FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal year ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from
to
Commission file number 0-9624
International Thoroughbred Breeders, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
22-2332039
(I.R.S. Employer Identification No.)
P.O. Box 1232 Cherry Hill, New Jersey 08034
(Address of principal executive offices, Zip Code)
Registrant's telephone number, including area code (609) 488-3838
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $2.00 par value
Series A Convertible Preferred Stock, $100.00 par value
Name of each exchange on which registered
American Stock Exchange
American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $2.00 par value
(Title of class)
Series A Convertible Preferred Stock, $100.00 par value
(Title of class)
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 period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant at September 30, 1996 was approximately
$42,208,028 based upon the closing sales price for such stock on the American
Stock Exchange as reported by The National Quotation Bureau Incorporated.
Indicate the number of shares outstanding of each of the registrant's
classes of Common Stock, as of the latest practicable date.
11,651,493 shares of Common Stock, $2.00 par value outstanding
as of September 30, 1996
PART I
ITEM 1 - BUSINESS
(A) General Development of Business
International Thoroughbred Breeders, Inc., a Delaware corporation
incorporated October 31, 1980, is primarily engaged in: 1) the ownership and
operation of the Garden State Park racetrack in Cherry Hill, New Jersey through
its wholly owned subsidiary, Garden State Race Track, Inc.; and 2) the
ownership and operation of Freehold Raceway through its wholly owned
subsidiaries Freehold Racing Association, Atlantic City Harness, Inc. and Circa
1850, Inc., the three corporations which own and operate Freehold Raceway and
nearby properties, in Freehold, New Jersey. As used herein, the term the
"Company" shall include International Thoroughbred Breeders, Inc. and its
wholly owned subsidiaries unless the context otherwise requires.
During the year ended June 30, 1996, the Company incurred an after tax
loss of $1,069,712 in comparison to after tax income of $2,398,452 for the
prior fiscal year. The change of $3,468,164 from 1995's net income to 1996's
net loss primarily resulted from the net effect of: 1) the loss generated by
Garden State Park during the period as compared to income for the comparable
period in fiscal 1995 offset by the increase in net income generated by
Freehold Raceway under the Company's ownership during the second half of
fiscal 1996 as compared to the second half of fiscal 1995; 2) increased
interest expense of $583,866 primarily associated with the mortgages on
Freehold Raceway for the comparable periods; and 3) a decrease in investment
income in fiscal 1996 from fiscal 1995; all partially offset by the increased
revenue, expenses and income generated during the first six months of fiscal
1996 as a result of the purchase of Freehold Raceway in January of 1995.
For the fiscal year ended June 30, 1996, Garden State Race Track, Inc.
incurred a loss from operations of $2,318,581 before interest expense, taxes
and interest due to the parent as compared to operating income of $201,872 for
the prior fiscal year. The change of $2,520,453 from Garden State Park's net
income to Garden State Park's net loss is primarily the net result of a
decrease in earnings during the third quarter of this fiscal year as compared
to the prior fiscal year primarily as a result of severe weather conditions
which forced the cancellation of a significant number of race days and also
lower attendance and handle on live racing and simulcasting (sending and
receiving) during the year.
For the twelve month period ended June 30, 1996, Freehold Raceway realized
income from operations of $5,362,039 before interest expense, taxes and
interest due to the parent. For the comparable six month periods under the
Company's ownership, January 1 through June 30, of fiscal 1995 and 1996,
Freehold Raceway realized income before interest expense, taxes and interest
due to the parent of $2,481,922 and $2,810,698, respectively. The increase in
net income for the comparable six month period is primarily the net result of
an increase in earnings in the fourth quarter as a result of receiving
simulcasting during the day at the track in June of this year as compared to
last year when simulcasting was not conducted during the day at the track
partially offset by a decrease in earnings during the third quarter of this
fiscal year as compared to last primarily as a result of severe weather
conditions which forced the cancellation of a significant number of race days.
Severe inclement weather, which affected the northeastern portion of the
United States during December, January and February of this fiscal year, caused
the Company to cancel 8 days of Freehold's scheduled live racing days (with its
simulcast sending) and 10 scheduled live racing days at Garden State Park (with
its simulcast sending) in addition to the simulcast receiving for some of those
days. Attendance and handles on many of the completed live racing programs
were also adversely affected by weather conditions during the third quarter.
This severe weather, which also caused most other racetracks in the
northeastern United States to limit their live racing programs, had an adverse
impact on earnings during these periods.
Management believes that telephone wagering to Philadelphia Park placed
from locations in Pennsylvania and areas outside Pennsylvania, including New
Jersey, has had and will continue to have a significant adverse impact on
handles and attendance at the Company's racetracks. Effective September 1995,
Delaware Park and other Delaware racetracks commenced offering slot machines to
their customers. These two additions to legalized gaming in our area may have
had and may in the future have the effect of increasing the competition the
Company's racetracks face.
(See PART II, ITEM 7 - "Management's Discussion and Analysis of Financial
Conditions and Results of Operations.")
Developments Since the Beginning of the Last Fiscal Year:
On July 21, 1995, Freehold Raceway completed the purchase of a 4.659 acre
section of land, previously leased for parking space, from an unrelated party.
The purchase price was $975,000 with $400,000 plus accrued interest due and
paid in cash on January 2, 1996 and the balance financed by a three year
$575,000 note at an eight percent per annum rate. The note, secured by a
purchase money mortgage on the land, is payable in three yearly principal
installments of $191,666 plus accrued interest commencing July 31, 1996.
On November 2, 1995, Robert E. Brennan resigned as Chairman of the Board
and Chief Executive Officer of the Company. Mr. Brennan resigned these
positions at the urging of the Company's Board of Directors based on actions
taken by New Jersey regulatory authorities which oversee the casino and horse
racing industries in the state. The New Jersey Division of Gaming Enforcement
("Division") filed a complaint with the New Jersey Casino Control Commission
("Commission") seeking to prohibit the Company's two racetracks, Garden State
Park ("Garden State") and Freehold Raceway ("Freehold") from conducting
industry business with any casino licensees. Garden State and Freehold
currently receive revenues from parimutuel wagering on races, including their
own, simulcast to certain of the Atlantic City casinos. The Division based its
complaint on the fact that Mr. Brennan, who is also a principal shareholder of
the Company, had been found in a June 1995 decision by Judge Richard Owen of
the United States District Court for the Southern District of New York in a
civil action to be "liable for violating federal securities laws in the years
1982 to 1985." None of the alleged securities law violations involved the
Company, its securities, or its operations. The Division claims that Mr.
Brennan's participation in the Company's racetrack subsidiaries "would be
inimical to the policies of the Casino Control Act" and according to the
Division, this would disqualify him and the Company's two New Jersey racetracks
from continued licensure with the Commission. Mr. Brennan has denied
committing any violations of the federal securities laws and is currently
appealing Judge Owen's decision. The Division subsequently indicated a
willingness to seek to resolve the complaint provided that Mr. Brennan resign
as Chairman of the Board, as a director of the Company and as an officer of the
Company or its subsidiaries and provided further that Mr. Brennan enter into an
agreement which would place his approximately 2,900,000 shares of the Company's
common stock into an irrevocable dispositive trust, which would provide for the
liquidation of all his shares. Pursuant to the proposed agreement, stock
certificates representing all of Mr. Brennan's shares will be delivered,
together with duly executed stock powers, to a liquidating trustee after the
approval of the New Jersey Casino Control Commission and the Bankruptcy Court
overseeing Mr. Brennan's personal Chapter 11 bankruptcy proceeding. The
liquidating trustee will hold the shares in escrow and will vote the shares in
the same proportion as the other stockholders of the Company. The agreement
will require that the liquidating trustee dispose of the shares no later than
October 19, 1997 in the absence of the occurrence of certain events. The
Company, Mr. Brennan and the Division entered into a settlement agreement on
May 31, 1996 as described herein. Said agreement is subject to the approval of
the Commission. The Company was also advised by the New Jersey Racing
Commission, which annually grants permits for the conduct of parimutuel racing
at Garden State and Freehold, that the Racing Commission is considering the
issuance of a Notice of Intention to suspend or revoke the permits held by
Garden State and Freehold based on Judge Owen's decision. At a subsequent
meeting, a representative of the Racing Commission indicated that the
previously described proposed resolution by the Division regarding Mr. Brennan
would be presented to the Racing Commission for its consideration. The Racing
Commission has been apprised of the settlement to be considered by the
Commission and has stated that it will consider it as a resolution of its
concerns. Management believes a settlement will be reached which is beneficial
to the continuation of racing at Garden State Park and Freehold Raceway.
On November 2, 1995, George E. Norcross III (who resigned on April 23,
1996) and Roger Bodman were elected to the Company's Board of Directors filling
the vacancies created by the resignation of Mr. Brennan, who resigned on
November 2, 1995 and Ronald J. Riccio, who resigned on October 27, 1995.
Robert J. Quigley was elected to serve the balance of Mr. Brennan's term as
Chairman of the Board. Mr. Quigley served as Chairman of the Board until May
14, 1996 when Joel Sterns was elected to that position.
In December 1995, the Company completed a Regulation S "Offshore" private
offering of 1.9 million shares of Common Stock at a price per share of $3.00.
The proceeds of approximately $5,440,000, net of expenses, were used by the
Company towards the purchase price in the acquisition of the El Rancho
property. (See Below)
In December 1995, Garden State Race Track, Inc. entered into an agreement
with an unaffiliated party, The Four B's of Vineland, New Jersey, to sell a 56
acre parking lot tract at the Garden State Park which is presently unused for
racing purposes. This property had previously been the subject of a
development agreement between the Company and Gale and Wentworth of Florham
Park, New Jersey. The contract calls for a purchase price of $11 million for
the property, subject to normal closing adjustments. The agreement provides
for a closing on or before December 15, 1996 (which date may be extended for a
six month period provided the purchaser pays a non-refundable sum of $100,000)
and is subject to standard real estate contingencies including the receipt of
all necessary governmental approvals to construct a retail shopping center of
approximately 300,000 square feet on the site. This site is currently used by
Ten Tables, Inc. which operates a flea market thereon for approximately 80 days
each year and pays Garden State Park rent therefor. Garden State Park also
retains all income derived from parking fees collected for the flea market.
Upon The Four B's purchase of this land, it is Garden State Park's intention,
subject to necessary governmental approvals, to relocate the flea market to
another location on Garden State Park's property.
On January 24, 1996, the Company purchased the El Rancho Hotel and Casino
property from an unrelated party, Las Vegas Entertainment Network, Inc.
("LVEN"). The El Rancho is located on 20.86 acres on a quadrilateral parcel of
land bounded by Las Vegas Boulevard South (Las Vegas strip with approximately
735 feet of frontage) on the west, the Algiers Hotel & Riviera Boulevard on the
south, a vacant lot on the east (with respect to which the Company subsequently
purchased an option to buy), and a "Wet and Wild" attraction on the north. The
El Rancho was one of the first large scale hotel casinos built in Las Vegas,
was operated on a western theme, and has 1,006 hotel rooms, a 90,000 square
foot casino and ancillary areas, a 52 -lane bowling alley, a swimming pool, and
a parking garage. The Company plans to develop the site through Orion Casino
Corporation, a newly formed wholly owned Nevada subsidiary of International
Thoroughbred Gaming Development Corporation ("ITG"), a wholly owned subsidiary
of the Company. The acquisition of the El Rancho property was for $43.5
million in cash and notes, plus contingent consideration of up to $160 million
(but not as a part of the purchase price), which is dependent on future
"adjusted cash flows" as contractually defined. The El Rancho property is
currently not in operation, therefore, there are no results of operations
included in the income statement for the current periods. The purchase price
of $43,500,000 consisted of approximately $12.5 million paid in cash (exclusive
of final adjustments) with the balance financed by: 1) a $6.5 million
unsecured mortgage note with an 8% interest rate that was paid during the third
quarter of the fiscal year; 2) assumption of a $14 million first mortgage
note, which was due December 20, 1996, secured by the land and building at a
13% interest rate (the Company and LVEN were each responsible for one-half of
the 13% interest payment due on July 25, 1996 and December 20, 1996) (See
Foothill Capital Corporation below); and 3) a $10.5 million second mortgage
note at an 8% interest rate which is payable only to the extent that certain
contingent events occur. In February, 1996 the Company announced that it
intended to develop the El Rancho property under a "Starship Orion" theme. The
Company may explore other alternative casino development plans with respect to
the El Rancho property.
On February 6, 1996, the Company announced that Robert J. Quigley was
named President of the Company effective February 12, 1996. He has been a
director of ITB since its inception in 1980 and previously served as President
of ITB from March, 1988 to June, 1992.
On March 20, 1996, the Company and Foothill Capital Corporation of Los
Angeles, California, signed a Letter of Intent for a proposed borrowing of
$30,000,000. Closing on the contract took place on June 4, 1996. The
financing arrangement, secured by among other things, a mortgage on Garden
State Park and a second mortgage on Freehold Raceway is for a $16,000,000
revolving credit line and a $14,000,000 Time Loan Mortgage, used at settlement
to pay off the $14 million first mortgage note referred to above due on
December 20, 1996, secured by the El Rancho property.
In March 1996, the Company secured long term financing of $6 million from
two foreign banks, each for $3 million, which was used together with available
cash to pay the $6.5 million short term note associated with the El Rancho
property referenced above. The Company has accrued $150,000 in fees in
connection with the $6 million loan pending receipt of documentation. One bank
has taken a mortgage on the 56 acre parcel of land currently under agreement of
sale to the 4 B's of Vineland as discussed above. If the property is sold, the
bank will receive $3 million of the proceeds. The other bank has a right to
perfect a mortgage on the 56 acre parcel, but has not done so at this time.
In connection with the payments on these notes, the Company issued warrants
exercisable to purchase 200,000 shares of the Company's Common Stock at an
exercise price of $5.00 per share to each foreign note holder.
In the Company's quarterly report (10-Q) dated March 31, 1996, it reported
that the Company's Board of Directors approved the purchase of an option to
acquire the remaining 2,904,016 shares of the Company's Common Stock owned by
its former chairman, Robert E. Brennan. Extensive negotiations between the
Company and Mr. Brennan failed to result in the execution of an option purchase
agreement to satisfy the two parties.
On April 25, 1996, the Company executed an agreement to purchase 15 acres
of unimproved land from a subsidiary of ITT Corporation. The land is located
directly behind and contiguous to the site of the Company's recently purchased
El Rancho Hotel and Casino property. The purchase of the property would allow
expanded frontage and room for future expansion and increased parking. The
Company is seeking additional financing in order to finalize the purchase. If
the Company fails to secure adequate financing by a settlement date of November
29, 1996, $2,350,000 of payments made to date would be forfeited.
On April 25, 1996, the Company announced the resignation of three
directors, Joseph K. Fisher, Louis P. Guida, and George E. Norcross III.
On May 14, 1996 Robert J. Quigley resigned as Chairman of the Company.
Mr. Quigley continues to serve as a director and President of International
Thoroughbred Breeders, Inc. Mr. Joel H. Sterns was elected to serve as a
director and to serve the balance of Mr. Quigley's term as Chairman. Mr.
Clifford A. Goldman and Mr. Robert Peloquin were elected to the Company's Board
of Directors, filling the vacancies created by the above resignations.
In June 1996, Francis W. Murray resigned his positions as president of
International Thoroughbred Gaming Corporation (ITG) and Orion Casino
Corporation.
On September 19, 1996, the Company announced that Steven Norton, who has
extensive experience in the casino industry, joined the Company's Board of
Directors.
(See PART II, ITEM 8 - "Notes to Financial Statements" for additional
information.)
(B) Financial Information
The Company is engaged primarily in operations at Garden State Park in
Cherry Hill, New Jersey and following the Company's acquisition effective
January 1, 1995 in the operation of Freehold Raceway in Freehold, New Jersey.
The racetracks accounted for approximately 99% of the Company's total revenues
in fiscal 1996.
(C) Narrative Description of Business
(1) Garden State Park
Ownership, Location and Property Description
Opened by the Company for racing on April 1, 1985, Garden State Park is
owned and operated by Garden State Race Track, Inc., a wholly owned subsidiary
of the Company. The Company purchased the racetrack site on March 15, 1983, and
through June 30, 1986 completed an extensive reconstruction of the racing
facility as well as the construction of a separate sales pavilion. Garden State
Park is situated on a tract of land (currently approximately 280 acres) located
in Cherry Hill, New Jersey.
The reconstructed grandstand and clubhouse is a 500,000 square foot, seven
level, steel frame, glass enclosed, fully heated and air-conditioned facility
with an adjacent multi-level glass covered thoroughbred paddock area. The
facility can accommodate a total capacity of 24,000, with seating for
approximately 9,500, and has three sit-down restaurants and 17 concession food
stands. The backstretch area includes 27 barns and stables capable of
accommodating approximately 1,500 horses, a harness paddock, a training track,
dormitories, cafeteria and recreation buildings for backstretch personnel, an
administration building, and other service buildings. Reconstruction also
included restoration of the main dirt and turf tracks, installation of lighting
for nighttime racing, paving of parking facilities that accommodate
approximately 11,500 automobiles, landscaping, fencing and other amenities
including furniture, fixtures and equipment. The Company uses the 56,000
square foot, 1-1/2 story sales pavilion with a seating capacity of
approximately 1,500 as a sales arena to conduct horse auctions, for closed
circuit television events (racing as well as other sporting and non-sporting
events), wagering, concerts, special events, concessions and other
conveniences.
Operations
The Company is required to obtain and intends to annually renew
thoroughbred and harness racing permits issued by the New Jersey Racing
Commission in order to operate the racetrack facility.
RACING DATES - Garden State Park's racing dates are primarily nighttime
racing dates. For the fiscal year ended June 30, 1996, Garden State Park
conducted its 1995 (fiscal 1996) Harness Meet from September 8, 1995 through
December 9, 1995 on a four night per week basis for a total of 53 racing dates.
Garden State Park conducted its 1996 Thoroughbred Meet from January 12, 1996
through May 24, 1996 for a total of 64 racing dates. Racing was conducted on a
three night a week basis during January and for four nights a week during the
remainder of the meet. The Company has received approval and plans to run a
1996 Harness Meet at Garden State Park on a four night per week basis. The
meet, consisting of 53 racing dates, is scheduled to run from September 6, 1996
through December 7, 1996.
SIMULCASTING - Simulcasting is the transmission of live horse racing by
television signal from one racetrack to another with pari-mutuel wagering being
conducted at the receiving track and a portion of the commission on the handle
being shared with the sending track. To date, the simulcasting arrangements
entered into by Garden State Park require the receiving track to remit a
percentage of the pari-mutuel handle at such track to the sending track as
commission. In addition, for New Jersey intra-state simulcast contracts, a
portion of the handle at the receiving track is remitted to the sending track
to be used for purses. This portion of the handle received at Garden State
Park is required to be used for purses in the current live race meeting, or at
the next live race meeting if live racing is not in progress at the time of
simulcasting.
ATTENDANCE AND HANDLES - The following summarizes average daily
attendance and wagering at Garden State Park and races simulcast to
other racing facilities during the past three fiscal years:
<TABLE>
<CAPTION>
Approximate
Commission DAILY AVERAGES
THOROUGHBRED MEETS % of Handle 1996 1995 1994
<S> <C> <C> <C> <C>
Attendance 2,891 3,292 3,492
Live Handle 13.4% $ 164,381 $ 212,580 $ 248,534
Simulcast Sending Signal:
New Jersey Tracks (Avg.) 3.3% $ 261,560 $ 311,763 $ 387,670
Atlantic City Casinos 4.4% $ 29,227 $ 43,503 $ 39,830
Out-of-State Tracks 1.5% $ 840,328 $ 792,269 $ 607,926
Combined Handles $ 1,295,497 $ 1,360,115 $ 1,283,960
Number of Live Race Days 64 75 62
</TABLE>
<TABLE>
<CAPTION>
Approximate
Commission DAILY AVERAGES
HARNESS MEETS % of Handle 1995 1994 1993
<S> <C> <C> <C> <C>
Attendance 2,434 2,767 2,674
Live Handle 12.7% $ 182,103 $ 207,747 $ 237,558
Simulcast Sending Signal:
New Jersey Tracks (Avg.) 4.0% $ 391,232 $ 456,522 $ 550,057
Atlantic City Casinos 4.6% $ 36,553 $ 35,578 $ 33,228
Out-of-State Tracks 1.5% $ 929,190 $ 658,699 $ 367,498
Combined Handles $ 1,539,079 $ 1,358,546 $ 1,188,340
Number of Live Race Days 53 55 55
</TABLE>
The following summarizes average handles experienced by Garden State Park
in connection with receiving simulcasts during the past three fiscal years.
<TABLE>
AVERAGES DAILY SIMULCAST HANDLES
<CAPTION>
1996 1995 1994
# of # of # of
From Tracks*: days $ days $ days $
New Jersey Tracks:
<S> <C> <C> <C> <C> <C> <C> <C>
Atlantic City (T) 52 45,916 59 61,672 70 99,851
Freehold (S) 201 27,225 216 33,353 211 41,510
Meadowlands (T,S) 234 71,182 251 98,652 240 127,036
Monmouth (T) 74 66,255 73 81,164 72 105,056
Out-of-State Tracks(T,S) 360 244,024 364 236,650 362 233,320
TOTAL RECEIVING
HANDLES 117,267,914 127,669,977 138,262,608
</TABLE>
(T)=Thoroughbred, (S)=Standardbred *The commission percentage of handle
averages approximately 9.9% of total handles on simulcasting received.
Loans and Existing Contracts
In November 1983, Garden State Park granted the exclusive right to operate
all food and retail services and to sell or rent all food products and
merchandise sold or rented at the racetrack facility to Servomation
Corporation, which company has since become Service America Corporation
("Service America"), an unaffiliated third party experienced in the business,
with principal offices in Stamford, Connecticut. The term of the agreement is
for the 15 year period commencing at the 1995 opening of the racetrack. Service
America agreed to invest $7,000,000 in the concession premises at the racetrack
facility. The investment is being depreciated on a straight line basis over the
term of the agreement, with Garden State Park paying Service America an amount
equal to the undepreciated balance (if any) upon termination and thereby
acquiring title to the improvements. As of June 30, 1996, the undepreciated
balance is approximately $1,866,000. The agreement contains a schedule of
varying percentages of adjusted gross sales of beverages, food and other items
which Service America is required to pay as concession fees to Garden State
Park on a monthly basis. In addition, Service America pays the Company a
percentage of net profits on the Garden State Park Phoenix Restaurant's
operations. Garden State Park is responsible for any net operating losses of
the Phoenix restaurant. Service America has obtained a license to permit the
sale of alcoholic beverages at the racetrack. Garden State Park has a right of
first refusal to purchase same at the expiration of the agreement subject to
regulatory approval.
The annual New Jersey State Fair was contracted to be held at Garden State
Park for a period of time until 1994, after which the agreement was terminated.
Garden State Park contracted with another fair operator to hold a similar type
fair on Garden State Park's grounds in 1995. An agreement was signed in fiscal
1996 to permit the annual New Jersey State Fair (under new ownership) to again
be held at Garden State Park for a mutually determined number of days in July
and/or August, from 1996 until 1998 in consideration of a fixed fee and a
percentage of the receipts from admissions, concessions, and other amenities
received by the operator of the Fair. Provisions in the contract allowed that
the Company shall have the option, at its sole discretion, to conduct a Fair
during calendar year 1999. The Fair was held at Garden State Park in August
of 1996 for 10 days.
Garden State Park has granted a license to Ten Tables, Inc. which grants
Ten Tables, Inc. the right to conduct a flea market on the Garden State Park
property. This event is conducted on a section of property not normally used
for racing operations. This license was effective January 1, 1994 for an
initial term of five (5) years with an extension provision for an additional
five (5) years. Garden State Park receives a fixed fee for each day the event
is run (approximately 80 days per year), plus parking revenue.
Garden State Park has a number of contractual arrangements including a
contract with American Totalisator Co., Inc. for the leasing of a parimutuel
system. Some of the other larger contracts with other entities are for video
manpower, and program printing. The Company regards these contracts as typical
for the industry.
(2) Freehold Raceway
Ownership, Location and Property Description
Freehold Raceway, a wholly owned subsidiary of the Company subsequent to
its stock purchase effective January 1, 1995, is located on a 51 acre site in
the western Monmouth County section of New Jersey. This facility is the
nation's oldest harness track. Daytime racing has been conducted at Freehold
Raceway since 1853; parimutuel wagering licensed by the State of New Jersey
commenced at the racetrack in 1941. The purchase price of the stock was $17.8
million with approximately $5.3 million paid in cash and the balance financed
by an eight year, $12.5 million note at eighty percent of the prevailing prime
rate, not to exceed six percent. The note is secured by a mortgage on the land
and buildings at Freehold Raceway and other collateral.
The principal assets include a five level, steel frame, fully heated and
air conditioned 150,000 square foot enclosed grandstand constructed in 1986.
The facility can accommodate a total capacity of 10,000 with seating for
approximately 2,500 and has a sit-down restaurant along with 7 concession
stands. Additional principal assets include a half mile oval racetrack,
receiving barns with an adjacent paddock, parking facilities that accommodate
approximately 2,500 vehicles, machinery and equipment and a two story
administration building.
Operations
The Company is required to obtain and intends to annually renew harness
racing permits issued by the New Jersey Racing Commission in order to operate
the racetrack facility. The Company maintains two racing permits for
standardbred racing at Freehold Raceway, Atlantic City Harness, Inc. ("ACH")
and Freehold Racing Association ("FRA"), both of which are licensed by the New
Jersey Racing Commission.
RACING DATES - Freehold Raceway's racing dates are strictly daytime
harness dates. FRA conducted a standardbred racing meet from August 17, 1995
through December 30, 1995 for a total of 99 days. This meet operated six days
a week in August and five days a week from September through December. ACH
conducted a standardbred racing meet from January 1, 1996 through May 29, 1996
on a five day per week basis for a total of 102 racing dates. The Company has
received approval and plans to conduct a 101 day FRA meet from August 15, 1996
through December 31, 1996. Additionally, the track hosts full-card simulcast
betting on thoroughbred and harness racing from numerous tracks in North
America.
SIMULCASTING - Simulcasting is the transmission of live horse racing by
television signal from one racetrack to another with pari-mutuel wagering being
conducted at the receiving track and a portion of the commission on the handle
being shared with the sending track. To date, the simulcasting arrangements
entered into by Freehold Raceway require the receiving track to remit a
percentage of the pari-mutuel handle at such track to the sending track as
commission. In addition, for New Jersey intra-state simulcast contracts, a
portion of the handle at the receiving track is remitted to the sending track
to be used for purses. This portion of the handle received at Freehold Raceway
is required to be used for purses in the current live race meeting, or at the
next live race meeting if live racing is not in progress at the time of
simulcasting.
ATTENDANCE AND HANDLES - The following summarizes average daily
attendance and wagering at Freehold Raceway and races simulcast to
other racing facilities during the past three fiscal years:
<TABLE>
<CAPTION>
Approximate DAILY AVERAGES
Commission
ACH HARNESS MEETS % of Handle 1996 1995 1994
<S> <C> <C> <C> <C>
Attendance 2,085 2,298 2,318
Live Handle 9.3% $ 252,058 $ 290,449 $ 302,918
Simulcast Sending Signal:
New Jersey Tracks(Avg.) 3.7% $ 181,929 $ 184,427 $ 200,796
Atlantic City Casinos 4.5% $ 23,073 $ 25,203 $ 21,569
Out-of-State Tracks 1.5% $ 389,771 $ 322,948 $ 350,322
Combined Handles $ 846,831 $ 823,026 $ 875,605
Number of Live Race Days 102 107 98
</TABLE>
<TABLE>
<CAPTION>
Approximate DAILY AVERAGES
Commission
FRA HARNESS MEETS % of Handle 1995 1994 1993
<S> <C> <C> <C> <C>
Attendance 2,286 2,421 2,517
Live Handle 9.3% $ 283,361 $ 323,079 $ 327,881
Simulcast Sending Signal:
New Jersey Tracks(Avg.) 3.6% $ 170,226 $ 182,427 $ 192,054
Atlantic City Casinos 4.5% $ 23,937 $ 25,304 $ 19,662
Out-of-State Tracks 1.5% $ 392,704 $ 292,914 $ 270,902
Combined Handles $ 870,228 $ 823,724 $ 810,499
Number of Live Race Days 99 109 114
</TABLE>
The following summarizes average handles experienced by Freehold Raceway
in connection with receiving simulcasts during the past three fiscal years.
<TABLE>
ACH HARNESS MEETS
AVERAGES DAILY SIMULCAST HANDLES
<CAPTION>
1996 1995 1994
# of # of # of
From Tracks*: days $ days $ days $
New Jersey Tracks:
<S> <C> <C> <C> <C> <C> <C> <C>
Atlantic City (T) 14 24,329 18 32,447 17 43,464
Garden State Park (T,S) 64 25,451 75 32,308 63 28,813
Meadowlands (T,S) 133 112,505 145 120,717 132 125,172
Out-of-State Tracks (T,S) 178 222,886 171 188,854 152 151,842
TOTAL RECEIVING
HANDLE 56,606,375 52,804,695 42,347,266
</TABLE>
(T)=Thoroughbred, (S)=Standardbred *The commission percentage of handle
averages approximately 8.6% of total handles on simulcasting received.
<TABLE>
FRA HARNESS MEETS
AVERAGES DAILY SIMULCAST HANDLES
<CAPTION>
1995 1994 1993
# of # of # of
From Tracks*: days $ days $ days $
New Jersey Tracks:
<S> <C> <C> <C> <C> <C> <C> <C>
Atlantic City (T) 38 37,932 39 54,053 48 58,603
Garden State Park (T,S) 53 80,887 55 83,228 55 83,756
Meadowlands (T,S) 101 85,330 104 92,874 105 84,218
Out-of-State Tracks (T,S) 152 240,491 169 130,189 145 127,997
TOTAL RECEIVING
HANDLE 50,901,316 38,346,452 34,821,979
</TABLE>
(T)=Thoroughbred, (S)=Standardbred *The commission percentage of handle
averages approximately 8.2% of total handles on simulcasting received.
Loans and Existing Contracts
In December 1985 Freehold Raceway granted the exclusive right and
privilege to sell, vend and dispense within the racetrack facility all food or
food products to Sportservice, Inc., an unaffiliated third party experienced in
the business, with principal offices in Buffalo, New York. The agreement
contains a schedule of varying percentages of adjusted gross receipts which
Sportservice is required to pay as concession fees to Freehold Raceway on a
monthly basis. The term of this agreement expires in May of 1997 and is in the
process of being extended for an additional five years until June 2002.
Sportservice holds a license to permit the sale of alcoholic beverages at the
racetrack. Sportservice has agreed to a consent to transfer said license back
to Freehold Raceway at the expiration of this agreement.
Freehold Raceway has a number of additional contractual arrangements
including a contract with Autotote Limited, Inc. for the leasing of a
parimutuel system. Some of the other larger contracts with other entities are
for video equipment and manpower, and program printing. The Company regards
these contracts as typical for the industry.
(3) Competition
Freehold Raceway conducts all its live harness racing during the day.
Garden State Park's live thoroughbred and harness racing has been is conducted
at night although day racing (in whole or part) may be conducted in the future.
It is the Company's intention to conduct live harness racing at night at Garden
State Park on some dates when live harness racing is being conducted at
Freehold Raceway.
On most days throughout the year, Garden State Park and Freehold Raceway
conduct simulcasting in competition with live and simulcast racing at the
other's facility. In addition, each track receives simulcasts of thoroughbred
and harness races at various times from other tracks when the same type of
racing may be conducted live at either track.
The Company's Garden State Park in Cherry Hill, New Jersey and its
Freehold Raceway in Freehold, New Jersey face direct competition from
year-round daytime thoroughbred racing at Philadelphia Park in Bucks County,
Pennsylvania as well as three off-track betting parlors in the Philadelphia
area operated by Philadelphia Park. Management believes that telephone
wagering to Philadelphia Park placed from locations in Pennsylvania and areas
outside Pennsylvania, including New Jersey which allows residents to place
wagers from their homes and businesses has had and will continue to have a
significant adverse impact on handles and attendance at the Company's
racetracks. (Up to three more off-track betting parlors in the Philadelphia
area may be opened by Philadelphia Park. Whether these will be in competitive
locations is unknown at this time.) The Company's racetracks also face
competition from Atlantic City Race Course (summer night thoroughbred racing as
well as all year simulcasting) and Delaware Park near Wilmington, Delaware (day
thoroughbred racing as well as all year simulcasting). Garden State Park and
Freehold Raceway also face competition from Monmouth Park (day thoroughbred
racing as well as all year simulcasting) and The Meadowlands (night
thoroughbred, harness racing as well as all year simulcasting). These tracks
lie greater distances from Garden State Park and Freehold, with the exception
of Monmouth in relation to Freehold. Garden State Park and Freehold Raceway
simulcast certain or all of their racing to and receive simulcasting of certain
or all of their racing from all of the above racetracks. A state law enacted
in 1992 permitting Garden State Park, Freehold Raceway, other New Jersey
racetracks and the Atlantic City Casinos to receive entire race cards from
out-of-state tracks may have had and may in the future have the effect of
increasing the competition the Company's racetracks face in the state of New
Jersey. Off-track wagering and full card simulcasting commenced in the state
of Maryland in April, 1993 and full card simulcasting commenced in the state of
Pennsylvania in May, 1993. Effective September, 1995, Delaware Park and other
Delaware racetracks commenced offering slot machines to their customers. This
may have had and may in the future have the effect of increasing the
competition the Company's racetracks face from legalized gaming in the nearby
Mid-Atlantic area. Competition from off-track betting, casino gambling (in
Atlantic City), various state lotteries and other forms of gambling and
entertainment including professional and collegiate sporting events may also
have had and may in the future have a material adverse effect on racetrack
attendance, wagering and thus profitability at Garden State Park and Freehold
Raceway. From time to time, legislation has been introduced in New Jersey and
neighboring states which would further expand gambling opportunities. Approval
of such legislation could increase competition for the Company in the future.
If and when the Company is able to open its proposed casino project in Las
Vegas, the Company will face direct competition from all other Las Vegas
Casinos and gaming parlors.
(4) Government Regulations
Racing Industry:
The Company's racetrack operations are dependent upon continued
governmental acceptance of racing as a form of legalized gambling. As a form of
gambling, racing could be subjected at any time to restrictive regulation or
banned entirely, although in the opinion of management of the Company, the
introduction and expansion of off-track betting and/or pari-mutuel wagering in
various jurisdictions in recent years would tend to indicate that racing is
gaining even greater governmental acceptance and is contributing to the general
positive economic status of the states.
The Company is required to obtain and intends to annually renew
thoroughbred and harness racing permits issued by the New Jersey Racing
Commission in order to operate (See "Developments Since the Beginning of the
Last Fiscal Year.")
Gaming Industry:
The ownership and operation of casino gaming facilities in Nevada are
subject to the Nevada Gaming Control Act and the regulations promulgated
thereunder (the "Nevada Act") and to licensing and regulatory control by the
Nevada Gaming Authorities. The laws, regulations and supervisory procedures of
the Nevada Gaming Authorities are based upon declarations of public policy
which are concerned with, among other things, (i) the character of persons
having any direct or indirect involvement with gaming, (ii) the establishment
and maintenance of responsible accounting practices and procedures, (iii)
maintenance of effective control over the financial practices and financial
stability of licensees, including procedures for internal fiscal affairs and
the safeguarding of assets and revenues, (iv) the prevention of cheating and
fraudulent practices, and (v) providing a source of state and local revenues
through taxation and licensing fees.
The Company must register with the Nevada Gaming Commission and be found
suitable and be granted all requisite licenses under the terms of the Nevada
Act to conduct a nonrestricted gaming operation in Nevada. The Company intends
to apply for the necessary governmental licenses, permits and approvals for its
proposed hotel/casino venture in Las Vegas, Nevada. However, there can be no
assurances that any licenses, permits or approvals that may be required in the
future will be given or that once received, they will not be suspended or
revoked. Nevada gaming licenses are not transferable and require periodic
payments of fees.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, a corporation
registered under the Nevada Act or which holds a license in order to determine
whether such individual is suitable or should be licensed as a business
associate of a gaming licensee. Officers, directors and certain key employees
of licensed gaming corporations must file license applications with the Nevada
Gaming Authorities. In addition, changes in corporate positions must be
reported to the Nevada Gaming Authorities. Officers, directors and key
employees of the Company who are actively and directly involved in gaming
activities of the Company may be required to be licensed or found suitable by
the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an
application for licensing for any cause which they deem reasonable. A finding
of suitability is comparable to licensing, and both require submission of
detailed personal and financial information followed by a thorough
investigation. The applicant for licensing or a finding of suitability must
pay all the costs of the investigation.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company, the Company involved would be required to sever
all relationships with such persons. In addition, the Nevada Gaming Commission
may require a registered company or licensee to terminate the employment of any
person who refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not subject to
judicial review in Nevada.
Any beneficial holder of the voting securities of a corporation registered
under the Nevada Act, including the Company regardless of the number of shares
owned, may be required to file applications, be investigated, and have such
holder's suitability determined if the Nevada Gaming Commission has reason to
believe that such ownership may be inconsistent with the declared policies of
the State of Nevada. Pursuant to the regulations of the Nevada Gaming
Commission, the applicant must reimburse all costs of investigation incurred by
the Nevada Gaming Commission in conducting its investigation upon an
application.
Persons who acquire beneficial ownership of more than 5% of the voting
securities of a corporation registered under the Nevada Act must report the
acquisition to the Nevada Gaming Commission. The Nevada Act requires that
beneficial owners of more than 10% of the voting securities of a corporation
registered under the Nevada Act must apply to the Nevada Gaming Commission for
a finding of suitability within 30 days after the Chairman of the Nevada Gaming
Control Board mails the written notice requiring such filing. If the
stockholder who is required to be found suitable is a corporation, partnership
or trust, it must submit detailed business and financial information including
a list of beneficial owners. In addition, the Liquor and Gaming Licensing
Board of the county having jurisdiction over a licensee has the authority to
require that any person owning or controlling any of the stock of a gaming
licensee, such as the Company, be investigated for suitability to be licensed.
The applicant is to pay all costs of investigation. Any person who fails or
refuses to apply for a finding of suitability for a license within 30 days
after being ordered to do so by the Nevada Gaming Commission or the Chairman of
the Nevada Gaming Control Board may be found unsuitable. Under certain
circumstances an "institutional investor" (as such term is defined in the
Nevada Gaming Commission's regulations) which acquires more than 10% of the
Company's voting securities may apply to the Nevada Gaming Commission for a
waiver of such finding of suitability.
Any stockholder who is found unsuitable and who continues to hold,
directly or indirectly, any beneficial ownership of the voting securities of a
corporation registered under the Nevada Act beyond such period of time as may
be prescribed by the Nevada Gaming Commission may be guilty of a criminal
offense. The registered corporation could be subject to disciplinary action by
the Nevada Gaming Commission if after it receives notice that a person is
unsuitable to be a stockholder or to have any other relationship with it, it
(i) pays the unsuitable person any dividends or interest upon any of its
securities or any other payment or distribution of any kind whatsoever, (ii)
recognizes the exercise, directly or indirectly, of any voting rights in its
securities by the unsuitable person, (iii) pays the unsuitable person any
remuneration in any form for services rendered or otherwise, except in certain
limited and specific circumstances, or (iv) fails to pursue all lawful
efforts to require the unsuitable person to divest the voting securities,
including if necessary, the immediate purchase of the voting securities for
cash at fair market value. The Nevada Commission may, in its discretion,
require the holder of any debt security of a Registered Corporation to file
applications, be investigated and be found suitable to own the debt security
of a Registered Corporation if the Nevada Commission has reason to believe that
such ownership would otherwise be inconsistent with the declared policies of
the State of Nevada. If the Nevada Commission determines that a person is
unsuitable to own such security, then pursuant to the Nevada Act, the
Registered Corporation can be sanctioned, including the loss of its approvals,
if without the prior approval of the Nevada Commission, it: (i) pays to the
unsuitable person any dividend, interest, or any distribution whatsoever, (ii)
recognizes any voting right by such unsuitable person in connection with such
securities, (iii) pays the unsuitable person remuneration in any form, or
(iv) makes any payment to the unsuitable person by way of principal,
redemption, conversion, exchange, liquidation or similar transaction. After
licensing, the Company is required to maintain current stock ledgers in the
State of Nevada which may be examined by the Nevada Gaming Authorities at any
time. If any securities are held in trust by an agent or by a nominee, the
record holder may be required to disclose the identity of the beneficial owner
to the Nevada Gaming Authorities. A failure to make such disclosure may be
grounds for finding the record holder unsuitable. The Company is also required
to render maximum assistance in determining the identity of the beneficial
owner. The Nevada Gaming commission has the power to require certificates
representing shares of the Common Stock of the company bear a legend to the
general effect that the securities are subject to the Nevada Act. The Nevada
Gaming Authorities, through the power to regulate licensees, have the power to
impose additional restrictions on the holders of the Company's securities at
any time.
The regulations of the Nevada Gaming Commission provide that the control
of a corporation registered under the Nevada Act may not change without the
prior approval of the Nevada Gaming Commission. Under the Nevada Gaming
Commission's regulations, an acquisition of control includes stock
acquisitions (including tender offers) and certain other transactions. Persons
seeking approval to control a corporation registered under the Nevada Act must
satisfy the Nevada Gaming Commission in a variety of stringent standards prior
to assuming control of such corporation. The failure of a person to obtain
such approval prior to assuming control over the registered corporation may
constitute grounds for finding such person or persons unsuitable.
Regulations of the Nevada Gaming Commission prohibit certain purchases of
securities by publicly traded corporations registered under the Nevada Act
without the prior approval of the Nevada Gaming Commission. Transactions
covered by these regulations are generally aimed at discouraging repurchases of
securities at a premium over market price from certain holders of greater than
3% of the outstanding securities of the publicly traded registered corporation.
The regulations of the Nevada Gaming Commission also require prior approval for
a "plan of recapitalization," as defined by the regulations. Generally, a plan
of recapitalization is a plan proposed by the management of a corporation
registered with the Nevada Gaming Commission that contains recommended action
in response to a proposed corporate acquisition opposed by the company's
management, which acquisition itself would require the prior approval of the
Nevada Gaming Commission. Substantially all loans' leases, sales of securities
and other financial transactions entered into by the Company must also be
reported to or approved by the Nevada Gaming Authorities.
Nevada law prohibits corporations registered under the Nevada Act from
making a public offering of their securities without the approval of the Nevada
Gaming Commission if any part of the proceeds of the offering is to be used to
finance the construction, acquisition or operation of gaming facilities in
Nevada, or to retire or extend obligations incurred for one or more purposes.
Furthermore, any such approval, if granted, does not constitute a finding,
recommendation or approval by the Nevada Gaming Commission, or Board as to the
accuracy or adequacy of any offering circular, or the investment merits of the
securities offered thereby. Any representation to the contrary is unlawful.
Pursuant to recent changes in Nevada law, the Company and its subsidiaries may
engage in gaming activities outside the State of Nevada without seeking the
approval of the Nevada Gaming Authorities provided that such activities are
lawful in the jurisdiction where they are to be conducted and that certain
information regarding the foreign operation is provided to the Nevada Gaming
Authority on a periodic basis. The Company and its Nevada based affiliates may
be disciplined by the Nevada Gaming Commission if it violates any laws of the
foreign jurisdiction pertaining to the foreign gaming operation, fails to
conduct the foreign gaming operation in accordance with the standards of
honesty and integrity required of Nevada gaming operations, engages in
activities that are harmful to the State of Nevada or its ability to collect
gaming taxes and fees, or employs a person in the foreign operation who has
been denied a license or finding of suitability on Nevada on the ground of
personal unsuitability.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Company's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable monthly, quarterly or annually and are based upon (i) a
percentage of the gross gaming revenues received, (ii) the number of slot
machines operated by the casino or (iii) the number of table games operated by
the casino. A casino entertainment tax is also paid by licensees where
entertainment is furnished in connection with the selling of food or
refreshments.
(5) Insurance Coverage
During fiscal year 1996, the Company contracted general liability
insurance, excess liability insurance, athletic participants coverage, workers
compensation, automobile damage and garage keepers liability insurance for
Garden State Park, Freehold Raceway and the El Rancho Property through an
insurance broker, Keystone National Companies, Inc., owned by George E.
Norcross III, a then director of the Company.
See PART III, ITEM 3 - "Certain Relationships and Related Transactions."
(6) Dependency on a Single Customer
During fiscal 1996, no single customer or group of customers accounted for
ten percent or more of the racetrack revenues.
(7) Research and Development
The Company does not spend material amounts on research and development
activities.
(8) Employees and Consultants
In connection with the operation of Garden State Park, the Company
directly employs approximately 440 persons during the thoroughbred meet and 360
during the harness meet in connection with the operation of Garden State Park.
Personnel include pari-mutuel machine tellers, security personnel, admissions,
cleaning, maintenance, and parking personnel, most of whom are presently
represented by unions with which the Company has entered into contracts.
Non-union racing department officials and starters are also employed during
each meet.
In connection with the operation of Freehold Raceway, the Company directly
employs approximately 250 persons during its harness meets. Personnel include
pari-mutuel machine tellers, security personnel, admissions, and maintenance,
most of whom are presently represented by unions with which the Company has
entered into contracts. Non-union racing department officials and starters are
also employed during each meet.
In addition, the two tracks combined employ approximately 100 persons on a
full time basis. This personnel provides information, media, marketing,
executive, administrative and clerical services and support for the tracks.
At June 30, 1996, the Company employed 9 full-time corporate executive,
administrative, and clerical personnel. The Company has entered into various
consulting contracts for professional services primarily relating to casino
development projects. The Company may also engage additional consultants from
time to time to provide advisory services.
ITEM 2 - PROPERTIES
The Company owns a condominium unit and ownership interest in the Ocala
Jockey Club in Reddick, Florida. CIRCA 1850, Inc. owns six properties,
including five single family homes and a condominium in Freehold, New Jersey.
All of these properties are held for the purpose of rental income, and in the
case of CIRCA 1850, Inc., for future use as parking lots in the event
necessary.
See PART I, ITEM 1, "Narrative Description of Business."
ITEM 3 - LEGAL PROCEEDINGS
In May 1996, the Company received subpoenas from the New Jersey Bureau of
Securities requesting copies of all corporate records with regard to its Olde
English Management Co, Inc.("OEM") subsidiary for a period of time from
February 13, 1995 to present in connection with an investigation being
conducted by the Bureau. The Company has been advised that it is not a target
of the investigation. The Company has complied with these subpoenas and has
cooperated with all of the Bureau's requests. The outcome of this pending
investigation is unknown at this time.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted by the Company to a vote of its security
holders during the quarter ended June 30, 1996.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
(A) Market Information
The Company's Common Stock has been traded on the American Stock Exchange
since April 4, 1985, under the symbol "ITB". The following table indicates the
high and low sales prices for such stock on the American Stock Exchange on a
quarterly basis for the two years ended June 30, 1996, based upon information
supplied by the American Stock Exchange.
<TABLE>
AMERICAN STOCK EXCHANGE
Sales Price
<CAPTION>
Quarter Ended: High Low
<S> <C> <C>
September 30, 1994 $ 5.63 $ 3.75
December 31,1994 4.25 2.56
March 31, 1995 3.63 2.63
June 30, 1995 7.25 3.00
September 30, 1995 4.75 3.38
December 31, 1995 5.25 3.25
March 31, 1996 5.69 3.31
June 30, 1996 4.75 3.50
</TABLE>
(B) Holders
As of June 30, 1996, the number of record holders of the Company's Common
Stock was 32,675.
(C) Dividends
The Company has not paid any dividends on its Common Stock since its
inception. Anticipated capital requirements of the Company make it unlikely
that any dividends will be declared in the foreseeable future on the Company's
Common Stock. Furthermore, 25% of "net racetrack earnings", as defined in the
Company's financial statements (See Note 13 of the Company's financial
statements Item 8), from the Company's Garden State Park racetrack facility
are required to be paid by the Company in dividends on its Series A
Convertible Preferred Stock and thus would not be available for payment as
dividends on the Common Stock.
Item 6 - SELECTED FINANCIAL DATA
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended Year Ended
June, 30 June, 30
1996 1995
<S> <C> <C>
Revenue from Operations $ 68,864,894 $ 55,744,950
Investment Income Revenue 255,063 3,437,788
Total Revenue $ 69,119,957 $ 59,182,738
Income(Loss) from Operations $ (841,845)$ 2,514,052
Net Income (Loss) $ (1,069,712)$ 2,398,452
Net Income (Loss) from
Operations per Common Share $ (0.08)$ 0.26
Working Capital (Deficiency) $ (2,395,583)$ 9,291,239
Total Assets $ 144,880,933 $ 97,469,045
Short Term Debt $ 3,214,100 $ 1,341,399
Long-Term Debt $ 50,992,702 $ 15,599,097
Shareholders' Equity $ 79,318,105 $ 72,206,437
Cash Dividends Per Share $ -0- $ -0-
Weighted Average Number of Shares 10,536,414 9,551,369
Common Shares Outstanding 11,651,487 9,551,386
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, June 30,
1994 1993
<S> <C> <C>
Revenue from Operations $ 37,334,236 $ 38,478,067
Investment Income Revenue 3,343,274 3,394,805
Total Revenue $ 40,677,510 $ 41,872,872
Income(Loss) from Operations $ 2,500,595 $ (3,543,567)
Net Income (Loss) $ 2,500,595 $ (29,410,166)
Net Income (Loss) from
Operations per Common Share $ 0.26 $ (0.40)
Working Capital (Deficiency) $ 16,757,837 $ 14,128,362
Total Assets $ 74,433,411 $ 72,263,542
Short Term Debt $ 40,000 $ 35,418
Long-Term Debt $ -0- $ 50,000
Shareholders' Equity $ 69,807,985 $ 67,307,389
Cash Dividends Per Share $ -0- $ -0-
Weighted Average Number of Shares 9,547,900 8,950,025
Common Shares Outstanding 9,551,255 9,511,415
</TABLE>
<TABLE>
<CAPTION>
Year Ended
June 30,
1992
<S> <C>
Revenue from Operations $ 39,505,622
Investment Income Revenue 5,610,502
Total Revenue $ 45,116,124
Income(Loss) from Operations $ (7,266,183)
Net Income (Loss) $ (6,466,152)
Net Income (Loss) from
Operations per Common Share $ (1.49)
Working Capital (Deficiency) $ (2,098,249)
Total Assets $ 204,235,883
Short Term Debt $ 2,900,896
Long-Term Debt $ 24,885,264
Shareholders' Equity $ 171,203,740
Cash Dividends Per Share $ -0-
Weighted Average Number of Shares 4,868,001
Common Shares Outstanding 4,869,046
</TABLE>
(1) Total Assets and Shareholders' Equity for June 30, 1993
and future years reflect the effects of a
quasi-reorganization of the Company's assets during the
fiscal year ended June 30, 1993. The 1996,1995 and 1994 statements
of operation are not comparable to prior years.
(2) The rights offering in August, 1992 materially affects the comparability
of the loss per share data.
(3) The weighted average number of shares, the per share data and the common
shares outstanding have been restated for all periods to reflect the
one-for-twenty reverse stock split effected on March 13, 1992.
(4) One of the Company's two racetracks was sold in the fiscal year ended
June 30, 1991 which materially affects the comparability of a portion
of the information reflected in the above data.
(5) The Company completed its purchase during the fiscal year ended
June 30, 1995 of a racetrack operation effective January 1, 1995 which
materially affects the comparability of a portion of the information
reflected in the above data.
ITEM 7 - MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
(A) Liquidity and Capital Resources
The Company's working capital (deficit), on a consolidated basis, as of
June 30, 1996, was ($2,395,582) which represents a decrease of approximately
$11,700,000 from June 30, 1995. During the year the Company's cash and cash
equivalents, decreased by $7,600,000 and its short term notes and mortgages
payable increased by $1,900,000, along with an increase in accounts payable
and accrued expenses of $3,100,000. This decrease in cash of $7,600,000 is
primarily the result of the following factors: 1) the utilization of cash of
$12,600,000 for the purchase of the El Rancho property and deposits of
$470,000 made for the purchase of an adjoining piece of property from Sheraton
Gaming Corporation for the casino development project; 2) an increase in
cash of $26,600,000 generated from debt financing offset by principal
payments of $21,900,000; 3) cash of $5,440,000 from a Regulation S offering
of Common Stock; 4) capitalized expenditures and improvements of
$5,470,000 associated with future casino development and $1,600,000 for the
two racetrack properties; 5) $400,000 for the purchase of land for a parking
lot at the Freehold racetrack facility (previously leased by the Company);
and 6) cash of $2,700,000 generated from operating activities.
The Company's cash flows from operations were $2,669,000 in fiscal 1996
compared to $2,560,000 in fiscal 1995. Although the Company suffered a net
loss of $1,070,000 for fiscal 1996 versus net income for fiscal 1995 of
$2,400,000, it was able to defer certain accounts payable along with other
adjustments effecting cash flow which resulted in cash being provided from
operations.
Cash used by investing activities was $20,441,000 for fiscal 1996
compared to $1,186,000 in fiscal 1995. The increase was the result of the
purchase of the El Rancho property which utilized $12,565,000 in cash,
deposits made on an adjacent piece of property in the amount of $470,000,
capital expenditures for improvements at the two racetrack properties of
$1,594,000, $400,000 utilized for the purchase of land at Freehold Raceway,
and expenditures for future casino development of $5,470,000.
Cash provided by financing activities was $10,187,000 in fiscal 1996
compared to cash (used) by financing activities in fiscal 1995 of $(5,648,000)
due in that year for payments made on the acquired debt at Freehold racetrack.
During 1996 the Company completed a Regulation S private offering for 1.9
million shares of common stock, for $3 per share, resulting in net proceeds of
$5,440,000. In March, 1996 the Company secured long term financing of
$6,000,000 from two foreign banks, each for $3,000,000, which was used to pay
$6,500,000 of short term notes associated with the El Rancho purchase. In
June, 1996 the Company obtained from Foothill Capital Corp. a $14,000,000 term
loan (used to pay off a $14,000,000 first mortgage note due in December,
1996), and a $16,000,000 revolving credit line of which at June 30, 1996 the
Company had drawn down $6,598,000. The Company used $4,000,000 to meet
vendor obligations and $2,598,000 to pay financing fees associated with the
closing of the loan. During 1996 the Company made payments of $1,394,000 on
other various notes for Freehold Raceway, purchased in January, 1995.
Restricted Cash and Investments of $2,972,000 as of June 30, 1996
consisted of horsemen's deposits held by the racetrack for race nominations,
purse winnings, and funds held for uncashed mutuel ticket sales due to the
patrons or government authorities. These balances are offset with the
Company's payables. As restricted cash these cash funds are not available for
Company operations.
On January 14, 1996, in connection with the Company's purchase of the El
Rancho Hotel and Casino property the Company issued its $10,500,000 second
mortgage note at 8% interest, which is payable only to the extent that certain
contingent events occur. At June 30, 1996, this amount is classified as long
term debt since the Company does not anticipate these contingencies happening
by June of 1997.
On March 20, 1996, the Company and Foothill Capital Corporation of Los
Angeles, California, signed a Letter of Intent for the proposed borrowing of
$30,000,000. Closing on the financing contract took place on June 4, 1996.
The financing arrangement, secured by, among other things, a mortgage on the
El Rancho property, Garden State Park, and a second mortgage on Freehold
Raceway, is for a $16,000,000 revolving credit line and a $14,000,000 Time
Loan Mortgage, used at settlement to pay off the note referred above due on
December 20, 1996. The revolving credit line is restricted by $3,000,000
until such time that an approved settlement agreement between the New Jersey
Division of Gaming Enforcement, the Company and Robert E. Brennan, the
Company's former chairman, has been reached by the New Jersey Casino Control
Commission. The revolving credit line requires that the Company make
quarterly principal payments of $400,000 beginning July 1, 1997. Interest on
the outstanding balance will be paid monthly starting July 1, 1996 at a rate
of 2.75% above the current published prime lending rate per annum. The Time
Loan Mortgage requires that the Company make equal monthly principal payments
of $250,000 plus interest beginning July 1, 1997. Interest on the outstanding
balance will be paid monthly starting July 1, 1996 at a rate of 2.75% above
the current published prime lending rate per annum. The financing agreement
also provides for the lender to receive a monthly service fee of $5,000; a
.5% monthly fee on the unused portion of the line of credit; and an annual 1%
lender's commitment fee. The total principal balance of the revolving credit
line and the Time Loan Mortgage as of June 30, 1996 was $20,837,320 leaving a
balance to draw on at June 30, 1996 of $6,162,680, before the release of the
$3,000,000 restriction. Subsequent to June 30, 1996 and as of September 30,
1996 the Company has drawn an additional $2,654,326, leaving a balance of
$3,508,354 to draw upon before the release of the $3,000,000 restriction.
The credit facility contains financial and other covenants that require the
Company to maintain certain standards with respect to: (i) minimum tangible
net worth of $70,000,000; and (ii) liabilities to tangible net worth ratio of
not more than one to one. The covenants also require that (iii) Foothill
Capital receive a subordinated Deed of Trust on the purchase of the adjacent
property; and (iv) that additional purchase money financing and/or capital
leases cannot exceed an aggregate $3,000,000. The Company believes it will
continue to be in compliance with these arrangements during fiscal 1997.
In March, 1996, the Company received financing of $6,000,000 from two
foreign banks, which was used in part to pay the $6,500,000 mortgage note due
to LVEN in March, 1996. The notes bear interest at 10% per annum, payable
yearly with principal due on March 17, 1998. The $3,000,000 note is
guaranteed by a first mortgage on the 56 acres of land at Garden State Park,
which is currently under contract of sale, subject to certain contingencies,
to the Four B's. The other entity has not exercised a right to perfect a
mortgage on the Garden State Park property for the other $3,000,000 note.
At various dates throughout the fiscal year, the Company financed its
payments on insurance policies in the amount of $1,236,400 at interest rates
ranging from 9.1% to 10.4%. Monthly payments are to be made over a period of
nine months. At June 30, 1996, $919,100 was outstanding and classified as a
current liability.
A note previously executed by Freehold Raceway with Marine Midland Bank
had a balloon payment of $1,405,000 which was due and paid on August 20, 1996.
In June, 1996 the Company entered into a purchase agreement with Sheraton
Gaming Corporation to purchase a fifteen acre tract directly behind its El
Rancho property. The Company made payments of $470,000 during fiscal 1996 and
$1,880,000 during the first quarter of fiscal 1997. The Company will need to
seek financing in order to finalize the purchase. If the Company fails to
secure adequate financing by a settlement date of November 29, 1996, the total
$2,350,000 payments made to date would be forfeited. Management believes
that the financing can be obtained, however, no assurance can be given that it
will be obtained, or, if it is obtained, will be prior to the required
closing date.
In July, 1996, the Company entered into an agreement with GE Capital
Corporation with respect to financing $827,891 at an interest rate of 9.3% for
the purchase of 2 new natural gas powered air conditioners at Garden State
Park. The contract provides for sixty consecutive monthly installments of
principal and interest of $17,067 beginning August 25, 1996.
On September 17, 1996 the Company entered into a lease agreement with
Siemens Credit Corporation that provides for eighteen monthly lease payments
of $850 and an end buy out of approximately $42,000 for a new telephone system
at Freehold Raceway. The Company is in the process of extending the
installation to include Garden State Park with a similarly priced contract
agreement.
For the last three years, the Company has had sufficient cash generated
from operations and from debt and equity financing to finance its operations,
make asset purchases of Freehold Raceway and the El Rancho properties, and to
maintain existing facilities. The cash and cash equivalents balance of
$4,216,000 at June 30, 1996 and the projected funds to be generated from the
racetrack operations will not be sufficient to fund the cash requirements of
the Company's existing operations, its scheduled debt service, and the
currently anticipated capital requirements of the Company's casino development
during the next fiscal year. In order to meet these projected cash
requirements, the Company believes that the closing in December, 1996 for the
sale of a portion of the land at Garden State Park will become a source of
cash in fiscal 1997. In December 1995, Garden State Race Track, Inc. entered
into an agreement to sell this 56 acre parking lot tract at the Garden State
Park, which is presently unused for racing purposes. The contract calls for a
purchase price of $11 million and provides for a closing on or before December
15, 1996, (although the buyer may extend for a six month period provided a
further non-refundable deposit is made). The closing is subject to standard
real estate contingencies including the receipt of all necessary governmental
approvals to construct a retail shopping center of approximately 300,000
square feet on the site, and provides the purchaser a period of time to
evaluate the feasibility of the project. The Buyer has made all required
payments to date and has warranted to the Company that it has the financial
capability to complete the transaction on an "all cash" basis and to comply
with all financial requirements. Net proceeds of this sale is expected to be
approximately $4.4 million after payment to two foreign banks in the amount
of $6,000,000 and closing adjustments.
The Company is also anticipating that the majority of the unused
revolving credit line with Foothill Capital Corporation of approximately
$9,000,000 as of June 30, 1996, or $6,500,000 as of September 30, 1996, will
be available during the fiscal year. The balance currently is restricted by
$3,000,000 until such time that an approved settlement agreement has been
reached between the State of New Jersey, Department of Law and Public Safety,
Division of Gaming Enforcement, Robert E.Brennan and the Company's racetrack
subsidiaries concerning the shares of Common Stock currently owned by Robert
E. Brennan, the Company's former chairman.
The purchase agreement for the El Rancho property provides that if, by
October 25, 1996, the Company has not arranged for the necessary commitments
to develop the "Starship Orion" project or a more modest project by the same
date, and if the seller, Las Vegas Entertainment Network, Inc. ("LVEN") (i)
arranges for the Refinance Loan (as defined therein), and (ii) pays all
associated costs and deposits into an escrow account up to one year's interest
on the refinanced or replaced Refinance Loan and up to one year's carrying
costs for El Rancho, then LVEN may have the non-exclusive right for up to one
year (the "Option Period") to appoint (during the last quarter of the Option
Period) an authorized licensed commercial real estate broker to arrange for
the sale of the property or obtain a minimum of $55 million in financing to
develop the property. During the Option Period, the Company continues to have
the right to arrange for the financing to develop the El Rancho property. If
such financing is arranged, LVEN's rights (if any) with respect to arranging
for the appointment of an authorized licensed commercial real estate broker or
refinancing would terminate, as would any requirement to obtain LVEN's consent
before the sale by the Company of the site.
The Company's anticipated principal payment on debt service will be
approximately $3,400,000 during the next year. The Notes and Mortgage
payments in connection with the purchase of Freehold Raceway will be
$2,295,000, and payments on various other notes and leases of the Company will
be $919,100 during fiscal 1997 plus additional payments of $200,000 for new
leases incurred from July 1, 1996 to September 30, 1996.
The anticipated capital needs for the Casino expansion during fiscal 1997
include carrying costs of the El Rancho casino of approximately $1,000,000 per
year for real estate taxes, utilities, guard and fire watch service and
maintenance. Interest and bank fees on debt connected with the Casino
expansion will be approximately $3,800,000 during the next year. Professional
fees for consultants, legal and architectural work is expected to be
approximately $3,000,000 during the next year. All costs above will be
capitalized and expensed over the useful life upon the opening of a casino.
Capital expenditures at the race track subsidiaries are projected to be
approximately $600,000 during fiscal 1997. During fiscal 1997, the Company
estimates the cash generated from operations to be at approximately a break-
even basis. Should the sale of land at Garden State Park be delayed and
should the settlement agreement concerning Mr. Brennan's shares of Common
Stock not be approved, which action would delay the release of the $3,000,000
on the revolving credit line, the Company believes it can make the necessary
adjustments in its current operations by reducing or delaying costs and
planned capital expenditures at the racetrack facilities and those amounts
needed for casino expansion in order to have sufficient cash during fiscal
1997. The Company has also received several offers to buy the El Rancho
property together with the adjoining property on which the Company has a
contract to purchase for amounts greater than what has been totally expended
to date. These offers could offer the Company alternatives if the development
of the original casino project is not possible due to cash not being available
on a timely basis. The Company continues to pursue financing for the project.
For fiscal 1998, the Company is required to make debt payments of
approximately $5,900,000 (or $11,900,000 if a foreign note in the amount of
$6,000,000 is not paid off in December, 1996 in conjunction with the sale of
56 acres of land at Garden State Park at that time). This does not include
monies that would be needed should debt be incurred in connection with the
acquisition of the additional property in Las Vegas. Additional costs of
carrying the El Rancho and estimated development costs, including interest on
debt is projected to be approximately $7,500,000. No assurance can be given
at this time that the Company will achieve a level of operating cash flow in
fiscal 1998 that will permit it to service its obligations. Therefore, the
Company will attempt to raise additional capital through debt and/or stock
issuance and/or attract equity partners. It may have to adopt other
alternative strategies such as reducing or delaying future expansion or
capital expenditures. The Company cannot provide any assurances as to the
terms by which any of these strategies can be completed.
(B) Seasonality and Effect of Inclement Weather
Horse racing is conducted outdoors, therefore a number of variables
contribute to the seasonality of the business, most importantly weather.
Weather conditions, particularly during the winter months, sometimes cause
cancellation of races or severely curtail attendance, which reduces wagering
and live racing and simulcast wagering both on site and off site. Attendance
and wagering also have been adversely affected by major winter storms which
have affected the entire Northeast part of the country during the 1995-96
winter season.
In addition a disproportionate amount of ITB's revenue is received during
the period September through May of each year because Garden State Park and
Freehold Raceway only conduct simulcast receiving (not live racing) during the
summer months. As a result, the Company's revenue and net income have been
greatest in the second and third quarters of the year.
(C) Results of Operations for the Years Ended June 30, 1996 and 1995
During the year ended June 30, 1996, the Company incurred an after tax
loss of $1,069,712 in comparison to after tax income of $2,398,452 for the
prior fiscal year. The change of $3,468,164 from net income to net loss
primarily resulted from the net effect of: 1) the loss generated by Garden
State Park during the period as compared to income for the comparable period
in fiscal 1995 and an increase in net income generated by Freehold Raceway
under the Company's ownership during the second half of the 1996 as compared
to the second half of fiscal 1995; 2) increased interest expense of $583,866
primarily associated with the mortgages on Freehold Raceway and additional
debt for the comparable periods; and 3) a decrease in investment revenue of
approximately $3.2 million for the comparable fiscal years; partially offset
by 4) the net increased income generated during the first six months of the
fiscal year as a result of the purchase of Freehold Raceway. Total revenues
from operations increased in fiscal 1996 primarily as a net result of the
purchase of Freehold Raceway, which significantly increased racetrack
revenues for the comparable periods. Total expenses increased $13,293,116 or
23% from $56,668,686 in fiscal 1995 to $69,961,802 in fiscal 1996 primarily as
a net result of: 1) significant additional operating and interest expenses
during fiscal 1996 as a result of the purchase of Freehold Raceway in January
1995; and 2) a net decrease in racetrack expenses during the second half of
fiscal 1996 primarily as a result of the decrease in the number of race days
at both racetracks; and 3) an increase of approximately $1,900,000 in
Corporate expenses associated with the development of casino gaming
opportunities.
During the year ended June 30, 1996, the Company realized investment
income of $255,063. This represents a decrease of $3,182,725 from the 1995
investment income of $3,437,788. This decrease is primarily the result of
decreasing investment transactions as the Company ceased these activities in
fiscal 1996.
During the year ended June 30, 1996, the Company's two racetracks
realized income of $3,043,458 before taxes and interest as compared to income
of $2,683,884 before taxes for the prior fiscal year. Interest expense of
$1,140,665 for the current fiscal year associated primarily with the mortgages
on the Freehold racetrack is recognized as a corporate expense, not that of
the racetrack. Capitalized interest for the current fiscal year of $751,592,
primarily associated with the casino development project will be expensed
(over the estimated benefit period) upon the opening of a casino on the El
Rancho property. (See Notes 1-(E) and 3)
Garden State Park
During the current fiscal year (July 1, 1995 to June 30, 1996), Garden
State Park ran its eleventh standardbred (harness) meet from September 8, 1995
through December 9, 1995 (53 dates) and the Company's twelfth thoroughbred
meet from January 12, 1996 through May 24, 1996 (64 dates). During these race
meetings, Garden State Park simulcasts its live racing to other racetracks,
other licensed venues and certain Atlantic City casinos. Simulcasting into
the racetrack from other racetracks continues throughout the fiscal year.
During the year ended June 30, 1996, Garden State's revenue decreased
$4,304,948 or 12% when compared to the prior fiscal year, reflecting a
significant net decrease in revenues generated during the period at Garden
State Park primarily as a result of the effect of severe weather conditions
which forced the cancellation of 10 scheduled live racing days and the
simulcasting during those days as well as the effect of adverse weather
conditions during many of the completed live racing programs. This severe
weather, which also caused most other racetracks in the northeastern United
States to limit their live racing programs, had an adverse impact on earnings
during these periods. In addition, Garden State Park experienced lower
handles and attendance throughout the year which reduced revcnue. The cost
of revenues, primarily purse expenses and simulcasting commissions, and
operating expenses decreased 1,938,065 or 6% when compared to the same period
last year also as a result of the canceled race days and limited simulcasting
schedules. Depreciation expenses for fiscal 1996 and 1995 were $633,369 and
$555,993, respectively. General and administrative expenses were reduced by
$76,195. As a net result of decreased revenues and expenses during the fiscal
year ended June 30, 1996, Garden State Park incurred an operating loss of
$2,318,582 before interest and income taxes compared to income during the
fiscal year ended June 30, 1995 of $201,872.
The 1995 (fiscal 1996) Harness Meet (53 days) resulted in operating income
of approximately $852,000, compared with the 1994 Harness Meet's (55 days)
operating income of approximately $855,000. Daily on-track attendance and
wagering at the track's 1995 Harness Meet, averaged 2,434 and $182,103,
respectively, as compared to 2,767 and $207,747, respectively, during the 1994
Harness Meet.
The 1996 Thoroughbred Meet (64 days) had an operating loss of
approximately $2,388,000 compared to the 1995 Thoroughbred Meet (75 days),
which had an operating loss of approximately $311,000. This increase in
operating loss primarily reflects the net effect of the decreased revenues and
expenses associated with a decrease in the number of race days, due to less
favorable weather conditions, during the third quarter of this fiscal year as
compared to the comparable period in the prior fiscal year in addition to
increased losses during the fourth quarter of this fiscal year which primarily
reflects decreases in income from live racing and simulcasting. Daily
on-track attendance and wagering at Garden State Park's 1996 Thoroughbred Meet
averaged 2,891 and $164,381, respectively. During the 1995 Thoroughbred Meet,
attendance and on-track wagering averaged 3,292 and $212,580, respectively.
During the fiscal year ended June 30, 1996, the track had an operating
loss of approximately $782,000 during the non-racing periods between meets as
compared to a loss of approximately $342,000 in the prior fiscal year. The
increase in operating loss was primarily due to lower simulcasting handles.
Simulcasting during fiscal 1996 and 1995, both to and from other New
Jersey racetracks as well as out-of-state racetracks and casinos, accounted
for approximately 79% and 75%, respectively, of revenue while live racing and
other income accounted for approximately 21% and 25%, respectively, of
revenue at Garden State Park during fiscal 1996 and 1995.
Freehold Raceway
During fiscal 1996, Freehold Raceway ran its Freehold Racing
Association (FRA) standardbred (harness) meet from August 17, 1995 through
December 30, 1995 for a total of 99 days. Freehold's Atlantic City Harness
(ACH), also standardbred, meet ran from January 1, 1996 through May 29, 1996
for a total of 102 days. During both race meetings, Freehold Raceway
simulcasts its live racing to other racetracks, other licensed venues and
certain Atlantic City casinos. Simulcasting into the racetrack from other
racetracks continues throughout the fiscal year.
For the year ended June 30, 1996, Freehold Raceway realized operating
income of $5,362,039 before interest and income taxes. Revenue for the period
was $36,242,799. The cost of revenues, primarily purse expenses and
simulcasting commissions, was $13,476,190. Operating and depreciation expenses
were $15,032,484 and $793,038, respectively. General and administrative
expenses were $1,579,048.
The 1995 (fiscal 1996) FRA harness meet resulted in operating income of
approximately $2,987,717. Daily on-track attendance and wagering at the 1995
FRA meet averaged 2,085 and $252,058.
The 1996 ACH harness meet resulted in operating income of approximately
$2,165,892 as compared to the 1995 meet income of $3,449,403. The decrease in
income was primarily the net result of decreased revenues and expenses
associated with a decrease in the number of race days, due to less favorable
weather conditions, during the third quarter of this fiscal year as compared
to the comparable period in the prior fiscal year. Daily on-track attendance
and wagering at the 1996 ACH meet averaged 2,085 and $252,058, respectively.
During the 1995 ACH meet, attendance and on-track wagering averaged 2,298 and
$290,449, respectively.
During the fiscal year ended June 30, 1996, Freehold Raceway had operating
income of approximately $208,430 during the non-racing periods between meets.
Live racing accounted for approximately 29% of revenue at Freehold
Raceway during the year ended June 30, 1996. Simulcasting, both to and from
other New Jersey racetracks as well as out-of-state racetracks and casinos,
accounted for approximately 66% of revenue at Freehold Raceway during the year
ended June 30, 1996.
(B) Results of Operations for the Years Ended June 30, 1995 and 1994
During the year ended June 30, 1995, the Company realized after tax income
of $2,398,452 in comparison to after tax income in the prior fiscal year of
$2,500,595. The $102,143 or 4% decrease in net income is primarily the net
result of: 1) the net increased income generated by the purchase of Freehold
Raceway; reduced by 2) the increased costs associated with casino gaming
development; 3) interest expense of $556,799 associated with the mortgages on
Freehold Raceway; 4) a decrease in income from breeding operations; and 5) an
increase in general and administrative expenses primarily associated with the
purchase of Freehold Raceway. Total revenues increased by approximately 45%
from $40,677,510 in fiscal 1994 to $59,182,738 in fiscal 1995 primarily as a
net result of the purchase of Freehold Raceway, which significantly increased
racetrack revenues for the comparable periods. Total expenses increased
$18,491,771 or 48% from $38,176,915 in fiscal 1994 to $56,668,686 in fiscal
1995 primarily as a result of: 1) significant additional operating and
interest expenses during the second half of fiscal 1995 as a result of the
purchase of Freehold Raceway; and 2) increased corporate expenses during
comparable periods of approximately $620,000 associated with the development
of casino gaming within racetrack structures and with the development of other
potential casino gaming operations, via the Company's subsidiary,
International Thoroughbred Gaming Development Corporation ("ITG").
Management believes that the breeding operation has become insignificant
to the overall operation of the Company. The breeding operation recognized a
loss before taxes of $2,041 for the fiscal year ended June 30, 1995 as
compared to income of $171,337 for the comparable period in fiscal 1994.
During the year ended June 30, 1995, the Company realized investment
income of $3,437,788. This represents an increase of $94,514 from the 1994
investment income of $3,343,274. This increase is primarily the result of
an increase in short term investment gains.
During the year ended June 30, 1995, the racetracks realized income of
$2,683,884 before taxes as compared to income of $818,717 before taxes for the
prior fiscal year. Interest expense of $556,799 for the current fiscal year
associated primarily with the mortgages on the Freehold racetrack is
recognized as a corporate expense, not that of the racetrack.
Garden State Park
During the current fiscal year (July 1, 1994 to June 30, 1995) Garden
State Park ran its tenth standardbred (harness) meet from September 7, 1994
through December 10, 1994 (55 dates) and its eleventh thoroughbred meet from
January 13, 1995 through May 27, 1995 (75 dates). During these race meetings,
Garden State Park simulcasts its live racing to other racetracks, other
licensed venues and certain Atlantic City casinos. Simulcasting into the
racetrack from other racetracks continues throughout the fiscal year.
During the year ended June 30, 1995 Garden State's revenue decreased
$348,318 when compared to the prior fiscal year, primarily reflecting: 1) a
significant net decrease in revenues generated during the period from
simulcasting into Garden State Park from other racetracks; partially offset
by (2) an increase in revenues generated by the simulcasting out of Garden
State Park's live races to the other racetracks. The cost of revenues,
primarily purse expenses and simulcasting commissions, and operating expenses
increased $367,118 or 1% when compared to the same period last year. General
and administrative expenses were reduced by $140,380 or 4% primarily as a
result of a cost reduction program in effect for the year. As a net result of
decreased revenues and increased expenses during the fiscal year ended June
30, 1995, Garden State Park's operating income was $201,872 before interest
and income taxes compared to income during the fiscal year ended June 30, 1994
of $818,717.
The 1994 (fiscal 1995) Harness Meet (55 days) resulted in operating income
of approximately $855,000, compared with the 1993 Harness Meet's (55 days)
operating income of approximately $1,146,000. The decrease primarily reflects
the effect of reduced total live and simulcast receiving handles, which
generate higher commission rates, versus significantly increased total
simulcast sending handles, which carry a lower commission rate to the sending
track, while expenses remain approximately the same for the comparable
periods. Daily on-track attendance and wagering at the track's 1994 Harness
Meet, averaged 2,767 and $207,747, respectively, as compared to 2,674 and
$237,558, respectively, during the 1993 Harness Meet.
The 1995 Thoroughbred Meet (75 days) had an operating loss of
approximately $311,000 compared to the 1994 Thoroughbred Meet (62 days), which
had an operating loss of approximately $360,000. This decrease in operating
losses primarily reflects the net effect of the increased revenues and
expenses associated with an increase in the number of race days, due to more
favorable weather conditions, during the third quarter of this fiscal year as
compared to the comparable period in the prior fiscal year. Daily on-track
attendance and wagering at Garden State Park's 1995 Thoroughbred Meet averaged
3,292 and $212,580, respectively. During the 1994 Thoroughbred Meet,
attendance and on-track wagering averaged 3,244 and $248,534, respectively.
During the fiscal year ended June 30, 1995 the track had an operating loss
of approximately $342,000 during the non-racing periods between meets as
compared to income of approximately $35,000 in the prior fiscal year. The
increase in operating loss was primarily due to lower simulcasting handles.
Simulcasting, both to and from other New Jersey racetracks as well as out-of-
state racetracks and casinos, accounted for approximately 75% of revenue
while live racing and other income accounted for approximately 25% of revenue
at Garden State Park during fiscal 1995 and 1994.
Freehold Raceway
During the six months subsequent to the Company's purchase effective
January 1, 1995 (January 1, 1995 to June 30, 1995), Freehold Raceway ran its
Atlantic City Harness (ACH) standardbred (harness) meet from January 2, 1995
through May 29, 1995 (107 dates). During this race meeting, Freehold Raceway
simulcasts its live racing to other racetracks, other licensed venues and
certain Atlantic City casinos. Simulcasting into the racetrack from other
racetracks continues throughout the fiscal year.
For the six months of operation under the Company's ownership during the
fiscal year ended June 30, 1995, Freehold Raceway realized operating income of
$2,482,012 before interest and income taxes. Revenue for the six month was
$18,210,033. The cost of revenues, primarily purse expenses and simulcasting
commissions, was $6,966,572. Operating and depreciation expenses were
$7,662,338 and $382,363, respectively. General and administrative expenses
were $716,748. Daily on-track attendance and wagering at the track's 1995
ACH Harness Meet, averaged 2,298 and $290,449, respectively.
Live racing accounted for approximately 54% of revenue at Freehold
Raceway during the six months of operation under the Company's ownership.
Simulcasting, both to and from other New Jersey racetracks as well as out-of-
state racetracks and casinos, accounted for approximately 46% of revenue at
Freehold Raceway during the six months of operation under the Company's
ownership.
IMPORTANT FACTORS RELATING TO FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in such statements. In connection with
certain forward-looking statements contained in this Annual Report on Form 10-K
and those that may be made in the future by or on behalf of the Company
which are identified as forward-looking, the Company notes that there are
various factors that could cause actual results to differ materially from
those set forth in any such forward-looking statements. The forward-looking
statements contained in this Annual Report were prepared by management and are
qualified by, and subject to, significant business, economic, competitive,
regulatory and other uncertainties and contingencies, all of which are
difficult or impossible to predict and many of which are beyond the control of
the Company. Accordingly, there can be no assurance that the forward-looking
statements contained in this Annual Report will be realized or that actual
results will not be significantly higher or lower. The statements have not
been audited by, examined by, compiled by or subjected to agreed-upon
procedures by independent accountants, and no third-party has independently
verified or reviewed such statements. Readers of this Annual Report should
consider these facts in evaluating the information contained herein. In
addition, the business and operations of the Company are subject to
substantial risks which increase the uncertainty inherent in the forward-
looking statements contained in this Annual Report. The inclusion of the
forward-looking statements contained in this Annual Report should not be
regarded as a representation by the Company or any other person that the
forward-looking statements contained in this Annual Report will be achieved.
In light of the foregoing, readers of this Annual Report are cautioned not to
place undue reliance on the forward-looking statements contained herein.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attached.
ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements on accounting and financial disclosure
between the Company and its independent public accountants.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
International Thoroughbred Breeders, Inc.
We have audited the accompanying consolidated balance sheets of
International Thoroughbred Breeders, Inc. and its subsidiaries as of June 30,
1996 and 1995, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the period
ended June 30, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated 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 audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of International Thoroughbred Breeders, Inc. and its subsidiaries as of June
30, 1996 and 1995, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended June 30, 1996, in
conformity with generally accepted accounting principles.
MOORE STEPHENS, P.C.
Certified Public Accountants
Cranford, New Jersey
August 23, 1996
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
June 30, June 30,
1996 1995
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash $ 1,069,282 $ 4,167,811
Short-Term Investments 3,147,074 7,633,483
TOTAL CASH AND CASH EQUIVALENTS 4,216,356 11,801,294
Restricted Cash and Investments 2,971,538 2,151,411
Accounts Receivable - Net 1,892,941 2,155,792
Prepaid Expenses 1,205,951 1,143,007
Other Current Assets 366,656 152,795
TOTAL CURRENT ASSETS 10,653,442 17,404,299
LAND, BUILDINGS, EQUIPMENT AND LIVESTOCK:
Land and Buildings 69,093,719 74,296,090
Construction In Progress 48,736,200 0
Equipment 4,356,202 3,666,168
Livestock 20,687 17,517
TOTAL LAND, BUILDINGS, EQUIPMENT
AND LIVESTOCK 122,206,808 77,979,775
LESS: Accumulated Depreciation 2,858,439 1,570,024
TOTAL LAND, BUILDINGS, EQUIPMENT
AND LIVESTOCK - NET 119,348,369 76,409,751
LAND AND IMPROVEMENTS HELD FOR SALE - NET 6,719,327 0
OTHER ASSETS:
Deposits and Other Assets 340,507 392,531
Financing Costs - Net 4,667,415 0
Goodwill - Net 3,151,872 3,262,464
TOTAL OTHER ASSETS 8,159,794 3,654,995
TOTAL ASSETS $ 144,880,933 $ 97,469,045
</TABLE>
See Notes to Financial Statements.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, June 30,
1996 1995
CURRENT LIABILITIES:
<S> <C> <C> <C> <C>
Accounts Payable and Accrued Expenses $ 9,804,641 $ 6,656,061
Notes and Mortgages Payable -
Current Portion 3,214,100 1,341,399
State Income Taxes Payable 30,284 115,600
TOTAL CURRENT LIABILITIES 13,049,025 8,113,060
DEFERRED INCOME 1,499,449 1,550,451
LONG-TERM LIABILITIES:
Notes Payable - Long Term Portion 50,992,702 15,599,097
Deferred State Income Taxes Payable 21,652 0
TOTAL LONG-TERM LIABILITIES 51,014,354 15,599,097
COMMITMENTS AND CONTINGENCIES 0 0
SHAREHOLDERS' EQUITY:
Series A (Convertible) Preferred Stock
$100.00 Par Value, Authorized 500,000
Shares, Issued and Outstanding,
362,462 and 362,450 Shares, Respectively 36,246,175 36,244,975
Common Stock $2.00 Par Value, Authorized
25,000,000 Shares, Issued and
Outstanding 11,651,487 and 9,551,386
Shares, Respectively 23,302,973 19,102,771
Capital in Excess of Par 16,111,652 11,959,643
Retained Earnings (subsequent to
June 30, 1993, date of quasi-
reorganization, total deficit
eliminated $102,729,936) 3,829,336 4,899,048
TOTAL 79,490,136 72,206,437
LESS: Deferred Compensation 172,031 0
TOTAL SHAREHOLDERS' EQUITY 79,318,105 72,206,437
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 144,880,933 $ 97,469,045
</TABLE>
See Notes to Financial Statements.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
Years Ended June 30,
<CAPTION>
1996 1995 1994
REVENUES:
<S> <C> <C> <C>
Revenue from Operations $ 68,864,894 $ 55,744,950 $ 37,334,236
Investment Income 255,063 3,437,788 3,343,274
TOTAL REVENUES 69,119,957 59,182,738 40,677,510
EXPENSES:
Cost of Revenues 23,309,829 17,342,134 10,416,610
Operating Expenses 35,752,642 29,892,282 22,088,521
Depreciation & Amortization 1,543,841 965,026 544,344
General & Administrative Expenses 8,214,825 7,912,445 5,127,440
Interest Expense 1,140,665 556,799 0
TOTAL EXPENSES 69,961,802 56,668,686 38,176,915
(LOSS) INCOME FROM OPERATIONS
BEFORE TAXES (841,845) 2,514,052 2,500,595
Income Tax Expense 227,867 115,600 0
NET (LOSS) INCOME $ (1,069,712)$ 2,398,452 $ 2,500,595
NET (LOSS) INCOME PER SHARE $ (0.10)$ 0.25 $ 0.26
</TABLE>
The Company's purchase of Freehold Raceway in January, 1995 materially
affects the comparability of
the twelve month periods reflected in the above data.
See Notes to Financial Statements.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Preferred
Number of
Shares Amount
<S> <C> <C>
BALANCE - JUNE 30, 1993 441,664 $ 44,166,375
Shares Issued for Fractional Exchanges
With Respect to the One-for-Twenty
Reverse Stock Split effected on March 13, 1992 36 3,600
Exchange of Preferred Stock for Common Stock (79,257) (7,925,700)
Net Income for the Year Ended June 30, 1994 --- ---
BALANCE - JUNE 30, 1994 362,443 $ 36,244,275
Shares Issued for Fractional Exchanges
With Respect to the One-for-Twenty
Reverse Stock Split effected on March 13, 1992 7 700
Net Income for the Year Ended June 30, 1995 --- ---
BALANCE - JUNE 30, 1995 362,450 $ 36,244,975
Common Shares Issued - Reg S Offering --- ---
Shares Issued in Connection with Debt Financing --- ---
Deferred Compensation for Options Granted
to Employees --- ---
Financing Costs for Warrants in Connection
with Debt --- ---
Shares Issued for Fractional Exchanges
With Respect to the One-for-Twenty
Reverse Stock Split effected on March 13, 1992 12 1,200
Amortization of Deferred Compensation Costs --- ---
Net (Loss) for the Year Ended June 30, 1996 --- ---
BALANCE - JUNE 30, 1996 362,462 $ 36,246,175
</TABLE>
<TABLE>
<CAPTION>
Common
Number of
Shares Amount
<S> <C> <C>
BALANCE - JUNE 30, 1993 9,511,415 $ 19,022,830
Shares Issued for Fractional Exchanges
With Respect to the One-for-Twenty
Reverse Stock Split effected on March 13, 1992 211 422
Exchange of Preferred Stock for Common Stock 39,629 79,257
Net Income for the Year Ended June 30, 1994 --- ---
BALANCE - JUNE 30, 1994 9,551,255 $ 19,102,509
Shares Issued for Fractional Exchanges
With Respect to the One-for-Twenty
Reverse Stock Split effected on March 13, 1992 131 262
Net Income for the Year Ended June 30, 1995 --- ---
BALANCE - JUNE 30, 1995 9,551,386 $ 19,102,771
Common Shares Issued - Reg S Offering 1,900,000 3,800,000
Shares Issued in Connection with Debt Financing 200,000 400,000
Deferred Compensation for Options Granted
to Employees --- ---
Financing Costs for Warrants in Connection
with Debt --- ---
Shares Issued for Fractional Exchanges
With Respect to the One-for-Twenty
Reverse Stock Split effected on March 13, 1992 101 202
Amortization of Deferred Compensation Costs --- ---
Net (Loss) for the Year Ended June 30, 1996 --- ---
BALANCE - JUNE 30, 1996 11,651,487 $ 23,302,973
</TABLE>
<TABLE>
<CAPTION>
Capital Deferred
in Excess Compensation
of Par Cost
<S> <C> <C>
BALANCE - JUNE 30, 1993 $ 4,118,184 $ 0
Shares Issued for Fractional Exchanges
With Respect to the One-for-Twenty
Reverse Stock Split effected on March 13, 1992 (4,022) ---
Exchange of Preferred Stock for Common Stock 7,846,443 ---
Net Income for the Year Ended June 30, 1994 --- ---
BALANCE - JUNE 30, 1994 $ 11,960,605 $ 0
Shares Issued for Fractional Exchanges
With Respect to the One-for-Twenty
Reverse Stock Split effected on March 13, 1992 (962) ---
Net Income for the Year Ended June 30, 1995 --- ---
BALANCE - JUNE 30, 1995 $ 11,959,643 $ 0
Common Shares Issued - Reg S Offering 1,638,162 ---
Shares Issued in Connection with Debt Financing 400,000 ---
Deferred Compensation for Options Granted
to Employees 175,000 (175,000)
Financing Costs for Warrants in Connection
with Debt 1,940,250 ---
Shares Issued for Fractional Exchanges
With Respect to the One-for-Twenty
Reverse Stock Split effected on March 13, 1992 (1,402) ---
Amortization of Deferred Compensation Costs --- 2,969
Net (Loss) for the Year Ended June 30, 1996 --- ---
BALANCE - JUNE 30, 1996 $ 16,111,652 $ (172,031)
</TABLE>
<TABLE>
<CAPTION>
Retained
Earnings Total
<S> <C> <C>
BALANCE - JUNE 30, 1993 $ 0 $ 67,307,389
Shares Issued for Fractional Exchanges
With Respect to the One-for-Twenty
Reverse Stock Split effected on March 13, 1992 --- ---
Exchange of Preferred Stock for Common Stock --- ---
Net Income for the Year Ended June 30, 1994 2,500,596 2,500,596
BALANCE - JUNE 30, 1994 $ 2,500,596 $ 69,807,985
Shares Issued for Fractional Exchanges
With Respect to the One-for-Twenty
Reverse Stock Split effected on March 13, 1992 --- ---
Net Income for the Year Ended June 30, 1995 2,398,452 2,398,452
BALANCE - JUNE 30, 1995 $ 4,899,048 $ 72,206,437
Common Shares Issued - Reg S Offering --- 5,438,162
Shares Issued in Connection with Debt Financing --- 800,000
Deferred Compensation for Options Granted
to Employees --- 0
Financing Costs for Warrants in Connection
with Debt --- 1,940,250
Shares Issued for Fractional Exchanges
With Respect to the One-for-Twenty
Reverse Stock Split effected on March 13, 1992 --- ---
Amortization of Deferred Compensation Costs --- 2,969
Net (Loss) for the Year Ended June 30, 1996 (1,069,712) (1,069,712)
BALANCE - JUNE 30, 1996 $ 3,829,336 $ 79,318,105
</TABLE>
See Notes to Financial Statements.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Year Ended
June 30,
1996
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
NET (LOSS) INCOME $ (1,069,712)
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and Amortization 1,543,841
(Gain) Loss on Sale of Livestock and Fixed Assets (5,000)
Provision for Deferred Income Taxes 21,652
Changes in Assets and Liabilities -
(Increase) Decrease in Restricted Cash & Investments (820,127)
(Increase) Decrease in Accounts Receivable 262,851
(Increase) Decrease in Other Assets (213,861)
(Increase) Decrease in Prepaid Expenses (62,944)
Increase (Decrease) in Account Payable and Accrued Expenses 3,063,264
Increase (Decrease) in Deferred Income (51,002)
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,668,962
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Equipment and Livestock 5,000
Purchase of Freehold Racetrack - Net of Cash Received 0
Purchase of El Rancho Property (12,564,700)
Option to Purchase Additional Land in Las Vegas (470,000)
Purchase of Land at Freehold (400,000)
Casino Development Costs (5,469,045)
Capital Expenditures for Racetracks (1,594,384)
(Increase) Decrease in Other Investment Activity 52,024
NET CASH (USED) BY INVESTING ACTIVITIES (20,441,105)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of Common Stock 5,438,162
Proceeds from issuance of Long Term Notes 6,000,000
Proceeds from Line of Credit 6,597,794
Proceeds from Foothill Refinance of Sun Mortgage 14,000,000
Principal Payments on Acquired Debt - Freehold 0
Principal Payments on Short Term Notes (6,500,000)
Principal Payments on Sun Mortgage (14,000,000)
Principal Payments on Long Term Notes (1,348,751)
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 10,187,205
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (7,584,938)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 11,801,294
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,216,356
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest (Net of Interest Capitalized) $ 1,163,980
Income Taxes $ 291,531
</TABLE>
<TABLE>
<CAPTION>
Year Ended
June 30,
1995
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
NET (LOSS) INCOME $ 2,398,452
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and Amortization 965,026
(Gain) Loss on Sale of Livestock and Fixed Assets (113,338)
Provision for Deferred Income Taxes 0
Changes in Assets and Liabilities -
(Increase) Decrease in Restricted Cash & Investments (21,339)
(Increase) Decrease in Accounts Receivable 142,576
(Increase) Decrease in Other Assets (15,907)
(Increase) Decrease in Prepaid Expenses (138,661)
Increase (Decrease) in Account Payable and Accrued Expenses (1,488,291)
Increase (Decrease) in Deferred Income 831,068
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,559,585
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Equipment and Livestock 186,859
Purchase of Freehold Racetrack - Net of Cash Received (94,602)
Purchase of El Rancho Property 0
Option to Purchase Additional Land in Las Vegas 0
Purchase of Land at Freehold 0
Casino Development Costs 0
Capital Expenditures for Racetracks (1,090,904)
(Increase) Decrease in Other Investment Activity (187,188)
NET CASH (USED) BY INVESTING ACTIVITIES (1,185,835)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of Common Stock 0
Proceeds from issuance of Long Term Notes 0
Proceeds from Line of Credit 0
Proceeds from Foothill Refinance of Sun Mortgage 0
Principal Payments on Acquired Debt - Freehold (5,169,098)
Principal Payments on Short Term Notes 0
Principal Payments on Sun Mortgage 0
Principal Payments on Long Term Notes (479,449)
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (5,648,547)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,274,797)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 16,076,091
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,801,294
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest (Net of Interest Capitalized) $ 160,674
Income Taxes $ 0
</TABLE>
<TABLE>
<CAPTION>
Year Ended
June 30,
1994
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
NET (LOSS) INCOME $ 2,500,595
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and Amortization 544,344
(Gain) Loss on Sale of Livestock and Fixed Assets (174,056)
Provision for Deferred Income Taxes 0
Changes in Assets and Liabilities -
(Increase) Decrease in Restricted Cash & Investments (745,055)
(Increase) Decrease in Accounts Receivable (222,198)
(Increase) Decrease in Other Assets 113,017
(Increase) Decrease in Prepaid Expenses (211,835)
Increase (Decrease) in Account Payable and Accrued Expenses (837,528)
Increase (Decrease) in Deferred Income 304,642
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,271,926
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Equipment and Livestock 540,164
Purchase of Freehold Racetrack - Net of Cash Received 0
Purchase of El Rancho Property 0
Option to Purchase Additional Land in Las Vegas 0
Purchase of Land at Freehold 0
Casino Development Costs 0
Capital Expenditures for Racetracks (1,019,886)
(Increase) Decrease in Other Investment Activity (18,349)
NET CASH (USED) BY INVESTING ACTIVITIES (498,071)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of Common Stock 0
Proceeds from issuance of Long Term Notes 0
Proceeds from Line of Credit 0
Proceeds from Foothill Refinance of Sun Mortgage 0
Principal Payments on Acquired Debt - Freehold 0
Principal Payments on Short Term Notes 0
Principal Payments on Sun Mortgage 0
Principal Payments on Long Term Notes (35,418)
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (35,418)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 738,437
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 15,337,655
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 16,076,091
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest (Net of Interest Capitalized) $ 0
Income Taxes $ 0
</TABLE>
Supplemental Schedule of Non-Cash Investing and Financing Activities:
During the year ended June 30, 1996, Land and Improvements at a total
cost of $31,975,000 was financed through Short and Long Term Notes.
See Note 3 for details of acquisitions.
During the year ended June 30, 1996, the Company recorded an unrealized
loss of $160,000 on trading securities.
During the year ended June 30, 1996, the Company issued 200,000 shares
and 925,000 warrants in connection with financing.
See Notes to Financial Statements.
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Nature of Operations - International Thoroughbred Breeders, Inc. and
subsidiaries, collectively the Company, conducts live race meetings for
Thoroughbred and Harness (Standardbred) horses and participates in intrastate
and interstate simulcast wagering as a host track and as a receiving track in
Cherry Hill and Freehold, New Jersey. The Company's racetrack operations are
dependent upon continued governmental acceptance of racing as a form of
legalized gambling. The Company has to compete for gaming revenue not only
with other racetracks, but also with other forms of gaming activities, such
as, off-track betting parlors, telephone wagering, casino gambling (in
Atlantic City), slot machines at racetracks, and various state lotteries, both
from within the State of New Jersey and from neighboring states (Pennsylvania
and Delaware in particular). From time to time, legislation has been
introduced in New Jersey and neighboring states which would further expand
gambling opportunities and increase competition. Severe inclement weather,
which can affect the northeastern portion of the United States in the winter
months, can also adversely affect operations. The Company is required to
annually renew its racing permits with the New Jersey Racing Commission in
order to operate.
During fiscal 1996, the Company, under one of its subsidiaries, purchased
property for the purpose of commencing casino gaming upon the opening of a
proposed casino project in Las Vegas, Nevada.
(B) Principles of Consolidations - The accounts of all wholly owned
subsidiaries are included in the consolidated financial statements. All
material intercompany transactions have been eliminated.
(C) Classifications - Certain prior year amounts have been reclassified to
conform with the current year's presentation. The operating section of the
Statements of Cash Flows for the years ended June 30, 1995 and 1994 have been
reclassified from the direct to the indirect method to conform with the 1996
presentation.
(D) Allowance for Bad Debts - The Company recognizes bad debts on the
allowance method. Bad debt allowance at June 30, 1996 and 1995 was $20,000.
(E) Construction in Progress - Construction in progress includes
development costs in conjunction with the acquisition of the El Rancho Hotel
and Casino which the Company has capitalized. These costs include land and
building acquisitions costs, interest, legal, consulting and other
professional fees, other development and carrying costs in connection with the
future development casino project. Such costs totaling approximately
$48,700,000, include real property acquisition costs in the amount of
approximately $43,500,00 and capitalized interest of $751,592 for the year
ended June 30, 1996.
(F) Goodwill - Goodwill is the excess of the cost of acquired Freehold
Raceway net assets over their fair value and is being amortized over 30 years
under the straight line method. Accumulated amortization at June 30, 1996 was
$445,757.
Management of the Company evaluates the periods of goodwill amortization
to determine whether later events and circumstances warrant revised estimates
of useful lives. Management also evaluates whether the carrying
value of goodwill has become impaired. This evaluation is done by analyzing
the projected undiscounted cash flow from related operations.
(G) Financing Costs - Deferred financing costs includes costs of
$2,759,502 associated with the purchase of the El Rancho property and
$1,907,913 associated with warrants issued in connection with the purchase and
financing of the casino project, net of amortization of $46,771 and $32,338,
respectively, as of June 30, 1996. These costs of $4,667,415, net of
amortization of $79,109, are being expensed over the five year life of the
loan.
(H) Revenue Recognition - The Company recognizes the revenues associated
with horse racing at Garden State Park and Freehold Raceway as they are
earned. Costs and expenses associated with horse racing revenues are charged
against income in those periods in which the horse racing revenues are
recognized. Other costs and expenses, including advertising, are recognized
as they actually occur throughout the year. Deferred income primarily
consists of prepaid purse income.
(I) Deferred Income Taxes - Deferred income taxes reflect the tax
consequences on future years of differences between the tax bases of assets
and liabilities and their financial reporting amounts.
(J) Cash and Cash Equivalents - The Company considers all highly liquid
debt instruments purchased with a maturity of three months or less to be cash
equivalents.
(K) Concentrations of Credit Risk - As of June 30, 1996, financial
instruments which potentially subject the Company to concentrations of credit
risk are cash and cash equivalents and receivables arising primarily from
event planning customers whose credit is routinely evaluated. The Company
places its cash investments with high credit quality financial institutions
and currently invests primarily in U.S. government obligations that have
maturities of less than 3 months. The amount on deposit in any one
institution that exceeds federally insured limits is subject to credit risk.
At June 30, 1996, the Company had approximately $2,500,000 on deposit in 5
institutions with an average of $500,000 at each institution that was subject
to such risk. In addition, repurchase agreements of approximately $2,000,000
which are classified as restricted investments are not insured. The Company
does not require collateral for its financial instruments.
(2) USE OF ESTIMATES
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 dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
(3) ACQUISITIONS AND DISPOSITIONS
Fiscal 1996
The Company purchased the El Rancho Hotel and Casino property from an
unrelated party, Las Vegas Entertainment Network, Inc. ("LVEN"). The Company
plans to develop the site through Orion Casino Corporation, a newly formed
wholly owned Nevada subsidiary of International Thoroughbred Gaming
Development Corporation ("ITG"), a wholly owned subsidiary of the Company.
The acquisition of the twenty-one acre El Rancho property, which is located on
the Las Vegas strip, was for approximately $43.5 million in cash and notes,
plus contingent consideration of up to $160 million, which is dependent on
future "adjusted cash flows" as contractually defined. The Company has
recorded development costs of approximately $5,200,000 during this fiscal
year as construction in progress relating to developing the El Rancho
property. The El Rancho property is currently not in operation. It is
anticipated that these costs, excluding land, will be expensed (over the
estimated benefit period) upon the opening of a casino on the premises.
The purchase price of approximately $43.5 million consisted of
approximately $12.5 million paid in cash (exclusive of final adjustments) with
the balance financed by: 1) a $6.5 million unsecured mortgage note due and
paid with 8% interest; 2) assumption of a $14 million first mortgage note,
which was secured and paid by refinancing; and 3) a $10.5 million second
mortgage note at an 8% interest rate which is payable only to the extent that
certain contingent events occur.
The Company executed an agreement to purchase 15 acres of unimproved land
from a subsidiary of ITT Corporation with a non-refundable deposits of
$470,000 through June 30, 1996 and additional deposits totaling $1,880,000
through August 23, 1996. The land is located directly behind and contiguous
to the site of the El Rancho Hotel and Casino property which is being
developed through Orion Casino Corporation. The purchase of the property
allows expanded frontage, a larger project or room for future expansion and
increased parking.
On July 21, 1995, Freehold Raceway completed the purchase of a 4.659 acre
section of land, previously leased for parking space, from an unrelated party.
The purchase price was $975,000 with $400,000 plus accrued interest due and
paid in cash on January 2, 1996 and the balance financed by a three year
$575,000 note at an eight percent per annum rate.
Approximately $775,000 in equipment, furniture and fixtures was acquired
in connection with improvements and replacements necessary to maintain
operations at the Company's subsidiaries. In addition, $20,000 of capital was
used for the continuation of real estate development at the Garden State Park
racetrack and approximately $1,066,000 was used in connection with
improvements of racetrack property at Garden State Park and Freehold Raceway.
Fiscal 1995
In the fiscal year ended June 30, 1995, the Company completed the purchase
of all of the outstanding stock of Freehold Racing Association and Atlantic
City Harness, Inc., the operating companies of Freehold Raceway,
and CIRCA 1850, Inc., a small real estate holding company, from an unrelated
party. The purchase price of the stock was $17.8 million with approximately
$5.3 million paid in cash (exclusive of final adjustments) and the balance
financed by an eight year, $12.5 million note at eighty percent of the
prevailing prime rate, not to exceed six percent. The note is secured by a
mortgage on the land and buildings at Freehold Raceway and a pledge of
2,000,000 of ITB's shares of Common Stock from Robert E. Brennan, the
Company's former chairman. The transaction, completed on February 2, 1995,
was effective as of January 1, 1995. In fiscal 1996, the holder of the $12.5
million mortgage note released Robert E. Brennan's pledge of 2,000,000 shares
of ITB's Common Stock as security for the mortgage note.
(4) INVESTMENTS
Short term investments, classified as cash equivalents, consist of trading
securities, and interest bearing certificates of deposit and money market
accounts whose cost approximates fair value due to the short period to
maturity. Investment income consists of interest income and realized and
unrealized gains on trading securities. In computing the realized gain, cost
was determined under the specific identification method.
Short-term investments, classified as current assets on the balance sheet,
include the following captions:
<TABLE>
<CAPTION>
June 30 June 30
1996 1995
<S> <C> <C>
Trading $ 80,000 $ --
Available For Sale 3,067,074 7,633,483
Totals $ 3,147,074 $ 7,633,483
</TABLE>
Management determines the appropriate classification of its investments in
debt and equity securities at the time of purchase and reevaluates such
determination at each balance sheet date. Trading securities are securities
bought and held principally for the purpose of selling them in the near term
and are reported at fair value, with unrealized gains and losses included in
operations for the current year.
At June 30, 1996, the Company held approximately $2,970,000, which were
classified as restricted cash and investments. These funds are primarily
cash received from horsemen for nomination and entry fees to be applied to
upcoming racing meets, purse winnings held in trust for horsemen and unclaimed
ticketholder winnings, which are classified as current liabilities.
At June 30, 1996, the Company held trading securities with an aggregate
fair value of $80,000. Investment income for the year ended June 30, 1996
includes an unrealized loss of $160,000 on this security. The Company did
not have any trading securities at June 30, 1995 or 1994. Interest income for
the years ended June 30, 1996, 1995, and 1994 was $ 415,063, $633,304, and
$505,889, respectively. Realized gains resulting from the sale of trading
securities for 1996, 1995 and 1994 was $7,500, $2,804,484 and $2,837,385,
respectively.
(5) FIXED ASSETS AND LIVESTOCK
Land Held for Sale
In December 1995, Garden State Race Track, Inc. entered into an agreement
to sell a 56 acre tract at the Garden State Park which is presently unused for
racing purposes. The contract calls for a purchase price of $11,000,000 for
the property, subject to normal closing adjustments. The agreement provides
for a closing on or before December 15, 1996 (which date may be extended for a
six month period provided the purchaser pays a non-refundable sum of $100,000)
and is subject to standard real estate contingencies including the receipt of
all necessary governmental approvals to construct a retail shopping center of
approximately 300,000 square feet on the site. The Company has mortgage liens
or right of assignment on the property in the amount of $6,000,000 and a cost
basis of approximately $6,800,000. Upon the sale of the property, the
estimated closing costs are expected to be approximately $630,000, which
together with the carrying amount of $6,720,000 would result in an estimated
profit on the sale of approximately $3,600,000.
On June 30, 1993 the Company adjusted its balance sheet (including land)
to fair value in accordance with quasi-reorganization accounting principles.
Any future gains from the sale of property will be recorded through the
stockholder equity section of the Company's balance sheet and will be excluded
from the results of operations. Any gain from the sale will not increase the
earnings per share amounts in future years.
The following is a summary of the basis of land held for sale:
<TABLE>
<CAPTION>
June 30, 1996
<S> <C>
Land $ 5,700,000
Land Improvements
and development costs 1,074,803
Total $ 6,774,803
Less:
Accumulated Depreciation $ 55,476
Land held for sale - Net $ 6,719,327
</TABLE>
Land, Buildings, Equipment and Livestock
For the fiscal year ended June 30, 1996 livestock, equipment, land and
buildings were carried at their adjusted fair value in accordance with
accounting principals applicable to a quasi-reorganization of the Company's
assets which was completed in fiscal 1993. Depreciation is being computed over
the estimated remaining useful lives using the straight-line method.
(5) FIXED ASSETS AND LIVESTOCK (CONTINUED)
A summary of livestock, equipment, land and buildings and depreciation
recorded for the fiscal year ended June 30, 1996 and 1995, is as follows:
<TABLE>
<CAPTION>
Accumulated
June 30, 1996 Adjusted Depreciation Depreciation
Class Basis Charged June 30, 1996
<S> <C> <C> <C> <C> <C>
Land $ 40,432,500 $ N/A $ N/A
Construction in Progress (A) 48,736,200 N/A N/A
Building & Improvements (B) 28,661,219 972,472 2,139,792
Furniture, Fixtures,
Machinery & Equipment (C) 4,356,202 374,700 716,647
Broodmares
& Other Horses (D) 20,687 1,000 2,000
Totals $ 122,206,808 $ 1,348,172 $ 2,858,439
</TABLE>
<TABLE>
<CAPTION>
Accumulated
June 30, 1995 Adjusted Depreciation Depreciation
Class Basis Charged June 30, 1995
<S> <C> <C> <C> <C> <C> <C>
Land $ 45,605,000 $ N/A $ N/A
Building & Improvements (B) 28,691,090 685,154 1,222,800
Furniture, Fixtures,
Machinery & Equipment 3,666,168 220,709 346,224
Broodmares
& Other Horses (D) 17,517 1,000 1,000
Totals $ 77,979,775 $ 906,863 $ 1,570,024
</TABLE>
(A) Includes the costs associated with the purchase of the El Rancho
property on which no depreciation was taken.
(B) Includes property not yet placed in service costing $229,700
and $796,678 as of June 30, 1996 and 1995 on which no depreciation
was taken.
(C) Includes property not yet placed in service costing $75,600 as
of June 30, 1996 on which no depreciation was taken.
(D) Includes horses costing $10,687 and $7,521 as of June 30, 1996
and 1995 respectively, on which no depreciation was taken since the
horses were either not yet placed in breeding service or were being
held for resale.
The depreciable life of buildings & improvements is based on a 15 to
40 year life. Furniture, fixtures, machines and equipment is being
depreciated over a 5 to 15 year period and livestock is being depreciated
between 2 and 10 years.
(6) NOTES AND MORTGAGES PAYABLE
Notes and Mortgages Payable are summarized below:
<TABLE>
June 30, 1996
<CAPTION>
Interest % Current Long-Term
<S> <C> <C> <C>
ITB:
Foothill Mortgage (A) Prime plus 2.75%
(current rate 11%) $ 0 $ 14,000,000
LVEN Mortgage (D) 8% 0 10,500,000
Foothill Line of Credit (A) Prime plus 2.75%
(current rate 11%) 0 6,837,320
Notes-Insurance Contracts (C) Various 200,338 0
FREEHOLD RACEWAY:
Seller's Mortgage (F) 80% of Prime
(not to exceed 6%)
(current rate 6%) 625,000 11,250,000
Seller's Mortgage (G) 80% of Prime
(current rate 6.6%) 225,000 2,022,049
Marine Midland Note (H) Prime 1,445,000 0
Notes - Other (E) Various 191,667 383,333
GARDEN STATE PARK:
Mortgage Note Payable (B) 10% 0 3,000,000
Note Payable (B) 10% 0 3,000,000
Notes-Insurance Contracts (C) Various 527,095 0
Totals $ 3,214,100 $ 50,992,702
</TABLE>
<TABLE>
June 30, 1995
<CAPTION>
Interest % Current Long-Term
<S> <C> <C> <C>
ITB:
Foothill Mortgage (A) Prime plus 2.75%
(current rate 11%) $ 0 $ 0
LVEN Mortgage (D) 8% 0 0
Foothill Line of Credit (A) Prime plus 2.75%
(current rate 11%) 0 0
Notes-Insurance Contracts (C) Various 0 0
FREEHOLD RACEWAY:
Seller's Mortgage (F) 80% of Prime
(not to exceed 6%)
(current rate 6%) 625,000 11,875,000
Seller's Mortgage (G) 80% of Prime
(current rate 6.6%) 225,000 2,265,799
Marine Midland Note (H) Prime 480,000 1,445,000
Notes - Other (E) Various 11,399 13,298
GARDEN STATE PARK:
Mortgage Note Payable (B) 10% 0 0
Note Payable (B) 10% 0 0
Notes-Insurance Contracts (C) Various 0 0
Totals $ 1,341,399 $ 15,599,097
</TABLE>
Prime rate at June 30, 1996 was 8.25%
The weighted averaged interest rate on short-term borrowings outstanding
as of June 30, 1996 was 9.29%.
The Company had no short-term borrowings during fiscal 1995.
(A) On March 20, 1996, the Company and Foothill Capital Corporation of
Los Angeles, California, signed a Letter of Intent for a proposed borrowing of
$30,000,000. Closing on the financing contract took place on June 4, 1996.
The financing arrangement, secured by among other things, a mortgage on the El
Rancho property, Garden State Park and a second mortgage on Freehold Raceway
is for a $16,000,000 revolving credit line and a $14,000,000 Time Loan
Mortgage, used at settlement to pay off a note that was due on December 20,
1996. At June 30, 1996 the unused line of credit was approximately
$9,150,000. The maximum line of credit balance is restricted by $3,000,000
until such time that an approved settlement agreement has been reached
concerning the shares of Common Stock currently owned by Robert E. Brennan,
the Company's former chairman.
The revolving credit line requires the Company to make quarterly
principal payments of $400,000 beginning July 1, 1997. The loans mature in
five years. Interest on the outstanding balance will be paid monthly starting
July 1, 1996 at a rate of 2.75% above the current published prime lending rate
per annum. The Time Loan Mortgage requires that the Company make equal monthly
principal payments of $250,000 plus interest beginning July 1, 1997. Interest
on the outstanding balance was paid monthly starting July 1, 1996 at a rate of
2.75% above the current published prime lending rate per annum.
The Company is required to maintain not more than one to one ratio of
total liabilities to tangible net worth with a minimun tangible net worth of
$70,000,000. In the event of default of the terms of the agreement, the
amounts due would be payable in full at that time and the Company would be
required to pay a 2% premium of $600,000 calculated on the maximum amount of
the financing. The financing agreement also provides for the lender to
receive 200,000 shares of the Company's common stock, a monthly service fee
of $5,000, a .5% monthly fee on the unused portion of the line of credit, and
an annual facility fee of $300,000.
The total principal balance of the Revolving Credit Line and the Time
Loan Mortgage as of June 30, 1996 was $20,837,320. Interest of $164,334
associated with the Foothill mortgage and revolving line of credit was
capitalized and will be expensed (over the estimated benefit period) upon the
opening of a casino in the El rancho property. Interest expense on this
obligation for the year ended June 30, 1996 was $28,356.
(B) In March 1996, the Company received financing of $6,000,000 from two
foreign banks (which was used in part to pay the $6.5 million mortgage note
due to LVEN) by issuing two $3,000,000 notes. The notes bear interest at 10%
per annum, payable yearly with principal due in March 1998. The Company has
accrued $150,000 in fees in connection with the $6 million loan pending
receipt of documentation. A $3,000,000 note is guaranteed by a first mortgage
on the land and buildings at Garden State Park. The foreign entity has not
exercised a right to perfect a mortgage on the Garden State property on the
other $3,000,000 loan. In connection with the payments on these notes, the
Company issued warrants exercisable to purchase 200,000 shares of the
Company's Common Stock, at an exercise price of $5.00 per share to each
foreign note holder. The Company recorded deferred financing cost of
$1,940,250 for these warrants.
(C) At various dates throughout the fiscal year, the Company financed
its payments on insurance policies in the amount of $1,236,400 at interest
rates ranging from 9.1% to10.4%. Monthly payments are made over a period of
nine months. At June 30, 1996, $727,433 was still outstanding and classified
a current debt.
(D) On January 14, 1996, in connection with the Company's purchase of
the El Rancho Hotel and Casino property, the Company financed a $10.5 million
second mortgage note at 8% interest, which is payable only to the extent that
certain contingent events occur. At June 30, 1996, this amount was classified
as long-term debt.
(E) On July 21, 1995, Freehold Raceway completed the purchase of a
4.659 acre section of land, previously leased for parking space, from an
unrelated party. The purchase price was $975,000 with $400,000 plus accrued
interest due and paid in cash on January 2, 1996 and the balance financed by a
three year $575,000 note at an eight percent per annum rate. The note,
secured by a purchase money mortgage on the land, is payable in three yearly
principal installments of $191,666 plus accrued interest commencing July 31,
1996. At June 30, 1996, $191,667 of the principal balance was classified as
short term and $383,333 was classified as long term. The Company recognized
interest expense of $49,320 associated with this note. At June 30, 1995, the
balance due was a note payable for an auto that was traded in for another auto
during fiscal 1996. The money received on the trade in was used to pay down
the balance of the note outstanding.
(F) On February 2, 1995, the Company entered into an agreement with the
former owner of Freehold Raceway whereby the $12.5 million balance of the
purchase price of the Freehold Raceway was financed by an eight year
promissory note at 80% of the prevailing prime rate, not to exceed 6%. Yearly
principal and interest payments during the first five (5) years commencing
January 1, 1996 is based upon a twenty (20) year principal amortization
schedule. During each of the next three (3) years, commencing January 1,
2001, yearly principal and interest payments shall be based upon a ten (10)
year amortization schedule. On January 1, 2003, the entire unpaid principal
balance, together with any accrued interest becomes due and payable. The note
is secured by a mortgage on the land and buildings at Freehold Raceway, with a
net book value of $23,453,660 at June 30, 1996. At June 30, 1996, $625,000 of
the principal balance was classified as short term and $11,250,000 was
classified as long term. Interest expense recognized on this note at June 30,
1996 was $734,375.
(G) On February 2, 1995, the Company and the seller of Freehold Raceway
each advanced to Freehold Raceway $2,584,549 to retire the $5.2 million
existing debt on Freehold Raceway. The seller and ITB received from Freehold
Raceway in fiscal 1995, promissory notes evidencing the indebtedness secured
by mortgages on the racetrack property and other collateral. Equal monthly
principal installments of $18,750 beginning on February 1, 1995 shall be paid
to the seller together with accrued interest. Interest shall be calculated at
80% of the prime rate at January 1 of each year. The note is secured by a
mortgage on the land and buildings at Freehold Raceway. At June 30, 1996,
$225,000 of the principal balance was classified as short term and $2,022,049
was classified as long term. The Company recognized interest expense of
$165,093 in connection with this debt at June 30, 1996.
(H) On August 24, 1994, Freehold Raceway renewed a two (2) year note
payable to Marine Midland Bank in the amount of $2,345,000. Twenty-three
principal payments of $40,000 are to be paid monthly together with interest
calculated at the prime rate computed on the basis of a 360 day year for the
actual number of days elapsed. On August 20, 1996 the unpaid principal
balance was paid. At June 30, 1996, $1,445,000 of the principal balance was
classified as short term. The Company recognized $147,572 of interest expense
on this note at June 30, 1996.
Annual maturities of the Company's consolidated long-term debt as of
June 30, 1996 are as follows:
To June 30, 1998 $11,641,667
To June 30, 1999 5,641,666
To June 30, 2000 5,450,000
To June 30, 2001 7,762,500
To June 30, 2002 1,599,820
Future Payments 18,897,049
Total $50,992,702
Total interest incurred on all debt obligations for the year ended June 30,
1996 was $1,892,257, which includes capitalized interest of $751,592.
(7) INCOME TAX EXPENSE
Effective July 1, 1993, the Company adopted the provisions of Statement
of Financial Standards (SFAS) No. 109, Accounting for Income Taxes. This
Statement requires that deferred income taxes reflect the tax consequences
on future years of differences between the tax bases of assets and liabilities
and their financial reporting amounts. The
effect of adoption of this Statement on current and prior financial statements
is immaterial.
When the Company incurs income taxes in the future, any future income
tax benefits resulting from the utilization of net operating losses and other
carryforwards existing at June 30, 1993 to the extent resulting from a quasi-
reorganization of the Company's assets effective June 30, 1993, will be
excluded from the results of operations and credited to paid in capital.
Freehold Raceway incurred a state income tax liability for the year
ended June 30, 1996 and does not have the benefit of any state income tax loss
carryforwards to offset this liability. A provision of $227,867 was made for
this liability.
A reconciliation of income tax expense at the Federal statutory rate to
income tax expense at the Company's effective rate is as follows:
<TABLE>
Years ended June 30, 1996
1996 1995 1994
<CAPTION>
<S> <C> <C> <C>
Income Taxes at the
Federal Statutory Rate $ -0- $ 815,473 $ 850,202
Utilization of Tax
Depreciation -0- (815,473) (850,202)
State Income Tax -Net
of Federal Tax Benefit 227,867 115,600 -0-
Provisions for Income
Taxes $ 227,867 $ 115,600 $ -0-
</TABLE>
At June 30, 1993, the Company went through a quasi-reorganization in
conformity with generally accepted accounting principles. The effect of the
quasi-reorganization was to decrease asset values for financial reporting, but
not for Federal income tax purposes. Accordingly, depreciation expense for
Federal income tax purposes continues to be based on amounts that do not
reflect the accounting quasi-reorganization.
The Company has a net operating loss carryforward of approximately
$171,800,000 at June 30, 1996 expiring in the years after June 30, 2001
through June 30, 2010. SFAS No. 109 requires the establishment of a deferred
tax asset for all deductible temporary differences and operating loss carry
forwards. Because of the uncertainty that the Company will generate income in
the future sufficient to fully or partially utilize these carry forwards,
however, any deferred tax asset of approximately $52,000,000 is offset by an
allowance of the same amount pursuant to SFAS No. 109. Accordingly, no
deferred tax asset is reflected in these financial statements.
Certain amounts of the net operating loss carryforward may be limited
due to possible changes in the Company's stock ownership. Currently Robert E.
Brennan and his family trusts own in the aggregate 3,994,747 shares, or 31.2%
of the total outstanding shares. Should Mr. Brennan dispose of all of his
shares and the family trust dispose of a portion of the shares it owns before
March 20, 1998, the Company's net operating loss carryforwards could be
limited based upon the value of the corporation at that time and the federal
long term tax exempt rate. How much, if any, such limitation would result in
the loss of NOL carryforwards would depend on the value of the Company at that
time.
As a result of the decision against Mr. Brennan in his case before Judge
Owen of the U.S. District Court for the Southern District of NewYork, the
Division of Gaming Enforcement and Mr. Brennan have entered into a settlement
of its complaints against the Company and Mr. Brennan which calls for Mr.
Brennan to place his approximately 2,900,000 shares of common stock into an
irrevocable disposition trust which would provide for the liquidation of all
his shares. The agreement will require that the liquidating trustee dispose
of the shares no later than October 19, 1997 in the absence of the occurrence
of certain events. This settlement requires approval by the New Jersey
Casino Control Commission which has scheduled a hearing for October 23, 1996.
If Mr. Brennan were forced to sell his shares and if the Brennan trusts
disposed of a portion of the shares they own, the Company has been advised
that the NOL could be affected. (The Company has been informed that the
family trust is not within the control of Mr. Brennan.)
In addition, the sale of common stock by the Company to raise additional
operating funds, if necessary, could be limited, depending on the outcome of
the events mentioned above. Should the Company exceed certain limitations
when issuing stock the Company's NOL carryforwards could also be restricted as
described above. The grant and/or exercise of stock options by others would
also impact the number of shares which could be sold by the Company, by Mr.
Brennan or by the family trust without affecting the net operating
carryforwards.
The following summarizes the operating tax loss carry forwards by year of
expiration.
<TABLE>
<CAPTION>
EXPIRATION DATE OF
Amount TAX LOSS CARRYFORWARD
<C> <C>
$ 47,776,318 7/1/2002
$ 26,421,817 7/1/2003
$ 19,899,773 7/1/2004
$ 15,617,154 7/1/2005
$ 11,781,307 7/1/2006
$ 50,333,941 7/1/2007
through 7/1/2010
$ 171,830,310 Total
</TABLE>
(8) COMMITMENTS AND CONTINGENCIES
The Company's wholly owned subsidiary, ITG, is responsible for
implementing the development of casino gaming business opportunities. In
January 1996, the Company purchased the El Rancho Hotel and Casino property
from an unrelated party, LVEN. The Company plans to develop the site through
Orion Casino Corporation, a newly formed wholly owned Nevada subsidiary of
ITG. The acquisition of the twenty-one acre El Rancho property, located on
the Las Vegas strip, was purchased for $43.5 million in cash and notes, plus
contingent consideration of up to $160 million (but not as a part of the
purchase price), which is dependent on future "adjusted cash flows" as
contractually defined, to LVEN for the development of the property by Orion.
The purchase price of $43,500,000 consisted of approximately $12.5 million
paid in cash (exclusive of final adjustments) with the balance financed by:
1) a $6.5 million unsecured mortgage note due and paid during the quarter at
an 8% interest rate; 2) assumption of a $14 million first mortgage note,
which was due December 20, 1996 and refinanced on June 4, 1996, secured by the
land and building at a 13% interest rate (the Company and LVEN were each
responsible for one-half of the 13% interest payments due on July 25, 1996 and
December 20, 1996); and 3) a $10.5 million second mortgage note, at an 8%
interest rate, which is payable only to the extent that certain contingent
events occur. The purchase agreement for the El Rancho property provides that
if, by October 25, 1996, the Company has not arranged for the necessary
commitments to develop the "Starship Orion" project or a more modest project
by the same date, and if the seller, Las Vegas Entertainment Network, Inc.
("LVEN") (i) arranges for the Refinance Loan (as defined therein), and (ii)
pays all associated costs and deposits into an escrow account up to one year's
interest on the refinanced or replaced Refinance Loan and up to one year's
carrying costs for El Rancho, then LVEN may have the non-exclusive right for
up to one year (the "Option Period") to appoint (during the last quarter of
the Option Period) an authorized licensed commercial real estate broker to
arrange for the sale of the property or obtain a minimum of $55 million in
financing to develop the property. During the Option Period, the Company
continues to have the right to arrange for the financing to develop the El
Rancho property. If such financing is arranged, LVEN's rights (if any) with
respect to arranging for the appointment of an authorized licensed commercial
real estate broker or refinancing would terminate, as would any requirement to
obtain LVEN's consent before the sale by the Company of the site.
The Company is committed to carrying costs of the El Rancho property of
approximately $4,800,000 per year for interest, bank loan fees, real estate
taxes, security, maintenance and other related costs. Development costs for
legal, professional and consulting costs incurred for a prospective gaming
project on the El Rancho property are estimated to be approximately $3,000,000
during the next fiscal year. These costs will increase substantially if the
Company is successful in obtaining financing or the partners it is seeking in
order to complete the project. In addition to those costs, the Company made
non-refundable deposits of $470,000 during the fiscal year and $1,880,000
during the first quarter of fiscal 1997 for a parcel of land associated with
the gaming development project. The Company is seeking additional financing
in order to finalize the purchase. If the Company fails to secure adequate
financing by a settlement date of November 29, 1996, the payments made through
August 23, 1996 of $2,350,000 would be forfeited. No assurance can be given
that the financing can be obtained or if it is obtained, will be prior to the
required closing date.
In December 1995, Garden State Race Track, Inc. entered into an
agreement with an unaffiliated party, The Four B's of Vineland, New Jersey, to
sell a 56 acre parking lot tract at the Garden State Park which is presently
unused for racing purposes. This property has previously been the subject of
a development agreement between the Company and Gale and Wentworth of Florham
Park, New Jersey. The contract calls for a purchase price of $11 million for
the property, subject to normal closing adjustments. The agreement provides
for a closing on or before December 15, 1996 (which date may be extended for a
six month period) is subject to standard real estate contingencies including
the receipt of all necessary governmental approvals to construct a retail
shopping center of approximately 300,000 square feet on the site, also
providing the purchaser a period of time to evaluate the feasibility of the
project.
On November 2, 1995, Robert E. Brennan resigned as Chairman of the Board
and Chief Executive Officer of the Company. Mr. Brennan resigned these
positions at the urging of the Company's Board of Directors based on actions
taken by New Jersey regulatory authorities which oversee the casino and horse
racing industries in the state. The New Jersey Division of Gaming Enforcement
("Division") filed a complaint with the New Jersey Casino Control Commission
("Commission") seeking to prohibit the Company's two racetracks, Garden State
Park ("Garden State") and Freehold Raceway ("Freehold") from conducting
industry business with any casino licensees. Garden State and
Freehold currently receive revenues from parimutuel wagering on races,
including their own, simulcast to certain of the Atlantic City casinos. The
Division based its complaint on the fact that Mr. Brennan, who is also a
principal shareholder of the Company, had been found in a June 1995 decision
by Judge Richard Owen of the United States District Court for the Southern
District of New York in a civil action to be "liable for violating federal
securities laws in the years 1982 to 1985." None of the alleged securities
law violations involved the Company, its securities, or its operations. The
Division claims that Mr. Brennan's participation in the Company's racetrack
subsidiaries "would be inimical to the policies of the Casino Control Act" and
according to the Division, this would disqualify him and the Company's two New
Jersey racetracks from continued licensure with the Commission. Mr. Brennan
has denied committing any violations of the federal securities laws and is
currently appealing Judge Owen's decision.
The Division subsequently indicated a willingness to seek to resolve the
complaint provided that Mr. Brennan resign as Chairman of the Board, a
director of the Company and as an officer of any of the Company's subsidiaries
and provided further that Mr. Brennan enter into an agreement which would
place his approximately 2,900,000 shares of the Company's common stock into an
irrevocable dispositive trust, which would provide for the liquidation of all
his shares. At the signing, stock certificates representing all of Mr.
Brennan's shares will be delivered, together with duly executed stock powers,
to a liquidating trustee with the approval of the New Jersey Casino Control
Commission and the bankruptcy court overseeing Mr. Brennan's personal Chapter
11 bankruptcy proceeding. The liquidating trustee will hold the shares in
escrow and will vote the shares in the same proportion as the other
stockholders of the Company. The agreement will require that the liquidating
trustee dispose of the shares no later than October 19, 1997 in the absence of
the occurrence of certain events. The Company, Mr. Brennan and the Division
entered into a settlement agreement on May 31, 1996 and is subject to the
approval of the Commission.
The Company was also advised by the New Jersey Racing Commission, which
annually grants permits for the conduct of parimutuel racing at Garden State
and Freehold, that the Racing Commission is considering the issuance of a
Notice of Intention to suspend or revoke the permits held by Garden State and
Freehold based on Judge Owen's decision. At a subsequent meeting, a
representative of the Racing Commission indicated that the previously
described settlement to be considered by the Commission regarding Mr. Brennan
would be presented to the Racing Commission for its consideration. The Racing
Commission has been apprised of the settlement to be considered by the
Commission and has stated that it will consider it as a resolution of its
concerns. Management believes a settlement will be reached which is
beneficial to the continuation of racing at Garden State Park and Freehold
Raceway.
In the Company's quarterly report (10-Q) dated March 31, 1996, it
reported that the Company's Board of Directors approved the purchase of an
option to acquire all 2,904,016 shares of the Company's Common Stock owned by
its former chairman, Robert E. Brennan. The Company does not anticipate the
purchase of any of Mr. Brennan's stock.
On March 20, 1996, the Company and Foothill Capital Corporation of Los
Angeles, California, signed a Letter of Intent for a proposed borrowing of
$30,000,000. Closing on the financing contract took place on June 4, 1996.
The financing arrangement, secured by among other things, a mortgage on the El
Rancho property, Garden State Park and a second mortgage on Freehold Raceway
is for a $16,000,000 revolving credit line and a $14,000,000 Time Loan
Mortgage, used at settlement to pay off the note referred above due on
December 20, 1996. The maximum line of credit balance is restricted by
$3,000,000 until such time that an approved settlement agreement has been
reached concerning the shares of Common Stock currently owned by Robert E.
Brennan, the Company's former chairman. The revolving credit line requires
that the Company make quarterly principal payments of $400,000 beginning July
1, 1997. Interest on the outstanding balance will be paid monthly starting
July 1, 1996 at a rate of 2.75% above the current published prime lending rate
per annum. The Time Loan Mortgage requires that the Company make equal
monthly principal payments of $250,000 plus interest beginning July 1, 1997.
Interest on the outstanding balance will be paid monthly starting July 1, 1996
at a rate of 2.75% above the current published prime lending rate per annum.
In connection with the purchase of the El Rancho project, and once the
project has been developed, completed and opened, LVEN, the seller of the
property, will retain the exclusive right to manage all aspects of Orion's
entertainment activities subject to meeting certain profitability criteria.
This would include; (i) responsibility for management and oversight of booking
all acts, performers, entertainers, movies, virtual reality rides and other
non-gaming attractions of any kind or nature at the property site, (ii)
arranging all advertising for all of Orion's advertising needs, and (iii)
managing all other entertainment venues for Orion. The term of the agreement
is for ten (10) years commencing on the date which is six (6) months prior to
the projected opening date of the property, and LVEN shall have the option to
renew the agreement for two (2) consecutive five year terms. The agreement
provides LVEN with an annual fee of $800,000 subject to annual increases.
LVEN will also receive an additional; (i) twenty-five percent (25%) of profits
from entertainment activities, (ii) ten percent (10%) of the cost of all
advertising placed by Orion, and (iii) booking fee equal to ten percent (10%)
of gross compensation paid to talent.
In February, 1996 the Company announced that it intended to develop the
El Rancho property under a "Starship Orion" theme. It was estimated that the
total cost of completion would be approximately $1 billion dollars and that
the Company intended to develop the property with up to as many as six
partners. To date the Company has not engaged any partners for its "Starship
Orion" theme development. The Company engaged certain professional, legal,
architectural and consulting services in connection with its development.
Costs capitalized of $53,403,615 as of June 30, 1996 are required costs for
any casino development project.
The Company has lease contracts for various equipment and maintenance
contracts at Garden State Park and Freehold Raceway. The majority of these
contracts are based upon the daily average of the pari-mutuel wagers accepted
during the Company's racing meets with a minimum per day. The minimum rental
payments for the next five years are based on 130 and 208 annual racing dates
at Garden State Park and Freehold Raceway, respectively. On July 1, 1995, the
Company executed an agreement to lease office space under its subsidiary, Olde
English Management, Inc. The two year lease provides for a monthly rent of
$18,168 beginning August, 1995. Rent expense, including racetrack operating
leases, for June 30, 1996, 1995 and 1994 was $2,201,346, $1,402,758 and
$996,820, respectively.
At June 30, 1996, the Company has eight (8) employees that are covered
by 2, 3 and 5 year employment contracts that are renewable at the option of
the Company.
(8) COMMITMENTS AND CONTINGENCIES (CONTINUED)
The following summarizes the commitments on contracts entered into
as of June 30, 1996 (See Notes 19 & 20 for additional commitments):
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended
June 30, June 30, June 30, June 30,
1997 1998 1999 2000
<S> <C> <C> <C> <C>
Employee Contracts $ 1,325,000 $ 825,500 $ 462,500 $ 200,000
Consultant Contracts 225,000 84,000 0 0
Operating Leases 2,363,669 1,876,138 1,503,048 993,048
Casino Commitments 166,568 16,568 16,568 16,568
Total Contracts
& Commitments $ 4,080,237 $ 2,802,206 $ 1,982,116 $ 1,209,616
</TABLE>
<TABLE>
<CAPTION>
Year Ended
June 30, All
2001 Future Total
<S> <C> <C> <C>
Employee Contracts $ 100,000 $ 0 $ 2,913,000
Consultant Contracts 0 0 309,000
Operating Leases 322,639 57,000 7,115,542
Casino Commitments 16,568 240,023 472,863
Total Contracts
& Commitments $ 439,207 $ 297,023 $ 10,810,405
Garden State has granted the exclusive right to operate all food and
retail services and to sell or rent all food products and merchandise sold or
rented at the racetrack facility to Service America Corporation, an
unaffiliated third party experienced in the business. The term of the
agreement is for the 15 year period commencing on opening day of the
racetrack. Service America agreed to invest $7,000,000 in the concession
premises at the racetrack facility. As of June 30, 1996, the Company is
contingently liable for approximately $1,866,000 if this agreement were to be
terminated under certain circumstances.
Racing dates at Garden State Park and Freehold Raceway are awarded each
year at the discretion of the State Racing Commission.
In June 1996, Francis W. Murray resigned his positions as president of
ITG and Orion Casino Corporation. The Company is in the process of negotiating
a severance package with Mr. Murray. An agreement acceptable to both parties
has not been reached.
The Company is a defendant in various lawsuits incident to the ordinary
course of business. It is not possible to determine with any precision the
probable outcome or the amount of liability, if any, under these lawsuits:
however, in the opinion of the Company and its counsel, the disposition of
these lawsuits will not have a material adverse effect on the Company's
financial position, results of operations, or cash flows.
(9) QUARTERLY FINANCIAL DATA (UNAUDITED)
The following quarterly financial data is unaudited, but in the opinion of
management includes all necesary adjustments for a fair presentation of the
interim results.
</TABLE>
<TABLE>
<CAPTION>
4th 3rd 2nd 1st
Quarter Quarter Quarter Quarter
Fiscal 1996 Fiscal 1996 Fiscal 1996 Fiscal 1996
<S> <C> <C> <C> <C>
Revenues $ 16,848,835 $ 17,867,272 $ 20,586,034 $ 13,562,753
Gross Profits
(Approximate) 11,444,979 11,169,416 13,056,726 9,883,944
Net Profit\(Loss) (775,180) (1,151,532) 1,007,416 (150,416)
Net Profit\(Loss)
Per Share $ (0.08) $ (0.10) $ 0.10 $ (0.02)
</TABLE>
<TABLE>
<CAPTION>
4th 3rd 2nd 1st
Quarter Quarter Quarter Quarter
Fiscal 1995 Fiscal 1995 Fiscal 1995 Fiscal 1995
<S> <C> <C> <C> <C>
Revenues $ 16,606,532 $ 21,527,590 $ 10,516,821 $ 7,094,007
Gross Profits
(Approximate) 11,318,717 13,986,608 7,281,861 5,815,630
Net Profit\(Loss) 1,276,215 717,760 357,866 46,610
Net Profit\(Loss)
Per Share $ 0.13 $ 0.08 $ 0.04 $ 0.00
</TABLE>
(10) FAIR VALUE OF FINANCIAL INTRUMENTS
Estimated fair values of the Company's financial instruments
are as follows:
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1996
Carrying Amount Fair Value
ASSETS:
<S> <C> <C> <C> <C>
Cash and Cash
Equivalents $ 4,136,356 $ 4,136,356
Trading Securities 80,000 80,000
Restricted Cash
and Investments 2,971,538 2,971,538
Non-Trade Accounts
Receivable and Loans 329,552 329,552
LIABILITIES:
Short-Term Debt 3,214,100 3,214,100
Long-Term Debt 50,992,702 47,987,091
</TABLE>
<TABLE>
<CAPTION>
June 30, 1995 June 30, 1995
Carrying Amount Fair Value
ASSETS:
<S> <C> <C> <C> <C>
Cash and Cash
Equivalents $ 11,801,294 $ 11,801,294
Trading Securities 0 0
Restricted Cash
and Investments 2,151,411 2,151,411
Non-Trade Accounts
Receivable and Loans 130,000 130,000
LIABILITIES:
Short-Term Debt 1,341,399 1,341,399
Long-Term Debt 15,599,097 12,709,494
</TABLE>
In assessing the fair value of financial instruments, the Company has
used a variety of methods and assumptions, which were based on estimates of
market conditions and loan risks existing at that time. For certain
instruments, including cash and cash equivalents, restricted cash and
investments, non-trade accounts receivable and loans, and short-term debt, it
was estimated that the carrying amount approximated fair value for the
majority of these instruments because of their short maturity. Quoted market
prices for the same instrument were used for trading securities. Estimated
discounted value of future cash flows, has been used to determine fair value
for long term debt. These values merely represent a general approximation of
possible value and may never actually be realized.
(11) PENSION PLANS
The Company has a deferred compensation plan pursuant to section 401(k)
of the Internal Revenue code for all its non-union full time employees, who
have completed one year of service. The Company's basic contribution under the
plan is 4% of each covered employee's compensation for such calendar year. In
addition, the Company contributes up to an additional 50% of the first 4% of
compensation contributed by any covered employee to the plan (an employee's
maximum contribution is $9,500 factored for inflation annually). The
Company's expense totaled $229,187, $194,949 and $126,159 for the fiscal years
ending June 30, 1996, 1995 and 1994, respectively. All 401K contributions are
funded currently.
For collectively bargained, multi-employer pension plans, contributions
are made in accordance with negotiated labor contracts and generally are based
on the number of hours worked. With the passage of the Multi-Employer Pension
Plan Amendments Act of 1980 (the "Act"), the Company may, under certain
circumstances become subject to liabilities in excess of contributions made
under collective bargaining agreements. Generally, these liabilities are
contingent upon the termination, withdrawal, or partial withdrawal from the
plans. The Company has not taken action to terminate or partially withdraw
from these plans which would result in any material liability. Under the Act,
liabilities would be based upon the Company's proportional share of each
plan's unfunded vested benefits which have been estimated by the trustees to
be approximately $380,000. The Company has not established any liabilities
because such withdrawal from these plans is not anticipated. Total
contributions charged to expense under all collectively bargained, multi-
employer pension plans were $1,070,549, $840,397, and $617,499, in fiscal
1996, 1995, and 1994, respectively. The Company had approximately 74% of its
labor force covered by collective bargaining agreements at June 30, 1996; 13%
of its labor force is covered by collective bargaining agreements that will
expire during fiscal 1997.
(12) STOCK OPTIONS AND WARRANTS
(A) EMPLOYEE AND DIRECTORS STOCK OPTIONS
On June 2, 1994, the Board of Directors approved the adoption of an
employee stock option plan. A block of 475,000 shares of common stock is
reserved for options to be granted under the plan. These options are non-
transferable and are only exercisable by the holder while he is employed by
the Company or a subsidiary of the Company. Under this plan, the Company
granted 325,000 options during fiscal 1995 and at June 30, 1995, all of these
options were outstanding. Also, during fiscal 1996, the Company granted an
additional 950,000 options to certain employees and directors. At June 30,
1996, total options outstanding were 1,275,000.
The Company accounts for these stock-based compensation awards to
employees and directors under the intrinsic value method in accordance with
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees." The excess of the current market value for the stock at the date
of grant over the option price has been accounted for as deferred compensation
and is being expensed over their respective exercise period, five and ten
years.
Total compensation cost recognized against income for these stock-based
employee compensation awards was $2,969 and $-0- for the years ended June 30,
1996 and 1995, respectively.
(B) NON-EMPLOYEE WARRANTS
At June 30, 1996 and 1995, the Company had 925,000 and -0-,
respectively, warrants outstanding for non-employees that were granted in
connection with the financing of the El Rancho property. Since these warrants
were issued after December 15, 1995, the Company accounts for these non-
employee warrants using a fair value methodology in accordance with Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation." The fair value of each warrant granted was estimated on the
date of grant using the Black-Scholes option-pricing model with the following
assumptions: a weighted average risk-free interest rate of 6.3%, a weighted
average expected life of 5 years based on Company expectations, and a weighted
average expected volatility of 56.29%. Dividends are not expected to be
available to shareholders during the expected life of the warrants.
The fair value of these warrants issued in June of 1996, $1,940,250, has
been accounted for as deferred financing costs for the year ended June 30,
1996 and is being expensed over the term of the financing, 5 years. Total
amortization expense recognized against income for these deferred financing
costs was $32,338 and $-0-, respectively for the years ended June 30, 1996 and
1995.
As of each fiscal year end, outstanding warrants and stock options were
as follows:
<TABLE>
<CAPTION>
June 30, June 30, June 30, June 30,
1996 1996 1995 1995
Related Related
Expiration Per Share Parties Others Parties Others
Date Price$ (000's) (000's) (000's) (000's)
<S> <C> <C> <C> <C> <C>
Term of
Employment(1) 5.875 325 -0- 325 -0-
3/14/01 (2) 5.00 -0- 400 -0- -0-
6/4/01 (3) 5.00 -0- 250 -0- -0-
1/24/06 (4) 4.00 325 -0- -0- -0-
4/23/06 (5) 4.00 275 -0- -0- -0-
4/23/06 (6) 4.625 225 -0- -0- -0-
5/14/06 (7) 4.00 400 -0- -0- -0-
Totals 1,550 650 325 -0-
</TABLE>
(1) For a five year period between 12/20/94 to 12/20/99 for (4) employees,
if employed.
(2) Issued to two foreign banks in connection with two $3 million notes.
(3) Issued to Standard Capital in connection with the Foothill financing
agreement.
(4) 25,000 options each issued to three directors, namely Mr. Bodman, Mr.
Dees, and Mr. Quigley and two former directors namely, Mr. Fisher and
Mr. Fitzpatrick and 200,000 options issued to Mr. Winkler, a director
and officer of the Company.
(5) 275,000 options issued to George E. Norcross III or his designee as a
fee in connection with the El Rancho property.
(6) Issued 75,000 options each to three directors namely, Mr. Quigley (also
an officer), Mr. Bodman and Mr. Dees.
(7) Issued 100,000 options each to two directors namely, Mr. Peloquin and
Mr. Goldman and 200,000 options to Mr. Joel Sterns, the Company's
chairman.
(13) DIVIDENDS
The Company is required to pay to the holders of the Company's Series A
(Convertible) Preferred Stock a cash dividend from any net racetrack earnings
of Garden State Park. The conversion period for the Company's Series A
Convertible Preferred Stock concluded as of July 31, 1993. The applicable
percentage of Garden State Park's "net racetrack earnings" (net after income
tax, less an annual management fee due the parent company of one-half of 1%
of the gross betting handle as computed by the Company's auditors) shall be
25% of such earnings (if any) for each
year. No dividends have been paid in the past. A dividend will not be paid for
the year ended June 30, 1996, since Garden State Park did not produce "net
racetrack earnings."
Below are the calculations of Garden State Park's profits (or losses) as
defined for the Preferred Stock for the past three fiscal years.
<TABLE>
<CAPTION>
June 30, June 30, June 30,
1996 1995 1994
<S> <C> <C> <C>
Net After Tax Income (Loss) $ (2,318,582) $ 201,873 $ 818,718
Less:
Management Fee 820,000 775,200 833,692
Interest on Advance from Parent 13,452,652 12,000,184 8,291,562
Defined Profit (Loss)--
"Net Racetrack Earnings (Loss)" $ (16,591,234) $ (12,573,511) $ (8,306,536)
</TABLE>
(14) REGULATION S STOCK OFFERING
In December 1995, the Company completed a Regulation S "Offshore"
private offering for 1,900,000 shares of Common Stock at a price per share of
$3.00. The proceeds of approximately $5,440,000, net of expenses, were used
by the Company for the purchase of the El Rancho property.
(15) RELATED PARTY INFORMATION
During fiscal 1996, the Company incurred consulting fees and travel
costs of approximately $108,000 and legal fees of approximately $205,600 for
professional services relating to the Company's expansion into the gaming
industry and approximately $286,000 for insurance premiums to firms associated
with members of the board of directors. In addition, the Company paid an
aggregate $400,000 in fees associated with the purchase and financing of the
El Rancho property to George E. Norcross and Louis P. Guida, former board
members. At June 30, 1996, the balance owed to related parties was $45,000.
During fiscal 1995 and the first quarter of fiscal 1996, the Company purchased
and sold securities and conducted investment and financial consulting
activities, both directly and through its wholly-owned Olde English
Management, Inc., ("OEM") subsidiary. The Company's then Chairman of the
Board and Chief Executive Officer, Robert E. Brennan, directed such
activities. In fiscal 1996 and 1995 the Company and OEM paid an aggregate
$725,000 and $1,250,000, respectfully, to Power Forward, Inc. ("PFI"), a
corporation wholly-owned by Mr. Brennan, in reimbursement for $365,500 and
$1,611,198 of expenses which Mr. Brennan advised were paid by PFI in fiscal
1996 and 1995 in support of the Company's and OEM's efforts to produce the
investment and financial consulting revenues.
(16) NET INCOME PER SHARE
Income (loss) per share for the fiscal years ended June 30, 1996, 1995
and 1994 was computed by dividing the income (loss) applicable to common stock
by the weighted average number of common shares outstanding during
each fiscal year (10,536,414 shares, 9,551,369 shares and 9,547,900 shares,
respectively). The convertible preferred stock and dilutive stock options are
assumed converted when dilutive. The conversion period for the Series A
Convertible Preferred Stock concluded as of July 31, 1993, therefore the
Convertible Preferred Stock has not been included in the computations.
(17) PRO FORMA INFORMATION
Effective January 1, 1995, the Company completed the purchase of all the
outstanding stock of Freehold Raceway and on January 24, 1996, the Company
completed the purchase of the El Rancho Hotel and Casino property which is
currently not in operation.
The following unaudited pro forma combined results of operations account
for the acquisitions as if they had occurred on July 1, 1994. The pro forma
results give effect to interest expense and debt assumed, additional debt on
the property, a decrease in interest earned on funds used to purchase the
property, and carrying costs of the project.
<TABLE>
Pro Forma Combined Results of Operations
For Year Ended June 30,
<CAPTION>
1996 1995
<S> <C> <C>
Total Revenues $ 68,470,000 $ 75,524,000
Net (Loss) (3,523,000) (610,000)
Net (Loss) Per Share $ (0.33) $ (0.06)
</TABLE>
These pro forma amounts may not be indicative of results that actually
would have occurred if the combinations had been in effect on the dates
indicated or which may be obtained in the future.
(18) NEW AUTHORITATIVE PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of in March of
1995. SFAS No. 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of. SFAS No. 121 is effective for
financial statements issued for fiscal years beginning after December 15,
1995.
As more fully discussed in Notes 1-(E) & 8, the Company has incurred
approximately $48.7 million in construction and related costs associated with
its El Rancho/Orion project, which is estimated to cost approimately $1
billion. The Company is still in the process of finalizing financing for this
project. While the Company intends to proceed with this casino project, any
significant reduction in financing will result in a more modestly scaled
project. Application of SFAS No. 121 could prospectively result in a write-
down of costs incurred on the project if there is any significant decrease in
the market value of the property; any significant adverse change in business
climate; or any accumulation of costs significantly in excess of amounts
expected to complete the project.
In October 1995, the Financial Accounting Standards Board issued SFAS
123, "Accounting for Stock Based Compensation," which is effective for fiscal
years beginning after December 15, 1995. Under SFAS 123, companies can elect,
but are not required, to recognize compensation expense for all stock-based
awards to employees, using a fair value methodology. The Company expects to
implement on July 1, 1996 the disclosure only provisions of the fair value
method, as permitted by SFAS 123 for awards to employees. The Company will
continue to account for stock-based awards to employees under the intrinsic
value method in accordance with Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees." SFAS 123 also applies to
transactions in which an entity issues its equity instruments to acquire goods
or services from non-employees. Those transactions must be accounted for or
based on the fair value of the consideration received of the fair value of the
equity instrument issued, whichever is more reliably measurable. This
requirement is effective for transactions entered into after December 15,
1995. The Company adopted the requirements of SFAS 123 for non-employee
awards for the year ended June 30, 1996.
The FASB has also issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities". SFAS No.
125 is effective for transfers and servicing of financial assets and
extinguishment of liabilities occurring after December 31, 1996. Earlier
application is not allowed. The provisions of SFAS No. 125 must be applied
prospectively; retroactive application is prohibited. Adoption on January 1,
1997 is not expected to have a material impact on the Company.
(19) SUBSEQUENT EVENTS
In July 1996, the Company entered into an agreement with GE Capital
Corporation with respect to financing $827,891 of improvements to the Garden
State Park's air conditioning systems. The contract provides for sixty
consecutive monthly installments of principal and interest of $17,067
beginning August 25, 1996.
On July 23, 1996, Arthur Winkler was named Executive Vice President of
the Company.
On August 20, 1996, the Company made a final principal payment on a note
previously executed by Freehold Raceway of $1,405,000.
On August 19, 1996, the Company and its financial advisor, Standard
Capital, agreed to terminate their agreement relationship. In consideration
of the agreement, the Company agreed to pay Standard Capital all outstanding
fees and expenses of $120,000 as of August 14, 1996. The Company also agreed
to provide Standard Capital an additional 250,000 warrants, each of such
warrants being for the purchase of one share of ITB Common Stock with an
exercise price of $5.00, exercisable for a period of five years after the date
of issuance. Compensation costs of approximately $440,000 will be accounted
for and expensed in fiscal 1997 for these warrants.
The Company made payments of $1,880,000 in July and August during the
first quarter of fiscal 1997 associated with the purchase of land adjacent to
the El Rancho property.
(20) SUBSEQUENT EVENTS (UNAUDITED)
On September 12, 1996, the Company engaged Southcoast Capital
Corporation to act as its exclusive financial advisor in order to render
certain financial advisory and investment banking services to the Company with
respect to potential transactions aimed at enabling the Company to capitalize
on its existing growth opportunities and to maximize shareholder value. In
connection with these services, the Company agreed to pay Southcoast a monthly
retainer fee of $20,000 plus commissions in the event capital is raised.
On September 17, 1996, the Company entered into a lease agreement with
Siemens Credit Corporation that provides for eighteen monthly lease payments
of $850 and an end buyout of approximately $42,000 for a new telephone system
at Freehold Raceway. The Company is in the process of extending the
installation to include Garden State Park with a similarly priced contract
agreement.
On September 19, 1996, the Company announced that Steven Norton, who has
extensive experience in the casino industry, joined the Company's Board of
Directors.
On September 26, 1996 the Board of Directors approved a three-year
employment contract for Joel H. Sterns, Chairman of the Board. The contract
provides for Mr. Sterns to serve a full-time period ending on June 30, 1997
during which he will devote an average of thirty to forty hours per week to
the Company for an annual compensation of $384,000. This full-time period may
be renewed in one year increments at the option of the Company through June
30, 1998 and June 30, 1999. In the event the Company elects not to renew Mr.
Sterns under the full-time terms, his compensation would be reduced to
$120,000 per year during which time he would devote up to twenty hours per
month of service to the Company. The contract also provides that the term of
the agreement shall be extended for an additional year as of June 30, 1997 and
on each June 30 thereafter unless either party gives notice that it does not
intend to extend the term. The contract further provides that upon a
"Termination Event", Mr. Sterns would receive a lump sum payment representing
his salary until the next June 30th plus $240,000. The contract with Mr.
Sterns defines a "Termination Event" as (i) a merger of the Company with
another entity, the execution of an agreement for the sale or development of
the El Rancho property prior to the expiration of the term of Mr. Sterns
contract (the "Term") or commencement of negotiations with a third party prior
to the expiration of the Term which results in such an acquisition, merger or
agreement occurring after the expiration of the Term; (ii) the removal or
failure to elect Mr. Sterns as Chairman of the Board of Directors of the
Company prior to the expiration of the Term; (iii) the termination of the
contract by Mr. Sterns as the result of a material breach by the Company; or
(iv) termination of the contract either voluntarily by Mr. Sterns or by reason
of his death or disability and, at the time of such termination, negotiations
have commenced with a third party for the Company's acquisition by, or merger
into, another entity, or for an agreement to sell or development of the El
Rancho property, and such acquisition, merger or agreement occurs after the
date of such termination. In addition, on May 14, 1996, the Company granted
Mr. Sterns five year options to purchase 200,000 shares of the Company's
Common Stock at an exercise price of $4.00 per share.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(A) Identification of Directors and Officers
The directors and/or executive officers of the Company are:
<TABLE>
<CAPTION>
Position Position
Name Age held since with Company
<S> <C> <C> <C>
Joel H. Sterns (2)(5) 62 May, 1996 Chairman of the Board
Robert J. Quigley (2) 67 October, 1980 Director
February, 1996 President
Arthur Winkler (2)(5) 52 September, 1987 Director
May, 1992 President of GSP
February, 1995 President of FRA
July, 1996 Executive Vice President
President of the Company
William H. Warner 51 December, 1983 Treasurer
Christopher C. Castens 45 April, 1987 Secretary
(3)(5)
Roger A. Bodman (1)(6) 44 October, 1995 Director
Charles Dees, Jr. 57 April, 1988 Director
(2)(3)(4)(6)
Clifford A. Goldman 53 May, 1996 Director
(1)(2)
Francis W. Murray 55 May, 1996 Director
H. Steven Norton 62 August, 1996 Director
Robert D. Peloquin (3)(4) 67 May, 1996 Director
</TABLE>
(1) Member of Audit Committee
(2) Member of Executive Committee
(3) Member of Related Party Transactions Committee
(4) Member of Executive Compensation Committee
(5) Member of Litigation Committee
(6) Member of Stock Option Committee
The Audit Committee and the Executive Committee were established in
March, 1985 and the Related Party Transactions Committee in February, 1986.
The Litigation Committee was established in October, 1992, and the Executive
Compensation Committee was established in May, 1993.
The Audit Committee periodically confers with the Company's independent
auditors concerning the Company's accounting systems and the maintenance of
its books and records, reviews the scope of the audit of the Company's
financial statements and the results thereof and performs other services.
The Litigation Committee reviews litigation matters of the Company on a
periodic basis.
The Executive Committee, subject to the limitations of the Delaware
Corporation Law (which without an enabling resolution from the Board of
Directors, prohibits the Committee from authorizing a dividend, issuing stock
or merging the Company), possesses all other powers of the Board of Directors
in the management and direction of the business and affairs of the Company.
The Related Parties Transactions Committee meets periodically to review
and approve any related party transactions considered and/or accepted by the
Company's management.
The Executive Compensation Committee reviews and recommends actions
regarding executive compensation.
The Stock Option Committee is responsible for the administration of the
employee stock option plan.
(B) Business Experience and Principal Occupations of Directors and
Executive Officers During Past Five Years
The following is a brief account of the business experience of each of the
Company's executive officers and directors during the past five years.
Joel H. Sterns is a founding partner and has been the president of the law
firm of Sterns & Weinroth in Trenton, New Jersey for the past five years prior
to his appointment as the Company's Chairman of the Board. Mr. Sterns is a
prominent attorney in the field of casino regulation and is the immediate past
president of the International Association of Gaming Attorneys. Mr. Sterns
was instrumental in Resorts International obtaining the first gaming license
to be issued in Atlantic City, New Jersey. Mr. Sterns has represented clients
in a variety of significant regulatory matters ranging from environmental to
banking and insurance, and also has broad experience in corporate law.
Robert J. Quigley was General Manager-Racing for the New Jersey Sports and
Exposition Authority (The Meadowlands) until May, 1983 when he commenced to
serve on a full-time salaried basis as Vice President of the Company and
President and Chief Executive Officer of its Garden State Park subsidiary. He
was also the President and Chief Executive Officer of the Company's
subsidiaries which owned and operated Philadelphia Park. In April, 1988, Mr.
Quigley was elected President of the Company. Effective July 1992, Mr. Quigley
resigned his positions to become president and chief operating officer of
Retama Park Association, Inc., engaged in operating a new racetrack facility
in San Antonio, Texas. In November 1995, Mr. Quigley was named the Company's
Chairman of the Board upon Mr. Brennan's resignation. Mr. Quigley resigned
this position in May 1996 upon Mr. Sterns' election as chairman. In February,
1996, Mr. Quigley rejoined the Company as President. Mr. Quigley continues to
serve as a member of the Company's board of directors.
Arthur Winkler is an attorney who served as an Assistant Commissioner of
the New Jersey Department of Education from March, 1979, until August, 1980
and as House Counsel at the New Jersey Sports and Exposition Authority (The
Meadowlands) from August, 1980, until July, 1983. He joined the Company in
July, 1983 and served as Director of Administration for the Garden State Park
subsidiary until his resignation in October, 1986. In October, 1986 Mr.
Winkler became President and Chief Executive Officer of Winkler Capital
Management, Inc., Lawrenceville, New Jersey. He currently retains this
position although that company is no longer actively conducting business. In
May 1987, Mr. Winkler became an associate of the Flemington, N. J. law firm of
Schaff, Motiuk, Gladstone, Moeller and Ligorano. In March, 1988, when Mr.
Winkler rejoined the Company, he resigned as an associate of the law firm and
became "of counsel" to said law firm. That relationship terminated on November
1, 1990. He was elected Director of the Company in September, 1987 and Vice
President and Chief Operating Officer of the Company in April, 1988. Effective
May 1992, Mr. Winkler succeeded Robert J. Quigley as President of the Company
as well as its Garden State Park subsidiary. Mr. Winkler was named President
of the Company's Freehold Raceway subsidiary upon its acquistion in February
1995. In February 1996, Mr. Winkler resigned as President of the Company. He
remained President of the Company's Garden State Park & Freehold Raceway
subsidiaries. Mr. Winkler was named as Executive Vice President of the
Company in July 1996.
William H. Warner is a certified public accountant and has been employed
by the Company since September, 1983.
Christopher C. Castens is an attorney who was admitted to practice law in
1978. He had served as house counsel and assistant to the executive vice
president of Harness Tracks of America for five years prior to joining the
Company in December, 1986 as house counsel.
Roger A. Bodman has been principally engaged for the past five years as a
principal in Public Strategies/Impact, L.L.C., a government relations
consulting firm. Mr. Bodman is not actively engaged in the business of the
Company.
Dr. Charles R. Dees, Jr. is currently Vice President of Institutional
Advancement at Fairleigh Dickinson University. Dr. Dees had been principally
engaged during the preceding five years as Vice Chancellor for University
Affairs at Seton Hall University in South Orange, New Jersey. He is not
actively engaged in the business of the Company.
Clifford A. Goldman has been a partner in Goldman, Beale Associates, a
financial advisory firm based in Princeton, New Jersey since 1982. For the
previous five years, from 1977 to 1982, he served as the Treasurer of the
State of New Jersey. He was Deputy State Treasurer from 1974 to 1976, and has
served on various New Jersey State Commissions including, the Board of New
Jersey Sports and Exposition Authority, the New Jersey Housing Finance Agency,
the New Jersey Economic Development Authority and the New Jersey Education
Facilities Authority. Mr. Goldman is not actively engaged in the business of
the Company.
Francis W. Murray began his professional career as a management consultant
with the accounting firm of Horwath and Horwath. From 1985 through November,
1992 Mr. Murray occupied various executive positions with and was a co-owner
of the New England Patriots Football Club. From December 1992 through
November 1993, Mr. Murray was the president of the St. Louis NFL Partnership,
engaged in attempting to obtain an expansion franchise for St. Louis in the
NFL. From November 1993 through June 1995, Francis W. Murray served as a
General Partner of Healthcare Properties, a partnership operating a chain of
nursing homes in New Jersey. During such period, Mr. Murray also served as a
consultant of the Company's International Thoroughbred Gaming Development
Corporation subsidiary ("ITG"). From November 1995 and until his resignation
in June 1996 from these positions, Mr. Murray served as president of ITG and
of Orion Casino Corporation, a newly formed wholly owned Nevada subsidiary of
ITG. Mr. Murray is no longer actively engaged in the business of the
Company.
H. Steven Norton has been president and Chief Operating Officer of Argosy
Gaming Company in Alton, Illinois, since January 1993. Argosy Gaming is an
entity which operates riverboat gaming operation in the United States. From
May 1991 through January 1993, Mr. Norton served as president and Chief
Executive Officer of The Gold River Gambling Hall & Resort in Laughlin,
Nevada. Mr. Norton has held various positions in the casino gaming and
riverboat gaming industry since 1967. Mr. Norton has assisted in impact
statements, testified and assisted governments in drafting and introducing
casino legislation, rules and regulations and has testified on casino gaming
before legislative and government study panels throughout the United States,
Canada and Australia. Mr. Norton is not actively engaged in the business of
the Company.
Robert D. Peloquin currently serves as a consultant on casino operations
to various gaming companies. From 1985 to 1994 he served as Chairman of the
Board of Intertel, Inc., an organization comprised of former FBI, CIA, and IRS
agents that provided internal security for private clients, including gaming
companies. From 1985 to 1990 he served as Executive Vice President for
Resorts International and was chairman of the Board, Resorts International,
Bahamas from 1987 to 1989. Mr. Peloquin is not actively engaged in the
business of the Company.
ITEM 11 - EXECUTIVE COMPENSATION
(A) Cash Compensation of Officers and Directors
The following table sets forth information concerning the compensation
paid or accrued by the Company during the years ended on June 30, 1996, 1995
and 1994 to (i) all individuals serving as the Company's Chief Executive
Officer (or acting in similar capacity) during the year ended June 30, 1996,
(ii) the Company's four most highly compensated executive officers (other than
the Chief Executive Officer) who were serving in such capacity at the end of
the year ended June 30, 1996 and (iii) one executive officer of the Company
who resigned prior to the end of the year ended June 30, 1996. During the
period ended June 30, 1996, the Company did not grant any restricted stock
awards or have any long-term incentive plan in effect. All of the Company's
group life, health, hospitalization or medical reimbursement plans, if any, do
not discriminate in scope, terms or operation, in favor of the executive
officers or directors of the Company and are generally available to all
salaried employees. Robert E. Brennan served as the Company's Chief Executive
Officer until his resignation in February 1996. During the years ended June
30, 1996, 1995 and 1994, Mr. Brennan did not receive any compensation from the
Company.
SUMMARY COMPENSATION TABLE
<TABLE>
ANNUAL COMPENSATION
---------------------------
<CAPTION>
Name and Other Annual
Principal Salary Bonus Compensation
Position Year $ $ (b)
<S> <C> <C> <C> <C>
Joel H. Sterns 1996 65,654 0 0
Chairman 1995 0 0 0
Acting CEO 1994 0 0 0
Robert J. Quigley 1996 71,923 0 1,969
President 1995 0 0 0
Acting CEO 1994 0 0 0
Until May 14, 1996
Arthur Winkler 1996 166,539 0 11,767
Exec. Vice Pres. 1995 163,007 0 12,121
1994 141,827 0 10,398
William H. Warner 1996 111,300 0 8,411
Treasurer, CFO 1995 96,827 0 7,956
1994 93,221 0 7,343
Francis W. Murray 1996 120,000 0 1,642
OEM President 1995 0 0 0
until resignation 1994 0 0 0
on June 12, 1996
Richard Orbann 1996 118,500 0 8,454
Gen.Mgr. - GSP 1995 96,827 0 7,936
1994 98,557 0 7,431
Edward Ryan 1996 112,654 0 10,520
Gen.Mgr. - FRA 1995 52,494 0 4,153
1994 0 0 0
</TABLE>
<TABLE>
LONG-TERM COMPENSATION
---------------------------
<CAPTION>
Name and Restricted
Principal Stock
Position Year Options (a) Awards
<S> <C> <C> <C>
Joel H. Sterns 1996 200,000 0
Chairman 1995 0 0
Acting CEO 1994 0 0
Robert J. Quigley 1996 100,000 0
President 1995 0 0
Acting CEO 1994 0 0
Until May 14, 1996
Arthur Winkler 1996 325,000 0
Exec. Vice Pres. 1995 275,000 0
1994 0 0
William H. Warner 1996 75,000 0
Treasurer, CFO 1995 75,000 0
1994 0 0
Francis W. Murray 1996 0 0
OEM President 1995 0 0
until resignation 1994 0 0
on June 12, 1996
Richard Orbann 1996 75,000 0
Gen.Mgr. - GSP 1995 75,000 0
1994 0 0
Edward Ryan 1996 0 0
Gen.Mgr. - FRA 1995 0 0
1994 0 0
</TABLE>
<TABLE>
LONG-TERM COMPENSATION
---------------------------
<CAPTION>
Name and LTIP All Other
Principal Payouts Compensation
Position Year $ $
<S> <C> <C> <C> <C>
Joel H. Sterns 1996 0 0
Chairman 1995 0 0
Acting CEO 1994 0 0
Robert J. Quigley 1996 0 0
President 1995 0 0
Acting CEO 1994 0 0
Until May 14, 1996
Arthur Winkler 1996 0 0
Exec. Vice Pres. 1995 0 0
1994 0 0
William H. Warner 1996 0 0
Treasurer, CFO 1995 0 0
1994 0 0
Francis W. Murray 1996 0 0
OEM President 1995 0 0
until resignation 1994 0 0
on June 12, 1996
Richard Orbann 1996 0 0
Gen.Mgr. - GSP 1995 0 0
1994 0 0
Edward Ryan 1996 0 0
Gen.Mgr. - FRA 1995 0 0
1994 0 0
</TABLE>
(a) In December 1994, Mr. Winkler was awarded options to purchase 275,000
shares of common stock. In May 1996, Mr. Winkler rescinded options to purchase
150,000 of such shares and was awarded options to purchase an additional
200,000 shares. In December 1994, Mr.Warner and Mr.Orbann were awarded
options to purchase 75,000 shares of common stock.
(b) Consists of life insurance premiums paid by the Company with respect to
certain term life insurance payable on the officer's death to beneficiaries
designated by him and further, includes amounts contributed by the Company
to the officer's account under the Company's 401(k) plan.
Amounts attributable to such term life insurance and 401(k) plan paid
on behalf of the named executive officers are as follows:
<TABLE>
<CAPTION>
Life
Insurance 401(k)
<S> <C> <C> <C> <C> <C>
Joel H. Sterns 1996 $ 0 $ 0
Chairman 1995 0 0
1994 0 0
Robert J. Quigley 1996 531 1,438
President 1995 0 0
1994 0 0
Arthur Winkler 1996 2,160 9,607
Exec. Vice Pres. 1995 2,673 9,448
1994 2,562 7,836
William H. Warner 1996 2,160 6,251
Treasurer, CFO 1995 2,220 5,736
1994 2,064 5,279
Francis W. Murray 1996 1,642 0
Director 1995 0 0
1994 0 0
Richard Orbann 1996 2,160 6,294
General Manager GSP 1995 2,220 5,716
1994 1,975 5,456
Edward Ryan 1996 4,961 5,559
General Manager FRA 1995 1,712 2,441
1994 0 0
</TABLE>
The following table indicates options granted during the fiscal
year ended June 30, 1996 to each person who served as chief executive
officer of ITB during such year and to each ITB executive officer
who earned at least $100,000 in compensation during such year:
OPTIONS/GRANTS IN LAST FISCAL YEAR
<TABLE>
Individual Grants
--------------------
<CAPTION>
Number of % of Total Market
Securities Options Price
Underlying Granted to Exercise or on
Options/ Employees in Base Price Grant
Name Grants (#) Fiscal Year ($/Share) Date $
<S> <C> <C> <C> <C>
Joel Sterns 200,000 38% 4.00 4.250
Robert J Quigley 25,000 5% 4.00 3.625
75,000 14% 4.63 4.625
Arthur Winkler 200,000 38% 4.00 3.625
</TABLE>
<TABLE>
Realizable Potential
Value at Assumed
Annual Rate of Stock
Price Appreciation
For Option Term (1)
--------------------
<CAPTION>
Expiration
Name Date 5%($) 10%($)
<S> <C> <C> <C>
Joel Sterns 5/14/2006 534,000 1,354,000
Robert J Quigley 1/23/2006 47,625 135,075
4/23/2006 218,175 552,900
Arthur Winkler 1/23/2006 381,000 1,080,600
</TABLE>
(1) Assumes appreciation at the stated rates in the market price for
ITB Common Stock as of June 30, 1996. The options will have no value
unless, and then only to the extent that the market price for ITB
Common Stock appreciates from the grant date to the exercise date.
The following table indicates the outstanding stock options held
at June 30, 1996 by the individuals named in the Summary
Compensation Table:
1996 FISCAL YEAR-END OPTIONS
- ---------------------------
<TABLE>
<CAPTION>
Number of Value of
Unexercised Unexercised
Options At In-the-Money
1996 Fiscal Options at
Name Year End 6/30/96
<S> <C> <C> <C> <C>
Joel H. Sterns 200,000 $ 12,500
Robert J. Quigley 100,000 1,562
Arthur Winkler 200,000 12,500
Arthur Winkler 125,000 0 (1)
William H. Warner 75,000 0 (1)
Francis W. Murray 0 0 (1)
Richard Orbann 75,000 0 (1)
Edward Ryan 0 0 (1)
</TABLE>
(1) The Option exercise price of $5.88 exceeded the last sales
price for the Common Stock on June 30, 1996 of $4.0625.
Compensation of Directors
For the fiscal year ended June 30, 1996, the Company paid an aggregate $46,416
in directors fees to five directors, namely Mr. Quigley, Mr. Bodman, Mr.
Goldman, Mr. Peloquin, and Mr. Dees.
(B) Employees Retirement Plan
During fiscal 1985, the Company adopted an employee retirement and savings
profit sharing plan for its non-union employees (as of June 30, 1996
approximately 109) pursuant to Section 401(k) of the Internal Revenue Code.
The Company made a contribution with respect to fiscal 1996 and 1995 of
$229,187 and $194,949, respectively. The Company's basic contribution under
the Plan is 4% of each covered employee's compensation for such calendar year.
In addition, commencing in fiscal 1986, the Company contributed up to an
additional 50% of the first 4% of compensation contributed by any covered
employee to the Plan (or up to an additional 2% of compensation). Funds in the
Plan become fully vested in six years or in the event of the employee's death
and can be withdrawn upon early retirement (attainment of age 59 and one half
and completion of 10 years of service), normal retirement (attainment of age
65) or separation from the Company.
(C) Employment Agreements
On September 26, 1996 the Board of Directors approved a three-year
employment contract for Joel H. Sterns, Chairman of the Board. The contract
provides for Mr. Sterns to serve a full-time period ending on June 30, 1997
during which he will devote an average of thirty to forty hours per week to
the Company for an annual compensation of $384,000. This full-time period may
be renewed in one year increments at the option of the Company through June
30, 1998 and June 30, 1999. In the event the Company elects not to renew Mr.
Sterns under the full-time terms, his compensation would be reduced to
$120,000 per year during which time he would devote up to twenty hours per
month of service to the Company. The contract also provides that the term of
the agreement shall be extended for an additional year as of June 30, 1997 and
on each June 30 thereafter unless either party gives notice that it does not
intend to extend the term. The contract further provides that upon a
"Termination Event", Mr. Sterns would receive a lump sum payment representing
his salary until the next June 30th plus $240,000. The contract with Mr.
Sterns defines a "Termination Event" as (i) a merger of the Company with
another entity, the execution of an agreement for the sale or development of
the El Rancho property prior to the expiration of the term of Mr. Sterns
contract (the "Term") or commencement of negotiations with a third party prior
to the expiration of the Term which results in such an acquisition, merger or
agreement occurring after the expiration of the Term; (ii) the removal or
failure to elect Mr. Sterns as Chairman of the Board of Directors of the
Company prior to the expiration of the Term; (iii) the termination of the
contract by Mr. Sterns as the result of a material breach by the Company; or
(iv) termination of the contract either voluntarily by Mr. Sterns or by reason
of his death or disability and, at the time of such termination, negotiations
have commenced with a third party for the Company's acquisition by, or merger
into, another entity, or for an agreement to sell or development of the El
Rancho property, and such acquisition, merger or agreement occurs after the
date of such termination. In addition, on May 14, 1996, the Company granted
Mr. Sterns five year options to purchase 200,000 shares of the Company's
Common Stock at an exercise price of $4.00 per share.
Robert J. Quigley, the Company's president has a contract providing him
an annual salary of $200,000 per annum that will be increased to $220,000 per
annum on January 1, 1997. His currently non-renewable contract expires on
December 31, 1998. The Company may terminate his contract without cause by
providing him six (6) months salary or salary for the remaining contract term,
whichever is greater. The contract also provides a relocation allowance of
$25,000 as Mr. Quigley has relocated from Texas to New Jersey.
Arthur Winkler, the Company's executive vice president has a contract
providing him an annual salary of $200,000 per annum. His contract expires on
December 31, 2000 and may be renewed at the option of the Company. The
Company may terminate his contract without cause by providing him one year
salary or salary for the remaining contract term, whichever is greater.
William H. Warner, the Company's treasurer has a contract providing him
an annual salary of $120,000 per annum. His contract expires on December 31,
1997 and may be renewed at the option of the Company. The Company may
terminate his contract without cause by providing him six (6) months salary or
salary for the remaining contract term, whichever is greater.
Christopher C. Castens, the Company's secretary has a contract providing
him an annual salary of $80,000 per annum. His contract expires on December
31, 1997 and may be renewed at the option of the Company. The Company may
terminate his contract without cause by providing him six (6) months salary or
salary for the remaining contract term, whichever is greater.
Richard E. Orbann, Garden State Park's general manager has a contract
providing him an annual salary of $121,000 per annum. His contract expires on
December 31, 1997 and may be renewed at the option of the Company. The
Company may terminate his contract without cause by providing him six (6)
months salary or salary for the remaining contract term, whichever is greater.
Edward Ryan, Freehold Raceway's general manager has a contract
providing him an annual salary of $120,000 per annum. His contract expires on
December 31, 1997 and may be renewed at the option of the Company. The
Company may terminate his contract without cause by providing him six (6)
months salary or salary for the remaining contract term, whichever is greater.
Kerry B. Fitzpatrick, another of the Company's employees has a contract
providing him an annual salary of $65,000 per annum. His contract expires on
December 31, 1998 and may be renewed at the option of the Company. The
Company may terminate his contract without cause by providing him six (6)
months salary or salary for the remaining contract term, whichever is greater.
(D) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation of the Company's executive officers is determined by
the Company's Executive Compensation Committee, which consists of Messrs.
Dees and Peloquin (both independent directors of the Company). No officer or
employee of the Company participated in deliberations of the Executive
Compensation Committee.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 15, 1996, the number of
shares of the Company's Common Stock owned beneficially to the knowledge of
the Company, by each beneficial owner of more than 5% of such Common Stock, by
each executive officer and director of the Company owning shares and by all
executive officers and directors of the Company as a group. The percentages
have been calculated on the basis of treating as outstanding for purposes of
computing the percentage ownership of a particular individual, all shares of
the Company's Common Stock outstanding as of such date. In the case of
persons other than executive officers and directors of the Company, such
information is based solely on a review of Schedules 13D and 13G filed with
the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Common Stock
Amount and Nature Common Stock
Name and Address of of Beneficial Percent of
5% Beneficial Owner Ownership Class
<S> <C> <C> <C>
Robert E. Brennan
264 Rt. 537 East
Colts Neck, NJ 07722 2,904,016 shs (1) 22.7%
The Family
Investment Trust
340 North Ave.
Cranford, NJ 07016 1,090,731 shs (2) 8.5%
Executive Officers &
Directors
Roger A. Bodman 100,000 shs (3) .8%
Charles Dees, Jr. 100,000 shs (3) .8%
Clifford A. Goldman 100,000 shs (3) .8%
Robert D. Peloquin 100,000 shs (3) .8%
Robert J. Quigley 105,830 shs (3) .8%
Joel H. Sterns 200,350 shs (4) 1.6%
Arthur Winkler 325,121 shs (5) 2.5%
All Executive Officers
and Directors as a 1,156,625 shs (3)(4) 9%
Group (5)(6)
</TABLE>
The above persons have sole voting and investment power, unless otherwise
indicated below.
(1) The proxy previously given to Robert J. Quigley to vote Robert E.
Brennan's shares was canceled on May 29, 1996 as a result of the agreements
between the Company, Mr. Brennan and the New Jersey Division of Gaming
Enforcement, pursuant to which these shares will be held in a liquidating
trust.
(2) Includes 1,090,731 shares of Common Stock which are owned of record by
Henry F. Brennan, a brother of Robert E. Brennan as the sole trustee of The
Family Investment Trust. The grantor of the Trust is Robert E. Brennan and
the sole beneficiaries are his three adult sons of Mr. Brennan. Mr.Brennan
disclaims beneficial ownership of the shares owned by The Family Investment
Trust.
(3) Includes 100,000 of shares of Common Stock issuable upon exercise of
100,000 warrants owned of record by each director.
(4) Includes 200,000 shares of Common Stock issuable upon exercise of
200,000 warrants owned of record by Mr. Sterns and 350 shares of Common
Stock which are owned of record and beneficially by Mr. Sterns' daughter.
(5) Includes 325,000 shares of Common Stock issuable upon exercise of
325,000 warants owned of record by Mr. Winkler
(6) Includes 125,000 shares of Common Stock issuable upon exercise of
125,000 warrants owned of record and 324 shares of Common Stock owned of
record and beneficially by two officers.
No executive officers or directors of the Company own any shares of
the Company's Series A Preferred Stock.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A company operated by the family of Kevin Quigley, son of Robert J.
Quigley, President and Director of the Company, maintained the stable area
cafeteria and stable area refreshment stand in the recreation hall at Garden
State Park making food and beverage service available for purchase by stable
employees. Although Kevin Quigley's company made investments in the
smallwares and some equipment and paid all direct costs in connection with
such operations, it used kitchen equipment permanently installed and owned by
Service America at a cost of approximately $445,000 without charge. (Title to
this equipment will automatically pass to Garden State Park in the year 2000).
These facilities provide three meals per day at prices that are below the
outside market prices for the benefit of licensed stable area employees in a
restrictive area not opened to the public. These facilities are required to
promote good relationships with the horsemen. These operations are customary
for racetracks in the industry. The Company believed these arrangements were
in its best interest as it believed it was the most economical method to
service the stable employees at the track without significant expense or risk
to the Company. Effective July 1, 1995, the Company contracted with an
unaffiliated party to continue to provide this service following the Quigley
family's relocation out of state.
The Company's wholly owned subsidiary, Olde English Equine Insurance
Agency, Inc.("OEEIA"), which was acquired in 1981, conducted a general
insurance agency business specializing in placing equine insurance until it
assigned its accounts to a third party insurance agency, Keystone National
Companies, Inc. of Cherry Hill, N.J. effective April 20, 1989. In order for
Keystone National Companies, Inc. to represent OEEIA, an officer of Keystone
National Companies, Inc. must also be an officer or on the Board of Directors
of OEEIA. Mr. Robert Tanke, of Keystone National Companies, Inc. is currently
a member of the Board of Directors of OEEIA. The Company has contracted to
receive 50% of all commission earned on these equine accounts by Keystone.
During the past few fiscal years, no equine insurance has been placed through
Keystone National Companies, Inc.
The Company has contracted through Keystone National Companies, Inc. to
purchase general liability insurance, excess liability insurance, athletic
participants coverage, workers compensation, automobile damage and
garagekeepers liability insurance for Garden State Park, Freehold Raceway and
the El Rancho property as well as corporate insurance. The premium amounts
associated with this insurance coverage are considered normal in the industry.
George E. Norcross III, a director of the Company from November 1995 until
April 1996, is the owner of Keystone National Companies, Inc.
During fiscal 1996, the Company paid an aggregate $400,000 for a fee in
connection with the purchase of the El Rancho property to KNC, Inc. ("KNC"), a
company controlled by George E. Norcross III and to Louis P. Guida (a director
of the Company from February 1996 until April 1996.) Of that sum, KNC
dispersed $235,000 to Mr. Guida and KNC retained the balance of $165,000 in
connection with their services. The Company also issued ten-year warrants
exercisable to purchase 275,000 shares of its Common Stock at an exercise
price of $4.00 per share to George E. Norcross III or his designee in
connection with the purchase of the El Rancho property. In addition, the
Company paid $24,000 in consulting fees to KNC. The Company has an agreement
to pay $8,000 per month to KNC in consideration for ongoing business
consulting services which was effective April 1, 1996 and expires September
30, 1997.
During fiscal 1996, the Company paid $68,000 in consulting fees to
Public Strategies, L.L.C., a company owned by Roger A. Bodman, a director of
the Company. The Company has an agreement to pay $10,000 per month to Public
Strategies in consideration for ongoing consulting services which was
effective May 1, 1996 and expires December 31, 1997. In addition, the Company
has an agreement to pay $1,500 per month for consulting services at Garden
State Park which was effective January 1, 1996 and expires December 31, 1996.
In fiscal 1996, the Company paid approximately $160,000 for the legal
services of Sterns and Weinroth, a company partially owned by Joel H. Sterns,
the Company's chairman. Sterns and Weinroth has also represented Mr. Brennan
in the past.
During fiscal 1996, the Company paid $35,000 in consulting fees to
Goldman, Beale Associates, a company partially owned by Clifford Goldman, a
director of the Company.
During fiscal 1995 and the first quarter of fiscal 1996, the Company
purchased and sold securities and conducted investment and financial
consulting activities, both directly and through its wholly-owned Olde English
Management, Inc., ("OEM") subsidiary. The Company's then chairman of the
board and chief executive officer, Robert E. Brennan, directed such
activities. With respect to fiscal 1995, the Company (including OEM)
recognized $3,733,399 in revenue, primarily associated with the sale of
securities, and net income of $1,934,335. In fiscal 1995, the Company and OEM
paid $1,250,000 and accrued an additional $350,000, to Power Forward, Inc.
("PFI"), a corporation wholly-owned by Mr. Brennan, in reimbursement for
$1,611,198 of expenses during the year which Mr. Brennan advised were paid by
PFI in support of the Company's and OEM's efforts to produce the investment
and financial consulting revenues.
During the first quarter of fiscal 1996, the Company (including OEM)
recognized $500,085 in revenue, primarily associated with the sale of
securities and previously deferred consulting fees, and a loss of $383,615.
In fiscal 1996 the Company and OEM paid an aggregate $725,000, which includes
accrued expenses of $350,000 from fiscal 1995, to PFI in reimbursement for
$365,500 of expenses during this fiscal year and $9,500 due to PFI from the
prior year.
The Company has been advised that the various categories of expenses
paid by PFI in fiscal 1996 and 1995 were approximately as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Salaries $ 244,700 $ 1,074,925
Payroll Taxes 5,800 59,911
Automobile Expense 19,900 84,780
Travel and Entertainment 12,300 53,845
Group Insurance 15,300 61,622
Insurance - other 15,900 55,231
Misc. office expense (rent,
telephone and other) 51,600 220,884
$ 365,500 $ 1,611,198
</TABLE>
The above salaries include the following amounts paid by PFI as
compensation to the following PFI executives who, Mr. Brennan advises, devoted
a substantial portion of their working time during fiscal 1995 and the first
quarter in fiscal 1996 assisting him in managing the Company's investment and
financial consulting activities. Mr. Brennan advised that he personally
received no compensation for his services in connection therewith.
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Robert Berkson $97,500 $390,000
Roger Barnett $78,000 $312,000
Andrew Alson $45,000 $180,000
</TABLE>
One of the fees earned by OEM in fiscal 1995 was a $250,000 consulting
fee represented by 500,000 shares of common stock of Las Vegas Entertainment
Network, Inc. ("LVEN"), received by OEM in May 1995 and valued at said amount.
The shares were sold by OEM in June 1995 for gross proceeds of $625,000. The
Company, on a consolidated basis, reported consulting fee income of $250,000
and a short-term capital gain of $375,000 from this transaction. The Company
discontinued the rendering of consulting services related to LVEN during
fiscal 1995 and in January 1996, purchased the El Rancho Hotel and Casino
property in Las Vegas, Nevada from LVEN for an aggregate purchase price of
$43.5 million including a cash payment of $12.5 million, the assumption of a
$14 million debt secured by a first mortgage on the property, the delivery of
a $6.5 million promissory note (paid in March 1996) and the delivery of an
additional $10.5 million promissory note payable in the event of the
occurrence of certain specified events. See the Company's current report on
Form 8-K for January 24, 1996.
During fiscal 1995 and the first quarter of fiscal 1996, Roger Barnett
also served as assistant treasurer of OEM.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) Exhibits
Exhibit Incorporated by
Number Description of Exhibit Reference to
4.3 The Registrant's $12,500,000 Promissory
Note dated January 31, 1995 payable to
the seller
10.1 Letter Agreement dated as of January Form 8K dated January 24,
22, 1996 among Las Vegas Entertainment 1996
Network, Inc., the Registrant and Orion
Stock Purchase Agreement made as of
January 1, 1995 for the acquisition by the
Registrant of all the outstanding capital
stock of Freehold Raceway.
10.2 Employment Agreements
11.1 Computation of Earnings per Share
22 Subsidiaries
27 Financial Data Schedule
(B) Financial Statements
Report of independent certified public accountants.
Consolidated Balance Sheets as of June 30, 1996 and 1995.
Consolidated Statements of Operations for the Years Ended June 30,
1996, 1995 and 1994.
Consolidated Statements of Shareholders' Equity for the Years Ended
June 30, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the Years Ended June 30,
1996, 1995 and 1994.
Notes to Financial Statements.
Report of Independent Certified Public Accountants on Supplementary
Schedules.
Supplementary Schedules.
(C) Reports on Form 8-K
The Company did not file any reports on Form 8-K with respect to the
quarter ended June 30, 1996.
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered
into as of the 1st day of January, 1996 by and between International
Thoroughbred Breeders, Inc., a Delaware corporation with its principal
offices at Garden State Park, Route 70 and Haddonfield Road, Cherry
Hill, New Jersey 08034 ("ITB") and Arthur Winkler, an individual
residing at 5 Meadow Run Road, Lawrenceville, New Jersey 08648 (the
"Employee").
W I T N E S S E T H :
WHEREAS ITB desires to employ the Employee in the capacities and
on the terms and conditions herein set forth; and
WHEREAS the Employee agrees to be employed by ITB and to serve in
such capacities on said terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto
agree as follows:
1. EMPLOYMENT
ITB hereby agrees to employ the Employee and the Employee hereby
accepts employment on a full-time basis as president of ITB's
subsidiaries which own and operate Garden State Race Track and Freehold
Raceway. In that capacity, Employee shall perform such duties as are
typical or appropriate in such capacities of employment, subject to and
under the direction of ITB's Board of Directors and/or Executive
Committee. In addition, the Employee shall perform such other duties
for ITB as ITB may reasonably request, or as may be necessary or
desirable in performing or carrying out the intention of this Agreement.
Employee shall provide such services for, and consult with and advise,
without additional compensation, such corporations (including
subsidiaries) affiliated with ITB as ITB may from time-to-time
reasonably specify.
2. TERM OF EMPLOYMENT
The employment of the Employee pursuant to this Agreement shall
commence on January 1, 1996 and shall end five years later on December
31, 2000 (the "Initial Term"). The term of this Agreement shall also be
subject to renewal pursuant to Section 5 herein.
3. COMPENSATION
During the period that this Agreement is in effect, ITB shall pay
Employee and provide him with the following benefits as compensation for
all of his services to be rendered hereunder:
3.1 Salary
January 1, 1996 through June 30, 1996.....$ 90,000 (i.e. an
annual rate of $180,000).
July 1, 1996 through December 31, 1996...$100,000 (i.e. an
annual rate of $200,000).
Year Two......................................$200,000 per annum
Year Three....................................$200,000 per annum
Year Four.....................................$200,000 per annum
Year Five.....................................$200,000 per annum
3.2 Vacation Time - Employee shall be entitled to six weeks of
vacation time per annum with a right to accrue an aggregate of up to 60
days of unused vacation during the term of the Agreement.
3.3 Automobile - Employee shall be provided by ITB with a new
executive model automobile every third year with ITB paying all
insurance, operating, maintenance and repair costs.
3.4 Expenses - ITB shall provide the Employee with a corporate
credit card and shall reimburse the Employee for all reasonable Travel,
Entertainment and similar expenses incurred in connection with ITB's
business.
3.5 Office and Secretarial - ITB will provide the Employee with
a private office and a private secretary on a full-time basis, both at
Garden State Race Track and at Freehold Raceway.
3.6 Employee Benefit Plans - ITB will provide the Employee with
participation on an equitable basis in any employee benefit plan
established for senior management of ITB or Garden State Race Track.
4. TERMINATION OF EMPLOYMENT
4.1 Death - If Employee dies during the term of this Agreement,
on the date of his death, this Agreement shall terminate. In such
event, ITB shall assign and transfer to the Employee's executors,
administrators, heirs, legatees and/or designated beneficiaries, as the
case may be, all rights to any life insurance policies insuring the life
of the Employee and the proceeds therefrom, as well as all of the
Employee's rights under any Employee Benefit Plans (including ITB's
401(k) Plan and any stock options) in which the Employee is vested at
the date of his death, and in lieu of all other amounts and benefits
which may be required to be paid or made available hereunder after the
date of his death, ITB shall pay to the Employee's spouse if then
surviving, over the following 36-month period, the sum of $40,000 per 12
months ($120,000 in the aggregate) and shall continue to fund the health
benefits to which such spouse was entitled at the date of death, during
such 36-month period.
4.2 Disability - If the Employee becomes Permanently Disabled
during the term of this Agreement so that he can no longer devote at
least 75% of his working time to ITB's business, ITB may terminate
Employee's employment by written notice to him. In such event and after
such effective date of termination, ITB shall assign and transfer to the
Employee, all rights to any life insurance and disability policies
insuring the life and/or health of the Employee and all rights under any
Employee Benefit Plans (including ITB's 401(k) Plan and stock options)
in which the Employee is vested at the effective date of such
termination, and in lieu of all other amounts and benefits which may be
required to be paid or made available hereunder after such termination,
ITB shall pay the Employee compensation at an annual rate of $100,000
for the remaining balance of the term of the Employment Agreement
determined at the date immediately preceding such termination, and shall
also continue to pay the Employee's health benefits during such
remaining balance.
4.3 Termination by ITB "Without Cause" - If ITB terminates this
Agreement without cause, such termination will be effective 60 days
after notice of same. Upon such termination, ITB shall assign and
transfer to the Employee, all rights to any life insurance policies
insuring the life of the Employee and all rights under any Employee
Benefit Plans (including ITB's 401(k) Plan) in which the Employee is
vested at the effective date of such termination, and in lieu of all
other amounts and benefits which may be required to be paid or made
available hereunder after such termination, ITB
(i) shall pay the Employee severance pay equal to the greater of
the salary due for the remaining term of this agreement or one year of
salary (plus, in each case, an amount equal to accrued unused vacation
and sick leave). Such severance payment would be paid in a lump sum or
weekly at the Employee's option;
(ii) shall pay the Employee's medical or health benefits for the
remaining term of the contract or for one year, whichever is greater;
and
(iii) shall transfer title to the Company car to the Employee at
no cost to Employee.
4.4 Termination by ITB "For Cause" - If ITB terminates this
Agreement "For Cause," no further benefits of any kind will be paid to
the Employee except that ITB shall assign and transfer to the Employee,
all of the Employee's rights under ITB's 401(k) Plan in which the
Employee is vested at the time of such termination. For purposes of
this Agreement, "For Cause" means (i) conviction of, or a plea of nolo
contendere with respect to a felony involving fraud or dishonesty or any
other crime for which a term of imprisonment in excess of one (1) year
could be imposed; or (ii) Employee's material breach of any of the terms
of this Employment Agreement which material breach is not cured within
90 days after receipt of written notice from ITB to Employee; or (iii)
judgment consented to by or rendered against the Employee on which any
regulatory licensor of ITB or any subsidiary bases a threatened license
revocation.
4.5 Voluntary Termination by Employee - If the Employee elects
to terminate this Agreement, ITB shall assign and transfer to the
Employee, all rights to any life insurance policies insuring the life of
the Employee and all rights under any Employee Benefit Plans (including
ITB's 401(k) Plan) in which the Employee is vested at the effective date
of such termination, and in lieu of all other amounts and benefits
which may be required to be paid or made available hereunder after such
termination, ITB will pay an amount to the Employee equal to six months
of salary at the annual rate then in effect, as a termination bonus,
payable at the option of the Employee in a lump sum or in equal monthly
installments over one year.
5. RENEWAL PROVISIONS
If ITB fails to give the Employee notice at least six months
before the end of the initial five-year term of its election to
terminate the Employment Agreement at the end of the five-year term, the
Agreement term shall be extended for an additional five years, on the
same terms and conditions as shall be in existence at the end of the
term. At the end of the initial five-year term (if ITB terminates the
Employment Agreement effective at such date) or upon the subsequent
Agreement termination date, ITB shall assign and transfer to the
Employee, all rights to any life insurance policies insuring the life of
the Employee and all rights under any Employee Benefit Plans (including
ITB's 401(k) Plan) in which the Employee is vested at the effective date
of such termination, and in lieu of all other amounts and benefits which
may be required to be paid or made available hereunder after such
termination, ITB shall
(i) pay the Employee severance pay equal to one year's salary as
in effect at such termination date (plus an amount equal to accrued
unused vacation and sick leave) in a lump sum or in equal monthly
installments over one year at the Employee's option;
(ii) pay the Employee's health benefits for one year after such
termination date; and
(iii) shall transfer title to the Company car to the Employee at
no cost to the Employee.
6. MISCELLANEOUS
6.1 New Jersey law shall govern this Agreement.
6.2 This Agreement shall not be modified or rescinded except in
a writing signed by both parties hereto.
6.3 This Agreement shall be binding on the parties hereto and
their respective successors and assigns.
6.4 Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been
given when received after delivery by hand, or two (2) business days
after sending by recognized overnight delivery services such as Federal
Express, or mailed by registered or certified mail, return receipt
requested; if to ITB or to the Employee, at the address set forth on the
first page of this Agreement, or to such other address as the recipient
party shall designate by notice to the other party in the manner
specified herein.
6.5 Any dispute or controversy arising from or relating to this
Agreement shall be decided by arbitration at the New Jersey offices of
the American Arbitration Association (presently located in Somerset, New
Jersey), in accordance with the commercial rules and regulations of the
American Arbitration Association and the parties hereto hereby consent
to such jurisdiction.
IN WITNESS WHEREOF, the parties hereto have each duly executed
this Agreement as of the date first above written.
EMPLOYER:
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
By____________________________________________
Robert J. Quigley, Acting Chairman of the Board
EMPLOYEE:
______________________________________________
Arthur Winkler
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered
into as of the 1st day of January, 1996 by and between International
Thoroughbred Breeders, Inc., a Delaware corporation with its principal
offices at Garden State Park, Route 70 and Haddonfield Road, Cherry
Hill, New Jersey 08034 ("ITB") and Christopher C. Castens, an
individual residing at 52 Sheffield Drive, Columbus, New Jersey 08022
(the "Employee").
W I T N E S S E T H :
WHEREAS ITB desires to employ the Employee in the capacities and
on the terms and conditions herein set forth; and
WHEREAS the Employee agrees to be employed by ITB and to serve in
such capacities on said terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto
agree as follows:
1. EMPLOYMENT
ITB hereby agrees to employ the Employee and the Employee hereby
accepts employment on a full-time basis as in-house counsel to and
corporate secretary of ITB. In that capacity, Employee shall perform
such duties as are typical or appropriate in such capacities of
employment, subject to and under the direction of ITB's chief operating
officer and/or Board of Directors and/or Executive Committee. In
addition, the Employee shall perform such other duties for ITB as ITB
may reasonably request, or as may be necessary or desirable in
performing or carrying out the intention of this Agreement. Employee
shall provide such services for, and consult with and advise, without
additional compensation, such corporations (including subsidiaries)
affiliated with ITB as ITB may from time-to-time reasonably specify.
2. TERM OF EMPLOYMENT
The employment of the Employee pursuant to this Agreement shall
commence on January 1, 1996 and shall end two years later on December
31, 1997 (the "Initial Term"). The term of this Agreement shall also
be subject to renewal pursuant to Section 5 herein.
3. COMPENSATION
During the period that this Agreement is in effect, ITB shall pay
Employee and provide him with the following benefits as compensation
for all of his services to be rendered hereunder:
3.1 Salary - $80,000 per annum.
3.2 Automobile - Employee shall be provided by ITB with an
automobile for his use with ITB paying all insurance, operating,
maintenance and repair costs.
3.3 Employee Benefit Plans - ITB will provide the Employee with
participation on an equitable basis in any employee benefit plan
established for senior management of ITB or Garden State Race Track,
Inc.
4. TERMINATION OF EMPLOYMENT
4.1 Death - If Employee dies during the term of this Agreement,
on the date of his death, this Agreement shall terminate. In such
event, ITB shall assign and transfer to the Employee's executors,
administrators, heirs, legatees and/or designated beneficiaries, as the
case may be, all rights to any life insurance policies insuring the
life of the Employee and the proceeds therefrom, as well as all of the
Employee's rights under any Employee Benefit Plans (including ITB's
401(k) Plan and any stock options) in which the Employee is vested at
the date of his death, in lieu of all other amounts and benefits which
may be required to be paid or made available hereunder after the date
of his death.
4.2 Disability - If the Employee becomes Permanently Disabled
during the term of this Agreement so that he can no longer devote at
least 75% of his working time to ITB's business, ITB may terminate
Employee's employment by written notice to him. In such event and
after such effective date of termination, ITB shall assign and transfer
to the Employee, all rights to any life insurance and disability
policies insuring the life and/or health of the Employee and all rights
under any Employee Benefit Plans (including ITB's 401(k) Plan and stock
options) in which the Employee is vested at the effective date of such
termination, in lieu of all other amounts and benefits which may be
required to be paid or made available hereunder after such termination.
4.3 Termination by ITB "Without Cause" - If ITB terminates this
Agreement without cause, such termination will be effective 60 days
after notice of same. Upon such termination, ITB shall assign and
transfer to the Employee, all rights to any life insurance policies
insuring the life of the Employee and all rights under any Employee
Benefit Plans (including ITB's 401(k) Plan) in which the Employee is
vested at the effective date of such termination, and in lieu of all
other amounts and benefits which may be required to be paid or made
available hereunder after such termination, ITB
(i) shall pay the Employee severance pay equal to the
greater of the salary due for the remaining term of this agreement or
six months of salary (plus, in each case, an amount equal to accrued
amounts for unused vacation and sick leave). Such severance payment
would be paid in a lump sum or weekly at the Employee's option;
(ii) will pay the Employee's medical or health benefits for
the remaining term of the contract or for one year, whichever is
greater; and
(iii) will transfer title to the Company car to the
Employee at no cost to Employee.
4.4 Termination by ITB "For Cause" - If ITB terminates this
Agreement "For Cause," no further benefits of any kind will be paid to
the Employee except that ITB shall assign and transfer to the Employee,
all of the Employee's rights under ITB's 401(k) Plan in which the
Employee is vested at the time of such termination. For purposes of
this Agreement, "For Cause" means (i) conviction of, or a plea of nolo
contendere with respect to a felony involving fraud or dishonesty or
any other crime for which a term of imprisonment in excess of one (1)
year could be imposed; or (ii) Employee's material breach of any of the
terms of this Employment Agreement which material breach is not cured
within 90 days after receipt of written notice from ITB to Employee; or
(iii) judgment consented to by or rendered against the Employee on
which any regulatory licensor of ITB or any subsidiary bases a
threatened license revocation.
4.5 Voluntary Termination by Employee - If the Employee elects
to terminate this Agreement, ITB shall assign and transfer to the
Employee, all rights to any life insurance policies insuring the life
of the Employee and all rights under any Employee Benefit Plans
(including ITB's 401(k) Plan) in which the Employee is vested at the
effective date of such termination, and in lieu of all other amounts
and benefits which may be required to be paid or made available
hereunder after such termination, ITB will pay an amount to the
Employee equal to six months of salary at the annual rate then in
effect, as a termination bonus, payable at the option of the Employee
in a lump sum or in equal weekly installments over six months.
5. RENEWAL PROVISIONS
ITB shall have the right to renew the Employment Agreement for up
to two additional two-year terms by giving the Employee notice of its
intention to renew the Employment Agreement no later than six months
prior to the then termination date. Any renewal shall be on such terms
and conditions as the parties may negotiate in good faith within thirty
(30) days after such notice. At the end of the initial two-year term
(if ITB fails to renew the Employment Agreement or terminates same at
such date) or upon the subsequent Agreement termination date after
which ITB has not renewed the Agreement, ITB shall assign and transfer
to the Employee, all rights to any life insurance policies insuring the
life of the Employee and all rights under any Employee Benefit Plans
(including ITB's 401(k) Plan) in which the Employee is vested at the
effective date of such termination, and in lieu of all other amounts
and benefits which may be required to be paid or made available
hereunder after such termination, ITB shall
(i) pay the Employee severance pay equal to six month's salary as
in effect at such termination date (plus an amount equal to accrued
amounts for unused vacation and sick leave) in a lump sum or in equal
weekly installments over six months at the Employee's option; and
(ii) shall transfer title to the Company car to the Employee at
no cost to the Employee.
6. MISCELLANEOUS
6.1 New Jersey law shall govern this Agreement.
6.2 This Agreement shall not be modified or rescinded except in
a writing signed by both parties hereto.
6.3 This Agreement shall be binding on the parties hereto and
their respective successors and assigns.
6.4 Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been
given when received after delivery by hand, or two (2) business days
after sending by recognized overnight delivery services such as Federal
Express, or mailed by registered or certified mail, return receipt
requested; if to ITB or to the Employee, at the address set forth on
the first page of this Agreement, or to such other address as the
recipient party shall designate by notice to the other party in the
manner specified herein.
6.5 Any dispute or controversy arising from or relating to this
Agreement shall be decided by arbitration at the New Jersey offices of
the American Arbitration Association (presently located in Somerset,
New Jersey), in accordance with the commercial rules and regulations of
the American Arbitration Association and the parties hereto hereby
consent to such jurisdiction.
IN WITNESS WHEREOF, the parties hereto have each duly executed
this Agreement as of the date first above written.
EMPLOYER:
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
By____________________________________________
Arthur Winkler, President
EMPLOYEE:
______________________________________________
Christopher C. Castens
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered
into as of the 1st day of January, 1996 by and between International
Thoroughbred Breeders, Inc., a Delaware corporation with its principal
offices at Garden State Park, Route 70 and Haddonfield Road, Cherry
Hill, New Jersey 08034 ("ITB") and Edward Ryan, an individual residing
at 3 Anderson Street, Monmouth Beach, New Jersey 07750 (the "Employee").
W I T N E S S E T H :
WHEREAS ITB desires to employ the Employee in the capacities and
on the terms and conditions herein set forth; and
WHEREAS the Employee agrees to be employed by ITB and to serve in
such capacities on said terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto
agree as follows:
1. EMPLOYMENT
ITB hereby agrees to employ the Employee and the Employee hereby
accepts employment on a full-time basis as Vice President and General
Manager of Freehold Racing Association Inc. and Atlantic City Harness,
Inc. In that capacity, Employee shall perform such duties as are
typical or appropriate in such capacities of employment, subject to and
under the direction of ITB's chief operating officer and/or Board of
Directors and/or Executive Committee. In addition, the Employee shall
perform such other duties for ITB as ITB may reasonably request, or as
may be necessary or desirable in performing or carrying out the
intention of this Agreement. Employee shall provide such services for,
and consult with and advise, without additional compensation, such
corporations (including subsidiaries) affiliated with ITB as ITB may
from time-to-time reasonably specify.
2. TERM OF EMPLOYMENT
The employment of the Employee pursuant to this Agreement shall
commence on January 1, 1996 and shall end two years later on December
31, 1997 (the "Initial Term"). The term of this Agreement shall also be
subject to renewal pursuant to Section 5 herein.
3. COMPENSATION
During the period that this Agreement is in effect, ITB shall pay
Employee and provide him with the following benefits as compensation for
all of his services to be rendered hereunder:
3.1 Salary - $120,000 per annum.
3.2 Automobile - Employee shall be provided by ITB with an
automobile for his use with ITB paying all insurance, operating,
maintenance and repair costs.
3.3 Employee Benefit Plans - ITB will provide the Employee with
participation on an equitable basis in any employee benefit plan
established for senior management of ITB or Garden State Race Track,
Inc.
4. TERMINATION OF EMPLOYMENT
4.1 Death - If Employee dies during the term of this Agreement,
on the date of his death, this Agreement shall terminate. In such
event, ITB shall assign and transfer to the Employee's executors,
administrators, heirs, legatees and/or designated beneficiaries, as the
case may be, all rights to any life insurance policies insuring the life
of the Employee and the proceeds therefrom, as well as all of the
Employee's rights under any Employee Benefit Plans (including ITB's
401(k) Plan and any stock options) in which the Employee is vested at
the date of his death, in lieu of all other amounts and benefits which
may be required to be paid or made available hereunder after the date of
his death.
4.2 Disability - If the Employee becomes Permanently Disabled
during the term of this Agreement so that he can no longer devote at
least 75% of his working time to ITB's business, ITB may terminate
Employee's employment by written notice to him. In such event and after
such effective date of termination, ITB shall assign and transfer to the
Employee, all rights to any life insurance and disability policies
insuring the life and/or health of the Employee and all rights under any
Employee Benefit Plans (including ITB's 401(k) Plan and stock options)
in which the Employee is vested at the effective date of such
termination, in lieu of all other amounts and benefits which may be
required to be paid or made available hereunder after such termination.
4.3 Termination by ITB "Without Cause" - If ITB terminates this
Agreement without cause, such termination will be effective 60 days
after notice of same. Upon such termination, ITB shall assign and
transfer to the Employee, all rights to any life insurance policies
insuring the life of the Employee and all rights under any Employee
Benefit Plans (including ITB's 401(k) Plan) in which the Employee is
vested at the effective date of such termination, and in lieu of all
other amounts and benefits which may be required to be paid or made
available hereunder after such termination, ITB
(i) shall pay the Employee severance pay equal to the
greater of the salary due for the remaining term of this agreement or
six months of salary (plus, in each case, an amount equal to accrued
amounts for unused vacation and sick leave). Such severance payment
would be paid in a lump sum or weekly at the Employee's option;
(ii) will pay the Employee's medical or health benefits for
the remaining term of the contract or for one year, whichever is
greater; and
(iii) will transfer title to the Company car to the Employee
at no cost to Employee.
4.4 Termination by ITB "For Cause" - If ITB terminates this
Agreement "For Cause," no further benefits of any kind will be paid to
the Employee except that ITB shall assign and transfer to the Employee,
all of the Employee's rights under ITB's 401(k) Plan in which the
Employee is vested at the time of such termination. For purposes of
this Agreement, "For Cause" means (i) conviction of, or a plea of nolo
contendere with respect to a felony involving fraud or dishonesty or any
other crime for which a term of imprisonment in excess of one (1) year
could be imposed; or (ii) Employee's material breach of any of the terms
of this Employment Agreement which material breach is not cured within
90 days after receipt of written notice from ITB to Employee; or (iii)
judgment consented to by or rendered against the Employee on which any
regulatory licensor of ITB or any subsidiary bases a threatened license
revocation.
4.5 Voluntary Termination by Employee - If the Employee elects
to terminate this Agreement, ITB shall assign and transfer to the
Employee, all rights to any life insurance policies insuring the life of
the Employee and all rights under any Employee Benefit Plans (including
ITB's 401(k) Plan) in which the Employee is vested at the effective date
of such termination, and in lieu of all other amounts and benefits which
may be required to be paid or made available hereunder after such
termination, ITB will pay an amount to the Employee equal to six months
of salary at the annual rate then in effect, as a termination bonus,
payable at the option of the Employee in a lump sum or in equal weekly
installments over six months.
5. RENEWAL PROVISIONS
ITB shall have the right to renew the Employment Agreement for up
to two additional two-year terms on the same terms and conditions as
shall be in existence at the end of the term (except for a 10% increase
in compensation during each additional two-year term) by giving the
Employee notice of its intention to renew the Employment Agreement no
later than six months prior to the then termination date. In other
words, if ITB elects to renew the Employment Agreement for years three
and four, the annual salary for each of such years shall be $132,000.
If after such election, ITB again elects to renew the Employment
Agreement for years five and six, the annual salary for each of such
years shall be $145,200. At the end of the initial two-year term (if
ITB terminates the Employment Agreement effective at such date) or upon
the subsequent Agreement termination date after which ITB has not
renewed the Agreement, ITB shall assign and transfer to the Employee,
all rights to any life insurance policies insuring the life of the
Employee and all rights under any Employee Benefit Plans (including
ITB's 401(k) Plan) in which the Employee is vested at the effective date
of such termination, and in lieu of all other amounts and benefits which
may be required to be paid or made available hereunder after such
termination, ITB shall
(i) pay the Employee severance pay equal to six month's salary as
in effect at such termination date (plus an amount equal to accrued
amounts for unused vacation and sick leave) in a lump sum or in equal
weekly installments over six months at the Employee's option; and
(ii) shall transfer title to the Company car to the Employee at no
cost to the Employee.
6. MISCELLANEOUS
6.1 New Jersey law shall govern this Agreement.
6.2 This Agreement shall not be modified or rescinded except in
a writing signed by both parties hereto.
6.3 This Agreement shall be binding on the parties hereto and
their respective successors and assigns.
6.4 Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been
given when received after delivery by hand, or two (2) business days
after sending by recognized overnight delivery services such as Federal
Express, or mailed by registered or certified mail, return receipt
requested; if to ITB or to the Employee, at the address set forth on the
first page of this Agreement, or to such other address as the recipient
party shall designate by notice to the other party in the manner
specified herein.
6.5 Any dispute or controversy arising from or relating to this
Agreement shall be decided by arbitration at the New Jersey offices of
the American Arbitration Association (presently located in Somerset, New
Jersey), in accordance with the commercial rules and regulations of the
American Arbitration Association and the parties hereto hereby consent
to such jurisdiction.
IN WITNESS WHEREOF, the parties hereto have each duly executed
this Agreement as of the date first above written.
EMPLOYER:
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
By____________________________________________
Arthur Winkler, President
EMPLOYEE:
______________________________________________
Edward Ryan
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered
into as of the 1st day of January, 1996 by and between International
Thoroughbred Breeders, Inc., a Delaware corporation with its principal
offices at Garden State Park, Route 70 and Haddonfield Road, Cherry
Hill, New Jersey 08034 ("ITB") and Kerry B. Fitzpatrick, an individual
residing at 211A Park Boulevard, West Cape May, New Jersey 08204 (the
"Employee").
W I T N E S S E T H :
WHEREAS ITB desires to employ the Employee in the capacities and
on the terms and conditions herein set forth; and
WHEREAS the Employee agrees to be employed by ITB and to serve in
such capacities on said terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto
agree as follows:
1. EMPLOYMENT
ITB hereby agrees to employ the Employee and the Employee hereby
accepts employment on a part-time basis as Director of Special Projects
and New Business opportunities devoting such time as ITB's President and
the Employee may reasonably determine. In that capacity, Employee shall
perform such duties as are typical or appropriate in such capacities of
employment, subject to and under the direction of ITB's chief operating
officer and/or Board of Directors and/or Executive Committee. In
addition, the Employee shall perform such other duties for ITB as ITB
may reasonably request, or as may be necessary or desirable in
performing or carrying out the intention of this Agreement. Employee
shall provide such services for, and consult with and advise, without
additional compensation, such corporations (including subsidiaries)
affiliated with ITB as ITB may from time-to-time reasonably specify.
2. TERM OF EMPLOYMENT
The employment of the Employee pursuant to this Agreement shall
commence on January 1, 1996 and shall end three years later on December
31, 1998 (the "Initial Term"). The term of this Agreement shall also be
subject to renewal pursuant to Section 5 herein.
3. COMPENSATION
During the period that this Agreement is in effect, ITB shall pay
Employee and provide him with the following benefits as compensation for
all of his services to be rendered hereunder:
3.1 Salary - $65,000 per annum.
3.2 Employee Benefit Plans - ITB will provide the Employee with
participation on an equitable basis in any employee benefit plan
established for senior management of ITB or Garden State Race Track,
Inc.
4. TERMINATION OF EMPLOYMENT
4.1 Death - If Employee dies during the term of this Agreement,
on the date of his death, this Agreement shall terminate. In such
event, ITB shall assign and transfer to the Employee's executors,
administrators, heirs, legatees and/or designated beneficiaries, as the
case may be, all rights to any life insurance policies insuring the life
of the Employee and the proceeds therefrom, as well as all of the
Employee's rights under any Employee Benefit Plans (including ITB's
401(k) Plan and any stock options) in which the Employee is vested at
the date of his death, in lieu of all other amounts and benefits which
may be required to be paid or made available hereunder after the date of
his death.
4.2 Disability - If the Employee becomes Permanently Disabled
during the term of this Agreement so that he can no longer devote at
least 75% of his working time to ITB's business, ITB may terminate
Employee's employment by written notice to him. In such event and after
such effective date of termination, ITB shall assign and transfer to the
Employee, all rights to any life insurance and disability policies
insuring the life and/or health of the Employee and all rights under any
Employee Benefit Plans (including ITB's 401(k) Plan and stock options)
in which the Employee is vested at the effective date of such
termination, in lieu of all other amounts and benefits which may be
required to be paid or made available hereunder after such termination.
4.3 Termination by ITB "Without Cause" - If ITB terminates this
Agreement without cause, such termination will be effective 60 days
after notice of same. Upon such termination, ITB shall assign and
transfer to the Employee, all rights to any life insurance policies
insuring the life of the Employee and all rights under any Employee
Benefit Plans (including ITB's 401(k) Plan) in which the Employee is
vested at the effective date of such termination, and in lieu of all
other amounts and benefits which may be required to be paid or made
available hereunder after such termination, ITB
(i) shall pay the Employee severance pay equal to the
greater of the salary due for the remaining term of this agreement or
six months of salary (plus, in each case, an amount equal to accrued
amounts for unused vacation and sick leave). Such severance payment
would be paid in a lump sum or weekly at the Employee's option; and
(ii) will pay the Employee's medical or health benefits for
the remaining term of the contract or for one year, whichever is
greater.
4.4 Termination by ITB "For Cause" - If ITB terminates this
Agreement "For Cause," no further benefits of any kind will be paid to
the Employee except that ITB shall assign and transfer to the Employee,
all of the Employee's rights under ITB's 401(k) Plan in which the
Employee is vested at the time of such termination. For purposes of
this Agreement, "For Cause" means (i) conviction of, or a plea of nolo
contendere with respect to a felony involving fraud or dishonesty or any
other crime for which a term of imprisonment in excess of one (1) year
could be imposed; or (ii) Employee's material breach of any of the terms
of this Employment Agreement which material breach is not cured within
90 days after receipt of written notice from ITB to Employee; or (iii)
judgment consented to by or rendered against the Employee on which any
regulatory licensor of ITB or any subsidiary bases a threatened license
revocation.
4.5 Voluntary Termination by Employee - If the Employee elects
to terminate this Agreement, ITB shall assign and transfer to the
Employee, all rights to any life insurance policies insuring the life of
the Employee and all rights under any Employee Benefit Plans (including
ITB's 401(k) Plan) in which the Employee is vested at the effective date
of such termination, and in lieu of all other amounts and benefits which
may be required to be paid or made available hereunder after such
termination, ITB will pay an amount to the Employee equal to six months
of salary at the annual rate then in effect, as a termination bonus,
payable at the option of the Employee in a lump sum or in equal weekly
installments over six months.
5. RENEWAL PROVISIONS
ITB shall have the right to renew the Employment Agreement for one
additional three-year term on the same terms and conditions as shall be
in existence at the end of the term (except for a 10% increase in
compensation during such additional three-year term) by giving the
Employee notice of its intention to renew the Employment Agreement no
later than six months prior to the then termination date. In other
words, if ITB elects to renew the Employment Agreement for years four,
five and six, the annual salary for each of such years shall be $71,500.
At the end of the initial three-year term (if ITB fails to renew the
Employment Agreement so that it terminates effective at such date) or
upon the subsequent Agreement termination date in the event ITB has
renewed the Agreement, ITB shall assign and transfer to the Employee,
all rights to any life insurance policies insuring the life of the
Employee and all rights under any Employee Benefit Plans (including
ITB's 401(k) Plan) in which the Employee is vested at the effective date
of such termination, and in lieu of all other amounts and benefits which
may be required to be paid or made available hereunder after such
termination, ITB shall pay the Employee severance pay equal to six
month's salary as in effect at such termination date (plus an amount
equal to accrued amounts for unused vacation and sick leave) in a lump
sum or in equal weekly installments over six months at the Employee's
option.
6. MISCELLANEOUS
6.1 New Jersey law shall govern this Agreement.
6.2 This Agreement shall not be modified or rescinded except in
a writing signed by both parties hereto.
6.3 This Agreement shall be binding on the parties hereto and
their respective successors and assigns.
6.4 Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been
given when received after delivery by hand, or two (2) business days
after sending by recognized overnight delivery services such as Federal
Express, or mailed by registered or certified mail, return receipt
requested; if to ITB or to the Employee, at the address set forth on the
first page of this Agreement, or to such other address as the recipient
party shall designate by notice to the other party in the manner
specified herein.
6.5 Any dispute or controversy arising from or relating to this
Agreement shall be decided by arbitration at the New Jersey offices of
the American Arbitration Association (presently located in Somerset, New
Jersey), in accordance with the commercial rules and regulations of the
American Arbitration Association and the parties hereto hereby consent
to such jurisdiction.
IN WITNESS WHEREOF, the parties hereto have each duly executed
this Agreement as of the date first above written.
EMPLOYER:
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
By____________________________________________
Arthur Winkler, President
EMPLOYEE:
______________________________________________
Kerry B. Fitzpatrick
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered
into as of the 1st day of January, 1996 by and between International
Thoroughbred Breeders, Inc., a Delaware corporation with its principal
offices at Garden State Park, Route 70 and Haddonfield Road, Cherry
Hill, New Jersey 08034 ("ITB") and Richard E. Orbann, an individual
residing at 652 Adams Avenue, Langhorne, Pennsylvania 19047 (the
"Employee").
W I T N E S S E T H :
WHEREAS ITB desires to employ the Employee in the capacities and
on the terms and conditions herein set forth; and
WHEREAS the Employee agrees to be employed by ITB and to serve in
such capacities on said terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto
agree as follows:
1. EMPLOYMENT
ITB hereby agrees to employ the Employee and the Employee hereby
accepts employment on a full-time basis as General Manager of Garden
State Race Track. In that capacity, Employee shall perform such duties
as are typical or appropriate in such capacities of employment, subject
to and under the direction of ITB's chief operating officer and/or Board
of Directors and/or Executive Committee. In addition, the Employee
shall perform such other duties for ITB as ITB may reasonably request,
or as may be necessary or desirable in performing or carrying out the
intention of this Agreement. Employee shall provide such services for,
and consult with and advise, without additional compensation, such
corporations (including subsidiaries) affiliated with ITB as ITB may
from time-to-time reasonably specify.
2. TERM OF EMPLOYMENT
The employment of the Employee pursuant to this Agreement shall
commence on January 1, 1996 and shall end two years later on December
31, 1997 (the "Initial Term"). The term of this Agreement shall also be
subject to renewal pursuant to Section 5 herein.
3. COMPENSATION
During the period that this Agreement is in effect, ITB shall pay
Employee and provide him with the following benefits as compensation for
all of his services to be rendered hereunder:
3.1 Salary - $121,000 per annum.
3.2 Automobile - Employee shall be provided by ITB with an
automobile for his use with ITB paying all insurance, operating,
maintenance and repair costs.
3.3 Employee Benefit Plans - ITB will provide the Employee with
participation on an equitable basis in any employee benefit plan
established for senior management of ITB or Garden State Race Track,
Inc.
4. TERMINATION OF EMPLOYMENT
4.1 Death - If Employee dies during the term of this Agreement,
on the date of his death, this Agreement shall terminate. In such
event, ITB shall assign and transfer to the Employee's executors,
administrators, heirs, legatees and/or designated beneficiaries, as the
case may be, all rights to any life insurance policies insuring the life
of the Employee and the proceeds therefrom, as well as all of the
Employee's rights under any Employee Benefit Plans (including ITB's
401(k) Plan and any stock options) in which the Employee is vested at
the date of his death, in lieu of all other amounts and benefits which
may be required to be paid or made available hereunder after the date of
his death.
4.2 Disability - If the Employee becomes Permanently Disabled
during the term of this Agreement so that he can no longer devote at
least 75% of his working time to ITB's business, ITB may terminate
Employee's employment by written notice to him. In such event and after
such effective date of termination, ITB shall assign and transfer to the
Employee, all rights to any life insurance and disability policies
insuring the life and/or health of the Employee and all rights under any
Employee Benefit Plans (including ITB's 401(k) Plan and stock options)
in which the Employee is vested at the effective date of such
termination, in lieu of all other amounts and benefits which may be
required to be paid or made available hereunder after such termination.
4.3 Termination by ITB "Without Cause" - If ITB terminates this
Agreement without cause, such termination will be effective 60 days
after notice of same. Upon such termination, ITB shall assign and
transfer to the Employee, all rights to any life insurance policies
insuring the life of the Employee and all rights under any Employee
Benefit Plans (including ITB's 401(k) Plan) in which the Employee is
vested at the effective date of such termination, and in lieu of all
other amounts and benefits which may be required to be paid or made
available hereunder after such termination, ITB
(i) shall pay the Employee severance pay equal to the
greater of the salary due for the remaining term of this agreement or
six months of salary (plus, in each case, an amount equal to accrued
amounts for unused vacation and sick leave). Such severance payment
would be paid in a lump sum or weekly at the Employee's option;
(ii) will pay the Employee's medical or health benefits for
the remaining term of the contract or for one year, whichever is
greater; and
(iii) will transfer title to the Company car to the Employee
at no cost to Employee.
4.4 Termination by ITB "For Cause" - If ITB terminates this
Agreement "For Cause," no further benefits of any kind will be paid to
the Employee except that ITB shall assign and transfer to the Employee,
all of the Employee's rights under ITB's 401(k) Plan in which the
Employee is vested at the time of such termination. For purposes of
this Agreement, "For Cause" means (i) conviction of, or a plea of nolo
contendere with respect to a felony involving fraud or dishonesty or any
other crime for which a term of imprisonment in excess of one (1) year
could be imposed; or (ii) Employee's material breach of any of the terms
of this Employment Agreement which material breach is not cured within
90 days after receipt of written notice from ITB to Employee; or (iii)
judgment consented to by or rendered against the Employee on which any
regulatory licensor of ITB or any subsidiary bases a threatened license
revocation.
4.5 Voluntary Termination by Employee - If the Employee elects
to terminate this Agreement, ITB shall assign and transfer to the
Employee, all rights to any life insurance policies insuring the life of
the Employee and all rights under any Employee Benefit Plans (including
ITB's 401(k) Plan) in which the Employee is vested at the effective date
of such termination, and in lieu of all other amounts and benefits which
may be required to be paid or made available hereunder after such
termination, ITB will pay an amount to the Employee equal to six months
of salary at the annual rate then in effect, as a termination bonus,
payable at the option of the Employee in a lump sum or in equal weekly
installments over six months.
5. RENEWAL PROVISIONS
ITB shall have the right to renew the Employment Agreement for up
to two additional two-year terms on the same terms and conditions as
shall be in existence at the end of the term (except for a 10% increase
in compensation during each additional two-year term) by giving the
Employee notice of its intention to renew the Employment Agreement no
later than six months prior to the then termination date. In other
words, if ITB elects to renew the Employment Agreement for years three
and four, the annual salary for each of such years shall be $133,100.
If after such election, ITB again elects to renew the Employment
Agreement for years five and six, the annual salary for each of such
years shall be $146,410. At the end of the initial two-year term (if
ITB terminates the Employment Agreement effective at such date) or upon
the subsequent Agreement termination date after which ITB has not
renewed the Agreement, ITB shall assign and transfer to the Employee,
all rights to any life insurance policies insuring the life of the
Employee and all rights under any Employee Benefit Plans (including
ITB's 401(k) Plan) in which the Employee is vested at the effective date
of such termination, and in lieu of all other amounts and benefits which
may be required to be paid or made available hereunder after such
termination, ITB shall
(i) pay the Employee severance pay equal to six month's salary as
in effect at such termination date (plus an amount equal to accrued
amounts for unused vacation and sick leave) in a lump sum or in equal
weekly installments over six months at the Employee's option; and
(ii) shall transfer title to the Company car to the Employee at no
cost to the Employee.
6. MISCELLANEOUS
6.1 New Jersey law shall govern this Agreement.
6.2 This Agreement shall not be modified or rescinded except in
a writing signed by both parties hereto.
6.3 This Agreement shall be binding on the parties hereto and
their respective successors and assigns.
6.4 Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been
given when received after delivery by hand, or two (2) business days
after sending by recognized overnight delivery services such as Federal
Express, or mailed by registered or certified mail, return receipt
requested; if to ITB or to the Employee, at the address set forth on the
first page of this Agreement, or to such other address as the recipient
party shall designate by notice to the other party in the manner
specified herein.
6.5 Any dispute or controversy arising from or relating to this
Agreement shall be decided by arbitration at the New Jersey offices of
the American Arbitration Association (presently located in Somerset, New
Jersey), in accordance with the commercial rules and regulations of the
American Arbitration Association and the parties hereto hereby consent
to such jurisdiction.
IN WITNESS WHEREOF, the parties hereto have each duly executed
this Agreement as of the date first above written.
EMPLOYER:
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
By____________________________________________
Arthur Winkler, President
EMPLOYEE:
______________________________________________
Richard E. Orbann
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered
into as of the 12th day of February, 1996 by and between International
Thoroughbred Breeders, Inc., a Delaware corporation with its principal
offices at Garden State Park, Route 70 and Haddonfield Road, Cherry
Hill, New Jersey 08034 ("ITB") and Robert J. Quigley, an individual
residing at 9435 Sumac, San Antonio, Texas 78266 (the "Employee").
W I T N E S S E T H :
WHEREAS ITB desires to employ the Employee in the capacities and
on the terms and conditions herein set forth; and
WHEREAS the Employee agrees to be employed by ITB and to serve in
such capacities on said terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto
agree as follows:
1. EMPLOYMENT
ITB hereby agrees to employ the Employee and the Employee hereby
accepts employment on a full-time basis as president and chief executive
officer of ITB. In that capacity, Employee shall perform such duties as
are typical or appropriate in such capacities of employment, subject to
and under the direction of ITB's Board of Directors and/or Executive
Committee. In addition, the Employee shall perform such other duties
for ITB as ITB may reasonably request, or as may be necessary or
desirable in performing or carrying out the intention of this Agreement.
Employee shall provide such services for, and consult with and advise,
without additional compensation, such corporations (including
subsidiaries) affiliated with ITB as ITB may from time-to-time
reasonably specify.
2. TERM OF EMPLOYMENT
The employment of the Employee pursuant to this Agreement shall
commence on February 12, 1996 and shall end approximately eighteen
months later on August 31, 1997.
3. COMPENSATION
During the period that this Agreement is in effect, ITB shall pay
Employee and provide him with the following benefits as compensation for
all of his services to be rendered hereunder:
3.1 Salary - At a rate per annum equal to $180,000, prorated for
the term of this Agreement.
3.2 Automobile - Employee shall be provided by ITB with the use
of an executive model automobile with ITB paying all insurance,
operating, maintenance and repair costs.
3.3 Expenses - ITB shall provide the Employee with a corporate
credit card and shall reimburse the Employee for all reasonable Travel,
Entertainment and similar expenses incurred in connection with ITB's
business.
3.4 Relocation Expenses - In order to induce the Employee to
relocate from his present domicile in San Antonio, Texas to the general
area of Garden State Race Track, ITB agrees to pay the sum of $25,000 to
the Employee for relocation costs. Relocation costs shall include the
Employee's temporary housing costs in the Garden State Race Track area,
his travel costs between Texas and New Jersey, moving costs and similar
expenses. To the extent the Employee's relocation costs exceed $25,000,
ITB and the Employee will negotiate in good faith, the additional
amount, if any, to be paid by ITB, subject to proper documentation of
such expenditures.
3.5 Employee Benefit Plans - ITB will provide the Employee with
participation on an equitable basis in any employee benefit plan
established for senior management of ITB or Garden State Race Track
including but not limited to group life and health insurance and 401(k)
plans.
4. TERMINATION OF EMPLOYMENT
4.1 Death - If Employee dies during the term of this Agreement,
on the date of his death, this Agreement shall terminate.
4.2 Disability - If the Employee becomes Permanently Disabled
during the term of this Agreement so that he can no longer devote at
least 75% of his working time to ITB's business, ITB may terminate
Employee's employment by written notice to him.
4.3 Termination by ITB "Without Cause" - If ITB terminates this
Agreement without cause, such termination will be effective 60 days
after notice of same. Upon such termination, ITB
(i) shall pay the Employee severance pay equal to six months of
salary. Such severance payment would be paid in a lump sum or weekly at
the Employee's option; and
(ii) shall pay the Employee's medical or health benefits for six
months after the last severance payment is made.
In the event that the Employee elects to be paid his severance
payment on a weekly basis, the Employee shall continue to participate in
all employee benefit plans as described in Section 3.5 hereof for the
period during which the severance payments are made hereunder.
4.4 Termination by ITB "For Cause" - If ITB terminates this
Agreement "For Cause," no further benefits of any kind will be paid to
the Employee except as may be required by law. For purposes of this
Agreement, "For Cause" means (i) conviction of, or a plea of nolo
contendere with respect to a felony involving fraud or dishonesty or any
other crime for which a term of imprisonment in excess of one (1) year
could be imposed; or (ii) Employee's material breach of any of the terms
of this Employment Agreement which material breach is not cured within
90 days after receipt of written notice from ITB to Employee; or (iii)
judgment consented to by or rendered against the Employee on which any
regulatory licensor of ITB or any subsidiary bases a threatened license
revocation.
4.5 Voluntary Termination by Employee - The Employee may elect
to terminate this Agreement upon thirty (30) days prior written notice
to ITB. Upon such termination, the Employee shall be entitled to
receive all rights provided by law in any employee benefit plans as
described in Section 3.5 herein.
5. MISCELLANEOUS
5.1 New Jersey law shall govern this Agreement.
5.2 This Agreement shall not be modified or rescinded except in
a writing signed by both parties hereto.
5.3 This Agreement shall be binding on the parties hereto and
their respective successors and assigns.
5.4 Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been
given when received after delivery by hand, or two (2) business days
after sending by recognized overnight delivery services such as Federal
Express, or mailed by registered or certified mail, return receipt
requested; if to ITB or to the Employee, at the address set forth on the
first page of this Agreement, or to such other address as the recipient
party shall designate by notice to the other party in the manner
specified herein.
5.5 Any dispute or controversy arising from or relating to this
Agreement shall be decided by arbitration at the New Jersey offices of
the American Arbitration Association (presently located in Somerset, New
Jersey), in accordance with the commercial rules and regulations of the
American Arbitration Association and the parties hereto hereby consent
to such jurisdiction.
IN WITNESS WHEREOF, the parties hereto have each duly executed
this Agreement as of the date first above written.
EMPLOYER:
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
By____________________________________________
William H. Warner, Chief Financial Officer
EMPLOYEE:
______________________________________________
Robert J. Quigley
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered
into as of the 1st day of January, 1996 by and between International
Thoroughbred Breeders, Inc., a Delaware corporation with its principal
offices at Garden State Park, Route 70 and Haddonfield Road, Cherry
Hill, New Jersey 08034 ("ITB") and William H. Warner, an individual
residing at 497 Clinton Avenue, Toms River, New Jersey 08753 (the
"Employee").
W I T N E S S E T H :
WHEREAS ITB desires to employ the Employee in the capacities and
on the terms and conditions herein set forth; and
WHEREAS the Employee agrees to be employed by ITB and to serve in
such capacities on said terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and intending to be legally bound hereby, the parties hereto
agree as follows:
1. EMPLOYMENT
ITB hereby agrees to employ the Employee and the Employee hereby
accepts employment on a full-time basis as principal financial officer
of ITB. In that capacity, Employee shall perform such duties as are
typical or appropriate in such capacities of employment, subject to and
under the direction of ITB's chief operating officer and/or Board of
Directors and/or Executive Committee. In addition, the Employee shall
perform such other duties for ITB as ITB may reasonably request, or as
may be necessary or desirable in performing or carrying out the
intention of this Agreement. Employee shall provide such services for,
and consult with and advise, without additional compensation, such
corporations (including subsidiaries) affiliated with ITB as ITB may
from time-to-time reasonably specify.
2. TERM OF EMPLOYMENT
The employment of the Employee pursuant to this Agreement shall
commence on January 1, 1996 and shall end two years later on December
31, 1997 (the "Initial Term"). The term of this Agreement shall also be
subject to renewal pursuant to Section 5 herein.
3. COMPENSATION
During the period that this Agreement is in effect, ITB shall pay
Employee and provide him with the following benefits as compensation for
all of his services to be rendered hereunder:
3.1 Salary - $120,000 per annum.
3.2 Automobile - Employee shall be provided by ITB with an
automobile for his use with ITB paying all insurance, operating,
maintenance and repair costs.
3.3 Employee Benefit Plans - ITB will provide the Employee with
participation on an equitable basis in any employee benefit plan
established for senior management of ITB or Garden State Race Track,
Inc.
4. TERMINATION OF EMPLOYMENT
4.1 Death - If Employee dies during the term of this Agreement,
on the date of his death, this Agreement shall terminate. In such
event, ITB shall assign and transfer to the Employee's executors,
administrators, heirs, legatees and/or designated beneficiaries, as the
case may be, all rights to any life insurance policies insuring the life
of the Employee and the proceeds therefrom, as well as all of the
Employee's rights under any Employee Benefit Plans (including ITB's
401(k) Plan and any stock options) in which the Employee is vested at
the date of his death, in lieu of all other amounts and benefits which
may be required to be paid or made available hereunder after the date of
his death.
4.2 Disability - If the Employee becomes Permanently Disabled
during the term of this Agreement so that he can no longer devote at
least 75% of his working time to ITB's business, ITB may terminate
Employee's employment by written notice to him. In such event and after
such effective date of termination, ITB shall assign and transfer to the
Employee, all rights to any life insurance and disability policies
insuring the life and/or health of the Employee and all rights under any
Employee Benefit Plans (including ITB's 401(k) Plan and stock options)
in which the Employee is vested at the effective date of such
termination, in lieu of all other amounts and benefits which may be
required to be paid or made available hereunder after such termination.
4.3 Termination by ITB "Without Cause" - If ITB terminates this
Agreement without cause, such termination will be effective 60 days
after notice of same. Upon such termination, ITB shall assign and
transfer to the Employee, all rights to any life insurance policies
insuring the life of the Employee and all rights under any Employee
Benefit Plans (including ITB's 401(k) Plan) in which the Employee is
vested at the effective date of such termination, and in lieu of all
other amounts and benefits which may be required to be paid or made
available hereunder after such termination, ITB
(i) shall pay the Employee severance pay equal to the
greater of the salary due for the remaining term of this agreement or
six months of salary (plus, in each case, an amount equal to accrued
amounts for unused vacation and sick leave). Such severance payment
would be paid in a lump sum or weekly at the Employee's option;
(ii) will pay the Employee's medical or health benefits for
the remaining term of the contract or for one year, whichever is
greater; and
(iii) will transfer title to the Company car to the Employee
at no cost to Employee.
4.4 Termination by ITB "For Cause" - If ITB terminates this
Agreement "For Cause," no further benefits of any kind will be paid to
the Employee except that ITB shall assign and transfer to the Employee,
all of the Employee's rights under ITB's 401(k) Plan in which the
Employee is vested at the time of such termination. For purposes of
this Agreement, "For Cause" means (i) conviction of, or a plea of nolo
contendere with respect to a felony involving fraud or dishonesty or any
other crime for which a term of imprisonment in excess of one (1) year
could be imposed; or (ii) Employee's material breach of any of the terms
of this Employment Agreement which material breach is not cured within
90 days after receipt of written notice from ITB to Employee; or (iii)
judgment consented to by or rendered against the Employee on which any
regulatory licensor of ITB or any subsidiary bases a threatened license
revocation.
4.5 Voluntary Termination by Employee - If the Employee elects
to terminate this Agreement, ITB shall assign and transfer to the
Employee, all rights to any life insurance policies insuring the life of
the Employee and all rights under any Employee Benefit Plans (including
ITB's 401(k) Plan) in which the Employee is vested at the effective date
of such termination, and in lieu of all other amounts and benefits which
may be required to be paid or made available hereunder after such
termination, ITB will pay an amount to the Employee equal to six months
of salary at the annual rate then in effect, as a termination bonus,
payable at the option of the Employee in a lump sum or in equal weekly
installments over six months.
5. RENEWAL PROVISIONS
ITB shall have the right to renew the Employment Agreement for up
to two additional two-year terms on the same terms and conditions as
shall be in existence at the end of the term (except for a 10% increase
in compensation during each additional two-year term) by giving the
Employee notice of its intention to renew the Employment Agreement no
later than six months prior to the then termination date. In other
words, if ITB elects to renew the Employment Agreement for years three
and four, the annual salary for each of such years shall be $132,000.
If after such election, ITB again elects to renew the Employment
Agreement for years five and six, the annual salary for each of such
years shall be $145,200. At the end of the initial two-year term (if
ITB terminates the Employment Agreement effective at such date) or upon
the subsequent Agreement termination date after which ITB has not
renewed the Agreement, ITB shall assign and transfer to the Employee,
all rights to any life insurance policies insuring the life of the
Employee and all rights under any Employee Benefit Plans (including
ITB's 401(k) Plan) in which the Employee is vested at the effective date
of such termination, and in lieu of all other amounts and benefits which
may be required to be paid or made available hereunder after such
termination, ITB shall
(i) pay the Employee severance pay equal to six month's salary as
in effect at such termination date (plus an amount equal to accrued
amounts for unused vacation and sick leave) in a lump sum or in equal
weekly installments over six months at the Employee's option; and
(ii) shall transfer title to the Company car to the Employee at no
cost to the Employee.
6. MISCELLANEOUS
6.1 New Jersey law shall govern this Agreement.
6.2 This Agreement shall not be modified or rescinded except in
a writing signed by both parties hereto.
6.3 This Agreement shall be binding on the parties hereto and
their respective successors and assigns.
6.4 Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been
given when received after delivery by hand, or two (2) business days
after sending by recognized overnight delivery services such as Federal
Express, or mailed by registered or certified mail, return receipt
requested; if to ITB or to the Employee, at the address set forth on the
first page of this Agreement, or to such other address as the recipient
party shall designate by notice to the other party in the manner
specified herein.
6.5 Any dispute or controversy arising from or relating to this
Agreement shall be decided by arbitration at the New Jersey offices of
the American Arbitration Association (presently located in Somerset, New
Jersey), in accordance with the commercial rules and regulations of the
American Arbitration Association and the parties hereto hereby consent
to such jurisdiction.
IN WITNESS WHEREOF, the parties hereto have each duly executed
this Agreement as of the date first above written.
EMPLOYER:
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
By____________________________________________
Arthur Winkler, President
EMPLOYEE:
______________________________________________
William H. Warner
AGREEMENT
This Agreement (the "Agreement") is made and entered into as
of the 14th day of May, 1996 by and between International Thoroughbred
Breeders, Inc., a Delaware corporation with its principal offices at
Garden State Park, Route 70 and Haddonfield Road, Cherry Hill, New
Jersey 08034 ("ITB") and Joel H. Sterns, and individual residing at R.D.
#1, Box 307, River Road, Titusville, New Jersey (08560) ("Sterns").
W I T N E S S E T H :
WHEREAS, Sterns has certain experience and expertise in the
field of casino gaming development and regulation; and
WHEREAS, ITB, engaged inter alia, in casino gaming
development activities, desires to avail itself of Sterns' experience
and expertise and to retain Sterns in the capacities and on the terms
and conditions herein set forth; and
WHEREAS, Sterns agrees to be retained by ITB and to serve in
such capacities on said terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and intending to be legally bound hereby, the parties
hereto agree as follows:
1. RETENTION
2. ITB hereby agrees to retain Sterns and Sterns
hereby agrees to serve ITB and its subsidiaries as ITB's
Chairman of the Board of Directors and to provide
services of the type normally provided by a senior
executive.
3. ITB and Sterns acknowledge that Sterns is a member
of the law firm of Sterns & Weinroth, a Professional Corporation
("Sterns & Weinroth"), which from time-to-time renders legal services to
ITB and its subsidiaries. ITB and Sterns hereby agree that Sterns is
being retained under this Agreement to provide non-legal, executive-type
services and that he shall not be required to render any legal services
to ITB during the term of this Agreement.
4. For the period beginning on the date hereof and
ending on June 30, 1997 (the "Full-Time Period"), Sterns agrees to
devote an average of 30 to 40 hours per week to the services to be
rendered hereunder. ITB may, at its option and with Sterns' consent,
extend the Full-Time Period until June 30, 1998. If ITB extends the
Full-Time Period until June 30, 1998, it shall again have the option,
with Sterns' consent, to extend the Full-Time Period until June 30,
1999.
5. Upon expiration of the Full-Time Period, and any
extension thereof, Sterns' required service hereunder shall be reduced
to approximately 20 hours per calendar month. Any period during which
Sterns' hours have been so reduced is referred to herein as the "Part-Time
Period."
6. The provisions of Paragraphs 1.3 and 1.4
notwithstanding, Sterns shall have the right to provide non-legal
executive-type services similar to those to be provided under this
Agreement and legal services for persons other than ITB throughout the
term of this Agreement, provided that the provision of such services
does not conflict with his responsibilities hereunder.
7. ITB shall use its best efforts to procure and
maintain during the time that this Agreement is in effect, and for a
period of two years after any termination of this Agreement, Officers'
and Directors' Liability Insurance coverage in the amount of at least
$5.0 million per claim/occurrence and in the aggregate. ITB shall
furnish to Sterns certificates of insurance confirming the existence of
such coverage, which shall include a provision whereby not less than
thirty (30) days' prior written notice to Sterns is required from the
insurer prior to any cancellation, non-renewal or material reduction of
such coverage. In the event that ITB fails or refuses to procure such
insurance coverage, Sterns shall have the right, but not the obligation,
to procure such insurance coverage and ITB shall promptly reimburse
Sterns for the actual costs and expenses incurred by Sterns in procuring
such insurance coverage.
8. ITB represents and warrants to Sterns that there is
no provision contained in its certificate of incorporation, by-laws, any
stock option plan or any other document, agreement or instrument which
would prohibit the undertaking contemplated by this Agreement or
materially impair or reduce the compensation, benefits and entitlements
of Sterns set forth herein. ITB further represents and warrants to
Sterns that it is duly authorized and empowered to enter into this
Agreement and to perform all of its obligations hereunder.
9. To the extent permitted under Delaware law, ITB
shall defend, indemnify and hold harmless Sterns from and against all
liability, loss, cost, expense and damages (including reasonable
attorneys' fees) asserted against, imposed on or incurred by Sterns in
any claim, action or proceeding arising out of or related to acts or
omissions of Sterns undertaken in good faith in the performance of
services and as Chairman of the Board of Directors of ITB under this
Agreement.
10. The parties acknowledge and agree that they must
take reasonable steps and institute reasonable procedures to identify
and attempt to resolve any conflicts of interest that may arise by
virtue of the fact that Sterns will provide services and serve as
Chairman of the Board of Directors of ITB while maintaining his status
as a shareholder-director of Sterns & Weinroth, which represents certain
clients, including casino gaming clients, whose interests are or may
become materially adverse to ITB and its subsidiaries in one or more
specific matters. Accordingly, Sterns shall not be required to render
any services or participate in any activities which would involve a
prohibited conflict of interest, and ITB agrees that Sterns may recuse
himself from any matter which he reasonably believes to involve a
prohibited conflict of interest, and that such recusal shall not
constitute a breach of this Agreement.
11. ITB shall confirm in writing with Sterns & Weinroth
the nature and scope of all matters on which Sterns & Weinroth shall be
engaged to render legal services as outside counsel to ITB and its
subsidiaries. ITB and its officers, directors, agents, servants,
employees and representatives shall not disclose to Sterns & Weinroth or
any of its directors or employees any facts, circumstances, knowledge or
information which is unrelated to any particular matter on which Sterns
& Weinroth shall have been engaged in writing to render legal services
as outside counsel to ITB and its subsidiaries.
12. TERM OF AGREEMENT
Subject to earlier termination as provided in Section 4,
(i) this Agreement shall have an initial term commencing on May 14, 1996 and
ending on June 30, 1999, and (ii) the term of this Agreement shall be
extended for an additional year as of June 30, 1997, and thereafter as
of each subsequent June 30 (each, a "Renewal Date"), unless either party
has given notice, prior to the applicable Renewal Date, that it does not
intend to so extend the term. The term of this Agreement, including any
such extensions, is hereinafter referred to as the "Term."
13. COMPENSATION
During the Term, ITB shall pay to Sterns the following
compensation in full payment for the services rendered by him hereunder.
14. During the Full-Time Period and any extensions thereof, ITB shall pay Sterns
an annual salary of $384,000, payable in monthly installments of $32,000, plus
reimbursable expenses, including travel, meals and entertainment relating to the
services governed by this Agreement ("Reimbursable Expenses"). Amounts payable
for the period from May 14, 1996 through the date of execution of this
Agreement, to the extent not previously paid, shall be paid promptly
after the date of such execution.
15. During the Part-Time Period, with respect to the
first twenty (20) hours of services rendered to ITB and its subsidiaries
by Sterns in each calendar month, ITB shall pay Sterns the sum of
$10,000, plus Reimbursable Expenses, payable within 30 days of ITB's
receipt of a bill therefor.
16. With respect to each additional hour of services
rendered in a calendar month to ITB and its subsidiaries by Sterns
during the Part-Time Period, ITB shall pay Sterns at the normal hourly
rate charged for Sterns' services by Sterns & Weinroth, plus
Reimbursable Expenses, payable within 30 days of ITB's receipt of a bill
therefor.
17. ITB's Board of Directors has granted to Sterns a
five-year option to purchase 200,000 shares of ITB common stock, $2.00
par value (the "Common Stock") at an exercise price of $4.00 per share.
ITB shall enter into a customary agreement with Sterns with respect to
such options. The options shall be non-transferable, except pursuant to
the laws of descent and distribution. The options will contain such
terms (if any) regarding registration of the underlying shares under the
Securities Act of 1933, as amended (the "Act") (but not beyond the
option term) as are contained in the ten-year options granted to Roger
A. Bodman, Charles Dees, Joseph Fisher, Kerry Fitzpatrick and Robert J.
Quigley by ITB's Board of Directors on January 23, 1996.
18. ITB shall assume the lease obligations of Sterns
with respect to the automobile presently used by Sterns and, upon
expiration of such lease, will provide during the term of this Agreement
a replacement lease for an automobile of comparable value selected by
Sterns.
19. Sterns hereby agrees that he shall not participate
in any pension, 401(k) or welfare benefit plans maintained by ITB for
its employees generally.
20. Sterns shall be paid a "Termination Payment" upon
the first to occur of any of the following events (each, a "Termination
Event"):
(a) ITB is acquired by or merged into another entity, or an
agreement is executed for the sale or development of its Las Vegas,
Nevada property prior to the expiration of the Term, or negotiations
have commenced with a third party prior to the expiration of the Term
which result in such an acquisition, merger or agreement occurring after
the expiration of the Term;
(b) the stockholders of ITB fail to re-elect or vote to
remove Sterns as Chairman of the Board of Directors of ITB prior to the
expiration of the Term;
(c) Sterns terminates this Agreement pursuant to
Paragraph 4.2 hereof; or
(d the Agreement terminates by reason of an event
described in Paragraph 4.1 or 4.3 hereof if, at the time of such
termination, negotiations have commenced with a third party for ITB's
acquisition by, or merger into, another entity, or for an agreement to
sell or develop its Las Vegas, Nevada property, and such acquisition,
merger or agreement occurs after the date of such termination.
The Termination Payment shall be computed as follows:
1. If the Termination Event occurs during the Full-Time
Period, the sum of (i) $32,000 multiplied by the number of full and
partial calendar months remaining from the date of termination until the
next following June 30, and (ii) $240,000.
2. If the Termination Event occurs during the Part-Time
Period, the sum of (i) $10,000 multiplied by the number of full and
partial calendar months then remaining from the date of termination
until the next following June 30, and (ii) $240,000.
The Termination Payment shall be paid to Sterns within 30 days after the
date of the event giving rise to such payment. Subject to any
continuing obligations which ITB may have pursuant to the terms of
Sections 1.6 and 1.8, ITB, upon payment of the Termination Payment,
shall have no further obligation hereunder to Sterns except for unpaid
amounts in respect of services provided prior to the Termination Event.
21. EARLY TERMINATION
22. If, during the Term, Sterns shall die or become
"disabled" so that he is unable with or without "reasonable
accommodation" (as such term is defined under applicable federal and
state law) to perform the services contemplated hereunder, this
Agreement shall terminate on the date of death or on the date Sterns
becomes disabled, as the case may be.
23. Sterns shall have the right to terminate this Agreement
upon thirty (30) days' prior written notice of a material breach of the
provisions hereof by ITB; provided, however, that if ITB shall
reasonably cure such breach within said period, then this Agreement
shall not be terminated on account thereof.
24. Sterns shall have the right to terminate this Agreement
and/or resign as Chairman of the Board of Directors of ITB upon thirty
(30) days' prior written notice; provided, however, that if resignation
and/or termination is required or is reasonably believed by Sterns to be
required by the New Jersey Rules of Professional Conduct, then Sterns
shall have the right to resign and/or terminate this Agreement upon such
other notice, if any, as may be required or appropriate under the
circumstances. In the event of such termination and/or resignation,
this Agreement shall terminate on the effective date thereof.
25. This Agreement shall terminate if ITB is acquired or
merged into another entity, or an agreement is executed for the sale or
development of its Las Vegas, Nevada property.
26. MISCELLANEOUS
27. New Jersey law shall govern this Agreement.
28. This Agreement shall not be modified or rescinded, nor
may any of its provisions be waived, except in a writing signed by both
parties hereto.
29. This Agreement shall be binding on the parties hereto and
their respective successors and assigns.
30. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed to have
been given when received after delivery by hand, or two (2) business
days after sending by recognized overnight delivery services such as
Federal Express, or mailed by registered or certified mail, return
receipt requested; if to ITB or to Sterns, at the address set forth on
the first page of this Agreement, or to such other address as the
recipient party shall designate by notice to the other party in the
manner specified herein.
31. Any dispute or controversy from or relating to this
Agreement shall be decided by binding arbitration by a panel of three
(3) arbitrators at the New Jersey offices of the American Arbitration
Association (presently located in Somerset, New Jersey), in accordance
with the commercial rules and regulations of the American Arbitration
Association. The arbitrators shall issue the award in writing, setting
forth their findings of fact and conclusions of law. An award by
majority of the arbitrators shall be final and conclusive; provided,
however, that in addition to any grounds for appeal afforded under the
New Jersey or federal arbitration statutes, a party may appeal the award
on the grounds that the arbitrators erroneously applied the law to the
facts as found by them. Any party may apply to any New Jersey federal
or state court having jurisdiction for entry and enforcement of judgment
based on the award. The parties shall initially share, equally, all
costs, expenses and fees related to the arbitration (including the
arbitrators' fees but excluding their own attorney's fees and witness
fees), pending final allocation of such costs, expenses and fees by the
arbitrators as part of their award.
32. The invalidity of any provision of this Agreement shall
not affect the validity of the remainder of this Agreement.
33. This Agreement contains the complete, final and
integrated understanding and agreement between the parties concerning
the subject matter hereof. All prior oral or written, or
contemporaneous oral representations, understandings and agreements
concerning the subject matter hereof are merged herein and superseded
hereby.
IN WITNESS WHEREOF, the parties hereto have each duly executed this
Agreement as of the date first above written.
ATTEST: INTERNATIONAL THOROUGHBRED
BREEDERS, INC.
By:
, Secretary Robert J. Quigley, President
WITNESS:
Joel H. Sterns
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
EXHIBIT 11.1
EARNINGS (LOSS) PER SHARE
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Average shares outstanding disregarding
dilutive outstanding stock options,
and preferred shares during each year 10,536,414 9,551,369 9,547,900
Dilutive stock options based on the
treasury stock method using the average
market price since it is higher than
year end price --- --- -0-
Assumed conversion of
Series A Convertible Preferred Stock --- --- ---
Shares Outstanding 10,536,414 9,551,369 9,547,900
Net Income (Loss) $ (1,069,712)$ 2,398,452 $ 2,500,595
Net Income (Loss) per Share $ (0.10)$ 0.25 $ 0.26
</TABLE>
This computation is submitted in accordance with Regulation S-K, Item 601(b)(11)
EXHIBIT 22
The following table indicates the wholly owned subsidiaries of
International Thoroughbred Breeders, Inc. and their states of incorporation.
All of such subsidiaries are wholly owned.
<TABLE>
<CAPTION>
State of
Name Incorporation
<S> <C>
International Thoroughbred Breeders Management, Inc. New Jersey
Olde English Equine Insurance Agency, Inc. New Jersey
Garden State Race Track, Inc. New Jersey
Colonial Racing Club, Inc. Pennsylvania
Philadelphia Turf Club, Inc. Pennsylvania
International Thoroughbred Gaming Development
Corporation New Jersey
Olde English Management Co, Inc. New Jersey
Freehold Racing Association New Jersey
Atlantic City Harness, Inc. New Jersey
Circa 1850, Inc. New Jersey
Orion Casino Corporation Nevada
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
(Registrant)
By/s/Joel H. Sterns By/s/Robert J. Quigley
Joel H. Sterns, Chairman of the Board Robert J. Quigley,
President and Director
Date: October 11, 1996 Date: October 11, 1996
By/s/William H. Warner
William H. Warner, Treasurer, Principal
Financial Officer and Accounting Officer
Date: October 11, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By/s/Joel H. Sterns By/s/Robert J. Quigley
Joel H. Sterns, Chairman of the Board Robert J. Quigley, President
and Director
Date: October 11, 1996 Date: October 11, 1996
By/s/Arthur Winkler By/s/Francis W. Murray
Arthur Winkler, Exec. Vice President Francis W. Murray, Director
and Director
Date: October 11, 1996 Date: October 11, 1996
By/s/Roger A. Bodman By/s/H. Steven Norton
Roger A. Bodman, Director H. Steven Norton, Director
Date: October 11, 1996 Date: October 11, 1996
By/s/Charles R. Dees, Jr. By/s/Robert D. Peloquin
Charles R. Dees, Jr., Director Robert D. Peloquin.,Director
Date: October 11, 1996 Date: October 11, 1996
By/s/Clifford A. Goldman
Clifford A. Goldman, Director
Date: October 11, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,136,356
<SECURITIES> 80,000
<RECEIVABLES> 1,912,941
<ALLOWANCES> (20,000)
<INVENTORY> 0
<CURRENT-ASSETS> 10,653,442
<PP&E> 122,206,808
<DEPRECIATION> 2,858,439
<TOTAL-ASSETS> 144,880,933
<CURRENT-LIABILITIES> 13,049,025
<BONDS> 0
0
36,246,175
<COMMON> 23,302,973
<OTHER-SE> 19,940,988
<TOTAL-LIABILITY-AND-EQUITY> 144,880,933
<SALES> 68,864,894
<TOTAL-REVENUES> 69,119,957
<CGS> 23,309,829
<TOTAL-COSTS> 59,062,471
<OTHER-EXPENSES> 10,899,331
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,140,665
<INCOME-PRETAX> (841,845)
<INCOME-TAX> 227,867
<INCOME-CONTINUING> (1,069,712)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,069,712)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
