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 November 30, 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 November 30, 1999.
Transitional Small Business Disclosure Format (check one): YES NO XX
XCEL MANAGEMENT, INC.
Form 10-QSB for the Quarter ended November 30, 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
------
November May 31,
1999 1999
------------- -------------
(Unaudited)
CURRENT ASSETS
Cash $ 25,748 $ 257
Refundable deposit - 30,180
------------- -------------
Total Current Assets 25,748 30,437
------------- -------------
TOTAL ASSETS $ 25,748 $ 30,437
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------
CURRENT LIABILITIES
Accounts payable $ 9,986 $ 6,225
Priority claims payable 5,000 5,000
------------- -------------
Total Current Liabilities 14,986 11,225
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Series A preferred stock, $0.001 par value,
authorized 5,000,000 shares, zero shares
issued and outstanding - -
Common stock, $0.001 par value, 50,000,000
shares authorized; issued and outstanding
1,800,000 shares 1,800 1,800
Additional paid-in capital 19,471,690 19,471,690
Stock subscription receivable (25,000) (25,000)
Accumulated deficit prior to the
development stage (19,889,690) (19,889,690)
Retained earnings accumulated during
the development stage 451,962 460,412
------------- -------------
Total Stockholders' Equity 10,762 19,212
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,748 $ 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 Six Months Ended June 1,
November 30, November 30, 1997 Through
-------------------------- -------------------------- November 30,
1999 1998 1999 1998 1999
------------- ------------ ------------- ------------- -------------
REVENUES $ - $ - $ - $ - $ -
------------- ------------ ------------- ------------- -------------
EXPENSES
General and administrative - 1,864 8,450 3,727 17,088
------------- ------------ ------------- ------------- -------------
Total Expenses - 1,864 8,450 3,727 17,088
------------- ------------ ------------- ------------- -------------
LOSS FROM OPERATIONS BEFORE
EXTRAORDINARY INCOME - (1,864) (8,450) (3,727) (17,088)
------------- ------------ ------------- ------------- -------------
EXTRAORDINARY INCOME
Gain on extinguishment of
debt net of zero tax expense - - - - 469,050
------------- ------------ ------------- ------------- -------------
Total Extraordinary Income - - - - 469,050
------------- ------------ ------------- ------------- -------------
INCOME TAX EXPENSE - - - - -
------------- ------------ ------------- ------------- -------------
NET INCOME (LOSS) $ - $ (1,864) $ (8,450) $ (3,727) $ 451,962
============= ============ ============= ============= =============
BASIC INCOME (LOSS) PER SHARE $ 0.00 $ (0.05) $ (0.01) $ (0.10)
============= ============ ============= =============
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, 1998 38,980 $ 40 2,602,000 $ 3,000 $ 19,444,551 $ - $(19,890,285)
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 year
ended May 31, 1999 - - - - - - 461,007
------------- ----------- ------------- ---------- ------------ ------------ -------------
Balance, May 31, 1999 1,800,000 1,800 - - 19,471,690 (25,000) (19,429,278)
Net loss for the six
months ended
November 30, 1999
(unaudited) - - - - - - (8,450)
------------- ----------- ------------- ---------- ------------ ------------ -------------
Balance, November 30, 1999
(unaudited) 1,800,000 $ 1,800 - $ - $ 19,471,690 $ (25,000) $(19,437,728)
============= =========== ============= ========== ============ ============ =============
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 Six Months Ended June 1,
November 30, November 30, 1997 Through
-------------------------- -------------------------- November 30,
1999 1998 1999 1998 1999
------------- ------------ ------------- ------------- -------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ - $ (1,864) $ (8,450) $ (3,727) $ 451,962
Adjustments to reconcile net(loss)
to net cash used in operating
activities:
Gain on extinguishment of debt - - - - (469,050)
Changes in assets and liabilities:
Decrease in refundable deposits 30,180 - 30,180 - 30,180
Increase in accounts payable (4,689) 1,864 3,761 3,727 9,986
------------- ------------ ------------- ------------- -------------
Net Cash Provided (Used) by
Operating Activities 25,491 - 25,491 - 23,078
------------- ------------ ------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES - - - - -
------------- ------------ ------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES - - - - -
------------- ------------ ------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH 25,491 - 25,491 - 23,078
CASH AT BEGINNING OF PERIOD 257 1,485 257 1,485 2,670
------------- ------------ ------------- ------------- -------------
CASH AT END OF PERIOD $ 25,748 $ 1,485 $ 25,748 $ 1,485 $ 25,748
============= ============ ============= ============= =============
CASH PAID FOR:
Interest expense $ - $ - $ - $ - $ -
Income taxes $ - $ - $ - $ - $ -
NON-CASH FINANCING ACTIVITIES:
Common stock issued for debt $ - $ - $ - $ - $ 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
November 30, 1999 and May 31, 1999
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 November 30, 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, 1999 audited
financial statements. The results of operations for the periods ended
November 30, 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 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
8
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 November 30, 1999 and 1998, the Company had no
revenues and expenses of $0 and $1,864, respectively, resulting in no net
income and a net loss of $1,864 respectively. During the six months ended
November 30, 1999, the Company had no revenues and expenses of $8,450,
resulting in a net loss of $8,450.
(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 November 30, 1999, the Company had total assets of
$25,748, total current liabilities of $14,986, and stockholders' equity of
$10,762. Current assets as of November 30, 1999, consist of cash. At the end
of the last fiscal year, May 31, 1999, the Company had total assets of
$30,437, total current liabilities of $11,225, and stockholders' equity of
$19,212.
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