAMING CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FLORIDA GAMING CORPORATION
------------------------------
(Registrant)
Date: MAY 14, 1997 By: /s/ W. B. Collett
----------------- ---------------------------
W.B. Collett
Chairman of the Board and Chief
Executive Officer
(Principal Executive Officer)
Date: MAY 14, 1997 By: /s/ Timothy L. Hensley
----------------- ---------------------------
Timothy L. Hensley
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10QSB
FOR THE PERIOD ENDED MARCH 31, 1997 AND SHOULD BE READ IN CONJUNCTION WITH THOSE
FINANCIAL STATEMENTS AND FOOTNOTES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 794
<SECURITIES> 0
<RECEIVABLES> 2,474
<ALLOWANCES> 0
<INVENTORY> 151
<CURRENT-ASSETS> 3,863
<PP&E> 23,576
<DEPRECIATION> 740
<TOTAL-ASSETS> 27,323
<CURRENT-LIABILITIES> 6,507
<BONDS> 0
4
0
<COMMON> 460
<OTHER-SE> 13,674
<TOTAL-LIABILITY-AND-EQUITY> 27,323
<SALES> 0
<TOTAL-REVENUES> 7,686
<CGS> 0
<TOTAL-COSTS> 7,545
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 153
<INCOME-PRETAX> 206
<INCOME-TAX> 0
<INCOME-CONTINUING> 206
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 206
<EPS-PRIMARY> .05
<EPS-DILUTED> .03
</TABLE>
<PAGE>
#1
STOCK OPTION GRANT
THIS STOCK OPTION GRANT is made by FLORIDA GAMING CORPORATION, a Delaware
corporation (the "Company") to W. Bennett Collett (the "Optionee") to
memorialize and evidence the grant, on February 26, 1997 of an option (the
"Option") to purchase 125,000 shares of $.10 par value common stock of the
Company ("Common Stock"), subject to the following terms and conditions:
1. The Options shall vest immediately and shall be exercisable in whole or
in part, from time to time, on and after February 26, 1997.
2. The Option shall expire on February 27, 2002.
3. The Purchase Price (herein so called) of each share of Common Stock
subject to the Option shall be $6.625.
4. The Option may be exercised in whole or in part, from time to time, by
the Optionee tendering to the Company the aggregate Purchase Price of the
shares of Common Stock being purchased.
5. The Option shall be non-transferable except by operation of law.
6. The number of shares of Common Stock with respect to which the Option is
granted and the Purchase Price of such shares shall be appropriately
adjusted for any increase or decrease in the number of shares of issued
Common Stock resulting from a subdivision or consolidation of such shares
through a reorganization, recapitalization, stock split-up, stock
distribution or combination of shares, or the payment of a Common Stock
dividend or other increase or decrease in the number of shares effected
without receipt of consideration by the Company.
7. The obligation of the Company to sell and deliver Common Stock pursuant
to the Option shall be subject to all applicable laws, rules and
regulations, including, without limitation, all applicable federal and
state securities laws.
8. Upon the exercise of the Option, the Company shall have the right to
require the Optionee to remit to the Company an amount sufficient to
satisfy all federal, state and local withholding tax requirements.
<PAGE>
9. All questions pertaining to the validity, construction and administration
of this Plan shall be governed by the laws of the State of Delaware.
EXECUTED as of February 26, 1997
FLORIDA GAMING CORPORATION
By: /s/ Timothy L. Hensley
-------------------------------------
Timothy L. Hensley
Executive Vice President,
Treasurer and Chief
Financial Officer
<PAGE>
#2
CONTINUING STOCK OPTION GRANT
THIS CONTINUING STOCK OPTION GRANT is made by FLORIDA GAMING CORPORATION,
a Delaware corporation (the "Company") to W. BENNETT COLLETT (the "Optionee")
to memorialize and evidence the grant of the following described option by
the Company to the Optionee.
On February 26, 1997, pursuant to the Directors' Continuing Stock Option
Plan ("Plan") adopted by the Board of Directors of the Company on the same
date, a copy of which is attached hereto as Exhibit "A", the Company granted
to the Optionee an option (the "Option") to purchase up to 40,000 shares of
$.10 par value common stock of the Company (the "Shares"), subject to the
terms and conditions stated herein and in said Plan.
The Option, which is non-transferable except by operation of law, vests
February 26, 1997 and is exercisable, in whole or in part, from time to time,
anytime prior to the earlier of February 26, 2002 or one year after you cease
to be a director of the Company.
The purchase price for each Share subject to the Option is $6.50
("Purchase Price"). The Option may be exercised by the Optionee tendering to
the Company the aggregate Purchase Price of the Shares being purchased plus,
if required by the Company, an amount of monies sufficient to pay all
applicable federal, state and local withholding taxes on the difference
between the Purchase Price and the market value of the Shares on the date of
exercise.
The obligation of the Company to sell any Shares to the Optionee is
subject to all applicable laws, rules and regulations, including, without
limitation, all applicable federal and state securities laws.
All questions pertaining to the validity, construction and administration
of this Stock Option Grant shall be governed by the laws of the State of
Delaware.
EXECUTED as of February 26, 1997.
FLORIDA GAMING CORPORATION
By: /s/ Timothy L. Hensley
-------------------------------------
Timothy L. Hensley
Executive Vice President,
Treasurer and Chief
Financial Officer
<PAGE>
FLORIDA GAMING CORPORATION
DIRECTORS' CONTINUING STOCK OPTION PLAN
1. PURPOSE. This Directors' Continuing Stock Option Plan is established
pursuant to resolutions adopted by the Board of Directors on February 26,
1997 for the purpose of partially rewarding directors of the Company for
their services as such.
2. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board of Directors.
3. GRANT OF OPTIONS. Each existing director of the Company shall be
granted an option as of February 26, 1997 to purchase 10,000 shares of Common
Stock for each full or partial year such person has served as a director of
the Company prior to January 1, 1997 ("Immediate Options") and for each full
year of service as a director after December 31, 1996 ("Delayed Options").
4. VESTING AND EXERCISE OF OPTIONS. All Immediate Options granted
pursuant to this Plan shall vest and be exercisable on and after February 26,
1997. All Delayed Options granted pursuant to this Plan shall vest and be
exercisable on and after the date such Delayed Options are granted.
5. EXPIRATION OF OPTIONS. All options granted pursuant to this Plan,
unless previously exercised, shall expire five years after the date such
option vests and becomes exercisable or one year after such director ceases
to be a director of the Company, whichever occurs first.
6. PURCHASE PRICE. The Purchase Price (herein so called) of a share of
Common Stock subject to the options granted pursuant to this Plan shall be
the fair market value of such share determined as follows:
(a) If the Common Stock is quoted on NASDAQ, the mean high and low
market prices for which the Common Stock is quoted on NASDAQ as of the most
recent date on which such shares were quoted prior to the date the option is
granted.
(b) If the Common Stock is listed on a national securities exchange,
the closing price of the Common Stock on the composite tape as of the most
recent date on which such shares were traded prior to the date the option is
granted.
(c) If the Common Stock is neither quoted on NASDAQ or listed on a
national securities exchange, the book value per share determined in
accordance with generally accepted accounting principles as of the last day
of the fiscal quarter immediately preceding the date the option is granted.
EXHIBIT A
<PAGE>
7. EXERCISE. An option may be exercised in whole or in part, from time
to time, by the optionee tendering to the Company the aggregate Purchase
Price of the shares of Common Stock being purchased.
8. RESTRICTION ON TRANSFER. The options granted pursuant to this plan
shall be non-transferable except by operation of law.
9. ADJUSTMENT OF SHARES. The number of shares of Common Stock with
respect to which options are granted under this Plan and the Purchase Price
of such shares shall be appropriately adjusted by the Board of Directors for
any increase or decrease in the number of shares of issued Common Stock
resulting from a subdivision or consolidation of such shares through a
reorganization, recapitalization, stock split-up, stock distribution or
combination of shares, or the payment of a Common Stock dividend or other
increase or decrease in the number of shares effected without receipt of
consideration by the Company.
10. LEGAL AND OTHER REQUIREMENTS. The obligation of the Company to sell
and deliver Common Stock under this Plan shall be subject to all applicable
laws, rules and regulations, including, without limitation, all applicable
federal and state securities laws.
11. WITHHOLDING TAXES. Upon the exercise of any option granted pursuant
to this Plan, the Company shall have the right to require the optionee to
remit to the Company an amount sufficient to satisfy all federal, state and
local withholding tax requirements.
12. APPLICABLE LAW. All questions pertaining to the validity,
construction and administration of this Plan shall be governed by the laws of
the State of Delaware.
<PAGE>
CONTINUING STOCK OPTION GRANT
THIS CONTINUING STOCK OPTION GRANT is made by FLORIDA GAMING CORPORATION,
a Delaware corporation (the "Company") to ROBERT L. HURD (the "Optionee")
to memorialize and evidence the grant of the following described option by
the Company to the Optionee.
On February 26, 1997, pursuant to the Directors' Continuing Stock Option
Plan ("Plan") adopted by the Board of Directors of the Company on the same
date, a copy of which is attached hereto as Exhibit "A", the Company granted
to the Optionee an option (the "Option") to purchase up to 40,000 shares of
$.10 par value common stock of the Company (the "Shares"), subject to the
terms and conditions stated herein and in said Plan.
The Option, which is non-transferable except by operation of law, vests
February 26, 1997 and is exercisable, in whole or in part, from time to time,
anytime prior to the earlier of February 26, 2002 or one year after you cease
to be a director of the Company.
The purchase price for each Share subject to the Option is $6.50
("Purchase Price"). The Option may be exercised by the Optionee tendering to
the Company the aggregate Purchase Price of the Shares being purchased plus,
if required by the Company, an amount of monies sufficient to pay all
applicable federal, state and local withholding taxes on the difference
between the Purchase Price and the market value of the Shares on the date of
exercise.
The obligation of the Company to sell any Shares to the Optionee is
subject to all applicable laws, rules and regulations, including, without
limitation, all applicable federal and state securities laws.
All questions pertaining to the validity, construction and administration
of this Stock Option Grant shall be governed by the laws of the State of
Delaware.
EXECUTED as of February 26, 1997.
FLORIDA GAMING CORPORATION
By: /s/ W. Bennett Collett
-------------------------------------
W. Bennett Collett
Chairman of the Board and
Chief Executive Officer
<PAGE>
FLORIDA GAMING CORPORATION
DIRECTORS' CONTINUING STOCK OPTION PLAN
1. PURPOSE. This Directors' Continuing Stock Option Plan is established
pursuant to resolutions adopted by the Board of Directors on February 26,
1997 for the purpose of partially rewarding directors of the Company for
their services as such.
2. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board of Directors.
3. GRANT OF OPTIONS. Each existing director of the Company shall be
granted an option as of February 26, 1997 to purchase 10,000 shares of Common
Stock for each full or partial year such person has served as a director of
the Company prior to January 1, 1997 ("Immediate Options") and for each full
year of service as a director after December 31, 1996 ("Delayed Options").
4. VESTING AND EXERCISE OF OPTIONS. All Immediate Options granted
pursuant to this Plan shall vest and be exercisable on and after February 26,
1997. All Delayed Options granted pursuant to this Plan shall vest and be
exercisable on and after the date such Delayed Options are granted.
5. EXPIRATION OF OPTIONS. All options granted pursuant to this Plan,
unless previously exercised, shall expire five years after the date such
option vests and becomes exercisable or one year after such director ceases
to be a director of the Company, whichever occurs first.
6. PURCHASE PRICE. The Purchase Price (herein so called) of a share of
Common Stock subject to the options granted pursuant to this Plan shall be
the fair market value of such share determined as follows:
(a) If the Common Stock is quoted on NASDAQ, the mean high and low
market prices for which the Common Stock is quoted on NASDAQ as of the most
recent date on which such shares were quoted prior to the date the option is
granted.
(b) If the Common Stock is listed on a national securities exchange,
the closing price of the Common Stock on the composite tape as of the most
recent date on which such shares were traded prior to the date the option is
granted.
(c) If the Common Stock is neither quoted on NASDAQ or listed on a
national securities exchange, the book value per share determined in
accordance with generally accepted accounting principles as of the last day
of the fiscal quarter immediately preceding the date the option is granted.
EXHIBIT A
<PAGE>
7. EXERCISE. An option may be exercised in whole or in part, from time
to time, by the optionee tendering to the Company the aggregate Purchase
Price of the shares of Common Stock being purchased.
8. RESTRICTION ON TRANSFER. The options granted pursuant to this plan
shall be non-transferable except by operation of law.
9. ADJUSTMENT OF SHARES. The number of shares of Common Stock with
respect to which options are granted under this Plan and the Purchase Price
of such shares shall be appropriately adjusted by the Board of Directors for
any increase or decrease in the number of shares of issued Common Stock
resulting from a subdivision or consolidation of such shares through a
reorganization, recapitalization, stock split-up, stock distribution or
combination of shares, or the payment of a Common Stock dividend or other
increase or decrease in the number of shares effected without receipt of
consideration by the Company.
10. LEGAL AND OTHER REQUIREMENTS. The obligation of the Company to sell
and deliver Common Stock under this Plan shall be subject to all applicable
laws, rules and regulations, including, without limitation, all applicable
federal and state securities laws.
11. WITHHOLDING TAXES. Upon the exercise of any option granted pursuant
to this Plan, the Company shall have the right to require the optionee to
remit to the Company an amount sufficient to satisfy all federal, state and
local withholding tax requirements.
12. APPLICABLE LAW. All questions pertaining to the validity,
construction and administration of this Plan shall be governed by the laws of
the State of Delaware.
<PAGE>
#4
CONTINUING STOCK OPTION GRANT
THIS CONTINUING STOCK OPTION GRANT is made by FLORIDA GAMING CORPORATION,
a Delaware corporation (the "Company") to W. BENNETT COLLETT, JR. (the
"Optionee") to memorialize and evidence the grant of the following described
option by the Company to the Optionee.
On February 26, 1997, pursuant to the Directors' Continuing Stock Option
Plan ("Plan") adopted by the Board of Directors of the Company on the same
date, a copy of which is attached hereto as Exhibit "A", the Company granted
to the Optionee an option (the "Option") to purchase up to 40,000 shares of
$.10 par value common stock of the Company (the "Shares"), subject to the
terms and conditions stated herein and in said Plan.
The Option, which is non-transferable except by operation of law, vests
February 26, 1997 and is exercisable, in whole or in part, from time to time,
anytime prior to the earlier of February 26, 2002 or one year after you cease
to be a director of the Company.
The purchase price for each Share subject to the Option is $6.50
("Purchase Price"). The Option may be exercised by the Optionee tendering to
the Company the aggregate Purchase Price of the Shares being purchased plus,
if required by the Company, an amount of monies sufficient to pay all
applicable federal, state and local withholding taxes on the difference
between the Purchase Price and the market value of the Shares on the date of
exercise.
The obligation of the Company to sell any Shares to the Optionee is
subject to all applicable laws, rules and regulations, including, without
limitation, all applicable federal and state securities laws.
All questions pertaining to the validity, construction and administration
of this Stock Option Grant shall be governed by the laws of the State of
Delaware.
EXECUTED as of February 26, 1997.
FLORIDA GAMING CORPORATION
By: /s/ W. Bennett Collett
-------------------------------------
W. Bennett Collett
Chairman of the Board and
Chief Executive Officer
<PAGE>
FLORIDA GAMING CORPORATION
DIRECTORS' CONTINUING STOCK OPTION PLAN
1. PURPOSE. This Directors' Continuing Stock Option Plan is established
pursuant to resolutions adopted by the Board of Directors on February 26,
1997 for the purpose of partially rewarding directors of the Company for
their services as such.
2. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board of Directors.
3. GRANT OF OPTIONS. Each existing director of the Company shall be
granted an option as of February 26, 1997 to purchase 10,000 shares of Common
Stock for each full or partial year such person has served as a director of
the Company prior to January 1, 1997 ("Immediate Options") and for each full
year of service as a director after December 31, 1996 ("Delayed Options").
4. VESTING AND EXERCISE OF OPTIONS. All Immediate Options granted
pursuant to this Plan shall vest and be exercisable on and after February 26,
1997. All Delayed Options granted pursuant to this Plan shall vest and be
exercisable on and after the date such Delayed Options are granted.
5. EXPIRATION OF OPTIONS. All options granted pursuant to this Plan,
unless previously exercised, shall expire five years after the date such
option vests and becomes exercisable or one year after such director ceases
to be a director of the Company, whichever occurs first.
6. PURCHASE PRICE. The Purchase Price (herein so called) of a share of
Common Stock subject to the options granted pursuant to this Plan shall be
the fair market value of such share determined as follows:
(a) If the Common Stock is quoted on NASDAQ, the mean high and low
market prices for which the Common Stock is quoted on NASDAQ as of the most
recent date on which such shares were quoted prior to the date the option is
granted.
(b) If the Common Stock is listed on a national securities exchange,
the closing price of the Common Stock on the composite tape as of the most
recent date on which such shares were traded prior to the date the option is
granted.
(c) If the Common Stock is neither quoted on NASDAQ or listed on a
national securities exchange, the book value per share determined in
accordance with generally accepted accounting principles as of the last day
of the fiscal quarter immediately preceding the date the option is granted.
EXHIBIT A
<PAGE>
7. EXERCISE. An option may be exercised in whole or in part, from time
to time, by the optionee tendering to the Company the aggregate Purchase
Price of the shares of Common Stock being purchased.
8. RESTRICTION ON TRANSFER. The options granted pursuant to this plan
shall be non-transferable except by operation of law.
9. ADJUSTMENT OF SHARES. The number of shares of Common Stock with
respect to which options are granted under this Plan and the Purchase Price
of such shares shall be appropriately adjusted by the Board of Directors for
any increase or decrease in the number of shares of issued Common Stock
resulting from a subdivision or consolidation of such shares through a
reorganization, recapitalization, stock split-up, stock distribution or
combination of shares, or the payment of a Common Stock dividend or other
increase or decrease in the number of shares effected without receipt of
consideration by the Company.
10. LEGAL AND OTHER REQUIREMENTS. The obligation of the Company to sell
and deliver Common Stock under this Plan shall be subject to all applicable
laws, rules and regulations, including, without limitation, all applicable
federal and state securities laws.
11. WITHHOLDING TAXES. Upon the exercise of any option granted pursuant
to this Plan, the Company shall have the right to require the optionee to
remit to the Company an amount sufficient to satisfy all federal, state and
local withholding tax requirements.
12. APPLICABLE LAW. All questions pertaining to the validity,
construction and administration of this Plan shall be governed by the laws of
the State of Delaware.
<PAGE>
STOCK OPTION GRANT
THIS STOCK OPTION GRANT is made by FLORIDA GAMING CORPORATION, a Delaware
corporation (the "Company") to TIMOTHY L. HENSLEY (the "Optionee") to
memorialize and evidence the grant of the following described option by the
Company to the Optionee.
On February 27, 1997, pursuant to the Directors' Stock Option Plan
("Plan") adopted by the Board of Directors of the Company on August 9, 1994,
a copy of which is attached hereto as Exhibit "A", the Company granted to the
Optionee an option (the "Option") to purchase up to 25,000 shares of $.10 par
value common stock of the Company (the "Shares"), subject to the terms and
conditions stated herein and in said Plan.
The Option, which is non-transferable except by operation of law, will
vest on February 27, 1998 and is exercisable, in whole or in part, from time
to time, anytime prior to the earlier of February 27, 2002 or one year after
you cease to be a director of the Company.
The purchase price for each Share subject to the Option is $6.4375
("Purchase Price"). The Option may be exercised by the Optionee tendering to
the Company the aggregate Purchase Price of the Shares being purchased plus,
if required by the Company, an amount of monies sufficient to pay all
applicable federal, state and local withholding taxes on the difference
between the Purchase Price and the market value of the Shares on the date of
exercise.
The obligation of the Company to sell any Shares to the Optionee is
subject to all applicable laws, rules and regulations, including, without
limitation, all applicable federal and state securities laws.
All questions pertaining to the validity, construction and administration
of this Stock Option Grant shall be governed by the laws of the State of
Delaware.
EXECUTED as of February 28, 1997.
FLORIDA GAMING CORPORATION
By: /s/ W. Bennett Collett
------------------------------------
W. Bennett Collett
Chairman of the Board and
Chief Executive Officer
<PAGE>
FLORIDA GAMING CORPORATION
DIRECTORS' STOCK OPTION PLAN
1. PURPOSE. The purpose of this Directors' Stock Option Plan (the
"Plan") is to give directors of Florida Gaming Corporation (the "Company") an
opportunity to acquire shares of $.10 par value common stock of the Company
(the "Common Stock") to provide an incentive for such directors to promote
the best interests of the Company and to enhance its long-term performance.
2. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Company, which, to the extent it may determine, may delegate
its powers with respect to the administration of the Plan to a committee of
directors (the "Committee") appointed by the Board and composed of not less
than two members.
3. GRANT OF OPTIONS. Each existing director of the Company shall be
granted an option as of the date this Plan is approved by the Board of
Directors to purchase 25,000 shares of Common Stock and each future director
of the Company shall be granted an option to purchase 25,000 shares of
Common Stock as of the effective date such director's election. Provided,
however, that no options shall be granted pursuant to this Plan after
December 31, 1997.
4. VESTING AND EXERCISE OF OPTIONS. All options granted pursuant to this
Plan shall vest and be exercisable one year after the effective date of such
director's election or on October 1, 1994, whichever occurs last.
5. EXPIRATION OF OPTIONS. All options granted pursuant to this Plan,
unless previously exercised, shall expire five years after the date
such option vests and becomes exercisable or one year after such director
ceases to be a director of the Company, whichever occurs first.
6. PURCHASE PRICE. The Purchase Price (herein so called) of a share of
Common Stock subject to the options granted pursuant to this Plan shall be
the fair market value of such share determined as follows:
(a) If the Common Stock is quoted on NASDAQ, the mean high and low
market prices for which the Common Stock is quoted on NASDAQ as of the most
recent date on which such shares were quoted prior to the date the option is
granted.
(b) If the Common Stock is listed on a national securities exchange,
the closing price of the Common Stock on the composite tape as of the most
recent date on which such shares were traded prior to the date the option is
granted.
EXHIBIT A
<PAGE>
(c) If the Common Stock is neither quoted on NASDAQ or listed on a
national securities exchange, the book value per share determined in
accordance with generally accepted accounting principles as of the last day
of the fiscal quarter immediately preceding the date the option is granted.
7. EXERCISE. An option may be exercised in whole or in part, from time to
time, by the optionee tendering to the Company the aggregate Purchase Price
of the shares of Common Stock being purchased.
8. RESTRICTION ON TRANSFER. The options granted pursuant to this plan
shall be non-transferable except by operation of law.
9. ADJUSTMENT OF SHARES. The number of shares of Common Stock with
respect to which options are granted under this Plan and the Purchase Price
of such shares shall be appropriately adjusted by the Board of Directors for
any increase or decrease in the number of shares of issued Common Stock
resulting from a subdivision or consolidation of such shares through a
reorganization, recapitalization, stock split-up, stock distribution or
combination of shares, or the payment of a Common Stock dividend or other
increase or decrease in the number of shares effected without receipt of
consideration by the Company.
10. LEGAL AND OTHER REQUIREMENTS. The obligation of the Company to sell
and deliver Common Stock under this Plan shall be subject to all applicable
laws, rules and regulations, including, without limitation, all applicable
federal and state securities laws.
11. WITHHOLDING TAXES. Upon the exercise of any option granted pursuant
to this Plan, the Company shall have the right to require the optionee to
remit to the Company an amount sufficient to satisfy all federal, state and
local withholding tax requirements.
12. APPLICABLE LAW. All questions pertaining to the validity,
construction and administration of this Plan shall be governed by the laws of
the State of Delaware.
<PAGE>
CONTINUING STOCK OPTION GRANT
THIS CONTINUING STOCK OPTION GRANT is made by FLORIDA GAMING CORPORATION,
a Delaware corporation (the "Company") to GEORGE W. GALLOWAY, JR. (the
"Optionee") to memorialize and evidence the grant of the following described
option by the Company to the Optionee.
On February 26, 1997, pursuant to the Directors' Continuing Stock Option
Plan ("Plan") adopted by the Board of Directors of the Company on the same
date, a copy of which is attached hereto as Exhibit "A", the Company granted
to the Optionee an option (the "Option") to purchase up to 30,000 shares of
$.10 par value common stock of the Company (the "Shares"), subject to the
terms and conditions stated herein and in said Plan.
The Option, which is non-transferable except by operation of law, vests
February 26, 1997 and is exercisable, in whole or in part, from time to time,
anytime prior to the earlier of February 26, 2002 or one year after you cease
to be a director of the Company.
The purchase price for each Share subject to the Option is $6.50
("Purchase Price"). The Option may be exercised by the Optionee tendering to
the Company the aggregate Purchase Price of the Shares being purchased plus,
if required by the Company, an amount of monies sufficient to pay all
applicable federal, state and local withholding taxes on the difference
between the Purchase Price and the market value of the Shares on the date of
exercise.
The obligation of the Company to sell any Shares to the Optionee is
subject to all applicable laws, rules and regulations, including, without
limitation, all applicable federal and state securities laws.
All questions pertaining to the validity, construction and administration
of this Stock Option Grant shall be governed by the laws of the State of
Delaware.
EXECUTED as of February 26, 1997.
FLORIDA GAMING CORPORATION
By: /s/ W. Bennett Collett
-------------------------------------
W. Bennett Collett
Chairman of the Board and
Chief Executive Officer
<PAGE>
FLORIDA GAMING CORPORATION
DIRECTORS' CONTINUING STOCK OPTION PLAN
1. PURPOSE. This Directors' Continuing Stock Option Plan is established
pursuant to resolutions adopted by the Board of Directors on February 26,
1997 for the purpose of partially rewarding directors of the Company for
their services as such.
2. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board of Directors.
3. GRANT OF OPTIONS. Each existing director of the Company shall be
granted an option as of February 26, 1997 to purchase 10,000 shares of Common
Stock for each full or partial year such person has served as a director of
the Company prior to January 1, 1997 ("Immediate Options") and for each full
year of service as a director after December 31, 1996 ("Delayed Options").
4. VESTING AND EXERCISE OF OPTIONS. All Immediate Options granted
pursuant to this Plan shall vest and be exercisable on and after February 26,
1997. All Delayed Options granted pursuant to this Plan shall vest and be
exercisable on and after the date such Delayed Options are granted.
5. EXPIRATION OF OPTIONS. All options granted pursuant to this Plan,
unless previously exercised, shall expire five years after the date such
option vests and becomes exercisable or one year after such director ceases
to be a director of the Company, whichever occurs first.
6. PURCHASE PRICE. The Purchase Price (herein so called) of a share of
Common Stock subject to the options granted pursuant to this Plan shall be
the fair market value of such share determined as follows:
(a) If the Common Stock is quoted on NASDAQ, the mean high and low
market prices for which the Common Stock is quoted on NASDAQ as of the most
recent date on which such shares were quoted prior to the date the option is
granted.
(b) If the Common Stock is listed on a national securities exchange,
the closing price of the Common Stock on the composite tape as of the most
recent date on which such shares were traded prior to the date the option is
granted.
(c) If the Common Stock is neither quoted on NASDAQ or listed on a
national securities exchange, the book value per share determined in
accordance with generally accepted accounting principles as of the last day
of the fiscal quarter immediately preceding the date the option is granted.
EXHIBIT A
<PAGE>
7. EXERCISE. An option may be exercised in whole or in part, from time
to time, by the optionee tendering to the Company the aggregate Purchase
Price of the shares of Common Stock being purchased.
8. RESTRICTION ON TRANSFER. The options granted pursuant to this plan
shall be non-transferable except by operation of law.
9. ADJUSTMENT OF SHARES. The number of shares of Common Stock with
respect to which options are granted under this Plan and the Purchase Price
of such shares shall be appropriately adjusted by the Board of Directors for
any increase or decrease in the number of shares of issued Common Stock
resulting from a subdivision or consolidation of such shares through a
reorganization, recapitalization, stock split-up, stock distribution or
combination of shares, or the payment of a Common Stock dividend or other
increase or decrease in the number of shares effected without receipt of
consideration by the Company.
10. LEGAL AND OTHER REQUIREMENTS. The obligation of the Company to sell
and deliver Common Stock under this Plan shall be subject to all applicable
laws, rules and regulations, including, without limitation, all applicable
federal and state securities laws.
11. WITHHOLDING TAXES. Upon the exercise of any option granted pursuant
to this Plan, the Company shall have the right to require the optionee to
remit to the Company an amount sufficient to satisfy all federal, state and
local withholding tax requirements.
12. APPLICABLE LAW. All questions pertaining to the validity,
construction and administration of this Plan shall be governed by the laws of
the State of Delaware.
<PAGE>
CONTINUING STOCK OPTION GRANT
THIS CONTINUING STOCK OPTION GRANT is made by FLORIDA GAMING CORPORATION,
a Delaware corporation (the "Company") to ROLAND M. HOWELL (the "Optionee")
to memorialize and evidence the grant of the following described option by
the Company to the Optionee.
On February 26, 1997, pursuant to the Directors' Continuing Stock Option
Plan ("Plan") adopted by the Board of Directors of the Company on the same
date, a copy of which is attached hereto as Exhibit "A", the Company granted
to the Optionee an option (the "Option") to purchase up to 20,000 shares of
$.10 par value common stock of the Company (the "Shares"), subject to the
terms and conditions stated herein and in said Plan.
The Option, which is non-transferable except by operation of law, vests
February 26, 1997 and is exercisable, in whole or in part, from time to time,
anytime prior to the earlier of February 26, 2002 or one year after you cease
to be a director of the Company.
The purchase price for each Share subject to the Option is $6.50
("Purchase Price"). The Option may be exercised by the Optionee tendering to
the Company the aggregate Purchase Price of the Shares being purchased plus,
if required by the Company, an amount of monies sufficient to pay all
applicable federal, state and local withholding taxes on the difference
between the Purchase Price and the market value of the Shares on the date of
exercise.
The obligation of the Company to sell any Shares to the Optionee is
subject to all applicable laws, rules and regulations, including, without
limitation, all applicable federal and state securities laws.
All questions pertaining to the validity, construction and administration
of this Stock Option Grant shall be governed by the laws of the State of
Delaware.
EXECUTED as of February 26, 1997.
FLORIDA GAMING CORPORATION
By: /s/ W. Bennett Collett
-------------------------------------
W. Bennett Collett
Chairman of the Board and
Chief Executive Officer
<PAGE>
FLORIDA GAMING CORPORATION
DIRECTORS' CONTINUING STOCK OPTION PLAN
1. PURPOSE. This Directors' Continuing Stock Option Plan is established
pursuant to resolutions adopted by the Board of Directors on February 26,
1997 for the purpose of partially rewarding directors of the Company for
their services as such.
2. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board of Directors.
3. GRANT OF OPTIONS. Each existing director of the Company shall be
granted an option as of February 26, 1997 to purchase 10,000 shares of Common
Stock for each full or partial year such person has served as a director of
the Company prior to January 1, 1997 ("Immediate Options") and for each full
year of service as a director after December 31, 1996 ("Delayed Options").
4. VESTING AND EXERCISE OF OPTIONS. All Immediate Options granted
pursuant to this Plan shall vest and be exercisable on and after February 26,
1997. All Delayed Options granted pursuant to this Plan shall vest and be
exercisable on and after the date such Delayed Options are granted.
5. EXPIRATION OF OPTIONS. All options granted pursuant to this Plan,
unless previously exercised, shall expire five years after the date such
option vests and becomes exercisable or one year after such director ceases
to be a director of the Company, whichever occurs first.
6. PURCHASE PRICE. The Purchase Price (herein so called) of a share of
Common Stock subject to the options granted pursuant to this Plan shall be
the fair market value of such share determined as follows:
(a) If the Common Stock is quoted on NASDAQ, the mean high and low
market prices for which the Common Stock is quoted on NASDAQ as of the most
recent date on which such shares were quoted prior to the date the option is
granted.
(b) If the Common Stock is listed on a national securities exchange,
the closing price of the Common Stock on the composite tape as of the most
recent date on which such shares were traded prior to the date the option is
granted.
(c) If the Common Stock is neither quoted on NASDAQ or listed on a
national securities exchange, the book value per share determined in
accordance with generally accepted accounting principles as of the last day
of the fiscal quarter immediately preceding the date the option is granted.
EXHIBIT A
<PAGE>
7. EXERCISE. An option may be exercised in whole or in part, from time
to time, by the optionee tendering to the Company the aggregate Purchase
Price of the shares of Common Stock being purchased.
8. RESTRICTION ON TRANSFER. The options granted pursuant to this plan
shall be non-transferable except by operation of law.
9. ADJUSTMENT OF SHARES. The number of shares of Common Stock with
respect to which options are granted under this Plan and the Purchase Price
of such shares shall be appropriately adjusted by the Board of Directors for
any increase or decrease in the number of shares of issued Common Stock
resulting from a subdivision or consolidation of such shares through a
reorganization, recapitalization, stock split-up, stock distribution or
combination of shares, or the payment of a Common Stock dividend or other
increase or decrease in the number of shares effected without receipt of
consideration by the Company.
10. LEGAL AND OTHER REQUIREMENTS. The obligation of the Company to sell
and deliver Common Stock under this Plan shall be subject to all applicable
laws, rules and regulations, including, without limitation, all applicable
federal and state securities laws.
11. WITHHOLDING TAXES. Upon the exercise of any option granted pursuant
to this Plan, the Company shall have the right to require the optionee to
remit to the Company an amount sufficient to satisfy all federal, state and
local withholding tax requirements.
12. APPLICABLE LAW. All questions pertaining to the validity,
construction and administration of this Plan shall be governed by the laws of
the State of Delaware.
<PAGE>
CONTINUING STOCK OPTION GRANT
THIS CONTINUING STOCK OPTION GRANT is made by FLORIDA GAMING CORPORATION,
a Delaware corporation (the "Company") to GARY E. BOWMAN (the "Optionee")
to memorialize and evidence the grant of the following described option by
the Company to the Optionee.
On February 26, 1997, pursuant to the Directors' Continuing Stock Option
Plan ("Plan") adopted by the Board of Directors of the Company on the same
date, a copy of which is attached hereto as Exhibit "A", the Company granted
to the Optionee an option (the "Option") to purchase up to 30,000 shares of
$.10 par value common stock of the Company (the "Shares"), subject to the
terms and conditions stated herein and in said Plan.
The Option, which is non-transferable except by operation of law, vests
February 26, 1997 and is exercisable, in whole or in part, from time to time,
anytime prior to the earlier of February 26, 2002 or one year after you cease
to be a director of the Company.
The purchase price for each Share subject to the Option is $6.50
("Purchase Price"). The Option may be exercised by the Optionee tendering to
the Company the aggregate Purchase Price of the Shares being purchased plus,
if required by the Company, an amount of monies sufficient to pay all
applicable federal, state and local withholding taxes on the difference
between the Purchase Price and the market value of the Shares on the date of
exercise.
The obligation of the Company to sell any Shares to the Optionee is
subject to all applicable laws, rules and regulations, including, without
limitation, all applicable federal and state securities laws.
All questions pertaining to the validity, construction and administration
of this Stock Option Grant shall be governed by the laws of the State of
Delaware.
EXECUTED as of February 26, 1997.
FLORIDA GAMING CORPORATION
By: /s/ W. Bennett Collett
-------------------------------------
W. Bennett Collett
Chairman of the Board and
Chief Executive Officer
<PAGE>
FLORIDA GAMING CORPORATION
DIRECTORS' CONTINUING STOCK OPTION PLAN
1. PURPOSE. This Directors' Continuing Stock Option Plan is established
pursuant to resolutions adopted by the Board of Directors on February 26,
1997 for the purpose of partially rewarding directors of the Company for
their services as such.
2. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board of Directors.
3. GRANT OF OPTIONS. Each existing director of the Company shall be
granted an option as of February 26, 1997 to purchase 10,000 shares of Common
Stock for each full or partial year such person has served as a director of
the Company prior to January 1, 1997 ("Immediate Options") and for each full
year of service as a director after December 31, 1996 ("Delayed Options").
4. VESTING AND EXERCISE OF OPTIONS. All Immediate Options granted
pursuant to this Plan shall vest and be exercisable on and after February 26,
1997. All Delayed Options granted pursuant to this Plan shall vest and be
exercisable on and after the date such Delayed Options are granted.
5. EXPIRATION OF OPTIONS. All options granted pursuant to this Plan,
unless previously exercised, shall expire five years after the date such
option vests and becomes exercisable or one year after such director ceases
to be a director of the Company, whichever occurs first.
6. PURCHASE PRICE. The Purchase Price (herein so called) of a share of
Common Stock subject to the options granted pursuant to this Plan shall be
the fair market value of such share determined as follows:
(a) If the Common Stock is quoted on NASDAQ, the mean high and low
market prices for which the Common Stock is quoted on NASDAQ as of the most
recent date on which such shares were quoted prior to the date the option is
granted.
(b) If the Common Stock is listed on a national securities exchange,
the closing price of the Common Stock on the composite tape as of the most
recent date on which such shares were traded prior to the date the option is
granted.
(c) If the Common Stock is neither quoted on NASDAQ or listed on a
national securities exchange, the book value per share determined in
accordance with generally accepted accounting principles as of the last day
of the fiscal quarter immediately preceding the date the option is granted.
EXHIBIT A
<PAGE>
7. EXERCISE. An option may be exercised in whole or in part, from time
to time, by the optionee tendering to the Company the aggregate Purchase
Price of the shares of Common Stock being purchased.
8. RESTRICTION ON TRANSFER. The options granted pursuant to this plan
shall be non-transferable except by operation of law.
9. ADJUSTMENT OF SHARES. The number of shares of Common Stock with
respect to which options are granted under this Plan and the Purchase Price
of such shares shall be appropriately adjusted by the Board of Directors for
any increase or decrease in the number of shares of issued Common Stock
resulting from a subdivision or consolidation of such shares through a
reorganization, recapitalization, stock split-up, stock distribution or
combination of shares, or the payment of a Common Stock dividend or other
increase or decrease in the number of shares effected without receipt of
consideration by the Company.
10. LEGAL AND OTHER REQUIREMENTS. The obligation of the Company to sell
and deliver Common Stock under this Plan shall be subject to all applicable
laws, rules and regulations, including, without limitation, all applicable
federal and state securities laws.
11. WITHHOLDING TAXES. Upon the exercise of any option granted pursuant
to this Plan, the Company shall have the right to require the optionee to
remit to the Company an amount sufficient to satisfy all federal, state and
local withholding tax requirements.
12. APPLICABLE LAW. All questions pertaining to the validity,
construction and administration of this Plan shall be governed by the laws of
the State of Delaware.
