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, 2001
[ ] 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) 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)
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
7,889,169 SHARES OF COMMON STOCK, $.001 PAR VALUE, AS OF
DECEMBER 31, 2001
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, 2001 and
March 31, 2001 3
Consolidated Statements of Operations for the three and nine
months ended December 31, 2001 and 2000 4
Consolidated Statements of Cash Flows for the nine
months ended December 31, 2001 and 2000 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis or Plan of Operation 9
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 11
ITEM 2. Changes in Securities 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, 2001 and March 31, 2001
Assets
Unaudited Audited
DEC 31 MARCH 31
------------ ------------
Current assets:
Receivables $ 15,630 $ 15,630
------------ ------------
Total current assets 15,630 15,630
------------ ------------
Deposit on claim 140,000 140,000
Deposit on Colorado casino lease 200,000 200,000
Other - -
------------ ------------
Total other assets 340,000 340,000
------------ ------------
$ 355,630 $ 355,630
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities $ 639,752 $ 639,350
Due to shareholder 75,687 77,859
Due to CSL Development Corporation 13,934 11,762
------------ ------------
Total current liabilities 729,373 728,971
------------ ------------
Commitments and contingencies - -
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,
7,889,169 shares issued and outstanding 7,889 7,889
Additional paid-in capital 5,569,866 5,569,866
Accumulated deficit (5,951,498) (5,951,096)
------------ ------------
Total stockholders' equity (deficit) (373,743) (373,341)
------------ ------------
$ 355,630 $ 355,630
============ ============
See notes to consolidated financial statements.
3
SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED DECEMBER 31, 2001 AND 2000
(UNAUDITED)
Three Months Ended Nine Months Ended
12/31/2001 12/31/2000 12/31/2001 12/31/2000
----------- ----------- ------------ ------------
Revenue:
Casino revenue $ - $ 42,168 $ - $ 1,417,571
Ticket sales - 4,990 - 208,133
Food and beverage sales - 27,323 - 340,918
----------- ----------- ------------ ------------
Total revenue - 74,481 - 1,966,622
----------- ----------- ------------ ------------
Operating expenses:
Cost of food and beverage sales 11,755 146,676
Casino operating costs 217,188 796,255
Casino vessel costs 75,511 1,601,751
Start-up costs - -
Sales and marketing 6,717 131,499
General and administrative 402 61,028 402 413,205
Minority interest in losses - -
----------- ----------- ------------ ------------
Total operating expenses 402 372,199 402 3,089,386
----------- ----------- ------------ ------------
Net income (loss) from continuing operations (402) (297,718) (402) (1,122,764)
Discontinued operations:
Gain on transfer of net liabilities to Imperial (Note 1) - - - -
Operating losses of discontinued business - - - -
----------- ----------- ------------ ------------
$ (402) $ (297,718) $ (402) $(1,122,764)
=========== =========== ============ ============
Basic net income (loss) per common share:
From continuing operations $ (0.00) $ (0.04) $ (0.00) $ (0.14)
From discontinued operations
----------- ----------- ------------ ------------
Net income (loss) $ (0.00) $ (0.04) $ (0.00) $ (0.14)
=========== =========== ============ ============
Weighted average common shares outstanding 7,889,169 7,884,038 7,889,169 7,860,998
=========== =========== ============ ============
See accompanying notes to consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 31, 2001 AND 2000
(Unaudited)
Nine Months Ended
12/31/2001 12/31/2000
---------- ------------
Cash flows from operating activities:
Net income (loss) $(402) $(1,122,764)
Adjustments to reconcile net loss to net cash
used in operating activities:
Minority interest in losses -
Shares Issued for Services
Depreciation - 25,557
Changes in operating assets and liabilities:
Accounts receivable (5,882)
Inventory 8,715
Other assets -
Accounts payable and accrued liabilities 402 1,325,928
------ ------------
Net cash provided by operating activities - 231,554
------ ------------
Cash flows from investing activities:
Purchase of furniture and equipment (2,071)
------ ------------
Cash flows from financing activities:
Net Advances from Shareholders - (276,940)
Sale of shares of subsidiary to minority interests -
Sale of common shares 14,252
------ ------------
Net cash provided by financing activities - (262,688)
------ ------------
Net increase (decrease) in cash and cash equivalents - (33,205)
Cash at beginning of period - 36,677
------ ------------
Cash at end of period $ - $ 3,472
====== ============
Supplemental disclosure:
Total interest paid $ - $ -
====== ============
See accompanying notes to consolidated financial statements.
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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, 2001 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 nine month periods
ended December 31, 2001 are not necessarily indicative of the results
that may be expected for the year ending March 31, 2002.
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 as a reverse acquisition whereby USG&L will be the
acquiring company for accounting purposes.
6
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
had 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, 2001, 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, 2001
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.
DEFAULT IN COLORADO LEASE. Pursuant to the lease between Black Hawk
Hotel Corporation and the Company, Black Hawk Hotel was to purchase
250,000 shares of the Company's common stock on or before March 1,
2000. Black Hawk did purchase 125,000 shares but has failed to purchase
the remaining 125,000 shares. Further, the commencement date of the
lease was October 1, 2000 and the Company is in default under this
provision. The parties are negotiating in good faith to reinstate the
lease.
Efforts by the Company to settle its difficulties with Black Hawk
Hotel Corporation have not been successful. Although the parties will
continue to negotiate in good faith to revisit the lease, the Company
chose to voluntarily withdraw its application with the Colorado Gaming
Commission effective August 7, 2001. This withdrawal is without
prejudice and if the Company is able to reinstate its lease the
application with the Colorado Gaming Commission will be resubmitted.
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 December 31,
2001, the Company had a working capital deficiency of $713,743 and an
accumulated deficit of $5,951,498. The Company does not 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, 2001 COMPARED TO THREE AND NINE MONTHS
ENDED DECEMBER 31, 2000
The sole source of revenue for the Company had been derived from the operation
of Casino Padre. On November 6, 2000, the Casino Padre operation was shut down.
Accordingly, there were no revenues for the three months and nine months ended
December 31, 2001, as compared to $74,481 and $1,966,622 of revenues for the
same periods of last year.
During the three and nine months ended December 31, 2001, the Company incurred
only $402 of general and administrative expenses, as compared to $61,028 and
$413,205 of operating expenses for the three and nine months ended December 31,
2000.
The above resulted in a net loss of $402 for the three and nine months ended
December 31, 2001, as compared to a net loss of $297,718 and $1,122,764 for the
three and nine months ended December 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2001, the Company had a working capital deficit of $713,743 and
an accumulated deficit of $5,951,498. There was no cash flow for the three and
nine months ended December 31, 2001. The Company does not believe that it will
be able to meet its normal operating costs and expenses from cash flow as
Company does not presently have any operations.
The Company has been dependent upon loans from its principal shareholder and
President, Charles Liberis. From May 31, 1999 to August 20, 2000, Mr. Liberis
advanced $118,000 to the Company. The loans are not evidenced by promissory
notes and there is no fixed date for repayment. During the year ended March 31,
2001, the Company repaid a net amount of $43,614. At December 31, 2001, $75,687
was owed to Mr. Liberis.
In addition, at December 31, 2001, $13,934 was owed to CSL Development
Corporation for past due charter payments and accrued interest thereon. Mr.
Liberis is also the President of CSL Development Corporation.
The report of the Company's independent auditors on the financial statements for
the year ended March 31, 2001, includes an explanatory paragraph relating to the
uncertainty of the
9
Company's ability to continue as a going concern due to the loss incurred for
the year ended March 31, 2001 and the working capital deficit and stockholders'
deficit existing as of March 31, 2001. The Company must raise additional capital
in order to fund operations.
The Company believes that it will be able to raise additional capital through
debt and equity financing which, along with additional loans from its principal
shareholders, 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 be able to raise additional capital or to take advantage
of any expansion opportunities that may become available. 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 further
business opportunities.
FORWARD LOOKING STATEMENTS
Except for historical information contained herein, the matters discussed in
this report, in particular, statements that use the words "believes", "intends",
"anticipates", or "expects", are intended to identify forward looking statements
that are subject to risks and uncertainties including, but not limited to,
inclement weather, mechanical failures, increased competition, financing,
governmental action, environmental opposition, legal actions, and other
unforeseen factors.
The development of the Black Hawk, Colorado project, in particular, is subject
to additional risks and uncertainties, including, but not limited to, risks
relating to permitting, financing, the activities of environmental groups, the
outcome of litigation and the actions of federal, state, or local governments
and agencies. The results of financial operations reported herein are not
necessarily an indication of future prospects of the Company. Future results may
differ materially.
10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 2, 2001, David M. Gilson obtained a judgment for $45,000 plus
interest at 18% per annum from November 1, 2001, as well as attorneys'
fees and court costs of $7,314, against the registrant and Casino Padre
Investment Company, LLC from the Circuit Court of Arlington County,
Virginia. Mr. Gilson sued for nonpayment of a promissory note in the
amount of $45,000. The registrant used the proceeds for operations of
Casino Padre.
ITEM 2. CHANGES IN SECURITIES
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)
11
EXHIBIT
NUMBER DOCUMENT
21 Subsidiaries of the Registrant (1)
-------------
(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 duly
authorized.
sureBET Casinos, Inc.
(Registrant)
Date: 2/14/02 By: /s/ CHARLES S. LIBERIS
------------------------------------
Charles S. Liberis
Chairman of the Board, Chief
Executive Officer and President
(Principal Executive, Financial, and
Accounting Officer)
12