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: September 30, 2002
[ ] 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
September 30, 2002
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 September 30, 2002 and
March 31, 2002 3
Consolidated Statements of Operations for the three and
six months ended September 30, 2002 and 2001 4
Consolidated Statements of Cash Flows for the three and
six months ended September 30, 2002 and 2001 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis or Plan of Operation 9
ITEM 3. Controls and Procedures 10
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
SEPTEMBER 30, 2002 AND MARCH 31, 2002
ASSETS
SEPT 30, 2002 MARCH 31, 2002
------------- --------------
(Unaudited)
Current assets:
Cash $ - $ -
Receivables - -
------------- --------------
Total current assets - -
------------- --------------
Other assets:
Deposit on claim (Note 3) - 30,000
Deposit on Colorado casino lease - -
------------- --------------
Total other assets - 30,000
------------- --------------
$ - $ 30,000
============= ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 646,124 $ 646,124
Due to shareholder (Note 4) 96,602 86,602
Due to CSL Development Corporation (Note 4) 37,084 27,101
------------- --------------
Total current liabilities 779,810 759,827
------------- --------------
Commitments and contingencies - -
Stockholders' 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 (6,357,565) (6,307,582)
------------- --------------
Total stockholders' deficit (779,810) (729,827)
------------- --------------
$ - $ 30,000
============= ==============
See notes to consolidated financial statements.
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SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (UNAUDITED)
Three Months Ended Six Months Ended
2002 2001 2002 2001
-------------- -------------- -------------- --------------
Revenue:
Casino revenue $ - $ - $ - $ -
Ticket sales - - - -
Food and beverage sales - - - -
-------------- -------------- -------------- --------------
Total revenue - - - -
-------------- -------------- -------------- --------------
Operating expenses:
Cost of food and beverage sales - - - -
Casino operating costs - - - -
Casino vessel costs - - - -
Sales and marketing - - - -
General and administrative 8,070 402 19,983 402
Write-off of deposit 24,000 - 30,000 -
Legal settlement(Note 3) - - - -
Minority interest in losses - - - -
-------------- -------------- -------------- --------------
Total operating expenses 32,070 402 49,983 402
-------------- -------------- -------------- --------------
Net loss $ (32,070) $ (402) $ (49,983) $ (402)
============== ============== ============== ==============
Basic net loss per share $ (0.00) $ (0.00) $ (0.01) $ (0.00)
============== ============== ============== ==============
Weighted average common shares outstanding 7,889,169 7,889,169 7,889,169 7,889,169
============== ============== ============== ==============
See accompanying notes to consolidated financial statements.
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SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three and Six Months Ended September 30, 2002 and 2001 (Unaudited)
Three Months Ended Six Months Ended
9/30/2002 9/30/2001 9/30/2002 9/30/2001
------------- ------------- ------------- -------------
Cash flows from operating activities:
Net loss $ (32,070) $ (402) $ (49,983) $ (402)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation - - - -
Loss on disposition of assets - - - -
Minority interest in losses - -
Legal settlement - - - -
Write-off of deposit 24,000 - 30,000 -
Changes in operating assets and liabilities:
Accounts receivable - - - -
Inventory - - - -
Other assets - - - -
Accounts payable and accrued liabilities - (402) - (402)
------------- ------------- ------------- -------------
Net cash used in operating activities (8,070) - (19,983) -
------------- ------------- ------------- -------------
Cash flows from financing activities:
Net advances from shareholder 8,070 - 19,983 -
Sale of shares of subsidiary to minority interests - - - -
Sale of common shares - - - -
------------- ------------- ------------- -------------
Net cash provided by financing activities 8,070 - 19,983 -
------------- ------------- ------------- -------------
Net decrease in cash and cash equivalents - - - -
Cash at beginning of year - - - -
------------- ------------- ------------- -------------
Cash at end of year $ - $ - $ - $ -
============= ============= ============= =============
Supplemental disclosure:
Total interest paid $ - $ - $ - $ -
============= ============= ============= =============
See accompanying notes to consolidated financial statements.
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NOTES TO UNAUDITED 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, 2002 included in the Company's Annual 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-month period ended September
30, 2002 are not necessarily indicative of the results that may be
expected for the year ending March 31, 2003.
2. DESCRIPTION OF BUSINESS
During the years ended March 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.
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.
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.
6
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. On October 27, 1999, the Company acquired 50
membership units in Casino Padre 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. The shares were acquired from
Charles S. Liberis, the President of the Company. Casino Padre 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 September 30, 2002, the Company owned 74% of
Casino Padre. Casino Padre ceased operations on November 6, 2000.
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. The Company canceled its
agreement with Black Hawk Hotel Corporation based on its determination
that the acquisition was not economically feasible due to increased
competition. The Company's application with the Colorado Gaming
Commission was withdrawn effective August 7, 2001.
The Company is currently considered a "public shell" corporation
with nominal business operations and is in the process of searching for
an operating business with which to negotiate a "reverse merger."
3. DEPOSIT ON CLAIM
In March 2000, Newpark Shipbuilding - Pasadena, Inc. ("Newpark")
filed a lawsuit against the Company seeking approximately $140,000 for
repair work on the M/V Casino Padre. The Company disputed the amount of
the claim and has posted a bond in the amount of $140,000 and
counterclaimed against Newpark for deceptive trade practices, damages
for improper workmanship and damages for delays caused by Newpark. The
case has been settled for $100,000 and CSL Development, the vessel
owner, was refunded $40,000 that it had posted on behalf of the
Company.
4. RELATED PARTY TRANSACTIONS
The payable to a principal shareholder included accrued interest
at a rate of 12% annually. The Company also owed CSL Development
Corporation for past due charter payments, payment of other operating
expenses and for accrued interest at 12% annually. Mr. Liberis is also
president of CSL Development Corporation.
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5. 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 September 30,
2002, the Company had a working capital deficiency of $779,810 and an
accumulated deficit of $6,357,565. 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
SIX MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,
2001
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 six months ended September 30, 2002
and for the same period of last year.
During the six months ended September 30, 2002, the Company incurred $49,983 of
operating expenses, as compared to $402 of operating expenses for same period
for the year 2001. Of this amount, $30,000 was the write-off of a deposit posted
in connection with a lawsuit.
The above resulted in a net loss of $49,983 for the six months ended September
30, 2002, as compared to a net loss of $402 for the six months ended September
30, 2001.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2002, the Company had a working capital deficiency of $779,810,
as compared to a deficiency of $759,827 at March 31, 2002. The Company does not
believe that it will be able to meet its normal operating costs and expenses
from management fees and cash flow as the Company does not presently have any
operations.
The Company has been dependent upon loans from its principal shareholder and
President, Charles Liberis. The loans are not evidenced by promissory notes and
there is no fixed date for repayment. At September 30, 2002, $96,602 was owed to
Mr. Liberis.
In addition, at September 30, 2002, $37,084 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, 2002, included an explanatory paragraph relating to the
uncertainty of the Company's ability to continue as a going concern due to the
loss incurred for the year ended March 31, 2002 and the working capital deficit
and stockholders' deficit existing as of March 31, 2002. The Company must raise
additional capital, incur debt, or obtain financing in order to fund operations.
9
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.
ITEM 3. CONTROLS AND PROCEDURES.
We have recently evaluated our internal controls. As of November 18, 2002, there
were no significant corrective actions taken by us or other changes made to
these internal controls. Our management does not believe there were changes in
other factors that could significantly affect these controls subsequent to the
date of the evaluation.
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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.
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 duly
authorized.
sureBET Casinos, Inc.
(Registrant)
Date: November 19, 2002 By: /s/ CHARLES S. LIBERIS
-----------------------------------------
Charles S. Liberis
Chairman of the Board, Chief
Executive Officer and President
(Principal Executive, Financial, and
Accounting Officer)
12
CERTIFICATION
I, Charles S. Liberis, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of sureBET
Casinos, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 19, 2002
/s/ CHARLES S. LIBERIS
-------------------------------------------
Charles S. Liberis, Principal Executive and
Financial Officer
13