UNITED STATES
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to ________.
Commission File Number 0-23859
FORTUNE ENTERTAINMENT CORPORATION
Delaware 88-04053347
State or other jurisdiction of incorporation (I.R.S.) Employe
Identification No.
Fortune Entertainment Corporation
144 Elm Street
2nd Floor, Suite 16
Biddeford, Maine 04005
Address of principal executive offices
(207) 282-0878
Registrant's telephone number, including area code
2700 East Sunset Road
Suite 39
Las Vegas, Nevada 89102
Former address of principal executive offices
Indicate by check mark whether the Registrant (1) has files all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports) and (2) had been subject to such filing
requirements for the past 90 days.
Yes X No ________
------------------
As of November 12, 1999 the Company had 17,612,799 outstanding shares of
common stock.
<PAGE>
FORTUNE ENTERTAINMENT CORPORATION
(A development stage enterprise)
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT SEPTEMBER 30, 1999
(UNAUDITED)
SEPT. 30 DEC. 31
1999 1998
---- ----
$ $
ASSETS
Current assets
Cash 11,522 353,543
Accounts receivable 35,785 22,423
Prepaid expense 8,598 8,598
-------- -------
Total current assets 55,905 384,564
Deposits 9,879 9,879
Investments - at cost 1,183,751 1,183,751
Property and equipment - net 97,016 90,978
Goodwill - net 492,936 538,836
Intellectual property - net 5,087,289 5,547,789
TOTAL ASSETS 6,926,776 7,755,797
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities 705,928 604,704
Due to related parties 688,030 595,980
Loans payable 385,983 470,000
Purchase consideration payable -current position 641,250 923,750
Total current liabilities 2,421,191 2,594,434
--------- ---------
Purchase consideration payable 231,250 231,250
Total liabilities 2,652,441 2,825,684
SHAREHOLDERS' EQUITY
Share stock
Common stock, $0.0001 per value
30,000,000 authorized 16,731,370 issued and
outstanding. 1,667 1,393
Preferred stock, $0.0001 par value convertible 10 85
For each Class A, B and C Preferred stock
1,100,000 authorized: 32,864, 32,864 and 36,864
issued and outstanding respectively
Additional paid in capital 10,496,459 9,482,958
Share stock to be issued 60,000 210,000
Accumulated deficit (6,283,801) (4,764,323)
Total shareholders' equity 4,274,335 4,930,113
_________ _________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 6,926,776 7,755,797
========= =========
The accompanying notes are an integral part of the condensed consolidated
financial statements
<PAGE>
FORTUNE ENTERTAINMENT CORPORATION
(A development stage enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS & DEFICIT
FOR THE PERIODS ENDED
(UNAUDITED)
Nine Months Three Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
$ $ $ $
EXPENSES
Amortization of intangible assets 506,400 505,249 168,800 168,299
Bank charges and interest 31,782 64,138 5,018 15,998
Consulting fees 207,790 296,474 75,754 129,191
General and administration 153,296 24,718 76,114 12,571
Legal and accounting 332,347 156,911 60,971 59,259
Management fees 93,750 188,000 31,250 63,000
Office and miscellaneous 38,985 159,486 - 45,440
Rent 27,649 34,106 - 11,520
Salaries and wages 86,390 62,416 28,790 10,468
Travel promotion and
entertainment 41,089 112,305 3,362 71,468
-------- ------- -------- --------
LOSS FOR THE PERIOD 1,519,478 1,603,803 450,059 587,242
DEFICIT, BEGINNING
OF PERIOD 4,764,323 1,456,114 5,833,742 2,472,675
--------- --------- --------- ---------
DEFICIT, END OF
PERIOD 6,283,801 3,059,917 6,283,801 3,059,917
========= ========= ========= =========
BASIC AND DILUTED
LOSS PER SHARE $ 0.10 $ 0.19 $ 0.03 $ 0.07
========= ========= ======== =========
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING 15,298,313 8,431,412 15,298,313 8,341,412
========== ========= ========== =========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
FORTUNE ENTERTAINMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
9 MONTHS 9 MONTHS
SEPT. 1999 SEPT. 1998
$ $
CASH FLOW FROM OPERATING ACTIVITIES
Net loss for the period (1,5,19,478) (1,603,803)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization of intangible assets 506,400 491,659
Depreciation - 13,590
Shares issued for services rendered 33,700 711,520
Changes in operating assets and liabilities:
Accounts receivable (13,362) 13,970
Prepaid expenses and deposits - 21,250
Accounts payable and accrued liabilities 101,224 250,375
CASH USED IN OPERATING ACTIVITIES (891,516) (101,439)
--------- ---------
INVESTING ACTIVITIES
Purchase price consideration payable (282,500) (125,000)
Acquisition of investments - (1,371,251)
Acquisition of property and equipment (6,038) (40,000)
--------- ----------
CASH USED IN INVESTING ACTIVITIES (288,538) (1,536,251)
--------- -----------
FINANCING ACTIVITIES
Loans payable (84,017) 85,673
Advances from related parties 92,050 (112,288)
Proceeds from capital contribution 830,000 1,624,563
------ ---------
CASH PROVIDED BY FINANCING ACTIVITIES 838,033 1,597,948
NET DECREASE IN CASH
DURING PERIOD (342,021) (39,742)
---------- --------
CASH AT BEGINNING OF PERIOD 353,543 41,890
-------- ---------
CASH AT END OF PERIOD 11,522 2,148
========= =========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
FORTUNE ENTERTAINMENT CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
1. INTERIM REPORTING
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles and Form
10-QSB requirements. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the
nine months ended September 30, 1999 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1999. For further
information, refer to the financial statements and footnotes thereto included in
the Company's annual report on Form 10-KSB for the year ended December 31, 1998.
2. PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Fortune Entertainment Corporation
(Bahamas), Fortune Entertainment Corporation (British Columbia, Canada), and
Fortune Poker Inc. (Delaware). All significant inter company accounts and
transactions have been eliminated.
3. BUSINESS
The Company is engaged in the acquisition, design and development of
selected gaming products, which the company intends to sell, lease and license
in the United States and International gaming markets.
The Company's two initial products are the Fortune Poker System, a
progressive multi-player draw poker video game and the Rainbow 21 casino
blackjack game.
The Company is still in the development stage and is expected to incur
substantial future losses. At September 30, 1999 the Company did not have
sufficient working capital to meet its commitments. As a result the Company is
attempting to raise additional capital.
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
AND PLAN OF OPERATION
The following should be read in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations in the Company's
annual report on Form 10-KSB for the year ended December 31, 1998.
This report contains forward-looking statements within the meaning of the
Securities Act of 1933 and of the Securities Exchange Act of 1934. Such
statements include, but are not limited to projected sales, market acceptance,
and the availability of capital. Forward-looking statements are inherently
subject to risks and uncertainties, many of which cannot be predicted with
accuracy and some of which may not even be anticipated. Future events and actual
results, financial and otherwise, could differ materially from those set forth
in or contemplated by the forward-looking statements.
The Company is still a development stage enterprise and is expected to
incur substantial future losses. The Company has to date, generated only minimal
revenues from its operations. The Company must obtain additional capital or
reduce operating costs to enable it to continue operations and to commercialize
its two major products - Rainbow 21 and Fortune Poker.
The Company's products are subject to state and local gaming laws, as well
as various federal laws and regulations governing business activities with North
American Indian Tribes. The ability of the Company to market its products is
dependent upon the company's ability to comply with these gaming laws and
regulations. The Company intends, initially, to lease its Fortune Poker system
to the charity and Indian Gaming segment of the market through its own sales
staff and through independent sales representatives and distributors. In the
absence of an advisory opinion as to the Class II status of the Fortune Poker
system, the Company has placed more emphasis on marketing the game to Indian
Tribes, such as Mille Lacs Band, who conduct operations under state compacts
which provide specific procedures for prior approval of new gaming machines. The
Company has initiated the testing and approval process for the Fortune Poker
system through Gaming Laboratories International with the sponsorship of the
Mille Lacs Band of Ojibwe Indians under the Mille Lacs Band's compact with the
State of Minnesota. The Company anticipates it will receive product orders of
its Fortune Poker game if regulatory approval is obtained.
The Company has acquired all the patents and intellectual property rights
relating to the Rainbow 21 blackjack game, which has been approved for casino
play in Nevada by the Nevada Gaming Control Board, and in Mississippi by the
Mississippi Gaming Commission and in New Jersey by the New Jersey Gaming
Commission. The Company has been advised by the Nevada Gaming Control Board that
the Company can sell or lease the Rainbow 21 game to licensed operators in
Nevada without obtaining its own operator's license provided the Company does
not share in a percentage of the gaming revenues.
No assurances can be given that the Company will be successful in
obtaining conventional lines of credit or raise additional capital. Furthermore,
there can be no assurance that the company will ever be profitable. If the
Company is unable to obtain adequate additional financing, the Company will be
required to sharply curtail its operations.
<PAGE>
The Company relies on short-term borrowings, the sale of promissory notes,
and the sale of restricted common stock to fund its operations. As of November
l, 1999 the Company did not have any formal commitments from any source to
provide additional capital to the Company.
<PAGE>
PART II
OTHER INFORMATION
Item l. Legal Proceedings
On April 26, 1999 a creditor to which the Company owes $369,600 filed
suit in the Supreme Court of British Columbia seeking a judgment against the
Company for the amount owed. The amount owed to this creditor is recorded as a
liability on the Company's December 31, 1998 and September 30, 1999 financial
statements.
Item 2. Changes in Securities and Use of Proceeds
During the three months ended September 30, 1999 the Company sold
160,000 shares of common stock and warrants for the purchase of an additional
160,000 shares to an individual and one corporation for total consideration of
$80,000. The Company paid a commission of $5,000 in connection with the sale of
100,000 shares and warrants. The Company relied upon the exemption provided by
Section 4 (2) of the Securities Act of 1933 in connection with the sale of these
shares of common stock. The shares and warrants described above are "Restricted
Securities" and that term is defined in Rule 144 of the Securities and Exchange
Commission.
During the quarter ending September 30, 1999, the Company issued 105,000
shares of its common stock upon the conversion of the Company's preferred stock.
The Company relied upon the exemption provided by section 3 (a) (9) of the
Securities Act of 1933 in connection with the issuance of these shares.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
No exhibits are filed with this report
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended September 30, 1999
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Fortune Entertainment Corporation
Date: November 12, 1999 By /s/ Robert V. Eberle
----------------------------------
Robert V. Eberle
Principal Financial Officer and
Officer authorized to sign this report
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