August 26, 1996
SECURITIES AND EXCHANGE COMMISSION
450 5th Street, N.W.
Judiciary Plaza
Washington, D.C. 20549-1004
Re: North American Gaming and Entertainment Corporation (the "Company")
Form 8-K/A (Amendment No. One) relating to the reported event dated
June 10, 1996
Commission File No. 0-5474
Our File No.: 15006-160
Ladies and Gentlemen:
On behalf of the Company, enclosed for electronic filing please find one
copy of Form 8-K/A (Amendment No. One) relating to the reported event dated June
10, 1996.
Please call the undersigned with any questions or comments. Collect calls
will be accepted at 214/419-8311.
Yours truly,
Mike Parsons
MDP/Ids
Enclosures
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. One)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
-------------------------
Date of Report (Date of earliest event reported): June 10, 1996
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-5474 75-2571032
(State of incorporation) (Commission File No.) (IRS Employer Identification No.)
777 E. 15th Street, Plano, Texas 75074
(Address of principal executive offices, including zip code)
(214) 423 -9113
(Registrant's telephone number, including area code)
(1)
<PAGE>
Item 7. Financial Statements and Exhibits.
The following financial statements and pro forma financial information
regarding I.T. Cruise, Inc. ("I.T. Cruise") and GalaxSea Cruises and Tours,
Inc. ("GalaxSea" are filed with this report. The operations and total
assets of GalaxSea prior to October 1, 1995 are not material to the
operations and total assets of the Registrant, and, therefore, are not
included in this Report.
Index to Financial Statements
(a) The following audited and unaudited financial statements of I.T. Cruise and
GalaxSea and included with this report.
<TABLE>
<CAPTION>
<S> <C>
(i) I.T. CRUISE, INC.
I.T. Cruise, Inc. - Year Ended December 31, 1995
Independent Auditors Report F-1
Balance Sheet F-2
Statement of Income and Retained Earnings F-3
Statement of Cash Flows F-4
Notes to Financial Statements F-5 & F6
I.T. Cruise, Inc. - Seven Months Ended December 31, 1994
Independent Auditors Report F-7
Balance Sheet F-8
Statement of Income and Retained Earnings F-9
Statement of Cash Flows F-10
Notes to Financial Statements F-11 & F12
I.T. Cruise, Inc. - Year Ended May 31, 1994
Independent Auditors Report F-13
Balance Sheet F-14
Statement of Income and Retained Earnings F-15
Statement of Cash Flows F-16
Notes to Financial Statements F-17 & F18
I.T. Cruise, Inc. - Three Months Ended March 31, 1996 and 1995
Balance Sheet (Unaudited) F-19
Statement of Operations (Unaudited) F-20
(ii) GALAXSEA CRUISES AND TOURS, INC.
GalaxSea Cruises and Tours, Inc. - Three Months Ended December 31, 1995
Independent Auditors Report F-21
Balance Sheet F-22
Statement of Operations F-23
Statement of Changes in Stockholder's Equity F-24
Statement of Cash Flows F-25
Notes to Financial Statements F-26 & F-27
(iii) GalaxSea Cruises and Tours, Inc. - Three Months Ended March 31, 1996
----- --------------------------------------------------------------------
Balance Sheet (Unaudited) F-28
Statement of Operations (Unaudited) F-29
(2)
<PAGE>
(b) Unaudited Pro Form Financial Statements
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION,
I.T. CRUISE, INC AND GALAXSEA CRUISES AND TOURS, INC.
Twelve Months Ended December 31, 1995
Proforma Balance Sheet F-30
Proforma Statement of Operations F-31
Three Months Ended March 31, 1996
Proforma Balance Sheet F-32
Proforma Statement of Operations F-33
Notes to Proforma Consolidated Financial Statements F-34
(c) Exhibits. The following exhibits are being filed herewith:
10.1.1 Agreement and Plan of Merger dated effective June 7, 1996, relating to the acquisition of GalaxSea
and I.T. Cruise.*
10.1.2 Form of Note dated June 10, 1996 in the original principal
amount of $1,400,000 payable by Registrant to International
relating to the acquisition of I.T. Cruise.*
10.1.3 Form of Security Agreement dated effective June 10, 1996
between International and Registrant securing repayment of the
Note filed as Exhibit 10.1.2.*
10.1.4 Form of "Certificate of Designation, Preferences and Rights of
Series B Convertible Preferred Stock" creating the Series B
Preferred Stock.*
10.1.5 Form of GalaxSea Cruise Marketing Agreement dated May 1, 1996 between International and
GalaxSea.*
10.1.6 Form of Cruise Marketing Agreement dated May 1, 1996 between International and I.T. Cruise.*
10.1.7 Form of Assignment between International and I.T. Cruise dated June 1, 1996.*
10.1.8 Form of Security Agreement dated June 10, 1996 between
Registrant, Ozdon Investments, and Lamar E. Ozley, Jr., as
Trustee for the former shareholders of Ozdon Investments,
Inc.*
</TABLE>
----------------------------------------------------------
* Previously Filed
(3)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Amendment No. One to this report to be
signed on its behalf by the undersigned hereunto duly authorized.
August 23, 1996
NORTH AMERICAN GAMING AND
ENTERTAINMENT CORPORATION
By: /s/ George J. Akmon
-------------------
George J. Akmon, Executive
Vice President and Chief Financial
Officer
<PAGE>
SARTAIN FISCHBEIN & CO.
CERTIFIED PUBLIC ACCOUNTANTS
SF&Co.
Independent Auditors' Report
The Board of Directors
I.T. Cruise, Inc.
Tulsa, Oklahoma
We have audited the accompanying balance sheet of I.T. Cruise, Inc., as of
December 31, 1995, and the related statements of income and retained earnings
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of I.T. Cruise, Inc., as of
December 31, 1995, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
June 21, 1996 /s/ SARTAIN FISCHBEIN & CO.
F-1
3010 SOUTH HARVARD AVE., SUITE 400, TULSA, OK 74114-6193 .
918 749-6601. FAX 918 744-1506
<PAGE>
I.T. CRUISE, INC.
BALANCE SHEET
December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current Assets:
Cash $ 283
Preferred supplier contracts receivable 211,312
-------
Total Current Assets 211,595
-------
Furniture and Fixtures, at cost, net of accumulated depreciation
of $26,458 17,242
-------
Other Assets:
Trade name, net of accumulated amortization of $1,098 8,902
Goodwill, net of accumulated amortization of $5,502 4,498
Noncompete agreement, net of accumulated amortization of
$9,169 831
------ -------
Total Other Assets 14,231
-------
$243,068
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt $115,818
Accounts payable 61,076
Accrued interest payable 19,338
-------
Total Current Liabilities 196,232
Long-Term Debt
Total Liabilities 196,232
-------
Stockholder's Equity:
Common stock, $1 par value; 50,000 shares authorized;
500 shares issued and outstanding 500
Retained earnings 46,336
Total Stockholder's Equity 46,836
-------
$243,068
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
I.T. CRUISE, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Revenues:
Preferred supplier commissions $ 435,332
Cruise fees 19,212
-------
Total Revenues 454,544
-------
Costs and Expenses:
Override commissions 23,293
Other administrative expenses 2,197
Amortization and depreciation 52,101
Interest expense 14,167
Operational costs 12,950
-------
Total Expenses 104,708
-------
Income Before Income Taxes 349,836
Income Tax Expense 133,000
-------
Net Income 216,836
Retained Earnings, beginning of year 267,585
Dividends (438,085)
--------
Retained Earnings, end of year $ 46,336
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
I.T. CRUISE, INC.
STATEMENT OF CASH FLOWS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Cash Flows From Operating Activities:
Net income $ 216,836
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization and depreciation 52,101
Increase in accounts receivable (24,741)
Increase in receivable from Parent (228,662)
Increase in accounts payable 17,159
Increase in accrued liabilities 5,692
Decrease in deferred commissions (6,972)
-------
Net Cash Provided By Operating Activities 31,413
-------
Cash Flows From Financing Activities:
Principal payments on notes payable (42,613)
--------
Net Cash Used In Financing Activities (42,613)
--------
Decrease In Cash (11,200)
Cash, beginning of year 11,483
--------
Cash, end of year $ 283
=====
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Issuance Of Dividends To Parent Company,
International Tours, Inc. In The Form Of
Distribution Of Receivable From Parent $ 438,085
OTHER DISCLOSURES
Interest paid $ 7,388
Income taxes paid -
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
I.T. CRUISE, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business: I.T. Cruise, Inc. ( the "Company"), a 100% owned
subsidiary of International Tours, Inc., was formed in March 1993 and conducts
cruise travel training and marketing for International Tours' franchisees. The
Company conducts business under the name of Cruise A-Hoy.
Effective March 31, 1993, the Company purchased substantially all the assets of
Cruise A-Hoy, Inc. (CAH), a cruise travel booking service in Colorado. The
Company purchased equipment, supplies inventory, contract rights with cruise
lines, and tradename. The Company also entered into a noncompete agreement with
CAH. The total cost of acquisition was $303,223, which exceeded the fair market
value of the net assets of CAH by $10,000. The excess is presented as goodwill.
Preferred Supplier Contract Revenue: Preferred supplier contract revenue
represents commissions earned by the Company from various travel service
providers, principally cruise lines. Such revenues are recognized as they are
earned.
Contract Rights: Cruise line preferred supplier contracts were acquired from
Cruise A-Hoy, Inc. These contracts represent the rights to overrides and
commissions with various cruise lines. These contract rights have been amortized
on a straight-line basis over the life of each contract, from one to three
years. Contract rights were fully amortized as of December 31, 1995.
Trade Name: Trade name is the name "Cruise A-Hoy" and insignia acquired from
CAH. Trade name is being amortized using the straight-line method over the
expected useful life of 25 years. Amortization expense on trade name was $400 in
1995.
Goodwill: Goodwill represents the excess of the cost of acquiring assets of CAH
over the fair market value of the assets acquired, and is being amortized using
the straight line method over five years. Amortization expense on goodwill was
$2,000 in 1995.
Noncompete Agreement: The noncompete agreement is being amortized using the
straight-line method over the life of the agreement, which is three years.
Amortization expense on the noncompete agreement was $3,333 in 1995.
Furniture and Fixtures: Depreciation is provided using accelerated methods over
the estimated useful lives of the related assets. Repairs and maintenance are
expensed as incurred, whereas major improvements are capitalized.
Income Taxes: International Tours, Inc. and the Company file consolidated
federal and state income tax returns. Income tax expense currently payable is
allocated to the Company based upon the amount the Company would pay if it filed
a separate income tax return. Income tax expense is provided for the tax effects
of transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes arising from temporary differences between
income for financial reporting and income tax purposes.
Income tax expense or the year ended December 31, 1995 amounted to $133,000
which represents the currently due tax expense allocation. This amount has been
reflected as a decrease in Receivable from Parent. As of December 31, 1995, the
Company had no material temporary differences.
Management Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
December 31, 1995, and revenues and expenses during the period then ended. The
actual outcome of the estimates could differ from the estimates made in the
preparation of the financial statements.
F-5
<PAGE>
I.T. CRUISE, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
(CONTINUED)
2. RECEIVABLE FROM PARENT
Receivable from Parent consists of amounts due from the Company's Parent,
International Tours, Inc. The receivable increased during the year ended
December 31, 1995 due to the collection of revenue and payment of expenses by
the Company's Parent. The receivable has decreased during the year ended
December 31, 1995 due primarily to the payment of dividends by the Company.
3. LONG-TERM DEBT
Long-term debt consists of a 7% note due to Cruise A-Hoy, Inc. (CAH), due on
demand as a result of non-compliance with the debt instrument. The note was
issued in March, 1993 for the purchase of certain assets of CAH. The payment of
principal and interest are based on 25% of all CAH marketing fees and override
commissions collected.
The fair value of long-term debt is approximate to its carrying amount
4. SALE OF COMPANY
On June 7, 1996, the Company's Parent, International Tours, Inc., entered into
an agreement to sell all of the common stock of the Company to another
corporation. Certain assets of the Company may be distributed prior to the sale
and certain liabilities may be assumed by the Company's Parent. As of the date
of our report, the sale had not yet been consummated.
F-6
<PAGE>
SARTAIN FISCHBEIN & CO.
CERTIFIED PUBLIC ACCOUNTANTS
SF&Co.
Independent Auditors' Report
The Board of Directors
I.T. Cruise, Inc.
Tulsa, Oklahoma
We have audited the accompanying balance sheet of I.T. Cruse, Inc., as of
December 31, 1994, and the related statements of income and retained earnings
and cash flows for the seven months ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of I.T. Cruise, Inc., as of
December 31, 1994, and the results of its operations and its cash flows for the
seven months then ended, in conformity with generally accepted accounting
principles.
October 18, 1995 /s/ SARTAIN FISCHBEIN & CO.
3010 SOUTH HARVARD AVE., SUITE 400, TULSA, OK 74114-6193 .
918 749-6601. FAX 918 744-1506
F-7
<PAGE>
I.T. CRUISE, INC.
BALANCE SHEET
December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current Assets:
Cash $ 11,483
Preferred supplier contracts receivable 186,250
Employee receivable 320
----
Total Current Assets 198,053
-------
Furniture and Fixtures, at cost, net of accumulated depreciation
of $19,183 24,517
-------
Other Assets:
Receivable from Parent 209,424
Contract rights, net of accumulated amortization of $164,130 39,093
Trade name, net of accumulated amortization of $698 9,302
Goodwill, net of accumulated amortization of $3,502 6,498
Noncompete agreement, net of accumulated amortization of $5,836 4,164
------
Total Other Assets 268,481
-------
$491,051
========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt $158,431
Accounts payable 43,917
Accrued interest payable 12,559
Accrued liabilities - other 1,087
Deferred commissions 6,972
------
Total Current Liabilities 222,966
Long-term Debt -
-------
Total Liabilities 222,966
-------
Stockholder's Equity:
Common stock, $1 par value; 50,000 shares authorized;
500 shares issued and outstanding 500
Retained earnings 267,585
-------
Total Stockholder's Equity 268,085
-------
$491,051
========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-8
<PAGE>
I.T. CRUISE, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
Seven Months Ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Revenues:
Preferred supplier commissions $ 294,568
Cruise fees 28,843
-------
Total Revenues 323,411
-------
Costs and Expenses:
Override commissions 20,779
Salaries and benefits 2,577
Other administrative expenses 5,502
Amortization and depreciation 46,870
Interest expense 10,514
Operational costs 26,339
-------
Total Expenses 112,581
-------
Income Before Income Taxes 210,830
Income Tax Expense 74,000
------
Net Income 136,830
Retained Earnings, beginning of year 130,755
-------
Retained Earnings, end of year $ 267,585
=========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-9
<PAGE>
I.T. CRUISE, INC.
STATEMENT OF CASH FLOWS
Seven Months Ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Cash Flows From Operating Activities:
Net income $ 136,830
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization and depreciation 46,870
Increase in accounts receivable (9,683)
Increase in receivable from Parent (162,508)
Decrease in accounts payable (45,085)
Decrease in accrued liabilities (648)
Decrease in deferred commissions (20,448)
--------
Net Cash Used In Operating Activities (54,672)
--------
Cash Flows From Financing Activities:
Principal payments on notes payable (61,657)
--------
Net Cash Used In Financing Activities (61,657)
--------
Decrease In Cash (116,329)
Cash, beginning of period 127,812
--------
Cash, end of period $ 11,483
========
OTHER DISCLOSURES
Interest Paid $ 10,749
Income Taxes Paid -
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-10
<PAGE>
I.T. CRUISE, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business: I.T. Cruise, Inc. ( the "Company"), a wholly owned
subsidiary of International Tours, Inc., was formed in March 1993 and conducts
cruise travel training and marketing for International Tours' franchisees. The
Company conducts business under the name of Cruise A-Hoy.
Effective March 31, 1993, the Company purchased substantially all the assets of
Cruise A-Hoy, Inc. ("CAH"), a cruise travel booking service in Colorado. The
Company purchased equipment, supplies inventory, contract rights with cruise
lines, and tradename. The Company also entered into a noncompete agreement with
CAH. The total cost of acquisition was $303,223, which exceeded the fair market
value of the net assets of CAH by $10,000. The excess is presented as goodwill.
Preferred Supplier Contract Revenue: Preferred supplier contract revenue
represents commissions earned by the Company from various travel service
providers, principally cruise lines. Such revenues are recognized as they are
earned.
Contract Rights: Cruise line preferred supplier contracts were acquired from
Cruise A-Hoy, Inc. These contracts represent the rights to overrides and
commissions with various cruise lines. These contract rights are being amortized
on a straight-line basis over the life of each contract, from one to three
years. Amortization expense on contract rights was $38,386 for the seven months
ended December 31, 1994.
Trade Name: Trade name is the name "Cruise A-Hoy" and insignia acquired from
Cruise Ahoy, Inc. Trade name is being amortized using the straight-line method
over the expected useful life of 25 years. Amortization expense on trade name
was $231 for the seven months ended December 31, 1994.
Goodwill: Goodwill represents the excess of the cost of acquiring assets of
Cruise A-Hoy, Inc. over the fair market value of the assets acquired, and is
being amortized using the straight line method over five years. Amortization
expense on goodwill was $1,169 for the seven months ended December 31, 1994.
Noncompete Agreement: The noncompete agreement is being amortized using the
straight-line method over the life of the agreement, which is three years.
Amortization expense on the noncompete agreement was $1,946 for the seven months
ended December 31, 1994.
Furniture and Fixtures: Depreciation is provided using accelerated methods over
the estimated useful lives of the related assets. Repairs and maintenance are
expensed as incurred, whereas major improvements are capitalized.
Income Taxes: International Tours, Inc. and Cruise file consolidated federal and
state income tax returns.
Income tax expense is provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes
arising from temporary differences between income for financial reporting and
income tax purposes. Income tax expense currently payable is allocated to the
Company based upon the amount the Company would pay if it filed a separate
income tax return.
Income tax expense for the seven months ended December 31, 1994 amounted to
$74,000 which represents the currently due tax expense allocation. This amount
has been reflected as a decrease in Receivable from Parent. As of December 31,
1994, the Company had no material temporary differences.
F-11
<PAGE>
I.T. CRUISE, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
(CONTINUED)
2. RECEIVABLE FROM PARENT
Receivable from Parent consists of amounts due from the Company's Parent,
International Tours, Inc. The receivable has increased during the year ended
December 31, 1994 due primarily to the collection of the Company's revenue and
payment of the Company's expenses by the Parent.
3. LONG-TERM DEBT
Long-term debt consists of a 7% note payable to Cruise A-Hoy, Inc. (CAH), due on
demand as a result of non-compliance with the debt instrument. The note was
issued in March, 1993, for the purchase of certain assets of CAH. The payment of
principal and interest are based on 25% of all CAH marketing fees and override
commissions collected.
F-12
<PAGE>
SARTAIN FISCHBEIN & CO.
CERTIFIED PUBLIC ACCOUNTANTS
SF&Co.
Independent Auditors' Report
The Board of Directors
I.T. Cruise, Inc.
Tulsa, Oklahoma
We have audited the accompanying balance sheet of I.T. Cruse, Inc., as of May
31, 1994, and the related statements of income and retained earnings and cash
flows for the year ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of I.T. Cruise, Inc., as of May
31, 1994, and the results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.
August 10, 1994 /s/ SARTAIN FISCHBEIN & CO.
3010 SOUTH HARVARD AVE., SUITE 400, TULSA, OK 74114-6193 .
918 749-6601. FAX 918 744-1506
F-13
<PAGE>
I.T. CRUISE, INC.
BALANCE SHEET
May 31, 1994
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current Assets:
Cash $127,812
Preferred supplier contracts receivable 176,487
Employee receivable 400
----
Total Current Assets 304,699
-------
Furniture and Fixtures, at cost, net of accumulated depreciation
of $14,045 29,655
-------
Other Assets:
Receivable from Parent 46,916
Contract rights, net of accumulated amortization of $125,744 77,479
Trade name, net of accumulated amortization of $467 9,533
Goodwill, net of accumulated amortization of $2,333 7,667
Noncompete agreement, net of accumulated amortization of $3,890 6,110
------
Total Other Assets 147,705
-------
$482,059
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt $174,838
Accounts payable 89,002
Accrued interest payable 12,794
Accrued liabilities - other 1,500
Deferred commissions 27,420
-------
Total Current Liabilities 305,554
Long-term Debt 45,250
------
Total Liabilities 350,804
-------
Stockholder's Equity:
Common stock, $1 par value; 50,000 shares authorized;
500 shares issued and outstanding 500
Retained earnings 130,755
-------
Total Stockholders' Equity 131,255
-------
$482,059
========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-14
<PAGE>
I.T. CRUISE, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
Year Ended May 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Revenues:
Cruise fees $ 650,238
Preferred supplier commissions 520,736
--------
Total Revenues 1,170,974
---------
Costs and Expenses:
Cruise costs 619,104
Salaries and benefits 88,088
Other administrative expenses 60,325
Amortization and depreciation 123,679
Interest expense 24,559
Loss on disposal of assets 13,419
-------
Total Expenses 929,174
-------
Income Before Income Taxes 241,800
Income Tax Expense 86,400
------
Net Income 155,400
Accumulated Deficit, beginning of year (24,645)
-------
Retained Earnings, end of year $ 130,755
=========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-15
<PAGE>
I.T. CRUISE, INC.
STATEMENT OF CASH FLOWS
Year Ended May 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Cash Flows From Operating Activities:
Net income $ 155,400
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization and depreciation 123,679
Loss on disposal of property and equipment 13,419
Increase in accounts receivable (143,708)
Decrease in supply inventory 5,000
Increase in receivable from Parent (143,269)
Increase in accounts payable 89,002
Increase in accrued liabilities 10,756
Increase in deferred commissions 20,244
-------
Net Cash Provided By Operating Activities 130,523
--------
Cash Flows From Financing Activities:
Principal payments on long-term debt (10,782)
-------
Net Cash Used In Financing Activities (10,782)
--------
Increase In Cash 119,741
Cash, beginning of period 8,071
-----
Cash, end of period $ 127,812
=========
OTHER DISCLOSURES:
Interest paid $ 15,303
Income taxes paid -
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-16
<PAGE>
I.T. CRUISE, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED MAY 31, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business: I.T. Cruise, Inc. ( the "Company"), a wholly-owned
subsidiary of International Tours, Inc., was formed in March 1993 and conducts
cruise travel training and marketing for International Tours' franchisees. The
Company conducts business under the name of Cruise A-Hoy.
Effective March 31, 1993, the Company purchased substantially all the assets of
Cruise A-Hoy, Inc. ("CAH"), a cruise travel booking service in Colorado. The
Company purchased equipment, supplies inventory, contract rights with cruise
lines, and tradename. The Company also entered into a noncompete agreement with
CAH. The total cost of acquisition was $303,223, which exceeded the fair market
value of the net assets of CAH by $10,000. The excess is presented as goodwill.
Preferred Supplier Contract Revenue: Preferred supplier contract revenue
represents commissions earned by the Company from various travel service
providers, principally cruise lines. Such revenues are recognized as they are
earned.
Contract Rights: Cruise line preferred supplier contracts were acquired from
Cruise A-Hoy, Inc. These contracts represent the rights to overrides and
commissions with various cruise lines. These contract rights are being amortized
on a straight-line basis over the life of each contract, from one to three
years. Amortization expense on contract rights was $103,894 for the year ended
May 31, 1994.
Trade Name: Trade name is the name "Cruise A-Hoy" and insignia acquired from
Cruise Ahoy, Inc. Trade name is being amortized using the straight-line method
over the expected useful life of 25 years. Amortization expense on trade name
was $400 for the year ended May 31, 1994.
Goodwill: Goodwill represents the excess of the cost of acquiring assets of
Cruise A-Hoy, Inc. over the fair market value of the assets acquired, and is
being amortized using the straight line method over five years. Amortization
expense on goodwill was $2,000 for the year ended May 31, 1994.
Noncompete Agreement: The noncompete agreement is being amortized using the
straight-line method over the life of the agreement, which is three years.
Amortization expense on the noncompete agreement was $3,334 for the year ended
May 31, 1994.
Furniture and Fixtures: Depreciation is provided using accelerated methods over
the estimated useful lives of the related assets. Repairs and maintenance are
expensed as incurred, whereas major improvements are capitalized.
Income Taxes: International Tours, Inc. and the Company file consolidated
federal and state income tax returns.
Income tax expense is provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes
arising from temporary differences between income for financial reporting and
income tax purposes. Income tax expense currently payable is allocated to the
Company based upon the amount the Company would pay if it filed a separate
income tax return.
Income tax expense for the year ended May 31, 1994 amounted to $86,400 which
represents the currently due tax expense allocation. This amount has been
reflected as a decrease in Receivable from Parent. As of May 31, 1994, the
Company had no material temporary differences.
2. RECEIVABLE FROM PARENT
Receivable from Parent consists of amounts due from the Company's Parent,
International Tours, Inc. The receivable has increased during the year ended May
31, 1994, due primarily to the collection of the Company's revenue and payment
of the Company's expenses by the Parent.
F-17
<PAGE>
I.T. CRUISE, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED MAY 31, 1994
(CONTINUED)
3. LONG-TERM DEBT
Long-term debt consists of a 7% note payable to Cruise A-Hoy, Inc., (CAH) due
March 1996, for the purchase of certain assets of CAH. The payment of principal
and interest are based on 25% of all CAH marketing fees and override commissions
collected.
Maturities of long-term debt are as follows: May 31, 1995 - $174,838; May 31,
1996 - $45,250.
F-18
<PAGE>
I.T. CRUISE, INC.
BALANCE SHEET
MARCH 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
ASSETS MARCH 31, 1996 MARCH 31, 1995
- ------ -------------- ---------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 234 $ 375
Other current assets 208,151 191,825
---------------- ---------------
Total current assets 208,385 192,200
PROPERTY & EQUIPMENT, net 15,709 17,500
OTHER ASSETS 16,231 17,850
TOTAL ASSETS $ 240,325 $ 227,550
=============== ===============
LIABILITIES & EQUITY
CURRENT LIABILITIES:
Current notes payable $ 143,614 $ 120,450
Other current liabilities 47,450 52,375
---------------- ---------------
Total current liabilities 190,964 172,825
LONG-TERM DEBT - -
---------------- ---------------
TOTAL LIABILITIES 190,964 172,825
STOCKHOLDERS' EQUITY:
Preferred stock - -
Common Stock 500 500
Additional paid-in capital - -
Retained earnings 48,861 54,225
---------------- ----------------
Total stockholders' equity 49,361 54,725
---------------- ----------------
TOTAL LIABILITIES AND EQUITY $ 240,325 $ 227,550
================ ================
</TABLE>
F-19
<PAGE>
I.T. CRUISE, INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,1996 AND 1995
(UNAUDITED)
1996 1995
--------------- ---------------
Revenues $ 102,272 $ 113,636
Other expenses 20,454 22,635
Interest expenses 3,010 3,542
--------------- ---------------
23,465 26,177
--------------- ---------------
Net Income before taxes 78,807 87,459
Income taxes 29,947 33,234
--------------- ---------------
Net income $ 48,861 $ 54,225
=============== ===============
F-20
<PAGE>
SARTAIN FISCHBEIN & CO.
CERTIFIED PUBLIC ACCOUNTANTS
SF&Co.
Independent Auditors' Report
The Board of Directors
GalaxSea Cruises and Tours, Inc.
Tulsa, Oklahoma
We have audited the balance sheet of GalaxSea Cruises and Tours, Inc. as of
December 31, 1995, and the related statement of operations, changes in
stockholder's equity, and cash flows for the three months then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of GalaxSea Cruises and Tours,
Inc. as of December 31, 1995, and the results of its operations and its cash
flows for the three months then ended in conformity with generally accepted
accounting principles.
March 15, 1996 /s/ SARTAIN FISCHBEIN & CO.
3010 SOUTH HARVARD AVE., SUITE 400, TULSA, OK 74114-6193 .
918 749-6601. FAX 918 744-1506
F-21
<PAGE>
GALAXSEA CRUISES AND TOURS, INC.
BALANCE SHEET
December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current Assets:
Cash $ 6,336
Accounts receivable-royalties and commissions
(no allowance for doubtful accounts) 22,563
------
Total Current Assets 28,899
Intangible Assets:
Trade name and intangibles 162,200
Software development cost 17,282
Organizational and developmental costs 63,717
-------
243,199
Less accumulated amortization (3,765)
------
Net Intangible Assets 239,434
-------
$268,333
========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt $ 15,550
Accounts payable 2,386
Payable to Parent 22,860
Accrued interest payable 1,244
------
Total Current Liabilities 42,040
Long-term Debt 46,650
------
Total Liabilities 88,690
------
Stockholder's Equity:
Common stock, $.01 par value; authorized
200,000 shares; issued and outstanding
1,000 shares 10
Additional paid-in capital 163,707
Retained earnings 15,926
-------
Total Stockholder's Equity 179,643
-------
$268,333
========
The accompanying notes are an integral part of the consolidated
financial statements.
F-22
<PAGE>
GALAXSEA CRUISES AND TOURS, INC.
STATEMENT OF OPERATIONS
Three Months Ended December 31, 1995
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Revenue:
Royalties and license fees $31,550
Commissions 18,000
------
49,550
------
Expenses:
Training and marketing expense 23,234
Amortization expense 3,765
Interest expense 1,244
Miscellaneous 81
---
28,324
------
Net Income Before Income Taxes 21,226
Income Tax Expense 5,300
-----
Net Income $ 15,926
========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-23
<PAGE>
GALAXSEA CRUISES AND TOURS, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
Three Months Ended December 31, 1995
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings Total
------ ------ ------- -------- -----
<S> <C> <C> <C> <C>
Balance at inception,
October 1, 1995 - $ - $ - $ - $ -
Issuance of common stock 1,000 10 163,707 - 163,717
Net income - - - 15,926 15,926
-- -- -- ------- -------
Balance, December 31, 1995 1,000 $ 10 $ 163,707 $ 15,926 $179,643
===== ==== ========= ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-24
<PAGE>
GALAXSEA CRUISES AND TOURS, INC.
STATEMENT OF CASH FLOWS
Three Months Ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Cash Flows From Operating Activities:
Net income $ 15,926
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization expense 3,765
Increase in accounts receivable (22,563)
Increase in accounts payable 2,386
Increase in payable to Parent 5,578
Increase in accrued interest payable 1,244
------
Net Cash Provided By Operating Activities 6,336
------
Cash Flows From Investing Activities:
Acquisition of trade name and intangibles (100,000)
Additions to organizational and developmental costs (63,717)
Net Cash Used in Investing Activities (163,717)
---------
Cash Flows From Financing Activities:
Issuance of common stock 163,717
-------
Net Cash Provided by Financing Activities 163,717
--------
Increase in Cash 6,336
Cash at Inception, October 1, 1995 -
--------
Cash, December 31, 1995 $ 6,336
=======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Issuance of Long-term Debt for Acquisition
of Trade Name and Intangibles $ 62,200
========
Increase in Payable to Parent for Software
Development Cost $ 17,282
========
Other Disclosures:
Interest paid $ -
Income taxes paid -
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-25
<PAGE>
GALAXSEA CRUISES AND TOURS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: GalaxSea Cruises and Tours, Inc. (the Company) was incorporated in
the State of Oklahoma on September 21, 1995. The Company is a wholly owned
subsidiary of International Tours, Inc. (the Parent). The Company began
operations on October 1, 1995 by purchasing the trade name, franchise
agreements, other agreements and intangibles from GalaxSea Associates, Inc.
GalaxSea franchises operate travel vacation stores which deal primarily in
arranging cruise travel packages for its customers.
The Company's current sources of revenue are royalty and license fees from
existing GalaxSea franchisees which are located principally in California and
Florida, and commissions from cruise lines. The Company plans to actively market
new franchise agreements.
Trade Name and Intangibles: Trade name and intangibles consist of the GalaxSea
Cruises trade name, trade mark, existing franchise agreements, cruise line
agreements, marketing database software and other intangible assets purchased
from GalaxSea Associates, Inc. on October 1, 1995.
Software Development Cost: The cost related to the enhancement of marketing
database software has been capitalized as an asset in the accompanying financial
statements. Costs consist primarily of programming and beta testing. This
software will be used by GalaxSea franchisees to assist in identifying potential
customers for cruise line packages.
Organizational and Developmental Costs: Prior to its start of business, the
Company incurred costs which were associated with the organization and
development of the Company. These costs have been capitalized.
Amortization of Intangibles: Intangible assets are amortized over the estimated
useful life of the intangibles of 15 years utilizing the straight-line method.
Recognition of Revenue: The Company recognizes revenue from franchisees
consisting primarily of monthly royalty and service fees and commissions from
cruise lines on an accrual basis.
Income Taxes: The Company files a consolidated income tax return with its
Parent, International Tours, Inc. An estimated amount of tax expense has been
recorded in the accompanying financial statements based upon the amount of tax
the Company would pay if it filed separate tax returns. The amount of accrued
income taxes for the year ended December 31, 1995 has been reflected as an
increase in payable to Parent. No deferred income taxes have been recorded since
no temporary differences exist in the basis of assets and liabilities for income
tax and financial purposes.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
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.
F-26
<PAGE>
GALAXSEA CRUISES AND TOURS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1995
(CONTINUED)
2. FRANCHISE AGREEMENTS
At December 31, 1995, the Company had 36 franchise and affiliate agreements
which it purchased on October 1, 1995 from GalaxSea Associates, Inc. for
$162,200. These agreements, among other things, allow the franchisee to use the
GalaxSea name, method of operation, training, marketing and database software.
GalaxSea Associates, Inc., as a part of the original purchase agreement, has
agreed to provide the services required under the franchise agreements for
$5,000 per month. This agreement expires October, 1999, but based upon certain
criteria, could be terminated at an earlier date. Expense under this agreement
was $15,000 for the three months ended December 31, 1995, and is included in
training and marketing expense.
The Company has also entered into an agreement with Cruise Support Services,
Inc. (CSS) whereby CSS will serve as the exclusive sales and support office for
the State of California for GalaxSea franchisees. CSS will earn 75% of the fees,
including franchise fees on new franchise agreements which the Company receives
from franchisees in the State of California. The agreement expires in October
2000, unless the Company is unable to obtain necessary approval to sell
franchise agreements in the State of California, in which case expiration would
be December 1996. Expense under this agreement was approximately $8,000 for the
three months ended December 31, 1995 and is included in training and marketing
expense.
3. LONG-TERM DEBT
Long-term debt at December 31, 1995 consisted of the following:
Unsecured note payable, originally to seller of GalaxSea franchises to Company,
but assigned to third party, principal due in annual installments of $15,550
each October 1, plus interest at 8%, with final installment due
October 1, 1999 $62,200
Less current maturities 15,550
$46,650
=======
The Company was unable to estimate the fair value of long-term debt because of
the lack of availability of current borrowing rates for loans with similar terms
and maturities due to the circumstances under which the debt was issued.
4. RELATED PARTY TRANSACTIONS
The Company is a wholly owned subsidiary of International Tours, Inc. (the
Parent). During the period from inception to December 31, 1995, the Parent
expended approximately $181,000 on behalf of the Company for certain intangible
assets. In exchange, the Company issued common stock and a payable to the Parent
in exchange for these assets.
The Parent also has provided the use of its office space and management
personnel, which has not been reflected in the accompanying financial
statements. For 1995, amounts for these costs were immaterial.
F-27
<PAGE>
GALAXSEA CRUISES AND TOURS, INC.
BALANCE SHEET
MARCH 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS MARCH 31, 1996
CURRENT ASSETS:
Cash $ 23,602
Other current assets 27,155
---------------
Total current assets 50,757
PROPERTY & EQUIPMENT, net -
OTHER ASSETS 237,339
TOTAL ASSETS $ 288,096
===============
LIABILITIES & EQUITY
CURRENT LIABILITIES:
Current notes payable $ 62,200
Other current liabilities 61,845
----------------
Total current liabilities 124,045
LONG-TERM DEBT -
----------------
TOTAL LIABILITIES 124,045
STOCKHOLDERS' EQUITY:
Common Stock 10
Additional paid-in capital 163,707
Retained earnings 334
----------------
Total stockholders' equity 164,051
----------------
TOTAL LIABILITIES AND EQUITY $ 288,096
================
</TABLE>
F-28
<PAGE>
GALAXSEA CRUISES AND TOURS, INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
1996
----------
Revenues $ 30,468
Other expenses 50,116
Interest expense 1,244
---------
51,360
----------
Net loss before taxes (20,892)
Income taxes (7,939)
---------
Net loss $ (12,953)
===========
F-29
<PAGE>
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION
I.T. CRUISE, INC. AND GALAXSEA CRUISES AND TOURS, INC.
PROFORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS NAGC I.T. CRUISE GALAXSEA DEBIT CREDIT CONSOL
- ------ -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash $ 696,119 $ 283 $ 6,336 (1,2) 106,619 $ 596,119
Other current assets 579,587 211,312 22,563 (1,2) 192,444 (1) 233,875 772,031
------------- ------------ ----------- ------------
Total current assets 1,275,706 211,595 28,899 1,368,150
PROPERTY & EQUIPMENT, net 1,660,542 17,242 - (1) 16,917 1,660,867
OTHER ASSETS 1,162,925 14,231 239,434 (2) 1,633,011 3,049,601
------------ ------------ ----------- ------------
TOTAL ASSETS $ 4,099,173 $ 243,068 $ 268,333 $ 6,078,618
============ ============ =========== ============
LIABILITIES & EQUITY
CURRENT LIABILITIES:
Current notes payable $ 2,096,065 $ 115,818 $ 15,550 (1) 131,368 (2,3) 680,142 $ 2,776,207
Preferred stock dividends
payable 580,000 - - 580,000
Other current liabilities 795,711 80,414 26,490 (1) 106,904 795,711
------------- ------------ ------------ ------------
Total current liabilities 3,471,776 196,232 42,040 4,151,918
LONG-TERM DEBT 809,334 - 46,650 (1) 46,650 (2,3)1,792,319 2,601,653
STOCKHOLDER'S EQUITY:
Preferred stock "Class A" 4,800,000 - - (3) 939,000 3,861,000
Preferred stock "Series B" (2) 80,000 80,000
Common stock 147,094 500 10 (2) 510 (2) 49,341 196,435
Additional paid-in capital (3,334,543) - 163,707 (2) 163,707 (2) 316,643 (3,017,900)
Retained earnings (1,794,488) 46,336 15,926 (2) 148,756 (1) 86,494 (1,794,488)
-------------- ------------- ----------- ------------
Total stockholders equity (181,937) 46,836 179,643 (674,953)
-------------- ------------- -----------
TOTAL LIABILITIES AND EQUITY $ 4,099,173 $ 243,068 $ 268,333 $ 6,078,618
============== ============= ============ ============
</TABLE>
SEE ACCOMPANYING NOTES
F-30
<PAGE>
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION,
I.T. CRUISE, INC AND GALAXSEA CRUISES AND TOURS, INC.
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NAGC I.T. CRUISE GALAXSEA DEBIT CREDIT CONSOL
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 15,040,509 $ 454,544 $ 49,550 $ 15,544,603
Other expenses 15,066,595 90,541 27,080 (6) 326,602 15,510,818
Interest expense 301,791 14,167 1,244 (5,7) 210,510 (4) 15,411 512,301
-------------- ------------ ----------- ------------
15,368,386 104,708 28,324 16,023,119
Operating income (327,877) 349,836 21,226 (478,516)
Other income 224,976 - - 224,976
-------------- ------------ -----------
Net income before taxes (102,901) 349,836 21,226 (253,540)
Income taxes 20,953 133,000 5,300 (4) 5,638 (5,7) 79,994 84,897
-------------- ------------ ----------- -------------
Net income $ (123,854) $ 216,836 $ 15,926 $ (338,437)
============== ============ =========== =============
Less: Preferred stock dividends 480,000 (7) 93,900 386,100
-------------- -------------
Net income (loss) applicable
to common stock $ (603,854) $ (724,537)
============== =============
</TABLE>
SEE ACCOMPANYING NOTES
F-31
<PAGE>
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION,
I.T. CRUISE, INC. AND GALAXSEA CRUISES AND TOURS, INC.
PROFORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS NAGC I.T. CRUISE GALAXSEA DEBIT CREDIT CONSO
- ------ ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 774,525 $ 234 $ 23,062 (1,2) 123,836 $ 674,525
Other current assets 386,863 208,151 27,155 (1,2) 192,444 (1) 235,306 579,307
------------- ------------ ----------- -----------
Total current assets 1,161,388 208,385 50,757 1,253,832
PROPERTY & EQUIPMENT, net 1,506,142 15,709 - (1) 15,384 1,506,467
OTHER ASSETS 1,151,036 16,231 237,339 (2) 1,631,011 3,035,617
------------ ------------ ---------- -----------
TOTAL ASSETS $ 3,818,566 $ 240,325 $ 288,096 $ 5,795,916
============ ============ ========== ===========
LIABILITIES & EQUITY
CURRENT LIABILITIES:
Current notes payable $ 1,917,116 $ 143,614 $ 62,200 (1) 205,814 (2,3) 680,142 $ 2,597,258
Preferred stock dividends
payable 700,000 - - 700,000
Other current liabilities 662,923 47,350 61,845 (1) 109,195 662,923
------------ ----------- ------------ -----------
Total current liabilities 3,280,039 190,964 124,045 3,960,181
LONG-TERM DEBT 709,017 - - (2,3) 1,792,319 2,501,336
STOCKHOLDER'S EQUITY:
Preferred stock "Class A" 4,800,000 - - (3) 939,000 3,861,000
Preferred stock "Series B" - (2) 80,000 80,000
Common stock 147,094 500 10 (2) 510 (2) 49,341 196,435
Additional paid-in capital (3,334,543) - 163,707 (2) 163,707 (2) 314,548 (3,019,995)
Retained earnings (1,783,041) 48,861 334 (2) 80,401 (1) 31,206 (1,783,041)
------------ ------------ ------------ -------------
Total stockholders equity (170,490) 49,361 164,051 (665,601)
------------ ------------ ----------- -------------
TOTAL LIABILITIES AND EQUITY $ 3,818,566 $ 240,325 $ 288,096 $ 5,795,916
============ ============ =========== =============
</TABLE>
SEE ACCOMPANYING NOTES
F-32
<PAGE>
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION
I.T. CRUISE, INC AND GALAXSEA CRUISES AND TOURS, INC.
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
NAGEC I.T. CRUISE GALAXSEA DEBIT CREDIT CONSOL
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $4,318,346 $ 102,272 $ 30,468 $ 4,451,086
Other expenses 4,149,205 20,454 50,116 (6) 81,650 4,301,425
Interest expense 43,502 3,020 1,244 (5,7) 52,628 (4) 1,244 99,140
------------ ----------- -----------
4,192,707 23,464 51,360 4,400,565
Operating income 125,639 78,808 (20,892) 50,521
Other income 41,802 - - 41,802
------------ ----------- ---------- -----------
Net income before taxes 167,441 78,808 (20,892) 92,323
Income taxes 36,000 29,947 (7,939) (4) 473 (5,7) 19,999 38,482
------------ ----------- ---------- -----------
Net income $ 131,441 $ 48,861 $(12,953) $ 53,841
============ =========== ========== ===========
Less: preferred stock dividends 120,000 (7) 23,475 $ 96,525
------------ -----------
Net income (loss) applicable to
common stock $ 11,441 $ (42,684)
============ ===========
</TABLE>
SEE ACCOMPANYING NOTES
F-33
<PAGE>
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION,
I.T. CRUISE, INC. AND GALAXSEA CRUISES AND TOURS, INC.
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES
(1) Assets and liabilities not included in acquisition in accordance with
merger agreement.
(2) Record equity issuances and goodwill related to the acquisition of I.T.
Cruise, Inc. and GalaxSea Cruises and Tours, Inc.
(3) Record conversion of Preferred Stock to subordinated debentures.
(4) Record reduction of interest for liabilities not assumed.
(5) Record increase in interest for liabilities issued during acquisition.
(6) Record amortization of goodwill.
(7) Record income statement impact converting Preferred Stock to subordinated
debt.
F-34
<PAGE>
