U.S. 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, 2000
[ ] 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: 000-29443
VIVA GAMING & RESORTS INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0873132
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2700 West Sahara Avenue, Third Floor, Las Vegas Nevada 89102
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number (702) 262-6477
3753 Howard Hughes Parkway, Las Vegas, NV 89109
(Former address and former fiscal year end, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES [ X ] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 7,167,400 as of November 30,
2000.
<PAGE>
VIVA GAMING & RESORTS INC. Form 10-QSB for the quarter ended September 30, 2000
<TABLE>
<CAPTION>
TABLE OF CONTENTS AND INFORMATION REQUIRED IN REPORT
Page
<S> <C>
PART I Financial Information
Item 1. Financial Statements (unaudited):
Condensed and Consolidated:
Balance Sheet as of September 30, 2000 3
Statements of Operations for the nine months ended
September 30, 2000 and September 30, 1999 and for the period
from December 9, 1997 (inception) to September 30, 2000 4
Statements of Operations for the three months ended
September 30, 2000 and September 30, 1999 5
Statements of Stockholders' Equity for the period
from December 9, 1997 (inception) to September 30, 2000 6
Statements of Cash Flows for the nine months ended
September 30, 2000 and September 30, 1999 and for the period
from December 9, 1997 (inception) to September 30, 2000 7
Notes to Condensed and Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis or Plan of
Operation 15
PART II Other Information
Item 1. Legal Proceedings 17
Item 2 Changes in Securities and Use of Proceeds 17
Item 3 Defaults Upon Senior Securities 17
Item 4 Submission of Matters to a Vote of Security Holders 17
Item 5 Other Information 17
Item 6 Exhibits and Reports on Form 8-K 17
SIGNATURES 18
</TABLE>
2
<PAGE>
VIVA GAMING & RESORTS INC.
(A Development Stage Company)
Condensed and Consolidated Balance Sheet
(Unaudited)
September 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C>
Current assets
Cash $ 42,877
Accounts and advances receivable 118,339
Prepaid expenses 86,303
Inventory 48,108
Total current assets 295,627
----------------
Property and equipment, net 19,920
Licenses and permits, net 2,293,438
Investment in subsidiary 1
Goodwill, net 4,514,794
Other assets 6,335
----------------
$ 7,130,115
================
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 1,723,343
Notes and advances from stockholders and officers 1,370,889
Due to affiliates 80,642
Notes payable 1,000,000
----------------
Total current liabilities 4,174,874
Minority interest 118,570
Commitments (note 6)
Stockholders' equity
Share capital (note 7)
Authorized
10,000,000 preferred shares with $0.10 par value
100,000,000 common shares with $0.001 par value
Issued
7,157,400 common shares 7,157
Additional paid-in capital 2,414,343
Common stock to be issued 3,735,000
Deficit accumulated during the development stage (3,319,829)
----------------
Total stockholders' equity 2,836,671
----------------
$ 7,130,115
================
</TABLE>
The Accompanying Notes are an Integral
Part of These Financial Statements
3
<PAGE>
VIVA GAMING & RESORTS INC.
(A Development Stage Company)
Condensed and Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Period from
December
Nine Months Ended 9, 1997
September 30, (inception)
------------------------------- to September
2000 1999 30, 2000
---- ---- ---------
<S> <C> <C> <C>
Revenue $ 73,567 $ $ 73,567
Operating Expenses
Beverage costs 24,154 24,154
Consultants 461,412 12,500 638,755
Depreciation and amortization 36,058 208 36,616
Finance fees 229,793 229,793
Legal and accounting 146,671 12,879 172,360
Office and administration 197,138 61,911 343,499
Payroll and related costs 201,800 58,717 349,618
Regulatory, transfer and fees 17,605 15,240 35,921
Stock based compensation 20,550 696,000
Travel, entertainment and promotion 137,902 75,223 242,712
------------ ----------- --------------
Total operating expenses 1,473,083 236,678 2,769,428
------------ ----------- --------------
(Loss) from operations (1,399,516) (236,678) (2,695,861)
Other income (expenses)
Foreign exchange (7,842) (2,240) (9,184)
Interest income 2,866 5,732
Interest expense (27,509) (28,662)
Equity interest in subsidiary (603,254) (603,254)
------------ ----------- --------------
Total other income (expenses) (638,605) 626 (635,368)
------------ ----------- --------------
Minority Interest 11,400 11,400
------------ ----------- --------------
Net (loss) $ (2,026,721) $ (236,052) $ (3,319,829)
============ =========== ==============
Net (loss) per share - Basic and Diluted $ (0.29) $ (0.04) $ (0.56)
============ =========== ==============
Weighted average shares
of common stock outstanding 7,043,730 6,076,923 5,953,664
============ =========== ==============
</TABLE>
The Accompanying Notes are an Integral
Part of These Financial Statements
4
<PAGE>
VIVA GAMING & RESORTS INC.
(A Development Stage Company)
Condensed and Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
2000 1999
---- ----
<S> <C> <C>
Revenue $ 73,567 $
Operating Expenses
Beverage costs 24,154
Consultants 231,113 12,500
Depreciation and amortization 34,675 208
Finance fees 178,693
Legal and accounting 38,816 4,459
Office and administration 83,679 46,106
Payroll and related costs 49,091 53,524
Stock based compensation 20,550
Regulatory, transfer and fees 8,492 10,616
Travel, entertainment and promotion 15,169 46,660
------------ --------------
Total operating expenses 684,432 174,073
------------ --------------
(Loss) from operations (610,865) (174,073)
Other income (expenses)
Foreign exchange (12,494) 4,063
Interest income
Interest expense (27,508)
Equity interest in subsidiary (603,254)
------------ --------------
Total other income (expenses) (643,256) 4,063
------------ --------------
Minority interest 11,400
------------ --------------
Net (loss) $ (1,242,721) $ (170,010)
============ ==============
Net (loss) per share - Basic and Diluted $ (0.17) $ (0.03)
============ ==============
Weighted average shares
of common stock outstanding 7,157,400 6,500,000
============ ==============
</TABLE>
The Accompanying Notes are an Integral
Part of These Financial Statements
5
<PAGE>
VIVA GAMING & RESORTS INC.
(A Development Stage Company)
Condensed and Consolidated Statements of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Deficit
Common Unearned Additional Accumulated During
Common Stock Stock to be Consulting Paid-in the Development
Shares Amount Issued Fees Capital Stage
<S> <C> <C> <C> <C> <C> <C>
Initial capitalization
September 30, 1998
for cash 3,750,000 $3,750 $ $ $ 108,750 $
-----------------------------------------------------------------------------
Net (loss) (189,710)
Balance as of
December 31, 1998 3,750,000 3,750 108,750 (189,710)
Shares issued for:
Settlement of
accounts payable 2,750,000 2,750 107,250
Consulting services 200,000 200 199,800
Consulting services 40,000 40 60,000 (60,000) 39,960
Stock options granted to
Non-employees for services 675,450
Net (loss) (1,103,398)
-----------------------------------------------------------------------------
Balance as of
December 31, 1999 6,740,000 6,740 60,000 (60,000) 1,131,210 (1,293,108)
Shares issued for:
Private placement 324,000 324 1,349,676
Private placement fee 29,400 29 122,471
Consulting services 60,000 60 (60,000) 60,000 59,940
Exercise of warrants 4,000 4 24,996
Private placement commissions (294,500)
Shares issuable for acquisition
of Viva Mexico 3,735,000
Stock options granted to
Non-employees for services 20,550
Net (loss) (2,026,721)
-----------------------------------------------------------------------------
Balance as of
September 30, 2000 7,157,400 $7,157 $3,735,000 $ $ 2,414,343 $(3,319,829)
=============================================================================
</TABLE>
The Accompanying Notes are an Integral
Part of These Financial Statements
6
<PAGE>
VIVA GAMING & RESORTS INC.
(A Development Stage Company)
Condensed and Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Period from
December
Nine Months Ended 9, 1997
September 30, (inception)
--------------------------------- to September
2000 1999 30, 2000
---- ---- --------
<S> <C> <C> <C>
Cash used in operating activities $ (1,415,573) $ (164,349) $(1,806,171)
------------- -------------- -----------
Cash flows from financing activities
Proceeds from the issuance of common stock 1,203,000 1,315,500
Advances to stockholder (115,366)
Repayment from stockholder advance 115,366 115,366
Proceeds from note payable 1,000,000 1,112,500
Repayment of note payable (112,500)
Advances from stockholders and officers 823,163 63,633 1,116,297
Repayment of stockholders and officers advances (245,408) (245,408)
------------- -------------- -----------
Cash provided by financing activities 2,780,755 178,999 3,186,389
------------- -------------- -----------
Cash flows from investing activities
Acquisition of property and equipment (11,563) (11,747) (23,309)
Acquisition of other assets (6,335) (6,335)
Net cash utilized in acquisition (511,314) (511,314)
Acquisition of investments (796,383) (796,383)
------------- -------------- -----------
Cash used in investing activities (1,325,595) (11,747) (1,337,341)
------------- -------------- -----------
Increase (decrease) in cash 39,587 2,903 42,877
Cash, beginning of period 3,290
------------- -------------- -----------
Cash, end of period $ 42,877 $ 2,903 $ 42,877
============= ============== ===========
Supplemental Disclosure of Non-Cash Financing and Investing Activities
Acquisition of subsidiaries
Fair value of:
Working capital, other than cash $ 1,965,176 $ $ 1,965,176
Licenses & permits (2,293,438) (2,293,438)
Notes payable 500,000 500,000
Cost in excess of net assets of
company acquired (4,548,022) (4,548,022)
Minority interest 129,970 129,970
Issuance of common stock for acquisition 3,735,000 3,735,000
------------- -------------- -----------
Cash utilized in acquisition $ (511,314) $ $ (511,314)
============= ============== ===========
</TABLE>
The Accompanying Notes are an Integral
Part of These Financial Statements
7
<PAGE>
VIVA GAMING & RESORTS INC.
(A Development Stage Company)
Notes to Condensed and Consolidated Financial Statements
(Unaudited)
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Organization and Nature of Business
These financial statements include the accounts of Viva Gaming & Resorts Inc.
(the "Company") and its wholly owned limited liability company Corpus Christi
Day Cruise Texas I, Inc. and Corpus Christi Day Cruise Concession, Inc., its
majority owned limited liability company, Viva Gaming & Resort de Mexico, S.A.
de C.V. and its investment in Corpus Christi Day Cruise, LTD (Limited
Partnership) (note 3).
Principals of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All material intercompany transactions and balances have been
eliminated upon consolidation
The Company's investment in Corpus Christi Day Cruise, LTD (Limited Partnership)
is accounted for under the equity method. Under the equity method, the Company
records only its investment in the subsidiary which is adjusted for the
Company's proportionate share of the investment's net income or loss.
Goodwill
Goodwill represents the excess of the cost of the Company's interest in a
purchased subsidiary over the fair value of a proportionate share of its net
assets at the date of acquisition. Goodwill is being amortized using the
straight line method over 15 years.
Minority Interest
Minority interest represents the interest of shareholders in subsidiaries that
are not wholly-owned subsidiaries of the Company, in the assets and liabilities
of the subsidiary included on the balance sheet and in the revenues and expenses
of the subsidiary included in the statement of operations.
Licenses and Permits
The Company capitalizes the cost of acquiring the licenses and permits required
to operate its business in Mexico. Licenses and Permits are stated at cost less
amortization on a straight line basis over the shorter of the term of the
license or permit or 15 years, commencing with operations. Lottery licenses are
held for an indefinite period. Municipal licenses are renewable yearly.
Foreign Currency Translation
The Company translates the assets and liabilities of international non-U.S.
functional currency subsidiaries into dollars at the current rates of exchange
in effect at each period. Revenues and expenses are translated using rates
that approximate those in effect during the period. Gains and losses from
translation adjustments are to be included in stockholders' equity in the
consolidated balance sheet caption "Accumulated other comprehensive income
(loss)."
8
<PAGE>
VIVA GAMING & RESORTS INC.
(A Development Stage Company)
Notes to Condensed and Consolidated Financial Statements
(Unaudited)
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Long-Lived Assets
The Company reviews for the impairment of long-lived assets whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. An impairment loss would be recognized when estimated future
cash flows expected to result from the use of the asset and its eventual
disposition is less than its carrying amount.
NOTE 2: INTERIM FINANCIAL DATA
The accompanying unaudited condensed and consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. All
adjustments that, in the opinion of management, are necessary for the fair
presentation of the results of operations for the interim periods have been made
and are of a recurring nature unless otherwise disclosed herein. The results of
operations for the nine month period ended September 30, 2000 are not
necessarily indicative of the results that will be realized for a full year. For
further information, refer to the financial statements and notes thereto
contained in the Company's Registration Statement on Form 10-SB.
NOTE 3: ACQUISITIONS AND VENTURES
Viva Gaming & Resort de Mexico, S.A. de C.V.
In August, 2000, the Company acquired 3,215,000 common shares of Viva Gaming &
Resort de Mexico, S.A. de C.V. ("Viva Mexico"), a Mexican corporation
representing a 64.3% interest therein from certain shareholders of Viva Mexico
for consideration of 1,500,000 restricted shares of the Company's common stock,
valued by management at $2.49 per share, $500,000 as a reimbursement to a
director for expenses incurred to develop Viva Mexico's business opportunity and
the payment of the capital contribution for the 3,215,000 Viva Mexico shares
($329,798). Stockholders of Viva Mexico include directors of the Company.
The acquisition was accounted for as a purchase and accordingly, the operations
of Viva Mexico have been included in the Company's financial statements since
the date of acquisition. The excess of the purchase price over the fair market
value of the assets acquired of $4,548,022 is being amortized over 15 years.
Corpus Christi Day Cruise (Note 9)
At the beginning of July, 2000, investors subscribed for a 40% equity interest
in Corpus Christi Day Cruise, LTD (Limited Partnership) (the "Texas Treasure")
for an aggregate consideration of $3.0 million and secured a letter of credit
for the project in the amount of $1.5 million for a 20% equity interest in the
Texas Treasure. The equity interests were obtained from the Limited Partnership.
The Company's interest therein has accordingly been reduced to 40%.
9
<PAGE>
VIVA GAMING & RESORTS INC.
(A Development Stage Company)
Notes to Condensed and Consolidated Financial Statements
(Unaudited )
NOTE 3: ACQUISITIONS AND VENTURES (Continued)
Corpus Christi Day Cruise (Continued)
In addition to its equity interest, the Company is entitled to a management fee
from the project in the amount of 4% of the project's net revenues. The receipt
and amount of the fee is subject to the Company attaining certain sales and
profit goals.
In the quarter ended June 30, 2000, the Company consolidated its investment in
the Texas Treasure and recorded a loss from start-up operations in the amount of
$192,118. Since June 30, 2000, the investment has been accounted for by the
equity method and accordingly, only the Company's proportionate share of the
results from the Texas Treasure's operations are included the Company's
financial statements. The results of Texas Treasure's operations are reflected
as an addition or deduction to the carrying value of the Company's investment on
the balance sheet.
The following is condensed financial information for the Texas Treasure as of
September 30, 2000.
Assets $ 4,018,136
Liabilities 2,229,339
Equity 1,790,603
Revenues 890,350
Net Loss 1,813,377
NOTE 4: NOTES AND ADVANCES FROM STOCKHOLDERS
AND OFFICERS
In August, 2000, the Company formalized its obligations to certain stockholders
and investors through the issuance of promissory notes in the amount of
$858,700. The promissory notes are due and payable on demand on September 30,
2000 with interest at the rate of 10% per annum. Advances from stockholders and
officers, also includes a secured promissory note in the amount of $500,000 due
to a director of the Company (note 5).
NOTE 5: NOTES PAYABLE
The Company has issued secured promissory notes to an investor for monies
borrowed by the Company to advance to the Company's Mexican subsidiary and to a
director for development expenses incurred in connection with obtaining the
business opportunity for the Company's Mexican subsidiary (note 4).
These promissory notes bear interest at the rate of 10% per annum and are due
and payable on September 30, 2000. To the extent that the private placement of
the Company's common stock (note 7) was not consummated on or before the
maturity date of September 30, 2000, the maturity dates of the secured
promissory notes are extended to December 31, 2000.
The promissory notes are collateralized through escrow by the 3,215,000 common
shares of Viva Mexico which shall be released to the Company upon full payment
of principal and interest due on the secured promissory notes.
10
<PAGE>
VIVA GAMING & RESORTS INC.
(A Development Stage Company)
Notes to Condensed and Consolidated Financial Statements
(Unaudited )
NOTE 6: COMMITMENTS (Note 9)
Irrevocable standby letter of credit
In connection with and as a condition of the lease of the M/V Island Dawn
(renamed the M/V Texas Treasure in October 2000), a Bahamian-flagged passenger
liner for the Texas Treasure, the Company has arranged on July 11, 2000 through
an independent investor, an irrevocable standby letter of credit in favor of the
vessel's owner in the amount of $1,500,000. In consideration for the issuance of
said irrevocable standby letter of credit, the Company has agreed to save and
render the investor harmless and intact and to replace or cause the replacement
of the irrevocable standby letter of credit on or before December 20, 2000. In
addition, the Company has agreed to pay the investor at the time of removal, an
origination fee of $250,000. The origination fee is being amortized through
December 20, 2000 and has been included in accrued liabilities
In connection with the Company's arrangement of the irrevocable standby letter
of credit, the Company has agreed to pay introduction and finders fees in the
amount of $100,000 and 40,000 shares of the Company's common stock. Cash fees
are payable in equal installments each calender quarter commencing December 20,
2000. Fees in the form of the Company's common stock are to be paid in full on
December 20, such shares of common stock are not being registered under the
Securities Act of 1933.
Gaming System Purchase and Financing
In August, 2000, the Company entered into a purchase agreement for certain
gaming equipment on behalf of the day cruise project. The purchase agreement is
for the amount of $449,010 of which $224,505 will be paid by a third party
equipment lessor (see subsequent events note 9 - Equipment Lease) and $224,505
will be financed by the gaming system vendor at the rate of 13% per annum in 48
monthly payments of $6,022.91. Payments under the equipment financing commence
on the first day of the month following installation and are the responsibility
of the Texas Treasure.
Common stock conversion
Under the terms of and agreement with investors for their investment in the
Texas Treasure of $3 million (note 3), the Company has agreed to the conversions
of their interests in the Texas Treasure to interests in the Company as follows:
At anytime after year 1 of operations, the investors shall have the option to
convert their equity interests in the Texas Treasure in whole or in part into
shares of the Company's common stock at the rate of 40,000 shares of common
stock for each $75,000 of investment tendered.
At such time as the investors receive net profit distributions from the Texas
Treasure equal to their initial investment plus a return of not less than and
additional 50% of their investment, the Company shall have an option to redeem
any or all of the investor's interest by the payment of $125,000 and 10,000
shares of the Company's common stock for each $75,000 investment so redeemed.
11
<PAGE>
VIVA GAMING & RESORTS INC.
(A Development Stage Company)
Notes to Condensed and Consolidated Financial Statements
(Unaudited )
NOTE 7: PRIVATE PLACEMENTS
During the period January to March 2000, the Company raised gross proceeds of
$500,000 from a private placement to offshore non-U.S. investors. In connection
with this private placement, the Company issued 120,000 shares of common stock
and 80,000 warrants to purchase additional shares of common stock at $6.25 per
share for a period of one year. The Company also issued 14,400 shares and 9,600
warrants as a fee for assistance in this private placement. The private
placement raised net proceeds of $430,000.
In April 2000, the Company raised gross proceeds of $850,000 from a second
private placement to offshore non-U.S. investors. In connection with this
private placement, the Company issued 204,000 shares of common stock and 136,000
warrants. This private placement raised net proceeds of $748,000. The warrants
issued entitle the holder to purchase one share of common stock at $6.25 per
share for a period of one year. The Company also issued 15,000 shares of common
stock and 10,000 warrants for fees related to the private placement.
In April 2000, the Company raised additional gross proceeds of $25,000 from the
exercise of 4,000 warrants issued under the first private placement.
In September 2000, the Company authorized a private placement offering of 5
million shares of common stock, with an over-allotment of up to an additional
2.5 million shares at a purchase price of $2.00 per share under Regulation D
under the Securities Act of 1933 as amended. In addition, the Company has
entered into an agreement with four consultants regarding services to be
rendered in connection with strategic corporate financing and development. In
consideration for the services, the Company has agreed to compensate the
consultants upon successful completion of the Company's private placement
offering through the issuance to the consultants for each share of common stock
issued in such private placement, warrants exercisable for the purchase of 1
common share of the Company at a purchase price of $2.25 per share.
In connection with the private placement offering, the Company will be obliged
to file a registration with the Securities and Exchange Commission covering the
shares of common stock sold pursuant to the private placement and the shares of
common stock underlying the warrants, as soon as reasonably practical.
No funds have been advanced or received in respect of this private placement.
NOTE 8: STOCK OPTIONS
In September, 1999, the Board of Directors and majority shareholders approved
the amendment to the 1999 Stock Option Plan (the "Revised Plan") to cancel
130,000 non-qualified stock options and to amend the exercise price of, as well
as to increase the issuance of stock options and stock appreciation rights.
Under the Revised Plan, 2,500,000 shares of common stock are reserved for the
grant of incentive stock options, non-qualified stock options, or stock
appreciation rights to officers, directors, employees, and consultants of the
Company, its subsidiaries, and affiliates. The committee designated by the Board
of Directors fixes the term of the stock option, but no incentive stock option
is exercisable more than ten years after the date the stock option is granted.
12
<PAGE>
VIVA GAMING & RESORTS INC.
(A Development Stage Company)
Notes to Condensed and Consolidated Financial Statements
(Unaudited )
NOTE 8: STOCK OPTIONS (Continued)
Pursuant to the Revised Plan, the Company has granted 1,200,000 non-qualified
stock options, 300,000 incentive stock options, and 1,300,000 stock appreciation
rights to certain employees and independent contractors. The stock options are
immediately exercisable through December 28, 2001 and enable the holders to
purchase shares of the Company's common stock at exercise prices ranging from
$2.35 to $4.25. The stock appreciation rights permit the holder, upon
surrendering all of the related stock options to receive cash, common stock, or
a combination thereof, in an amount equal to 100 percent of the difference
between the market price and the option price.
For the nine months ended September 30, 2000, the Company recorded stock
compensation expense, resulting from the issuance of non-qualified stock options
to non-employees of $20,550.
A summary of the status of the Company's stock options as of September 30, 2000
and the changes in the nine months since December 31, 1999 is presented below:
September 30, 2000
------------------------
Weighted
Average
Exercise
Shares Price
Outstanding at beginning of year 1,155,000 $ 3.71
Granted 475,000 2.38
Repriced - original options (925,000) 3.44
Repriced - repriced options 925,000 2.35
Exercised
Forfeited 130,000 5.25
----------- ---------
Outstanding at September 30, 2000 1,500,000 $ 2.49
========== =======
<TABLE>
<CAPTION>
Outstanding Exercisable
-------------------------------- -----------------
Weighted
Number Average Weighted Number Weighted
Outstanding Remaining Average Exercisable Average
at September Contractual Exercise at September Exercise
30, 2000 Life Price 30, 2000 Price
---------------------------------- ----------- -------------------------
<S> <C> <C> <C> <C> <C>
Incentive stock
options $2.35 300,000 1.25 $ 2.35 300,000 $ 2.35
Non-Qualified
stock options
$2.35 - $4.25 1,200,000 1.25 $ 2.52 1,200,000 $ 2.52
</TABLE>
13
<PAGE>
VIVA GAMING & RESORTS INC.
(A Development Stage Company)
Notes to Condensed and Consolidated Financial Statements
(Unaudited )
NOTE 9: SUBSEQUENT EVENTS
Consulting Agreement
The Company has engaged a consultant for a one year period commencing
October 1, 2000 to represent and promote the Company's interest in the State of
Texas as it pertains to the Texas Treasure and related business activities. In
consideration for the services to be rendered, the Company has agreed to
reimburse the consultant for all necessary expenses incurred in connection with
the engagement, issue 10,000 shares of unregistered common stock at a deemed
price of $2.00 per share and to pay the sum of $80,000 in quarterly installments
of $20,000 at the commencement of each three month period during the term of the
agreement. The agreement may be terminated by either party upon at least 60 days
advance notice.
On October 3, 2000, the Company issued 10,000 shares of common stock pursuant to
the above noted consulting agreement.
Equipment Lease
As a part of its capital contributions to the Texas Treasure, the Company has
entered into two leases for gaming equipment with an aggregate capital value of
$1,627,824. The lease includes $231,000 of financing for the gaming equipment
purchased by the Company on behalf of the day cruise project. The lease is for a
term of 36 months at the rate of $54,859 per month. The first payment of $48,771
on the first lease was made on November 15, 2000. The second lease of $6,088
monthly will commence on December 15, 2000.
The Company has guaranteed the lease payments and is responsible for their
payment. The payments will be treated as contributions to the Company's
investment in the Texas Treasure.
Sale of interest in controlled companies and equity investment.
On December 12, 2000 the Company entered into an agreement with an investor in
the Texas Treasure whereunder the Company would sell its interest in its wholly
owned limited liability company Corpus Christi Day Cruise, Texas I, Inc. and
Corpus Christi Day Cruise Concession, Inc. and its investment in Corpus Christi
Day Cruise, LTD (Limited Partnership). In addition, the Company would be
released from all management obligations regarding the Texas Treasure. In
consideration of the transfer of its interests, the Company would receive:
- A promissory note in the amount not to exceed $1,335,000 composed of
$350,000 plus the amount of the Company's capital account as is
determined by the buyer payable over 15 months with interest at prime
plus 1%. The promissory note is subject to offset to the extent the
liabilities or obligations of the companies in which the Company is
selling its interest in exceed $866,000 as at November 26, 2000.
- The buyer will assume the Company's obligation to replace the
irrevocable standby letter of credit in favor of the owner of the M/V
Texas Treasure in the amount of $1,500,000.
- The buyer will assume the Company's obligations for additional capital
required by the Texas Treasure.
- The buyer will release the Company from any conversion options
contemplated in the buyers original investment in the Texas Treasure.
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The information contained in this quarterly report about us and our
business and operations contains "forward-looking statements." Such statements
consist of any statement other than a recitation of historical fact and can be
identified by the use of forward-looking terminology such as "may," "expect,"
"anticipate," "estimate" or "continue" or the negative thereof or other
variations thereon or comparable terminology. You are cautioned that all
forward-looking statements are necessarily speculative, and there are certain
risks and uncertainties that could cause actual events or results to differ
materially from those referred to in such forward looking statements. We do not
have a policy of updating or revising forward-looking statements and thus it
should not be assumed that silence by our management over time means that actual
events are bearing out as estimated in such forward looking statements.
ITEM 2 Management's Discussion and Analysis or Plan of Operation
The Company is in the business of acquiring or developing and managing
casino gaming operations that are either undervalued or evidence a high rate of
profitability, and providing consulting and managerial services relating to the
management and operation of such facilities.
Since our last quarter end we have undertaken the following to further
the successful implementation of our business model:
In July 2000, we received equity investments to the Texas Treasure
project totalling $4.5 million and on September 15, 2000 we sailed on the Texas
Treasure's inaugural cruise. The Texas Treasure cruise has been in operation
since that time, sailing twice daily to international water where the Texas
Treasure's casino is available for cruise patrons. For the first 17 days of
operation, the cruise recorded 10,715 passengers.
In August 2000, we entered into an agreement to acquire a 64.3% interest
in Viva Gaming & Resort de Mexico, S.A. de C.V. ("Viva Mexico"), a Mexican
corporation. Viva Mexico through a trust agreement permitted by Mexican Law, has
recently been granted a license from the Loteria Nacional Para La Asistencia
("National Lottery for Public Assistance") to sell, market and distribute the
government's instant lottery tickets throughout the Republic of Mexico.
We have only just commenced to engage in revenue-producing activities. We
are also developing a project in Mexico in which we hold a 64.3% equity interest
We also continue to seek and evaluate various opportunities consistent with our
business model that we believe will, over time, allow us to become profitable
and enhance shareholder value. Due to our small revenue-production to date, our
lack of contractual commitments to generate revenue and our poor financial
position, there is no basis at this time for investors to make an informed
determination as to the prospects for our future success. For similar reasons,
our auditors have included in their report covering our financial statements for
the years ended December 31, 1999 and 1998, that there was substantial doubt
about our ability to continue as a going concern.
To date, we have funded our operations through a combination of
borrowings and the sale of our equity securities. In early 2000, we completed
the sale of units consisting of a total of 120,000 shares of stock and 80,000
warrants, resulting in net proceeds to us of approximately $430,000. Thereafter,
we completed the further sale of units consisting of a total of 204,000 shares
of stock and 136,000 warrants, resulting in net proceeds to us of approximately
$748,000. We also received $25,000 in March 2000 for the exercise of warrants to
purchase 4,000 shares of common stock at $6.25 per share. The sale of these
shares was effected off-shore, pursuant to SEC rules, regulations and
interpretations, including Regulation S.
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Our financial position as at September 30, 2000 is as follows:
Cash and other current assets $ 295,627
Liabilities
Accounts payable and accrued liabilities 1,723,343
Advances from stockholders 1,370,889
Due to affiliates 80,642
Notes payable 1,000,000
---------------
4,174,874
Net working capital (deficit) $ (3,879,247)
===============
Since September 30, 2000, our working capital deficit has increased. In
addition we have undertaken an obligation to lease capital equipment for an
aggregate cost of $1,677,777 at a rate of $54,859 per month starting in November
and December, 2000.
We will also be required to refinance or repay a $1,500,000 letter of
credit for the Texas Treasure on December 20, 2000 and pay fees to the
originator of the letter of credit in the amount of $250,000 in addition to the
amount of $25,000 then and quarterly thereafter (for an aggregate payment of
$100,000). Promissory notes secured by the Company's 64.3% interest in Viva
Mexico totalling $1,500,000, listed in the working deficiency summary table
above, are due and payable no later than December 31, 2000.
At the quarter end and at present, our resources are insufficient to
satisfy our debts and obligations without the infusion of capital or the
renegotiation of our obligations.
On December 13th, we entered into an agreement with an investor
whereunder, we would sell our interest in our wholly owned limited liability
company Corpus Christi Day Cruise Texas I, Inc. and Corpus Christi Day Cruise
Concession, Inc. and its investment in Corpus Christi Day Cruise, LTD (Limited
Partnership). In addition, we would be released from all management obligations
regarding the Texas Treasure. In consideration of the transfer of its interests,
we would receive:
- A promissory note in the amount not to exceed $1,335,000 composed of
$350,000 plus the amount of our capital account as is determined by the
buyer payable over 15 months with interest of prime plus 1%. The
promissory note is subject to offset to the extent the liabilities or
obligations of the companies in which we are selling our interest in
exceeds $866,000 as at November 26, 2000.
- The buyer will assume our obligation to replace the irrevocable standby
letter of credit in favor of the owner of the M/V Texas Treasure in the
amount of $1,500,000.
- The buyer will assume our obligations for additional capital required
by the Texas Treasure.
- The buyer will release us from any conversion options contemplated in
the buyers original investment in the Texas Treasure
Although relieving our obligations to the Texas Treasure, to satisfy our
current obligations and to implement our business plan, we cannot rely on funds
from our operations and accordingly, we are required to seek additional funding
in the form of equity investments or shareholder loans or from some other source
to meet our obligations and development objectives and any shortfall between
expenses and expected revenue over the next 12 month period. There is however,
no assurance additional financing, as required, will be available to us or
available upon acceptable terms.
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PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities and Use of Proceeds
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submissions of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
(a) Index to Exhibits
Exhibits Description of Documents
10.1 Agreement for acquisition of Viva Gaming & Resort de Mexico,
S.A. de C.V.
27 Financial Data Schedule
(b) Reports on 8-K.
No reports on form 8-K were filed during the quarter.
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SIGNATURES
In accordance with the Requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Viva Gaming & Resorts Inc.
(Registrant)
Date December 18, 2000
By Robert Sim
------------------------------------------------------
(Robert Sim, Chairman of the Board)
