U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2000
[ ] TRANSITION REPORT UNDER 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 X No ___
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
SEPTEMBER 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 September 30, 2000 and 3
March 31, 2000
Consolidated Statements of Operations for the three and six 4
months ended September 30, 2000 and 1999
Consolidated Statements of Cash Flows for the three and six 5
months ended September 30, 2000 and 1999
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial Condition 9
and Results of Operations for the three and six months ended
September 30, 2000 and 1999
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 11
ITEM 2. Changes in Securities and Use of Proceedstions 11
ITEM 3. Defaults Upon Senior Securities 11
ITEM 4. Submission of Matters to a Vote of Security Holders 11
ITEM 5. Other Information 11
ITEM 6. Exhibits and Reports on Form 8-K 11
Signatures 12
2
SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND MARCH 31, 2000
(UNAUDITED)
ASSETS
30-SEP 31-MAR
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 183,323 $ 36,677
Accounts Receivables 11,983 6,116
Inventory 6,795 8,715
------------ ------------
Total current assets 202,101 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 992 992
------------ ------------
Total other assets 340,992 340,992
------------ ------------
TOTAL ASSETS $ 658,329 $ 505,664
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 398,879 $276,666
Due to Shareholder 118,000 121,473
Due to CSL Development Corporation 1,104,960 267,589
------------ ------------
Total current liabilities 1,621,839 665,728
------------ ------------
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 (6,548,613) (5,723,567)
------------ ------------
Total stockholders' equity (deficit) (963,510) (160,064)
Total Liabilities and Stockholders' Deficit $ 658,329 $ 505,664
============ ============
The accompanying notes are an integral part of these financial statements
3
SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- -------------------------
REVENUES: 9/30/00 9/30/99 9/30/00 9/30/99
------------ ------------ ------------ --------
Casino Revenue $ 876,507 $ - $ 1,375,403 $ -
Ticket sales 95,284 - 203,143 -
Food and beverage sales 168,554 - 313,595 -
------------ ------------ ------------ --------
TOTAL REVENUE 1,140,345 - 1,892,141 -
EXPENSES:
Cost of food and beverage sales 129,882 - 253,258 -
Casino operating costs 309,007 - 579,067 -
Casino vessel costs 781,923 - 1,449,658 -
Sales and marketing 36,039 - 124,782 -
General and administrative 178,672 - 340,422 -
Minority interest in losses - - (30,000) -
------------ ------------ ------------ --------
TOTAL OPERATING EXPENSES 1,435,523 - 2,717,187 -
------------ ------------ ------------ --------
NET INCOME (LOSS) FROM OPERATIONS (295,178) - (825,046) -
Operating losses of discontinued business - -
------------ ------------ ------------ --------
$ (295,178) $ - $ (825,046) $ -
============ ============ ============ ========
Basic net income (loss) per common share:
From continuing operations ($0.04) ($0.10) $ -
From discontinued operations -
Net income (loss) ($0.04) ($0.10) $ -
============ ============ ============ ========
Weighted average common shares outstanding 7,864,542 979,489 7,864,542 979,489
============ ============ ============ ========
The accompanying notes are an integral part of these financial statements
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SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------- ---------------------------
9/30/00 9/30/99 9/30/00 9/30/99
---------- ---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(295,178) $ - $(825,046) $ -
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 (5,461) - (5,867) -
Inventory - - 1,920 -
Other assets 21,898 - -
Accounts payable and accrued liabilities 419,588 - 956,111 -
Net liabilities of discontinued operations
---------- ---------- ---------- ----------
Net cash used in operating activities 140,847 - 97,118 -
---------- ---------- ---------- ----------
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 140,847 - 146,646 -
Cash at beginning of period 42,476 - 36,677 362
---------- ---------- ---------- ----------
Cash at end of period $ 183,323 $ - $ 183,323 $ 362
========== ========== ========== ==========
SUPPLEMENTAL DISCLOSURE:
Total interest paid $ - $ - $ - $ -
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2000 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 and six month period ended
September 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
September 30, 1999 and 1998, sureBET Casinos, Inc. ("the Company") had no
operating assets and had 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 provided 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 had no assets or liabilities as of March 31, 1999 or
September 30, 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
September 30, 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
6
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.
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 ("Casino Padre"), 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
September 30, 2000, the Company owned 61% of the LLC.
The Company has operated the M/V Casino Padre 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.
As of September 30, 2000 Casino Padre was in arrears on its charter
payments to CSL Development in the amount of $1,104,960. On November 6,
2000 CSL terminated the charter and Casino Padre ceased operations.
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 is currently negotiating a lease for a casino boat berth
in Ft. Pierce, Florida. The Company is negotiating to charter the MV Ocean
Club. It is the intent of the Company to operate the MV Ocean Club for Ft.
Pierce, Florida with a commencement of operation expected in early December
2000.
7
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 September 30, 2000, the Company had a
working capital deficiency of $1,419,738. The Company has reported
cumulative net losses since inception of $6,548,613. 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.
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.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following Management's Discussion and Analysis or Plan of Operation 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 company. Accordingly, there can be no
assurances that we will achieve our business objectives.
RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE AND SIX MONTHS
ENDED SEPTEMBER 30, 1999
The sole source of revenue for the Company through September 30, 2000 was
derived from the operation of Casino Padre. During the three and six months
ending September 30, 1999 the Company had no financial operating activity. Our
revenue for the three months ended September 30, 2000 was $1,140,345 as compared
to $447,968 for the twelve months ended March 31, 2000. The 154% increase in
revenue at Casino Padre was directly related to improved whether conditions and
tourists visiting the island.
For the six months ending September 30, 2000 our revenue was $1,892,141 as
compared to the $447,968 for the twelve months ended March 31, 2000. The 322%
increase in revenues was due to the reasons cited above.
Costs of sales for the three months ended September 30, 2000 were $129,882.
Selling, general and administrative expenses were $178,672. A total of $309,007
was expended for the operation of the casino and $781,923 for the operation of
the vessel. Sales and marketing expenses for the period were $36,039.
Costs of sales for the six months ended September 30, 2000 were $253,258.
Selling, general and administrative expenses were $340,422. A total of $579,067
was expended for the operation of the casino and $1,449,658 for the operation of
the vessel. Sales and marketing expenses for the period were $124,782 with
($30,000) being allocated to the minority interest in Casino Padre.
The above resulted in a net loss of $295,178 for the three months ended
September 30, 2000 and a net loss of $825,046 for the six months ended September
30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Our cash requirements have been and will continue to be significant. From our
inception to September 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 September
9
30, 2000, we had a working capital deficit of $1,419,738 and an accumulated
deficit of $6,548,613.
Net cash used in operating activities for the three months ended September 30,
2000 was $140,847 and $97,118 for the six months ended September 30, 2000. Net
cash was used primarily to fund the losses from operations.
Net cash provided by investing activities for the six months ended September 30,
2000 was $51,600, primarily from the sale of common stock in sureBET and
minority interest in Casino Padre. At September 30, 2000, we did not have any
material commitments for capital expenditures.
Net cash provided by increases in accounts payable was $419,588 and $956,111 for
the three and six months ended September 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 $1,104,960 at September 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.
10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are included with this report.
EXHIBIT
NUMBER DOCUMENT
2.1 Agreement to Exchange Common Stock with U.S. Gaming & Leisure Corp. (1)<F1>
3.1 Articles of Incorporation, as amended (1)<F1>
3.2 Bylaws, as amended (1)<F1>
10.1 Asset Purchase Agreement with Imperial Petroleum, Inc. (1)<F1>
10.2 Management Contract with Casino Padre Investment Company, LLC (1)<F1>
10.3 Lilly Belle lease (1)<F1>
10.4 South Padre Island Sublease and Dockage Agreement (1)<F1>
10.5 Charter Agreement with CSL Development Corporation (1)<F1>
21 Subsidiaries of the Registrant (1)<F1>
27 Financial Data Schedule
11
<FN>
(1)<F1> Previously filed as an exhibit to the Company's Registration Statement on Form 10-SB (File No. 0-30263)
and incorporated by reference herein.
</FN>
(b) Reports on Form 8-K
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto
authorized.
sureBET Casinos, Inc.
(Registrant)
Date: November 13, 2000 By: /S/ CHARLES S. LIBERIS
-------------------------------------
Charles S. Liberis
Chairman of the Board, Chief
Executive Officer and President
Date: November 13, 2000 By: /S/ WAYNE E. MARKS
-------------------------------------
Wayne E. Marks
Chief Financial Officer
12