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EX-32.1 - FLORIDA GAMING CORPv193965_ex32-1.htm
EX-31.2 - FLORIDA GAMING CORPv193965_ex31-2.htm
EX-31.1 - FLORIDA GAMING CORPv193965_ex31-1.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549

F O R M 10-Q

(Mark One)

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010
 
OR

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  ____________ to ____________ 

Commission file number 0-9099

FLORIDA GAMING CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
59-1670533
(State or other Jurisdiction of
Incorporation or Organization)
(IRS Employer Identification No.)

3500 NW 37th Avenue, Miami, Florida
33142-0000
(Address of principal executive offices)
(Zip code)
 
Registrant's telephone number, including area code  (305) 633-6400

Former name, former address and former fiscal year, if changed since last report  N/A

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter 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 ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o  No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ¨
 
Accelerated filer ¨
     
Non-accelerated filer   ¨
 
Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨     No  x
 
As of  August 16, 2010, there were 3,888,959 shares of the Registrant’s common stock outstanding.



FLORIDA GAMING
CORPORATION

INDEX TO FORM 10-Q

   
PAGE NUMBER
 
PART I. FINANCIAL INFORMATION
    2  
         
Item 1. Financial Statements
       
         
Balance Sheets as of June 30, 2010 (unaudited) and December 31, 2009
    2  
         
Statements of Operations (unaudited) for the Three and Six Months ended June 30, 2010 and 2009
    4  
         
Statements of Cash Flows (unaudited) for the Three and Six Months ended June 30, 2010 and 2009
    5  
         
Notes to Financial Statements (unaudited)
    6  
         
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation
    16  
         
Item 3. Quantitative and Qualitative Disclosures about Market Risk
    27  
         
Item 4. Controls and Procedures
    27  
         
PART II. OTHER INFORMATION
    28  
         
SIGNATURES
    34  
         
Certification of CEO (Exhibit 31.1)
       
         
Certification of CFO (Exhibit 31.2)
       
         
Certification of CEO & CFO (Exhibit 32.1)
       

1

 
PART 1.  FINANCIAL INFORMATION

FLORIDA GAMING CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)

   
June 30,
2010
   
December 31,
2009
 
CURRENT ASSETS:
           
Cash and cash equivalents (Note 2)
  $ 741,319     $ 819,256  
Accounts receivable, net
    154,389       234,674  
Inventory (Note 2)
    37,521       43,494  
Total current assets
  $ 933,229     $ 1,097,424  
                 
PROPERTY AND EQUIPMENT:
               
                 
Land
  $ 8,164,543     $ 8,164,543  
Buildings and improvements
    8,941,404       8,941,404  
Furniture, fixtures and equipment
    1,835,766       1,782,111  
    $ 18,941,713     $ 18,888,058  
Less accumulated depreciation
   
(4,700,986
)     (4,480,410 )
    $ 14,240,727     $ 14,407,648  
                 
REAL ESTATE HELD FOR SALE (net)
    234,000       234,000  
                 
OTHER ASSETS
    356,371       488,788  
    $ 15,764,327     $ 16,227,860  
 
2

 
FLORIDA GAMING CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)

   
June 30,
2010
   
December 31,
2009
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
           
             
CURRENT LIABILITIES
           
Accounts payable and accrued expenses
  $ 8,902,044     $ 6,610,867  
Short-term borrowing and current portion of long-term debt
    7,347,922       6,412,746  
Total current liabilities
  $ 16,249,966     $ 13,023,613  
                 
LONG-TERM LIABILITIES
               
Long-term portion notes payable
    2,752,605       3,002,813  
                 
STOCKHOLDERS’ EQUITY
               
                 
Class A convertible preferred stock, convertible to common stock; $.10 par value, 1,200,000 shares authorized; 27,756 shares issued and outstanding at June 30, 2010 and December 31, 2009
    2,776       2,776  
                 
Class AA convertible preferred stock, convertible to common stock; $.10 par value, 5,000 shares authorized; 5,000 shares issued and outstanding at June 30, 2010 and December 31, 2009
    500       500  
                 
Class B convertible preferred stock; convertible to common stock, 50 shares Authorized; 45 shares issued and outstanding at June 30, 2010 and December 31, 2009
    5       5  
                 
Class F 8% cumulative convertible preferred stock, 2,500 shares authorized; 2,000 Shares issued and outstanding at June 30, 2010 and December 31, 2009
    200       200  
                 
Common stock, $.20 par value, authorized 7,500,000 shares, 3,888,959 issued and outstanding at June 30, 2010 and December 31, 2009
    777,792       777,792  
                 
Capital in excess of par value
    50,615,750       50,615,750  
Accumulated deficit
    (54,635,267 )     (51,195,589 )
Total stockholders’ equity (deficit)
    (3,238,244 )     201,434  
Total liabilities and stockholders’ equity (deficit)
  $ 15,764,327     $ 16,227,860  

The accompanying notes are an integral part of these financial statements.

3

 
FLORIDA GAMING CORPORATION
SUMMARY OF OPERATIONS
(UNAUDITED)

   
For the Three Months Ended
   
For the Six Months Ended
 
   
June 30, 2010
   
June 30, 2009
   
June 30, 2010
   
June 30, 2009
 
PARI-MUTUEL REVENUE
                       
Live Jai-Alai Revenues, Net of State Taxes
  $ 598,376     $ 1,139,786     $ 1,483,504     $ 2,359,275  
Inter-Track Commissions
    598,637       751,320       1,257,054       1,544,625  
Pari-Mutuel Revenue
  $ 1,197,013     $ 1,891,106     $ 2,740,558     $ 3,903,900  
                                 
OTHER REVENUE
                               
Cardroom Income
    1,179,781       1,539,538       2,476,059       3,246,773  
Admissions Income, net of taxes
    2,023       8,089       8,704       11,932  
Programs, Food, Beverage and Other
    274,109       334,802       554,968       712,363  
Total Operating Revenue
    2,652,926     $ 3,773,535       5,780,289     $ 7,874,968  
                                 
EXPENSES
                               
Operating
  $ 3,066,100     $ 3,748,321     $ 6,383,548     $ 7,861,054  
General and Administrative
    1,336,986       1,107,210       2,544,977       2,242,057  
Depreciation and Amortization
    115,967       137,655       233,607       278,077  
    $ 4,519,053     $ 4,993,186     $ 9,162,132     $ 10,381,188  
NET LOSS FROM OPERATIONS
  $ (1,866,127 )   $ (1,219,651 )   $ (3,381,843 )   $ (2,506,220 )
                                 
OTHER INCOME
                               
Gain on Sale of Right-of-Way
    0       870,185       0       870,185  
Pari-Mutuel Tax Credits
    39,548       124,490       209,262       306,209  
Misc.Income
    0       0       0       39,872  
Interest Income
    2,159       834       2,418       5,300  
      41,707       995,509       211,680       1,221,566  
NET LOSS
    (1,824,420 )     (224,142 )     (3,170,163 )     (1,284,654 )
Dividends on Preferred Stock
    (134,758 )     (134,843 )     (269,515 )     (272,975 )
Net Loss Contributable to Common Shareholders
  $ (1,959,178 )   $ (358,985 )   $ (3,439,678 )   $ (1,557,629 )
Basic Loss per Common Share
  $ (0.50 )   $ (0.09 ) 5   $ (0.88 )   $ (0.41 )
Diluted Loss per Common Share
  $ (0.50 )   $ (0.09 )   $ (0.88 )   $ (0.41 )
Weighted Avg Common Shares Outstanding
    3,888,959       3,888,917       3,888,959       3,834,753  
Diluted Avg Common Shares Outstanding
    3,888,959       3,888,917       3,888,959       3,834,753  

4


FLORIDA GAMING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

   
30-Jun 2010
   
30-Jun 2009
 
Cash flows from operating activities:
           
Net Loss
  $ (3,170,163 )   $ (1,284,654 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization
    233,607       278,077  
Gain on sale of right of way
    0       (870,185 )
Decrease in inventory
    5,973       13,693  
Decrease (increase) in other assets
    119,386       (19,780 )
Decrease (increase) in accounts receivable
    80,285       (54,374 )
Increase in a/p and accrued expenses
    2,021,661       947,651  
Net cash used in operating activities
    (709,251 )     (989,572 )
Investing Activities:
               
Proceeds from sale of right-of-way
    0       1,185,345  
Purchases of property and equipment
    (53,655 )     (466,295 )
Net proceeds provided by (used in) investing activities
    (53,655 )     719,050  
Financing Activities:
               
Proceeds from issuance of debt
    735,000       0  
Proceeds from issuance of common stock
    0       98,750  
Repayment of debt
    (50,031 )     (139,929 )
Dividends paid
    0       (43,289 )
Net cash provided by (used in) financing activities
    684,969       (84,468 )
DECREASE IN CASH
    (77,937 )     (354,991 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    819,256       1,512,719  
CASH AND CASH EQUIVALENTS AT JUNE 30, 2010 AND JUNE 30, 2009
  $ 741,319     $ 1,157,728  
Supplemental disclosure of cash flow information:
               
Cash paid during the period for interest
  $ 119,792     $ 120,965  
Non-cash purchase of land    0     $  3,013,586  

5

 
Notes to Financial Statements

(1) BASIS OF PRESENTATION

The financial statements of Florida Gaming Corporation (the "Company") have been prepared without audit for filing with the United States Securities and Exchange Commission (the “Commission”). The accompanying unaudited financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, it is suggested that the accompanying financial statements be read in conjunction with the financial statements and notes thereto included in the Company's latest annual report on Form 10-K.

Certain information and notes have been condensed or omitted pursuant to the rules and regulations of the Commission. The financial information presented herein, while not necessarily indicative of results to be expected for the year, reflects all adjustments of a normal recurring nature, which, in the opinion of the Company, are necessary to a fair statement of the results for the periods indicated.

(2)  GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The attainment of sustainable profitability and positive cash flow from operations is dependent on certain future events. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company is primarily involved in the jai-alai gaming industry along with intertrack wagering on jai-alai, horse racing and dog racing. The industry as a whole has declined significantly in last ten years. Due to this decline, the Company has sought to increase revenues through investments in its licensed card rooms as well as continued analysis of their ability to install slot machines in its Miami facility. The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan to generate increased revenues and to raise additional funds. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

(3) SIGNIFICANT ACCOUNTING POLICIES

Florida Gaming Corporation (the Company) operates live Jai Alai games at frontons in Ft. Pierce, and Miami, Florida through its Florida Gaming Centers, Inc. subsidiary (Centers). The Company also conducts intertrack wagering (ITW) on jai alai, horse racing and dog racing from its facilities.  Poker is played at the Miami and Ft. Pierce Jai-Alai, and dominoes are played at the Miami Jai-Alai.     In addition, the Company operates Tara Club Estates, Inc. (“Tara”), a residential real estate development  located near Atlanta in Walton County, Georgia.  Approximately 46.2% of the Company's common stock is controlled by the Company's Chairman and CEO either directly or beneficially through his ownership of Freedom Holding, Inc.

Basis of Presentation: These consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany transactions have been eliminated.
 
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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents: The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
 
6

 
Property, Plant and Equipment: Property, plant and equipment are stated at cost. Depreciation is provided using the straight-line and accelerated methods over the estimated useful life of the related assets as follows:

Buildings
   
39 years
 
Land and building improvements
   
15 years
 
Furniture and equipment
   
5-7 years
 
Automobiles
   
5 years
 

   
June 30,
 
   
2010
   
2009
 
Land
  $ 8,164,543     $ 8,158,650  
Buildings and improvements
    8,941,404       8,885,639  
Equipment furniture and fixtures
    1,696,201       1,691,618  
Automobiles
    85,910       85,910  
Construction in progress
    48,865       24,007  
Less accumulated depreciation
    (4,700,986 )     (4,241,734 )
    $ 14,240,727     $ 14,604,090  

Depreciation Expense totaled  $220,576 and $240,909 during the six months ended June 30, 2010 and 2009, respectively.

Long-lived assets: The Company's investment in its residential and commercial property is carried at cost. The Company evaluates the carrying value of its real estate development and other long-lived assets, annually under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 360, “Plant, Property, and Equipment” and ASC Topic 970 “Real Estate.”

Bad Debt Reserve: The Company provides an allowance for doubtful accounts equal to estimated uncollectible amounts. The Company's estimate is based on historical losses, changes in volume and economic conditions impacting the current receivables.
There was no allowance for doubtful accounts recorded for  the six months ending June 30, 2010 and 2009.

Inventory: The Company's inventory, consisting of food and beverage products and souvenirs, is stated at the lower of cost or market using the First-In First-Out method to assign cost. Inventory market values exceeded its cost at  June 30, 2010.

Other comprehensive income:  The Company follows the provisions of ASC Topic 220, “Comprehensive Income.” The Company had no “other comprehensive income” during either year presented. Accordingly, comprehensive income is equal to net income at June 30, 2010 and June 30, 2009.

Pari-mutuel Wagering: Revenue is derived from acceptance of wagers under a pari-mutuel wagering system. The Company accepts wagers on both on-site and ITW events. On-site wagers are accumulated in pools with a portion being returned to winning bettors, a portion paid to the State of Florida, and a portion retained by the Company. ITW wagers are also accepted and forwarded to the "host" facility after retention of the Company's commissions. As of  June 30, 2010,  and  June 30,  2009 the Company's unclaimed winnings (outs) totaled $211,241  and $270,865, respectively.

Revenue Recognition:: The Company recognizes revenue from gaming operations in accordance with ASC Topic 605, “Revenue Recognition,” which requires revenues to be recognized when realized or realizable and earned. Jai-Alai and inter track mutuel commissions are recognized immediately upon completion of the event upon which the related wagers are placed. In general, wagers are placed immediately prior to the event and are made in cash or other good funds so collectability is not an issue. Revenues derived from admission, program sales, food and beverage sales, card room activities, and other revenues are recognized at the time of the transaction. Revenues from the Company’s real estate operations are recognized in accordance with ASC Topic 360-20, “Real Estate Sales”, which generally allows the Company to record all profit on real estate sales at closing unless the down payment is insufficient to accrue the revenue.

Income Taxes:  The Company utilizes the asset and liability approach to accounting for income taxes. The objective of the asset and liability method is to establish deferred tax assets and liabilities for temporary differences between the financial reporting and the tax bases of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
 
7

 
The Company follows ASC Topic 740, “Income Taxes” regarding accounting for income tax uncertainties. ASC Topic 740 states that a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company maintained no net tax assets at June 30,  2010 and 2009.

It is the Company’s policy to recognize interest and/or penalties related to income tax matters in income tax expense.

The Company files income tax returns in the U.S. federal jurisdiction. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for all years prior to and including 2005.

Income or Loss Per Common Share: Basic income (loss) per common share is determined by dividing income (loss), less required dividends declared on preferred shares, and dividends accumulating on cumulative preferred stock divided by the weighted average number of shares of common stock outstanding. Diluted income (loss) per common share is determined by dividing income (loss) by the weighted average number of shares of common stock outstanding plus the weighted average number of shares that would be issued upon exercise of dilutive stock options, assuming proceeds are used to repurchase shares pursuant to the treasury stock method plus the weighted average number of shares that would be issued if holders of the Company's preferred stock converted those shares to common stock using the “if converted” method. Diluted loss per common share is not presented when the resulting calculation is antidilutive relative to basic loss per common share.

The net loss per common share for the quarters ended June 30, 2010 and June 30, 2009 were calculated based upon reducing net loss attributable to common stock shareholders by dividends declared on preferred stock ($134,758 and $134,843 respectively) by the weighted average number of outstanding shares. The weighted average number of shares outstanding used in the calculation of basic net loss per common share for the quarters ended June 30, 2010 and June 30, 2009 was 3,888,959 and 3,888,917, respectively.
 
The net loss per common share for the six months ended June 30, 2010 and June 30, 2009 were calculated based upon reducing net loss attributable to common stock shareholders by dividends declared on preferred stock ($269,515 and $272,975 respectively) by the weighted average number of outstanding shares. The weighted average number of shares outstanding used in the calculation of basic net loss per common share for the quarters ended June 30, 2010 and June 30, 2009 was 3,888,959 and 3,834,753, respectively.

Weighted average shares were not adjusted for common stock equivalence in the determination of diluted earnings per share for the three or six months ended June 30, 2010 and June 30, 2009 because the effect would be antidilutive.

Advertising Costs: Advertising costs are expensed as incurred.

Stock Options:   The fair value of options and warrants is determined using the Black-Scholes option pricing model consistent with ASC Topics 718 and 505-50.  The Black-Scholes option pricing model uses assumptions for inputs including the risk free rate of return, expected forfeitures, expected volatility, expected term, and expected dividends.  The risk-free rate of return for the option or warrant life is based on U.S. Treasury zero coupon issues with a remaining term equal to the expected option term.  Expected forfeitures are based on environmental factors tied to the options and warrants as well as historical behavior.  Expected volatilities are based on historical volatility of the Company’s stock.  Expected terms are generally based on the options contractual term unless environmental factors reflect that the option holder would likely exercise their option sooner.   There were no options issued  during the three or six months ended June 30, 2010.

During the three and six months ended June 30, 2010, there were no options exercised, compared to  six months ended June 30, 2009, where  25,000 options were exercised by  a director  at $3.50 per share, and 5,000 options were exercised by an officer at $2.25 per share.  On July 11, 2009 the company extended 362,500 options for one year, at $8.25 per share. The Company recognized total stock based compensation expense of $231,257 during the year 2009.

   
Shares
   
Weighted-
Average
Exercise Price
 
Outstanding, beginning of year
    985,625     $ 8.97  
Granted
    -0-          
Exercised
    -0-          
Forfeited
    -0-          
Expired
    (20,000 )   $ 30.00  
Outstanding, at June 30, 2010
    965,625     $ 8.54  
Options and warrants exercisable at June 30, 2010
    965,625          
 
8

 
On July 11, 2010, the Company extended 362,500 options for one year.  These options were due to expire July 11, 2010, with an exercise price of $8.25 per share.  The Company extended these options for one year, with an expiration date of July 11, 2011, with an exercise price of $8.25 per share.   The Company has recorded the expense for these options in the third quarter.

Real Estate Development: The Company's Tara Subsidiary accounts for the cost of lots sold by dividing the acquisition and development costs by the number of lots developed.

Compensated Absences: The Company has not accrued compensated absences for the six months ending June 30, 2010 and 2009 because the amounts cannot be reasonably estimated.

Subsequent Events: The Company adopted the provisions of SFAS No. 165, “Subsequent Events” (SFAS 165), during the year ended December 31, 2009.  SFAS 165, as incorporated into ASC Topic 855, establishes general standards of accounting for and disclosure of events that occur after the balance sheet date and through the date financial statements are issued.  In accordance with ASC Topic 855, the Company evaluated and disclosed all events or transactions that occurred after June 30, 2010 and through August 16, 2010, the date these financial statements were issued.

Effect of Implementing Recently Issued Accounting Standards:

In April 2009, the FASB issued Staff Position (“FSP”) SFAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” which was subsequently incorporated into ASC Topic 820, “Fair Value Measurements and Disclosures.” This ASC emphasizes that even if there has been a significant decrease in the volume and level of activity, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants. The ASC provides a number of factors to consider when evaluating whether there has been a significant decrease in the volume and level of activity for an asset or liability in relation to normal market activity. In addition, when transactions or quoted prices are not considered orderly, adjustments to those prices based on the weight of available information may be needed to determine the appropriate fair value. Topic 820 also requires increased disclosures and was effective for interim and annual reporting periods ending after June 15, 2009. The adoption of this statement did not have a material impact on the Company’s financial statements.

In May 2009, the FASB issued SFAS No. 165 “Subsequent Events.” SFAS No. 165 established general standards of accounting for disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The statement sets forth 1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements 2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements 3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This statement was effective for interim and annual financial periods ending after June 15, 2009. The adoption of this statement did not have a material effect on the Company’s financial statements.

In June 2009, the FASB issued SFAS No. 166 “Accounting for Transfers of Financial Assets” an amendment of SFAS No. 140, which was subsequently incorporated into ASC Topic 860. This statement removes the concept of a qualifying special-purpose entity from SFAS No. 140 and removes the exception from applying FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities”, to qualifying special-purpose entities. SFAS No. 166 also clarifies that the objective of SFAS No. 140 is to determine whether a transferor and all of the entities included in the transferor’s financial statements being presented have surrendered control over transferred financial assets. This statement modifies the financial-components approach used in SFAS No. 140 and limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized when the transferor has not transferred the entire original financial asset to an entity that is not consolidated with the transferor in the financial statements being presented and/or when the transferor has continuing involvement with the transferred financial asset. Additionally, SFAS No. 166 defines the term participating interest to establish specific conditions for reporting a transfer of a portion of a financial asset as a sale. If the transfer does not meet those conditions, a transferor should account for the transfer as a sale only if it transfers an entire financial asset or a group of entire financial assets and surrenders control over the entire transferred asset(s) in accordance with the conditions addressed in SFAS No. 140, as amended by SFAS No. 166. The special provisions in SFAS No. 140 and SFAS No. 65, “Accounting for Certain Mortgage Banking Activities”, for guaranteed mortgage securitizations are removed. SFAS No. 166 requires that a transferor recognize and initially measure at fair value all assets obtained (including a transferor’s beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. Enhanced disclosures are required to provide financial statement users with greater transparency about transfers of financial assets and a transferor’s continuing involvement with transferred financial assets. SFAS No. 166 is effective for annual reporting periods that begin after November 15, 2009. The adoption of this statement did not have a material effect on the Company’s financial statements.
 
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In June 2009, the FASB issued SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”, which was subsequently incorporated into ASC Topic 810. This statement amends Interpretation 46(R) to require an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity. This analysis identifies the primary beneficiary of a variable interest entity as the enterprise that has both of the following characteristics: 1) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance 2) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. Additionally, this statement amends other technical points in Interpretation 46(R) and enhances disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity. SFAS No. 167 is effective for annual reporting periods that begin after November 15, 2009. The adoption of this statement did not have a material effect on the Company’s financial statements.
 
On June 30, 2009, the FASB issued SFAS No. 168 “The FASB Accounting Standards Codification (ASC) and the Hierarchy of Generally Accepted Accounting Principles”. On its effective date, SFAS No. 168 became the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009 except for nonpublic nongovernmental entities that have not followed the guidance included in AICPA Technical Inquiry Service Section 5100. Despite the implementation of SFAS No. 168, the following standards issued by the FASB remained authoritative until such time that each was integrated into the Codification: SFAS No. 164 “Accounting for Non-Profit Mergers and Acquisitions”, SFAS No. 166, SFAS No. 167, and SFAS No. 168. The adoption of SFAS No. 168 did not have a material effect on the Company’s financial statements.

In August 2009, the FASB amended ASC Topic 820-10 “Fair Value Measurements and Disclosures – Measuring Liabilities at Fair Value.” The amendment reduces ambiguity in measuring the fair value of liabilities by providing that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using either a valuation technique that uses the quoted price of the identical liability when traded as an asset, the quoted prices for similar liabilities or similar liabilities when traded as assets, or another valuation technique that is consistent with the principles of Topic 820 e.g. the income approach using the present value technique. The amendment was effective for the first reporting period following its release. The adoption of this amendment did not have a material effect on the Company’s financial statements.

In January 2010, the FASB amended ASC Topic 820 “Improving Disclosures about Fair Value Measurements.” This amendment provides more robust disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and 3. This amendment was effective for reporting periods beginning after December 15, 2009 with the exception of disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements, which are effective after December 15, 2010. The adoption of this amendment did not have a material effect on the Company’s financial statements.

In February 2010, the FASB amended ASC Topic 855 “Subsequent Events.” This amendment allows entities which are either 1) SEC filers or 2) conduit bond obligors for conduit debt securities that are publicly traded to evaluate subsequent events through the date that their financial statements are issued; unlike other entities which must evaluate subsequent events through the date their financial statements are available to be issued. The adoption of this amendment did not have a material effect on the Company’s financial statements.
 
In July 2010, the FASB issued Accounting Standards Update No. 2010-20, Receivables (Topic 310): “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses” (“ASC 2010-20”). The amendments in this update require additional disclosure about the credit quality of financing receivables, such as aging information and credit quality indicators. Both new and existing disclosures must be disaggregated by portfolio segment or class. The disaggregation of information is based on how allowances for credit losses are developed and how credit exposure is managed. The amendments in this Update affect all entities with financing receivables, excluding short-term trade accounts receivable or receivables measured at fair value or lower of cost or fair value.ASC 2010-20 is effective for interim periods and fiscal years ending after December 15, 2010.  The Company has determined that the adoption of this standard will not have a material effect on its consolidated financial statements.
 
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(4) REAL ESTATE HELD FOR SALE

As of June 30, 2010, the Company's subsidiary, Tara Club Estates, Inc. held six (6) residential lots at it’s residential real estate development (“Tara”), which are situated in Loganville, Walton County, Georgia with an aggregate carrying value of $234,000. The Company carries a valuation reserve  in the amount of $68,569. A provision of $63,500  was made to the reserve during the fourth quarter 2009 due to the decrease in real estate values in the area where the property is located.   The Company has completed its development activities  at Tara. Accordingly, any future costs incurred related to these properties will be expensed.
 
Valuation Reserve Analysis

   
6/30/2010
   
6/30/2009
 
Balance at the beginning of the year
  $ 68,569     $ 5,069  
Provision charged to operations
    -0-       -0-  
Charge offs to the reserve
    -0-       -0-  
Ending Balance
  $ 68,569       5,069  
 
The Company had no real estate sales during the six months ended June 30, 2010 and June 30, 2009.

(5) TAXES

At December 31, 2009, the Company had tax net operating loss (NOL) carryforwards of approximately $20,042,000 available to offset future taxable income.  These NOL carryforwards expire fifteen years from the year in which the losses were incurred or at various intervals through fiscal 2023.
 
Effective July 1, 1998, tax relief legislation was enacted by the State of Florida stipulating that jai alai permit holders incurring state taxes on handle and admissions in an amount exceeding its operating earnings (before deduction of certain expenses such as depreciation and interest) for the prior year are entitled to credit such excess amounts against pari-mutuel taxes due and payable. Tax credits are used to satisfy the Company's obligation to pay taxes incurred on handle and admission. Tax credits used, depreciation expense and interest expense are all excluded from the statutory calculation of operating earnings or loss in the determination of the amounts of future tax credits.

The Company’s Tampa Jai-Alai Permit (the fronton closed in 1998) retain such tax credits carried forward totaling $1,362,265.  The Company’s Ft. Pierce facility has not incurred statutory operating losses and therefore has not earned any state tax credits.
 
 For the years 2001 through 2009, Miami had unused credits totaling $2,352,201 and Summer Jai-Alai had $1,220,208 unused credits available for recovery.
 
(6) PREFERRED STOCK

CLASS A PREFERRED STOCK
The Company's Class A preferred stock provides annual dividends, at the rate of $.90 per share payable in cash, property or common stock, which are cumulative and have priority over dividends on the common stock. The Class A preferred is redeemable at the option to the Company at $10.60 per share. In the event of dissolution, the holders of Class A preferred shall be entitled to receive $10.00 per share, plus accrued dividends, prior to any distribution to holders of common stock.  The Company has declared and accrued the required dividends.

CLASS AA PREFERRED STOCK
On June 15, 2007 the Company authorized and issued 5,000 shares of its Series AA 7% cumulative convertible preferred stock to Prides Capital for $1,000 cash per share for an aggregate of $5,000,000.  Each share is convertible into 40 shares of the Company’s $.20 par value common stock.   The stated value per share is $1,000 (as adjusted for stock splits, combinations or splits).  The Company has declared and accrued the required dividends.

CLASS B PREFERRED STOCK
The Company's Series B convertible preferred stock provides annual cumulative dividends at the rate of 8% to 10% of the consideration paid for the stock. Such dividends are payable in shares of the Company's common stock. The consideration received by the Company upon the initial issuance of each share of the Series B stock was $1,000. Holders of Series B shares may convert all or any of such Series B shares to the Company's common stock using a ratio based on the consideration paid for the stock and 80% of the market value of the common stock. Upon liquidation, the holders of Series B preferred shares shall be entitled to be paid $1,000 per share plus 8% to 10% accrued dividends before any distribution to holders of common stock.  The Company has declared and accrued the required dividends.
 
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CLASS F PREFERRED STOCK
The Company is also authorized to issue up to 2,500 shares of Series F 8% Cumulative Convertible Preferred Stock (the “Series F Preferred Stock”), which provides annual dividends at the rate of 8% of the shares' stated value. The stated value per share equals $1,000 (as adjusted for any stock dividends, combination or split). At the discretion of the Company's Board of Directors, such dividends may be paid in shares of the Series F Preferred Stock. Holders of Series F Preferred Stock may convert all or any of such shares to the Company's common stock at any time. Each share of Series F Preferred Stock shall be converted into 148.3345 shares of common stock (the “Conversion Stock”). The number of shares of Conversion Stock into which each share of Series F Preferred Stock shall be converted shall be proportionately adjusted for any increase or decrease in the number of shares of common stock or Series F Preferred Stock. Upon liquidation, the holders of Series F Preferred Shares shall be entitled to be paid $1,000 per share plus accrued dividends before any distribution to holders of common stock.  The Company has declared and accrued the required dividends.

The Class A Preferred Stock, the Series  AA Preferred Stock, the Series B Preferred Stock, and the Series F Preferred Stock are all equal in rank with respect to the payment of dividends and with respect to the distribution of assets upon liquidation of the Company.

(7) COMMITMENTS AND CONTINGENCIES

Miami Dade County. On January 6, 2009, the Company agreed to acquire a total of 10.982 acres of property from Miami-Dade County and sell .492 acres and a right-of-way to the county to be used by the Miami-Dade Metro Rail, an overhead light rail system.  The total purchase price of the 10.982 acres was $16,742,145. The Company agreed to exchange the .492 acres  and easement valued at $1,014,300,  plus cash of $1,572,785, and a 15-year, 7 ¼% fixed rate interest note in the amount of $14,155,060 for the 10.982 acres of land.  The Company also received air-rights from Miami-Dade County over N.W. 37th  Avenue which separates the two parcels.  The phase two purchase of the approximately 8.7 remaining acres for $13,393,716 was to close no later than 60 days after the United States Corps of  Engineers releases the property free and clear of environmental contamination or July 1, 2010, whichever is later.  Miami-Dade County and the Company mutually agreed to amend the Settlement Agreement so that the Final Closing shall occur not later than 60 days from such release and compliance or  October 28, 2011, whichever is later.  Prior to the second closing, a resolution will be presented to the Board of Miami-Dade County Commissioners (Board) to close part of N.W. 37th Avenue.  If the Board votes to close the  road and the County decides to expand N.W. 36th Avenue within 36 months of the vote, the Company shall pay the cost of design, land acquisition and construction for said N.W. 36th Avenue road expansion as well as any required utility relocations with the total paid by the Company not to exceed $5,700,000.   Upon conclusion of these actions Miami Jai-Alai’s casino footprint will effectively grow from the present 8.9 acres to approximately 20 acres, thereby accommodating any potential future build-out. This will also allow Miami Jai-Alai to virtually enclose its casino area and provide a controlled, safe and well illuminated facility. 

Registration Rights: The Company has committed upon certain terms and conditions, to use its best efforts to register for resale, certain shares held by other parties, allowing those shares to be publicly traded. The Company intends to use reasonable efforts to comply with these commitments.

Leases:   The Company leased totalizator equipment from Scientific Games Corp. at each fronton under leases which expired October 31, 2008, but are subsequently being leased on a month- to- month basis. The leases required minimum annual rental at the Miami and Ft. Pierce locations. Transmission of the Miami Jai-Alai signal requires the use of a satellite uplink simulcasting service which requires a fee of $500 per performance. Total totalizator rental expense and other equipment rental under operating leases for the years ended December 31, 2009 and 2008 was approximately $386,000 and $388,000, respectively.

The Company leased parking facilities adjacent to the Miami fronton. Lease payments totaled $34,000 in 2009, with the lease concluding with the purchase of the underlying property.

Litigation Costs: Legal fees for settlement costs and fees associated with various lawsuits incurred in the normal course of the Company's business activities are included in General & Administrative expenses in the accompanying Statements of Operations.

Collective Bargaining Agreement: The Company is a party to a collective bargaining agreement with the International Jai Alai Players Association U.A.W. Local 8868, AFL-CIO. The agreement allows the Company to negotiate individual contracts with players and provides for minimum salaries and bonuses based on pari-mutuel handle, certain cesta allowances and retirement benefits. The agreement continues from year to year unless timely notice of termination is given by either party to the agreement.
 
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Concentration of Deposits: The Company maintains significant cash balances with financial institutions in excess of the insurance provided by the Federal Deposit Insurance Corporation (FDIC).

Letter of Credits:  The Company has letters of credit in favor of its bonding company totaling $300,000.  These letters of credit are secured by cash on deposit on an equal amount.

Dependence on One Vendor: The Company depends on Scientific Games Corp. (Scientific), a leading supplier of pari-mutuel wagering systems, to provide the computer systems that accumulate wagers, record sales, calculate payoffs and display wagering data accurately and in a secure manner. If Scientific failed to properly maintain their computer systems and software it could affect the security of wagering and the Company’s ability to serve its customers. In addition, the Company is currently past due on monthly payments required by its contract with Scientific which could result in the termination of Scientific’s services to the Company.

Summer Jai Alai: In conjunction with the acquisition of WJA’s Frontons, the Company acquired WJA’s 21% interest in the Summer Jai-Alai, Partnership (the “Partnership”), a Florida general partnership formed in 1980 with three other pari-mutuel permit holders for the purpose of conducting pari-mutuel jai-alai operations at the Miami fronton during the six months between May 1 to October 31 (“Summer Jai-Alai Operations”).  The Company’s partners were Hollywood Greyhound, Flagler Greyhound and Biscayne Kennel Club or their successors.  The Company’s interest in the Partnership was accounted for under the equity method and had a carrying value of $92,491 at June 30, 2010 and 2009.

Pursuant to the settlement of certain partnership disputes, since the 1998 season the Company operated the Partnership at its own risk and for its own benefit under annual agreements which required fixed payments to each of the partners.  The agreement authorizing the Company’s use of the Summer Jai-Alai permit (the “Permit”) between June 30, 2002 and June 30, 2004 required a fee of $345,000 payable monthly in 12 equal installments.  The Company agreed to hold its partners harmless for any and all losses or liabilities incurred through June 30, 2004.  After June 30, 2004, the permit agreement terminated and the previous partnership agreement became the controlling document for the operation of the Partnership by the parties.  The Partnership had a loss of $202,227 for its 2004 summer season.  The Company entered into a dispute to recover $98,608 from its partners for their allocable shares of the loss after June 30, 2004.

The Company also took the position in the dispute with its partners that effective October 31, 2004 the Partnership terminated and subsequent to December 31, 2004 the Company has operated the Summer Jai-Alai Operations for its own benefit as a division of the Company.   In this connection the Company assumed certain operating payables and receivables of the Partnership which resulted in the Company carrying a receivable from the Partnership of $255,509 at December 31, 2006.  During 2007, a settlement was reached between the Company and its partners.  The Company forgave its $255,509 receivable from the Partnership and its $98,608 receivable from its partners.  The settlement provides the Partnership will continue as a going concern with the Company a 21% owner, West Flagler Associates LTD a 52% owner, and BKCLP 2 LTD a 27% owner.  The Partnership owns the Permit and under a Permit Use Agreement (the “PUA”) between the Company and the Partnership, the Company has the exclusive right to conduct gaming operations under the Permit. The Company derives all revenue, and is responsible for all expenses, from such gaming operations.  In addition, the Company must assure that the holder of the Permit remains authorized to conduct all activities that Florida law authorizes under the Permit, based on the law in effect at any particular time.  The Company may terminate the PUA if the requirement to keep it valid imposes a material burden on the Company.  West Flagler and BKCLP may terminate the PUA if they jointly elect to do so.  If the PUA is terminated (and, thus the Permit’s use reverts to the Partnership) the Partnership does not have the right to conduct activities at the Company’s fronton.  The Company, West Flagler and BKCLP entered into an Amended and Restated Partnership Agreement for the Summer Jai-Alai Partnership and except for the following put/call rights, all actions of the Partnership require unanimous approval of the three Partners.  The Partnership contains mandatory put/call rights which take effect if (1) the PUA is terminated by the Company, (2) the PUA is terminated by West Flagler and BKCLP, or (3) any two partners deliver to the third partner a notice of election to trigger the put/call.  Under the put/call rights, the party(ies) triggering the put/call must offer to sell to the other partner(s) its interest at a stated price.  The other partners may either buy the interest at that price, or sell their interests to the triggering partner at that price.  Each partner must give the other partners 45 days advance notice of a “Change of Control” – which is a change of ownership of more that 40% of the partner’s equity and, in the case of the Company, a sale by its Chairman and his affiliates of more than 50% of their stock in the Company.

In accordance with the settlement, all revenues and expenses of the Summer Jai-Alai Operations are included in operating income and expenses of the Company in the accompanying Statements of Operations.

(8) ACQUISITION OF WJA ASSETS

Florida Gaming Corporation (“FGC” or the “Company”), was incorporated in the state of Delaware in 1976 as Lexicon Corporation (“Lexicon”). In 1993, Lexicon sold 699,480 shares of common stock to Freedom Financial Corporation ("Freedom") and a new board of directors was elected, and present management assumed control of Lexicon. The acquisition of the Ft. Pierce Fronton (“Ft. Pierce”) was consummated in February, 1994 following receipt of the approval from the Florida Department of Business Regulation on that date. Following the purchase of Ft. Pierce the Company, changed its’ name to Florida Gaming Corporation on March 17, 1994. On January 1, 1997, the Company purchased the Jai-Alai Facilities at Ocala, Tampa, and Miami, Florida.   The Company also entered into the real estate development business in 1997. The Company’s stock is traded on the over-the-counter bulletin board under the stock symbol “FGMG”. The Company’s principal place of business and executive offices are located at 3500 N.W. 37th  Avenue, Miami, FL 33142.
 
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On September 4, 1998, the Company sold the Tampa Jai-Alai property. The sale did not include the Company's gaming permit which remains available for future use in Hillsborough County, Florida. On July 31, 2000, the Company sold the Ocala Jai-Alai.  In March, 2006, the Company sold approximately 79 acres of investment real estate located adjacent to its' Jai-alai facility in Fort Pierce, Florida.

(9) NOTES

Isle of Capri Casinos, Inc. On October 29,2004, the Company borrowed $5 million  from Isle of Capri Casinos, Inc. (“Isle”), a Delaware corporation,  pursuant to a Secured Promissory Note (the "Note") which matured on December 31, 2008.  On December 31, 2008,  the Company paid $2,000,000 on the original note and issued a new note and mortgage for $3,000,000 to Isle.  The new Note for $3,000,000 was due December 31, 2009,  bears interest at the rate of ten percent (10%) per annum,  and is secured by a first mortgage on the Ft. Pierce Jai-Alai facility which is located on 37 acres owned by the Company. The Company failed to make the payment on the Note and the Company is currently in default.  The default interest accrues at 18%.  On March 1, 2010 the Company and Centers were served with a complaint by Isle (“See Item 1. Legal Proceedings” and Form 8-K dated March 1, 2010).   On March 19, 2010 the Company and Centers were served with a second complaint by Isle seeking foreclosure on the mortgage granted to Isle on the property located in Ft. Pierce, FL, and all buildings, structures, and fixtures and improvements thereon  (See Item 1. Legal Proceedings and Form 8-K dated March 19, 2010)

Nurmi Properties, LLC.  Florida Gaming Corporation, a Delaware corporation, and its wholly-owned subsidiary Florida Gaming Centers, Inc., a Florida corporation (collectively, the “Company”), borrowed Five Hundred Thousand Dollars ($500,000) from Nurmi Properties, LLC, a Delaware limited liability company, and Robinette Investments, LLC, a Florida limited liability company (collectively, the “Lenders”) pursuant to a Promissory Note and a Mortgage and Security Agreement (the “Original Note and Mortgage”).  On February 4, 2010, the Company borrowed an additional One Hundred Fifty Thousand Dollars ($150,000) from the Lenders pursuant to a Note and Mortgage Modification (the “First Modification”) among the Company and the Lenders.  Under the First Modification, the Original Note and Mortgage were modified such that the total amount due to the Lenders under the Original Note and Mortgage became $650,000 rather than $500,000. On March 8, 2010, the Company borrowed an additional One Hundred Fifty Thousand Dollars ($150,000) from the Lenders pursuant to a Note and Mortgage Modification (the “Second Modification”) among the Company and the Lenders.  Under the Second Modification, the Original Note and Mortgage were modified such that the total amount due to the Lenders under the Original Note and Mortgage became $800,000 rather than $650,000. On March 25, 2010, the Company borrowed an additional Thirty Five Thousand Dollars ($35,000) from the Lenders pursuant to a Note and Mortgage Modification (the “Third Modification”) among the Company and the Lenders, dated March 23, 2010. Under the Third Modification, the Original Note and Mortgage were modified such that the total amount due to the Lenders under the Original Note and Mortgage became $835,000 rather than $800,000. On April 16th, 2010, the Company borrowed an additional Seventy-Five Thousand Dollars ($75,000) from the Lenders pursuant to a Note and Mortgage Modification (the “Fourth Modification”) among the Company and the Lenders.  Under the Fourth Modification, the Original Note and Mortgage became $910,000 rather than $835,000.  On June 2, 2010, the Company borrowed an additional Seventy Five Thousand Dollars ($75,000) from the Lenders pursuant to a Note and Mortgage Modification (the “Fifth Modification”), among the Company and the Lenders.  Under the Fifth Modification (“the Fifth Modification”) the Original Note and Mortgage became $985,000 rather than $910,000. (See Form 8-K filed June 8, 2010).
H2C Note.    On February 4, 2010, the Company borrowed Ninety Thousand Dollars ($90,000) from H2C, Inc. (“H2C”) pursuant to a Promissory Note between the Company and H2C dated February 4, 2010 (the “H2C Note”).  The original outstanding principal amount, plus accrued but unpaid interest thereon, was payable in ten equal monthly installments commencing March 1, 2010.  On April 28, 2010, Florida Gaming Corporation (the “Company”) entered into a Promissory Note and Mortgage (collectively, the “Agreements”) with H2C, Inc. (the “Lender”) pursuant to which the Lender advanced to the Registrant two hundred fifty thousand dollars ($250,000) (the “Advance”).  $82,156 of the Advance was used to pay to the Lender all outstanding principal and accrued interest due to the Lender pursuant to a Promissory Note of the Company dated February 4, 2010.  Under the Agreements, the outstanding principal amount of the Advance bears interest at an annual rate of ten percent (10%).   Accrued interest is payable to the Lender in monthly installments of $2,083, with a balloon payment of the outstanding principal amount of the Advance and all accrued but unpaid interest due on December 31, 2010.  The Company’s obligations under the Note are secured by a first mortgage in the Lender’s favor with respect to 18 acres of unimproved real property in St. Lucie County in the state of Florida. If any amount due under the Note is not paid when due, the Lender is entitled to a late fee of ten percent of the delinquent amount. For further information refer to 8-K filed May 4, 2010.
 
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On July 1, 2010, the Company entered into a Promissory Note and Mortgage  pursuant to which the Lender advanced to the Registrant fifty thousand dollars ($50,000) (the “Advance”).   Under the Agreements, the outstanding principal amount of the Advance bears interest at an annual rate of ten percent (10%).  Accrued interest is payable to the Lender in five monthly installments of $416.66, with a balloon payment of the outstanding principal amount of the Advance and all accrued but unpaid interest due on December 31, 2010.  The Company’s obligations under the Note are secured by a first mortgage (the “Mortgage”) in the Lender’s favor with respect to with respect to 18 acres of unimproved real property in St. Lucie County in the state of Florida.  No prepayments are permitted under the Note.  For further information refer to Form 8-K filed July 8, 2010.

CIB Bank/Freedom/Holding Note
On October 31, 2005 Freedom Financial Corporation (“Freedom”)  purchased Florida Gaming’s note with First Bank (formerly CIB) for $2,400,000. At the same date, Florida Gaming renegotiated the terms of this note with Freedom. Under the new terms, the note had a fixed interest rate of 8.0% per annum and was secured by various mortgages, rents, and receivables. The note matured on October 31, 2008 and was refinanced under a new note with Freedom Holding Inc. (“Holding”).   On November 1, 2008, Florida Gaming Centers, Inc. (“FGC”), a wholly-owned subsidiary of the Company, borrowed One Million Three Hundred Twenty-Two Thousand Five Hundred and Seventy-Four Dollars ($1,322,574) (the “Principal Amount”) from Holding, which was evidenced by FGC’s Promissory Note in favor of Holding  dated November 1, 2008 (the “Original Note”).  Holding is  controlled by the Company’s CEO/Chairman and the President maintains ownership in Holding.   The Note was accounted for as a debt refinance.  The Holding note is unsecured, bears interest at 10.0% per annum, and had an initial maturity date of May 1, 2009. The note was refinanced on May 1, 2009, again on September 1, 2009 and March 1, 2010 with maturity extended until September 1, 2010 (See Item 10.  Related Party Transactions).

West Flagler/Calder Note
On January 20, 2005, the Miami-Dade Board of County Commissioners called a countywide special election to be held by Miami-Dade County on March 8, 2005, (the “Special Election”) for the purpose of submitting to the qualified electors of Miami-Dade County the question of whether to authorize slot machines in certain existing, licensed pari-mutuel facilities. Florida Gaming agreed to enter into certain agreements with Miami-Dade County, which mandated a prepayment of $1,333,333 by Florida Gaming to Miami-Dade. Florida Gaming paid $500,000 of this prepayment in 2005 and signed a note payable to Calder Race Course, Inc. and West Flagler Associated, LTD, who paid the remaining $833,333 on Florida Gaming’s behalf. Payment of neither the note’s principal nor interest was due until the authorization by the qualified electors of Miami-Dade County of the operation of slot machines at Miami Jai-Alai (the “Event”). The Event failed to occur on March 8, 2005 but did occur in a subsequent election on January 29, 2008. Florida Gaming made its first payment on the note within ten days following the Event. The note bears interest at the prime lending rate plus 4% and is due in thirty-six installments of $23,145 plus all interest accrued.  The Company failed to make payments on the note after July 1, 2009  and on December 23, 2009, Centers was served with a summons and complaint from West Flagler Associated, Ltd. and Calder Race Course, Inc.(See Item 1. Legal Proceedings).

James W. Stuckert and Solomon O. Howell Notes
On August 14, 2009, Florida Gaming Corporation (the “Registrant”) entered into a Memorandum of Agreement (the “Agreement”) with Solomon O. Howell (“Howell”) and James W. Stuckert (“Stuckert,” and collectively with Howell, the “Lenders”) pursuant to which the Lenders may advance cash (each an “Advance”, and collectively the “Advances”) to the Company up to a maximum aggregate amount of one million dollars ($1,000,000).  The advances to the Company were $1,000,000 evidenced by eight separate notes with a maturity date of December 31, 2009.  On October 7, 2009, the Registrant and the Lenders amended the Agreement  to require the Company to issue to each of the Lenders warrants to acquire up to 20,000 shares of the Registrant’s common stock at a price of $6.00 per share.  Such warrants expire on October 7, 2012.  The Company incurred $39,451 of cost related to the issuance of the warrants.  These costs  were amortized into expense over the remaining term of the related Notes from October 7, 2009 through December 31, 2009.  The Notes also included a convertible feature allowing the lenders, at their option to convert outstanding principal and any accrued but unpaid interest into the Company’s $0.20 par value common stock.  The value of this  conversion feature to the Company was $138,204, this value was initially recorded as a discount on notes payable and then amortized over the life of the Notes, which ended December 31, 2009. The Company is currently in default on this Note.  As of the date of this filing,  Mr. Stuckert and Mr. Howell have not informed the Company of any default. 

Miami Dade County
On April 6, 2009, the Company completed Phase 1 of its two-phase acquisition of the 10.982 acres of property from the County. Phase 1 included the closing of the purchase of approximately 2.283 acres from the County for $3,348,429, including a down payment of $334,843 and a County financed note payable of $3,013,586 for 15 years with final payment due April 1, 2024, with a fixed interest rate of 7.25%. The Note is secured by the purchased property pursuant to a mortgage and security agreement between the Company and the County. The Company also received air-rights over N.W. 37th Avenue, a street separating the two properties. Closing of Phase 2 of the transaction for the remaining approximately 8.7 acres was scheduled to take place prior to July 1, 2010.   Miami Dade County and the Company agreed to amend the Settlement Agreement so that the Final Closing shall occur no later than 60 days from the date the US Corps of Engineers clears the property free and clear of environmental contamination or October 28, 2011, whichever is later.
 
15

 
Lawsuit settlement
On February 22, 2009 the Company executed a note payable to a party in settlement of a lawsuit.  The $200,000 note is unsecured and bears interest at 7.0%.  Payments of interest is paid monthly  with all remaining unpaid principal and interest due February 1, 2011.

Hamilton State Bank
The Company had a mortgage note payable on one of the 6 lots at Tara Club Estates in Georgia.  The note matured on November 17, 2009.  The Company failed to repay the note at this time and the lender has refused to extend the note.  The $38,368 note plus interest is currently in default.

(10) RETIREMENT PLAN

The Company provides defined contribution retirement plans under Internal Revenue Code Section 401(k). The plans, which cover employees included in its current Collective Bargaining Agreement and certain non-union employees, provide for the deferral of salary and employer matching.

(11) RELATED PARTY TRANSACTIONS

Management fees. In lieu of salaries for the Chairman/CEO, the Company accrues management fees to Freedom Financial Corporation (“Freedom”) of $780,000 per year.  Freedom is controlled by the Company’s Chairman/CEO and the Company’s President also maintains ownership in Freedom.  The Company accrued management fees of $780,000 during the year ended December 31, 2009 and the Company has accrued management fees of $390,000 for the six months ended June 30, 2010.

CIB Bank/Freedom Note
On October 31, 2005 Freedom purchased Centers First Bank (formerly CIB) loan for $2,400,000. First Bank assigned, without recourse,  the note representing the loan as well as the mortgages, rents, and receivables securing the loan to Freedom, but retained the right to elect between receiving a $250,000 deferred fee or exercising warrants to purchase 102,115 shares of the Registrant's common stock in connection with the loan. First Bank exercised all warrants in 2006. Effective October 31, 2005, Freedom and Centers entered into an Amended and Restated Loan Agreement and a Third  Amended and Restated Note in the principal amount of $2,400,000 with an 8% fixed rate of interest. On October 31, 2008, Centers note payable to Freedom matured and was subsequently refinanced with a $1,322,574 note payable issued November 1, 2008 to Freedom Holding, Inc. ("Holding"). Holding is  controlled by the Company’s CEO/Chairman and the President maintains ownership in Holding.  The Holding note is unsecured and bears interest at a fixed rate of 10%, with all principal and interest originally due May 1, 2009.  The Note has subsequently been renewed through September 1, 2010 (refer to 8-K filed March 5, 2010).   As an inducement to refinance the note, the Company issued Holding a warrant to purchase 20,000 shares of the Company's $0.20 par value common stock at a price per share of $8.25. The warrant is exercisable at any time from November 1, 2008 through November 1, 2011.

As of June 30, 2010 Freedom has a receivable due from the Company of $388,226.

 
This Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project,” and similar expressions. When the Company makes forward-looking statements, it is basing them on management’s beliefs and assumptions, using information currently available. These forward-looking statements are subject to risks, uncertainties and assumptions, including but not limited to, risks, uncertainties and assumptions related to the following:
 
·  
changes in legislation;
   
·  
federal and state regulations;
   
·  
general economic conditions;
   
·  
competitive factors and pricing pressures;
   
·  
dependence on the services of key personnel;
   
·  
interest rates;
   
·  
risks associated with acquisitions;
   
·  
uncertainties associated with possible hurricanes;
   
·  
and uncertainties related to the State of Florida negotiations with the American Indian tribes who operate casinos.
 
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If one or more of these or other risks or uncertainties materialize, or if the underlying assumptions prove to be incorrect, actual results may vary materially from those anticipated. Any forward-looking statements in this Form 10-Q or the documents incorporated herein by reference reflect management’s current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the Company’s operations, results of operations, growth strategy and liquidity. The factors specifically consider the factors identified in the Company’s  Form 10-K including under the caption “Risk Factors” should be considered.

References to “we”, “us”, “our”, “the registrant”, “Florida Gaming ” and “the Company” in this quarterly  report on Form 10Q shall mean or refer to Florida Gaming Corporation, unless the context in which those words are used would indicate a different meaning.

Florida Gaming Corporation (the "Company") currently owns and operates two jai-alai and inter-track pari-mutuel wagering facilities (each, a "Fronton," and collectively, the "Frontons") located in Miami and Central Coastal Florida (“Ft. Pierce”).  The Company's business consists primarily of its operations at the Frontons, which include, among other things, live jai-alai games, poker, dominoes, inter-track pari-mutuel wagering ("ITW") on jai-alai, thoroughbred racing, harness racing, and dog racing, and the sale of food and alcoholic beverages.  Poker is played at the  Miami Jai-Alai and  Ft. Pierce Jai-Alai, and dominoes are played at the Miami Jai-Alai  Card Room.   The Company also owns a third gaming permit which was previously operated by the Company at the Tampa Jai-Alai Fronton in Hillsborough County (Tampa) Florida.

The term "pari-mutuel wagering," which refers to the betting by members of the public against each other, as used in this report includes wagering on both live Jai-Alai performances and ITW.

The Company's Ft. Pierce location provides audio, video and Inter-Track Wagering (“ITW”) on live inter-track and interstate telecasting of horse racing, dog racing and jai-alai from the State of Florida as well as the rest of the country. The Miami location receives limited ITW telecasts, but telecasts its jai-alai performances via satellite to approximately sixty-two (62) other gaming facilities in Florida, Connecticut, Rhode Island, and to approximately 25 locations in Mexico, Central America, and Austria.  ITW provides about 50% of the Company's revenue as well as providing additional entertainment for customers.

Critical Accounting Estimates
The Company's Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments, and select from a range of possible estimates and assumptions, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period.
 
On an on-going basis, the Company evaluates its estimates, including those related to allowances for doubtful accounts, accounts receivable, inventory allowances, asset lives, the recoverability of other long-lived assets, including property and equipment, goodwill and other intangible assets, the realization of deferred income tax assets, remediation, litigation, income tax and other contingencies. The Company bases its estimates and judgments, to varying degrees, on historical experience, advice of external specialists and various other factors it believes to be prudent under the circumstances. Actual results may differ from previously estimated amounts and such estimates, assumptions and judgments are regularly subject to revision.

The policies and estimates discussed below are considered by management to be critical to an understanding of the Company's financial statements because their application requires the most significant judgments from management in estimating matters for financial reporting that are inherently uncertain.
 
The Company presents accounts receivable, net of allowances for doubtful accounts, to ensure accounts receivable are not overstated due to uncollectibility. The allowances are calculated based on detailed review of certain individual customer accounts, historical rates and an assessment of the overall economic conditions as well as the aging of the accounts receivable. In the event that the receivables become uncollectible after exhausting all available means of collection, the company will be forced to record additional adjustments to receivables to reflect the amounts at net realizable value. The effect of this entry would be a charge to income, thereby reducing its net profit. Although the company considers the likelihood of this occurrence to be remote, based on past history and the current status of it’s accounts, there is a possibility of this occurrence.
 
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The Company provides an allowance for doubtful accounts equal to estimated uncollectible amounts. The Company's estimate is based on a review of the current status of receivables. The Company had no allowance for doubtful accounts for the six months ended June 30, 2010 and June 30, 2009.

In connection with losses incurred from natural disasters, insurance proceeds are collected on existing business interruption and property and casualty insurance policies. When losses are sustained in one period and the amounts to be recovered are collected in a subsequent period, management uses estimates to determine the amounts that it believes will be collected.  So far the Company’s estimates have proved to be reasonable.  The Company evaluates the carrying value of its real estate development and other long-lived assets, annually under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 360, “Plant, Property, and Equipment” and ASC Topic 970 “Real Estate.”

In accordance with ASC Topic 970, the Company periodically provides for losses on its property held for sale. Generally, when events or changes in circumstances indicate that the carrying amount of long-lived assets, including property and equipment and intangible assets, may not be recoverable, the Company undertakes an evaluation of the assets or asset group. If this evaluation indicates that the carrying amount of the asset or asset group is not recoverable, the amount of the impairment would typically be calculated by using appraised values of the property. All relevant factors are considered in determining whether an impairment exists. The Company reviews for impairment annually and has found this to be very effective.  There has been no additional provision for losses for the six months ending June 30, 2010.

Revenue is derived from acceptance of wagers under a pari-mutuel wagering system. The Company accepts wagers on both on-site and ITW events. On-site wagers are accumulated in pools with a portion being returned to winning bettors, a portion paid to the State of Florida, and a portion retained by the Company. ITW wagers are also accepted and forwarded to the "host" facility after retention of the Company's commissions. The Company recognizes revenue from gaming operations in accordance with ASC Topic 605 which requires revenues to be recognized when realized or realizable and earned.  Revenues derived from gaming operations including: mutuel, admission, program, food and beverage, card room, and other revenues are collected shortly before the earning events take place. The Company recognizes revenues from the Company's real estate operations in accordance with ASC Topic 360-20, and sales are generally recognized when consummated , which is upon the closing of the sale, unless the down payment is insufficient to accrue the revenue.

The Company's policy for unclaimed winning tickets follows the requirements as set forth by the State of Florida. Abandoned tickets are winning tickets that remain uncashed for a period of one year. The value of the abandoned tickets escheat to the state. These funds are deposited into the State School Fund for support and maintenance of Florida's public schools. During the first six months of  2010, unclaimed winnings totaled $211,241.

Competition
The gaming industry is highly competitive. Many gaming companies have substantially greater financial resources and larger management staffs than the Company. Because of the growing popularity and profitability of gaming activities, competition is significantly increasing. The Company competes for customers with other forms of legal wagering, including video poker gaming in non-casino facilities, charitable gaming, pari-mutuel wagering, state lotteries, Indian casinos, and cruise ships.
 
Further expansion of gaming opportunities not related to the pari-mutuel industry could also significantly and adversely affect the Company's business. In particular, the expansion of casino gaming in Miami-Dade and Broward Counties  which is near the geographic areas from which the Company attracts or expects to attract a significant number of its customers could have a material adverse effect on the Company's business. The Company expects that it will experience significant competition as the emerging casino industry matures. The Company is now competing with Calder Casino, a slot facility in Florida adjacent to Calder Race Course, which opened on January 22, 2010 with approximately 1,200 slot machines. Additionally, a poker room operation opened at Calder Casino on October 23, 2009 and Flagler Dog Track reopened in October 2009 as Magic City Casino with 700 Las Vegas-style slot machines.

The Company also faces competition from gaming companies that operate on-line and Internet-based gaming services. These services allow patrons to wager from home on a wide variety of sporting events. Unlike most on-line and Internet-based gaming, companies, the Company may require significant and ongoing capital expenditures for both its continued operation and expansion. The Company also could face increased costs in operating business compared to these gaming companies. The Company cannot offer the same number of gaming options as on-line and Internet-based gaming companies. In addition, many on-line and Internet gaming companies are based off-shore and avoid regulation under state and federal laws. These companies may divert wagering dollars from legitimate wagering venues. Competition in the gaming industry is likely to increase due to limited opportunities for growth in new markets. The Company's inability to compete successfully with these competitors could have a material, adverse affect on its business.
 
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Jai-Alai Industry
The jai-alai industry live handle (money wagered) generally has declined in the last several years, due to increased gaming competition such as casino gaming in Broward and Miami-Dade County,  Indian Casino Gaming, gambling cruise ships, and the State of Florida lottery. Also, competition in the sports/entertainment area has increased significantly due to more professional sports teams in the Company's market areas. There can be no assurance that the jai-alai industry will improve significantly, if at all, in the future. Because the Company's jai-alai business is tied directly to many, if not all, of the factors which influence the jai-alai industry as a whole, a players strike or the enactment of unfavorable legislation could have an adverse impact on the Company's operations.

All Florida permit-holders are authorized to engage in Inter-Track Wagering (“ITW”)  year-round, subject to certain restrictions, all of which are not discussed herein. ITW is permitted on thoroughbred racing, harness racing, dog racing, and jai-alai. ITW is permitted at a pari-mutuel facility so long as at least one facility in Florida is providing live pari-mutuel performances on any such day that ITW is offered.

Pursuant to the statute and subject to certain restrictions, Florida jai-alai frontons and dog racing tracks may receive broadcasts of dog races or jai-alai games conducted at tracks or frontons located outside of Florida ("out-of-state host facilities"). Among the restrictions applicable to such broadcasts, however, are the following: (1) that the receipt of out-of-state broadcasts by the Florida fronton or dog racing track (the "Florida guest facility") only be permitted during the Florida guest facility's operational meeting, (2) in order for the Florida guest facility to receive such broadcasts, the out-of-state host facility must hold the same type of class of pari-mutuel permit as the Florida guest facility, i.e., horse to horse, jai-alai to jai-alai, etc., (3) the guest facilities may not accept wagers on out-of-state races or games that exceed 20% of the total races or games on which wagers are accepted live. All wagering placed on out-of-state ITW broadcasts is included in the amount taxed pursuant to the Pari-Mutuel Law.

Each of the Frontons, as a guest facility when it participates in ITW, is entitled by statute to a minimum of 7% of the total contributions to the pari-mutuel pool when the ITW broadcast is by a host horse racing facility. Each of the Frontons is eligible by statute to receive a minimum of 5% of the total contributions to the pari-mutuel pool when the ITW broadcast is by facilities other than horse racing facilities (greyhound and jai-alai). In addition, each of the Frontons is authorized to receive admissions and program revenue when conducting ITW.

Card Room & Dominoes  Development
A new Florida pari-mutuel statute was enacted July 1, 2007 allowing card rooms at licensed pari-mutuel facilities to add the game of dominoes, increase the maximum wager on poker, and permit year round operation of card rooms. Card rooms are regulated by the Florida Division of Pari-Mutuel Wagering (“DPMW)”.  Permitted games are limited to non-banked poker games and dominoes.  On June 5, 2007, the St. Lucie County commission approved a card room at the Company’s  Ft. Pierce Jai-Alai facility.  The Ft. Pierce card room opened April 28, 2008 and the new rules also applied to the Ft. Pierce facility.

 There have been some positive changes in the new legislation:

1.  
Card rooms may operate on any day for a cumulative amount of 12 hours;
   
2.  
“Authorized games”  means a game or series of games of poker or dominoes;
   
3.  
“Tournament” means a series of games that have more than one betting round involving one or more tables and where the winners or others receive a prize or cash award;
   
4.  
Card room operators may award giveaways, jackpots, and prizes to a player who holds certain combinations of cards specified by the card room operator;
   
5.  
Card rooms maximum bet may not exceed $5 in value.  There may not be more than three raises in any round of betting;
   
6.  
Card rooms may conduct games of Texas Hold-Em’s with a betting limit if the required player buy-in is not more than $100.

Florida state taxes are 10% of revenue and 4% of the revenues are paid to the jai-alai players. The Company is encouraged with the recent changes to the card room rules and the addition of dominoes and  believes these changes should improve the overall profitability of the card room operations.

Development of Slot Machines
On January 29, 2008, residents of Miami-Dade County passed a referendum that would allow Miami Jai-Alai, Calder Race Course, and Flagler Dog Track, to install up to 2,000 slot machines.   The other two facilities in Dade County have recently opened and the Company is now competing with Calder Casino, a slot facility in Florida adjacent to Calder Race Course, which opened on January 22, 2010 with approximately 1,200 slot machines. Additionally, a poker room operation opened at Calder Casino on October 23, 2009 and Flagler Dog Track reopened in October 2009 as Magic City Casino with 700 Las Vegas-style slot machines.
 
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In April, 2010, the Florida legislature subsequently enacted legislation which provided for a reduction in the tax rate for racetracks operating slot facilities in Miami-Dade and Broward Counties from 50% to 35% as well as a reduction in the annual license fee from $3 million to $2 million over a two-year period and removes wagering limits for poker. Under SB 622, the Seminole tribe would gain the exclusive right to have blackjack and other table games at three Broward County casinos and two others in Imokalee and Tampa. All seven tribal casinos also would be able to keep operating Las Vegas-style slot machines. On April 15, 2010, the Florida Senate passed SB 622 and on April 19, 2010, the House of Representatives passed SB 622. On April 28, 2010 the Governor of Florida signed SB 622, which  became effective on July 1, 2010. In accordance with SB 622 legislation, the annual license fee was reduced to $2.5 million on July 1, 2010 and then $2.0 million on July 1, 2011.  Miami Jai-Alai will be able to operate up to 2,000 machines, have ATM machines at the facility, and hours of operation during the week will be 18 hrs a day and 24 hours a day on weekends.

RESULTS OF OPERATIONS -- SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2010 COMPARED WITH SECOND QUARTER AND SIX MONTHS  ENDED JUNE 30,   2009

During the quarter ended June 30, 2010,  Miami only operated live jai-alai one month, April,  compared to operating three months of live Jai-Alai during the quarter ended June 30, 2009.   Ft. Pierce normally operates live jai-alai during the first quarter,  but did not start live jai-alai until May 7th, 2010,  and will continue live jai-alai through August 28, 2010.  By comparison, Ft. Pierce did not conduct live jai-alai during the three months  ended June 30, 2009.   Ft. Pierce  conducted a full schedule of Inter-Track Wagering (“ITW”) for the quarters ending June 30,  2010 and June 30, 2009.   Miami offers limited ITW product due to blackouts imposed because of its close proximity to other South Florida pari-mutuels. Ft. Pierce and Miami operate a card room, with the  Miami location also offering dominoes in its’ card room.

Handle Analysis for the Quarter Ended June 30, 2010 compared to the Quarter ended June 30, 2009
Total handle (amount of money wagered) for the three months ended June 30, 2010 was $10,743,640 of which $3,876,330 was from live jai-alai wagering and $6,867,310 was from inter-track wagering.  This compared to the total handle (amount of money wagered) of  $16,334,434 for the three months ended June 30, 2009, of which $7,136,875 was from live jai-alai wagering and $9,197,559 was from inter-track wagering.  The $5,590,794 decrease is due to a decrease of $3,260,545 of live jai-alai and a decrease of $2,330,249 in ITW. Handle decreased due to the increased competition, the overall economy, and the scheduling of  live jai-alai at Miami and Ft. Pierce.

Total Pari-Mutuel  Revenues for the Quarter ended June 30, 2010 compared to Quarter ended June 30, 2009
Pari-mutuel revenues (net of state pari-mutuel taxes) for the quarter ended June 30, 2010 were $1,197,013 compared to pari-mutuel revenues of $1,891,107 the same period in 2009, a 37% decrease. Revenues for the quarter ended June 30, 2010 ($1,197,013) consisted of $598,376 from live Jai-Alai wagering and $598,637  from Inter-Track Wagering. Pari-mutuel revenues (net of state pari-mutuel taxes) for the  quarter ended June 30, 2009 ($1,891,106) consisted of $1,139,786 from live Jai-Alai wagering and $751,320  from Inter-Track Wagering.

Card Room Revenue for the quarter ended June 30, 2010 compared to the quarter ended June 30, 2009
Card room Revenue for the three months ended June 30, 2010 was $1,179,781 compared to  $1,539,538 for the three months ended June 30, 2009 a $359,757 decrease.   Card room  operating expenses totaled $534,276 for the quarter ending June 30, 2010, compared to $671,590 or the quarter ending June 30, 2009.

Admissions  for the quarter  ended June 30, 2010  compared to the quarter ended June 30, 2009
Admissions income, net of state taxes, for the quarter ended June 30, 2010 was $2,023 compared to $8,089 for the same period in 2009. Ft. Pierce does not charge admission at their facility.

Food, beverage and other income for the quarter ended June 30, 2010 compared to the quarter ended June 30, 2009
Food, beverage and other income for the quarters ended June 30,  2010 and June 30,  2009 were $274,109 and $334,802, respectively.
The decrease of $60,693 is primarily due to decreased concession and bar revenues sales due to fewer patrons at the facilities.

Real Estate Revenue for the quarter  ended June 30,  2010 compared to the quarter ended June 30, 2009
There were no real estate sales for the quarters ended June 30, 2010 and June 30, 2009.

Total Operating Revenues for the quarter ended June 30, 2010 compared to the quarter ended June 30, 2009
Total Operating Revenues for the quarter ended June 30, 20010 were $2,652,926 compared to $3,773,535 for the same period in 2009, a decrease of $1,120,609. All areas of revenue declined during the quarter ended June 30, 2010.
 
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Operating  Expenses for the quarter ended June 30, 2010 compared to the quarter ended June 30, 2009
The Company's operating expenses for the three months ended June 30, 2010 were $3,066,100 compared to $3,748,321 for the same period in 2009.  The components of  the Company’s operating expenses and their comparison to the second quarter last year are as follow:  Player costs, salaries, benefits, and support staff, represent a significant portion of operational expenses.  Player costs for the quarter  ending June 30, 2010 and June 30, 2009, were $596,845 and $761,054 respectively.  Rental and service costs for totalizator wagering equipment and satellite receiving/television equipment also represent a significant portion of operating expenses.  These expenses totaled $242,621 for the quarter ended June 30, 2010, compared to $316,797 for quarter ended  June 30, 2009. The components of the 2010 wagering equipment and expenses were $68,561 in ITW tote, interface, and telephone charges; $39,423 in totalizator equipment rental; $44,150  in satellite charges and $90,488 in camera/television rental. The components of the 2009 wagering equipment and expenses were $85,479 in ITW tote, interface, and telephone charges; $62,631 in totalizator equipment rental; $52,000 in satellite charges and $116,687 in camera/television rental. Utilities expense totaled $118,741 and $146,878 respectively, for the quarter ended June 30, 2010 and June 30, 2009. Operating expenses (including payroll costs)  for the cardroom, bar, program, souvenir, parking,  and concessions costs were $775,826 and $941,522 for the quarters ended June 30,  2010 and June 30, 2009,  respectively. Operating payrolls for mutuels, maintenance, admissions, office, security and contract labor costs totaled $623,059 and $699,196 for the quarters ended June 30, 2010 and June 30, 2009, respectively.    Of the $623,059,  $166,159 was mutuels payroll, $148,642 was maintenance payroll, $4,687 was admissions payroll, $44,900 was office payroll, and $258,671 was security payroll.     Maintenance and cleaning expenses for the quarter ended June 30, 2010,  totaled $63,269 compared to $72,749 for the same period in 2009.    Advertising expense for the quarter ended June 30, 2010, totaled $47,144 compared to $73,377 for the quarter ended June 30, 2009, a $26,233 decrease.

General And Administrative Expenses for the quarter ended June 30, 2010 compared to the quarter ended June 30, 2009
The Company's general and administrative expenses  for the quarters ended June 30, 2010 and June 30, 2009 were $1,336,986 and $1,107,210, respectively, an increase of $279,776.  Significant categories of the Company’s general and administrative expenses for the second quarter of 2010  compared to the second  quarter of 2009 are as follows:   Executive salaries and director fees for the quarter ended June 30, 2010 were $161,571 compared to $163,781 for the quarter ended June 30,  2009 (see consulting fees). Professional fees were $182,741 for the quarter ending June 30, 2010 compared to $155,156 for the same period in 2009. Consulting fees were $195,000 for the quarters ended June 30, 2010 and June 30, 2009.   Consulting  fees consist of management fees paid to Freedom Financial Corporation in lieu of a salary to the Chairman/CEO. Travel and entertainment expense decreased from $90,318  for the second quarter of 2009, to $80,002 for the second quarter of 2010.  Interest expense saw an increase of $216,718 for the quarter ended June 30, 2010.  Interest expense continues to increase due to default interest rates being charged on outstanding notes,

Handle Analysis for the Six Months Ended June 30, 2010  compared to the Six Months ended June 30, 2009
Total handle (amount of money wagered) for the six months ended June 30, 2010 was $24,397,176 of which $9,903,647 was from live jai-alai wagering and $14,493,529 was from inter-track wagering.    Total handle (amount of money wagered) for the six months ended June 30, 2009 was $33,642,088 of which $14,998,290 was from live jai-alai wagering and $18,643,798 was from inter-track wagering.Total handle decreased $9,244,912 or 27% for the six months ended June 30, 2010.
 
Total Pari-Mutuel Revenues for the Six Months  ended June 30, 2010 compared to the Six months  ended June 30, 2009
Pari-mutuel revenues (net of state pari-mutuel taxes) for the six months ended June 30, 2010 were $2,740,558 compared to $3,903,900  for the same period in 2009. Revenues ($2,740,558) for the six months ended June 30, 2010 consisted of $1,483,504 from live Jai-Alai wagering and $1,257,054  from Inter-Track Wagering. Revenues ($3,903,900) for the six months ended June 30, 2009 consisted of $2,359,275 from live Jai-Alai wagering and $1,544,625 from ITW.

Card Room Revenue for the six months ended June 30, 2010 compared to the six months  ended June 30, 2009
Card room Revenue for the six months ended June 30, 2010 was $2,476,059 compared to $3,246,773 for the six months ended June 30, 2009 a $770,714 decrease.  Ft. Pierce had card room revenue of $1,822,296 during the six months ended June 30, 2010, compared to $2,226,532 for the same period in 2009.  Miami had card room revenue of $653,763 for the six months ended June 30, 2010, compared to $1,020, 241 for the same period in 2009.   Card room operating costs totaled $1,101,243 for the period ending June 30, 2010, with Ft. Pierce having expense of $763,912 and Miami having card room expense of $337,331.  This compares to card room operating costs of $1,382,381 for the same period in 2009.

Admissions  for the six months  ended June 30, 2010 compared to the six months  ended June 30, 2009
Admissions income, net of state taxes, for the six months ended June 30, 2010 was $8,704 compared to $11,932 for the six months ended June 30, 2009.  Ft. Pierce does not charge admission.

Food, beverage and other income for the six months ended June 30, 2010 and June 30, 2009
Food, beverage and other income for the six months ended June 30,  2010 and June 30,  2009 were $554,968 and $712,363 respectively, a $157,395 decrease.  All areas of revenue decreased for the six months ended June 30, 2010.
 
21

 
Real Estate Revenue for the six months  ended June 30,  2010 compared to six months  ended June 30, 2009
There were no real estate sales for the six months ended June 30, 2010 and June 30, 2009.

Total Operating Revenues for the six months  ended June 30, 2010 compared to six months ended June 30, 2009
Total Operating Revenues for the six months ended June 30, 2010 was $5,780,289 compared to $7,874,968 for the same period in 2009, a decrease of $2,094,679.    Pari-Mutuel  Revenue decreased $1,163,342 for the six months ended June 30, 2010, and other revenue decreased $931,337.

Operating  Expenses for the six months ended June 30, 2010 compared to the six months ended June 30, 2009
The Company's operating expenses for the six months ended June 30, 2010 were $6,383,548 compared to $7,861,054 for the same period in 2009, a decrease of $1,477,506.    The components of  the Company’s operating expenses and their comparison to the six months ended June 30, 2010  are as follow:  Player costs, salaries, benefits, and support staff, represent a significant portion operational expenses.  Player costs for the six months ending June 30, 2010 and June 30, 2009, were $1,266,738 and $1,651,399 respectively.  Rental and service costs for totalizator wagering equipment and satellite receiving/television equipment also represent a significant portion of operating expenses.  These expenses totaled $546,913 for the six months ended June 30, 2010, compared to $624,852 for quarter ended  June 30, 2009.   The components of the 2010 wagering equipment and expenses were $144,985 in ITW  tote, interface, and telephone charges; $100,795 in totalizator equipment rental; $95,650  in satellite charges and $205,483 in camera/television rental. The components of the 2009 wagering equipment and expenses were $166,494 in ITW  tote, interface, and telephone charges; $125,359 in totalizator equipment rental; $103,500  in satellite charges and $229,499 in camera/television rental. Utilities expense totaled $202,684 and $278,081 respectively, for the six months ended June 30, 2010 and June 30, 2009. Operating expenses (including payroll costs)  for the cardroom, bar, program, souvenir, parking  and concessions costs were $1,590,422 and $1,964,846 for the six months ended June 30,  2010 and June 30, 2009,  respectively, a $374,424 increase. Operating payrolls for admissions, mutuels, office, maintenance and security and contract labor costs totaled $1,268,995 and $1,459,003 for the six month periods ended June 30, 2010 and June 30, 2009, respectively.  Of the $1,268,995,  $357,801 was mutuels payroll, $300,287 was maintenance payroll, $12,414 was admissions payroll, $86,393 was office payroll, and $512,101 was security payroll. This Compares to the six months ended June 30, 2009, of $1,459,003,  $441,358 was mutuels payroll, $344,780 was maintenance payroll, $19,293 was admissions payroll, $106,671 was office payroll, and $546,900 was security payroll. Maintenance expense for the six months ended June 30, 2010,  totaled $123,678 compared to $151,440 for the same period in 2009.  Advertising expense for the six months ended June 30,  2010, totaled $97,919 compared to $129,903 for the six months ended June 30, 2009.

General And Administrative Expenses for the six months ended June 30, 2010  compared to the six months ended June 30, 2009
The Company's general and administrative expenses  for the six months ended June 30, 2010 and June 30, 2009, were $2,544,977 and $2,242,057  respectively, a $302,920 increase.   Executive salaries and director fees for the six months ended June 30, 2010 were $324,145 compared to $324,567 or the six months ended June 30,  2009 (see consulting fees). Professional fees decreased from $401,450 for the  six months 2009 to $290,217 for the  six months ended June 30, 2010. Consulting fees were $390,000 for the six months ended June 30, 2010 and June 30, 2009.   Consulting  fees consist of management fees paid to Freedom Financial Corporation in lieu of a salary to the Chairman/CEO.  Travel and entertainment expense decreased from $189,328 for the period ended June 30, 2009 to $136,970 for the same period in 2010, a $52,358 decrease. Interest expense increased due to the default interest rate being charged on the delinquent notes, and additional short term borrowings.

Real Estate Cost of Sales
The  Company had no real estate cost of  sales during the quarters ended or six months ended June 30, 2010 and June 30, 2009.

Other Income
The Company had other income of $41,707 for the quarter ended June 30, 2010, compared to  $995,509 for the quarter ended June 30, 2009. Other income for the quarter ended June 30, 2010, consisted of $39,548 in pari-mutuel tax credits, and interest income of $2,159.   Other income for the quarter ended June 30, 2009, consisted of  $870,185 on the gain for the compensation of the right-of-way by Miami-Dade County,  $124,490 in pari-mutuel tax credits, and interest income of $834.

The Company had other income of $211,680 for the six months ended June 30, 2010, compared to other income of $1,221,566 for the six months ended June 30, 2009.  Other income for the six months ended June 30, 2010, included $209,262 in pari-mutuel credits, and $2,418 in interest income.  This compares to the six months ended June 30, 2009, where other income included a $870,185 gain from the compensation of the right-of-way by Miami-Dade County, $306,209 in pari-mutuel credits, $39,872 refund from the City of Miami Fire Rescue,  and $5,300 in interest income. The gain of $870,185 is a result of  Florida Gaming completing Phase 1 of its two-phase acquisition of  the 10.982 acres of property from Miami-Dade County (“County”).  As part of this transaction, the County purchased the right-of-way for the use of  .492 acres from the Company for $1,014,300. The Company recorded a gain of $870,185 on the sale  of the right-of-way by the County.    

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Tax Loss Carryforwards
At December 31, 2009, the Company had tax net operating loss (NOL) carryforwards of approximately $20,042,000 available to offset future taxable income.  These NOL carryforwards expire fifteen years from the year in which the losses were incurred or at various intervals through fiscal 2023.

Summary of Operations
Due to a number of factors affecting consumers, the volatility in the stock market,  high unemployment levels, all of which have resulted in reduced levels of consumer spending, the outlook for the gaming industry remains highly unpredictable. All areas of revenue saw a decrease during the quarter and six months ended June 30, 2010.

The Company had net loss of $1,824,420 or ($.50)  per common share for the three months ended June 30,  2010, compared to net  loss of  $224,142 or ($.09) per common share  for the quarter ended June 30, 2009. All areas of revenue decreased during the second quarter 2010.

The Company had net loss of $3,170,163 or ($.88)  per common share for the six months ended June 30,  2010, compared to net  loss of  $1,284,654 or ($.41) per common share  for the quarter ended June 30, 2009. Pari-mutuel revenue, card room,  food, beverage and other revenue  all decreased during the six months ended June 30, 2010.

LIQUIDITY AND CAPITAL RESOURCES
 
The Company’s cash and cash equivalents at June 30, 2010 was $741,319.  At June 30, 2010, the Company had a negative working capital of $15,316,737.   At December 31, 2009, the Company had negative working capital of $11,926,189.  This is an increase in negative working capital of $3,390,548 during the six months ended June 30, 2010. During the six months ended June 30,  2010, the Company has seen an increase in current liabilities of $935,176, and an increase of $2,291,177 in accounts payable and accrued expenses.  The Company borrowed $735,000 in short term debt during the first six months ended June 30, 2010.
 
During the six months ended  June 30, 2010, net cash used in Company's operating activities was $709,251 compared to net cash used in operating activities of $989,572 during the six months ended June 30, 2009.  The Company had an increase in accounts payable and accrued expenses of $2,241,177 during the first six months ended June 30,  2010, compared to an increase of $947,651 during the same period in 2009.  During 2010, some of the expenses accrued, include  management fee expenses of $390,000, dividends of  $269,515, accrued professional fees of $188,346, accrued property taxes of $141,782 and accrued interest of $608,441. The Company has experienced increased interest expense due to increased borrowing and the default interest rate being charged on certain loans.    The Company's continuing operating expenses consist principally of office expenses, general and administrative expenses, and costs associated with live Jai-Alai, ITW operations and cardroom operations.

During the six months ended June 30, 2010, cash used in investing activities was $53,655 in purchases of property and equipment compared to cash provided by  investing activities of $719,050 for the six months ended June 30, 2009.   During 2009, Miami Dade County purchased .492 acres from the Company for $1,185,345.  The .492 acres sold to the County will be used by the Miami-Dade Metro Rail, an overhead light rail system.

During the six months ended June 30, 2010, cash provided by financing activities was $684,969 compared to cash used in financing of $84,468 during the same period in 2009.  During the six months  ended June 30, 2010, the Company borrowed $250,000 from H2C, Inc. and an additional $485,000 from Nurmi Properties, LLC. This compares to the six months ended June 30, 2009, during which the Company received $98,750 from 30,000 stock options that were exercised, dividends paid of $43,289, and repaid debt of $139,929.
 
23

 
The Company leased totalizator equipment from Scientific Games Corp. at each fronton under leases which expired October 31, 2008, but subsequently being leased on a month- to- month basis. The leases required minimum annual rental at the Miami and Ft. Pierce locations. Transmission of the Miami Jai-Alai signal requires the use of a satellite uplink simulcasting service which requires a fee of $500 per performance. Total totalizator rental expense and other equipment rental under operating leases for the six months ended June 30, 2010 and 2009 was approximately $100,795 and $125,359, respectively.

The Company also leased parking facilities adjacent to the Miami fronton. This lease was dated February 17, 2003, and lease payments totaled $34,000 in 2009, with the lease concluding with the purchase of the Miami-Dade County property.
 
At December 31, 2009, the Company had two notes mature, Isle of Capri Casinos, Inc. (“Isle”) for $3,000,000 plus  interest, and the Stuckert/Howell Note of $1,000,000 plus interest.  The Company failed to pay these amounts on December 31, 2009 at maturity (For more information reference Form 8-K dated December 31, 2009).  On March 1, 2010 the Company was served with a complaint by Isle  (See Item 1. Legal Proceedings) .   At June 30, 2010, the Company owed Isle $3,000,000 principal plus interest.

At June 30, 2010, the Company owed $1,000,000 principal plus interest on the Stuckert/Howell note.  As of the date of this filing, Mr. Stuckert and Mr. Howell have not informed the Company of any default.    

At June 30, 2010 the Company owed West Flagler/Calder $416,666 principal balance plus interest.  The Company failed to make the required payments to West Flagler/ Calder since July 2009, and on December 23, 2009, Centers was served with a summons and complaint (See Item 1. Legal Proceedings). 

At June 30, 2010, the Company owed $2,887,920  on a note to Miami-Dade County. 
  
The Company borrowed $500,000  from Nurmi Properties, LLC on December 11, 2009, and additional borrowings from Nurmi total $335,000 through March 31, 2010 (See Form 8-K’s dated December 11, 2009, and February 4, 2010). On April 16, 2010 the Company borrowed an additional $75,000 from Nurmi Properties, LLC (See Form 8-K dated April 16, 2010), for a total of $910,000. On June 2, 2010, the Company borrowed an additional Seventy Five Thousand Dollars ($75,000) from the Lenders pursuant to a Note and Mortgage Modification (the “Fifth Modification”), among the Company and the Lenders.  The Original Note and Mortgage became $985,000 rather than $910,000. (See Form 8-K dated June 2, 2010).

On February 4, 2010, the Company borrowed $90,000 from H2C (refer to Form 8-K dated February 4, 2010).  On April 28, 2010, the  Company entered into a Promissory Note and Mortgage  with H2C, Inc. pursuant to which the Lender advanced to the Registrant two hundred fifty thousand dollars ($250,000).  $82,156 of the Advance was used to pay to the Lender all outstanding principal and accrued interest due to the Lender pursuant to a Promissory Note of the Registrant dated February 4, 2010 (See Form 8-K dated April 28, 2010). 

On July 1, 2010, the Company entered into a Promissory Note and Mortgage  pursuant to which the Lender advanced to the Registrant fifty thousand dollars ($50,000) (the “Advance”).   Under the Agreements, the outstanding principal amount of the Advance bears interest at an annual rate of ten percent (10%).  Accrued interest is payable to the Lender in five monthly installments of $416.66, with a balloon payment of the outstanding principal amount of the Advance and all accrued but unpaid interest due on December 31, 2010.  The Company’s obligations under the Note are secured by a first mortgage (the “Mortgage”) in the Lender’s favor with respect to with respect to 18 acres of unimproved real property in St. Lucie County in the state of Florida.  No prepayments are permitted under the Note.  For further information refer to Form 8-K filed July 8, 2010.

The Company had a note with Freedom Holding that was scheduled to mature on March 1, 2010. The Company extended their $1,322,574  note with Freedom Holding through September 1, 2010. 

The Company intends to refinance its debts or sell the Fort Pierce Jai-Alai Property and Tampa Jai-Alai permit.  The proceeds received from the sale of Ft. Pierce would be used to pay past-due obligations and to initiate efforts to install slot machines at the Miami Jai-Alai Fronton.   There is no assurance that the Company will be successful in any of these efforts.
 
24

 
Segment Information

The Company follows ASC Topic 280, “Segment Reporting.” Topic 280 requires companies to report information about the revenues derived from the enterprise’s segments, about the geographical divisions in which the enterprise earns revenues and holds assets, and about major customers.

The Company has defined its segments into two main areas: Florida Gaming Centers (Centers) and Tara Club Estates (Tara). These segments are organized under the supervision of the Florida Gaming executive management team and are evaluated based on the following information presented: Revenues from gaming operations, revenues from lot sales and operating profit contribution to the total corporation. All inter-segment transactions are eliminated to arrive at the total corporation revenue and operating profit. Income and expense items below operating profit are not allocated to the segments and are not disclosed.

The Florida Gaming Centers segment operates the Corporation’s jai-alai centers in Miami and Fort Pierce, Florida. Centers also operates the Company’s inter-track wagering operation in Florida. Tara Club Estates is a real estate development in Loganville, Georgia. Tara develops residential building lots for sales to builders and individuals. As permitted under Topic 280, certain information not routinely used in the management of these segments, information not allocated back to the segments or information that is impractical to report is not shown. Items not disclosed are as follows: Interest Income and Expense, Amortization Expense, Income Tax Expense or Benefit, Extraordinary Items, Significant non-cash items and Long-lived assets.

During the six months ended June 30, 2010, Centers’ gaming operations comprised  100% of the Company’s revenues. Neither Centers nor Tara has any customers that individually represent a significant portion of their business.

June 30, 2010
 
(Dollar Amount In Thousands)
 
Assets
   
Revenues
   
Profit (Loss)
 
 Florida Gaming Centers
    98 %   $ 15,501       100 %   $ 5,780       100 %   $ (3,159 )
Tara Club Estates
    2 %     263       -       -0-               (11 )
Consolidated Total
    100 %   $ 15,764       100 %   $ 5,780       100 %   $ (3,170 )

June 30,  2009
 
(Dollar Amount In Thousands)
 
Assets
   
Revenues
   
Profit (Loss)
 
 Florida Gaming Centers
    98 %   $ 16,660       100 %   $ 7,875       100 %   $ (1,269 )
Tara Club Estates
    2 %     333       -       -0-               (16 )
Consolidated Total
    100 %   $ 16,993       100 %   $ 7,875       100 %   $ (1,285 )
                                                 
 Fair Value Measurement
                                               
 
ASC Topic 820 requires disclosures concerning fair value measurements and establishes a three-level valuation hierarchy. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement.

ASC Topic 820 requires disclosure of assets and liabilities measured at fair value on a nonrecurring basis.  The following table presents the financial assets carried by the Company at fair value as of   June 30, 2010 and 2009 and by Topic 820 valuation hierarchy (as described above).

25

 
Assets measured at fair value on a nonrecurring basis as of  June 30, 2010

   
Total carrying value in balance sheet
   
Quoted market prices in an active market (Level 1)
   
Internal models with significant observable market parameters (Level 2)
   
Internal models with significant unobservable market parameters (Level 3)
   
Total Gains (Losses)
 
Real Estate Held For Sale
  $ 234,000       -0-     $ 234,000       -0-     $ (68,569 )
                                         
Total assets at fair value
  $ 234,000       -0-     $ 234,000       -0-     $ (68,569 )
 
Assets measured at fair value on a nonrecurring basis as of  June 30,  2009

   
Total carrying value in balance sheet
   
Quoted market prices in an active market (Level 1)
   
Internal models with significant observable market parameters (Level 2)
   
Internal models with significant unobservable market parameters (Level 3)
   
Total Gains (Losses)
 
Real Estate Held For Sale
  $ 297,500       -0-     $ 297,500       -0-     $ (5,069 )
                                         
Total assets at fair value
  $ 297,500       -0-     $ 297,500       -0-     $ (5,069 )
 
In accordance with the provisions of ASC Topic 360-10-05 the Company periodically evaluates and adjusts its real estate held for sale for impairment.  The Company maintained a reserve for loss of $68,569 on its real estate held for sale as of  June 30, 2010.  A provision of $63,500 was made to the reserve in the fourth quarter 2009 due to the decrease in real estate values in the area where the property is located.

ASC Topic 820 also requires disclosure of assets and liabilities measured at fair value on a recurring basis.  The Company measured no assets or liabilities at fair value on a recurring basis as of  June 30,  2010.
 
26

 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Under SEC regulations, the information called for by this item is not required because the Company is a smaller reporting Company.
 
ITEM 4. CONTROLS AND PROCEDURES

As of  June 30, 2010, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms.

(a) Management’s quarterly report on internal control over financial reporting.   Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15f under the Exchange Act. Our internal control system is designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

*
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

*
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

*
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of  June 30, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Based on management's assessment and those criteria, management believes that, as of  June 30, 2010, the Company maintained effective internal control over financial reporting.
 
(b) Changes in internal controls. The Company made no changes to its internal control over financial reporting during the most recent fiscal quarter.
 
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Item 1. Legal Proceedings.

Isle of Capri

On March 1, 2010, the Company and its subsidiary, Florida Gaming Centers, Inc. (“Centers”), were served with a complaint (the “Complaint”) by Isle of Capri Casinos, Inc. (“Isle”). Centers comprises 100% of Registrant’s operations. The Complaint filed in the 15th Circuit Court of Palm Beach County, FL on February 18, 2010, alleges: (1) that Registrant breached its duties under an Amended and Restated Secured Promissory Note (the “Note”) made to Isle; (2) that Centers breached its guaranty under the Note; (3) that the Company and Centers breached their duties under a Simulcast Wagering Agreement with Isle; and, (4) that the Company and Centers were unjustly enriched through Isle’s broadcasts of horse racing events. Under the Complaint, Isle is demanding (1) foreclosure of a security interest Isle holds in all of the shares of outstanding stock of Centers, and (2) damages of $358,823.32 plus interest, costs and such further relief as the court deems proper.

As reported in the Company’s Form 8-K filed on January 7, 2010, the Company is indebted to Isle in the principal amount of Three Million Dollars ($3,000,000) pursuant to the Note and related instruments, dated December 31, 2008 (collectively, the “Isle Documents”). The Isle Documents include a Pledge Agreement under which Registrant granted to Isle a security interest in all of the outstanding shares of capital stock of Centers. The Isle Documents were filed as Exhibit 10.1 on the Registrant’s Form 10-K dated March 31, 2009, which is incorporated herein. Under the Isle Documents, the Registrant was required to pay to Isle the $3,000,000 principal amount, plus any accrued but unpaid interest, on December 31, 2009. The Company did not make the required December 31, 2009 payment to Isle. That failure constituted an Event of Default under the Isle Documents. Under the Isle Documents, after an Event of Default the outstanding principal and interest accrues interest at an annual default rate of 18%, payable on demand. On December 23, 2009, Isle’s counsel made the requisite demand for payment under the Note.

On March 19, 2010, the Florida Gaming Corporation (the “Company”), a Delaware corporation, and Florida Gaming Centers, Inc., a Florida corporation 100% of the stock of which is owned by the Company, were served with a complaint (the "Complaint") by Isle of Capri Casinos, Inc. ("Isle"). The Complaint seeks to foreclose on a mortgage granted to Isle in connection with a Note and related instruments dated December 31, 2008. As reported in the Company's Current Report on Form 8-K filed on January 7, 2010, the Company is indebted to Isle in the principal amount of Three Million Dollars ($3,000,000) pursuant to the Note and related instruments dated December 31, 2008. Under the Note and the related instruments, the Company was required to pay to Isle the $3,000,000 principal amount, plus any accrued but unpaid interest, on December 31, 2009. The Company did not make the required December 31, 2009 payment to Isle. The mortgage granted to Isle in connection with the Note affects Center's real property located at 1750 S. King's Highway, Ft. Pierce, Florida, and all buildings, structures, fixtures and improvements located thereon. The Company has engaged counsel to respond to the Complaint and intends to vigorously defend itself against Isle’s lawsuit.

West Flagler Associated LTD and Calder Race Course
 
On December 23, 2009, Florida Gaming Centers, Inc. (“Centers”) was served with a summons and complaint (the “Complaint”) from West Flagler Associated, Ltd. and Calder Race Course, Inc. (“Plaintiffs”). The Complaint filed in the 11th Circuit Court in and for Miami-Dade County, Florida on December 21, 2009 alleges that Centers executed a Promissory Note on January 31, 2005 in favor of the Plaintiffs and that Centers has breached the terms of the Promissory Note by failing to make the payments required there under, which Plaintiffs allege were to commence in February 2008. Plaintiffs allege that Centers made monthly payments under the Promissory Note in the amount of $23,148.14 per month from February 2008 to July 2009 but have failed to make payments thereafter. Plaintiffs allege that the entire debt is now due and owing and allege to be owed the principal amount of $416,666.48 plus interest since July 1, 2009, the date of the alleged last payment made under the Promissory Note. Plaintiffs also seek default interest and late penalties of undisclosed amounts. Centers filed an answer and affirmative defenses to the Complaint on March 2, 2010 and intends to vigorously defend the Complaint.
 
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Other Suits
 
The Company is a defendant in certain other suits which are deemed to be routine litigation in the ordinary course of business. The Company believes that the ultimate resolution of the suits will not have a material adverse impact on the Company's financial position or its results of operations.
 
b

Item 1a.  Risk Factors.
 
               Not required for smaller reporting companies.


None

Item 3.  Defaults upon Senior Securities.
 
As of June 30, 2010, the Company had accrued but not paid dividends on their four classes of Preferred Stock:
 
The Company owes the following amounts on their Preferred Stock:

Preferred A:
  $ 39,431  
Preferred AA:
  $ 612,500  
Preferred B:
  $ 52,877  
Preferred F:
  $ 220,000  
 
Item 4.  Submission of Matters to a Vote of Security Holders.

None.

 Item 5.  Other Information.
 
 None

29

 
Item 15. Exhibits List and Reports on Form 8-K
 
3.1
Registrant’s Third Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on March 28, 2005, filed as reference 3.1 to the Registrant’s 2004 10-KSB, is incorporated herein by reference as Exhibit 3.1.
   
3.2
Registrant’s By-Laws as amended to date filed as Exhibit 3.5 to Registrant’s Form 10-KSB for the fiscal year ended December 31, 1998 are incorporated herein by reference as Exhibit 3.2.
   
4.1
Registrant’s Amended and Restated Master Stock Option Plan filed as Exhibit 99.1 to the Second Post-Effective Amendment of Registrants Registration Statement Form S-8 dated August 23, 2006, is incorporated herein by reference as Exhibit 4.1.
   
4.2
Stock Option Agreement entered into by and between Registrant and Freedom Financial Corporation dated April 28, 2006 and is filed as Exhibit 4.1 to Registrants Current Report on Form 8-K dated April 28, 2006, is incorporated herein by reference as Exhibit 4.2.
   
4.5
Stock Subscription Agreement entered into between the Registrant and Prides Capital Fund I.L.P. dated June 15, 2007 and is filed as Exhibit 4.5 to Registrant Current Report on Form 8-K dated June 15, 2007 and is incorporated herein by reference as Exhibit 4.5.
   
4.6
Stockholders Agreement entered into between the Registrant and Prides Capital Fund I.L.P. dated June 15, 2007 and is filed as Exhibit 4.6 to Registrant Current Report on Form 8-K dated June 15, 2007 and is incorporated herein by reference as Exhibit 4.6.
   
4.7
Warrant Agreement entered into between the Registrant and Prides Capital Fund I.L.P. dated June 15, 2007 and is filed as Exhibit 4.7 to Registrant Current Report on Form 8-K dated June 15, 2007 and is incorporated herein by reference as Exhibit 4.7.
 
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10.0
Note Restructuring Agreement, Mortgage and Security Agreement, Amended and Restated Pledge Agreement, Amended and Restated Secured Promissory Note, and certain other related instruments and agreements dated December 31, 2008, between the Registrant and Isle of Capri, filed as Exhibit 10.1 on Form 8-K dated January 8, 2009, and is incorporated herein by reference as Exhibit 10.1.
   
10.1
Settlement Agreement as to Parcel No. 155 and Parcel No. 155TCE, dated February 3, 2009, by and between the Registrant and the County, filed as Exhibit 10.1 on Form 8-K dated April 6, 2009, and is incorporated herein by reference as Exhibit 10.1.
   
 10.2
Promissory Note, entered into by the Registrant, the County and City National Bank of Florida on April 2, 2009, filed as Exhibit 10.2 on Form 8-K dated April 6, 2009 and is incorporated herein by reference as Exhibit 10.2.
   
10.3
Mortgage and Security Agreement, entered into by the Registrant, the County and City National Bank of Florida on April 6, 2009, filed as Exhibit 10.3 on Form 8-K dated April 6, 2009 and is incorporated herein by reference as Exhibit 10.3.
   
10.4
Letter Agreement dated October 29, 2004 entered into by and among Registrant, Florida Gaming Centers, Inc., and Isle of Capri Casinos, Inc. filed as Exhibit 10.48 to Registrant’s Current Report on Form 8-K dated November 4, 2004 and is incorporated herein by reference as Exhibit 10.4.
   
10.7
Agreement dated January 31,2005 between Florida Gaming Centers, Inc., d/b/a Miami Jai-Alai, the Summer Jai-Alai partnership and Miami Dade County regarding slot machine in pari-mutuel facilities was filed as reference 10.7 to the Registrant’s 2004 10-KSB and is incorporated herein by reference as Exhibit 10.7.
   
10.8
Registrant’s Third Amended and Restated Note between Florida Gaming Centers, Inc. and Freedom Financial Corp, dated October 31, 2005, was filed as reference 10.8 to Registrant’s 2005 10KSB, herein incorporated by reference as Exhibit 10.8.
   
10.9
Registrant’s Amended and Restated Loan Agreement between Florida Gaming Centers, Inc. City National Bank of Florida, and Freedom Financial Corp, dated October 31, 2005, was filed as reference 10.9 to Registrant’s 2005 10-KSB, herein incorporated by reference as Exhibit 10.9.
   
10.10
Registrant’s Guaranty Agreement between Florida Gaming Corporation and Freedom Financial Corporation, dated October 31, 2005, was filed as Exhibit 10.10 to Registrant’s 2005 10-KSB, is incorporated herein by reference as Exhibit 10.10.
   
10.11
Registrant’s Guaranty Agreement between W, Bennett Collett and Freedom Financial Corporation, dated October 31, 2005, was filed as reference 10.11 to Registrant’s 2005 10-KSB, is incorporated herein by reference as Exhibit 10.11.
   
10.13
Promissory Note entered into between the Registrant and Freedom Holding, Inc. dated November 1, 2008, was filed as Exhibit 10.13 to the Registrant's 10-Q dated November 14, 2008, and is incorporated herein by reference as Exhibit 10.13.
   
10.14
Promissory Note entered into between the Registrant and Nurmi Properties, dated December 11, 2009, was filed as Exhibit 10.14 to an 8-k filed December 17, 2009  and is incorporated herein by reference as Exhibit 10.14.
   
10.15
Mortgage and Security Agreement entered into between the Registrant and Nurmi Properties, dated December 11, 2009, was filed as Exhibit 10.15 to an 8-K filed December 17, 2009  and is incorporated herein by reference as Exhibit 10.15.
   
10.16
Security Agreement entered into between the Registrant and Nurmi Properties, dated December 11, 2009, was filed as Exhibit 10.16 to an 8-k filed December 17, 2009  and is incorporated herein by reference as Exhibit 10.16.
   
10.17
Assignment of Rents and Leases between the Registrant and Nurmi Properties, dated December 11, 2009, was filed as Exhibit 10.17 to an 8-k filed December 17, 2009  and is incorporated herein by reference as Exhibit 10.17.
 
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10.18
Warrant Agreement entered into between the Registrant and Nurmi Properties, dated December 11, 2009, was filed as Exhibit 10.18 to an 8-k filed December 17, 2009  and is incorporated herein by reference as Exhibit 10.18.
   
10.19
Note and Mortgage Modification between the Registrant and Nurmi Properties, dated February 4, 2010,  was filed as Exhibit 10.19 to an 8-k filed February 10, 2010  and is incorporated herein by reference as Exhibit 10.19.
   
10.20
Note between the Registrant and H2C, dated February 4, 2010,  was filed as Exhibit 10.20 to an 8-k filed February 10, 2010  and is incorporated herein by reference as Exhibit 10.20.
   
10.21
Note and Mortgage Modification between the Registrant and Nurmi Properties, dated  March 10,  2010,  was filed as Exhibit 10.21 to a 10-k filed March 31, 2010, and is incorporated herein  by reference as Exhibit 10.21.
   
10.22
Note and Mortgage Modification between the  Registrant and Nurmi Properties, dated  March 25,  2010, was filed as Exhibit 10.22 to a 10-k filed March 31, 2010, and is incorporated herein by reference as Exhibit 10.22.
   
10.23
Note and Mortgage Modification between the  Registrant and Nurmi Properties, dated  April 16,  2010,  was filed as Exhibit 10.23 to an 8-k filed April 22, 2010, and is incorporated herein by reference as Exhibit 10.23.
   
10.24
Note between the Registrant and  H2C, dated  April 28,  2010,  was filed as Exhibit 10.24 to an 8-k filed  on May 4, 2010, and is incorporated herein by reference as exhibit 10.24.
   
10.25
Mortgage between the  Registrant and H2C, dated April 28, 2010, was filed as Exhibit 10.25 to an 8-k filed  May 4, 2010 and
is incorporated herein by reference as exhibit 10.25.
   
10.30
Note and Mortgage Modification between the Registrant and Nurmi Properties, dated June 2, 2010, and is incorporated herein by reference as Exhibit 10.30.
   
10.31
Promissory Note entered into between the Registrant and H2C, dated  July 1, 2010, was filed as Exhibit 10.31 to a 8-k filed July 8, 2010 and is incorporated herein by reference as Exhibit 10.31.
   
10.32
Mortgage entered into between the Registrant and H2C, dated July 1, 2010, was filed as Exhibit 10.32 to an 8-k filed July 8, 2010  and is incorporated herein by reference as Exhibit 10.32.
   
10.49
Shareholders Support and Release of Lien Agreement dated October 29, 2004 entered into among Registrant, Isle of Capri Casinos, Inc., Freedom Financial Corporation, Freedom Holding, Inc., Collett Capital Corporation, and W. Bennett Collett, individually, filed as Exhibit 10.49 on Form 8-K dated November 4, 2004, is incorporated herein by reference as Exhibit 10.49.
   
10.50
Shareholders Support Agreement dated October 29, 2004 entered into between Isle of Capri Casinos, Inc. and Roland and Dorothy Howell filed as Exhibit 10.50 on Form 8-K dated November 4, 2004 is incorporated herein by reference as Exhibit 10.50.
   
14.0
Registrant’s Code of Ethics adopted by the Board of Directors on May 16, 2003, filed as Exhibit 14 to Registrant’s 2004 10-KSB is incorporated by reference as Exhibit 14.0
   
21.0
List of Registrant’s Subsidiaries as of December 31, 2004, filed as Exhibit 21 to Registrant’s 2004 10-ksb is incorporated by reference as Exhibit 21.0.
   
31.1
Certification by Registrant’s Chief Executive Officer pursuant to Rule 302 as adopted pursuant to Section 902 of the Sarbanes-Oxley Act of 2002 is attached hereto.
   
31.2
Certification by Registrant’s Chief Financial Officer pursuant to Rule 302 as adopted pursuant to Section 902 of the Sarbanes-Oxley Act of 2002 is attached hereto.
   
 
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32.1
Certification by Registrant’s Chief Executive Officer pursuant to18 USC 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is attached hereto.
   
32.2
Certification by Registrant’s Chief Financial Officer pursuant to18 USC 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is attached hereto.
   
99.1
Secured Promissory Note dated October 29, 2004 in the face amount of $5,000,000 executed by Registrant in favor of Isle of Capri Casinos, Inc. was filed as Exhibit 99.1 to Registrant's 8-K dated November 4, 2004, and is incorporated herein by reference as Exhibit 99.1.
   
99.3
Promissory Note dated January 31,2 005 in the face amount of $833,333 executed by Florida Gaming Centers, Inc. to Calder Race Course, Inc. and West Flagler Associated, LTD., was filed as Exhibit 99.3 to Registrant's 10-KSB dated March 31, 2005, and is incorporated herein by reference as Exhibit 99.3.

(b)  Form 8-K Reports
 
Registrant filed a report on Form 8-K dated April 16, 2010, reporting the transaction with Nurmi Properties, LLC

Registrant filed a report on Form 8-K dated April 28, 2010, reporting the transaction with  H2C, Inc.

Registrant filed a report on Form 8-K dated  June 2, 2010, reporting the transaction with Nurmi Properties, LLC

Registrant filed a report on Form 8-K dated  July 1, 2010, reporting the transaction with  H2C, Inc.

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FLORIDA GAMING CORPORATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
FLORIDA GAMING CORPORATION
(Registrant)
 
       
Date:  August 16,  2010
By: 
/s/ W.B. Collett  
    W.B. Collett  
    Chairman of the Board and Chief Executive Officer  
 
       
Date:  August 16,  2010
By: 
/s/ Kimberly Tharp  
    Kimberly Tharp  
    Chief Financial Officer  
       
 
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