SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
AMENDMENT TO APPLICATION OR REPORT
FILED PURSUANT TO SECTION 12, 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
(Exact name of registrant as specified in charter)
Commission File Number: 0-9624
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items of its
Annual Report for the year ended June 30, 1995 on Form 10-K as set forth in
the pages attached hereto:
Amending Part II
Item 6 - Selected Financial Data
Item 7 - Management's Analysis of Financial Conditions
and Results of Operations
Item 8 - Financial Statements and Supplementary Data
Amending Part III
Item 13 - Certain Relationships and Related Transactions
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
International Thoroughbred Breeders, Inc.
[Registrant]
By/s/Joel Sterns____________________________
Joel H. Sterns, Chairman of the Board
By/s/Robert J. Quigley________________________
Robert J. Quigley, President
By________________________________________
William H. Warner, Principal
Financial and Accounting Officer
Date: September 20, 1996
PART II
Item 6 - SELECTED FINANCIAL DATA
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
<TABLE>
Years Ended June 30,
1995 1994
<CAPTION>
<S> <C> <C> <C> <C>
Revenue from Operations $ 55,744,950 $ 37,334,236
Investment Income Revenue 3,437,788 3,343,274
Total Revenue $ 58,182,738 $ 40,677,510
Income(Loss) from
Continuing Operations $ 2,514,052 $ 2,500,595
Net Income (Loss) $ 2,398,452 $ 2,500,595
Net Income (Loss) from
Continuing Operations
per Common Share $ 0.26 $ 0.26
Working Capital (Deficiency) $ 9,202,399 $ 16,757,837
Total Assets $ 97,469,045 $ 74,433,411
Short Term Debt $ 1,441,399 $ 40,000
Long-Term Debt $ 15,510,257 $ -0-
Shareholders' Equity $ 72,206,437 $ 69,807,985
Cash Dividends Per Share $ -0- $ -0-
Weighted Average Number
of Shares 9,551,369 9,547,900
Common Shares Outstanding 9,551,386 9,551,255
</TABLE>
<TABLE>
Years Ended June 30,
1993 1992
<CAPTION>
<S> <C> <C> <C> <C>
Revenue from Operations $ 38,478,067 $ 39,505,622
Investment Income Revenue 3,394,805 5,610,502
Total Revenue $ 41,872,872 $ 45,116,124
Income(Loss) from Continuing
Operations $ (3,543,567)$ (7,266,183)
Net Income (Loss) $ (29,410,166)$ (6,466,152)
Net Income (Loss) from
Continuing Operations per
Common Share $ (0.40)$ (1.49)
Working Capital (Deficiency) $ 14,128,362 $ (2,098,249)
Total Assets $ 72,263,542 $ 204,235,883
Short Term Debt $ 35,418 $ 2,900,896
Long-Term Debt $ 50,000 $ 24,885,264
Shareholders' Equity $ 67,307,389 $ 171,203,740
Cash Dividends Per Share $ -0- $ -0-
Weighted Average Number
of Shares 8,950,025 4,868,001
Common Shares Outstanding 9,511,415 4,869,046
</TABLE>
<TABLE>
Years Ended June 30,
1991
<CAPTION>
<S> <C> <C>
Revenue from Operations $ 67,657,622
Investment Income Revenue 3,725,168
Total Revenue $ 71,382,790
Income(Loss) from Continuing
Operations $ (10,977,558)
Net Income (Loss) $ 4,288,480
Net Income (Loss) from
Continuing Operations per
Common Share $ (2.16)
Working Capital (Deficiency) $ 2,434,656
Total Assets $ 211,083,683
Short Term Debt $ 3,883,608
Long-Term Debt $ 24,920,282
Shareholders' Equity $ 177,669,892
Cash Dividends Per Share $ -0-
Weighted Average Number
of Shares 5,090,256
Common Shares Outstanding 4,867,507
</TABLE>
(1) Total Assets and Shareholders' Equity for June 30, 1993 reflect the
effects of a quasi-reorganization of the Company's assets during the
fiscal year ended June 30, 1993. The 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
FISCAL YEAR 1995 VS. FISCAL YEAR 1994
(A) Liquidity and Capital Resources
The Company's working capital, on a consolidated basis, as of June
30, 1995, was $9,302,399 which represents a decrease of $7,455,438 from
the comparable period in the prior fiscal year. This decrease is primarily
the result of the effect of: 1) the utilization of approximately $5,300,000
in cash for the purchase of the Freehold racetrack (See Note 2); 2) a
decrease of $726,263 as a result of the effect on the Company's working
capital of current liabilities exceeding current assets for the Freehold
Raceway operation at June 30, 1995; and 3) an increase in the utilization
of approximately $950,000 related to the pursuit of casino development
under the direction of the International Thoroughbred Gaming Development
Corporation subsidiary. The Company is committed to a minimum of $400,000
in additional expenses related to the pursuit of casino development and
other related projects.
Freehold Raceway has entered into an agreement to purchase land, previously
leased as a parking lot, at Freehold for $981,720 (See Note 19). A money
mortgage note previously executed by Freehold Raceway has a balloon payment
of $1,405,000 due on August 20, 1996 if no extension is negotiated. (See
Note 5-B)
(B) Operations
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.
FISCAL YEAR 1994 VS. FISCAL YEAR 1993
(A) Liquidity and Capital Resources
The Company's working capital, on a consolidated basis, as of June
30, 1994, was $16,757,857. The Company's working capital position
increased $2,629,475 for this fiscal year as compared to the fiscal year
ended June 30, 1993 primarily as a result of a positive cash flow from
operations and gains realized from trading securities. The Company is
committed to a minimum of $550,000 in expenses related to the pursuit of
casino development under the direction of the newly created International
Thoroughbred Gaming Development Corporation subsidiary.
(1) Racetrack Segment
The working capital of the racetrack segment increased $708,616,
before interest due to the parent, as a primary result of earnings for the
year. The Company is committed to spending a minimum of $330,000 in
connection to the development of the 56 acre parcel of racetrack property
as a retail shopping center.
(2) Thoroughbred Horse Breeding Segment
At June 30, 1994, the Company owned two thoroughbred broodmares, four
stallion shares in four thoroughbred stallions, one season, one yearling,
one other horse and a two thirds interest in one other horse.
The sale of a broodmare or stallion share, reduces the producing
assets of the Company and would have an effect on future earnings; the sale
of foals would not. During fiscal 1993 and 1994, the Company continued a
reduction of its bloodstock holdings begun during fiscal 1986 in response
to what management believed to be a long term downturn in the bloodstock
market and the continuing need to raise cash for the operating requirements
of the racetracks. The Company plans to continue its bloodstock reduction
program in fiscal 1995.
(B) Operations
During the year ended June 30, 1994, the Company realized after tax
income of $2,500,596 in comparison to a loss after taxes in the prior
fiscal year of $29,410,166. The change from a significant net loss to net
income is primarily the result of: 1) a significant decrease in
depreciation expense as a result of the quasi-reorganization at June 30,
1993; 2) reduced interest expense as a result of the extinguishment of the
debt on the Garden State Park racetrack; 3) operating profits before
interest due parent generated by Garden State Park and operating profits
generated by the breeding segment. Total revenues decreased by
approximately 3% from $41,872,872 in fiscal 1993 to $40,667,510 in fiscal
1994 primarily as a net result of increased revenues generated by Garden
State Park during the first half of the fiscal year reduced by a decrease
in revenues generated by Garden State Park during the second half of fiscal
1994. Total expenses decreased $7,239,524 or 16% from $45,416,439 in
fiscal 1993 to $38,176,915 in fiscal 1994 primarily as a result of
decreased depreciation and interest expense as discussed above.
During the year ended June 30, 1994, the Company realized investment
income of $3,343,274. This represents a decrease of $51,531 from the 1993
investment income of $3,394,805. The decrease is primarily the net result
of the elimination of mortgage interest as a result of the sale of the
mortgage note held on Philadelphia Park and the increase in short term
investment gains realized from trading securities. (See Note 7 of the
accompanying financial statements.)
(1) Racetrack Segment
During the year ended June 30, 1994, the racetrack segment realized
income of $818,718 before taxes as compared to a loss of $2,451,790 before
taxes for the prior fiscal year. For purposes of segment discussion,
interest expense of $628,068 for the prior fiscal year associated primarily
with the mortgage on the racetrack is recognized as a corporate expense,
not that of the racetrack segment.
During the current fiscal year (July 1, 1993 to June 30, 1994) Garden
State Park ran its ninth standardbred (harness) meet from September 8, 1993
through December 11, 1993 (55 dates) and its tenth thoroughbred meet from
January 13, 1994 through May 28, 1994 (62 dates). During these race
meetings, Garden State Park simulcasts its live racing to out-of-state
racetracks in addition to other racetracks in New Jersey. Simulcasting of
the live race meetings into certain Atlantic City casinos was also
conduted during the year. Simulcasting into the racetrack from out-of-state
racetracks and New Jersey racetracks continues throughout the fiscal year.
During the fiscal year ended June 30, 1994, Garden State Park
realized operating income of $818,718 before interest and income taxes
compared to a loss during the fiscal year ended June 30, 1993 of
$4,184,421. The change from operating losses to operating income for the
racetrack primarily reflect the effect of the quasi-reorganization which
significantly reduced depreciation expense by approximately $5,000,000.
Operating expenses decreased $1,260,597 or 5% primarily as a result of a
reduction in the cost of outside service contracts. General and
administrative expenses were reduced by $782,604 or 18% primarily as a
result of a cost reduction program in effect for the year.
The 1993 (fiscal 1994) Harness Meet (55 days) resulted in operating
income of approximately $1,146,000, compared with the 1992 Harness Meet's
(53 days) operating losses of approximately $951,000. The change primarily
reflects the significant decrease in depreciation expense as discussed
above. In addition, the racetrack experienced decreases in the average
daily attendance and handle which reduced revenues generated by live racing
offset by increased revenues generated by the simulcasting out of these
races to New Jersey and out-of-state racetracks and the Atlantic City
casinos. Daily on-track attendance and wagering at the track's 1993
Harness Meet, averaged 2,674 and $237,558, respectively, as compared to
3,330 and $303,908, respectively, during the 1992 Harness Meet.
Although Garden State Park received approval to conduct its 1994
Thoroughbred Meet on a four night per week basis for 79 nights from January
13, 1994 through May 28, 1994, racing was only conducted for 62 of those
nights due to severe weather conditions that forced the cancellation of 17
of those scheduled race dates. The 1994 Thoroughbred Meet (62 days) had an
operating loss of approximately $360,000 compared to the 1993 Thoroughbred
Meet (74 days), which had an operating loss of approximately $1,272,000.
This decrease in operating losses also primarily reflects the
significantly reduced depreciation expense as discussed above. Daily
on-track attendance and wagering at Garden State Park's 1994 Thoroughbred
Meet averaged 3,492 and $248,534, respectively. During the 1993
Thoroughbred Meet, attendance and on-track wagering averaged 4,234 and
$363,499, respectively.
During the fiscal year ended June 30, 1994 the track realized income
of approximately $35,000 during the non-racing periods between meets as
compared to a loss of approximately $1,961,000 in the prior fiscal year.
The change was primarily due to the significantly decreased depreciation
expense during this fiscal year as compared to last.
Simulcasting, both to and from other New Jersey racetracks as well as
out-of-state racetracks and casinos, accounted for approximately 75% of
revenue at Garden State Park during fiscal 1994 and 1993.
(2) Thoroughbred Horse Breeding Operations
Revenues and expenses from breeding operations for the current fiscal
year ended June 30, 1994 were approximately 1% of total revenues and
expenses of the Company for the period.
Revenues from breeding operations for the fiscal years ended June 30,
1994 and 1993 were $573,323 and $273,499, respectively, representing an
increase of $299,824 primarily of the increased value of the breeding stock
sold during comparable periods.
As a result of the Company having a lower cost basis in the breeding
stock sold during the 1994 fiscal year as compared to fiscal 1993, the cost
of revenues generated by the breeding segment in the current fiscal year
was $166,649, representing a $130,229 or 44% decrease in comparison to last
fiscal year. Operating and depreciation expenses for the current fiscal
year were $167,370 representing a $162,034 or 49% decrease from the prior
fiscal year due to the number of animals owned during the periods being
significantly reduced.
The breeding segment realized income before taxes of $171,336 as
compared to a loss before taxes of $429,697 for the prior fiscal year,
primarily reflecting the increase in revenues and decrease in expenses
during fiscal 1994 as discussed above.
Item 8. Financial Statements and Supplementary Data.
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,
1995 and 1994, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the period
ended June 30, 1995. 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, 1995 and 1994, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended June 30, 1995, in
conformity with generally accepted accounting principles.
MORTENSON AND ASSOCIATES, P.C.
Certified Public Accountants
Cranford, New Jersey
September 25, 1995
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1995 AND 1994
ASSETS
<TABLE>
June 30, June 30,
1995 1994
<CAPTION>
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash $ 4,167,811 $ 2,683,361
Short-Term Investments 7,633,483 13,392,730
TOTAL CASH AND CASH EQUIVALENTS 11,801,294 16,076,091
Restricted Cash and Investments 2,151,411 2,690,072
Accounts Receivable - Net 2,285,792 937,921
Prepaid Expenses 1,143,007 907,654
Other Current Assets 22,795 52,142
TOTAL CURRENT ASSETS 17,404,299 20,663,880
LAND, BUILDINGS, EQUIPMENT AND LIVESTOCK:
Land and Buildings 74,296,090 52,133,715
Equipment 3,666,168 1,800,630
Livestock 17,517 187,951
TOTAL LAND, BUILDINGS, EQUIPMENT
AND LIVESTOCK 77,979,775 54,122,296
LESS: Accumulated Depreciation 1,570,024 801,031
TOTAL LAND, BUILDINGS, EQUIPMENT
AND LIVESTOCK - NET 76,409,751 53,321,265
OTHER ASSETS:
Deposits and Other Assets 392,531 448,266
Goodwill - Net 3,262,464 0
TOTAL OTHER ASSETS 3,654,995 448,266
TOTAL ASSETS $ 97,469,045 $ 74,433,411
See Notes to Financial Statements.
</TABLE>
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1995 AND 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
June 30, June 30,
1995 1994
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C> <C> <C>
Accounts Payable and Accrued Expenses $ 6,656,061 $ 3,866,043
Notes and Mortgages Payable -
Current Portion 1,341,399 40,000
State Income Taxes Payable 115,600 0
TOTAL CURRENT LIABILITIES 8,113,060 3,906,043
DEFERRED INCOME 1,550,451 719,383
NOTES AND MORTGAGES PAYABLE - Long
Term Portion 15,599,097 0
COMMITMENTS AND CONTINGENCIES 0 0
SHAREHOLDERS' EQUITY:
Series A (Convertible) Preferred
Stock $100.00 Par Value,Authorized
500,000 Shares, Issued and Outstanding,
362,450 and 362,443 Shares, Respectively 36,244,975 36,244,275
Common Stock $2.00 Par Value, Authorized
25,000,000 Shares,Issued and Outstanding,
9,551,386 and 9,551,255 Shares,
Respectively 19,102,771 19,102,509
Capital in Excess of Par 11,959,643 11,960,605
Retained Earnings (subsequent to
June 30, 1993, date of quasi-reorganization,
total deficit eliminated $102,729,936) 4,899,048 2,500,596
TOTAL SHAREHOLDERS' EQUITY 72,206,437 69,807,985
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 97,469,045 $ 74,433,411
</TABLE>
See Notes to Financial Statements.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
Years Ended June 30,
1995 1994
<CAPTION>
REVENUES:
<S> <C> <C> <C> <C>
Revenue from Operations $ 55,744,950 $ 37,334,236
Investment Income 3,437,788 3,343,274
TOTAL REVENUES 59,182,738 40,677,510
EXPENSES:
Cost of Revenues 17,342,134 10,416,610
Operating Expenses 29,892,282 22,088,521
Depreciation & Amortization 965,026 544,344
General & Administrative Expenses 7,912,445 5,127,440
Interest Expense 556,799 0
TOTAL EXPENSES 56,668,686 38,176,915
INCOME (LOSS) FROM OPERATIONS BEFORE
TAXES, NON-OPERATING INCOME (LOSS) AND
EXTRAORDINARY ITEM 2,514,052 2,500,595
NON-OPERATING LOSS 0 0
INCOME (LOSS) BEFORE TAXES AND
EXTRAORDINARY ITEM 2,514,052 2,500,595
LESS: Income Tax Expense 115,600 0
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 2,398,452 2,500,595
EXTRAORDINARY ITEM:
Gain on Extinguishment of Debt 0 0
NET INCOME (LOSS) $ 2,398,452 $ 2,500,595
PER SHARE:
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM $ 0.25 $ 0.26
NET INCOME (LOSS) $ 0.25 $ 0.26
See Notes to Financial Statements.
</TABLE>
<TABLE>
Years ended June 30,
1993
<CAPTION>
REVENUES:
<S> <C> <C>
Revenue from Operations $ 38,478,067
Investment Income 3,394,805
TOTAL REVENUES 41,872,872
EXPENSES:
Cost of Revenues 9,970,694
Operating Expenses 23,308,378
Depreciation & Amortization 5,601,887
General & Administrative Expenses 5,896,787
Interest Expense 638,693
TOTAL EXPENSES 45,416,439
INCOME (LOSS) FROM OPERATIONS BEFORE
TAXES, NON-OPERATING INCOME (LOSS) AND
EXTRAORDINARY ITEM (3,543,567)
NON-OPERATING LOSS (27,599,230)
INCOME (LOSS) BEFORE TAXES AND
EXTRAORDINARY ITEM (31,142,797)
LESS: Income Tax Expense 0
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM (31,142,797)
EXTRAORDINARY ITEM:
Gain on Extinguishment of Debt 1,732,631
NET INCOME (LOSS) $ (29,410,166)
PER SHARE:
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM $ (3.48)
NET INCOME (LOSS) $ (3.29)
See Notes to Financial Statements.
</TABLE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
Common
Number of
Shares Amount
<CAPTION>
<S> <C> <C>
BALANCE - JUNE 30, 1992 4,869,046 9,738,092
Sale of Common Stock From
Rights Offering 4,640,103 9,280,206
Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse
Stock Split effected on March
13,1992 278 556
Exchange of Preferred Stock
for Common Stock 1,988 3,976
Quasi-reorganization
Revaluation adjustments, net --- ---
Transfer to additional capital --- ---
Net (Loss) for the Year Ended
June 30, 1993 --- ---
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 211 422
13, 1992
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
See Notes to Financial Statements.
</TABLE>
<TABLE>
Preferred
Number of
Shares Amount
<CAPTION>
<S> <C> <C>
BALANCE - JUNE 30, 1992 445,371 44,537,075
Sale of Common Stock From
Rights Offering --- ---
Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse
Stock Split effected on March
13, 1992 251 25,100
Exchange of Preferred Stock for
Common Stock (3,958) (395,800)
Quasi-reorganization
Revaluation adjustments, net --- ---
Transfer to additional capital --- ---
Net (Loss) for the Year Ended
June 30, 1993 --- ---
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
See Notes to Financial Statements.
</TABLE>
<TABLE>
Capital
in Excess Retained
of Par Earnings
<CAPTION>
<S> <C> <C>
BALANCE - JUNE 30, 1992 190,248,343 (73,319,770)
Sale of Common Stock From
Rights Offering (286,377) ---
Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse Stock Split
effected on March 13, 1992 (25,656) ---
Exchange of Preferred Stock
for Common Stock 391,824 ---
Quasi-reorganization
Revaluation adjustments, net (83,480,014) ---
Transfer to additional capital (102,729,936) 102,729,936
Net (Loss) for the Year Ended
June 30, 1993 --- (29,410,166)
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 --- 2,500,596
BALANCE - JUNE 30, 1994 11,960,605 2,500,596
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 --- 2,398,452
BALANCE - JUNE 30, 1995 11,959,643 4,899,048
See Notes to Financial Statements.
</TABLE>
<TABLE>
Total
<CAPTION>
<S> <C>
BALANCE - JUNE 30, 1992 171,203,740
Sale of Common Stock From
Rights Offering 8,993,829
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 ---
Quasi-reorganization
Revaluation adjustments, net (83,480,014)
Transfer to additional capital 0
Net (Loss) for the Year Ended
June 30, 1993 (29,410,166)
BALANCE - JUNE 30, 1993 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
BALANCE - JUNE 30, 1994 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
BALANCE - JUNE 30, 1995 72,206,437
See Notes to Financial Statements.
</TABLE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
Years Ended June 30,
1995 1994
<CAPTION>
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Cash Received from Customers $ 56,605,775 $ 36,888,487
Cash Paid to Suppliers and Employees (57,406,149) (38,174,512)
Interest Received 677,488 420,460
Mortgage Interest Received 0 0
Interest Paid (160,674) 0
Cash Used to Purchase Trading Securities (1,634,000) (7,225,000)
Cash Received from Sale of Trading
Securities 4,498,485 10,107,546
Change in Restricted Cash & Investments (21,339) (745,055)
NET CASH PROVIDED BY OPERATIONS 2,559,585 1,271,926
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Livestock 178,359 473,164
Proceeds from Sale of Equipment 8,500 67,000
Decrease in Mortgage Receivable 0 0
Purchase Freehold Racetrack -
Net of Cash Received (94,602) 0
Capital Expenditures (1,090,904) (1,019,886)
(Increase)Decrease in Other
Investment Activity (187,188) (18,349)
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (1,185,835) (498,071)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of Common Stock 0 0
Principal Payments on Acquired Debt
Freehold (5,169,098) 0
Principal Payments on Long Term Notes (479,449) (35,418)
NET CASH USED BY FINANCING ACTIVITIES (5,648,547) (35,418)
NET INCREASE(DECREASE) IN CASH AND
CASH EQUIVALENTS (4,274,797) 738,437
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 16,076,091 15,337,655
CASH AND CASH EQUIVALENTS AT
END OF THE YEAR $ 11,801,294 $ 16,076,091
See Notes to Financial Statements.
</TABLE>
<TABLE>
Years Ended June 30,
1993
<CAPTION>
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Cash Received from Customers $ 38,497,194
Cash Paid to Suppliers and Employees (39,474,874)
Interest Received 311,251
Mortgage Interest Received 3,591,983
Interest Paid (638,693)
Cash Used to Purchase Trading Securties 0
Cash Received from Sale of Trading
Securities 0
Change in Restricted Cash & Investments (386,739)
NET CASH PROVIDED BY OPERATIONS 1,900,122
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Livestock 233,154
Proceeds from Sale of Equipment 42,879
Decrease in Mortgage Receivable 27,264,042
Purchase Freehold Racetrack - Net
of Cash Received 0
Capital Expenditures (300,285)
(Increase)Decrease in Other Investment
Activity 11,758
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES 27,251,548
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of Common Stock 8,993,830
Principal Payments on Acquired Debt
Freehold 0
Principal Payments on Long Term Notes (24,600,000)
NET CASH USED BY FINANCING ACTIVITIES (15,606,170)
NET INCREASE(DECREASE) IN CASH AND
CASH EQUIVALENTS 13,545,500
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 1,792,155
CASH AND CASH EQUIVALENTS AT
END OF THE YEAR $ 15,337,655
See Notes to Financial Statements
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
Years Ended June 30,
1995 1994
<CAPTION>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
NET INCOME (LOSS) $ 2,398,452 $ 2,500,596
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization 965,026 544,344
(Gain)Loss on Disposal of Investment 0 164,478
(Gain)Loss on Sale of Buildings &
Equipment (3,314) (8,000)
(Gain) Loss on Sale of Livestock (110,024) (330,534)
Non Operating (Income)Loss 0 0
Extraordinary Item 0 0
Changes in Assets and Liabilities -
(Increase)Decrease in Restricted Cash (21,339) (745,055)
(Increase)Decrease in Accounts Receivable 12,576 (222,198)
(Increase)Decrease in Mortgage Receivable 0 0
(Increase)Decrease in Other Assets 102,324 146,129
(Increase)Decrease in Notes Payable 479,449 0
(Increase)Decrease in Accrued Interest 44,185 (40,268)
(Increase)Decrease in Inventory (32,416) 7,155
(Increase)Decrease in Prepaid Expenses (138,661) (211,835)
Increase(Decrease) in Account Payable
and Accrued Expenses (1,967,740) (837,528)
Increase(Decrease) in Deferred Income 831,068 304,642
TOTAL ADJUSTMENTS 161,134 (1,228,670)
NET CASH PROVIDED(USED) BY OPERATING
ACTIVITIES $ 2,559,585 $ 1,271,926
See Notes to Financial Statements.
</TABLE>
<TABLE>
Years Ended June 30,
1993
<CAPTION>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
<S> <C> <C>
NET INCOME (LOSS) $ (29,410,166)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization 5,601,887
(Gain)Loss on Disposal of Investment 0
(Gain)Loss on Sale of Buildings &
Equipment 2,136
(Gain) Loss on Sale of Livestock 52,042
Non Operating (Income)Loss 27,599,230
Extraordinary Item (1,732,631)
Changes in Assets and Liabilities -
(Increase)Decrease in Restricted Cash (386,739)
(Increase)Decrease in Accounts Receivable 99,682
(Increase)Decrease in Mortgage Receivable 264,042
(Increase)Decrease in Other Assets (34,979)
(Increase)Decrease in Notes Payable 0
(Increase)Decrease in Accrued Interest 512,600
(Increase)Decrease in Inventory 2,722
(Increase)Decrease in Prepaid Expenses (11,806)
Increase(Decrease) in Account Payable
and Accrued Expenses (853,375)
Increase(Decrease) in Deferred Income 195,477
TOTAL ADJUSTMENTS 31,310,288
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 1,900,122
See Notes to Financial Statements.
</TABLE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1995, 1994, AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Consolidation - The accounts of all wholly owned subsidiaries are
included in the consolidated financial statements. All material intercompany
transactions have been eliminated.
(B) Classifications - Certain prior year amounts have been reclassified
to conform with the current year's presentation.
(C) Allowance for Bad Debts - The Company recognizes bad debts on the
allowance method. Bad debt allowance for fiscal years ended June 30, 1995 and
1994 was $20,000.
(D) Goodwill - Goodwill is the excess of the cost of acquired net assets
over their fair value. It is being amortized over 30 years under the straight
line method. Accumulated amortization at June 30, 1995 is $58,165.
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
(E) 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 are recognized as they actually occur
throughout the year. Deferred income primarily consists of prepaid purse
income.
(F) 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.
(G) Cash Flows - The Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
(H) Concentrations of Credit Risk - As of June 30, 1995, 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.
The Company believes no significant concentration of credit risk exists with
respect to these cash investments.
(2) STOCK PURCHASE OF FREEHOLD RACEWAY
On February 2, 1995, ITB completed the purchase of all of the
outstanding stock of Freehold Racing Association ("FRA") and Atlantic City
Harness, Inc., ("ACH") the operating companies of Freehold Raceway, and CIRCA
1850, Inc., a small real estate holding company, (herein and after
collectively referred to as Freehold Raceway) from an unrelated party. FRA
and ACH will continue to hold the racing permits and conduct the racing
programs at Freehold Raceway.
The purchase price of the stock was $17.8 million with approximately
$2.7 million paid in cash and the balance financed with the seller by: 1) an
eight year, $12.5 million note at eighty percent of the prevailing prime rate,
not to exceed six percent; and 2) an eleven and one half year $2.6 million
promissory note at eighty percent of the prevailing prime rate. The note is
secured by a mortgage on the land and buildings at Freehold Raceway and other
collateral including 2,000,000 shares of ITB's Common Stock pledged by ITB's
principal stockholder. (See Note 5-A) The transaction, completed on February
2, 1995, was effective as of January 1, 1995. The results of operations of
FRA for six months are included in the consolidated statement of operations
for the year ended June 30, 1995.
The total cost of $18,153,480 exceeded the fair value of net assets
acquired by $3,317,628, which is presented as goodwill in the accompanying
financial statements. (See Note 1-D).
The following unaudited pro forma combined results of operations account
for the acquisition as if it had occurred on July 1, 1993. The pro forma
results give effect to depreciation of fixed assets purchased, amortization of
goodwill, and interest expense.
<TABLE>
International Thoroughbred Breeders, Inc.
Pro Forma Combined Results of Operations
For The Years Ended June 30,
1995 1994
<CAPTION>
<S> <C> <C>
Total Revenues $ 81,708,421 $73,421,902
Net Earnings 4,327,260 4,389,154
Net Earnings
Per Common Share $ 0.45 $ 0.46
Weighted Average Number of Shares
Outstanding 9,551,369 9,547,900
</TABLE>
These pro forma amounts may not be indicative of results that actually
would have occurred if the combination had been in effect on the dates
indicated or which may be obtained in the future.
(3) INVESTMENTS
Short term investments, classified as cash equivalents, consist of
interest bearing certificates of deposit, repurchase agreements and commercial
paper, whose cost approximates fair value.
(4) LAND, BUILDINGS, EQUIPMENT AND LIVESTOCK
For the fiscal year ended June 30, 1995 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. A summary
of livestock, equipment, land and buildings and depreciation recorded for the
fiscal year ended June 30, 1995 and 1994, is as follows:
<TABLE>
Accumulated
June 30,1995 Adjusted Depreciation Depreciation June
Class Basis Charged 30, 1995
<CAPTION>
<S> <C> <C> <C>
Land $ 45,605,000 $ N/A $ N/A
Building & Improvement (A) 28,691,090 685,154 1,222,800
Furniture, Fixtures,
Machinery & Equipment 3,666,168 220,709 346,224
Broodmares
& Other Horses (B) 17,517 1,000 1,000
Stallion Shares 0 0 0
Totals $ 77,979,775 $ 906,863 $ 1,570,024
</TABLE>
<TABLE>
Accumulated
June 30, 1994 Adjusted Depreciation Depreciation June
Class Basis Charged 30, 1994
<CAPTION>
<S> <C> <C> <C>
Land $ 38,000,000 $ N/A $ N/A
Building & Improvements (A) 14,133,715 427,048 537,646
Furniture, fixtures,
Machinery & Equipment 1,800,630 109,046 136,387
Broodmares
& Other Horses (B) 56,954 0 0
Stallion Shares 130,997 8,250 126,998
Totals $ 54,122,296 $ 544,344 $ 801,031
</TABLE>
(A) Includes property not yet placed in service costing $21,520 and $439,694
as of June 30, 1995 and 1994 respectively, on which no depreciation was taken.
(B) Includes horses costing $7,521 and $56,952 as of June 30, 1995 and 1994
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.
(5) NOTES AND MORTGAGES PAYABLE
( A ) On February 2, 1995, the Company entered into an agreement with
the former owner of FRA whereby the $12.5 million balance of the purchase
price of the Freehold Raceway (See Note 2) was financed by an eight year
promissory note at 80 percent of the prevailing prime rate, adjusted on each
anniversary date, not to exceed 6 percent. Yearly principal and interest
payments during the first five (5) years commencing January 31, 1996 shall be
paid based upon a twenty (20) year principal amortization schedule. During
each of the next three (3) years, commencing January 21, 2001, yearly principal
and interest payments shall be based upon a ten (10) year amortization
schedule. On December 31, 2003, the entire unpaid principal balance, together
with any accrued interest, becomes due and payable. At January 31, 1995, the
prime rate was 8.5 percent, therefore interest due on the note for the first
year shall be calculated at 6 percent. The note is secured by a mortgage on the
land and buildings at Freehold Raceway and other collateral. At June 30,
1995, $625,000 of the principal balance was classified as short term and
$11,875,000 was classified as long term.
( B ) On February 2, 1995, the Company and the seller of FRA each
advanced to FRA $2,584,549 to retire the $5.2 million existing debt on FRA.
The seller and ITB received from FRA promissory notes evidencing the
indebtedness secured by mortgages on the racetrack property and other
collateral. Equal monthly principal installments of $18,750 beginning on
March 1, 1995 shall be paid to the seller together with accrued interest.
Interest shall be calculated at 80% of the prime rate at January 31 of each
year. The first year interest payments shall be calculated at 6.8 percent.
At June 30, 1995, $225,000 of the principal balance was classified as short
term and $2,265,799 was classified as long term.
( C ) On August 24, 1994, FRA 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 entire unpaid principal
balance, scheduled to be $1,405,000 if no extension is negotiated, together
with any accrued interest, becomes due and payable. At June 30, 1995,
$480,000 of the principal balance was classified as short term and $1,445,000
was classified as long term.
Notes and Mortgages Payable are summarized below:
<TABLE>
June 30, 1995
Interest % Current Long-term
<CAPTION>
Freehold
Raceway:
<S> <C> <C>
Mortgage (A) 80% of Prime $ 625,000 $ 11,875,000
(not to exceed 6%)
Mortgage (B) 80% of Prime 225,000 2,265,799
Note (C) Prime 480,000 1,445,000
Notes-Other Various 11,399 13,298
Garden State
Park:
Notes N/A -0- -0-
Totals $ 1,341,399 $ 15,599,097
</TABLE>
<TABLE>
June 30, 1994
Interest % Current Long-Term
<CAPTION>
Freehold
Raceway:
<S> <C> <C>
Mortgage (A) 80% of Prime $ -0- $ -0-
(not to exceed 6%)
Mortgage (B) 80% of Prime -0- -0-
Note (C) Prime -0- -0-
Notes-Other Various -0- -0-
Garden State
Park:
Notes N/A 40,000 -0-
Totals $ 40,000 $ -0-
</TABLE>
<TABLE>
Annual maturities of the Company's consolidated long-term debt as of June 30,
1995 are as follows:
<CAPTION>
<S> <C>
To June 30, 1997 $ 2,306,399
To June 30, 1998 851,899
To June 30, 1999 850,000
To June 30, 2000 850,000
To June 30, 2001 850,000
Future Payments 9,890,799
Total $15,599,097
</TABLE>
(6) COMMITMENTS AND CONTINGENCIES
The Company announced on March 22, 1994, an offer to purchase The
Meadowlands Sports Complex and Monmouth Park for $1 Billion from the New Jersey
Sports and Exposition Authority ("NJSEA"). An alternative offer also was
made to purchase Monmouth Park and The Meadowlands Race Track improvements
for $125 million and to enter into a long-term lease for the Meadowlands Race
Track for $50 million per year. The offer is subject, among other conditions,
to adoption by the voters of the State of New Jersey of an appropriate
constitutional amendment authorizing the casino gaming at the Meadowlands and
Garden State Park racetracks. ITB acquired options to purchase Atlantic City
Race Course and Freehold Raceway. The option on the Atlantic City Race
Course was allowed to expire on March 18, 1995 and there are no plans
presently contemplated with regard to renegotiating the option. The option
to purchase Freehold Raceway was exercised and completed on February 2, 1995
(See Note 2). Assuming acceptance of the Company's offer by the NJSEA, and
the adoption of the said constitutional amendment, the Company proposes to
construct interactive gaming complexes that combine racing, casino gaming and
entertainment on land presently used to stable and train horses at The
Meadowlands and Garden State Park. The ITB offer proposes that up to 12
casinos be constructed and operated in the current stable area of each
racetrack. The existing operating, licensed casino owners/operators in
Atlantic City, New Jersey would be offered the opportunity to own and
operate all of those casinos with the Company paid rent by the casino
operators. The plan does provide that tracks can operate casinos within
racetrack structures. Monmouth Park would serve as the backstretch and
training centers for The Meadowlands and Garden State Park. There has been
no indication that the Sports Authority intends to treat the Company's
proposal favorably. No assurances can be given as to
the outcome of the Company's proposal.
The Company formed a wholly owned subsidiary, International Thoroughbred
Gaming Development Corporation (ITG), which is responsible for implementing the
development of casino gaming business opportunities. In addition to the funds
expended during the last two fiscal years of approximately $1,150,000 the
Company is committed to approximately $400,000 in expenses, related to the
development of the above described project and other casino gaming business
opportunities. The Company's financial commitment could increase if
circumstances warrant.
No assurances can be given that the Company's offer will be accepted or
that the constitutional amendment will be placed on the ballot or adopted.
Furthermore, even assuming such acceptance and adoption, no assurance can be
given that the Company will be able to obtain the required financing.
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
at 50 Broadway, New York, New York, under its subsidiary, Olde English
Management, Inc. The two year lease provides for a monthly rent of $18,168.75
beginning August, 1995.
The following summarizes the commitments on all contracts:
<TABLE>
Year Ended June 30:
<CAPTION>
<C> <C>
1996 $2,674,400
1997 2,297,554
1998 947,554
1999 500,000
2000 500,000
Subsequent to June 30,
2000 457,000
</TABLE>
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, 1995, the Company is contingently liable for approximately $2,200,000
if this agreement were to be terminated.
Racing dates at Garden State Park and Freehold Raceway are awarded each
year at the discretion of the State Racing Commission.
On August 16, 1986, a putative "class action" was filed against the
Company, its Garden State Race Track, Inc. subsidiary, First Jersey
Securities, Inc. ("First Jersey"), two other broker-dealers, the Company's
Chairman of the Board and principal stockholder, and ten other present and
former directors of the Company alleging various violations of federal
securities laws and other statutes. On July 8, 1987, another putative "class
action" was filed against the Company, First Jersey, another broker-dealer,
the Company's Chairman of the Board and principal stockholder, and six
other present and former directors of the Company alleging various violations of
federal securities laws and other statutes. During fiscal 1988, based upon a
change of venue motion which had been filed by the Company, the U.S. District
Court transferred both cases from the Southern District of New York to the
District of New Jersey. On June 7, 1988 a consolidated amended complaint was
filed by the plaintiffs in the two putative "class action" suits described
above in federal court in Trenton. This complaint was substantially similar
to the original suits filed separately except to name eleven current and
former directors as defendants. On July 27, 1989, based upon motions which
had been filed by the Company, the United States District Court, District of
New Jersey dismissed several, but not all, of the claims and allegations
contained in the consolidated amended complaint. On October 20, 1993, the
United States District Court for the District of New Jersey signed an order
granting preliminary approval to a proposed partial settlement of the claims.
Although the Company believes this lawsuit is totally without merit, it has
incurred approximately $1,150,000 in legal expense in defending against the
lawsuit and would have been required to expend significant additional amounts to
continue the defense through trial. In order to avoid further expense,
inconvenience and delay and to dispose of this expensive, burdensome and
protracted litigation, the Company executed a proposed partial Settlement
Agreement. The proposed partial settlement required the Company to make a
$250,000 settlement payment and an additional payment of up to $150,000
contingent upon receipt of future amounts by the Company from its sale of the
Philadelphia Park mortgage note. On January 25, 1995, the Company agreed to
modify the terms of the agreement pertaining to the Philadelphia Park
mortgage note which provides that no additional pyaments will be made. The
settlement disposes of all class claims made against the Company, its
officers and directors and all derivative claims made on behalf of the
Company against all parties in the litigation. As part of the proposed
settlement, the Company's directors and officers' liability insurance
carrier will pay $3,125,000 plus an additional $4,125,000 which latter amount is
subject to reduction on a dollar for dollar basis in the event of collections
from certain non-settling defendants. On April 12, 1994, an order was
entered approving the settlement agreement and entering a final judgment of
dismissal of the plaintiffs claims against the Company and the Director
defendants in their capacity as officers and directors of the Company.
Certain non-settling defendants appealed the order approving the settlement.
On March 27, 1995, the United States Court of Appeals for the Third Circuit
affirmed the district court's approval of the settlement.
On January 25, 1995 the Company agreed to modify certain terms of: 1) the
asset purchase agreement dated October 12, 1990 relating to the sale of its
Philadelphia Park subsidiary; and 2) the agreement whereby the Company
assigned its rights under the purchase money mortgage and note it held on
Philadelphia Park. Under the terms of this modification, the Company is
released from all liability for environmental clean-up at Philadelphia Park
to the extent that such clean-up costs exceed $370,500 (previously the
Company had been responsible for up to $3.35 million in clean-up costs).
In consideration for this release, the Company has waived its right to:
1) certain fees that it was entitled to receive under the asset purchase
agreement based upon a percentage of Philadelphia Park's handle when
operating in competition with Garden State Park; and 2) all future
contingent payments due the Company in connection with its sale of the
Philadelphia Park mortgage note based upon possible future profitable
operations of Philadelphia Park. The Company retained the right to receive
an accounting from the assignee of the Philadelphia Park mortgage note so
that the Company may determine to what extent, if any, an amount equal to the
1994 and 1995 contingent fees are payable under the terms of the proposed
partial settlement of the putative "class action".
The assignee of the Philadelphia Park mortgage note has provided said
accountings and no contingent fees would have been due for 1994 and 1995.
Consequently, no additional payments will be made in settlement of the
above-described legal action. (See Part I, Item 3 Legal Proceedings.)
(7) INVESTMENT INCOME
Investment income consists primarily of gains realized on trading
securities. In computing the realized gain, cost was determined under the
specific identification method.
(8) PRIOR YEAR INFORMATION
During the third quarter of fiscal 1993, the Company incurred a
non-operating loss of $27,599,230 as a result of the sale of Philadelphia Park
racetrack mortgage. A portion of the proceeds was used to retire the debt on the
Garden State Park racetrack. As a result of the early debt extinguishment at a
discount, the Company realized an extraordinary item of $1,732,631.
(9) ACQUISITIONS AND DISPOSITIONS
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 other collateral including 2,000,000 shares
of ITB's Common Stock pledged by ITB's principal stockholder. The transaction,
completed on February 2, 1995, was effective as of January 1, 1995. At
closing, $5.2 million of debt was retired with the Company and the seller
each advancing to FRA approximately $2.6 million. The seller and ITB received
from FRA promissory notes evidencing the indebtedness secured by the same
collateral securing the above described $12.5 million note. (See Notes 2 & 5)
Approximately $660,000 in equipment, furniture and fixtures was acquired in
connection with improvements and replacements necessary to maintain operations
at the Company's subsidiaries. In addition, $88,000 of capital was used for the
continuation of real estate development at the Garden State Park racetrack and
approximately $343,000 was used in connection with improvements of racetrack
property at Garden State Park and Freehold Raceway.
Fiscal 1994
In the fiscal year ended June 30, 1994 approximately $461,780 in equipment,
furniture and fixtures was acquired in connection with improvements and
replacements necessary to maintain operations. In addition, $394,715 of
capital was used for the continuation of real estate development at the
racetrack and approximately $45,000 was used in connection with improvements of
racetrack property.
Fiscal 1993
On January 22, 1993, the Company sold its interest in the purchase money,
non-recourse mortgage note held on Philadelphia Park for $27,000,000 in cash.
In addition, non-cumulative contingent payments of up to a maximum aggregate
amount of $10,000,000 were scheduled to have been paid to the Company for the
next seven years. These payments were scheduled to be up to $2,000,000 with
respect to each calendar year from 1993 through 1995 and of up to $1,000,000
with respect to each calendar year from 1996 through 1999 in the event
Greenwood and its subsidiaries achieve certain "Adjusted Earnings". The original
agreement was modified so that no additional payment will be made. (See Note 6)
The principal balance due at the time of the sale was $55,655,958. The Company
incurred a $28,655,958, non-operating loss as a result of the sale. Deferred
income tax expense of $1,056,728 was also eliminated as a result of this
transaction. Consequently, the Company incurred a net $27,599,230 non-operating
loss.
(10) INCOME TAXES
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 the
quasi-reorganization, will be excluded from the results of operations and
credited to paid in capital.
Freehold Raceway incurred a state income tax liability for the six months
of the Company's ownership during the fiscal year 1995 and does not have the
benefit of any state income tax loss carryforwards to offset this liability.
A provision of $115,600 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,
1995 1994 1993
<CAPTION>
<S> <C> <C> <C>
Income Taxes at the Federal
Statutory Rate $ 815,473 $ 850,202 $ -0-
Utilization of Tax Depreciation (815,473) (850,202) -0-
State Income Tax - Net of
Federal Tax Benefit 115,600 -0- -0-
Provisions for Income Taxes $ 115,600 $ -0- $ -0-
</TABLE>
At June 30, 1993, the Company went through a quasi-reorganization
(See Note 18) in accordance 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
$166,800,000 at June 30, 1995, expiring in the years after June 30, 2001
through June 30, 2009.
SFAS No. 109 requires the establishment of a deferred tax asset for all
deductible temporary differences and operating loss carryforwards. Because of
the uncertainty that the Company will generate income in the future sufficient
to fully or partially utilize these carryforwards, however, any deferred tax
asset 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.
The following summarizes the operating tax loss carry forwards by year of
expiration.
<TABLE>
EXPIRATION DATE OF
AMOUNT TAX LOSS CARRYFORWARD
<CAPTION>
<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
$45,333,941 7/1/2007 through 7/1/2010
</TABLE>
(11) EARNINGS (LOSS) PER SHARE
The earnings (loss) per share for the fiscal years ended June 30, 1995,
1994 and 1993 was computed by dividing the earnings (loss) applicable to common
stock by the weighted average number of common shares outstanding during each
fiscal year (9,551,369 shares, 9,547,900 shares and 9,950,025 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 1995 and 1994
computations.
(12) QUARTERLY FINANCIAL DATA (UNAUDITED)
The following quarterly financial data is unaudited, but in the opinion of
management includes all necessary adjustments for a fair presentation of the
interim results.
<TABLE>
4th 3rd 2nd 1st
Quarter Quarter Quarter Quarter
Fiscal 1995
<CAPTION>
<S> <C> <C> <C> <C>
Revenues $ 15,606,532 $ 21,527,590 $ 10,516,821 $ 7,094,007
Gross Profit $ 11,318,717 $ 13,986,608 $ 7,281,861 $ 5,815,630
(Aproximate)
Net Profit\(Loss) $ 1,276,215 $ 717,760 $ 357,866 $ 46,610
Net Profit\(Loss)
Per Share $ .13 $ .08 $ .04 $ .00
</TABLE>
<TABLE>
4th 3rd 2nd 1st
Quarter Quarter Quarter Quarter
Fiscal 1994
<CAPTION>
<S> <C> <C> <C> <C>
Revenues $ 9,961,805 $ 8,628,778 $ 11,282,588 $ 7,461,065
Gross Profit $ 6,879,022 $ 6,031,956 $ 7,634,399 $ 6,372,250
(Approximate)
Net Profit\(Loss) $ 1,000,142 $ (873,198) $ 1,842,283 $ 531,368
Net Profit\(Loss)
Per Share $ .10 $ (.09) $ .19 $ .06
</TABLE>
(13) PENSION PLAN
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
(approximately 111), who have completed one year of service. The Company's basic
contribution under the plan is 4 percent of each covered employee's
compensation for such calendar year. In addition, the Company contributes up to
an additional 50 percent of the first 4 percent of compensation contributed by
any covered employee to the plan (an employee's maximum contribution is $9,240
factored for inflation annually). The Company's expense totaled $194,949,
$126,159 and $148,897 for the fiscal years ending June 30, 1995, 1994 and 1993,
respectively. All contributions are funded currently.
(14) INCENTIVE STOCK OPTIONS
On June 2, 1994, the Board of Directors approved the adoption of an employee
stock option plan subject to stockholder approval. A block of 475,000 shares of
common stock was reserved for options to be granted under the plan. Under the
plan, options to purchase the following number of shares were granted; 275,000
to Arthur Winkler, president of the Company, 75,000 to William H. Warner,
treasurer of the Company, 75,000 to Richard E. Orbann, general manager of
Garden State Park and 50,000 to Christopher C. Castens, secretary of the
Company. These options, exercisable for a five year period which commenced
following stockholder approval on December 20, 1994 at a price of $5.875, are
non-transferable and are only exercisable by the holder while he is employed by
the Company or a subsidiary of the Company. On March 21, 1994, the Board of
Directors granted non-transferable options to purchase
1,000,000 shares of common stock at prices ranging from $12 to $24 to Francis W.
Murray, President of International Thoroughbred Gaming Development Corporation,
a recently formed wholly owned subsidiary of ITB. These options are exercisable
during a two-year period which commenced following stockholder approval on
December 20, 1994 and only while he is employed by the Company or a subsidiary
of the Company.
(15) 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, 1995, 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>
June 30,
1995 1994 1993
<CAPTION>
<S> <C> <C> <C> <C>
Net After Tax Income (Loss) $ 201,873 $ 818,718 $ (2,451,790)
Less:
Management Fee 775,200 833,692 934,395
Interest on Advance
from Parent 12,000,184 8,291,562 8,492,569
Defined Profit (Loss)--
"Net Racetrack
Earnings (Loss)" $ (12,573,511) $(8,306,536) $(11,878,754)
</TABLE>
(16) INTEREST EXPENSE
All interest expense of the subsidiaries is considered expense of the parent
company. In addition to the interest paid each year to third party lenders, the
parent company is due interest on funds it has advanced to Freehold Raceway and
to Garden State Park for the purchase, construction and equipping of the
racetracks and funding their operations as needed. As of June 30, 1995, such
advances totaled $8,499,695 to Freehold Raceway and $152,538,000.84 to Garden
State Park, the latter being in addition to initial capitalization of
$86,130,000 provided by the net proceeds of the Company's preferred stock
offering in July, 1983. The interest on these advances is computed at the
average prime lending rate as published from time to
time by the "Wall Street Journal", Eastern Edition, which during the fiscal
year ranged between 7.25% and 9% for the year. The resulting interest owed to
the parent company for the fiscal year ended June 30, 1995 by Freehold Raceway
and Garden State Park totals $377,068 and $12,000,184, respectively.
(17) NEW AUTHORITATIVE PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities", is effective for fiscal
years beginning after December 15, 1993. The Company adopted SFAS 115 on June
30, 1994. (See Note 3) The adoption of SFAS No. 115 did not have a material
effect on the financial statements.
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires that the fair value of all financial instruments, including marketable
securities, be disclosed. SFAS No. 107 is effective for fiscal years ended
after December 15, 1992, except for entities with less than $150 million in
total assets; for those entities, the effective date is three years later
(See Note 4). The Company adopted SFAS 107 in fiscal 1993. The adoption of
SFAS No. 107 did not have a material effect on the financial statements.
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan" is effective
for fiscal years beginning after December 15, 1994. The Company does not have
any loans that are subject to an impairment assessment as defined by SFAS No.
114.
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions", is effective for fiscal years beginning after December 15, 1992.
SFAS No. 112, "Employers' Accounting for Postemployment Benefits, is effective
for fiscal years beginning after December 15, 1993. The Company does not
provide postretirement or postemployment benefits as defined by SFAS Nos. 106
and 112.
SFAS No. 121, "Accounting For the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" is effective for fiscal years beginning
after December 15, 1995. The Company will adopt SFAS 121 on July 1, 1996. The
adoption of SFAS No. 121 will not have a material effect on the financial
statements.
(18) QUASI-REORGANIZATION
The Company, with the approval of the Board of Directors, adjusted its June
30, 1993 balance sheet to fair value and transferred the accumulated deficit of
$102,729,936 to Capital in Excess of Par in accordance with quasi-reorganization
accounting principles. The quasi-reorganization reflects management's judgment
that because of increased competition from the gaming industry and the decline
of racing in the last few years, the adjustment to fair value of racetrack
buildings and equipment and livestock was appropriate.
The effect of the quasi-reorganization is that future operations will reflect
depreciation and amortization which is more consistent with current value.
Future operating statements will not be comparable with those for years ending
through June 30, 1993. Any future income tax benefits resulting from the
utilization of new operating loss and other carryforwards existing at June 30,
1993 and temporary differences resulting from the quasi-reorganization, will be
excluded from the results of operations and credited to Capital in Excess of
Par.
(19) SUBSEQUENT EVENTS
On July 21, 1995, FRA completed the purchase of a 4.659 acre section of land,
previously leased for parking space, from an unrelated party. The purchase
price was $981,720 with $406,720 to be 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 commencing July 31, 1997
plus accrued interest.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
PART III
Item 13. Certain Relationships and Related Transactions.
A company operated by the family of Kevin Quigley, son of Robert J.
Quigley, former 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., 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, New Jersey 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 and
Freehold Raceway as well as corporate insurance. The premium amounts
associated with this insurance coverage are considered normal in the industry.
During fiscal 1995, 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 an aggregate $3,733,399 in revenues and
$1,934,335 in net income from such activities (excluding $489,585 in financial
consulting fees deferred to subsequent fiscal periods). The Company and OEM
paid an aggregate $1,600,000 to Power Forward, Inc. ("PFI"), a corporation
wholly-owned by Mr. Brennan, in reimbursement for $1,611,198 of expenses
which Mr. Brennan advised were paid by PFI in fiscal 1995 in support of the
Company's and OEM's efforts to produce the investment and financial consulting
revenues. The various categories of expenses paid by PFI were as follows:
Salaries $1,074,925
Payroll Taxes 59,911
Automobile Expense 84,780
Travel and Entertainment 53,845
Group Insurance 61,622
Insurance - other 55,231
Misc. office expense (rent,
telephone and other) 220,884
$1,611,198
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 in fiscal 1995 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.
Robert Berkson $390,000
Roger Barnett $312,000
Andrew Alson $180,000
During fiscal 1995, Roger Barnett also served as assistant treasurer of OEM.
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 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.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 11,801,294
<SECURITIES> 0
<RECEIVABLES> 2,305,792
<ALLOWANCES> 20,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 97,469,045
<CURRENT-LIABILITIES> 8,113,060
<BONDS> 0
0
36,244,975
<COMMON> 19,102,771
<OTHER-SE> 16,858,691
<TOTAL-LIABILITY-AND-EQUITY> 97,469,045
<SALES> 55,744,950
<TOTAL-REVENUES> 59,182,738
<CGS> 17,342,134
<TOTAL-COSTS> 47,234,416
<OTHER-EXPENSES> 9,434,270
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 556,799
<INCOME-PRETAX> 2,514,052
<INCOME-TAX> 115,600
<INCOME-CONTINUING> 2,398,452
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,398,452
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
