SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended July 31, 1998
Commission File No. 0-10315
E-COMMERCE WEST CORP.
(exact name of registrant as specified in its charter)
(formerly Royal Casino Group Inc.)
Utah 95-4091368
(State of Incorporation) (I.R.S. Employee I.D.No.)
152 Sherman St.
Deadwood, SD 57732
(605) 578-1299 Fax (605) 578-1298
Address and telephone of principal executive offices
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par
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:
[x] Yes [ ] No
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the
Securities and Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
[x] Yes [ ] No
The aggregate market value of registrant's voting stock held by non-
affiliates as of the close of business on July 31, 1998 was $1,834,122
8,642,102 shares of registrant's $0.001 par value
common stock were outstanding and issued as
of July 31, 1998
Documents incorporated by reference: None
TABLE OF CONTENTS
PART I PAGE
NUMBER
ITEM 1. BUSINESS............................................. 3
ITEM 2. PROPERTIES........................................... 6
ITEM 3. LEGAL PROCEEDINGS.................................... 6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . 8
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON
STOCK AND RELATED STOCKHOLDER MATTERS................ 9
ITEM 6. SELECTED FINANCIAL DATA.............................. 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS........ 12
ITEM 8. FINANCIAL STATEMENTS................................. 19
NOTES TO FINANCIAL STATEMENTS........................ 27
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES ............. 37
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.................... 38
ITEM 11. EXECUTIVE COMPENSATION.............................. 38
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT ..................................... 41
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS........................................ 41
SUBSEQUENT EVENTS................................... 48
PART IV
ITEM 11. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K............................. 50
SIGNATURE PAGE .................................................... 52
PART I
Item 1. Business
General Development of Business
The Company, which is a Utah Corporation, was originally formed on
March 21, 1981. Since incorporation the Company has undergone several
name, ownership, directional and management changes together with a
reorganization. In January, 1994 the Company changed its name to Royal
Casino Group Inc. Due to prevailing economic conditions pertaining to
the gaming industry coupled with the long-term negative industry outlook,
the Company elected to scale back its gaming operations and enter the E-
Commerce business. In July, 1998 the Company amended its Articles of
Incorporation to change its name to E-Commerce West Corp.
The Company does not have any current revenue streams from
operations. However, revenues are anticipated to commence with the launch
of the Company's first Internet retail Web site which is scheduled to
occur during the Company's 1998/1999 second fiscal quarter.
E-Commerce West Corp. is a publicly traded company whose stock
trades on the NASDAQ Over-The-Counter ("OTC") Bulletin Board under the
symbol "ECOM". The Company currently maintains its principal office at
152 Sherman St, Deadwood, SD 57732. The Company's mailing address is
P.O. Box 545 Deadwood, SD 57732, it's telephone number is (605) 578-1299
and the fax number is (605) 578-1298
Narrative Description of Business
Prior
The Company operated in the gaming industry as Royal Casino Group
since 1994 and changed its name to E-Commerce West Corp. in July, 1998
to reflect a shift in its primary business focus away from gaming to e
Commerce.
The Company, through Atlantic-Pacific Corp., a wholly-owned
subsidiary, owned and operated Goldiggers Hotel & Casino in Deadwood,
South Dakota. The property, which consisted of slots, table games, a
bar, restaurant, hotel rooms and a 13 vehicle transportation system,
closed in January, 1998 and was subsequently liquidated,
The Company has two private, active, wholly-owned subsidiaries,
GoldiggersWest.com and Royal Casino Group; and two dormant
subsidiaries, Atlantic-Pacific Corp., and Goldiggers Southern Nevada,
Inc. Three corporations are incorporated in South Dakota and one in
Nevada.
Current
The Company is in the process of developing its niche Internet retail
web site and intends to attempt to acquire existing privately held
niche Web sites, taking advantage of our status as a public company.
Niche-based web sites are designed to appeal to a target market such as
`Garden.com' which is geared specifically towards gardening
enthusiasts. E-Commerce West intends to own and operate as many niche-
based Web sites as is economically feasible. The Company will seek to
acquire privately held niche web sites which would either be acretive
to earnings or hold the potential to be acretive to earnings primarily
with the introduction of cross-promotions designed to drive traffic to
each web site owned by the Company, thus creating more highly
trafficked web sites collectively than would be when operated
independently. Although it is more difficult to brand several select
sites rather than one large one, the Company believes that the
advantages will accrue through cross-promotion and multiple rewards-
based marketing, in addition to the economies of scale that can be
achieved through centralization of key operating elements.
There are several components to the Internet - from navigation
aggregators (Yahoo, Excite) to commerce enablers (Cybercash,
Doubleclick), from services (Mindspring, PSInet), to software
(Netscape, RealNetworks), from security (Cyberguard, Verisign), to
high-speed solutions (Broadband Technologies), to content providers
(CNET, Mecklermedia). Profitability has been elusive in this area, as
has been acceptability to refined technologies known as the `better
mousetrap syndrome'. Electronic commerce retailers (Amazon, CDNow &
Virtual Vineyards) are what the Company believes are the stable future
of electronic commerce for the very simple reason that people will
choose the easiest and cheapest way to buy and sell goods and services.
This is why the Company has chosen to occupy this particular electronic
commerce arena described above.
Planned Wyatt, Missouri Riverboat Casino & Entertainment Center
E-Commerce West believes it has a significant asset remaining in
gaming. To preserve that asset, the Company formed a new wholly-owned
subsidiary to which it transferred all of its gaming assets including
the name Royal Casino Group. Royal Casino Group has invested a
considerable amount of time and money over the last three plus years in
the planning and development of a riverboat casino entertainment center
on the Mississippi River near Wyatt, Missouri. Royal Casino Group has
an exclusive 25 year agreement with the city, 50 acres of land under
its control and its pending application with the Army Corps of
Engineers for a docking permit. The Company has received a tentative
commitment for debt and equity financing subject to customary terms and
conditions. Over 15,000 vehicles daily pass in view of the location. A
market of 2 million people reside within 100 miles of the site. The
closest competition is a riverboat casino located 50 miles away which
opened in 1993 and generated gross revenues of $84 million in 1997.
"The Royal Missourian" is projected to have gross revenues of $40
million with an EBITDA of $10 million on a total investment of $20
million. The Company is exploring several options from development to
joint-venturing with another gaming entity to a sale of substantially
all the assets of the transaction. Should the Company elect to sell
its interest and at a price satisfactory to the Company then the
proceeds of the sale will be applied to E-Commerce West's e Commerce
business endeavors. The Company has no interest in participating in
Internet gaming.
Research & Evaluation of the Internet to Determine Corporate
Direction
A recent University of Michigan study cited that 70% of people
going online look for product and service information. This
illustrates a strong disposition for commerce. Since then, pent-up
consumer demand for electronic commerce has been demonstrated in
numerous surveys. Consumer studies have been done on the way people
react to banner advertising, how they look at banners as relevant
information events and the way the ads drive them to increasing
transactional behavior.
Since the second quarter of 1997, portal sites have been
repositioned by the web commerce companies who were seeking to use the
portal sites as distribution points. This altered the business model
for the search category and that started to expose tens of millions of
web users to the ability to shop for everything from automobiles to
books to CD's to stocks and mutual funds. A whole range of products
and services became available. Over the course of the last couple of
years, what started out as fledgling company stores and specialty
retailers, has evolved into to category killers (a web site which
dominates a particular category) and upstart new brands which are
giving traditional retail brands significant competition for retail
business on the Internet.
New technologies demand that we learn more about who the
customers are that are actually using these services. This is
important because site studies indicate that 5% of customers are
driving 55% of the transactions and that 5% of the customers are
driving 70% of the `click-throughs' on ads.
The Company realized it couldn't just take a classic business
model, use an approach to doing business with a product or service
design from another category, put it on the Internet and expect it to
succeed. The Company found it's a combination of direct disciplines.
Necessary components are an understanding of branding principals; how
to deal with customer communication; whether or not to take control of
inventory; what the service or product is that provides the `value add'
to the customer; where margin is found within our business combined
with what kind of customers we're going to - a whole variety of
elements that will equal our success.
The Internet has people using the medium to get information which
leads to a purchase. With the whole dynamic accelerating into the new
millennium, companies that master the technique of leveraging the use
of technology to deliver products or services will prosper.
Future
As of September 1, 1998 there were approximately 79 million
Americans and Canadians, 12 million Europeans, 3 million Asians and 3
million Australians using the Internet. When the majority become
comfortable with the security and privacy issues and recognize the
convenience shopping on the Internet provides, the Company expects
revenues will increase dramatically. Once this occurs online retailers
positioned to respond to the demand will be successful, although no
time line can presently be estimated.
The future of `e-tail' on the Internet will be comprised of so
called "category killers" such as Amazon.com, CDNow, and niche
companies such as Virtual Vinyards or Garden.com. Just as television
has evolved from the `Big 3' networks to hundreds of smaller niche
channels offering a vast array of programming choices and
`broadcasting' has become `narrowcasting', the Company believes history
will repeat itself in this new medium, the Internet. The Company
expects that success will be achieved in thousands of Web sites world-
wide offering select goods and services targeted to a specific, and
eager audience although there can be no assurance of the Company's
individual success.
The Company believes the best has yet to come. The fact that
business models can be so compelling is the reason so many have rushed
to the Internet recently in order to build their business and capture
the market today. This equates to profitability and shows that as a
platform for delivery of product and services the Internet is
incredibly viable, particularly for a high-end audience which is well
educated, technologically savvy and deep pocketed.
E-Commerce West is a forward thinking, long-term focused Company.
Possessing management expertise and proven marketing skills and a CEO
with over 30 years experience in successful consumer and business
marketing. The Company will also be technologically advanced to cope
with the demands of being competitive in electronic commerce.
Employees
The Company currently employs three full time employees prior to
the launch of the Company's initial Internet Web site. Once deployed, it
is anticipated the Company will initially employ an additional twelve
persons.
Item 2. Properties
The Company leases approximately 640 square feet for its corporate
headquarters in Deadwood, South Dakota for $400 per month on a lease
through April, 1999. The property is suitable for the current needs of
the Company.
Additionally, the Company's wholly-owned subsidiary, Atlantic-
Pacific, Corp. leased three buildings on Main Street that housed
Goldiggers on a five year lease with four five year options. The
Company has negotiated a complete release in perpetuity of all its past
and future obligations pursuant to this lease.
Item 3. Legal Proceedings
The Company is not involved in any existing law suits, nor is the
Company aware of any pending legal proceedings.
Subsequent to the closing of Goldiggers and as anticipated by the
Company and reported in the Company's January, 1998 Form 10-Q, several
vendors elected to assert their claims in small claims court. The
Company's wholly-owned subsidiary, Atlantic-Pacific Corp., which owned
and operated Goldiggers Hotel & Gaming Est., has four small claims
judgments entered from former trade suppliers totaling less than $4,000.
On February 9, 1998 the owner of the building which housed
Goldiggers filed suit against C. Don Tyner and Reunion Corp. plus Jon
Elliott, Atlantic-Pacific Corp. and Royal Casino Group Inc. seeking
among other things, back rent and property taxes. The Company's
attorneys deposed the property owner who admitted that he never had a
contractual written nor oral agreement with any of Jon Elliott,
Atlantic-Pacific Corp. and Royal Casino Group Inc. and that actually
Atlantic-Pacific, the Company's wholly-owned subsidiary, was a sub-
lessee of his tenant, Reunion Corp. Subsequently, on April 7, 1998 the
property owner dismissed all actions against Jon Elliott, Atlantic-
Pacific Corp. and Royal Casino Group Inc. with prejudice and without
any costs to the defendants.
As previously reported, in July, 1997 the Company settled its
lawsuit with Stephen Grogan. In August, 1996 Stephen Grogan, a former
Officer and Director of the Company sued Royal Casino Group, E-Commerce
West Inc.'s predecessor company, and Jon Elliott, its President seeking
$1 million. The Company sued Stephen Grogan and in the course of such
suit discovered formal documentation from the South Dakota Commission on
Gaming recommending that Stephen Grogan not be given a gaming license.
Solely to avoid the continuous distraction and costs associated with
litigation, the Company, without admitting any wrongdoing, chose to
settle Grogan's suit for less than $75,000, and withdraw their suit. On
October 10, 1997 the Company entered into an Amendment to the Settlement
Agreement previously entered into on July 30, 1997 with Stephen Grogan
calling for an alternate payment schedule. On October 29, 1997 the
Company filed suit against Stephen Grogan in Lawrence County, South
Dakota alleging a breech of the Settlement Agreement and seeking a
declaratory judgment for the remaining portion of the settlement. In
response, Stephen Grogan filed a counterclaim and third party complaint
against the Company and its President, Jon Elliott, alleging that it
was the Company, not Stephen Grogan, who breached the Agreement and
seeking a determination of duties to be performed by both sides under
the agreement. The Company believes the counterclaim and third party
complaint is without merit. On December 18, 1997 Stephen Grogan filed
for personal bankruptcy seeking Chapter 7 liquidation proceedings.
However, two days prior to his filing for bankruptcy, Mr. Grogan's
attorney contacted the Company's transfer agent requesting that 50,000
common shares of Royal Casino Group stock issued to Stephen Grogan be
transferred "immediately" out of Mr. Grogan's name and into his
father's name and one other individual. The Company rejected the
attempted transfer as explicitly counter to provisions contained in the
Settlement Agreement. As a result of Mr. Grogan filing for Bankruptcy,
the Company's action against Mr. Grogan has been stayed. On April 22,
1998 Mr. Grogan was discharged in Chapter 7. Although the bankruptcy
trustee has acquired Mr. Grogan's assets, which include the
aforementioned settlement agreement, and liabilities per the Company's
lawsuit against Mr. Grogan, it is deemed unlikely by the Company that
the matters will be pursued due to the time and cost involved to bring
the actions to resolution.
Conditions of the July, 1997 Settlement Agreement between Stephen
Grogan and the Company called for both sides to dismiss, without
prejudice, their lawsuits against each other. Mr. Grogan's suit
against the Company filed in Colorado was dismissed however, when the
Company attempted to dismiss their lawsuit filed in South Dakota
against Mr. Grogan in November, 1997, Mr. Grogan filed a motion pro se
with the Court seeking to stop the Court from allowing the Company to
dismiss its suit against Mr. Grogan. The Court agreed to defer
dismissal 90 days. The Company believes the filing in the US
Bankruptcy Court for Chapter 7 by Mr. Grogan effectively ends this
action.
Item 4 Submission of Matters to a Vote of Security Holders
On July 17, 1998 security holders representing 51.5% of the total
issued and outstanding number of shares and permitted to vote, executed a
"Written Consent of Shareholders". By resolution adopted by the consent,
all proceedings of the Board of Directors and all actions taken by the
directors and officers of the Corporation since the last shareholder
meeting were ratified and approved in all respects. Additionally, the
officers and directors of the Corporation are indemnified and held
harmless from and against any and all liability for monetary damages
resulting from actions taken, or to be taken, while acting on behalf of
the Corporation within their respective scope of authority.
Further it was resolved to redirect and redefine the Corporation's
business objectives to encompass the development of current and future
business opportunities within the area of e Commerce. Correspondingly,
the consent also approved an Amendment to the Corporation's Articles of
Incorporation changing the name of the Corporation to "E-Commerce West
Corp.".
Further, to consolidate those assets and liabilities directly
related to the Corporation's gaming operations it was resolved that E-
Commerce West subsequently incorporate a wholly-owned subsidiary in the
state of South Dakota to be named "Royal Casino Group" to which it would
transfer any and all assets and liabilities including the name and logo
of "Royal Casino Group" and all contracts entered into by the Corporation
in connection with its gaming activities.
Finally, the officers of the Corporation were authorized and
directed to perform any and all acts, incur all expenses and prepare,
execute and file all such documents and reports as were necessary,
desirable or convenient to effectuate all forgoing resolutions contained
within the consent.
PART II
Item 5. Market for the Registrant's Common
Stock and Related Security-Holder Matters
(a) Market Information. E-Commerce West's common stock is traded
on the NASDAQ Bulletin Board under the symbol "ECOM".
The following table sets forth the high and low bid prices per
share of the Company's Common Stock for the quarters indicated. These
prices represent inter-dealer prices, without adjustment for retail mark-
up, markdown or commissions, and may not necessarily represent actual
transactions.
High Low
1998 Fourth Quarter. . . . . $0.42 $0.08
1998 Third Quarter. . . . . $0.13 $0.08
1998 Second Quarter. . . . . $0.33 $0.11
1998 First Quarter. . . . . $0.57 $0.31
1997 Fourth Quarter. . . . . $0.97 $0.49
1997 Third Quarter. . . . . $0.99 $0.44
1997 Second Quarter. . . . . $0.94 $0.44
1997 First Quarter. . . . . $1.28 $0.66
(b) Holders. The approximate number of holders of record of the
Company's Common Stock as of July 31, 1998 was 2,568
(c) The Company has not paid a cash dividend on its Common Stock
and does not anticipate that it will do so in the foreseeable future.
(d) On January 19, 1998 the Board of Directors passed a motion
extending the exercise date for the Company's Class "B" Warrants to July
26, 1998. On July 14, 1998 the Board of Directors passed a motion
extending the exercise date for the Company's Class "B" Warrants six
months to January 26, 1999, with all other terms and conditions
applicable to the warrants remaining in effect.
Item 6. Selected Financial Data
The selected financial data set forth below should be read in
conjunction with the financial statements and related notes. Balance
sheet information is presented as of the end of the period shown.
The following table summarizes certain audited financial data and
is qualified in its entirety by the more detailed financial statements
included elsewhere herein.
Schedule of Selected Financial Information
for the Year ended July 31,
1998 1997 1996 1995 1994
Net Operating Revenues:
Continuing Operations $0 $0 $0 $0 $0
Loss from continuing
operations ($691,566)($1,239,785)($282,795)($322,899)($39,729)
Loss from continuing
operations per common
share ($0.12) ($0.27) ($0.09) ($0.15) ($0.02)
Cash dividends declared
per common shrae $0 $0 $0 $0 $0
As of July 31,
1998 1997 1996 1995 1994
Total Assets:
Continuing Operations $205,708 $156,923 $913,420 $21 $3,300
Current Liabilities:
Continuing Operations $294,051 $392,703 $158,247 $135,422 $21,044
Long-Term Obligations &
Redeemable Preferred
Stock $2,440,000 $2,440,000 $2,440,000 $0 $0
July 31, 1998
(Audited)
Total Assets ...............................$ 205,708
Total Liabilities...........................$ 430,443
Shareholders' Equity .......................$ (224,635)
Shares Outstanding
Common Stock ................................ 8,642,102
Series A Convertible Preferred Stock ........ 1,100,000
Net Tangible Book Value
Per Share of Common
Stock . . . . . . . . . . . . .$ (0.04)
(1) There are presently outstanding 1,611,842 "B" Warrants which
entitle the holder to purchase one share of Common Stock at a purchase
price of $20 until January 26, 1999. There are presently outstanding
550,000 "C" Warrants which entitle the holder to purchase one share of
Common Stock at a purchase price of $4 until December 31, 2000. This
calculation assumes that none of the aforementioned "B" and "C" Warrants
have been exercised.
Income Taxes:
The Company is current with all its Federal and State Income Tax
filings. The Company does not owe any Federal or State Income Taxes, and
has a net operating loss carryforward of approximately $5,372,703
expiring beginning 2010. However, Atlantic-Pacific Corp., the Company's
subsidiary corporation which owned and operated Goldigger's Hotel and
Gaming, submitted an Offer in Compromise to the Internal Revenue Service
in April, 1998 concerning approximately $100,000 in unpaid payroll taxes.
The Company has been advised that its offer is under review.
Stockholders' Equity
Common Stock:
The Company has 150,000,000 shares authorized, 8,642,102 shares
issued and outstanding. There are presently outstanding 1,611,842 "B"
Warrants which entitle the holder to purchase one share of Common Stock
at a purchase price of $20 until January 26, 1999. The "B" Warrants are
callable by the Company at a purchase price of $0.20 per Warrant.
Additionally, as part of the Company's acquisition of Goldiggers, Casino
Magic Corp. holds 500,000 "C" Warrants which entitle the holder to
purchase one share of Common Stock at a purchase price of $4. until
December, 2000. These Warrants are callable by the Company at a purchase
price of $1. per Warrant. As part of the Company's acquisition of the
Triple J Casino in Henderson, Nevada, since discontinued, the Company
issued 50,000 of the aforementioned $4. "C" Warrants to the seller.
Preferred Stock:
The Company has 100,000,000 shares authorized of which 1,100,000
Class A Preferred are issued and outstanding. The outstanding preferred
stock is convertible by the holder into common shares on a one-for-one
basis, one third each year, beginning in 1997. It may also be redeemed by
the Company at any time, in any number of shares at $3 per share.
Stockholders' Equity
Stock Options:
Under the terms of its nonqualified employee stock option plan the
Company is authorized to establish a plan for up to two hundred and fifty
thousand (250,000) shares of Common Stock pursuant to a resolution of the
Board of Directors and by Amendment of its Certificate of Incorporation
and/or Bylaws. Pursuant to this plan the Company has issued one hundred
and seventy thousand (170,000)options to an officer/director/stockholder.
The options may be exercised at a purchase price of $1.25 per share. The
options expire on December 31, 2003. Additionally, the Company created
options, with an expiration date of December 31, 2003, equating to three
million shares of common stock to an Employee Stock Option Plan. The
Board granted 900,000 options to Jon Elliott, the Company's President and
CEO. The 600,000 options granted to Larry Close, the Company's former
Vice President, were returned to the Plan when Mr. Close elected not to
exercise them within ninety days of leaving the Company per the rules of
the Plan. These options carry an exercise price of $0.60 per share.
Additionally, the Board on the same date authorized the establishment of
500,000 options, each to be exchanged on a one for one common stock
basis, to be offered at the discretion of the President to investors.
These options would be priced at the time granted, at a price above the
then current price of the Company's common shares. Further, that each
option shall be for a period established by the President at the time
they are granted. The common stock issued pursuant to all of the
aforementioned options are restricted under the Securities and Exchange
Commission Rule 144.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion provides information on results of
operations, liquidity, capital resources, and the impact of inflation on
the Company. The financial statements and notes thereto also contain
information that is pertinent to this analysis.
General Financial Condition
The Company has depleted most of its cash resources and does not
possess the collateral to borrow from its lenders. To augment the
revenues of the two currently planned Web sites, the Company is seeking
financing to sustain operations. Current cash on hand is not sufficient
to meet ongoing operating expenses however the Company is optimistic that
financing will be available, although there can be no assurances that
financing in the amount and on terms acceptable to the Company will be
available within the time frame required.
The Company has sustained operations through:
- - a combination of private placements and loans from an officer and
director
- - not paying cash compensation to any officers, directors or employees
- - the Company's limited staff performs multiple tasks that in most
corporations would be handled by a significantly increased number of
employees
- - the majority of the Company's professionals deferred their fees.
Management has taken the following steps to revise its operating and
financial requirements which it believes are sufficient to provide the
Company with the ability to continue in existence:
- - The Company has reduced operating expenses and has no debt other
than payroll taxes and professional fees.
- - The Company is entering the eCommerce arena by launching selected
niche Internet web sites. The internet is a medium that is expected
to experience substantial growth into the next millennium.
- - The Company is optimistic that financing is available for the
Company's future plans through additional debt or equity private
placements, additional notes payable to banks or related parties
(officers, directors or shareholders), or from industry-available
funding sources at market rates of interest, or a combination of
these.
The ability to raise necessary financing will depend on many factors,
including the nature and prospects of any business to be acquired and
the economic and market conditions prevailing at the time financing is
sought.
Results of Operations:
Goldiggers Hotel & Gaming Est.
Throughout the first half of the Company's recently completed
fiscal year the Company continued to fund the deficiencies of Goldiggers
plus the ongoing costs of operation of the Company and the costs incurred
in seeking other gaming opportunities. Although the implementation of
the Company's cost cutting measures resulted in a reduction in year-over-
year operating reductions in excess of $875,000, Goldiggers continued to
lose money due to the decline in gaming revenues in the Deadwood market
coupled with increased competition. The Company determined it had cut
costs to the maximum while still delivering high quality customer
service. Management determined revenues could not be increased.
Consequently to preserve the Company's capital the decision was made to
close Goldiggers on January 5, 1998 and liquidate the assets in an
orderly fashion to pay down the trade debt. The balance of the fiscal
year was devoted to activities related to the closing of Goldiggers
including regulatory issues and audits with the South Dakota Commission
on Gaming, the South Dakota Department of Revenue, Workman's Compensation
and the Nevada Gaming Commission. When Goldiggers closed it owed trade
debt of approximately $197,000; back rent and property taxes of
approximately $215,000; lines of credit and bank debt of approximately
$195,000 and a short term note of approximately $32,000 totaling
approximately $640,000. Since the closing the Company conducted an
orderly sale of Goldiggers assets, the proceeds of which were being
used to pay Goldiggers debts. As of the date of this filing the
outstanding debt has been reduced to approximately $16,000. In addition,
at the time of Goldiggers' closing Royal Casino Group was owed
approximately $415,000. As of the date of this filing that figure has
been reduced to $79,500. As substantially all Goldiggers assets have
been sold it is unlikely that any further pay down of the debt to Royal
Casino Group will occur.
In the third quarter the Company caused an auction of Goldiggers'
furniture, fixtures and equipment in which the Company received
$57,415; sold Deadwood Stage, the Company's transportation system, sold
the Company's real estate and systematically disposed of other
Goldiggers' assets. The proceeds repaid the company's bank in full,
including all interest through to the date of repayment, plus repaid
the short term note in full. On April 15, 1998 Goldiggers sent a
letter to the majority of Goldiggers' trade creditors offering a
settlement in full of 20% of the amount owed. The vast majority of
creditors accepted prior to the deadline of April 30, 1998. Further,
in February the Company negotiated a full release in perpetuity of back
rent and property taxes on the premises previously occupied by
Goldiggers. In the fourth quarter the slot machines were sold. The
Company incurred a loss of $459,886 on the disposal of these assets
As Goldiggers had been a drain on the Company's cash resources,
the closure of the property requires no further demand on the parent
Company's funds and therefore should produce positive long term results
for the Company.
Planned Wyatt, Missouri Riverboat Casino
The Company won a Request for Proposal to develop a riverboat
casino in Wyatt, Missouri. On November 9, 1995 the Company signed a
definitive 25 year Docking and Franchise agreement with the City of
Wyatt, Missouri granting Royal Casino Group the exclusive right to
develop and manage a Riverboat Casino Entertainment Center on the
Mississippi River. The agreement contains five additional five year
renewal periods at Royal's option. Wyatt is located where the states
of Missouri, Illinois & Kentucky meet and is just 20 miles from
Tennessee. The closest operating riverboat casino is Players located
approximately 40 miles away in Metropolis, IL with revenues in excess
of $84M in 1997. Royal's plans, subject to receiving the required
regulatory approvals, call for the development of a Riverboat Casino
Entertainment Complex including a Visitor's Center, a 150 seat buffet
restaurant, lounge, substantial parking area, ticketing booth plus a
Missouri Arts & Craft shop. Land has been accumulated to allow for the
additional development, once successful, of a hotel, RV park,
playgrounds, tennis courts and a performance theater.
Land Lease with Option to Purchase
On March 23, 1996 the Company and a local landowner entered into
a three year lease with an unlimited number of five year renewal
options (at base plus customary CPI adjustments) plus an option to
purchase 50 acres of land directly on the Mississippi River near Wyatt,
Missouri. The term and annual lease payments of $50,000 commence upon
the earlier of the Company beginning construction on the land or the
selection of its gaming application for review by the Missouri Gaming
Commission. The Company has an option for three years to purchase the
land for $300,000 with 50% of the rent paid credited towards the
purchase price. Ten percent of the rental sum due for the initial
three year term will be payable in the Company's restricted common
stock priced at the average ask price of the Company's shares for the
preceding 15 trading days prior to the payment due date. As a condition
of the transaction, the City of Wyatt will annex the property into the
city with the lessor paying the costs associated with this procedure.
Army Corps of Engineers
On June 19, 1998 the Corps issued a 30-day Public Notice
requesting comments from both the public and private sector concerning
the decision to grant a Section 401 water quality certification permit.
The notice expired on July 20, 1998 with two responses. One was not an
issue as it expressed concerns related to potential navigational
hazards on the river and since the riverboat will be permanently
dockside this was a non issue. The other correspondence was from the
Missouri Department of Natural Resources containing comments concerning
the issuance of a Water Certification Permit. All of the points raised
were acceptable to the Company. [See; Subsequent Events]
Additionally, Missouri statutes require the land used for a
riverboat casino development to be located within the city limits of
that community. In July, 1997 the City Council of Wyatt voted to annex
the 50 acres of land which the Company controls into the City of Wyatt.
This proposed annexation has been cumbersome due to the complexities and
variables associated with this procedure. The Company believes this
annexation should be completed during the first quarter of 1999 although
no assurances to this effect can be given as unexpected circumstances may
further delay this procedure.
Once the Company has received its docking permit from the Army
Corps of Engineers and the annexation of the land has been completed,
Royal Casino Group will be equipped to submit its application for
licensing to the Missouri Gaming Commission. Royal will have a
complete package comprised of an exclusive 25-year definitive agreement
with the City of Wyatt; sufficient land to adequately develop the
Riverboat Casino Entertainment Center; governmental and regulatory
docking approval on its site; preliminary architectural drawings; an
available, suitable riverboat together with demonstrable financing
capabilities. Licensing is solely at the discretion of the Missouri
Gaming Commission and there can be no assurances that Royal, should the
Company apply, will be selected for review and if selected will gain
approval.
Discontinued Oklahoma Racetrack Casino Project
For several months the Company had been working towards the
acquisition of Blue Ribbon Downs, an active horse racing facility
located on Interstate 40 in Sallisaw, Oklahoma. In January, 1998 the
Company made a proposal, which was accepted in principle, to acquire
all of the stock in the racetrack's parent company. The offer was
contingent upon the passage by referendum of an initiative which would
add a new measure to the State of Oklahoma's constitution approving
casino gaming. The aforementioned ballot measure was defeated in a
special state election on February 10, 1998. Pursuant to the terms of
the Company's offer to acquire all the outstanding shares of the parent
company of the racetrack, since the results of the election ensured
there would be no casino gaming for the foreseeable future, the
Company's offer was withdrawn.
Discontinued Aruba Casino Project
In August, 1997 the Company commenced negotiations to acquire the
Aruban corporation that operates the Palm Casino in the Aruba Palm
Beach Hotel on the Caribbean resort island of Aruba. Although the
Company was comfortable with the terms and conditions of the
acquisition, the Company was unable to raise the necessary funds to
acquire and operate the casino prior to the need by the property's
operator to enter into an agreement with another gaming company.
Selected Data for Management Analysis
July 31,
Change Change
1998 1997 97 to 98 1996 96 to 97
Components of G&A
Professional fees $225,151 $388,353 ($163,202) $200,611 $187,742
Advertising $150 $2,422 ($2,272) $24,000 ($21,578)
Auto Expense $12,294 $20,562 ($8,268) $0 $20,622
Insurance $3,654 $2,622 $1,032 $0 $2,622
Employee benefits $4,107 $0 $4,107 $0 $0
Office Expense $19,527 $19,803 ($276) $7,990 $11,813
Rent $9,273 $7,023 $2,250 $425 $6,598
Salaries/Wages $199,542 $306,250 ($106,708) $9,375 $296,875
Telephone $10,885 $17,013 ($6,128) $6,531 $10,482
Travel $18,860 $29,818 ($10,958) $21,455 $8,363
Gaming applications $0 $22,988 ($22,988) $0 $22,988
Other $89,550 $54,875 $34,675 $9,057 $45,818
$592,993 $871,729 ($278,736) $279,444 $592,285
Other Income/Expense
Interest income $2,013 $411 $1,602 $411
Interest expense ($14,421) ($6,435) ($7,986) ($6,561) $126
Other expense ($77,760) 77,760 ($77,760)
Loss on abandoned
projects ($93,377)($276,172) $202,795 $3,310 ($299,482)
Other $7,312 $12,000 ($4,688) $12,000
Total other ($98,473)($367,956) $269,483 ($3,251)($364,705)
In comparing the fiscal years 1996 and 1997 please note that prior to
June 13, 1996 when the company acquired its operating property,
Goldiggers, it had no revenues. Therefore, fiscal year 1996 reflected
only 48 days of revenues. The Company operated Goldiggers throughout all
of fiscal 1997 which explains the revenue and corresponding expense
increases. The Company closed Goldiggers permanently in the fifth month
of fiscal 1998 which explains the lower revenues during this year.
Consequently, general and administrative expenses fluctuated accordingly.
Professional fees went from $200,611 in 1996 to $388,353 in 1997 as a
revenue generating entity then down to $255,151 as a discontinued entity;
salaries moved from $9,375 when the Company was absent of revenues in
1996 to $306,250 when operating as a revenue generating organization in
1997 decreasing to $225,151 when revenue producing for approximately one
half a year in 1998 while gaming applications went from $0 to $22,988 and
back to $0 in 1996, 1997 and 1998 respectively and telephone expense went
from $6,531 in 1996 to $17,013 in 1997 and back down to $10,885 in 1998.
Revenues
At the time of this filing the Company does not have any revenues
as the Company's sole source of revenues was from Goldiggers which closed
in January, 1998. The Company does anticipate revenues within the
current fiscal year to be derived form its Internet niche Web sites
although there can be no assurances as to the amount of revenues or if
the revenues will be sufficient to satisfy ongoing corporate operating
expense.
Direct Expenses
The Company's direct expenses throughout the year have been made
from cash on hand plus loans from time to time from its President/CEO.
Current finances are strained by an insufficient cash supply. The
Company is optimistic that the financing the Company requires to sustain
operations will be attainable on terms and conditions acceptable to the
company although there can be no assurances that such financing will be
available.
Consulting Fees
The Company retained Fordham Consultants of Denver, Colorado as an
expert witness during the course of its previously mentioned litigation
with Stephan Grogan for $2,188. As previously mentioned, the Company
retained the following as consultants at various times during the
recently ended fiscal year:, Arthur Lovett, Ron Island, Dan French, Deb
Berg, Gaming Venture Corp., Mainstream Consultants, and WWWServices. [See
Subsequent Events]
In this fiscal year, the Company expensed $73,238 in consulting
fees vs. $160,544 in the previous fiscal year. Of this amount $71,050
was paid in S-8 stock with the balance of $2,187 paid in cash. In the
fourth quarter $14,625 was paid in S-8 stock and zero was expensed in
cash.
Equipment Rental, Overhead, Rent, Support Services
The Company rents approximately 640 square feet of office space for
its corporate headquarters for $400 per month on a lease through April,
1998. The Company's general and administration expenses have been paid
from cash reserves. Support services have been compensated by cash from
the Company's cash on hand and/or through the issuance of shares of the
Company's common stock.
The Company's lease for its corporate headquarters' office space
expired in April. The Company entered into a new one year lease
utilizing approximately half the space previously occupied at a reduced
rental of $400 per month.
Impact Of Inflation Upon The Company
Inflation has not impacted, nor would it be expected to have an
impact upon the Company.
Repayment of Outstanding Debt
From September 16, 1997 through October 9, 1997 the Company sold
its shares of Gaming Venture USA, Inc. in open market transactions
resulting in proceeds of $ 38,004.11 and a profit of $8,004.11. The
proceeds were used to repay the $30,000 loaned to Royal Casino Group in
July, 1997 by Gaming Venture Corp. USA.
The $30,000 loan due September 8, 1997 was extended by the lender
and repaid in full including all interest due on March 20, 1998.
The Company has spent the last two fiscal quarters working
towards the repayment of Atlantic-Pacific's corporate debt incurred
through Goldiggers. When Goldiggers closed on January 5, 1998
outstanding debt was approximately $640,000 not including monies
advanced and owed to Royal Casino Group. As of the date of this filing
the remaining amount owed is approximately $14,000.
New Line of Business
As of the date of the filing of the Form 10-K the Company was
developing two niche retail Web sites, the first www.echristmastrees.com
launched in mid-November, 1998 and operated for approximately 30 days as
a seasonal site. The purpose in operating this site was to garner
experience in electronic commerce, Internet advertising, marketing,
promotion and product fulfillment with a time-sensitive product. The
Company's second niche retail Web site is scheduled to launch by the end
of the first quarter of 1999. The Company is progressing methodically,
eliminating potential problems as it develops what will be the Company's
first year round Web site. As the Company continues to develop this site
it continues to add additional suppliers in an effort to enhance the
overall appeal of the site and expand its market reach. As this site
will offer over 30,000 individual product combinations, the site will
take approximately six months to take live. The above information was
added to the document.
Liquidity and Capital Resources
As of July 31, 1998, the Company had cash and cash equivalents
totaling $71,615 and a working deficit of $257,608. Since inception, we
have financed our operations primarily through private offerings of
equity and debt securities.
Net cash used in continuing operating activities was $208,403 and
$811,918 for the years ended July 31, 1998 and 1997, respectively. The
decrease in net cash used in operating activities was primarily
attributable to a decrease in prepaid expenses and other current assets
primarily attributable to the Company's not having to prepay an annual
South Dakota Gaming Commission device fee.
Net cash provided by (used in) investing activities was ($8,180)
and $20,361 for the years ended July 31, 1998, 1997, respectively. Net
cash used in investing activities consisted primarily of purchases of
property and equipment and sales of marketable securities.
The Company expects cash flows from operating activities to
continue to be negative over the next year. Depending on the success of
the Company's efforts to develop its web-sites, management believes that
the Company's present working capital may need to be supplemented to
support the Company's operations over the next 12 months. Additional
working capital may be sought through additional debt or equity private
placements, additional notes payable to banks or related parties
(officers, directors or shareholders), or from industry-available funding
sources at market rates of interest, or a combination of these. The
ability to raise necessary financing will depend on many factors,
including the nature and prospects of any business to be acquired and the
economic and market conditions prevailing at the time financing is
sought. No assurances can be given that any necessary financing can be
obtained on terms favorable to the Company, or at all.
Item 8 Financial Statements and Supplementary Data.
E-COMMERCE WEST CORP.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
JULY 31, 1998 AND 1997
E-COMMERCE WEST CORP. AND SUBSIDIARIES
CONTENTS
July 31, 1998
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 21
FINANCIAL STATEMENTS
Consolidated Balance Sheet 22
Consolidated Statements of Operations 23
Consolidated Statements of Shareholders' Equity (Deficit) 24
Consolidated Statements of Cash Flows 25 - 26
Notes to Consolidated Financial Statements 27 - 36
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
E-Commerce West Corp. and subsidiaries
We have audited the accompanying consolidated balance sheet of E-Commerce
West Corp. (a Utah corporation) and subsidiaries as of July 31, 1998 and the
related consolidated statements of operations, shareholders' equity
(deficit), and cash flows for each of the two years in the period ended July
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of E-Commerce West
Corp. and subsidiaries as of July 31, 1998, and the consolidated results of
their operations and cash flows for each of the two years in the period ended
July 31, 1998 in conformity with generally accepted accounting principles.
The accompanying financial statements for the year ended July 31, 1998 have
been prepared assuming that the Company will continue as a going concern. As
discussed in Note 2 to the financial statements, the Company's recurring
losses from operations and limited capital resources raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 2. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
November 8, 1998
E-COMMERCE WEST CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
July 31, 1998
ASSETS
Current assets
Cash and cash equivalents $71,615
Accounts receivable 2,930
Note receivable - officer 9,000
Notes receivable 51,000
Prepaid expenses and other assets 38,290
Total current assets 172,835
Property and equipment, net 32,873
Other assets -
Net assets of discontinued operations -
Total assets $205,708
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Notes payable $ -
Accounts payable 153,803
Accrued liabilities 140,248
Net liabilities of discontinued operations 136,392
Total current liabilities 430,443
Commitments and contingencies
Shareholders' deficit
Preferred stock, $.001 par value, 100,000,000 shares authorized
Series A Convertible preferred stock 1,100,000 shares issued
and outstanding 1,100
Series B Convertible preferred stock no shares issued
and outstanding -
Common stock, $.001 par value 150,000,000 shares authorized
8,642,102 shares issued and outstanding 8,642
Additional paid-in capital 5,856,840
Accumulated deficit (6,091,217)
Total shareholders' deficit (224,635)
Total liabilities and shareholders' deficit $ 205,708
E-COMMERCE WEST CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended July 31,
1998_____ 1997____
Selling, general, and administrative expenses $ 592,993 $ 871,729
Loss from operations (592,993) (871,729)
Other income (expense)
Interest income 2,013 411
Interest expense (14,421) (6,435)
Other expense - (77,760)
Gain on sale of assets 7,312 -
Loss on abandoned projects (93,377) (296,172)
Total other income (expense) (98,473) (367,956)
Loss from continuing operations before
provision for income taxes (691,466) (1,239,685)
Provision for income taxes 100 100
Net loss from continuing operations (691,566) (1,239,785)
Discontinued operations
Loss from operations (304,867) (608,534)
Loss on disposition of operations (1,394,169) -
Net loss from discontinued operations 1,699,036 (608,534)
Net loss $(2,390,602) $(1,848,219)
Basic loss per share
From continuing operations $ (0.12) $ (0.27)
From discontinued operations (0.28) (0.13)
Total basic loss per share $ (0.40) $ (0.40)
Weighted-average common shares outstanding 6,052,413 4,671,182
<TABLE>
E-COMMERCE WEST CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
For the Years Ended July 31,
<CAPTION>
Preferred Stock Additional
Series A Series B Common Stock Paid-in Accumulated
Shares Amount Shares Amount Shares Amount Capital Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, July 31, 1996 1,000,000 $ 1,000 - $ - 4,334,959 $ 4,335 $5,088,767 $(1,852,297) $3,241,805
Issuance of preferred stock 100,000 100 49,900 50,000
Issuance of common stock
for services rendered and
compensation 778,806 779 384,472 385,251
Sale of common stock 50,000 50 49,950 50,000
Net loss (1,848,419) (1,848,419)
Balance, July 31, 1997 1,100,000 1,100 - - 5,163,765 5,164 5,573,089 (3,700,715) 1,878,638
Issuance of restricted
common stock for services
rendered and compensation 3,170,832 3,171 133,162 136,333
Issuance of common stock
for services rendered
and compensation 507,505 507 150,589 151,096
Common shares returned by
an officer and canceled (200,000) (200) (200)
Net loss (2,390,602)(2,390,602)
Balance, July 31, 1998 1,100,000 $ 1,100 - $ - ,642,102 $ 8,642 $5,856,840 $(6,091,217) $ 224,635)
</TABLE>
E-COMMERCE WEST CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended July 31,
1998 1997
Cash flows from operating activities
Net loss from continuing operations $ (691,566) $(1,239,785)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 5,416 7,107
Issuance of stock for services rendered
and compensation 287,229 385,251
Provision for loss on doubtful accounts 46,314 -
(Increase) decrease in
Accounts receivable (44,109) 5,000
Prepaid expenses and other assets 162,040 (134,254)
Increase (decrease) in
Accounts payable 48,700 35,143
Accrued liabilities (22,427) 129,620
Net cash used in continuing operating activities (208,403) (811,918)
Net cash provided by (used in)
discontinued operating activities 412,659 (302,692)
Cash flows from investing activities
Sale of marketable securities - 38,004
Acquisitions of property and equipment (8,180) (17,643)
Net cash provided by (used in) investing
activities (8,180) (20,361)
Cash flows from financing activities
Issuance of preferred stock - 50,000
Borrowings under notes payable - 81,393
Payments on notes payable (125,025) -
Issuance of common stock - 50,000
Net cash provided by (used in)
financing activities (125,025) 181,393
Net increase (decrease) in cash and cash
equivalents $ 71,051 $ (912,856)
Cash and cash equivalents, beginning of year 564 913,420
Cash and cash equivalents, end of year $ 71,615 $ 564
E-COMMERCE WEST CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
For the Years Ended July 31,
Supplemental schedule of non-cash investing and financing activities
1998 1997
Option acquired by issuance of common stock $ - $ 75,000
Equipment acquired under capital lease $ - $ 46,450
E-COMMERCE WEST CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998
NOTE 1 - NATURE OF BUSINESS AND BASIS OF PRESENTATION
The Company, which is a Utah corporation, was originally formed on
March 21, 1981. Since incorporation the Company has undergone several
name, ownership, incorporation and management changes together with a
reorganization. In January 1994 the Company changed its name to Royal
Casino Group, Inc. Due to prevailing economic conditions pertaining to
the gaming industry coupled with the long-term negative industry
outlook, the Company elected to scale back its gaming operations and
enter the eCommerce business. In July 1998 the Company amended its
Articles of Incorporation to change its name to E-Commerce West Corp.
The Company's subsidiary, Atlantic-Pacific Corporation, operated a
limited stakes gaming establishment and hotel in Deadwood, South Dakota
under the name of Goldiggers Hotel and Gaming Establishment
("Goldiggers"). Goldiggers was acquired by the Company on June 13,
1996 (see Note 5.) The financial statements as of July 31, 1996
reflect activity from June 13, 1996 to July 31, 1996.
NOTE 2 - REALIZATION OF ASSETS
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles which assume that the
Company will continue as a going concern. However, during the year
ended July 31, 1998, the company incurred a net loss of $2,390,602.
Recovery of the Company's assets is dependent upon future events, the
outcome of which is indeterminable. In addition, the Company's
attainment of profitable operations is dependent upon obtaining
adequate financing to support its expansion activities and achieving a
level of revenues adequate to support the Company's cost structure. In
view of these matters, realization of a major portion of the assets in
the accompanying balance sheet is dependent upon the Company's ability
to meet its financing requirements.
Management has taken the following steps to revise its operating and
financial requirements which it believes are sufficient to provide the
Company with the ability to continue in existence:
? The Company has reduced operating expenses and has no debt other than
payroll taxes and professional fees.
? The Company is entering the eCommerce arena by launching selected niche
Internet web sites. The Internet is a medium that is expected to
experience substantial growth into the next millennium.
? The Company is optimistic that financing is available for the Company's
future plans due to the succession of financing the financial community
has placed in other eCommerce related enterprises, including start-ups.
E-COMMERCE WEST CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998
NOTE 3 - DISPOSAL OF OPERATIONS
As of January 31, 1998, the Company and its board of directors shut
down its gaming establishment and hotel in Deadwood, South Dakota. As
a result, the gaming establishment and hotel operations are accounted
for as discontinued operations and, accordingly, its operations are
reported in this manner for all periods presented. For 1998, all
assets and liabilities of discontinued operations are presented as net
liabilities of discontinued operations and for 1997, all assets and
liabilities of discontinued operations are presented as net assets of
discontinued operations in the consolidated balance sheets. Included
in loss from discontinued operations are the gaming establishment and
hotel total revenues of $678,529, $1,785,133 and $395,895 and the net
loss from operations of $260,598, $611,942, and $397,675 for the years
ended July 31, 1998, 1997, and 1996, respectively. Given the Company's
losses and discontinued operations' historical losses, there is no tax
effect on the disposition of the operations.
The following is a summary of net assets from discontinued operations:
1998 1997___
Current assets - $ 431,855
Property, plant, and equipment - 2,247,576
Other assets - 19,116
Current liabilities (136,392) (539,455)
Long-term liabilities - (44,674)
Net assets (liabilities)
from discontinued operations $ (136,392) $ 2,114,418
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of E-
Commerce West Corp. and its wholly-owned subsidiaries, Atlantic-Pacific
Corporation, Goldiggers Southern Nevada, Inc., Royal Casino Group, Inc.
and GoldiggersWest.Com Corp. All material intercompany balances and
transactions have been eliminated in the consolidation.
E-COMMERCE WEST CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 disclosures 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.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
highly liquid investments purchased with original maturities of three
months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation and
amortization are provided using the straight-line method over the
estimated useful lives as follows:
Purchased software 3 years
Furniture and equipment 5 to 7 years
Leasehold improvements 10 years
Maintenance and minor replacements are charged to expenses as incurred.
Expenditures which materially extend the useful lives of capital assets
are capitalized.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the year
in which those temporary differences are expected to be recovered or
settled. Reserves for deferred tax assets are recorded when ultimate
recovery of such assets is deemed uncertain.
Impairment of Long-Lived Assets
The Company reviews its ling-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of the
assets to future net cash flows expected to be generated by the assets.
If the assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of
the assets exceeds the fair value of the assets. To date, no
impairment has occurred.
E-COMMERCE WEST CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recently Issued Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income," is effective for financial statements
with fiscal years beginning after December 15, 1997. SFAS No. 130
establishes standards for reporting and display of comprehensive income
and its components in a full set of general-purpose financial
statements. The Company does not expect adoption of SFAS No. 130 to
have a material effect, if any, on its financial position or results of
operations.
Recently Issued Accounting Pronouncements (Continued)
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," is effective for financial statements with fiscal years
beginning after December 15, 1997. This statement establishes standards
for the way that public entities report selected information about
operating segments, products, and services, geographic areas, and major
customers in interim and annual financial reports. The Company does not
expect adoption of SFAS No. 131 to have a material effect, if any, on
its financial position or results of operations.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Post-
Retirement Benefits," was issued in February 1998. This statement is
not applicable to the Company.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," is effective for financial statements with fiscal years
beginning after June 15, 1999. SFAS No. 130 establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging
activities. The Company does not expect adoption of SFAS No. 133 to
have a material effect, if any, on its financial position or results of
operations.
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after
the Securitization of Mortgage Loans Held for Sale by a Mortgage
Banking Enterprise," was issued in October 1998. This statement is not
applicable to the Company.
Earnings per Share
The Company reports earnings per share in accordance with SFAS No. 128,
"Earnings per Share." Basic earnings per share is computed by dividing
income available to common stockholders by the weighted-average number
of common shares available. Diluted earnings per share is computed
similar to basic earnings per share except that the denominator is
increased to include the number of additional common shares that would
have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive. Diluted earnings
per share are not presented for 1998, 1997 and 1996 because common
stock equivalents are anti-dilutive.
E-COMMERCE WEST CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Reclassifications
Certain reclassifications have been made to conform prior period
amounts to the current year presentation.
NOTE 5 - ACQUISITION OF ATLANTIC-PACIFIC CORPORATION
On June 13, 1996, the Company completed a transaction to buy all of the
outstanding common stock of Atlantic-Pacific Corporation, a South
Dakota gaming corporation, from Casino Magic Corporation. In exchange,
the Company delivered to Casino Magic Corporation 1,000,000 shares of
the Company's Series A convertible preferred stock, a Series C warrant
to acquire 500,000 shares of the Company's common stock at an exercise
price of $4.00 per share (see Note 9), and $1,000 in cash. This
transaction was recorded using the purchase method of accounting in the
amount of $2,537,427.
NOTE 6 - PROPERTY AND EQUIPMENT
Property and equipment at July 31, 1998 consisted of the following:
Purchased software $ 8,000
Furniture and equipment 37,396
45,396
Less accumulated depreciation and
amortization 12,523
Total $ 32,873
NOTE 7 - ACCRUED LIABILITIES
Accrued liabilities at July 31, 1998 consisted of the following:
Accrued payroll, benefits, and taxes $ 100,014
Accrued legal settlement 40,000
Income taxes payable 100
Other 134
Total $ 140,248
E-COMMERCE WEST CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998
NOTE 8 - INCOME TAXES
The current provision for income taxes is the minimum tax due to the
state of South Dakota. The components of the Company's net deferred
taxes as of July 31, 1998 are as follows:
Deferred tax assets
Net operating loss carryforward $1,692,395
Outside services paid with restricted stock 54,840
Officer compensation in restricted stock 81,911
Total deferred tax assets 1,829,146
Deferred tax liabilities
Property and equipment (2,427)
Valuation allowance 1,826,719
Net deferred taxes $ -
The Company has established a valuation allowance based on a number of
factors which impact the likelihood the deferred tax assets will be
recovered, including the Company's history of operating losses. Based
upon a weighting of all available evidence, management believes that
there is no basis to project significant United States-sourced taxable
income. Therefore, it is more likely than not that the deferred tax
assets will not be realized, and a full valuation allowance has been
established. The net change in the valuation allowance for the year
ended July 31, 1998 was an increase of $806,597.
As of July 31, 1998, the Company had a federal net operating loss
carryforward of $5,372,703. This carryforward, if unused, begins to
expire in 2010.
The overall effective tax rate differs from the federal statutory tax
rate of 34% due to operating losses not providing benefit for income
tax purposes.
E-COMMERCE WEST CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998
NOTE 9 - SHAREHOLDERS' EQUITY
Preferred Stock
The Company has 100,000,000 authorized shares of preferred stock.
1,100,000 shares were designated as Series A Convertible preferred
stock ("Series A Convertible") at July 31, 1998 and 1997. 1,000,000
shares were designated as Series B Convertible preferred stock ("Series
B Convertible") at July 31, 1998 and 1997.
The Series A Convertible is redeemable only by the Company, is non-
dividend bearing, and is convertible at the option of the holder into
shares of common stock over a three-year period as defined. Upon
liquidation of the Company, holders of Series A Convertible shall be
entitled to receive $3 in cash from the assets of the Company for each
share held. Effective August 1, 1996, the Company amended its articles
of incorporation to change the par value of its Series A Convertible
from no par to $0.001 par value per share. The accompanying financial
statements have been restated to reflect the new par value for all
periods presented. The Company had 1,100,000 shares of the Series A
Convertible issued and outstanding at July 31, 1998 and 1997.
The Series B Convertible is redeemable only by the Company and is non-
dividend bearing. The Company had no shares issued and outstanding of
the Series B Convertible at July 31, 1998 and 1997, respectively.
Common Stock
The Company has 150,000,000 shares authorized and 8,642,102 and
5,163,765 shares issued and outstanding at July 31, 1998 and 1997,
respectively. Effective August 1, 1996, the Company amended its
articles of incorporation to change the par value of its common stock
from no par to $0.001 par value per share. The accompanying financial
statements have been restated to reflect the new par value for all
periods presented.
During the year ended July 31, 1998, the Company issued 3,145,832
shares of its restricted common stock to the President of the Company
for compensation at $0.04 per share, and issued 25,000 shares of its
restricted common stock for services rendered at $0.42 per share.
During the year ended July 31, 1998, the Company issued 25,000 shares
of its common stock to an employee for compensation at $0.44 per share,
and issued 482,505 shares of its common stock for services rendered at
prices ranging from $0.10 to $0.44 per share.
Warrants
During the year ended July 31, 1996, 1,079,901 Series A warrants were
exercised. These warrants entitled the holder to purchase one share of
common stock at a purchase price of $1. Approximately 592,000
unexercised Series A warrants expired July 26, 1996. There were no A
warrants issued and outstanding at July 31, 1998.
E-COMMERCE WEST CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998
NOTE 9 - SHAREHOLDERS' EQUITY (Continued)
The Company had 1,611,842 Series B warrants issued and outstanding at
July 31, 1998 and 1997. These warrants entitle the holder to purchase
one share of common stock at a purchase price of $20 and are callable
by the Company for $0.20 per warrant. The Company has extended the
expiration date of the Series B warrants from July 26, 1996 to January
26, 1999.
During the year ended July 31, 1997, the Company issued 50,000
additional Series C warrants. These warrants entitle the holder
to purchase one share of common stock at a purchase price of $4. The
Series C warrants are callable by the Company for $1 per warrant and
expire on December 31, 2000.
Options
Under the terms of its nonqualified employee stock option plan, the
Company is authorized to establish a plan for up to 250,000 shares of
common stock. Pursuant to this plan, the Company has issued 170,000
options to an officer/director/shareholder. The options may be
exercised at a purchase price of $1.25 per share. During the year
ended July 31, 1997, the expiration date was extended from January 31,
1999 to December 31, 2003.
During the year ended July 31, 1997, the terms of the Company's
nonqualified stock option plan were modified to authorize the Company
to issue 3,000,000 options at a price that is above the market price on
the grant date. Pursuant to the plan, at July 31, 1998, the Company
had issued 1,518,000 options to its officers/directors/shareholders and
to a consultant. The options may be exercised at a purchase price from
$0.60 to $0.88 per share and expire on December 31, 2003.
During the year ended July 31, 1997, the Company was also authorized to
issue 500,000 options to investors as an inducement. The options will
be issued at a price above the then current market price and shall be
for a period established at the time they are granted. At July 31,
1998, none of these options had been issued.
The following table summarizes certain information relative to stock options:
Weighted Avg.
Option Exercise
Shares Price Price
Balance, July 31, 1996 170,000 $ 1.25 $ 1.25
Granted 1,518,000 $0.60-0.88 $ 0.60
Balance, July 31, 1997 1,688,000 $0.60-1.25 $ 0.69
Granted - $ - $ -
Balance, July 31, 1998 1,688,000 $0.60-1.25 $ 0.69
E-COMMERCE WEST CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998
NOTE 9 - SHAREHOLDERS' EQUITY (Continued)
Options (Continued)
The weighted-average life of the options outstanding and exercisable at
July 31, 1998 is 53 months. Options available for future grant at July
31, 1998 were 2,062,000.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no
compensation cost other than that required to be recognized by APB 25
for the difference between the fair value of the Company's common stock
at the grant date and the exercise price of the options has been
recognized. Had compensation cost for the Company's stock option plan
been determined based on the fair value at the grant date for awards in
1998 consistent with the provisions of SFAS No. 123, the Company's net
loss and loss per share would have been increased to the pro forma
amounts indicated below:
For the Years Ended
July 31,
1998 1997
Net loss as reported $(2,390,502) $(1,848,419)
Net loss, pro forma $(2,390,502) $(2,118,419)
Basic loss per share as reported $ (0.40) $ (0.40)
Basic loss per share, pro forma $ (0.40) $ (0.45)
The fair value of each option grant is estimated on the date of the
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1997:
Risk free interest rate 5.9%
Expected life 1.5 years
Expected volatility 65%
Expected dividends $0
NOTE 10 - COMMITMENTS AND CONTINGENCIES
Leases
On November 9, 1995, the Company signed a definitive 25-year docking
and franchise agreement with the city of Wyatt, Missouri granting the
Company the exclusive right to development and manage a riverboat
casino entertainment center on the Mississippi River. On March 23,
1996, the Company entered into a three-year lease plus renewal options
for land on the Mississippi River near Wyatt, Missouri. Payments under
the lease will be required only if the Company begins construction or
if the Missouri Gaming Commission selects the Company for gaming
license review. In the event that one of these conditions is met, the
Company will be required to pay lease payments of $50,000 annually.
E-COMMERCE WEST CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998
NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued)
Litigation
The Company is involved in certain legal proceedings and claims which
arise in the normal course of business. Management does not believe
that the outcome of these matters will have a material adverse effect
on the Company's consolidated financial position or results of
operations.
NOTE 11 - RELATED PARTIES
The Company has a note receivable outstanding for $9,000 from an
officer/director/shareholder of the Company as of July 31, 1998. The
note earns interest at 9% and had an initial maturity date of April 9,
1997 which was extended to January 9, 1998. This note is currently
due.
Item 9. Changes in and Discussions with Accountants on
Accounting and Financial Disclosure.
Dismissal of Auditors
At a Board of Directors meeting on August 8, 1997 the Board
dismissed Arthur Andersen LLP as the Company's auditors. A Form 8-K
stating that event was filed on August 12, 1997, a copy of which is
included as an exhibit to this report. [See: Exhibits]
Appointment of Auditors
At a Board of Directors meeting on October 20, 1997 the Board
selected Singer, Lewak, Greenbaum & Goldstein, LLP, a regional accounting
firm based in Los Angeles, California, as its auditors. A Form 8-K
stating this event and that there were no disagreements with the previous
auditors was filed on October 24, 1997 a copy of which is included as an
exhibit to this report. [See: Exhibits]
PART III
Item 10. Directors and Executive Officers
of the Registrant
The names of the directors and executive officers of the Company
and certain information about them is set forth below:
Directors and Executive Officers
The Directors and Executive Officers of the Company, their
positions and ages are as follows:
Name Age Position
Jon F. Elliott 51 President, Chief Executive
Officer & Chairman of the
Jon F. Elliott, President & Chief Executive Officer - As President of
the Company Mr. Elliott will oversee all corporate matters pertaining to
the development and operation of the Company. In addition to having a
background in gaming, television production and broadcasting, Mr. Elliott
has 17 years of management, marketing and franchise skills.
Mr. Elliott's employment history is as follows:
1993 to Present - Founder, President, Chief Executive Officer and
Chairman of the Board, E-Commerce West. President, Secretary and a
Director of the Company's wholly-owned subsidiaries.
Appointments and Resignations to the Board of Directors
On March 30, 1998 Larry Close, the Company's Vice President of
Gaming, Secretary and a Director and an Officer, Director and Secretary
of the Company's subsidiary companies resigned from all the
aforementioned positions. Mr. Close stated in his resignation letter
to the Company's President and Chief Executive Officer that his
resignation was in order to pursue other employment opportunities. The
parting was on an amicable basis as the Company acknowledged Mr.
Close's contributions to the Company due to his 25 years of experience
in the gaming industry and wished him the very best in the future.
This move was expected by the Company as Mr. Close had not received his
salary since June, 1997 due to the Company's application of funds to
sustain operations rather than paying executive salaries, and Mr.
Close's move back to Reno from Deadwood in September, 1997. As of the
date of the filing of this report Mr. Close's seat on the board has not
been filled. [See Exhibits]
Item 11. Executive Compensation
Pursuant to Management Agreements approved and signed by the
Board of Directors, Jon Elliott and Larry Close, the Company's two
senior executive officers were to receive annual salaries of $140,000
and $115,000 respectively in the Company's fiscal year August 1, 1997 to
July 31, 1998. Larry C. Close the Company's Vice President of Gaming
left the Company at the end of September, 1997 and thus was to receive a
pro rata portion of his annual salary of $115,000. Officers' salary
expense for the year was $196,667 however, in an effort to preserve the
Company's cash, both Officers drew no cash for the entire year. $125,833
was paid to one officer in restricted stock; two $9,000 loans plus 9%
annual interest to two officers were offset against the salaries; and,
$2,500 in office equipment was applied against one officer's salary. At
the close of the fiscal year Jon Elliott was due $24,841 while Larry
Close was owed $23,174. Mr. Elliott is to receive $165,000 per the terms
of his employment contract for the upcoming fiscal year. As of the date
of this filing Mr. Elliott is owed $61,764 in deferred compensation.
At a Board Meeting on May 5, 1998 and specifically to strengthen
the Company's balance sheet by reducing the Company's outstanding debt
to better position the Company to attract financing, Jon Elliott the
Company's President & CEO, agreed to exchange the money owed to him per
his employment agreement for restricted common shares. Mr. Elliott has
not received any salary nor any remuneration from the Company from June
1, 1997 through July 31, 1998. His salary has been accrued. Through
April 30, 1998 the Company owed Mr. Elliott $125,833.29. On May 5,
1998 the common shares of the Company had a bid price of $0.08. Due to
the fact the shares are restricted shares pursuant to Rule 144 of the
Securities & Exchange Commission, and primarily due to the volatility
and drastic drop in the price of the Company's common shares; from
$0.53 at the end of the Company's fiscal year on July 31, 1997, to
$0.31 at the end of the current year's first fiscal quarter on October
31, 1997, to $0.13 at the end of the current year's second fiscal
quarter on January 30, 1998 to $0.10 at the end of the current fiscal
quarter on April 30, 1998, the stock issued to Mr. Elliott was issued
at a discount to the then current bid price. Therefore 3,145,832
shares calculated at $0.04 per share were issued to Mr. Elliott.
Directors will be paid $200 for each meeting and are reimbursed for
their out-of-pocket expenses when attending meetings on behalf of the
Company. Executive Officers will not be paid any additional
consideration for attending Board Meetings. The Directors have deferred
all compensation for attending Board Meetings to date.
Stock Options
The Company has issued a total of 170,000 options to purchase
Common Stock from its initial stock option plan. These options are non-
qualified stock options. The Company is authorized to issue up to
250,000 shares of Common Stock from this initial stock option plan at an
exercise price of $1.25 per option pursuant to resolution of the Board of
Directors and by Amendment of its Certificate of Incorporation and/or
Bylaws.
At a July 15, 1997 Board Meeting the Board added options with an
expiration date of December 31, 2003 equating to three million shares of
common stock to its Employee Stock Option Plan. In addition the
expiration date of the existing options were extended to December 31,
2003. Further, the president was empowered to issue the options at his
discretion and the option price would be above the then current offer
price of the Company's common shares at the time of the granting of the
options.
The following table sets forth the options issued by the Company on
January 7, 1989:
Number of Shares Weighted Average Expiration
Name Subject to Option Exercise Price Dates
Jon F. Elliott 170,000 $1.25 Dec. 31, 2003
These options are exercisable at any time up to December 31, 2003,
at $1.25 per share unless an individual leaves his employment or formal
association with the Company for any reason, in which case, the options
expire unless exercised within 90 days from the date the individual
resigns, is terminated or otherwise ceases to be with the Company
The following table sets forth the options issued by the Company on
July 15, 1997:
Number of Shares Weighted Average Expiration
Name Subject to Option Exercise Price Dates
Jon F. Elliott 900,000 $0.60 Dec. 31, 2003
The Board of Directors on July 15, 1997 authorized the establishment of
500,000 options, each to be exchanged on a one for one common stock
basis, to be offered at the discretion of the President to investors.
These options would be priced at the time granted at a price above the
then current price of the Company's shares. Further, that each option
shall be for a period established by the President at the time they are
granted. The common stock issued pursuant to all of the aforementioned
options are restricted under the Securities and Exchange Commission Rule
144.
Larry C. Close, the Corporation's former Vice President, did not
exercise the 600,000 options issued to him at $0.60 on July 15, 1997
within the ninety day period from his departure from the Company as
required by the Plan. Thus the options expired and were automatically
returned into the Company's stock option plan.
Employment Agreements
The Company's chief executive officer voluntarily restructured his
employment agreement. Jon Elliott, the Company's President & CEO reduced
the relocation fee from $15,000 down to $5,000, eliminated all bonuses
due on the Company's net profit and reduced his gross revenues bonus
allocation by one percent across the board.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth certain information regarding the
Company's Common Stock as of July 31, 1998, not giving effect to any
stock options or Warrants outstanding as of such date, owned or recorded
beneficially by each person owning more than 5% of such Common Stock and
by all officers and directors as a group.
COMMON STOCK
Name of Number
Beneficial Owner of Shares % of Total Outstanding
Jon F. Elliott
P.O. Box 623
Deadwood, SD 4,124,734 47.7
CEO/ President and Director
- -------------------------------------------------------------------------
All Officers & Directors
as a Group 4,124,734 47.7
Item 13. Certain Relationships and Related Transactions
The Company believes that in the past all transactions with
officers, directors and affiliates have been on terms no less favorable
to the Company than would have customarily been obtained from non-
affiliated parties, and that future transactions, if any, with officers,
directors and affiliates will likewise be subject to such standard and to
approval by a majority of the directors who have no economic interest in
the transaction.
Corporate Activities
Class "A" & Class "B" Warrants
At a Board of Directors meeting on January 19, 1998, the Board
extended the exercise date for the Company's Class "B" Warrants to July
26, 1998 with all other terms and conditions remaining in effect.
At a Board of Directors meeting on July 14, 1998 the Board
extended the exercise date for the company's Class "B" Warrants until
January 26, 1999 with all terms and conditions remaining in effect.
Amendment to Articles of Incorporation
Subject to the Corporation's request on July 20, 1996 the Company
received a Certificate from the Utah Division of Corporations and
Commercial Code dated July 28, 1998 amending its Articles of
Incorporation to change the name of the Corporation to "E-Commerce West
Corp." from "Royal Casino Group Inc." [See: Exhibits]
Stock Issuances & Retirement of Shares
From its active S-8 registrations, # 33-34786 and # 333-32415, the
Company instructed its transfer agent in August, 1997 to issue 6,000
common shares to Ron Island for consulting services; in November, 1997 to
issue 4,217 common shares in the name of OTR Inc. for outside services
performed for the Company; and, in April, 1998 to issue 5,000 common
shares to Dan French for consulting services related to engineering for
the Company's planned riverboat casino development near Wyatt, Missouri.
Further, the Company instructed its transfer agent to issue the following
in August, 1998: David Addison 26,470 common shares for legal services
performed for the Company; Deb Berg 25,000 common shares as an employee
bonus; McGinn, Smith & Co. 50,000 common shares as an investment banking
fee; and, Dalton & Mathias, the Company's outside accounting firm, 44,845
common shares as a portion of their compensation for consulting services
performed for the company; In October, 1998 to issue Gaming Venture Corp.
10,938 common shares as the balance of consulting fees for services
performed for the Company; Mainstream Consultants 17,000 common shares as
a consulting fee for services performed for the Company; and, David
Addison 9,097 common shares for legal fees performed for the Company. In
December, 1997 to issue 68,116 common shares to Dalton & Mathias as a
portion of their compensation for consulting services performed for the
company and 7,692 common shares in the name of Arthur Lovett for his
efforts as an outside consultant assisting the Company with its EDGAR
compliance filings. In February, 1998 to issue Deb Berg 58,400 common
shares for consulting services performed for the Company. In April, 1998
to issue David Addison 23,100 common shares for legal services performed
for the Company. In June, 1998 to issue Dan French 12,890 common shares
for consulting services related to engineering for the Company's planned
riverboat casino development near Wyatt, Missouri. In July, 1998 to issue
Dalton & Mathias 88,740 common shares as a portion of their compensation
for consulting services performed for the company; WWWServices 20,000
common shares for Internet consulting services performed for the Company;
Leonard Milstein 5,000 common shares as partial payment for legal
services performed for the Company; and, Deb Berg 25,000 common shares
for consulting services performed for the Company.
The Company's President/CEO, Jon Elliott, has not received any cash
compensation in the 17 months from June, 1997 through the date of the
filing of this report and has continued to devote his full time to the
Company. In lieu of cash salary per the terms of his Employment Agreement
and to preserve the Company's cash he exchanged the $125,833.29 owed
through April 30, 1998 for 3,145,832 restricted common shares which were
issued on May 5, 1998. This transaction strengthened the Company's
balance sheet by reducing its debt.
The Company issued 25,000 restricted common shares to the Company's
corporate counsel, Richard Schneider, as a bonus on July 31, 1998.
Larry Close, the Company's former Vice President of Gaming and a
director who resigned on March 30, 1998, returned 200,000 common shares
which were issued to him in his capacity as an officer and director of
the Company on July 24, 1998. These shares were retired into the
Company's treasury. Mr. Close still retains 100,000 common shares.
Regulatory Matters
South Dakota Commission on Gaming
To operate a gaming facility in Deadwood, South Dakota each
gaming company together with its officers, directors and 5%
shareholders must be found suitable, after thorough background checks,
to hold a South Dakota Gaming License. The licenses are renewable each
year. Due to the closing of Goldiggers in January, 1998 and the
Company's new corporate direction into Internet commerce, the Company
chose not to renew its gaming license in July, 1998.
On September 17, 1997 the South Dakota Commission on Gaming filed a
complaint against Royal Casino Group alleging a violation of the minimum
bankroll requirements in Goldiggers. The complaint stated that
Goldiggers had $61,000 cash on hand when the regulations called for
$63,000. In correspondence to the Commission from the Company's attorney
and further in a meeting between the Company's attorney and the Company's
President with the Executive Secretary, the Director of Enforcement and
the Senior Auditor of the South Dakota Commission on Gaming, it was
pointed out to the Commission that the agent conducting the audit
overlooked certain moneys on hand which brought the actual total to over
$78,000, 25% more than the required minimum. The Executive Secretary
promptly dismissed the complaint on October 2, 1997.
As is customary with the permanent closing of a casino, the South
Dakota Commission on Gaming conducted an audit of all Goldiggers gaming
records from the date the property was acquired in June, 1996 through to
the date of closing, January 5, 1998. The audit began in January, 1998.
The Company was notified in June, 1998 that the Commission had completed
its audit with the result being a refund to the Company in excess of
$4,000.
The Company adhered to the South Dakota Commission on Gaming's
request and completed and filed on time by March 15, 1998, a complete set
of financial information containing departmentalized gaming revenues for
the calendar year ended December 31, 1997 plus the first five days of
January, 1998 on forms provided by the Commission.
In December, 1997 the South Dakota Commission on Gaming filed a
complaint against the Company stating that the Company had failed to
provide the Commission with a copy of its Form 10-K plus two Form 8-K's
within the required 10 day period after such documents are filed with the
Securities & Exchange Commission. In addition, the complaint alleged
that Royal Casino Group is two months delinquent in the payment of real
estate taxes on the property occupied by Goldiggers. The Commission was
made aware that the real estate taxes that were the subject of this
complaint had been paid. On February 18, 1998 the Company entered into
a Stipulation and Assurance of Voluntary Compliance with the South
Dakota Commission on Gaming concerning these two complaints. The
Company stated that they had provided the Commission with the
securities filings and agreed to a $500 fine with the entire amount
suspended on the condition that the Company have no like or similar
violations for the life of its license. The Stipulation also stated
that because the real estate taxes had been paid, the Commission
dismissed the complaint.
Chip & Token Redemption
Per the rules and regulations of the South Dakota Commission on
Gaming, the Company is compelled to redeem all outstanding tokens and
chips presented by patrons at face value and to advertise that fact for a
continuous four month period. Therefore, the Company placed newspaper
advertisements twice a week in four area newspapers from January 22, 1998
through May 15, 1998 announcing that persons in possession of Goldiggers
gaming chips and tokens may redeem them for face value through May 15,
1998. The total amount redeemed for the four month period was $1,216.
Complaint
On April 13, 1998 the Executive Secretary of the South Dakota
Commission on Gaming ("SDCG") filed a two-count complaint alleging that
on April 13, 1998 there were four small claims judgments against Royal
Casino Group and/or Goldiggers Hotel & Gaming totaling approximately
$7,500 & further on April 13, 1998 there existed an IRS tax lien entered
against Royal Casino Group and/or Goldiggers in the amount of
approximately $15,740. Further, that the Commission had scheduled a
hearing on these matters with the stated purpose to consider a revocation
of the gaming licenses of Royal Casino Group and Goldiggers. The Company
believed this to be very grave action proposed to be taken by the SDCG
with potentially severe repercussions to the Company. A gaming license
in any recognized jurisdiction comes only after extensive and invasive
background and suitability checks have been performed on the Company, its
Officers, Directors and significant shareholders to the satisfaction of
the appropriate gaming commission. As such a gaming license is
considered a privilege. Royal Casino Group together with its Officers
and Directors had undergone a thorough investigation by the SDCG prior to
receiving its gaming license. On April 20, 1998 and in a subsequent
letter re-capping the conversation on April 21, 1998, the President & CEO
of Royal Casino Group and the President of Atlantic-Pacific Corp.,
Royal's wholly-owned subsidiary that owned and operated Goldiggers,
informed the SDCG's Executive Secretary, Larry Eliason, that:
1) on March 24, 1998 the SDCG was informed in writing by the Company's
legal counsel that an IRS lien had been filed and the reasons for the
filing. Further, on March 31, 1998 the SDGC was notified in writing by
the Company's legal counsel that the tax lien was paid in full. This
notification was given to the SDCG two weeks before the date the
complaint was filed.
2) of the judgments listed, only one in the amount of $751.57 had yet to
be satisfied and that was due to the fact that the Company was unable to
contact the creditor despite several attempts via telephone and letters.
3) there were two pending small claims actions totaling over $6,600 that
had been resolved before they became judgments.
4) that the Company's legal counsel had sent the SDCG over 25 separate
letters in the two month period from the end of January, 1998 until the
end of March, 1998 keeping the commission appraised of every small claims
action and all other legal issues concerning the closing of Goldiggers.
In fact, the original letter advised the SDCG that due to the closing of
Goldiggers, the Company expected to be deluged with small claims actions
as creditors move to protect their interests and that this action is
standard in these circumstances.
5) that the Company had been advised by professionals to seek bankruptcy
protection for its subsidiary, but that the Company had chosen to use its
best efforts to seek an orderly liquidation of Goldiggers' assets to
satisfy its creditors. Further, that the company had been successful to
date in its efforts and that it believed it had staved off bankruptcy.
6) that because there was only one outstanding judgment totaling the
small amount of $751.57 the Executive Secretary, Larry Eliason, was asked
to reconsider the need to have a public hearing to take the severe
measures of revoking the Companies' gaming licenses.
The Executive Secretary, Larry Eliason, in a letter to the Company dated
April 27, 1998 refused to do away with the hearing despite being aware of
the aforementioned facts. As the Company's legal counsel was appearing
before the SDCG concerning an unrelated matter and in the SDCG's notice
of the hearing the SDCG had stated that this was to be an adversarial
hearing, the Company's counsel notified the Company that he had a
conflict and would not be able to appear on the Company's behalf at this
hearing. The Company wrote Larry Eliason on April 29, 1998 advising him
that the Company's legal counsel, who had represented the company since
early 1996 and in all matters between the Company and the SDCG, would be
unable to represent the Company at the hearing and since Mr. Eliason
would not do away with the need for the public hearing, the Company
requested a postponement of the hearing to allow the Company to be
represented by its long-standing counsel. The letter went on to say if
Mr. Eliason would not even agree to a postponement, the retention of a
new lawyer would most certainly require a retainer, using monies the
Company had dedicated to the repayment of Goldiggers' creditors. After
he personally confirmed with the Company's legal counsel that he would be
unable to represent the Company and receiving an explanation of the
conflict, the Executive Secretary, Larry Eliason, wrote the Company in a
letter dated April 28, (sic) 1998 denying the Company's request for a
postponement of the public hearing.
Dismissal of Complaint
The Company was adamant about protecting its rights and its
gaming licenses and was therefore forced by Larry Eliason, the SDCG's
Executive Secretary, to retain a new legal counsel to defend what was
obviously, in the Company's oppinion, malicious and selective
enforcement on Mr. Eliason's part. The Company's new lawyer required a
retainer causing the Company to use funds that otherwise would have gone
to pay creditors. This new lawyer informed the attorney for the SDCG
that if they did not dismiss the complaints with prejudice, he would
embarrass the SDCG by putting the Executive Secretary, Larry Eliason and
the Director of Enforcement, Stan Triplett on the witness stand and
demanding they testify as to how many gaming licenses have ever been
revoked and if any, how many had ever been revoked for a small claims
judgment. He knew the answer was none. Further, he advised counsel he
would put the Clerk of Courts on the stand and ask her to research each
and every small claims judgment against every holder of a South Dakota
Gaming License dating back to 1990 and after every one ask Larry Eliason,
the Executive Secretary, why a complaint and a revocation hearing was
never taken against that license holder. It was clear from the response
that never had the SDCG filed a complaint seeking license revocation
against any holder of a gaming license for having a small claims
judgment. The Company asked the member of the legislature together with
the state senator for the area to attend the Commission hearing on the
Company's behalf which they did. At the public hearing on May 8, 1998
the SDCG voluntarily dismissed both complaints without a hearing and with
prejudice.
Nevada Gaming Commission
In April, 1997 the Company submitted its application to the Nevada
Gaming Commission seeking licensing in connection with its proposed
acquisition of the Triple J Casino in Henderson, Nevada. The Company
provided $85,000 to the Nevada gaming regulatory bodies to commence the
background checks and suitability into the Company and its Officers and
Directors. The Commission began its background checks in early July,
1997. In late July, 1997 the Company determined not to proceed with the
acquisition of the Triple J Casino and so notified the Nevada Gaming
Commission seeking permission to withdraw its application for licensing.
In January, 1998 the Nevada Gaming Control Board advised the
Company that pursuant to its request in July, 1997 to withdraw its
application for licensing in Nevada, its agent would need to re-visit
Royal Casino Group's offices in late February, 1998 to review all
financial reports and documents generated by Goldiggers. In addition,
the agent requested to review related Royal Casino Group financial
information and correspondence plus corporate documentation relating to
the Company's Nevada subsidiary which had been created solely to acquire
the Triple J Casino. Subsequently, the Company was informed by an agent
of the Nevada Gaming Control Board that the Company's request to
withdraw was scheduled on the agenda of the Nevada Gaming Control
Board's meeting on June 3, 1998 and on the Nevada Gaming Commission's
agenda at its meeting on June 25, 1998. If both agencies granted the
Company's request to withdraw, then the Company would be entitled to a
refund of the unused portion of the $85,000 deposited by the Company
with the Nevada Gaming Control Board at the onset of their
investigation into the Company's application.
On June 3, 1998 the Company appeared with both corporate counsel
and Nevada gaming counsel before the Nevada Gaming Control Board
seeking permission to withdraw the Company's application for a Nevada
gaming license. The Nevada Gaming Control Board voted unanimously to
grant the Company's request to withdraw their applications without
prejudice. Subsequently, on June 25, 1998 the Nevada Gaming Commission
voted to allow the Company to withdraw its application without
prejudice. [See: Subsequent Events]
South Dakota Department of Revenue
In January, 1998 the State of South Dakota Department of Revenue
began conducting an audit of the sales and use tax paid by the Company's
subsidiary that operated Goldiggers. They selected three random months
for review, two of which occurred when the subsidiary was owned by Casino
Magic. Based upon their findings they expanded their audit to cover the
period from November, 1994 through December, 1997. The majority of this
time Goldiggers was owned and operated by Casino Magic. Subsequently,
the Company was informed that its subsidiary company owed approximately
$12,000 in unpaid sales tax, use tax and interest.
The Company did not believe it owed the $12,000 assessed by the
Department of Revenue and began to research and gather related
information that the Company believed would drastically reduce this
amount. The Company was hampered in its efforts to locate the support
documents due to the closing of Goldiggers and the relocation of the
historical files, some of which at the time were in the possession of the
South Dakota Commission on Gaming for the purpose of conducting their
audit. Goldiggers was owned and operated by Atlantic-Pacific Corp. which
was owned by Casino Magic Corp. from inception in 1991 through to its
acquisition by Royal Casino Group in June, 1996. Per the terms of the
acquisition, Casino Magic indemnified Royal Casino Group from any prior
obligations arising from actions such as an outstanding sales or use
tax obligation should one exist.
After presentation of appropriate documentation verifying the
payment of the majority of the taxes claimed as owed by the Department
of Revenue to the agent assigned the matter, the South Dakota
Department of Revenue reduced the amount it claimed was owed by
Goldiggers for sales and use tax plus interest for the periods from
November, 1994 through to and including December, 1997 from $12,000 to
approximately $5,000. The Company believed, by continuing to research
its records, that it would be able to considerably reduce the
aforementioned amount. However, the agent resigned from the Department
resulting in an immediate assessment by the Department of $4,936 plus
penalties and interest. The Company sought to have a hearing to
present the additional proof of payment. The Department set a
December, 1998 hearing date in Pierre, South Dakota. The Department
simultaneously offered to settle the matter for payment of the
principal amount only. Against the advice of the Company's counsel,
the Company advised the Company's counsel to advise the Department that
it would accept the settlement as the costs for employees and corporate
counsel to travel to Pierre together with fees incurred would almost
equal the settlement amount. The settlement will be in full and in
perpetuity. [See: Subsequent Events]
Securities & Exchange Commission
In a letter to the Company dated February 27, 1998, the Securities
& Exchange Commission made comments based upon an examination restricted
solely to considerations of the Financial Statements, Management's
Discussion and Analysis and Selected Financial Data incorporated in the
Company's Form 10-K for the year ended July, 31, 1997 and the Form 10-Q
for the quarter ended October 31, 1997. Commission staff made comments
and requested an amendment and answer within 10 business days from the
date of the letter. Although the company believes that it can adequately
address all the issues raised to the satisfaction of the Commission, to
do so involves time, research and coordinated input from three of the
Company's professionals. The Company has incorporated all of the
Commission's comments in this Form 10-K.
Internal Revenue Service
A federal tax lien in the amount of $15,740.35 was filed against
the Company with the appropriate South Dakota regulatory bodies on
March 2, 1998 and was paid in full by the Company by March 30, 1998.
In a letter of explanation to the Company, the revenue officer wrote
that she had received information that Goldiggers was closed and the
assets were for sale. Therefore she stated, she filed the lien to
protect the government's interest. A Certificate of release of Federal
Tax Lien was recorded by the appropriate South Dakota regulatory
agencies on April 15, 1998.
Workman's Compensation Audit
Post-closing of Goldiggers, Atlantic-Pacific Corp. underwent a
workman's compensation audit, which resulted in a refund to Goldiggers in
the amount of $14,043.
Subsequent Events
Option To Purchase Land Adjacent to the Triple J Casino in
Henderson, Nevada.
In anticipation of its planned acquisition of the Triple J Casino
in Henderson, Nevada, the Company obtained an eighteen month option to
purchase for $75,000 7.28 acres of land adjacent to the 16 acres which
comprised the Triple J. The option allowed the Company to purchase the
property for $1.5 million with the $75,000, which was paid in
restricted shares of the Company's common stock, to be credited toward
the purchase price. Since the Company elected not to proceed with the
acquisition of the Triple J the Company had no further use for the
property and allowed its option to expire on September 30, 1998. The
Company has written off the $75,000 down payment.
S-8 Registration
An S-8 registration statement was filed on July 28, 1998. On
August 21, 1998 E-Commerce West received its registration number from the
Securities & Exchange Commission making the registration statement
effective as of that date. The Registration Number 333-59975 is for
employees and consultants and is for 750,000 common shares with the
proposed maximum offering price of $0.30 per share resulting in a
proposed maximum aggregate offering price of $225,000. A copy of this
registration statement is included as an exhibit with this report.
Stock Issuances
During the Company's fiscal year from August, 1997 through July,
1998, Jon Elliott, the company's Chief Executive Officer and a Director
sold a total of 56,000 common shares at an average price of $0.39 on the
open market of which 10,000 were sold in the last fiscal quarter. All
appropriate forms concerning the aforementioned transactions were filed
in a timely fashion with the Securities & Exchange Commission.
After the end of the Company's fiscal year on July 31, 1998 the
following shares were issued:
- - on September 9, 1998 20,000 restricted common shares were issued to
Keith & Kristi Schillinger for their participation in E-Commerce West's
Internet Web site from the treasury.
- - on October 26, 1998 25,000 restricted common shares were issued as a
bonus to Craig Mathias, the Company's outside accountant from the
treasury; 300,000 restricted common shares were issued to Deb Berg from
the treasury for her participation in a variety of yet-to-be defined
Internet Web sites. The 300,000 shares are provided to Ms. Berg with the
understanding that she will return 100,000 shares to the Company for each
year less than three that she provides services to the Company. Issued
to John Lowe for consulting services relative to the Internet, 1,294
common shares from the Company's active S-8 registration # 33-34786
completing the issuance of the total number of shares to be issued under
the registration, plus 492 common shares from the Company's active S-8
registration # 333-32415.
Common Stock Trading Symbol Change
Reflecting the name change to E-Commerce West the trading symbol
for the common stock was changed from "WINZ" to "ECOM" on August 7, 1998.
Sale of Slot Machines
The terms of the sale agreement of the slot machines called for
monthly payments commencing 60 days after the date of the agreement and
continuing for an extended period of time. As the Company was in need of
cash, the Company and the purchaser agreed to an accelerated payment
totaling $51,000 to complete the transaction. The Company included a few
separate bill acceptors and its casino signage in the transaction.
Proposed Wyatt, Missouri Riverboat Casino
Subsequent to the Company notifying the Army Corps of Engineers
that the points proposed by the Missouri Department of Natural Resources
in their comment letter responding to the Corps's Public Notice were
acceptable, the Company's engineer has been notified by the Corps that
they will request the Missouri Department of Natural Resources to issue a
Water Certification Permit. Once received by the Corps, they will
proceed to issue the Section 404 permit necessary prior to the
commencement of any construction related to the Company's proposed
Riverboat Casino Entertainment Center. However, the Company can not
project a time frame for the issuance of the permit.
Nevada Gaming Commission
In April, 1997 Royal Casino Group applied to the Nevada Gaming
Commission for a gaming license pursuant to its proposed acquisition of
the Triple J Casino in Henderson, Nevada. In July, 1997 Royal Casino
Group gave the Nevada Gaming Commission $85,000 to begin their
investigation into the background of the Company and its officers and
directors. As previously reported, Royal Casino Group determined not to
proceed with the acquisition and requested permission from the Nevada
Gaming Commission to withdraw its application later that same month in
July, 1997. As reported earlier in this document both the Nevada Gaming
Control Board and the Nevada Gaming Commission voted to grant permission
to allow Royal Casino Group to withdraw its application in June, 1998.
In October, 1998 the Company received a refund of $38,000 of the $85,000
deposited with the Nevada Gaming Commission.
Corporate Loans
Jon Elliott, the Company's President/CEO has not received any cash
compensation per the terms of his Employment Agreement for the 17 month
period from June, 1997 through October, 1998. He owes the Company a
total of $9,000 per loans of $3,000 on August 5, 1998; $2,000 on August
28, 1998; and, $4,000 on October 3, 1998. The loans have an interest
rate of 5%, simple interest, calculated annually.
PART IV
Item 14. Financial Statements, Schedules
Exhibits and Reports on Form 8-K
(1) Financial Statements
(a) The Financial Statements required pursuant to this Item have been
filed as part of this report under Part II, Item 8.
All other schedules have been omitted because the information
prescribed therein is not applicable, not required, or is furnished in
the financial statements or notes thereto.
(b) Three reports on Form 8-K were filed during the year ended July 31,
1998; one on August 12, 1997, one on October 21, 1998 and the other on
January 12, 1998. Subsequent to the end of the fiscal year a Form 8-K
was filed on August 11, 1997
(2) Exhibits
Exhibit No. Description Page No.
1 S-8 Registration Statement dated *
July 30, 1997, Registration # 333-32415.
2 Form 8-K which was filed on August 12, *
1998 announcing the dismissal of Arthur
Andersen LLP as the Company's auditors;
the Company's request to the Nevada Gaming
Commission seeking permission to withdraw
its application for a gaming license; and,
the entering into a settlement agreement
on the only outstanding corporate litigation.
3 Form 8-K which was filed on October 21, 1998 *
announcing the engagement of Singer, Lewak
Greenbaum & Goldstein LLP as the Company's
independent accountants.
4 Form 8-K which was filed on January 12, 1998 *
announcing the closure of Goldiggers Hotel
and Gaming Est.
5 Form 8-K filed on August 3, 1998 announcing *
the name change of the Corporation to E-Commerce
West Corp. from Royal Casino Group Inc. including
a Certificate of Amendment to the Company's
Articles of Incorporation attesting to that fact.
6 Copy of Larry C. Close's letter of resignation *
as an officer, secretary and director of Royal
Casino Group and all its subsidiaries.
7 S-8 Registration Statement dated July 28, 1998,*
Registration # 333-59975.
8 Consent of Singer Lewak Greenbaum & Goldstein *
Exhibits other than those listed have been omitted because they are
nonexistent, inapplicable or because the information is given in the
financial statements of the Company.
* documents previously filed
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of The Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, this
10th day of November, 1998.
E-COMMERCE WEST CORP.
By /s/ Jon F. Elliott___
Jon F. Elliott
President and Chief Executive Officer
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that such person whose signature
appears below constitutes and appoints Jon F. Elliott, his-attorney-in-
fact, with power of substitution, for him in any and all capacities, to
sign this Annual Report on Form 10-K, and any amendments thereto, each
with exhibits thereto, and other documents in connection therewith, with
The Securities and Exchange Commission, hereby ratifying and confirming
all that said attorney-in-fact, or his substitute may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature Title Date
/s/ Jon F. Elliott President, May 28, 1999
Jon F. Elliott Chief Executive Officer,
Chairman of the Board
2
21
20
20
The accompanying notes are an integral part of these financial
statements.
23
22
The accompanying notes are an integral part of these financial
statements.
26
The accompanying notes are an integral part of these financial
statements
25
30
The accompanying notes are an integral part of these financial
statements.
32
33
34
38
