SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 9)
Filed by the registrant (X )
Filed by a party other than the registrant ( )
Check the appropriate box:
( ) Preliminary proxy statement
(X ) Definitive proxy statement
( ) Definitive additional materials
( ) Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
NUOASIS GAMING, INC.
(Name of Registrant as Specified in Its Charter)
NUOASIS GAMING, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box)
(X ) $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(j)(2).
( ) $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
(4) Proposed maximum aggregate value of transaction:
1 Set forth the amount on which the filing fee is calculated
and state how it was determined.
[NUOGAM\14A:97ANPRX9.14A]
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( X ) Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing of which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
$125.00
(2) Form, schedule or registration statement no:
Schedule 14A
(3) Filing party:
NuOasis Gaming, Inc.
(4) Date filed:
February 9,1995
[NUOGAM\14A:97ANPRX9.14A]
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NuOASIS GAMING, INC.
(Formerly E.N. PHILLIPS COMPANY)
2 Park Plaza, Suite 470
Irvine, California 92614
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
(to be held on Monday, May 5, 1997)
To the Stockholders of NuOasis Gaming, Inc. (formerly E.N. Phillips Company):
The Annual Meeting of Stockholders of NuOasis Gaming, Inc. (formerly
E.N. Phillips Company), a Delaware corporation (the "Company"), will be held at
the Hyatt Regency Hotel, 17900 Jamboree Road, Irvine, California 92614, on May
5, 1997, at 10:00 A.M.
At the Annual Meeting, stockholders will be asked:
1. To consider and act upon a proposal to amend the Company's
Certificate of Incorporation to increase the number of authorized
shares of $.01 par value common stock to Three Hundred Thirty
Three Million;
2. To consider and act upon a proposal to sell the Company's
wholly-owned subsidiary Casino Management of America, Inc., a
Utah corporation, ("CMA");
3. To consider and act upon a proposal to amend the Company's
Certificate of Incorporation to change the name of the Company to
"Group V Corporation";
4. To elect five (5) directors to serve as the Board of Directors
until the next Annual Meeting of Stockholders and until their
respective successors have been elected and qualified; and
5. To transact such other business as may properly come before the
meeting or any adjournments and postponements thereof.
The discussion of the proposals set forth above is intended only as a
summary, and is qualified in its entirety by the information relating to the
proposals set forth in the accompanying Proxy Statement.
The Board of Directors has fixed the close of business on April 4,
1997 as the record date for the determination of stockholders entitled to notice
of and to vote at the Annual Meeting. Only holders of the Company's voting
securities at the close of business on the record date are entitled to vote at
the Annual Meeting.
ACCOMPANYING THIS NOTICE ARE A PROXY AND A PROXY STATEMENT. IF YOU WILL
NOT BE ABLE TO ATTEND THE MEETING TO VOTE IN PERSON, PLEASE SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
By Order of the Board of Directors
/s/ John D. Desbrow
----------------------------------
John D. Desbrow, Secretary
Irvine, California
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March 27, 1997
NuOASIS GAMING, INC.
(Formerly E.N. PHILLIPS COMPANY)
2 Park Plaza, Suite 470
Irvine, CA 92614
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
to be held on Monday, May 5, 1997
Introduction
This Proxy Statement is being furnished to the holders of the Common
Stock, par value $.01 per share ("Common"), 14% Cumulative Convertible Preferred
Stock, par value $.01 per share ("14% Preferred"), the Series B Preferred Stock
(the "B Preferred"), of NuOasis Gaming, Inc., a Delaware corporation ("NuOasis"
or the "Company"), in connection with the solicitation of proxies by the Board
of Directors for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held at the Hyatt Regency Hotel, 17900 Jamboree Road, Irvine,
California, on Monday, May 5, 1997, at 10:00 a.m. Pacific Daylight Savings Time,
and any postponement or adjournment thereof. The approximate date when
this Proxy Statement and form of Proxy are first being sent to stockholders
is April 7, 1997.
Matters to be Considered
The following matters will be acted on at the Annual Meeting:
1. Adoption of an Amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of $.01
par value Common Stock to Three Hundred Thirty Three Million;
2. Approval of the sale of the Company's wholly-owned subsidiary,
Casino Management of America Inc., a Utah Corporation ("CMA");
3. Adoption of an Amendment to the Company's Certificate of
Incorporation to change the name of the Corporation to "Group V
Corporation";
4. Election of five (5) directors to serve as the Board of Directors
until the next Annual Meeting of Stockholders and until their
successors have been elected and qualified the next Annual
Meeting of stockholders; and
5. Transaction of such other business as may properly come before
the meeting or any adjournments and postponements thereof.
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Voting Securities and Voting Rights
Only shareholders of record on April 4, 1997, or their proxies, will
be entitled to vote at the Annual Meeting of stockholders. The warrantholders
and/or optionholders are not entitled to vote at the meeting.
As of February 28, 1997, the Company had 30,000,000 shares of $.01 par
value Common Stock outstanding, each of which has one (1) vote per share
outstanding, 170,000 shares of 14% Preferred outstanding, each of which has one
(1) vote per share, and 250,000 shares of Series B Preferred outstanding, each
of which has seventy-eight (78) votes per share, which together represent all of
the outstanding voting securities of the Company.
One-third of the outstanding shares entitled to vote must be
represented at the Annual Meeting in person or by proxy to constitute a quorum
for the transaction of business. All shares are entitled to one vote per share,
with the exception of the Series B Preferred which has seventy-eight (78) votes
per share. In the election of directors, each share of stock is entitled to one
vote for a nominee for each director position. The Company does not have
cumulative voting. A shareholders' list will be available for examination by
shareholders at the Annual Meeting.
Voting Procedure
The shares represented by each properly executed proxy returned to
NuOasis will be voted at the Annual Meeting as indicated on the proxy. If no
instructions are given, the person authorized by the proxy will vote for the
election of the director nominees named in this Proxy Statement at the Annual
Meeting, in favor of the approval of the proposed Amendments to the Certificate
of Incorporation and in favor of the sale of Casino Management of America, Inc.
Any person giving a proxy has the right to revoke it at any time before it is
exercised (1) by filing with the Secretary of NuOasis a duly signed revocation
or proxy bearing a later date or (2) by voting in person at the Annual Meeting.
The Board of Directors is not aware of any matters other than those set
forth above which may come before the Annual Meeting. If any other matters are
properly presented to the meeting for action, unless contrary instructions are
given, the person named in the enclosed form of proxy and acting thereunder have
the power to vote in accordance with their best judgment on such matters.
Directors of the Company will be elected by a plurality vote of the
outstanding shares of voting securities present and entitled to vote at the
meeting. Pursuant to ss.242(b)(1) of the Delaware General Corporation Law,
approval of the Amendment to the Company's Certificate of Incorporation to
increase the authorized common shares will require the affirmative vote of a
majority of the class of outstanding common stock present in person or
represented by proxy at the meeting voting separately as a class, as well as a
majority of the shares of NuOasis voting securities present in person or
represented by proxy at the meeting. Approval of the Amendment to the Company's
Certificate of Incorporation to change the name of the Company will require the
affirmative vote of a majority of the shares of NuOasis voting securities
present in person or represented by proxy at the meeting. Nona Morelli's II,
Inc. ("Nona") intends to vote in favor of the election of five directors
including Mr. Luke and for approval of the proposals to be voted upon at the
meeting. Nona controls 39.39% of the voting securities outstanding on the Record
Date. The Secretary of the Company intends to vote his shares of common stock
representing .174% of the voting securities outstanding on the Record Date in
favor of the election of five directors including Mr. Luke and for approval of
the proposals to be voted upon at the meeting.
If a proxy is marked with instructions to withhold authority to vote
for one or more director nominees or to abstain from voting on any matter, those
shares will be treated as represented at the meeting and entitled to vote in
[NUOGAM\MIN:97ANSTM3.CLN]-3
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<PAGE>
determining whether a quorum is present. In other matters where approval is
required by a majority of shares outstanding or represented at the meeting,
abstentions from voting on a matter will have the effect of a vote against the
matter.
Abstentions and broker non-votes (where a broker or other record holder
submits a proxy but does not have authority to vote a customer's shares) will be
considered present for purposes of establishing a quorum. Under applicable
Delaware law, a broker non-vote will have the effect of a vote against the
proposals being considered.
Solicitation of Proxies
The proxies are solicited by the Board of Directors. Solicitation of
proxies may be made by officers, directors and employees of the Company in
person, by telephone, facsimile transmission or by mail. In addition, brokers,
banks and other nominee holders will be reimbursed for expenses they incur in
forwarding proxy materials to and obtaining voting instructions from beneficial
owners of the Company's common stock. The cost of solicitation of proxies will
be borne by the Company.
Security Ownership of Certain Principal Stockholders
The following tables set forth the number of shares of Common Stock,
Series B Preferred Stock, 14% Cumulative Preferred Stock of the Company
beneficially owned as of February 28, 1997 by (I) each person (including any
"Group" as that term is defined in Section 13 (d)(3) of the Securities Exchange
Act of 1934) who beneficially owns more than 5% of any class of voting
securities (i.e. the Common, 14% Cumulative Preferred or the Series B Preferred)
(ii) each of the officers or directors of the Company who beneficially owns any
shares of Common, 14% Preferred, or Series B Preferred and (iii) all directors
and officers of the Company as a group.
[NUOGAM\MIN:97ANSTM3.CLN]-3
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<TABLE>
<CAPTION>
Shares of
Common Stock Number and Percent of
Name and Address of Beneficially Class if Proposal
Beneficial Owners(1) Owned(2) No. 1 is Approved(3)
- ---------------------------------- ------------------- --------------------------------------
Number Percentage Number Percentage
------ ---------- ------------- ----------
<S> <C> <C> <C> <C>
Nona Morelli's II, Inc. 0 - 31,500,000(4) 51.22%
Joseph Monterosso 0 - 19,500,000(5) 39.39%
550 15th Street
San Francisco, CA 94103
Structure America, Inc. 0 - 2,000,000(6) 6.25%
550 N. Jefferson
Loveland, CO 80537
Officers and
Directors
Fred G. Luke 0 - 2,881,176(7)
John D. Desbrow 86,250 .28% 361,250 1.19%
Steven H. Dong 0 - 275,000 .91%
All directors and 86,250 .28% 3,517,426 10.49%
executive
officers as a
group (3 persons)
</TABLE>
<TABLE>
<CAPTION>
Shares of Series Number and Percent of
Name and Address of B Preferred Stock Class if Proposal
Beneficial Owner(1) Beneficially Owned No. 1 is approved(3)
- ---------------------------------- --------------------- ----------------------
Number Percentage Number Percentage
-------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Nona Morelli's II, Inc. 250,000 100% 250,000 100%
Joseph Monterosso(5) 250,000 100% 250,000 100%
550 15th Street
San Francisco, CA 94103
</TABLE>
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<TABLE>
<CAPTION>
Shares of 14%
Cumulative Preferred Number and Percent of
Name and Address of Stock Beneficially Class if Proposal
Beneficial Owner(1) Owned No.1 is Approved(3)
- ---------------------------------- -------------------- --------------------------------
Number Percentage Number Percentage
------ ----------- ------ ----------
<S> <C> <C> <C> <C>
Raymond C. Kitely 30,000 17.6% 30,000 17.6%
20079 Glen Arbor
Court
Saratoga, CA 95070
Eli Moshe 10,000 5.9% 10,000 5.9%
110 S. Sweetzer,
No. 301
Los Angeles, CA
90048
Walter K. Theis, 20,000 11.8% 20,000 11.8%
M.D.
1200 Corsica Drive
Pacific Palisades,
CA 90272
David Seror,
Chapter 7 Trustee
for the Estate of
David A. Paletz 77,500 45.6% 77,500 45.6%
221 N. Figueroa
St., Room 800
Los Angeles, CA
90012
Neil Miller 15,000 8.8% 15,000 8.8%
2790 Forrester
Drive
Los Angeles, CA
90064
David Sheetrit 10,000 5.9% 10,000 5.9%
c/o Moshe Shram
929 East Fourteenth
Street
Los Angeles, CA
90021
- ------------------------------------------ ------------------------------------ ---------------------- -------------------
</TABLE>
(1) The address of Nona Morelli's II, Inc., NuVen Advisors, Inc. and each
executive officer and Director is c/o NuOasis Gaming, Inc. 2 Park Plaza,
Suite 470 Irvine, Ca 92614. With the exception of Joseph Monterosso, each
stockholder listed in these tables possesses sole voting and investment
power with respect to the shares listed opposite the holder's name.
(2) Excludes common shares underlying convertible securities, options or
warrants that are presently held but not currently exercisable because the
Company's authorized capital is insufficient.
[NUOGAM\MIN:97ANSTM3.CLN]-3
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<PAGE>
(3) Percentage ownership amounts under the Approval of Proposal No. 1 column
are computed for each holder assuming that convertible securities, options
and warrants held by such holder that are exercisable within 60 days are
exercised. The effect of options and warrants of other holders are excluded
from each holder's percentage computation.
(4) Assumes conversion of Series B Preferred shares into 19,500,000 shares of
Common Stock and 12,000,000 shares of Common stock which may be issued to
Nona on exercise of New Class D Warrants.
(5) Nona has granted Joseph Monterosso an option to acquire the 250,000 shares
of Series B Preferred Stock. The table presents the effect of the exercise
of such option by Mr. Monterosso. The table presents both Nona and Mr.
Monterosso as beneficial owners of the same 250,000 shares of Series B
Preferred stock.
(6) On February 29, 1996, Structure America, Inc. received contingent
contractual rights for 1,000,000 shares for services to be rendered and an
option to purchase 1,000,000 shares at $.12 per share. Under Rule
13d-3(d)(1)(c) Structure America, Inc. is deemed the beneficial owner of
2,000,000 shares even though the shares are not outstanding.
(7) The Luke Family Trust (the "Luke Trust") owns 93% of NuVen Advisors,
formerly New World. Fred G. Luke, as Co-Trustee of the Luke Trust
determines the voting of the shares of NuVen Advisors, Inc. and, as a
result, may be deemed to control the Luke Trust. Under Rule 13d-3(d)(1)(c)
Fred G.Luke is deemed the beneficial owner of 2,000,000 shares subject to
the outstanding option granted to NuVen Advisors, Inc. even though the
option has not been exercised and the shares are not outstanding. Mr. Luke
personally has accrued options rights as to 881,176 shares.
[NUOGAM\MIN:97ANSTM3.CLN]-3
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<PAGE>
Historical Financial Information on the Company
The following selected financial data shows balance sheet and operating
information for the Company for the years 1990 through September 30, 1996. This
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and Notes included in the Annual Report on Form 10-KSB filed by the
Company for the fiscal year ended June 30, 1996 which accompanies this Proxy
Statement and also included in Form 10-QSB/A for the quarter ended December 31,
1996 which is included as part of this Proxy Statement.
In October 1994, Ba-Mak Gaming International, Inc. ("Ba-Mak"), a
wholly-owned subsidiary of the Company, 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 this period.
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 liquidated such
assets for the benefit of Ba-Mak's bankruptcy estate. As such, all gaming
operations of Ba-Mak ceased and accordingly, Ba-Mak has been accounted for as a
disposition of an investment which resulted in (1) 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. Fiscal year
1995 gaming revenues include approximately $884,000 in Ba-Mak revenues which
will not be recurring in future fiscal years.
Since April 1995 the Chapter 7 Trustee has liquidated Ba-Mak's assets
for the benefit of Ba-Mak's bankruptcy estate. All but 35 of the video bingo
machines were returned to the machine vendor in satisfaction of its claim under
the Louisiana vendor's lien statute. The remaining 35 machines and Ba- Mak's
office equipment were sold by the Trustee. The Company has filed a Proof of
Claim with the Bankruptcy Court for the intercompany advances made to Ba-Mak. As
of the date of this Proxy Statement, the Trustee's administration of the
bankruptcy estate is ongoing. In February 1996, the Trustee applied to the
bankruptcy court for authority to make an interim distribution in the amount of
$70,750 consisting of $67,168 to Chapter 11 Administrative Creditors, $750 to
the Office of the U.S. Trustee and $2,831 to the Trustee for interim
compensation and expenses payable to the Trustee. Since the interim distribution
is expected to exhaust the estate and since the Company's claim is not included
in the Trustee's interim distribution list, the Company does not anticipate
receiving any sums on its Claim.
Total revenues and cost of gaming during fiscal 1994 from Ba-Mak in the
amounts of $2.2 Million for fiscal 1994 and $1.9 Million, respectively, are not
expected to recur in future years due to Ba-Mak's Chapter 7 bankruptcy and
therefore the Company's historical financial information is not indicative of
the Company's future financial condition.
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6 Months 9 Months
Ended Ended
December June 30,
31, 1996 1996
(Unaudited)(5) (Audited)
-------------- ------------
Operating Data:
Revenues from
continuing
operations(1) $ - $ -
Loss from
continuing
operations (3,718,618) (797,140)
Loss from
discontinued
operations(2) - -
Net loss (3,718,618) (797,140)
Net loss
applicable
to common (3,730,518) (814,990)
stock(3)
Net loss per
common
share(3):
Continuing
operations $ (.12) $ (.03)
Discontinued
operations $ - $ -
Weighted
average
number of
common shares
outstanding 30,000,000 29,057,660
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<TABLE>
<CAPTION>
Years Ended September 30,
(Audited)
-----------------------------------------------------------------------------------------------------------
Operating Data: 1995(5) 1994(4) 1993 1992 1991 1990
------------ ---------------- --------------- --------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues from
continuing
operations(1) $ 884,077 $ 2,252,699 $ 82,137 $ 75,415 $ 107,607 $ 171,112
Loss from
continuing
operations (1,096,705) (4,657,456) (813,501) (1,009,914) (1,060,200) (691,392)
Loss from
discontinued
operations(2) - - (5,986) (18,600) (1,292,102) (409,664)
Net loss (1,096,705) (4,657,456) (819,487) (1,028,514) (2,352,302) (1,101,056)
Net loss
applicable
to common (1,120,505) (4,564,681) (850,637) (1,086,614) (2,457,302) (1,206,056)
stock(3)
Net loss per
common
share(3):
Continuing
operations $ (.04) $ (.23) $ (.06) $ (.12) $ (.18) $ (.16)
Discontinued
operations $ - $ - $ - $ -- $ (.20) $ (.09)
Weighted
average
number of
common shares
outstanding 23,785,550 19,755,113 12,716,027 8,733,158 6,392,200 4,875,161
</TABLE>
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6 Months 9 Months
Ended Ended
December June 30,
31, 1996 1996
(Unaudited)(5) (Audited)
-------------- ------------
BalanceSheet
Data:
Working capital
(Deficit)
$ (3,299,555) $ (769,012)
Total assets $ 88,932 $ 84
Long-term
debt $ 1,200,000 $ -
Total
liabilities $ 4,499,555 $ 769,096
Stockholders'
Equity
(Deficiency) $ (4,410,623) $ (769,012)
[NUOGAM\MIN:97ANSTM3.CLN]-3
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<TABLE>
<CAPTION>
Years Ended September 30,
(Audited)
-----------------------------------------------------------------------------------------------------------
1995(5) 1994(4) 1993 1992 1991 1990
------------ ---------------- --------------- --------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BalanceSheet
Data:
Working capital
(Deficit)
$ (580,103) $ (410,547) $ 277,142 $ (323,077) $ 200,638 $ 131,745
Total assets $ 328,732 $ 2,859,550 $ 2,889,096 $ 1,152,682 $ 1,635,716 $ 2,532,049
Long-term
debt $ - $ - $ 804,102 $ 821,221 $ 876,194 $ 910,081
Total
liabilities $ 631,555 $ 906,723 $ 1,551,581 $ 1,148,914 $ 1,180,004 $ 1,572,675
Stockholders'
Equity
(Deficiency) $ (302,824) $ 1,952,827 $ 1,337,515 $ 3,768 $ 455,712 $ 959,374
</TABLE>
(1) Includes revenues from gaming operations of $7,685 in fiscal 1993.
Operations of electronic video bingo machines did not commence until
September, 1993.
(2) The Company discontinued its health screening center operations
effective September 30, 1991.
(3) The Company has paid no dividends on its common stock. Dividends in
arrears on the Company's 14% Preferred Stock aggregated $116,575 and
$92,775 at September 30, 1995 and 1994, respectively.
(4) On January 29, 1996, the Texas State Board of Public Accountancy made a
determination that the firm of C. Williams & Associates, P.C. was not
properly licensed to practice public accounting in Texas, retroactive
back to March 2, 1995.
The firm of C. Williams & Associates, P.C. performed an audit of the
Company's financial statements for the year ended September 30, 1994
and issued its report on that audit on February 5, 1995, which is prior
to the revocation of Mr. Williams' license on March 2, 1995.
Article 2 of Regulation S-X provides that, after March 2, 1995, the
firm of C. Williams & Associates, P.C. is not qualified to practice
before the Commission. Shareholders continue to retain legal rights to
sue and recover damages from C. Williams & Associates, P.C., for
material misstatements or omissions, if any, in the financial
statements.
Should C. Williams & Associates, P.C. dissolve under the laws of Texas,
its state of incorporation, the rights of the shareholders to sue and
recover damages from C. Williams & Associates, P.C. and its directors,
officers and shareholders would be determined by the laws of the State
[NUOGAM\MIN:97ANSTM3.CLN]-3
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of Texas governing the dissolution of Texas professional corporations
or possibly federal securities laws or the laws of the forum where
such shareholders reside.
(5) As of April 1995, the former operations of the Company's gaming
subsidiary have ceased following conversion of Chapter 11 proceedings
to Chapter 7 under the Bankruptcy Code. As of the date of this Proxy
Statement the Company is not engaged in gaming or any other revenue
generating activities and the Company's historical financial
information is not indicative of the Company's future financial
condition of results of operations.
[NUOGAM\MIN:97ANSTM3.CLN]-3
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PROPOSAL NO. 1: AMENDMENT TO CERTIFICATE OF INCORPORATION TO AUTHORIZE
ADDITIONAL COMMON SHARES
The Company's Board of Directors has approved an amendment to the
Company's Certificate of Incorporation and is recommending that the stockholders
approve the amendment to the Company's Certificate of Incorporation.
Need for Additional Authorized Common Shares and Common Shares Reserved for
Issuance
Since March 30,1994 the Company currently has had insufficient
authorized shares to provide for conversion of all outstanding convertible
securities and exercise of all outstanding warrants and options. The Company's
Certificate of Incorporation currently authorizes Thirty Million shares of $.01
par value common stock and all 30,000,000 shares are now issued and outstanding.
There are 1,530,000 shares currently reserved for issuance upon conversion of
New Class A Warrants; 3,080,000 shares currently reserved for issuance upon
conversion of New Class B Warrants; 1,510,000 shares currently reserved for
issuance upon conversion of New Class C Warrants; 12,000,000 shares currently
reserved for issuance upon conversion of 6,000,000 New Class D Warrants held by
Nona; 19,500,000 shares currently reserved for issuance upon conversion of
250,000 Series B Preferred shares held by Nona; 170,000 shares reserved for
issuance to 14% Cumulative Preferred Stock shareholders; and 6,550,000 shares
currently reserved for issuance upon exercise of outstanding options. On March
30, 1994 the number of shares reserved for issuance together with the number of
shares issued and outstanding on March 30, 1994 exceeded the number of shares
authorized in the Company's Certificate of Incorporation. Since March 30, 1994
the Company has granted options to purchase an aggregate 7,150,000 shares of
common stock, and contractually undertaken to issue 1,000,000 shares to
Structure America, Inc. and 1,000,000 shares to the shareholders of National
Pools Corporation ("NPC"). (See " Acquisition of National Pools Corporation" at
page 17) For common shares currently reserved to be issued the dates of
reservation and common shares outstanding on each reservation date are as
follows:
<TABLE>
<CAPTION>
Approximate
Number of Number of
Preferred Number of Common Shares
Shares/ Common Number of Outstanding on
Description of Warrants/ Shares Common Issuance/
Derivative Month Options/ Initially Shares now Reservation
Securities Issued Rights Reserved Reserved Date
Issued
- ------------------------ ------ --------- --------- ---------------- --------------
<S> <C> <C> <C> <C>
14% Cumulative 6-89 750,000 750,000 170,000 4,791,276
Preferred Stock
New Class A 6-93 3,080,000 3,080,000 1,530,000[DELTA] 18,711,175
Warrants
New Class B 6-93 3,080,000 3,080,000 3,080,000 18,711,175
Warrants
New Class C 8-93 1,550,000 1,550,000 1,510,000# 18,711,175
Warrants
New Class D 3-94 6,000,000 12,000,000 12,000,000 20,688,675
Warrants
Series B 3-94 250,000 19,500,000 19,500,000 20,688,675
Preferred Stock
</TABLE>
[NUOGAM\MIN:97ANSTM3.CLN]-3
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<PAGE>
<TABLE>
<CAPTION>
Approximate
Number of Number of
Preferred Number of Common Shares
Shares/ Common Number of Outstanding on
Description of Warrants/ Shares Common Issuance/
Derivative Month Options/ Initially Shares now Reservation
Securities Issued Rights Reserved Reserved Date
Issued
- ------------------------------ ------ --------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C>
OTC 10-94 600,000 600,000 600,000 20,688,675
Communications
NuVen Advisors 2-95 2,000,000 2,000,000 2,000,000 25,151,175
Option
Steven H. Dong 7-95 275,000 275,000 275,000 25,801,175
Option
Fred G. Luke 8-95 3,000,000* 3,000,000* 2,131,176* 26,176,175
Option
Structure Agreement 2-96 1,000,000 1,000,000 1,000,000 30,000,000
America, (**)
Inc.
Option 2-96 1,000,000 1,000,000 1,000,000 30,000,000
(***)
John D. Desbrow 4-96 275,000 275,000 275,000 30,000,000
Option
NPC Shareholders 12-96 241,900,000 241,900,000 241,900,000 30,000,000
Convertible
Promissory Notes
NPC Shareholders 12-96 1,000,000 1,000,000 1,000,000 30,000,000
per Stock
Purchase
Agreements
Total: 287,971,176
</TABLE>
* Mr. Luke has accrued and continues to accrue option rights at 50,000
shares per month from April 1994. The Company issued 868,824 shares to
Mr. Luke after Mr. Luke exercised his option as to 868,824 shares on
January 4, 1996, leaving a balance of 2,131,176 reserved shares.
[DELTA] 1,550,000 New Class A Warrants were exercised.
# 40,000 New Class C Warrants were canceled for non-payment of the
exercise price on 40,000 New Class A Warrants tendered for exercise.
** On February 29, 1996 Structure America , Inc. received contingent
contractual rights to 1,000,000 shares.
*** On February 29, 1996 Structure America, Inc. received an option to
purchase 1,000,000 shares.
As set forth in the foregoing table, 287,971,176 shares in excess of the
authorized shares are necessary to meet outstanding convertible securities,
warrants and options.
None of the above options, warrants, preferred shares or convertible
notes may be exercised or converted until the Certificate of Incorporation is
amended to authorize additional shares. Similarly, the shares due to Structure
America, Inc. and the NPC shareholders under contractual obligations may not be
issued until the Certificate of Incorporation is amended to authorize additional
shares. If Proposal 1 is approved, options held by officers, directors,
affiliates and significant shareholders will become exercisable. The exercise
prices and expiration dates of options presently held by affiliates are as
follows:
[NUOGAM\MIN:97ANSTM3.CLN]-3
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<PAGE>
<TABLE>
<CAPTION>
Number of Shares Now Subject
to Option or Warrant Exercise Price Expiration Date
---------------------------- -------------- ---------------
<S> <C> <C> <C>
Fred G. Luke 881,176 * $0.12 July 31, 2000
Steven Dong 275,000 $0.12 July 31, 2000
John D. Desbrow 275,000 $0.12 July 31, 2000
NuVen Advisors, Inc. 2,000,000 $0.10 July 31, 2000
Structure America, Inc. 1,000,000 $0.12 July 31, 2000
Nona Morellis II, Inc. 12,000,000 $0.50 March 30, 2004
</TABLE>
* Reflects unexercised option rights accrued as of February 28, 1997.
Conflicts of Interest and Control Over Future Issuances of Common Stock
Furthermore, increasing the number of authorized shares via amendment
of the Certificate of Incorporation will permit the Board of Directors to issue
stock to consultants for services including issuing shares to members of the
Board of Directors and officers of the Company. Such enabling discretion in the
Board of Directors may be viewed as a conflict of interest of which shareholders
should be aware. Until the Company has meaningful cash flows from operations, it
is unlikely the Company will be able to compensate its officers and directors
and outside consultants in any manner other than through the issuance of shares
of common stock. In this regard, NuVen Advisors, Inc., which renders services
and provides facilities and administrative personnel to the Company and which
holds an option to purchase 2,000,000 shares of the Company, is controlled by
Fred G. Luke, a Director of the Company. Issuances of shares to NuVen Advisors,
Inc., whether for sums due it by contract or upon exercise of its option,
presents a conflict of interest of which shareholders should be aware.
Additionally, issuances of shares to officers such as John D. Desbrow and Steven
H. Dong or Directors, such as Fred G. Luke, upon exercise of compensatory
options poses a conflict of interest of which shareholders should be aware.
Until the Company obtains working capital, the Company's key administrative
functions will continue to be provided by consultants, directors and officers
who are compensated primarily in the form of the Company's common stock. The
Company intends to negotiate with NPC creditors regarding settlement of NPC
debts, which may involve issuances of common stock. There are no other current
plans or proposals to issue stock or securities other than as described herein.
All of the above will be made possible by the passage of the proposal to
increase the number of authorized common shares. By voting in favor of the
proposal shareholders will in essence grant to the Board of Directors control
over future issuances of shares except for specified transactions requiring
shareholder approval under Delaware law.
Under the Delaware conflict of interest statute, Section 144 of the
Delaware General Corporation Law, no contract shall be void or voidable if
disclosure of the material facts as to the relationship or interest and as to
the contract or transaction with any officer or director or entity in which an
officer or director has a financial interest is made and the approval by a
majority of disinterested directors or the shareholders is obtained. Section
144(a)(1) requires that the disinterested directors must act in good faith in
issuing shares to related parties. Alternatively, Section 144(a)(2) requires
that the contract or transaction be "approved in good faith by the
shareholders." Independent shareholder good faith approval, after full
disclosure, will generally result in a shift of the burden of proof from the
interested officer or director to the party attacking the transaction.
Additionally, the Company's articles of incorporation provide that "any contract
or act that shall be approved or be ratified by the vote of the holders of a
majority of the stock of the Corporation which is represented in person or by
proxy at such meeting and entitled to vote thereat (provided that a lawful
quorum of stockholders be there represented in person or by proxy) shall be as
valid and as binding upon the Corporation and upon all the stockholders as
though it had been approved or ratified by every stockholder of the Corporation,
whether or not the contract or act would otherwise be open to legal attack
because of directors' interest, or for any other reason."
Dilution to Existing Shareholders
If the Certificate of Incorporation is amended to authorize additional
shares, upon the issuance of new shares for whatever reason, whether upon
exercise of options or conversion of warrants or preferred stock or otherwise,
existing shareholders will suffer dilution. If the Certificate of Incorporation
is amended, significant dilution of current common stockholders is possible upon
the issuance of more common shares. If 303,000,000 more shares are issued,
existing common stockholders would be diluted to a 9% ownership of the
outstanding common shares. However, the issuance of an additional 241,900,000
shares to the NPC shareholders is conditioned upon the reporting of cumulative
earnings according to the following schedule.:
[NUOGAM\MIN:97ANSTM3.CLN]-3
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<PAGE>
CONVERSION TRIGGERED UPON CUMULATIVE NUMBER OF COMMON
REPORTING OF THE FOLLOWING SHARES ISSUABLE AT EACH LEVEL OF
CUMULATIVE NET OPERATING NET OPERATING INCOME REPORTED
INCOME
$ 1,000,000 6,047,500
$ 10,000,000 60,475,000
$ 20,000,000 120,950,000
$ 30,000,000 181,425,000
$ 40,000,000 241,900,000
The cut off date by which the dollar earnings thresholds must be
achieved is five years from the date of the shareholders' meetings. If the
lowest of the thresholds is not achieved, then the convertible notes held by the
NPC shareholders would not be converted to common stock. If the notes are not
paid or extended at maturity, the note holders could foreclose on the NPC assets
which secure the notes.
Statutory Requirements for Shareholder Approval of Certain Transactions
The Delaware General Corporation Law requires the approval of a
majority of the outstanding shares present in person or represented by proxy at
a meeting for the merger, consolidation or dissolution of the Company or the
sale, lease or exchange of all or substantially all of the Company's assets. Any
future transactions falling within these parameters will require future
solicitation of shareholder approval. Transactions not encompassed by the
above-referenced sections of Delaware law will not require shareholder approval
prior to the issuance of additional common shares and this solicitation will be
the only opportunity for the shareholders to consider such future issuances of
common stock, unless the Board, under the discretion conferred upon it in the
Certificate of Incorporation, elects to submit any contract for shareholder
ratification. Until the Company obtains working capital the Company's key
administrative functions will continue to be provided by consultants, directors
and officers who are primarily compensated in the form of common stock. The
Company intends to negotiate with NPC creditors regarding settlement of NPC
debts which may involve issuances of common stock. There are no other current
plans or proposals to issue stock or securities other than as described herein.
Benefits of Approval of the Increase in Authorized Common Shares
The Board of Directors has determined that adoption of the proposal is
in the best interest of the Company. Increasing the authorized number of common
shares will allow the Company to be able to issue shares of common stock now
reserved for issuance upon exercise of outstanding warrants and options. It will
permit the conversion of the outstanding shares of preferred stock and the
convertible notes issued to the NPC stockholders. It will also allow the Company
to issue the common shares necessary to satisfy its contractual obligations to
issue 1,000,000 shares to the NPC shareholders for the acquisition of NPC. It
will further allow the Company to issue shares in subsequent private placements
or public offerings to raise capital for the Company.
Consequences of a Failure to Authorize Additional Shares
If the proposed Amendment is not adopted, there will be insufficient
shares authorized to allow conversion of outstanding convertible promissory
notes, warrants and options. Neither the Series B Preferred Stock nor the Nona
Option nor the convertible notes issued to the NPC shareholders may be exercised
until there are sufficient common shares authorized to permit such conversion or
exercise. If additional common shares are not authorized, the NPC shareholders
will demand to rescind the NPC acquisition and Joseph Monterosso will resign as
President.
[NUOGAM\MIN:97ANSTM3.CLN]-3
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<PAGE>
The funding of NPC and the Company entering into its proposed new line
of business is wholly dependent upon amending the Articles of Incorporation to
authorize sufficient shares to permit:
1) Conversion of the Series B Preferred shares into common stock.
2) The issuance of 1,000,000 common shares to the NPC
shareholders.
3) The conversion of the Convertible Promissory Notes issued to
the NPC shareholders into common stock.
The Board of Directors believes that if the proposed amendment is not
adopted, the Company will be significantly hampered in its ability to generate
revenues, raise capital, increase the value of shareholder's equity, and will be
unable to commence operations in the lottery pool business.
Common Stock
The Company is authorized to issue 30,000,000 shares of Common Stock of
$.01 par value. Each share of Common Stock is entitled to one vote at all
meetings of shareholders. All shares of Common Stock are equal to each other
with respect to liquidation rights and dividend rights. All shares of Common
Stock when issued, including shares issuable upon exercise of Warrants and upon
conversion of the 14% Preferred Stock and Series B Preferred Stock, will be
validly issued, fully paid, and non-assessable. There are no preemptive rights
with respect to additional issuances of Common Stock. The Certificate of
Incorporation of the Company does not provide for cumulative voting at the
election of directors.
In the event of liquidation, dissolution, or winding-up of the Company,
holders of the Common Stock will be entitled to receive on a pro-rata basis all
assets of the Company remaining after satisfaction of all liabilities, including
the liquidation preference of the holders of the Company's 14% Preferred Stock
or any other series of preferred stock subsequently issued having a liquidation
preference.
14% Cumulative Convertible Preferred Stock
The 14% Cumulative Convertible $.01 par value Preferred Stock ("14%
Preferred Stock") issued by the Company shall pay an annual dividend of $.14 or
fourteen percent (14%) paid quarterly in arrears on March 31, June 30, September
30 and December 31, to the extent permitted by the General Corporation Law of
the State of Delaware which permits the payment of dividends only out of the
surplus or net earnings for the fiscal year in which the dividend is declared
and/or the preceding fiscal year.
Dividends are cumulative; i.e., unpaid dividends, whether or not
earned, accrue beyond the designated payment date. Dividends in arrears
aggregated $ 134,425 and $116,575 at June 30, 1996 and September 30, 1995,
respectively. Dividends may be declared and paid upon Common Stock in any fiscal
year of the Company only if all accrued dividends upon all shares of 14%
Preferred Stock have been paid. The 14% Preferred Stock shall have a liquidation
preference of the original purchase price ($1.00 per share) plus unpaid
dividends on each share of Preferred Stock. The balance of proceeds of a
liquidation, if any, are to be paid to the Common Stockholders of the Company. A
merger or reorganization or other transaction in which control is transferred
will be treated similar to a liquidation.
The 14% Preferred Stock is redeemable by the Company upon thirty days
notice by the Company's Board of Directors at a redemption price of $1.00 per
share plus an amount equal to all unpaid dividends thereon to the redemption
date.
Subject to certain provisions for adjustments, each share of 14%
Preferred Stock is convertible at any time into one share of the Company's
Common Stock. Each share of the 14% Preferred Stock votes on a 1:1
converted-to-Common Stock basis, and the holders of 14% Preferred Stock and the
holders of Common Stock shall vote together as one class on all matters
submitted to a vote of the Company's stockholders. The conversion ratio of the
14% Preferred Stock to Common Stock will be proportionally adjusted in the event
[NUOGAM\MIN:97ANSTM3.CLN]-3
15
<PAGE>
of certain events granting rights of prescription to all common stockholders.
Proportional adjustments for stock splits and stock dividends will be made.
Acquisition of Casino Management of America, Inc.
On January 13, 1994, the Company entered into a Stock Purchase and
Business Combination Agreement (the "Stock Purchase Agreement") with Nona
Morelli's II, Inc. ("Nona") and Casino Management of America, Inc. ("CMA"). The
Stock Purchase Agreement provided for the transfer of all of the stock of CMA,
which was a wholly owned subsidiary of Nona, to the Company in exchange for
certain shares of common stock, preferred stock, warrants, and options issued to
Nona by the Company. The Stock Purchase Agreement closed on March 30, 1994 (the
"Closing Date"), pursuant to the terms of a Closing Agreement executed by Nona,
CMA, and the Company. Under Delaware law stockholder approval of the transaction
was not required since the transaction did not involve a merger or sale of all
or substantially all the assets of the Company. The Company foresees no possible
future adverse consequences given that the transaction was closed in accordance
with Delaware law. Any future claims have already been barred by the one year
statute of limitations contained in 15.U.S.C. 77m. At the Closing, Nona
transferred to the Company 7,500,000 shares of common stock in CMA, comprising
100% of the stock issued and outstanding of CMA, and the Company issued to Nona
1) 2,000,000 shares of common stock; 2) 250,000 shares of Series B Convertible
Preferred Stock; 3) 6,000,000 New Class D common stock purchase warrants; and 4)
an option to purchase up to 6,160,000 shares of common stock more particularly
described as follows:
Series B Preferred Stock
The 250,000 shares of Series B Preferred are convertible at the rate of
seventy-eight (78) shares of common stock for each share of Series B Preferred,
or a total of 19,500,000 shares of common stock if all of the shares of Series B
are converted. The Series B Preferred Stock has no redemption rights and is not
entitled to any dividends. It has a liquidation value of $2 per share in
preference to any payment on common stock, subject only to rights of the holders
of the 14% Preferred Stock. Each share is entitled to seventy-eight (78) votes
and shall be convertible into seventy-eight (78) fully paid and non-assessable
shares of common stock. Nona's stock holdings in the Company presently consist
of the 250,000 Series B Preferred shares which represent 39.39% of the
outstanding voting securities of the Company. Nona has granted an option to
Joseph Monterosso to acquire the 250,000 shares of Series B Preferred Stock at
an exercise price of $13.00 per share. If Mr. Monterosso exercises such option,
the majority of the funds received by Nona will be used to acquire CMA from the
Company as more fully set forth in Proposal 2 below.
Nona Option
This Option was granted to Nona to enable Nona to purchase any of the
shares underlying the New Class A, B and C Warrants that are not exercised by
the Warrant holders. The total number of shares that can be purchased upon
exercise of the option is equal to the number of shares of common stock subject
to New Class A, New Class B and New Class C warrants outstanding on March 30,
1994 that eventually expire unexercised. In other words the option was designed
to enable Nona to purchase any of the common shares underlying the New Class A,
B and C Warrants that are not purchased by the Warrant holders. The right to
exercise the Nona Option will continue for a period of 180 days after the last
expiration date of the New Class A, B and C Warrants. The Nona Option is
non-transferable. Nona does not presently hold any of the New Class A, B or C
Warrants, nor is it currently entitled to exercise its Option. The Nona Option
for the purchase of up to 6,160,000 shares of common stock is nontransferable
and exercisable at $.01 per share.
New Class D Warrants
Each New Class D Warrant is exercisable at $1.00 per warrant and will
entitle the holder to receive upon exercise two (2) shares of common stock, or a
total of 12,000,000 shares if all of the New Class D Warrants are exercised. The
New Class D Warrants expire on March 30, 2004. To date none of the New Class D
[NUOGAM\MIN:97ANSTM3.CLN]-3
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<PAGE>
Warrants have been exercised and Nona has been the holder of the New Class D
Warrants since March 30, 1994. The New Class D Warrants have anti-dilution
protection so the common shares purchasable upon exercise of the Warrants shall
not be subject to dilution or reduction by any reverse split.
Events Subsequent To March, 1994
Between March 30, 1994 and the present, additional common shares of
stock in the Company were issued bringing the total number of shares of
outstanding common stock to 30,000,000 as of the date of this Proxy Statement.
Acquisition of National Pools Corporation
On June 13, 1996 Nona Morelli's II, Inc. ("Nona"), the controlling parent of
NuOasis, granted an option to Joseph Monterosso, the President and Chief
Executive Officer of NPC ("Monterosso"), to acquire 250,000 Series B Preferred
Shares (the "Series B Shares") owned by Nona. Such option is exercisable at a
price of $13.00 per share. Monterosso has subsequently conditionally assigned
his rights under the option as to 79,361 Series B Shares to certain shareholders
of NPC and other investors, leaving him with rights under the option to purchase
170,639 Series B Shares.
On December 19, 1996 the Company entered into a Stock Purchase Agreements with
each of the shareholders of NPC pursuant to which the Company agreed to issue a
series of Secured Promissory Notes (the "Notes") in the aggregate amount of
$1,200,000 and 1,000,000 shares of its common stock to the NPC shareholders in
exchange for all of the issued and outstanding shares of capital stock of NPC.
The business and history of NPC are summarized below. The Notes are convertible
into a total of 241,900,000 shares of NuOasis' common stock contingent upon
NPC's operations achieving certain financial goals over the next several fiscal
years. The Notes are non-recourse to NuOasis and secured by the assets of NPC,
bear interest at 8% per annum, and are due and payable on May 31, 1999. Under
the terms of the Notes, for every $250,000 of net annual operating income
achieved by NPC, $7,500 in principal amount of the Notes may be converted into
1,511,875 shares of restricted NuOasis common stock. As part of this
acquisition, Nona and NuOasis agreed to a debt assumption agreement whereby all
NuOasis accounts payable debt in excess of $20,000 on December 24, 1996 is
assumed by Nona except for amounts owed to NuVen Advisors, Inc., an affiliate
and Fred G. Luke, Chairman and Former President, which are to be converted into
shares of NuOasis common stock based upon the prevailing market price on the
date of the NuOasis Shareholder's Meeting.
The audited financial statements of NPC are included in the body of the
attached Form 8-K/A. Such audit reports explain that NPC's financial statements
have been prepared assuming that NPC will continue as a going concern and that
such statements do not include any adjustments that may result in the event it
is unable to do so. The audited financial statements of NPC also reflect that it
has incurred operating losses of $2,401,992 from its inception and had negative
working capital of $1,581,827, as of December 31, 1995. Unaudited financial
statements of NPC for the quarter ended September 30, 1996 are also included in
the body of the attached Form 8-K/A.
Subject to the exercise of the Option and the sale by Nona of the
Series B Shares, NuOasis has agreed to fund NPC's future operations. Exercise of
the Option is contingent upon the approval of an amendment to the NuOasis
Certificate of Incorporation allowing for its authorized capital stock to be
increased to have sufficient shares of its common stock available for conversion
of the Notes. Upon such Amendment to the NuOasis Certificate of Incorporation,
and the acquisition of the Series B Shares, there will be a change of control of
NuOasis. If the NuOasis shareholders do not approve such Amendment to the
Certificate of Incorporation it is unlikely that the Series B Shares will be
acquired pursuant to the Option and, in this event, NPC may not have sufficient
working capital to "roll out" the Hit-Lotto program on a commercial basis, and
there will not be a change of control of NuOasis. The Company estimates the
minimum dollar amount necessary to roll out the Hit-Lotto project on a
commercial basis is $1,235,000; however, full implementation on a more rapid
scale would require $3,000,000. The Transaction is divided into three phases and
summarized as follows:
[NUOGAM\MIN:97ANSTM3.CLN]-3
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<PAGE>
Phase I : Acquisition of NPC, which closed on December 24, 1996
Phase II: Exercise of 95,000 Series B Shares
Holders of the Option exercise the option to purchase 95,000
Series B Shares, at $13.00 per share, by payment to Nona of
$1,235,000. The 95,000 Series B Shares so acquired may then
immediately be converted into 7,410,000 shares of restricted
NuOasis common stock at the election of the holders.
Subject to the exercise of the Option as to the 95,000 Series
B Shares, NuOasis has agreed to sell its wholly-owned
subsidiary, CMA, to Nona for $1,235,000. Upon the sale of CMA,
NuOasis intends to contribute most if not all of the proceeds
of the sale of CMA to NPC, its wholly owned subsidiary, for
working capital.
Phase III: Exercise of 155,000 Series B Shares
Following the initial exercise of 95,000 Series B Shares, if
such exercise occurs, there will be remaining 155,000 Series B
Shares available under the Option. If exercised, the 155,000
Series B Shares could immediately be converted into 12,090,000
common shares. The exercise and sale of such remaining Series
B Shares will result in an additional $2,015,000 in proceeds
to Nona which Nona intends to utilize to satisfy any
intercompany payables owed to NuOasis of up to $1,765,000 as
of the date Phase III occurs. No amounts are owed by Nona to
NuOasis as of September 30, 1996 assuming Phase II occurs,
therefore, the entire $1,765,000 is assumed to be
consideration for a release from NuOasis to Nona and
accordingly reflected as such in the pro forma financial
statements (see Note 4 to the pro forma financial statements
in Form 8-K/A attached hereto).
Although this Proposal permits a transfer of control to NPC's shareholders for
an entity with no revenues or profitable operations, the Board of Directors
believes the acquisition of NPC is in the best interest of the Company due to
the revenues expected from the implementation of the NPC's business plan and its
Hit LottoTM project. Moreover, the issuance of 241,900,000 shares is dependent
upon the achievement of net operating income levels over a number of years. See
"Dilution to Existing Shareholders" above.
The Business and History of NPC
National Pools Corporation ("NPC") is a California corporation doing
business at 550 15th Street, San Francisco, California 94103. Since inception
NPC has been developing a system to facilitate participation in group play in
state lotteries in the United States and the lotteries of foreign countries. The
program developed by NPC was named "HIT-LOTTO". The HIT-LOTTOTM program uses
debit cards, telecommunications, Internet Website, and proprietary computer
software to organize and market lottery pools for lottery players who
participate in various state lotteries. This program provides players of the
various Lotteries the opportunity to increase their chances of winning by 100
times by randomly pooling with 99 other players. Since inception NPC's
operations have been devoted primarily to the formulation and design of the
telecommunication and computer technology to support the HIT-LOTTO program.
National Pools Corporation plans to offer its proprietary HIT-LOTTOTM
service to the public through the sale of a prepaid card, the "HIT-LOTTOTM"
Value Card. The HIT-LOTTOTM Value Card will be sold at approved outlets and
Lottery retailers for $ 10 and $20 each. Each card will hold four or eight
respective plays. Through a network of retailers, NPC will distribute the
HIT-LOTTOTM Value Card enabling participation in the program. To join a pool,
callers will simply call 1-800-HIT-LOTTOTM, enter their HIT- LOTTOTM card number
and PIN, and be automatically entered into the open pool. National Pools
[NUOGAM\MIN:97ANSTM3.CLN]-3
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<PAGE>
Corporation will administer the pools and purchase 100 Lottery tickets on behalf
of the pool members. Pools will be composed of players present in the state
issuing lottery tickets to be purchased by the pools; for example, players in
Idaho would enter pools by purchasing tickets issued by the Idaho Lottery. Pools
of players will be automatically formed by voice response computers after
callers enter their HIT-LOTTOTM Value Card number and password. Pool play is
allowed only after the card number, password and account balance have been
validated. Each pool consists of one hundred $1.00 Lottery tickets, and each
pool is completed after receipt of 100 successful HIT-LOTTOTM telephone calls.
Each call equates to one pool position and pools are formed for the next
available Super Lotto jackpot.
NPC will act as an agent of the players (callers) by coordinating the
formation of groups or pools of purchasers of Lottery tickets. NPC charges each
member of the pools formed a fee ($2.50 per play) for NPC's service of
coordinating the pool and purchasing the associated tickets on behalf of the
pool members from an authorized Lottery retailer.
Once a pool has 100 members it is closed, the computer starts a new
pool, and NPC purchases the 100 lottery tickets on behalf of the just closed
pool. Tickets will be Lottery generated "Quick Pick" and are always purchased in
sequence (to avoid any manipulation of tickets). The pool will then be
associated with the corresponding 100 tickets. The first and last sequence
numbers will be entered into NPC's database to ensure the integrity of the pool.
Further, all tickets will be endorsed and stamped with the company name, the
pool number, date and time. The physical tickets will be bound to a pool draw
card and deposited in a safe until the winning numbers are announced and
verified by the Lottery. The winnings will be automatically announced to the
player the next time he or she plays HIT-LOTTOTM . Winning pools will also be
announced in daily newspapers and on radio and T.V. When a player has depleted
the value of the HIT- LOTTOTM Value Card, it can then be easily "recharged" via
a credit card; the card balance can also be transferred to a new HIT-LOTTOTM
Value Card. Hit-Lotto players will be able to cash out their winnings at any
time.
Pool winnings between $5 and $599 are automatically credited to the
player's HIT-LOTTOTM Value Card one business day after the lottery draw. NPC
will process winning tickets and claims prize winnings with the Lottery on
behalf of pool members. When pool winnings are over $600, NPC will provide the
names of the individual pool members to the Lottery by filling out the State
Lottery Multiple Ownership Claim form. In general a State Lottery will pay
winnings in amounts between $600 and $1 million in a one time payment directly
to pool members in accordance with established policies and procedures for Group
Play. Prize amounts of $1 million will generally be paid by the State Lottery
directly to winners over a 20 year period by the Lottery.
NPC provides its HIT-LOTTOTM Value Card with a valuable second feature,
long distance calling service. The HIT-LOTTOTM Value Card can be used to make
long distance calls from any touch tone telephone in the U.S. to anywhere around
the world. At the end of a long distance call, NPC will debit the HIT-LOTTOTM
Value Card.
NPC's objective is to attract 1.5% of the more than $2.5 billion
average monthly lottery tickets purchased in the U.S. to become members of an
NPC administered HIT-LOTTOTM pool through the convenience of the telephone and
the "HIT-LOTTOTM Value Card."
NPC intends to introduce its Hit-LottoTM program in selected states
after additional review of the potential markets, the regulatory environment in
those states and similar factors. At the present time, NPC believes that the
Hit-LottoTM concept should be introduced in one or more smaller markets and only
introduced into larger markets, such as California, (where the initial test of
the Hit-LottoTM took place) after the concept is successfully proven in smaller
markets. Arizona and Illinois are states presently under consideration. The
precise legal and regulatory approvals required depend on the law of the state
involved. NPC has retained the law firm of Bagatelos & Fadem and the lottery
consulting division of KMPG Peat Marwick to do legal research for and advise NPC
concerning the law and regulatory climate in several states with lotteries. NPC
will need to retain counsel to review local law, determine what, if any,
regulatory approval is necessary and obtain it. Consultations with lottery
officials will be undertaken to structure the program in each particular state
to either make obtaining regulatory approval likely as possible or to eliminate
[NUOGAM\MIN:97ANSTM3.CLN]-3
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<PAGE>
the need for such approval by securing the consent to the program by regulators
in a form not needing formal approval. Preliminary research and discussions with
regulators in several states suggest that such informal approval or cooperation
is likely, but NPC does not yet know the precise regulatory and legal approvals
that must be obtained before it can begin operations in the states where it
intends to do business.
NPC has obtained three opinions on the legality of its Hit-LottoTM
program under the California Lottery Law from the law firm of Adkins, Rothman &
Morris, the most recent in 1994. The 1994 opinion of Adkins, Rothman & Morris
concluded that the intended business operations of NPC would not violate any
criminal or statutory prohibition of the State of California, including the
California State Lottery Act of 1984, as amended, or any regulation of any
agency, municipality or subdivision of the State of California. NPC does not now
intend to introduce its Hit-LottoTM program into California until it has proven
successful in a smaller market and this opinion cannot be relied upon in other
states.
In the fall of 1994, after securing second round private debt
financing, NPC tested the Hit-LottoTM program in San Diego, California. In
addition to establishing telephone lines in which players could call to enter
pools, a publicity and advertising campaign was launched in San Diego, as was an
attempt to secure retail outlets for the Hit-LottoTM cards. NPC was able to
successfully obtain publicity and place advertisements for its program in local
media. Mailing to 1,200 convenience store operators, taverns and other possible
retail outlets yielded a 3% positive response, i.e., the merchant agreed to
become a Hit-LottoTN retail outlet. Follow-up calls to these merchants
(approximately 30 to 50 per day) resulted in a 50% favorable response from these
called. One hundred pools were formed on the 1-900-Hit-LottoTM number which was
in operation for only a few days. The 1-800-Hit-LottoTM number, which was not
advertised or even able to form pools, received 1,000 calls per hour during the
few days the line was open. NPC assumes interested parties called this number
rather than the 1-900-Hit-Lotto number to save money. While calls were answered
automatically, callers could not enter pools.
Due to problems in funding the program, the experiment was limited to
several weeks of publicity and advertising and one week of operation. NPC's
management deemed the results successful in that the Hit- LottoTM program
attracted media interest, retail vendors of Hit-LottoTM cards proved receptive
and, in the relatively limited time phone lines were open, customers appeared
willing to play lottery games under the Hit- LottoTM program in numbers
sufficient to generate the minimum projected revenues in the NPC business plan.
After the premature end of the marketing test of the Hit-LottoTM
program, NPC ceased publicity efforts and efforts to operate the program on a
retail basis. Limited development of necessary software and other technical
systems continued for several months. Lack of funds required further cut backs
and reductions in operations. By early 1995, NPC had one full time employee,
Joseph Monterosso, who concentrated his efforts on raising capital and
maintaining contacts with vendors and other providers of goods and services to
NPC. Nominal amounts of capital were raised from NPC shareholders, both by short
term loans, which have since been converted into equity, and some additional
stock purchases by NPC shareholders to allow NPC to operate.
While NPC's management is confident about the viability of the
HIT-LOTTOTM program and the Company's management believes that acquiring NPC and
assisting in the funding of the launch of its HIT- LOTTOTM program represents an
excellent opportunity for the Company, the ultimate market acceptance of the
HIT-LOTTOTM program cannot be guaranteed. Likewise, there can be no guarantee
that NPC as a subsidiary of the Company, will be able to acquire all of the
necessary regulatory approvals, enter into all the necessary service and other
contracts or otherwise accomplish all tasks needed to launch and to operate the
HIT-LOTTOTM program.
NPC's Capital Resources and Liquidity
NPC has incurred recurring net losses and negative cash flows from
operating activities since its inception in 1993. As of December 31, 1996, NPC
had cash in the amount of $1,342 and negative working capital of $2,082,038 as
of December 31, 1996. As of December 31, 1996 NPC had no current material
commitments for capital expenditures.
[NUOGAM\MIN:97ANSTM3.CLN]-3
20
<PAGE>
Due to the lack of revenues NPC had minimal cash as of December 31,
1996 to finance future operations. Considering NPC's operating losses and
negative cash flows from operating activities, management cannot assure that
such limited resources will be sufficient to sustain NPC. NPC has received
financial support from its shareholders and is dependent upon them for such
future working capital. Such conditions raise substantial doubt about NPC's
ability to continue as a going concern.
As disclosed elsewhere herein, the pending transactions with NuOasis
and Nona Morelli's II, Inc. are anticipated to improve NPC's negative working
capital and to provide cash flow up to $3 million which is intended to be
utilized to implement NPC's business plan and the Hit-LottoTM Project.
Cash Flows
Cash used in operating activities decreased $16,129 in fiscal 1996 from
1995. This was primarily attributable to additional accruals of operating
expenses in 1996. Cash used in investing activities decreased $1,275 in fiscal
1996 from 1995. This was primarily attributable to having no purchases or
disposals of fixed assets in 1996 as there were in 1995.
Cash provided by financing activities decreased $40,743 in fiscal 1996
from 1995. This was primarily attributable to having no stock issuances in 1996
as there were in 1995, and having approximately $53,598 fewer proceeds received
from stockholder loans in 1996 from 1995.
As discussed above, a net decrease in cash of $11,297 during fiscal
1996 from 1995 resulted primarily from a combination of a $16,129 decrease in
cash used in operating activities, a $1,275 decrease in cash used in investing
activities, and a $40,743 decrease in cash provided by financing activities.
NPC's Results of Operations
Comparison of the Year Ended December 31, 1996 to the year ended December 31,
1995
NPC has not had any revenues during the twelve months ended December
31, 1996 or December 31, 1995.
Operating expenses totaled $397,448 for the year ended December 31,
1996, and decreased $39,438 from the prior corresponding period due principally
to a reduction in salaries. R&D expenses totaled $58,712 for the year ended
December 31, 1996, and decreased $165,479 from the prior corresponding period.
The decrease in R&D expense in 1996 compared with 1995 was due principally to a
decreased need to incur R&D expense as the project development neared
completion. Total interest expense decreased to $126,719 in fiscal 1996 compared
to $257,495 in fiscal 1995. The decrease in interest expense in 1996 compared to
1995 was due principally to the $762,877 conversion of shareholder loans to
common stock at December 31, 1995.
NPC's total operating loss for fiscal 1996 was $582,879 as compared to
an operating loss of $661,077 for fiscal 1995, resulting in an operating loss
decrease of $78,198. The decrease was primarily attributable to the reduction of
salaries and R & D as discussed above.
NPC's loss on disposal of assets and gain on extinguishment of debt in
the amount of $0 and $0, respectively, for fiscal 1996, decreased from $17,212
and $384,800, respectively, for fiscal 1995. There were no disposal of assets or
debt conversion in fiscal 1996 as there were in 1995.
As discussed above, due to the debt conversion in fiscal 1996, related
interest expense for fiscal 1996 compared to fiscal 1995 decreased by $127,477
in 1996 from 1995.
Comparison of the Year ended December 31, 1995 to the Year ended December 31,
1994
[NUOGAM\MIN:97ANSTM3.CLN]-3
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<PAGE>
NPC has not had any revenues during the twelve months ended December
31, 1995 or December 31, 1994.
Operating expenses totaled $436,886 for the year ended December 31,
1995, which were approximately the same level as the prior corresponding period.
Research and development (R&D) spending totaled $224,191 for the year ended
December 31, 1995, and decreased $617,828 from the prior corresponding period.
The decrease in R&D in 1995 compared to 1994 was due principally to a decreased
need to incur R&D expense as the testing of the systems using the proprietary
software neared completion. Total interest expense decreased to $257,495 in
fiscal 1995 compared to $180,455 in fiscal 1994. The increase in interest
expense in 1995 compared to 1994 was due to additional borrowings in 1995
required to finance operations and R&D.
NPC's total operating loss for fiscal 1995 was $661,077 as compared to
an operating loss of $1,279,797 for fiscal 1994 resulting in an operating loss
decrease of $618,720. The decrease was primarily attributable to the increase in
R&D as discussed above.
NPC's loss on disposal of assets and gain on extinguishment of debt
were $17,212 and $384,860, respectively, for fiscal 1995. Loss on disposal of
assets and gain on extinguishment of debt was $40,373 and $67,934, respectively,
for fiscal 1994.The decrease in loss of disposal of assets was primarily
attributable to different assets being disposed of in 1994 than in 1995, and,
the increase in gain on extinguishment of debt is attributable to a greater
amount of debt being converted in 1995 than 1994.
Changes to Certificate of Incorporation
The Company currently has insufficient authorized shares to provide for
conversion of all outstanding convertible securities and exercise of all
outstanding warrants and options described above. The Board of Directors is
proposing to amend the Certificate of Incorporation by replacing, in Article
Fourth, the number "30,000,000" with the number "333,000,000" so that Article
Fourth shall read as follows:
"FOURTH: The Corporation shall be authorized to issue 333,000,000
shares of common stock of the par value of $.01 and 1,000,000 shares of
preferred stock without par value. Further, the Board of Directors of
this Corporation, by resolution only and without further action or
approval, may cause the Corporation to issue one or more classes of
stock or one or more series of stock within any class thereof
(including the $.01 par value common stock described in this Article
FOURTH), any or all of which classes or series may have such voting
powers, full or limited, or no voting powers, and such designations,
preferences or relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions adopted
by the Board of Directors; and to fix the number of shares constituting
any classes or series and to increase or decrease the number of shares
of any such class or series subsequent to the issue of shares of that
class or series."
[NUOGAM\MIN:97ANSTM3.CLN]-3
22
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSED
AMENDMENT TO THE CERTIFICATE OF INCORPORATION. THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE COMMON SHARES PRESENT IN PERSON OR REPRESENTED BY PROXY AT
THE MEETING IS NECESSARY TO PASS THIS PROPOSAL. IF ALL OF THE COMMON
SHAREHOLDERS ATTEND THE MEETING OR ARE REPRESENTED BY PROXY AT THE MEETING,
THE AFFIRMATIVE VOTE OF 15,000,001 COMMON SHARES WOULD BE REQUIRED TO PASS
THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED
FOR THIS PROPOSAL UNLESS A VOTE AGAINST THIS PROPOSAL OR ABSTENTION IS
SPECIFICALLY INDICATED.
PROPOSAL NO. 2: SALE OF CMA
The funding of NPC via the conversion of the Series B Preferred Stock
contemplates the sale of CMA by the Company to Nona Morelli's II, Inc. for
$1,235, 000 in cash. The sale of CMA is conditioned upon amendment of the
Certificate of Incorporation and the approval of Proposal 1 above. A vote
against this Proposal 2 will not have the effect of a vote against Proposal 1.
CMA has a net asset book value of $1,143,415 as of September 30, 1996. The
assets of CMA primarily consist of art work having a book value of $0,
intercompany receivables from Nona Morelli's II, Inc. having a book value of
approximately $1.4 million and prepaid media issued by American Independent
Network having a book value of $0. The funds received by Nona Morrelli's II,
Inc. from its sale of the Series B Preferred Stock in the Company will be used
to pay the $1,235,000 CMA purchase price to the Company. On a proforma basis the
impact of the sale of CMA on the Company's balance sheet is set forth in the
Form 8-K/A attached hereto. The Board of Directors urges shareholders to vote in
favor of the sale of CMA. The sale of CMA is conditioned upon the Amendment of
the Certificate of Incorporation but a vote against this proposal will not have
the effect of a vote against Proposal 1.
THE BOARD OF DIRECTORS URGES SHAREHOLDERS TO VOTE IN FAVOR OF THE SALE OF
CMA. THE SALE OF CMA IS CONDITIONED UPON THE AMENDMENT OF THE CERTIFICATE
OF INCORPORATION BUT A VOTE AGAINST THIS PROPOSAL WILL NOT HAVE THE EFFECT
OF A VOTE AGAINST PROPOSAL 1.
PROPOSAL NO. 3: AMENDMENT TO CERTIFICATE OF INCORPORATION TO CHANGE
THE NAME OF THE COMPANY
The Board has approved and adopted a resolution and, upon receipt of
shareholder approval, to change the name of the Company by way of an Amendment
to its Certificate of Incorporation filed in Delaware whereby the name of the
Company will be changed to "Group V Corporation." The Board of Directors is
proposing to amend the Certificate of Incorporation by replacing, in Article
First, the name NuOasis Gaming, Inc. with the name Group V Corporation so that
Article First shall read as follows:
"FIRST: The name of the Corporation is Group V Corporation." The Board of
Directors recommends that Stockholders vote for the Proposed Amendment to the
Certificate of Incorporation. The affirmative vote of a majority of the voting
securities present in person or represented by proxy at the meeting is necessary
to pass this proposal. Proxies solicited by the Board of Directors will be voted
FOR this proposal unless a vote against this proposal or abstention is
specifically indicated.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSED
AMENDMENT TO THE CERTIFICATE OF INCORPORATION. THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE VOTING SECURITIES PRESENT IN PERSON OR REPRESENTED BY PROXY
AT THE MEETING IS NECESSARY TO PASS THIS PROPOSAL. PROXIES SOLICITED BY THE
BOARD OF DIRECTORS WILL BE VOTED FOR THIS PROPOSAL UNLESS A VOTE AGAINST
THIS PROPOSAL OR ABSTENTION IS SPECIFICALLY INDICATED.
[NUOGAM\MIN:97ANSTM3.CLN]-3
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<PAGE>
PROPOSAL NO. 4: ELECTION OF DIRECTORS
A Board of Directors of five members is to be elected at the Annual
Meeting. The persons authorized by the enclosed form of proxy will vote each
proxy received by them for the election of the five nominees named below unless
contrary instructions are given. The term of office for all Directors will
commence on election and such persons will serve as Directors until their
successors are elected and qualified at the next Annual Meeting of shareholders
in 1998. Two of the nominees named below, Fred G. Luke and Joseph Monterosso,
are incumbent Directors. Each nominee has consented to be named in this Proxy
Statement and to serve if elected.
Except as set forth above, it is not expected that the nominees will become
unable to serve as a Director prior to the Annual Meeting. In the event that any
of the nominees for Director should, before the Annual Meeting, become unable to
serve if elected, it is intended that shares represented by proxies which are
executed and returned will be voted for such substitute nominees as may be
recommended by the Company's existing Board of Directors. The accompanying form
of Proxy contains a discretionary grant of authority with respect to this
matter. If the above nominees are not elected, shareholders would have to elect
other persons as Directors.
The following biographical information is furnished with respect to the
five nominees for election at the Annual Meeting:
Position(s) Held
Name of Nominee Age in the Company Director Since
- ------------------ --- ---------------------- -----------------
Fred G. Luke 49 Treasurer and Director April 1994
Royse Warren 56 None Not Applicable
Joseph Monterosso 49 President and Director November 25, 1996
Paula Amanda 46 None Not Applicable
Leland E. Rees 47 None Not Applicable
Fred G. Luke, age 49. Mr. Fred Luke has been a Director, Chairman and President
of the Company since March 30, 1994. Mr. Luke has over twenty-five (25) years of
experience in domestic and international financing and the management of private
and publicly held companies. Since 1982, Mr. Luke has provided consulting
services and has served, for brief periods lasting usually not more than six
months, as Chief Executive Officer and/or Chairman of the Board of various
publicly held and privately held companies in conjunction with such financial
and corporate restructuring services. In addition to his position with the
Registrant, Mr. Luke currently serves as Chairman and Chief Executive Officer of
the Company's Parent Company, Nona, (since July 1993) as well as Chairman and
President of NuVen Advisors, Inc., ("NuVen Advisors") formerly New World
Capital, Inc. ("New World"), President and Director of The Toen Group, Inc.
("Toen"), since President of Hart Industries, Inc. ("Hart"), (since August
1993)Chairman and President of Diversified Land & Exploration Co. ("DL&E"). DL&E
is a former publicly traded independent natural resource development company
engaged in domestic oil and gas exploration, development and production. Prior
to 1995, DL&E was a 90% owned subsidiary of Basic Natural Resources, Inc.
("BNR"). From 1991 through 1994 Mr. Luke served as the President and a Director
of BNR. BNR is presently inactive. Hart and DL&E were formerly in the
environmental services and natural gas processing business, respectively. Both
Hart and Toen are public companies which were formerly traded on Nasdaq or the
OTC Bulletin Board. Neither Hart nor Toen have ongoing operations. Nona is a
publicly traded (OTC: Bulletin Board) diversified holding company with overseas
gaming and domestic pasta production subsidiaries, in addition to NuOasis
Gaming. NuVen Advisors provides managerial, acquisition and administrative
services to public and private companies including Nona, NuOasis Gaming, Hart
and Toen. NuVen Advisors, which is controlled by Fred G. Luke, as Trustee of the
Luke Family Trust, is an affiliate of both Nona and NuOasis Gaming. NuVen
Advisors is a stockholder of Hart, DL&E and Nona, and provides management,
general and administrative services, and merger and acquisition services to
Hart, DL&E and Nona pursuant to independent Advisory and Management Agreements.
Mr. Luke also served from 1973 through 1985 as President of American Energy
[NUOGAM\MIN:97ANSTM3.CLN]-3
24
<PAGE>
Corporation, a privately held oil and gas company involved in the operation of
domestic oil and gas properties. From 1970 through 1985 Mr. Luke served as an
officer and Director of Eurasia, Inc., a private equipment leasing company
specializing in oil and gas industry equipment. Mr. Luke received a Bachelor of
Arts Degree in Mathematics from California State University, San Jose in 1969.
Royse Warren, age 56. Mr. Royse Warren is a consultant to the Cheyenne Casino &
Hotel in Las Vegas, Nevada. Mr. Warren has been a consultant to the Cheyenne
Casino & Hotel since November 1995. Since August 1, 1985, Mr. Warren has served
as President of The Cattle Baron Inc. whose projects include a restaurant and
casino hotel project in Henderson, Nevada. Mr. Warren has more than 25 years
experience in gaming personnel recruitment.
Joseph Monterosso, age 49. Mr. Monterosso has used his entrepreneurial skills to
launch a variety of companies over the past 25 years, culminating with National
Pools Corporation in 1992. Monterosso embarked upon fulfilling his lifelong
dream of producing his own automobile after attending the Geneva Auto Show in
1986. After raising over $45 million for funding, Monterosso founded LAFORZA
AUTOMOBILES, INC., which produced a four-wheel drive sport utility vehicle for
the luxury market and established a new mark in four-wheel drive sport vehicles.
Monterosso conceived the concept of a new kind of Sports Utility Four Wheel
Drive Vehicle when he discovered a unique Italian Sports Utility vehicle at the
Geneva Auto Show in 1986. Monterosso negotiated the design, licensing and
purchase of the body stamps and dies from the manufacturer and contracted
Pininfarina in Turin to produce the automobile. Monterosso raised the capital
through U.S. investors and European partners. Monterosso negotiated all vendor
contracts in the U.S. and Italy; including the lengthy and delicate negotiations
with Ford to supply the power train and warranty. Monterosso headed AutoItalia
SpA, of Turin, the company that produced the automobile. Monterosso supervised
the redesign of the automobile to meet U.S. DOT specifications and market
expectations. Designing the interior and the wheels himself, Monterosso resided
in Turin at this time, commuting monthly to his home in California, overseeing
the production and delivery of the automobile to the U.S.
Upon production of the finished body, interior and chassis in Turin, the LaForza
was flown to an after market assembler located in Detroit to receive the Ford
engine, drive train and electronics. A final fit and finish was done and the
LaForza was then delivered directly to the U.S. distributor, LaForza Automobiles
Inc., of Hayward, CA. LaForza Automobiles was independent of the Italian
production company, and was operated by a President and CPA. In late 1989
LaForza Automobiles Inc., caught in the market downturn and resulting capital
crunch, could not finance their marketing operation and filed for bankruptcy
protection and ceased doing business, eventually being liquidated. Monterosso
tried to salvage the situation by seeking capital for the U.S. company, but was
unsuccessful as he was given only weeks notice of the impending financial
shortfall. Without a distribution network Monterosso closed down the production
of the automobile, paid AutoItalia's creditors and shelved the designs for the
next generation of the automobile that were in process and returned to
California in Mid-1990.
AutoItalia produced 650 LaForza vehicles for the U.S. market, almost all are
still on the road today and are a highly sought after collector's item,
ironically selling for more today than their original price. In hindsight,
Monterosso believes that the market timing could have been better and
capitalization stronger, while the basic concept was sound. He believes that
this is shown by the fact that the rounded, aerodynamic LaForza body style, four
wheel-on-the-fly technology, elegant, luxurious yet Spartan design, has
subsequently been copied by every sports utility manufacturer currently
producing vehicles worldwide; and that the Sports Utility / Light Truck 4 x 4
market is now the strongest share of the U.S. auto market.
In June 1979, Monterosso was named Sales and Operating Vice President for Tony
Ward, Inc., an importer of forklifts from Japan. Monterosso left Tony Ward, Inc.
to found North American Forklift, Inc. in July 1980. While living in Australia
from 1970 - 1979, Monterosso founded three successful firms including a company
that manufactured custom wheels and imported accessories for off-road sport
vehicles which was subsequently sold to Ford Motor Corporation in 1979.
[NUOGAM\MIN:97ANSTM3.CLN]-3
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<PAGE>
Leland E. Rees, age 47. In his role as Chairman of National Pools Corporation's
Advisory Board, Leland E. Rees brings strong experience in government, public
affairs and finance. He was most recently with Rees and Associates, Inc., a
legislative advocacy and governmental affairs firm in Sacramento representing
corporations, non-profit organizations and several associations. Rees remains an
officer and director of Rees and Associates, Inc. which is wholly owned by he
and his wife. Rees has a strong background in finance and banking, as well as
both public and private accounting. He worked for five years in corporate
banking helping to finance large mergers and was the lead lending officer as
well as training officer for both credit analysis and corporate finance. He was
invited by the government of the Philippine Islands to instruct a two- week
seminar on "Financing Cooperatives" where he spoke to an audience of 100
bankers, attorneys and accountants. Rees then spent 12 years with a Fortune 200
company negotiating large, complex, domestic and international, government and
commercial contracts for missile systems and specialty chemicals. Rees joined
that firm to start a specialty chemical company which grew to a $20 million/year
firm and was merged into its parent. Rees is a founder and a major stockholder
of Ventura County National Bank in Oxnard, California. He holds a bachelor's
degree in Accounting from the University of Washington in Seattle, Washington
and a master's degree in Finance from Governor's State University in Park Forest
South, Illinois.
Paula Amanda, 46. Ms. Amanda has used her legal and managerial skills to manage
and launch her own successful real estate development company 12 years ago. Most
recently, for the last five years, Ms. Amanda has served as in house counsel for
Southern Pacific Transportation Company specializing in environmental matters.
Amanda has extensive experience in all business and environmental matters which
has included critical management skills including: the ability to bring together
diverse interests in a cooperative and effective manner to accomplish often
difficult and complex tasks; experience in managing an $8 million per year
environmental budget for the Southern Pacific law department and developing and
implementing compliance with a myriad of state and federal laws and regulations.
Her strengths lie in the conflict resolutions and communication arenas. Ms.
Amanda graduated from UCLA in 1975 with a degree in South East Asian politics
and is a member of Phi Beta Kappa. She received her law degree from the
University of Santa Clara in 1979.
Directors will be elected by a favorable vote of a plurality of the shares
of voting stock present, entitled to vote, and actually voting, in person or by
proxy, at the Annual Meeting. Accordingly, abstentions or broker non-voters as
to the election of Directors will not affect the election of the candidates
receiving the plurality of votes. Properly executed, unrevoked proxies will be
voted FOR election of the above-named nominees unless the stockholders indicate
that the proxy shall not be voted for any one or all of the nominees.
Meetings of Board and Committees
Based on records obtained by the new Board the former Board of Directors
held twelve (12) meetings during the fiscal year ended September 30, 1993, and
no director attended fewer than seventy-five percent (75%) of the aggregate of
the total number of those meetings. During the fiscal year ended September 30,
1994, the former Board of Directors held three meetings. During the fiscal year
ended September 30, 1995 the Board of Directors held one meeting. No director
attended fewer than seventy-five percent (75%) of the aggregate of the total
number of those meetings. During the fiscal years ended September 30, 1994,
September 30, 1995 and June 30, 1996 the Board of Directors passed various
resolutions by written consent without a meeting on multiple dates. No committee
members were in place during the fiscal years ended September 30, 1994,
September 30, 1995 or June 30, 1996 and therefore no committee meetings took
place.
The Board of Directors does not have an audit committee or a nominating
committee. Nominees to the Board of Directors are selected by the entire Board
of Directors.
The former Board of Directors, on January 22, 1993 formed a Compensation
Committee whose initial members were Richard H. Wessler and Gary L. Blum. The
Compensation Committee formulates and reviews significant compensation policies
and decisions and administers the Company's employee benefit plans and option
plans.
The Board of Directors, on January 22, 1993 formed an Executive Committee
whose initial members were Douglas J. Phillips, Richard H. Wessler and Gary L.
Blum. The Executive Committee has, and may exercise, all of the powers and
authority of the Board of Directors and the management of the Company,
[NUOGAM\MIN:97ANSTM3.CLN]-3
26
<PAGE>
except as limited by Section 141 of the Delaware General Corporation Law, the
by-laws of the Company and by resolutions of the Board of Directors.
On March 30, 1994, Douglas J. Phillips, Dennis Phillips and Richard H.
Wessler resigned as Directors. Fred G. Luke and John D. Desbrow were appointed
as Directors on March 30, 1994 to fill two vacancies on the Board. Gary L. Blum
resigned as a Director on July 13, 1994. John D. Desbrow resigned as a Director
on July 20, 1994. Kenneth R. O'Neal was appointed as a Director on October 24,
1994 and resigned as a Director on July 15, 1995. Fred G. Luke was the sole
director of the Company from July 16, 1995 to November 25, 1996. Joseph
Monterosso was appointed as a Director on November 25, 1996. Both Compensation
Committee positions and all three Executive Committee positions are currently
vacant.
Director or Executive Compensation
There is no standard agreement for the compensation of directors. Directors
do not receive a per diem fee for their attendance at meetings of the Board. Mr.
Luke's Employment Agreement includes compensation for services rendered as
Chairman of the Board of Directors. Members of the Board do not receive a
monthly stipend.
Steven H. Dong. Mr. Dong, a Certified Public Accountant, serves as Chief
Financial Officer of the Registrant. Mr. Dong replaced Kenneth R. O'Neal who
resigned as the Registrants' Chief Financial Officer and as a Director effective
July 16, 1995. Prior to joining the Registrant, Mr. Dong worked with the
international accounting firm of Coopers & Lybrand since 1988. As an Assurance
Manager with Coopers & Lybrand, Mr. Dong's experience consisted of providing
financial accounting and consulting services to privately and publicly held
companies. In addition to his position with the Registrant, Mr. Dong currently
serves as Chief Financial Officer of Nona, Hart and Toen. Mr. Dong received his
Bachelor of Science degree in Accounting from Babson College in 1988 and is a
member in good standing with the California Society of Certified Public
Accountants and American Institute of Certified Public Accountants.
John D. Desbrow. Mr. Desbrow has been Secretary of the Registrant since
November 8, 1994 and was the Secretary from March 30, 1994 to July 20, 1994. Mr.
Desbrow is also the Secretary of the Registrant's parent company, Nona. Mr.
Desbrow is a member in good standing of the State Bar of California and has been
since 1980. Prior to joining the Registrant, Mr. Desbrow was in the private
practice of law. Mr. Desbrow received his Bachelor of Science degree in Business
Administration from the University of Southern California in 1977, his Juris
Doctorate from the University of Southern California Law Center in 1980, and his
Master of Business Taxation degree from the University of Southern California
Graduate School of Accounting in 1982. Mr. Desbrow has also been serving as a
Director and Secretary of Hart since July 31, 1993. Mr. Desbrow has been a
director of Toen since September 28, 1994.
(a) Summary Compensation Table
The following table sets forth in summary form the compensation received
during each of the Company's last three completed fiscal years by the
Company's President and four most highly compensated executive officers
other than the President.
[NUOGAM\MIN:97ANSTM3.CLN]-3
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<PAGE>
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------------------------- ----------------------------------
Awards Payouts
---------- ---------------------
Restricted
Name and Principal Fiscal Other Annual Stock Options LTIP All Other
Position Year Salary($) Bonus Compensation($) Award(s)$) (#) Payouts($) Compensation
- ----------------------------- -------- ---------- ----- --------------- ---------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fred G. Luke 1994 $27,000(1) - - - - - -
President(3-30-94 to 11-25-
96)and Director(3-30-94 to 1995 $59,000(1) - - - 3,000,000 - -
Present)
1996 $40,500(3) - $ 25,000 - - - -
- ----------------------------- -------- ----------- ----- --------------- ---------- --------- ---------- ------------
John Desbrow 1994 $18,000(2) - - - - - -
Secretary(4-94 to 7-94
and 11-94 to Present) 1995 $43,000(2) - - - - - -
Director (4-94 to 7-94)
1996 $43,750(3) - - - 275,000 - -
- ----------------------------- -------- ----------- ----- --------------- ------------ --------- ---------- ------------
Steven H. Dong 1994 - - - - - - -
Chief Financial Officer
(7-95 to Present) 1995 $ 5,000 - - - 275,000 - -
1996 $15,000(3) - - - - - -
</TABLE>
(1) Total compensation of $86,000 during fiscal 1995 was accrued and
expensed for Fred G. Luke; however, no cash payments have been made.
Approximately $27,000 of the $86,000 compensation represents
compensation retroactive from April 1, 1994 to September 30, 1994,
which is included in the table for fiscal year 1994. Mr. Luke's salary
for fiscal year 1996 has been accrued and The Company owes Mr. Luke
$126,500 as of June 30, 1996.
(2) Based on amounts billed to the Company by Mr. Desbrow. Mr. Desbrow
billed $18,000 or $3,000 per month for the six months ended September
30, 1994 for his services as Secretary and $4,000 or $1,000 per month
for his services as a Director from April, 1994 to July, 1994. Mr.
Desbrow received 337,500 shares in January 1995, of which the proceeds
from 225,000 shares were applied to amounts due for the 1994 fiscal
year. Mr. Desbrow billed $18,000 or $3,000 per month for the first six
months of fiscal 1995 and $25,000 or $4,167 per month for the second
six months of fiscal 1995. 112,500 of the shares issued in January 1995
and 112,500 shares issued in March 1995 were applied to amounts due for
fiscal year 1995. In June, 1995 Mr. Desbrow received 600,000 shares of
which the proceeds from 225,000 shares were applied to the amounts due
for fiscal year 1995. The remaining 375,000 shares have been applied
towards services performed in fiscal 1996. No shares were issued during
fiscal year 1996.
(3) Amounts for fiscal year 1996 represent the nine months ended June 30,
1996, whereas amounts for fiscal years 1995 and 1994 represent the
years ended September 30, 1995 and 1994.
(4) Other Annual Compensation of $25,000 represent payments in excess of
reimbursable expenses pursuant to Mr. Luke's Employment Agreement.
[NUOGAM\MIN:97ANSTM3.CLN]-3
28
<PAGE>
(b) Option and Long-Term Compensation Tables
The following summary option table sets forth in summary form the
aggregate options granted during each of the Company's last completed
fiscal year ended June 30, 1996 by the Company's President and four
most highly compensated executive officers other than the President.
<TABLE>
<CAPTION>
Fiscal Percent of Total Options/ Exercise or
Year Options/SAR's SAR's Granted to Employees Base Price Expiration
Name Granted (#) In Fiscal Year ($/Sh) Date
- ------------------------- ------- ------------- -------------------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Fred G. Luke, 1995 3,000,000 53% $ 0.12 7/00
President and Director
NuVen Advisors Inc.(2) 1995 2,000,000 35.4% $ 0.10 3/97
Steven H. Dong, CFO 1995 275,000 4.8% $ 0.12 7/00
John D. Desbrow 1996 275,000 100% $ 0.12 7/00
</TABLE>
[NUOGAM\MIN:97ANSTM3.CLN]-3
29
<PAGE>
The following summary option table sets forth in summary form the
aggregate exercised options during fiscal year 1996 and the June 30 by
the Company's President and four most highly compensation executive
officers other than the President.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Options/SAR's at Options/SAR's at
Fiscal Year-End (#) Fiscal Year-End ($)
Shares Acquired Value ---------------------------- -------------------------
Name on Exercise (#) Realized ($) Exercisable/Unexercisable(d) Exercisable/Unexercisable
- ----------------------- --------------- ------------ ---------------------------- -------------------------
<S> <C> <C> <C> <C>
Fred G. Luke, 868,824 $104,258 481,176 Exercisable $173,205 Exercisable
President and 1,650,000 Unexercisable $594,000 Unexercisable
Director(1)
NuVen Advisors, Inc.(2) - - 2,000,000 Exercisable $760,000 Exercisable
Steven H. Dong, CFO - - 275,000 Exercisable $99,000 Exercisable
John D. Desbrow,
Secretary - - 275,000 Exercisable $99,000 Exercisable
</TABLE>
(1) Options vest at a rate of 50,000 per month over a five year term ending
March 31, 1999.
(2) The Luke Family Trust (the "Luke Trust") owns 93% of NuVen Advisors,
formerly New World. Fred G. Luke, as Co-Trustee of the Luke Trust
determines the voting of such shares and, as a result, may be deemed to
control the Luke Trust.
[NUOGAM\MIN:97ANSTM3.CLN]-3
30
<PAGE>
Employment and Consulting Contracts
In August 1995, the Company entered into an Employment Agreement with
Fred G. Luke, the Company's Chairman and President. Mr. Luke has been serving as
the Company's Chairman and President since approximately March 31, 1994. The
terms of the Employment Agreement call for Mr. Luke to receive approximately
$4,500 per month, retroactive to April 1, 1994, for five (5) years as a base
salary; granted him an option to purchase 3,000,000 shares of the Company's
common stock at an exercise price of $.12 per share; provides him with an annual
bonus based upon a number of factors related to the Company's growth and
performance which include (a) serving on the Company's Board of Directors and as
its President; (b) providing advice concerning mergers and acquisitions; (c)
corporate finance; (d) day to day management; (e) guidance with respect to
general business decisions; (f) other duties commonly performed by the President
of a publicly-held company; and requires the Company to purchase life insurance
coverage, reimburse vehicle expenses, and provide other fringe benefits. Between
March 31, 1994 and September 30, 1994, Mr. Luke received no cash payments for
his services. In August 1995, the Company agreed to retroactively compensate Mr.
Luke for past services in the amount of $27,000 for the period April 1, 1994 to
September 30, 1994 and $59,000 for the period October 1, 1994 to September 30,
1995. No bonuses have been accrued, paid or are owed as of the date of this
Report. The Company expensed $40,500 and $86,000 during fiscal 1996 and 1995,
respectively, and had $126,500 due to Mr. Luke as of June 30, 1996.
Effective April 1, 1994, the Company entered into a Consulting
Agreement with John D. Desbrow for the engagement of Mr. Desbrow to perform
legal services and to hold the office of Secretary, on behalf of the Company,
for the period from April 1, 1994 to March 31, 1995. Between April 1, 1994 and
September 30, 1994, Mr. Desbrow did not receive any funds or shares of common
stock in the Company but in fiscal 1995, he did bill and eventually received
from the sale of shares $3,000 per month for services rendered as Secretary from
April 1, 1994 to September 30, 1994 all of which was expensed in fiscal year
1994. Additionally, the Company expensed $4,000 for services rendered by Mr.
Desbrow as a Director from April 1994 to July 1994.
Effective April 1, 1995, the Company and Mr. Desbrow renewed the
Consulting Agreement through March 31, 1996. Under the renewed Consulting
Agreement the Company contracted to pay Mr. Desbrow $50,000 for the renewal term
payable in the Company's common stock. 1,050,000 shares were registered for
issuance on Forms S-8 filed with the Securities and Exchange Commission during
the 1995 fiscal year for payment of sums earned during fiscal years 1994 and
1995. Under the terms of the Consulting Agreement, Mr. Desbrow invoices the
Company and applies the net proceeds received from the sale of stock to the
invoiced amounts. For purposes of any "profit" computation under Section 16 (b),
Mr. Desbrow and the Company have agreed the price paid for the shares is deemed
to be the value of the services rendered, i.e. the annual rate under the
consulting agreement as renewed. As of September 30, 1995, Mr. Desbrow held
600,000 shares which were to be utilized for current and future services
incurred. Effective April 1, 1996, the Consulting Agreement was renewed through
March 31, 1997 at an annual rate of $75,000 and granted him an option to
purchase 275,000 shares of the Company's Common Stock at an exercise price of
$0.12 per share. The Company expensed $43,750 and $43,000, during fiscal 1996
and 1995, respectively, and had $8,252 due from Mr. Desbrow as of June 30, 1996.
In July 1995, the Company entered into a Consulting Agreement with Mr.
Dong, pursuant to which Mr. Dong is to perform accounting services and to hold
the office of Chief Financial Officer through June 30, 1996. Pursuant to the
agreement the Company agreed to pay Mr. Dong $20,000 per annum in cash or in the
Company's common stock, payable monthly in arrears, and granted him an option to
purchase 275,000 shares of the Company's common stock at an exercise price of
$.12 per share. Cash payments of $5,000 were made to Mr. Dong by the Company
during fiscal 1995. No shares were issued to Mr. Dong during fiscal 1995 or
1996. During fiscal 1996, the Consulting Agreement was renewed for fiscal 1997
for an amount of $39,000 per annum. The Company expensed $15,000 and $5,000
[NUOGAM\MIN:97ANSTM3.CLN]-3
31
<PAGE>
during fiscal 1996 and 1995, respectively, and had $15,000 due to Mr. Dong as
of June 30, 1996.
Advisory Agreements With Affiliates
The Luke Trust and Lawver Corporation own 93% and 7%, respectively, of
NuVen Advisors. Fred G. Luke, as trustee of The Luke Trust, controls the Luke
Trust, and Mr. Lawver is the majority shareholder of Lawver Corp. and thereby
controls Lawver Corp. Mr. Lawver is President of Fantastic Foods International,
Inc., a wholly-owned subsidiary of Nona.
Effective April 1, 1994, the Company entered into an Advisory and
Management Agreement with NuVen Advisors for the engagement of NuVen Advisors to
perform administrative, human resource and merger/acquisition services
consisting of (a) management of the use, purchase and disposition of the
Company's assets including, by way of illustration, the evaluation of economic,
statistical, financial and other data, and formulation and/or implementation of
the Company's business plan; and (b) management of the Company's operations
including, by way of illustration, the furnishing of routine supervisory, and
administrative services and the supervision of administrative personnel
including, by way of illustration, consultant recruiting and screening; and (c)
preparation of the usual and customary reports required of a publicly-held
company subject to the reporting requirements of the Securities Exchange Act of
1934; and (d) furnishing of office space, facilities and equipment for the
Company's non-exclusive use. The Company has significantly reduced or eliminated
completely its human resource and payroll obligations and requirements, but the
Company continues to require the administrative, audit and consultant
screenings, and merger/acquisition services. The Company anticipates continued
reliance on the services provided under the Advisory and Management Agreement
until such time it has, or its subsidiaries have, the need and sufficient cash
flow to justify performing such services in-house. Pursuant to such Agreement,
the Company agreed to pay NuVen Advisors $180,000 annually, payable monthly in
$15,000 increments in arrears, and granted NuVen Advisors an option to purchase
2,000,000 shares of the Company's common stock exercisable at a price of $.10
per share. During fiscal year 1996, the Advisory and Management Agreement was
renewed effective October 1, 1995, for $120,000 annually. The Company expensed
$90,000 and $180,000, during fiscal years 1996 and 1995, respectively, and had
$118,000 due to NuVen Advisors as of June 30, 1996.
Effective April 1, 1994, CMA entered into an Advisory and Management
Agreement with NuVen Advisors for the engagement of NuVen Advisors to perform
administrative, human resource and merger/acquisition services consisting of (a)
management of the use, purchase and disposition of CMA's assets including, by
way of illustration, the evaluation of economic, statistical, financial and
other data, and formulation and/or implementation of CMA's business plan; and
(b) management of CMA's operations including, by way of illustration, the
furnishing of routine supervisory and administrative services and the
supervision of administrative personnel including, by way of illustration,
consultant recruiting and screening; and (c) furnishing of office space,
facilities and equipment for CMA's non-exclusive use. CMA has significantly
reduced or eliminated completely its human resource and payroll obligations and
requirements, but CMA continues to require the administrative, audit and
consultant screenings, and merger/acquisition services. CMA anticipates
continued reliance on the services provided under the Advisory and Management
Agreement until such time it has, or its subsidiaries have, the need and
sufficient cash flow to justify performing such services in-house. Pursuant to
such Agreement CMA agreed to pay NuVen Advisors $120,000 annually, payable
monthly in $10,000 increments in arrears, and granted NuVen Advisors an option
to purchase up to five percent (5%) of CMA's common stock outstanding at the
time of exercise, exercisable at a price per share equal to one hundred ten
percent (110%) of the book value of such shares. During fiscal year 1996, the
Advisory and Management Agreement was renewed for fiscal year 1997. CMA expensed
$120,000 and $90,000 during fiscal years 1996 and 1995, respectively, and had
$159,000 due to NuVen Advisors as of June 30, 1996. The option given to NuVen
Advisors by CMA, if exercised, will (a) result in an infusion of working capital
into CMA; and, (b) reduce the Company's ownership of CMA by five percent (5%),
[NUOGAM\MIN:97ANSTM3.CLN]-3
32
<PAGE>
which management believes will not have any material adverse effect on the
Company's financial condition or investment in CMA.
During fiscal year 1994, the Company entered into an agreement with Structure
America, Inc. ("SAI") to issue 1,000,000 shares for consulting services. Such
services were rendered during fiscal 1995. During fiscal year 1996, the Company
entered into another agreement with SAI to perform consulting services. Pursuant
to such agreement, the Company agreed to issue 1,000,000 common shares of the
Company to SAI and granted SAI an option to purchase 1,000,000 common shares of
the Company, exercisable at $.12 per share. The agreement is fully contingent
upon the final execution and closing of the purchase of National Pools
Corporation. The Company expensed $75,000 and $54,000 during fiscal years 1996
and 1995, respectively and had approximately $40,000 due to SAI as of June 30,
1996.
Advances from Affiliate
The Company has received financial support from Nona of approximately
$155,000 during fiscal 1996, and is dependent upon Nona for future working
capital. As of June 30, 1996, the Company had $238,118 due to Nona and
classified as Due to Affiliates.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers and directors, and person who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and greater than
ten-percent shareholders are required by Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on review of the copies of such forms furnished to the
Company, or representations that no Forms 5 were required or filed, the Company
believes that during the periods from October 1, 1995 through June 30, 1996, all
Section 16(a) filing requirements applicable to its officers, directors, and
greater than ten-percent beneficial owners were complied with except Fred G.
Luke in March 1996 filed a late Form 4 for the month of August 1995 reporting
the acquisition in August 1995 of option rights to purchase up to 3,000,000
shares of the Company's common stock. In November 1996 Steven Dong filed Form 5
for the fiscal year ending June 30, 1996 reporting his acceptance of the office
of Chief Financial Officer in July 1995 and his acquisition in July 1995 of an
option to purchase 275,000 shares of the Company's common stock. In November
1996, John D. Desbrow filed an amended Form 4 for the month of April 1996
reporting the acquisition in April 1996 of an option to purchase 275,000 shares
of the Company's common stock.
Independent Accountants
Raimondo, Pettit & Glassman audited the financial statements for the
Company for the fiscal years ended 1995 and 1996. A representative of Raimondo,
Pettit & Glassman, P.C. is expected to be present at the annual meeting of
shareholders with the opportunity to make a statement if he so desires, and is
expected to be available to respond to appropriate questions raised orally at
the meeting. The Company has not established an Audit Committee.
J.H. Cohn & Company acted as the independent auditors of the Company
for the four fiscal years prior to 1994. During the fiscal years ended September
30, 1993 and 1992 and the interim period preceding the dismissal, there were no
disagreements with JHC on any matter of accounting principles or practices,
[NUOGAM\MIN:97ANSTM3.CLN]-3
33
<PAGE>
financial statement disclosure or auditing scope or procedure which if not
resolved to the satisfaction of JHC would have caused JHC to make reference to
any such matter in their reports, nor were there any other reportable events.
JHC's reports on the consolidated financial statements of the Company during the
fiscal years ended September 30, 1993 and 1992 did not contain an adverse
opinion or a disclaimer of opinion nor were they qualified or modified as to
uncertainty, audit scope or accounting principles except as described below.
JHC's report dated December 13, 1993 (the "1993 Report") on the consolidated
financial statements of the Company as of September 30, 1993 and 1992 and for
the years ended September 30, 1993, 1992 and 1991 and its report dated January
29, 1993 on the consolidated financial statements of the Company as of September
30, 1992, 1991 and 1990 were modified with respect to uncertainties related to
litigation. The 1993 Report also included an explanatory paragraph with respect
to the substantial doubt existing about the ability of the Company to continue
as a going concern.
Following the change in management discussed above, the new Board of
Directors dismissed J.H. Cohn & Company effective March 31, 1994.
C. Williams & Associates, P.C. ("C. Williams") acted as the independent
accountants of the Company for the fiscal year 1994. The report of C. Williams
with respect to the 1994 fiscal year financial statements included an
explanatory paragraph with respect to the substantial doubt existing about the
ability of the Company to continue as a going concern due to its recurring net
losses, negative cash flows from operating activities since its inception,
limited liquid resources, negative working capital and its primary operating
subsidiary filing for protection under Chapter 11 of the U.S. Bankruptcy Code.
During 1994 and to the date of dismissal there were no disagreements
with C. Williams on any matter of accounting principle or practice, financial
statement disclosure, or auditing scope or procedure, which, if not resolved to
the satisfaction of C. Williams, would have caused C. Williams to make a
reference to the subject matter of the disagreement in connection with its
report. Following the change in Chief Financial Officer in July 1995 C. Williams
was dismissed effective November 8, 1995. On January 29, 1996, the Texas State
Board of Public Accountancy made a determination that the firm of C. Williams
was not properly licensed to practice public accounting in Texas, retroactive
back to March 2, 1995.
The firm of C. Williams performed an audit of the Company's financial
statements for the year ended September 30, 1994 and issued its report on that
audit on February 5, 1995, which is prior to the revocation of Mr. Williams'
license on March 2, 1995.
Article 2 of Regulation S-X provides that, after March 2, 1995, the
firm of C. Williams is not qualified to practice before the Commission.
Shareholders continue to retain legal rights to sue and recover damages from C.
Williams, for material misstatements or omissions, if any, in the financial
statements.
Should C. Williams dissolve under the laws of Texas, its state of
incorporation, the rights of the shareholders to sue and recover damages from C.
Williams and its directors, officers and shareholders would be determined by the
laws of the State of Texas governing the dissolution of Texas professional
corporations or possibly federal securities laws or the laws of the forum where
such shareholders reside.
The Report of Raimondo, Pettit & Glassman with respect to the 1995 and
1996 fiscal years financial statements included an explanatory paragraph with
respect to the substantial doubt existing about the ability of the Company to
continue as a going concern due to its recurring net losses, negative cash flows
from operating activities since its inception, limited liquid resources,
negative working capital and its primary operating subsidiary filing for
protection under Chapter 7 of the Bankruptcy Code.
No accounting firm has been selected or recommended to shareholders for
the fiscal year 1997 because the Company expects to commence operations through
its new wholly-owned subsidiary, National Pools Corporation, in a new line of
[NUOGAM\MIN:97ANSTM3.CLN]-3
34
<PAGE>
business involving lottery pools and the Company anticipates retaining a Big-6
accounting firm with substantial experience in auditing businesses in the
lottery industry. Such firm has not been identified given the uncertainties
regarding the commencement of such operations and the need for funding to
support such operations as explained in Proposal 1.
The Board of Directors of the Company unanimously recommends a vote FOR the
election of each of the nominees listed above. Proxies solicited by the Board of
Directors will be voted FOR the named nominees unless instructions are given to
the contrary.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR THE
ELECTION OF EACH OF THE NOMINEES LISTED ABOVE. PROXIES SOLICITED BY THE
BOARD OF DIRECTORS WILL BE VOTED FOR THE NAMED NOMINEES UNLESS INSTRUCTIONS
ARE GIVEN TO THE CONTRARY.
PROPOSAL NO. 5: OTHER BUSINESS
The Board of Directors knows of no matter to come before the
stockholders meeting other than as specified in this Proxy Statement. If other
business should, however, be properly brought before such meeting, the persons
voting the proxies will vote them in accordance with their best judgment.
Annual, Quarterly and Current Reports
The Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1996 accompanies this Proxy Statement and is hereby incorporated
by reference. The Company's Form 8-K/A reporting the acquisition of National
Pools Corporation and Quarterly Report on Form 10-QSB/A for the quarter ended
December 31, 1996 are included as part of this Proxy Statement.
Shareholder Proposals
Any stockholder proposal to be presented at the next Annual Meeting
which is expected to be held in December 1997 must reviewed by the Company at
its principal office at the address listed on page thereof no later than July
31, 1997.
THE STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, AND RETURN PROMPTLY
THE ACCOMPANYING PROXY CARD.
By Order of the Board of Directors,
/s/ John D. Desbrow
----------------------------------
JOHN D. DESBROW, Secretary
Irvine, California
March 27, 1997
[NUOGAM\MIN:97ANSTM3.CLN]-3
35
<PAGE>
NuOASIS GAMING, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 5, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. UNLESS OTHERWISE
INDICATED, THIS PROXY WILL BE VOTED FOR
PROPOSALS I THROUGH 5
The undersigned hereby appoints Joseph Monterosso proxy to represent
the undersigned, with full power of substitution, to vote all shares of NuOasis
Gaming, Inc. (the "Company") held of record by the undersigned on April 7,
1997, at the Annual Meeting of Shareholders to be held on May 5, 1997 or any
adjournment thereof, with all the powers the undersigned would possess if
personally present, upon the matters noted and in accordance with the
instructions noted below, and with discretionary authority with respect to such
other matters, not known or determined at the time of the solicitation of this
proxy, as may properly come before said meeting or any adjournment thereof. The
undersigned hereby revokes any proxies heretofore given in connection with the
Annual Meeting and directs said persons to use this proxy to act or vote as set
forth on the reverse hereof:
(change of address)
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
(If you have written in the above space,
please mark thebox on the reverse side of this card.)
SEE REVERSE
SIDE
<PAGE>
<TABLE>
<CAPTION>
|X| Please mark your notes SHARES IN YOUR NAME:
as in this example ----------
PRINT NAME CERTIFICATE IS HELD UNDER:
-------------------------------------
o Change of Address
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
1. Proposal to amend the Certificate of Incorporation to increase the number
of authorized shares of $.01 par value Common Stock toThree Hundred Thirty o o o
Three Million.
2. Proposal to sell Casino Management of America, Inc. o o o
3. Proposal to amend the Certificate of Incorporation to change the name of
the company to Group V Corporation o o o
4. Election of Directors FOR WITHHELD
Nominees: Fred G. Luke o o
Royse Warren o o
Joseph Monterosso o o
Leland E. Rees o o
Paula Amanda o o
For, except vote withheld from the following nominee(s)
- ------------------------------------------------------------------------------
5. Proposal to transact such other business as may properly come before the
meeting FOR AGAINST ABSTAIN
o o o
SIGNATURE(S) DATE
------------------------------------------------------------------ --------------------
SIGNATURE(S) DATE
------------------------------------------------------------------ --------------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, give your full title as such.
</TABLE>
FORM 8-K/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
Date of Report (Date of earliest event reported): December 24, 1996
NuOasis Gaming, Inc.
(Exact name of registrant as specified in its charter.)
Delaware
(State of incorporation or organization)
33-73240
(Commission File Number)
95-4176781
(I.R.S. Employee Identification No.)
2 Park Plaza, Suite 470, Irvine, California
(Address of principal executive offices)
92614
(Zip Code)
Registrant's telephone number, including area code: (714) 833-5382
(Former name or former address, if changed since last report)
Total number of pages: 42
[NUOGAM\8KA\NPC8K44.CLN]-6
<PAGE>
Item 1. Changes in Control of Registrant
N/A
Item 2. Acquisition or Disposition of Assets
Pursuant to a Stock Purchase Agreement dated December 19, 1996
with the shareholders of National Pools Corporation("NPC") (the "Agreement"),
the Registrant acquired 29,713,689 shares of NPC representing 100% of the issued
and outstanding shares of NPC.
The transaction closed on December 24, 1996 whereupon the
Registrant issued a series of Convertible Promissory Notes in the aggregate
amount of approximately $1,200,000 and agreed to issue 1,000,000 shares of
common stock to the shareholders of NPC when there are sufficient authorized
shares available for issuance.
The terms and conditions of the agreement were determined as a
result of arms length negotiations between unrelated parties.
Item 3. Bankruptcy or Receivership
N/A
Item 4. Changes in Registrant's Certifying Accountant
N/A
Item 5. Other Events
N/A
Item 6. Change in Registrant's Directors
On November 25, 1996 the Board elected Joseph Monterosso to
fill one of the vacancies on the Board of Directors.
[NUOGAM\8KA\NPC8K44.CLN]-6
2
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements
Set forth on pages 6 through 33 are the financial
statements of the business acquired required to be
set forth in the Registrant's Current Report. This
Current Report on Form 8-K/A amends the Form 8-K\A
filed on March 13, 1997. The following are included:
(1) Unaudited Balance Sheet - As of September
30, 1996.
Unaudited Statement of Operations for the
three and nine months ended September 30,
1996 and for the period from February 23,
1993 (inception) through September 30, 1996.
Unaudited Statement of Stockholders' Equity
for the three and nine months ended
September 30, 1996 and for the period from
February 23, 1993 (inception) through
September 30, 1996.
Unaudited Statement of Cash Flows for the
three and nine months ended September 30,
1996 and for the period from February 23,
1993 (inception) through September 30, 1996.
Notes to Financial Statements.
(2) Audited Balance Sheets - As of December 31,
1994 and 1995.
Audited Statement of Operations for the
years ended December 31, 1994 and 1995 and
for the period from February 23, 1993
(inception) through December 31, 1995.
Audited Statement of Stockholders' Equity
for the years ended December 31, 1994 and
1995 and for the period from February 23,
1993 (inception) through December 31, 1995.
Audited Statement of Cash Flows for the
years ended December 31, 1994 and 1995 and
for the period from February 23, 1993
(inception) through December 31, 1995.
Notes to Financial Statements.
(b) Proforma Financial Information
Set forth on pages 34 through 42 is pro forma
financial information required to be set forth in the
Registrant's Current Report. This current Report on
Form 8- K/A amends the Form 8-K\A filed on March 7,
1997. The following are included:
[NUOGAM\8KA\NPC8K44.CLN]-6
3
<PAGE>
Pro Forma Consolidated Balance Sheet
(Unaudited) - September 30, 1996.
Pro Forma Consolidated Statement of
Operations (Unaudited) for the three months
ended September 30, 1996 and for the year
ended June 30, 1996.
Notes to Pro Forma Consolidated Financial
Statements (Unaudited).
(c) Exhibits
1. Stock Purchase Agreement dated December 19,
1996 (incorporated by reference to Exhibit 1
to Form 8-K filed on January 15, 1997 (SEC
File No. 000-18224).
2. Director Acceptance letter by Joseph
Monterosso (incorporated by reference to
Exhibit 2 to Form 8-K filed on January 15,
1997 (SEC File No. 000-18224).
Item 8. Change in Registrant's Fiscal Year
N/A
[NUOGAM\8KA\NPC8K44.CLN]-6
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
NuOasis Gaming, Inc.
(Registrant)
Dated: March 28, 1997 By: /s/ Joseph Monterosso
----------------------------------
Joseph Monterosso,
President and Director
[NUOGAM\8KA\NPC8K44.CLN]-6
5
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
FINANCIAL STATEMENTS
Three Months Ended September 30, 1996 and 1995, And For The
Period Cumulative From Inception (February 23, 1993) through
September 30, 1996
[NUOGAM\8KA\NPC8K44.CLN]-6
6
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
BALANCE SHEETS
September 30, December 31,
1996 1995
(Unaudited) (Audited)
------------ ------------
ASSETS
Current Assets:
Cash $ 15,211 $ 12,639
Employee Advances Receivable 30,939 17,965
------------ -----------
Total Current Assets 46,150 30,604
------------ -----------
Fixed Assets:
Equipment 89,090 89,090
Less Accumulated Depreciation 39,448 26,218
------------ -----------
Net Fixed Assets 49,642 62,872
------------ -----------
Intangible Assets (Note 7):
Software 200,036 200,036
Less Accumulated Amortization 145,124 95,120
------------ -----------
Net Intangible Assets 54,912 104,916
------------ -----------
Deposits 6,573 3,811
------------ -----------
TOTAL ASSETS $ 157,277 $ 202,203
============ ===========
See accompanying notes
[NUOGAM\8KA\NPC8K44.CLN]-6
7
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
BALANCE SHEETS
(Continued)
September 30, December 31,
1996 1995
(Unaudited) (Audited)
------------ ------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable (Note 3) $ 616,922 $ 533,085
Accrued Interest Payable (Note 5) 255,819 162,116
Wages Payable 195,288 82,788
Payroll Taxes Payable 13,291 11,512
Notes Payable (Note 5) 929,180 822,930
------------ -----------
Total Current Liabilities 2,010,500 1,612,431
------------ -----------
Total Liabilities 2,010,500 1,612,431
------------ -----------
Stockholders' Deficit:
Common Stock (Note 6) 991,764 991,764
Preferred Stock (Note 6)
Deficit Accumulated during the
Development Stage (2,844,987) (2,401,992)
------------ ------------
Total Stockholders' Deficit (1,853,223) (1,410,228)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 157,277 $ 202,203
============ ===========
See accompanying notes
[NUOGAM\8KA\NPC8K44.CLN]-6
8
<PAGE>
<TABLE>
<CAPTION>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND ACCUMULATED
DEFICIT Three Months and Nine Months Ended September 30,
1996 and 1995, and for the
Period Cumulative from Inception (February 23, 1993) through September 30, 1996
Cumulative
from
Inception
Three Months Ended Nine Months Ended through
September 30, September 30, September 30,
---------------------------- ---------------------------- -------------
1996 1995 1996 1995 1996
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Operating Expenses $( 136,788) $( 47,254) $( 296,341) $( 223,489) $( 1,315,604)
Research and Development (Note 2) ( 5,178) ( 39,004) ( 52,951) ( 177,602) ( 1,308,326)
------------- ------------- ------------- ------------- -------------
Net (Loss) from Operations ( 141,966) ( 86,258) ( 349,292) ( 401,091) ( 2,623,930)
------------- ------------- ------------- ------------- -------------
Other Income and (Expense):
Interest Expense:
Discounts on Convertible Debt
(Note 6) ( 20,682) ( 62,046) ( 248,188)
Other Interest Expense ( 32,238) ( 40,324) ( 93,703) ( 120,812) ( 380,700)
------------- ------------- ------------- ------------- -------------
Total Interest Expense ( 32,238) ( 61,006) ( 93,703) ( 182,858) ( 628,888)
Interest Income 1,012
Loss on Disposal of Assets ( 7,490) ( 57,585)
------------- ------------- ------------- ------------- -------------
Total Other Income and (Expense) ( 32,238) ( 61,006) ( 93,703) ( 190,348) ( 685,461)
------------- ------------- ------------- ------------- -------------
Net (Loss) Before Extraordinary
Item ( 174,204) ( 147,264) ( 442,995) ( 591,439) ( 3,309,391)
Benefit from Extinguishment
of Debt 464,404
Net (Loss) ( 174,204) ( 147,264) ( 442,995) ( 591,439) ( 2,844,987)
</TABLE>
See accompanying notes
[NUOGAM\8KA\NPC8K44.CLN]-6
9
<PAGE>
<TABLE>
<CAPTION>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(Continued)
Cumulative
from
Inception
Three Months Ended Nine Months Ended through
September 30, September 30, September 30,
--------------------------- -------------------------- -------------
1996 1995 1996 1995 1996
------------ ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Net (Loss) ( 174,204) ( 147,264) ( 442,995) ( 591,439) ( 2,844,987)
Accumulated Deficit, Beginning ( 2,670,783) ( 2,295,243) ( 2,401,992) ( 1,851,068)
------------- ------------- ------------- ------------- -------------
Accumulated Deficit, Ending $( 2,844,987) $( 2,442,507) $( 2,844,987) $( 2,442,507) $( 2,844,987)
============= ============= ============= ============= =============
Per Common Share
Net (Loss) Per Common Share $( .01) $( .01) $( .01) $( .08)
Weighted Average Common Shares
Outstanding 29,713,689 13,925,592 29,713,689 7,483,777
============= ============= ============= =============
</TABLE>
See accompanying notes
[NUOGAM\8KA\NPC8K44.CLN]-6
10
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
Period from Inception (February 23, 1993) through September 30, 1996
Common Accumulated Total
Stock Deficit Stockholders'
Deficit
------------ ------------ -------------
Shares Issued in 1993 (Note 6) $ 10,326 $ 10,326
Net Loss for the period $( 418,377) ( 418,377)
------------ ------------ -------------
Balance December 31, 1993 10,326 ( 418,377) ( 408,051)
Shares Issued in 1994 (Note 6) 29,600 29,600
Net Loss for the period (1,432,691) (1,432,691)
------------ ------------ -------------
Balance December 31, 1994 39,926 (1,851,068) (1,811,142)
Shares Issued in 1995 (Note 6) 951,838 951,838
Net Loss for the period ( 550,924) ( 550,924)
------------ ------------ -------------
Balance December 31, 1995 991,764 (2,401,992) (1,410,228)
Net Loss for the period ( 442,995) ( 442,995)
------------ ------------ -------------
Balance September 30, 1996 $ 991,764 $(2,844,987) $(1,853,223)
============ ============ =============
See accompanying notes
[NUOGAM\8KA\NPC8K44.CLN]-6
11
<PAGE>
<TABLE>
<CAPTION>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOW
Three Months and Nine Months Ended September 30, 1996 and 1995, and
the Period From Inception (February 23, 1993) through September 30, 1996
Cumulative
from
Inception
Three Months Ended Nine Months Ended through
September 30, September 30, September 30,
---------------------------- ---------------------------- --------------
1996 1995 1996 1995 1996
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Cash Flow from Operating
Activities:
Net Loss $( 174,204) $( 147,264) $( 442,995) $( 591,439) $( 2,844,987)
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
Depreciation 4,410 8,992 13,230 26,976 54,748
Amortization of Intangible Assets 16,668 50,004 50,010 147,948
Amortization of Original Issue
Discount, Convertible Debt 20,682 62,047 248,188
Loss on Disposal of Assets 7,490 57,585
Gain from Extinguishment of Debt ( 464,404)
(Increase) Decrease in:
Employee Advances Receivable ( 8,359) ( 5,581) ( 12,974) ( 6,279) ( 30,939)
Deposits ( 2,762) 610 ( 2,762) 10,281 ( 6,573)
Increase (Decrease) in:
Accounts Payable 54,055 4,901 83,837 94,397 562,893
Wages Payable 37,500 36,725 112,500 109,151 636,401
Payroll Taxes Payable 1,075 ( 4,510) 1,779 ( 795) 13,291
Accrued Interest Payable 32,237 40,244 93,703 120,731 378,657
------------- -------------- ------------- ------------- -------------
Net Cash Used by Operating
Activities ( 39,380) ( 28,531) ( 103,678) ( 117,430) ( 1,247,192)
</TABLE>
See accompanying notes
[NUOGAM\8KA\NPC8K44.CLN]-6
12
<PAGE>
<TABLE>
<CAPTION>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOW
(Continued)
Cumulative
from
Inception
Three Months Ended Nine Months Ended through
September 30, September 30, September 30,
---------------------------- ---------------------------- --------------
1996 1995 1996 1995 1996
------------ ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Cash Flows from Investing
Activities:
Proceeds from Sale of Assets $ $ $ $ 8,000 8,400
Cash Paid for Fixed Assets ( 168,465)
Cash Paid for Intangible
Assets ( 100,967)
------------ ------------- ------------- ------------- --------------
Net Cash (Used by) Provided by
Investing Activities 8,000 ( 261,032)
Cash Flows from Financing
Activities:
Issuance of Common Stock 5,000 75,167 129,903
Proceeds from Short-Term Debt 822,930
Proceeds from Stockholder Loans
(Note 5) 33,537 21,650 106,250 35,602 570,602
------------- ------------- ------------- ------------- --------------
Net Cash Provided by
Financing Activities 33,537 26,650 106,250 110,769 1,523,435
------------- ------------- ------------- ------------- --------------
Net Increase (Decrease) in
Cash and Cash Equivalents ( 5,843) ( 1,881) 2,572 1,339 15,211
Cash and Cash Equivalents,
Beginning of Period 21,054 3,817 12,639 597
------------- ------------- ------------- ------------ --------------
Cash and Cash Equivalents,
End of Period $ 15,211 $ 1,936 $ 15,211 $ 1,936 $ 15,211
============= ============= ============= ============= ==============
</TABLE>
See accompanying notes
[NUOGAM\8KA\NPC8K44.CLN]-6
13
<PAGE>
<TABLE>
<CAPTION>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOW
(Continued)
Cumulative
from
Inception
Three Months Ended Nine Months Ended through
September 30, September 30, September 30,
---------------------------- ---------------------------- -------------
1996 1995 1996 1995 1996
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Supplemental Disclosures:
Noncash Investing Activities:
Accounts Payable Reduced by
Disposal (Return) of Assets $ $ $ $( 41,966) $( 41,966)
Intangible Assets Financed by
Accounts Payable 145,769
Total Noncash Investing
Activities $ $ $ $( 41,966) $ 103,803
============= ============= ============= ============= =============
Noncash Financing Activities:
Wages Payable Converted to
Common Stock $ $ $ $ $ 22,498
Accounts Payable Converted to
Common Stock 4,748
Stockholder Loans and Related
Accrued Interest Converted to
Common Stock 853,377
Total Noncash Financing
Activities $ $ $ $ $ 880,623
============= ============= ============= ============= ============
</TABLE>
See accompanying notes
[NUOGAM\8KA\NPC8K44.CLN]-6
14
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
The Company was formed on February 23, 1993, for the purpose of
developing and operating the Hit-Lotto Project (Project). This Project
uses debit card, telecommunications, Internet website, and computer
technology to market and distribute chances for lottery players to enter
pools when they buy Hit-Lotto cards.
Basis of Accounting
The financial statements have been prepared for a development stage
company in accordance with generally accepted accounting principles.
Fixed Assets
Equipment is shown at cost. When retired or otherwise disposed of, the
related carrying value and accumulated depreciation are removed from the
respective accounts. Any resulting profit or loss is reflected in
income. The Company provides for depreciation of equipment using the
straight-line method and lives of five to seven years.
Intangible Assets
The Company has capitalized proprietary software developed for the
Project. The Company provides for amortization of intangible assets
using the straight-line method over three years, subject to periodic
review of impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable.
Convertible Debt Discount
The Company provides for amortization of the convertible debt discount
using the straight-line method over three years.
Research and Development Costs
The Company charges all research and development costs, including direct
and indirect costs, to an expense when incurred.
Net Loss Applicable Per Common Share
Per share amounts are calculated based on the weighted average number of
common shares outstanding during the periods of net loss.
[NUOGAM\8KA\NPC8K44.CLN]-6
15
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1996
Cash Equivalents
For purposes of the statement of cash flows, cash equivalents include
the general operating checking and money market accounts.
2. DEVELOPMENT STAGE OPERATIONS
Since inception, the Company operations have been devoted primarily to
the formulation and design of telecommunications and computer
technology, including the Hit-Lotto debit card and Internet Web Page,
for the Project. In August, 1994, the Project was tested in San Diego,
and development is continuing.
3. ACCOUNTS PAYABLE
Accounts payable consist of the following at September 30, 1996:
Rent $ 81,078
Legal Fees 129,357
Advertising 151,999
Proprietary Software 145,769
Accounting 35,126
Miscellaneous 73,593
---------
Total $ 616,922
=========
4. INCOME TAXES
As of September 30, 1996, the Company has a federal loss carryforward of
$2,844,987 and a state loss carryforward of $1,422,493. The loss
carryforwards are available to reduce future years' taxable income (if
earned) and expire as follows:
Losses Expire
December 31, Federal State
------------- ----------- -----------
2008 $ 418,376 $ 209,188
2009 1,432,692 716,346
2010 550,924 275,462
2011 442,995 221,497
----------- -----------
$ 2,844,987 $ 1,422,493
=========== ===========
[NUOGAM\8KA\NPC8K44.CLN]-6
16
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1996
5. NOTES PAYABLE
Included in notes payable at September 30, 1996, are the following:
Payable to Providence on demand,
prime + 4% (12.25% at September 30, 1996) $ 822,930
Payable to stockholders, 10%, revolving
three month maturity 106,250
$ 929,180
6. CAPITAL TRANSACTIONS
Common Stock
The following schedule includes the date and number of common shares
issued for cash and other considerations.
Shares
Authorized Shares
and Unissued Issued Amount
Shares authorized,
February 23, 1993 3,000
Increase in shares
authorized, September 23,
1993 9,997,000
Shares issued throughout
year at $.005 per share ( 1,912,398) 1,912,398 $ 9,562
Shares issued to employees
during September through
November 1993, at $.0025
per share ( 305,533) 305,533 764
------------ ---------- ---------
Balance December 31, 1993 7,782,069 2,217,931 10,326
Shares issued during
September, 1994, at $.50
per share ( 50,000) 50,000 25,000
Shares issued during
December, 1994, at $.05
per share ( 20,000) 20,000 1,000
Shares issued to employees
throughout the year at
$.0025 per share ( 1,439,875) 1,439,875 3,600
------------ ---------- ---------
Balance December 31, 1994 6,272,194 3,727,806 39,926
[NUOGAM\8KA\NPC8K44.CLN]-6
17
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1996
Shares issued during April,
1995, at $.0465 per share ( 591,910) 591,910 27,500
Shares issued during April,
1995, in lieu of advance
payable to stockholder
at $.0465 per share ( 1,560,490) 1,560,490 72,500
Shares issued January through
May, 1995, at $.05 per share ( 790,841) 790,841 39,541
Increase in shares
authorized, December 29,
1995 25,000,000
Shares issued to employees
during July, 1995, in lieu
of payment of wages at
$.0025 per share ( 6,948,878) 6,948,878 17,372
Shares issued during December,
1995, in lieu of accounts
payable to stockholder at
$.0025 per share ( 205,500) 205,500 514
Shares issued August through
December, 1995, at $.05
per share ( 546,000) 546,000 27,300
Shares issued during November
and December, 1995, in lieu of
employee expenses at $.05
per share ( 74,685) 74,685 3,734
Shares issued during December,
1995, in lieu of accounts
payable at $.05 per share ( 10,000) 10,000 500
Shares issued during December,
1995, for extinguishment of
stockholder debt at $.05
per share (15,257,579) 15,257,579 762,877
------------ ---------- ---------
Balance September 30, 1996 5,286,311 29,713,689 $ 991,764
============ ========== =========
[NUOGAM\8KA\NPC8K44.CLN]-6
18
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1996
Preferred Stock
On September 23, 1993, the Company authorized 5,000,000 shares of
preferred stock which remain unissued as of September 30, 1996.
Shares Issued for Extinguishment of Stockholder Debt
In the event the Company does not obtain other financing by December 31,
1996, 15,257,579 shares issued for extinguishment of stockholder debt
shall become void and interest shall continue to accrue, effective
January 1, 1996, under all indebtedness otherwise converted.
7. INTANGIBLE ASSETS AMORTIZATION
Unamortized intangible assets were $54,912 at September 30, 1996.
Amortization expense was $16,668, $50,004, and $147,948 for the three
months and nine months ended September 30, 1996 and since inception,
respectively. Accumulated amortization was $145,124 at September 30,
1996.
8. STOCK OPTIONS OUTSTANDING
On January 20, 1995, one stockholder was granted an option to purchase
3,744,000 shares of common stock at $.05 per share. The option expires
January 30, 1997.
9. SUBSEQUENT EVENT
On June 13, 1996, the President, as an individual, entered into an
option agreement to acquire 250,000 shares of convertible preferred
stock in NuOasis Gaming, Inc. (NuOasis) at $13.00 per share
($3,250,000). The stock is convertible to 19,500,000 shares of common
stock, or 39% of voting stock in NuOasis. The options are assignable,
and any profits earned through assignment will be used to purchase
additional shares of NuOasis common stock.
The preferred shares will be purchased from a single stockholder who in
turn has agreed to use the majority of the proceeds to purchase a
subsidiary from NuOasis, and to obtain a release from liabilities from
NuOasis.
The preferred share option exercise is contingent upon NuOasis'
acquisition of the Company for consideration of $1,200,000 in
convertible notes and 1,000,000 shares of common stock when available
for issuance. Subsequent to the acquisition and the preferred share
option exercise, the Company would be a wholly-owned subsidiary of
NuOasis with $3,000,000 working capital available for continuing
operations.
The conversion of the NuOasis preferred shares following the exercise of
the preferred share option is conditioned on an increase in the
authorized shares of NuOasis common stock. The required increase in
authorized shares of common stock is subject to NuOasis stockholder
approval.
[NUOGAM\8KA\NPC8K44.CLN]-6
19
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1996
10. GOING CONCERN
As shown in the accompanying financial statements, the Company has
incurred a $2,844,987 deficit since inception and, as of September 30,
1996, the Company's current liabilities exceeded its current assets by
$1,964,350. Liens of $108,498 have been filed by two creditors.
Management of the Company is currently negotiating settlement payments
for several accounts payable balances.
The ability of the Company to continue as a going concern is dependent
on its ability to obtain additional working capital or equity
investment, as well as to be successful in developing a product that can
be marketed profitably. Should the Company not receive additional
funding, it is uncertain whether the Company has the ability to
continue. The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going
concern.
[NUOGAM\8KA\NPC8K44.CLN]-6
20
<PAGE>
NATIONAL POOLS CORPORATION
A Development Stage Company)
FINANCIAL STATEMENTS
With Report of Certified Public Accountants
Years Ended December 31, 1995 and 1994, And For The
Period Cumulative From Inception (February 23, 1993) through
December 31, 1995
MARCIA FRITZ & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
5530 Birdcage Street,
Suite 200 Citrus Heights, CA 95610-7621
[NUOGAM\8KA\NPC8K44.CLN]-6
21
<PAGE>
MARCIA FRITZ & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
5530 Birdcage Street, Suite 200
Citrus Heights, CA 95610-7621
(916) 966-9366 o Fax (916) 966-8743
To the Board of Directors and
Stockholders of National Pools Corporation
We have audited the accompanying balance sheets of National Pools Corporation (a
development stage company) as of December 31, 1995 and December 31, 1994, and
the related statements of operations and accumulated deficit, changes in
stockholders' equity, and cash flows for the years then ended and from inception
(February 23, 1993) through December 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of National Pools Corporation as
of December 31, 1995 and December 31, 1994, and the results of its operations
and its cash flows for the years then ended and from inception (February 23,
1993) through December 31, 1995, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 13, the Company's
operating losses since inception and negative working capital raise substantial
doubt about its ability to complete development of its project and successfully
conduct principal operations as a going concern. As discussed in Note 12, the
Company is currently attempting to be acquired as a wholly owned subsidiary by
another company. The acquiring company must be successful in obtaining
sufficient working capital to finance the acquisition, satisfy the Company's
creditors, complete development of the project, and successfully conduct
principal operations. The Company cannot predict what the outcome of these plans
will be. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
Marcia Fritz & Company
July 5, 1996, except for
Note 12 which is dated
November 7, 1996
[NUOGAM\8KA\NPC8K44.CLN]-6
22
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
BALANCE SHEETS
December 31, 1995 and 1994
ASSETS 1995 1994
------------ -----------
Current Assets:
Cash $ 12,639 $ 597
Employee Advances Receivable 17,965 2,286
------------ -----------
Total Current Assets 30,604 2,883
------------ -----------
Fixed Assets:
Equipment 89,090 168,465
Less Accumulated Depreciation 26,218 16,784
------------ -----------
Net Fixed Assets 62,872 151,681
------------ -----------
Intangible Assets:
Software 200,036 190,361
Less Accumulated Amortization 95,120 28,441
------------ -----------
Net Intangible Assets 104,916 161,920
------------ -----------
Deposits 3,811 14,092
------------ -----------
TOTAL ASSETS $ 202,203 $ 330,576
============ ===========
The accompanying notes are an integral part of these financial statements
[NUOGAM\8KA\NPC8K44.CLN]-6
23
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
LIABILITIES AND STOCKHOLDERS' DEFICIT
1995 1994
Current Liabilities: ----------- ---------
Accounts Payable (Note 3) $ 533,085 $ 528,033
Accrued Interest Payable (Note 5) 162,116 51,501
Wages Payable 82,788 102,630
Payroll Taxes Payable 11,512 15,924
Note Payable (Note 5) 822,930 822,930
------------ ---------
Total Current Liabilities 1,612,431 1,521,018
------------ ---------
Payable to Stockholders (Note 6):
Accrued Interest Payable 72,478
Notes Payable 75,864
Advance Payable to Stockholder 72,500
Convertible Debt 496,376
Less Unamortized Original Issue Discount 96,518
------------ ---------
Net Convertible Debt 399,858
Total Payable to Stockholders 620,700
Total Liabilities 1,612,431 2,141,718
------------ ---------
Stockholders' Deficit:
Common Stock (Note 8) 991,764 39,926
Preferred Stock (Note 8)
Deficit Accumulated during the
Development Stage ( 2,401,992) (1,851,068)
------------ -----------
Total Stockholders' Deficit ( 1,410,228) (1,811,142)
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 202,203 $ 330,576
============ ===========
The accompanying notes are an integral part of these financial statements
[NUOGAM\8KA\NPC8K44.CLN]-6
24
<PAGE>
<TABLE>
<CAPTION>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
Years Ended December 31, 1995 and 1994, and for the
Period Cumulative from Inception (February 23, 1993) through December 31, 1995
Cumulative
from
Inception
through
Years Ended December 31, December 31,
------------------------------------------------ ----------------------------
1994 1995 1995
----------------------- ----------------------- ----------------------------
<S> <C> <C> <C>
Operating Expenses $ (436,886) $ (437,778) $ (1,019,263)
Research & Development (Note 2) (224,191) (842,019) (1,255,375)
----------------------- ----------------------- ----------------------------
Net (Loss) From Operations (661,077) (1,279,797) (2,274,638)
----------------------- ----------------------- ----------------------------
Other Income and (Expense):
Interest Expense:
Discounts on Convertible Debt (96,518) (82,729) (248,188)
(Note 6)
Other Interest Expense (160,977) (97,726) (286,997)
----------------------- ----------------------- ----------------------------
Total Interest Expense (257,495) (180,455) (535,185)
Interest Income 1,012
Loss on Disposal of Assets (17,212) (40,373) (57,585)
----------------------- ----------------------- ----------------------------
Total Other Income and (Expense) (274,707) (220,828) (591,758)
Net (Loss) Before Extraordinary
Item (935,784) (1,500,625) (2,866,396)
Benefit from Extinguishment of
Debt (Note 7) 384,860 67,934 464,404
----------------------- ----------------------- ---------------------------
Net (Loss) (550,924) (1,432,691) (2,401,992)
Accumulated Deficit, Beginning (1,851,068) (418,377)
----------------------- -----------------------
Accumulated Deficit, Ending $ (2,401,992) $ (1,851,068) $ (2,401,992)
======================= ======================= ============================
Per Common Share (Note 1)
Net (Loss) Before Extraordinary
Item $ (.09) $ (.51)
Benefit from Extinguishment of
Debt .04 .02
----------------------- -----------------------
Net (Loss) Per Common Share
(Note 1) $ (.05) $ (.49)
======================= =======================
Weighted Average Common Shares
Outstanding (Note 1) 10,910,839 2,956,201
======================= =======================
</TABLE>
The accompanying notes are an integral part of these financial statements
[NUOGAM\8KA\NPC8K44.CLN]-6
25
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
Period from Inception (February 23, 1993) through December 31, 1995
Common Accumulated Total
Stock Deficit Stockholders'
Deficit
------------- ------------ ------------
Shares Issued in 1993 (Note 8) $ 10,326 $ 10,326
Net Loss for the period $( 418,377) ( 418,377)
------------- ------------ ------------
Balance December 31, 1993 10,326 ( 418,377) ( 408,051)
Shares Issued in 1994 (Note 8) 29,600 29,600
Net Loss for the period (1,432,691) (1,432,691)
------------- ------------ ------------
Balance December 31, 1994 39,926 (1,851,068) (1,811,142)
Shares Issued in 1995 (Note 8) 951,838 951,838
Net Loss for the period ( 550,924) ( 550,924)
------------- ------------ ------------
Balance December 31, 1995 $ 991,764 $(2,401,992) $(1,410,228)
============= ============ ============
The accompanying notes are an integral part of these financial statements
[NUOGAM\8KA\NPC8K44.CLN]-6
26
<PAGE>
<TABLE>
<CAPTION>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOW
Years Ended December 31, 1995 and 1994, and
the Period From Inception (February 23, 1993) through December 31, 1995
Cumulative
from
Inception
through
Years Ended December 31, December 31,
--------------------------------- -------------
1995 1994 1995
------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Cash Flow from Operating
Activities:
Net Loss $( 550,924) $( 1,432,691) $( 2,401,992)
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
Depreciation 21,230 19,374 41,518
Amortization of Intangible Assets 66,679 29,765 97,944
Amortization of Original Issue
Discount, Convertible Debt 96,518 82,729 248,188
Loss on Disposal of Assets 17,212 40,373 57,585
Gain from Extinguishment of Debt ( 384,860) ( 67,934) ( 464,404)
(Increase) Decrease in:
Employee Advances Receivable ( 15,679) ( 145) ( 17,965)
Deposits 10,281 ( 11,092) ( 3,811)
Increase (Decrease) in:
Accounts Payable 96,792 371,564 479,056
Wages Payable 337,364 138,957 523,901
Payroll Taxes Payable ( 4,412) 15,924 11,512
Accrued Interest Payable 160,975 95,685 284,954
------------- ------------- ------------
Net Cash Used by Operating
Activities ( 148,824) ( 717,491) ( 1,143,514)
Cash Flows from Investing
Activities:
Proceeds from Sale of Assets 8,400 8,400
Cash Paid for Fixed Assets ( 150,722) ( 168,465)
Cash Paid for Intangible
Assets ( 9,675) ( 81,292) ( 100,967)
------------- ------------- -------------
Net Cash (Used by) Provided by
Investing Activities ( 1,275) ( 232,014) ( 261,032)
</TABLE>
The accompanying notes are an integral part of these financial statements
[NUOGAM\8KA\NPC8K44.CLN]-6
27
<PAGE>
<TABLE>
<CAPTION>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
Cumulative
from
Inception
through
Years Ended December 31, December 31,
-------------------------------- ------------
1995 1994 1995
------------- ------------ ------------
<S> <C> <C> <C>
Cash Flows from Financing
Activities:
Issuance of Common Stock $ 94,341 $ 26,000 $ 129,903
Proceeds from Short-Term Debt 822,930 822,930
Proceeds from Stockholder Loans 67,800 101,640 464,352
------------- ------------- ------------
Net Cash Provided by
Financing Activities 162,141 950,570 1,417,185
------------- ------------- ------------
Net Increase (Decrease) in
Cash and Cash Equivalents 12,042 1,065 12,639
Cash and Cash Equivalents,
Beginning of Period 597 ( 468)
------------- ------------- ------------
Cash and Cash Equivalents,
End of Period $ 12,639 $ 597 $ 12,639
============= ============= ============
Supplemental Disclosures:
Noncash Investing Activities:
Accounts Payable Reduced by
Disposal (Return) of Assets $( 41,966) $ $( 41,966)
Intangible Assets Financed by
Accounts Payable 145,769 145,769
------------- ------------- ------------
Total Noncash Investing
Activities $( 41,966) $ 145,679 $ 103,803
============= ============= ============
Noncash Financing Activities:
Wages Payable Converted to
Common Stock $ 17,372 $ 3,600 $ 22,498
Accounts Payable Converted to
Common Stock 4,748 4,748
Stockholder Loans and Related
Accrued Interest Converted to
Common Stock 835,377 853,377
------------- ------------- ------------
Total Noncash Financing
Activities $ 857,497 $ 3,600 $ 880,623
============= ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements
[NUOGAM\8KA\NPC8K44.CLN]-6
28
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1995 and 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
The Company was formed on February 23, 1993, for the purpose of
developing and operating the Hit-Lotto Project (Project). This Project
uses debit card, telecommunications, and computer technology to market
and distribute chances for lottery players to enter pools when they buy
Hit-Lotto cards.
Basis of Accounting
The financial statements have been prepared for a development stage
company in accordance with generally accepted accounting principles.
Fixed Assets
Equipment is shown at cost. When retired or otherwise disposed of, the
related carrying value and accumulated depreciation are removed from the
respective accounts. Any resulting profit or loss is reflected in
income. The Company provides for depreciation of equipment using the
straight-line method and lives of five to seven years.
Intangible Assets
The Company has capitalized proprietary software developed for the
management of the Project. The Company provides for amortization of
intangible assets using the straight-line method over three years,
subject to periodic review of impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable.
Convertible Debt Discount
The Company provides for amortization of the convertible debt discount
using the straight-line method over three years.
Research and Development Costs
The Company charges all research and development costs, including direct
and indirect costs, to an expense when incurred.
Net Loss Applicable Per Common Share
Per share amounts are calculated based on the weighted average number of
common shares outstanding during the periods of net loss.
Cash Equivalents
For purposes of the statement of cash flows, cash equivalents include
the general operating checking and money market accounts.
[NUOGAM\8KA\NPC8K44.CLN]-6
29
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1995 and 1994
2. DEVELOPMENT STAGE OPERATIONS
Since inception, the Company operations have been devoted primarily to
the formulation and design of telecommunications and computer
technology, including the Hit-Lotto debit card and Internet Web Page,
for the Project. In August, 1994, the Project was tested in San Diego,
and development is continuing. Advertising costs of $237,936 were
incurred during the test period and are included in research and
development expenses for the year ended December 31, 1994.
3. ACCOUNTS PAYABLE
Accounts payable consist of the following:
1995
Rent $ 81,078
Legal Fees 74,742
Advertising 151,999
Proprietary software 145,769
Miscellaneous 79,497
---------
Total $ 533,085
=========
4. INCOME TAXES
As of December 31, 1995, the Company has a federal loss carryforward of
$2,401,992 and a state loss carryforward of $1,200,996. The loss
carryforwards are available to reduce future years' taxable income (if
earned) and expire as follows:
Losses Expire
December 31, Federal State
------------- ----------- -----------
2008 $ 418,376 $ 209,188
2009 1,432,692 716,346
2010 550,924 275,462
----------- -----------
$ 2,401,922 $ 1,200,996
=========== ===========
5. NOTE PAYABLE
During 1994 the Company issued a note payable to Providence Investment
Group with an interest rate based on the prime rate plus four points
(12.65% at December 31, 1995).
The note is payable upon demand and is unsecured.
6. PAYABLE TO STOCKHOLDERS
On March 18, 1993, the Company issued convertible debt at a 50%
discount, a 7% interest rate, and a March 1, 1996, maturity date in
connection with a sale of common stock.
During 1993 and 1994, the Company issued notes payable with a 10%
interest rate and a one-year maturity. During 1994 and 1995, the Company
issued notes payable with a 12.5% interest rate and a December 31, 1995,
maturity date.
[NUOGAM\8KA\NPC8K44.CLN]-6
30
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1995 and 1994
As shown in Note 8, all convertible debt, notes payable to stockholders,
and related accrued interest were converted to 15,257,579 shares of
common stock on December 31, 1995. In the event the Company does not
obtain other financing by December 31, 1996, the shares issued in lieu
of payment of stockholder debt shall become void and interest shall
continue to accrue, effective January 1, 1996, under all indebtedness
otherwise converted.
7. BENEFIT FROM EXTINGUISHMENT OF DEBT
As discussed in Note 8, the Company's employees agreed to accept shares
of common stock in lieu of wages. The stock issued was valued less than
wages owed which resulted in gains of $339,834, $67,934, and $419,378
for the years ended December 31, 1995 and 1994 and since inception,
respectively. The per share benefit was $.03 and $.02 for the years
ended December 31, 1995 and 1994, respectively.
As discussed in Note 10, a vendor and related party agreed to accept
shares of common stock in lieu of payment on accounts payable. The stock
issued was valued less than amounts owed which resulted in a gain of
$45,026 for the year ended December 31, 1995. The per share benefit was
$.01 for the year ended December 31, 1995.
8. CAPITAL TRANSACTIONS
Common Stock
The following schedule includes the date and number of common shares
issued for cash and other considerations.
<TABLE>
<CAPTION>
Shares
Authorized Shares
and Unissued Issued Amount
------------ --------- ---------
<S> <C> <C> <C>
Shares authorized, February 23, 1993 3,000 $
Increase in shares authorized, September 23, 1993 9,997,000
Shares issued throughout year at
$.005 per share (1,912,398) 1,912,398 9,562
Shares issued to employees during September
through November 1993, at $.0025 per share (305,533) 305,533 764
----------- --------- ---------
Balance December 31, 1993 7,782,069 2,217,931 10,326
Shares issued during September 1994 at $.50 per
share (50,000) 50,000 25,000
Shares issued during December 1994 at $.05 per
share (20,000) 20,000 1,000
Shares issued to employees throughout the year at
$.0025 per share (1,439,875) 1,439,875 3,600
----------- --------- ---------
Balance December 31, 1994 6,272,194 3,727,806 39,926
</TABLE>
[NUOGAM\8KA\NPC8K44.CLN]-6
31
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
Shares
Authorized Shares
and Unissued Issued Amount
------------ --------- ---------
<S> <C> <C> <C>
Shares issued to employees during April, 1995 at
at $.0465 per share (591,910) 591,910 27,500
Shares issued to employees during April 1995 in
lieu of advance payable to stockholder at $.0465
per share (1,560,490) 1,560,490 72,500
Shares issued January through May 1995 at $.05
per share (790,841) 790,841 39,541
Increase in shares authorized December 29, 1995 25,000,000
Shares issued to employees during July 1995 in
lieu of payment of wages at $.0025 per share (6,948,878) 6,948,878 17,372
Shares issued during December 1995 in lieu of
accounts payable to stockholder at $.0025 per
share (205,500) 205,500 514
Shares issued August through December 1995 at
$.05 per share (546,000) 546,000 27,300
Shares issued during November and December 1995
in lieu of employee expenses at $.05 per share (74,685) 74,685 3,734
Shares issued during December 1995 in lieu of
accounts payable at $.05 per share (10,000) 10,000 500
Shares issued during December 1995 for
extinguishment of stockholder debt at $.05 per
share (15,257,579) 15,257,579 762,877
------------ ---------- ---------
Balance December 31, 1995 5,286,311 29,713,689 $ 991,764
============ ========== =========
</TABLE>
Preferred Stock
On September 23, 1993, the Company authorized 5,000,000 shares of preferred
stock which remain unissued as of December 31, 1995.
Shares Issued for Extinguishment of Stockholder Debt
In the event the Company does not obtain other financing by December 31, 1996,
15,257,579 shares issued for extinguishment of stockholder debt shall become
void and interest shall continue to accrue, effective January 1, 1996, under all
indebtedness otherwise converted.
9. INTANGIBLE ASSETS AMORTIZATION
Unamortized intangible assets were $104,916 and $161,920 at December 31, 1995
and 1994, respectively. Amortization expense was $66,679, $29,765, and $97,944
for the years ended December 31, 1995 and 1994 and since inception,
respectively. Accumulated amortization was $95,120 and $28,441 at December 31,
1995 and 1994, respectively.
10. STOCK OPTIONS OUTSTANDING
On January 20, 1995, one stockholder was granted an option to purchase 3,744,000
shares of common stock at $.05 per share. The option expires January 30, 1997.
[NUOGAM\8KA\NPC8K44.CLN]-6
32
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1995 and 1994
11. RELATED PARTY TRANSACTIONS
Included in operating expenses are $37,294, $21,138, and $67,742 for the years
ended December 31, 1995 and 1994 and since inception, respectively, for lobbying
expenses provided by a company owned by a 5.08% stockholder. Included in the
gain on extinguishment of debt is $45,026 formerly owed to this company.
Additionally, $514 of accounts payable to this company was converted to 205,500
shares of common stock in 1995.
12. SUBSEQUENT EVENT
On June 13, 1996, the President, as an individual, entered into an option
agreement to acquire 250,000 shares of convertible preferred stock in NuOasis
Gaming, Inc. (NuOasis) at $13.00 per share ($3,250,000). The stock is
convertible to 19,500,000 shares of common stock, or 39% of voting stock in
NuOasis. The options are assignable, and any profits earned through assignment
will be used to purchase additional shares of NuOasis common stock.
The preferred shares will be purchased from a single stockholder who in turn has
agreed to use the majority of the proceeds to purchase a subsidiary from
NuOasis, and to obtain a release from liabilities from NuOasis.
The preferred share option exercise is contingent upon NuOasis' acquisition of
the Company for consideration of $1,200,000 in convertible notes and 1,000,000
shares of common stock when available for issuance. Subsequent to the
acquisition and the preferred share option exercise, the Company would be a
wholly-owned subsidiary of NuOasis with $3,000,000 working capital available for
continuing operations.
The conversion of the NuOasis preferred shares following the exercise of the
preferred share option is conditioned on an increase in the authorized shares of
NuOasis common stock. The required increase in authorized shares of common stock
is subject to NuOasis stockholder approval.
13. GOING CONCERN
As shown in the accompanying financial statements, the Company has incurred a
$2,401,992 deficit since inception and as of December 31, 1995, the Company's
current liabilities exceeded its current assets by $1,581,827. Liens of $108,498
have been filed by two creditors. Management of the Company is currently
negotiating settlement payments for several accounts payable balances.
Management of the Company has developed a one-year financing plan based on loans
to be provided from existing stockholders until the receipt of working capital
in connection with the NuOasis acquisition of the Company, as discussed in Note
12.
The ability of the Company to continue as a going concern is dependent on the
ability to obtain additional working capital or equity investment, as well as to
be successful in developing a product that can be marketed profitably. Should
the Company not receive additional funding, it is uncertain whether the Company
has the ability to continue. The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern.
[NUOGAM\8KA\NPC8K44.CLN]-6
33
<PAGE>
NUOASIS GAMING, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
AND STATEMENTS OF OPERATIONS
(Unaudited)
To Reflect the
Acquisition of
National Pools Corporation
The following unaudited pro forma consolidated balance sheet as of September 30,
1996 and the unaudited pro forma consolidated statement of operations for the
three months ended September 30, 1996, give effect to the acquisition of all the
outstanding shares of National Pools Corporation, ("NPC") by NuOasis Gaming
Inc., ("NuOasis") which acquisition was completed on December 24, 1996, and
other related transactions which are expected to occur in the near future
(collectively, the "Transaction"). The pro forma consolidated information is
based on the historical financial statements of NuOasis Gaming and NPC and
includes the effect of the acquisition under the purchase method of accounting
and the assumptions and adjustments set forth in the accompanying notes to the
pro forma consolidated financial statements. The pro forma consolidated balance
sheet presents the financial position of NuOasis Gaming as if it had acquired
NPC as of September 30, 1996. The pro forma consolidated statement of operations
presents the result of operations of NuOasis Gaming as if it had acquired NPC as
of July 1, 1995.
The unaudited pro forma consolidated balance sheet as of September 30, 1996 and
the unaudited pro forma consolidated statement of operations for the year ended
June 30, 1996 and for the three months ended September 30, 1996 may not be
indicative of the results which may be obtained in the future or that actually
would have occurred if the Transaction closed on July 1, 1995, and the
combination had been in effect on the dates indicated. These unaudited pro forma
consolidated financial statements should be read in conjunction with the NuOasis
Gaming audited financial statements and notes included in its Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1996, and the NPC's audited
financial statements and notes contained elsewhere herein.
[NUOGAM\8KA\NPC8K44.CLN]-6
34
<PAGE>
<TABLE>
<CAPTION>
NUOASIS GAMING, INC.
PRO FORMA CONSOLIDATED BALANCE SHEETS
As of September 30, 1996
(Unaudited)
Pro Forma Pro Forma
NuOasis NPC Adjustments Totals
---------------- --------------- ------------------------- -----------------
<S> <C> <C> <C> <C>
ASSETS
Cash $ 2,022 $ 15,211 $ 1,765,000 (E) $ 3,017,233
1,235,000 (B)
Employee Advances - 30,939 - 30,939
Fixed Assets, Net - 49,642 - 49,642
Intangibles, Net - 54,912 3,178,223 (A) 54,912
(3,178,223) (D)
Investment in NPC - - 1,325,000 (A) -
(1,325,000) (A)
Other Assets - 6,573 - 6,573
---------------- ---------------- --------------------- -----------------
Total Assets $ 2,022 $ 157,277 $ 3,000,000 $ 3,159,299
================ ================ ===================== =================
LIABILITIES &
STOCKHOLDERS' DEFICIT
Current Liabilities $ 79,436 $ 1,081,320 $ 125,000 (A) $ 1,285,756
Due to Affiliates
801,585 - (59,436) (F) 438,539
(79,025) (F)
(224,585) (B)
Notes Payable
- 929,180 1,200,000 (A) 2,129,180
----------------- ---------------- --------------------- -----------------
Total Liabilities
881,021 2,010,500 961,954 3,853,475
----------------- ---------------- --------------------- ------------------
Stockholders' Deficit
Preferred Stock Series B 501,700 - - 501,700
Common Stock 300,000 991,764 (991,764) (A) 300,000
Stockholders' Receivable (1,368,613) - 1,368,000 (B) -
Additional Paid in Capital 12,376,196 - 1,765,000 (E) 14,141,196
Accumulated Deficit (12,688,895) (2,844,987) 2,844,987 (A) (15,637,072)
----------------- ---------------- ------------------
138,461 (F)
(3,178,223) (D)
91,585 (B)
---------------------
Total Stockholders' Deficit (878,999) (1,853,223) 2,038,046 (694,176)
----------------- ---------------- --------------------- ------------------
Total Liabilities and
Stockholders' Equity $ 2,022 $ 157,277 $ 3,000,000 $ 3,159,299
================= ================ ===================== =================
</TABLE>
See Accompanying Notes to Pro Forma Consolidated Financial Statements.
[NUOGAM\8KA\NPC8K44.CLN]-6
35
<PAGE>
<TABLE>
<CAPTION>
NUOASIS GAMING, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended June 30, 1996
(Unaudited)
Pro Forma Pro Forma
NuOasis NPC Adjustments Totals
--------------- -------------- -------------------------- ------------------
<S> <C> <C> <C>
Operating Expenses $ 1,087,987 $ 406,524 $ - $ 1,494,511
Write-off Goodwill - - 3,178,223 (A)(D) 3,178,223
Research & Development - 195,762 - 195,762
---------------- --------------- ------------------ -----------------
Total operating expenses 1,087,987 602,286 3,178,223 4,868,496
Interest Expense - 227,095 96,000 (C) 323,095
Loss (gain) on Disposal of Asset - 12,684 (91,585) (B) (78,901)
---------------- --------------- ------------------ ------------------
Loss from operations (1,087,987) (842,065) (3,182,638) (5,112,690)
================ =============== ================== ==================
Pro forma loss per share $ (.04) $ N/A $ N/A $ (.18) (G)
================ =============== ================= ==================
Pro forma weighted-average common
shares outstanding 28,301,697 N/A N/A 28,301,697 (G)
================ =============== ================= ==================
</TABLE>
See Accompanying Notes to Pro Forma Consolidated Financial Statements.
[NUOGAM\8KA\NPC8K44.CLN]-6
36
<PAGE>
<TABLE>
<CAPTION>
NUOASIS GAMING, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 1996
(Unaudited)
Pro Forma Pro Forma
NuOasis NPC Adjustments Totals
---------------- ---------------- ----------------- ---------------
<S> <C> <C> <C>
Operating Expenses $ 189,067 $ 136,788 $ - $ 325,855
Write-off Goodwill - - - -
Research & Development - 5,178 - 5,178
----------------- ----------------- ----------------- ---------------
Total operating expenses 189,067 141,966 - 331,033
Interest Expense - 32,238 24,000 (C) 56,238
----------------- ----------------- ----------------- ---------------
Loss from operations $ (189,067) $ (174,204) $ (24,000) $ (387,271)
================= ================= ================= ================
Pro forma loss per share $ (.01) $ N/A $ N/A $ (.01) (G)
================= ================ ================= ================
Pro forma weighted-average
common shares outstanding 30,000,000 N/A N/A 30,000,000 (G)
================= ================= ================= ================
</TABLE>
See Accompanying Notes to Pro Forma Consolidated Financial Statements.
[NUOGAM\8KA\NPC8K44.CLN]-6
37
<PAGE>
NUOASIS GAMING, INC.
Notes to Pro Forma Financial Statements
(Unaudited)
Note 1. Basis of Presentation
The unaudited pro forma consolidated balance sheet as of September 30, 1996 and
the unaudited pro forma consolidated statement of operations for the three
months ended September 30, 1996 of NuOasis reflect the acquisition of NPC and
the unaudited pro forma consolidated financial statements and operations of
NuOasis as if it had acquired NPC as of July 1, 1995.
These unaudited pro forma consolidated financial statements do not purport to be
indicative of the results that actually would have been obtained if the two
companies and their operations had actually been combined at July 1, 1995, and
this presentation is not intended to be a projection of future results or
trends.
These proforma financial statements are presented assuming that NuOasis Gaming
is the accounting acquiror and that all phases surrounding the Transaction,
described in Note 2 herein, have occurred. Since conversion of the Notes (see
Note 2) is based upon future earnings of NPC, which is in itself based upon the
success of the Hit- Lottotm program, a developmental business, the probability
of the conversion is undeterminable and uncertain. Although control of NuOasis
Gaming may be transferred to the NPC shareholders upon conversion of the Notes
(see Note 2), due to this uncertainty, the acquisition of NPC has been accounted
for as a purchase with NuOasis Gaming deemed the accounting acquiror.
Note 2. Background and Overview of the Transaction
NPC was formed in 1993 for the purpose of developing and operating a system to
facilitate participation in group play in state lotteries in the United States
and the lotteries of foreign countries. The program developed by NPC was named
"Hit-Lotto". The Hit-Lotto program uses debit cards, telecommunications,
Internet Website, and proprietary computer software to organize and market
lottery pools for lottery players who participate in various state lotteries.
Since inception NPC's operations have been devoted primarily to the formulation
and design of the telecommunication and computer technology to support the
Hit-Lotto program. In August, 1994, Hit-Lotto was tested in the San Diego
market: development is ongoing.
On June 13, 1996 Nona Morelli's II, Inc. ("Nona"), the controlling parent of
NuOasis, granted an option to Joseph Monterosso, the President and Chief
Executive Officer of NPC ("Monterosso"), to acquire 250,000 Series B Preferred
Shares (the "Series B Shares") owned by Nona. Such option is exercisable at a
price of $13.00 per share. Monterosso has subsequently conditionally assigned
his rights under the option as to 95,000 Series B Shares to certain shareholders
of NPC and other investors, leaving him with rights under the option to purchase
155,000 Series B Shares.
On December 19, 1996 NuOasis entered into a Stock Purchase Agreements with each
of the shareholders of NPC pursuant to which it agreed to issue a series of
Secured Promissory Notes (the "Notes") in the aggregate amount of $1,200,000 and
1,000,000 shares of its common stock to the NPC shareholders in exchange for all
of the issued and outstanding shares of capital stock of NPC. The Notes are
convertible into a total of 241,900,000 shares of NuOasis' common stock
contingent upon NPC's operations achieving certain financial goals over the next
several fiscal years. The Notes are non-recourse to NuOasis and secured by the
assets of NPC, bear interest at 8% per annum, and are due and payable on May 31,
1999. Under the terms of the Notes, for every $250,000 of net annual operating
[NUOGAM\8KA\NPC8K44.CLN]-6
38
<PAGE>
NUOASIS GAMING, INC.
Notes to Pro Forma Financial Statements
(Unaudited)
income achieved by NPC, $7,500 in principal amount of the Notes may be converted
into 1,511,875 shares of restricted NuOasis common stock. As part of this
acquisition, Nona and NuOasis agreed to a debt assumption agreement whereby all
NuOasis debt in excess of $20,000 on December 24, 1996 is assumed by Nona except
for amounts owed to NuVen Advisors, Inc, an affiliate, and Fred G. Luke,
Chairman and former President, which are to be converted into shares of NuOasis
common stock: the conversion rate is based upon the prevailing market price on
the date of the next NuOasis Shareholder's Meeting.
The audited financial statements of NPC are included herein as an exhibit. Such
audit reports explain that NPC's financial statements have been prepared
assuming that NPC will continue as a going concern and that such statements do
not include any adjustments that may result in the event it is unable to do so.
The audited financial statements of NPC also reflect that it has incurred
operating losses of $2,401,992 from its inception and had negative working
capital of $1,581,827, as of December 31, 1995. Unaudited financial statements
of NPC for the quarter ended September 30, 1996 are also included elsewhere
herein at Part (a) to this Report.
Subject to the exercise of the Option and the sale by Nona of the Series B
Shares, NuOasis has agreed to fund NPC's future operations. Exercise of the
Option is contingent upon the approval of an amendment to the NuOasis
Certificate of Incorporation allowing for its authorized capital stock to be
increased to have sufficient shares of its common stock available for conversion
of the Notes. Upon such Amendment to the NuOasis Certificate of Incorporation,
and the acquisition of the Series B Shares, there will be a change of control of
NuOasis. If the NuOasis shareholders do not approve such Amendment to the
Certificate of Incorporation it is unlikely that the Series B Shares will be
acquired pursuant to the Option and, in this event, NPC may not have sufficient
working capital to "roll out" the Hit-Lotto program on a commercial basis, and
there will not be a change of control of NuOasis. The Company estimates the
minimum dollar amount to roll out the Hit Lotto project on a commercial basis is
$1,235,000; however, full implementation on a more rapid scale would require
$3,000,000 The Transaction is divided into three phases and summarized as
follows:
Phase I : Acquisition of NPC, which closed on December 24, 1996
Phase II: Exercise of 95,000 Series B Shares
Holders of the Option exercise the option to purchase 95,000
Series B Shares, at $13.00 per share, by payment to Nona of
$1,235,000. The 95,000 Series B Shares so acquired may then
immediately be converted into 7,410,000 shares of restricted
NuOasis common stock at the election of the holders.
Subject to the exercise of the Option as to the 95,000 Series B
Shares, NuOasis has agreed to sell its wholly-owned subsidiary,
CMA, to Nona for $1,235,000. Upon the sale of CMA, NuOasis
intends to contribute most if not all of the proceeds of the
sale of CMA to NPC, its wholly owned subsidiary, for working
capital.
Phase III: Exercise of 155,000 Series B Shares
Following the initial exercise of 95,000 Series B Shares, if
such exercise occurs, there will be remaining 155,000 Series B
[NUOGAM\8KA\NPC8K44.CLN]-6
39
<PAGE>
NUOASIS GAMING, INC.
Notes to Pro Forma Financial Statements
(Unaudited)
Shares available under the Option. If exercised, the 155,000
Series B Shares could immediately be converted into 12,090,000
common shares. The exercise and sale of such remaining Series B
Shares will result in an additional $2,015,000 in proceeds to
Nona which Nona intends to utilize to satisfy any intercompany
payables owed to NuOasis of up to $1,765,000 as of the date
Phase III occurs and obtain a release of liability, if any, from
any events while it controlled NuOasis. No amounts are owed by
Nona to NuOasis as of September 30, 1996 assuming Phase II
occurs, therefore, the entire $1,765,000 is assumed to be a
payment from Nona to NuOasis for a release of liability and
accordingly reflected as such in the pro forma financial
statements (see Note 4).
Note 3. Difference in Fiscal Year Ends
NPC's most recent fiscal year end of December 31, 1995 differs from the
Registrant's most recent fiscal year end of June 30, 1996 by more than 93 days.
NPC's income statement is updated to March 31, 1996 which is within 93 days of
the Registrant's most recent fiscal year end of June 30, 1996. This updating is
accomplished by adding subsequent interim period results of three months ended
March 31, 1996 to the most recent fiscal year-end information of December 31,
1995 and deducting the comparable preceding year interim period results of the
three months ended March 31, 1995.
During the most recent fiscal year end of NuOasis, a change in fiscal year end
was made from September 30 to June 30 and, accordingly, the most recent fiscal
year ended June 30, 1996 results include only nine months ended June 30, 1996.
Since NPC's latest fiscal year is a twelve month period, the latest fiscal year
(nine months) of NuOasis ended June 30,1996 have been shown to present a twelve
month period ended June 30, 1996. The twelve months ended June 30, 1996 is
accomplished by adding NuOasis' interim period results of three months ended
September 30, 1995 to its nine months ended June 30, 1996 results.
Note 4. Adjustments to Proforma Financial Statements
(A) Acquisition of NPC
This adjustment reflects (i) the acquisition of 100% of the outstanding stock of
NPC in exchange for the Note in the amount of $1.2 million and the issuance of 1
million shares of NuOasis restricted common stock valued at $125,000, the low
bid price on the purchase date of $.12 per share; (ii) the elimination of NPC's
common stock in the amount of $991,764 and accumulated deficit of $2,844,987;
and, (iii) the recording of "goodwill" in the amount of $3,178,223 which is
assumed to be immediately written off - see Adjustment (D) below.
The acquisition is presented assuming NuOasis Gaming is the accounting acquiror,
as discussed above, and accordingly, the allocation of NPC's assets acquired and
liabilities assumed is as follows:
[NUOGAM\8KA\NPC8K44.CLN]-6
40
<PAGE>
NUOASIS GAMING, INC.
Notes to Pro Forma Financial Statements
(Unaudited)
September 30
NPC 1996 (Historical)
------------------------ ---------------------
Cash $ 15,211
Employee advances 30,939
Fixed assets, net 49,642
Software, net 54,912
Other assets 6,573
Goodwill 3,178,223 (a)
Liabilities assumed (2,010,500)
---------------------
Total consideration $ 1,325,000 (b)
=====================
(a) Goodwill is assumed to be written off - see adjustment (D)
below.
(b) Total consideration consists of note payable of $1,200,000
and accrued liability of $125,000.
(B) Sale of CMA
This adjustment reflects the probable sale of CMA for $1,235,000 resulting in
the elimination of the CMA's net equity basis of $ 1,143,415 and gain on sale of
$91,585. The adjustment also reflects the elimination of CMA's net assets,
including $224,585 of current liabilities and $1,368,000 of shareholders'
receivable.
(C) Interest on Notes Payable
This adjustment reflects interest expense retroactively incurred in the amounts
of $96,000 and $24,000 for the twelve months ended June 30, 1996 and three
months ended September 30, 1996, respectively, as if the Notes were issued on
July 1, 1995.
(D) Write-off of Goodwill
The excess of the purchase price over the fair market value of the net assets
acquired was approximately $3,178,223 and was assumed to be allocated to
goodwill. Due to the Registrant's and NPC's historical negative cash flows from
operations and working capital deficit, this adjustment assumes the goodwill of
$3,178,223 is immediately written off due to the uncertainty of realizing any
future benefit from this asset.
(E) Release
This adjustment reflects the assumption that the Phase III funds generated in
the amount of $1,765,000 by Nona are assumed to be a payment from Nona to
NuOasis for a release of liability, if any, for any events while Nona controlled
NuOasis. (see Note 2).
[NUOGAM\8KA\NPC8K44.CLN]-6
41
<PAGE>
NUOASIS GAMING, INC.
Notes to Pro Forma Financial Statements
(Unaudited)
(F) Debt Assumption
This adjustment reflects the assumption that, as agreed upon by NuOasis and
Nona, all account payables and accrued expenses in excess of $20,000 on December
24, 1996 is assumed by Nona. The total amount of $138,461 represents the
outstanding balances of account payables and accrued expenses, as of September
30, 1996, less the $20,000.
(G) Earnings/Loss Per Share
Pro forma loss per share is completed using the weighted average number of
shares of NuOasis common stock issued and outstanding assuming that all the
shares were outstanding for the entire year. Common stock equivalents were not
considered in the loss per share calculation as the effect would have been
anti-dilutive.
[NUOGAM\8KA\NPC8K44.CLN]-6
42
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB/A
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For The Quarter Ended December 31, 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 or organization)
95-4176781
(I.R.S. Employer Identification Number)
2 Park Plaza, Suite 470, Irvine, California
(Address of principal executive offices)
92614
(Zip Code)
(714) 833-5382
(Registrant's telephone number, including area code)
N/A
(Former Address, if changed since last report)
N/A
(Former Zip Code, if changed since last report)
N/A
(Former telephone number, if changed since last report)
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 December 31, 1996
Total No. of Pages: 25
[NUOGAM\10QA\:123196.QSB-A]-2
<PAGE>
NUOASIS GAMING, INC.
INDEX
Page
PART I
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1996
(unaudited) and June 30, 1996 (audited) ...............1
Consolidated Statements of Operations for the Three
and Six Months Ended December 31, 1996 and 1995
(unaudited) ...........................................2
Consolidated Statements of Cash Flows for the Six
Months Ended December 31, 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 ...................9
PART II
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
Signatures...............................................11
[NUOGAM\10QA\:123196.QSB-A]-2
<PAGE>
<TABLE>
<CAPTION>
NUOASIS GAMING, INC.
Consolidated Balance Sheets
As of December 31, 1996 (Unaudited) and
June 30, 1996 (Audited)
December 31, June 30,
1996 1996
--------------------- --------------------
(Unaudited) (Audited)
--------------------- --------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ - $ 84
--------------------- --------------------
Total Current Assets - 84
--------------------- --------------------
Fixed assets
Equipment 89,090 -
Less accumulated depreciation (43,858) -
--------------------- --------------------
Total Fixed Assets, net 45,232 -
--------------------- --------------------
Intangible asset
Software 200,037 -
Less accumulated amortization (161,792) -
--------------------- --------------------
Total Intangible Asset, net 38,245 -
--------------------- --------------------
Other assets 5,455 -
--------------------- --------------------
TOTAL ASSETS $ 88,932 $ 84
===================== ====================
Current Liabilities:
Accounts payable $ 730,201 $ 98,595
Loans payable 944,328 -
Due to affiliates 1,325,617 665,371
Accrued expenses and accrued interest 299,409 5,130
--------------------- --------------------
Total Current Liabilities 3,299,555 769,096
--------------------- --------------------
Commitments And Contingencies - -
Long Term Liabilities:
Notes payable 1,200,000 -
--------------------- --------------------
Total Long Term Liabilities 1,200,000 -
--------------------- --------------------
Total Liabilities 4,499,555 769,096
--------------------- --------------------
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 (1,370,073) (1,447,080)
Accumulated deficit (16,218,446) (12,499,828)
-------------------- ---------------------
Total Stockholders' Deficiency (4,410,623) (769,012)
--------------------- ---------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY $ 88,932 $ 84
===================== ====================
</TABLE>
See accompanying notes to these consolidated financial statements
[NUOGAM\10QA\:123196.QSB-A]-2
1
<PAGE>
<TABLE>
<CAPTION>
NUOASIS GAMING, INC.
Consolidated Statements of Operations
For the Three and Six Months Ended December 31, 1996 and 1995 (Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
----------------------------------------- ---------------------------------------
1996 1995 1996 1995
-------------------- -------------------- ------------------- -------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
-------------------- -------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Revenues:
Gaming $ - $ - $ - $ -
-------------------- -------------------- ------------------- -------------------
Totals - - - -
-------------------- -------------------- ------------------- -------------------
Costs and expenses:
General and administrative 211,444 373,539 400,511 664,386
Write down of goodwill 3,318 5,107 - 3,318,107 -
-------------------- -------------------- ---------------- -------------------
Totals 3,529,551 373,539 3,718,618 664,386
-------------------- -------------------- ------------------- ------------------
Net loss $ (3,529,551) $ (373,539) $ (3,718,618) $ (664,386)
==================== ==================== =================== ===================
Net loss applicable to
common stock $ (3,535,501) $ (379,489) $ (3,730,518) $ (676,286)
==================== ==================== =================== ===================
Net loss per common share $ (.12) $ (.01) $ (.12) $ (.03)
==================== ==================== =================== ===================
Weighted average common
shares outstanding 30,000,000 27,202,841 30,000,000 26,668,675
==================== ==================== =================== ==================
</TABLE>
See accompanying notes to these consolidated financial statements
[NUOGAM\10QA\:123196.QSB-A]-2
2
<PAGE>
<TABLE>
<CAPTION>
NUOASIS GAMING, INC.
Consolidated Statements of Cash Flows
For the Six Months Ended December 31, 1996 and 1995 (Unaudited)
Six Months Ended
December 31,
1996 1995
----------------------- -----------------------
(Unaudited) (Unaudited)
----------------------- -----------------------
<S> <C> <C>
Operating activities:
Net loss $ (3,718,618) $ (664,386)
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 - 360,001
Write off of goodwill 3,318,107 -
Increase (decrease) from changes in: -
Other assets - (11,220)
Accounts payable and accrued expenses (13,589) 170,231
Due to affiliate 292,757 68,820
----------------------- -----------------------
Net cash provided (used) in operating activities (121,343) (341)
----------------------- -----------------------
Financing activities:
Proceeds from stockholders' receivables 121,259 -
----------------------- -----------------------
Net cash provided (used) by financing activities 121,259 -
----------------------- -----------------------
Net increase (decrease) in cash and cash equivalents (84) (341)
Cash and cash equivalents, beginning of period 84 341
----------------------- -----------------------
Cash and cash equivalents, end of period $ - $ -
======================= =======================
Supplemental Disclosure of Cash Flow Information Cash paid during the year for:
Income taxes $ - $ -
Interest $ - $ -
Non-cash investing and financing activities:
Purchase of NPC (Note 2) for notes payable $ 1,200,000 $ -
Purchase of NPC (Note 2) for accrued liability $ 125,000 $ -
</TABLE>
See accompanying notes to these consolidated financial statements
[NUOGAM\10QA\:123196.QSB-A]-2
3
<PAGE>
NUOASIS GAMING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 (Unaudited)
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 quarter ended December 31, 1996, the Company had three 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, National Pools Corporation ("NPC") (Note 2), Ba-Mak Gaming
International, Inc. ("Ba-Mak"), formerly Phillips Gaming International, Inc.,
and, 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
December 31, 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 December 31, 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 and six months ended December 31, 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.
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.
[NUOGAM\10QA\:123196.QSB-A]-2
4
<PAGE>
NUOASIS GAMING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 (Unaudited)
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 and National Pools
Corporation (See Note 2). The Company has received financial support from Nona
Morelli's II, Inc. ("Nona"), the Registrant's controlling parent company, and
management estimates that Nona will need to contribute 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 December 31, 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 December 31, 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.
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 and six months ended December 31,
1996 and 1995.
Reclassification of Prior Year Amounts
To enhance comparability, the fiscal 1996 consolidated financial statements have
been reclassified, where appropriate, to conform with the financial statement
presentation used in fiscal 1997.
[NUOGAM\10QA\:123196.QSB-A]-2
5
<PAGE>
NUOASIS GAMING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 (Unaudited)
Note 2. Acquisition
On June 13, 1996, Nona entered into an Option Agreement ("Option") with Joseph
Monterosso ("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 95,000 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. The option shall expire 90 days after the next Annual Meeting of
Shareholders of the Registrant. Monterosso has subsequently conditionally
assigned his rights under the option as to 95,000 Series B Shares to certain
shareholders of NPC and other investors, leaving him with rights under the
option to purchase 155,000 Series B Shares.
On November 21, 1996, the Registrant's Board of Directors approved the
acquisition of NPC. On December 24, 1996 NuOasis executed and closed the Stock
Purchase Agreements with each of the shareholders of NPC pursuant to which it
agreed to issue a series of Secured Promissory Notes (the "Notes") in the
aggregate amount of $1,200,000 and 1,000,000 shares of its common stock to the
NPC shareholders in exchange for all of the issued and outstanding shares of
capital stock of NPC. The Notes are convertible into a total of 241,900,000
shares of NuOasis' common stock contingent upon NPC's operations achieving
certain financial goals over the next several fiscal years. The Notes are
non-recourse to NuOasis and secured by the assets of NPC, bear interest at 8%
per annum, and are due and payable on May 31, 1999. Under the terms of the
Notes, for every $250,000 of net annual operating income achieved by NPC, $7,500
in principal amount of the Notes may be converted into 1,511,875 shares of
restricted NuOasis common stock. As part of this acquisition, Nona and NuOasis
agreed to a debt assumption agreement whereby all NuOasis debt in excess of
$20,000 on December 24, 1996 will be assumed by Nona, except for amounts owed to
NuVen Advisors, Inc., an affiliate , and Fred G. Luke, Chairman and former
President, which are to be converted into shares of NuOasis common stock: the
conversion rate is based upon the prevailing market price on the date of the
next NuOasis Shareholder's Meeting.
NPC was formed in 1993 for the purpose of developing and operating a system to
facilitate participation in group play in state lotteries in the United States
and the lotteries of foreign countries. The program developed by NPC was named
"Hit-LottoTM". The Hit-LottoTM program uses debit cards, telecommunications,
Internet Website, and proprietary computer software to organize and market
lottery pools for lottery players who participate in various state lotteries.
Since inception NPC's operations have been devoted primarily to the formulation
and design of the telecommunication and computer technology to support the
Hit-LottoTM program. In August, 1994, Hit-LottoTM was tested in the San Diego
market: development is ongoing.
The audited financial statements of NPC as of December 31, 1995 and the year
then ended are incorporated by reference filed with the Registrant's Form 8-K/A
(SEC File No. 000-18224). Such audit reports explain that NPC's financial
statements have been prepared assuming that NPC will continue as a going concern
and that such statements do not include any adjustments that may result in the
event it is unable to do so. The audited financial statements of NPC also
reflect that it has incurred operating losses of $2,401,992 from its inception
and had negative working capital of $1,581,827, as of December 31, 1995.
Unaudited financial statements of NPC for the quarter ended December 31, 1996
and 1995 are included elsewhere herein in Part II, Item 6 as an exhibit.
Subject to the exercise of the Option and the sale by Nona of the Series B
Shares, NuOasis has agreed to fund NPC's future operations. Exercise of the
Option is contingent upon the approval of an amendment to the NuOasis
Certificate of Incorporation allowing for its authorized capital stock to be
increased to have sufficient shares of its common stock available for conversion
of the Notes. Upon such Amendment to the NuOasis Certificate of Incorporation,
and the acquisition of the Series B Shares, there will be a change of control of
NuOasis. If the NuOasis shareholders do not approve such Amendment to the
Certificate of Incorporation it is unlikely that the Series B Shares will be
acquired pursuant to the Option and, in this event, NPC may not have sufficient
working capital to "roll out" the Hit-LottoTM program on a commercial basis, and
there will not be a change of control of NuOasis. The Transaction is divided
into three phases and summarized as follows:
[NUOGAM\10QA\:123196.QSB-A]-2
6
<PAGE>
NUOASIS GAMING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 (Unaudited)
Phase I : Acquisition of NPC, which closed on December 24, 1996
On December 24, 1996 NuOasis executed and closed the Stock Purchase
Agreements with each of the shareholders of NPC pursuant to which it
issued a series of the Secured Promissory Notes in the aggregate amount
of $1,200,000 and a promise to issue 1,000,000 shares of common stock
of NuOasis to the NPC shareholders in exchange for all of the issued
and outstanding shares of capital stock of NPC.
Phase II: Exercise of 95,000 Series B Shares
Holders of the Option exercise the option to purchase 95,000 Series B
Shares, at $13.00 per share, by payment to Nona of $1,235,000. The
95,000 Series B Shares so acquired may then immediately be converted
into 7,410,000 shares of restricted NuOasis common stock at the
election of the holders.
Subject to the exercise of the Option as to the 95,000 Series B Shares,
NuOasis has agreed to sell its wholly-owned subsidiary, CMA, to Nona
for $1,235,000. Upon the sale of CMA, NuOasis intends to contribute
most if not all of the proceeds of the sale of CMA to NPC, its wholly
owned subsidiary, for working capital. Phase II is expected to occur
following the next NuOasis Shareholders' Meeting. As of the date of
this Report there has been no Shareholders' Meeting held.
Phase III: Exercise of 155,000 Series B Shares
Following the initial exercise of 95,000 Series B Shares, if such
exercise occurs, there will be remaining 155,000 Series B Shares
available under the Option. If exercised, the 155,000 Series B Shares
could immediately be converted into 12,090,000 common shares. The
exercise and sale of such remaining Series B Shares will result in an
additional $2,015,000 in proceeds to Nona which Nona intends to utilize
to satisfy any intercompany payables owed to NuOasis of up to
$1,765,000 as of the date Phase III occurs. No amounts are expected to
be owed by Nona to NuOasis assuming Phase II occurs, therefore, the
entire $1,765,000 is expected to be a payment from Nona to NuOasis for
a release of liability, if any, for events while it controlled NuOasis.
Phase III is expected to occur following Phase II and the next NuOasis
Shareholders' Meeting. As of the date of this Report there has been no
Shareholders' Meeting held.
Basis of Presentation
As of December 31, 1996, Phase I has occurred and accordingly Phase I has been
reflected in the accompanying unaudited condensed consolidated financial
statements. The Phase II and III portions of the acquisition will be reflected
and recorded at such time when the events included in Phase II and III have
occurred; these events are expected to occur only subsequent to the next NuOasis
Shareholders' Meeting. As of the date of this Report there has been no
Shareholders' Meeting held. The acquisition has been recorded as a purchase with
NuOasis Gaming as the accounting acquiror. Since conversion of the Notes is
based upon future earnings of NPC, which is in itself based upon the success of
the Hit-Lottotm program, a developmental business, the probability of the
conversion is undeterminable and uncertain. Although control of NuOasis Gaming
may be transferred to the NPC shareholders upon conversion of the Notes, due to
this uncertainty, the acquisition of NPC has been accounted for as a purchase
with NuOasis Gaming deemed the accounting acquiror.
[NUOGAM\10QA\:123196.QSB-A]-2
7
<PAGE>
Supplemental Pro Forma Information
The following unaudited pro forma combined results of operations for the three
months ended December 31, 1996 and 1995 have been prepared assuming that the
acquisition of NPC occurred at the beginning of each such period. In preparing
the pro forma data, adjustments have been made for the interest expense related
to the borrowings under the Notes to finance a portion of the purchase price and
the write off of goodwill. The following unaudited pro forma financial
information is not necessarily indicative of results of operations that would
have occurred had the transaction been put into effect at the beginning of each
of the periods or of future results of the combined companies.
8
<PAGE>
NUOASIS GAMING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 (Unaudited)
Three Months Ended
December 31,
Proforma Information 1996 1995
----------------------------------- ------------- -------------
Net revenues $ - $ -
Loss before extraordinary item $ (3,273,783) $ (3,812,237)
Net loss $ (3,273,783) $ (3,427,377)
Per share data:
Loss before extraordinary item $ (.11) $ (.14)
Net loss $ (.11) $ (.12)
Weighted average common shares 30,000,000 27,202,841
Note 3. 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, or alternatively, the receivable will be sold back to Nona under Phase
II (Note 2).
Note 4. 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. Fred G. Luke remains as
Chairman.
[NUOGAM\10QA\:123196.QSB-A]-2
9
<PAGE>
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 $0 and $84 as of December 31, 1996 and June 30,
1996, respectively, and negative working capital of $3,299,555 and $769,012 as
of December 31, 1996 and June 30, 1996, respectively. The increase in working
capital deficiency is a direct result of the acquisition of NPC, discussed
below, whereby the Registrant assumed current liabilities in the approximate
amount of $2.1 million as part of acquiring NPC. 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 December 31,
1996 to finance future operations. The Registrant has received financial support
from Nona, 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 consummating the remaining phases of the NPC acquisition
(see Note 2 of the footnotes to accompanying unaudited financial statements
included elsewhere herein at Item 1). In the interim, the Registrant's existence
is dependent upon continuing financial support from Nona and NPC for the
remaining of fiscal year 1997. Such conditions raise substantial doubt about the
Registrant's ability to continue as a going concern.
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.
Acquisition
On December 24, 1996, Phase I of the NPC acquisition occurred (see Note 2 of the
footnotes to accompanying unaudited financial statements included elsewhere
herein at Item 1).
Results of Operations
Comparison of the Three Months Ended December 31, 1996 to the Three Months Ended
December 31, 1995
There were no gaming or other revenue producing operations during the three
months ended December 31, 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 December 31, 1996 and 1995.
Total General and Administrative expenses decreased by $162,095 or 43% during
the quarter ended December 31, 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.
Additionally, the acquisition of NPC had no significant effect on General or
Administrative expenses since Phase I of the acquisition occurred late in the
second quarter on December 24, 1996.
As a result of the NPC acquisition, the excess of the purchase price over the
fair market value of the net assets acquired was approximately $3,318,107 and
was assumed to be allocated to goodwill. Due to the Registrant's and NPC's
historical negative cash flows from operations and working capital deficit, the
goodwill of $3,318,107 is immediately written off due to the uncertainty of
realizing any future benefit from this asset. There was no such write off during
the comparable period last year.
[NUOGAM\10QA\:123196.QSB-A]-2
10
<PAGE>
Comparison of the Six Months Ended December 31, 1996 to the Six Months Ended
December 31, 1995
There were no gaming or other revenue producing operations during the six months
ended December 31, 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 December 31, 1996 and 1995.
Total General and Administrative expenses decreased by $263,875 or 40% during
the quarter ended December 31, 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.
Additionally, the acquisition of NPC had no significant effect on General or
Administrative expenses since Phase I of the acquisition occurred late in the
second quarter on December 24, 1996.
As a result of the NPC acquisition, the excess of the purchase price over the
fair market value of the net assets acquired was approximately $3,318,107 and
was assumed to be allocated to goodwill. Due to the Registrant's and NPC's
historical negative cash flows from operations and working capital deficit, the
goodwill of $3,318,107 is immediately written off due to the uncertainty of
realizing any future benefit from this asset. There was no such write off during
the comparable period last year.
Cash used in operating activities increased to $121,343 for the six months ended
December 31, 1996 from $341 used in 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. Additionally, payments for professional services contributed to the
increase.
Cash provided by financing activities increased to $121,259 for the six months
ended December 31, 1996 from $0 for the comparable period last year which was
primarily attributable to proceeds received from stockholder's receivables. Of
the $121,259 proceeds received, approximately $80,000 was received from the
former President for repayment of a note receivable.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
The Registrant knows of no significant changes for the six months ended December
31, 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
Exhibit No. Description
----------- ------------------------------------------------
1 Financial Statements of National Pools Corporation
for the three and six months ended December 31, 1995
2 Financial Statements of National Pools Corporation as
of December 31, 1996 and for the three months and
year then ended.
27 Financial Data Schedule
[NUOGAM\10QA\:123196.QSB-A]-2
11
<PAGE>
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: Mach 28, 1997 By: /s/ Joseph Monterosso
-----------------------------
Joseph Monterosso,
President and Director
Dated: March 28, 1997 By: /s/ Fred G. Luke
-----------------------------
Fred G. Luke, Chairman
Dated: March 28, 1997 By: /s/ Steven H. Dong
-----------------------------
Steven H. Dong,
Chief Financial Officer
[NUOGAM\10QA\:123196.QSB-A]-2
12
<PAGE>
EXHIBIT 1
Financial Statements of National Pools Corporation
for the three and six months ended December 31, 1995
[NUOGAM\10QA\:123196.QSB-A]-2
13
<PAGE>
NATIONAL POOLS CORPORATION
(A Development Stage Corporation)
FINANCIAL STATEMENTS
Three and Six Months Ended December 31, 1995, And For
The Period Cumulative From Inception (February 23, 1993)
through December 31, 1995
[NUOGAM\10QA\:123196.QSB-A]-2
14
<PAGE>
<TABLE>
<CAPTION>
NATIONAL POOLS CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
Three and Six Months Ended December 31,
1995, and for the Period Cumulative from Inception
(February 23, 1993) through December 31, 1995
Three Months Six Months
Ended Ended Cumulative from
----------------------- ----------------------------- Inception through
December 31, 1995 December 31, 1995
----------------------- ----------------------------- ----------------------------
<S> <C> <C> <C>
Operating Expenses $ (104,903) $ (177,864) $ (1,019,263)
Research and Development (46,589) (85,593) (1,255,375)
----------------------- ----------------------------- ----------------------------
Net (Loss) from Operations (151,492) (263,457) (2,274,638)
----------------------- ----------------------------- ----------------------------
Other Income and (Expense):
Interest Expense:
Discounts on Convertible Debt (34,471) (55,153) (248,188)
Other Interest Expense (40,165) (80,489) (286,997)
----------------------- ----------------------------- ----------------------------
Total Interest Expense (74,636) (135,642) (535,185)
Interest Income 1,012
Loss on Disposal of Assets (9,721) (9,721) (57,585)
----------------------- ----------------------------- ----------------------------
Total Other Income and (Expense) (84,357) (145,363) (591,758)
----------------------- ----------------------------- ----------------------------
Net (Loss) Before Extraordinary Item (235,849) (408,820) (2,866,396)
Benefit from Extinguishment of Debt 384,860 384,860 464,404
----------------------- ----------------------------- ---------------------------
Net Income (Loss) 149,011 (23,960) (2,401,992)
Accumulated Deficit, Beginning (2,551,003) (2,378,032)
----------------------- -----------------------------
Accumulated Deficit, Ending $ (2,401,992) $ (2,401,992) $ (2,401,992)
======================= ============================= ============================
Per Common Share
Net (Loss) Before Extraordinary Item $ (.01) $ (.03)
Benefit from Extinguishment of Debt .02 .03
----------------------- ----------------------------
Net Income (Loss) Per Common Share $ .01 $ (.00)
======================= =============================
Weighted Average Common Shares
Outstanding 16,604,200 14,571,210
======================= =============================
</TABLE>
[NUOGAM\10QA\:123196.QSB-A]-2
15
<PAGE>
EXHIBIT 2
Financial Statements of National Pools Corporation
as of December 31, 1996 and for the three months
and the year then ended
[NUOGAM\10QA\:123196.QSB-A]-2
16
<PAGE>
<TABLE>
<CAPTION>
National Pools Corporation
Balance Sheet
As of December 31, 1996
(Unaudited)
December 31,
1996
(Unaudited)
--------------------------
<S> <C>
CURRENT ASSETS
Current Assets
Cash $ 1,342
Accounts Receivable 1,000
Employee Advances 33,550
--------------------------
Total Current Assets 35,892
Fixed Assets
Office Equipment 89,090
Accumulated Depreciation - Office Equipment (43,858)
---------------------------
Total Fixed Assets, net 45,232
Intangible Assets
Software 200,036
Accumulated Amortization (161,792)
Total Intangible Assets, net 38,244
Other Assets 5,456
TOTAL ASSETS $ 124,824
===========================
LIABILITIES
Current Liabilities
Accounts Payable $ 641,538
Loans Payable 121,398
Accrued Interest Payable ST 285,986
Payroll Payable 232,788
Payroll Taxes Payable 13,291
Working Capital Loan Payable 822,930
---------------------------
TOTAL LIABILITIES 2,117,931
STOCKHOLDERS' DEFICIENCY
Capital
Common Stock 991,764
Accumulated Deficiency (2,984,871)
TOTAL STOCKHOLDERS' DEFICIENCY (1,993,107)
---------------------------
TOTAL LIABILITIES AND EQUITY $ 124,824
===========================
</TABLE>
[NUOGAM\10QA\:123196.QSB-A]-2
17
<PAGE>
<TABLE>
<CAPTION>
National Pools Corporation
Income Statement
For the three months and year ended
December 31, 1996
(Unaudited)
Three Months Year
Ended Ended
------------------------------ ------------------------------
December 31, 1996
(Unaudited)
------------------------------ ------------------------------
<S> <C> <C>
Operating Expenses $ 103,569 $ 452,861
------------------------------ ------------------------------
Net loss from Operations (103,569) (452,861)
------------------------------ ------------------------------
Other Income and (Expense):
Interest Expense:
Discounts on Convertible Debt - -
Other Interest Expense (36,315) (130,018)
------------------------------ ------------------------------
Total Interest Expense (36,315) (130,018)
------------------------------ ------------------------------
Total Other Income and (Expense) (36,315) (130,018)
------------------------------ ------------------------------
Net loss $ (139,884) $ (582,879)
============================== ==============================
</TABLE>
[NUOGAM\10QA\:123196.QSB-A]-2
18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 89,090
<DEPRECIATION> (43,858)
<TOTAL-ASSETS> 88,932
<CURRENT-LIABILITIES> 3,299,555
<BONDS> 0
0
501,700
<COMMON> 300,000
<OTHER-SE> (5,212,323)
<TOTAL-LIABILITY-AND-EQUITY> 88,932
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,529,551
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,529,551)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,529,551)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,529,551)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> 0
</TABLE>
