U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2000
[ ] TRANSITION REPORT PURSUANT SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission file number: 0-30263
SUREBET CASINOS, INC.
(Exact name of small business issuer as specified in its charter)
UTAH 75-1878071
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1610 BARRANCAS AVENUE, PENSACOLA, FLORIDA 32501
(Address of principal executive offices)
(850) 438-9647
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since
last report)
Check 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 No X
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the last practicable date:
7,884,038 SHARES OF COMMON STOCK, $.001 PAR VALUE, AS OF
JUNE 30, 2000
Transitional Small Business Disclosure Format (check one): Yes No X
SUREBET CASINOS, INC. AND SUBSIDIARY
INDEX TO FORM 10-QSB
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Balance Sheets as of June 30, 2000 and
March 31, 2000 3
Consolidated Statements of Operations for the three months
ended June 30, 2000 and 1999 4
Consolidated Statements of Cash Flows for the three months
ended June 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations for the three months ended
June 30, 2000 and 1999 8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 10
ITEM 2. Changes in Securities and Use of Proceeds 10
ITEM 3. Defaults Upon Senior Securities 10
ITEM 4. Submission of Matters to a Vote of Security 10
ITEM 5. Other Information 10
ITEM 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
2
SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND MARCH 31, 2000
(UNAUDITED)
ASSETS
JUNE 30 MARCH 31
Current assets:
Cash and cash equivalents $ 42,476 $ 36,677
Accounts Receivables 6,476 6,116
Inventory 6,795 8,715
------------ ------------
Total current assets 55,793 51,508
------------ ------------
Furniture, leasehold improvements and equipment:
Furniture and equipment 39,324 37,252
Leasehold improvements 88,460 88,460
Accumulated depreciation (12,548) (12,548)
------------ ------------
Net furniture and equipment 115,236 113,164
------------ ------------
Other assets:
Deposit on claim 140,000 140,000
Deposit on Colorado casino Lease 200,000 200,000
Other 22,890 992
------------ ------------
Total other assets 362,890 340,992
------------ ------------
Total assets $ 533,919 $ 505,664
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities $ 370,605 $ 276,666
Due to Shareholder 78,818 121,473
Due to CSL Development Corporation 752,828 267,589
------------ ------------
Total current liabilities 1,202,251 665,728
------------ ------------
Commitments and contingencies -- --
Stockholders' equity (deficit):
Preferred stock, $.01 par value, 500,000 shares authorized,
none issued and outstanding -- --
Common stock, $.001 par value, 50,000,000 shares authorized,
7,884,038 and 7,849,478 shares issued and outstanding 7,884 7,849
Additional paid-in capital 5,577,219 5,555,654
Accumulated deficit (6,253,435) (5,723,567)
------------ ------------
Total stockholders' equity (deficit) (668,332) (160,064)
------------ ------------
Total Liabilities and Stockholders' Deficit $ 533,919 $ 505,664
============ ============
The accompanying notes are an integral part of these financial statements
3
SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
QUARTER ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
---- ----
Revenue:
Casino revenue $ 498,896 $ --
Ticket sales 107,859 --
Food and beverage sales 145,041 --
------------- -------------
Total revenue 751,796 --
------------- -------------
Operating expenses:
Cost of food and beverage sales 123,376 --
Casino operating costs 270,060 --
Casino vessel costs 667,735 --
Start-up costs -- --
Sales and marketing 88,743 --
General and administrative 161,750 --
Minority interest in losses (30,000) --
------------- -------------
Total operating expenses 1,281,664 --
------------- -------------
Net income (loss) from continuing operations (529,868) --
Discontinued operations:
Gain on transfer of net liabilities to Imperial (Note 1) --
Operating losses of discontinued business --
------------- -------------
$ (529,868) $ --
============= =============
Basic net income (loss) per common share:
From continuing operations $ (0.07) $ --
From discontinued operations --
------------- -------------
Net income (loss) $ (0.07) $ --
============= =============
Weighted average common shares outstanding 7,864,542 979,489
============= =============
The accompanying notes are an integral part of these financial statements
4
SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
QUARTER ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (529,868) $ --
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
used in operating activities:
Depreciation -- --
Shares issued for services --
Gain on transfer of net liabilities to Imperial --
Minority interest in losses (30,000) --
Changes in operating assets and liabilities:
Accounts receivable (406) --
Inventory 1,920
Other assets (21,898)
Accounts payable and accrued liabilities 536,523 --
Net liabilities of discontinued operations -- --
------------- -------------
Net cash used in operating activities (43,729) --
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment (2,072) --
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net advances from shareholder -- --
Sale of shares of subsidiary to minority interests 30,000 --
Sale of common shares 21,600
------------- -------------
Net cash provided by financing activities 51,600 --
------------- -------------
Net increase (decrease) in cash and cash equivalents 5,799 --
Cash at beginning of year 36,677 362
------------- -------------
Cash at end of year $ 42,476 $ 362
============= =============
SUPPLEMENTAL DISCLOSURE:
Total interest paid $ -- $ --
============= =============
The accompanying notes are an integral part of these financial statements
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. UNAUDITED FINANCIAL INFORMATION
The accompanying unaudited condensed consolidated financial
statements of sureBet Casinos Inc. and its majority-owned subsidiaries
(the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB of Regulation S-B of the U.S.
Securities and Exchange Commission. They do not include all of the
information and notes required by generally accepted accounting
principles for complete corporate financial statements. However, except
as disclosed herein, there has been no material change in the
information disclosed in the notes to the financial statements for the
year ended March 31, 200 included in the Company's Annual Financial
Report on Form 10-KSB filed with the Securities and Exchange
Commission. The unaudited financial statements should be read in
conjunction with these financial statements included in Form 10-KSB. In
the opinion of management, all adjustments consisting only of normal
recurring accruals, considered necessary for a fair presentation have
been included. Operating results for the three-month period ended June
30, 2000 are not necessarily indicative of the results that may be
expected for the year ending March 31, 2001.
2. DESCRIPTION OF BUSINESS
During the years ended March 31, 1999 and 1998 and the periods
ended August 31, 1999 and 1998, sureBET Casinos, Inc. ("the Company")
had no operating assets and has been investigating the acquisition of
an operating business. The Company changed its name on June 24, 1999
from Wexford Technology, Incorporated. In connection with an Agreement
to Exchange Stock with U.S. Gaming and Leisure Corp. ("USG&L") (see
below), the Company entered into an Asset Purchase Agreement (the
"Agreement") on March 5, 1999 with its controlling shareholder,
Imperial Petroleum, Inc. ("Imperial"). The Agreement provides that
Imperial would acquire all the assets and liabilities of the Company.
No consideration was exchanged in return for the sale of the net
liabilities of the Company. As a result of the Agreement, the Company
has no assets or liabilities as of March 31, 1999 or August 31, 1999.
Accordingly, as a result of the Company's liquidation and
abandonment of its assets and liabilities to a "shell" status, the
Company has accounted for its former operations as discontinued for all
periods presented. The common stock issued for services for the period
ended August 31, 1999 has been reported as continuing operations since
the shares were issued to new continuing management of the Company.
In connection with the Agreement to Exchange Common Stock with
USG&L, dated May 12, 1999, which is contingent on a private placement
which has not been completed, the Company will issue 6,000,000 new
common shares to stockholders of USG&L for 100% of the outstanding
shares of USG&L. As a result of the tax-free transaction, USG&L will
become a wholly owned subsidiary of the Company. The owners of USG&L
obtained effective control Of the Company in July 1999 by obtaining
control of the Board of Directors of the Company. USG&L is presently in
the business of operating a cruise ship and, after a private offering
to raise additional capital, intends to also enter the gaming business.
The transaction will be accounted for as a reverse acquisition whereby
USG&L will be the acquiring company for accounting purposes.
6
On June 7, 1999, there was a change in the Board of Directors of
the Company. The new board changed the Company's business strategy and
decided to enter into the casino business. On June 24, 1999, the
Articles of Incorporation of the Company were amended to change the
name of the Company to sureBET Casinos, Inc.
Under the direction of its new management, the Company intends to
develop, acquire, joint venture, manage, and operate gaming
establishments with an initial focus on water-based gaming, the
emerging gaming markets, and the rehabilitation and reorganization of
casinos that are underperforming financially.
On October 1, 1999, the Company entered into a Management
Contract with Casino Padre Investment Company, LLC, a Nevada limited
liability company. Under the terms of the contract, the Company has an
exclusive agreement to operate the gaming ship M/V Entertainer and the
gaming operations located on the ship on behalf of and for the account
of Casino Padre Investment Company, LLC. On October 27, 1999, the
Company acquired 50 membership units in Casino Padre Investment Company
LLC in exchange for 5,000,000 shares of the common stock of the
Company. Immediately following the transaction, the Company owned 83%
of Casino Padre Investment Company LLC. The shares were acquired from
Charles S. Liberis, the President of the Company. The LLC was formed on
September 14, 1999 and at the time of the acquisition, was still in a
developmental stage. Casino Padre commenced operations on November 18,
1999. As of June 30, 2000, the Company owns 61% of the LLC.
On December 20, 1999, the Company entered into an agreement with
Black Hawk Hotel Corporation, an unaffiliated entity, to lease Lilly
Belle's Casino, an existing casino facility located in Black Hawk,
Colorado. Pursuant to the terms of the lease, the Company has an option
to purchase the premises. The lease is contingent on the Company
receiving approval for the transaction and issuance of regulatory
licenses from the Colorado Gaming Commission.
The Company operates the M/V Entertainer as a casino boat,
conducting day and evening cruises of approximately six hours each from
South Padre Island, Texas. In addition to casino operations, the
cruises feature a variety of shipboard activities including
sightseeing, live music, and other entertainment. The Company markets
its cruises and conducts its casino operations in international waters
in such a manner as to comply with applicable Federal and State laws
and regulations.
3. GOING CONCERN
The Company's financial statements have been prepared on the
basis that it is a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty. At June 30, 2000,
the Company had a working capital deficiency of $1,146,458. The Company
has reported cumulative net losses since inception of $6,253,435. The
Company does not believe that it will be able to meet its normal
operating costs and expenses from management fees and cash flow of
Casino Padre.
7
The cash requirements of funding the Company's operations and
expansion have exceeded cash flow from operations. To date, the Company
has satisfied its capital needs primarily through debt and equity
financing. The Company continually explores raising additional capital
through such means.
The Company believes that it will be able to raise additional
capital through debt and equity financing which, along with anticipated
cash from operations, will be sufficient to meet the Company's current
working capital needs for at least the next twelve months. However,
there can be no assurance that the Company will not need to raise
additional capital sooner, particularly to take advantage of any
expansion opportunities, not currently anticipated that may become
available. In such event, there can be no assurance that additional
capital will be available at all, at an acceptable cost, or on a basis
that is timely to allow the Company to finance any such opportunities.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements about our plans and
business. Actual events and results may differ materially from those anticipated
in these forward-looking statements. The ability to achieve our projections and
business objectives is dependent on a variety of factors, many of which are
outside of our control. Some of the most significant factors, alone or in
combination would be our failure to obtain additional equity financing to fund
development activities and projected losses from operations and/or the inability
to grow the revenues and improve the financial performance of the Casino Padre
operation during the winter months. Accordingly, there can be no assurances that
we will achieve our business objectives.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
The sole source of revenue for the Company through June 30, 2000 was derived
from the operation of Casino Padre. During the three months ending June 30, 1999
the Company had no financial activity. Our revenue for the three months ended
June 30, 2000 was $751,796, as compared to $447,968 for the twelve months ended
March 31, 2000. The 68% increase in revenue at Casino Padre was directly related
to improved weather conditions and more tourists visiting the island
Costs of sales for the three months ended June 30, 2000 were $123,376. Selling,
general and administrative expenses were $161,750. A total of $270,060 was
expended for the operation of the casino and $667,735 for the operation of the
vessel. Sales and marketing expenses for the period were $88,743 with ($30,000)
being allocated to the minority interest in Casino Padre.
The above resulted in a net loss of $529,868 for the three months ended June 30,
2000.
8
LIQUIDITY AND CAPITAL RESOURCES
Our cash requirements have been and will continue to be significant. From our
inception to June 30, 2000, we have financed our operations primarily through
the issuance of equity and debt securities, loans from stockholders, and revenue
from Casino Padre. At June 30, 2000, we had a working capital deficit of
$1,146,458 and an accumulated deficit of $6,253,435.
Net cash used in operating activities for the three months ended June 30, 2000
was $43,729. Net cash was used primarily to fund the losses from operations.
Net cash provided by investing activities for the three months ended June 30,
2000 was $51,600, primarily from the sale of common stock in sureBET and
minority interest in Casino Padre. At June 30, 2000, we did not have any
material commitments for capital expenditures.
Net cash provided by increases in accounts payable activities was $536,523 for
the three months ended June 30, 2000, primarily from increases in payables for
the charter of the vessel. The amount due to CSL Development increased from
$267,589 at March 31, 2000 to $752,828 at June 30, 2000.
We expect our cash needs will continue to increase in future periods, primarily
because we will incur additional expenses related to the development of new
projects and continuing operations. Our company will need to raise substantial
additional funds to continue the development of new markets and products.
The cash requirements of funding the Company's operations and expansion have
exceeded cash flow from operations. To date, the Company has satisfied its
capital needs primarily through debt and equity financing. The Company
continually explores raising additional capital through such means.
Under the present circumstances, our ability to continue as a going concern
depends on our ability to obtain additional financing. The Company believes that
it will be able to raise additional capital through debt and equity financing
which, along with anticipated cash from operations, will be sufficient to meet
the Company's current working capital needs for at least the next twelve months.
However, there can be no assurance that the Company will not need to raise
additional capital sooner, particularly to take advantage of any expansion
opportunities, not currently anticipated that may become available. In such
event, there can be no assurance that additional capital will be available at
all, at an acceptable cost, or on a basis that is timely to allow the Company to
finance any such opportunities.
9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the quarter ended June 30, 2000, the Company issued and sold
unregistered securities as described below:
On May 19, 2000, the Company sold 15,360 shares of Common stock to
Mr. David Brannen, an accredited investor for $9,600.00
On May 25, 2000, the Company sold 19,200 shares of Common stock to
Mr. Gary Williky, an accredited investor for $12,000.00
The sale and issuance of securities and the transactions described
above were deemed to be exempt of registration under the Securities
Act by virtue of Section 4(2). Appropriate legends were affixed to
stock certificates issued in the above transactions. Some restrictive
legends were imposed in connection with any subsequent sales of these
securities. The securities were offered and sold by the Company
without any underwriters. All of the purchasers were deemed to be
sophisticated with respect to the investment and securities of the
Company by virtue of their financial condition and/or relationship to
members of the management of the Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are included with this registration statement:
EXHIBIT
NUMBER DOCUMENT
2.1 Agreement to Exchange Common Stock with U.S. Gaming & Leisure
Corp.(1)
10
EXHIBIT
NUMBER DOCUMENT
3.1 Articles of Incorporation, as amended(1)
3.2 Bylaws, as amended(1)
10.1 Asset Purchase Agreement with Imperial Petroleum, Inc.(1)
10.2 Management Contract with Casino Padre Investment Company, LLC(1)
10.3 Lilly Belle lease(1)
10.4 South Padre Island Sublease and Dockage Agreement(1)
21 Subsidiaries of the Registrant(1)
27 Financial Data Schedule
- --------------
(1) Previously filed as an exhibit to the Company's Registration Statement
on Form 10-SB dated April 10, 2000 and incorporated by reference
herein.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SUREBET CASINOS, INC.
(Registrant)
Date: August 30, 2000 By: /S/ CHARLES S. LIBERIS
--------------------------------
Charles S. Liberis
Chairman of the Board, Chief
Executive Officer and President
Date: August 30, 2000 By: /S/ WAYNE E. MARKS
--------------------------------
Chief Financial Officer
11