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: December 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
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) Idenfitication 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
DECEMBER 31, 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 December 31, 2000 and
March 31, 2000 3
Consolidated Statements of Operations for the three and nine
months ended December 31, 2000 and 1999 4
Consolidated Statements of Cash Flows for the nine
months ended December 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis or Plan of Operation
for the three and nine months ended December 31, 2000 and 1999 9
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 11
ITEM 2. Changes in Securities and Use of Proceeds 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
December 31, 2000 and March 31, 2000
ASSETS
December 31, March 31,
2000 2000
-------------- -------------
Current assets:
Cash $ 3,472 $ 36,677
Receivables 11,999 6,116
Inventory - 8,715
-------------- -------------
Total current assets 15,471 51,508
-------------- -------------
Furniture, leasehold improvements and equipment:
Furniture and equipment 39,323 37,252
Leasehold improvements 88,460 88,460
-------------- -------------
127,783 125,712
Accumulated depreciation (38,105) (12,548)
-------------- -------------
Net furniture and equipment 89,678 113,164
-------------- -------------
Other assets:
Deposit on claim (Note 5) 140,000 140,000
Deposit on Colorado casino lease (Note 5) 200,000 200,000
Other 992 992
-------------- -------------
Total other assets 340,992 340,992
-------------- -------------
$ 446,141 $ 505,664
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities $ 1,602,594 $ 276,666
Due to shareholder (Note 6) 79,688 121,473
Due to CSL Development Corporation (Notes 5 and 6) 32,434 267,589
-------------- -------------
Total current liabilities 1,714,716 665,728
-------------- -------------
Commitments and contingencies (Note 5) - -
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 5,569,871 5,555,654
Accumulated deficit (6,846,330) (5,723,567)
-------------- -------------
Total stockholders' equity (deficit) (1,268,575) (160,064)
-------------- -------------
$ 446,141 $ 505,664
============== =============
See notes to consolidated financial statements.
3
SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Nine Months Ended December 31, 2000
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------ ----------------------------
12/31/00 12/31/99 12/31/00 12/31/99
------------- ----------- ------------ -----------
Revenue:
Casino revenue $ 42,168 $ 130,549 $ 1,417,571 $ 130,549
Ticket sales 4,990 22,027 208,133 22,027
Food and beverage sales 27,323 10,869 340,918 10,869
------------- ------------ ------------ -----------
Total revenue 74,481 163,445 1,966,622 163,445
------------- ------------ ------------ -----------
Operating expenses:
Cost of food and beverage sales 11,755 39,539 146,676 39,539
Casino operating costs 217,188 79,223 796,255 79,223
Casino vessel costs 75,511 155,149 1,601,751 155,149
Start-up costs - 290,565 - 290,565
Sales and marketing 6,717 53,791 131,499 53,791
General and administrative 61,028 84,928 413,205 95,214
Minority interest in losses - (140,335) - (140,335)
------------- ------------ ------------ -----------
Total operating expenses 372,199 562,860 3,089,386 573,146
------------- ------------ ------------ -----------
Net loss (297,718) (399,415) (1,122,764) (409,701)
------------- ------------ ------------ -----------
$ (297,718) $ (399,415) $(1,122,764) $ (409,701)
============= ============ ============ ===========
Basic net loss per common share:
------------- ------------ ------------ -----------
Net loss ($0.04) ($0.05) ($0.14) ($0.13)
============= ============ ============ ============
Weighted average common shares outstanding 7,884,038 7,473,383 7,860,998 3,106,717
============= ============ ============ ============
See accompanying notes to consolidated financial statements.
4
SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 31, 2000 AND 1999
2000 1999
-------------- --------------
Cash flows from operating activities:
Net income (loss) $ (1,122,764) $ (409,701)
Adjustments to reconcile net loss to net cash
used in operating activities:
Shares issued for services - 142,500
Depreciation 25,557 -
Minority interest in losses -
Changes in operating assets and liabilities:
Accounts receivable (5,882) (36,776)
Inventory 8,715 -
Other assets - (11,220)
Accounts payable and accrued liabilities 1,325,928 268,975
-------------- --------------
Net cash used in operating activities 231,554 (46,222)
-------------- --------------
Cash flows from investing activities:
Purchase of furniture and equipment (2,071) (383,469)
-------------- --------------
Cash flows from financing activities:
Net advances from shareholder (276,940) -
Sale of shares of subsidiary to minority interests - 500,000
Sale of common shares 14,252 13,000
-------------- --------------
Net cash provided by financing activities (262,688) 513,000
-------------- --------------
Net increase (decrease) in cash and cash equivalents (33,205) 83,309
Cash at beginning of year 36,677 -
-------------- --------------
Cash at end of year $ 3,472 $ 83,309
============== ==============
Supplemental disclosure:
Total interest paid $ - $ -
============== ==============
See accompanying notes to consolidated 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, 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 six and nine month period
ended December 31, 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 December 31, 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 December 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 December 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. The transaction will
be accounted for
6
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 December 31, 2000, the Company owned 61% of the LLC.
The Company 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, until November 6, 2000 when CSL terminated
the charter and Casino Padre ceased operations. As of December 31, 2000
Casino Padre was in arrears on its charter payments to CSL Development
in the amount of $1,104,960.
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.
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 December 31,
2000, the Company had a working capital deficiency of $1,699,245. The
Company has reported cumulative net losses since inception of
$6,846,330. The Company does not
7
believe that it will be able to meet its normal operating costs and
expenses from operations.
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 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 NINE MONTHS ENDED DECEMBER 31, 2000 COMPARED TO THREE AND NINE MONTHS
ENDED DECEMBER 31, 1999
The sole source of revenue for the Company through December 31, 2000 was derived
from the operation of Casino Padre. During the three and nine months ending
December 31, 1999 the Company began its Casino Padre operation (November 1999).
Revenue for the three months ended December 31, 2000 was $74,481 as compared to
$163,445 for the three months ended December 1999. The reason for the decrease
was due to the shutdown of the Casino Padre operation on November 6, 2000.
For the nine months ending December 31, 2000 revenue was $1,966,622 as compared
to $163,445 for the six months ended December 31, 1999. The increase in revenues
was due to additional months of full operation.
Costs of sales for the three months ended December 31, 2000 were $11,775.
Selling, general and administrative expenses were $67,745. A total of $217,188
was expended for the operation of the casino and $75,511 for the operation of
the vessel.
Costs of sales for the nine months ended December 31, 2000 were $146,676.
Selling, general and administrative expenses were $544,704. A total of $796,255
was expended for the operation of the casino and $1,601,751 for the operation of
the vessel.
The above resulted in a net loss of $297,718 for the three months ended December
31, 2000 and a net loss of $1,122,764 for the nine months ended December 31,
2000.
LIQUIDITY AND CAPITAL RESOURCES
Cash requirements have been and will continue to be significant. From inception
to December 31, 2000, the Company has financed operations primarily through the
issuance of equity and debt securities, loans from stockholders, and revenue
from Casino Padre. At December 31, 2000, the Company had a working capital
deficit of $1,699,245 and an accumulated deficit of $6,846,330.
9
Net cash provided by operating activities for the nine months ended December 31,
2000 was $231,554. Net cash was provided primarily by an increase in
liabilities.
Net cash from financing activities for the nine months ended December 31, 2000
was $262,688, primarily from payments to a shareholder. At December 31, 2000,
the Company did not have any material commitments for capital expenditures.
Cash needs will continue to increase in future periods, primarily because of
additional expenses related to the development of new projects and continuing
operations. The 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, the Company's ability to continue as a going
concern depends on its 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)
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)
10.5 Charter Agreement with CSL Development Corporation (1)
21 Subsidiaries of the Registrant (1)
11
(1) Previously filed as an exhibit to the Company's Registration Statement on
Form 10-SB (File No. 0-30263) and incorporated by reference herein.
(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: February 20, 2001 By: /s/ Charles S. Liberis
-----------------------------------
Charles S. Liberis
Chairman of the Board, Chief
Executive Officer and President
12