SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended June 30, 2000 Commission file number 0-9476
OASIS RESORTS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Nevada 48-0680109
(State of other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
3753 Howard Hughes Parkway, Suite 200, Las Vegas, Nevada 89103
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(949) 833-5381
____________
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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
filing requirements for the past 90 days.
Yes No X
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S- K, is not contained herein and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
The Registrant's revenues for its most recent fiscal year were $5,192,905
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of September 30, 2000 was approximately
$1,425,000
Class Outstanding at October 1, 2000
Common Stock, $.001 par value 12,611,215 shares
Documents Incorporated by Reference:
None
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TABLE OF CONTENTS
PART I
Page
Item 1. Description of Business............................................. 1
Item 2. Description of Property.............................................. 9
Item 3. Legal Proceedings.................................................... 9
Item 4. Submission of Matters to a Vote of Security-Holders................. 10
PART II
Item 5. Market for Common Equity and Related Stockholder Matters............ 11
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 12
Item 7. Financial Statements................................................ 16
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure............................................. 16
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act................ 16
Item 10. Executive Compensation.............................................. 20
Item 11. Security Ownership of Certain Beneficial Owners and Management...... 21
Item 12. Certain Relationships and Related Transactions...................... 22
Item 13. Exhibits and Reports on Form 8-K.................................... 23
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(a) General
Oasis Resorts International Inc. (the "Company" or "Oasis") was originally
incorporated under the name Flexweight Drillpipe Company in 1958, and became
publicly-held in August 1980. From 1961 through 1985, the Company's activities
were limited to the manufacture and sale of oilfield equipment. In 1985, the
Company filed for protection from creditors under Chapter 11 of the U.S.
Bankruptcy Code in the District of Kansas.
During the pendency of its reorganization proceedings, the Company
liquidated all of its oilfield related assets. The Company filed a Plan of
Reorganization in June 1987, which was approved in February 1988, and resumed,
on a limited scale, its manufacturing operations. During fiscal 1995, the
Company discontinued its manufacturing operations and liquidated its remaining
assets.
Following the close of fiscal 1995, the Company began evaluating investment
and merger opportunities outside of the manufacturing industry. During fiscal
1996, the Company experienced a change in control and, in the process, adopted a
new strategy to renew operations and grow by acquiring and developing business
interests in the legalized gaming, hotel management and real estate industries.
Following the change of control in fiscal 1996 and the adoption of a new
business plan and growth strategy in May, 1998, the Company acquired 100%
interest of Oasis Hotel, Resort & Casinos III Inc. ("Oasis III"), which owned
and was in the process of developing a destination resort hotel and casino
gaming property in Oasis, Nevada (the "Oasis III Property"). In October 1998,
the Company acquired the operational and development-stage international hotel
and gaming assets of NuOasis International Inc. ("NuOasis"), a wholly-owned
subsidiary of NuOasis Resorts Inc. ("Resorts"), making NuOasis the Company's
largest single shareholder.
In April, 2000, the Company entered into an agreement to acquire 60% of the
voting capital stock of Cleopatra Hammamet, Limited ("CHL") from an unrelated
party for 750,000 shares of its common stock. The common shares of the Company
were delivered to the unrelated party; however, due to certain regulatory and
tax considerations, the transaction has not been completed. Management is unsure
at the present time whether the transaction will be closed.
(b) Business Development
Through subsidiaries, the Company now develops, owns interests in, leases,
manages and operates themed hotels, gaming casinos and related operations in
Tunisia and Nevada. The Company operates its facilities under two marketing
themes: "Cleopatra Palace" and "Oasis Resorts." The Company's "Cleopatra"-themed
facilities are owned and operated by Cleopatra Palace Resorts and Casinos
Limited, a British corporation ("CPRC"), a 75% owned subsidiary. CPRC conducts
its operations through Cleopatra Cap Gammarth Casino Limited, a Tunisian
corporation in organization ("CCGL") and Cleopatra's World Inc., a British
Virgin Island corporation ("CWI"), entities which, at June 30, 2000 were 90% and
80% owned, respectively.
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(c) Description of Business
The Company's business interests are comprised of casino gaming and hotel
management, and to a limited extent, real estate acquisition and development.
The casino gaming and resort hotels, operated and planned for development by the
Company and its subsidiaries, are presently located in the Mediterranean and the
United States, and are Las Vegas-style facilities. Some of the Company's casino
facilities are or will be associated with Company-managed hotel properties.
The Company's strategy is to acquire existing hotel and casino facilities,
or obtain management contracts, with a view to re-branding the facilities as
"Cleopatra" or "Oasis"-themed properties. The Company's focus and target markets
are growth-stage vacation markets in the Mediterranean, Caribbean, South Pacific
(including certain Asian markets and Pacific Rim islands) and the United States.
The Company also intends to develop "sportsbook" and Internet-based gaming
activities where possible.
In addition to its present activities and interests in Tunisia, North
Africa and the United States, the Company is evaluating casino and hotel
projects located in Spain, Morocco, and South Korea which it hopes to acquire
outright or on which it intends to obtain management rights.
(1) Gaming and Hotel Management Activities
Domestic Gaming and Hotel Facilities
As a result of the merger in May 1998 of Flex Holdings Inc. ("Flex"),
a wholly-owned subsidiary of the Company, into Oasis III, the Company
acquired the Oasis III Property, a 20- acre interest in partially-developed
land located in Oasis, Nevada together with an option to acquire an
additional 30 acres adjacent to the 20-acre parcel. The Oasis III Property
presently contains a 6-unit motel, an eight-pump truck stop, a cafe and
mini-market store and was subdivided from an 1100-acre parcel originally
purchased in December, 1995 by Oasis III from Oasis International Hotel &
Casinos Inc. ("OHIC"), which was at the time of the transaction, and
continues to be, a shareholder of the Company. The hotel and truck stop are
currently closed and is available for rent by the Company.
The Company intends to develop the Oasis III Property as a 500-room
resort hotel with a 30,000 square-foot Las Vegas style gaming casino with
38 gaming tables, Keno, Sportsbook, and 1,000 slot machines, together with
an entertainment complex with movie theaters, outdoor rodeo facilities, and
bowling alley. The Company is currently seeking financing to develop this
property.
International Gaming and Hotel Activities
Through the acquisition of CPRC, the Company intends to develop and
expand its casino gaming and resort hotel activities outside of the United
States. The Company believes that international leisure and entertainment
opportunities offer much greater potential, and have far less competition
than domestic market because of the "emerging market" status of many of the
host countries. The Company's goal is to capitalize on the expected growth
in tourism trade and the surge of entertainment spending worldwide, and to
take advantage of certain investment opportunities in emerging markets
which appear to be the greatest beneficiaries of this expected growth.
Prior to and following its acquisition of CPRC, the Company has been
soliciting and evaluating prospects in certain resort hotel and casino
gaming markets in Asia, North Africa, South America, the Caribbean, and the
South Pacific.
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CPRC's predecessor, Cleopatra Palace Limited ("CPL"), developed the
concept of resort hotels and Las Vegas style gaming casinos designed along
the theme "Cleopatra Palace," in 1993.
In October 1994, CPL became the lessee of a 200,000 square foot casino
and Las Vegas- style showroom (the "Cap Gammarth Casino") pursuant to a
Casino Lease Agreement and Operating Management Contract (the "Gammarth
Casino Lease") with Societe Animation Loisers Touristique ("SALT"). The Cap
Gammarth Casino is part of a large resort development located in Tunisia,
North Africa, in the town of Gammarth, approximately 6 miles north of the
city of Tunis, the country's capital. In conjunction with this casino, an
affiliate of SALT, Societe Touristique Tunisie Golfe ("STTG"), partially
constructed a five-star hotel (the "Le Palace Hotel"), is currently
attempting to complete construction on an adjacent health and sports
center, a beach club, a 54-unit shopping mall and 250 apartments, all
located within walking distance to the Cap Gammarth Casino (collectively,
the "Gammarth Resort"). The Gammarth Casino Lease was subsequently assigned
by CPL to CWI who serves as the operator of the Gammarth Resort.
In 1996, CPL deposited approximately $2,000,000 with SALT as a lease
deposit on the Cap Gammarth Casino. In April 1998, CPL converted the Cap
Gammarth Casino lease deposit to a 9% equity ownership in SALT.
After a long history of missed completion dates set by STTG, CWI
opened the Le Palace Hotel in October 1996 with only 100 of 350 total rooms
ready for occupancy, and without any of the other resort facilities.
Through internally operated cash flow and working capital provided by
NuOasis, CWI completed the Le Palace Hotel and marketed the facility since
its opening. And, while the balance of the resort remained unfinished at
June 30, 2000, the Le Palace Hotel has been actively managed and marketed
by CWI with steadily increasing annual room rental rates and revenues;
however, the reputation of the hotel is not what is expected by management
for a 5-star Hotel due to such delays in completing the Hotel and the
balance of the complex by STTG.
In October 1994, in a separate transaction, CPL entered into an
agreement to lease and operate a casino and French-style cabaret in
Hammamet, Tunisia (the "Hammamet Casino"). The Hammamet Casino was
completed in the first half of calendar 1997 and opened December 6, 1997.
Adjoining the Hammamet Casino is a five-star hotel and villa resort (the
"Hammamet Hotel") which was completed and opened in September 1996, and is
operated by the Occidental Group. The Hammamet Hotel is one of forty-five
(45) hotels planned or currently under construction in south Hammamet as
part of a Tunisian government-sponsored expansion of the Hammamet resort
area. When completed, these additional hotels are expected to provide up to
38,000 additional beds for the Hammamet area. Both the Hammamet Casino and
Hammamet Hotel are situated within walking distance of other hotels, with
approximately 1,800 beds.
CPL financed the completion and opening of the Hammamet Casino through
loans from NuOasis and financing from Cedric Investment Company Inc., a
Panamanian corporation (Cedric"). In connection with a $1.5 million loan
from Cedric to complete and open the Hammamet Casino, the Company pledged
its 70% interest in Cleopatra Hammamet Casino, Ltd., the lease holder of
the Hammamet Casino to Cedric. The Company had the right to repurchase such
interest for $1.5 million plus interest. Such right expired September 22,
1998 and accordingly, the Company had no further interest in the Hammamet
Casino. To finance the
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remaining expenditures on the Cap Gammarth Casino, CPRC has been
negotiating possible joint ventures with foreign banks and investment
groups.
On April 1, 2000, the Company entered into an agreement to acquire 60%
of the voting capital stock of CHL from an unrelated party for 750,000
shares of its common stock, valued at $2.25 million. The common shares of
the Company were delivered to the unrelated party; however, due to certain
regulatory and tax considerations, the transaction has not been completed.
Management is unsure at the present time whether the transaction will be
closed. In connection with the agreement, the seller was required to
provide $600,000 of working capital to CHL, of which $300,000 was paid by
the seller. NuOasis loaned the remaining $300,000 to CHL and will be repaid
by the seller either in cash or by a portion of the Company's common stock
issued to seller. If the transaction is not closed, the Company could
possibly lose its investment.
Between 1996 and 1999, CPL and other related CPRC subsidiaries,
increased their interest in CWI and entered into Letters of Intent and
contracts to acquire additional proposed and existing resort hotel and
casino gaming interests in the Mediterranean and Southern Europe. On July
7, 1996, CPL entered into an agreement between Compagnie Monastirienne
Immobiliere et Touristique S.A. ("CMI") to take over and operate a casino
in Monastir, Tunisia (the "Monastir Casino Lease"); it entered into an
agreement with CMI dated July 7, 1996 to take over and operate a resort
hotel in Monastir, Tunisia (the "Monastir Hotel Lease"); it entered into an
agreement in principle to lease an existing potential casino site and to
acquire a gaming license in Morocco (the "Morocco Project"); and, it
entered into an agreement to acquire certain real property interests in San
Roque, Spain and the gaming license related to a casino under construction
in Marbella, Spain (the "Marbella Casino"). However, at June 30, 2000, none
of the properties under contract or agreements in principle have been
acquired by the Company or any of its subsidiaries.
(2) Real Estate Activities
The Company did not have any real estate operations during fiscal 2000
or fiscal 1999.
(d) Marketing
(1) Gaming and Hotel Management
Domestic Gaming
The Company did not have any domestic gaming activities in fiscal 2000
and fiscal 1999 and did not utilize or rely upon any marketing for domestic
gaming activities in fiscal 1998.
International Casino Gaming and Hotel Management
The Company's current international activities are located in North
Africa, but the Company intends to enter the European and Caribbean
markets, once it beginning in fiscal 2000.
The Company's marketing strategy is to target past and repeat
middle-market, value- oriented visitors to its facilities by systematic
marketing programs directed to the individual visitors and to the tour
operators who have historically promoted and booked the tours to the
respective areas in the past. The Company uses general marketing approaches
to attract first
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time customers to its casinos by advertising its slot player club program,
popular entertainment and other promotions. Once customers enter the
Company's casinos, the Company attempts to capture the name and playing
level of each slot machine and table game player.
The Company uses this information to follow up promotions. The Company
believes that utilizing the "Cleopatra" name in the Mediterranean area, and
the proposed "Oasis" theme in other areas, combined with personalized
database driven marketing programs, will create a strong brand image
synonymous with quality casino gaming and hotel facilities, service and
food. With respect to its existing hotel and casino gaming activities in
Tunisia, the Company is currently working with the Tunisian government and
local organizations with the goal of promoting the areas to increase the
number of tourists.
As the markets surrounding the Company's current and future hotel and
casino facilities continue to mature, it intends to expand its focus to
other markets in the respective regions. The Company has utilized and
intends to continuously monitor the effectiveness of direct mail,
television advertising, newspapers, billboards and tourist magazine
advertising placed in the surrounding areas to increase the visibility of
the Company's facilities and to promote the image that these facilities are
part of the history and romance of the region of the past. Management
believes that the advent of Las Vegas-style casino gaming in the
Mediterranean area will increase the current length of a tourist's stay as
well as increase the number of tourists into its market areas.
(e) Raw Materials
The Company's casino gaming and hotel management, and its related real
estate acquisition and development activities, are not manufacturing-based
businesses and, therefore, do not rely on raw materials.
(f) Patents, Trademarks and Licenses
The Company's proposed gaming activities do not require patents or
trademarks, and the Company does not intend to rely on patents or
trademarks. The operations of the proposed gaming casinos and resort hotel
properties will depend on and be subject to gaming licenses and permits
from their respective jurisdictions.
(g) Seasonality
The Company's domestic gaming activities were non-operational in
fiscal 2000 and fiscal 1999. The Company's international casino gaming and
hotel management activities are seasonal and are strongly affected by
weather and other factors that influence the tourist trade in Tunisia.
Higher revenues are typically realized from the Company's current
operations in North Africa during the late spring, summer and early fall
months. Additionally, due to their location on the southern Mediterranean
coast, tourist traffic can be especially adversely affected by severe
weather.
(h) Customer Dependence
The Company's domestic gaming activities were in the development stage
during fiscal 2000 and fiscal 1999; its international casino gaming and
hotel management activities, except for
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one Tunisian casino and its Tunisian hotel management operations, were also
development stage and, therefore, not subject to customer dependence. The
Company's resort hotel operations are solely dependent upon Tunisian
tourism and the Company's ability to attract foreign visitors to its
Tunisian operations; two Tunisian gaming segments remained under
development at the close of fiscal 2000.
(i) Backlog of Orders
The Company's domestic gaming, international gaming and hotel
management, and real estate subsidiaries were not subject to the type of
business activities which would give rise to "orders."
(j) Government Contracts
None of the Company's industry segment activities involved government
contracts in fiscal 2000 or fiscal 1999.
(k) Competition
Gaming and Hotel Management Activities
Domestic Gaming
The Company did not have any domestic gaming activities in fiscal 2000
or fiscal 1999 and, therefore, was not subject to competition.
International Gaming and Hotel Management Activities
The Company competes with other gaming companies for opportunities to
manage casino gaming and hotel management activities in emerging
international gaming jurisdictions. The Company expects many competitors to
enter new international jurisdictions that authorize gaming, some of whom
may have more personnel and greater financial and other resources than the
Company or its subsidiaries.
Further expansion of international legalized gaming in the markets
where the Company is active or proposes to become active could also
significantly and adversely affect its proposed gaming activities. In
particular, the expansion of casino gaming in or near any geographic area
where the Company is active, or in pursuit of a gaming license or rights to
manage casino gaming activities, may diminish or otherwise detract from the
activities of the Company or its subsidiaries. In this regard, the Company
believes that its gaming markets are extremely competitive and expects them
to become even more competitive as the number of gaming and other
entertainment establishments increases. Such competition is growing in the
Mediterranean market and the Company also competes with gaming facilities
worldwide. It is also possible that substantial competition could cause the
supply of casino gaming facilities to exceed the demand for casino gaming.
Additionally, many of the Company's competitors have more casino
gaming industry experience, larger operations or significantly greater
financial and other resources than the Company. Given these factors it is
possible that substantial competition could have a material adverse effect
on the Company's future results of operations.
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(3) Real Estate Activities
Real estate investments through June 30, 2000 consisted solely of the
Oasis III Property, which was undeveloped at the close of fiscal 2000 and,
therefore, competition as it relates to real estate activities is not
applicable.
(l) Research and Development
The Company's business strategy is to acquire or obtain management
contracts on upscale hotels, resorts and gaming casinos and to renovate
(where necessary) and re-brand in growth-stage vacation markets in the
Mediterranean, Caribbean, South Pacific (including certain Asian markets
and Pacific Rim islands) and the United States. The Company also intends to
develop "sportsbook" and Internet-based gaming opportunities where
possible.
(m) Government Regulation
(1) Gaming and Hotel Management Activities
Domestic Gaming
The Company did not have any domestic gaming activities during fiscal
2000 or fiscal 1999 and, therefore, was not subject to government
regulation.
International Casino Gaming and Hotel Management Activities
The Company's international operations are generally dependent on the
continued licenseability, qualification and operations of the Company or
the subsidiaries and/or that hold the requisite licenses or permits in the
jurisdictions where it conducts or proposes to conduct gaming and hotel
management activities. Generally, such operations are reviewed periodically
by local, state and/or federal governmental authorities. In addition, in
most jurisdictions, the Company's directors and many of the employees of
casinos and hotels are often required to be approved. The failure of the
Company or any of its key personnel to obtain or retain a license or a
permit in a particular jurisdiction could have a material adverse effect on
the Company's ability to continue or expand its casino gaming and/or hotel
management operations, or to obtain or retain licenses or permits in other
jurisdictions. In addition, any regulations adopted by the local, state
and/or federal governmental authorities, the legislatures or any
governmental authority in jurisdictions in which the Company intends to
have casino gaming and/or hotel management operations, may materially
adversely affect its operations.
At the close of fiscal 2000, the Company's only international casino
gaming and hotel management investments were in Tunisia, North Africa.
Under Tunisian law, casino gaming is closely supervised and monitored
through the use of on-site government representatives and strict published
operating procedures. The process through which a company obtains a license
to conduct casino gaming in Tunisia is similar to that of many of the
various states in the U.S. which have recently adopted legalized gaming
statutes, involving background checks, personal interviews and the
discretionary right of the government body overseeing gaming activities to
deny or withdraw a license to any applicant.
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The Tunisian government has approved the Company's management for
gaming licenses at the Cap Gammarth Casino and the Hammamet Casino.
(2) Real Estate Activities
The Company did not have any real estate development activities in
fiscal 2000 or fiscal 1999 and, therefore, was not subject to government
regulation.
(n) Compliance With Environmental Laws
Compliance with United States federal, state and local provisions
regulating the discharge of materials into the environment or otherwise
relating to the protection of the environment has no material effect on the
capital expenditures, earnings and competitive position and operations of
the Company's casino gaming and hotel management activities.
(o) Employees
There were two (2) corporate officers of the Company and 185 employees
of significant subsidiaries who rendered services during fiscal 2000 and
fiscal 1999.
(p) Forward Looking Statements
The statements contained herein include forward-looking statements
based on management's current expectations of the Company's future
performance. Predictions relating to future performance are inherently
uncertain and subject to a number of risks. Consequently, the Company's
actual results could differ materially from the expectations expressed in
this Report. Factors that could cause the Company's actual results to
differ materially from the expected results include, among other things:
increases in the number and the intensely competitive nature of competitors
in the markets in which the Company operates; the seasonality of the hotel
and casino gaming industry in certain markets in which the Company
operates; the susceptibility of the Company's operating results to adverse
weather conditions and natural disasters; the availability of sufficient
capital to finance the Company's business plan on terms satisfactory to the
Company; the risk that jurisdictions in which the Company proposes to
operate hotels or casinos rescind or fail to enact legislation permitting
casino gaming or do not enact such legislation in a timely manner; changes
in governmental regulations governing the Company's activities; changes in
labor, equipment and capital costs; the ability of the Company to
consummate contemplated joint ventures and acquisitions on terms
satisfactory to the Company, and to obtain necessary regulatory approvals
therefor; and other risks detailed in the Company's filings with the
Securities and Exchange Commission ("SEC").
Additionally, all statements contained herein that are not historical
facts, including but not limited to statements regarding the Company's
current business strategy, the Company's prospective joint ventures, asset
sales and expansions of existing projects, and the Company's plans for
future development and operations, are based upon current expectations. In
addition to being forward-looking in nature, these statements involve a
number of risks and uncertainties. Generally, the words "anticipates,"
"believes," "estimates," "expects," and similar expressions as they relate
to the Company and its management are intended to identify forward-looking
statements. The Company wishes to caution readers not to place undue
reliance on any such forward-looking statements, which statements are made
pursuant to the Private Litigation Reform Act of 1995 and, as such, speak
only as of the date made.
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ITEM 2. DESCRIPTION OF PROPERTY.
(a) Corporate Headquarters
The Company currently leases space and maintains its executive office
at 3753 Howard Hughes Parkway, Las Vegas, Nevada. From May 1998 to December
31, 1998, the Company was provided office space at the office of its
President in Wendover, Nevada.
(b) Gaming and Hotel Management Facilities
Domestic Gaming
At the close of fiscal 2000, the Company did not own any domestic real
property interests related to its proposed hotel and casino gaming
activities, nor did it have any domestic casinos or hotel management
activities subject to lease obligations.
International Gaming and Hotel Management Facilities
At the close of fiscal 2000, the Company, through its subsidiaries,
was a lessee under three (3) lease agreements related to the Cap Gammarth
Casino, the Gammarth Resort, and Hammamet Casino in Tunisia. Due to its
position as a lessee, neither the Company or its subsidiaries owned any
real or personal property.
(c) Real Estate Activities
The Company did not have any domestic real estate operations at the
close of fiscal 2000 or fiscal 1999.
ITEM 3. LEGAL PROCEEDINGS.
The Company settled, or had agreements to settle all material litigation
where it was a defendant at the close of fiscal 2000 and knows of no material
threatened legal proceedings, other than ordinary routine litigation incidental
to its business; provided however that one of the Company's indirect
subsidiaries, CWI, is currently in arbitration with STTG, the developer/owner of
the Gammarth Resort over the amount of rent due for the LePalace Hotel since its
opening. Through June 30, 2000, the Company has not paid rents to STTG in
connection with its lease arrangement. However, the Company paid opening costs
and purchased equipment totaling approximately $1.8 million which were the
responsibility of STTG. STTG filed a complaint and received an arbitration award
for calendar year lease rental payments for 1997 and 1998, net of amounts
expended by the Company. At June 30, 2000, the Company owed STTG approximately
$4.0 million for the rental payments, net of costs and expenses and trade
receivables from STTG under the agreement.
Although the award due STTG is final, management of CWI is not in agreement
with this award because it does not provide for completion of the property nor a
provision for economic damages that CWI suffered as a result of the complex
being incomplete. Currently, the Company is pursuing additional arbitration for
the rents that will be due for the years 1999 and 2000, which also demands that
STTG be required to complete the complex and pay economic damages suffered by
it.
However, the Company believes the best solution to the issues at the Le
Palace Hotel are for it to
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purchase the complex. The Company has obtained a financing commitment that it
believes is adequate to fund the acquisition of and complete the development of
this real property and has made an offer to purchase the Cap Gammarth Complex
from STTG. In the event management is unsuccessful in its arbitration or legal
actions, or fails to pay the past-due rent payments, the Company will in all
likelihood lose its rights to operate the Le Palace Hotel.
On July 13, 1998, Resorts filed a civil complaint for damages in the U.S.
District Court, District of Nevada against SALT and several other defendants. On
July 2, 1999 the District Court adjudged and decreed compensatory damages in the
amount of $292 Million plus interest and $10 Million in punitive damages (the
"SALT Judgment"). The SALT Judgment affects the Cap Gammarth Casino and is
expected to result in the Company foreclosing on the interest of SALT and the
individual defendants equity ownership of SALT. CPRC management currently has
instituted proceedings in Tunisia to collect upon its money judgement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
On October 19, 1998, there was a special meeting of the Company's
shareholders (the "Fiscal 99 Meeting") at which the Company's shareholders
approved an Agreement of Merger with Oasis Resorts International, Inc., a Nevada
corporation ("Oasis") to implement a reincorporation of the company known as
Flexweight Corporation in the state of Nevada. Oasis was incorporated by the
company known as Flexweight Corporation specifically for the purpose of
implementing the reincorporation. Oasis had no assets or liabilities. As a
result of the reincorporation, the name of the Company was changed to Oasis
Resorts International, Inc. and all the assets and liabilities of the company
known as Flexweight Corporation became the assets and liabilities of Oasis, and
each share of $.10 par value common stock for one (1) share of preferred stock
in the company known as Flexweight Corporation was exchanged for one (1) share
of common stock and one (1) share of preferred stock of preferred stock in
Oasis.
The Company's Board of Directors, at the time of the Fiscal 99 Meeting,
recommended in the Proxy Statement that shareholders vote in favor of each of
the proposal's presented. No solicitation in opposition to management's
recommendations was received prior to or at the meeting, and all of the
proposals were passed by margins of at least 67% of the shares represented at
the meeting.
There were no matters submitted to a vote of security-holders in fiscal
2000.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) Market Information
Through November 1998, the Company's common stock was traded through the
NASDAQ Over-the-Counter Electronic Bulletin Board system under the symbol
"FXWA." From November 1998 to March 2000, the Company's shares have traded on
the NASDAQ Electronic Bulletin Board system under the symbol "OAIS." In February
2000, as a result of the Company failing to be in compliance with respect to the
filing requirements of the Exchange Act, the NASD delisted the Company's common
stock and ceased trading on the Bulletin Board. The Company completed its filing
requirements with the Securities and Exchange Commission in July 2000 and
shortly thereafter, the common stock was again quoted by NASD. On March 3, 2000,
the Company's symbol was changed to "OAII."
The range of high and low "bid" quotations for the Company's common stock
for the last two fiscal years as reported by NASDAQ OTC Bulletin Board are
provided below. These over-the-counter market quotations reflect inter-dealer
prices without retail markup, markdown or commissions and may not necessarily
represent actual transactions.
Bid Price of Common Stock
Fiscal 2000 High (1) Low (1)
Quarter ended 06/30/00 $5.00 $1.01
Quarter ended 03/31/00 $5.31 $2.50
Quarter ended 12/31/99 $5.00 $0.94
Quarter ended 09/30/99 $5.31 $0.94
Fiscal 1999 High (1) Low (1)
Quarter ended 06/30/99 $10.05 $2.50
Quarter ended 03/31/99 $33.75 $3.15
Quarter ended 12/31/98 $36.25 $26.25
Quarter ended 09/30/98 $47.50 $26.25
_____________
(1) Amounts have been adjusted to give retroactive effect for the five to one
reverse stock split in February 2000.
(b) Holders
The Company had approximately 920 holders of record of its single class of
equity securities at June 30, 1999. This approximate number of record holders of
common stock does not include an unknown number of beneficial holders whose
shares are registered in "street name."
11
<PAGE>
(c) Dividends
The Company has not paid any cash dividends with respect to its common
stock since its inception. No cash or property dividends were paid or declared
during fiscal 2000 or fiscal 1999. At the close of fiscal 2000, the Board of
Directors of the Company had not approved a dividend distribution policy,
however, there are no contractual restrictions on the Company's present or
future ability to pay dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(a) Forward Looking Statements
EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS DISCUSSED
IN THIS FORM 10-KSB ARE FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO CERTAIN
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE SET FORTH IN SUCH FORWARD LOOKING STATEMENTS. SUCH RISKS AND
UNCERTAINTIES INCLUDE, WITHOUT LIMITATION, THE COMPANY'S DEPENDENCE ON THE
TIMELY DEVELOPMENT, INTRODUCTION AND CUSTOMER ACCEPTANCE OF SERVICES AND
PRODUCTS, THE IMPACT OF COMPETITION AND DOWNWARD PRICING PRESSURES, THE ABILITY
OF THE COMPANY TO REDUCE ITS OPERATING EXPENSES AND RAISE ANY NEEDED CAPITAL AND
THE EFFECT OF CHANGING ECONOMIC CONDITIONS.
(b) Significant Events During the Fiscal Year Ended June 30, 2000 and 1999
In October 1998, the Company entered into an Asset Purchase Agreement with
NuOasis which resulted in the Company acquiring 75% of CPRC. The consideration
for the purchase of CPRC consisted of 1,563,450 shares of the Company's common
stock (the "Oasis Stock"), warrants to purchase 7.2 million shares of the
Company's common stock at $30.00 per share (the "Oasis Warrants") and $80
million of promissory notes valued at $7 million issued by the Company (the
"Oasis Notes").
The Oasis Notes consist of promissory notes with an aggregate face value of
$180 million. At the time of the transaction, Oasis had no ability to repay the
notes, and therefore, the notes had an estimated fair value at the date of
issuance of $7 million. Management estimated the fair value of the $180 million
of notes payable to NuOasis at approximately $7 million based on an enterprise
value of Oasis. Management considered factors such as the fair value of the
assets received from Oasis III, as well as the value of the Company's common
stock at the date of the acquisition and post-acquisition period of 90 to 120
days. Management estimated a fair value of Oasis III at $16.6 million. The $7
million fair value of the notes was deemed a constructive dividend since the
amount is payable to the controlling shareholders, NuOasis, and accordingly, the
value of such notes was reflected as a reduction of paid-in capital.
On November 15, 1999, NuOasis converted the notes into 8.1 million shares
or $0.87 per share, and canceled the Oasis warrants. After the conversion, the
shareholders of NuOasis controlled approximately 85% of the issued and
outstanding common stock.
The acquisition of NuOasis interests by the Company has been accounted for
as a "reverse acquisition," whereby NuOasis is the acquiror, and since the
operations of NuOasis are more significant than that of the Company and, NuOasis
acquired a controlling interest in Oasis on November 15, 1999. Accordingly, the
accompanying consolidated financial statements include the operations of NuOasis
interests acquired for all periods presented. The net assets of Oasis are deemed
to have been acquired in
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<PAGE>
the reverse acquisition and, accordingly, the assets and liabilities were
recorded at fair value at the date of acquisition.
In April 2000, the Company entered into an agreement to acquire 60% of the
voting capital stock of CHL from an unrelated party for 750,000 shares of its
common stock. The common shares of the Company were delivered to the unrelated
party; however, due to certain regulatory and tax considerations, the unrelated
party, has been unable to record the CHL shares and the transaction has not been
completed. Management is unsure at the present time whether the transaction will
be closed.
In September 2000, the Company tendered an offer to acquire the Cap
Gammarth Complex including the Le Palace Hotel for approximately $18.0 million.
By acquiring the property, management expects to eliminate approximately $4.0
million dollars of accrued rental payments to STTG for operation of the Le
Palace Hotel. The Company has obtained a financing commitment that it believes
is adequate to fund the acquisition of and complete the development of this real
property.
(c) Results of Operations
Year Ended June 30, 2000 Compared to Year Ended June 30, 1999.
The Company's total revenues for the year ended June 30, 2000 were $5.2
million as compared to $5.5 million for the year ended June 30, 1999. These
revenues were entirely derived from the operations of the LePalace Hotel. To
date, the hotel has not been able to realize its potential due the failure of
the developer to complete certain amenities at the hotel, the Cap Gammarth
Casino and the surrounding properties associated with the complex. Occupancy
rates have been in the 35% to 45% range during the summer months and 10% to 18%
during the winter months. Revenues declined in fiscal 2000 as a result of
approximately $600,000 of trade receivables being deemed uncollectible.
Total cost of revenues were $6.4 million in fiscal 2000 as compared to $5.8
million in fiscal 1999. The increase is due to increased rent expense as a
result of the arbitration award. Selling, general and administrative costs
inceased $430,000 as a result of costs incurred in arbitration and marketing the
hotel.
In fiscal 2000 and 1999, the Company recorded impairments of long-lived
assets of $647,000 and $8.3 million, respectively. As of June 30, 2000, the
value of the marketable securities offered as a lease deposit was impaired and,
as of June 30, 1999, management believed that the goodwill generated by the
reverse acquisition of Oasis was impaired, and accordingly, the Company charged
operations $8.3 million.
As a result of change in stock ownership which occurred in fiscal 1999, the
Company's use of its net operating loss carry forwards may be limited by Section
382 of the Internal Revenue Code until such net operating loss carry forwards
expire.
(d) Liquidity and Capital Resources
The Company's working capital resources during the years ended June 30,
2000 and 1999 were provided by utilizing the cash on hand and from the
operations of the Le Palace Hotel, plus advances from NuOasis. The Company has
experienced recurring net losses, has limited liquid resources, negative working
capital. Management's intent is to continue searching for additional sources of
capital and, in the case of NuOasis International, new casino gaming and hotel
management opportunities. In the interim, the Company intends to continue
operating with minimal overhead and key administrative
13
<PAGE>
functions provided by consultants who are compensated in the form of the
Company's common stock. It is estimated, based upon its historical operating
expenses and current obligations, that the Company may need to utilize its
common stock for future financial support to finance its needs during fiscal
2001. Accordingly, the accompanying consolidated financial statements have been
presented under the assumption the Company will continue as a going concern and
do not include any adjustments that might result from the outcome of this
uncertainty.
A comparison of working capital, cash and cash equivalents and current
ratios for the past two fiscal years are reflected in the following table:
June 30,
2000 1999
Net Losses $ (3,976,078) $ (10,807,411)
Working Capital (Deficit) $ (5,619,099) $ (5,021,869)
Cash and Cash Equivalents $ 669,679 $ 51,698
Current Ratio .22 .20
The most significant effects on working capital and its components during
fiscal 2000 were the operations of the Le Palace Hotel & Resort, the continued
accrual of rent on the Le Palace Hotel & Resort as well as general
administrative expenses, legal and professional advisory fees, and the
acquisition of a controlling interest of CPRC and its subsidiaries.
The Company's current plan for growth is to increase its working capital by
arranging debt and equity financing to finance the activities of its
subsidiaries and for future acquisitions. Additionally, the Company anticipates
receiving a distribution of net operating revenues from its hotel management
activities and its proposed international casino gaming activities beginning in
fiscal 2001. However, the Le Palace Hotel & Resort has been in operation for
more than two (2) years, but has yet been able to generate positive cash flows
and there are no assurances that it will be able to generate positive cash flow,
or that the Cap Gammarth Casino will open or generate positive cash flow. As of
the close of fiscal 2000, the Company's sole operations were derived from its
hotel management subsidiary and, therefore, there is considerable risk that the
Company will not have adequate working capital to sustain its current status or
that the Company or its subsidiaries may not be able to secure the required debt
or equity financing to complete their proposed projects on a timely basis. In
such event the Company or its subsidiaries may be forced to sell all or certain
projects, or contribute them to a third party on terms which would preclude the
Company from realizing significant future benefit, or any benefit at all from
the projects. The Company may also need to issue additional shares of its common
stock to pay for services incurred, to generate working capital for the
development and current operations of its subsidiaries, or to continue to
sustain itself.
(e) Capital Expenditures
General
The Company has no commitments for material capital expenditures; however,
the Company's subsidiaries, CPRC and Oasis III, are seeking financing
commitments in the aggregate amount of $100 Million to complete their various
properties.
As to any future projects undertaken by the Company, additional project
financing will be
14
<PAGE>
required. Capital investments may include all or some of the following:
acquisition and development of land, acquisition of leasehold investments and
contract rights, and construction of other facilities. In connection with
development activities relating to potential acquisitions or new jurisdictions,
the Company also makes expenditures for professional services which are expenses
as incurred. The Company's financing requirements depend upon actual development
costs, the amounts and timing of such expenditures, the amount of available cash
flow from operations and the availability of other financing arrangements
including selling equity securities and selling or borrowing against assets
(including current facilities). The Company may also consider strategic
combinations or alliances. Although there can be no assurance that the Company
can effectuate any of the financing strategies discussed above, the Company
believes that if it determines to seek any additional licenses to operate gaming
or permits to conduct hotel operations in other jurisdictions it will be able to
raise sufficient capital to pursue its strategic plan.
If for any reason, any of the Company's subsidiaries' joint ventures or
projects are unable to borrow or otherwise meet their commitments under current
agreements to provide the furniture, fixtures, equipment and working capital to
acquire, develop and operate future casino gaming and hotel management projects,
the Company may be required to intercede and provide the requisite financing and
working capital, or be forced to sell all or a portion of the respective
interests, or lose the respective rights to the projects and properties
entirely.
Cap Gammarth Casino
At June 30, 2000, the Cap Gammarth Casino had approximately $1,000,000
remaining to be paid as security deposits and advance rent before the Company
could take possession and open the facility. Additionally, there was
approximately $6,000,000 remaining to be paid for furniture, fixtures and
equipment, bankroll and pre-opening costs for the casino.
To finance the remaining expenditures on the Cap Gammarth Casino, the
Company has been negotiating debt financing and possible joint ventures with
foreign banks and investment groups.
Gammarth Resort
During fiscal 1998, CWI made a partial payment on the lease on the Gammarth
Resort and, simultaneously, filed a request for arbitration in its dispute with
the developer, STTG, claiming that STTG had breached the terms of the underlying
lease by not completing for occupancy, on a timely basis, the Le Palace Hotel,
the shopping arcade, the health club or the beach club comprising the resort in
accordance with the terms of the lease, causing CWI significant loss of revenue
and profits. In December 1999, the arbitration board awarded STTG a judgement
against CWI of 2.6 million Tunisian Dinars for rent through December 1998.
Through June 30, 2000, the Company has not paid rents to STTG in connection with
its lease arrangement and owes STTG approximately $4.0 million, net of expenses,
equipment purchased and trade receivables.
Although the award due the Lessor is final, management of CWI is not in
agreement with this award because it does not provide for completion of the
property nor a provision for economic damages that CWI suffered as a result of
the complex being incomplete. Currently, the Company is pursuing additional
arbitration for the rents that will be due for the years 1999 and 2000, which
demands that STTG be required to complete the complex and pay economic damages
suffered by it.
However, the Company believes the best solution to the issues at the Le
Palace Hotel are for it to
15
<PAGE>
purchase the complex. The Company has obtained a financing commitment that it
believes is adequate to fund the acquisition of and complete the development of
this real property and has made an offer to purchase the Cap Gammarth Complex
from STTG. In the event management is unsuccessful in its arbitration or legal
actions, or fails to pay the past-due rent payments, the Company will in all
likelihood lose its rights to operate the Le Palace Hotel.
(f) Cash Flows
Cash used by operating activities was $1.4 million for the year ended June
30, 2000 as compared to cash $134,000 for the comparable period last year. The
increase is due to a higher cost of revenues in fiscal 2000.
Cash used by investing activities was $613,000 for the year ended June 30,
1999 as compared to no cash being expended in fiscal 2000. During fiscal 1999
the Company purchased equipment for its Tunisian operations.
Cash provided by financing activities was $1.8 million for the year ended
June 30, 2000 as compared to $539,000 for the comparable period last year.
During fiscal 2000, the Company received $1.8 million of advances from NuOasis
as compared to $296,000 during fiscal 1999. The Company also received capital
contributions of $467,000 in fiscal 1999.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements are filed as a part of this Annual Report on Form
10-KSB commencing on page F-1 attached hereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
(a) Identification of Directors and Executive Officers.
The Company, pursuant to its Bylaws is authorized to maintain executive
officers as needed, but not less than three (3) and not more than nine (9)
members on its Board of Directors. The directors and officers for fiscal 2000
and fiscal 1999 were as follows:
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<PAGE>
Name Age Position Period Served as Director
Walt Sanders 54 President May 1, 1998 to present
Director
Leonard J. Roman 51 Chief Financial Officer August 31, 2000 to Present
Director
Charles R. Longson 52 Director May 1, 1998 to present
Richard O. Weed 38 Director October 1, 1998 to present
Jon L. Lawver 62 Director October 1, 1998 to present
All directors of the Company hold office until the next annual meeting of
shareholders and until their successors have been elected and qualified.
Vacancies in the Board of Directors are filled by the remaining members of the
Board until the next annual meeting of shareholders. The officers of the Company
are elected by the Board of Directors at its first meeting after each annual
meeting of the Company's shareholders and serve at the discretion of the Board
of Directors or until their earlier resignation or death.
(b) Business Experience
The following is a brief account of the business experience during the past
five years of each director, director nominee and executive officer of the
Company, including principal occupations and employment during that period and
the name and principal business of any corporation or other organization in
which such occupation and employment were carried on.
Walter Sanders. Walter Sanders was appointed CEO, President and Director of
the Company on May 1, 1998. Mr. Sanders is currently the Mayor of the City of
West Wendover, Nevada and the President of Nevlink Enterprises, Inc. a
construction company ("Nevlink"). Mr. Sanders' construction experience includes
the development of both commercial and residential projects primarily in the
western region of the United States. Mr. Sanders, through his role as President
of Nevlink, is currently focusing on the development of casinos, hotels, golf
courses, housing projects and large public works projects. Mr. Sanders has a
wide range of skills in engineering, design and surveying. Mr. Sanders'
experience also includes a substantial role in the development of several
casinos located in Wendover, Nevada including: Nevada Crossing Hotel and Casino,
State Line Hotel and Casino, Peppermill Hotel and Casino and several other
casinos.
Leonard J. Roman. Leonard J. Roman has been Chief Financial Officer and a
director since August 2000 and has 29 years of diversified public and private
business management experience. Since 1997, Mr. Roman has provided consulting
services and has served, for brief periods lasting usually not more than six
months, as Chief Financial Officer of various publicly held and privately held
companies in conjunction with such financial and corporate restructuring
services. In addition to his position with the Company, Mr. Roman currently
serves as Chief Financial Officer of NuOasis Resorts, Inc., NewBridge Capital,
Inc. and NetHoldings.Com, Inc.. From 1991 to 1994, he was General Manager and
Chief Financial Officer of Cosmar Corporation, from 1995 to 1997 he was
President of Trumpets Holdings, Inc. and was Executive Vice President, Chief
Financial Officer of W-C Designs, Inc. He ia a CPA with a B.S. degree from St.
John's University.
Charles R. Longson. Charles R. Longson was appointed Vice-President and
Director of the Company on May 1, 1998. Mr. Longson has been the general manager
of the Silver Smith Casino and Resort
17
<PAGE>
in Wendover, Nevada since 1979. His experience includes over 26 years in
developing and managing large gaming resorts. Mr. Longson specializes in
start-up construction, including: design, development, floor layouts and
operations and personnel.
Richard O. Weed. Richard O. Weed (Director), is Managing Director/Special
Projects with Weed & Co. L.P. in Newport Beach, California. Weed & Co. provides
advice on capital formation, business strategy and legal matters on a special
project basis. Mr. Weed is known for using analytical firepower, creative
problem solving and resourceful implementation to assist clients. Mr. Weed's
abilities are the result of his association with prominent law firms in
California and Texas and graduate business education. Mr. Weed received a Master
of Business Administration - International Management in 1992 from the
University of Southern California, Juris Doctor in 1987 from St. Mary's
University School of Law, and Bachelor of Business Administration -
International Business in 1984 from The University of Texas at Austin. Mr. Weed
is a member of the State Bar of California and State Bar of Texas.
Jon L. Lawver. Mr. Jon L. Lawver has been Secretary and a Director of the
Company since October 1, 1998. Mr. Lawver has thirty-two (32) years of
experience in the area of bank financing where he has assisted medium size
companies by providing expertise in documentation preparation and locating
financing for expansion requirements. Mr. Lawver was with Bank of America from
1961 to 1970, ending his employment as Vice President and Manager of one of its
branches. From 1970 to present Mr. Lawver has served as President and a Director
of J.L. Lawver Corp., a financial consulting firm ("Lawver Corp."). Since 1988,
as President and a Director of Eurasia Inc., a private finance equipment leasing
company.
(c) Identification of Certain Significant Employees and Consultants
During fiscal 1998, the Company entered into an Exchange Agreement with
NuOasis pursuant to which the Company issued Two Hundred Thousand (200,000)
shares of its common stock to NuOasis in exchange for Six Hundred Fifty Thousand
(650,000) shares of common stock of Resorts owned by NuOasis. As part of the
transaction, the Company also granted NuOasis an Option to purchase an
additional Fifty Thousand (50,000) shares of its common stock (the "NuOasis
Option") at $0.50 per share. At June 30,2000, NuOasis had not exercised the
NuOasis Option; the options were scheduled to expire July 1, 1999; however, such
option term was extended until July 1, 2003.
During fiscal 1999, the Company entered into two (2) consulting agreements,
one with Hudson Consulting Group Inc. ("Hudson") on July 18, 1998, as amended
September 15, 1998 (the "Hudson Agreement") and another with NuVen Advisors Inc.
("NuVen") on July 18, 1999 subsequently amended and assigned to NuVen Advisors
Limited Partnership on July 1, 1999 (the "NuVen Agreement"). The Company agreed
to pay Hudson certain performance based fees upon the merger with or acquisition
of a business introduced by Hudson, and to pay Hudson Three Thousand (3,000)
shares of its common stock each month for the term of the subject agreement.
Following the purchase of the assets of NuOasis in October 1998, the Company
issued 300,000 shares of its common stock to Hudson as its fee for identifying
and assisting in the closing of the transaction. The Hudson Agreement had a term
of one (1) year and expired on January 1, 1999.
Pursuant to the NuVen Agreement, the Company agreed to retain NuVen to
assist it in identifying and effecting the purchase of business and assets
relative to its hotel and gaming business (the "NuVen Agreement"). The NuVen
Agreement became effective April 1, 1998 and expired in March 31, 1999 and
resulted in the Company issuing Eight Thousand (8,000) shares of its common
stock for services; NuVen waived its right to expense reimbursement and to
receive additional shares of the Company's common stock on the closing of the
purchase of the assets of NuOasis. As incentive to execute the NuVen Agreement,
the Company granted NuVen the option to purchase Seventy Thousand (70,000)
shares of the Company;
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<PAGE>
common stock at a price of $30.00 per share. At June 30, 2000, NuVen had not
exercised the NuVen Option.
In connection with the purchase of CPRC in fiscal 1999, the Company
acquired the existing operations of a resort hotel and development-stage casino
gaming interests in Tunisia, North Africa and, with it, acquired employee
relationships with certain executives who hold officers', directors' and key
management positions in various foreign subsidiaries of CPRC. None of these
individuals are shareholders of the Company and the Company is not dependent on
any single such individual for operations.
At June 30, 2000, NuOasis owned 8,114,148 shares, or approximately
sixty-five percent (65%), of the issued and outstanding common stock of the
Company, and it has three (3) appointees sitting on the Company's five (5)
member Board of Directors. Fred G. Luke is the President of NuOasis and its
parent corporation, Resorts, and he has been instrumental in the Company's
purchase of the NuOasis assets and in identifying, acquiring, financing and
developing the assets and business interests of Resorts and NuOasis, including
those acquired by the Company. Pursuant to the relationship between the Company
and NuVen Limited Partnership ("NuVen LP") and as a result of Mr. Luke's
position with NuOasis and Resorts, he is in a position to influence the business
affairs of the Company and therefore deemed a "control person," as defined in
the Exchange Act.
Mr. Luke has been President of NuOasis since fiscal 1995, and the Chief
Executive Officer and Director of Resorts, the parent of NuOasis since June
1993. Mr. Luke has more than thirty (30) years of experience in domestic and
international financing and the management of private and publicly held
companies. Since 1982, Mr. Luke has provided financial and corporate
restructuring consulting services and has served, for brief periods lasting
usually six months, as Chief Executive Officer and/or Chairman of the Board of
various publicly held and privately held companies in conjunction with such
financial and corporate restructuring services. In addition to his position with
Resorts and NuOasis, Mr. Luke currently serves as Chairman and President of
NuVen and General Partner, NuVen LP, which have provided consulting services,
office space and other general and administrative services to the Company since
the beginning of fiscal 1999. NuVen and NuVen LP currently provide managerial,
acquisition, and administrative services to other public and private companies
in addition to the Company. NuVen LP and NuVen are controlled by Mr. Luke and
are affiliates of the Company. Mr. Luke received a Bachelor of Arts Degree in
Mathematics from California State University, San Jose in 1969.
Mr. Gabriel Tabarani serves as Director of CPRC and CWI and owns 12.5% of
CPRC. Fred Graves Luke, Fred G. Luke's father, is a Director of CPRC and owns
personally 12.5% of CPRC.
(d) Family Relationships
Fred Graves Luke is the father of Fred G. Luke. He serves as a Director of
CPRC, CCGL, CHL and CWI.
(e) Involvement in Certain Legal Proceedings.
During the past five years, no director or officer of the Company has:
(1) Filed or has filed against him a petition under the federal bankruptcy laws
or any state insolvency law, nor has a receiver, fiscal agent or similar officer
been appointed by a court for the business or property of such person, or any
partnership in which he was a general partner, or any corporation or business
association of which he was an executive officer at or within two years before
such filings.
19
<PAGE>
(2) Been convicted in a criminal proceeding;
(3) Been the subject of any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining such person from, or otherwise limiting his
involvement in any type of business, securities or banking activities.
(4) Been found by a court of competent jurisdiction in a civil action, the SEC
or the Commodity Futures Trading Commission ("FTC") to have violated any federal
or state securities or commodities law, which judgment has not been reversed,
suspended, or vacated.
(f) Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and officers and persons who own more than ten
percent (10%)of the Company's equity securities, to file reports of ownership
and changes in ownership with the SEC. Directors, officers and greater than
ten-percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) reports filed.
ITEM 10. EXECUTIVE COMPENSATION.
(a) Summary Compensation Table
The following summary compensation table sets forth in summary form the
compensation received during each of the Company's last three completed fiscal
years by the Company's President and four most highly compensated executive
officers other than the President.
Name and Principal Fiscal Salary Other Annual Options
Position Year ($) Compensation ($) Granted (#)
Walter Sanders, 2000 - - -
President 1999 - - -
1998 - - -
(b) Stock Options
During the years ended June 30, 2000 and 1999, the Company had no stock
options granted to employees. However, the Company granted options and warrants
to non-employees. The Company issued warrants to purchase 7,200,000 shares at
$30.00 per share to NuOasis and 200,000 shares at $0.50 per share. The Company
issued options to NuVen to purchase 70,000 shares at $30.00 per share. On
November 15, 1999, Oasis cancelled the 7,200,000 warrants and issued 8,111,240
shares of common stock to NuOasis.
(c) Long-Term Incentive Plans
Not applicable.
(d) Compensation of Directors
The Company has no standard arrangement for the compensation of directors
or their committee participation or special assignments.
20
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(e) Contracts With Executive Officers
None
(f) Change of Control
None.
(g) Report on Repricing of Options
Not applicable.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) and (b) Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information regarding the ownership of the
Company's voting securities by persons owning more than 5% of such securities as
of September 21, 2000, the most recent practicable date.
<TABLE>
<CAPTION>
Title Name and Address Amount and Nature of Percent
Of Class of Beneficial Owner Beneficial Interest (1) of Class
<S> <C> <C> <C>
$.001 par value NuOasis Resorts International Inc. 8,144,148 64.6%
Common Stock 43 Elizabeth Avenue, Box N-8680
Nassau, Bahamas
Cleopatra's World, Inc. 750,000 5.9%
Box 3186, Road Town
Tortola, British Virgin Islands
European Holdings, Limited 642,847 5.1%
Victoria House
P.O. Box 58
The Valley, Anguilla, British West Indies
</TABLE>
The following sets forth information with respect to the Company's voting
stock beneficially owned by each current and former officer and director, and by
all current and former officers and directors as a group, as of September 30,
2000:
21
<PAGE>
<TABLE>
<CAPTION>
Title of Name and Address Amount and Nature of Percent
Class of Beneficial Owner Beneficial Interest (1) of Class
<S> <C> <C> <C>
$.001 par value Mr. Walter Sanders 300,000 2.4%
Common Stock P.O. Box 2329
West Wendover NV 89883
All Officers and Directors as a group 300,000 2.4%
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Transactions with Directors and Affiliates.
There were no transactions or series of similar related transactions during
fiscal 2000 or fiscal 1999 that exceeded an aggregate amount of $60,000.
(b) Indebtedness of Management
There were no transactions, or series of similar related transactions
during fiscal 2000 or fiscal 1999.
(c) Transactions with Promoters
Not applicable.
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<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Consolidated Financial Statements
The Consolidated Financial Statements included in this Item are indexed on
Page F-1, "Index to Consolidated Financial Statements."
(b) Financial Statement Schedules
Not applicable.
(c) Exhibits
Unless otherwise noted, Exhibits are filed herewith.
Exhibit
Number Description
3.1 Articles of Incorporation of Oasis Resorts International, Inc.(1)
3.2 Bylaws of Oasis Resorts International, Inc.(1)
10.1 Exchange Agreement between Cleopatra's Palace Resorts and Casinos
Limited and Cleopatra's World, Inc.(1)
10.2 Exchange Agreement between Cleopatra's World, Inc. and Cleopatra
Palace Limited(1)
10.3 Exchange Agreement between Cleopatra's Palace Resorts and Casinos
Limited and Cleopatra Palace Limited (1)
10.4 Exchange Agreement between Cleopatra's Palace Resorts and Casinos
Limited and NuOasis International Inc.(1)
10.5 Advisory Agreement between NuVen Advisors, Inc. and Flexweight
Corporation.(1)
10.6 Merger Agreement between Oasis Resorts International, Inc. and
Flexweight Corporation (1)
10.7 Warrant Agreement between NuOasis International Inc. and Flexweight
Corporation (1)
10.8 Asset Purchase Agreement between NuOasis International Inc. and
Flexweight Corporation (1)
10.9 Option Agreement between NuOasis International Inc. and Flexweight
Corporation (1)
10.10 Option Agreement between NuVen Advisors Inc.. and Flexweight
Corporation (1)
10.11 Flexweight Corporation 1998 Stock Option Plan (1)
10.12 Exchange Agreement between NuOasis International Inc. and Cleopatra's
World, Inc.(1)
22.1 Schedule of Subsidiaries of the Company
27 Financial Data Schedule
(1) Incorporated herein by reference from the Company's Annual Report on Form
10-KSB for the year ended June 30, 1999.
23
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OASIS RESORTS INTERNATIONAL, INC.
(formerly, Flexweight Corporation)
Date: October 13, 2000 By: /s/ Walter Sanders
Walter Sanders, President and Director
Date: October 13, 2000 By: /s/ Leonard J. Roman
Leonard J. Roman, Principal Accounting
Officer and Director
Date: October 13, 2000 By: /s/ Jon L. Lawver
Jon L. Lawver, Secretary and Director
Date: October 13, 2000 By: /s/ Charles Longson
Charles Longson, Director
Date: October 13, 2000 By: /s/ Richard O. Weed
Richard O. Weed, Director
In accordance with the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
OASIS RESORTS INTERNATIONAL, INC.
(formerly, Flexweight Corporation)
Date: October 13, 2000 By: /s/ Walter Sanders
Walter Sanders, President and Director
Date: October 13, 2000 By: /s/ Leonard J. Roman
Leonard J. Roman, Principal Accounting
Officer and Director
Date: October 13, 2000 By: /s/ Jon L. Lawver
Jon L. Lawver, Secretary and Director
Date: October 13, 2000 By: /s/ Charles Longson
Charles Longson, Director
Date: October 13, 2000 By: /s/ Richard O. Weed
Richard O. Weed, Director
24
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
(Formerly Flexweight Corporation)
Index to Consolidated Financial Statements
Description Page
Independent Auditors' Report.................................................F-2
Consolidated Balance Sheet as of June 30, 2000...............................F-3
Consolidated Statements of Operations and Comprehensive Loss
for the years ended June 30, 2000 and 1999.................................F-4
Consolidated Statements of Stockholders' Equity (Deficit) and
Comprehensive Loss for the years ended June 30, 2000 and 1999..............F-5
Consolidated Statements of Cash Flows for the years ended June 30, 2000 and
1999.......................................................................F-7
Notes to Consolidated Financial Statements...................................F-9
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Oasis Resorts International, Inc.
We have audited the accompanying consolidated balance sheet of Oasis Resorts
International, Inc., ("Oasis"), and subsidiaries (collectively the "Company"), a
company controlled by NuOasis Resorts International, Inc. ("NuOasis"), as of
June 30, 2000, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the two years in the
period ended June 30, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Oasis
Resorts International, Inc., formerly Flexweight Corporation, as of June 30,
2000, and the consolidated results of their operations and their cash flows for
each of the two years in the period ended June 30, 2000, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has recurring losses from
operations since its inception. The Company requires substantial long-term
financing to complete certain projects, as well as working capital financing to
meet its past- due and current obligations. These factors raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
As discussed in Notes 1 and 2, Oasis entered into an exchange agreement
accounted for as a reverse acquisition, whereby Oasis is deemed to have been
acquired by NuOasis for accounting purposes. Accordingly, the accompanying
consolidated financial statements have been retroactively restated to include
the historical assets and liabilities, and the historical operations of the net
assets acquired from NuOasis for all periods presented. The operations of Oasis
are included in the accompanying consolidated financial statements from the date
of acquisition, October 19, 1998, to June 30, 2000.
/s/ McKennon, Wilson & Morgan LLP
Irvine, California
October 11, 2000
F-2
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
<TABLE>
<CAPTION>
Consolidated Balance Sheet
June 30, 2000
<S> <C>
ASSETS
Cash and cash equivalents $ 699,679
Accounts receivable, net of allowance
for doubtful accounts of $97,720 484,976
Inventory 194,775
Marketable securities (Note 4) 34,000
Other current assets 77,630
Total current assets 1,491,060
Property and equipment, net 145,955
Receivable from Lessor (Note 3) -
Lease deposit (Note 6) 2,040,000
Land held for development (Note 5) 3,700,000
Investment, at cost (Notes 2 and 3) 2,000,000
Acquisition advance (Notes 1 and 3) 2,250,000
Other 190,555
Total assets $ 11,817,570
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
Accounts payable $ 1,819,630
Due Lessor (Notes 3 and 8) 4,039,711
Accrued liabilities 621,394
Current portion of notes payable (Note 7) 629,424
Total current liabilities 7,110,159
Notes payable, net of current portion (Note 7) 3,270,135
Due to NuOasis (Note 10) 632,957
Total liabilities 11,013,251
Commitments and contingencies (Notes 2,3 and 8)
Stockholders' deficit (Notes 1, 2, and 9):
Preferred stock, par value $0.001; 25,000,000 shares
authorized, no shares issued and outstanding -
Common stock, par value $0.001; 75,000,000 shares
authorized, 12,611,215 shares issued and outstanding 12,611
Additional paid-in capital 34,725,247
Accumulated deficit (28,152,577)
Accumulated other comprehensive income 219,038
Notes receivable from Resorts (6,000,000)
Total stockholders' equity (deficit) 804,319
Total liabilities and stockholders' equity (deficit) $ 11,817,570
</TABLE>
See accompanying notes to these consolidated financial statements.
F-3
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Consolidated Statements of Operations and Comprehensive Loss
For The Years Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Revenues $ 5,192,905 $ 5,522,626
Costs of revenues 6,407,813 5,795,187
Gross profit (loss) (1,214,908) (272,561)
Selling, general and administrative expenses 1,442,503 1,012,300
Impairment of long-lived assets (Notes 2 and 3) 647,000 8,319,241
Loss from operations (3,304,411) (9,604,102)
Loss on sale of marketable securities 295,750 803,000
Interest expense 375,917 400,309
Net loss (3,976,078) (10,807,411)
Comprehensive income (loss):
Unrealized gain (loss) on marketable
securities (58,000) 133,000
Foreign currency translation adjustment 215,962 154,781
Comprehensive loss $ (3,818,116) $(10,519,630)
Basic and diluted net loss per share $ (0.46) $ (4.01)
Weighted average shares included in basic and
diluted net loss per share 8,556,174 2,698,008
</TABLE>
See accompanying notes to these consolidated financial statements.
F-4
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Consolidated Statements of Stockholders' Deficit
For The Years Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
Accumulated Notes
Additional Other Receivable
Preferred Stock Common Stock Paid-In Accumulated Comprehensive From
Capital Deficit Income (Loss) Resorts Total
Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, July 1,
1998 - $ - 1,563,450 $ 1,563 $ 10,344,270 $(13,369,088)$(521,705) $(9,000,000) $(12,544,960)
Restructuring, July 1,
1998 - - - - 10,000,000 - - 3,000,000 13,000,000
Capital contributions - - - - 466,750 - - - 466,750
Cancellation of note
payable to NuOasis - - - - 1,517,000 - - - 1,517,000
Common stock
retained by Oasis
shareholders
after reverse
acquisition - - 1,627,255 1,627 8,134,648 - - - 8,136,275
Constructive dividend
for fair value of
notes payable
issued to NuOasis - - - - (7,000,000) - - - (7,000,000)
Unrealized loss on
marketable securities - - - - - - 133,000 - 133,000
Foreign currency
translation adjustment - - - - - - 154,781 - 154,781
Net loss - - - - - (10,807,411) - - (10,807,411)
Balances, June 30, 1999 - - 3,190,705 3,190 23,462,668 (24,176,499) (233,924) (6,000,000) (6,944,565)
</TABLE>
See accompanying notes to these consolidated financial statements.
F-5
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Consolidated Statements of Stockholders' Deficit (continued)
For The Years Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
Accumulated Notes
Additional Other Receivable
Preferred Stock Common Stock Paid-In Accumulated Comprehensive From
Capital Deficit Income (Loss) Resorts Total
Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Common stock issued
for investment in CHL - - 750,000 750 2,249,250 - - - 2,250,000
Conversion on notes
payable into common
stock - - 8,111,240 8,111 6,991,889 - - - 7,000,000
Common stock issued for
lease deposit - - 550,000 550 1,999,450 - - - 2,000,000
Common stock issued for
services and other - - 9,270 10 21,990 - - - 22,000
Unrealized loss on
marketable securities - - - - - - (237,000) - (57,750)
Foreign currency
translation adjustment - - - - - - 215,962 - 215,962
Net loss - - - - - (3,976,078) - - (3,626,078)
Balances, June 30, 2000 - $ - 12,611,215 $12,611 $34,725,247 $(28,152,577) $ 219,038 $(6,000,000) $ 804,319
</TABLE>
See accompanying notes to these consolidated financial statements.
F-6
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
For The Years Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,976,078) $(10,807,411)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 42,619 9,777
(Gain)/Loss on sale of marketable securities 295,750 803,000
Impairment of goodwill - 8,006,241
Impairment of lease deposit 647,000 313,000
Services exchanged for marketable securities 52,750 -
Changes in operating assets and liabilities:
Accounts receivable (111,426) 245,734
Inventory (24,649) 1,111
Other assets (225,657) (84,729)
Accounts payable 18,553 89,445
Accrued liabilities 59,428 (166,729)
Due Lessor 1,826,423 1,456,450
Net cash used in operating activities (1,395,287) (134,111)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment - (266,611)
Other assets - (345,980)
Net cash used in investing activities - (612,591)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances due from Lessor - (198,966)
Payments on notes payable - (25,000)
Advances from related party 50,000 -
Advances (repayments) from NuOasis 1,777,306 296,381
Capital contributions - 466,750
Net cash provided by financing activities 1,827,306 539,165
Foreign currency effect on cash 215,962 154,781
Net increase (decrease) in cash 647,981 (52,756)
Cash and cash equivalents at beginning of year 51,698 104,454
Cash and cash equivalents at end of year $ 699,679 $ 51,698
</TABLE>
See accompanying notes to these consolidated financial statements.
F-7
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Consolidated Statements of Cash Flows (continued)
For The Years Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Supplemental Disclosure of Cash Flows -
Cash paid during the year for interest $ 220,000 $ 350,489
Non-Cash Financing and Investing Activities:
Common stock issued for lease deposit 2,000,000 -
Conversion of notes payable issued to NuOasis 7,000,000 -
Common stock issued for acquisition advance - CHL 2,250,000 -
Contribution of notes receivable from Resorts in recapitalization - 10,000,000
Effective capital contribution from cancellation of notes issued to
CPL for shares of CPRC in restructuring - 13,000,000
Effective capital contribution resulting from restructuring - 10,000,000
Exchange of note receivable from Resorts in restructuring - 3,000,000
Notes payable assumed in reverse acquisition with Oasis III - 3,925,000
Acquisition of land held for development in reverse acquisition
with Oasis III - 3,700,000
Estimated fair value of shares retained by shareholders of Oasis in
reverse acquisition - 8,136,275
Constructive dividend resulting from estimated fair value of notes
payable issued in reverse acquisition of Oasis - 7,000,000
Receivable from NuOasis resulting from sale of marketable
securities - 264,000
</TABLE>
See accompanying notes to these consolidated financial statements.
F-8
<PAGE>
1 - Organization and History
Oasis Resorts International, Inc., a Nevada corporation, was originally
incorporated under the name Flexweight Drill Pipe Company in 1958. Oasis Resorts
International Inc., herein referred to as "Oasis" and its subsidiaries
(collectively the "Company"), operate a resort hotel in Tunisia, North Africa,
and held undeveloped land in Oasis, Nevada. Management intends to develop casino
gaming operations in Tunisia. Substantially all operations included herein are
those of the Le Palace Hotel and Resort.
On May 1, 1998, Oasis, then Flexweight Corporation, merged with Oasis Resorts,
Hotel & Casino-III, Inc. ("Oasis III"), which held assets representing 20 acres
of partially-developed land in Oasis, Nevada. In connection with the merger,
Oasis issued 602,000 shares of common stock to the shareholders of Oasis III to
acquire 100% of the issued and outstanding common stock of Oasis III. In
addition, the Company issued the shareholders of Oasis III 200,000 shares of
Oasis common stock in connection with the real estate agreement dated April 9,
1998 (Note 5). Upon the close of the merger, the shareholders of Oasis held
149,916 shares of common stock and the shareholders of Oasis III held
approximately 80% of the issued and outstanding common stock of Oasis. Oasis III
has title to 20 acres of commercial real estate located in Nevada which
management intends to develop into a gaming complex. There are no assurances
that the Company will be successful in developing such gaming complex.
On October 19, 1998, the Company reincorporated in Nevada and changed its name
from Flexweight Corporation to Oasis Resorts International, Inc. to better
reflect its new corporate direction. The Company then entered into an exchange
agreement with NuOasis International, Inc. ("NuOasis"), a wholly-owned
subsidiary of NuOasis Resorts, Inc. ("Resorts") to acquire NuOasis' 75% interest
in Cleopatra Palace Resorts and Casinos Ltd. ("CPRC"). CPRC had previously
acquired all of the equity interest owned by NuOasis in Cleopatra Cap Gammarth,
Limited ("CCGL") which intends to operate the Cleopatra Cap Gammarth Casino (the
"Cap Gammarth Casino"), a right to re-acquire a 70% interest in Cleopatra
Hammamet Limited ("CHL"), which operates the casino Cleopatra Hammamet Casino,
and Cleopatra's World, Inc. ("CWI") which operates the Le Palace Hotel & Resort
at Cap Gammarth (see Note 3). All of the properties are located in Tunisia.
Cleopatra Palace Ltd. ("CPL") is a predecessor company to CPRC, an entity
controlled by NuOasis, which previously held the interests in the Cleopatra
Hammamet Casino and the Cleopatra Cap Gammarth Casino.
In connection with the acquisition of CPRC, the Company issued 1,363,450 shares
of common stock, common stock purchase warrants representing the right to
acquire 7,200,000 shares at $30.00 per share, and issued promissory notes with
an aggregate face value of $180 million to NuOasis in exchange for certain
assets in NuOasis. At the time of the transaction, Oasis had no ability to repay
the notes, and therefore, the notes had an estimated fair value substantially
less than the face value at the date of issuance. Based on the enterprise value
of Oasis at the date of the reverse acquisition of approximately $16.6 million,
the Company valued the notes at $7 million. On November 15, 1999, management of
Oasis agreed to extinguish the notes and cancel the 7,200,000 warrants for the
issuance of 8,111,240 shares of the Company's common stock (Note 9), such that
the NuOasis shareholders control approximately 86% of the Company's issued and
outstanding common stock.
F-9
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements (Continued)
On April 1, 2000, the Company entered into an agreement to acquire 60% of the
voting capital stock of CHL from an unrelated party (see Note 3) for 750,000
shares of its common stock valued at $2,250,000. The common shares of the
Company were delivered to the unrelated party; however, due to certain
regulatory and tax considerations, the transaction has not been completed.
Management is unsure at the present time whether the transaction will be closed.
In connection with the agreement, the seller was required to provide $600,000 of
working capital to CHL, of which $300,000 was paid by the seller. NuOasis loaned
the remaining $300,000 to CHL and will be repaid by the seller either in cash or
by a portion of the Company's common stock issued to seller.
2 - Basis of Presentation and Principles of Accounting
Basis of Presentation
This acquisition of NuOasis interests by the Company on October 19, 1998, is
accounted for as a reverse acquisition, whereby NuOasis is the acquiror, since
the operations of NuOasis are more significant than Oasis and NuOasis acquired a
controlling interest in the Company on November 15, 1999. Accordingly, the
accompanying consolidated financial statements include the historical assets and
liabilities, and the historical operations of NuOasis interests acquired for all
periods presented. The operations of Oasis are included in the accompanying
consolidated financial statements from the date of acquisition, October 19,
1998, through June 30, 1999. The net assets of Oasis were recorded at fair value
at the date of acquisition. Assets, consisting primarily of land valued at $3.7
million based upon an independent appraisal, and marketable securities of
$350,000, and liabilities consisting of $3.975 million in secured notes, were
recorded at fair value. The purchase price in the reverse acquisition was
approximately $8.1 million, with the excess of the purchase price over the fair
value of the net assets acquired of $8 million allocated to goodwill (see
below).
Proforma Financial Data
The unaudited proforma statements of operations data for the year ending June
30, 1999, assuming the acquisition of Oasis occurred on July 1, 1998, are as
follows:
<TABLE>
<CAPTION>
1999
<S> <C>
Revenues $ 5,522,626
Net loss $ (10,106,787)
Basic and diluted net loss per share $ (3.17)
</TABLE>
The above unaudited proforma amounts are not necessarily indicative of what the
actual results might have been if the acquisitions had occurred on July 1, 1998.
F-10
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements (Continued)
Going Concern Considerations
The Company has recurring losses from operations, and at June 30, 2000, the
Company has a working capital deficit of $5.6 million. The Company requires
approximately $6 million of immediate working capital to service certain
past-due trade creditors of the Le Palace Hotel & Resort and it will require
additional capital to meet obligations as they become due during the next 12
months. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans with respect to these matters
are as follows:
1. Acquire the Le Palace Hotel and the adjacent complex in Cap Gammarth
(collectively the "Cap Gammarth Complex"), which excludes the Cap Gammarth
Casino. By acquiring the property, management expects to eliminate
approximately $4.0 million dollars of accrued rental payments to Societe
Touristique Tunisie-Golfe ("STTG" or "Lessor") for operation of the Le
Palace Hotel. Management has tendered an offer to acquire the Cap Gammarth
Complex for approximately $18.0 million(Note 3). The Company has obtained a
financing commitment that it believes is adequate to fund the acquisition
of and complete the development of this real property, as well as pursue
the acquisition of similar properties. The Le Palace Hotel currently is
generating positive cash flow before the accrual of rent. Management
believes that the cash flow from operations will be sufficient to service
the current operating liabilities if the acquisition is successful.
2. Should the offer to acquire the Cap Gammarth Complex not be accepted,
management intends to continue to seek a legal reprieve based upon the fact
that the parties have been unable to negotiate a long term solution. The
Lessor is currently seeking an injunction to remove CWI from the Le Palace
Hotel. In the event management is unsuccessful in its arbitration or legal
actions, or fails to pay the past-due rent payments, the Company will in
all likelihood lose its rights to operate the Le Palace Hotel.
3. Finally, management intends to pursue collection of its judgment against
SALT. Management is currently attempting to seek collection by perfecting
its claim in the Tunisian courts. Management believes that it will
successfully perfect its judgement, which is expected to result in the
Company foreclosing on the interest of SALT and the individual defendants'
equity ownership of SALT.
There are no assurances that such financing will be consummated on terms
favorable to the Company, if at all, nor that the Company will be successful in
collecting on its judgment against SALT. No adjustments have been made to the
accompanying consolidated financial statements as a result of these
uncertainties.
Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its controlled subsidiaries. All inter-company accounts have been
eliminated in consolidation. The accompanying consolidated balance sheet
excludes a minority interest for its 75% interest in CPRC, 80% interest in CWI,
and its 90% interest in CCGL since the entities have shareholder deficiencies.
F-11
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements (Continued)
Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments with maturities
of three months or less at the time of acquisition.
Marketable Securities
The Company accounts for its equity securities as available-for-sale securities.
In connection therewith, the Company records unrealized gains and losses as a
component of shareholders' equity. Realized gains and losses are recorded in
operations. The Company uses the specific identification method for accounting
for its marketable securities.
Property and Equipment
Property and equipment are depreciated over their estimated useful lives using
the straight-line method ranging from three to five years. Additions and
betterments are capitalized. The cost of maintenance and repairs is charged to
expense as incurred. When depreciable property is retired or otherwise disposed
of, the related cost and accumulated depreciation or amortization are removed
from the accounts and any gain or loss is reflected in the consolidated
statements of operations. Depreciation expense reflected in the accompanying
consolidated financial statements was not significant.
Goodwill
Goodwill represents the excess of purchase price over the fair value of the net
assets of acquired businesses. Goodwill is stated at cost and is amortized on a
straight-line basis over the expected benefit period. As discussed above, the
Company generated goodwill of $8 million in connection with the reverse
acquisition of Oasis on October 19, 1998 (see impairment discussion below).
Impairment of Long-lived Assets
The Company assesses the recoverability of long-lived assets by determining
whether the depreciation and amortization of property and goodwill over their
remaining life can be recovered through projected undiscounted future cash
flows. The amount of impairment, if any, is measured based on fair value and is
charged to operations in the period in which such impairment is determined by
management.
Oasis originally acquired its interest in Oasis III in May 1998. Oasis III had
no significant operations, however, Oasis III has a management team, which upon
the close of a funding, intends to obtain a casino gaming license in the state
of Nevada. The Company has been seeking capital to begin construction of its
casino in Oasis, Nevada, with the assistance of NuVen Advisors, Inc. ("NuVen"),
an affiliate of NuOasis, since July 1998. Through June 30, 1999, the Company had
been unsuccessful in obtaining necessary financing, one year after commencing
its search for capital with the assistance of NuVen, and accordingly, the
Company charged operations totaling $8 million, since the recovery of such
goodwill is unlikely. Through September 30, 2000, no construction financing has
been obtained by management of the Company to commence its development in Oasis,
Nevada.
F-12
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements (Continued)
Interest Capitalization
The Company will capitalize interest charges incurred during active development
of its land. Since management has curtailed development until such time funds
are raised, no interest is capitalized. No interest has been capitalized during
the years presented.
Investment, at cost
The Company holds a 6% equity interest in SALT. This investment is carried at
cost, less amounts deemed necessary to reflect the asset at its net realizable
value due to uncertainties about the viability of SALT. The carrying value at
June 30, 2000 is $2 million.
Foreign Currency
The consolidated financial statements of the Company's non-U.S. operations are
translated into U.S. dollars for financial reporting purposes. The assets and
liabilities of non-U.S. operations whose functional currencies are other than
the U.S. dollar are translated at rates of exchange at fiscal year-end, and
revenues and expenses are translated at the average exchange rate for the fiscal
year. The cumulative translation effects are reflected in stockholders' deficit.
Foreign currency gains and losses on transactions denominated in other than the
functional currency of an operation are reflected in other income (expense).
Revenue Recognition
Revenues from hotel operations are recorded when the services are rendered.
Revenues from food and beverage sales are recognized upon delivery of the
product and service.
Provision for Income Taxes
The Company accounts for its income taxes under an asset and liability method
whereby deferred tax assets and liabilities are determined based on temporary
differences between bases used for financial reporting and income tax reporting
purposes. Income taxes are provided based on the enacted tax rates in effect at
the time such temporary differences are expected to reverse. A valuation
allowance is provided for certain deferred tax assets if it is more likely than
not that the Company will not realize tax assets through future operations.
The Company's net deferred tax assets at June 30, 2000, consist of net operating
loss carryforwards amounting to approximately $20 million. At June 30, 2000, the
Company provided a 100% valuation allowance for these net operating loss
carryforwards totaling $8 million. During the years ended June 30, 2000 and
1999, the Company's valuation allowance increased $1.5 million, and $4 million,
respectively. The Company's annual use of net operating loss carryforwards are
limited due to the change in ownership experienced in fiscal 1999. No benefit
for income taxes has been provided since all deferral tax assets have been fully
reserved. Income tax expense is not material to the accompanying consolidated
statements of operations.
F-13
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements (Continued)
The Company, and its subsidiaries, have not filed federal income tax returns for
several years. Federal law requires the Company to disclose information about
its holdings outside the United States which management has not completed
through the date of this report. In the event management does not complete its
filing of its federal income tax returns, the net operating losses discussed
above will not be available. Management intends to complete its delinquent
filings in fiscal 2001, and they do not believe that penalties, if any, imposed
for lack of filing its income tax returns will be material.
Loss Per Share
Basic EPS is computed as net income divided by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur from common shares issuable through stock options,
warrants and other convertible securities. Diluted EPS is equal to basic EPS
since the effect of common stock purchase warrants would be anti-dilutive. See
Note 9 for common stock purchase warrants outstanding which are anti-dilutive
for EPS reporting purposes.
Stock Split
Share and per share amounts have been retroactively restated for all periods
presented to reflect the one for five reverse stock split approved on February
8, 2000 (Note 9).
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.
Reporting Comprehensive Income
The Company reports the components of comprehensive income (loss) using the
income statement approach. Comprehensive income includes net income (loss), as
well as certain non-shareholder items that are reported directly within a
separate component of stockholders' equity and bypass net income (loss).
Components which give rise to the other comprehensive income (loss) are foreign
currency translation adjustments and unrealized gains and losses on marketable
securities classified as available-for-sale.
Disclosures about Segments of an Enterprise and Related Information
The Company provides disclosures of financial and descriptive information about
an enterprise's operating segments in annual and interim financial reports
issued to stockholders. The Company defines an operating segment as a component
of an enterprise that engages in business activities that generate revenue and
incur expense, whose operating results are reviewed by the chief operating
decision maker in the determination of resource allocation and performance, and
for which discrete financial information is available. During the periods
presented, the Company had only one reportable operating segment.
F-14
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements (Continued)
Stock-based Compensation
The Company accounts for its employee stock options using the intrinsic method
of accounting prescribed by Accounting Principles Board Opinion No. 25 ("APB
25"), "Accounting for Stock Issued to Employees." The Company must make pro
forma disclosures of net income and earnings per share, as if the fair value
method of accounting defined in Statement of Financial Accounting Standards No.
123 ("SFAS 123"), "Accounting for Stock-Based Compensation," had been applied.
Through June 30, 2000, the Company had no employee stock options outstanding.
The Company accounts for transactions in which goods or services are the
consideration received for the issuances of its equity instruments based on the
fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably measurable.
Accounting for Derivative Instruments and Hedging Activities
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133"). Under the provisions of FAS 133, the Company will be
required to recognize all derivatives as either assets or liabilities in the
statements of financial position and measure these instruments at fair value.
The Company has adopted FAS 133 during fiscal 1999 with no material impact on
its current financial position or results of operations. Currently, the Company
does not have any instruments that would qualify as derivatives under FAS 133.
Financial assets with carrying values approximating fair value include cash and
cash equivalents, marketable securities, notes receivable and other investments.
Financial liabilities with carrying values approximating fair value include
accounts payable and accrued interest, and notes payable. Notes due to and from
related parties have no readily ascertainable fair value.
3 - Tunisian Operations
Restructuring
As stated in Note 1, NuOasis entered into an exchange agreement to acquire its
75% interest in CPRC on July 1, 1998. CPRC was formed by the management of
NuOasis as a means to consolidate its off-shore hotel and casino operations,
principally in Tunisia. CPRC was a multi-step restructuring, whereby CPRC first
issued 12,553,125 shares to CWI to acquire from CWI its 9% equity interest in
SALT, the SALT Casino Lease rights, and $1.9 million note due from Club
Hammamet; CWI, immediately thereafter, exchanged 8,490,625 CPRC shares to fully
satisfy the $13 million notes payable to CWI. CPRC then acquired the remaining
CPL assets for 946,875 shares and a $3 million note due from Resorts, acquired
an 80% interest in CWI, a 100% interest in Club Hammamet from NuOasis for
11,500,000 CPRC shares, and finally, CPRC increased its ownership in CCGL to 90%
by assigning to CCGL, $3.5 million of notes due from Resorts and its rights to
the SALT Casino Lease. As a result, CPRC owned an 80% interest in CWI, a 90%
interest in CCGL, rights to certain interests in Club Hammamet, and a 9% equity
interest in SALT.
F-15
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements (Continued)
Le Palace Hotel & Resort
CPRC owns an 80% interest in the capital stock of CWI. CWI operates the Le
Palace Hotel under a 15-year operating agreement with the Lessor. At present,
the parties are in dispute over rental payments. An initial arbitration award
covering rent through 1998 has been rendered. Although the award due the Lessor
is final, management of CWI is not in agreement with this award because it does
not provide for completion of the property nor a provision for economic damages
that CWI suffered as a result of the complex being incomplete. Currently, the
Company is pursuing additional arbitration for the rents that will be due for
the years 1999 and 2000, which demands that STTG be required to complete the
complex and pay economic damages suffered by it.
Because the parties have been unable to agree upon a long term solution, the
Company's management has been unable to generate working capital or financing to
pay the rent that was awarded. The Lessor is currently seeking an injunction to
remove CWI from the Le Palace Hotel. CWI continues to seek legal reprieve. CWI
believes that the most viable long term solution is for it to purchase the Cap
Gammarth Complex. Management has tendered an offer of 24.0 million Tunisian
Dinars ($18.0 million converted to U.S. dollars at the exchange rate on June 30,
2000) to acquire the Cap Gammarth Complex, which does not include the Cap
Gammarth Casino. Management has secured a commitment from a domestic, private
investment fund to enable them to effect the transaction.
There are no assurances that the Company will be successful in receiving an
acceptance to its offer or that the financing will be available in the event the
offer is accepted. In the event management is unable to complete the acquisition
or fails to pay the past-due lease payments, the Company will in all likelihood
lose its rights to operate the Le Palace Hotel. Since the Company has only one
operating subsidiary, CWI, all revenues, substantially all operating assets,
such as accounts receivable and inventory, and operating liabilities, such as
accounts payable and amounts due to Lessor, are those of the operations of the
Le Palace Hotel.
In connection with the operation of the Le Palace Hotel & Resorts, the Company
provides employees of Societe Touristique Tunisie-Golfe ("STTG" or the "Lessor")
meals and allowances while working at the Cap Gammarth complex. In fiscal 2000
and 1999, the Company incurred reimbursable expenses amounting to approximately
$100,000 and $199,000, respectively, which were offset against amounts accrued
for rents.
Cleopatra Cap Gammarth Casino
Cleopatra has rights to an operating lease of a 200,000 square foot casino and
Las Vegas-style showroom, construction which is substantially complete, pursuant
to a Casino Lease Agreement and Operating Management Contract with STTG. The
lease on the Cap Gammarth Casino was transferred by SALT resulting in a change
in lessor from STTG to SALT. See Note 8 for further discussion of this lease
arrangement.
On July 13, 1998, the Company filed a civil complaint for damages in the U.S.
District Court, District of Nevada against SALT and several other defendants. On
July 2, 1999, the District Court adjudged and decreed compensatory damages in
the amount of $292 million plus interest, and $10 million in punitive damages.
Management is proceeding in Tunisia to collect upon its money judgement. No
amounts have
F-16
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements (Continued)
been recorded in these consolidated financial statements as a result of this
potential gain contingency.
Hammamet Casino
In October 1994, CPL entered into an agreement with Club Hammamet to lease and
operate a 60,000 square foot casino (held by the Seller) and French-style
cabaret recently completed in Hammamet, Tunisia (the "Hammamet Casino"). On or
about September 26, 1997, in order to finance the remaining expenditures on the
Hammamet Casino, the Company and Club Hammamet entered into an agreement with
Cedric International Company Inc., a Panamanian corporation ("Cedric"), pursuant
to which the Company and Cedric each agreed to contribute $1.5 million to the
capital of Club Hammamet. In making the first annual lease payments on the
Hammamet Casino, the Company pledged to Cedric its 70% interest in Hammamet
Casino. The Company and Cedric agreed that Cedric will return such interest when
and if the Company reimburses Cedric for all funds advanced prior to September
26, 1998 (on an all or nothing basis), plus interest at the rate of 15% per
annum. The Company did not reimburse Cedric, due to sustained losses at the
Hammamet Casino, and the Company forfeited its right to reacquire its interest
in Hammamet Casino. Accordingly, the Company impaired its interest in Hammamet
Casino and charged operations approximately $1.9 million in fiscal 1998.
As discussed in Note 1, on April 1, 2000, the Company entered into an agreement
to acquire its 70% interest in CHL for 750,000 shares of common stock valued at
$2.25 million. The Company has not closed the transaction, however, the
consideration was tendered. The Seller was required to contributed $600,000 of
working capital and settle all past due rents, owed by the Seller. The Seller
contributed $300,000 of the required capital. Resorts agreed to contribute the
balance of the $300,000 in exchange for 107,500 shares of the Company's common
stock through NuOasis. According to management of CHL, CHL has incurred
operating losses since opening the Hammamet Casino in 1997. In the event the
transaction is completed, CHL will require significant working capital to fund
operating losses until such time, if ever, CHL becomes profitable.
4 - Marketable Securities
At June 30, 1998, the Company held 2,000,000 shares of Resorts and 880,000
shares of Hartcourt as available-for-sale securities. Through the acquisition of
Oasis III, the Company acquired an additional 3,250,000 shares of Resort's
common stock valued at $350,000.
During fiscal 1999, NuOasis, on behalf of the Company, liquidated 741,872 shares
of the Hartcourt companies for $264,000. In connection therewith, the Company
recorded a loss of $803,000 in fiscal 1999. At June 30, 1999, the Company had a
receivable from NuOasis totaling $264,000 and such amount was paid in fiscal
2000. During fiscal 2000, the Company sold 138,128 shares of Hartcourt for
$199,000, resulting in a gain totaling $1,000. During fiscal 2000, the Company
exchanged its 3,250,000 shares of Resorts for consulting services. The shares of
Resorts were valued at $55,250 upon the exchange, resulting in a loss totaling
$294,750.
As of June 30, 2000, the Company holds 2,000,000 NuOasis shares with an original
cost of $254,000 and a market value at June 30, 200 or $34,000.
F-17
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements (Continued)
5 - Land Held for Development
As discussed in Note 1, Oasis III retained a 20-acre interest in
partially-developed land located in Oasis, Nevada and an option to acquire an
additional 30 acres adjacent to the 20-acre interest. The subject property was
subdivided from a 1100-acre parcel originally purchased on December 27, 1995,
for $1,450,000 by Oasis International Hotel & Casino, Inc. ("OIHC"), a current
shareholder of the Company through the merger of Oasis III on May 1, 1998 (Note
1). The property contains a 6-unit motel and an eight-pump truck stop, including
a cafe and mini store; however, these assets have not been in operation since
1996. Substantial expenditures would have to be made to the property
improvements in order for the property to be operative in its current state.
In December 1998, the Company obtained an independent appraisal valuing the
20-acre parcel at $3.7 million on an "as-is" basis. In connection with the
reverse acquisition (Note 1), the Company valued the property at $3.7 million.
All land-related interest costs incurred subsequent to October 19, 1998, have
been expensed as incurred. In connection with the reverse acquisition, the
Company assumed a $550,000 First Trust Deed Note Payable to an unrelated party
and a Second Trust Deed Note Payable to OIHC totaling $3,450,000 (see Note 7).
6 - Lease deposit
The Company is required to maintain a lease deposit totaling $3 million for the
benefit of the Lessor of the Le Palace Hotel. In fiscal 1998, the Company
pledged 200,000 shares of its common stock as collateral for the required lease
deposit. At June 30, 1999, the value of the underlying securities was $687,000.
The Company charged operations of $313,000 in 1999 as a result of this decline
in value. At June 30, 1999, the Company was deficient in the collateral held for
the lease deposit, and in February 2000, the Company issued 550,000 shares of
its common stock valued at $2,000,000 to provide additional security under the
lease agreement. At June 30, 2000, the value of the Company's common stock held
by CWI for the lease deposit on the Le Palace Hotel declined to $2,040,000.
Based on this impairment, the Company recorded $647,000 as a charge to
operations in fiscal 2000. Subsequent to June 30, 2000, the value of the
Company's common stock declined significantly. Based on the value of such shares
of common stock, the Company may be required to deposit additional collateral.
7 - Notes Payable
In connection with the reverse acquisition of Oasis III on October 19, 1998,
Oasis assumed the $550,000 note payable (See Note 5). The note was due May 11,
1999, with interest-only payments (at an annual rate of 10.0% per annum) of
$4,500 per month. During fiscal 2000, the Company repaid principal totaling
$50,000. The note amounting to $500,000, outstanding at June 30, 2000, is in
technical default is currently due on demand. The holder of the note has not
made a demand for payment. Total interest expense included in operations in
connection with this note in fiscal 2000 and 1999 was approximately $54,000 and
$45,000, respectively.
F-18
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements (Continued)
The Company also assumed a Second Deed of Trust note payable in the amount of
$3.450 million related to the 20-acre parcel payable to OIHC. The term of this
Second Deed of Trust is for 30 years principal and interest payable at 9% per
annum. The Company has been unable to make the required principal payments;
however, the Second Trust Deed holder has waived its rights under the events of
default for a period of one year. The Company's ability to continue to make the
required payments is contingent upon its raising additional capital. The
principal amount outstanding at June 30, 2000, was $3.4 million. Total interest
expense in fiscal 2000 and 1999 was $321,917 and $305,792, respectively related
to this note agreement.
Future annual minimum principal payments of notes payable at June 30, 2000 are
as follows:
Year Ending
June 30 Amounts Due
2001 $ 629,424
2002 30,846
2003 33,740
2004 36,905
2005 40,207
Thereafter $ 3,128,437
8 - Commitments and Contingencies
Leases
CCGL and CWI are lessees under lease agreements related to the Cap Gammarth
Casino and the Le Palace Hotel, respectively, which require annual lease
payments to be made, monthly or quarterly, over their respective terms, which
are 11 to 20 years (also see Note 3). The leases are renewable automatically for
two five-year terms. The Company has not begun operations at the Cap Gammarth
Casino; therefore, this lease is not yet in effect. Upon consummating the lease,
the Company will be required to pay the amounts reflected in the table below.
Management expects the lease to be consummated by December 2000. Future annual
minimum lease payments in each of the next five years and thereafter at June 30,
2000 are as follows:
Amounts Due
Cap
Year Ending Gammarth Le Palace
June 30 Casino Hotel Total
2001 $ 3,000,000 $ 8,046,861 $ 11,046,861
2002 3,000,000 4,007,150 7,007,150
2003 3,300,000 4,287,650 7,587,650
2004 3,600,000 4,587,785 8,187,785
2005 3,900,000 4,908,930 8,808,930
Thereafter 74,700,000 52,872,889 127,572,889
$ 91,500,000 $ 78,711,265 $ 170,211,265
F-19
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements (Continued)
Prior to taking possession of the Cleopatra Cap Gammarth Casino under its lease
agreement, the Company is required to make a lease deposit totaling $1 million.
No rent expense has been included in operations under this arrangement. Total
rent expense included in operations under the Le Palace Hotel lease for the
years ended June 30, 2000 and 1999, was $2.6 million and $2.5 million,
respectively.
Litigation
The Company has been a party to litigation with STTG due to significant delays
in completing the Le Palace Hotel & Resorts. Through June 30, 2000, the Company
has not paid rents to STTG in connection with its lease arrangement. However,
the Company has paid opening costs and purchased equipment totaling
approximately $1.8 million which were the responsibility of STTG. STTG filed a
complaint and received an arbitration award for calendar year lease rental
payments for 1997 and 1998, net of amounts expended by the Company. At June 30,
2000, the Company owed STTG approximately $4.04 million for the net rental
payments under the agreement. Also, see Note 3 for discussion of amounts due to
the Company from STTG.
The Company is subject to claims and suits that arise from time to time out of
the ordinary course of its business. Through June 30, 2000, management of the
Company is not aware of any claims that will have a material impact on the
Company's business, financial condition or results of operations which are not
reflected in the accompanying consolidated financial statements other than the
matter discussed in the preceding paragraph.
9 - Stockholders' Equity (Deficit)
Capital Structure
Effective October 19, 1998, the Company increased its authorized capital stock
from 25,000,000 shares of $0.10 par value common stock to 75,000,000 shares of
$0.001 par value common stock and 25,000,000 shares of $0.001 par value
preferred stock. Each share of the Company was exchanged for one (1) share in
the new corporation. All share amounts have been restated to reflect this
amendment to the Company's Articles of Incorporation. On February 8, 2000, the
board of directors approved a one for five reverse stock split of the Company's
$0.001 par value common stock (Note 2).
Common Stock
As part of the restructuring on July 1, 1998 (Note 3), the Company exchanged
certain shares held by the Company in CPRC with CPL for cancellation of $13
million in notes payable due CPL and transfer of $3 million in notes receivable
from Resorts held by the Company. Since the companies are under common control,
the net effect of this transaction was to capitalize the Company by $13 million
as reflected in the accompanying consolidated statements of stockholders' equity
(deficit) for the year ended June 30, 1999.
On July 1, 1998, the Company also transferred certain shares in CPRC for
cancellation of $1.5 million in notes payable to NuOasis. The reduction of such
obligation with NuOasis is treated as an effective contribution of capital in
the accompanying consolidated statements of stockholders' equity (deficit) for
the year ended June 30, 1999.
F-20
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements (Continued)
As discussed in Note 1, the Company's reverse acquisition caused the 1,563,450
shares of common stock held by NuOasis on October 19, 1998, to be reflected as
outstanding prior to the merger, with the 1,627,255 shares held by the Oasis
shareholders reflected as consideration for the reverse acquisition. The NuOasis
shareholders were issued 1,363,450 shares of the Company's common stock in
connection with the reverse acquisition (Note 1) and 200,000 shares issued in
the exchange for 3,250,000 shares of Resorts (Note 10). The 1,627,255 shares
were valued by the board of directors of the Company at $5.00 per share or $8.1
million, based on the market price of the Company's common stock subsequent to
the close of the transaction.
On November 15, 1999, the Company issued 8,111,240 shares of its common stock in
satisfaction of notes payable to NuOasis valued at $7,000,000 and warrants to
purchase 7,200,000 at $30.00 per share.
On February 5, 2000, the Company issued 550,000 shares of its common stock
valued at Two Million Dollars ($2,000,000) for the Le Palace Hotel lease
deposit.
On April 17, 2000, the Company issued 750,000 shares of common stock valued at
Two Million Two Hundred Fifty Thousand Dollars ($2,250,000) in connection with
its proposed acquisition of CHL. Such shares are subject to forfeiture in the
even the acquisition of CHL is not completed.
See Note 11 for additional stock transactions subsequent to year end.
Common Stock Purchase Warrants
Prior to October 19, 1998, the Company issued options to purchase 200,000 shares
at $0.50 per share and options to purchase 70,000 shares at $30.00 per share.
Such options and warrants expire from July 1, 2001 to July 1, 2003. These
options are currently outstanding and exercisable. On October 19, 1998, the
Company issued warrants to purchase 7,200,000 shares at $30.00 per share. On
November 15, 1999, the Company canceled such warrants to purchase 7,200,000
shares of common stock as part of the extinguishment of notes payable to NuOasis
(Note 1).
F-21
<PAGE>
OASIS RESORTS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements (Continued)
Notes Receivable From Resorts
On June 30, 1998, had Nine Million Dollars ($9,000,000) of notes receivable from
Resorts. During fiscal 1999, the Company received Three Million Dollars
($3,000,000) in value in connection with the restructuring. These notes are due
on demand and bear interest at the rate of 6% per annum. Management has
reflected such notes as a reduction of shareholders' deficit since the original
capitalization was reflected as additional paid-in capital. Management of
Resorts intends to satisfy these notes with in-kind consideration; however it is
unlikely that Resorts will be able to repay the notes. In the event the Notes
are worthless, management will reduce additional paid-in capital.
10 - Related Party Transactions
Director Compensation
Two directors of the Company have entered into agreements which expired
September 30, 1999, but have continued on a month-to-month basis since that
date, which provide for payments of $3,000 per month. No payments have been
made. Included in accounts payable are amounts due such directors of $72,000 at
June 30, 1999. Also see Note 11 below.
See Notes 1, 3, 8, and 9 for additional related party transactions.
11 - Subsequent Events
On December 29, 1999, the Company entered into an agreement with an unrelated
entity to acquire common stock of Virtual Gaming Technology, Inc. ("VGAM") in
exchange for common stock of the Company, the number of shares of which were to
be determined at a later date. On August 31, 2000, the Board of Directors
approved the exchange whereby the Company would issue 4,802,032 shares of its
newly issued common stock for 1,200,508 shares of VGAM. The transaction closed
on August 31, 2000. The Company valued the securities at $4,754,012 based on the
closing price of the Company's common stock on August 31, 2000, less a discount
of 20%, for blockage, since the shares VGAM are thinly traded.
On August 31, 2000, the Company issued 359,515 shares of common stock to
directors and consultants valued at $355,920. Such shares will be registered
under the 1933 Securities Act.
F-22
