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 March 31, 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 15,039,870 May 14, 1999
<PAGE>
FORTUNE ENTERTAINMENT CORPORATION
(A development stage enterprise)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1999 1998
ASSETS
Current assets
Cash $70,128 $353,543
Accounts receivable 22,423 22,423
Prepaid expenses 13,742 8,598
---------- -----------
Total current assets 106,293 384,564
Deposits 9,879 9,879
Investments - at cost 1,183,751 1,183,751
Property and equipment - net 90,978 90,978
Goodwill - net 523,536 538,836
Intellectual property - net 5,394,289 5,547,789
--------- ---------
TOTAL ASSETS $7,308,726 $7,755,797
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $600,240 $604,704
Due to related parties 650,058 595,980
Loans payable 470,000 470,000
Purchase consideration payable -current
position 723,750 923,750
---------- ----------
Total current liabilities 2,444,048 2,594,434
Purchase consideration payable 231,250 231,250
---------- ----------
Total liabilities 2,675,298 2,825,684
SHAREHOLDERS' EQUITY
Common stock, $0.0001 par value, 30,000,000 1,504 1,393
shares authorized, 15,039,870 shares
issued and outstanding.
Series A, B and C Preferred stock $0.0001 par value, 52 85
1,100,000 shares authorized: 130,864, 220,864
and 172,364 shares issued and outstanding,
respectively
Additional paid in capital 9,876,580 9,482,958
Shares to be issued 60,000 210,000
Accumulated deficit (5,304,708) (4,764,323)
----------- -----------
Total shareholders' equity 4,631,872 4,930,113
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $7,308,726 $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 THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
1999 1998
---- ----
EXPENSES
Amortization of intangible assets $168,800 $178,223
Bank charges and interest 13,230 3,624
Consulting fees 96,495 32,358
General and administration 4,226 -
Legal and accounting 111,976 4,663
Management fees 62,500 94,500
Office and miscellaneous 20,485 19,208
Rent 15,649 10,296
Salaries and wages 34,310 28,481
Travel promotion and entertainment 12,714 20,012
----------- --------
LOSS FOR THE PERIOD 540,385 391,365
DEFICIT, BEGINNING OF PERIOD 4,764,323 1,456,114
------------ ----------
DEFICIT, END OF PERIOD $5,304,708 $1,847,479
========== ==========
BASIC AND DILUTED LOSS PER SHARE $ 0.04 $ 0.08
============= ===========
WEIGHTED AVERAGE COMMON SHARES 14,482,563 4,933,420
========== =========
OUTSTANDING
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 THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
1999 1998
---- ----
CASH FLOW FROM OPERATING ACTIVITIES
Net loss for the period $(540,385) $(391,365)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization of intangible assets 168,800 178,223
Shares issued for services rendered 33,700 -
Changes in operating assets and liabilities:
Accounts receivable - 4,729
Prepaid expenses and deposits (5,144) 7,987
Accounts payable and accrued liabilities (4,464) 29,140
---------- ---------
NET CASH USED IN OPERATING ACTIVITIES (347,493) (171,286)
--------- ---------
INVESTING ACTIVITIES
Purchase price consideration payable (200,000) (155,000)
--------- ---------
FINANCING ACTIVITIES
Loans payable - 220,178
Advances from related parties 54,078 88,215
Proceeds from capital contribution 210,000 517,500
------- --------
CASH PROVIDED BY FINANCING ACTIVITIES 264,078 825,893
------- -------
NET DECREASE IN CASH DURING PERIOD (283,415) 499,607
--------- -------
CASH AT BEGINNING OF PERIOD 353,543 41,890
------- ---------
CASH AT END OF PERIOD $70,128 $541,497
======= ========
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 THREE MONTHS ENDED MARCH 31, 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 three months ended March 31,
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 financial
statements 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 both 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 March 31, 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'S 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 not, to date, generated any
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
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 market 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.
No assurances can be given that the Company will be successful in
obtaining 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 May 17,
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 1. 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 judgement 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 March 31, 1999 financial statements.
Item 2. Changes in Securities and Use of Proceeds
During the three months ending March 31, 1999 the Company (i) sold
150,000 shares of common stock and warrants for the purchase of an additional
150,000 shares to one corporation for $150,000 and (ii) issued 67,400 shares of
common stock to three persons in payment of services rendered. 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" as that term is defined
in Rule 144 of the Securities and Exchange Commission.
During the quarter ending March 31, 1999 the Company issued 327,214 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 March 31, 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: May 17, 1999 /s/ D. Bruce Horton
---------------------
D. Bruce Horton,
Principal Financial Officer, Chief
Accounting Officer, Secretary and a
Director
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<S> <C>
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<PERIOD-END> Mar-31-1999
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<PP&E> 113,119
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0
52
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<SALES> 0
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