UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the Quarter ended September 30, 2004 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period to ---- ---- Commission file number - 0-50187 GAMING VENTURE CORP., U.S.A. Exact name of Registrant as specified in its charter) NEVADA 86-0883289 (State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification Number) 801 Pascack Road Paramus, NJ 07652 (Address of principal executive offices) (Zip Code) (201) 599-8484 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding twelve months (or such shorter period that the Registrant was required to file such reports), and (2) has been subject to file such filing requirements for the past thirty days. Yes x No ------ ------ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report: 6,514,427 Shares of Common Stock ($.001 par value) Transitional Small Business Disclosure Format (check one): Yes No x ------- ------- 2 Gaming Venture Corp., U.S.A. PART I: Financial Information ITEM 1 - Financial statements ITEM 2 - Management's discussion and analysis of financial condition and results of operations ITEM 3 - Controls and Procedures PART II: Other Information ITEM 6 - Exhibits and Reports on Form 8-K 3 PART I Item 1. Financial Statements: GAMING VENTURE CORP., U.S.A. CONDENSED BALANCE SHEET SEPTEMBER 30, 2004 (UNAUDITED) ASSETS ------ Current assets Cash $ 434,765 Accounts receivable 11,076 Prepaid expenses and other current assets 38,000 Investment in marketable securities 102,813 ---------- Total current assets 586,654 Property and equipment - at cost, less accumulated depreciation 5,028 ---------- $ 591,682 ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities Accounts payable and accrued expenses $ 5,274 Deferred revenues 86,958 ---------- Total current liabilities 92,232 Shareholders' equity Common stock, $.001 par value; 50,000,000 shares authorized, 6,514,427 shares issued and outstanding 6,514 Additional paid-in capital 1,324,045 Accumulated unrealized loss on investments (203,251) Accumulated deficit (627,858) ---------- 499,450 ---------- $ 591,682 ========== The accompanying notes are an integral part of these condensed financial statements. 4 GAMING VENTURE CORP., U.S.A. CONDENSED STATEMENT OF OPERATIONS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, 2004 2003 2004 2003 ---------- ---------- ---------- ---------- <s> <c> <c> <c> <c> Revenues Subscriptions $ 55,553 $ 49,728 $ 166,503 $ 134,407 Consulting 30,600 20,250 136,554 56,250 Other - 749 1,099 4,181 ---------- ---------- ---------- ---------- Total revenues 86,153 70,727 304,156 194,838 Cost of revenues 26,258 19,786 70,161 60,460 ---------- ---------- ---------- ---------- Gross profit 59,895 50,941 233,995 134,378 General and administrative expenses 68,693 43,258 212,837 204,984 ---------- ---------- ---------- ---------- (8,798) 7,683 21,158 (70,606) ---------- ---------- ---------- ---------- Other income (expense) Realized gain on marketable securities 9,229 3,569 43,627 5,893 Provision for doubtful accounts, former affiliates - - - (312,299) Other 767 - 2,205 - ---------- ---------- ---------- ---------- 9,996 3,569 45,832 (306,406) ---------- ---------- ---------- ---------- Net income (loss) $ 1,198 $ 11,252 $ 66,990 $ (377,012) ========== ========== ========== ========== Basic and diluted income (loss) per share $ 0.00* $ 0.00* $ 0.01 $ (0.06) ========== ========== ========== ========== Shares used in calculation of income (loss) per share 6,514,427 6,514,427 6,514,427 6,514,427 ========== ========== ========== ========== * Amount is less than $.005 The accompanying notes are an integral part of these condensed financial statements. 5 GAMING VENTURE CORP., U.S.A. CONDENSED STATEMENT OF COMPREHENSIVE INCOME (LOSS) NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED) 2004 2003 ---------- ---------- Net income (loss) $ 66,990 $ (377,012) Reclassification adjustments for gain included in net income (loss) (15,925) (14,031) Unrealized gain (loss) on investments (25,441) 31,205 ---------- ---------- Other comprehensive income (loss) (41,366) 17,174 ---------- ---------- Comprehensive income (loss) $ 25,624 $ (359,838) ========== ========== The accompanying notes are an integral part of these condensed financial statements. 6 GAMING VENTURE CORP., U.S.A. CONDENSED STATEMENT OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED) 2004 2003 ---------- ---------- Cash flows used in operating activities $ (77,141) $ (42,337) Cash flows from investing activities 69,757 61,791 ---------- ---------- Net increase (decrease) in cash (7,384) 19,454 Cash, beginning of period 442,149 431,745 ---------- ---------- Cash, end of period $ 434,765 $ 451,199 ========== ========== The accompanying notes are an integral part of these condensed financial statements. 7 GAMING VENTURE CORP., U.S.A. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Gaming Venture Corp., U.S.A. was incorporated on June 1, 1995 in the State of Nevada. The operations and objectives of the Company are to provide various types of gaming reports and newsletters regarding the gaming and hospitality industries. The Company also provides consulting and advisory services to the gaming and hospitality industries. On April 3, 1998, Casino Journal Publishing Group, Inc. ("CJPG") and its combined affiliates merged with Gaming Venture Corp., U.S.A. ("Gaming" or the "Company"), a Nevada corporation. CJPG and its combined affiliates became wholly owned subsidiaries of Gaming, the legal acquirer. As the shareholders of CJPG and its combined affiliates acquired 65 percent of Gaming's outstanding voting shares, the merger was accounted for as a reverse acquisition of Gaming by CJPG, the accounting acquirer in the transaction. Simultaneous with the acquisition, Gaming changed its name to CJPG. On January 3, 2003, the Board of Directors of CJPG approved the spin- off of one of its subsidiaries, Gaming Venture Corp., U.S.A., as a separate company on a basis of one share of Gaming for three shares of CJPG owned as of the record date. The record date was April 1, 2003 and the initial distribution was made on April 30, 2003, the pay date. No fractional shares were issued prior to the adjustment of the distribution ratio. The terms of this spin-off arrangement were amended on May 13, 2003 to provide for a pro-rata distribution of one share of Gaming for each share of CJPG owned as of the record date. No fractional shares were issued. The additional shares required to provide for a pro-rata distribution were sent to the shareholders on June 25, 2003. No cash payments were made or received in connection with either the initial spin-off distributions or the distributions completed to achieve a pro-rata distribution. Because the common shares distributed in the spin-off were initially not on a pro-rata basis and the pay date was prior to completion of the Form 10-SB, the exemption from registration provided by Staff Legal Bulletin No. 4 is not available and Gaming may have violated Section 5 of the Securities Act of 1933. The accompanying statement of operations for the three and nine months ended September 30, 2003 was retroactively adjusted to reflect the spin-off as if it had occurred as of January 1, 2003. The Company increased the number of outstanding Gaming shares from 1,664,000 to 6,514,427 and adjusted the par value of common stock and additional paid-in capital by $4,855 as a result of the increased shares. 8 Comprehensive Income (Loss) Comprehensive income (loss) is the total of (1) net income (loss) plus (2) all other changes in net assets arising from nonowner sources, which are referred to as other comprehensive income (loss). Other comprehensive income (loss) consists of net unrealized (gains) losses from marketable securities and reclassification adjustments for reconciliation of previously unrealized losses. The Company has presented a separate statement of comprehensive income (loss). 2. BASIS OF PRESENTATION The condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and applicable rules and regulations of the Securities and Exchange Commission. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting primarily of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying financial statements should be read in conjunction with the Company's audited financial statements, Form 10KSB for the year ended December 31, 2003. 3. PER SHARE DATA Basic income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during the periods. Diluted income per share is computed by dividing the net income by the weighted average number of shares of common stock, stock warrants and options outstanding during the period. The Company had no stock options and warrants outstanding for the nine months ended September 30, 2004 and 2003. 4. CONCENTRATION OF CREDIT RISK At September 30, 2004, the Company maintained cash balances in banks and brokerage firms. Balances are insured up to $100,000 by the Federal Deposit Insurance Corporation. At times, balances may exceed such insurance limits. The Company believes it mitigates its risk by banking with major financial institutions. 5. INVESTMENT IN AVAILABLE-FOR-SALE SECURITIES Investments, consisting of marketable equity securities, are classified as available-for-sale securities and are carried at fair value. Unrealized gains and losses are reported as a separate component of shareholders' equity, net of applicable income taxes. The Company calculates its gains (losses) on the sale of marketable securities on a 9 first-in, first-out basis. Net unrealized loss at September 30, 2004 was $25,441. Net unrealized gain at September 30, 2003 was $31,205. These unrealized gains and losses are reflected in other comprehensive income (loss) and as a component of stockholders' equity. 6. INCOME TAXES AND DEFERRED INCOME TAXES The Company applies the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the year in which those temporary differences are expected to be settled or recovered. At September 30, 2004, the Company had a net operating loss carryforward of approximately $1,000,000 available to reduce its future Federal taxable income, if any, through 2024. The Company recorded a valuation allowance for the entire net operating loss carryforward due to the uncertainty of realizing any related tax benefits. 7. RELATED PARTY TRANSACTIONS The Company leases an office facility from its officer under a five- year lease which began on January 1, 2001. Total related party rent expense was $18,160 for each of the nine months ended September 30, 2004 and 2003. Approximate future minimum lease payments at September 30, 2004 are as follows: Period Ending September 30, ------------- 2005 $ 24,000 2006 6,000 ---------- $ 30,000 ========== 8. REPORTABLE SEGMENTS The Company applies Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS No. 131). This statement establishes standards for the reporting of information about operating segments in annual and interim financial statements and requires restatement of prior year information. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker(s) in 10 deciding how to allocate resources and in assessing performance. SFAS No. 131 also requires disclosures about products and services, geographic areas and major customers. The Company has two reportable segments, newsletter and gaming subscriptions and consulting services. All revenues generated in the segments are external. For the nine months ended September 30, 2004 and 2003, the total reportable segment information is as follows: Newsletter and Gaming Consulting Corporate/ Total As Subscriptions Services Other Reported ---------- ---------- ---------- ---------- <s> <c> <c> <c> <c> For the nine months ended September 30, 2003: Reportable segments External revenues $ 134,407 $ 56,250 $ 4,181 $ 194,838 Depreciation and amortization 6,742 2,481 - 9,223 Operating loss (61,826) (8,780) - (70,606) Assets 7,776 4,107 536,262 548,145 For the nine months ended September 30, 2004: Reportable segments External revenues $ 166,503 $ 136,554 $ 1,099 $ 304,156 Depreciation and amortization 1,217 1,074 - 2,291 Operating income (loss) (24,954) 46,112 - 21,158 Assets 8,393 4,433 578,856 591,682 Products and Services Revenues The table below presents external revenues for groups of similar products and services for the nine months ended September 30, 2004 and 2003. 2004 2003 ---------- ---------- Newsletter and gaming subscriptions $ 166,503 $ 134,407 Consulting 136,554 56,250 Other 1,099 4,181 ---------- ---------- $ 304,156 $ 194,838 ========== ========== The segments of the Company are operating in, and derived their revenues in, the United States. 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations: Trends and Uncertainties. Demand for Gaming Venture's future products and services will be dependent on, among other things, market acceptance of Gaming Venture's concept, our proposed operations and general economic conditions that are cyclical in nature. Inasmuch as a major portion of our activities are the revenues generating from the sale of our newsletters, Gaming Venture's business operations may be adversely affected by competitors and prolonged recessionary periods. On April 3, 1998, Casino Journal Publishing Group, Inc. and its combined affiliates merged with Gaming Venture Corp., U.S.A., a Nevada corporation. Casino Journal and its combined affiliates became wholly owned subsidiaries of Gaming Venture, the legal acquiror. As the shareholders of Casino Journal and its combined affiliated acquired 65% of Gaming's outstanding voting shares, the merger was accounted for as a reverse acquisition of Gaming Venture by Casino Journal, the accounting acquiror in the transaction. Simultaneous with the acquisition, Gaming Venture Corp., U.S.A. changed its name to Casino Journal Publishing Group while the Gaming Venture's West, Inc. subsidiary changed its name to Gaming Venture Corp., U.S.A. On January 3, 2003, the board of directors of Casino Journal approved the spin-off of one of its subsidiaries, Gaming Venture Corp., U.S.A., as a separate company on a basis of one share of Gaming Venture for three shares of Casino Journal owned as of the record date. The record date was April 1, 2003 and the initial distribution was made on April 30, 2003, the pay date. No fractional shares were issued prior to the adjustment of the distribution ratio. The terms of this spin-off arrangement were amended on May 13, 2003 to provide for a pro-rata distribution of one share of Gaming Venture for each share of Casino Journal owned as of the record date. No fractional shares were issued. The additional shares required to provide for a pro-rata distribution were sent to the shareholders on June 25, 2003. No cash payments were made or received in connection with either the initial spin-off distributions or the distributions completed to achieve a pro rata distribution. Due to the fact that the common shares distributed in the spin-off was initially not on a pro-rata basis and the pay date was prior to completion of the Form 10-SB, the exemption from registration provided by Staff Legal Bulletin No. 4 is not available and Gaming Venture may have violated Section 5 of the Securities Act of 1933. Gaming Venture has incurred accumulated losses of $627,858 through September 30, 2004. It has achieved profitability during the second quarter of 2004. Gaming Venture plans to increase revenues by increased newsletter sales, new newsletters catered to different hospitality industries such as restaurants and timeshare, and additional regional newsletters for the lodging industry. Historically, Gaming Venture launched a new publication every two years, resulting in a 20% increase in revenue. The last new publication launched was the Daily Lodging Report - Asia Pacific in February 2000. 12 Gaming Venture also plans to expand the consulting business to the lodging industry along with expansion of gaming clients. Management is in discussions with other hotel consulting companies to form partnerships on consulting contracts. Gaming Venture is proposing to provide investor communication services to the hotel companies and assist on financial consulting in return for a portion of the retainer fee. Management has held very preliminary discussions with certain hotel consulting companies and public relations firms with hotel company clients. The discussions have been general on possible working together in the future on some mutual clients. There has been no further progress on this as management has been focusing on existing operations and completion of the spin-off. Capital and Source of Liquidity. For the nine months ended September 30, 2004 and 2003, Gaming Venture relied on the sale of marketable securities to provide for any shortfalls of cash needed for operations. For the nine months ended September 30, 2004, Gaming Venture received proceeds from the sale of marketable securities of $69,757. For the nine months ended September 30, 2003, Gaming Venture received proceeds from the sale of marketable securities of $59,553. The Company had a decrease of $2,238 due from an affiliate. As a result, the Company had cash flow from investing activities of $61,791 for the nine months ended September 30, 2003. For the nine months ended September 30, 2004 and 2003, Gaming Venture did not have any financing activities. Results of Operations. Gaming Venture had net income of $66,990 and a net loss of $377,012 for the nine months ended September 30, 2004 and 2003, respectively. The significant change from net loss for the nine months ended September 30, 2003 to net income for the nine months ended September 30, 2004 was due to decreased legal and accounting costs related to the completion of the spin-off and an increase in consulting revenue. For the nine months ended September 30, 2004, Gaming Venture had revenues from subscriptions of $166,503, consulting of $136,554 and other revenue of $1,099 with costs of revenues of $70,161. Gross profit for the nine months ended September 30, 2004 was $233,995. For the nine months ended September 30, 2003, Gaming Venture had revenues from subscriptions of $134,407, consulting of $56,250 and other revenue of $4,181 with costs of revenues of $60,460. Gross profit for the nine months ended September 30, 2003 was $134,378. For the nine months ended September 30, 2004, the increase in subscriptions revenue of newsletters circulation of approximately $32,000 and the increase in consulting revenue of approximately $80,000 13 from September 30, 2003 was mainly due to an increase in subscriptions and an increase in consulting services rendered. Portions of the payroll, payroll taxes, employee benefits and telephone expense were allocated to the cost of revenues based on the percentage of time spent by the employee in connection with generating revenues for the nine months ended September 30, 2004 and 2003, respectively. General and administrative expenses for 2004 were $212,837 compared to $204,984 in 2003. This was mainly due to an increase in advertising fees. The general and administrative expense for 2004 and 2003 consisted of mainly salaries and related expenses, rent, investor relation expense and professional fees. For the nine months ended September 30, 2004 and 2003, Gaming Venture realized a gain on marketable securities of $43,627 and $5,893, respectively. For the nine months ended September 30, 2004, Gaming Venture had a increase in accounts receivable of $1,337, an increase in prepaid expenses and other assets of $38,000 and an increase in accounts payable and accrued expenses of $2,012. Deferred subscription revenues increased by $4,032 as a result of the increase in its newsletter subscriptions. Gaming Venture had depreciation and amortization of $2,290 and other decreases in non-cash adjustments of $69,501. Net cash used in operations for the nine months ended September 30, 2004 was $77,141. For the nine months ended September 30, 2003, Gaming Venture had an increase in accounts receivable of $6,546. Deferred subscription revenues increased by $11,409 from the increase in its newsletter subscriptions. Gaming Venture had depreciation and amortization of $8,407. Gaming Venture had other increases in non-cash adjustments of $321,408. Net cash used in operation for the nine months ended September 30, 2003 was $42,337. Critical Accounting Policies. Revenue Recognition Gaming Venture has two types of revenues, subscription revenue on newsletters for gaming and lodging industries and consulting income on gaming related business. Gaming Venture recognizes the revenue from newsletter subscriptions when they are delivered to subscribers. Any unfilled subscriptions are accounted for as deferred revenues. Consulting revenue related to contracts with a short duration, are recognized as income upon the completion of services. Gaming Venture occasionally receives marketable securities in exchange for consulting services. These transactions are valued at the quoted market price on the applicable securities exchange on the date consulting contracts are signed. Gaming Venture retains all rights and title of the securities received. Investment in Available for Sale Securities Gaming Venture accounts for the marketable securities as available for sale securities in accordance with SFAS 115, "Accounting for Certain 14 Investments in Debt and Equity Securities." Gaming Venture acquires its securities for cash or for consulting services rendered. Gaming Venture does not intend to trade its securities with the objective of generating profits based on short-term differences in price, but sells the securities to generate cash for operations. Item 3. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, under the supervision and with the participation of our chief executive officer, conducted an evaluation of our "disclosure controls and procedures" (as defined in Securities Exchange Act of 1934 (the "Exchange Act") Rules 13a-14(c)). Based on his evaluation, our chief executive officer and chief financial officer have concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that all material information required to be filed in this quarterly report on Form 10QSB has been made known to him in a timely fashion. Changes in Internal Controls There have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls or in other factors that could significantly affect these controls subsequent to the Evaluation Date set forth above. 15 PART II Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (numbered in accordance with Item 601 of Regulation S-K) Exhibit 31 - 302 Certification Exhibit 32 - 906 Certification (b) Reports on Form 8-K None 16 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 11, 2004 /s/Alan Woinski ------------------------ Alan Woinski, President