SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For The Quarter Ended September 30, 1996 Commission File No. 0-18224
-------
NuOASIS GAMING, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization
95-4176781
(I.R.S. Employer Identification Number)
2 Park Plaza, Suite 470, Irvine, California 92614
(Address of principal executive offices)
(714) 833-5382
(Registrant's telephone number, including area code)
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 shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of capital stock, as of the latest practicable date.
Common Stock $.01 par value; 30,000,000 shares as of November 30, 1996.
Total No. of Pages:13
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NUOASIS GAMING, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1996
(unaudited) and June 30, 1996 (audited) ...............1
Consolidated Statements of Operations for Three Months
Ended September 30, 1996 and 1995 (unaudited) .........2
Consolidated Statements of Cash Flows for The Three
Months Ended September 30, 1996 and 1995 (unaudited) ..3
Notes to Consolidated Financial Statements ..............4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .......................................10
Item 2. Changes In Securities ...................................10
Item 3. Defaults Upon Senior Securities .........................10
Item 4. Submission Of Matters to a Vote of Security Holders .....10
Item 5. Other Information .......................................10
Item 6. Exhibits And Reports On Form 8-K ........................10
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NUOASIS GAMING, INC.
Consolidated Balance Sheets
As of September 30, 1996 (Unaudited) and
June 30, 1996 (Audited)
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
---------------------- ---------------------
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,022 $ 84
---------------------- ---------------------
Total Current Assets 2,022 84
---------------------- ---------------------
TOTAL ASSETS $ 2,022 $ 84
====================== =====================
Current Liabilities:
Accounts payable and accrued expenses $ 79,436 $ 103,725
Due to affiliates 760,198 665,371
---------------------- ---------------------
Total Current Liabilities 839,634 769,096
---------------------- ---------------------
Stockholders' Deficiency:
Preferred stock - par value $.01; authorized 1,000,000 shares; 14% cumulative
convertible; issued and outstanding 170,000
shares (aggregate liquidation of $170,000) 1,700 1,700
Preferred Stock Series B - par value $2.00; authorized, issued
and outstanding 250,000 shares (aggregate liquidation of $500,000) 500,000 500,000
Common stock - par value $.01; authorized 30,000,000 shares;
30,000,000 shares issued and outstanding, 300,000 300,000
Additional paid-in capital 12,376,196 12,376,196
Stockholders' receivables (1,326,613) (1,447,080)
Accumulated deficit (12,688,895) (12,499,828)
---------------------- ----------------------
Total Stockholders' Deficiency (837,612) (769,012)
---------------------- ----------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY $ 2,022 $ 84
====================== =====================
</TABLE>
See accompanying notes to these consolidated financial statements
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NUOASIS GAMING, INC.
Consolidated Statements of Operations
For the Three Months Ended September 30, 1996 and 1995 (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
-------------------------------------------------------------
1996 1995
------------------------------- ----------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues:
Gaming $ - $ -
Interest and other - -
------------------------------- ----------------------------
Totals - -
------------------------------- ----------------------------
Costs and expenses:
Gaming operating expenses - -
General and administrative 189,067 290,847
------------------------------- ----------------------------
Totals 189,067 290,847
------------------------------- ----------------------------
Net loss $ (189,067) $ (290,847)
=============================== =============================
Net loss applicable to
common stock $ (189,067) $ (290,847)
=============================== =============================
Net loss per common share $ (.01) $ (.01)
=============================== =============================
Weighted average common
shares outstanding 30,000,000 25,676,175
=============================== ============================
</TABLE>
See accompanying notes to these consolidated financial statements
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NUOASIS GAMING, INC.
Consolidated Statements of Cash Flows
For the Three Months Ended September 30, 1996 and 1995 (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1996 1995
------------------------ --------------
(Unaudited) (Unaudited)
<S> <C> <C>
Operating activities:
Net loss $ (189,067) $ (290,847)
Adjustments to reconcile net loss to net
cash used in operating activities:
Effect of common shares issued for payment of services - 76,213
Depreciation and amortization - 90,000
Increase (decrease) from changes in:
Other assets - (43,144)
Accounts payable and accrued expenses (24,289) 890
Due to affiliate 94,827 167,413
------------------------ -----------------------
Net cash provided (used) in operating activities (118,529) 525
------------------------ -----------------------
Financing activities:
Proceeds from stockholders' receivables 120,467 -
------------------------ -----------------------
Net cash provided (used) by financing activities 120,467 -
------------------------ -----------------------
Net increase (decrease) in cash and cash equivalents 1,938 525
Cash and cash equivalents, beginning of period 84 341
-------------------------------------------------
Cash and cash equivalents, end of period $ 2,022 $ 866
======================== =======================
Supplemental Disclosure of Cash Flow Information
Non-cash financing activities:
Income taxes paid $ - $ -
Interest paid $ - $ -
</TABLE>
See accompanying notes to these consolidated financial statements
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NUOASIS GAMING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. General
Principles of Consolidation
NuOasis Gaming, Inc. and its subsidiaries (the "Company" or the "Registrant"),
operated as a holding company for leisure and entertainment related businesses.
NuOasis Gaming, Inc. was incorporated in the State of Delaware in 1987. During
the three months ended September 30, 1996 and 1995, the Company had two
wholly-owned subsidiaries engaged in casino gaming and investment development
activities.
The activities of the Company's subsidiaries have been primarily in the United
States.
The accompanying unaudited condensed consolidated financial statements include
the accounts of NuOasis Gaming, Inc. ("NuOasis") and its wholly-owned
subsidiaries, Ba-Mak Gaming International, Inc. ("Ba- Mak"), formerly Phillips
Gaming International, Inc., Casino Management of America, Inc. ("CMA"); the
accounts of CMA include its wholly-owned subsidiaries, NuOasis Las Vegas, Inc.
("NuOasis Las Vegas"), and NuOasis Laughlin, Inc. ("NuOasis Laughlin"). As used
herein, collectively referred to as the "Registrant" or the "Company" unless the
context indicates otherwise. All material intercompany accounts and transactions
have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments, consisting of normal recurring
accruals, necessary to present fairly the Registrant's financial position as of
September 30, 1996, and its results of operations and cash flows for six months
then ended. Information included in the unaudited condensed consolidated balance
sheet as of September 30, 1996 has been derived from the Registrant's audited
consolidated balance sheet included in the Registrant's 1996 Form 10-KSB. The
accompanying unaudited condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and other
information in the fiscal 1996 Form 10-KSB. The unaudited results of operations
for the three months ended September 30, 1996 are not necessarily indicative of
the operating results for the full year.
Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Bankruptcy Filing of Ba-Mak Gaming International, Inc.
Ba-Mak was incorporated in Louisiana on December 15, 1992 to conduct the
Company's gaming operations, including gaming machine route operations and sales
of gaming equipment. On April 8, 1993, Ba-Mak received approval from the
Louisiana Gaming Regulatory Division to become a licensed distributor/route
operator for electronic video bingo machines.
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NUOASIS GAMING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In October 1994, Ba-Mak filed for protection under Chapter 11 of the U.S.
Bankruptcy Code in the Eastern District of Louisiana. While under the protection
of Chapter 11, Ba-Mak continued to operate as a charitable bingo route operator
in Louisiana as Debtor-in-Possession. It was management's objective to
reorganize Ba- Mak's debt under Chapter 11 and fully continue its gaming
operations. Accordingly, Ba-Mak was accounted for as a continuing operation
during fiscal 1995.
On April 20, 1995, upon motion from the United States Trustee, an order
converting the case to Chapter 7 was issued and a Chapter 7 Trustee was
appointed. The trustee took possession of Ba-Mak's assets and is in the process
of liquidating such assets for the benefit of Ba-Mak's bankruptcy estate. As
such, all gaming operations at Ba-Mak ceased and, accordingly, were accounted
for as a disposition of an investment during fiscal 1995 which resulted in (a)
the write off of $1,056,978 and $1,415,050 of total assets and liabilities,
respectively; and (b) a net loss on disposal of investment in the amount of
approximately $140,949. Gaming revenues with respect to Ba-Mak were $0 and
$884,077 during fiscal years 1996 and 1995, respectively, and will not recur in
future years.
Going Concern
The Company has experienced recurring net losses, has limited liquid resources,
negative working capital and its primary operating subsidiary was liquidated
during the fiscal year 1995. Management's intent is to continue searching for
additional sources of capital and new operating opportunities. In the interim,
the Company will continue operating with minimal overhead and key administrative
functions will be provided by an affiliate, NuVen Advisors. The Company has
received financial support from Nona of approximately $ 135,000 during the three
months ended September 30, 1996, and management estimates that Nona will need to
contribute approximately $1 million in future financial support for the Company
to fund its operations through the remaining of fiscal year 1997. Accordingly,
the accompanying consolidated financial statements have been presented under the
assumption the Company will continue as a going concern.
Issuance of Stock for Services
Shares of the Company's common stock issued for services are recorded in
accordance with APB16 at the fair market value of the stock issued or the fair
market value of the services provided, whichever value is the more clearly
evident. The value of the services are typically stipulated by contractual
agreements. There were no shares issued for services during the three months
ended September 30, 1996.
Loss per Common Share
Loss per common share is computed based on the net loss for each period, as
adjusted for dividends required on preferred stock ($5,950 and $5,950 for the
three months ended September 30, 1996, and 1995, respectively) and the weighted
average number of common shares outstanding. Common stock equivalents were not
considered in the loss per share calculations, as the effect would have been
anti-dilutive.
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NUOASIS GAMING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes
The Company accounts for income taxes using the liability method. Income taxes
are provided on all revenue and expense items, regardless of the period in which
such items are recognized for tax purposes, except for those items representing
a permanent difference between pre-tax accounting income and taxable income. A
valuation allowance is recorded when it is more likely than not that benefits
resulting from deferred tax assets will not be realized.
Revenue Recognition
There were no gaming revenues during the three months ended September 30, 1996
and 1995.
Reclassification of Prior Year Amounts
To enhance comparability, the 1995 consolidated financial statements have been
reclassified, where appropriate, to conform with the financial statement
presentation used in 1996.
Recent Accounting Development
In October 1995, the FASB adopted Statement No. 123, "Accounting for Stock-Based
Compensation." This Statement encourages entities to adopt a fair value method
of accounting for stock-based compensation plans including stock options and
warrants issued to employees. For entities which do not adopt this method, the
Statement requires disclosure of the effect that the fair-value method would
have on net income and earnings per share. The Statement is effective for
transactions entered into in fiscal years that begin after December 15, 1995.
The Company has not determined the effect of this Statement nor has it decided
when it will adopt the provisions of this Statement.
Note 2. Stockholders' Receivables
Stockholders' Receivables relates primarily to a receivable from Nona in
connection with the acquisition of CMA and has been reclassified to equity
because the repayment of the receivable is at the discretion of Nona and the
Company. The Company is dependent upon Nona for continued financial support
(Note 1), and Nona historically and currently provides financial support to the
Company. The Company believes that Nona has the ability and intent to repay the
receivable or will offset the receivable against any amounts due to Nona by the
Company.
Note 3. Subsequent Events
Proxy Filing and Comment Letter
In February 1995, the Company filed its Schedule 14A - Preliminary Proxy
Material to hold a shareholders meeting. Since February 1995, the Company has
received five comment letters from the Division of Corporate Finance of the
Securities and Exchange Commission ("SEC") regarding reports filed with the SEC
for fiscal years 1994 and 1995 and has responded to all but the last comment
letter. On October 2, 1996, the Company received its latest comment letter, with
respect to the Company's Form 10-KSB/A for fiscal year ended September 30, 1995
and its Amended Schedule 14A - Preliminary Proxy Material.
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NUOASIS GAMING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company is in the process of answering the SEC comments and does not believe
the changes that will be made in response to the comments will have a material
effect on the accompanying financial statements. However, the SEC may have
further comments upon receipt of the Company's response and there is no
assurance as to when all comments will be cleared.
Subsequent Event - Acquisition
On June 13, 1996, Nona entered into an Option Agreement with Joseph Monterosso,
President of National Pools Corporation ("NPC"), an individual previously
unrelated to the Registrant or Nona, and granted such individual an option to
purchase the 250,000 Series B Preferred Shares of the Registrant owned by Nona
at a purchase price of $13.00 per share, or a total of $3,250,000, with a
minimum purchase of 110,000 shares.
The exercise of the option is conditioned upon shareholder approval of a
proposal to increase the authorized number of shares of common stock of the
Registrant by at least twenty million (20,000,000) shares. The option is
assignable and shall expire 90 days after the next Annual Meeting of
Shareholders of the Registrant.
On November 21, 1996, the Registrant's Board of Directors approved the
acquisition of NPC. The acquisition is expected to be financed by the issuance
of securities, however, a definitive agreement has not been signed. Moreover,
the acquisition is contingent upon the occurrence of certain events including
but not limited to: (a) NPC shareholder approval; (b) exercise of that certain
option agreement between Monterosso and Nona; (c) Monterosso securing financing
that would allow the exercise of the option by Monterosso and/or one or more
qualified private investors; (d) reaching an agreement to sell CMA; and (e)
shareholder approval of a proposal to increase the number of authorized shares
of common stock of the Registrant by at least 20,000,000 shares. There are no
assurances that such transaction will occur, and because of on-going
negotiations and uncertainties surrounding the realization of such transaction,
the Registrant cannot determine the ultimate effect on the Registrant's
financial position at this time.
Change in Registrant's Directors and Officers
On November 25, 1996, the Board of Directors elected Joseph Monterosso to fill
one of the vacancies on the Registrant's Board of Directors. Additionally, on
November 25, 1996, Fred G. Luke resigned as President and the Board of Directors
elected Joseph Monterosso to the office of President.
[NUOGAM\10Q:093096.QSB]-4
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NUOASIS GAMING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Registrant has incurred net losses and negative cash flows from operating
activities since its inception in 1988. The Registrant had cash and cash
equivalents of approximately $2,022 and $84 as of September 30, 1996 and June
30, 1996, respectively, and negative working capital of $837,612 and $769,012 as
of September 30, 1996 and June 30, 1996, respectively. The increase in working
capital deficiency is a direct result of the Registrant incurring professional,
consulting and advisory services and other overhead during the first quarter of
fiscal year 1997. As of the date of this Report, the Registrant has no material
commitments for capital expenditures.
As a result of the Registrant having no revenue producing activities, the
Registrant had limited cash and cash equivalents remaining as of September 30,
1996 to finance future operations. The Registrant has received financial support
from Nona of approximately $135,000 during the three months ended September 30,
1996, and is dependent upon Nona for future working capital. The Registrant's
plan is to continue searching for additional sources of equity and working
capital and new operating opportunities. In the interim, the Registrant's
existence is dependent upon continuing financial support from Nona which is
estimated to be approximately $1 million for the remaining of fiscal year 1997
based upon agreements and obligations the Registrant has at September 30, 1996.
Such conditions raise substantial doubt about the Registrant's ability to
continue as a going concern. As such, the Registrant's independent accountants
have modified their report to include an explanatory paragraph with respect to
such uncertainty.
As of the date of filing this Report, Ba-Mak's operations had ceased following
the bankruptcy court's conversion in April 1995 of its Chapter 11 proceeding
into a proceeding under Chapter 7 of the Bankruptcy Code. The Chapter 7 Trustee
took possession of Ba-Mak's assets and is in the process of liquidating such
assets for the benefit of Ba-Mak's bankruptcy estate. As such, all gaming
operations at Ba-Mak ceased and accordingly, Ba-Mak was accounted for as a
disposition of an investment during fiscal year 1995. Gaming revenues in the
amount of $884,077 for the year ended September 30, 1995 from Ba-Mak are not
expected to recur in future years due to the Chapter 7 bankruptcy. The
Registrant is also pursuing other joint venture, merger or acquisition
opportunities which may provide additional capital resources during fiscal 1997.
Subsequent Event - Acquisition
On June 13, 1996, Nona entered into an Option Agreement with Joseph Monterosso,
President of National Pools Corporation ("NPC"), an individual previously
unrelated to the Registrant or Nona, and granted such individual an option to
purchase the 250,000 Series B Preferred Shares of the Registrant owned by Nona
at a purchase price of $13.00 per share, or a total of $3,250,000, with a
minimum purchase of 110,000 shares.
[NUOGAM\10Q:093096.QSB]-4
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NUOASIS GAMING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The exercise of the option is conditioned upon shareholder approval of a
proposal to increase the authorized number of shares of common stock of the
Registrant by at least twenty million (20,000,000) shares. The option is
assignable and shall expire 90 days after the next Annual Meeting of
Shareholders of the Registrant.
On November 21, 1996, the Registrant's Board of Directors approved the
acquisition of NPC. The acquisition is expected to be financed by the issuance
of securities, however, a definitive agreement has not been signed. Moreover,
the acquisition is contingent upon the occurrence of certain events including
but not limited to: (a) NPC shareholder approval; (b) exercise of that certain
option agreement between Monterosso and Nona; (c) Monterosso securing financing
that would allow the exercise of the option by Monterosso and/or one or more
qualified private investors; (d) reaching an agreement to sell CMA; and (e)
shareholder approval of a proposal to increase the number of authorized shares
of common stock of the Registrant by at least 20,000,000 shares. There are no
assurances that such transaction will occur, and because of on-going
negotiations and uncertainties surrounding the realization of such transaction,
the Registrant cannot determine the ultimate effect on the Registrant's
financial position at this time.
Results of Operations
Comparison of the Three Months Ended September 30, 1996 to the Three Months
Ended September 30, 1995
There were no gaming or other revenue producing operations during the three
months ended September 30, 1996. The Registrant's gaming operations ceased
during April 1995 upon commencement of Ba-Mak's Chapter 7 bankruptcy
liquidation. As a result, there were no gaming revenues or gaming costs or
expenses during the three months ended September 30, 1996 and 1995.
Total General and Administrative expenses decreased by $101,780 or 35% during
the quarter ended September 30, 1996 as compared to the same period last year.
Since there were no operations during the quarter, General and Administrative
expenses comprised mostly of professional, consulting and advisory fees.
Cash used in operating activities decreased to $118,529 for the three months
ended September 30, 1996 from $525 cash provided by operating activities for the
comparable period last year which was primarily attributable to the Chapter 7
bankruptcy proceedings of the Registrant's operating subsidiary which commenced
April 20, 1995.
Cash provided by financing activities increased to $120,467 for the three months
ended September 30, 1996 from $0 for the comparable period last year which was
primarily attributable to proceeds received from stockholder's receivables. Of
the $120,467 proceeds received, approximately $80,000 was received from the
former President for repayment of a note receivable.
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NUOASIS GAMING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Since June 30, 1996, the Registrant knows of no significant changes for the
quarter ended September 30, 1996, in the status of the pending litigation as
described in the fiscal year 1996 Form 10-KSB, filed on or about November 22,
1996.
Item 2. Changes In Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission Of Matters To A Vote Of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits And Reports On Form 8-K
None.
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NUOASIS GAMING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
Pursuant to the requirements 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.
NUOASIS GAMING, INC.
Dated: December 3, 1996 By: /s/ Joseph Monterosso
------------------------------------
Joseph Monterosso,
President and Director
Dated: December 3, 1996 By: /s/ Fred G. Luke
------------------------------------
Fred G. Luke, Director
Dated: December 3, 1996 By: /s/ Steven H. Dong
------------------------------------
Steven H. Dong,
Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,022
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,022
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,022
<CURRENT-LIABILITIES> 839,634
<BONDS> 0
0
501,700
<COMMON> 300,000
<OTHER-SE> (1,639,312)
<TOTAL-LIABILITY-AND-EQUITY> (837,612)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (189,067)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (189,067)
<INCOME-TAX> 0
<INCOME-CONTINUING> (189,067)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (189,067)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
