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 JUNE 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 (I.R.S.) Employer
incorporation Identification No.
2700 East Sunset Road
Suite 39
Las Vegas, Nevada 89102
-------------------------------
Address of principal executive offices
(702) 895-7812
------------------------------------------
Registrant's telephone number, including area code
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
-------- -------
Class of Stock No. Shares Outstanding Date
Common 16,276,370 August 10, 1999
<PAGE>
FORTUNE ENTERTAINMENT CORPORATION
(A development stage enterprise)
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
June 30, December 31,
1999 1998
---- ----
ASSETS $ $
Current assets
Cash 37,816 353,543
Accounts receivable 5,785 22,423
Prepaid expenses 8,598 8,598
----------- ------------
Total current assets 52,199 384,564
----------- ----------
Deposits 9,879 9,879
Investments - at cost 1,183,751 1,183,751
Property and equipment - net 97,016 90,978
Goodwill - net 508,236 538,836
Intellectual property - net 5,240,789 5,547,789
--------- ---------
TOTAL ASSETS 7,091,870 7,755,797
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities 653,013 604,704
Due to related parties 595,980 595,980
Loans payable 385,983 470,000
Purchase consideration payable
-current position 641,250 923,750
Total current liabilities 2,276,226 2,594,434
--------- ---------
Purchase consideration payable 231,250 231,250
---------- ----------
Total liabilities 2,507,476 2,825,684
--------- ---------
SHAREHOLDERS' EQUITY
Share stock
Common stock, $0.0001 per value 1,574 1,393
30,000,000 authorized 16,276,370
issued and outstanding. Preferred stock,
$0.0001 par value convertible 38 85
For each Class A, B and C Preferred stock
1,100,000 authorized: 37,864, 127,864
and 41,864 issued and outstanding
respectively
Additional paid in capital 9,906,524 9,482,958
Share stock to be issued 510,000 210,000
Accumulated deficit (5,833,742) (4,764,323)
----------- -----------
Total shareholders' equity 4,584,394 4,930,113
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 7,091,870 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)
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
EXPENSES $ $ $ $
Amortization of intangible assets 168,800 158,727 337,600 336,950
Bank charges and interest 13,534 44,516 26,764 48,140
Consulting fees 35,541 134,925 132,036 167,283
General and administration 72,956 - 77,182 -
Legal and accounting 159,400 92,989 271,376 97,652
Management fees - 30,500 62,500 125,000
Office and miscellaneous 18,500 106,985 38,985 126,193
Rent 12,000 12,290 27,649 22,586
Salaries and wages 23,290 23,439 57,600 51,920
Travel promotion and
entertainment 25,013 20,825 37,727 40,837
-------- --------- ---------- --------
LOSS FOR THE PERIOD 529,034 625,196 1,069,419 1,016,561
DEFICIT, BEGINNING
OF PERIOD 5,304,708 1,847,479 4,764,32 1,456,114
--------- --------- --------- ---------
DEFICIT, END OF
PERIOD 5,833,742 2,472,675 5,833,742 2,472,675
========= ========= ========= =========
BASIC AND DILUTED
LOSS PER SHARE $ 0.04 $ 0.09 $ 0.07 $ 14.94
============ =========== ======== =========
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING 15,100,813 6,804,000 15,100,813 6,804,000
========== ========= ========== =========
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 SIX MONTHS ENDED JUNE 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 six months ended June 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-KB for the year ended December 31, 1998.
2. PRINCIPALS OF CONSOLIDATION
The condensed consolidated financial statements include the amount 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
select 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 June 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 and is also evaluating
acquisitions that would generate immediate cash flow for the Company.
<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 is seeking an advisory opinion from the National Indian
Gaming commission to the effect that the Company's Fortune Poker Game should be
classified as a Class II activity under the National Indian Gaming Regulatory
Act. The Native Indian gaming market is the initial target for the Company and
the Company intends to enter into revenue sharing agreements with various Indian
Tribal governing bodies, when and if, Class II classification is obtained.
Management believes that the Company's ability to market its Fortune Poker Game
would be significantly improved, if the advisory opinion were obtained.
The Company anticipates it will receive product orders for its Fortune
Poker game if regulatory approval is obtained. At that time, the Company will
seek more conventional forms of financing such as bank lines of credit or
product lease financing.
The Company has obtained, regulatory approval to license and market its
Rainbow 21 black jack game in the States of Nevada, Mississippi and South
Dakota. The Company is applying for regulatory approval in other jurisdictions.
No assurances can be given that the Company will be successful in obtaining the
required regulatory approvals, or, if successful, that the Company will be able
to obtain 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.
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 August 6,
1999 the Company did not have any formal commitments from any source to provide
additional capital to the Company.
The Company is evaluating acquisitions that would generate immediate cash flow
for 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 June 30, 1999 financial statements.
Item 2. Changes in Securities and Use of Proceeds
During the three months ended June 30, 1999 the Company sold 900,000
shares of common stock and warrants for the purchase of an additional 900,000
shares to an individual and two corporations for total consideration of
$450,000. (a 100,000, 300,000, and 500,000 unit offerings) The Company did not
pay any commissions in connection with the foregoing transactions. 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
described in this paragraph are "Restricted Securities" and that term is defined
in Rule 144 of the Securities and Exchange Commission.
During the quarter ending June 30, 1999, the Company issued 316,500 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 June 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: August 6, 1999 /s/ Robert V. Eberle
----------------------
Robert V. Eberle
Principal Financial and a Director
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