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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 26, 1997
FLORIDA GAMING CORPORATION
(Exact name of registrant as specified in charter)
Delaware 0-9099 59-1670533
(State or other (Commission File Number) (IRS Employer
jurisdiction or Identification No.
incorporation)
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3500 N.W. 37th Avenue
Miami, Florida 33142
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 633-6400
(Former name or former address
if changed since last report.)
INFORMATION TO BE INCLUDED IN THE REPORT
The Registrant hereby amends its Current Report on Form 8-K dated
November 26, 1997 to amend Item 5 to add the information set forth below
and to amend its item 7 to reads in its entirety as set forth below:
Item 5. Other Events.
I. On September 12, 1996, the Registrant consummated the purchase of notes
(the "WJA Notes") of WJA Realty Limited Partnership ("WJA") from the Bank of
Oklahoma, National Association ("BOK"). The WJA Notes totaled $20,728,826
(consisting of $16,887,907 principal and $3,840,919 accrued but unpaid
interest), bearing interest at 9.25% on the principal and unpaid interest. The
Registrant paid $2,000,000 in cash, issued 703,297 shares of the Registrant's
Common Stock to BOK DPC Asset Holding Corporation, a wholly owned subsidiary of
BOK, issued a promissory note in the original principal amount of $6,000,000
(the "BOK Note") to BOK bearing interest at New York Prime Rate, and issued a
$1,000,000 original principal amount non-interest bearing promissory note to BOK
in payment of a contingent liability relating to certain collections by the
Registrant in excess of $12,000,000 on account of the WJA Notes. Substantially
all of the Registrant's real estate associated with its jai-alai facilities in
Florida (excluding 79 acres contiguous to the Ft. Pierce facilities securing
other indebtedness) provides collateral for the BOK Note. The BOK Note matures
on September 12, 1998. The terms of the transaction were determined based on
arm's length negotiations. The Registrant failed to make payments in the
aggregate amount of $413,629 due under the BOK Note in October and November
1997. BOK has taken the position that the applicable rate of interest under the
BOK Note increases to the Applicable Prime Rate, as defined, plus 5 percent, on
December 15, 1997. Calculated using the increased interest rate, the Registrant
has failed to make payments in the aggregate amount of $450,319 in December 1997
and January 1998; the Registrant paid BOK $207,534 on January 31, 1998, in full
payment for amounts due from October 1997. BOK and the Registrant have agreed
that two of the monthly payments due will be made from the proceeds of the sale
of certain surplus real estate in Miami, Florida, which sale was originally
scheduled to close in early January 1998, but is now expected to close in late
February 1998. BOK and the Registrant are in negotiations concerning the BOK
Note and BOK has reserved its rights with respect to acceleration of all amounts
due under the BOK Note. There is no assurance either that the Registrant will
consummate the sale of the surplus real estate or that BOK will not attempt to
accelerate all amounts due under the BOK Note.
On November 25, 1996, the Registrant entered into an agreement with WJA
and Florida Gaming Centers, Inc. ("Centers"), a wholly-owned subsidiary of
the Registrant, pursuant to which Centers agreed to acquire jai-alai
facilities in Miami, Tampa, and Ocala, Florida. The acquisition was
consummated as of December 31, 1996. In connection with the acquisition,
among other consideration including the cancellation of the WJA Notes, the
Registrant assumed the principal amount outstanding under a $500,000
promissory note (the "Wheeler-Phoenix 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 Registrant did not make the initial payment of
$80,000 due on December 31, 1997. On January 28, 1998, Wheeler-Phoenix, Inc.
demanded payment of all amounts due under the Wheeler-Phoenix Note. The
Registrant and the principal of Wheeler-Phoenix, Inc. are in discussions
concerning a revised payment schedule for the Wheeler-Phoenix Note, although
there can be no assurance that the parties will reach agreement with respect
to a revised payment schedule.
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Two principals of WJA, Roger M. Wheeler, Jr. and Richard P. Donovan,
entered into consulting agreements dated December 31, 1996, with Centers. Mr.
Wheeler entered into a ten-year consulting arrangement with Centers, 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 entered into a five-year consulting agreement with Centers, with annual
compensation of $240,000, plus certain benefits. Centers ceased making monthly
payments of $8,333 to Mr. Wheeler under the consulting agreement in October 1997
and ceased making monthly payments of $20,000 to Mr. Donovan under the
consulting agreement in August 1997. The Registrant is in discussions with Mr.
Wheeler and Mr. Donovan concerning the terms of payments under the agreements.
In connection with the November 1993 purchase of certain real estate
adjoining the Registrant's Ft. Pierce, Florida gaming facility, the Registrant
issued 47,336 shares of common stock to the seller. The purchase agreement
provided that the per share value of the shares would be at least $10.00 on the
third anniversary date of the purchase. Pursuant to the purchase agreement,
the seller has demanded that the Registrant pay it $284,016 not later than
February 12, 1998.
The Registrant is also currently obligated to pay certain taxing
authorities approximately $835,000, plus penalties and interest, with an
additional $500,000 of real estate taxes due the State of Florida in March 1998.
In addition, the Registrant has not escheated $109,227 due in October 1997 to
the State of Florida.
The working capital needs of the Registrant have been met primarily
through its financing activities, including the issuance of convertible
preferred stock, convertible debentures and the exercise of options
previously granted to Freedon Financial Corporation. The terms of the Series G
5% Convertible Preferred Stock (the "Series G Preferred Stock") issued in
late 1997 require the affirmative vote of the holders of a majority of the
shares of Series G Preferred Stock to approve the issuance of additional
equity financing before January 1, 1999.
The Registrant's cash flow is currently not adequate to meet its debts and
other obligations as they come due. The Registrant is currently evaluating its
alternatives to improve its cash flow, including the sale of selected assets and
the refinancing of its indebtedness using its real estate holdings as collateral
to secure the debt. There can be no assurances that the Registrant will be
successful with respect to the consummation of any asset sale or refinancing
transaction, or that such transactions will be on terms and conditions favorable
to the Registrant.
In January 1998, Centers entered into an agreement with Monroe's Prestige
Group, Inc. ("MPG"), a real estate development company based in Tampa, Florida,
which provides MPG with a ninety day inspection period during which MPG may
elect to purchase the land and improvements where Registrant's Tampa, Florida
gaming operations are located for $8.3 million in cash. A copy of the agreement
is included as Exhibit 2.4 to this Form 8-K/A. MPG can terminate the agreement
at any time and for any reason during the 90 day inspection period without
penalty. If MPG determines to proceed with the purchase, the purchase would
likely close late in the second quarter or early in the third quarter of 1998.
The sale would not include the Registrant's Tampa gaming licenses which would be
available for the Registrant to use at a different Hillsborough County, Florida
facility. There can be no assurances that the Registrant will consummate the
transaction with MPG, or that if such transaction is consummated, that it will
be on the terms and conditions contemplated in the January 1998 agreement.
The Company has terminated all discussions concerning the possible
expansion of its gaming operations to Nevada.
II. Pursuant to Florida legislation that authorized cardrooms at
licensed parimutuel facilities beginning in January 1997, the Registrant
committed to add cardrooms at its Tampa and Miami facilities. During 1997,
the Registrant incurred approximately $2,300,000 in capital expenditures
related to these cardrooms. The results from operations of the cardrooms
have been poor. Unless the Florida legislature in its 60-day session
beginning in March 1998 provides such cardrooms with additional, more
competitive card-related products, the Registrant may determine to close its
cardrooms.
III. From September 1997 through December 1997, the Registrant paid to
Freedom Financial Corporation ("Freedom") $120,000 in management fees. The
Registrant had previously paid a similar amount in salary to the Registrant's
chief executive officer, W. Bennett Collett, and the Registrant's president,
Robert M. Hurd. The Registrant did not pay a salary to Mr. Collett from
September 1997 through December 1997 and did not pay a salary to Mr. Hurd
during November and December 1997. Mr. Collett is also the chief executive
officer and principal stockholder of Freedom, which beneficially owns
approximately 39.4% of the Registrant's common stock. Mr. Hurd is the
president of Freedom.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The following historical financial statements of Interstate required
by this Item 7(a) are attached hereto as Exhibit 99.2 and incorporated herein
by reference:
Independent Auditors' Report.
Interstate Capital Corporation
Balance Sheet as of December 31, 1996.
Interstate Capital Corporation
Statement of Operations for the year ended December 31, 1996.
Interstate Capital Corporation
Statement of Changes in Stockholder's Equity for the year
ended December 31, 1996.
Interstate Capital Corporation
Statement of Cash Flows for the year ended December 31, 1996.
Interstate Capital Corporation
Notes to Financial Statements as of December 31, 1996.
(b) PRO FORMA FINANCIAL INFORMATION.
The following pro forma financial information required by this Item
7(b) is attached hereto as Exhibit 99.3 and incorporated herein by reference:
Florida Gaming Corporation and Interstate Capital Corporation Pro
Forma Combined Balance Sheet as of September 30, 1997 (unaudited).
Florida Gaming Corporation and Interstate Capital Corporation Pro
Forma Combined Statements of Operations for the year ended December
31, 1996 (unaudited).
Florida Gaming Corporation and Interstate Capital Corporation Pro
Forma Combined Statements of Operations for the nine months ended
September 30, 1997 (unaudited).
Florida Gaming Corporation and Interstate Capital Corporation Notes to
Pro Forma Combined Financial Statements (unaudited).
(c) Exhibits.
Exhibit 2.1 -- Asset Purchase Agreement dated as of September 24,
1997, among the Registrant, Freedom Financial
Corporation and Interstate Capital
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Corporation (incorporated by reference to Exhibit 2.1
to Form 8-K dated September 26, 1997).
Exhibit 2.2 -- Addendum dated as of October 9, 1997, to Asset
Purchase Agreement dated as of September 24, 1997,
among the Registrant, Freedom Financial Corporation
and Interstate Capital Corporation (incorporated by
reference to Exhibit 2.2 to Form 8-K dated October 10,
1997.
Exhibit 2.3 -- Second Addendum dated as of October 31, 1997, to Asset
Purchase Agreement dated as of September 24, 1997,
among the Registrant, Freedom Financial Corporation
and Interstate Capital Corporation (previously filed
in this Form 8-K).
Exhibit 2.4 -- Agreement for Sale and Purchase of Property between
Florida Gaming Centers, Inc., City National Bank of
Florida, Trustee, and Monroe's Prestige Group, Inc.,
and Staack and Klemm, P.A., Escrow Agent. Omitted
from this Exhibit 2.4, as filed, is the Exhibit A
referenced in the Agreement containing a description
of the property and the Policy of Title Insurance
issued by Ticor Title Insurance. The Registrant will
furnish supplementally a copy of such exhibit to the
Commission upon request.
Exhibit 3.1, 4.1 -- Certificate of Designation of Series F 8%
Cumulative Convertible Preferred Stock (previously
filed in this Form 8-K).
Exhibit 3.2, 4.2 -- Certificate of Designation of Series G 5%
Convertible Preferred Stock (previously filed
in this Form 8-K).
Exhibit 4.3 -- Series G Convertible Preferred Stock Purchase
Agreement with respect to the Series G Preferred
Stock (previously filed in this Form 8-K).
Exhibit 4.4 -- Registration Rights Agreement with respect to the
Series G Preferred Stock (previously filed in this
Form 8-K).
Exhibit 4.5 -- Form of Warrant to purchase common stock of Registrant
(previously filed in this Form 8-K).
Exhibit 4.6 -- Registration Rights Agreement with respect to the
Warrant (previously filed in this Form 8-K).
Exhibit 23.1 - Consent of King & Company, PSC
Exhibit 99.1 - Lock-Up Agreement dated November 18, 1997 between
Florida Gaming Corporation and Interstate Capital
Corporation (previously filed in this Form 8-K).
Exhibit 99.2 - Financial Statements of Interstate Capital Corporation
listed at Item 7(a) of this Report.
Exhibit 99.3 - Pro forma financial information of the Registrant and
Interstate Capital Corporation listed at Item 7(b) of
this Report.
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SIGNATURE
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
By: /s/ Timothy L. Hensley
Timothy L. Hensley
Executive Vice President,
Treasurer and Chief Financial
Officer
Date: February 9, 1998
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EXHIBIT 2.4
AGREEMENT FOR
SALE AND PURCHASE OF PROPERTY
THIS Agreement for Sale and Purchase of Property ("Agreement") is between,
FLORIDA GAMING CENTERS, INC. and CITY NATIONAL BANK OF FLORIDA, Trustee
("Seller"); and MONROE'S PRESTIGE GROUP, INC. and/or assigns, ("Buyer");
Staack and Klemm, P.A. ("Escrow Agent").
WITNESSETH:
1. AGREEMENT TO SELL AND CONVEY. Seller and Trustee hereby agree to sell and
convey to Buyer and Buyer hereby agrees to purchase from Seller and Trustee
subject to the terms and conditions hereinafter set forth, all that certain
parcel of land consisting of approximately 39.5 acres located in Tampa,
Florida being more particularly described on Exhibit "A" attached hereto
and incorporated herein, together with the following:
a. All and singular the rights pertaining thereto, including any right
title and interest of Seller in and to adjacent streets, roads,
alleys, and right of way; and
b. Such other assignable rights, interests and properties as may be
specified in this Agreement, except that Seller shall retain the
Pari-Mutuel License, liquor licenses, and all other licenses
related to the operation of Sellers present business.
The land described on Exhibit "A" and the rights, interest, and other rights
described above, are collectively called the "Property". At Buyer's option,
title shall be conveyed by use of the metes and bounds description to be
obtained as a result of the survey required under Section 4.b below.
2. PURCHASE PRICE. The purchase price ("Purchase Price") to be paid for
the Property shall be Eight Million Three Hundred Thousand Dollars
($8,300,000). The Purchase Price shall be paid by Buyer to Seller as
follows:
(a) First Deposit. $100,000 Dollars earnest money deposit to be
delivered within five (5) days of the Effective Date. All
earnest monies deposited hereunder, together with all interest
accrued thereon, shall be collectively referred to as the "First
Deposit". Buyer shall have Ninety (90) calendar days from the
Effective Date to conduct its initial inspection (hereinafter
collectively referred to as the "Inspection Period") of the
Property as further described in Sections 7.a and 21.
(b) Second Deposit. $100,000 Dollars earnest money to be delivered
on the 91st day to and held by Escrow Agent, provided that Buyer
elects to go to Closing before or at the end of the Inspection
Period pursuant to Paragraph 23 of the Agreement. All monies to
be deposited hereunder, together with all interest accrued thereon
shall be collectively referred to as the "Second Deposit". If
Buyer elects to go to Closing pursuant to Paragraph 23 and
subsequently does not close this transaction for any reason
whatsoever, other than default by Seller, then in that event,
Escrow Agent shall deliver immediately to the Seller the Second
Deposit of $100,000 and in the event of an extension a payment of
$100,000 pursuant to Paragraph 5.
(c) Balance of Purchase Price. $8,050,000 Dollars representing the
balance of the Purchase Price, subject to adjustments for
pro-rations, extension payments, and Closing costs as specified
herein,
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shall be paid in immediately wired funds, payable to the order
of Seller, or as Seller shall otherwise designate in writing
prior to Closing.
All funds held in escrow shall be placed in an interest-bearing account, as
directed by Buyer, with interest accruing to the benefit of Buyer and applied
towards the Purchase Price at Closing, unless Buyer is in default hereunder, in
which event the Deposits plus interest shall be forfeited to Seller. If Buyer
elects to proceed to Closing pursuant to Paragraph 23, the First Deposit shall
be non-refundable and shall be paid to Seller on the 91st day from the Effective
Date and applied to the Purchase Price, if the Closing occurs.
3. THIRD PARTY FINANCING. This Agreement is subject to Buyer being able to
obtain financing.
4. TITLE. Seller has the legal capacity to and shall cause to be delivered
to Buyer, a Trustees Deed conveying title to the Property, provided
there exists at Closing no violation of any restrictions of the Property
and none of them prevents Buyer's intended use of the Property.
a. Evidence of Title. Seller shall, at Buyer's expense and within
ten (10) days prior to the Closing deliver to Buyer a title
insurance commitment by a Florida licensed title insurer and, upon
Buyer recording the deed, Buyer shall obtain an ALTA owner's
policy in the amount of the purchase price for fee simple title
subject only to exceptions stated in the Seller's Owners Policy of
Title Insurance No. 10513210600000016, from TICOR TITLE INSURANCE
delivered to Buyer identified as Exhibit "A", and being a part
of this Agreement. Buyer shall, within five (5) calendar days
from receipt of the up-dated abstract or seven (7) calendar days
from receipt of the commitment, to deliver written notice to
Seller of title defects. Title shall be deemed acceptable to
Buyer if (1) Buyer fails to deliver proper notice to Seller of
title defects; or (2) Buyer delivers proper notice and Seller
cures the defects within thirty (30) calendar days from receipt of
the notice ("Curative Period"). If the defects are cured within
the Curative Period, Closing shall occur within ten (10) calendar
days from receipt by Buyer of notice of such curing. Seller may
elect not to cure defects.
If the defects are not cured within the Curative Period, Buyer
shall have ten (10) days from receipt of notice of Seller's
decision not to cure the defects to elect whether to terminate
this Agreement or accept title subject to existing defects and
close the transaction.
b. Survey. Seller shall, upon or within a reasonable time after
execution of this Agreement, deliver to Buyer copies of surveys,
plans, specifications, and engineering documents, if any, prepared
for Seller or in Seller's possession. The Buyer may, at Buyer's
option and expense, obtain a current certified survey of the
Property from a registered surveyor. If the survey reveals
encroachments on the Property or if there are encroachments on the
lands of another, such encroachments shall constitute a title
defect to be cured within the Curative Period.
5. CLOSING DATE AND PROCEDURE. This transaction shall be closed in
Hillsborough County, Florida on or before the date Buyer obtains all
applicable building permits for Buyers intended use of the property,
however in any event no later than One Hundred Eighty (180) calendar
days from the Effective Date, unless otherwise extended herein. Seller
shall designate the closing agent. Buyer and Seller shall within sixty
(60) days from Effective Date, deliver to Escrow Agent signed
instructions which provide for closing procedures. If an institutional
lender is providing purchase funds, lender requirements as to place,
time of day, and closing procedures shall control over any contrary
provisions in this Agreement. In the event that Buyer has exercised due
diligence and has elected to proceed to Closing pursuant to Paragraph 23
but is unable to close during aforementioned period, Buyer shall be
entitled to one thirty (30) calendar day extension by paying to Seller
an additional $100,000 which sum shall be non-refundable, but applicable
to the purchase price.
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a. Costs. Buyer shall pay any recording fees on notes, mortgages and
financing statements and recording fees for the deed. Buyer
shall pay taxes on the deed and recording fees for documents
needed to cure title defects. If Seller is obligated to discharge
any recorded encumbrances at Closing and fails to do so, Buyer may
withhold from the purchase price an amount equal to the recorded
encumbrance and satisfy same prior to Closing.
b. Taxes, Assessments, and Prorations. The following items shall
be made current and prorated as of the Closing Date: real estate
taxes, bond and assessment payments assumed by Buyer. If the
amount of taxes and assessments for the current year cannot be
ascertained, rates for the previous year shall be used with due
allowance being made for improvements and exemptions. Seller is
not aware of any assessments affecting or potentially affecting
the Property. Buyer shall be responsible for all assessments of
any kind which become due and owing on of after Effective Date,
unless the improvement is substantially completed as of the
Closing Date, in which case Seller shall be obligated to pay the
entire assessment.
6. ESCROW. Buyer and Seller authorize Staack and Klemm, P.A. ("Escrow
Agent"), Telephone: (813) 441-2635, Facsimile: (813) 461-4836. Address:
121 N. Osceola Ave, Clearwater, FL 34615 to act as "Escrow Agent" to
receive funds and other items and subject to clearance, disburse them in
accordance with the terms of this Agreement. Escrow Agent will deposit
all funds received in an interest bearing escrow account with interest
accruing to Buyer. If Escrow Agent receives conflicting demands or has
a good faith doubt as to Escrow Agent's duties or liabilities under this
Agreement, he/she may (a) hold the subject matter of the escrow until
the parties mutually agree to its disbursement or until the issuance of
a court order or decision of an arbitrator determining the parties'
rights regarding the escrow; or (b) deposit the subject matter of the
escrow with the clerk of the circuit court having jurisdiction over the
dispute. Upon notifying the parties of such action, Escrow Agent shall
be released from all liability except for the duty to account for items
previously required by Chapter 475 , Florida Statutes. In any suit or
arbitration in which Escrow Agent is made a party because of acting as
agent hereunder or inter-pleads the subject matter of the escrow, Escrow
Agent shall recover reasonable attorney's fees and costs, which such
fees and costs are to be paid from the escrowed funds or equivalent and
charged and awarded as court or other costs in favor of the prevailing
party.
7. PROPERTY CONDITIONS. Seller shall deliver the Property to Buyer at the
time agreed in its present "as is" condition, except that Seller shall
have right to remove from the Property anything which the Seller
considers, in it's sole discretion, to be of value prior to closing or
within ninety (90) days after closing. Seller makes no warranties except
that to the best of Seller's knowledge without making any investigation,
no Hazardous Substances exist as further defined in Section 20. By
accepting the Property "as is", Buyer waives all claims against Seller
for any defects in the Property.
a. As Is Right of Inspection. Buyer may, at Buyer's expense and
within Ninety (90) days from the Effective Date ("Inspection
Period"), upon reasonable prior notice to Seller and in a manner
that
b. will not interfere with Seller's business conducted on the
Property, conduct inspections, tests and investigations of the
Property as Buyer deems necessary to determine suitability for
Buyer's intended use, in Buyer's sole discretion. Seller shall
grant reasonable access to the Property to Buyer, its agents,
contractors and assigns for the purpose of conducting inspections
provided, however, that all such persons enter the Property and
conduct any inspections at their own risk. Buyer shall indemnify
and hold Seller harmless from losses, damages, costs, claims, and
expenses of any nature, including attorney's fees, and from
liability to any person, arising from the inspection by Buyer or
Buyers agents. Buyer may terminate this Agreement by written
notice to Seller prior to expiration of the Inspection Period, for
those conditions outlined in Sections 7 and 21 or prior to the
end of the Inspection Period or Buyer may terminate this Agreement
for any
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reason whatsoever during the Inspection Period. If the Buyer
terminates this Agreement prior to the end of the Inspection
Period, the First Deposit described in Section 2 shall be returned
to Buyer by the Escrow Agent after Buyer repairs all damages
resulting from Buyer's inspections of the Property. If Buyer
elects to terminate this Agreement during the Inspection Period or
if Buyer elects to go to Closing pursuant to Paragraph 23 and this
transaction does not close for any reason, in either event, Buyer
shall, at Buyer's expense, repair all damages to the Property
resulting from the inspections and return the Property to its
present condition prior to the return of the First Deposit or the
Second Deposit as applicable.
c. Buyer shall have one hundred twenty (120) calendar days from the end
of the Inspection Period to obtain all government approvals required
to develop the Property for Buyer's intended use "Approval Period".
8. (INTENTIONALLY LEFT BLANK)
9. (INTENTIONALLY LEFT BLANK)
10. DEFAULT.
(a) Default By Seller. In the event that Seller should fail to
consummate the transaction contemplated herein for any reason,
except Buyer's default, Buyer, as Buyer's sole remedies; (i) may
enforce a specific performance of this Agreement; or (ii)
terminate this Agreement and the Deposit or Deposits shall be
immediately returned to Buyer.
(b) Default of Buyer. In the event that Buyer should fail to
consummate the transaction contemplated herein for any reason,
except default by Seller or the failure of Seller to satisfy any
of the conditions to Buyer's obligations, as set forth in this
Agreement, the Deposit or Deposits and extension payments, if any,
shall be delivered to Seller, such sum being agreed upon as
liquidated damages for the failure of Buyer to perform the duties
and obligations imposed upon it by the terms and provisions of
this Agreement and because of the difficulty, inconvenience and
uncertainty of ascertaining actual damages.
11. ATTORNEY'S FEES, ETC. Should either party employ an attorney or
attorneys to enforce any of the provisions hereof, or to protect its
interest in any matter arising under this Agreement or to recover
damages for the breach of this Agreement, the party prevailing is
entitled to receive from the other party all reasonable costs, charges
and expenses, including attorney's fees, expert witness fees, appeal
fees, and the cost of paraprofessional working under the supervision of
an attorney, expended or incurred in connection therewith whether
resolved by out-of-court settlement, arbitration, pre-trial settlement,
trial or appellate proceedings
12. BROKERAGE COMMISSIONS. Each Party represents to the other that no
brokers other than Hogan Burt and Extreme Development Corporation have
been involved in this transaction. Seller agrees to pay each broker
named herein, a real estate commission of One Hundred Fifty Thousand
Dollars ($150,000) and delivery of deed to Buyer and payment of total
Purchase Price to Seller. It is agreed that the real estate commission
shall be paid to the aforementioned brokers at Closing. It is agreed
that each such party to this Agreement whose actions or alleged actions
or commitments form the basis of any such claim, other than the broker
specified above, agrees to indemnify and hold harmless the other party
to this Agreement from and against any and all such claims or demands
with respect to any brokerage fees or agents' commissions or other
compensation asserted by any person, firm, or corporation in connection
with this Agreement or the transaction contemplated hereby.
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13. ASSIGNABILITY. Upon written approval of the Seller, Buyer shall
have the right and authority to assign, in whole or in part, this
Agreement and all of its rights hereunder to any entity and such
assignee shall be entitled to all of the rights and powers or Buyer
hereunder. Upon any such assignment, such assignee shall succeed to all
of the rights and assume all obligations of Buyer hereunder and shall
for all purposes hereof, be substituted as and be deemed the Buyer
hereunder.
14. NOTICES. Any notices to be given or to be served upon any party hereto,
in connection with this Agreement, must be in writing, and may be given
by either certified mail or a nationally recognized overrnight delivery
service such as Federal Express or Purolator and shall be deemed to have
been given and received when a letter containing such notice, properly
addressed, with postage prepaid is deposited in either the United States
Mail or delivered to such overnight delivery service; and if given
otherwise than by certified mail or overnight delivery service, it shall
be deemed to have been given when delivered to and received by the party
to whom it is addressed. Such notices shall be given to the parties
hereto at the following addresses:
FOR SELLER: FOR BUYER:
Florida Gaming Centers, Inc. Monroe's Prestige Group, Inc.
3500 N.W. 37th Ave. 28050 U.S. 19 North Suite 208
Miami, Florida 33142 Clearwater, Florida 33761
Attn: Mr. W. Bennett Collett Attn: Mr. Charles H. Monroe III
With a copy to: Extreme Development Corporation
Brown, Todd & Heyburn 550 N. Reo Street Suite 300
400 W. Market St., #3200 Tampa, Florida 33607
Louisville, KY 40202
Attn: Marshall P. Eldred Attn: Mr. Kenneth I. Morin
Any parties hereto may, at any time by giving five (5) calendar days written
notice to the other party hereto, designate any other address in substitution of
the foregoing address to which such notice shall be given and other parties to
whom copies of all notices hereunder shall be sent.
15. ENTIRE AGREEMENT; MODIFICATION. This Agreement embodies and constitutes
the entire understanding among the parties with respect to the
transaction contemplated herein. All prior or contemporaneous
agreements, understandings, representations, and statements, oral or
written, are merged into this Agreement. Neither this Agreement nor any
provision hereof may be waived modified, amended, discharged, or
terminated except by any instrument in writing signed by the party
against which the enforcement of such waiver, modification, amendment,
discharge, or termination is sought, and then only to the extent set
forth in such instrument.
16. APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Florida. Venue for this
transaction shall be deemed to be Hillsborough County, Florida.
17. SOLE LIABILITY. Escrow Agent assumes no liability under this Agreement
except that of a stakeholder. If there is any dispute as to whether
Escrow Agent is obligated to deliver the escrow monies, or as to whom
that sum is to be delivered, Escrow Agent shall not be obligated to
make any delivery of the sum, but in such event may hold the sum until
receipt by Escrow Agent of an authorization in writing signed by all the
persons having an interest in such dispute, directing the
5
<PAGE>
disposition of the sum, or in the absence of such determination of the
rights of the parties in an appropriate proceeding. If such written
authorization is not given, or if proceedings for such determination are
not begun and diligently continued, Escrow Agent may, but is not
required to , bring an appropriate action or proceeding to deliver the
Deposit to the registry of court of competent jurisdiction pending such
determination. Upon making delivery of the monies in the manner
provided for in this Agreement, Escrow Agent shall have no further
liability in this matter.
18. LEGAL ACTION. In the event a dispute arises between Seller and Buyer
sufficient in the discretion of Escrow Agent to justify its doing so,
Escrow Agent shall be entitled to tender into the registry or custody of
any court of competent jurisdiction, all money or property in its
possession under this Agreement as Escrow Agent after deducting
therefrom all costs and expenses, including a reasonable amount for
attorney's fees as defined in Section 11, incurred by Escrow Agent in
connection with any legal action taken by Escrow Agent, in such
capacity, hereunder. Buyer acknowledges that Escrow Agent is the law
firm which has represented Seller in connection with this transaction
and Buyer consents to such continued representation relative to this
Agreement, the transaction contemplated hereby, or matters related to
any of the foregoing.
19. CONFIRMATION OF DEPOSIT. Escrow Agent has executed this Agreement at
the bottom hereof to confirm that Escrow Agent is holding (drafts are
subject to collection) and will hold the Deposit in escrow, pursuant to
the provisions of this Agreement, and shall immediately place the
Deposit in an interest bearing savings account insured by either the
Federal Deposit Insurance Corporation or the Federal Savings and Loan
Insurance Corporation.
20. HAZARDOUS SUBSTANCES. The term "Hazardous Substances:, as used in this
Agreement shall include, without limitation, flammables, explosives,
radioactive materials, asbestos, polychlorinated bipheyls (PCB'S),
chemicals known to cause cancer or reproductive toxicity, pollutants,
contaminants, hazardous wastes, toxic substances or related materials,
petroleum and petroleum products, and substances declared to be
hazardous or toxic under any law or regulation now in effect.
21. CONDITIONS PRECEDENT. Notwithstanding anything contained in the
Agreement to the contrary, in addition to all rights granted to Buyer
during the inspection Period as further described in Section 7.a, this
Agreement is contingent upon the following items being satisfactory to
Buyer, in Buyer's sole discretion, during the ninety (90) day Inspection
Period.
a. All environmental inspections and satisfactory resolution with the
City of Tampa relating to the environmental clean up and
remediation of the Property.
b. All civil engineering and associated site development costs
required for Buyer's intended use.
c. Confirmation of zoning or rezoning of the property (as the case
may be) for Buyer's intended use.
d. Financing satisfactory to Buyer for Buyer's intended use of the
property.
e. Exceptions noted in Ticor Titile Insurance Company Policy
No. 10 5132 106 00000016 - Schedule B Exceptions #30 through #34.
If Buyer has not notified Seller, in writing, before the end of the sixty day
Inspection Period of the failure of any conditions precedent, they shall be
waived by Buyer.
6
<PAGE>
22. CONFIDENTIALITY PROVISION. All information contained in this Agreement
shall be on a strict "need to know" basis and shall not be disseminated
to any parties outside of this Agreement for any reason whatsoever. The
parties agree however, that in order for Buyer to perform its due
diligence effectively, Buyer shall need to contact prospective users for
the Property and conduct meetings with the City of Tampa regarding
environmental issues relating to the Property. To that extent, Buyer
shall use all commercially reasonable efforts to ensure that all parties
act in a confidential manner, but can not enforce the provisions of this
contract on any third party. Under no circumstances shall Buyer or any
of Buyer's Agents contact any employee of Seller except Mr. W. Bennett
Collett.
23. FIRST EARNEST MONEY DEPOSIT. Notwithstanding anything contained in this
Agreement to the contrary, the Buyer shall on or before the 91st day
from the Effective Date, make an election in writing, to Seller, to
either terminate this Agreement or to proceed to Closing. If Buyer
elects to proceed to Closing, the conditions precedent listed in
Paragraph 21 shall be deemed to be satisfied or waived by Buyer and the
First Deposit of $100,000 shall be paid to Seller immediately, shall be
non-refundable, but shall be credited to the Purchase Price at Closing.
If Seller elects to terminate this Agreement, on or before the 91st day,
then in that event, the First Deposit of $100,000 plus interest, shall
be immediately returned to the Buyer by Escrow Agent upon the completion
of any repair or damage to the Property, if any, resulting from the
inspections during the Inspection Period.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year written below, provided, however, that for the purpose of
determining the "Effective Date", as used in this Agreement, such date shall be
the last date that either Seller or Buyer hereto executes this Agreement.
BUYER:
MONROE'S PRESTIGE GROUP, INC.
BY: /s/ Charles H. Monroe
--------------------------------
Charles H. Monroe, III
President
Date: 1/8/98
-----------------------------
SELLER:
FLORIDA GAMING CENTERS, INC.
By: /s/ W. Bennett Collett
-------------------------------
W. Bennett Collett
Chairman and CEO
Date: January 7, 1998
-----------------------------
7
<PAGE>
ESCROW AGENT
The undersigned hereby acknowledges receipt of the sum of $100,000 from Buyer
as the First Deposit under this Agreement and agrees to serve as Escrow Agent
hereunder and to perform his or her duties in accordance with the terms hereof.
By: /s/ James Staack, President
-----------------------------
Staack and Klemm, P.A.
Date: 1/13/98
---------------------------
8
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our reports included in this Form 8-K, into the previously
filed Registration Statements of Florida Gaming Corporation on Forms S-3
(Registration Nos. 33-99380 and 333-10535).
/s/ King & Company, PSC
KING & COMPANY, PSC
Louisville, Kentucky
February 9, 1998
<PAGE>
EXHIBIT 99.2
Audited Financial Statements
INTERSTATE CAPITAL CORPORATION
December 31, 1996
AUDITED FINANCIAL STATEMENTS
Independent Auditors' Report.........................................1
Financial Statements
Balance Sheet......................................................2
Statement of Operations............................................3
Statement of Changes in Stockholder's Equity.......................4
Statement of Cash Flows............................................5
Notes to Financial Statements......................................6
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Stockholder
Interstate Capital Corporation
New Albany, Indiana
We have audited the accompanying balance sheet of Interstate Capital
Corporation, a wholly-owned subsidiary of Freedom Financial Corporation, as of
December 31, 1996, and the related statements of operations, stockholder's
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Interstate Capital Corporation
as of December 31, 1996 and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
/s/ King & Company, PSC
Louisville, Kentucky
June 16, 1997
<PAGE>
BALANCE SHEET
INTERSTATE CAPITAL CORPORATION
December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 3,119
Accounts receivable from related parties 62,637
----------
65,756
INVESTMENTS
Marketable securities--Note B 39,000
Real estate held for investment--Note F 1,881,692
----------
1,920,692
FURNITURE AND EQUIPMENT, net 119,455
OTHER ASSETS
Real estate development--Note E 4,417,496
Deferred income taxes 61,895
Other 902
----------
4,353,293
----------
$ 6,586,196
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Book overdrafts $ 50,272
Advances from Freedom Financial Corporation 3,310,526
Current portion of long-term debt--Note G 593,113
Other 194,723
----------
4,148,634
LONG-TERM DEBT, less current portion--Note G 1,464,884
STOCKHOLDER'S EQUITY
Common stock, $10 stated value, 1,000 shares
authorized, issued and outstanding 10,000
Additional paid in capital 2,669,409
Retained earnings (deficit) (1,706,731)
----------
972,678
----------
$ 6,586,196
----------
----------
</TABLE>
See notes to financial statements
2
<PAGE>
STATEMENT OF OPERATIONS
INTERSTATE CAPITAL CORPORATION
Year ended December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
SALES OF REAL ESTATE $ 158,000
COST OF REAL ESTATE SOLD (94,283)
--------
GROSS PROFIT ON SALES OF REAL ESTATE 63,717
Gain on sale of securities 2,548
Interest income 1,137
Other income 17,445
--------
TOTAL OTHER INCOME 21,130
--------
TOTAL INCOME 84,847
EXPENSES
Salaries and employee benefits 676
Other taxes and licenses 68,487
Occupancy 149,501
Interest expense 40,488
Travel and entertainment 2,799
Other expenses 238,813
Provision for losses on real estate investments 250,000
--------
TOTAL EXPENSES 750,764
--------
NET LOSS $(665,917)
--------
--------
Net loss per common share $ 666
--------
--------
</TABLE>
See notes to financial statements
3
<PAGE>
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
INTERSTATE CAPITAL CORPORATION
For the year ended December 31, 1996
<TABLE>
<CAPTION>
Common Stock Additional
--------------------- Paid-in Retained
Shares Amount Capital Earnings Total
------ ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balances at
January 1, 1996 1,000 $10,000 $2,635,561 $(1,040,814) $1,604,747
Stockholder capital
contribution 33,848 33,848
Net loss for the year (665,917) (665,917)
------ ------- ---------- ----------- ---------
BALANCES AT
DECEMBER 31, 1996 1,000 $10,000 $2,669,409 $(1,706,731) $972,678
------ ------- ---------- ----------- ---------
------ ------- ---------- ----------- ---------
</TABLE>
See notes to financial statements
4
<PAGE>
STATEMENT OF CASH FLOWS
INTERSTATE CAPITAL CORPORATION
Year ended December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
OPERATING ACTIVITIES
Net loss
Adjustments to reconcile net loss $(665,917)
to net cash used in operating activities:
Depreciation and amortization expense 43,107
Gain on sale of securities (2,548)
Provision for loss on real estate
held for investment 250,000
Increase in real estate development (496,400)
Increase in other assets (902)
Increase in book overdraft 13,193
Increase in other current liabilities 32,707
Other 100,000
--------
NET CASH USED IN OPERATING ACTIVITIES (726,760)
INVESTING ACTIVITIES
Repayment of advances to related parties 1,900
Repayment of notes receivable 51,299
Proceeds from sales of marketable equity
securities and bonds 89,548
Furniture, equipment and leasehold additions (51,950)
--------
NET CASH PROVIDED BY INVESTING ACTIVITIES 90,797
FINANCING ACTIVITIES
Debt repayments (66,218)
Advances from affiliates, net 667,412
Stockholder capital contribution 33,848
--------
NET CASH PROVIDED BY FINANCING ACTIVITIES 635,042
--------
NET DECREASE IN CASH AND CASH EQUIVALENTS (921)
Cash and cash equivalents at beginning of year 4,040
--------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,119
--------
--------
SUPPLEMENTAL DISCLOSURES
Repayment of advances from affiliate through
assumption of note payable $ 570,000
Interest paid $ 27,042
</TABLE>
See notes to financial statements
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
INTERSTATE CAPITAL CORPORATION
December 31, 1996
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed by Interstate Capital Corporation ("ICC" or
"the Company") which materially affect the determination of its financial
position, results of operations and cash flows are as follows:
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.
NATURE OF OPERATIONS: ICC is a real estate investment and development
Company. It is a wholly-owned subsidiary of Freedom Financial
Corporation, a diversified investment company originally formed as a
bank holding company. Freedom's primary investment is its ownership of
an interest in Florida Gaming Corporation (NASDAQ) and ICC.
CASH EQUIVALENTS: The Company considers all highly liquid investments
with a maturity of three months or less to be cash equivalents.
(LOSS) PER COMMON SHARE: Loss per common share is computed based on the
weighted average number of common shares outstanding during 1996.
INVESTMENT SECURITIES: On January 1, 1994, Interstate Capital
Corporation adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS
115), which specifies the accounting for investments in securities that
have readily determinable fair values. Securities that management has
both the positive intent and ability to hold to maturity are classified
as securities held to maturity and are carried at cost, adjusted for
amortization of premium or accretion of discount using the interest
method. Securities that may be sold prior to maturity for
asset/liability management purposes, or that may be sold in response to
changes in interest rates, changes in prepayment risk, or other similar
factors, are classified as securities available for sale and carried at
fair value with any adjustments to fair value, after tax, reported as a
separate component of stockholders' equity.
Interest and dividends on securities, including the amortization of
premiums and the accretion of discounts, are reported in interest and
dividends on securities using the interest method. Gains and losses on
securities are recorded on the trade date and are calculated based on
the security with the highest cost unless specific securities are
identified.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
INTERSTATE CAPITAL CORPORATION
December 31, 1996
NOTE A--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
FURNITURE AND EQUIPMENT: Furniture and equipment are stated at cost,
less accumulated depreciation. Depreciation is computed on the
declining balance method over estimated useful lives ranging generally
from 5 to 7 years.
REAL ESTATE HELD FOR INVESTMENT: Real estate held for investment is
considered a non-current asset and is stated at the lower of cost or net
realizable value. A valuation allowance is provided to the extent cost
exceeds net realizable value.
REAL ESTATE DEVELOPMENT: The Company's real estate development is
considered a non-current asset based on management's estimate that it
would not liquidate the property within a year. It is carried at the
lower of original cost plus development expenses or net realizable value
as estimated by management.
INCOME TAXES: Deferred income taxes are provided for temporary
differences in the recognition of income and expenses for financial
reporting and income tax purposes.
NOTE B--MARKETABLE EQUITY SECURITIES
The Company's marketable equity securities held as available for sale are as
follows:
<TABLE>
<CAPTION>
1996
-------
<S> <C>
Aggregate cost, end of year $ 71,042
Aggregate market value, end of year $ 39,000
Unrealized gains $ -0-
Unrealized losses $(32,042)
</TABLE>
Proceeds from sales of investment securities held as available for sale and the
related realized gains and losses for the years ended December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
1996
------
<S> <C>
Proceeds from sales $89,548
Gross realized gains $ 2,548
Gross realized losses $ -0-
</TABLE>
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
INTERSTATE CAPITAL CORPORATION
December 31, 1996
NOTE C--FURNITURE AND EQUIPMENT
Furniture and equipment at December 31, 1996 comprised the following:
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Office furniture and equipment $ 278,171
Vehicles 47,500
Leasehold improvements 1,857
--------
327,528
Less accumulated depreciation (208,073)
--------
$ 119,455
--------
--------
</TABLE>
Depreciation expense for 1996 was $43,107.
NOTE D--INCOME TAXES
Deferred tax assets and liabilities are recognized for the temporary differences
between the bases of assets and liabilities measured by tax laws and their bases
reported in the financial statements. Deferred tax expense or benefit is then
recognized for the change in deferred tax liabilities or assets between periods.
Deferred tax assets are recognized subject to an assessment as to future
realizability.
The tax effects of the temporary differences that created deferred tax assets
and liabilities at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
1996
-------
<S> <C>
Deferred tax assets:
Net unrealized loss on securities
available for sale $ 10,895
Investment real estate valuation allowance 51,000
-------
Total deferred tax asset $ 61,895
-------
-------
</TABLE>
The Company recognized no tax benefits for its 1996 operating loss due to the
limitation on the amount of tax which can be recovered through the carryback of
the Company's tax losses.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
INTERSTATE CAPITAL CORPORATION
December 31, 1996
NOTE E--REAL ESTATE UNDER DEVELOPMENT
The Company is developing its real estate in Walton County, Georgia for sale as
residential building lots. The Company plans to utilize 26 of the 196 acres it
owns as a set aside for commercial development with the remaining acreage being
devoted to the residential development. A total of 170 acres will be used for
residential property, comprising approximately 289 lots in three phases. The
phases are summarized as follows:
<TABLE>
<CAPTION>
DEVELOPMENT COSTS 1996
--------------------- --------------------------------------
Land Incurred Estimated Lots Allocated Gross
Phase Acres Costs to Date Remaining Lots Sold Revenue Cost Profit
- ----- ----- ----- -------- --------- ---- ---- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
I 37 $ 182,000 $1,180,000 -0- 58 2 $ 80,000 $45,000 $35,000
II 50 282,000 1,589,000 -0- 90 2 78,000 45,000 29,000
III 83 442,000 1,358,000 $1,000,000 141 -0- -0- -0- -0-
Other 26 127,000 125,000 -0- -0- -0- -0- -0-
--- ---------- ---------- ---------- --- --- -------- ------- -------
196 $1,033,000 $4,252,000 $1,000,000 289 4 $158,000 $90,000 $64,000
--- ---------- ---------- ---------- --- --- -------- ------- -------
--- ---------- ---------- ---------- --- --- -------- ------- -------
</TABLE>
The Company's cost for all of the land under development plus development costs
and capitalized interest to date, less the cost of lots sold, totals $4,417,000
at December 31, 1996 and is carried as Real Estate under Development in the
accompanying balance sheet. Should costs incurred to date plus estimated costs
to complete the development ever exceed the combined expected selling price of
the remaining lots, an allowance for loss would be provided. During 1996, the
Company created a joint venture with an individual to facilitate the sale of the
Company's residential development. The individual paid $100,000 to the Company
to purchase a share in the future profits of the development. Because the joint
venture has not been successful the $100,000 payment is included as an other
liability in the accompanying balance sheet to reflect the likelihood that the
Company will return the funds to the individual as required by the joint venture
agreement.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
INTERSTATE CAPITAL CORPORATION
December 31, 1996
NOTE F--REAL ESTATE HELD FOR INVESTMENT
The Company owns various parcels of developed and undeveloped real estate held
for investment comprising the following at December 31, 1996:
<TABLE>
<CAPTION>
Estimated
Book Net Realizable Valuation
Description Value Value Allowance
----------- --------- --------- ---------
<S> <C> <C> <C>
Residential estate Walton Co., GA $1,577,470 $1,327,000 $275,000
Residential rental units Milltown, IN 214,683 144,000 75,000
Residential rental unit St. Petersburg, FL 350,000 300,000 50,000
Furnishings Walton Co., GA 139,539 150,000 -0-
--------- --------- -------
$2,281,692 $1,921,000 $400,000
--------- --------- -------
--------- --------- -------
</TABLE>
The Company has provided a $400,000 valuation reserve against the carrying value
of certain of the above investment realty. The reserve was established to
reduce the basis of the real estate to the lower of cost or fair value in
keeping with the Company's accounting practice. Fair value was determined using
independent appraisals and management estimates.
NOTE G--LONG-TERM DEBT
The Company's long-term debt obligations comprise the following:
<TABLE>
<CAPTION>
December 31, 1996
Current Long-term
------- ---------
<S> <C> <C>
Mortgage note dated April 17, 1986
secured by Company investment real
estate in Walton County, Georgia;
interest payable in monthly
installments of $4,167 (10% per
annum) with the principal due in
one balloon payment on April 17,
2006. -0- $ 500,000
</TABLE>
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
INTERSTATE CAPITAL CORPORATION
December 31, 1996
NOTE G--LONG-TERM DEBT--CONTINUED
<TABLE>
<CAPTION>
December 31, 1996
Current Long-term
------- ---------
<S> <C> <C>
Mortgage note dated September 23, 1992
secured by Company investment real
estate in Walton County, Georgia;
payable in monthly installments
of $2,769.96 including interest
at 8% per annum through
August 4, 2004. $ 12,446 $ 253,167
Note payable dated October 28, 1994
secured by development real estate
in Walton County, Georgia; interest
payable in quarterly installments
at prime rate plus 1/4 point;
principal payments are to be made
in $10,000 increments from the sale
of lots in Phase II of the company's
real estate development; all
outstanding principal and interest
is due June 30, 1997. 570,000 -0-
Note Payable dated July 7, 1993
secured by investment real estate
in Walton County, Georgia; interest
payable in monthly installments at
an adjusted monthly rate of prime
plus 1 point through September 23, 1998. -0- 555,079
Mortgage note dated November 8, 1991
secured by Company investment real
estate in St. Petersburg, Florida;
payable in monthly installments of
$2,141 including interest at 9.25%
per annum through December 1, 2006. 10,667 156,638
------- ---------
$593,113 $1,464,884
------- ---------
------- ---------
</TABLE>
Current maturities of the Company's long-term debt for the five years
following 1996 are as follows: 1997--$593,113; 1998--$580,225;
1999--$27,424; 2000--$29,873; 2001--$32,544.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
INTERSTATE CAPITAL CORPORATION
December 31, 1996
NOTE H--GOING CONCERN
The Company's parent stockholder has incurred losses from operations for four
consecutive years during which time its equity has decreased from $8,112,000 to
$3,300,000. The Company's ability to ultimately continue as a going concern is
dependent on management's plans to liquidate certain of its assets and to obtain
working capital by means other than borrowings. The Parent Company's capital
appears sufficient to sustain continuing losses in the near term. Management
believes its strategic plans for the near term will reverse the Company's
negative operating trend.
12
<PAGE>
EXHIBIT 99.3
FLORIDA GAMING CORPORATION
AND
INTERSTATE CAPITAL CORPORATION
INTRODUCTORY HEAD NOTE
TO PRO FORMA COMBINING FINANCIAL STATEMENTS
UNAUDITED
On November 26, 1997, Florida Gaming Corporation (the "Company") acquired
substantially all of the assets of Interstate Capital Corporation (ICC), a
wholly-owned subsidiary of Freedom Financial Corporation (Freedom). The assets
consist of certain unimproved properties and a residential real estate
development called Tara Club Estates (collectively, the "Properties"), all of
which are situated in Loganville, Walton County, Georgia. As consideration for
the purchase, the Company paid ICC $6,373,265 as follows: (i) the Company
issued to ICC 2,084 shares of Series F 8% Convertible Preferred Stock (the
"Series F Preferred Stock") at a stated value of $1,000 per share (convertible
into the Company's common stock ("Common Stock") on the basis of 296.6689 shares
of the Company's Common Stock for each $1,000 of stated value of the Series F
Preferred Stock), (ii) the Company assumed $1,081,102 of first mortgage
promissory notes to certain lenders secured by the properties purchased, and
(iii) the Company canceled $3,208,163 owed by Freedom to the Company.
The Company accounted for the acquisition of ICC's assets using the purchase
method of accounting. The total purchase price was $6,373,265 comprising the
above indebtedness cancellation, debt assumption and preferred stock. In
accordance with generally accepted accounting principles, the purchase price was
allocated to the assets acquired based on their fair value at the date of
acquisition. Management estimated fair value using available appraisals or
other cost information with respect to the individual assets.
The pro forma combined financial statements should be read in conjunction with:
The Company's audited financial statements and related notes as of
December 31, 1996 and December 31, 1995 included in the annual reports
on Form 10-KSB (No. 0-9099) filed by the Company under the Securities
Exchange Act of 1934.
ICC's audited financial statements and related notes as of December 31,
1996 and for the year then ended.
The notes to the pro forma combined financial statements.
The pro forma combined financial statements combine the historical balance sheet
of the Company with the acquired assets and related liabilities of ICC as of
September 30, 1997. The historical statements of operations of the Company have
been combined with the historical statements of operations of ICC for the year
ended December 31, 1996 and the nine months ended September 30, 1997.
<PAGE>
FLORIDA GAMING CORPORATION
AND
INTERSTATE CAPITAL CORPORATION
PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
----------- ------------ ----------- ---------
FLORIDA INTERSTATE ADJUSTMENTS PRO FORMA
GAMING CORP CAPITAL CORP (SEE NOTE 3) COMBINED
----------- ------------ ----------- ---------
----------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $803,025 ($12,978) $12,978 C $803,025
ACCOUNTS AND NOTES RECEIVABLE $3,428,574 $224,305 ($3,432,468) A,C $220,411
INVENTORIES $92,907 $0 $0 $92,907
PREPAID AND OTHER $472,673 $21,385 ($21,385) C $472,673
REAL ESTATE DEVELOPMENT $0 $0 $0 $0
$0 $0 $0 $0
----------- ------------ ----------- -----------
TOTAL CURRENT ASSETS $4,797,179 $232,712 ($3,440,875) $1,589,016
PROPERTY, PLANT AND EQUIPMENT
LAND $11,647,485 $0 $6,373,265 A $18,020,750
BUILDINGS AND IMPROVEMENTS $11,714,405 $0 $0 $11,714,405
FURNITURE, FIXTURES AND EQUIPMENT $2,188,785 $340,018 ($340,018) C $2,188,785
------------- ------------ ----------- ------------
$25,550,675 $340,018 $6,033,247 $31,923,940
LESS ACCUMULATED DEPRECIATION ($974,612) ($237,666) $237,666 C ($974,612)
------------- ------------ ----------- ------------
$24,576,063 $102,352 $6,270,913 $30,949,328
OTHER ASSETS
REAL ESTATE HELD FOR INVESTMENT-GEORGIA $0 $1,906,592 ($1,906,592) B $0
REAL ESTATE HELD FOR INVESTMENT-OTHER $564,683 ($564,683) C $0
REAL ESTATE UNDER DEVELOPMENT $4,290,496 ($4,290,496) B $0
OTHER ASSETS $606,953 $9,902 ($9,902) C $606,953
------------- ------------ ----------- ------------
$606,953 $6,771,673 ($6,771,673) $606,953
------------- ------------ ----------- ------------
$29,980,195 $7,106,737 ($3,941,635) $33,145,297
------------- ------------ ----------- ------------
------------- ------------ ----------- ------------
</TABLE>
(CONTINUED)
<PAGE>
FLORIDA GAMING CORPORATION
AND
INTERSTATE CAPITAL CORPORATION
PRO FORMA COMBINED BALANCE SHEET--CONTINUED
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
----------- ------------ ------------ ---------
FLORIDA INTERSTATE ADJUSTMENTS PRO FORMA
GAMING CORP CAPITAL CORP (SEE NOTE 3) COMBINED
----------- ------------ ------------ ---------
----------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $5,133,176 $247 ($247)C $5,133,176
PAYABLE TO PARENT COMPANY $0 $2,079,791 ($2,079,791)C $0
OTHER ACCRUED EXPENSES $1,377,465 $20,824 ($20,824)C $1,377,465
S/T BORROWING AND C/P OF LONG-TERM DEBT $5,834,808 $3,426,714 ($2,345,612)A,C $6,915,910
----------- ------------ ------------ ---------
TOTAL CURRENT LIABILITIES $12,345,449 $5,527,576 ($4,446,474) $13,426,551
LONG-TERM DEBT $3,443,818 $1,939,140 ($1,939,140) $3,443,818
STOCKHOLDERS' EQUITY
CLASS A CONVERTIBLE PREFERRED STOCK $3,443 $0 $0 $3,443
CLASS B CONVERTIBLE PREFERRED STOCK $54 $0 $0 $54
CLASS C CUMULATIVE CONVERTIBLE PREFERRED STOCK $25 $0 $0 $25
CLASS D CUMULATIVE CONVERTIBLE PREFERRED STOCK $3 $0 $0 $3
CLASS E CUMULATIVE CONVERTIBLE PREFERRED STOCK $200 $0 $0 $200
SERIES F 8% CUMULATIVE CONVERTIBLE PREF STOCK $0 $0 $2,084,000 A $2,084,000
COMMON STOCK $553,813 $10,000 ($10,000)D $553,813
ADDITIONAL PAID IN CAPITAL $36,498,920 $1,862,725 ($1,862,725)D $36,498,920
ACCUMULATED DEFICIT ($22,865,530) ($2,232,704) $2,232,704 D ($22,865,530)
---------- --------- --------- ----------
TOTAL STOCKHOLDERS EQUITY $14,190,928 ($359,979) $2,443,979 $16,274,928
---------- --------- --------- ----------
$29,980,195 $7,106,737 ($3,941,635) $33,145,297
---------- --------- --------- ----------
---------- --------- --------- ----------
</TABLE>
SEE NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)
<PAGE>
FLORIDA GAMING CORPORATION
AND
INTERSTATE CAPITAL CORPORATION
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------------------------------
FLORIDA INTERSTATE ADJUSTMENTS PRO FORMA
GAMING CORP CAPITAL CORP (SEE NOTE 3) COMBINED
----------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
REVENUES
PARI-MUTUEL REVENUES $2,934,088 $0 $0 $2,934,088
ADMISSIONS AND PROGRAMS $339,422 $0 $0 $339,422
FOOD, BEVERAGE AND OTHER $499,024 $0 $0 $499,024
SALES OF REAL ESTATE $0 $158,000 $0 $158,000
------------ ------------ ------------ -----------
TOTAL REVENUES $3,772,534 $158,000 $0 $3,930,534
EXPENSES
OPERATING ($2,801,144) $0 $0 ($2,801,144)
GENERAL AND ADMINISTRATIVE ($2,443,085) ($468,097) $235,716 E ($2,675,467)
DEPRECIATION AND AMORTIZATION ($193,205) ($32,667) $32,667 F ($193,205)
COST OF REAL ESTATE SOLD $0 ($94,283) $0 ($94,283)
PROVISION FOR LOSS ON REAL ESTATE $0 ($250,000) $250,000 G $0
------------ ------------ ------------ -----------
TOTAL OPERATING EXPENSE ($5,437,434) ($845,047) $518,382 ($5,764,099)
------------ ------------ ------------ -----------
LOSS FROM OPERATIONS ($1,664,900) ($687,047) $518,382 ($1,833,565)
OTHER INCOME (EXPENSE)
INTEREST AND DIVIDEND INCOME $1,179,386 $0 ($272,694)H $906,692
OTHER, NET ($33,586) $21,130 $0 ($12,456)
------------ ------------ ------------ -----------
NET LOSS ($519,100) ($665,917) $245,688 ($939,329)
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
LOSS PER COMMON SHARE ($0.15) ($0.27)
------------ -----------
------------ -----------
</TABLE>
SEE NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)
<PAGE>
FLORIDA GAMING CORPORATION
AND
INTERSTATE CAPITAL CORPORATION
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------------------------------------
FLORIDA INTERSTATE ADJUSTMENTS PRO FORMA
GAMING CORP CAPITAL CORP (SEE NOTE 3) COMBINED
----------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
REVENUES
PARI-MUTUEL REVENUES $14,049,652 $0 $0 $14,049,652
ADMISSIONS AND PROGRAMS $412,399 $0 $0 $412,399
FOOD, BEVERAGE AND OTHER $3,418,948 $0 $0 $3,418,948
SALES OF REAL ESTATE $0 $279,000 $0 $279,000
----------- -------- -------- ----------
TOTAL REVENUES $17,880,999 $279,000 $0 $18,159,999
EXPENSES
OPERATING ($12,863,964) $0 $0 ($12,863,964)
GENERAL AND ADMINISTRATIVE ($6,700,154) ($280,259) $136,339 E ($6,844,074)
DEPRECIATION AND AMORTIZATION ($482,991) ($24,500) $24,500 F ($482,991)
COST OF REAL ESTATE SOLD $0 ($177,538) $0 ($177,538)
----------- -------- -------- ----------
TOTAL OPERATING EXPENSE ($20,047,109) ($482,297) $160,839 ($20,368,567)
----------- -------- -------- ----------
LOSS FROM OPERATIONS ($2,166,110) ($203,297) $160,839 ($2,208,568)
OTHER INCOME (EXPENSE)
INTEREST AND DIVIDEND INCOME $267,078 $213,594 ($213,594)H $267,078
OTHER, NET ($322,193) $0 $0 ($322,193)
----------- -------- -------- ----------
NET LOSS ($2,221,225) $10,297 ($52,755) ($2,263,683)
----------- -------- -------- ----------
----------- -------- -------- ----------
LOSS PER COMMON SHARE ($0.45) ($0.46)
----------- ----------
----------- ----------
</TABLE>
SEE NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)
<PAGE>
ADDENDUM TO FORM 8-K
FLORIDA GAMING CORPORATION
AND
INTERSTATE CAPITAL CORPORATION
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
UNAUDITED
(1) The accompanying pro forma combined balance sheet and statements of
operations combine the historical balance sheet of the Company at
September 30, 1997 with the historical balance sheet of ICC as of
September 30, 1997. The historical statements of operations of the
Company for the year ended December 31, 1996 and the nine months ended
September 30, 1997, have been combined with the historical statements of
operations of ICC for the corresponding periods.
(2) Pro forma income/loss per share has been computed based on the weighted
average number of common shares outstanding for the income statement
period.
(3) The following adjustments have been made to give pro forma effect to the
transaction described in the introductory head note:
(A) On November 26, 1997, Florida Gaming Corporation (the "Company")
acquired substantially all of the assets of Interstate Capital
Corporation (ICC), a wholly-owned subsidiary of Freedom Financial
Corporation (Freedom). The assets consist of certain unimproved
properties and a residential real estate development called Tara
Club Estates (collectively, the "Properties"), all of which are
situated in Loganville, Walton County, Georgia. As consideration
for the purchase, the Company paid ICC $6,373,265 as follows: (i)
the Company issued to ICC 2,084 shares of Series F 8% Convertible
Preferred Stock (the "Series F Preferred Stock") at a stated value
of $1,000 per share (convertible into the Company's common stock
("Common Stock") on the basis of 296.6689 shares of the Company's
Common Stock for each $1,000 of stated value of the Series F
Preferred Stock), (ii) the Company assumed $1,081,102 of first
mortgage promissory notes to certain lenders secured by the
properties purchased, and (iii) the Company canceled $3,208,163
owed by Freedom to the Company.
The Company accounted for the acquisition of ICC's assets using the
purchase method of accounting. The total purchase price was
$6,373,265 comprising the above indebtedness cancellation, debt
assumption and preferred stock. In accordance with generally
accepted accounting principles, the purchase price was allocated to
the assets acquired based on their fair value at the date of
acquisition. Management estimated fair value using available
appraisals or other cost information with respect to the individual
assets.
(B) The carrying value on the books of ICC of the real estate conveyed
to the Company totaled $6,197,088. This adjustment removes the
asset from the combined balance sheet at its former book value.
<PAGE>
(C) This account was not conveyed to the Company in connection with
this transaction. The adjustment eliminates the account from the
combined balance sheet.
(D) This adjustment eliminates the capital accounts of ICC from the
combined balance sheet. The transaction was an asset purchase and
capital accounts are not carried forward.
(E) The combined entity will have increased interest expense
attributable to the Bank debt assumed by the Company from the
parent company of ICC. ICC's parent Company did not charge ICC
with a market rate of interest on its intercompany borrowings. It
is estimated that the Company will incur interest carrying cost of
$91,894 on the Bank debt assumed as part of the purchase price.
This compares with the interest expense of ICC included in General
and Administrative expenses of $40,488 in 1996 and $68,350 in the
nine months ended September 30, 1997. Further, the Company will
continue to incur certain General and Administrative expenses
associated with the real estate development that cannot be replaced
by the Company. These costs include security, maintenance,
insurance, utilities and telephone. These costs are estimated by
management at $100,000 annually. This adjustment includes the
prorata interest expense and General and Administrative expenses
attributable to the proforma combined statement of operations.
(F) This adjustment removes costs associated with assets retained by ICC.
(G) ICC's provision for loss on its real estate investment does not
apply to the real estate acquired by the Company in the subject
transaction. Additionally, the Company does not foresee the
necessity to provide for losses on any of the real estate acquired
based on its appraised values.
(H) Included in the Company's income is interest earned on loans made
to ICC's parent which were canceled as a part of the purchase
price. Income recorded on this debt totaled approximately
$272,694 and $204,520 during the year ended December 31, 1996 and
the nine months ended September 30, 1997, respectively. This
adjustment reduces the Company's interest income to reflect the
debt cancellation.
