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EX-31.2 - FLORIDA GAMING CORPv216836_ex31-2.htm
EX-31.1 - FLORIDA GAMING CORPv216836_ex31-1.htm
EX-32.1 - FLORIDA GAMING CORPv216836_ex32-1.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
 
   
x
ANNUAL REPORT UNDER SECTION 13 OR 15(d) of the SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2010

OR

¨
TRANSITION REPORT UNDER 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
(Name of Small Business Issuer in its Charter)

Delaware
 
59-1670533
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)

3500 N.W. 37th Avenue
   
Miami, Florida
 
33142
(Address of principal
 
(Zip Code)
executive offices)
   
     
Issuer's telephone number
   
Including area code:
 
(305) 633-6400

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
Yes o   No x
 
Indicate by check mark if the registrant is not required to file reports pursuant to section 13 or 15(d) of the Act. 
 
Yes o   No x
 
Indicate by check mark whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated herein by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  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. (Check one):
 
Large accelerated filer o
 
Accelerated filer o
 
Non-accelerated filer o
(Do not check if a smaller reporting 
company)
 
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 o   No x
 
The aggregate market value of the common stock of the Registrant held by non-affiliates as of June 30, 2010 was approximately $9,152,213 (based on the last sale price for shares of the Registrant’s common stock). Shares of common stock held by each executive officer, director and holder of 10 percent or more of the outstanding common stock have been excluded in that such persons may be deemed affiliates.
 
The number of shares of the registrant's common stock outstanding as of March 31, 2011 - 3,888,959 shares.
 
 
 

 

PART I
 
FORWARD-LOOKING STATEMENTS

This Form 10-K and the documents incorporated by reference in this Form 10-K 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 we make forward-looking statements, we are basing them on our management’s beliefs and assumptions, using information currently available to us. 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.

 If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from those anticipated. Any forward-looking statements you read in this Form 10-K or the documents incorporated herein by reference reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. You should specifically consider the factors identified in this Form 10-K included under the caption “Risk Factors,” or in the documents incorporated by reference in this Form 10-K which could cause actual results to differ materially from those indicated by the forward-looking statements. In light of the foregoing risks and uncertainties, you should not unduly rely on such forward-looking statements when deciding whether to buy, sell or hold any of our securities. We disclaim any intent or obligation to update or alter any of the forward-looking statements whether in response to new information, unforeseen events, changed circumstances or otherwise.

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

 
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Item 1. Description of Business

(a) Business Development

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. 37 th  Avenue, Miami, FL 33142.

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.

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.   On August 3, 2010, an Amendment to the Settlement Agreement was filed to change   the final closing date to provide 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 10.8 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.  

(b) Business of Issuer

Overview
 
The Company currently owns and operates two jai-alai frontons and inter-track pari-mutuel wagering facilities (each, a "Fronton", and collectively, the "Frontons") located in South and Central Florida. The Company also owns an inactive Jai-Alai pari-mutuel permit for Hillsborough County (Tampa), Florida. The Company's business at this time consists primarily of its operations at the Frontons, which include, card rooms, live jai-alai performances, inter-track pari-mutuel wagering ("ITW") on jai-alai, horse racing (both thoroughbred and harness) and dog racing, and the sale of food and alcoholic beverages. The Fort Pierce location provides inter-track wagering on interstate simulcasting of horse racing, dog racing, and jai-alai from various tracks and frontons in the United States and within the State of Florida. Jai-alai games are played live and simulcast year round from the Miami facility via satellite to a total of sixty two (62) pari-mutuel wagering locations in Florida, Connecticut, Rhode Island, as well as locations in Mexico, Central America, and Austria. Poker and dominoes are played at the Miami Jai-Alai Crystal Card Room. Ft. Pierce opened a card room on April 28, 2008 but does not operate domino tables.

The term "pari-mutuel wagering" refers to the betting by members of the public against each other, and as used in this report, and includes wagering on both live performances and inter-track pari-mutuel wagering.
  
In November 1997, the Company entered into the real estate development business. The Company has since sold all developed real estate except six residential (6) lots. The Company has completed its development activities and future expenses related to these properties will be expensed as incurred.
 
 
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Acquisition of Frontons: On September 12, 1996, the Company acquired from the Bank of Oklahoma, N.A., Tulsa, Oklahoma secured notes of World Jai-Alai (the "WJA Notes") with balances aggregating about $20,000,000 . The WJA Notes were secured by real estate and improvements consisting of three jai-alai and ITW facilities located at Miami, Tampa and Ocala, Florida (the "WJA Frontons"). Consideration for the WJA Notes was a combination of $2,000,000 in cash, a $6,000,000 promissory note bearing interest at the prime rate, a $1,000,000 non-interest bearing promissory note, and 703,297 shares of the Company's Common Stock.
 
On November 25, 1996, the Company, through a wholly-owned subsidiary, Florida Gaming Centers, Inc. ("Centers") entered into an agreement with WJA pursuant to which Centers agreed to acquire title to the three (3) WJA Frontons. The acquisition was consummated as of January 1, 1997. The Fort Pierce Jai-Alai Fronton which had previously been purchased from WJA was also transferred into Centers.

Summer Jai-Alai: Florida Gaming Centers, Inc. (“Centers”) held a 21% interest in Summer Jai-Alai (“SJA”), 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 Jai-Alai fronton.  The Company's Summer partners were Hollywood Greyhound, Flagler Greyhound and Biscayne Kennel Club or their successors. Under the terms of the partnership agreement certain costs and expenses were allocated to Summer Jai-Alai Summer Operations based upon specific formulas as set forth in the agreement. Pursuant to a lease agreement which expired in 2004, Summer Jai-Alai Operations rented the Miami fronton for the time in which its season was conducted.  After June 30, 2004, the permit agreement terminated and the previous partnership agreement became the controlling document for the operation of SJA by the parties. The Company paid the three unaffiliated Summer Jai-Alai partners $306,667, all of which was previously accrued, in complete settlement of amounts due those partners under agreements resolving certain partnership disputes through June 30, 2004. The partnership’s lease for the purpose of conducting Jai-Alai operations at the Miami fronton and all related agreements terminated on October 31, 2004.  In December, 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.

On October 14, 2010, the Company’s subsidiary, Centers, sold to West Flagler Associates, Ltd. (“Flagler”) all of Centers’ interest in the Summer Jai-Alai Partnership (“Summer”) for a total purchase price of $2,501,583.  The purchase price included both cash ($2,000,000) and noncash ($501,583) compensation, including: $963,000 was delivered by Flagler to an escrow account in order to provide for and secure Centers' obligations to complete roof repair or replacement at Centers’ fronton and facility in Miami, Florida (the “Facility”); $54,592 was applied to the Company’s note and interest payable to Nurmi Property, LLC and Robinette Investments, LLC; $982,408 was paid directly to the Company; Flagler forgave its portion and assumed Calder Race Course, Inc.’s portion of a promissory note payable to both parties from the Company.  The debt forgiven and assumed by Flagler totaled principal of $416,666 and accrued interest of $84,917. (See Form 8-K filed October 20, 2010) (See Note J)

Centers’ aforementioned obligation to complete roof repair at the Facility is pursuant to a September 24, 2010 roof repair agreement between Centers and Flagler.  Costs for the roof repair were the responsibility of Centers and paid out of the escrowed funds.  Centers repaired the roof at a cost of $963,000.

Centers’ interest sold to Flagler consisted of its entire 21% ownership of the total issued and outstanding partnership interest in Summer, including any and all rights, title, and interest that Centers maintained in Summer’s gaming permit (the “Summer Permit”).  The Summer Permit enabled Summer to conduct pari-mutuel wagering during the period beginning May 1st and ending November 30th (the “Summer Season”)  of each year at the Facility in accordance with the following agreements between Centers and Summer: 1) an Amended and Restated Permit Use Agreement dated September 30, 2010; 2) a Lease Agreement dated September 30, 2010; and 3) a Memorandum of Lease dated September 30, 2010.
 
 
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The Amended and Restated Permit Use Agreement (“APUA”) dated September 30, 2010 requires Centers to perform management services at the Facility during the term of the APUA.  Centers must conduct the minimum number of performances required by Florida law for the Summer Permit to be authorized to conduct pari-mutuel , intertrack wagering, and cardroom operations, but not more than 115% of the minimum required performances, subject to annual  adjustment agreed upon by the two parties.  All revenue of any type produced and all costs, expenses, and liabilities incurred from the Summer operations that specifically occur at the Facility during the APUA’s term belongs entirely to Centers. In the event Summer obtains authorization and a license under the Summer Permit to conduct cardroom operations at a location other than the Facility, Summer must remit to Centers 4.00% of Summer’s weekly gross cardroom receipts to supplement prizes paid in connection with live jai alai games conducted at the Facility.  The APUA commenced on October 1, 2010 and continues until the date which is seven years after all of the following events have occurred: 1) Centers obtains a slot machine license under Chapter 551 of the Florida Statutes, pursuant to Centers’ Miami Jai-Alai permit; 2) Centers installs slot machines, and holds itself out to the public as, and commences operations as, a slot machine gaming facility under Chapter 551, Florida Statutes; and 3) the first “coin-in” occurs at the Facility.  If the aforementioned events do not occur, the APUA terminates on its 21st anniversary.  Additionally, Summer has the option to unilaterally terminate the APUA at any time by giving Centers 30 days notice of such termination The Lease Agreement and Memorandum of Lease both dated September 30, 2010 outline terms for Summer to lease the Facility from Centers during the Summer Seasons.  The Lease Agreement and Memorandum have the same term as the APUA, including the unilateral option of Summer to terminate the lease with notice. Rent owed by Summer to Centers equals the product of $7,500 multiplied by the number of jai alai performances held during the period. Rent is capped at 115% of the minimum number of performances required under Florida law.

Development of Card rooms  Miami Jai-Alai opened a card room in 1997, and on June 5, 2007, the St. Lucie county commissioners voted that Ft. Pierce Jai-Alai  be allowed to operate a card room.  After extensive remodeling of approximately $2.0 million, the Ft. Pierce Jai-Alai card room opened on April 28, 2008. Poker is played at the Miami and Ft. Pierce Jai-Alai, and dominoes are played at the Miami Jai-Alai.

On July 1, 2007, a new Florida pari-mutuel statute was enacted allowing card rooms at licensed pari-mutuel facilities to add the game of dominoes, increase the maximum wager on poker from $2 to $5, 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.  Florida state taxes are 10% of revenue and 4% of the revenues are paid to the jai-alai players.

 
1.
Card rooms may operate on any day for a cumulative amount of 18 hours on week days and 24 hours on weekend and holidays;

 
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 may conduct games of poker.
 
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 opened and the Company is now competing with Calder Casino, a slot facility in Florida adjacent to Calder Race Course, and  Magic City Casino.     On April 28, 2010 the Governor of Florida signed SB 622, Chapter 2009-170, Laws of Florida, 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 will be reduced to $2.0 million on July 1, 2011, and a reduction in the tax rate from 50% to 35%  for racetracks operating slot facilities in Miami-Dade and Broward Counties was effective on  July 1, 2010.   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 can be 18 hrs a day and 24 hours a day on weekends. Under SB 622, the Seminole tribe gained 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.   Other portions of Chapter 2009-170 Laws of Florida, purports to permit Hialeah Race Course, located approximately 4 miles from Miami Jai-Alai, to open as a horse facility and operate slot machines after two consecutive years of quarter horseracing.  On June 30, 2010, W. Flagler and Florida Gaming Centers filed a constitutional challenge regarding the enactment of changes to Florida Statutes in Chapter 551 that purport to enable the expansion of slot machine games in Miami Dade County to the site of Hialeah Park.  The Statutory Amendment conflicts with the Constitutional Provision, Article X, Section 23 in numerous ways.  The Leon County Circuit Court held the statute to be valid and that decision is presently on appeal to the Florida First District Court of  Appeal.
 
 
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Clean Indoor Air Act
 
Effective July 1, 2003, an amendment to the Clean Indoor Air Act made all of Florida's enclosed indoor workplaces smoke-free, with certain exceptions. The jai-alai facilities became smoke free on July 1, 2003. The Company has provided a smoking area to accommodate the smoking patrons.

Simulcasting
 
The Company generates a portion of their revenue by transmitting signals from the frontons to other (“guest”) facilities and receiving signals from other (“host”) facilities. Revenues are earned through pari-mutuel wagers on signals that the Company receives and sends as host and guest. The Fort Pierce location provides inter-track wagering on interstate simulcasting of horse racing, dog racing, and jai-alai from various tracks and frontons in the United States and within the State of Florida. Jai-Alai games are played live and simulcast year round from the Miami facility via satellite.

Distribution Methods
 
The Company uses radio, including live remote broadcasts, television, newspapers and magazines to promote activities at the jai-alai locations.

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.
 
The Company is now competing with Calder Casino and Magic City Casino.
 
Under SB 622, the Seminole tribe gained 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 are able to keep operating Las Vegas-style slot machines.

There has been a general decline in the number of people attending and wagering on jai-alai due to a number of factors, including Indian casinos, cruise ships to nowhere and the Florida state lottery. Any decline in the interest in jai-alai or any change may adversely impact revenues and, therefore, results of operations. Declining jai-alai attendance and increasing competition in simulcasting may have a material, adverse impact on our results of operations.
 
The Company also competes for patrons with other sports, entertainment and gaming operations, including land-based, cruise ships and Native American casinos and state lotteries.
 
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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Dependence on one or a few major customers
 
The company depends on Sportech, successor to Scientific Games Corp. a leading supplier of pari-mutuel wagering systems. Sportech provides the computer systems that accumulate wagers, record sales, calculate payoffs and display wagering data in a secure manner. The Company relies on the totalizator’s computer systems to ensure the integrity of the wagering process. If Sportech did not keep their technology up to date, this could affect the security of wagering, and limit our ability to serve our customers. The Company is past due on monthly payments required by its contract with Sportech which could result in termination of services to the Company, but the Company has renegotiated its contracts with Sportech to more financially favorable terms and included a repayment schedule for its past due balances.

Licenses
 
Each Fronton must obtain an initial pari-mutuel permit and an annually renewable pari-mutuel license specifying the number of performances authorized at the Fronton during the year with respect to which such license is issued. A permit for any new pari-mutuel must either be enacted by the Legislature, or be ratified by the electorate of the county in which it is to be located. Pari-mutuel permits and licenses may be revoked or suspended by the DPMW for, in the case of licenses, willful violations of laws, rules or regulations or, as to permits, by a vote of the county electorate. Any amendment or repeal of the Pari-Mutuel Laws or suspension or revocation of the Company's permits or licenses, could be materially adverse to its business.

Occupational and Totalizator License Requirements. The DPMW requires that persons "connected with" pari-mutuels have one of two forms of occupational licenses.

One form of occupational license is the "unrestricted license" issued to persons with access to restricted areas such as the backside, racing animals, jai-alai player rooms, the mutuels, or money room, or to persons, who by virtue of the position they hold, might be granted access to such areas. Any person obtaining an unrestricted license must undergo a Federal Bureau of Investigation and Florida Department of Law Enforcement criminal records check as well as submit fingerprints with their application for a license. The category of persons qualifying for unrestricted licenses includes, but is not limited to, trainers, officials, doctors, jai-alai players, owners, members of management, officers, directors, stockholders who own 5% or greater equity interest, and other professional employees.

Another form of occupational license is the "restricted license" issued to persons who are denied access to restricted areas. Applicants for a restricted license do not usually have to undergo a criminal background check nor submit fingerprints with their application, although the DPMW may require such if it deems necessary.

The DPMW also requires all totalizator operators, including the Company's vendor, Sportech, to possess an annual totalizator license. Among the various requirements imposed by the DPMW, the totalizator operator is required to agree in writing to pay the DPMW an amount equal to any loss of state revenue from missed or canceled performances due to acts of the totalizator owner, operator, agents, or employees, and for any failure of the totalizator system, unless such acts are beyond the control of the above-listed persons. Every licensed totalizator operator must post a performance bond issued by a surety approved by the DPMW in the amount of $250,000 insuring the state against such revenue loss.

Businesses, such as vendors and contractual concessionaires, must also obtain an occupational license from the DPMW. Minors may be employed by a pari-mutuel facility as long as their employment is not directly involved with alcoholic beverages or wagering.

Daily License Fee. During the 2009-2010 live jai-alai season, a Daily License Fee of $40 was assessed for each jai-alai game conducted at each of the Company's Frontons. The Daily License Fee regulations amendments provide, however, that should an amendment to the Florida Constitution be adopted that would permit casino gambling at pari-mutuels such as the Frontons, the fee would return to $80 per jai-alai game; no such amendment has been passed. Such fee is paid to the DPMW to defray regulatory costs.
 
        Slot License Fee   The DPMW enforces the state slot licensing. Anyone wishing to work with slot machines in Florida must apply for a license from this agency. All Florida casinos, as well as casino employees who have contact with the slot machines, are required to have a license to legally operate or work with slots. There are several levels of Florida slot licenses, depending on who holds the license and for what purpose.
 
 
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Government Regulations

Gaming ventures are regulated by federal and state laws and regulations applicable to the gaming industry generally and to the distribution of gaming equipment. The following description of the regulatory environment in which the Company operates is intended to be a summary and is not intended to be a complete recitation of all applicable law. Moreover, because the regulatory environment is dynamic and evolving, it is impossible to predict how certain provisions will ultimately be interpreted or how they may affect the Company. Changes in such laws or regulations could have a material adverse impact on the Company's ability to finance, develop and operate.
 
The Company may need to secure regulatory approvals from state and local authorities for each of its prospective gaming ventures from time to time. No assurance can be given that any of these approvals will be secured in a timely fashion, or at all.

Florida Legislative Changes

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 will be reduced to $2.0 million on July 1, 2011 and on July 1, 2010 the tax rate decreased from 50% to 35%.   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.   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.
 
Florida Law and Regulation

Overview. Pari-mutuel wagering in Florida must be conducted in compliance with the applicable Florida statutes and regulations of the DPMW. In the 1992 Special Session, the Florida Legislature enacted several new statutes governing pari-mutuel activities in the State of Florida and repealed many laws enacted before the 1992 Special Session regarding pari-mutuels in Florida. Certain provisions of the new pari-mutuel statute, which governs all pari-mutuel activities relating to horse racing, dog racing, and jai-alai, were amended in the 1994 Regular Session. The amendments from the 1994 Regular Session became effective July 1, 1994. In 1996, the legislature enacted statutes permitting interstate simulcasts and temporarily reduced the tax on jai-alai performances as discussed below. The new pari-mutuel statutes, as amended, are referred to herein as the "Pari-Mutuel Law."

The Role of the DPMW. The DPMW, in its administration of the Pari-Mutuel Law, is authorized to adopt reasonable rules for the control, supervision, and direction of all applicants, permittees, and licensees and for holding, conducting, and operating of all pari-mutuel activities in Florida. In addition to its taxation powers already described above, the DPMW's powers include, but are not limited to (1) testing occupational license holders officiating at or participating in any race or game at any pari-mutuel facility for a controlled substance or alcohol, and (2) excluding "certain persons" from any pari-mutuel facility in Florida, including but not limited to persons who have previously engaged in conduct that violates certain Florida laws or regulations. Certain forms of conduct are expressly prohibited at pari-mutuels and include but are not limited to, (1) conniving to prearrange the outcome of a game, (2) use of alcohol or a controlled substance by an official or participant in a jai-alai performance, and (3) bookmaking. Failure to comply with the requirements of the Pari-Mutuel Law can result in a fine imposed by the DPMW of up to $1,000 per offense, as well as a suspension or revocation of a pari-mutuel permit, pari-mutuel license, or an occupational license.
 
Limit on Share Accumulations. Florida law requires that before any person or Company is permitted to obtain a 5% or greater equity interest in a pari-mutuel operator and exercises control with respect to those shares, such person or company must receive the approval of the DPMW. Such person or company must submit to a background investigation equivalent to that required of permit-holders to determine that such person or company has the requisite qualifications for holding a permit. Consistent with Florida law, the Company cannot issue shares of Common Stock to a person or company who would thereby have obtained a 5% or greater equity interest, whether in a single transaction or series of integrated transactions, until the purchaser has received the approval of the DPMW.
 
 
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Required Number of Live Jai-Alai Performances. In order to qualify to offer ITW, a fronton must offer a "full schedule" of live races per year. A "full schedule" of jai-alai means the operation of at least 40 live evening or matinee performances during a year. In this context, a live performance must consist of no fewer than 8 games conducted live for each of a minimum of three performances per week at the permit-holder's facility under a single admission charge. The Company anticipates it will offer at least 40 live evening or matinee performances on an annual basis at its Miami Jai-Alai and Ft. Pierce Jai-Alai.
 
Taxation. The pari-mutuel tax structure applicable to frontons operating in Florida provides for distribution of taxes, on a daily basis, based on the Handle. As discussed below, the pari-mutuel tax structure changed effective July 1, 1994, as a result of amendments adopted by the Florida Legislature in the 1994 Regular Session. The various taxes applicable to the Fronton are as follows:

1.
Tax on Handle: Effective July 1, 1994, the tax rate established by the State of Florida was amended to a rate of 5% on handle in excess of $30,000 per day where the live handle for such jai-alai fronton has been less than $15 million during the preceding state fiscal year. Effective July 1, 1996, for the two-year period ending June 30, 1998, the pari-mutuel tax rate was reduced from 5% to 4.25% at the Ft. Pierce Fronton and from 5% to 3.85% at the Miami Fronton. As a result of legislation enacted July 1, 2000, Miami Jai-Alai's tax rate on live handle decreased from 3.85% to 2%. However, the Pari-Mutuel Law also provides that, should casino gaming be conducted at a jai-alai fronton (i.e., assuming an amendment to the Florida Constitution is adopted), the tax rate will return to 7.1% as it was under the pre-amended statute. When a fronton has paid a total of admissions tax, daily license fee and tax on handle for live performances in excess of the tax revenues from wagering on live jai-alai performances paid by the fronton in fiscal year 1991-1992, the tax on Handle for live jai-alai wagering drops to 2.55% with no exception.
   
  Jai-Alai Tax Legislation.  Major tax legislation which limits the amount of state handle and admission taxes went into effect July 1, 1998. The new law, (Section 2, Subsection (1b) of section 550.09511, Florida Statutes) states, in part, that "Any jai-alai permit holder that incurred state taxes on handle and admissions in an amount that exceeds its operating earnings in a fiscal year that ends during or after the 1997-1998 state fiscal year, is entitled to credit the excess amount of the taxes against state pari-mutuel taxes due and payable after June 30, 1998, during its next ensuing meets."
 
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 2010, Miami had unused credits totaling $2,352,201 and Summer Jai-Alai had 1,220,208 unused Credits available for recovery.
 
2.
Breaks Tax: Jai-alai permit-holders must pay a tax equal to the "breaks." The "breaks" are that portion of each pari-mutuel pool, computed by rounding down to the nearest multiple of $.10, which is not redistributed to the contributors or withheld by the permit-holder as takeout (commission). Breaks tax amounts may be retained, however, by the jai-alai permit-holder for special prize awards.

3. 
Admission Tax: In addition to a sales tax of 6%, the Frontons must pay an admission tax equal to 15% of the entrance fee or 10 cents, whichever is greater, for any person attending a jai-alai game.

4. 
Daily License Fee: Effective July 1, 1994, the daily license fee of $80 per game paid by jai-alai frontons was reduced to $40 per game. The amendments adopted in the 1994 Regular Session provide, however, that should an amendment to the Florida Constitution be adopted that would permit casino gaming at pari-mutuels such as the Frontons, the fee would return to $80 per jai-alai game; no such amendment has been passed.

5.
Jai-Alai Tournament of Champions: The amendments adopted in the 1994 Regular Session create a special jai-alai  meet called the "Jai-Alai Tournament of Champions Meet" (the "Tournament"). The Tournament, which may be held  only once a year and for no longer than four performances over four days, permits permit-holders selected to  participate  in the Tournament to do so even though they would not otherwise be authorized to conduct a meet at such time.  In addition, the participants do not have to pay any taxes on Handle for performances during the Tournament and may  apply any credit they receive, up to $150,000 aggregated between all participants, to supplement awards for the  performance conducted during the Tournament as well as to taxes otherwise due and payable by them to the State of Florida.
 
 
8

 
 
Research & Development
 
The Company has had no charges for research and development.

Costs to be compliant with environmental laws
 
It is not anticipated that the Company will have any environmental costs as a result of non-compliance with environmental laws at any of our properties.

Employees
 
As of December 31, 2010, the company had approximately 36  jai-alai players under contract.  The Company believes that its present employee relations with its jai-alai players, some of whom belong to the International Jai-Alai Players Association/U.A.W., and the Company's relations with other employees are satisfactory.  

The Company has approximately 188  part-time employees and 86 full-time employees.

Item 1A. Risks Related to the Company

In addition to risks and uncertainties in the ordinary course of business that are common to all businesses, important factors that are specific to our industry and company could materially impact our future performance and results. The factors described below are the most significant risks that could materially impact our business, financial condition and results of operations. Additional risks and uncertainties that are not presently known to management, that are currently deemed immaterial or that are similar to those faced by other companies in the gaming industry or business in general may also impair the Company's business and operations. Should any risks or uncertainties develop into actual events, these developments could have a material, adverse impact on our business, financial condition and results of operations.

Potential Changes in Legislation and Regulation of Operations.   Gaming operations exist at the discretion of the state of Florida. Certain aspects of the gaming operations are also subject to federal statutes or regulations. All pari-mutuel wagering operations are contingent upon continued governmental approval of those operations as forms of legalized gaming. Legislation to limit or prohibit gaming (pari-mutuel or non-pari-mutuel) may be introduced in the future. Any restriction on or prohibition of gaming operations could have a material, adverse impact on the results of operations. In addition, the approval process for any expansion of gaming operations into alternative gaming, such as video lottery terminals can be time-consuming and costly, and there is no assurance of success. The Company will continue to seek legal authority to offer alternative gaming at our frontons where alternative gaming is not currently permitted.

 The passage of legislation permitting alternative gaming at the frontons can be a long and uncertain process. As a result, there can be no assurance that (1) jurisdictions in which the Company owns or operates frontons will pass legislation permitting alternative gaming, (2) if jurisdictions pass such legislation, it will be permitted at the frontons, and (3) if alternative gaming is permitted at the Company owned frontons, it will be on economically viable terms. If alternative gaming legislation is enacted in the areas where a Company-owned front is located, the Company plans to conduct alternative gaming. There may be significant costs and there may be other significant risks.

Inclement Weather and Other Conditions. In September 2004, the Ft. Pierce fronton was struck by two hurricanes and the fronton could not open for the live jai-alai season in 2005.  On October 24, 2005 a hurricane caused disruption to operations at the Miami Jai-Alai and the Miami fronton was closed for 18 days during 2005. Any severe weather conditions that could lead to the loss of use of Company facilities for an extended period could have a material, adverse impact on our results of operations.

Dependence on Key Personnel. The success of the Company is dependent, in part, on its executive officers. The loss of any of their services could have a material adverse effect on the Company. There is no assurance that the Company will be able to hire qualified individuals to replace these persons if necessary. The Company does not have any employment contracts with its' executives, nor does the Company have any key man life insurance policies on their lives.
 
 
9

 

Jai-Alai Players. The Company strives to continue to draw the best jai-alai players from around the world. The Company has written agreements with our players. The failure to maintain agreements with the players or if the players should strike, this could negatively impact the results of operations.

Risks Associated with Acquisitions. There may be liabilities which the Company fails or is unable to discover in the course of performing due diligence investigations on any company or business it seeks to acquire or has acquired, including liabilities arising from non-compliance with certain federal, state or local laws by prior owners, and for which the Company, as a successor owner, may be responsible. The Company will seek to minimize its exposure to such liabilities by obtaining indemnification from former owners, which may be supported by deferring payment of a portion of the purchase price. However, there is no assurance that such indemnification's, even if obtainable, enforceable and collectible (as to which there also is no assurance), will be sufficient in amount, scope or duration to fully offset the possible liabilities arising from the acquisitions. The success of the Company in the gaming industry is dependent on a number of factors including, but not limited to, economic conditions, competitive environment, adequate capital, accurate site selection, construction schedules, and the availability of trained personnel. There can be no assurance that the Company will be successful in the pari-mutuel and gaming industry or in any related industries which it enters.
 
Any of the above listed factors could have a material adverse effect on our business, financial condition and results of operations. In addition, we may incur substantial additional indebtedness in the future, including to fund acquisitions. The terms of our existing indebtedness do not, and any future debt may not, fully prohibit us from doing so. If new debt is added to our current debt levels, the related risks that we now face could intensify.
 
Other Risks. Many other risks beyond the control could seriously disrupt operations, including:

·
The effect of global economic conditions;

·
The effect (including possible increases in the cost of doing business) resulting from future war and terrorist activities  or political uncertainties;

·
The economic environment;

·
The financial performance of the jai-alai operations;

·
Costs associated with the efforts in support of alternative gaming initiatives.
 
Item 2. Description of Property.

Set forth below is a brief description of the Frontons:
 
   
Number
   
Size of
   
Number of
 
   
Of
   
Building
   
Gaming
 
Location
 
Acres
   
Sq.Ft.
   
Seats
 
                   
Ft. Pierce
   
37.00
     
80,000
     
2,150
 
Miami
   
10.8
     
185,000
     
4,389
 
               Totals
   
47.8
     
265,000
     
6,539
 

 
10

 
 
The Company's Miami fronton, near Miami International Airport, was built in 1926 and most recently remodeled in 1982. In addition to its jai-alai auditorium, the fronton has a restaurant overlooking the jai-alai court, a banquet room, four television lounges and a 12,000 square foot low-stakes card room that can accommodate 80 poker tables. Parking facilities at the Miami fronton (including on-street parking) accommodate about 2,000 cars.
 
Fort Pierce is a coastal community in St. Lucie County, Florida approximately 110 miles north of Miami. The Fort Pierce fronton, completed in 1974, is located approximately one mile from an exit on the Florida Turnpike, two miles from an exit on Interstate Highway 95 and five miles west of U.S. Highway 1. The Florida Turnpike is the primary route between South Florida and Orlando. The Fort Pierce fronton is situated on a thirty seven acre site and its parking facilities accommodate approximately 1,500 cars.

Both of the Company's frontons have pari-mutuel windows, liquor bars and concession stands.

Investment in Real Estate

In November, 1997, the Company entered into a new business — residential real estate development. These Properties consisted of over 100 fully-developed, and 163 partially-developed, single-family residential home sites, a swim and tennis club facility, and 27 acres of partially-developed commercial property. As of December 31, 2009, the Company has six (6) residential lots remaining to be sold with a mortgage and accrued interest of $41,615 on one of the lots. The six (6) lots have a book value of $234,000.  The Note on the lot with the Mortgage was due November 17, 2009, and was not extended.  The Company is currently in default on the mortgage and Mr. Collett has been named a defendant in a lawsuit filed by Hamilton State Bank. The Properties are located on the east side of Georgia Highway 81, approximately one (1) mile south of U.S. Highway 78, inside the Loganville, Georgia city limits, in Walton County.

Item 3. 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  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 is vigorously defending itself against Isle’s lawsuit.
 
 
11

 
 
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. On October 14, 2010, Centers sold to West Flagler Associates, Ltd. (“Flagler”) all of Centers’ interest in the Summer Jai-Alai Partnership (“Summer”) for a total purchase price of $2,501,583.  The purchase price included both cash ($2,000,000) and noncash ($501,583).   Flagler forgave its portion of the Promissory Note and assumed Calder Race Course, Inc.’s  portion of a promissory note payable to both parties from the Company.  The debt was forgiven and assumed by Flagler which totaled the principal amount of $416,666 and accrued interest of $84,917.  The lawsuit was dismissed.

CCLN, LLC vs Florida Gaming Corporation

On February 18, 2011, Florida Gaming Corporation (“Florida Gaming”) was served with a summons and complaint (the “Complaint”) from CCLN, LLC (“Plaintiffs”).  The Complaint filed in the 11th Judicial Circuit Court in and for Miami-Dade County, Florida on February 11, 2011.  The Complaint alleges that Florida Gaming executed a Compensation Agreement (“Agreement”)  on January 21, 2008 and Florida Gaming has breached the terms of the Agreement by failing to make the required payments.  The Agreement called for $100,000 to be paid upon approval of the local referendum in Dade County, FL for Class III Slots to be operated at Miami Jai-Alai.  The referendum was approved on January 28, 2008.  The Complaint also alleges that Florida Gaming shall pay Consultants $100,000 within thirty (30) days of Florida Gaming receiving payment of its insurance claim settlement which was received in September of 2008.   The Complaint alleges that Florida Gaming has failed to pay Plaintiff Thirty Thousand Dollars ($30,000) from the approval of the local slot referendum under Section 1 a) of the Compensation Agreement and  $100,000 due from the Insurance Settlement under section 1 c) of the Compensation Agreement.  Florida Gaming  filed an answer on March 25, 2011 and intends to vigorously defend the Complaint.

West Flagler/Centers vs FDBPR and  South Florida Racing Association, LLC

On June 30, 2010, W. Flagler and Florida Gaming Centers filed a constitutional challenge  regarding the enactment of changes to Florida Statutes in Chapter 551 that purport to enable the expansion of slot machine games in Miami Dade County to the site of Hialeah Park.  The Statutory Amendment conflicts with the Constitutional Provision, Article X, Section 23 in numerous ways.  In December, 2010 FDBPR and South Florida Racing Association, LLC were granted a partial summary judgement in regards to the suit.  That finding is presently on appeal to the Florida First District Court of Appeal.

State of Florida

By letters dated June 30, 2000 and September 8, 2000 the State of Florida took a contradictory position to the Company's interpretation for the determination of the ITW tax rate on handle and asserted a tax liability of $170,172 as of April 30, 2000. Further, the State's computation included only credits approved through 1998. Based on the Company's interpretation, as of April 30, 2000, the Company would have utilized only $2,293,373 of the $2,936,915 available for recovery from taxes incurred in 1997 and 1998. On October 6, 2000 and in response to a letter from the Division of Pari-Mutuel Wagering of the State of Florida, the Company filed suit for declaratory relief against the Division/State of Florida contesting the Division's interpretation of the statute. In response to the Company's action, the Division/State of Florida filed a motion to dismiss and requested that Florida Gaming Corporation post bond.

The court did not grant the motion to dismiss and did not require the Company to post bond requested by the Division/State of Florida. As of December 31, 2005, the suit concluded due to expiration of the statute of limitations. However, the Company received letters dated October 27, 2010 and November 4, 2010 from the Division/State of Florida which reflected a computation of tax credits for Miami and Summer Jai-Alai that agreed with the Company’s records. The Company believes it will prevail should litigation be required to resolve this issue.
 
 
12

 

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.
 
PART II
 
Item 5. Market for Common Equity and Related Stockholder Matters.

The Common Stock was traded on the NASDAQ SmallCap Market under the trading symbol "BETS" until August 21, 1998, at which time it was delisted. The Common Stock traded on the pink sheets from August 22, 1998 until July 28, 1999. On July 29, 1999 the Common Stock began trading on the Over the Counter - Bulletin Board under the trading symbol “BETS”. On January 28, 2003, the trading symbol was changed to “FGMG”.

The bid prices reflect inter dealer prices, without retail mark-up, markdown or commissions and may not represent actual transactions. The table shows the high and low bid prices for the years 2009 and 2010.

2010
 
High
   
Low
 
For the Quarter Ended:
           
March 31
   
5.38
     
2.48
 
June 30
   
5.40
     
2.80
 
September 30
   
5.99
     
2.10
 
December 31
   
3.50
     
.55
 
 
2009
 
High
 
Low
 
For the Quarter Ended:
         
March 31
   
5.99
 
2.01
 
June 30
   
10.02
 
3.75
 
September 30
   
8.25
 
5.25
 
December 31
   
7.50
 
3.50
 

***********************

As of December 31, 2010, the Company had approximately 1,523 holders of record of its Common Stock.

The Company has never paid any cash dividends on its Common Stock and currently anticipates that earnings will be retained for use in its operations. The Company is not contractually restricted from paying dividends on its Common Stock, however, it does not anticipate paying any cash dividends on its Common Stock in the foreseeable future. Any future determination as to cash dividends will depend on the earnings and financial position of the Company, as well as any legal restrictions and such other factors as the Board of Directors many deem appropriate.

Persons who may be deemed “affiliates” of the Company or who acquired the shares in a transaction exempt from registration under the U. S. Securities and Exchange Act (“the “Securities Act”)   hold approximately 1,448,369 shares (“Restricted Shares”) of the 3,888,959 shares of Common Stock outstanding as of March 30, 2011, which may only be sold in the public market if such shares are registered under the Securities Act or sold in accordance with Rule 144 promulgated under the Securities Act. Holding, the holder of 1,325,869 Restricted Shares, has demand registration rights for its shares.  All of the restricted shares have been held for over six months and are thus available for sale in the public market, subject to the volume and other limitations of Rule 144.  As of January  6, 2011, Holding has pledged all 1,325,869 shares of common stock and 1,000 shares of Preferred F stock to a bank to secure a loan.  
 
 
13

 

In general, under Rule 144 a person (or person whose shares are aggregated) who has beneficially owned Restricted Shares for at least six months, including a person who may be deemed an affiliate of the Company, is entitled to sell within any three-month period up to that number of shares of Common Stock that does not exceed the greater of 1% of the then-outstanding shares (approximately 38,889 shares) of Common Stock of the Company or up to the number of shares equal to the average weekly trading volume of the Common Stock on the Over-the-Counter Market during the four calendar weeks preceding such sale. Sales under Rule 144 are also subject to certain restrictions relating to manner of sale, notice, and the availability of current public information about the Company. A person who has not been an affiliate of the Company at any time during the 90 days preceding a sale and who has beneficially owned shares for at least two years could be entitled to sell such shares without regard to the volume limitations, manner of sale provisions and other requirements of Rule 144.
 
Sales of a substantial number of shares of Common Stock, including following conversion of shares of the Company's preferred stock or pursuant to Rule 144, or a registered offering, could adversely affect the market price of the Common Stock, increase significantly the number of shares of Common Stock issuable upon the conversion of the Company's preferred stock, the conversion rates which are related to the prevailing market price, may make it more difficult for the Company to sell equity securities in the future at a time and price that it deems appropriate.

The Company has four issues of Convertible Preferred Stock outstanding as of December 31, 2010.  Preferred A, Preferred AA, Preferred B, and Preferred F.  A complete description and summary of the Convertible Preferred Stock is set forth in the financial statements Note B - Preferred Stock.

The Company did not issue any new stock options during the years ended December 31, 2010, and December 31, 2009.  The Company did extend 362,500 options that were to expire July 11, 2010, 20,000 advisor and consultant options expired in January 2010, and in August, 2010 the Company issued Mr. Steve Craig 30,000 warrants at $6.00 per share.   At December 31, 2010 the Company had a total of 835,625 stock options outstanding to directors and officers and to certain key employees to purchase common stock of the Company, and 160,000 options in warrants in connection with financing. ( Refer to 2006 Stock Incentive Plan below)
 
Equity Compensation Plan Information
December 31, 2010
 
Plan Category
 
Number of securities to be issued Upon Exercise of Outstanding options, Warrants, And Rights
   
Weighted- Average Exercise Price Of Outstanding options, Warrants and rights
   
Number of Securities Remaining available for future issuance under equity compensation Plans (excluding Securities reflected in column (a)
 
                   
Equity compensation plans not approved by security holders
   
995,625
   
$
8.46
     
250,000
 
                         
Total
   
995,625
             
250,000
 

Master Stock Option Plan:
 
On July 31, 2006, the Registrants Board of Directors adopted the Registrant’s 2006 Third Amended and Restated Master Stock Option Plan, which consists of the Registrant’s (i) 2006 Stock Incentive Plan adopted by the Board of Directors on June 28, 2006, (ii) Second Amended and Restated Officers and Directors Stock Option Plan adopted by the Board of Directors on July 31, 2006, and (iii) Second Amended and Restated Advisors and Consultants Stock Option Plan adopted by the Board of Directors on July 31, 2006.
 
 
14

 
 
2006 Stock Incentive Plan
 
The Company's 2006 Stock Incentive Plan (the "2006 Plan") provides for the grant of non-qualified stock options to purchase shares of the Company's $.20 par value common stock to compensate and induce (a) certain key employees to (i) increase the profitability and growth of the Company; (ii) provide competitive compensation while obtaining the benefits of tax deferral; (iii) attract and retain exceptional personnel and encourage excellence in the performance of individual responsibilities; and (iv) to motivate key employees to the Company’s success; and (b) non-employee directors to, among other things, attract and retain persons of outstanding ability to serve as directors of the Company.
 
The 2006 Plan may be administered by the Board of Directors or by a committee appointed by the Board of Directors (In either case, referred to herein as the “Committee”.) All stock options granted under the 2006 Plan must be approved by the Committee, and the Committee has full power to construe and interpret the plan subject to the plan's express provisions. If the Stock is listed on a national securities exchange, the closing price of the Stock on the composite tape as of the most recent date on which the Stock was traded prior to the Grant Date. If the Stock is quoted on NASDAQ, the mean high and low market prices for which the Stock is quoted as of the most recent date on which the Stock was quoted prior to the Grant Date. If the Stock is not listed on a national securities exchange or quoted on NASDAQ, but is traded over the counter, the last sales price of the Stock on the most recent date on which the Stock was sold in the over-the-counter market prior to the Grant Date. On October 9, 2007, the Board of Directors amended the 2006 Stock Incentive Plan to make the options cashless and transferable. There are 395,500 options outstanding under the 2006 stock incentive plan.

During 2010, the Company extended 362,500 options of these options that were issued in July 2006.   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, and an exercise price of $8.25 per share. The Company recorded a $14,152 expense for the extension of these options during the year 2010 (See Note C), compared to $231,257 expense for extending the options in 2009.   The 2010 expense was calculated using the following assumptions:

   
July 11,
 2010
 
Risk Free Rate of Return
   
.3
%
Expected Forfeiture
   
50.0
%
Expected Volatility
   
49.37
%
Expected Dividends
 
None
 
Expected Term   1 year  
 
Second Amended and Restated Officers and Directors Stock Option Plan
 
The Company's Second Amended and Restated Directors and Officers Stock Option Plan (the "Directors and Officers Plan") provides for the grant of stock options to the directors and executive officers of the Company and its subsidiaries to purchase shares of the Company's $.20 par value common stock to motivate them to contribute to the success of the Company. The Directors and Officers Plan may be administered by the Board of Directors or by a committee appointed by the Board of Directors (In either case, referred to herein as the “Committee”). All stock options granted under the Directors and Officers Plan must be approved by the Committee, and the Committee has full power to construe and interpret the plan subject to the plan's express provisions. The exercise price per share for an option granted under the Directors and Officers Plan shall not be less than the fair market value of the stock on the date the option is granted. If the Stock is listed on a national securities exchange, the closing price of the Stock on the composite tape as of the most recent date on which the Stock was traded prior to the Grant Date. If the Stock is quoted on NASDAQ, the mean high and low market prices for which the Stock is quoted as of the most recent date on which the Stock was quoted prior to the Grant Date. If the Stock is not listed on a national securities exchange or quoted on NASDAQ, but is traded over the counter, the last sales price of the Stock on the most recent date on which the Stock was sold in the over-the-counter market prior to the Grant Date. If the Stock is not listed on a national securities exchange, quoted on NASDAQ or traded in the over-the-counter market, the book value per share of the Stock determined in accordance with generally accepted accounting principles as of the last day of the fiscal quarter immediately preceding the Grant Date. On October 9, 2007, the Board of Directors amended the plan to make the options cashless and transferable.  There are 115,125 options outstanding under the second amended and restated officers and directors stock option plan. (See Note C)
 
 
15

 
 
Second Amended and Restated Advisors and Consultants Stock Option Plan
 
The Company's Second Amended and Restated Advisors and Consultants Stock Option Plan (the "Advisors and Consultants Plan") provides for the grant of options to purchase shares of the Company's $.20 par value common stock to natural persons who provide bona fide valuable services to the Company that are not in connection with the offer of sale of securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the Company's securities. The Board of Directors administers the Advisors and Consultants Plan. All stock options granted under the Advisors and Consultants Plan must be approved by the Board of Directors, which has full power to construe and interpret the plan subject to the plan's express provisions. The exercise price per share for an option granted under the Advisors and Consultants Plan is the greater of three (3) times the book value per share as of the last day of the fiscal quarter immediately proceeding the date the option is granted as determined in accordance with generally accepted accounting principles, or the market value determined. If the Stock is listed on a national securities exchange, the closing price of the Stock on the composite tape as of the most recent date on which the Stock was traded prior to the Grant Date. If the Stock is quoted on NASDAQ, the mean high and low market prices for which the Stock is quoted as of the most recent date on which the Stock was quoted prior to the Grant Date. If the Stock is not listed on a national securities exchange or quoted on NASDAQ, but is traded over the counter, the last sales price of the Stock on the most recent date on which the Stock was sold in the over-the-counter market prior to the Grant Date. Options granted under the Advisors and Consultants Plan cannot be assigned or transferred except by will or the laws of descent and distribution, and cannot otherwise be pledged or hypothecated in any way. Any attempted assignment, transfer, pledge hypothecation or other disposition of an option, or the levy of any process upon an option, will render the option null, void and without effect. In January, 2010, 20,000 options expired under this plan. There are no options outstanding at this time.

Non-Plan Options
 
On October 9, 2007, the Board of Directors amended the plan to make the options cashless and transferable. To exercise an Option, the Optionee or the other person(s) entitled to exercise the Option shall give written notice of exercise to the Treasurer of the Company, specifying the number of full shares to be purchased.  Such notice shall be accompanied by (1) payment in full for the Stock being purchased; or (2) payment in full or in part may be made in the form of Stock owned by the Optionee for at least 6 months (based on the Fair Market Value of the Stock on the date the Option is exercised) evidenced by negotiable Stock certificates registered either in the sole name of the Optionee or the names of the Optionee and the Optionee’s spouse or the sole name of the transferee or the names of the transferee and the transferee’s spouse, or (3) by electing that the Company withhold shares that would otherwise be issued on exercise of the Option in payment of the purchase price; or (4) in any combination of the forgoing permitted methods with respect to a particular Option. If required by the Company the required withholding tax shall be paid to the Company in any manner specified in this section.” The Option is transferable but only if in the opinion of counsel acceptable to the Company the transfer of the Option will not violate the Securities Act of 1933 or any applicable state securities laws. The Stock Option Agreement shall  remain in full force and effect except as expressly amended herein.  There are 325,000 options outstanding under this plan and 140,00 warrants outstanding.

On August 17, 2010, the Company issued Mr. Steven Craig 30,000 options at $6.00 per share with an expiration of December 11, 2011.  The warrants were issued for his consulting services and his efforts to assist the Company in securing long term financing. (See Note C).   The Company recognized total compensation expense of $5,630 for these warrants.  The Company used the following assumptions:
 
   
August 17,
 2010
 
Risk Free Rate of Return
    .26 %
Expected Forfeitures
    50.00 %
Expected Volatility
    49.37 %
Expected Term
 
1.3 years
 
Expected Dividends
 
None
 

During the year ended December 31, 2009, 70,000 warrants were issued as an inducement for financing.  All 70,000 warrants were issued at $6.00 per share.  On October 7, 2009, Mr. James Stuckert and Mr. Solomon Howell were each issued warrants for 20,000 shares at $6.00 per share for financing up to a $1,000,000.  The Company recorded an expense of $39,451 for the issuance of the warrants and amortized the expense over the life of the loan, which expired December 31, 2009 (See Note C).  The Company used the following assumptions:

 
 
October 7, 2009
 
Risk Free Rate of Return
 
 
.87
%
Expected Forfeiture
 
 
56.06
%
Expected Volatility
 
 
66.7
%
Expected Dividends
 
None
 
 
 
16

 
 
On December 11, 2009, the Company borrowed  $500,000 from Nurmi Properties, and Mr. Steve Craig was issued 30,000 warrants at $6.00 per share in connection with the financing.  The Company capitalized an expense of $14,726 for the warrants and the expense was recorded straight line amortization over the period of the note which was one year  (See Note  C ).  The Company used the following assumptions for the warrants:

   
December 11,
 2009
 
Risk Free Rate of Return
   
.83
%
Expected Forfeiture
   
56.06
%
Expected Volatility
   
66.7
%
Expected Dividends
 
None
 
 
At December 31, 2010, the Company had the following options and warrants outstanding.

Grantee
 
Number of
Options or
Warrants
 
Expiration
 
Grant Price
   
Fair Value of
Stock on Grant
Date
 
Key Employees
   
33,000
 
7/10/2012
   
8.25
     
6.25
 
Freedom Holding
   
381,000
 
7/10/2012
   
8.25
     
6.25
 
Executive Employees
   
69,125
 
7/10/2012
   
8.25
     
6.25
 
Key Employee
   
10,000
 
7/10/2012
   
8.25
     
6.25
 
Freedom Holding
   
325,000
 
7/11/2011
   
8.25
     
7.00
 
Officer & Director
   
37,500
 
7/11/2011
   
8.25
     
7.00
 
James Stuckert
   
20,000
 
6/26/2013
   
8.25
     
4.50
 
Solomon Howell
   
20,000
 
10/7/2012
   
6.00
     
6.05
 
James Stuckert
   
20,000
 
10/7/2012
   
6.00
     
6.05
 
Steve Craig
   
30,000
 
12/11/2011
   
6.00
     
4.25
 
Steve Craig
   
30,000
 
12/11/2011
   
6.00
     
4.00
 
Freedom Holding
   
20,000
 
11/1/2011
   
8.25
     
3.80
 
Pride Capital
   
 20,000
 
6/15/2012
   
30.00
     
26.15
 
      995,625                    
 
The Board may, from time to time, alter or amend the Plan or stock option agreements issued under it, provided, that no amendment may

 
(a)
Impair or adversely affect the rights of a Participant under an outstanding Option; or

 
(b)
Decrease the exercise price of an Option, extend the period for exercise of an Option, or otherwise provide a participant with an enhancement or additional material benefit or right under such Option, including by exercise of existing discretion, if such amendment or change in the Option  would be a “material modification” of the Option that would cause Code Section 409A to become  applicable to the Option. Under this rule, any adjustment of an Option under Section 5(h) shall be done in a manner consistent with Code Section 424(h) even though that section is not otherwise applicable (if all fractional shares would be rounded down).
 
Item 6. Select Financial Data.
 
Under SEC regulations, the information called for by this item is not required because the Company is a smaller reporting Company.

Item 7. Management's Discussion and Analysis or Plan of Operation.

You should read the following discussion together with the financial statements, including the related notes and the other financial information in this Form 10-K.
 
 
17

 

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.   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. In accordance with SB 622 legislation, the annual license fee will be reduced to $2.5 million on July 1, 2010 and $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 up to 18 hrs a day and 24 hours a day on weekends.

On October 14, 2010 the Company sold its interest in the Summer Jai-Alai partnership to West Flagler Associates, Ltd. for a purchase price of $2,501,583, which included non-cash compensation of $501,583 for the cancellation of a promissory note owed to Flagler and Calder Race Course, Inc.  The debt forgiven and assumed by Flagler had a total principal of $416,666 and accrued interest of $84,917.  The Company recorded a gain of $1,907,509 in connection with this sale transaction.  Flagler also prepaid rents of $225,000 to the Company for use of its facilities which are carried as deferred income on the accompanying 2010 balance sheet. (See Note J)

COMPARISON DEFINITION

The following analysis of handle, revenues, real estate sales, attendance, operating expenses and general & administrative expenses in this part of the report compares figures for the twelve months ended December 31, 2010 to figures for the twelve months ended December 31, 2009, for the Miami and Ft. Pierce pari-mutuel facilities, and the real estate development.

During the twelve month period ended December 31, 2010 the Company’s revenue was severely impacted by Miami Jai-Alai not offering live jai-alai from May 1, 2010 through November 1, 2010, due to construction at the facility.  In comparison to the twelve month period ended December 31, 2009 when Miami offered live jai-alai year round.    Ft. Pierce operated live jai-alai from May 7, 2010 through August 28, 2010 compared to only operating  two months of live jai-alai in 2009.   Ft. Pierce  conducted a full schedule of Inter-Track Wagering (“ITW”) during the years ended December 31, 2010 and December 31, 2009.  Miami acted as a guest site only during May through August  2010, and Ft. Pierce acted as the host in sending out the simulcast signal during the same time period.  This change impacted the revenue because of fewer performances at Ft. Pierce when Miami acted as a host.   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. 
 
 
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Fiscal Year 2010 Compared with Fiscal Year 2009

Handle Analysis

Total Handle for the twelve months ended December 31, 2010 was $35,922,619 of which $6,126,708 was wagered on live jai-alai, $9,211,804 was wagered on the Miami jai-alai signal as a host site via inter-track simulcasting, and $20,584,107 was wagered on inter-track guest signals carried at the Company's two frontons.

Total Handle for the twelve months ended December 31,2009 was $58,908,940 of which $12,712,386 was wagered on live jai-alai, $13,546,357 was wagered on the Miami jai-alai signal as a host site via inter-track simulcasting, and $32,650,197 was wagered on inter-track guest signals carried at the Company's two frontons.

Handle Increases and Decreases
 
All areas of the handle saw a decrease during 2010. Total handle for the twelve months ended December 31, 2010  was $35,922,619, compared to $58,908,940 for the twelve months ended December 31, 2009, a decrease of $22,986,321 or 39%.

Live handle was $6,126,708 for the twelve months ended December 31, 2010 compared to  $12,712,386 for the twelve months ended December 31, 2009, a decrease of $6,585,678 or 51.8%.

ITW host signal for the twelve-months ended December 31, 2010 was $9,211,804 compared to $13,546,357 for the same period in 2009, a decrease of $4,334,553 or 47%.  ITW guest handle for the twelve months ended December 31, 2010, was $20,584,107 compared to  $32,650,197 for the same period in 2009, —a decrease of $12,066,090 (37%).
 
Miami only operated live jai-alai for six months for the twelve month period ended December 31, 2010, compared to operating  twelve months for the twelve month period ended December 31, 2009.

Revenue

Net Pari-Mutuel Revenues
 
Pari-mutuel revenues, net of state taxes and guest commissions, for the year ended December 31, 2010 were $3,992,922 compared to net pari-mutuel revenues of $6,694,981 for the same period in 2009, a decrease of $2,702,060 (40%). Revenues for the twelve months ended December 31, 2010, consisted of $2,280,155 from live and simulcast jai-alai wagering and $1,806,527 from inter-track guest commission. This compares to revenues for the twelve months ended December 31, 2009, consisting of $4,000,249 from live and simulcast jai-alai wagering and $2,694,732 from inter-track guest commission.

Admissions Income
 
Admissions Income, net of state taxes, for the year ended December 31, 2010, was $8,704, net of state taxes, compared to $26,947 for the year ended December 31, 2009, a decrease of $18,243 or 67.7%.

Program Revenue
 
Program Revenue for the year ended December 31, 2010, was $101,535 compared to $135,218 for the year ended December 31, 2009, a $33,683 decrease.

Food and Beverage
 
Food and beverage income decreased $334,972 (34%) to $654,115 for the year ended December 31, 2010, compared to $989,087 for the year ended December 31, 2009. Food and beverage income is revenue from the bar and concession stand. Sales at both facilities were below prior year.

Card room revenue
 
Card Room revenue for the Miami & Ft. Pierce Crystal Card Room for the twelve months ended December 31, 2010 was $4,463,383 compared to $5,998,668 for the same period in 2009, a decrease of $1,535,285
 
 
19

 

Other Revenue
 
Other Revenue for the year ended December 31, 2010 was $102,758 compared to $151,038 for the year ended December 31, 2009. Other Revenue primarily consists of souvenirs, parking, vending machines, lottery commission and misc. income.

Real Estate Sales
 
The Company had no real estate sales for the years 2010 and 2009.

Operating Expenses

The Company's operating expenses for the year ended December 31, 2010 were $11,797,400 compared to $15,553,657 for the same period in 2009, a $3,756,257 decrease. Operating Expenses were lower due to Miami Jai-Alai not operating live jai-alai for six months during the year ended December 31, 2010, compared to operating live jai-alai for twelve months during the same period in 2009.  Ft. Pierce also offered fewer performances while Miami acted as the host.
 
Advertising and Promotions
 
Advertising and promotional costs were $213,293 for December 31, 2010, compared to $404,137 for the year ended December 31, 2009. A total decrease of $190,844 or 47.2%.

Operating and Mutuel Payroll and related costs
 
Total operating and mutual payroll costs were $3,834,917 for the year 2010, compared to $4,828,975 for the year 2009, a $994,058 decrease. Mutuels payroll for the year ended December 31, 2010 was $563,321, compared to $840,832 for the same period in 2009. Payroll has decreased due to staff reductions due to the decline in wagering. Admission payroll for 2010 was $15,681 compared to $35,511 during the same period in 2009. Maintenance and janitorial payroll was $552,349 for the year ended 2010 compared to $661,054 for the same period in 2009. Security payroll for 2010 was $766,289 compared to $867,071 for the same period in 2009. Employee benefits were $793,740 for the year 2010, compared to $1,038,758 for the same period in 2009. Employee benefits consists of insurance for health care for the players and employees. Office payroll remained relatively the same with $333,818 for the year ended 2010, compared to $335,181 for the same period in 2009.

Player payroll and related costs
 
Player payroll and related costs for the year ended December 31, 2010 were $2,185,851 compared to $3,020,738 for the year ended December 31, 2009, a 27.6% decrease. The largest portion of the players decrease was due to a decrease in Players payroll of $328,471 and the players prize money decreased $267,769. There was a smaller roster and reduced prize money associated with fewer performances.

Food and beverage costs
 
Food and beverage costs for the period ended December 31, 2010, were $545,165 compared to $784,651 for the same period in 2009. Food and Beverage costs are from the bar and concession stand. Bar payroll was $63,840 for period ended December 31, 2010, compared to $75,596 in 2009. Bar purchases were $101,527 for the year ended December 31, 2010, compared to $146,809 for the same period in 2009, a $45,282 decrease Concession payroll was $181,975 for the year ended December 31, 2010, compared to $277,756 for the same period in 2009, a decrease of $95,781.

 Repairs and Maintenance
 
Total Repairs and Maintenance for the year ended December 31, 2010, was $193,241 compared to $228,576 for the same period in 2009. The Company has reduced staffing at both facilities.

Totalizator/teleview rental
 
The Company leases totalizator equipment at each fronton. The cost was $278,066 for the year ended December 31, 2010 compared to $385,591 for the year ended December 31, 2009. The Company had reduced operations and a renegotiated contract.

ITW and television costs
 
Total  ITW and television costs were the year ended December 31, 2010 were $616,467 compared to $844,969 for the same period in 2009, a decrease of $228,502. Of the total costs for 2010, TV Camera rental costs decreased from $461,391 in 2009 to $349,749 in 2010, and ITW tote and telecom costs decreased $116,861 (30.5%) to $266,718 for the year ended December 31, 2010 compared  to $383,579 for the year ended December 31, 2009.
 
 
20

 

Programs
 
Total Program costs were $129,702 for 2010, compared to $175,108 for the same period in 2009, a decrease of $45,406. Out of the total program costs, payroll totaled $8,747 for the year ended December 31, 2010, compared to $24,323 for the same period in 2009. Program expenses totaled $120,848 for the year ended December 31, 2010, compared to $150,785 for the same period in 2009.

Card room payroll and related costs
 
Card room payroll totaled $1,199,356 for the year ended December 31, 2010, compared to $1,427,075 for the same period in 2009.

Other card room operating costs
 
Expenses related to card room operations amounted to $844,068 for the year ended December 31, 2010, compared to $1,237,975 in 2009, a decrease of $393,907. The state participation was $487,040 during the twelve months ended December 31, 2010 compared to $669,367 for the twelve months ended December 31, 2009. A decrease of $182,326 or 27.2%. The supplemental prize expense was $178,535 for the twelve months ended December 31, 2010, compared to $239,947 for the same period in 2009, a decrease  of  $61,411.  Promotions and Purchases were $35, 308 for the year ended December 31, 2010, compared to $130,313 for the same period in 2009, a decrease of $95,005.    The Company also has to pay City and County taxes for operating the Ft. Pierce card room in St. Lucie County.  The Company paid St. Lucie County  $124,102 in 2010 compared to $102,063 in 2009.

Depreciation and amortization
 
Depreciation and Amortization expense amounted to $457,559 for the year ended December 31, 2010 compared to $490,918 for the same period in 2009.
 
Utilites
 
Utility costs decreased $171,275 (29.8%) from $574,798 for the year ended December 31, 2009 to $403,523 for the year ended December 31, 2010.   
 
Cost of Real Estate Sales
 
The Company had no real estate sales for the years ended December 31, 2010 and 2009.

 Provision for loss on real estate
 
The Company had provision for loss of $63,500 for the year ended December 31, 2009, compared to -0-  in  2010.  The provision was made in 2009 for the six lots at Tara.
 
Misc. net
 
Misc. expenses were $896,192 for the year 2010, compared to $1,086,646 for the same year in 2009,  a $190,454 decrease.

General and Administrative Expenses

The Company's general and administrative expenses were $5,097,985 for the twelve months ended December 31, 2010, compared to $4,923,908 for the twelve-months ended December 31, 2009, a $174,077 increase. The increase is due to higher interest costs.

Comparisons of significant categories of general and administrative expense for 2010 versus 2009 are as follows:

Executive payroll and related costs
 
Executive payroll and related costs  were $577,153 in 2010, compared to $579,467 in 2009.

Stock Options
 
The Company did not issue any new stock options in 2010, but the Company did extend 362,500 option from July 11, 2010 to July 11, 2011 which led to an expense  of $14,152 compared to the stock option expense of $231,257 for extending the options in 2009. The Company issued 30,000 warrants to Mr. Steve Craig in August, 2010, for his consulting services and his efforts to assist the Company in securing financing.  The company had warrant  expense of $5,630. During 2009, the Company had warrant expense of $54,158 for issuing 20,000 warrants to Mr. Stuckert and Mr. Howell, and 30,000 warrants to Mr. Steve Craig. (See Note C)
 
 
21

 
 
Director Fees
 
The Company has two non-employee directors and the fees are $2,000 per month  Mr. Roland Howell, a director of the Company since  1995, passed away on June 12, 2010.  Director Fees for the periods ended December 31, 2010 were $60,000 compared to $72,000 for the year ended December 31, 2009.  Director fees were accrued for 2010.

Management consulting
 
Total management consulting fees were $780,000 for years ended December, 31, 2010 and December 31, 2009.  Management fees consist of fees paid to Freedom Financial Corporation for services provided by W. B. Collett, Chairman and CEO.   Management Fees have not been for the past two years, the $1,560,000  expense has been accrued.  (See Note F)

Telephone and Travel
 
Total fees for telephone and travel were $337,916 for the year ended December 31, 2010, compared to $443,324 for the same period in 2009. Of the $337,916, $244,597 was for travel and $93,319 for phone.  This compares to travel expense was $350,584 and  telephone of $92,740 for the same period in 2009.

Professional fees
 
Professional fees were $613,747 in 2010 compared to $728,919 in 2009, a decrease of $115,172 or 15.8%. Included in professional fees are lawyers, accountants, and consultants.

Interest and Financing Costs
 
The Company had total interest and financing costs of $1,519,004 for the twelve month period ended December 31, 2010 compared to $903,280 during the same period in 2009. During 2010, the company had interest expense of $1,504,277 and financing costs of $14,727.   The financing costs were from the warrant issued to Mr. Craig on December 31, 2009.    During 2010, several Notes were in default and the Company was accruing interest at a much higher interest rate.  The Isle of Capri Casinos Note interest went from 10% to 18% in July, 2009.  On January 1, 2010  the Stuckert/Howell Note interest rate went from 5% to 24%.  The Company borrowed an additional $1,435,000 during 2010 which also increased the interest expense.  This compares to the total of $903,280 for the twelve month period ended December 31, 2009,  when interest costs totaled $671,277 and financing costs were $232,003.  During 2009, the Company incurred financing costs relating to the convertible promissory notes.  The Notes include a convertible feature allowing the Lenders, at their option, to convert outstanding principal and any accrued interest into the Company’s $.20 par value common stock at $6.00 per share.  The conversion rights of the  Stuckert/Howell Notes were valued at $138,204.  The Company also issued Mr. Stuckert and Mr. Howell each 20,000 warrants and incurred financing costs of $39,451.  On December 11, 2009, the Company issued Mr. Steve Craig 30,000 warrants at $6.00 per share and had financing costs of $14,727, which were amortized over the life of the loan.
 
Property Taxes
 
Property taxes were $484,583 for the year ended December 31, 2010, compared to $398,623 for the same period in 2009.  The Company has accrued but not paid the property taxes on the Ft. Pierce Jai-Alai and Miami Jai-Alai for the years 2008, 2009, and 2010.

Insurance Costs
 
The Company had insurance expense of $705,800 for the twelve months ended December 31, 2010, compared to insurance expense of $787,038 for the same period in 2009.
 
Other Income and Expense

Other income for the year ended December 31, 2010, was $2,728,602 compared to $1,621,434 for the same period in 2009. There was interest income of $3,604 for the twelve months ended December 31, 2010, compared to $7,866 for the same period in 2009 a decrease of $4,262. The Company recorded a $1,907,509  gain on the sale of Summer Jai-Alai (See Note J).  The State Tax credits on handle and admissions in 2010 was $817,489 compared to $703,511 during the same period in 2009. During 2009, the Company sold a piece of property to the county and recorded a gain on sale of right-of-way of $870,185 (See Note I)
 
 
22

 
 
Liquidity and Capital Resources

The Company had cash and cash equivalents of $748,617 at December 31, 2010, compared to  $819,256 at December 31, 2009. The Company had negative working capital of approximately $18,207,827 for the twelve months ended December 31, 2010.  This compares to negative working capital of $11,926,189 during the year ended December 31, 2009.  The large increase in negative working capital is due to the current liabilities increasing $5,961,233 during 2010 and the assets decreasing $184,740. The Company borrowed an additional $1,435,000 in 2010 that is included in current liabilities.

Net cash used in operating activities was $1,829,348 compared to $2,416,703 in 2009.  During the year ended December 31, 2010, the Company extended 362,500 options for one year for a stock option expense of $14,782 and the Company issued warrants to Mr. Steve Craig for consulting services with the Company for an expense of $5,630.  During the twelve month period ended December 31, 2009, the Company had stock option expense of $231,257 and warrant expense of $54,178.  During 2009, the Company extended 362,500 options  for one year and issued warrants to Mr, James Stuckert, Mr. Solomon Howell, and Mr. Steve Craig for a warrant expense of $54,178. On October 14, 2010 the Company sold the Summer Jai-Alai partnership for a total of $2,501,583.  The purchase price included both cash ($2,000,000) and noncash ($501,583) compensation.   The Company recorded a gain on the sale of $1,907,509.  The company had an increase in accounts payable and accrued expenses of $4,415,789. A few of the larger expenses accrued during the twelve month period ended December 31, 2010,  included interest expense of $1,504,277, dividends of $524,030, management fees of $780,000, professional fees of $331,805, and property taxes of $428,318.  During 2009, the Company recorded a gain on the sale of the right of way for $870,185.   The Company completed Phase 1 of its two-phase acquisition of the 10.982 acres of property from the County (see Note H). The County purchased the right-of-way of .492 acres from the Company for $1,185,345. The Company’s basis in the right-of-way was $65,160, costs to sell totaled $250,000; therefore, the net gain on sale totaled $870,185.

Net cash provided by investing totaled $867,527 for 2010, compared to $426,815 in 2009.   The Company had purchases of property and equipment of $1,132,473 for 2010 compared to  $508,350 during 2009. On October 14, 2010, Florida Gaming Centers (“Centers”) sold to West Flagler Associates, Ltd. all of Centers’ interest in the Summer Jai-Alai Partnership for a total purchase price of $2,501,583.  The purchase price included both cash ($2,000,000) and noncash ($501,583) compensation.  During 2010, the Company put on a new roof at Miami Jai-Alai for $963,000. During the twelve months ended December 31, 2009,  the Company agreed to acquire a total of 10.982 acres of property from Miami-Dade County in exchange for an easement of .492 acres to be used by the Miami-Dade Metro Rail, an overhead light rail system.  The Company’s basis in the right of way was $65,160, expenses of $250,000; therefore net proceeds on the sale of .492 acres totaled $935,345. 

During 2010, net cash provided by financing activities totaled $891,182 compared to cash provided by financing activities of $1,296,425 for the year ending December 31, 2009. During the year ended December 31, 2010, the  Company borrowed $1,435,000, compared to $1,500,000 for the year ended December 31, 2009. The Company did not have any persons exercise their options during 2010. This compares to 2009, when the Company received $98,750 from the exercising of 25,000 options @ $3.50 per share, and 5,000 options at $2.25 per share. During the year ended December 31, 2010, the Company repaid short term debt of $528,818 compared to  repaying debt of $239,036 for the year ended  December 31, 2009.  During 2010, the Company paid dividends of $15,000 compared to paying dividends of $63,289 during 2009.
 
The Company leased totalizator equipment from Sportech 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 year ended December 31, 2010 and 2009 was approximately $278,000 and $386,000, respectively.

The Company also leased parking facilities adjacent to the Miami fronton. The Company had -0- lease payments during 2010, compared to lease payments totaling $34,000 in 2009. The lease concluding with the purchase of the additional property from the County.
 
 
23

 

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 3. Legal Proceedings) .   At December 31,  2010, the Company owed Isle $3,000,000 principal plus $885,986 in interest.  At December 31, 2010, the Company owed $1,000,000 principal plus $254,644 interest on the Stuckert/Howell note.  The Company is currently in negotiations with Mr. Stuckert and Mr. Howell to extend the Note.  As of the date of this filing, Mr. Stuckert and Mr. Howell have not informed the Company of any default. 

At December 31, 2010, the Company owed $2,827,477 on a note to Miami-Dade County.  The Company has made the required payments to Miami-Dade County. (See Note H)
  
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.  On October 12, 2010,  Nurmi Properties, LLC  modified the mortgage by extending the Note one year from December 11, 2010  to December 11, 2011. (See Note H)

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 for the Registrant dated February 4, 2010 (See Form 8-K dated April 28, 2010). The Company was to make monthly interest payments on the Note.  The Note was due December 31, 2010.   On December 31, 2010 H2C, Inc. extended the due date of the Note to March 31, 2011 (See Form 8-K filed January 6, 2011).  The Company has not made the required interest payments on this Note.  (See Note H)

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 has not made the required interest payments on this Note.  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).     On December 31, 2010 H2C, Inc. extended the due date of the Note to March 31, 2011. (See Note H)

The Company has 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.   On September 1, 2010, the Company extended the Note until September 1, 2011.  (Refer to Form 8-K filed September 8, 2010)

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 were paid through October, 2010,  with all remaining unpaid principal and interest due February 1, 2011.  The Company did not make the required interest payments  for two months in 2010, and the principal payment and accrued interest was  due February 1, 2011.  The Company is currently in negotiations with the Company to extend the Note.   (See Note H)

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 Hamilton State Bank note of $36,691 plus interest of $4,924. The Company is currently in default on the mortgage and Mr. Collett has been named the defendant in a lawsuit filed by Hamilton State Bank.  The suit has been filed in the Superior Court of Hall County State of Georgia.  The Note also provides for collection of attorney’s fees in the amount of 15% of principal and interest owed in the event of default. (See Note H)
 
 
24

 

On November 14, 2010, the Company entered into three separate promissory notes for $25,000 each.  The notes are unsecured, bear 3% interest per annum, require quarterly interest payments and mature on December 31, 2011. (See Note H)

On December 3, 2010, W.B. Collett, Jr., President and COO of the Company, advanced the Company $125,000 for operating expenses.

On December 9, 2010 the Company entered into a Promissory Note for $400,000 with Construct Design, Inc.  The note is unsecured and bear interest at 12% per annum.  The maturity date was January 31, 2011.  The note is currently in default and the Company is attempting to negotiate an extension. (See Note H)

On December 16, 2010 the Company entered into an Unsecured Promissory Note for $50,000, at 10% interest, requiring quarterly interest payments and the note matures on December 31, 2011. (See Note H)

On January 26, 2011, the Company entered into a Loan and Security Agreement with City National Bank of Florida  as trustee under its land trust number 5003471 dated January 3, 1979, and AGS Capital, LLC pursuant to which the Lender loaned the Company $1 Million, payable  in two equal tranches of $500,000, and the Company has issued the Lender a promissory note  (“Note”) in the original principal amount of $1 Million.  The Company received the first tranche on January 26, 2011 and received the second tranche on February  16 , 2011.   The outstanding principal balance of the note bears interest at an annual rate of 8%.  The entire outstanding principal balance of the Note, plus accrued but unpaid interest, is due in full on the Note’s maturity date, which is the earlier of March 31, 2011 or the date on which the Company secures permanent financing of approximately $83 Million.  The Company has the right to prepay the Note in full or in part without penalty.  If the note is not paid in full on the maturity date, the note will thereafter bear interest at the default rate of 18% per annum. (See Form 8-k filed on February 1, 2011)

The Note is secured by: (i) a junior mortgage and security agreement in favor of the Lender on the real estate at the Miami  Jai-Alai; (ii) a security interest in all licenses (excluding any license or permit to operate pari-mutuel wagering or slot machines) and permits and all contracts, agreements and warranties owned by the Company and related to the Miami Jai Alai Facility; (iii) the beneficial interest in and a power of direction in and to the Land Trust (the “Collateral Assignment of Beneficial Interest in Collateral”); and, (iv) a security interest in the Company’s tangible and intangible property at the Jai Alai Facility.  Additionally, during the term of the Note, the Lender has the right to approve any management agreement relating to the management of the Jai Alai Facility.

In February, 2005, the Company agreed to contribute to political action committee (PAC) formed by South Florida gaming interests seeking passage of a statewide legislative initiative and local referenda to expand gaming rights to include “slots” in Miami-Dade County, Florida.  Pursuant to that contribution agreement, the Company is contingently committed to the payment of $3,550,000 to the PAC as its share of the cost of the initiative.  The contingent commitment becomes binding upon the Company at the earlier of ten days after the Company begins slot machine operations at its facility or upon the bona fide sale or transfer of its business operations to a third party purchaser.  At this time, it is not known when or if, the Company will begin operating slot machines in its Miami facilities.

The Company continues to seek financing to refinance its debts.  The Company continues to try to sell the Fort Pierce Jai-Alai Property and Tampa Jai-Alai permit. The proceeds received from the sale would be used to pay past-due obligations and 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.
 
 
25

 

 (a) Off -Balance Sheet Arrangements
None.

Critical Accounting Estimates

The Company's 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. See Note A - "Summary of Significant Accounting Policies" to our financial statements for additional information on these policies and estimates, as well as discussion of additional accounting policies and estimates.
 
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 estimation of the overall economic conditions as well as the aging of the accounts receivable. In the event that the receivables became uncollectible after exhausting all available means of collection, the company would 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 our accounts, there is a possibility of this occurrence.
 
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. Allowance for doubtful accounts totaled -0- for the years ended December 31, 2010 and 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 and judgment to determine the amounts that are probable of recovery.
 
The Company estimates the useful lives of property and equipment in order to determine the amount of depreciation and amortization expense to be recorded during any reporting period. The majority of its equipment is depreciated over five to seven years. The estimated useful lives are based on historical experience with similar assets as well as taking into account anticipated technological or other changes. If technological changes were to occur more rapidly than anticipated or in a different form than anticipated, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased depreciation in future periods. The Company reviews for impairment annually or when events or circumstances indicate that the carrying amount may not be recoverable over the remaining lives of the assets. In assessing impairments, it follows the provisions of ASC Topic 360-10-05 “Impairment or  Disposal of Long-Lived Assets".
 
In accordance with ASC Topic 360-10-05, 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 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. Provisions for losses totaled $63,500 on property held for sale, for the years ended December 31, 2010 and 2009.
 
 
26

 

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 mutual 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.

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 2010, unclaimed winning totaled $97,028 compared to $162,350 for the same period in 2009.
 
Item 7A.  Quantitative and Qualitative Disclosures 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 8.  Financial Statements

List of Financial Statements Filed.
 
 
See accompanying Financial Statements:
   
 
Balance Sheets as of December 31, 2010 and 2009.
   
 
Statements of Income for the years ended December 31, 2010 and 2009.
   
 
Statement of Changes in Stockholders' Equity for the two years ended December 31, 2010 and 2009.
   
 
Statements of Cash Flows for the years ended December 31, 2010 and 2009.
   
 
Notes to Financial Statements.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
None
 
Item 9A. Controls and Procedures. 

As of December 31, 2010, an evaluation was carried out under the supervision and with the participation of our management team, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of  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.
 
 
27

 

(a) Management’s annual 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 December 31, 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 December 31, 2010, the Company maintained effective internal control over financial reporting.

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report of the effectiveness on the design and operation of  internal control over financial reporting was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

b)  Changes in internal control over financial reporting.  The Company made one change to its internal control over financial reporting during 2010. During 2009, the Company believed it had reached a verbal understanding with two of its creditors to remove a convertibility clause in notes to such creditors.  The written amendment, when final, did not remove the convertibility clause, but the Company had relied upon its verbal understanding for financial reporting.  The Company now requires any material contract or contract amendment to be in writing, along with a documented review by the Company’s CFO and CEO prior to reliance for financial reporting.
  
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met.  In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any control will meet its objectives under all potential future conditions.  
 
Item 9B.    Other Information
 
As of December 31, 2010, the Company had accrued but not paid dividends on their four classes of Preferred Stock:
The Company owes the following amounts:
 
Preferred A:
$  51,922
Preferred AA:  
$787,500
Preferred B:
$  54,902
Preferred F:
$285,000
 
 
28

 

Item 10.
Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act.

Directors and Executive Officers

The following table sets forth certain information concerning the Company's executive officers and directors at December 31, 2010:
 
Name
 
Age
 
Position with the Company
 
Director or
Executive
Officer Since
W. Bennett Collett
 
78
 
Chief Executive Officer, Director and Chairman
 
1993
             
W. Bennett Collett, Jr.
 
55
 
President , Director, and Chief Operating Officer
 
1993
             
Kimberly R. Tharp
 
53
 
Chief Financial Officer, Secretary and Treasurer
 
2002
             
Daniel Licciardi
 
54
 
Executive Vice-President and Pari-Mutuels Manager
 
1998
             
Jennifer Chong
 
54
 
Controller
 
2003
             
George Galloway, Jr.
 
77
 
Director
 
1994
             
*Roland M. Howell
           
             
William Haddon
 
80
 
Director
 
2001
 

*
Roland Howell passed away on June 12, 2010
 
W. Bennett Collett has served as Chairman of the Board, Chief Executive Officer and a director of Freedom Financial Corporation (“Freedom”) since its formation in 1985. Freedom was a registered bank holding company until January, 1988 when it sold its banking subsidiaries. Mr. Collett has served as Chairman and director of Freedom Holding, Inc. (“Holding”) since its formation in December 1992. Holding's sole business currently is to hold shares of  Florida Gaming Corporation. Collett was involved in the ownership and management of banking and financial service companies for over 30 years, having been a principal officer, and director of ten commercial banks. For 14 years Mr. Collett was a principal shareholder and chief executive officer of various banks and finance companies in Alabama, Arkansas, Georgia, Indiana and Missouri ranging in asset size from $1,000,000 to $500,000,000.

W. Bennett Collett Jr. served as President of Freedom from 1988 to 1989. Since August 1989, Mr. Collett has served as Executive Vice President of Freedom. He has been a director of Freedom since its formation in 1985 and a director of Holding since April, 1998. He presently serves as Secretary and Treasurer of Holding. Mr. Collett is responsible for directing the Company's gaming operations (live jai-alai performances and inter track wagering). Mr. Collett currently serves as President and Chief Operating Officer and was appointed to the Company's Board of Directors on August 9, 1994. W. Bennett Collett Jr. is the son of W. Bennett Collett.

Kimberly R. Tharp was elected Chief Financial Officer of the Company in 2002 and still serves in that capacity. She has served Freedom since 1995 to present, in various capacities, including Chief Financial Officer, Controller and Secretary.

Daniel Licciardi was elected Exec. Vice-President and Pari-Mutuels Manager in 1998 of Florida Gaming Centers.  Mr. Licciardi was employed at the Miami Jai-Alai when present management took over in 1997. He has overseen the operations at the Miami Jai-Alai for over 20 years.

Jennifer Chong  has worked in various positions at the Miami Jai-Alai and was elected Controller in 2003. She had previously served Centers as Asst. Controller.

George W. Galloway, Jr., M.D. a physician since 1958, served as the medical director of the emergency room at Kennestone Hospital in Marietta, Georgia from 1983 until his retirement in March 1999.

William Haddon an attorney and certified public accountant, has been engaged in the private practice of law in Atlanta, Georgia since 1962.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and persons who own more than 10 per Cent of the Company's Common stock to file with the Securities and Exchange Commission (the “SEC”) initial reports of ownership and reports of changes in ownership of common stock. Officers, directors and greater than 10 percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
 
 
29

 

To the Company's knowledge, based solely on a review of the copies of such reports and certain representations furnished to the Company, during the fiscal year ended December 31, 2010, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were satisfied.

 Information Relating to Our Audit Committee of the Board of Directors

The purpose of the Audit Committee is to oversee the accounting and financial reporting processes of our company and the audits of our financial statements. The Audit Committee provides assistance to our Board of Directors with respect to its oversight of (a) the integrity of our financial statements, (b) our compliance with legal and regulatory requirements, (c) the independent registered public accountant’s qualifications and independence, and (d) the performance of our independent registered public accountants. The primary responsibilities of the Audit Committee are set forth in its charter, which is reviewed annually, and includes various matters with respect to the oversight of our company’s accounting and financial reporting process and audits of the financial statements of the Company on behalf of our Board of Directors.

The Audit Committee also selects the independent registered public accountants to conduct the annual audit of the financial statements of the Company; reviews the proposed scope of such audit, reviews accounting and financial controls of the Company with the independent registered public accountants and our financial accounting staff; and reviews and approves transactions between us and our directors, officers, and their affiliates.

The Audit Committee currently consists of Messrs. Haddon, and Galloway, each of whom is an independent director of our company under OTCBB rules as well as under rules adopted by the Securities and Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002. The Board of Directors has determined that Mr. Haddon qualifies as an “audit committee financial expert” in accordance with applicable rules and regulations of the SEC. Mr. Haddon serves as Chair of the Audit Committee.

Code of Ethics

The Code of Ethics can be viewed on the Company's website @ www.fla-gaming.com

Item 11. Executive Compensation

Cash Compensation.

The following table sets forth all cash compensation paid by the Company for the fiscal years ended December 31, 2010 and 2009 for W. Bennett Collett, W. B. Collett, Jr., and Daniel Licciardi. W. Bennett Collett received no cash compensation from the Company from the time he began service as an executive officer on March 31, 1993 through December 31, 1995.
 
SUMMARY COMPENSATION TABLE

Name of
Executive Officer
 
Year
 
Salary
   
Bonus
 
Stock
Awards
 
Option
Awards
 
Non-Equity
  Incentive
Plan
Compen-
sation
 
Non-
Qualified
Deferred
Compen-
sation
Earnings
 
All
Other
Compen-
sation
 
Total
 
       
($)
   
($)
 
($)
 
($)
 
($)
 
($)
 
($)
 
($)
 
(a)
 
(b)
 
(c)
   
(d)
 
(e)
 
(f)
 
(g)
 
(h)
 
(i)
 
(j)
 
                                         
W. B. Collett
 
2010
 
$
780,000
             
-
           
17,900
 
 
797,900
 
Chairman and CEO
 
2009
 
$
780,000
             
-
           
25,018
   
805,018
 
                                                 
W. B. Collett, Jr.
 
2010
   
263,000
             
-
           
51,076
   
314,076
 
President
 
2009
   
263,000
               
-
           
51,925
   
314,925
 
                                                   
Daniel Licciardi
 
2010
   
141,300
               
-
           
6,000
   
147,300
 
Exec. Vice President
 
2009
   
141,300
               
-
           
6,000
   
147,300
 

 
30

 
 
Salary (c)
 
In September, 1997, the Company discontinued the salary payments to Mr. Collett and began paying a consulting fee of $30,000 per month to Freedom Financial Corporation (“Freedom”) in lieu of paying a salary to Mr. Collett. The payments to Freedom totaled $360,000 in each year from 1998 to 2002. Beginning in 2003, the payments were increased to $40,000 a month to Mr. Collett. The Board of Directors elected to give Mr. Collett an increase of $10,000 per month to $50,000 per month effective May 1, 2005. On May 1, 2007 the Board of Directors gave Mr. Collett an increase of $10,000 per month which increased his consulting fee to $60,000 per month. On April 1, 2008, the Board of Directors authorized an increase of $5,000 per month which increased his consulting fee to $65,000 per month.  Mr. Collett is Chairman of the Board and Chief Executive Officer of Freedom. As of December 31, 2010, there was no written employment or consulting agreement between the Company and Freedom Financial Corporation. The Company has no employment agreements with any of the officers.

Bonus (d)
 
The Company did not issue any bonuses during 2010 or 2009. 

Option Awards (f)

The Company did not issue any new options during 2010 or 2009. During 2010, the Company did extend 362,500 options from July 11, 2010 to July 11, 2011. The company recognized stock option expense of $14,152.

Other Compensation (I)

W. B. Collett had other compensation of $17,900 for the year ended 2010, $5,000 was for personal travel,  and $12,900 was a discretionary expense allowance.   This compares to $25,018 for the year ended 2009.  During 2009, the $25,018 included  $9,418 reimbursements for medical payments, insurance and auto repairs on personal cars used for company business.  The remaining $15,600 was discretionary expense allowance of $300 a week.  
 
W. B. Collett, Jr. had other compensation of $51,076 for the year ended December, 31, 2010, which included $18,178 in car payments and repairs made by the Company for personal autos used in Company business. In an effort to reduce travel expenses, the Company rented a fully furnished house near the Ft. Pierce Jai-Alai Fronton for W. B. Collett, Jr. in lieu of paying hotel accommodations.  The cost for the house in 2010 was $32,898.  This compares to other compensation of $51,925 for the year ended December 31, 2009, which included $18,619  in car payments and repairs made by the Company for personal autos used in Company business.  The cost for the rental house in 2009 was $33,306. 
 
Dan Licciardi had other compensation of $6,000 for auto allowance during the years ended December 31, 2010 and December 31, 2009.
 
 
31

 
 
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2010
 
Name
 
Number Of Securities Underlying Unexercised Options (#) Exercisable
 
 
Number Of Securities Underlying Unexercised Options (#) Unexercis- Able
 
 
Equity Incentive Plan Awards: Number of Securities Underlying Unexer-
 Cised Unearned Options
(#)
 
 
Option Exercise Price
($)
 
Option   Expira-
 tion Date
 
Number of Shares or units of Stock That Have Not Vested
($)
 
Market Value of Shares of Units of Stock That Have Not Vested
($)
 
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
 
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
(a)
 
(b)
   
(c)
   
(d)
   
(e)
 
(f)
 
(g)
 
(h)
 
(i)
 
(j)
Freedom Holding
                                                 
W. B. Collett
   
250,000
(1)
                   
8.25
 
7/11/2011
                 
Chairman & CEO
   
48,000
(1)
                   
8.25
 
7/10/2012
                 
                                                     
Freedom Holding
                                                   
W. B. Collett, Jr.
   
75,000
(1)
                   
8.25
 
7/11/2011
                 
President & COO
   
18,000
(1)
                   
8.25
 
7/10/2012
                 
                                                     
Kimberly Tharp
   
4,125
                     
8.25
 
7/10/2012
                 
CFO,Treas & Sec
                                                   
                                                     
Daniel Licciardi
   
17,500
                     
8.25
 
7/11/2011
                 
Ex Vice-Pres.
   
7,125
                     
8.25
 
7/12/2012
                 
& Pari Mutels Mgr
                                                   
                                                     
Jennifer Chong
   
2,250
                     
8.25
 
7/10/2012
                 
Controller
                                                   
 

(1)
W.B. Collett and W.B. Collett, Jr. transferred  726,000 options to Freedom Holding, Inc. on March 11, 2008. W. B. Collett transferred  528,000 options, and W.B. Collett, Jr. transferred 198,000 options. Freedom Holding exercised 335,000 of these shares in March, 2008. W. B. Collett owns 85.09% of Freedom Holding, Inc. and W. B. Collett, Jr. owns 9.21% of Freedom Holding, Inc.  (See Item 12.)
 
There were no new options issued during the years ended December 31, 2010, and December 31, 2009.  On July 10, 2010, the Company extended 362,500 options that were to expire on July 11, 2010 for one year to July 11, 2011.  Of the 362,500 options extended, Freedom Holding holds 325,000 of those options.  The Company recorded a cost of $14,152 for the extension.
Daniel Licciardi was issued 17,500 options on July 10, 2006, with an expiration date of July 11, 2010. The Company extended these 17,500 options from July 11, 2010 to July 11, 2011.

Kimberly Tharp was issued 4,125 options on July 10, 2006 with an expiration of July 10, 2012.
 
Jennifer Chong was issued 2,250 options on July 10, 2006 with an expiration of July 10, 2012.

Director Compensation

The Company currently pays its non-management directors, Dr. George W. Galloway, Jr., and William C. Haddon, a monthly fee of $2,000.  The directors fees were accrued but not paid for the twelve months ended December 31, 2010.  W. Bennett Collett, and W. B. Collett, Jr. are also directors, but receive no directors fees.

DIRECTOR COMPENSATION
 
Name
 
Fees Earned or
Paid in Cash
($)
 
Stock Awards
($)
 
Option Awards
($)
 
Non-Equity Incentive Plan
Com-
Pensation
($)
 
Change in Pension Value and Nonqualified Deferred Compensation Earnings
 
All other Compensa-
 Tion
($)
 
Total
 ($)
 
(a)
 
(b)
 
( c)
 
(d)
 
(e)
 
(f)
 
(g)
 
(h)
 
Roland Howell*
   
12,000
                       
12,000
 
William Haddon
   
24,000
                       
24,000
 
George Galloway
   
24,000
                       
24,000
 
 

*
Roland M. Howell passed away June 12, 2010

 
32

 
 
Option Awards (d)
 
The directors did not receive any stock options during 2010 or 2009.  George Galloway had  20,000 options that were to expire on July 11, 2010, and the Company extended the options for one year until July 11, 2011.   
 
Indemnification
 
Under Section 145 of the Delaware General Corporation Law (“DGCL”), the Company has the power to indemnify directors and officers under certain prescribed circumstances and subject to certain limitations against certain costs and expenses, including attorney's fees, actually and reasonably incurred in connection with any action, suit or proceeding, whether civil, criminal, administrative, or investigative, to which any of them is a party by reason of his being a director or officer of the Company if it is determined that the officer or director acted in accordance with the applicable standard of conduct set forth in such statutory provisions. The Company's Bylaws provide that the Company shall indemnify each person who may be indemnified pursuant to Section 145, as amended from time to time (or any successor provision thereto), to the fullest extent permitted by Section 145. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information as of March 29, 2011 concerning each stockholder known to the Company to own beneficially more than five percent of the outstanding Common Stock of the Company and information regarding beneficial ownership of Common Stock,  and the Common Stock of Freedom  Holding (“Holding”) by each director and executive officer, and all directors and executive officers as a group.  Holding each may be deemed to be a “parent” of the Company as such term is defined in the rules promulgated under the Securities Exchange Act of 1934. Holding's sole business currently is to hold shares of Florida Gaming Corporation.  During 2008, Freedom Financial Corporation, W. B. Collett and W. B. Collett, Jr. transferred all options, common and preferred stock to Freedom Holding.  In 2009, Holding converted all 200 shares of Series E Preferred stock to 104,712 shares of the Company’s $.20 par value common stock.  The reason for the transfer was to centralize the Florida Gaming Corporation holdings.  Before the transfer Freedom Holding owned 100% of Freedom Financial Corp. Freedom Holding is owned by three individuals, two of which are executive officers in Florida Gaming, W. B. Collett, and W. B. Collett, Jr.  Their option shares were transferred to Freedom Holding representing capital contributions by the officers to a controlled corporation.  The transfer of stock from Freedom Financial to Holding was a dividend to its parent corporation.  The Company pays management fees of $65,000 per month to Freedom Financial Corporation, for the services of W. B. Collett, Chairman and CEO.

   
THE COMPANY
   
FREEDOM
   
HOLDING
 
Directors
And
Executive
Officers
 
Number
Of
Shares
(1)
   
Percent
Of
Class
(2)
   
Number
Of
Shares
(1)
   
Percent
Of
Class
(3)
   
Number
Of
Shares
(1)
   
Percent
Of
Class
(4)
 
                                     
W. B. Collett
   
2,200,203
(3)
   
46.2
%
   
1,109,011
(4)
   
100
%
   
812.05
     
85.09
%
                                                 
W. B. Collett, Jr. (9)
   
*
             
     
     
87.95
     
9.21
%
                                                 
Kimberly R. Tharp
   
31,625
(12)
   
1
%
   
     
     
     
 
                                                 
Daniel Licciardi
   
54,625
(13)
   
1.4
%
   
     
     
     
—-
 
                                                 
Jennifer Chong
   
12,250
(15)
 
<1
%
   
     
     
     
 
                                                 
William C.  Haddon
   
43,750
(11)
   
1.2
%
   
     
     
     
 
                                                 
George W. Galloway, Jr.
   
57,500
(10)
   
1.5
%
   
     
     
     
 
                                                 
All current directors and Executive officers as a group (7 persons) (6)
 
 
                        2,399,953
     
                49.6
%
   
1,109,011
     
100
%
   
900.00
     
94.3
%

 
33

 


5% Beneficial
Owners
 
Number
Of
Shares
(1)
   
Percent
Of
Class
(2)
   
Number
Of
Shares
(1)
   
Percent
Of
Class
(3)
   
Number
Of
Shares
(1)
   
Percent
Of
Class
(4)
 
Freedom Holding, Inc. (7)
   
2,200,203
     
46.2
%
   
N/A
     
N/A
     
N/A
     
N/A
 
                                                 
Pride’s Capital Partners, LLC (14)
   
220,000
     
5.6
%
   
N/A
     
N/A
     
N/A
     
N/A
 
                                                 
Dorothy V. Howell (5)(8)
   
472,079
     
11.7
%
   
N/A
     
N/A
     
N/A
     
N/A
 
 

(1)
Based upon information furnished to the Company by the named person, and information contained in filings with the Securities and Exchange Commission (the “Commission”). Under the rules of the Commission, a person is deemed to beneficially own shares over which the person has or shares voting or investment power or which the person has the right to acquire beneficial ownership within 60 days. Unless otherwise indicated, the named persons have sole voting and investment power with respect to shares owned by them.

(2)
Based on 3,888,959 shares outstanding as of March 30, 2011 Shares of Common Stock of the Company subject to options exercisable or preferred stock convertible within 60 days are deemed outstanding for computing the percentage of class of the person holding such options or preferred stock, but are not deemed outstanding for computing the percentage of class for any other person.

(3)
Of the 2,200,203 shares, it includes 1,325,869 shares owned by Freedom Holding, Inc. (“Holding”), 706,000 options, and 148,334 shares of the Company’s Preferred F Stock. Holding also owns 20,000 warrants. On March 16, 2009, Holding converted 200 Shares of Class E Preferred Stock to 104,712 of the Company’s $.20 common stock which is included in the 1,325,869.   As of January 6, 2011, Holding has pledged all 1,325,869 shares of Florida Gaming Corporation common stock and the 1,000 shares of Preferred F stock to a bank as collateral for a loan. Mr. Collett may be deemed to beneficially own the shares held by Holding, although he disclaims such beneficial ownership of such shares. Mr. Collett can exert considerable influence over the election of the Company's directors and the outcome of corporate actions requiring stockholder approval.

(4)
Includes 1,109,011 shares owned by Holding. Mr. Collett may be deemed to beneficially own the shares held by Holding, although he disclaims beneficial ownership of such shares.

(5)
Includes 148,334 shares of common stock into which 1000 shares of the Company's Series F Preferred Stock owned by Mrs. Howell are convertible. The 472,709 shares also includes options granted to Mr. Howell to purchase 9,375 shares of the Company's common stock.  Mr. Howell passed away on June 12, 2010 and Mrs. Howell has up to one year to purchase the options.

(6)
Includes 148,334 shares which may be acquired by all directors and executive officers as a group upon conversion of 1,000 shares of the Company's Series F Preferred Stock.

(7)
See Note (3). The address of Freedom Financial Corporation and Freedom Holding, Inc. is 2669 Charlestown Road, Suite D, New Albany, Indiana 47150. The business address of W. B. Collett is 1750 South Kings Highway, Fort Pierce, Florida 34945-3099.
 
 
34

 
 
(8)
Dorothy V. Howell's address is Plaza Venetia, Suite 22 A-B, Miami, Florida 33132.

(9)
On March 11, 2008, W. Bennett Collett, Jr. transferred his options to Freedom Holding, Inc.  W. B. Collett, Jr., has 9.21% ownership in Freedom Holding, Inc.

(10)
George W. Galloway, director, transferred his options to GWGJR, INC on March 12, 2008. GWGJR, INC.  owns 30,000 shares and has 27,500 vested options.

(11)
William C. Haddon has 18,750 vested options and owns 25,000 shares individually.  Mr. Haddon exercised his option to purchase 25,000 shares at $3.50 per share on March 16,2009.

(12) 
Kimberly R. Tharp has 4,125 vested options and owns 27,500 shares individually. Ms. Tharp exercised her option to purchase 5,000 shares @ $2.25 per share on February 11, 2009.

(13)
Daniel Licciardi has 24,625 vested options and owns 30,000 shares individually.

(14)
Prides Capital Partners, LLC owns 5,000 shares of Preferred AA stock that is convertible into 200,000 shares of common stock. Prides Capital also has 20,000 warrants. Prides Capital address is 200 High Street, #700, Boston, MA 02110.

(15)
Jennifer Chong has 2,250 vested options and owns 10,000 individually.

Item 13. Certain Relationships and Related Transactions
 
Freedom Holding, Inc. (“Holding”) owns 1,325,869 shares of Florida Gaming Corporation common stock.  Freedom Holding, Inc. also owns 1,000 shares of Preferred F stock, 20,000 warrants and 706,000 stock options.  The stock and options were transferred to Holding in 2008 by Freedom Financial Corporation and W. B. Collett, and W. B. Collett, Jr. Holding may each be deemed to be a “parent” of the Company as such term is defined in the rules promulgated under the U.S. Securities & Exchange Act, by virtue of beneficial ownership of 46.2% of the Common Stock of the Company. The option shares were transferred to Freedom Holding representing capital contributions by the officers to a controlled corporation.  The transfer of stock from Freedom Financial to Holding was a dividend to its parent corporation.  The reason or the transfer was to centralize the Florida Gaming holdings. Freedom Holding is owned by three individuals, two of which are executive officers in Florida Gaming, W. B. Collett, and W. B. Collett, Jr.  As of January 6, 2011, Holding has pledged all 1,325,869 shares of Florida Gaming Corporation common stock and the 1,000 shares of Preferred F stock to a bank as collateral for a loan.  See ITEM 12. “Security Ownership of Certain Beneficial Owners and Management”.

On November, 1997, the Company entered into a new business — residential real estate development. These Properties consisted of over 100 fully-developed, and 163 partially-developed, single-family residential home sites, a swim and tennis club facility, and 27 acres of partially-developed commercial property. As of December 31, 2009, the Company has six (6) residential lots remaining to be sold and owed the Hamilton State Bank $38,368 on one of the lots. The Company is currently in default on the mortgage and Mr. Collett has been named the defendant in a lawsuit filed by Hamilton State Bank.  (See Item 3. Legal Proceedings) The suit has been filed in the Superior Court of Hall County State of Georgia.  The Note also provides for collection of attorney’s fees in the amount of 15% of principal and interest owed in the event of default.    The six (6) lots have a book value of $234,000. The Properties are located on the east side of Georgia Highway 81, approximately one (1) mile south of U.S. Highway 78, inside the Loganville, Georgia city limits, in Walton County.

 On October 31, 2005 Freedom Financial 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”), the parent company of Freedom Financial, dated November 1, 2008.  The Holding note is unsecured, bears interest at 10.0% per annum, and matured on May 1, 2009.  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 $8.25.  The warrant is exercisable at any time from November 1, 2008 through November 1, 2011.  The fair value of this warrant issued totaled $12,984 and was amortized  on a straight line basis from November 1, 2008 through May 1, 2009.   The Company accounted for the note as a debt refinance.    The Company then extended the Note from May 1, 2009 through September 1, 2009, from September 1, 2009 through March 1, 2010, from March 1, 2010 through September 1, 2010, and currently the Note expires September 1, 2011.   The extension of the notes were accounted for as debt refinances and did not have any expense associated with the refinance.
 
 
35

 

In lieu of a salary for the Chairman / CEO, the Company pays management fees to Freedom Financial of $65,000 per month.    The management fees have not been paid but the Company has accrued management fees of $780,000 for the year ended December 31, 2010 and $780,000 for the year ended December 31, 2009.
 
On December 3, 2010 W. B. Collett, Jr., the Company’s President and COO, advanced the Company $125,000 for operating expenses.

Item. 14  Principal Accountant Fees and Services
 
Audit Fees. For the year ended December 31, 2010 were $91,225 compared to $99,545 for the year ended December 31, 2009.
 
Audit-Related Fees. For the year ended December 31, 2010, were $4,300 compared to $5,900 for the year ended December 31, 2009. Audit-Related fees consisted of a review of 10-K and communications with audit committee.

Tax Fees. For corporation tax return preparation for the year ended December 31, 2010, the fees were $14,050 compared to $19,575 for the year ended December 31, 2009.

All Other Fees. Miscellaneous Fees for the year ended December 31, 2010 were $800 compared to  $2,050 for the year ended December 31, 2009.

Audit Committee Pre-Approval Policies

The duties and responsibilities of our Audit Committee include the pre-approval of all audit, audit related, tax, and other services permitted by law or applicable SEC regulations (including fee and cost ranges) to be performed by our independent auditor. Any pre-approved services that will involve fees or costs exceeding pre-approved levels will also require specific pre-approval by the Audit Committee. Unless otherwise specified by the Audit Committee in pre-approving a service, the pre-approval will be effective for the 12-month period following pre-approval. The Audit Committee will not approve any non-audit services prohibited by applicable SEC regulations or any services in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which will not be supported by the Internal Revenue Code and related regulations.

To the extent deemed appropriate, the Audit Committee may delegate pre-approval authority to any one or more members of the Audit Committee provided that any member of the Audit Committee who has exercised any such delegation must report any such pre-approval decision to the Audit Committee at its next scheduled meeting. The Audit Committee will not delegate the pre-approval of services to be performed by the independent auditor to management.

All of the services provided by King & Company, PSC and described above under the captions “Audit Fees,” were approved by our Audit Committee.

 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.
 
 
36

 
 
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.

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.
 
 
37

 
 
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.

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.

10.21
Note and Mortgage Modification between the Registrant and Nurmi Properties, dated  March 20,  2010,  and is attached hereto.
 
10.30 Partnership Purchase Interest Agreement, dated October 14, 2010, is attached hereto.
   
10.31  Assignment of Interest Agreement, between Florida Gaming Centers and W. Flagler Associates, dated October 14,2010, is incorporated herein by reference as Exhibit 10.31.
   
10.32 Asumption Agreement, between Florida Gaming Centers and West Flagler Associates,  dated October 14, 2010,  is incorporated herein by reference as Exhibit 10.31
 
 
38

 
 
10.33 Escrow Agreement, between Mintzer Sarowitz Zeris Ledva & Meyers LLP, Florida Gaming Centers and West Flagler,dated  October 14, 2010, is incorporated herein by reference as Exhibit 10.33
   
10.34 Legal opinion, dated October 14, 2010, is incorporated herein by reference as Exhibit 10.34
 
10.35 Legal opinion of seller, dated October 14, 2010, is incorporated herein by reference as Exhibit 10.35
   
10.36  Secretary’s Certificate, dated October 14, 2010, is incorporated herein by reference as Exhibit 10.36
   
10.37 Sellers Certificate, between Florida Gaming Centers and West Flagler Associates ,dated October 14, 2010, is incorporated herein by reference as Exhibit 10.37
   
10.38 Sellers Release,  between Florida Gaming Centers and West Flagler Associates, dated October 14, 2010, is incorporated herein by reference as Exhibit 10.31
   
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.

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.
 
 
39

 
 
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)

Registrant filed a report on Form 8-K dated February 4, 2010, reporting the transaction with Nurmi Properties, LLC and H2C, Inc.

Registrant filed a report on Form 8-K dated March 1, 2010, reporting the transaction with Freedom Holding.

Registrant filed a report on Form 8-K dated March 1, 2010, reporting the Registrant was served with a complaint by Isle of Capri Casinos, Inc.

Registrant filed a report on Form 8-K dated March 19, 2010, reporting the Registrant received a complaint from Isle of Capri to foreclose on mortgage.
 
Registrant filed a report on Form 8-K dated April 16, 2010, reporting the transaction with Nurmi Properties, LLC and H2C, Inc.

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.

Registrant filed a report on Form 8-K dated September 1, 2010, reporting the transaction with Freedom Holding, Inc.

Registrant filed a report on Form 8-K dated October 14, 2010, reporting the transaction with  West Flagler Associates, Ltd.

Registrant filed a report on Form 8-K dated December 31, 2010, reporting the transaction with H2C, Inc.

Registrant filed a report on Form 8-K dated  January 26, 2011, reporting the transaction with AGS.
 
 
40

 

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
FLORIDA GAMING CORPORATION
     
Date: March 31, 2011
By:  
/s/ W. Bennett Collett
   

W. Bennett Collett
   
Chairman and Chief Executive Officer

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

/s/ W. Bennett Collett
 
Chairman of the Board
 
March 31, 2011
W. Bennett Collett
 
of Directors and
   
   
Chief Executive Officer
   
   
(Principal Executive Officer)
   
         
/s/ Kimberly R. Tharp
 
Chief Financial Officer, Secretary
 
March 31, 2011
Kimberly R.Tharp
 
and Treasurer
   
         
/s/ W. Bennett Collett, Jr.
 
President, Director,
 
March 31, 2011
W. Bennett Collett, Jr.
 
and Chief Operating Officer
   
         
/s/ George W. Galloway, Jr.
 
Director
 
March 31, 2011
George W. Galloway, Jr.
       
         
/s/ William C. Haddon
 
Director
 
March 31, 2011
William C. Haddon
       

 
41

 
 
Audited Consolidated Financial Statements

FLORIDA GAMING CORPORATION AND SUBSIDIARIES

December 31, 2010 and 2009

Report of Independent Registered Accounting Firm
    1  
Consolidated Financial Statements
       
Balance Sheets
    2  
Statements of Operations
    4  
Statement of Changes in Stockholders' Equity
    6  
Statements of Cash Flows
    8  
Notes to Consolidated Financial Statements
    9  
 
 
 

 
 
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders
Florida Gaming Corporation and Subsidiaries
Miami, Florida

We have audited the accompanying consolidated balance sheets of Florida Gaming Corporation and Subsidiaries (“the Company”) (a Delaware Corporation) as of December 31, 2010 and 2009 and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years then ended.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Florida Gaming Corporation and Subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  As discussed in Note P to the financial statements, the Company has suffered recurring losses from operations and cash flow deficiencies which raise substantial doubt about its ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note P.  The financial statements do not include any adjustment that might result from the outcome of this uncertainty.

/s/ King + Company, PSC
Louisville, Kentucky
March 28, 2011
 
 
 

 
 
CONSOLIDATED BALANCE SHEETS

FLORIDA GAMING CORPORATION AND SUBSIDIARIES
 
   
December 31,
 
 
 
2010
   
2009
 
ASSETS
           
             
CURRENT ASSETS
           
  Cash and cash equivalents
  $ 748,617     $ 819,256  
  Accounts receivable, including ITW, net
    130,862       234,674  
  Inventory
    33,205       43,494  
 
    912,684       1,097,424  
                 
PROPERTY, PLANT AND EQUIPMENT--Note I
               
  Land
    8,164,543       8,164,543  
  Buildings and improvements
    9,904,404       8,941,404  
  Furniture, fixtures and equipment
    1,951,584       1,782,111  
 
    20,020,531       18,888,058  
                 
  Less accumulated depreciation
    (4,918,276 )     (4,480,410 )
 
    15,102,255       14,407,648  
                 
REAL ESTATE HELD FOR SALE--Note K
    234,000       234,000  
                 
OTHER ASSETS--Note J
    396,986       488,788  
                 
 
  $ 16,645,925     $ 16,227,860  
 
 
 

 
 
   
December 31,
 
   
2010
   
2009
 
LIABILITIES AND STOCKHOLDERS' EQUITY
           
             
CURRENT LIABILITIES
           
  Unclaimed winnings
  $ 97,028     $ 162,350  
  Accrued payroll and related expenses
    607,206       393,452  
  Accounts payable and accrued expenses
    8,996,129       5,275,065  
  Related party payables--Note F
    1,685,000       780,000  
  Current portion of long-term debt--Note H
    7,510,148       6,412,746  
  Deferred rental income--Note J
    225,000       -0-  
 
    19,120,511       13,023,613  
                 
LONG-TERM DEBT (less current portion)--Note H
    2,686,594       3,002,813  
                 
STOCKHOLDERS' EQUITY--Notes B and C
               
Class A cumulative convertible preferred stock; 1,200,000 shares authorized; 27,756 shares issued and outstanding in 2010 and 2009; aggregate 2010 liquidation preference of $329,482
      2,776         2,776  
                 
Series AA 7% cumulative convertible preferred stock; 5,000 shares authorized; 5,000 shares issued and outstanding in 2010 and 2009; aggregate 2010 liquidation preference of $5,787,500
      500         500  
                 
Series B cumulative convertible preferred stock; 50 shares authorized; 45 shares issued and outstanding in 2010 and 2009; aggregate 2010 liquidation preference of $99,902
      5         5  
                 
Series F 8% cumulative convertible preferred stock; 2,500 shares authorized; 2,000 shares issued and outstanding in 2010 and 2009; aggregate 2010 liquidation preference of $2,285,000
      200         200  
                 
Common stock, $.20 par value, 7,500,000 shares authorized; 3,888,959 shares issued and outstanding in 2010 and 2009
    777,792       777,792  
  Capital in excess of par value
    50,635,532       50,615,750  
  Accumulated deficit
    (56,577,985 )     (51,195,589 )
 
    (5,161,180 )     201,434  
                 
 
  $ 16,645,925     $ 16,227,860  
 
See notes to consolidated financial statements
 
 
 

 
 
CONSOLIDATED STATEMENTS OF OPERATIONS

FLORIDA GAMING CORPORATION AND SUBSIDIARIES

For the years ended December 31, 2010 and 2009

   
2010
   
2009
 
             
JAI-ALAI MUTUEL REVENUE
  $ 4,114,550     $ 6,856,199  
  Less Florida State pari-mutuel taxes incurred--Note D
    (665,166 )     (972,624 )
  Less simulcast guest commissions
    (1,262,989 )     (1,883,326 )
INTER TRACK MUTUEL COMMISSIONS
    1,806,527       2,694,732  
                     Net Pari-Mutuel Revenue
    3,992,922       6,694,981  
                 
ADMISSION INCOME, net of State taxes incurred
    8,704       26,947  
PROGRAM REVENUE
    101,535       135,218  
FOOD AND BEVERAGE
    654,115       989,087  
CARD ROOM REVENUE
    4,463,383       5,998,668  
OTHER
    102,758       151,038  
                     TOTAL OPERATING REVENUE
    9,323,417       13,995,939  
                 
OPERATING EXPENSES
               
  Advertising and promotions
    213,293       404,137  
  Operating and mutuels payroll and related costs
    3,834,917       4,828,975  
  Player payroll and related costs
    2,185,851       3,020,738  
  Food and beverage costs
    545,165       784,651  
  Repairs and maintenance
    193,241       228,576  
  Totalizator/teleview rent--Note G
    278,066       385,591  
  ITW and television costs
    616,467       844,969  
  Programs
    129,702       175,108  
  Card room payroll and related costs
    1,199,356       1,427,075  
  Other card room operating costs
    844,068       1,237,975  
  Depreciation and amortization
    457,559       490,918  
  Utilities
    403,523       574,798  
  Provision for loss on real estate held for sale
    -0-       63,500  
  Miscellaneous, net
    896,192       1,086,646  
                    TOTAL OPERATING EXPENSES
    11,797,400       15,553,657  
 
(CONTINUED)
 
See notes to consolidated financial statements
 
 
 

 
 
CONSOLIDATED STATEMENTS OF OPERATIONS--CONTINUED

FLORIDA GAMING CORPORATION AND SUBSIDIARIES

For the years ended December 31, 2010 and 2009
 
 
 
2010
   
2009
 
GENERAL AND ADMINISTRATIVE
           
  Executive payroll and related costs
  $ 577,153     $ 579,467  
  Stock options--Note C
    19,782       231,257  
  Directors' fees
    60,000       72,000  
  Management consulting--Note F
    780,000       780,000  
  Telephone and travel
    337,916       443,324  
  Professional fees
    613,747       728,919  
  Interest and financing costs--Note H
    1,519,004       903,280  
  Property taxes
    484,583       398,623  
  Insurance
    705,800       787,038  
 
    5,097,985       4,923,908  
                    LOSS FROM OPERATIONS
    (7,571,968 )     (6,481,626 )
                 
OTHER INCOME
               
  Interest and dividend income
    3,604       7,866  
  State tax credits on handle and admissions--Note D
    817,489       703,511  
  Gain on sale of Summer Jai-Alai--Note J
    1,907,509       -0-  
  Gain on sale of right-of-way--Note I
    -0-       870,185  
  Miscellaneous income
    -0-       39,872  
 
    2,728,602       1,621,434  
NET LOSS BEFORE INCOME TAX
    (4,843,366 )     (4,860,192 )
Federal income taxes
    -0-       10,164  
                 
                                    NET LOSS
    (4,843,366 )     (4,870,356 )
                 
Dividends on preferred stock
    (539,030 )     (542,931 )
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
  $ (5,382,396 )   $ (5,413,287 )
                 
Loss per common share – Basic
  $ (1.38 )   $ (1.40 )
Loss per common share – Diluted
  $ (1.38 )   $ (1.40 )

See notes to consolidated financial statements
 
 
 

 
 
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FLORIDA GAMING CORPORATION AND SUBSIDIARIES

For the two years ended December 31, 2010
 
   
Class A
   
Series AA
   
Series B
   
Series E
   
Series F
                   
    Preferred Stock     Preferred Stock     Preferred Stock     Preferred Stock    
Preferred Stock
   
Common Stock
   
Capital in
       
    Par Value $.10     Par Value $.10     Par Value $.10     Par Value $.10     Par Value $.10     Par Value $.20     Excess of    
Accumulated
 
   
Shares