13056 ar [mcsrc] - ftboa

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Florida Thoroughbred Breeder and

Stallion Awards Program

2019 Financial Statements

and Independent Auditor’s Report

As of and for the Years Ended

December 31, 2019 and 2018

FLORIDA THOROUGHBRED BREEDER AND STALLION AWARDS PROGRAM

FINANCIAL STATEMENTS

AND INDEPENDENT AUDITOR’S REPORT

AS OF AND FOR THE YEARS ENDED

DECEMBER 31, 2019 AND 2018

TABLE OF CONTENTS Independent Auditor’s Report .................................................................................................................. 1-2 Basic Financial Statements Statements of Financial Position .............................................................................................................. 3 Statements of Activities ........................................................................................................................... 4 Statements of Functional Expenses ......................................................................................................... 5 Statements of Cash Flows ........................................................................................................................ 6 Notes to Financial Statements ............................................................................................................ 7-12

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INDEPENDENT AUDITOR’S REPORT Board of Directors Florida Thoroughbred Breeders’ Association, Inc. d/b/a Florida Thoroughbred Breeders’ and Owners’ Association Ocala, Florida We have audited the accompanying financial statements of the Florida Thoroughbred Breeder and Stallion Awards Program (the Program), a separate restricted fund established by the Florida Thoroughbred Breeders’ Association, Inc. d/b/a Florida Thoroughbred Breeders’ and Owners’ Association (the Association) pursuant to Sections 550.26165 and 550.2625(3) of the Florida Statutes, which comprise the statements of financial position as of December 31, 2019 and 2018, and the related statements of activities, statements of functional expenses and cash flows for the years then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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Board of Directors Florida Thoroughbred Breeders’ Association, Inc. d/b/a Florida Thoroughbred Breeders’ and Owners’ Association Ocala, Florida

INDEPENDENT AUDITOR’S REPORT We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Program as of December 31, 2019 and 2018, and the changes in net assets and cash flows for the years then ended, in accordance with accounting principles generally accepted in the United States of America. Emphasis of a Matter As more fully described in Note 12 to the financial statements as a subsequent event, the Program may be operationally and financially impacted by the outbreak of the novel coronavirus (COVID-19) pandemic. June 25, 2020 Ocala, Florida

2019 2018

Current Assets

Cash and cash equivalents 205,552$ 1,511,351$

Accounts receivable, race tracks 892,450 977,475

Accounts and interest receivable, other 268 2,359 Total Assets 1,098,270 2,491,185

Current Liabilities

Breeder awards payable 637,308 786,609

Stallion awards payable 22,500 30,000

Purse supplements payable - 289,750

Florida Thoroughbred Breeders'

Association administration fees payable 89,245 97,778

Total Current Liabilities 749,053 1,204,137

Total Liabilities 749,053 1,204,137

Net Assets

Without donor restrictions 349,217 1,287,048

Total Liabilities and Net Assets 1,098,270$ 2,491,185$

LIABILITIES AND NET ASSETS

STATEMENTS OF FINANCIAL POSITION


DECEMBER 31, 2019 AND 2018

ASSETS

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

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2019 2018

Revenue

Revenue from race tracks 7,894,341$ 8,244,933$

Revenue from slot machines/cardrooms 1,155,955 1,167,195

Interest and other income 11,170 12,050

Total Revenue 9,061,466 9,424,178

Expenses

Program services 9,094,267 9,576,200

Support services 905,030 941,213

Total Expenses 9,999,297 10,517,413

Change in Net Assets Without Donor Restrictions (937,831) (1,093,235)

Net Assets Without Donor Restrictions, Beginning of Year 1,287,048 2,380,283

Net Assets Without Donor Restrictions, End of Year 349,217$ 1,287,048$

STATEMENTS OF ACTIVITIES

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018



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2019 2018

Program Supporting Program Supporting

Activities Activities Activities Activities

Promotional Management Total Promotional Management Total

Fund and General Expenses Fund and General Expenses

Expenses

Breeder awards 6,675,103$ -$ 6,675,103$ 7,241,950$ -$ 7,241,950$

Stallion awards 195,000 - 195,000 315,000 - 315,000

Stakes program 1,217,331 - 1,217,331 1,166,000 - 1,166,000

Purse supplements 1,006,833 - 1,006,833 853,250 - 853,250

Administrative fee - 905,030 905,030 - 941,213 941,213

Total Expenses 9,094,267$ 905,030$ 9,999,297$ 9,576,200$ 941,213$ 10,517,413$


STATEMENTS OF FUNCTIONAL EXPENSES



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2019 2018

Cash Flows from Operating Activities

Cash Receipts:

Receipts from race tracks 7,971,559$ 8,259,096$

Receipts from slot machines and cardrooms 1,163,762 1,172,452

Interest and other income received 13,261 10,455

Cash Disbursements:

Breeder awards paid (6,824,404) (7,306,869)

Stallion awards paid (202,500) (375,000)

Florida sire stakes program paid (1,217,331) (1,182,250)

Breeder and stallion bonus awards paid - (700,000)

Purse supplements paid (1,296,583) (613,500)

Administrative fee paid (913,563) (943,125)

Net Cash Used in Operating Activities (1,305,799) (1,678,741)

Cash and Cash Equivalents, Beginning of Year 1,511,351 3,190,092

Cash and Cash Equivalents, End of Year 205,552$ 1,511,351$

STATEMENTS OF CASH FLOWS




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FLORIDA THOROUGHBRED BREEDER AND STALLION AWARDS PROGRAM NOTES TO FINANCIAL STATEMENTS

Note 1 - Summary of Significant Accounting Policies Organization and Administration In accordance with Chapter 550, Florida Statutes, the Florida Thoroughbred Breeder and Stallion Awards Program (the Program) is administered by the Florida Thoroughbred Breeders’ Association, Inc. d/b/a/ Florida Thoroughbred Breeders’ and Owners’ Association (the Association), pursuant to an annual awards plan approved by the Florida Division of Pari-Mutuel Wagering (the Adopted Plan). All the thoroughbred race tracks within the State of Florida send directly to the Association 0.955% of the total handle on live wagering, inter-track wagering, and simulcast wagering for use as breeder, stallion, and special racing awards. The latter take the form of purse supplements in races that are part of the Florida-bred stakes program. The Association also receives, for this purpose, 3.475% of the gross revenue derived from a Florida thoroughbred race tracks’ sale of its racing signal to out-of-state markets. Some thoroughbred race tracks also generate revenues from their operation of slot machines and/or cardrooms. The Association currently receives 1.2% of certain slot machine revenues for the Program, in accordance with an agreement explained more fully in Note 4. By statute, the Association also receives, for use as awards, 3% of the net proceeds derived by thoroughbred race tracks from their cardroom operations. The Breeder awards are based on a set percentage of the gross purse. From January 1, 2019 through June 30, 2019, breeder awards were paid to first, second, and third place finishers at a rate of 13.33%, 4%, and 2.67%, respectively, of the announced gross purse, in accordance with the 2019 Adopted Plan and Florida Statutes. As of July 1, 2019, the plan was amended changing the breeder awards rate for first, second, and third place finishes to 10%, 3% and 2%, respectively, of the announced gross purse, in accordance with the amended 2019 Adopted Plan and Florida Statutes. For the year ended December 31, 2018, breeder awards were paid to first, second, and third place finishers at a rate of 13.33%, 4%, and 2.67%, respectively, of the announced gross purse, in accordance with the 2018 Adopted Plan and Florida Statutes. The “announced gross purse” means the gross purse available in the race for the applicable place of finish, as stated in the condition book, minus any Florida Owners’ Awards included therein (pursuant to Section 550.2625(6)(d), Florida Statutes). Caps also exist on the dollar amount to be paid out for each place of finish. The Florida-bred stakes program is administered in accordance with the annual Adopted Plan and Florida Statutes, subject to agreements with each participating thoroughbred race track. The 2019 Adopted Plan, which was approved by the state in December 2018, states that stallion awards will be paid at the rate of 20% of the announced gross purse, limited to no more than $15,000, to owners of Association-registered stallions whose Association-registered Florida-bred offspring finish first in listed black-type stakes races at a Florida thoroughbred race. As of July 1, 2019, the plan was amended to reduce the rate from 20% to 15%. The stallion must be registered with the Association in the year of conception of the winning horse and each year thereafter, including the year in which the race occurred. For the year ended December 31, 2018, stallion awards were paid at the rate of 20% of the announced gross purse, limited to no more than $15,000, to owners of Association-registered stallions whose Association-registered Florida-bred offspring finished first in listed black-type stake races held at a Florida thoroughbred race track.

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All breeder, stallion, and Florida-bred stakes program awards are paid only to breeders or owners of registered Florida-bred thoroughbred horses, with the limited exception that thoroughbreds foaled outside of Florida but sired by Association-registered Florida stallions may be made eligible to compete for reduced special racing awards/purse supplements in some stakes races. Florida Statutes allow the Association to retain up to 10% of the gross receipts for administration of the Program and for general promotion of the industry. The Program withholds these amounts at the time of receipt from the tracks and transfers payment to the Association. Basis of Accounting The financial statements of the Program have been prepared on the accrual basis. The Program’s net assets and its revenues, gains, and expenses are classified with donor restrictions or without donor restrictions, based on the existence or absence of donor-imposed restrictions. Without donor restrictions are not restricted by donors, or the donor-imposed restrictions have expired. With donor restrictions contain donor-imposed restrictions that permit the Program to use or expend the donated assets as specified and are satisfied either by the passage of time or by actions of the Program, while some donor-imposed restrictions neither expire by passage of time nor can be fulfilled or otherwise removed by actions of the Program. The Program has no donor restricted net assets at December 31, 2019 and 2018, respectively. Revenues Revenues earned by the Program are used exclusively as provided in the Florida Statutes for the payment of breeder, stallion, and special racing awards, as specified in the annual awards plan and track agreements, and the 10% administration/promotion fee. Revenue Recognition Pursuant to the Florida Statutes, the Program recognized revenues on a monthly basis when earned from the race tracks for live wagering, inter-track wagering, simulcast wagering, sale of racing signal, slot machines, and cardrooms as the cumulative effect of the monthly wagering on events has occurred. Income Taxes The Program is administered by the Association, which has been granted tax-exempt status under the Internal Revenue Code Section 501(c)(5). No provision is made in these statements for income taxes. Cash and Cash Equivalents Cash and cash equivalents consist of a demand deposit account. For the purpose of the statements of cash flows, cash and cash equivalents consist of this demand deposit account. All highly liquid investments purchased with a maturity of three months or less would be considered cash equivalents, if applicable. Accounts Receivable Receivables are recorded by management for revenue to be received from the various race tracks. An allowance for uncollectible receivables has not been recorded, as all amounts are deemed collectible.

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Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments Unless otherwise indicated, the fair values of all reported assets and liabilities, which represent financial instruments (none of which are held for trading purposes) approximate the carrying value of such amounts. Financial instruments include cash, short-term investments, short-term debt, long-term debt, and accounts receivable. Functional Expenses The cost of providing administration costs of the Program are shown on a functional basis in the statements of activities. All program, management, and general expenses are shown as a direct cost in the statements of functional expenses and there are no allocations. New Accounting Pronouncement In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU No. 2014-09 introduces new, increased requirements for disclosure of revenue in financial statements and is intended to eliminate inconsistencies in revenue recognition and thereby improve financial reporting comparability across entities, industries, and capital markets. The Association adopted ASU No. 2014-09 for the Program; however, the adoption of ASU No. 2014-09 did not have a material effect on the Program’s reported results of operations, financial condition, or cash flows. No cumulative effect adjustment was recorded. Additionally, comparative disclosures for 2018 operating results under the previous revenue recognition rules are not applicable as the revenue recognition has not materially changed as a result of the new standard. In June 2018, the FASB issued ASU No. 2018-08, Not-for-Profit Entities (Topic 958), Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. The ASU clarifies and improves guidance for contributions received and contributions made, and provides guidance to organizations on how to account for certain exchange transactions. This change is preferable in that it clarifies whether to account for transactions as contributions or as exchange transactions. In addition, it clarifies whether a contribution is conditional. As a result, it enhances comparability of financial information among not-for-profit entities. The Association adopted ASU No. 2018-08 for the Program; however, the adoption of ASU No. 2018-08 did not have a material effect on the Program’s reported results of operations, financial condition, or cash flows. No cumulative effect adjustment was recorded. Note 2 - Accounts Receivable - Race Tracks Accounts Receivable - Race Tracks consist of the following:

2019 2018 Tampa Bay Downs $ 184,461 $ 213,318 Calder Race Course 95,784 91,433 Gulfstream Park 612,205 672,725 Total $ 892,450 $ 977,476

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The above receivables were fully collected subsequent to year-end; therefore, no allowance for doubtful accounts is recorded. Note 3 - Breeder Awards Payable The December 31, 2019 and 2018, payables consist of breeder awards earned as of December 2019 and 2018, and payable to breeders of record. Note 4 - Calder Race Course Slots Revenues Pursuant to an agreement dated September 10, 2008, a percentage of revenue from slot machines at Calder Race Course is to be remitted to a bank account designated by the Association to supplement the payment of breeder, stallion, and special racing awards as generally defined under Chapter 550 of the Florida Statutes. Slot machines began operating at Calder Race Course during January 2010. Slot machine revenue received from Calder Race Course by the Program was $1,118,439 and $1,105,655 in 2019 and 2018, respectively. Note 5 - Concentration of Credit Risk The Program maintains cash balances at one financial institution. The checking account balance at year-end did not exceeded the Federal Deposit Insurance Corporation (FDIC) insurance limit of $250,000, however it did exceed the limit during the course of the year. The Association maintains its cash with a high quality financial institution which the Association believes limits these risks. Note 6 - Stallion Awards The Association elected to approve and pay stallion awards for 2019 and 2018. Stallion owners earned $195,000 and $315,000 for the years ended December 31, 2019 and 2018, respectively. As of July 1, 2019, the plan was amended to reduce the rate from 20% to 15% as described in Note 1. Stallion awards earned in 2019 were based on stakes races in the 2019 calendar year. Stallion awards earned in 2018 were based on stakes races in the 2018 calendar year.

Note 7 - Purse Supplements (Special Racing Awards) In accordance with the 2019 and 2018 Adopted Plan, Florida Statutes, and track agreements, Program funds were used to supplement purses for appropriately registered horses in certain races. Additionally, Program funds were used to supplement purses for appropriately registered horses in the races that comprise the Florida Sire Stakes. Purse supplements of $1,006,833 and $853,250 were paid for races run in 2019 and 2018, respectively, as follows:

2019 2018 Gulfstream Park $ 1,006,833 $ 572,000 Gulfstream Park West - 181,250 Florida Sire Stakes - 100,000 Total $ 1,006,833 $ 853,250

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Note 9 - Liquidity and Available Resources

The following reflects the Program’s financial assets as of the balance sheets date, reduced by amounts not available for general use because of contractual or donor-imposed restrictions within one year of the balances sheet date. Financial Assets, at December 31, 2019 $ 1,098,270 Total Available for General Expenditures within One Year $ 1,098,270 Financial Assets, at December 31, 2018 $ 2,491,185 Total Available for General Expenditures within One Year $ 2,491,185

Note 10 - Contingency Liabilities As referenced in Notes 1 and 7, the annual awards plan allows for the payment of purse supplements in races that are part of the Florida-bred stakes program. The Association annually negotiates an agreement with each Florida thoroughbred track regarding the races and purse supplements to be included in the Florida-bred stakes program. Due to the race restrictions and the uncertainties surrounding how the relevant horses will perform in those races, a liability is not recorded until the race is completed. As of December 31, 2019, the Program was contingently liable for an estimated $2,160,000 to be paid out in certain races held during the 2020 calendar year. Note 11 - Related-Party Transactions Breeder and stallion awards earned by members of the Board of Directors (the Board) of the Association, or entities in which they have an ownership interest, totaled $536,047 and $705,739 during the years ended December 31, 2019 and 2018, respectively. Included in awards payable are amounts owed to members of the Board of the Association, or entities in which they have an ownership interest, totaling $71,403 and $55,183 at December 31, 2019 and 2018, respectively. Florida Statutes allow the Association to retain up to 10% of the gross receipts for administration of the awards program and for general promotion of the industry; the amount included in expense was $905,030 and $941,213 for the years ended December 31, 2019 and 2018, respectively. The Program owed the Association $89,245 and $97,778 at December 31, 2019 and 2018, respectively, for the administration/promotion fee. Note 12 - Subsequent Events The Program has evaluated events and transactions for potential recognition or disclosure in the financial statements through the date the financials were available to be issued on June 25, 2020.

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The COVID-19 pandemic has created economic disruptions throughout the country as of the date of our report causing significant declines in the financial markets and economic activity overall. The ultimate effect of these items is expected to be significant but is not quantifiable at this time. However, subsequent to December 31, 2019, due to the events noted above, the Association asked the state to approve an amendment to the 2020 Adopted Plan that would eliminate breeder awards on second and third place finishes and reduce stallion awards from 15% down to 10%. The state approved this request on March 31, 2020.

13056 ar [mcsrc] - ftboa

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