UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
---- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1999
____ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number: 0-22814
XCEL MANAGEMENT, INC.
(Exact Name of small business issuer as specified in its charter)
Utah 87-0363613
(State of Incorporation) (IRS Employer ID Number)
781 East 2300 South, Bountiful, Utah 84010
(Address of principal executive offices)
(801) 292-4104
(Issuer's telephone number)
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 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 XX NO
Check whether the issues has filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. YES XX NO
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date:
1,800,000 shares as of February 28, 1999.
Transitional Small Business Disclosure Format (check one): YES NO XX
XCEL MANAGEMENT, INC.
Form 10-QSB for the Quarter ended February 28, 1999
Table of Contents
Part I - Financial Information Page
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis
or Plan of Operation 8
Part II - Other Information
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
2
XCEL MANAGEMENT, INC.
(Formerly Palace Casinos, Inc.)
(A Development Stage Company)
Balance Sheets
ASSETS
------
February 28, May 31,
1999 1998
------------- -------------
(Unaudited)
CURRENT ASSETS
Cash $ 257 $ 257
Refundable deposit 30,180 30,180
------------- -------------
Total Current Assets 30,437 30,437
------------- -------------
TOTAL ASSETS $ 30,437 $ 30,437
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
CURRENT LIABILITIES
Accounts payable $ 6,225 $ -
Priority claims payable 5,000 473,721
------------- -------------
Total Current Liabilities 11,225 473,721
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Series A preferred stock, $0.001 par value,
authorized 5,000,000 shares, zero and
2,602,000 shares issued and outstanding,
respectively - 40
Common stock, $0.001 par value, 50,000,000
shares authorized; issued and outstanding
1,800,000 and 38,980 shares, respectively 1,800 3,000
Additional paid-in capital 19,471,690 19,444,551
Stock subscription receivable (25,000) -
Accumulated deficit prior to the development
stage (19,889,690) (19,889,690)
Retained earnings accumulated during the
development stage 460,412 (1,185)
------------- -------------
Total Stockholders' Equity 19,212 (443,284)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 30,437 $ 30,437
============= =============
The accompanying notes are an integral part of these financial statements.
3
XCEL MANAGEMENT, INC.
(Formerly Palace Casinos, Inc.)
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
Inception of the
Development
For the For the Stage on
Three Months Ended Nine Months Ended June 1,
February 28, February 28, 1997 Through
-------------------------- -------------------------- February 28,
1999 1998 1999 1998 1999
------------- ------------ ------------- ------------- -------------
REVENUES $ - $ - $ - $ - $ -
------------- ------------ ------------- ------------- -------------
EXPENSES
General and administrative 3,726 296 7,453 889 8,638
------------- ------------ ------------- ------------- -------------
Total Expenses 3,726 296 7,453 889 8,638
------------- ------------ ------------- ------------- -------------
LOSS FROM OPERATIONS BEFORE
EXTRAORDINARY INCOME (3,726) (296) (7,453) (889) (8,638)
------------- ------------ ------------- ------------- -------------
EXTRAORDINARY INCOME
Gain on extinguishment of
debt net of zero tax expense 469,050 - 469,050 - 469,050
------------- ------------ ------------- ------------- -------------
Total Extraordinary Income 469,050 - 469,050 - 469,050
------------- ------------ ------------- ------------- -------------
INCOME TAX EXPENSE - - - - -
------------- ------------ ------------- ------------- -------------
NET INCOME (LOSS) $ 465,324 $ (296) $ 461,597 $ (889) $ 460,412
============= ============ ============= ============= =============
BASIC INCOME (LOSS) PER SHARE
Continuing operations $ (0.01) $ (0.01) $ (0.01) $ (0.02)
Gain on extinguishment
of debt 0.76 - 0.76 -
------------- ------------ ------------- -------------
$ 0.75 $ (0.01) $ 0.75 $ (0.02)
============= ============ ============= =============
WEIGHTED AVERAGE SHARES
OUTSTANDING 1,800,000 38,980 1,800,000 38,980
============= ============ ============= =============
The accompanying notes are an integral part of these financial statements.
4
XCEL MANAGEMENT, INC.
(Formerly Palace Casinos, Inc.)
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
Additional Stock
Common Stock Preferred Stock Paid-in Subscription Accumulated
Shares Amount Shares Amount Capital Receivable Deficit
------------- ----------- ------------- ---------- ------------ ------------ -------------
Balance, May 31, 1997 38,980 $ 40 2,602,000 $ 3,000 $ 19,444,551 $ - $(19,889,690)
Net loss for the year ended
May 31, 1998 - - - - - - (1,185)
------------- ----------- ------------- ---------- ------------ ------------ -------------
Balance, May 31, 1998 38,980 40 2,602,000 3,000 19,444,551 - (19,890,875)
Conversion of preferred
stock to common stock 51,020 50 (2,602,000) (3,000) 2,949 - -
Common stock issued for
settlement of debt at
$0.01 per share 90,000 90 - - 810 - -
Common stock issued for
cash at $0.015 per share 1,620,000 1,620 - - 23,380 (25,000) -
Net income for the nine
months ended
February 28, 1999 - - - - - - 461,597
------------- ----------- ------------- ---------- ------------ ------------ -------------
Balance, February 28, 1999 1,800,000 $ 1,800 - $ - $ 19,471,690 $ (25,000) $(19,429,278)
============= =========== ============= ========== ============ ============ =============
The accompanying notes are an integral part of these financial statements.
5
XCEL MANAGEMENT, INC.
(Formerly Palace Casinos, Inc.)
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
From
Inception of the
Development
For the For the Stage on
Three Months Ended Nine Months Ended June 1,
February 28, February 28, 1997 Through
-------------------------- -------------------------- February 28,
1999 1998 1999 1998 1999
------------- ------------ ------------- ------------- -------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ 465,324 $ (296) $ 461,597 $ (889) $ 460,412
Adjustments to reconcile net(loss)
to net cash used in operating
activities:
Gain on extinguishment of debt (469,050) - (469,050) - (469,050)
Changes in assets and liabilities:
Increase in accounts payable 3,726 - 7,453 (339) 6,225
------------- ------------ ------------- ------------- -------------
Net Cash Provided (Used) by
Operating Activities - (296) - (1,228) (2,413)
------------- ------------ ------------- ------------- -------------
CASH FLOWS FROM INVESTING
ACTIVITIES - - - - -
------------- ------------ ------------- ------------- -------------
CASH FLOWS FROM FINANCING
ACTIVITIES - - - - -
------------- ------------ ------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH - (296) - (1,228) (2,413)
CASH AT BEGINNING OF PERIOD 257 553 257 1,485 2,670
------------- ------------ ------------- ------------- -------------
CASH AT END OF PERIOD $ 257 $ 257 $ 257 $ 257 $ 257
============= ============ ============= ============= =============
CASH PAID FOR:
Interest expense $ - $ - $ - $ - $ -
Income taxes $ - $ - $ - $ - $ -
NON-CASH FINANCING ACTIVITIES:
Common stock issued for debt $ 900 $ - $ 900 $ - $ 900
The accompanying notes are an integral part of these financial statements.
6
XCEL MANAGEMENT, INC.
(Formerly Palace Casinos, Inc.)
(A Development Stage Company)
Notes to Financial Statements
February 28, 1999 and May 31, 1998
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at February 28, 1999 and 1998
and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's May 31, 1998 audited
financial statements. The results of operations for the periods ended
February 28, 1999 and 1998 is not necessarily indicative of the operating
results for the full years.
7
Part I - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(1) Caution Regarding Forward-Looking Information
This quarterly report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the
Company or management as well as assumptions made by and information currently
available to the Company or management. When used in this document, the words
"anticipate," "believe," "estimate," "expect" and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current view
of the Company regarding future events and are subject to certain risks,
uncertainties and assumptions, including the risks and uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially
from those described herein as anticipated, believed, estimated, expected or
intended. In each instance, forward-looking information should be considered
in light of the accompanying meaningful cautionary statements herein.
(2) Results of Operations
From November 1992 until approximately the end of 1995, the Company
(which had changed its name to "Palace Casinos, Inc."), was engaged, through
its then wholly-owned subsidiary, Maritime Group, Ltd. (the "Subsidiary"), in
the development of a dockside gaming facility in Biloxi, Mississippi. In
April, 1994, the Subsidiary completed the development of the Biloxi gaming
facility, "Palace Casino," and commenced operations. On December 1, 1994, the
Company and the Subsidiary separately filed voluntary petitions for relief
under Chapter 11 of the federal bankruptcy laws. Although the Company's
original bankruptcy petition was filed in the United States Bankruptcy Court
for the District of Utah, Central Division, the supervision of the Company's
Chapter 11 proceedings was transferred to the United States Bankruptcy Court
for the Southern District of Mississippi (the "Bankruptcy Court"). On
September 22, 1995, the Company, which had been operating as
debtor-in-possession in connection with the bankruptcy proceeding, entered
into an Asset Purchase Agreement under the terms of which it agreed, subject
to the approval of the Bankruptcy Court, to sell substantially all of the
Subsidiary's operating assets. This transaction was approved by the
Bankruptcy Court, and completed in the end of 1995, with all of the net
proceeds of the transaction being distributed to creditors. Following the
completion of the sale of the Subsidiary's Assets, the Company had essentially
no assets and liabilities and the Company's business operations essentially
ceased, except for efforts to complete a plan of reorganization, described
below.
In February, 1999, Steve Rippon and Edward D. Bagley, the Company's
present management, submitted to the Bankruptcy Court, as plan proponents, a
plan of reorganization (the "Plan"), which was confirmed by the Bankruptcy
Court on June 16, 1999. Under the terms of the
8
Plan: (a) all of the Company's priority creditors were paid a total of $5,000;
(b) unsecured creditors, holding between $300,000 and $500,000 in claims, were
issued pro rata a total of 90,000 shares of post-bankruptcy common stock in
full satisfaction of such obligations; and (c) all of the equity holders of
the Company's common stock, were issued, pro rata, a total of approximately
90,000 shares of common stock in lieu of a total of 8,794,329 shares of
preferred and common stock issued and outstanding, with the result that .0102
shares of common stock were issued for each previously outstanding share of
common stock. Under the terms of the Plan, all outstanding warrants and
options of the Company expired. In connection with the Plan, Messrs. Rippon
and Bagley, the plan proponents, were elected as the officers and directors of
the Company, and were issued a total of 1,620,000 shares of common stock
(810,000 shares each) of the Company, in consideration of their contributions
of services and approximately $20,000 in cash provided to pay for legal
services and costs incurred in the Plan confirmation process and related
activities.
Following the confirmation of the Plan in June, 1999, the Company and the
plan proponents completed the Plan in accordance with its terms. As a result
of the Plan, the Company currently has a total of approximately 1,800,000
shares of common stock, par value $0.001 per share, issued and outstanding.
On December 3, 1999, the Bankruptcy Court, after reviewing the efforts by the
plan proponents, issued an order closing the bankruptcy estate of the Company.
The Company is not aware of any trends that have or are reasonably likely
to have a material impact on its liquidity, net sales, revenues, or income
from continuing operations. There have been no events which have caused
material changes from period to period in one or more line items of the
financial statements or any seasonal aspects that have had a material effect
on the financial condition or results of operation.
During the quarters ended February 28, 1999 and 1998, the Company had no
revenues and expenses of $3,726 and $296, respectively, resulting in net
income of $465,324, and a net loss of $296, respectively. During the nine
months ended February 28, 1999, the Company had no revenues and expenses of
$7,453, resulting in net income of $461,597. The reported net income for the
quarter and nine months ended February 28, 1999, is attributable to a gain on
the extinguishment of debt as the result of a Chapter 11 bankruptcy.
(3) Liquidity and Capital Resources
During the past year, there have been no material changes in the
financial condition of the Company, except for the approval by the U.S.
Bankruptcy Court of the Company's Chapter 11 Plan of Reorganization, and the
closing of the bankruptcy estate. At February 28, 1999, the Company had total
assets of $30,437, total current liabilities of $11,225, and stockholders'
equity of $19,212. Current assets as of February 28, 1999, consist of cash
and a refundable deposit. At the end of the last fiscal year, May 31, 1998,
the Company had total assets of $30,437, total current liabilities of
$473,721, and stockholders' deficit of $443,284.
The Company plans to seek one or more potential business ventures from
its known sources. In connection with a business acquisition or transaction,
the Company may need to raise equity or debt to fund such transaction, or to
provide the business opportunity with necessary operating capital. There is no
assurance the Company will be able to raise capital when needed, or on terms
which are favorable to the Company.
9
Part II - Other Information
Item 1 - Legal Proceedings
None.
Item 2 - Changes in Securities
None.
Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
The Company has held no regularly scheduled, called or special meetings
of shareholders during the reporting period, nor have any matters been
submitted to a vote of this Company's security holders.
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K
None.
10
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.
XCEL MANAGEMENT, INC.
December 20, 1999 /s/ Steve Rippon
--------------------
Steve Rippon
President
XCEL MANAGEMENT, INC.
December 20, 1999 /s/ Edward D. Bagley
--------------------
Edward D. Bagley
Secretary/Treasurer