U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number: 0-30263
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, 2001:$1,966,621
Aggregate market value of the registrant's common stock held by non-affiliates
as of July 16, 2001: APPROXIMATELY $18,142
Number of shares of the registrant's common stock outstanding: 7,889,169 as of
July 16, 2001.
Transitional Small Business Disclosure Format (Check One) Yes / / No /X/
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. 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 "SBET". The Company's subsidiary is Casino Padre Investment Company,
LLC., a Nevada limited liability company.
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.
2
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 Company had 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 31, 2001, the Company owned 74% of the LLC. The LLC ceased operations
on November 6, 2000. The charter on the M/V Entertainer has been terminated. 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. The
Company's application with the Colorado Gaming Commission is still pending.
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
3
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 20 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.
If the Company obtains its gaming license and sufficient funding, the Company
will focus its marketing efforts on direct mail to customers who are on a
customer list obtained by the Company pursuant to 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.
4
DEFAULT IN COLORADO LEASE. Pursuant to the lease between Black Hawk Hotel
Corporation and the Company, Black Hawk Hotel was to purchase 250,000 shares of
the Company's common stock on or before March 1, 2000. Black Hawk did purchase
125,000 shares but has failed to purchase the remaining 125,000 shares. Further,
the commencement date of the lease was October 1, 2000 and the Company is in
default under this provision. The parties are negotiating in good faith to
reinstate the lease.
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 July 16, 2001, the Company employed approximately 3 employees. Of
the Company's 3 employees, 2 are executive and management personnel and 1 is
engaged primarily in administrative positions. 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 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, 2001:
LOCATION LEASE TERM
301 Gregory Street 5 years commencing the earlier of October 1,
Black Hawk, Colorado 2000 or the issuance of a gaming license by
Lease of Lilly Belle's Casino the Colorado Gaming Commission. Thereafter,
3 additional terms of 5 years each.
5
ITEM 3. LEGAL PROCEEDINGS.
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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 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.
o Debra Rasheed V. Casino Padre
On or about October 10, 2000, Debra Rasheed filed a lawsuit in the United
States District Court, Southern District of Texas, Brownsville Division, against
Casino Padre Investment Company, LLC and the vessel M/V Casino Padre, seeking
damages for injuries allegedly sustained while acting as an employee of Casino
Padre. 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 July 12, 2001, a Compromise, Settlement, Release, Indemnity and
Confidentiality Agreement was entered into between the Plaintiff and the
Defendants.
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, 2001.
6
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. It traded under the symbol "DICE" from July 14, 1999
to August 23, 2000. The stock was delisted from August 23, 2000 to May 23, 2001
and began trading under the symbol "SBET" on May 24, 2001. 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.
FISCAL QUARTER ENDED HIGH BID LOW BID
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
June 30, 2000................................. $ .68 $ .37
September 30, 2000............................ - -
December 31, 2000............................. - -
March 31, 2001................................ - -
As of March 31, 2001 there were 290 record holders of the Company's
Common Stock. On July 16, 2001 there were 292 record holders of the Company's
Common Stock. The date of the last trade was June 7, 2001 at a price of $.01.
Since the Company's inception, no cash dividends have been declared on the
Company's Common Stock.
In May 2000, $9,585 was received from David Brannen and $4,667 from GW
Sports Promoting. These amounts were for shares subscribed during the year ended
March 31, 2000. These sales and issuances of securities and the transactions
were deemed to be exempt of registration under the Securities Act by virtue of
Section 4(2). Appropriate legends were affixed to stock certificates issued in
the above transactions. The securities were offered and sold by the Company
without any underwriters. All of the purchasers were deemed to be sophisticated
with respect to the investment and securities of the Company by virtue of their
financial condition and/or relationship to members of the management of the
Company.
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
7
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 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, 2001 was
derived from the operation of Casino Padre. Casino Padre began operations on
November 18, 1999 and ceased operations on November 6, 2000. For the year ending
March 31, 2001, the Company incurred a net loss of $227,529. The net loss for
the previous fiscal year was $1,154,563.
For the year ending March 31, 2001, revenues from operations were
$1,966,621 while cost of sales were $146,676 and operating expenses were
$2,077,474. A total of $30,000 was allocated to the minority interest in Casino
Padre. For the previous fiscal year, sales were $447,968, with cost of sales of
$46,225 and operating expenses of $1,556,307.
8
General and administrative expenses for the year ending March 31, 2001,
totaled $458,290. A total of $893,435 was expended for the operation of the
casino and $594,250 for the operation of the vessel. Sales and marketing
expenses were $131,499 for the period.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2001, the Company had a working capital deficiency of
$713,341, as compared to a deficiency of $614,220 at March 31, 2000. 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 as Company does not
presently have any operations.
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. During the year ended
March 31, 2001, the Company repaid a net amount of $43,614. At March 31, 2001,
$77,859 was owed to Mr. Liberis.
In addition, at March 31, 2001, $11,762 was owed to CSL Development
Corporation for past due charter payments and accrued interest thereon. 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, 2001, 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, 2001 and the
working capital deficit and stockholders' deficit existing as of March 31, 2001.
The Company must raise additional capital in order to fund operations.
The Company believes that it will be able to raise additional capital
through debt and equity financing which, along with additional loans from its
principal shareholders, 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 be able to raise additional capital or to take
advantage of any expansion opportunities that may become available. 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 further
business 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.
9
ITEM 7. FINANCIAL STATEMENTS
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The consolidated financial statements and notes are included herein
beginning at page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
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None.
10
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
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The officers and directors of the Company are as follows:
NAME AGE POSITION
Charles S. Liberis 59 Chairman of the Board of Directors, President, Chief
Operating Officer
Michael Georgilas 47 Director
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 1983
to 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.
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 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.
11
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During the fiscal year ended March 31, 2001, Messrs. Liberis and Georgilas filed
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.
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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 $100,000. Accordingly, no other executive officers of the
Company are included in the table.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------------------- -------------------------------------------
AWARDS PAYOUTS
----------------------------- ------------
OTHER RESTRICTED SECURITIES ALL OTHER
NAME AND ANNUAL STOCK UNDERLYING COMPEN-
PRINCIPAL COMPENSA AWARD(S) OPTIONS/ LTIP SATION
POSITION YEAR SALARY ($) BONUS ($) TION ($) ($) SARS (#) PAYOUTS ($)
------------- ------------ ------------ ------------- ------------- --------------- ------------- ------------ -----------
Charles S. 2000 $0.00 $0.00 $0.00 $1,000,000 0 0 $0.00
Liberis, (2)
President 2001 $0.00 $0.00 $0.00 0 0 $0.00
(1)
---------------
(1) Charles S. Liberis was the President of the Company from July 8, 1999 to present.
(2) Mr. Liberis received no cash compensation or other benefits for the fiscal year ended March 31, 2001. 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.
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.
12
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, 2001:
NAME AND ADDRESS OF OWNER NUMBER OF SHARES OWNED PERCENT OF CLASS (1)
Charles S. Liberis 6,000,000 76.1%
1610 Barrancas Avenue
Pensacola, FL 32501
Michael Georgilas 75,000 1.0%
Ellis 26
N. Erythrea 14671
Athens, Greece
Officers and directors as a group 6,075,000 77.0%
(3 persons)
---------------
(1) This table is based on 7,889,169 shares of common stock outstanding on March 31, 2001.
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 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 was for five
(5) years commencing on October 1, 1999. The Charter Agreement was terminated.
At March 31, 2001, $11,762 was owed to CSLD.
From May 31, 1999 to March 31, 2001, 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. During the
year ended March 31, 2001, the Company repaid net amounts to Mr. Liberis
amounting to $43,617. At March 31, 2001, $77,859 was owed to Mr. Liberis.
13
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:
EXHIBIT
NUMBER DOCUMENT
2.1 Agreement to Exchange Common Stock with U.S. Gaming & Leisure Corp. (1)
3.1 Articles of Incorporation, as amended (1)
3.2 Bylaws, as amended (1)
10.1 Asset Purchase Agreement with Imperial Petroleum, Inc. (1)
10.2 Management Contract with Casino Padre Investment Company, LLC (1)
10.3 Lilly Belle lease (1)
10.4 South Padre Island Sublease and Dockage Agreement (1)
10.5 Charter Agreement with CSL Development Corporation (1)
21 Subsidiaries of the Registrant (1)
(1) Previously filed as an exhibit to the Company's Registration
Statement on Form 10-SB dated April 10, 2000 and incorporated
by reference herein.
14
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: July 16, 2001 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 July 16, 2001
Chairman of the Board of Directors,
President and Chief Operating Officer
(Principal Executive, Financial
and Accounting Officer)
/s/ Michael Georgilas July 16, 2001
Director
15
SUREBET CASINOS, INC. AND SUBSIDIARY
Index To Consolidated Financial Statements
Page
Independent Auditors' Report................................................F-2
Consolidated Balance Sheets as of March 31, 2001 and 2000...................F-3
Consolidated Statements of Operations
for the Years Ended March 31, 2001 and 2000........................F-4
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
for the Years Ended March 31, 2001 and 2000........................F-5
Consolidated Statements of Cash Flows
for the Years Ended March 31, 2001 and 2000........................F-6
Notes to Consolidated Financial Statements..................................F-7
F-1
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, 2001 and 2000, 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 audit in accordance with auditing standards generally accepted
in the United States of America. 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, 2001 and 2000, 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.
/s/ JACKSON & RHODES P.C.
Jackson & Rhodes P.C.
Dallas, Texas
July 10, 2001
F-2
SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, 2001 and 2000
ASSETS
2001 2000
------------ ------------
Current assets:
Cash $ - $ 36,677
Receivables 15,630 6,116
Inventory - 8,715
------------ ------------
Total current assets 15,630 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) 140,000 140,000
Deposit on Colorado casino lease (Note 5) 200,000 200,000
Other - 992
------------ ------------
Total other assets 340,000 340,992
------------ ------------
$ 355,630 $ 505,664
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities $ 639,350 $ 276,666
Due to shareholder (Note 6) 77,859 121,473
Due to CSL Development Corporation (Notes 5 and 6) 11,762 267,589
------------ ------------
Total current liabilities 728,971 665,728
------------ ------------
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,
7,889,169 and 7,849,478 shares issued and outstanding 7,889 7,849
Additional paid-in capital 5,569,866 5,555,654
Accumulated deficit (5,951,096) (5,723,567)
------------ ------------
Total stockholders' equity (deficit) (373,341) (160,064)
------------ ------------
$ 355,630 $ 505,664
============ ============
See notes to consolidated financial statements.
F-3
SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended March 31, 2001 and 2000
2001 2000
------------ ------------
Revenue:
Casino revenue $ 1,417,571 $ 314,208
Ticket sales 208,133 76,376
Food and beverage sales 340,917 57,384
------------ ------------
Total revenue 1,966,621 447,968
------------ ------------
Operating expenses:
Cost of food and beverage sales 146,676 46,225
Casino operating costs 893,435 357,891
Casino vessel costs 594,250 578,016
Start-up costs - 290,565
Sales and marketing 131,499 102,076
General and administrative 458,290 517,759
Minority interest in losses (30,000) (290,000)
------------ ------------
Total operating expenses 2,194,150 1,602,532
------------ ------------
Net income (loss) $ (227,529) $(1,154,564)
============ ============
Basic net loss per share $ (0.03) $ (0.28)
============ ============
Weighted average common shares outstanding 7,869,324 4,162,123
============ ============
See accompanying notes to consolidated financial statements.
F-4
SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Years Ended March 31, 2001 and 2000
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
---------- -------- ----------- ------------ -----------
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)
---------- -------- ----------- ------------ ------------
Balance, March 31, 2000 7,849,478 7,849 5,555,654 (5,723,567) (160,064)
Adjustment to shares 39,691 40 (40) - -
Receipt of cash for subscribed shares - - 14,252 - 14,252
Net loss - - - (227,529) (227,529)
---------- -------- ----------- ------------ ------------
Balance, March 31, 2001 7,889,169 $ 7,889 $5,569,866 $(5,951,096) $ (373,341)
========== ======== =========== ============ ============
See accompanying notes to consolidated financial statements.
F-5
SUREBET CASINOS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended March 31, 2001 and 2000
2001 2000
------------ ------------
Cash flows from operating activities:
Net income (loss) $ (227,529) $(1,154,564)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 15,072 12,548
Loss on disposition of assets 98,092 -
Shares issued for services - 142,500
Minority interest in losses (30,000) (290,000)
Changes in operating assets and liabilities:
Accounts receivable (9,514) (6,116)
Inventory 8,715 (8,715)
Other assets 992 (120,742)
Accounts payable and accrued liabilities 362,684 526,666
------------ ------------
Net cash used in operating activities 218,512 (898,423)
Cash flows from investing activities:
Purchase of furniture and equipment - (125,712)
------------ ------------
Cash flows from financing activities:
Net advances from shareholder (299,441) 118,812
Sale of shares of subsidiary to minority interests 30,000 290,000
Sale of common shares 14,252 652,000
------------ ------------
Net cash provided by financing activities (255,189) 1,060,812
Net increase (decrease) in cash and cash equivalents (36,677) 36,677
Cash at beginning of year 36,677 -
------------ ------------
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.
See accompanying notes to consolidated financial statements.
F-6
SUREBET CASINOS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001 AND 2000
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.
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
SUREBET CASINOS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 61% of Casino Padre. Casino
Padre ceased operations on November 6, 2000.
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. As of this date, the Company has not received approval
from the Colorado Gaming Commission. Even if approval is received, there
is no assurance that the Company can raise the capital required to
commence operations.
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 $227,529 and $1,154,564 for the years ended March 31, 2001 and 2000,
respectively, and has a working capital deficit of $713,341 and a
stockholders' deficit of $373,341 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
F-8
SUREBET CASINOS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOING CONCERN (CONTINUED)
believes that it will be able to raise additional capital through debt
and equity financing, along with loans from its principal shareholders,
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 be able to raise additional capital or
take advantage of any expansion opportunities that may become available.
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 further business opportunities.
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
SUREBET CASINOS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2001 the Company had net operating loss carryforwards
totaling approximately $6,200,000 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:
March 31,
2001 2000
------------ ------------
Net operating loss carryforwards $ 2,108,000 $ 2,040,000
Valuation allowance (2,108,000) (2,040,000)
------------ ------------
Net deferred tax asset $ - $ -
------------ ------------
F-10
SUREBET CASINOS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2001, Casino Padre sold 30,000 units for
$30,000.
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,
2001.
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
F-11
SUREBET CASINOS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. COMMON STOCK (CONTINUED)
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 2000: dividend yield of 0.0 percent;
expected volatility of zero percent; risk free 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.
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.
Following is a summary of the minimum lease payments for the above
operating leases:
Year Ending March 31:
2001 $1,680,000
2002 1,110,000
2003 360,000
2004 360,000
2005 360,000
Thereafter 540,000
F-12
SUREBET CASINOS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. CONTINGENT LIABILITIES (CONTINUED)
LITIGATION (CONTINUED)
The vessel charter expense amounted to $250,000 for the year ended March
31, 2001. The lease of the vessel berth (month-to-month) amounted to
$60,000 for the year ended March 31, 2001.
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 and repaid
net amounts owed to the principal shareholder amounting to $43,614. The
Company also owed $250,000 to CSL for past due charter payments as of
March 31, 2000. These payables include interest accrued at 12% per year.
The Company has paid the past due charter payments as of March 31, 2001.
F-13