UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 205491919
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission
File No:
(Exact name of registrant as specified in charter)
| (State of Incorporation) | (I.R.S. EIN) |
(Address of principal executive offices)
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b)-2 of the Exchange Act.:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| None |
Indicate
by check mark whether the Registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such
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Indicate
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| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller
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| Emerging
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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Indicate the number of shares outstanding of each of the Issuer’s classes of common equity as of the latest practicable date: Number of shares outstanding as of November 8, 2023: .
DIAMONDHEAD CASINO CORPORATION
AND SUBSIDIARIES
TABLE OF CONTENTS
| I |
DIAMONDHEAD CASINO CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Total current assets | ||||||||
| Land (Note 3) | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses due related parties (Note 4) | $ | |||||||
| Accounts payable and accrued expenses - others (Note 4) | ||||||||
| Convertible notes and line of credit payable (Note 5) | ||||||||
| Debenture payable (Note 6) | ||||||||
| Convertible debenture payable (Note 6) | ||||||||
| Short term notes and interest bearing advance (Note 7) | ||||||||
| Notes payable due related parties (net of unamortized debt discount of $ | ||||||||
| Notes payable due others (net of unamortized debt discount of $ | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Long term notes and interest bearing advance (Note 10) |
| |||||||
| Total non-current liabilities |
| |||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Notes 3 and 12) | ||||||||
| Stockholders’ deficit: | ||||||||
| Preferred stock, $ par value; shares authorized , outstanding at September 30,
2023 and December 31, 2022 (aggregate liquidation preference of $ | ||||||||
| Common stock, $ par value; shares authorized , issued: at September 30, 2023 and December 31 2022, outstanding: at September 30, 2023 and December 31, 2022 | ||||||||
| Additional paid-in capital | ||||||||
| Unearned ESOP shares | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Treasury stock, at cost, shares at September 30, 2023 and December 31, 2022 | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
See the accompanying notes to these unaudited condensed consolidated financial statements.
| 1 |
DIAMONDHEAD CASINO CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
| Three Months Ended | |||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| COSTS AND EXPENSES | ||||||||
| Administrative and general | $ | $ | ||||||
| Other | ||||||||
| Total costs and expenses | ||||||||
| OTHER EXPENSE | ||||||||
| Interest expense: | ||||||||
| Related parties | ||||||||
| Other | ||||||||
| Total other expense | ||||||||
| NET LOSS | ( | ) | ( | ) | ||||
| PREFERRED STOCK DIVIDENDS | ( | ) | ( | ) | ||||
| NET LOSS APPLICABLE TO COMMON STOCKHOLDERS | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding -basic and diluted | ||||||||
| Net loss per common share - basic and diluted | $ | ) | $ | ) | ||||
See the accompanying notes to these unaudited condensed consolidated financial statements.
| 2 |
DIAMONDHEAD CASINO CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| COSTS AND EXPENSES | ||||||||
| Administrative and general | $ | |||||||
| Other | ||||||||
| Total costs and expenses | ||||||||
| OTHER EXPENSE | ||||||||
| Interest expense: | ||||||||
| Related parties | ||||||||
| Other | ||||||||
| Total other expense | ||||||||
| NET LOSS | ( | ) | ( | ) | ||||
| PREFERRED STOCK DIVIDENDS | ( | ) | ( | ) | ||||
| NET LOSS APPLICABLE TO COMMON STOCKHOLDERS | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding - basic and diluted | ||||||||
| Net loss per common share - basic and diluted | $ | ) | $ | ) | ||||
See the accompanying notes to these unaudited condensed consolidated financial statements.
| 3 |
DIAMONDHEAD CASINO CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(UNAUDITED)
| Additional | Total | |||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Unearned ESOP | Accumulated | Treasury Stock | Stockholders’ | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Shares | Amount | Deficit | Shares | Amount | Deficit | ||||||||||||||||||||||||||||||||||
| Balances at January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Common stock to be issued in connection with notes payable | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Dividends | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2022 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Debt discount | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Dividends | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2022 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Dividends | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balances at September 30, 2022 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||
| Balances at January 1, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Common stock to be issued in connection with notes payable - related parties | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Dividends | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2023 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Dividends | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2023 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Common stock to be issued in connection with notes payable - related parties | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Common stock to be issued in connection with notes payable - others | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Dividends | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balances at September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
See the accompanying notes to these unaudited condensed consolidated financial statements.
| 4 |
DIAMONDHEAD CASINO CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
| Nine Months Ending | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization | ||||||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts payable and accrued expenses - related parties | ||||||||
| Accounts payable and accrued expenses - other | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from non-interest bearing advances from others | ||||||||
| Proceeds from non-interest bearing advances from related parties | ||||||||
| Repayments to notes payable issued to related parties | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Common stock to be issued in connection with notes payable - related parties | $ | $ | ||||||
| Common stock to be issued in connection with notes payable - Others | $ | $ | ||||||
| Unpaid preferred stock dividends in accounts payable and accrued expenses | $ | $ | ||||||
See the accompanying notes to these unaudited condensed consolidated financial statements.
| 5 |
DIAMONDHEAD CASINO CORPORATION
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Organization and Business
Diamondhead Casino Corporation (the “Company”) owns, through its wholly-owned subsidiary, Mississippi Gaming Corporation, an approximate 400-acre undeveloped property located at 7051 Interstate 10, Diamondhead, Mississippi 39525 (hereafter “the Diamondhead Property” or “the Property”). The Company’s intent was and is to construct a casino resort and other amenities on the Property unilaterally or in conjunction with one or more joint venture partners. However, the Company has been unable, to date, to obtain financing to move the project forward and/or enter into a joint venture partnership. There can be no assurance that the substantial funds required for the design and construction of the project can be obtained or that such funds can be obtained on acceptable terms. In addition, the Company has been unable to obtain financing to sustain the Company. Due to its lack of financial resources, the Company was forced to explore other alternatives, including a sale of part or all of the Property. The Company’s preference is to sell only part of the Property inasmuch as this would appear to be in the best interest of the stockholders of the Company. However, there can be no assurance the Company will be able to sell only part of the Property. The Company intends to continue to pursue a joint venture partnership and/or other financing while seeking a viable purchaser for part or all of the Property. Finally, there can be no assurance that if the requisite financing for the project were obtained and the project were constructed, that the project would be successful.
Note 2. Liquidity and Going Concern
These
unaudited condensed consolidated financial statements have been prepared on the basis that the Company is a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses over
the past several years, has no operations, generates no operating revenues and, as reflected in the accompanying unaudited condensed
consolidated financial statements, incurred a net loss applicable to common stockholders of $
The Company has had no operations since it ended its gambling cruise ship operations in 2000. Since that time, the Company has concentrated its efforts on the development of its Diamondhead, Mississippi property. That development is dependent upon the Company obtaining the necessary capital, through either equity and/or debt financing, unilaterally or in conjunction with one or more partners, to master plan, design, obtain permits for, construct, open, and operate a casino resort.
In
the past, in order to raise capital to continue to pay on-going costs and expenses, the Company has borrowed funds, through Private Placements
of convertible instruments as well as through other secured notes which are more fully described in Notes 5 through 10 to these unaudited
condensed consolidated financial statements. The Company is in default with respect to payment of both principal and interest under the
terms of most of these instruments. In addition, at September 30, 2023, the Company had $
The above conditions raise substantial doubt as to the Company’s ability to continue as a going concern.
| 6 |
Note 3. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conformity with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements and, in our opinion, reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the nine months ended September 30, 2023 are not necessarily indicative of the results that we will have for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31, 2022, attached to our annual report on Form 10-K.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of Diamondhead Casino Corporation and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Land
Land held for development is carried at cost. Costs directly related to site development, such as licensing, permitting, engineering, and other costs, are capitalized.
Land development costs, which have been capitalized, consist of the following at September 30, 2023 and December 31, 2022:
| Land | $ | |||
| Licenses | ||||
| Engineering and costs associated with permitting | ||||
| $ |
Fair Value Measurements
The Company follows the provisions of ASC Topic 820 “Fair Value Measurements” for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. The standard discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The standard utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
| 7 |
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Input other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable input that reflects management’s own assumptions.
Financial instruments included in current assets and liabilities are reported at carrying value in the unaudited condensed consolidated balance sheets, which approximate fair value due to their short-term nature.
Long-Lived Assets
The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The recoverability of long-lived assets is measured by comparing the carrying amount of the assets to the estimated undiscounted future cash flows projected to be generated by the assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount the carrying value exceeds the fair value of such assets determined by appraisal, discounted cash flow projections, or other means. As of September 30, 2023, there was a triggering event due to recurring losses and an impairment test was conducted. However, the fair value of the long-lived assets exceeded the carrying value and the Company determined that no impairment existed at September 30, 2023.
Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share is calculated by using the weighted average number of common shares outstanding, plus other potentially dilutive securities. Potentially dilutive securities are excluded from the computation of diluted loss per shares since their effect would be antidilutive. Common shares outstanding consist of issued shares, including allocated and committed shares held by the ESOP trust, less shares held in treasury. Common shares outstanding excludes the shares subject to be issued in connection with notes payables (see note 9) and shares subject to be issued to the Chairman of the Board of Directors. (see note 11). The dilutive securities below do not include potentially convertible Debentures since the requirements for possible conversion have not yet been met and may never be met.
| September 30, | ||||||||
| Description | 2023 | 2022 | ||||||
| Convertible Preferred Stock | ||||||||
| Options to Purchase Common Shares | ||||||||
| 8 |
Recently Adopted Accounting Pronouncements
In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivative and Hedging (Topic 815, and Leases (Topic 841). This new guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual reporting periods. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date to entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. Accordingly, the Company has adopted this standard as of January 1, 2023 and it did not have an effect on its consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
On March 27, 2023, the FASB issued ASU 2023-01, which amends certain provisions of ASC 842 that apply to arrangements between related parties under common control. Specifically, the ASU:
| ● | Offers private companies, as well as not-for-profit entities that are not conduit bond obligors, a practical expedient that gives them the option of using the written terms and conditions of a common-control arrangement when determining whether a lease exists and the subsequent accounting for the lease, including the lease’s classification | |
| ● | Amends the accounting for leasehold improvements in common-control arrangements for all entities. |
The ASU is effective for fiscal years beginning after December 15, 2023. The Company has not completed its assessment of the standard, but does not expect the adoption to have a material impact on the Company’s unaudited condensed consolidated financial position, results of operations, or cash flows.
No other recent accounting pronouncements were issued by FASB that are believed by management to have a material impact on the Company’s present or future financial statements.
Note 4. Accounts Payable and Accrued Expenses
The table below outlines the elements included in accounts payable and accrued expenses at September 30, 2023 and December 31, 2022:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Related parties: | ||||||||
| Accrued payroll due officers | $ | $ | ||||||
| Accrued interest due officers and directors | ||||||||
| Accrued director fees | ||||||||
| Base rents due to the President | ||||||||
| Associated rental costs | ||||||||
| Other | ||||||||
| Total related parties | $ | $ | ||||||
| Non-related parties: | ||||||||
| Accrued interest | $ | $ | ||||||
| Accrued dividends | ||||||||
| Accrued fines and penalties | ||||||||
| Other | ||||||||
| Total non-related parties | $ | $ | ||||||
| 9 |
Note 5. Convertible Notes and Line of Credit
Line of Credit
In
2008, the Company entered into an agreement with an unrelated third party for an unsecured Line of Credit up to a maximum of $
Convertible Notes
The
Convertible Notes issued pursuant to the two Private Placements discussed above total $
The table below summarizes the Company’s debt arising from the above-described sources as of September 30, 2023 and December 31, 2022:
September 30, 2023 | December 31, 2022 | |||||||
| Private placements - March 1, 2010* | $ | $ | ||||||
| Private placements - October 25, 2010 | ||||||||
| $ | $ | |||||||
| * |
Note 6. Convertible Debentures
Pursuant
to a Private Placement Memorandum dated February 14, 2014 (the “Private Placement”), the Company offered up to a maximum
of $
(a)
$
(b)
$
| 10 |
(c)
$
The conversion rights on each issued Debenture carried an Anti-Dilution Provision. If the Company issued any shares of Common Stock or other securities after March 31, 2014 at a price per security that was less than the conversion price of a Debenture, then the Debenture would have had a new conversion price equal to the price per security that was less than the Conversion Price of the Debenture. The foregoing provision did not apply to the following:
(a) The issuance of any of the other Debentures in the Offering or the issuance of shares of Common Stock upon conversion of any of the Debentures in the Offering.
(b) The issuance of any shares of Common Stock if such issuance relates to an agreement, arrangement or grant to issue shares of Common Stock entered into by the Company prior to the Issue Date of the First Tranche Debentures in the Offering, including but not limited to, for example, previously issued convertible promissory notes, previously issued warrants, previously issued options to purchase Common Stock, or common stock vested or to be issued pursuant to a pre-existing Employee Stock Ownership Plan.
The Anti-Dilution Provisions with respect to a Debenture terminate the earlier of (a) the date (if ever) the Company receives an “Approval to Proceed” from the Mississippi Gaming Commission to develop a casino/hotel on the Property, (b) the date on which the Debenture is converted in full, (c) the date on which the Debenture is paid in full, or (d) the Final Maturity Date of the Debenture (as defined in the Debenture).
Since the issuance of the Debentures, there have been no events that would trigger the above anti-dilution provisions.
The First Tranche Debentures were issued on March 31, 2014. The Final Maturity Date of the First Tranche Debentures was six years from the issuance date of the Debentures, or March 31, 2020. Therefore, the anti-dilution provisions of the First Tranche Debentures have expired.
The Second Tranche Debentures were issued on December 31, 2014. The Final Maturity Date of the Second Tranche Debentures was six years from the issuance date of the Debentures, or December 31, 2020. Therefore, the anti-dilution provisions of the Second Tranche Debentures have expired.
When
originally issued, in the event the Company failed to meet the conditions for conversion of the Debentures, the First Tranche Convertible
Debentures, which total $
On or about October 25, 2016, certain Debenture holders sued the Company for failing to make payments due under the terms of the Debentures. On or about December 12, 2019, the parties entered into a Settlement Agreement and on January 13, 2020, the parties filed a Stipulation of Voluntary Dismissal with Prejudice in the case. The case was dismissed with the Court maintaining continuing jurisdiction over the Settlement Agreement.
In
or about December 2022, the parties entered into an Amendment to Settlement Agreement. The Amendment provides, in pertinent part, as
follows: that on or before March 31, 2023, the Plaintiffs would be paid the principal due under their debentures of $
| 11 |
Note 7. Short Term Notes and Interest-Bearing Advance
Bank Credit Facility
Wells
Fargo Bank provided an unsecured credit facility of up to $
Interest Bearing Advances
In
2016, the Company received cash advances totaling $
On
February 2, 2017, the Company borrowed $ from an unrelated third party. The Note carries an annual interest rate of approximately
and is past due. The Company is in default and as such, the lender may increase the interest rate due by an amount of up to
Of
the amounts discussed above, $
Note 8. Current Notes Payable Due Related Parties
In
2016, the Company received cash advances totaling $
| 12 |
In
the third quarter of 2016, the Chairman of the Board of Directors of the Company loaned the Company $
In
July 2017, at the request of the Company, the current Chairman of the Board of Directors, who is also a Vice President of the Company
(“the Chairman”), paid all property taxes due, together with all interest due thereon, to Hancock County, Mississippi on
an approximate
The
Chairman is one of the secured parties under that Land Deed of Trust recorded on September 26, 2014 in Hancock County, Mississippi, to
secure Tranche I and Tranche II Debentures issued by the Company in 2014. Under paragraph 5 of the Land Deed of Trust, a secured party
who advances sums for taxes due on the Property is secured by the same Land Deed of Trust, but only at that interest rate specified in
the note representing the primary indebtedness, namely
The
Chairman advanced the $
In
March of 2018, the Board of Directors voted to increase up to an additional $
| 13 |
On
September 30, 2018, Mississippi Gaming Corporation issued a secured promissory note, due one year from the date of issue to the Chairman,
for an amount up to $
In
November of 2018, the Board of Directors voted to increase up to an additional $
In
July 2020, the Chairman of the Board of the Company paid a total of $
In
May 2021, the Chairman of the Board of the Company paid a total of $
On
May 30, 2021, the Chairman of the Board of the Company loaned the Company $
On
February 17, 2023, the Board of Directors agreed to issue a non-interest bearing promissory note to the Chairman in the principal amount
of $
On
July 28, 2023, the Board of Directors agreed to issue a non-interest bearing promissory note to the Chairman in the principal amount
of $
As
of September 30, 2023, the Chairman had advanced a total of $
| 14 |
On
July 24, 2017, the President of the Company, who is a Director of the Company, agreed to advance the Company up to $
As
of September 30, 2023, the President had advanced a total of $
The
third lien placed on the Diamondhead Property, which secures the above three promissory notes, totals up to $
The
principal balance of the notes payable due to the officers and directors discussed above was $
Note 9. Notes Payable Due Others
In
October 2017, the Company entered into a settlement with a holder of $
In December 2020, the Company entered into three promissory notes with unrelated lenders in exchange for an aggregate principal amount of $. The Company received total proceeds of $ for the notes, resulting in an original issue discount of $. This original issue discount was recorded as a debt discount, which will be amortized to interest expense over the life of the notes.
In January and February 2021, the Company entered into two additional promissory notes with unrelated lenders in exchange for a principal amount of $ and $, respectively. The Company received total proceeds of $ for the notes, resulting in an original issue discount of $. This original issue discount was recorded as a debt discount, which will be amortized to interest expense over the life of the notes. The notes are non-interest bearing and matured in January and February 2022, respectively, one year after the notes’ issuances. These notes are currently in default.
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In April and May 2021, the Company entered into three additional promissory notes with unrelated lenders in exchange for a principal amount of $, $ and $, respectively. The Company received total proceeds of $ for the notes, resulting in an original issue discount of $. This original issue discount was recorded as a debt discount, which will be amortized to interest expense over the life of the notes. The notes are non-interest bearing and matured in April and May 2022, respectively, one year after the notes’ issuances. The notes are currently in default.
In July 2021, the Company entered into an additional promissory note with an unrelated lender in exchange for a principal amount of $. The Company received proceeds of $ for the note. The note is non-interest bearing and matures in July 2022, one year after the note’s issuance. The note is currently in default.
In November 2021, the Company entered into an additional promissory note with an unrelated lender in exchange for a principal amount of $. The Company received proceeds of $ for the note. The note is non-interest bearing and matures in November 2022, one year after the note’s issuance. The note is currently in default.
In
March 2022, unrelated third parties paid a total of $
In April 2022, the Company entered into an additional promissory note with an unrelated lender in exchange for a principal amount of $. The Company received proceeds of $ for the note. The note is non-interest bearing and matures in April 2023, one year after the note’s issuance. The note is currently in default.
From
April 2021 to June 2022, thirteen liens were placed on the Property to secure these notes.
On
July 25, 2023 and August 8, 2023, the Company entered into two additional promissory notes with unrelated lenders in exchange for a
principal amount of $each.
The Company received total proceeds of $for
the notes. These notes are non-interest bearing and mature in one year after the notes’ issuance. In exchange for the loans,
the Company also agreed to issue shares
of common stock of the Company to each lender and agreed to pay each lender the principal due on each note out of the proceeds
expected to be received from the settlement of an eminent domain proceeding. The notes are not convertible. As of the issuance date
of these financial statements, no shares have been issued. The Company recorded a fair value of the stock of $
During
the nine months ended September 30, 2023 and 2022, $
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Note 10. Long Term Notes and Interest-Bearing Advance
Promissory Notes
On June 9, 2017, the Company entered into a Promissory
Note with an unrelated lender in exchange for proceeds in the amount of $
Note 11. Related Party Transactions
As
of September 30, 2023, the President of the Company is owed deferred salary in the amount of $
The
Company has a month-to-month lease with the President and then-Chairman of the Board of Directors of the Company, for office space owned
by the President in Alexandria, Virginia. The lease calls for monthly base rent in the amount of $
Directors
of the Company are entitled to a director’s fee of $
On February 4, 2022, the Board of Directors entered into an agreement with Mr. Harrison, the Chairman of the Board of Directors, to issue shares of common stock of the Company to Mr. Harrison to repurchase the indemnifications the Company had previously agreed to pay Mr. Harrison for losses, if any, suffered on certain stock he had sold in prior years in an unrelated company to raise funds to pay property taxes due on the Diamondhead, Mississippi Property and to lend additional funds to the Company. This repurchase eliminates any risk to the Company arising from the indemnification which could have been material. During the nine months ended September 30, 2023, the Company recorded stock-based compensation of $ for the fair value of these shares, which have not yet been issued as of the issuance date of these unaudited condensed consolidated financial statements.
On
February 17, 2023, the Board of Directors agreed to issue a non-interest bearing promissory note to the Chairman in the principal amount
of $
On
July 28, 2023, the Board of Directors agreed to issue a non-interest bearing promissory note to the Chairman in the principal amount
of $
See Notes 4, 5, 7, 8 and 12 for other related party transactions.
Note 12. Commitments and Contingencies
Liens
As of September 30, 2023, there were twenty-one liens on the Company’s Diamondhead, Mississippi Property as follows:
| 17 |
The
Company’s obligations under the First Tranche Collateralized Convertible Senior Debentures are secured by a first lien on the Company’s
Diamondhead, Mississippi property (the “Investors Lien”). On March 31, 2014, the Company issued $
On
December 16, 2016, the Company filed a second lien on the Diamondhead Property in the maximum amount of $
On
August 21, 2018, the Company filed a third lien on the Diamondhead Property for up to $
On
January 26, 2021, a fourth lien in the amount of $
On
February 17, 2021, a fifth lien in the amount of $
In
April 2021, six liens were placed on the Property to secure six non-interest-bearing notes payable to be issued to six lenders bringing
total liens on the Property to eleven. The six notes issued total $
In
June 2021, a twelfth and thirteenth lien were placed on the Property to secure two non-interest bearing notes issued in May of 2021 which
total $
In
July 2021, the Company placed a fourteenth lien on the Property to secure a promissory note in the amount of $
In
July 2021, the Company placed a fifteenth lien on the Property to secure a promissory note in the amount of $
In
July 2021, the Company placed a sixteenth lien on the Property to secure a non-interest bearing note issued to the Chairman in May 2021
which totals $
In
July 2021, the Company placed a seventeenth lien on the Property to secure a non-interest bearing note issued to a lender, which totals
$
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In
November 2021, an eighteenth lien was placed on the Property to secure a non-interest bearing note issued in November 2021 which totals
$
In
March 2022, a nineteenth and twentieth lien were placed on the Property to secure two non-interest bearing notes issued in March of 2022
which total $
In
May 2022, a twenty-first lien was placed on the Property to secure a non-interest bearing note issued in April of 2022 which totals $
Other
The
Company is currently delinquent in filing those documents and forms required to be filed in connection with its Employee Stock Ownership
Plan (“ESOP”) for the year ended December 31, 2022, 2021, 2020, 2019, 2018, 2017, 2016 and 2015. The Company did not have
the funds to pay professionals to prepare, audit and file these documents and forms when due. Although these required filings normally
do not result in any tax due to an agency of the government, the Company could be subject to significant penalties for failure to file
these forms when due. Penalties are assessed by the Department of Labor on a per diem basis from the original due dates for the required
informational filings until the filings are actually made. The Company has accrued $
The Company and its subsidiaries file their federal tax return on a consolidated basis. The Company has not filed its consolidated federal tax returns for the years ended December 31, 2022, 2021, 2020, 2019, 2018, 2017 and 2016.
The
Company believes no tax will be due with these federal returns. The Company has not filed its annual reports together with its franchise
tax due with the state of Delaware for 2022, 2021, 2020, 2019 and 2018. Mississippi Gaming Corporation, a wholly owned subsidiary of
the Company, has not filed its annual reports, together with its franchise tax due, with the state of Delaware for 2022, 2021, 2020,
2019 and 2018. Casino World, Inc., a wholly owned subsidiary of the Company, has not filed its annual reports, together with its franchise
tax due, with the state of Delaware for 2022, 2021, 2020, 2019, 2018, 2017 and 2016. Mississippi Gaming Corporation has not filed its
corporate income and franchise tax returns, together with the tax due, with the state of Mississippi for 2022, 2021, 2020, 2019, or 2018.
Casino World, Inc. has not filed its corporate income and franchise tax returns, together with the tax due, with the state of Mississippi
for 2022, 2021, 2020, 2019, 2018, 2017 and 2016. As of September 30, 2023, the accrued franchise taxes for Delaware and Mississippi totaled
$
Management Agreement
On June 19, 1993, two subsidiaries of the Company, Casino World Inc. and Mississippi Gaming Corporation, entered into a Management Agreement with Casinos Austria Maritime Corporation (CAMC). Subject to certain conditions, under the Management Agreement, CAMC would operate, on an exclusive basis, all of the Company’s proposed dockside gaming casinos in the State of Mississippi, including any operation fifty percent (50%) or more of which is owned by the Company or its affiliates.
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Letter of Intent with an Unrelated Third Party
On March 31, 2023, the Company entered into a Letter of Intent with an unrelated third party. The Agreement provided for purchases of Common Stock of Diamondhead Casino Corporation and purchases of Common Stock of its wholly-owned subsidiary, Mississippi Gaming Corporation. As of the issuance date of these financial statements, no payment has been made by the third party investor, no transactions pursuant to the Letter of Intent have occurred and no shares of common stock have been issued. The Company does not expect the Agreement to be honored.
Note 13. Subsequent Events
On
October 20, 2023, MGC received $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Financial Results
Forward Looking Statements
This section should be read together with the consolidated financial statements and related notes thereto, for the year ended December 31, 2022 included with our annual report filed on Form 10-K.
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, for which the Private Securities Litigation Reform Act of 1995 provides a safe harbor. These forward-looking statements include, but are not limited to, statements about our plans, objectives, representations and intentions and are not historical facts and typically are identified by use of terms such as “believes,” “expects,” “anticipates,” “estimates,” “plans,” “intends,” “objectives,” “goals,” “aims,” “projects,” “forecasts,” “possible,” “seeks,” “may,” “could,” “should,” “might,” “likely,” “enable,” or similar words or expressions, as well as statements containing phrases such as “in our view,” “there can be no assurance,” “although no assurance can be given,” or “there is no way to anticipate with certainty.” These statements include, among other things, statements regarding our ability to implement our business plan and business strategy, our ability to obtain financing to sustain the Company, our ability to finance any future development, construction or operations, our ability to attract key personnel, and our ability to operate profitably in the future. These forward-looking statements are based on current expectations and assumptions that are subject to substantial risks and uncertainties which could cause our actual results to differ materially from those reflected in the forward-looking statements. In evaluating these forward-looking statements, you should consider risks and uncertainties relating to various factors, including, but not limited to, financing, licensing, construction and development, competition, legal actions, federal, state, county and/or city government actions, general financing conditions, and general economic conditions.
The Company’s actual results may differ significantly from results projected in the forward-looking statements. We undertake no obligation to revise or update forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Throughout this Annual Report references to “we,” “our,” “us,” “Diamondhead Casino Corporation,” the “Company,” and similar terms refer to Diamondhead Casino Corporation and its wholly-owned subsidiaries, unless the context indicates otherwise.
The Company’s current priority is the development of a casino resort on its Property located in Diamondhead, Mississippi. The Company’s management, financial resources and assets will be devoted towards the development of this Property. There can be no assurance that the property can be developed or, that if developed, that the project will be successful.
Liquidity
The Company has incurred continued losses over the years and certain conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company has had no operations since it ended its gambling cruise ship operations in 2000. Since that time, the Company has concentrated its efforts on the development of its Diamondhead, Mississippi Property. The development of the Diamondhead Property is dependent on obtaining the necessary capital, through equity and/or debt financing, unilaterally, or in conjunction with one or more partners, to master plan, design, obtain permits for, construct, staff, open, and operate a casino resort. In the past, the Company has been able to sustain itself through various short term borrowings, however, as of September 30, 2023, the Company had cash of $25,112, while accounts payable and accrued expenses totaled $13,488,928 and the Company had an accumulated deficit of $46,678,350 In addition, the Company reported a net loss applicable to common shareholders of $1,326,975 for the nine months ended September 30, 2023. Therefore, in order to sustain itself, it is imperative that the Company secure a source of funds to provide further working capital.
Management of the Company believes it will be difficult to secure suitable financing that would allow it to continue to pursue ultimate development of the Property. Therefore, on March 25, 2019, Mississippi Gaming Corporation entered into a brokerage agreement with an unrelated third party to seek a buyer for all or part of the Property or, alternatively, to seek a joint venture partner for the project. The brokerage agreement has expired, but the Company continues to work with the broker on the same terms that applied under the contract.
The above conditions raise substantial doubt about the Company’s ability to continue as a going concern and its ability to generate cash to meet its cash requirements for the following twelve months as of the date of this Form 10-Q.
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Financial Results and Analysis
During the nine months ended September 30, 2023 and 2022, the Company incurred net losses applicable to common stockholders of $1,326,975 and $1,316,710 respectively. The increase in the loss, which totaled $10,265 is primarily due to an increase in administrative and general expenses.
Administrative and general expenses incurred totaled $589,744 and $552,467 for the nine months ending September 30, 2023 and 2022, respectively. The table below depicts the major categories comprising these expenses:
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Payroll and Related Taxes | $ | 225,000 | $ | 225,000 | ||||
| Director Fees | 67,500 | 67,500 | ||||||
| Professional Services | 121,027 | 86,518 | ||||||
| Rents and Insurances | 65,797 | 63,584 | ||||||
| Fines and Penalties | 97,700 | 84,950 | ||||||
| All Other Expenses | 12,720 | 24,915 | ||||||
| Total General and Administrative Expenses | $ | 589,744 | $ | 552,467 | ||||
Other Income and Expense
Interest expense incurred totaled $609,968 and $636,829 for the nine months ending September 30, 2023, and 2022, respectively, a decrease of $26,861. The decrease in 2023 is primarily attributable to non-interest bearing borrowings and amortization of debt discount during the last three quarters of 2022 and the three quarters of 2023.
Off-Balance Sheet Arrangements
Management Agreement
On June 19, 1993, two subsidiaries of the Company, Casino World Inc. and Mississippi Gaming Corporation, entered into a Management Agreement with Casinos Austria Maritime Corporation (CAMC). Subject to certain conditions, under the Management Agreement, CAMC would operate, on an exclusive basis, all of the Company’s proposed dockside gaming casinos in the State of Mississippi, including any operation fifty percent (50%) or more of which is owned by the Company or its affiliates. Unless terminated earlier pursuant to the provisions of the Agreement, the Agreement terminates five years from the first day of actual Mississippi gaming operations and provides for the payment of an annual operational term management fee of 1.2% of all gross gaming revenues between zero and $100,000,000; plus 0.75% of gross gaming revenue between $100,000,000 and $140,000,000; plus 0.5% of gross gaming revenue above $140,000,000; plus two percent of the net gaming revenue between zero and $25,000,000; plus three percent of the net gaming revenue above twenty-five million dollars $25,000,000. The Company believes this Agreement is no longer in effect. However, there can be no assurance that CAMC will not attempt to maintain otherwise which would lead to litigation.
Related Party
In July 2017, the Chairman of the Board paid $67,628 for all property taxes due, together with all interest due thereon, to Hancock County, Mississippi for an approximate 400-acre tract of land (“the Diamondhead Property”), owned by Mississippi Gaming Corporation, a wholly-owned subsidiary of the Company. In 2018, the Chairman advanced additional funds totaling $205,250 to the Company. In 2019, the Chairman advanced additional funds totaling $125,396 to the Company. In 2020, the Chairman advanced additional funds totaling $69,679 to the Company. The conditions of the notes under which the Chairman agreed to make the foregoing payments and advances are discussed in full detail in Note 8 of the attached unaudited condensed consolidated financial statements.
| 22 |
Of particular note to these conditions is that the Company agreed to indemnify the Chairman for losses, if any, sustained on the sale of certain common stock sold in an unrelated company to pay the property taxes due on the Diamondhead, Mississippi Property and to lend additional funds to the Company. On February 4, 2022, the Board of Directors entered into an agreement with the Chairman to issue 35,000 shares of common stock of the Company to the Chairman to repurchase the indemnification. This repurchase eliminated any risk to the Company arising from the indemnification which could have been material. During the nine months ended September 30, 2023, the Company recorded stock-based compensation of $0 for the fair value of these shares, which have not yet been issued as of the issuance date of the attached unaudited condensed consolidated financial statements.
There are no other off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues and expenses, results of operations, liquidity, capital expenditures or capital resources, that are material to our stockholders.
Critical Accounting Policies
Refer to Note 3 of the notes to the unaudited condensed consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
As a smaller reporting company, information under this item is not required to be presented.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
In connection with the preparation of this quarterly report on Form 10-Q, our management, with the participation of our Chief Executive Officer, who also serves as Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023. Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are controls and other procedures that are designed to ensure that the information that we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s Rules and Forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer/Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on the results of this evaluation, the Chief Executive Officer/Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of September 30, 2023.
The management, under the supervision of our Chief Executive Officer/Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Generally Accepted Accounting Principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with existing policies or procedures may deteriorate.
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The Chief Executive Officer/Chief Financial Officer conducted, under the supervision of our principal executive officer and principal financial officer, an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, commonly referred to as the “COSO” criteria. Based on this evaluation, the Chief Executive Officer/Chief Financial Officer concluded that material weaknesses over financial reporting existed as of September 30, 2023. Management identified the following two material weaknesses that have caused management to conclude that, as of September 30, 2023, our disclosure controls and procedures, and our internal control over financial reporting, were not effective at the reasonable assurance level:
| 1. | We do not have sufficient segregation of duties within accounting functions. | |
|
2. | We have not been timely in our financial reporting functions. Management has not developed and effectively communicated its accounting policies and procedures. This has resulted in inconsistent practices with regards to complex debt and equity transactions. |
The Company has designed and instituted policies and procedures to eliminate and/or mitigate the foregoing.
As a result of the material weaknesses identified above, our internal control over financial reporting was not effective as of September 30, 2023. The Company has initiated policies and procedures to address the above weakness. While segregation of duties is very difficult in a small company, the Company intends to file timely reports and utilize third-party consultants to ensure effective financial reporting and disclosures are met.
To address the material weaknesses identified, management performed additional analyses and other procedures to ensure that the consolidated financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended) during the quarter ended September 30, 2023 that are expected to materially affect, or are reasonably likely to materially affect, our internal control over financial reporting.
Entry into a Material Definitive Agreement
On March 31, 2023, the Company entered into a Letter of Intent with an unrelated third party. The Agreement provided for purchases of Common Stock of Diamondhead Casino Corporation and purchases of Common Stock of its wholly-owned subsidiary, Mississippi Gaming Corporation. As of the issuance date of these financial statements, no payment has been made by the third party investor, no transactions pursuant to the Letter of Intent have occurred and no shares of common stock have been issued. The Company does not expect the Agreement to be honored.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Cooperative Energy, a Mississippi Electric Cooperative v. Mississippi Gaming Corporation (In the Special Court of Eminent Domain, Hancock County, Mississippi (Case No. CC20-0221)
Cooperative Energy, a Mississippi Electric Cooperative v. Mississippi Gaming Corporation, et al (all lienholders of the Diamondhead Property. (In the Special Court of Eminent Domain, Hancock County, Mississippi (Case No. CC23-0153)
Since 1994, American Telephone and Telegraph Company (“AT&T”) has had an exclusive right of way easement along the northern portion of Mississippi Gaming Corporation’s (“MGC”) Diamondhead, Mississippi Property (“the Property”) to construct, operate, maintain, inspect, alter, replace and remove communications systems which they may require from time to time. Cooperative Energy, a Mississippi Electric Cooperative, is also seeking a permanent easement along the northern portion of the Property on which to construct, maintain and operate electric transmission lines together with an access road. On or about November 19, 2020, Cooperative Energy filed a Complaint with the Special Court of Eminent Domain, Hancock County, Mississippi seeking an Order authorizing the Cooperative to enter onto the Property for the purpose of examinations and surveys. The matters sought in the Complaint were quickly resolved by agreement of the parties. The Company’s understanding and MGC’s understanding was that the case would be dismissed, but the case was not dismissed. On or about May 24, 2023, Cooperative Energy filed a Complaint for Eminent Domain in the Special Court of Eminent Domain, Hancock County, Mississippi in which it named MGC and all persons and entities holding liens on the Diamondhead, Mississippi Property as defendants.
On or about February 19, 2023, the parties entered into an Indemnification Agreement to fully indemnify MGC and Diamondhead Casino Corporation and each of their respective directors, officers, employees, agents, attorneys, and affiliates, and hold each of them harmless and defend each of them against any and all claims, losses, damages, expenses and/or liabilities to which an Indemnified Party might become liable arising out of or relating to any activities conducted on or about the Property by Cooperative Energy and/or its respective directors, officers, employees, agents, attorneys, affiliates and/or representatives and/or any unrelated third parties, contractors and/or subcontractors performing any activities on the Property at the request of or for the benefit of Cooperative Energy.
On or about October 26, 2022, Cooperative Energy offered MGC $395,038 for the easement. MGC rejected this offer. On or about April 18, 2023, Cooperative Energy offered MGC $643,748 for the easement. MGC rejected this offer. On or about May 24, 2023, Cooperative Energy offered MGC $850,000 for the easement. MGC rejected this offer. On or about June 20, 2023, MGC offered to accept $1,000,000 for the permanent easement upon certain conditions. On July 28, 2023, Cooperative Energy filed a First Amended Complaint for Eminent Domain. On August 17, 2023, Cooperative Energy filed Plaintiff’s Statement of Values. On August 31, 2023, MGC and Deborah A. Vitale filed a Statement of Values. On August 24, 2023, Cooperative Energy filed a Motion for Right of Entry and Order of Possession. On September 1, 2023, Cooperative Energy filed a Motion to Approve Settlement, an Amended Statement of Values and a Notice of Hearing for September 11, 2023. Cooperative Energy served all interested parties, including all persons or entities holding liens on the Diamondhead Property as defendants in the case. On September 26, 2023, the Court entered an Order Granting Plaintiff Right of Immediate Title and Possession. On October 17, 2023, the Court entered an Order Approving Settlement in the amount of $1,000,000 and entered an Order Approving Disbursement of Funds to MGC. On October 20, 2023, MGC received $845,377.89 as part of the settlement amount. The parties are working on the wording of the easement. Once MGC signs the easement, Cooperative Energy will pay the remainder of the settlement due MGC.
| 25 |
Cooperative Energy has informed MGC that it has obtained an agreement from AT&T concerning AT&T’s pre-existing exclusive right of way easement so that the Company will not be in breach of its agreement with AT&T.
Edson R. Arneault, Kathleen Devlin and James Devlin, J. Steven Emerson, Emerson Partners, J. Steven Emerson Roth IRA, Steven Rothstein, and Barry Stark and Irene Stark v. Diamondhead Casino Corporation (In the United States District Court for the District of Delaware (C.A. No. 1:16-cv-00989-LPS)
On October 25, 2016, Edson R. Arneault, Kathleen Devlin and James Devlin, J. Steven Emerson, Emerson Partners, J. Steven Emerson Roth IRA, Steven Rothstein, and Barry Stark and Irene Stark filed a Complaint against the Company in the United States District Court for the District of Delaware for monies due and owing pursuant to certain Collateralized Convertible Senior Debentures issued on March 31, 2014 and December 31, 2014. A companion case was filed in the Superior Court of the State of Delaware by John Hawley, as servicing agent for Argonaut 2000 Partners, L.P. (John Hawley, as servicing agent for Argonaut 2000 Partners, L.P. v. Diamondhead Casino Corporation (Superior Court of the State of Delaware)(Case No. N19C-02-239 RRC) The eight plaintiffs in the two cases were seeking a total of $1.5 million in principle due, plus interest from January 1, 2015, together with costs and fees. On or about December 12, 2019, the parties entered into a Settlement Agreement and on January 13, 2020, the parties filed a Stipulation of Voluntary Dismissal with Prejudice in the case. The case was dismissed with the Court maintaining continuing jurisdiction over the Settlement Agreement.
In or about December 2022, the parties entered into an Amendment to Settlement Agreement. The Amendment provides, in pertinent part, as follows: that on or before March 31, 2023, the Plaintiffs would be paid the principal due under their debentures of $1.5 million, plus interest of four percent (4%) per annum on the principal due from January 1, 2015 through December 31, 2019, plus interest of six percent (6%) per annum on the principal due from January 1, 2020 through March 31, 2022, plus interest of eight percent (8%) per annum on the principle due from April 1, 2022 through the date of payment. In addition the Company agreed to pay legal costs and fees of $175,000 plus 50,000 shares of common stock. In the event payment was not made on or before March 31, 2023, a judgment would be entered in the case. Post judgment interest shall only apply to the $1.5 million principle due. Payment was not made on or before March 31, 2023. On July 5, 2023, the Plaintiffs filed a Motion to Reopen the Action, Vacate Dismissal, and Enter Judgment on Consent. The Company did not object to the Motion. On September 20, 2023, the Court entered an Order Granting Plaintiffs’ Motion to Reopen this Action, Vacate Dismissal, and Compel Enforcement of the Settlement Agreement and entered the Consent Judgment previously agreed to by the Company.
Item 1A. Risk Factors
As a smaller reporting company, information under this item is not required to be presented.
| 26 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Default Upon Senior Securities
Refer to the footnotes for all defaults on the Company’s indebtedness.
The Company is in arrears on the payment of dividends due on its three series of preferred stock currently issued and outstanding. The Company has not paid preferred dividends due in the first nine months of 2023 in the amount of i) $22,500 on its Series S preferred stock; ii) $22,500 on its Series S-NR preferred stock; and iii) $31,200 on its Series S-PIK preferred stock. The table below summarizes total preferred stock dividends in arrears at September 30, 2023.
| Total Amount | ||||
| Description | In Arrears | |||
| Series S | $ | 367,500 | ||
| Series S-NR | 367,500 | |||
| Series S-PIK | 509,600 | |||
| Total in arrears | $ | 1,244,600 | ||
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
Item 6. Exhibits
Attached to this report is the certification of the Chief Executive Officer/Chief Financial Officer of the Company pursuant to Rule 13a-14 and Rule15d-14.
Attached to this report is the certification of the Chief Executive Officer/Chief Financial Officer of the Company as required by 18 U.S.C. Section 1350.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| DIAMONDHEAD CASINO CORPORATION | ||
| Date: November 9, 2023 | /s/ Deborah A. Vitale | |
| By: | Deborah A. Vitale | |
| Chief Executive Officer | ||
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Exhibit 31.1
CERTIFICATIONS
I, Deborah A. Vitale, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Diamondhead Casino Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present, in all material respects, the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
4. As the Issuer’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and I have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and
5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent function):
(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.
Date: November 9, 2023
| /s/ Deborah A. Vitale | |
| Deborah A. Vitale | |
| Chief Executive Officer |
Exhibit 31.2
CERTIFICATIONS
I, Deborah A Vitale, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Diamondhead Casino Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present, in all material respects, the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
4. As the issuer’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and I have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and
5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent function):
(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.
Date: November 9, 2023
| /s/ Deborah A. Vitale | |
| Deborah A. Vitale | |
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATION
In connection with the Quarterly Report of Diamondhead Casino Corporation (the “Company”) on Form 10-Q for the quarter ending September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Deborah A. Vitale, Chief Executive Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 9, 2023 | /s/ Deborah A. Vitale |
| Deborah A. Vitale | |
| Chief Executive Officer |
Exhibit 32.2
CERTIFICATION
In connection with the Quarterly Report of Diamondhead Casino Corporation (the “Company”) on Form 10-Q for the quarter ending September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Deborah A. Vitale, Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 9, 2023 | /s/ DEBORAH A. VITALE |
| Deborah A. Vitale | |
| Chief Financial Officer |
Cover - shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Nov. 08, 2023 |
|
| Cover [Abstract] | ||
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Quarterly Report | true | |
| Document Transition Report | false | |
| Document Period End Date | Sep. 30, 2023 | |
| Document Fiscal Period Focus | Q3 | |
| Document Fiscal Year Focus | 2023 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity File Number | 0-17529 | |
| Entity Registrant Name | DIAMONDHEAD CASINO CORPORATION | |
| Entity Central Index Key | 0000844887 | |
| Entity Tax Identification Number | 59-2935476 | |
| Entity Incorporation, State or Country Code | DE | |
| Entity Address, Address Line One | 1013 Princess Street | |
| Entity Address, City or Town | Alexandria | |
| Entity Address, State or Province | VA | |
| Entity Address, Postal Zip Code | 22314 | |
| City Area Code | 703 | |
| Local Phone Number | 683-6800 | |
| Entity Current Reporting Status | Yes | |
| Entity Interactive Data Current | No | |
| Entity Filer Category | Non-accelerated Filer | |
| Entity Small Business | true | |
| Entity Emerging Growth Company | false | |
| Entity Shell Company | false | |
| Entity Common Stock, Shares Outstanding | 36,297,576 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Defined Benefit Plan Disclosure [Line Items] | ||
| Preferred stock par value | $ 0.01 | $ 0.01 |
| Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
| Preferred stock, shares outstanding | 2,086,000 | 2,086,000 |
| Preferred stock liquidation preference value | $ 2,519,080 | $ 2,519,080 |
| Common stock par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 50,000,000 | 50,000,000 |
| Common stock, shares issued | 39,052,472 | 39,052,472 |
| Common stock, shares outstanding | 36,297,576 | 36,297,576 |
| Treasury stock, shares | 1,004,886 | 1,004,886 |
| Related Party [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Debt instrument unamortized discount | $ 51,527 | $ 0 |
| Others [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Debt instrument unamortized discount | $ 22,617 | $ 24,937 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| COSTS AND EXPENSES | ||||
| Administrative and general | $ 206,436 | $ 184,288 | $ 589,744 | $ 552,467 |
| Other | 17,239 | 16,940 | 51,063 | 51,214 |
| Total costs and expenses | 223,675 | 201,228 | 640,807 | 603,681 |
| Interest expense: | ||||
| Other | 72,612 | 92,643 | 250,565 | 295,948 |
| Total other expense | 161,831 | 180,184 | 609,968 | 636,829 |
| NET LOSS | (385,506) | (381,412) | (1,250,775) | (1,240,510) |
| PREFERRED STOCK DIVIDENDS | (25,400) | (25,400) | (76,200) | (76,200) |
| NET LOSS APPLICABLE TO COMMON STOCKHOLDERS | $ (410,906) | $ (406,812) | $ (1,326,975) | $ (1,316,710) |
| Weighted average common shares outstanding - basic | 36,297,576 | 36,297,576 | 36,297,576 | 36,297,576 |
| Weighted average common shares outstanding - diluted | 36,297,576 | 36,297,576 | 36,297,576 | 36,297,576 |
| Net loss per common share - basic | $ (0.011) | $ (0.011) | $ (0.037) | $ (0.036) |
| Net loss per common share - diluted | $ (0.011) | $ (0.011) | $ (0.037) | $ (0.036) |
| Related Party [Member] | ||||
| Interest expense: | ||||
| Related parties | $ 89,219 | $ 87,541 | $ 359,403 | $ 340,881 |
Condensed Consolidated Statements of Changes in Stockholders' Deficiency (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Sep. 30, 2022 |
Jun. 30, 2022 |
Mar. 31, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Balance | $ (12,893,445) | $ (12,500,734) | $ (11,994,876) | $ (10,947,469) | $ (10,568,493) | $ (10,147,051) | $ (11,994,876) | $ (10,147,051) |
| Common stock to be issued in connection with notes payable | 64,000 | |||||||
| Common stock to be issued in connection with notes payable - related parties | 52,500 | 17,500 | ||||||
| Common stock to be issued in connection with notes payable - others | 27,200 | |||||||
| Stock-based compensation | 11,480 | |||||||
| Dividends | (25,400) | (25,400) | (25,400) | (25,400) | (25,400) | (25,400) | ||
| Net loss | (385,506) | (367,312) | (497,957) | (381,412) | (387,576) | (471,522) | (1,250,775) | (1,240,510) |
| Debt discount | 34,000 | |||||||
| Balance | (13,224,651) | (12,893,445) | (12,500,734) | (11,354,281) | (10,947,469) | (10,568,493) | (13,224,651) | (11,354,281) |
| Preferred Stock [Member] | ||||||||
| Balance | $ 20,860 | $ 20,860 | $ 20,860 | $ 20,860 | $ 20,860 | $ 20,860 | $ 20,860 | $ 20,860 |
| Balance, shares | 2,086,000 | 2,086,000 | 2,086,000 | 2,086,000 | 2,086,000 | 2,086,000 | 2,086,000 | 2,086,000 |
| Common stock to be issued in connection with notes payable | ||||||||
| Common stock to be issued in connection with notes payable - related parties | ||||||||
| Common stock to be issued in connection with notes payable - others | ||||||||
| Stock-based compensation | ||||||||
| Dividends | ||||||||
| Net loss | ||||||||
| Debt discount | ||||||||
| Balance | $ 20,860 | $ 20,860 | $ 20,860 | $ 20,860 | $ 20,860 | $ 20,860 | $ 20,860 | $ 20,860 |
| Balance, shares | 2,086,000 | 2,086,000 | 2,086,000 | 2,086,000 | 2,086,000 | 2,086,000 | 2,086,000 | 2,086,000 |
| Common Stock [Member] | ||||||||
| Balance | $ 39,052 | $ 39,052 | $ 39,052 | $ 39,052 | $ 39,052 | $ 39,052 | $ 39,052 | $ 39,052 |
| Balance, shares | 39,052,472 | 39,052,472 | 39,052,472 | 39,052,472 | 39,052,472 | 39,052,472 | 39,052,472 | 39,052,472 |
| Common stock to be issued in connection with notes payable | ||||||||
| Common stock to be issued in connection with notes payable - related parties | ||||||||
| Common stock to be issued in connection with notes payable - others | ||||||||
| Stock-based compensation | ||||||||
| Dividends | ||||||||
| Net loss | ||||||||
| Debt discount | ||||||||
| Balance | $ 39,052 | $ 39,052 | $ 39,052 | $ 39,052 | $ 39,052 | $ 39,052 | $ 39,052 | $ 39,052 |
| Balance, shares | 39,052,472 | 39,052,472 | 39,052,472 | 39,052,472 | 39,052,472 | 39,052,472 | 39,052,472 | 39,052,472 |
| Additional Paid-in Capital [Member] | ||||||||
| Balance | $ 36,139,578 | $ 36,139,578 | $ 36,122,078 | $ 36,210,453 | $ 36,176,453 | $ 36,100,973 | $ 36,122,078 | $ 36,100,973 |
| Common stock to be issued in connection with notes payable | 64,000 | |||||||
| Common stock to be issued in connection with notes payable - related parties | 52,500 | 17,500 | ||||||
| Common stock to be issued in connection with notes payable - others | 27,200 | |||||||
| Stock-based compensation | 11,480 | |||||||
| Dividends | ||||||||
| Net loss | ||||||||
| Debt discount | 34,000 | |||||||
| Balance | 36,219,278 | 36,139,578 | 36,139,578 | 36,210,453 | 36,210,453 | 36,176,453 | 36,219,278 | 36,210,453 |
| Unearned ESOP [Member] | ||||||||
| Balance | $ (2,609,264) | $ (2,609,264) | $ (2,609,264) | $ (2,727,866) | $ (2,727,866) | $ (2,727,866) | $ (2,609,264) | $ (2,727,866) |
| Balance, shares | 1,750,010 | 1,750,010 | 1,750,010 | 1,829,555 | 1,829,555 | 1,829,555 | 1,750,010 | 1,829,555 |
| Common stock to be issued in connection with notes payable | ||||||||
| Common stock to be issued in connection with notes payable - related parties | ||||||||
| Common stock to be issued in connection with notes payable - others | ||||||||
| Stock-based compensation | ||||||||
| Dividends | ||||||||
| Net loss | ||||||||
| Debt discount | ||||||||
| Balance | $ (2,609,264) | $ (2,609,264) | $ (2,609,264) | $ (2,727,866) | $ (2,727,866) | $ (2,727,866) | $ (2,609,264) | $ (2,727,866) |
| Balance, shares | 1,750,010 | 1,750,010 | 1,750,010 | 1,829,555 | 1,829,555 | 1,829,555 | 1,750,010 | 1,829,555 |
| Retained Earnings [Member] | ||||||||
| Balance | $ (46,267,444) | $ (45,874,732) | $ (45,351,375) | $ (44,303,968) | $ (43,890,992) | $ (43,394,070) | $ (45,351,375) | $ (43,394,070) |
| Common stock to be issued in connection with notes payable | ||||||||
| Common stock to be issued in connection with notes payable - related parties | ||||||||
| Common stock to be issued in connection with notes payable - others | ||||||||
| Stock-based compensation | ||||||||
| Dividends | (25,400) | (25,400) | (25,400) | (25,400) | (25,400) | (25,400) | ||
| Net loss | (385,506) | (367,312) | (497,957) | (381,412) | (387,576) | (471,522) | ||
| Debt discount | ||||||||
| Balance | (46,678,350) | (46,267,444) | (45,874,732) | (44,710,780) | (44,303,968) | (43,890,992) | (46,678,350) | (44,710,780) |
| Treasury Stock, Common [Member] | ||||||||
| Balance | $ (216,227) | $ (216,227) | $ (216,227) | $ (186,000) | $ (186,000) | $ (186,000) | $ (216,227) | $ (186,000) |
| Balance, shares | 1,004,886 | 1,004,886 | 1,004,886 | 925,341 | 925,341 | 925,341 | 1,004,886 | 925,341 |
| Common stock to be issued in connection with notes payable | ||||||||
| Common stock to be issued in connection with notes payable - related parties | ||||||||
| Common stock to be issued in connection with notes payable - others | ||||||||
| Stock-based compensation | ||||||||
| Dividends | ||||||||
| Net loss | ||||||||
| Debt discount | ||||||||
| Balance | $ (216,227) | $ (216,227) | $ (216,227) | $ (186,000) | $ (186,000) | $ (186,000) | $ (216,227) | $ (186,000) |
| Balance, shares | 1,004,886 | 1,004,886 | 1,004,886 | 925,341 | 925,341 | 925,341 | 1,004,886 | 925,341 |
Organization and Business |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Organization and Business | Note 1. Organization and Business
Diamondhead Casino Corporation (the “Company”) owns, through its wholly-owned subsidiary, Mississippi Gaming Corporation, an approximate 400-acre undeveloped property located at 7051 Interstate 10, Diamondhead, Mississippi 39525 (hereafter “the Diamondhead Property” or “the Property”). The Company’s intent was and is to construct a casino resort and other amenities on the Property unilaterally or in conjunction with one or more joint venture partners. However, the Company has been unable, to date, to obtain financing to move the project forward and/or enter into a joint venture partnership. There can be no assurance that the substantial funds required for the design and construction of the project can be obtained or that such funds can be obtained on acceptable terms. In addition, the Company has been unable to obtain financing to sustain the Company. Due to its lack of financial resources, the Company was forced to explore other alternatives, including a sale of part or all of the Property. The Company’s preference is to sell only part of the Property inasmuch as this would appear to be in the best interest of the stockholders of the Company. However, there can be no assurance the Company will be able to sell only part of the Property. The Company intends to continue to pursue a joint venture partnership and/or other financing while seeking a viable purchaser for part or all of the Property. Finally, there can be no assurance that if the requisite financing for the project were obtained and the project were constructed, that the project would be successful.
|
Liquidity and Going Concern |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Liquidity and Going Concern | Note 2. Liquidity and Going Concern
These unaudited condensed consolidated financial statements have been prepared on the basis that the Company is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses over the past several years, has no operations, generates no operating revenues and, as reflected in the accompanying unaudited condensed consolidated financial statements, incurred a net loss applicable to common stockholders of $1,326,975 and $1,316,710 for the nine months ended September 30, 2023 and 2022 respectively. In addition, the Company had an accumulated deficit of $46,678,350 on September 30, 2023. Due to its lack of financial resources, the Company has been forced to explore other alternatives, including a sale of part or all of the Property.
The Company has had no operations since it ended its gambling cruise ship operations in 2000. Since that time, the Company has concentrated its efforts on the development of its Diamondhead, Mississippi property. That development is dependent upon the Company obtaining the necessary capital, through either equity and/or debt financing, unilaterally or in conjunction with one or more partners, to master plan, design, obtain permits for, construct, open, and operate a casino resort.
In the past, in order to raise capital to continue to pay on-going costs and expenses, the Company has borrowed funds, through Private Placements of convertible instruments as well as through other secured notes which are more fully described in Notes 5 through 10 to these unaudited condensed consolidated financial statements. The Company is in default with respect to payment of both principal and interest under the terms of most of these instruments. In addition, at September 30, 2023, the Company had $13,488,928 of accounts payable and accrued expenses and $25,112 in cash on hand.
The above conditions raise substantial doubt as to the Company’s ability to continue as a going concern.
|
Summary of Significant Accounting Policies |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies | Note 3. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conformity with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements and, in our opinion, reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the nine months ended September 30, 2023 are not necessarily indicative of the results that we will have for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31, 2022, attached to our annual report on Form 10-K.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of Diamondhead Casino Corporation and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Land
Land held for development is carried at cost. Costs directly related to site development, such as licensing, permitting, engineering, and other costs, are capitalized.
Land development costs, which have been capitalized, consist of the following at September 30, 2023 and December 31, 2022:
Fair Value Measurements
The Company follows the provisions of ASC Topic 820 “Fair Value Measurements” for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. The standard discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The standard utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Input other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable input that reflects management’s own assumptions.
Financial instruments included in current assets and liabilities are reported at carrying value in the unaudited condensed consolidated balance sheets, which approximate fair value due to their short-term nature.
Long-Lived Assets
The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The recoverability of long-lived assets is measured by comparing the carrying amount of the assets to the estimated undiscounted future cash flows projected to be generated by the assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount the carrying value exceeds the fair value of such assets determined by appraisal, discounted cash flow projections, or other means. As of September 30, 2023, there was a triggering event due to recurring losses and an impairment test was conducted. However, the fair value of the long-lived assets exceeded the carrying value and the Company determined that no impairment existed at September 30, 2023.
Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share is calculated by using the weighted average number of common shares outstanding, plus other potentially dilutive securities. Potentially dilutive securities are excluded from the computation of diluted loss per shares since their effect would be antidilutive. Common shares outstanding consist of issued shares, including allocated and committed shares held by the ESOP trust, less shares held in treasury. Common shares outstanding excludes the shares subject to be issued in connection with notes payables (see note 9) and shares subject to be issued to the Chairman of the Board of Directors. (see note 11). The dilutive securities below do not include potentially convertible Debentures since the requirements for possible conversion have not yet been met and may never be met.
Recently Adopted Accounting Pronouncements
In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivative and Hedging (Topic 815, and Leases (Topic 841). This new guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual reporting periods. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date to entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. Accordingly, the Company has adopted this standard as of January 1, 2023 and it did not have an effect on its consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
On March 27, 2023, the FASB issued ASU 2023-01, which amends certain provisions of ASC 842 that apply to arrangements between related parties under common control. Specifically, the ASU:
The ASU is effective for fiscal years beginning after December 15, 2023. The Company has not completed its assessment of the standard, but does not expect the adoption to have a material impact on the Company’s unaudited condensed consolidated financial position, results of operations, or cash flows.
No other recent accounting pronouncements were issued by FASB that are believed by management to have a material impact on the Company’s present or future financial statements.
|
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Accounts Payable and Accrued Expenses |
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| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Payable and Accrued Expenses | Note 4. Accounts Payable and Accrued Expenses
The table below outlines the elements included in accounts payable and accrued expenses at September 30, 2023 and December 31, 2022:
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Convertible Notes and Line of Credit |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Convertible Notes And Line Of Credit | ||||||||||||||||||||||||||||||||||||||||
| Convertible Notes and Line of Credit | Note 5. Convertible Notes and Line of Credit
Line of Credit
In 2008, the Company entered into an agreement with an unrelated third party for an unsecured Line of Credit up to a maximum of $1,000,000. The Line of Credit carries an interest rate on amounts borrowed of 9% per annum. All funds originally advanced under the facility were due and payable by November 1, 2012. As an inducement to provide the facility, the lender was awarded an immediate option to purchase shares of common stock of the Company at $ per share. In addition, the lender received an option to purchase a maximum of additional shares of common stock of the Company at $ per share. The options expire following repayment in full by the Company of the amount borrowed. The Company is in default under the repayment terms of the agreement. At September 30, 2023 and December 31, 2022, the unpaid principal and accrued interest due on the obligation totaled $2,280,490 and $2,213,422, respectively.
Convertible Notes
The Convertible Notes issued pursuant to the two Private Placements discussed above total $962,500 in principle and became due and payable beginning in March 2012 and extending to various dates through June 2013. As of the date of the filing of this report, all the aforementioned debt obligations remain unpaid and in default under the repayment terms of the notes. In November 2020, the Superior Court of the State of Delaware awarded Judgments in favor of certain holders of these Promissory Notes who filed suit against the Company. As a result, the Company must carry an aggregate of $486,796 (total principal and interest) as debt owed to these noteholders. As of September 30, 2023 and December 31, 2022, all Notes issued had a total outstanding principal of $962,500 and accrued interest, including the additional interest awarded pursuant to the Court Judgments, of $1,120,169 and $1,043,547 respectively.
The table below summarizes the Company’s debt arising from the above-described sources as of September 30, 2023 and December 31, 2022:
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Convertible Debentures |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Debt Disclosure [Abstract] | |
| Convertible Debentures | Note 6. Convertible Debentures
Pursuant to a Private Placement Memorandum dated February 14, 2014 (the “Private Placement”), the Company offered up to a maximum of $3,000,000 of Collateralized Convertible Senior Debentures to accredited or institutional investors. The Offering was conducted contingent on the deposit into Escrow of the purchase price for all the Debentures offered in the principal amount of $3,000,000. The Debentures, once issued, originally bore interest at 4% per annum after 180 days, matured six years from the date of issuance, and were secured by a lien on the Company’s Mississippi property. The interest rate on these debentures was raised pursuant to subsequent agreements. The debentures were offered in three tranches as follows:
(a) $1,000,000 of First Tranche Collateralized Convertible Senior Debentures convertible into an aggregate of shares of Common Stock of the Company at a conversion price of $.30 per share (the “First Tranche Debentures”);
(b) $1,000,000 of Second Tranche Collateralized Convertible Senior Debentures, convertible into an aggregate of shares of Common Stock of the Company at a conversion price of $.45 per share (the “Second Tranche Debentures”); and
(c) $1,000,000 of Third Tranche Collateralized Convertible Senior Debentures, convertible into either shares of Common Stock or shares of Common Stock of the Company, at a conversion price of $.55 or $.75 per share depending upon certain conditions described in the Private Placement Memorandum (the “Third Tranche Debentures”).
The conversion rights on each issued Debenture carried an Anti-Dilution Provision. If the Company issued any shares of Common Stock or other securities after March 31, 2014 at a price per security that was less than the conversion price of a Debenture, then the Debenture would have had a new conversion price equal to the price per security that was less than the Conversion Price of the Debenture. The foregoing provision did not apply to the following:
(a) The issuance of any of the other Debentures in the Offering or the issuance of shares of Common Stock upon conversion of any of the Debentures in the Offering.
(b) The issuance of any shares of Common Stock if such issuance relates to an agreement, arrangement or grant to issue shares of Common Stock entered into by the Company prior to the Issue Date of the First Tranche Debentures in the Offering, including but not limited to, for example, previously issued convertible promissory notes, previously issued warrants, previously issued options to purchase Common Stock, or common stock vested or to be issued pursuant to a pre-existing Employee Stock Ownership Plan.
The Anti-Dilution Provisions with respect to a Debenture terminate the earlier of (a) the date (if ever) the Company receives an “Approval to Proceed” from the Mississippi Gaming Commission to develop a casino/hotel on the Property, (b) the date on which the Debenture is converted in full, (c) the date on which the Debenture is paid in full, or (d) the Final Maturity Date of the Debenture (as defined in the Debenture).
Since the issuance of the Debentures, there have been no events that would trigger the above anti-dilution provisions.
The First Tranche Debentures were issued on March 31, 2014. The Final Maturity Date of the First Tranche Debentures was six years from the issuance date of the Debentures, or March 31, 2020. Therefore, the anti-dilution provisions of the First Tranche Debentures have expired.
The Second Tranche Debentures were issued on December 31, 2014. The Final Maturity Date of the Second Tranche Debentures was six years from the issuance date of the Debentures, or December 31, 2020. Therefore, the anti-dilution provisions of the Second Tranche Debentures have expired.
When originally issued, in the event the Company failed to meet the conditions for conversion of the Debentures, the First Tranche Convertible Debentures, which total $950,000, would have been due on March 31, 2020 and the Second Tranche Convertible Debentures, which total $850,000, would have been due December 31, 2020. The sole remaining non-convertible Debenture in the amount of $50,000 would have been due March 31, 2020. However, the Company is in default with respect to interest payments due under the Debenture agreements in the amount of $427,081 and as a result, the Debentures payable are reported as current liabilities.
On or about October 25, 2016, certain Debenture holders sued the Company for failing to make payments due under the terms of the Debentures. On or about December 12, 2019, the parties entered into a Settlement Agreement and on January 13, 2020, the parties filed a Stipulation of Voluntary Dismissal with Prejudice in the case. The case was dismissed with the Court maintaining continuing jurisdiction over the Settlement Agreement.
In or about December 2022, the parties entered into an Amendment to Settlement Agreement. The Amendment provides, in pertinent part, as follows: that on or before March 31, 2023, the Plaintiffs would be paid the principal due under their debentures of $1.5 million, plus interest of four percent (4%) per annum on the principal due from January 1, 2015 through December 31, 2019, plus interest of six percent (6%) per annum on the principal due from January 1, 2020 through March 31, 2022, plus interest of eight percent (8%) per annum on the principle due from April 1, 2022 through the date of payment. In addition the Company agreed to pay legal costs and fees of $175,000 plus shares of common stock. In the event payment was not made on or before March 31, 2023, judgment would be entered in the case. Post judgment interest shall only apply to the $1.5 million principle due. Total accrued interest due on all outstanding Debentures amounted to $717,473 and $617,733 at September 30, 2023 and December 31, 2022 respectively. Payment was not made on or before March 31, 2023. On July 5, 2023, the Plaintiffs filed a Motion to Reopen the Action, Vacate Dismissal, and Enter Judgment on Consent. The Company did not object to the Motion. On September 20, 2023, the Court entered an Order Granting Plaintiffs’ Motion to Reopen this Action, Vacate Dismissal, and Compel Enforcement of the Settlement Agreement and entered a Consent Judgment previously agreed to by the Company.
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Short Term Notes and Interest-Bearing Advance |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Debt Disclosure [Abstract] | |
| Short Term Notes and Interest-Bearing Advance | Note 7. Short Term Notes and Interest-Bearing Advance
Bank Credit Facility
Wells Fargo Bank provided an unsecured credit facility of up to $15,000 to the Company. The facility required a variable monthly payment of amounts borrowed plus interest, which was applied at 11.24% on direct charges and 24.99% on any cash advanced through the facility. At September 30, 2023 and December 31, 2022, a principal balance of $18,004 remained outstanding on the facility. The lending bank has since cancelled privileges under the facility for non-payment.
Interest Bearing Advances
In 2016, the Company received cash advances totaling $47,500 from seven lenders which included $22,500 from third parties (see Note 8 for related party advances). The proceeds from the cash advances were earmarked for the payment of accounting and auditing fees and other expenses required to file the Company’s Form 10-Q. On August 25, 2016, the Company issued a Note to the foregoing lenders, which matures four years from the date of issuance and bears interest at 8% per annum, with a full year of interest accruing in any year in which the advance remains unpaid. Accrued interest due on the above notes amounted to $16,400 and $14,200 at September 30, 2023 and December 31, 2022, respectively.
On February 2, 2017, the Company borrowed $ from an unrelated third party. The Note carries an annual interest rate of approximately and is past due. The Company is in default and as such, the lender may increase the interest rate due by an amount of up to 3% per annum in excess of the rate then otherwise applicable. The Company does not have the funds to repay the advance. The President of the Company has agreed to personally secure the note with an assignment of proceeds due to her under the first lien on the Property. Accrued interest on this obligation amounted to $ and $ at September 30, 2023 and December 31, 2022, respectively.
Of the amounts discussed above, $65,504 in short-term notes and advances are in default under the original agreed to terms.
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Current Notes Payable Due Related Parties |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Current Notes Payable Due Related Parties | |
| Current Notes Payable Due Related Parties | Note 8. Current Notes Payable Due Related Parties
In 2016, the Company received cash advances totaling $47,500 from seven lenders which included $25,000 from three Current Directors of the Company (see Note 7). The proceeds from the cash advances were earmarked for the payment of accounting and auditing fees and other expenses required to file the Company’s Form 10-Q. On August 25, 2016, the Company issued a Note to the foregoing lenders, which matures four years from the date of issuance and bears interest at 8% per annum, with a full year of interest accruing in any year in which the advance remains unpaid. Accrued interest due on the above notes amounted to $16,000 and $14,000 at September 30, 2023 and December 31, 2022, respectively. These amounts are included in current liabilities on the consolidated balance sheets as of September 30, 2023 and December 31, 2022. This note is secured by a second lien on the Diamondhead Property.
In the third quarter of 2016, the Chairman of the Board of Directors of the Company loaned the Company $90,000. On August 25, 2016, the Company issued a Note to the Chairman of the Board. The Note bears interest at 14% per annum effective August 1, 2016 and matures four years from the date of issuance. The proceeds of the loan were used for the payment of Mississippi property taxes and auditing, accounting and other corporate expenses. Accrued interest due on the above note amounted to $90,306 and $80,882 at September 30, 2023 and December 31, 2022, respectively.
In July 2017, at the request of the Company, the current Chairman of the Board of Directors, who is also a Vice President of the Company (“the Chairman”), paid all property taxes due, together with all interest due thereon, to Hancock County, Mississippi on an approximate 400-acre tract of land, owned by Mississippi Gaming Corporation, a wholly owned subsidiary of the Company. The total amount advanced was $67,628.
The Chairman is one of the secured parties under that Land Deed of Trust recorded on September 26, 2014 in Hancock County, Mississippi, to secure Tranche I and Tranche II Debentures issued by the Company in 2014. Under paragraph 5 of the Land Deed of Trust, a secured party who advances sums for taxes due on the Property is secured by the same Land Deed of Trust, but only at that interest rate specified in the note representing the primary indebtedness, namely 4% per annum.
The Chairman advanced the $67,628 on condition that: (i) the advance constitute a lien with interest at 4% per annum under that Land Deed of Trust recorded September 26, 2014; (ii) he be paid additional interest of 11% per annum on the amount advanced and owing and that the full 11% interest per annum is payable during any calendar year in which all or part of the amount advanced and owing or interest due thereon remains unpaid; (iii) this additional interest obligation be treated as a separate and secured debt of the Company, to be evidenced by a separate note and is secured with a separate and third lien to be placed on the Property (hereafter “the Third Lien”); (iv) the entire obligation will be treated as an advance to be paid out of any subsequent incoming financing obtained by the Company or any amounts recovered by the Company from a defendant in that collection action brought by the Company in the Circuit Court of Montgomery County, Maryland; and (v) he be indemnified for any losses sustained on the sale of that common stock sold to cover the payment of real estate property taxes and any credit card fees associated with payment (“the indemnification”). The Chairman identified the common stock sold and provided the Company with the documentation required to document the sale of said stock and to calculate the loss, if any, on said stock. The fair value measurement of the derivative indemnification liability at December 31, 2021 was developed using Level 1 inputs, which was valued at $0. On February 4, 2022, the Board of Directors entered into an agreement with the Chairman to issue shares of common stock of the Company to the Chairman to repurchase the indemnification. See Note 11. On September 30, 2018, Mississippi Gaming Corporation issued a secured promissory note, due one year from the date of issue to the Chairman for an amount up to $100,000 to cover the principal and interest due with respect to this note. On August 21, 2018, Mississippi Gaming Corporation placed a third lien on the Property to secure this obligation for $100,000. Accrued interest on the note amounted to $68,845 and $59,360 at September 30, 2023 and December 31, 2022, respectively.
In March of 2018, the Board of Directors voted to increase up to an additional $200,000 the amount secured by the third lien in favor of the Chairman of the Board, for amounts advanced by the Chairman on behalf of the Company, on the following terms and conditions, namely, that (i) the advance constitutes a lien on the Property with interest at 15% per annum; (ii) that the full interest of 15% per annum is payable during any calendar year in which all or part of the amount advanced is due and owing or interest due thereon remains unpaid; (iii) that this debt be evidenced by a separate promissory note and is to be included in and secured with a third lien that is to be placed on the Diamondhead Property to secure previous advances made to the Company (hereafter “the Third Lien”); (iv) that he be indemnified for any losses sustained on the sale of his common stock in an unrelated publicly-traded company to be sold to cover this advance based on a sales price of approximately $2.80 per share with a cap on the maximum loss per share to be at a sales price of $10.00 per share; and (v) that the Chairman’s previous indemnification approved by the Board of Directors on July 24, 2017 with respect to any loss on the sale of the same stock also be capped at a maximum of $10.00 per share. The Chairman identified the common stock sold and provided the Company with the documentation required to document the sale of said stock and to calculate the loss, if any, on said stock. On February 4, 2022, the Board of Directors entered into an agreement with the Chairman to issue shares of common stock of the Company to the Chairman to repurchase the indemnifications. See Note 11.
On September 30, 2018, Mississippi Gaming Corporation issued a secured promissory note, due one year from the date of issue to the Chairman, for an amount up to $200,000 to cover the principal and interest due with respect to this note. On August 21, 2018, Mississippi Gaming Corporation placed a third lien on the Diamondhead Property to secure this obligation for $200,000.
In November of 2018, the Board of Directors voted to increase up to an additional $100,000 of advances from the Chairman and in March of 2019, the Board of Directors voted to increase the limit of the advances to $200,000. The terms of this advance are identical to the terms as approved above in March 2018.
In July 2020, the Chairman of the Board of the Company paid a total of $67,076 for property taxes due for the year 2019 on the Company’s 400-acre Diamondhead, Mississippi Property plus $1,573 in related fees. The Company placed a fourteenth lien on the Property in July 2021 to secure a promissory note in the amount of $150,000 issued to the Chairman of the Board of the Company to secure the payment of these taxes and interest due thereon.
In May 2021, the Chairman of the Board of the Company paid a total of $62,610 for property taxes due for the year 2020 on the Company’s 400-acre Diamondhead, Mississippi Property plus $1,468 in related fees. The Company placed a fifteenth lien on the Property in July 2021 to secure a promissory note in the amount of $100,000 issued to the Chairman of the Board of the Company to secure the payment of these taxes and interest due thereon.
On May 30, 2021, the Chairman of the Board of the Company loaned the Company $50,000. The note is non-interest bearing and matures one year from the date of issuance. The Company placed a sixteenth lien on the Property in July 2021 to secure this non-interest bearing note which totals $50,000 in principal and calls for the issuance of shares of common stock. The note is not convertible. As of the issuance date of these financial statements, no shares have been issued. The Company recorded a fair value of the stock of $33,500, which was determined by the fair value of the Company’s common stock at the date of the loan. The fair value of the stock was recorded as a debt discount, which will be amortized to interest expense over the life of the note. Debt discount was fully amortized during 2022.
On February 17, 2023, the Board of Directors agreed to issue a non-interest bearing promissory note to the Chairman in the principal amount of $25,000 together with shares of common stock of the Company. The note was issued in connection with the Chairman advancing funds to pay off accounts payable on behalf of the Company. The note is not convertible. As of the issuance date of these financial statements, no shares have been issued. The Company recorded a fair value of the stock of $17,500, which was determined by the fair value of the Company’s common stock at the date of the loan. The fair value of the stock was recorded as a debt discount, which will be amortized to interest expense over the life of the note. During the nine months ended September 30, 2023, $12,164 of debt discount was amortized to interest expense to related parties. On November 1, 2023, as previously agreed, the Company paid the Chairman the $25,000 advanced out of the proceeds of the eminent domain settlement.
On July 28, 2023, the Board of Directors agreed to issue a non-interest bearing promissory note to the Chairman in the principal amount of $75,000 together with shares of common stock of the Company. The note was issued in connection with the Chairman advancing funds to pay off property taxes due for the year 2022 on the Diamondhead, Mississippi Property and fees due to Company’s outside auditor for review of Form 10Q for the period ending June 30, 2023, on behalf of the Company. The note is not convertible. As of the issuance date of these financial statements, no shares have been issued. The Company recorded a fair value of the stock of $52,500, which was determined by the fair value of the Company’s common stock at the date of the loan. The fair value of the stock was recorded as a debt discount, which will be amortized to interest expense over the life of the note. During the nine months ended September 30, 2023, $9,290 of debt discount was amortized to interest expense to related parties. On November 1, 2023, as previously agreed, the Company paid the Chairman the $75,000 advanced out of the proceeds of the eminent domain settlement.
As of September 30, 2023, the Chairman had advanced a total of $467,953, net of repayment of $16,250, under both the March 2018 and March 2019 arrangements and was owed accrued interest in the amount of $349,415 and $279,754 at September 30, 2023 and December 31, 2022, respectively.
On July 24, 2017, the President of the Company, who is a Director of the Company, agreed to advance the Company up to $20,000 for the payment of expenses. In March of 2018, the Board of Directors voted to increase to up to $100,000 the amount to be secured by a third lien in favor of the President of the Company for amounts advanced by the President under this note, on the following terms and conditions, namely, that (i) she be paid interest of 15% per annum on the amount advanced and owing and that the full 15% interest per annum is payable during any calendar year in which all or part of the amount advanced and owing or interest due thereon remains unpaid; (ii) the obligation in the maximum principal amount of $100,000 with interest due thereon be treated as a secured debt of the Company, to be evidenced by a separate note and to be secured with a separate lien to be placed on the Diamondhead Property (“the Third Lien”) together with the Chairman’s Third Lien, as well as a first lien to be placed on the residential lot owned by the Company; (iii) that the Third Lien on the Diamondhead Property also include the two loans ($25,000 and $15,000) and interest due thereon and credit facilities in the maximum amount of $15,000; and (iv) that the foregoing will be treated as advances to be paid out of any subsequent incoming financing obtained by the Company or any amounts recovered by the Company from a defendant in that collection action brought by the Company in the Circuit Court of Montgomery County, Maryland.
As of September 30, 2023, the President had advanced a total of $23,620, net of repayments of $49,949, under this agreement. The President previously agreed to secure a $25,000 loan and interest due thereon and to secure and guarantee a $15,000 loan and interest due thereon due non-related parties discussed above. The President is also personally liable for certain bank-issued credit cards used by the Company to pay expenses incurred by the Company in the approximate amount of $18,000. On September 30, 2018, Mississippi Gaming Corporation issued a secured promissory note, due one year from date of issue, to the President for an amount up to $100,000 to cover the principal and interest due with respect to this note. On August 21, 2018, Mississippi gaming Corporation placed a third lien on the Diamondhead Property to secure this obligation for $100,000. Accrued interest due on this note amounted to $50,655 and $41,409 at September 30, 2023 and December 31, 2022, respectively.
The third lien placed on the Diamondhead Property, which secures the above three promissory notes, totals up to $400,000 and is payable to the Chairman of the Board ($300,000) and President ($100,000) of the Company.
The principal balance of the notes payable due to the officers and directors discussed above was $769,125, net of debt discount of $51,527 and $720,651, net of debt discount of $0, as of September 30, 2023 and December 31, 2022, respectively.
|
Notes Payable Due Others |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Notes Payable Due Others | |
| Notes Payable Due Others | Note 9. Notes Payable Due Others
In October 2017, the Company entered into a settlement with a holder of $150,000 of convertible notes as described in Note 5 above. As part of the settlement, the Company agreed to pay legal fees in the amount of $50,000 and issued a four year note at 0% interest to satisfy this obligation. The note is currently in default.
In December 2020, the Company entered into three promissory notes with unrelated lenders in exchange for an aggregate principal amount of $. The Company received total proceeds of $ for the notes, resulting in an original issue discount of $. This original issue discount was recorded as a debt discount, which will be amortized to interest expense over the life of the notes.
In January and February 2021, the Company entered into two additional promissory notes with unrelated lenders in exchange for a principal amount of $ and $, respectively. The Company received total proceeds of $ for the notes, resulting in an original issue discount of $. This original issue discount was recorded as a debt discount, which will be amortized to interest expense over the life of the notes. The notes are non-interest bearing and matured in January and February 2022, respectively, one year after the notes’ issuances. These notes are currently in default.
In April and May 2021, the Company entered into three additional promissory notes with unrelated lenders in exchange for a principal amount of $, $ and $, respectively. The Company received total proceeds of $ for the notes, resulting in an original issue discount of $. This original issue discount was recorded as a debt discount, which will be amortized to interest expense over the life of the notes. The notes are non-interest bearing and matured in April and May 2022, respectively, one year after the notes’ issuances. The notes are currently in default.
In July 2021, the Company entered into an additional promissory note with an unrelated lender in exchange for a principal amount of $. The Company received proceeds of $ for the note. The note is non-interest bearing and matures in July 2022, one year after the note’s issuance. The note is currently in default.
In November 2021, the Company entered into an additional promissory note with an unrelated lender in exchange for a principal amount of $. The Company received proceeds of $ for the note. The note is non-interest bearing and matures in November 2022, one year after the note’s issuance. The note is currently in default.
In March 2022, unrelated third parties paid a total of $60,436 for property taxes due for the year 2021 on the Company’s Mississippi Property and loaned the Company an additional $19,564 for a total of $80,000. In return for the $80,000, the Company issued two non-interest bearing secured promissory notes for $40,000 each, due and payable in one year and, in addition, agreed to issue shares of common stock for each $40,000 loaned, for a total repayment due of $80,000 plus shares of common stock. The note is currently in default.
In April 2022, the Company entered into an additional promissory note with an unrelated lender in exchange for a principal amount of $. The Company received proceeds of $ for the note. The note is non-interest bearing and matures in April 2023, one year after the note’s issuance. The note is currently in default.
From April 2021 to June 2022, thirteen liens were placed on the Property to secure these notes. There is a call for the issuance of a total of shares of common stock in connection with the notes and liens, however, no shares have been issued to date. In December 2020, the Company recorded a fair value of the stock of $22,050, which was determined by the fair value of the Company’s common stock at the date of each loan issuance. In 2021, the Company recorded a fair value of the stock pertaining to the 2021 notes of $102,000. In 2022, the Company recorded a fair value of the stock pertaining to the 2022 notes of $98,000. The fair value of the stock was recorded as a debt discount, which has been fully amortized to interest expense as of September, 30 2023.
On July 25, 2023 and August 8, 2023, the Company entered into two additional promissory notes with unrelated lenders in exchange for a principal amount of $each. The Company received total proceeds of $for the notes. These notes are non-interest bearing and mature in one year after the notes’ issuance. In exchange for the loans, the Company also agreed to issue shares of common stock of the Company to each lender and agreed to pay each lender the principal due on each note out of the proceeds expected to be received from the settlement of an eminent domain proceeding. The notes are not convertible. As of the issuance date of these financial statements, no shares have been issued. The Company recorded a fair value of the stock of $27,200, which was determined by the fair value of the Company’s common stock at the date of the loan. The fair value of the stock was recorded as a debt discount, which will be amortized to interest expense over the life of the note. During the nine months ended September 30, 2023, $4,583 of debt discount was amortized to interest expense to others. On November 1, 2023, as previously agreed, the Company paid the two lenders $20,000 each out of the proceeds of the eminent domain settlement.
During the nine months ended September 30, 2023 and 2022, $29,520 and $101,499 of the debt discount was amortized to interest expense to others. As of September 30, 2023 and December 31, 2022, total notes payable due others, net of unamortized discount, was $574,883 and $532,563, respectively.
|
Long Term Notes and Interest-Bearing Advance |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Debt Disclosure [Abstract] | |
| Long Term Notes and Interest-Bearing Advance | Note 10. Long Term Notes and Interest-Bearing Advance
Promissory Notes
On June 9, 2017, the Company entered into a Promissory Note with an unrelated lender in exchange for proceeds in the amount of $15,000. Interest on the note is 12.5% per annum and payable March 1 of each year the note remains outstanding. Payment in full of the Note was due June 9, 2019. On July 20, 2023, the Noteholder agreed to extend the maturity date of the note to June 9, 2025. Mississippi Gaming Corporation, a wholly owned subsidiary of the Company, guaranteed the Note. In addition, the President of the Company agreed to personally guarantee the Note and to personally secure the Note with an assignment of proceeds due to her under the first lien on the Diamondhead property. The interest payments since March 1, 2018 have not been made. Accrued interest due on this obligation amounted to $11,862 and $10,443 at September 30, 2023 and December 31, 2022, respectively.
|
Related Party Transactions |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions | Note 11. Related Party Transactions
As of September 30, 2023, the President of the Company is owed deferred salary in the amount of $3,591,996 and the Vice President and the current Chairman of the Board of Directors of the Company is owed deferred salary in the amount of $121,140. The Board of directors agreed to pay interest at 9% per annum on the foregoing amounts owed. Interest expense under this agreement amounted to $241,166 and $221,372 during the nine months ended September 30, 2023 and 2022, respectively. Total interest accrued under this agreement totaled $2,153,065 and $1,911,499 as of September 30, 2023 and December 31, 2022, respectively.
The Company has a month-to-month lease with the President and then-Chairman of the Board of Directors of the Company, for office space owned by the President in Alexandria, Virginia. The lease calls for monthly base rent in the amount of $4,534 and payment of associated costs of insurance, real estate taxes, utilities and other expenses. Rent expense associated with this lease amounted to base rent in the amount of $40,808 and associated rental costs of $24,989 for a total of $65,797 for the nine months ended September 30, 2023 and base rent of $40,806 and associated rental costs of $22,776 for a total of $63,582 for the nine months ended September 30, 2022. No payments associated with the base rents were made in nine months ended September 30, 2023. At September 30, 2023 and December 31, 2022, amounts owed for base rent and associated rental costs totaled $634,366 and $568,569, respectively.
Directors of the Company are entitled to a director’s fee of $15,000 per year for their services. The Company has been unable to pay directors’ fees to date. A total of $906,250 and $838,750 was due and owing to the Company’s current and former directors as of September 30, 2023 and December 31, 2022, respectively. Directors have previously been compensated and may, in the future, be compensated for their services with cash, common stock, or options to purchase common stock of the Company.
On February 4, 2022, the Board of Directors entered into an agreement with Mr. Harrison, the Chairman of the Board of Directors, to issue shares of common stock of the Company to Mr. Harrison to repurchase the indemnifications the Company had previously agreed to pay Mr. Harrison for losses, if any, suffered on certain stock he had sold in prior years in an unrelated company to raise funds to pay property taxes due on the Diamondhead, Mississippi Property and to lend additional funds to the Company. This repurchase eliminates any risk to the Company arising from the indemnification which could have been material. During the nine months ended September 30, 2023, the Company recorded stock-based compensation of $ for the fair value of these shares, which have not yet been issued as of the issuance date of these unaudited condensed consolidated financial statements.
On February 17, 2023, the Board of Directors agreed to issue a non-interest bearing promissory note to the Chairman in the principal amount of $25,000 together with shares of common stock of the Company. The note was issued in connection with the Chairman advancing funds to pay off accounts payable on behalf of the Company.
On July 28, 2023, the Board of Directors agreed to issue a non-interest bearing promissory note to the Chairman in the principal amount of $75,000 together with shares of common stock of the Company. The note was issued in connection with the Chairman advancing funds to pay property taxes on the Diamondhead Property for the year 2022 and to pay fees due to the Company’s outside auditor for review of the Form 10-Q for the period ending June 30, 2023. In exchange for the $25,000 and $75,000 loans, the Company also agreed to pay the principal due of out of the proceeds expected to be received from the settlement of an eminent domain proceeding. On November 1, 2023, as previously agreed, the Company paid the Chairman the $25,000 and $75,000 advanced out of the proceeds of the eminent domain settlement.
See Notes 4, 5, 7, 8 and 12 for other related party transactions.
|
Commitments and Contingencies |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | Note 12. Commitments and Contingencies
Liens
As of September 30, 2023, there were twenty-one liens on the Company’s Diamondhead, Mississippi Property as follows:
The Company’s obligations under the First Tranche Collateralized Convertible Senior Debentures are secured by a first lien on the Company’s Diamondhead, Mississippi property (the “Investors Lien”). On March 31, 2014, the Company issued $1 million of First Tranche Collateralized Convertible Senior Debentures and, on December 31, 2014, the Company issued $850,000 of Second Tranche Collateralized Convertible Senior Debentures. Thus, on September 26, 2014, a first lien was placed on the Diamondhead Property in favor of the Investors to secure the principal due in the amount of $1,850,000 and interest due thereon. The Investors Lien is in pari passu with a first lien placed on the Property in favor of the President of the Company, the Vice President of the Company, and certain directors of the Company, for past due wages, compensation, and expenses owed to them in the maximum aggregate amount of $2,000,000 (the “Executives Lien”). The CEO will serve as Lien Agent for the Executives Lien.
On December 16, 2016, the Company filed a second lien on the Diamondhead Property in the maximum amount of $250,000 to secure certain notes payable, including notes to related parties, totaling $137,500 in principal and accrued interest incurred.
On August 21, 2018, the Company filed a third lien on the Diamondhead Property for up to $400,000 to secure notes issued to the Chairman and President of the Company arising in the third quarter of 2017 and during 2018, as more fully described in Note 8.
On January 26, 2021, a fourth lien in the amount of $2,000,000 was placed on the Property to secure a non-interest-bearing note payable in the amount of $2,000,000, issued to secure amounts owed to the President of the Company for accrued, but unpaid, salary, rent and other expenses.
On February 17, 2021, a fifth lien in the amount of $658,750 was placed on the Property to secure a non-interest-bearing note payable in the amount of $658,750, issued to secure amounts owed to nine directors, including the Company’s six current directors.
In April 2021, six liens were placed on the Property to secure six non-interest-bearing notes payable to be issued to six lenders bringing total liens on the Property to eleven. The six notes issued total $252,500 in principal and call for the issuance of shares of common stock. The notes are not convertible. As of the issuance date of these financial statements, no shares have been issued.
In June 2021, a twelfth and thirteenth lien were placed on the Property to secure two non-interest bearing notes issued in May of 2021 which total $50,000 in principal and call for the issuance of a total of shares of common stock. The notes are not convertible. As of the issuance date of these financial statements, no shares have been issued.
In July 2021, the Company placed a fourteenth lien on the Property to secure a promissory note in the amount of $150,000 issued to the Chairman of the Board of the Company to secure the payment of taxes and interest that were paid by the Chairman in July 2020.
In July 2021, the Company placed a fifteenth lien on the Property to secure a promissory note in the amount of $100,000 issued to the Chairman of the Board of the Company to secure the payment of taxes and interest that were paid by the Chairman in May 2021.
In July 2021, the Company placed a sixteenth lien on the Property to secure a non-interest bearing note issued to the Chairman in May 2021 which totals $50,000 in principal and calls for the issuance of shares of common stock. The note is not convertible. As of the issuance date of these unaudited condensed consolidated financial statements, no shares have been issued.
In July 2021, the Company placed a seventeenth lien on the Property to secure a non-interest bearing note issued to a lender, which totals $25,000 in principal and calls for the issuance of shares of common stock. The note is not convertible. As of the issuance date of these unaudited condensed consolidated financial statements, no shares have been issued.
In November 2021, an eighteenth lien was placed on the Property to secure a non-interest bearing note issued in November 2021 which totals $50,000 in principal and calls for the issuance of shares of common stock. The note is not convertible. As of the issuance date of these unaudited condensed consolidated financial statements, no shares have been issued.
In March 2022, a nineteenth and twentieth lien were placed on the Property to secure two non-interest bearing notes issued in March of 2022 which total $80,000 in principal and call for the issuance of a total of shares of common stock. The notes are not convertible. As of the issuance date of these unaudited condensed consolidated financial statements, no shares have been issued.
In May 2022, a twenty-first lien was placed on the Property to secure a non-interest bearing note issued in April of 2022 which totals $50,000 in principal and calls for the issuance of a total of shares of common stock. The note is not convertible. As of the issuance date of these unaudited condensed consolidated financial statements, no shares have been issued.
Other
The Company is currently delinquent in filing those documents and forms required to be filed in connection with its Employee Stock Ownership Plan (“ESOP”) for the year ended December 31, 2022, 2021, 2020, 2019, 2018, 2017, 2016 and 2015. The Company did not have the funds to pay professionals to prepare, audit and file these documents and forms when due. Although these required filings normally do not result in any tax due to an agency of the government, the Company could be subject to significant penalties for failure to file these forms when due. Penalties are assessed by the Department of Labor on a per diem basis from the original due dates for the required informational filings until the filings are actually made. The Company has accrued $542,575 and $429,750 on the current delinquent filings as of September 30, 2023 and December 31, 2022, respectively. The Company intends to bring its ESOP-required filings current and when current, will attempt to enroll in a voluntary compliance program with the Department of Labor with respect to any penalties or fines incurred. However, there can be no assurance the Company will be able to enroll in any such program or obtain a reduction of the fines and penalties that may be due.
The Company and its subsidiaries file their federal tax return on a consolidated basis. The Company has not filed its consolidated federal tax returns for the years ended December 31, 2022, 2021, 2020, 2019, 2018, 2017 and 2016.
The Company believes no tax will be due with these federal returns. The Company has not filed its annual reports together with its franchise tax due with the state of Delaware for 2022, 2021, 2020, 2019 and 2018. Mississippi Gaming Corporation, a wholly owned subsidiary of the Company, has not filed its annual reports, together with its franchise tax due, with the state of Delaware for 2022, 2021, 2020, 2019 and 2018. Casino World, Inc., a wholly owned subsidiary of the Company, has not filed its annual reports, together with its franchise tax due, with the state of Delaware for 2022, 2021, 2020, 2019, 2018, 2017 and 2016. Mississippi Gaming Corporation has not filed its corporate income and franchise tax returns, together with the tax due, with the state of Mississippi for 2022, 2021, 2020, 2019, or 2018. Casino World, Inc. has not filed its corporate income and franchise tax returns, together with the tax due, with the state of Mississippi for 2022, 2021, 2020, 2019, 2018, 2017 and 2016. As of September 30, 2023, the accrued franchise taxes for Delaware and Mississippi totaled $15,125.
Management Agreement
On June 19, 1993, two subsidiaries of the Company, Casino World Inc. and Mississippi Gaming Corporation, entered into a Management Agreement with Casinos Austria Maritime Corporation (CAMC). Subject to certain conditions, under the Management Agreement, CAMC would operate, on an exclusive basis, all of the Company’s proposed dockside gaming casinos in the State of Mississippi, including any operation fifty percent (50%) or more of which is owned by the Company or its affiliates.
Unless terminated earlier pursuant to the provisions of the Agreement, the Agreement terminates five years from the first day of actual Mississippi gaming operations and provides for the payment of an annual operational term management fee of 1.2% of all gross gaming revenues between zero and $100,000,000; plus 0.75% of gross gaming revenue between $100,000,000 and $140,000,000; plus 0.5% of gross gaming revenue above $140,000,000; plus two percent of the net gaming revenue between zero and $25,000,000; plus three percent of the net gaming revenue above twenty-five million dollars $25,000,000. The Company believes this Agreement is no longer in effect. However, there can be no assurance that CAMC will not attempt to maintain otherwise which would lead to litigation.
Letter of Intent with an Unrelated Third Party
On March 31, 2023, the Company entered into a Letter of Intent with an unrelated third party. The Agreement provided for purchases of Common Stock of Diamondhead Casino Corporation and purchases of Common Stock of its wholly-owned subsidiary, Mississippi Gaming Corporation. As of the issuance date of these financial statements, no payment has been made by the third party investor, no transactions pursuant to the Letter of Intent have occurred and no shares of common stock have been issued. The Company does not expect the Agreement to be honored.
|
Subsequent Events |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | Note 13. Subsequent Events
On October 20, 2023, MGC received $845,377.89 as part of the $1,000,000 settlement amount due in Cooperative Energy, a Mississippi Electric Cooperative v. Mississippi Gaming Corporation, et al. (In the Special Court of Eminent Domain, Hancock County, Mississippi (Case No. CC23-0153). The parties are working on the wording of an easement. Once MGC signs the easement, Cooperative Energy will pay the remainder due to MGC. In line with previous agreements, the funds were used, in part, to reimburse two unrelated lenders a total of $40,000 for amounts advanced in 2023 and to reimburse the Chairman of the Board approximately $100,000 for amounts advanced in 2023. In addition, $45,503.74 was paid to the President of the Company to reimburse the President for expenses paid on behalf of the Company in prior years. The Company intends to use the remaining funds to pay property taxes for the year 2023, to pay its outside auditors and accountant for the Form 10-K for the year ending December 31, 2023, to prepare and file past due federal and state tax returns, to perform an updated wetland delineation survey and certain environmental studies, to obtain an updated property appraisal and updated feasibility study, to obtain aerials of the Diamondhead Property and surrounding area, to prepare updated marketing materials, to pay legal fees and expenses of outside counsel, to pay down some debt due, including rent due in 2023, and to pay administrative and operating expenses. |
Summary of Significant Accounting Policies (Policies) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conformity with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements and, in our opinion, reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the nine months ended September 30, 2023 are not necessarily indicative of the results that we will have for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31, 2022, attached to our annual report on Form 10-K.
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| Principles of Consolidation | Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of Diamondhead Casino Corporation and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
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| Estimates | Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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| Land | Land
Land held for development is carried at cost. Costs directly related to site development, such as licensing, permitting, engineering, and other costs, are capitalized.
Land development costs, which have been capitalized, consist of the following at September 30, 2023 and December 31, 2022:
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| Fair Value Measurements | Fair Value Measurements
The Company follows the provisions of ASC Topic 820 “Fair Value Measurements” for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. The standard discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The standard utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Input other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable input that reflects management’s own assumptions.
Financial instruments included in current assets and liabilities are reported at carrying value in the unaudited condensed consolidated balance sheets, which approximate fair value due to their short-term nature.
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| Long-Lived Assets | Long-Lived Assets
The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The recoverability of long-lived assets is measured by comparing the carrying amount of the assets to the estimated undiscounted future cash flows projected to be generated by the assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount the carrying value exceeds the fair value of such assets determined by appraisal, discounted cash flow projections, or other means. As of September 30, 2023, there was a triggering event due to recurring losses and an impairment test was conducted. However, the fair value of the long-lived assets exceeded the carrying value and the Company determined that no impairment existed at September 30, 2023.
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| Net Loss per Common Share |
Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share is calculated by using the weighted average number of common shares outstanding, plus other potentially dilutive securities. Potentially dilutive securities are excluded from the computation of diluted loss per shares since their effect would be antidilutive. Common shares outstanding consist of issued shares, including allocated and committed shares held by the ESOP trust, less shares held in treasury. Common shares outstanding excludes the shares subject to be issued in connection with notes payables (see note 9) and shares subject to be issued to the Chairman of the Board of Directors. (see note 11). The dilutive securities below do not include potentially convertible Debentures since the requirements for possible conversion have not yet been met and may never be met.
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| Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements
In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivative and Hedging (Topic 815, and Leases (Topic 841). This new guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual reporting periods. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date to entities that qualify as a small reporting company. The Company has elected this extension and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. Accordingly, the Company has adopted this standard as of January 1, 2023 and it did not have an effect on its consolidated financial statements.
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| Recently Issued Accounting Pronouncements Not Yet Adopted | Recently Issued Accounting Pronouncements Not Yet Adopted
On March 27, 2023, the FASB issued ASU 2023-01, which amends certain provisions of ASC 842 that apply to arrangements between related parties under common control. Specifically, the ASU:
The ASU is effective for fiscal years beginning after December 15, 2023. The Company has not completed its assessment of the standard, but does not expect the adoption to have a material impact on the Company’s unaudited condensed consolidated financial position, results of operations, or cash flows.
No other recent accounting pronouncements were issued by FASB that are believed by management to have a material impact on the Company’s present or future financial statements. |
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Summary of Significant Accounting Policies (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Land Development Cost Capitalized | Land development costs, which have been capitalized, consist of the following at September 30, 2023 and December 31, 2022:
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| Schedule of Components of Potential Dilutive Securities |
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Accounts Payable and Accrued Expenses (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accounts Payable and Accrued Expenses | The table below outlines the elements included in accounts payable and accrued expenses at September 30, 2023 and December 31, 2022:
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Convertible Notes and Line of Credit (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Convertible Notes And Line Of Credit | ||||||||||||||||||||||||||||||||||||||||
| Schedule of Convertible Notes Payable | The table below summarizes the Company’s debt arising from the above-described sources as of September 30, 2023 and December 31, 2022:
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Liquidity and Going Concern (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
| Net income (loss) available to common stockholders, basic | $ 410,906 | $ 406,812 | $ 1,326,975 | $ 1,316,710 | |
| Accumulated deficit | 46,678,350 | 46,678,350 | $ 45,351,375 | ||
| Accounts payable and accrued expenses | 13,488,928 | 13,488,928 | |||
| Cash on hand | $ 25,112 | $ 25,112 | $ 55,885 | ||
Schedule of Land Development Cost Capitalized (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Product Information [Line Items] | ||
| Land development costs | $ 5,476,097 | $ 5,476,097 |
| Land [Member] | ||
| Product Information [Line Items] | ||
| Land development costs | 4,934,323 | 4,934,323 |
| Licenses [Member] | ||
| Product Information [Line Items] | ||
| Land development costs | 77,000 | 77,000 |
| Engineering and Costs Associated with Permitting [Member] | ||
| Product Information [Line Items] | ||
| Land development costs | $ 464,774 | $ 464,774 |
Schedule of Components of Potential Dilutive Securities (Details) - shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 4,815,000 | 4,815,000 |
| Convertible Preferred Stock [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 260,000 | 260,000 |
| Options To Purchase Common Shares [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 4,555,000 | 4,555,000 |
Summary of Significant Accounting Policies (Details Narrative) - shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items] | ||
| Shares issued for notes payable | 910,000 | |
| Antidilutive securities excluded from computation of earnings per share amount | 4,815,000 | 4,815,000 |
| Convertible Debt [Member] | ||
| Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items] | ||
| Antidilutive securities excluded from computation of earnings per share amount | 5,055,555 | |
| Board of Directors Chairman [Member] | ||
| Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items] | ||
| Issuance of shares | 185,000 | |
Schedule of Accounts Payable and Accrued Expenses (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Defined Benefit Plan Disclosure [Line Items] | ||
| Accrued payroll due officers | $ 3,794,711 | $ 3,569,711 |
| Accrued interest due officers and directors | 2,827,246 | 2,467,844 |
| Accrued director fees | 906,250 | 838,750 |
| Other | 17,308 | 17,308 |
| Associated rental costs | 190,284 | 165,295 |
| Accrued interest | 3,060,664 | 2,841,520 |
| Accrued dividends | 1,244,600 | 1,168,400 |
| Accrued fines and penalties | 542,575 | 444,875 |
| Other | 461,208 | 463,743 |
| Total non-related parties | 5,309,047 | 4,918,538 |
| President [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Other | 444,082 | 403,274 |
| Related Party [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Total related parties | $ 8,179,881 | $ 7,462,182 |
Schedule of Convertible Notes Payable (Details) - Convertible Promissory Note [Member] - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
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|---|---|---|---|---|
| March 1, 2010 Private Placement [Member] | ||||
| Short-Term Debt [Line Items] | ||||
| Convertible notes payable | [1] | $ 475,000 | $ 475,000 | |
| October 25, 2010 Private Placement [Member] | ||||
| Short-Term Debt [Line Items] | ||||
| Convertible notes payable | 487,500 | 487,500 | ||
| Private Placement [Member] | ||||
| Short-Term Debt [Line Items] | ||||
| Convertible notes payable | $ 962,500 | $ 962,500 | ||
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Schedule of Convertible Notes Payable (Details) (Parenthetical) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Short-Term Debt [Line Items] | ||
| Due to a related party | $ 17,308 | $ 17,308 |
| March 1, 2010 Private Placement [Member] | Convertible Promissory Note [Member] | Related Party [Member] | ||
| Short-Term Debt [Line Items] | ||
| Due to a related party | $ 75,000 | $ 75,000 |
Convertible Notes and Line of Credit (Details Narrative) - USD ($) |
1 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|
Nov. 30, 2020 |
Dec. 31, 2008 |
Sep. 30, 2023 |
Dec. 31, 2022 |
|
| Two Private Placement [Member] | Convertible Promissory Note [Member] | ||||
| Line of Credit Facility [Line Items] | ||||
| Convertible notes payable, current | $ 962,500 | $ 962,500 | ||
| Debt instrument, periodic payment | $ 486,796 | |||
| Interest payable | 1,120,169 | 1,043,547 | ||
| Line of Credit [Member] | ||||
| Line of Credit Facility [Line Items] | ||||
| Line of credit facility maximum borrowing capacity | $ 1,000,000 | |||
| Line of credit facility interest rate during period | 9.00% | |||
| Line of credit facility expiration date | Nov. 01, 2012 | |||
| Number of options awarded | 50,000 | |||
| Weighted average grant date fair value | $ 1.75 | |||
| Total unpaid principal and accrued interest due on obligation | $ 2,280,490 | $ 2,213,422 | ||
| Line of Credit [Member] | Maximum [Member] | Lender [Member] | ||||
| Line of Credit Facility [Line Items] | ||||
| Number of options awarded | 250,000 | |||
| Weighted average grant date fair value | $ 1.75 |
Current Notes Payable Due Related Parties (Details Narrative) |
1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Nov. 01, 2023
USD ($)
|
Jul. 28, 2023
USD ($)
shares
|
Jul. 28, 2023
USD ($)
|
Jul. 25, 2023
USD ($)
|
Feb. 17, 2023
USD ($)
shares
|
Feb. 17, 2023
USD ($)
|
Feb. 04, 2022
shares
|
May 30, 2021
USD ($)
shares
|
Sep. 30, 2018
USD ($)
|
Aug. 21, 2018
USD ($)
|
Jul. 24, 2017
USD ($)
|
Aug. 25, 2016 |
Mar. 31, 2022
USD ($)
shares
|
May 31, 2021
USD ($)
a
|
Jul. 31, 2020
USD ($)
a
|
Mar. 31, 2019
USD ($)
|
Nov. 30, 2018
USD ($)
|
Mar. 31, 2018
USD ($)
|
Mar. 31, 2022
USD ($)
|
Sep. 30, 2016
USD ($)
|
Sep. 30, 2023
USD ($)
shares
|
Sep. 30, 2022
USD ($)
|
Dec. 31, 2016
USD ($)
|
Dec. 31, 2022
USD ($)
|
Dec. 31, 2021
USD ($)
|
Jul. 31, 2017
USD ($)
a
|
Sep. 26, 2014 |
|
| Debt instrument interest rate stated percentage | 4.00% | ||||||||||||||||||||||||||
| Proceeds from related parties | $ 97,020 | ||||||||||||||||||||||||||
| Principal amount | 1,500,000 | ||||||||||||||||||||||||||
| Fair value of the stock | $ 64,000 | ||||||||||||||||||||||||||
| [custom:ProceedsFromEminentDomainSettlement] | $ 25,000 | $ 75,000 | $ 20,000 | $ 25,000 | |||||||||||||||||||||||
| Repayment of related party debt | $ 15,104 | ||||||||||||||||||||||||||
| Fair Value, Inputs, Level 1 [Member] | |||||||||||||||||||||||||||
| Derivative fair value of derivative net | $ 0 | ||||||||||||||||||||||||||
| Payable During any Calendar Year [Member] | |||||||||||||||||||||||||||
| Debt instrument interest rate stated percentage | 11.00% | ||||||||||||||||||||||||||
| Mississippi Property [Member] | |||||||||||||||||||||||||||
| Issuance of shares | shares | 160,000 | ||||||||||||||||||||||||||
| Principal amount | $ 80,000 | 80,000 | |||||||||||||||||||||||||
| Taxes payable | 60,436 | $ 60,436 | |||||||||||||||||||||||||
| Repayment of related party debt | $ 80,000 | ||||||||||||||||||||||||||
| Diamond Head Property [Member] | |||||||||||||||||||||||||||
| Proceeds from repayments of secured debt | 400,000 | ||||||||||||||||||||||||||
| Board of Directors Chairman [Member] | |||||||||||||||||||||||||||
| Debt matures term | 4 years | ||||||||||||||||||||||||||
| Debt instrument interest rate stated percentage | 14.00% | ||||||||||||||||||||||||||
| Interest payable | 90,306 | $ 80,882 | |||||||||||||||||||||||||
| Proceeds from related parties | $ 90,000 | ||||||||||||||||||||||||||
| Area of land, owned | a | 400 | 400 | |||||||||||||||||||||||||
| Issuance of shares | shares | 50,000 | 100,000 | |||||||||||||||||||||||||
| Proceeds from repayments of secured debt | $ 100,000 | $ 200,000 | $ 100,000 | $ 200,000 | |||||||||||||||||||||||
| Description terms on advances from chairman | the advance constitutes a lien on the Property with interest at 15% per annum; (ii) that the full interest of 15% per annum is payable during any calendar year in which all or part of the amount advanced is due and owing or interest due thereon remains unpaid; (iii) that this debt be evidenced by a separate promissory note and is to be included in and secured with a third lien that is to be placed on the Diamondhead Property to secure previous advances made to the Company (hereafter “the Third Lien”); (iv) that he be indemnified for any losses sustained on the sale of his common stock in an unrelated publicly-traded company to be sold to cover this advance based on a sales price of approximately $2.80 per share with a cap on the maximum loss per share to be at a sales price of $10.00 per share; and (v) that the Chairman’s previous indemnification approved by the Board of Directors on July 24, 2017 with respect to any loss on the sale of the same stock also be capped at a maximum of $10.00 per share. The Chairman identified the common stock sold and provided the Company with the documentation required to document the sale of said stock and to calculate the loss, if any, on said stock. | ||||||||||||||||||||||||||
| Principal amount | $ 25,000 | $ 25,000 | $ 50,000 | ||||||||||||||||||||||||
| Taxes payable | $ 62,610 | $ 67,076 | |||||||||||||||||||||||||
| Property related fees | 1,468 | 1,573 | |||||||||||||||||||||||||
| Debt instrument periodic payment principal | 50,000 | ||||||||||||||||||||||||||
| Fair value of the stock | $ 33,500 | ||||||||||||||||||||||||||
| Fair value of the stock | $ 17,500 | ||||||||||||||||||||||||||
| Debt discount amortized interest expense | 12,164 | ||||||||||||||||||||||||||
| [custom:ProceedsFromEminentDomainSettlement] | 75,000 | ||||||||||||||||||||||||||
| Board of Directors Chairman [Member] | July 28, 2023 [Member] | |||||||||||||||||||||||||||
| Issuance of shares | shares | 150,000 | ||||||||||||||||||||||||||
| Principal amount | $ 75,000 | 75,000 | |||||||||||||||||||||||||
| Fair value of the stock | 52,500 | ||||||||||||||||||||||||||
| Debt discount amortized interest expense | 9,290 | ||||||||||||||||||||||||||
| Board of Directors Chairman [Member] | July, 2021 [Member] | |||||||||||||||||||||||||||
| Proceeds from secured debt | $ 100,000 | $ 150,000 | |||||||||||||||||||||||||
| Board of Directors Chairman [Member] | March 2018 and March 2019 [Member] | |||||||||||||||||||||||||||
| Interest payable | 349,415 | 279,754 | |||||||||||||||||||||||||
| Principal amount | 467,953 | ||||||||||||||||||||||||||
| Repayment of related party debt | 16,250 | ||||||||||||||||||||||||||
| Board of Directors Chairman [Member] | Maximum [Member] | July 28, 2023 [Member] | |||||||||||||||||||||||||||
| Line of credit | $ 75,000 | $ 75,000 | |||||||||||||||||||||||||
| Board of Directors Chairman [Member] | Mississippi Gaming Corporation [Member] | |||||||||||||||||||||||||||
| Interest payable | 68,845 | 59,360 | |||||||||||||||||||||||||
| Issuance of shares | shares | 35,000 | ||||||||||||||||||||||||||
| Secured obligation | $ 100,000 | ||||||||||||||||||||||||||
| Board of Directors Chairman [Member] | Mississippi Gaming Corporation [Member] | Maximum [Member] | |||||||||||||||||||||||||||
| Principal amount | 200,000 | ||||||||||||||||||||||||||
| Board of Directors Chairman [Member] | Diamondhead Casino Corporation [Member] | |||||||||||||||||||||||||||
| Secured obligation | 200,000 | ||||||||||||||||||||||||||
| Board of Directors Chairman [Member] | Diamond Head Property [Member] | |||||||||||||||||||||||||||
| Proceeds from repayments of secured debt | 300,000 | ||||||||||||||||||||||||||
| Related Party [Member] | |||||||||||||||||||||||||||
| Notes payable, current | $ 769,125 | 720,651 | |||||||||||||||||||||||||
| Board of Directors [Member] | Maximum [Member] | |||||||||||||||||||||||||||
| Proceeds from repayments of secured debt | $ 100,000 | ||||||||||||||||||||||||||
| Proceeds from repayment of related party debt | $ 20,000 | ||||||||||||||||||||||||||
| Related party transaction terms and manner of settlement | interest of 15% per annum on the amount advanced and owing and that the full 15% interest per annum is payable during any calendar year in which all or part of the amount advanced and owing or interest due thereon remains unpaid; (ii) the obligation in the maximum principal amount of $100,000 with interest due thereon be treated as a secured debt of the Company, to be evidenced by a separate note and to be secured with a separate lien to be placed on the Diamondhead Property (“the Third Lien”) together with the Chairman’s Third Lien, as well as a first lien to be placed on the residential lot owned by the Company; (iii) that the Third Lien on the Diamondhead Property also include the two loans ($25,000 and $15,000) and interest due thereon and credit facilities in the maximum amount of $15,000; and (iv) that the foregoing will be treated as advances to be paid out of any subsequent incoming financing obtained by the Company or any amounts recovered by the Company from a defendant in that collection action brought by the Company in the Circuit Court of Montgomery County, Maryland. | ||||||||||||||||||||||||||
| President [Member] | |||||||||||||||||||||||||||
| Debt instrument interest rate stated percentage | 9.00% | ||||||||||||||||||||||||||
| Interest payable | $ 50,655 | 41,409 | |||||||||||||||||||||||||
| Secured obligation | $ 100,000 | ||||||||||||||||||||||||||
| Other accrued liabilities current and noncurrent | 18,000 | ||||||||||||||||||||||||||
| President [Member] | Loan One [Member] | |||||||||||||||||||||||||||
| Line of credit | $ 25,000 | 25,000 | |||||||||||||||||||||||||
| President [Member] | Loan Two [Member] | |||||||||||||||||||||||||||
| Line of credit | 15,000 | 15,000 | |||||||||||||||||||||||||
| President [Member] | Two Loans [Member] | |||||||||||||||||||||||||||
| Line of credit facility maximum borrowing capacity | $ 15,000 | ||||||||||||||||||||||||||
| President [Member] | Maximum [Member] | |||||||||||||||||||||||||||
| Proceeds from repayments of secured debt | $ 100,000 | ||||||||||||||||||||||||||
| Seven Lenders [Member] | |||||||||||||||||||||||||||
| Cash received from advances | $ 47,500 | ||||||||||||||||||||||||||
| Three Current Directors [Member] | |||||||||||||||||||||||||||
| Cash received from advances | $ 25,000 | ||||||||||||||||||||||||||
| Seven Lenders and Three Current Directors [Member] | |||||||||||||||||||||||||||
| Debt matures term | 4 years | ||||||||||||||||||||||||||
| Debt instrument interest rate stated percentage | 8.00% | ||||||||||||||||||||||||||
| Interest payable | $ 16,000 | 14,000 | |||||||||||||||||||||||||
| Board of Directors Chairman [Member] | |||||||||||||||||||||||||||
| Issuance of shares | shares | 185,000 | ||||||||||||||||||||||||||
| Board of Directors Chairman [Member] | Related Party [Member] | Mississippi Gaming Corporation [Member] | |||||||||||||||||||||||||||
| Notes payable related parties | $ 67,628 | ||||||||||||||||||||||||||
| Board of Directors Chairman [Member] | Related Party [Member] | Mississippi Property [Member] | |||||||||||||||||||||||||||
| Area of land, owned | a | 400 | ||||||||||||||||||||||||||
| President [Member] | Diamond Head Property [Member] | |||||||||||||||||||||||||||
| Proceeds from repayments of secured debt | $ 100,000 | ||||||||||||||||||||||||||
| President [Member] | Related Party [Member] | |||||||||||||||||||||||||||
| Due from officers or stockholders | 23,620 | ||||||||||||||||||||||||||
| Repayments of debt | 49,949 | ||||||||||||||||||||||||||
| Officers and Directors [Member] | |||||||||||||||||||||||||||
| Notes payable, current | 769,125 | 720,651 | |||||||||||||||||||||||||
| Debt instrument, unamortized discount current | $ 51,527 | $ 0 | |||||||||||||||||||||||||
Long Term Notes and Interest-Bearing Advance (Details Narrative) - USD ($) |
Jun. 09, 2017 |
Sep. 30, 2023 |
Dec. 31, 2022 |
Sep. 26, 2014 |
|---|---|---|---|---|
| Short-Term Debt [Line Items] | ||||
| Debt Instrument, Interest Rate, Stated Percentage | 4.00% | |||
| Promissory Note [Member] | ||||
| Short-Term Debt [Line Items] | ||||
| Proceeds from Notes Payable | $ 15,000 | |||
| Debt Instrument, Interest Rate, Stated Percentage | 12.50% | |||
| Debt Instrument, Maturity Date | Jun. 09, 2019 | |||
| Interest payable | $ 11,862 | $ 10,443 |
Subsequent Events (Details Narrative) - Subsequent Event [Member] |
Oct. 20, 2023
USD ($)
|
|---|---|
| Subsequent Event [Line Items] | |
| Accounts receivable from securitization | $ 845,377 |
| Due to settlement amount | 1,000,000 |
| Repayments of lenders | 40,000 |
| President [Member] | |
| Subsequent Event [Line Items] | |
| Payment for reimbursement amount | 45,503.74 |
| Board of Directors Chairman [Member] | |
| Subsequent Event [Line Items] | |
| Reimbursement advance amount | $ 100,000 |