U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
sureBET Casinos, Inc.
(Name of Small Business Issuer in its charter)
Utah 75-1878071
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1610 Barrancas Avenue, Pensacola, Florida 32501
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (850) 438-9647
Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $0.001 par value
(Title of class)
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 / / No /x/
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. / /
Issuer's revenues for the fiscal year ended March 31, 2000: $447,968
Aggregate market value of the registrant's common stock held by non-affiliates
as of August 21, 2000: approximately $4,238,718.
Number of shares of the registrant's common stock outstanding: 7,849,478 as of
August 21, 2000
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
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sureBET Casinos, Inc. ("the Company") is a corporation organized under
the laws of the State of Utah on June 13, 1985. Although the Company has been in
existence since June 1985, it recently changed its business strategy to enter
into the casino business and therefore, should be considered a development stage
company. The Company intends to develop, acquire, joint venture, manage, and
operate gaming establishments with an initial focus on water-based gaming, the
emerging gaming markets, and the rehabilitation and reorganization of casinos
that are underperforming financially.
The Company is an Over the Counter Bulletin Board stock trading under
the symbol "DICE". The Company's subsidiary is Casino Padre Investment Company,
LLC.
CORPORATE HISTORY
The company was formed in Utah on June 13, 1985 under the name Navis,
Bona, Inc. On March 29, 1988, the company merged with I Love Yogurt Corporation,
a Texas corporation. Navis Bona, Inc., the surviving corporation, changed its
name upon completion of the merger to I Love Yogurt Corporation.
On June 24, 1992, I Love Yogurt Corporation merged with Chelsea Street
Holding Company, Inc., a Delaware corporation. I Love Yogurt Corporation was the
surviving corporation after the merger. Pursuant to the Merger Agreement, I Love
Yogurt Corporation changed its name to Chelsea Street Financial Holding
Corporation. On November 23, 1993, Chelsea Street Financial Holding Corporation
amended its Articles of Incorporation changing the name of the corporation to
Wexford Technology Incorporated.
On March 5, 1999, the Company entered into an Asset Purchase Agreement
with its controlling shareholder, Imperial Petroleum, Inc. ("Imperial").
Pursuant to the Agreement, Imperial acquired all of the assets and liabilities
of the Company. No consideration was exchanged in return for the sale of the
assets and transfer of the liabilities.
On May 12, 1999, the Company entered into an Agreement to Exchange
Common Stock with U.S. Gaming & Leisure Corp. ("USGL"). Pursuant to the
agreement with USGL. The Company is to issue 6,000,000 new common shares to
shareholders of USGL for 100% of the outstanding shares of USGL. This
transaction is contingent on a private placement of the Company's common stock
which as of this date has not been completed. At such time as the private
placement is completed and the exchange of stock is completed, USGL will become
a wholly-owned subsidiary of the Company.
On June 7, 1999, there was a change in the Board of Directors of the
Company. The new board changed the Company's business strategy and decided to
enter into the casino business. On June 24, 1999, the Articles of Incorporation
of the Company were amended to change the name of the Company to sureBET
Casinos, Inc.
Under the direction of its new management, the Company intends to
develop, acquire, joint venture, manage, and operate gaming establishments with
an initial focus on water-based gaming, the emerging gaming markets, and the
rehabilitation and reorganization of casinos that are underperforming
financially.
On October 1, 1999, the Company entered into a Management Contract with
Casino Padre Investment Company, LLC, a Nevada limited liability company. Under
the terms of the contract, the
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Company has an exclusive agreement to operate the gaming ship M/V Entertainer
and the gaming operations located on the ship on behalf of and for the account
of Casino Padre Investment Company, LLC.
On October 27, 1999, the Company acquired 50 membership units in Casino
Padre Investment Company LLC in exchange for 5,000,000 shares of the common
stock of the Company. Immediately following the transaction, the Company owned
83% of Casino Padre Investment Company LLC. The shares were acquired from
Charles S. Liberis, the President of the Company. The LLC was formed on
September 14, 1999 and at the time of the acquisition, was still in a
developmental stage. Casino Padre commenced operations on November 18, 1999. As
of March 29, 2000, the Company owns 74% of the LLC. See Item 12. Certain
Relationships and Related Transactions.
On December 20, 1999, the Company entered into an agreement with Black
Hawk Hotel Corporation, an unaffiliated entity, to lease Lilly Belle's Casino,
an existing casino facility located in Black Hawk, Colorado. Pursuant to the
terms of the lease, the Company has an option to purchase the premises. The
lease is contingent on the Company receiving approval for the transaction and
issuance of regulatory licenses from the Colorado Gaming Commission.
M/V ENTERTAINER (TEXAS) OPERATIONS
The Company operates the M/V Entertainer as a casino boat conducting
day and evening cruises of approximately six hours each from South Padre Island,
Texas. In addition to casino operations, the cruises feature a variety of ship
board activities including sightseeing, live music, and other entertainment. The
Company markets its cruises and conducts its casino operations in international
waters in such a manner as to comply with applicable Federal and State laws and
regulations.
CASINO VESSEL. The M/V Entertainer was built in January 1965 and
underwent a major conversion and refit in 1994 into a day cruise vessel at
Bender Shipbuilding and Repair Yard in Mobile, Alabama, and is a U.S.
registered, American flagged vessel. The vessel is 202 feet haul length, 36.6
foot beam, and over 473 gross tons. The vessel has a capacity of 400 passengers
which may be increased to 600 by the addition of certain lifesaving equipment.
The vessel has over 350 gaming positions including craps, roulette, blackjack,
Caribbean stud, slot machines, video poker, and keno. The vessel also has a
150-seat restaurant, kitchen, gift shop, entertainment areas and bars. The M/V
Entertainer is chartered from CSL Development Corporation, an affiliated
company. See Item 12. Certain Relationships and Related Transactions.
The Company charters the vessel, "MV Entertainer", and the equipment
associated therewith, pursuant to a Charter Agreement (the "Charter Agreement")
with CSL Development Corporation ("CSLD"). The initial charter period is for
five (5) years commencing on October 1, 1999. Under the Charter Agreement, the
Company makes monthly charter payments in the amount of $125,000 per month.
During the charter period, the Company shall have an option to purchase the
vessel at a price of $6,000,000. The Company is required, at its expense, to
obtain and maintain at all times during the charter period adequate insurance on
the vessel. The Company assumes (1) all risk of liability for the vessel and for
its use and operations, and is required to indemnify the Owner from and against
any claim, penalty, damage or liability resulting therefrom; and (2) all
obligations with respect to the maintenance, repair and inspection of the
vessel. CSLD has agreed to waive the Charter payments for the months of October,
and November and December 1999 ($375,000) as well as the security deposit
required under the Charter Agreement ($200,000) and in return, CSLD will receive
50% of net operating income once the investors have received 100% of their
capital. CSLD will have a 50% interest in working capital and undistributed
income. CSLD is owned by The Liberis Charitable Settlement Trust ("the Liberis
Trust"). The Liberis Trust was established in 1994 by Charles S. Liberis
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("Liberis") as Grantor. The Company believes that the terms of the Charter
Agreement are competitive with terms that could have been obtained from
unrelated third parties for a comparable vessel.
SOUTH PADRE ISLAND SUBLEASE AND DOCKAGE. The Company leases a berth,
office space and parking on South Padre Island, Texas, from an unaffiliated
third party. The Sublease and Dockage Agreement was entered into on June 23,
1999, for an initial term of five years and assigned to Casino Padre Investment
Company LLC on October 11, 1999. The Company has an option to renew the lease
for two additional terms of five years each. Under the Sublease and Dockage
Agreement, the Company is responsible for all taxes, improvements, repairs and
maintenance, and payment of utilities related to the dock space. The Company is
also required to indemnify the sublessor from all claims, liabilities, loss and
damages against the sublessor occurring on the premises, vessel or in any way
related to the Company's business. The Company operates a portside ticketing and
administrative holding area referred to as the portside facility. The portside
facility consists of approximately 800 square feet and includes a ticketing
area, gift shop, coat check, public restrooms and waiting area for casino
cruises, as well as several small offices and a player development booth.
COMPETITION. At the present time, the Company's vessel has no
competition in the immediate market area. A competing vessel, the Casino Del
Mar, operated in the market from Port Isabel, Texas, from October 1999 until
February 2000. Competition was fierce and the Company's vessel operated at a
loss.
There are approximately 28 casino boats operating on the Gulf and
Atlantic Coasts; one or more of them could reposition to the South Padre area.
All of the competing firms offer casino cruises, with published fares ranging
from $0 to $39.95. These fares vary due to competitive pressures.
Many of the competing firms offer free cruises or minimally priced
cruises. Should a competing vessel move to the South Padre area, it could force
the Company to adjust its fares and to offer free cruises to remain competitive.
Any increase in competition would have an adverse impact on operations and the
Company's financial position.
In addition to competition in the casino cruise industry, the Company
competes with a variety of other activities in its market area. These include,
but are not limited to, parimutuel betting, short-term cruises, resort
attractions, various sports activities and other recreational activities.
WEATHER AND SEASONAL FLUCTUATIONS. The business of the Company suffers
as a direct result of inclement weather. Inclement weather has a direct effect
on the number of cruises conducted and on passenger counts. In addition,
passenger counts are reduced immediately before and immediately after inclement
weather conditions. The business of the Company is also subject to seasonal
fluctuations. Since commencing operations, weather conditions have severely
affected the Company's operations and revenues causing a cancellation in cruises
from November 1, 1999 to August 20, 2000 at a rate of 27% of scheduled cruises.
MARKETING AND PROMOTION. The Company does not have sufficient funds
with which to advertise, market and promote its cruises through a mass media
campaign. The Company focuses its marketing efforts on its repeat customers, the
local population and tourists. The Company tries to attract customers from the
local population within a 70-mile radius to survive the seasonal fluctuations
that are known to occur in the South Padre tourist industry. The Company
currently markets its cruises primarily through direct mail, print, and radio.
The Company's financial ability to advertise was minimal compared to the heavy
advertising, marketing and promotion of the Company's competition, the Casino
Del Mar, prior to the closing of Casino Del Mar in February 2000.
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GAMING LAWS & REGULATIONS AFFECTING CASINO BOATS. The Company's
operations are directly affected by current and future federal, state and local
regulations and ordinances and could be interrupted or terminated on the basis
of such laws, regulations and ordinances. Moreover, the Company is potentially
subject to significant financial penalties if it violates such laws, regulations
or ordinances. Compliance with such laws, regulations and ordinances may
necessitate significant capital outlays.
o FEDERAL LEGISLATION. Federal legislation enacted in 1948, 18 U.S.C. ss.
ss. 1082 et seq. (the "Gambling Devices Act"), prohibits any citizen,
resident of the United States or any other person within the
jurisdiction of the United States from establishing, operating or
owning an interest in a gambling ship on the high seas or otherwise
within the jurisdiction of the United States. In 1992, the federal
government enacted an amendment to the Gambling Devices Act. This
amendment was designed to make the laws pertaining to gaming activities
on United States flag vessels and foreign flag vessels essentially the
same. Prior to being amended, the Act forbade gaming on United States
flagged vessels but allowed foreign flagged vessels to carry gaming
equipment into United States ports. The 1992 amendment gave United
States flagged vessels the same right, preempting state laws. The
amendment allowed states to elect to "opt out" of the Act by enacting a
statute which would prohibit "cruise-to-nowhere" operations. A number
of states have enacted legislation opting out. Texas did not. However,
there can be no assurance that at some time in the future a bill
"opting out" will not be introduced by Texas.
On January 6, 1999, Congressmen Wolf, Gilchrest and Shays introduced a
Bill, H.R. 316, (the "Cruises-to-Nowhere Act of 1999"), to amend the
Johnson Act to restore the authority of state laws over gambling
cruises-to-nowhere. This Bill did not pass but may be reintroduced in
2000. Should it become law, it would give states the ability to apply
their own laws to gambling on cruises to no-where. The passage of this
law would allow the State of Texas and other states to ban
cruises-to-nowhere. Such a ban would destroy the business of the
Company in Texas.
o STATE REGULATION - TEXAS. Texas Penal Code Section 47.06 prohibits the
possession of gambling devices, equipment, or paraphernalia within the
State of Texas or within the territorial waters of the State of Texas.
The violation of this Section is a felony. However, there is a
provision to allow the possession of gambling devices, equipment, or
paraphernalia onboard an ongoing vessel which departs from the State of
Texas and conducts its gambling activities outside the territorial
waters of the State of Texas. Specifically, Section 47.09(b) provides
that it is an affirmative defense to prosecution under Section
47.09(b). It is the Company's belief that it at all times complies with
the provisions of the Texas Penal Code.
Further, Texas Penal Code Section 48.10 (American Documentation of
Vessel Required) provides that "if 18 USC Section 1082 is repealed, the
affirmative defenses provided by Section 47.09(b) apply only if the
vessel is documented under the laws of the United States." Accordingly,
it would appear even if a bill similar to the "Cruise to Nowhere Act of
1999" were introduced and passed, that the State of Texas would
continue to exempt casino cruises so long as they were conducted on
U.S. flagged American documented vessels. The M/V Entertainer is a U.S.
flagged American documented vessel.
FUTURE PORTS. The Company is exploring the possibility of relocating
the M/V Entertainer to a Florida port for the Winter season.
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LILLY BELLE'S CASINO (COLORADO) BUSINESS
The Company, through its wholly owned subsidiary, Lilly Belle's Casino
Investment Company LLC (hereinafter "Lilly Belle's"), intends to operate Lilly
Belle's Casino located at 301 Gregory Street, Black Hawk, Colorado, pursuant to
the Colorado Gaming Act and the Colorado Gaming Regulations.
Gaming in Colorado is "limited stakes" which restricts any single wager
to a maximum of $5.00. While this limits the revenue potential of table games,
management believes that slot machine play, which accounts for over 95% of total
gaming revenues, is currently impacted only marginally by the $5.00 limitation.
LILLY BELLE'S CASINO. Lilly Belle's Casino is located at 301 Gregory
Street, Black Hawk, Colorado. The casino is contained in a three and
one-half-story, 12,000-square foot building which was constructed as a casino in
1993 and operated until November 1994. The structure is fully sprinkled, air
conditioned and serviced by a hydraulic elevator to each floor. The building is
completely furnished for a casino operation including all furniture and
fixtures, surveillance equipment, cage equipment, Black Jack tables, poker
tables, coins and tokens. There are no slot machines presently on the premises.
The Company leases the casino as well as an adjacent Victorian bed and breakfast
and an adjacent area which will provide approximately 100 parking spaces as well
as all the furniture, fixtures, and equipment, from an unaffiliated third party.
A lease with an option to purchase was entered into on December 20, 1999, for an
initial term of five years. The Company has an option to renew the lease for
three additional terms of five years each. The Company has the option to
purchase the premises during the term of the lease. Under the terms of the
lease, the Company is responsible for all taxes, improvements, repairs and
maintenance and payment of utilities related to the premises. The Company is
also required to indemnify the lessor from all claims, liabilities, loss and
damages against the lessor occurring on the premises in any way related to the
Company's business.
THE BLACK HAWK MARKET. Black Hawk is a small mountain town located
approximately 30 miles from Denver. Black hawk is an historic mining town
originally founded in the late 1800's following a large gold strike. Black Hawk
is a tourist town and its heaviest traffic is in the summer months. Traffic
generally decreases to its low point in the winter months.
Black Hawk is one of only three Colorado cities where casino gaming is
legal, the others being Cripple Creek and Central City. Black Hawk operated
approximately 51% of the gaming devices and generated 67.6% of gaming revenues
for these three cities during the year ended December 31, 1999. As of December
31, 1999, there were 19 casinos operating in Black Hawk.
COMPETITION. There are presently 19 casinos operating in Black Hawk,
Colorado. In addition, there are 9 casinos operating in Central City which is
adjacent to Black Hawk. The Company will be competing with many established
casino companies, most of which have greater financial resources than the
Company in the same market that the Company will be operating.
WEATHER AND SEASONAL FLUCTUATIONS. The business of the Company will
suffer as a direct result of inclement weather. Inclement weather has a direct
affect on driving conditions between Black Hawk and Denver, Colorado, which is
the major metropolitan area from which Black Hawk derives most of its business.
The business of Lilly Belle's will be subject to seasonal fluctuations with the
slowest months being the months of January, February, and March.
MARKETING AND PROMOTION. The Company does not have sufficient funds
with which to advertise market and promote its casino through a mass media
campaign. The Company will focus its marketing efforts on direct mail to
customers who are on a customer list obtained by the Company pursuant to
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its lease agreement. In addition, the Company will market into Denver through a
limited amount of print, radio and billboard advertising.
STATE REGULATION - COLORADO. The ownership and operation of a gaming
business in Colorado is subject to extensive laws and regulations including the
Colorado Limited Gaming Act of 1991 (the "Colorado Act") and the rules and
regulations (the "Colorado Regulations") promulgated thereunder by The Colorado
Limited Gaming Commission (the "Colorado Commission") which is empowered to
oversee and enforce the Colorado Act.
Neither the Company nor any of its subsidiaries has a license to
operate a casino in Colorado or in any other jurisdiction. The Colorado Act
requires that a person (including any corporation or other entity) must be
licensed by Colorado to conduct gaming activities in Colorado. A license will be
issued only for a specified location that has been approved as a gaming site by
the Colorado Commission prior to issuing a license. The Colorado Act also
requires that each officer or director of a gaming licensee, or other person who
exercises a material degree of control over the licensee, must be found suitable
by the Colorado Gaming Commission. Any person who, directly or indirectly, or in
association with others, acquires beneficial ownership of more than 5% of the
common stock of any gaming enterprise must notify the Colorado Gaming Commission
of this acquisition and must be found suitable by the Colorado Gaming
Commission. The granting of a license requires submission of detailed personal
financial information followed by a thorough investigation. In addition, the
Colorado Gaming Commission will not issue a license unless it is satisfied that
the licensee is adequately financed or has a reasonable plan to finance its
proposed operations from acceptable sources.
The political and regulatory environment in which the Company is and
will be operated with respect to gaming activities, is uncertain, dynamic and
subject to rapid change. Existing operators often support legislation and
litigation designed to make it more difficult or impossible for competition to
develop and operate gaming facilities. This environment makes it impossible to
predict the effects, including cost, that the adoption of and changes in gaming
law, rules and regulations and/or competition will have on proposed gaming
operations.
Except for historical information contained herein, the matters
discussed in this Item 1, in particular, statements that use the words
"believes", "expects", "intends", or "anticipates", are intended to identify
forward looking statements that are subject to risks and uncertainties
including, but not limited to, inclement weather, mechanical failures, increased
competition, financing, governmental action, environmental opposition, legal
actions, and other unforeseen factors. The development of the Black Hawk
project, in particular, is subject to additional risks and uncertainties,
including, but not limited to, risks relating to permitting, financing, the
activities of environmental groups, the outcome of litigation and the actions of
federal, state, or local governments or agencies.
EMPLOYEES
As of August 20, 2000, the Company employed approximately 59 employees.
Of the Company's 59 employees, 3 are executive and management personnel and 3
are engaged primarily in administrative positions. The remaining employees are
ship officers, crew, casino, reservations, food service and other staff employed
by the Company who work on or about the Company's vessel. None of the Company's
employees is a party to a collective bargaining agreement. The Company considers
its employee relations to be generally satisfactory.
The Company's continued future success depends in significant part upon
the continued service of its key senior management personnel and its continuing
ability to attract and retain highly qualified managerial personnel. The time
that the officers and directors devote to the business affairs of the Company
and the skill with which they discharge their responsibilities will
substantially impact the
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Company's success. To the extent the services of these individuals would be
unavailable to the Company for any reason, the Company would be required to
identify, hire, train and retain other highly qualified managerial personnel to
manage and operate the Company. The Company's business could be adversely
affected to the extent such key individuals could not be replaced.
ITEM 2. DESCRIPTION OF PROPERTY.
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The Company's administrative offices are located in 1,996 square feet
of office space in Pensacola, Florida, under a month-to-month lease with Charles
S. Liberis, the Company's Chairman of the Board of Directors, Chief Executive
Officer and principal stockholder. The lease provides for monthly rental
payments of $1,663 which the Company believes are competitive with rents which
could have been obtained from unrelated third parties for comparable office
space.
The Company leased the following locations for its operations during
the fiscal year ended March 31, 2000:
<TABLE>
<CAPTION>
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LOCATION LEASE TERM
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<S> <C>
One South Padre Blvd 180 Days commencing November 1, 1999.
South Padre Island, Texas 78597 Thereafter, 2 additional terms of 5 years each.
Berth & Sublease Agreement
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301 Gregory Street 5 years commencing the earlier of Oct 1, 2000
Black Hawk, Colorado or the issuance of a gaming license by the
Lease of Lilly Belle's Casino Colorado Gaming Commission. Thereafter, 3
additional terms of 5 years each.
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</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
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o Betty Butron Smith v. Charles Liberis and sureBET Casinos, Inc.
On or about January 26, 2000, Betty Butron Smith filed a law suit in
the United States District Court for the Southern District of Texas, Brownsville
Division, against Charles Liberis, the Company, and Casino Padre Investment
Company. The suit alleges wrongful termination, fraud and inducement, libel,
slander, and defamation. Although management believed that there was no support
for Plaintiff's factual allegations, management entered into a settlement
agreement for an amount that was less than the legal fees would have been
incurred in defending the matter. On March 10, 2000, a Compromise, Settlement,
Release, Indemnity and Confidentiality Agreement was entered into between the
Plaintiff and the Defendants.
o Newpark Shipbuilding-Pasadena, Inc. v. Vessel Casino Padre f/k/a/
Entertainer, its equipment, apparel, etc., in rem, and CSL Development
Corporation, Casino Padre Investment Company LLC, and sureBET Casinos,
Inc., its owners and/or operators, in personam, C.A. No. H-00-1014
Admiralty
On or about March 23, 2000, Newpark Shipbuilding-Pasadena, Inc. filed a
lawsuit in the United States District Court Southern District of Texas, Houston,
Division, against Vessel Casino Padre f/k/a/ Entertainer, its equipment,
apparel, etc., in rem, and CSL Development Corporation, Casino Padre Investment
Company LLC, and sureBET Casinos, Inc., seeking the sum of $139,193.36 for
repair work on the M/V Entertainer. The Defendants dispute the amount of the
claim, have posted a bond in the
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amount claimed, and have counterclaimed against Newpark Shipbuilding-Pasadena,
Inc. for deceptive trade practices, damages for improper workmanship and damages
for delays caused by Newpark Shipbuilding-Pasadena, Inc.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended March 31, 2000.
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PART II
ITEM 5. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
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The Company's Common Stock is not traded on a registered securities
exchange, or on NASDAQ. The Company's Common Stock has been quoted on the OTC
Bulletin Board since 1987, and currently trades under the symbol "DICE". The
following table sets forth the range of high and low bid quotations for each
fiscal quarter within the last two fiscal years, as well as the current fiscal
year. These quotations reflect inter-dealer prices without retail mark-up,
mark-down, or commissions and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Fiscal Quarter Ended High Bid Low Bid
<S> <C> <C>
March 31, 1998............................................ $3 3/16 $ 15/16
June 30, 1998............................................. $4.50 $2.25
September 30, 1998........................................ $2.25 $0.60
December 31, 1998......................................... $0.06 $0.06
March 31, 1999............................................ $0.06 $0.06
June 30, 1999............................................. $0.06 $0.06
September 30, 1999........................................ $1.38 $0.75
December 31, 1999......................................... $2.00 $0.13
March 31, 2000............................................ $2.00 $0.63
</TABLE>
As of March 31, 2000 there were 290 record holders of the Company's
Common Stock. On August 21, 2000 there were 88 record holders of the Company's
Common Stock. The date of the last trade was July 31, 2000 at a price of $.54.
Since the Company's inception, no cash dividends have been declared on the
Company's Common Stock.
The Securities and Exchange Commission (SEC) has adopted rules that
regulate broker-dealer practices in connection with transactions in "penny
stocks". Generally, penny stocks are equity securities with a price of less than
$5.00 (other than securities registered on certain national exchanges or quoted
on the NASDAQ system). If the Company's shares are traded for less than $5 per
share, as they currently are, the shares will be subject to the SEC's penny
stock rules unless (1) the Company's net tangible assets exceed $5,000,000
during the Company's first three years of continuous operations or $2,000,000
after the Company's first three years of continuous operations; or (2) the
Company has had average revenue of at least $6,000,000 for the last three years.
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prescribed by the SEC that provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker- dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules require that prior to a transaction in a penny stock not
otherwise exempt from those rules, the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
requirements may have the effect of reducing the level of trading activity in
the secondary
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market for a stock that becomes subject to the penny stock rules. As long as the
Company's Common Stock is subject to the penny stock rules, the holders of the
Common Stock may find it difficult to sell the Common Stock of the Company.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
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The Company ceased conducting an active trade or business in April
1997. During the fiscal years ended March 31, 1999 and 1998, the Company had no
operating business. The Company entered into an Asset Purchase Agreement (the
"Agreement") on March 5, 1999 with its controlling shareholder, Imperial
petroleum, Inc. ("Imperial"). The Agreement provided that Imperial would acquire
all of the assets and liabilities of the Company. No consideration was exchanged
in return for the sale of the net liabilities of the Company. As a result of the
Agreement, the Company had no assets or liabilities as of March 31, 1999. For
the fiscal year ended March 31, 1999, the Company recognized a gain of
$1,561,127 on the transfer of the liabilities, resulting in net income of
$1,201,414 for the period.
Accordingly, as a result of the Company's liquidation and abandonment
of its assets and liabilities to a "shell" status, the Company has accounted for
its former operations as discontinued for all periods presented.
On June 7, 1999, there was a change in the control of the Board of
Directors of the Company. The new Board changed the Company's business strategy
and decided to enter into the casino business. On June 24, 1999, the Articles of
Incorporation of the Company were amended to change the name of the Company to
sureBET Casinos, Inc.
Under the direction of its new management, the Company intends to
develop, acquire, joint venture, manage, and operate gaming establishments with
an initial focus on water-based gaming, the emerging gaming markets, and the
rehabilitation and reorganization of casinos that are underperforming
financially.
RESULTS OF OPERATIONS
The sole source of revenue for the Company through March 31, 2000 was
derived from the operation of Casino Padre. Casino Padre began operations on
November 18, 1999 and for the year ending March 31, 2000, the Company incurred a
net loss of $1,154,564.
For the year ending March 31, 2000, the Company's pro rata share of the
operating loss of Casino Padre was $1.34 million. During that period, revenues
from operations were $447,968 while cost of sales were $46,225 and operating
expenses were $1,583,390. A total of $290,000 was allocated to the minority
interest in Casino Padre.
General and administrative expenses for the year ending March 31, 2000,
totaled $517,759. A total of $357,891 was expended for the operation of the
casino and $578,016 for the operation of the vessel. Sales and marketing
expenses were $102,076 for the period with an additional $290,565 being expended
to start up expenses.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had a working capital deficiency of
$614,220. The Company does not believe that it will be able to meet its normal
operating costs and expenses from management fees and cash flow of Casino Padre.
11
<PAGE>
The Company has been dependent upon loans from its principal
shareholder and President, Charles Liberis. From May 31, 1999 to August 20,
2000, Mr. Liberis advanced $118,000 to the Company. The loans are not evidenced
by promissory notes and there is no fixed date for repayment. At March 31, 2000,
$121,473 was owed to Mr. Liberis.
In addition, at March 31, 2000, $267,589 was owed to CSL Development
Corporation for past due charter payments and accrued interest thereon. At
August 20, 2000, the amount owed to CSL is $767,589, which includes $17,589 of
accrued interest. Mr. Liberis is also the President of CSL Development
Corporation.
The report of the Company's independent auditors on the financial
statements for the year ended March 31, 2000, includes an explanatory paragraph
relating to the uncertainty of the Company's ability to continue as a going
concern due to the loss incurred for the year ended March 31, 2000 and the
working capital deficit and stockholders' deficit existing as of March 31, 2000.
The Company must raise capital and general additional operating funds.
The Company believes that it will be able to raise additional capital
through debt and equity financing which, along with anticipated cash from
operations, will be sufficient to meet the Company's current working capital
needs for at least the next twelve months. However, there can be no assurance
that the Company will not need to raise additional capital sooner, particularly
to take advantage of any expansion opportunities, not currently anticipated that
may become available. In such event, there can be no assurance that additional
capital will be available at all, at an acceptable cost, or on a basis that is
timely to allow the Company to finance any such opportunities.
FORWARD LOOKING STATEMENTS
Except for historical information contained herein, the matters
discussed in this Item 6, in particular, statements that use the words
"believes", "intends", "anticipates", or "expects" are intended to identify
forward looking statements that are subject to risks and uncertainties
including, but not limited to, inclement weather, mechanical failures, increased
competition, financing, governmental action, environmental opposition, legal
actions, and other unforeseen factors.
The development of the Black Hawk, Colorado project, in particular, is
subject to additional risks and uncertainties, including, but not limited to,
risks relating to permitting, financing, the activities of environmental groups,
the outcome of litigation and the actions of federal, state, or local
governments and agencies. The results of financial operations reported herein
are not necessarily an indication of future prospects of the Company. Future
results may differ materially.
ITEM 7. FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The consolidated financial statements and notes are included herein
beginning at page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
--------------------------------------------------------------------------------
None.
12
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
--------------------------------------------------------------------------------
The officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Charles S. Liberis 58 Chairman of the Board of Directors, President, Chief
Operating Officer
Wayne E. Marks 53 Vice President Finance, Controller and Director
Michael Georgilas 46 Director
</TABLE>
The term of office of each director of the Company ends at the next
annual meeting of the Company's stockholders or when the director's successor is
elected and qualified. No date for the next annual meeting of stockholders is
specified in the Company's Bylaws, nor has a meeting been fixed by the Board of
Directors. The term of office of each officer of the Company ends at the next
annual meeting of the Company's Board of Directors, which is expected to take
place immediately after the next annual meeting of stockholders, or when such
officer's successor is elected and qualified.
CHARLES S. LIBERIS. Mr. Liberis was elected Chairman, President and
Chief Operating Officer of the Company on July 8, 1999. Since 1992, Mr. Liberis
served as President of CSL Development Corporation, a private company. CSL
Development Corporation has been engaged in general development of real estate
property including condominiums, resorts, golf courses, and casinos. Mr. Liberis
was a founder of Europa Cruises Corporation (NASDAQ - KRUZ), Pensacola, Florida,
and served as its Chief Executive Officer from 1989 to 1992. Prior to joining
Europa, Mr. Liberis was a practicing attorney for over twenty years and was a
Senior Partner in the law firm of Liberis, Sauls, and Fleming, P.A., with
offices in Pensacola and Tallahassee, Florida, and Atlanta, Georgia. His
practice consisted primarily of real estate and corporate reorganization law and
he has had an extensive background in the reorganization of numerous hospitality
operations. Mr. Liberis was a founder and served on the Board of Directors and
as General Counsel of Southern National Bankshares, Atlanta, Georgia, from
1983to 1985. Mr. Liberis majored in business and finance and received his Juris
Doctorate from Stetson University College of Law in 1977. He is a member of the
American and Florida Bar Associations and the International Association of
Gaming Attorneys. Mr. Liberis has previously been found suitable for licensing
by the Mississippi Gaming Commission.
WAYNE E. MARKS. Mr. Marks was elected to the Board and as Vice
President Finance and Controller of the Company on July 8, 1999. Since June
1997, Mr. Marks has served as Vice President of CSL Development, Pensacola,
Florida, and General Manager of Fiesta Casino, Lima, Peru. CSL Development
Corporation has been engaged in general development of real estate property
including condominiums, resorts, golf courses, and casinos. From September 1991
to June 1997, Mr. Marks served as partner in DB & Associates, Jackson,
Mississippi, a consulting firm specializing in project development. From 1973 to
1991, Mr. Marks worked in the Farm Credit System. Mr. Marks served on the
Executive Committee of the Farm Credit Banks of Jackson and the Farm Credit
Banks of New Orleans from 1979 to 1988. Federal Intermediate Credit Bank of New
Orleans from 1979 to 1985, and The Jackson Bank for Cooperatives from 1985 to
1988. He is a graduate of the University of New Orleans, New Orleans, Louisiana.
MICHAEL GEORGILAS. Mr. Georgilas was elected to the Board of Directors
of the Company in June 1999. Since September 1996, Mr. Georgilas has served as
Chairman and Chief Executive Officer of
13
<PAGE>
Mondial Group Inc, Athens, Greece, an international casino development and
management company. From July 1993 to August 1996, he was Vice President of
Gaming and Director of Gaming Development for ITT/Sheraton Corporation, Boston,
Massachusetts. From June 1992 to December 1992, he served as Chief Operating
Officer of Europa Cruises Corporation, Pensacola, Florida. From 1991 to 1992, he
served as Associate Director of the Casino and Gaming Management Division at the
University of Nevada in Las Vegas. From 1986 through 1991, he held various
positions with Hilton Corporation having last served as President and General
Manager of the Flamingo Hilton Reno. Mr. Georgilas holds a Bachelor of Science
Degree in Hotel Administration and a Master of Science Degree in Hotel
Administration from the University of Nevada, Las Vegas.
Mr. Liberis may be deemed to be the "promoter" of the Company within
the meaning of the Rules and Regulations under federal securities laws.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During the fiscal year ended March 31, 2000, Messrs. Liberis, Marks,
and Georgilas failed to file their reports on Form 3 (Initial Statement of
Beneficial Ownership of Securities) on a timely basis. There were no other known
failures to file a report required by Section 16(a) of the Securities Exchange
Act of 1934.
ITEM 10. EXECUTIVE COMPENSATION.
--------------------------------------------------------------------------------
The following table sets forth information for all persons who have
served as the chief executive officer of the Company during the last completed
fiscal year. No disclosure need be provided for any executive officer, other
than the CEO, whose total annual salary and bonus for the last completed fiscal
year did not exceed $100,000. Accordingly, no other executive officers of the
Company are included in the table.
<TABLE>
<CAPTION>
Summary Compensation Table
------------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
----------------------------------------------------------------------------------------------
Awards Payouts
-------------------------------------------------
Other Restricted Securities All other
Name and annual stock Underlying compen-
principal compensat award(s) Options/ LTIP sation
position Year Salary ($) Bonus ($) ion ($) ($) SARs (#) payouts ($)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jeffrey T. 1999 $0.00 $0.00 $0.00 $0.00 0 0 $0.00
Wilson, 2000 $0.00 $0.00 $0.00 $0.00 0 0 $0.00
President
(1)<F1>
Charles S. 2000 $0.00 $0.00 $0.00 $1,000,000 0 0 $0.00
Liberis, (3)<F3>
President
(2)<F2>
---------------
<FN>
(1)<F1> Jeffrey T. Wilson was the President of the Company from April 8, 1996 to July 8, 1999.
(2)<F2> Charles S. Liberis was the President of the Company from July 8, 1999 to present.
(3)<F3> Mr. Liberis received no cash compensation or other benefits for the fiscal year ended March 31, 2000. Mr. Liberis
received 1,000,000 of restricted common stock for services rendered as a consultant, director, and executive officer
of the Company through July 12, 1999.
</FN>
</TABLE>
14
<PAGE>
The Company does not have any employment contracts with any of its
officers or directors. Such persons are employed by the Company on an at will
basis, and the terms and conditions of employment are subject to change by the
Company.
STOCK OPTION PLANS
The Company has no stock option plans.
OPTION GRANTS IN LAST FISCAL YEAR
There were no options granted as executive compensation during the past
year.
DIRECTOR COMPENSATION
No employees will receive additional compensation as directors.
Non-Employee directors will be compensated at the rate of $500 per meeting for
attendance at meetings with the Board of Directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------------------------------------------------------
The following table provides certain information as to the officers and
directors individually and as a group, and the holders of more than 5% of the
Common Stock of the Company, as of March 31, 2000:
<TABLE>
<CAPTION>
Name and Address of Owner Number of Shares Owned Percent of Class (1)<F1>
<S> <C> <C>
Charles S. Liberis 6,000,000 76.4%
1610 Barrancas Avenue
Pensacola, FL 32501
Wayne E. Marks 200,000 2.5%
1464 Heartstone
Baton Rouge, LA 70808
Michael Georgilas 75,000 1.0%
Ellis 26
N. Erythrea 14671
Athens, Greece
Officers and directors as a group 6,275,000 79.9%
(3 persons)
---------------
<FN>
(1)<F1> This table is based on 7,849,478 shares of Common Stock outstanding on March 31, 2000.
</FN>
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
--------------------------------------------------------------------------------
On March 5, 1999, the Company entered into an Asset Purchase Agreement
with its controlling shareholder, Imperial Petroleum, Inc. ("Imperial").
Pursuant to the Agreement, Imperial acquired all of the assets and liabilities
of the Company. No consideration was exchanged in return for the sale of the
assets and transfer of the liabilities.
On May 12, 1999, the Company entered into an Agreement to Exchange
Common Stock with U.S. Gaming & Leisure Corp. ("USGL"). USGL is controlled by
Charles S. Liberis, the President of the
15
<PAGE>
Company. Pursuant to the agreement with USGL, the Company is to issue 6,000,000
new common shares to shareholders of USGL for 100% of the outstanding shares of
USGL. This transaction is contingent on a private placement of the Company's
common stock which as of this date has not been completed. At such time as the
private placement is completed and the exchange of stock is completed, USGL will
become a wholly-owned subsidiary of the Company.
In contemplation of the Agreement with USGL, there was a change in the
Board of Directors of the Company on July 8, 1999. The new board changed the
Company's business strategy and decided to enter into the casino business.
On October 1, 1999, Casino Padre Investment Company LLC entered into a
Charter Agreement to charter the vessel, "MV Entertainer", and the equipment
associated therewith, pursuant to a Charter Agreement (the "Charter Agreement")
with CSL Development Corporation (CSLD). The initial charter period is for five
(5) years commencing on October 1, 1999. Under the Charter Agreement, the
Company makes monthly charter payments in the amount of $125,000 per month.
During the charter period, the Company shall have an option to purchase the
vessel at a price of $6,000,000. The Company is required, at its expense, to
obtain and maintain at all times during the charter period adequate insurance on
the vessel. The Company assumes (1) all risk of liability for the vessel and for
its use and operations, and is required to indemnify the Owner from and against
any claim, penalty, damage or liability resulting therefrom; and (2) all
obligations with respect to the maintenance, repair and inspection of the
vessel. CSLD has agreed to waive the Charter payments for the months of October,
and November and December 1999 ($375,000) as well as the security deposit
required under the Charter Agreement ($200,000) and in return, CSLD will receive
50% of net operating income once the investors have received 100% of their
capital. Entertainer LLC will have a 50% interest in working capital and
undistributed income. CSLD is owned by The Liberis Charitable Settlement Trust
("the Liberis Trust"). The Liberis Trust was established in 1994 by Charles S.
Liberis ("Liberis") as Grantor. The Company believes that the terms of the
Charter Agreement are competitive with terms that could have been obtained from
unrelated third parties for a comparable vessel.
On October 1, 1999, the Company entered into a Management Contract with
Casino Padre Investment Company, LLC, ("Casino Padre") a Nevada limited
liability company. Under the terms of the contract, the Company has an exclusive
agreement to operate the gaming ship M/V Entertainer and the gaming operations
located on the ship on behalf of and for the account of Casino Padre Investment
Company, LLC. At the time that the Management Contract was entered into, Charles
Liberis, the President of the Company, owned 83%of the membership units of
Casino Padre Investment Company LLC.
On October 27, 1999, the Company acquired 50 membership units in Casino
Padre Investment Company LLC in exchange for 5,000,000 shares of the common
stock of the Company. Following the transaction, the Company owned 83% of Casino
Padre Investment Company LLC. The membership units were acquired from Charles S.
Liberis, the President of the Company. The price of the units was $500,000,
which is the same price paid for the units by Mr. Liberis. Casino Padre was
formed on September 14, 1999. At the time of the acquisition Casino Padre was
still in the development stage. Casino Padre commenced operations on November
18, 1999.
From May 31, 1999 to August 20, 2000, Charles Liberis, the President of
the Company, advanced to the Company a total of $118,000. The loans are not
evidenced by promissory notes. There is no fixed date for repayment.
As of August 20, 2000, Casino Padre Investment, LLC is obligated to CSL
Development for the payment of a total of $767,589 including $17,589 of annual
interest for charter payments on the M/V
16
<PAGE>
Casino Padre. Charles S. Liberis, the President of the Company is also President
of CSL Development Corporation.
The Company's administrative offices are located in 1,996 square feet
of office space in Pensacola, Florida, under a month-to-month lease with Charles
S. Liberis, the Company's Chairman of the Board of Directors, Chief Executive
Officer and principal stockholder. The lease provides for monthly rental
payments of $1,663 which the Company believes are competitive with rents which
could have been obtained from unrelated third parties for comparable office
space.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------------------------------------------------------
The following exhibits are included with this registration statement:
<TABLE>
<CAPTION>
Exhibit
Number Document
<S> <C>
2.1 Agreement to Exchange Common Stock with U.S. Gaming & Leisure Corp. (1)<F1>
3.1 Articles of Incorporation, as amended (1)<F1>
3.2 Bylaws, as amended (1)<F1>
10.1 Asset Purchase Agreement with Imperial Petroleum, Inc. (1)<F1>
10.2 Management Contract with Casino Padre Investment Company, LLC (1)<F1>
10.3 Lilly Belle lease (1)<F1>
10.4 South Padre Island Sublease and Dockage Agreement (1)<F1>
10.5 Charter Agreement with CSL Development Corporation (1)<F1>
21 Subsidiaries of the Registrant (1)<F1>
27 Financial Data Schedule
<FN>
(1)<F1> Previously filed as an exhibit to the Company's
Registration Statement on Form 10-SB dated April 10, 2000 and
incorporated by reference herein.
</FN>
</TABLE>
17
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
sureBET Casinos, Inc.
Date: August 24, 2000 By:/S/ CHARLES S. LIBERIS
---------------------------------
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
SIGNATURE AND TITLE DATE
/s/ Charles Liberis August 24, 2000
Chairman of the Board of Directors,
President and Chief Operating Officer
(Principal Executive Officer)
/s/ Wayne Marks August 24, 2000
Vice President Finance, Controller and
Director (Principal Financial and
Accounting Officer)
/s/ Michael Georgilas August 24, 2000
Director
18
<PAGE>
SUREBET CASINOS, INC. AND SUBSIDIARY
Index To Consolidated Financial Statements
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report...............................................................................F-2
Consolidated Balance Sheets as of March 31, 2000 and 1999..................................................F-3
Consolidated Statements of Operations for the Years Ended March 31, 2000 and 1999..........................F-4
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
for the Years Ended March 31, 2000 and 1999.......................................................F-5
Consolidated Statements of Cash Flows for the Years Ended March 31, 2000 and 1999..........................F-6
Notes to Consolidated Financial Statements.................................................................F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
SureBET Casinos, Inc.
We have audited the accompanying consolidated balance sheets of SureBET Casinos,
Inc. and subsidiary as of March 31, 2000 and 1999, and the related consolidated
statements of operations, changes in stockholders' equity (deficit) and cash
flows. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SureBET Casinos,
Inc. and subsidiary as of March 31, 2000 and 1999, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's significant operating losses and its working
capital deficit and stockholders' deficit raise substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Jackson & Rhodes P.C.
/s/JACKSON & RHODES P.C.
Dallas, Texas
August 14, 2000
F-2
<PAGE>
SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, 2000 and 1999
ASSETS
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Current assets:
Cash $ 36,677 $ -
Receivables 6,116 -
Inventory 8,715 -
------------ ------------
Total current assets 51,508 -
------------ ------------
Furniture, leasehold improvements and equipment:
Furniture and equipment 37,252 -
Leasehold improvements 88,460 -
------------ ------------
125,712 -
Accumulated depreciation (12,548) -
------------ ------------
Net furniture and equipment 113,164 -
------------ ------------
Other assets:
Deposit on claim (Note 5) 140,000 -
Deposit on Colorado casino lease (Note 5) 200,000 -
Other 992 -
------------ ------------
Total other assets 340,992 -
------------ ------------
$ 505,664 $ -
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities $ 276,666 $ -
Due to shareholder (Note 6) 121,473 -
Due to CSL Development Corporation (Notes 5 and 6) 267,589 -
------------ ------------
Total current liabilities 665,728 -
------------ ------------
Commitments and contingencies (Note 5) - -
Stockholders' equity (deficit):
Preferred stock, $.01 par value, 500,000 shares
authorized, none issued and outstanding - -
Common stock, $.001 par value, 50,000,000 shares
authorized, 7,849,478 and 1,040,050 shares issued
and outstanding 7,849 1,040
Additional paid-in capital 5,555,654 4,567,963
Accumulated deficit (5,723,567) (4,569,003)
------------ ------------
Total stockholders' equity (deficit) (160,064) -
------------ ------------
$ 505,664 $ -
============ ============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Revenue:
Casino revenue $ 314,208 $ -
Ticket sales 76,376 -
Food and beverage sales 57,384 -
------------ ------------
Total revenue 447,968 -
------------ ------------
Operating expenses:
Cost of food and beverage sales 46,225 -
Casino operating costs 357,891 -
Casino vessel costs 578,016 -
Start-up costs 290,565 -
Sales and marketing 102,076 -
General and administrative 517,759 -
Minority interest in losses (290,000) -
------------ ------------
Total operating expenses 1,602,532 -
------------ ------------
Net income (loss) from continuing operations (1,154,564) -
Discontinued operations:
Gain on transfer of net liabilities to
Imperial (Note 1) - 1,561,127
Operating losses of discontinued business - (359,713)
------------ ------------
$(1,154,564) $ 1,201,414
============ ============
Basic net income (loss) per common share:
From continuing operations $ (0.28) $ -
From discontinued operations - 1.23
------------ ------------
Net income (loss) $ (0.28) $ 1.23
============ ============
Weighted average common shares outstanding 4,162,123 979,489
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Years Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance March 31, 1998 $ 914,858 $ 915 $ 4,459,298 $(5,770,417) $(1,310,204)
Common stock issued for cash 83,333 83 99,917 - 100,000
Common stock issued for services rendered 41,859 42 8,748 - 8,790
Net income - - - 1,201,414 1,201,414
------------ ------------ ------------ ------------ ------------
Balance March 31, 1999 1,040,050 1,040 4,567,963 (4,569,003) -
Common stock issued for cash 184,428 184 151,816 - 152,000
Common stock issued for services rendered 1,425,000 1,425 141,075 - 142,500
Common stock issued for Casino Padre, Inc. 5,000,000 5,000 495,000 - 500,000
Common stock issued for deposit on lease 200,000 200 199,800 - 200,000
Net loss - - - (1,154,564) (1,154,564)
------------ ------------ ------------ ------------ ------------
$ 7,849,478 $ 7,849 $ 5,555,654 $(5,723,567) $ (160,064)
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(1,154,564) $ 1,201,414
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 12,548 -
Shares issued for services 142,500 8,790
Gain on transfer of net liabilities to Imperial - (1,561,127)
Minority interest in losses (290,000) -
Changes in operating assets and liabilities:
Accounts receivable (6,116) -
Inventory (8,715) -
Other assets (120,742) -
Accounts payable and accrued liabilities 526,666 -
Net liabilities of discontinued operations - 250,561
------------ ------------
Net cash used in operating activities (898,423) (100,362)
------------ ------------
Cash flows from investing activities:
Purchase of furniture and equipment (125,712) -
------------ ------------
Cash flows from financing activities:
Net advances from shareholder 118,812 -
Sale of shares of subsidiary to minority interests 290,000 -
Sale of common shares 652,000 100,000
------------ ------------
Net cash provided by financing activities 1,060,812 100,000
------------ ------------
Net increase (decrease) in cash and cash equivalents 36,677 (362)
Cash at beginning of year - 362
------------ ------------
Cash at end of year $ 36,677 $ -
============ ============
Supplemental disclosure:
Total interest paid $ - $ -
============ ============
Noncash transactions:
During the year ended March 31, 2000, the Company issued
200,000 common shares for a deposit on a casino in Colorado.
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
SUREBET CASINOS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
1. DISCONTINUED OPERATIONS, REVERSE MERGER AND BUSINESS OF THE COMPANY
During the year ended March 31, 1999, SureBET Casinos, Inc. ("the
Company") had no operating assets and had been investigating the
acquisition of an operating business. The Company changed its name on
June 24, 1999 from Wexford Technology, Incorporated. In connection with
an Agreement to Exchange Stock with U.S. Gaming and Leisure Corp.
("USG&L") (see below), the Company entered into an Asset Purchase
Agreement (the "Agreement") on March 5, 1999 with its controlling
shareholder, Imperial Petroleum, Inc. ("Imperial"). The Agreement
provides that Imperial would acquire all the assets and liabilities of
the Company. No consideration was exchanged in return for the sale of the
net liabilities of the Company. As a result of the Agreement, the Company
has no assets or liabilities as of March 31, 1999.
Accordingly, as a result of the Company's liquidation and abandonment of
its assets and liabilities to a "shell" status, the Company has accounted
for its former operations as discontinued for the year ended March 31,
1999. The common stock issued for services for the period ended August
31, 1999 has been reported as continuing operations since the shares were
issued to new continuing management of the Company
In connection with the Agreement to Exchange Common Stock with USG&L,
dated May 12, 1999, which is contingent on a private placement which has
not been completed, the Company will issue 6,000,000 new common shares to
stockholders of USG&L for 100% of the outstanding shares of USG&L. As a
result of the tax-free transaction, USG&L will become a wholly owned
subsidiary of the Company. The owners of USG&L obtained effective control
of the Company in July 1999 by obtaining control of the Board of
Directors of the Company. USG&L is presently in the business of operating
a cruise ship and, after a private offering to raise additional capital,
intends to also enter the gaming business. The transaction will be
accounted for as a reverse acquisition whereby USG&L will be the
acquiring company for accounting purposes.
On June 7, 1999, there was a change in the Board of Directors of the
Company. The new board changed the Company's business strategy and
decided to enter into the casino business. On June 24, 1999, the
Company's articles of incorporation were amended to change the name of
the Company to SureBET Casinos, Inc.
Under the direction of its new management, the Company intends to
develop, acquire, joint venture, manage and operate gaming establishments
with an initial focus on water-based gaming, the emerging gaming markets,
and the rehabilitation and reorganization of casinos that are
underperforming financially.
On October 1, 1999, the Company entered into a Management Contract with
Casino Padre Investment Company, LLC, ("Casino Padre") a Nevada limited
liability company. Under the terms of the contract, the Company has an
exclusive agreement to operate the gaming ship
F-7
<PAGE>
SUREBET CASINOS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
F-13
1. DISCONTINUED OPERATIONS, REVERSE MERGER AND BUSINESS OF THE COMPANY
(CONTINUED)
M/Ventertainer (name changed in April 2000 to M/V Casino Padre) and the
gaming operations located on the ship on behalf of and for the account of
Casino Padre. On October 27, 1999, the Company acquired 50 membership
units in Casino Padre in exchange for 5,000,000 shares of the common
stock of the Company. Immediately following the transaction, the Company
owned 83% of Casino Padre. The shares were acquired from Charles S.
Liberis, the President of the Company. Casino Padre was formed on
September 14, 1999 and at the time of the acquisition, was still in a
developmental stage. Casino Padre commenced operations on November 18,
1999. As of March 31, 2000, the Company owns 74% of Casino Padre.
The acquisition has been accounted for in a manner similar to the
pooling-of-interests method due to Charles L. Liberis' control of the
respective companies. Accordingly, the Company has presented, in the
accompanying consolidated financial statements, the combination of the
companies as if the acquisition had occurred at the inception of Casino
Padre in September 1999. Casino Padre's assets and liabilities are
presented on a historical basis with no adjustment for the acquisition.
On December 20, 1999, the Company entered into an agreement with Black
Hawk Hotel Corporation, an unaffiliated entity, to lease Lilly Belle's
Casino, an existing casino facility located in Black Hawk, Colorado.
Pursuant to terms of the lease, the Company has an option to purchase the
premises. The lease is contingent on the Company receiving approval for
the transaction and issuance of regulatory licenses from the Colorado
Gaming Commission.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GOING CONCERN
The Company's financial statements have been presented on the basis that
it is a going concern, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. The
financial statements do not include any adjustments that might result
from the outcome of this uncertainty. The Company is reporting a net loss
of $1,154,564 for the year ended March 31, 2000 and has a working capital
deficit of $614,220 and a stockholders' deficit of $160,064 at that date.
The following is a summary of management's plan to raise capital and
generate additional operating funds.
As explained in Note 4, the Company has raised approximately $750,000 in
cash in the last two years by the sale of common shares, including
$500,000 in Casino Padre. The Company continually explores the raising of
additional capital through such means. The Company believes that it will
be able to raise additional capital through debt and equity financing
which will be sufficient to meet the Company's current working capital
needs for at least the next twelve months. However, there can be no
assurance that the Company will not need to raise additional capital
sooner, particularly to take advantage of any expansion opportunities,
not currently anticipated that may become available. In such event, there
can be no assurance that additional capital will be available at all, at
an acceptable cost, or on a basis that is timely to
F-8
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOING CONCERN
allow the Company to finance any such opportunities.
Additionally, the Company has decided to move the M/V Casino Padre (see
Note 1) to a south Florida location, which the Company believes will
produce substantially improved operating results. The dock owners,
pending executing a contract acceptable to both parties, have accepted a
letter of intent for the leasing of berth space and parking suitable for
a gaming vessel operation. The Company anticipates that it will take an
estimated six weeks to move the vessel and open operations in south
Florida. The Company intends to cease operations in south Texas shortly
after Labor Day and begin operations in south Florida on or about October
20, 2000.
DISCONTINUED OPERATIONS
See Note 1 regarding the accounting for the discontinued business
operations of the Company.
STATEMENT OF CASH FLOWS
For statement of cash flow purposes, the Company considers short-term
investments, with an original maturity of three months or less when
purchased, to be cash equivalents.
USE OF ESTIMATES AND ASSUMPTIONS
Preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiary. All significant intercompany balances and
transactions are eliminated in consolidation.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"). SFAS 109 utilizes the asset and liability method of
computing deferred income taxes. The objective of the asset and liability
method is to establish deferred tax assets and liabilities for the
temporary differences between the financial reporting basis and the tax
basis of the Company's assets and liabilities at enacted tax rates
expected to be in effect when such amounts are realized or settled.
F-9
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER COMMON SHARE AND REVERSE STOCK SPLIT
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS
128"). SFAS 128 provides a different method of calculating earnings per
share than was formerly used in APB Opinion 15. SFAS 128 provides for the
calculation of basic and diluted earnings per share. Basic earnings per
share includes no dilution and is computed by dividing income available
to common stockholders by the weighted average number of common shares
outstanding for the period. Dilutive earnings per share reflects the
potential dilution of securities that could share in the earnings of the
Company. Because the Company has no potential dilutive securities, the
accompanying presentation is only of basic loss per share. All share and
per share amounts in the accompanying financial statements have been
retroactively restated as a result for a 1-for-6 reverse stock split on
May 3, 1999.
FURNITURE, LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Furniture, leasehold improvements and equipment are stated at cost. Cost
of property renewals and betterments are capitalized; cost of property
maintenance and repairs are charged against operations as incurred.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets of five years.
3. INCOME TAXES
At March 31, 2000 the Company had net operating loss carryforwards
totaling approximately $6,000,000 available to reduce future taxable
income through the year 2014. Due to changes in control of the Company,
these carryforwards are generally limited on an annual basis.
Deferred taxes are determined based on temporary differences between the
financial statement and income tax basis of assets and liabilities as
measured by the enacted tax rates which will be in effect when these
differences reverse.
Deferred tax assets are comprised of the following:
<TABLE>
<CAPTION>
March 31,
2000 1999
------------ ------------
<S> <C> <C>
Net operating loss carryforwards $ 2,040,000 $ 1,530,000
Valuation allowance (2,040,000) (1,530,000)
------------ ------------
Net deferred tax asset $ - $ -
============ ============
</TABLE>
F-10
<PAGE>
3. INCOME TAXES (CONTINUED)
The Company has recorded a full valuation allowance against all deferred
tax assets because it could not determine whether it was more likely than
not that the deferred tax asset would be realized.
4. COMMON STOCK
During the year ended March 31, 1999, the Company issued 83,333 shares
for cash of $100,000 and 41,859 shares for services valued at $8,790. The
shares for services were valued at the vendors' invoiced cost.
During the year ended March 31, 2000, the Company issued 1,425,000 shares
of common stock to officers and directors for services rendered. The
shares were valued at $.10 per share, based on the restrictions and lack
of liquidity of the stock and the value of shares issued for Casino Padre
(see below).
During the year ended March 31, 2000, the Company issued 5,000,000 shares
of common stock for 50 units of Casino Padre (see Note 1). The shares
were valued at the historical cost of the Company's ownership of the net
assets of Casino Padre, as explained in Note 1. This $500,000 ($.10 per
share) represented the $500,000 invested by Charles S. Liberis in Casino
Padre at its inception.
During the year ended March 31, 2000, the Company issued 184,428 shares
of common stock for cash of $152,000.
At March 31, 2000, the Company issued 200,000 shares valued at $200,000
as a deposit for a lease on a casino in Colorado (see Note 5).
In February 2000, the Company entered in subscription agreements with two
individuals for the purchase of an aggregate of 1,000,000 units
consisting of one share of common stock and one warrant to purchase one
share of common stock at $.687 per share for a period of five years. The
purchase price of the units is $.6525 per share. The individuals
purchased an aggregate of 59,428 units in March 2000; therefore, there
exist 59,428 warrants to purchase common shares outstanding at March 31,
2000.
Fair value for the stock underlying stock warrants was determined using
information available from other stock sale transactions at or near the
grant date. In management's opinion, these transactions between willing
parties included the best information available at the time of warrants
to estimate the market value of the warrants. These fair values were used
to determine the compensatory components of the stock warrants granted.
Using the fair value method, the fair value of each warrant is estimated
on the date of grant using the Black-Scholes option pricing model with
the following weighted-average assumptions used for grants in 1999:
dividend yield of 0.0 percent; expected volatility of zero percent; risk
free
F-11
<PAGE>
4. COMMON STOCK (CONTINUED)
interest rates of 5.5 percent; expected lives of two years. The Company
recorded no compensation expense during the periods under FASB Statement
123 for warrants issued to non-employees because the value of the
warrants was nominal.
5. CONTINGENT LIABILITIES
CONCENTRATION OF CREDIT RISK
The Company invests its cash and certificates of deposit primarily in
deposits with major banks. Certain deposits, at times, are in excess of
federally insured limits. The Company has not incurred losses related to
its cash.
LITIGATION
In March 2000, Newpark Shipbuilding - Pasadena, Inc. ("Newpark") filed
lawsuit against the Company seeking approximately $140,000 for repair
work on the M/V Casino Padre. The Company disputes the amount of the
claim and have posted a bond in the amount of $140,000 and have
counterclaimed against Newpark for deceptive trade practices, damages for
improper workmanship and damages for delays caused by Newpark. The
Company is vigorously defending itself in this matter and believes that
damages assessed, if any, will not be material to the Company's financial
position or statement of operations.
LEASES
The Company leases the casino vessel, M/V Casino Padre, from CSL
Development Corporation ("CSL"), a company for which Mr. Liberis is an
officer and director, for $125,000 per month. The lease requires minimum
lease payments through September 2001. The rent was deferred until
February 2000. During the charter period, the Company has the right to
purchase the vessel at a price of $6,000,000. The Company is required, at
its expense, to obtain and maintain at all times during the charter
period adequate insurance on the vessel. The Company assumes all risk of
liability for the vessel and for its use and operations, and is required
to indemnify the owner from and against any claim, penalty, damage or
liability resulting therefrom; and all obligations with respect to the
maintenance, repair and inspection of the vessel. The owner has agreed to
waive the lease payments for the months of October 1999 through January
2000 as well as the security deposit required ($200,000) and in return,
the owner will receive 50% of the net operating income of the casino once
the investors have received 100% of their capital.
As explained in Note 4, the Company has issued 200,000 common shares
valued at $200,000 as a deposit on the lease of a casino in Black Hawk,
Colorado. The lease is a five-year lease for $30,000 per month which will
commence the earlier of October 1, 2000 or the issuance of a gaming
license by the Colorado Gaming Commission. Thereafter, the Company has an
option for three additional five-year terms.
F-12
<PAGE>
5. CONTINGENT LIABILITIES (CONTINUED)
Following is a summary of the minimum lease payments for the above
operating leases:
<TABLE>
<CAPTION>
Year Ending March 31:
<S> <C>
2001 $1,680,000
2002 1,110,000
2003 360,000
2004 360,000
2005 360,000
Thereafter 540,000
</TABLE>
The vessel charter expense amounted to $250,000 for the year ended March
31, 2000. The lease of the vessel berth (month-to-month) amounted to
$32,500 for the year ended March 31, 2000.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
Disclosures about Fair Value of Financial Instruments. The estimated fair
value amounts have been determined by the Company, using available market
information and appropriate valuation methodologies.
The fair value of financial instruments classified as current assets or
liabilities including cash and cash equivalents and accounts payable
approximate carrying value due to the short-term maturity of the
instruments.
6. RELATED PARTY TRANSACTIONS
The Company has acquired Casino Padre from CSL (see Note 5).
The Company's principal shareholder has loaned the Company funds of
approximately $118,000 during the year ended March 31, 2000. The Company
also owes $250,000 to CSL for past due charter payments. These payables
include interest accrued at 12% per year.
F-13
<PAGE>
