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, 2000.
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 0-30292
FORTUNE ENTERTAINMENT CORPORATION
Delaware 88-04053347
State or other jurisdiction (I.R.S.) Employer
of incorporation 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
N/A
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 May 18, 2000 the Company had 24,787,450 outstanding shares of common
stock.
<PAGE>
FORTUNE ENTERTAINMENT CORPORATION
(A development stage enterprise)
CONDENSED BALANCE SHEETS
(UNAUDITED)
March 31, 2000 December 31, 1999
ASSETS
Current assets
Cash $ 208,738 $ 22,397
Accounts receivable -- 2,635
----------------- ----------
Total Current assets 208,738 25,032
Deposits 9,879 9,879
Investments - at cost 1,956,658 1,356,658
Property and equipment - net 68,689 73,146
Goodwill - net 462,336 477,636
Intellectual property - net 4,780,289 4,933,789
------------ -----------
TOTAL ASSETS $7,486,589 $6,876,140
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 348,366 $ 385,134
Due to related parties 1,071,960 1,072,491
Loans payable 270,000 370,000
Purchase consideration payable 405,000 405,000
----------- ----------
Total current liabilities 2,095,326 2,232,625
--------- ---------
Total liabilities 2,095,326 2,232,625
SHAREHOLDERS' EQUITY
Common stock, $ 0.0001 par value, 30,000,000
authorized, 19,234,615 and 18,093,615
respectively issued and outstanding 1,924 1,810
Preferred stock $0.0001 par value,
convertible Class A, B and C
Preferred stock; 5,000,000 authorized,
32,864; 32,864; 32,864 issued and
outstanding 10 10
Additional paid in capital 11,329,083 10,795,642
Shares to be issued 760,000 138,703
Stock Based Compensation 465,000 465,000
Accumulated deficit (7,164,754) (6,757,650)
----------- -----------
Total shareholders' equity 5,391,263 4,643,515
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $7,486,589 $ 6,876,140
========== ===========
The accompanying notes are an integral part of the consolidated financial
statements
<PAGE>
FORTUNE ENTERTAINMENT CORPORATION
(A Development stage enterprise)
CONDENSED STATEMENTS OF OPERATIONS & DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31
(UNAUDITED)
EXPENSES 2000 1999
----- ----
Amortization of intangible assets $ 168,800 $ 168,800
Depreciation 4,458 --
Bank charges and interest 25,997 13,230
Consulting fees 50,609 96,495
General and administration 49,934 4,226
Legal and accounting 40,492 111,976
Management fees 20,000 62,500
Office and miscellaneous 4,110 20,485
Rent 13,527 15,649
Salaries and wages -- 34,310
Contracted Services 20,466 --
Travel promotion and entertainment 8,711 12,714
-------- -------
LOSS FOR THE PERIOD 407,104 540,385
DEFICIT, BEGINNING OF PERIOD 6,757,650 4,764,323
--------- ---------
DEFICIT, END OF PERIOD $ 7,164,754 $ 5,304,708
----------- -----------
BASIC AND DILUTED LOSS PER SHARE $ 0.04 $ 0.04
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 18,664,115 14,482,563
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
FORTUNE ENTERTAINMENT CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31
(UNAUDITED)
2000 1999
----- ----
CASH FLOW FROM OPERATING ACTIVITIES
Net loss for the period $ (407,104) $ (540,385)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization of intangible assets 168,800 168,800
Depreciation 4,458 --
Shares issued for services rendered -- 33,700
Changes in operating assets and liabilities:
Accounts receivable 2,635 --
Prepaid expenses and deposits -- (5,144)
Accounts payable and accrued liabilities (36,768) (4,464)
---------- -----------
NET CASH USED IN OPERATING ACTIVITIES (267,979) (347,493)
---------- ----------
INVESTING ACTIVITIES
Purchase price consideration payable -- (200,000)
----------- ----------
FINANCING ACTIVITIES
Loans payable (100,000) --
Advances from (Payments to) related parties (532) 54,078
Proceeds to from capital contribution 554,852 210,000
------- --------
CASH PROVIDED BY FINANCING ACTIVITIES 454,320 264,078
------- -------
NET INCREASE (DECREASE) IN CASH
DURING PERIOD 186,341 (283,415)
------- ---------
CASH AT BEGINNING OF PERIOD 22,397 353,543
CASH AT END OF PERIOD $ 208,738 $ 70,128
=========== ===========
The accompanying notes are an integral part of the condensed financial
statements.
<PAGE>
FORTUNE ENTERTAINMENT CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 2000
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, 2000 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2000. For further
information, refer to the financial statements and related footnotes included in
the Company's annual report on Form 10-KSB for the year ended December 31, 1999.
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.
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, 1999.
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
<PAGE>
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's products are in the early stage of commercialization and
regulatory approval. The Company is still in the development stage and is
expected to incur substantial future losses. The Company has not, to date,
generated any revenues from its operations. The ability of the Company to
generate revenues and positive cash flow will depend on several factors,
including the timing and costs in obtaining gaming licenses and concluding
agreements with Indian Tribal Casinos with respect to the Company's gaming
products.
During the period ending December 31, 2000 the Company plans to market its
Fortune Poker and electronic Bingo games to Indian Tribes holding Class III
casino licenses in Minnesota. During the year 2000 the Company plans to license
the rights to its Rainbow 21 game to third parties who will then attempt to
market the Rainbow 21 game to casino operators.
In order to market its Fortune 21 and electronic Bingo games, the Gaming
Laboratories International will need to complete its testing of the Fortune
Poker game. The Company expects this testing will be completed by May 2000.
Following the competition of the testing of the Company's Fortune Poker
and electronic Bingo games the Company will apply for a gaming license from
Minnesota. While the Company's application is being reviewed, the Company will
begin negotiations with Indian Tribal Casinos in Minnesota with a view to the
Tribal Casino's purchase or lease of the Company's Fortune Poker and/or
electronic Bingo games. It will be the Company's objective to conclude an
arrangement whereby the Company will receive a percentage of the net revenues
derived from the operation of the games. The percentage which the Company
expects to receive will vary (typically between 9% and 23%) depending upon
whether the games are purchased or leased from the Company and whether the
Company or the particular Tribal Casino operates the games.
The Company does not anticipate any difficulties in obtaining a gaming
license from Minnesota. Contingent with the ability of the Company to conclude
satisfactory agreements with one or more Tribal Casinos in Minnesota, the
Company expects that its first Fortune Poker game and/or electronic Bingo game
will be installed and operational in a Minnesota Indian Tribal Casino by
September 2000.
If the Company is successful in obtaining a gaming license in Minnesota, the
Company plans to apply for gaming licenses in other states (with the exception
of Nevada and states that do not have Class III Indian Tribal casinos) which
have tribal casinos with Class III gaming licenses. However, before applying for
a gaming license in any of these states, the Company must first obtain the
sponsorship of an Indian tribe which operates a casino in the state.
No assurances, however, can be given that the Company will be successful
in obtaining any required licenses, permits or approvals, or in obtaining the
sponsorship of any Indian tribe operating casinos in states other than
Minnesota.
<PAGE>
Since inception the Company has funded its operations and capital
expenditures primarily through private placements of debt and equity securities.
The Company needs additional financing on an ongoing basis to remain in
operation. There can be no assurance that such financing will continue to be
available at all, or on terms acceptable 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 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, 1999 and March 31, 2000 financial statements.
Item 2. Changes in Securities and Use of Proceeds
During the three months ended March 31, 2000 the Company sold 1,141,000
shares of common stock for total consideration of $ 502,000. The Company paid a
commission of $ 47,148 and 53,041 shares of common stock in connection with the
sale of 1,141,000 shares. 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.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
No exhibits are filed with this report
(b) Reports on Form 8-K
On March 28, 2000 the Company filed a report on Form 8-K disclosing a
change in the Company's auditors.
<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 19, 2000 By /s/ Robert V. Eberle
----------------------
Robert V. Eberle
Principal Financial Officer and
Officer authorized to sign this report
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