<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
Group V Corporation (formerly NuOasis Gaming, Inc.)
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(Name of Small Business Issuer in Its Charter)
95-4176781
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(IRS Employer Identification Number)
Delaware
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(State or other jurisdiction of incorporation or organization)
7900
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(Primary Standard Industrial Classification Code Number)
550 15th Street, San Francisco, California 94103, (415) 575-0222
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(Address of Principal Executive Offices, including ZIP Code,
and Telephone Number)
Joseph Monterosso, 550 15th Street, San Francisco, California 94103
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(Name and address of agent for service)
(415) 575-0222
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(Telephone number, including area code, of agent for service)
Approximate Date of Proposed Sale to the Public: As soon as practicable after
the Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of earlier effective registration
statement for the same offering. [ ].
If this Form is a post-effective amendment filed pursuant to Rule 462 (c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
1
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<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
- -------------------------------- -------------- ------------- -------------- -------------------
Proposed Proposed
Title of Each Class of Amount of Maximum Maximum Amount of
Securities Shares Offering Aggregate Registration
to be Registered to be Price Offering Fee
Registered Per Share(1) Price(1)
- -------------------------------- -------------- ------------- -------------- -------------------
<S> <C> <C> <C> <C>
$.01 par value Common Stock
issuable upon exercise of
Class A Warrants 1,570,000 $.50 $785,000 $237.88
$.01 par value Common Stock
issuable upon exercise of
Class B Warrants 3,080,000 $.75 $2,310,000 $700.00
$.01 par value Common Stock
issuable upon exercise of
Class C Warrants 1,510,000 $1.00 $1,510,000 $457.58
$.01 par value Common Stock
issuable upon exercise of
Class D Warrants 12,000,000 $.50 $6,000,000 $1,818.18
$.01 par value Common Stock
17,174,992 $.15 $2,576,248 $780.68
TOTAL: 35,334,992 $13,181,248 $3,994.32
- -------------------------------- -------------- ------------- -------------- -------------------
</TABLE>
(1) This calculation is made solely for the purposes of determining the
registration fee pursuant to the provisions of Rule 457(h) under the
Securities Act and is calculated on the basis of either (a) the average of
the high and low prices per share of the Common Stock as of a date within
five business days prior to the filing of this Registration Statement or
(b) the price at which the warrants described herein may be exercised.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
2
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PART I INFORMATION REQUIRED IN PROSPECTUS
ITEM 1. FRONT OF REGISTRATION STATEMENT AND OUTSIDE FRONT COVER OF PROSPECTUS.
GROUP V CORPORATION
550 15th Street
San Francisco, California 94103
(415) 575-0222
35,334,992 SHARES OF COMMON STOCK
This prospectus relates to the offer and sale of up to 35,334,992 shares of $.01
par value common stock of Group V Corporation (formerly NuOasis Gaming, Inc.) a
Delaware corporation. Up to 18,160,000 shares are shares that may be issued upon
the exercise of certain warrants to purchase common stock held by certain
Selling Security Holders. Up to 17,174,992 shares are being offered by the
Selling Security Holders and are shares that were acquired by the Selling
Security Holders in an exempt transaction under the Securities Act of 1933. (See
Item 7 Selling Security-Holders) The risk factors section of the prospectus may
be found on page 5.
THE PURCHASE OF THESE SHARES INVOLVES A HIGH DEGREE OF RISK. PRIOR TO
PURCHASE, EACH PROSPECTIVE INVESTOR SHOULD CONSIDER VERY CAREFULLY THE
INFORMATION PRESENTED UNDER THE CAPTION RISK FACTORS AS WELL AS THE OTHER
INFORMATION SET FORTH HEREIN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
UNDERWRITING PROCEEDS TO ISSUER OR
PER UNIT TOTAL PRICE TO PUBLIC DISCOUNTS AND OTHER PERSONS
COMMISSIONS
Per Share Market Price -0- Market Price
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
The date of this prospectus is January 20, 1998.
3
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The estimated expenses of the offering, all of which are to be borne by the
Company, are:
Registration Fee - Securities and Exchange Commission $3,683
Stock Certificates - estimate for printing additional certificates* $2,000
Prospectus Printing* $2,500
State Blue Sky Registration Fees* $1,500
Accounting Fees and Disbursements* $5,000
Legal Fees* $25,000
-------
Total: $39,683
=======
*Estimates
ITEM 2. INSIDE FRONT AND OUTSIDE BACK COVER OF PROSPECTUS.
The Company is a reporting company under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The reports and other information filed by the
Company may be inspected and copied at the public reference facilities of the
Commission in Washington, DC and copies of such materials can be obtained from
the Public Reference Section of the Commission, Washington, DC 20549 at
prescribed rates.
The Company is subject to the informational requirements of the Exchange Act,
and in accordance therewith files reports, proxy or information statements and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy or information statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Avenue, N.W., Washington,
D.C. 20549, and at the following regional offices of the Commission: New York
Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048, and
Chicago Regional Office, CitiCorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials can be obtained from the
Public Reference Section of the Commission, Washington, D.C. 20549 at prescribed
rates. The Commission also maintains a site on the World Wide Web that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of such
site is http://www.sec.gov.
The Company will provide without charge to each person who receives a
prospectus, upon written or oral request of such person, a copy of any
information that was incorporated by reference in the prospectus (not including
exhibits to the information that is incorporated by reference unless the
exhibits are themselves specifically incorporated by reference) by writing or
calling the Company at 550 15th Street San Francisco, California 94103.
Telephone (415) 575-0222.
Until January 20, 1998 (25 calendar days after the later of the effective date
of the registration statement or the first date on which the security was bona
fide offered to the public) all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligations of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
4
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TABLE OF CONTENTS
PART I INFORMATION REQUIRED IN PROSPECTUS......................................3
ITEM 1. FRONT OF REGISTRATION STATEMENT AND OUTSIDE FRONT COVER
OF PROSPECTUS........................................................4
ITEM 2. INSIDE FRONT AND OUTSIDE BACK COVER OF PROSPECTUS....................4
ITEM 3. SUMMARY INFORMATION AND RISK FACTORS..................... ...........6
ITEM 4. USE OF PROCEEDS......................................................8
ITEM 5. DETERMINATION OF OFFERING PRICE......................................8
ITEM 6. DILUTION.............................................................8
ITEM 7. SELLING SECURITY HOLDERS.............................................8
Class A Warrants...........................................................9
Class B Warrants..........................................................11
Class C Warrants..........................................................13
Class D Warrants..........................................................14
Common Stock..............................................................14
ITEM 8. PLAN OF DISTRIBUTION................................................16
ITEM 9. LEGAL PROCEEDINGS...................................................17
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.......17
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....22
ITEM 12. DESCRIPTION OF SECURITIES..........................................24
ITEM 13. INTEREST OF NAMED EXPERTS AND COUNSEL..............................25
ITEM 14. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES.........................................25
ITEM 15. ORGANIZATION WITHIN LAST 5 YEARS...................................26
ITEM 16. DESCRIPTION OF BUSINESS............................................28
ITEM 17. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION..........35
ITEM 18. DESCRIPTION OF PROPERTY............................................41
ITEM 19. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................41
ITEM 20. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...........45
ITEM 21 EXECUTIVE COMPENSATION.............................................46
ITEM 22. FINANCIAL STATEMENTS...............................................50
ITEM 23. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE...........................................81
PART II INFORMATION NOT REQUIRED IN PROSPECTUS................................82
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS..........................82
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION........................82
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES............................83
ITEM 27. EXHIBITS...........................................................83
ITEM 28. UNDERTAKINGS.......................................................88
ITEM 3. SUMMARY INFORMATION AND RISK FACTORS.
The Selling Security Holders are offering for resale up to 35,334,992 shares of
common stock of the Company. The Company's only ongoing operations are the
development stage activities of its wholly owned subsidiary National Pools
Corporation ("NPC"). 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. (See Item 16 Description of Business and
Item 17 Management Discussion and Analysis or Plan of Operation).
5
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HISTORY OF LOSSES
The Company has experienced recurring net losses since inception and its former
operating subsidiary, Ba-Mak Gaming International, Inc. was liquidated during
fiscal 1995. Management's intent is to pursue the business plan of its
wholly-owned subsidiary National Pools Corporation ("NPC"). NPC is a development
stage company focused on developing and implementing a system to facilitate
participation in group play in state lotteries in the United States and the
lotteries of foreign countries. NPC has not yet earned any revenues from
operations.
LACK OF REVENUE FROM OPERATIONS
There are no revenue producing operations and the Company has recognized
substantial net losses since its inception through the date of this prospectus
and anticipates losses for the next fiscal year. At present, the Company intends
to focus its attention and resources on pursuing the business plan of its wholly
owned subsidiary, NPC. While the Company's historical financial information is
not indicative of the Company's future financial condition, there can be no
assurance that the Company's future plan of operation will generate revenues or
profits in the future. The Company's existence is dependent upon the success of
NPC's HitLoTTo(TM) product, which has not yet been sold as of the date of this
Registration Statement.
COMPETITION
Although there are no direct competitors to the Company's wholly owned
subsidiary, NPC, there can be no assurance that competition will not develop
from companies with greater capital resources than the Company. Further,
potential customers of NPC's services have existing alternative methods to
participate in the state lotteries of the United States and the lotteries of
foreign countries and for making long distance telephone calls.
GOVERNMENT REGULATION
The Company anticipates making significant expenditures to evaluate and
accommodate the various government regulations which will affect the Company's
plan of operations. The business plan of NPC indicates that the precise legal
and regulatory approvals required to implement NPC's plan of operation will
depend upon the law of the state or other jurisdiction involved. Therefore, at
the present stage of development, there can be no assurance that the Company
will be successful in its efforts to secure the appropriate legal and regulatory
approval.
CAPITAL REQUIREMENTS
On June 13, 1997, the Company received approximately $1,140,000 in cash from the
sale of its formerly wholly owned subsidiary Casino Management of America, Inc.
("CMA"). Although the Company anticipates that these funds will be sufficient to
meet the Company's capital requirement for the next twelve months, there can be
no assurance that Company will not require additional capital in the future.
6
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DEPENDENCE ON KEY PERSONNEL
The Company's future success depends to a large extent upon the continued
services of key employees. The loss of the services of any of the Company's key
employees could have a material adverse effect on the Company. The Company
believes that its future success depends on its ability to attract and retain
highly qualified, managerial, marketing and sales personnel. Competition for
such personnel is intense, and there can be no assurance that the Company will
be able to attract, assimilate or retain such personnel. If the Company is
unable to retain new personnel, the Company's business, financial condition and
results of operations may be materially adversely affected.
ABILITY TO ISSUE PREFERRED STOCK
The Board of Directors has the authority to issue up to 25,000,000 shares of
preferred stock and to fix the rights, preferences, privileges and restrictions,
including dividend, liquidation, conversion, voting, redemption or other rights
without any further vote or action by the stockholders, which rights could
adversely affect the voting power or other rights of the holders of common
stock. The rights of the holders of the common stock will be subject to, and may
be adversely affected by, the rights of the holders of such Preferred Stock and
any holders of Preferred Stock that may be issued in the future. The issuance of
Preferred Stock, while providing desired flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of the Company, thereby delaying, deferring or preventing a change in
control of the Company.
LIMITED UTILIZATION OF TAX LOSS CARRYFORWARDS
As of June 30, 1997, the Registrant had net operating loss carryforwards of
approximately $9,510,000 available for federal income tax purposes that expire
through 2010. If there would be a greater than 50% change in the ownership of
the Registrant's common stock, Internal Revenue Code Section 382 would place
certain restrictions on the amount of the net operating loss ("NOL") that could
be utilized in future years. Internal Revenue Code Section 382 limits the use of
NOL's to the extent of an amount equal to the fair market value of the
Registrant just prior to the 50% or greater change in ownership multiplied by
the Federal Long Term Discount Rate. A valuation allowance was recorded in the
financial statements to offset the tax benefit resulting from utilization of the
NOL carryforward due to the uncertainty surrounding the realization of such tax
asset.
LACK OF MARKET FOR SECURITIES
At present, there is a limited market for the Company's Common Stock. There is
no assurance that a regular trading market will develop for any of the Company's
Securities at the conclusion of this Offering or that if one does develop, such
market will be sustained. Therefore, purchasers may be unable to resell the
Securities offered herein at or near their original offering price or at any
price. Furthermore, it is unlikely that a lending institution will accept the
Company's Securities as pledged collateral for loans even if a regular trading
market develops.
7
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LACK OF DIVIDENDS
The Company has never paid any cash dividends on its capital stock. The Company
presently intends to retain future earnings for use in its business and does not
anticipate paying cash dividends in the foreseeable future.
OTHER RISK FACTORS
In addition to the above risks, businesses are often subject to risks not
foreseen or fully appreciated by management. In reviewing this prospectus
potential investors should keep in mind other possible risks that could be
important.
ITEM 4. USE OF PROCEEDS.
If all or any part of the Warrants are exercised, the proceeds received by the
Company for the shares of the Company's common stock underlying the Warrants
will become immediately available for general corporate purposes in furtherance
of the Company's plan of operation. (See Management's Discussion and Analysis or
Plan of Operation). However, no funds will be immediately available to the
Company and related offering expenses are estimated to be approximately $39,683.
ITEM 5. DETERMINATION OF OFFERING PRICE.
As of January 20, 1998, the common stock of the Company had a bid and an asked
price of $.13 and $.14, respectively. The Selling Security Holders have
indicated that they may offer their shares for sale at any time or from time to
time. As such, the market price for the Company's common stock will determine
the offering price received by the Selling Security Holders.
The price the Company will receive for the common stock issued upon the exercise
of the Warrants is fixed by the terms of the respective Warrants (See Item 7 and
Item 12). Investors should note that the proceeds received by the Company may be
less than the market price of the Company's common stock at the time the
Warrants are exercised. For the life of the Warrants, the holders are given an
opportunity to profit from a rise in the market price for the Company's common
stock, if any, without the risk of ownership.
ITEM 6. DILUTION.
There are 18,160,000 shares that may be acquired upon the exercise of certain
warrants to purchase common stock held by certain selling security holders; and;
there are 11,700,000 shares that may be issued upon conversion of the Company's
Series B convertible preferred stock.
ITEM 7. SELLING SECURITY HOLDERS.
There are 35,334,992 shares that are being registered for resale under this
registration statement. 17,174,992 of the shares being registered are either
issued and outstanding or issuable upon conversion of the Company's Series B
Convertible Preferred Stock, while up to 18,160,000 are shares may be issued
upon the exercise of certain warrants to purchase common stock held by certain
selling security holders.
8
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The outstanding warrants consist of the following. There are 1,570,000 New Class
A Redeemable Common Stock Purchase Warrants (the "Class A Warrants")
outstanding. The Class A Warrant grants the holder the right to acquire one
share of the Company's common stock at a price of $.50 per share. There are
3,080,000 New Class B Redeemable Common Stock Purchase Warrants (the "Class B
Warrants") outstanding. The Class B Warrant grants the holder the right to
acquire one share of the Company's common stock at a price of $.75 per share.
There are 1,510,000 New Class C Redeemable Common Stock Purchase Warrants (the
"Class C Warrants") outstanding. The Class C Warrant grants the holder the right
to acquire one share of the Company's common stock at a price of $1.00 per
share. There are 12,000,000 New Class D Redeemable Common Stock Purchase
Warrants (the "Class D Warrants") outstanding. The Class D Warrant grants the
holder the right to acquire one share of the Company's common stock at a price
of $.50 per share.
The following tables set forth information about the securities being offered
and includes the name of each selling security holder, the position, office, or
other material relationship which the selling security holder has had within the
past three years with the Company or any of its predecessors or affiliate, if
any, and the amount of each class of securities owned by such selling security
holder before the offering, the amount to be offered for the security holder's
account, the amount and (if one percent or more) the percentage of the class to
be owned by such security holder after the offering is complete.
Class A Warrants
name of each selling the position, the the the
security holder office, or amount of amount to amount
other each be and (if
material class of offered one
relationship securities for the percent
which the owned by security or more)
selling such holder's the
security selling account percentage
holder has security of the
had within holder class to
the past before be owned
three years the by such
with the offering security
Company or holder
any of its after the
predecessors offering
or is
affiliates, complete
if any
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Andrea Valentine 20,000 20,000
Austin Church III & Janey Church JTWROS 20,000 20,000
Charles J. Zanetti 10,000 10,000
Charles L. Cox 10,000 10,000
9
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Cowen & Co. 40,000 40,000
Dana D. Coulson 20,000 20,000
Deepak Chopra 20,000 20,000
Douglas A. Miller & Carolyn F. Miller Jt Ten 20,000 20,000
George K. Kickliter 40,000 40,000
George R. & Bonnie L. Trautvetter JTWROS 10,000 10,000
Gustavo Farias 120,000 120,000
Irwin Gruverman 40,000 40,000
Jack Drummond 20,000 20,000
John N. Boyle & Cynthia M. Boyle JTWROS 70,000 70,000
John P. Rogers 10,000 10,000
Lawrence D. & Lynn M. Huntsman Jt Ten 40,000 40,000
Lawrence Garloch & Reva Garloch JTWROS 20,000 20,000
Leslie Flood 200,000 200,000
Lindsey Capital Inc. 80,000 80,000
M&S Associates 20,000 20,000
Mary J. Rueter 20,000 20,000
Maurice W. Mandel 10,000 10,000
Michael Stanton 60,000 60,000
Morton H. Seelenfeund 40,000 40,000
Nathan A. Low 100,000 100,000
Peter Biberstein 100,000 100,000
Ramon J. Barany & Nancy Barany JTWROS 40,000 40,000
Richard D. Mandel 10,000 10,000
Robert K. Fuchs 40,000 40,000
Ronald M. Urvater 40,000 40,000
Ruth I. Low 40,000 40,000
Ted R. Melcher, Jr. 40,000 40,000
TH Partnership 100,000 100,000
Uri D. Landsman 40,000 40,000
Vincent Beatty 10,000 10,000
Wilbur & C. Gloria Boyer Trustee 20,000 20,000
William Barany & Ruth Barany JTWROS 10,000 10,000
William J. Archer 20,000 20,000
10
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Class B Warrants
name of each selling the position, the the the
security holder office, or amount of amount to amount
other each be and (if
material class of offered one
relationship securities for the percent
which the owned by security or more)
selling such holder's the
security selling account percentage
holder has security of the
had within holder class to
the past before be owned
three years the by such
with the offering security
Company or holder
any of its after the
predecessors offering
or is
affiliates, complete
if any,
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Allen H. Evert 7,000 7,000
Andrea Valentine 20,000 20,000
Austin Church III & Janey Church JTWROS 40,000 40,000
Baron Associates 7,000 7,000
Charles J. Zanetti 10,000 10,000
Charles L. Cox 10,000 10,000
Cowen & Co. 40,000 40,000
Dana D. Coulson 20,000 20,000
Deepak Chopra 40,000 40,000
Douglas A. Miller & Carolyn F. Miller Jt Ten 20,000 20,000
Gary L. Garrigan 20,000 20,000
George K. Kickliter 40,000 40,000
George Markelson 300,000 300,000
George R. & Bonnie L. Trautvetter JTWROS 10,000 10,000
Gerald R. Miller 14,000 14,000
Gustavo Farias 120,000 120,000
Irwin Gruverman 40,000 40,000
Jack Drummond 20,000 20,000
James W. King & Fran G. King JTWROS 80,000 80,000
Jim Kalhorn, Trustee Isfahan Holding Ltd. 40,000 40,000
John N. Boyle & Cynthia M. Boyle JTWROS 70,000 70,000
John P. Rogers 10,000 10,000
Khaled A Al-Araj 160,000 160,000
Lawrence D. & Lynn M. Huntsman Jt Ten 80,000 80,000
Lawrence Garloch & Reva Garloch JTWROS 20,000 20,000
Leslie Flood 260,000 260,000
Liberty Marketing 60,000 60,000
Lindsey Capital Inc. 80,000 80,000
M&S Associates 20,000 20,000
Mary J. Rueter 20,000 20,000
Maurice W. Mandel 10,000 10,000
11
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Michael D. Krebs 80,000 80,000
Michael Stanton 60,000 60,000
Morton H. Seelenfeund 40,000 40,000
Muhbub Rahman & Donna L. Rahman JTWROS 40,000 40,000
Nancy P. Levin 40,000 40,000
Nathan A. Low 100,000 100,000
Peter Biberstein 100,000 100,000
Ramon J. Barany & Nancy Barany JTWROS 40,000 40,000
Reuben D. Peters 200,000 200,000
Richard D. Mandel 10,000 10,000
Robert K. Fuchs 40,000 40,000
Robert S. Loh 7,000 7,000
Robert T. Cross 14,000 14,000
Ronald M. Urvater 40,000 40,000
Ruben Kitay 40,000 40,000
Ruth I. Low 40,000 40,000
Scott W. Smith 20,000 20,000
Steven E. Sowieja 80,000 80,000
Stuart I. Miller 7,000 7,000
Ted R. Melcher, Jr. 40,000 40,000
TH Partnership 100,000 100,000
Thomas E. Creel 20,000 20,000
Uri D. Landsman 40,000 40,000
Vincent Beatty 10,000 10,000
Wally Guager 14,000 14,000
Walter Gauger & Linda Gauger JTWROS 20,000 20,000
Wilbur & C. Gloria Boyer Trustee 20,000 20,000
William Barany & Ruth Barany JTWROS 10,000 10,000
William J. Archer 20,000 20,000
William Lloyd 20,000 20,000
12
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Class C Warrants
name of each selling the position, the the the
security holder office, or amount of amount to amount
other each be and (if
material class of offered one
relationship securities for the percent
which the owned by security or more)
selling such holder's the
security selling account percentage
holder has security of the
had within holder class to
the past before be owned
three years the by such
with the offering security
Company or holder
any of its after the
predecessors offering
or is
affiliates, complete
if any,
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Aliza Alden 13,333 13,333
Allen H. Evert 7,000 7,000
Austin Church III & Janey Church JTWROS 20,000 20,000
Baron Associates 7,000 7,000
C&R Resources, Inc. 13,334 13,334
Deepak Chopra 20,000 20,000
Frederick Barak 13,333 13,333
Gary L. Garrigan 20,000 20,000
George Markelson 300,000 300,000
Gerald R. Miller 14,000 14,000
Irwin Gruverman 40,000 40,000
James W. King & Fran G. King JTWROS 80,000 80,000
Jim Kalhorn, Trustee Isfahan Holding Ltd. 40,000 40,000
Khaled A Al-Araj 160,000 160,000
Lawrence D. & Lynn M. Huntsman Jt Ten 40,000 40,000
Leslie Flood 60,000 60,000
Liberty Marketing 60,000 60,000
Mel Baron 7,000 7,000
Michael D. Krebs 80,000 80,000
Muhbub Rahman & Donna L. Rahman JTWROS 40,000 40,000
Nancy P. Levin 40,000 40,000
Reuben D. Peters 200,000 200,000
Robert S. Loh 7,000 7,000
Robert T. Cross 7,000 7,000
Scott W. Smith 20,000 20,000
Steven E. Sowieja 80,000 80,000
Stuart I. Miller 7,000 7,000
Thomas E. Creel 20,000 20,000
Vincent Beatty 80,000 80,000
Wally Guager 14,000 14,000
Walter & Linda Gauger JTWROS 20,000 20,000
William Lloyd 20,000 20,000
13
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Class D Warrants
name of each selling the position, the the the
security holder office, or amount of amount to amount
other each be and (if
material class of offered one
relationship securities for the percent
which the owned by security or more)
selling such holder's the
security selling account percentage
holder has security of the
had within holder class to
the past before be owned
three years the by such
with the offering security
Company or holder
any of its after the
predecessors offering
or is
affiliates, complete
if any,
- -------------------------------------------------------------------------------
Joseph Monterosso Director & 12,000,000 12,000,000 12,000,000
President 100%
Common Stock
name of each selling the position, the the the
security holder office, or amount of amount to amount
other each be and (if
material class of offered one
relationship securities for the percent
which the owned by security or more)
selling such holder's the
security selling account percentage
holder has security of the
had within holder class to
the past before be owned
three years the by such
with the offering security
Company or holder
any of its after the
predecessors offering
or is
affiliates, complete
if any,
- -------------------------------------------------------------------------------
Barbara Monterosso 28,394 28,394 -
Bernard Accristo 24,003 24,003 -
Bert Boekmann 760,500 760,500 -
Bill Burgers 5,148 5,148 -
Brad Hunt 382,200 382,200 -
Brian & Colleen Heslip 7,893 7,893 -
Carol Jackson 8,243 8,243 -
Conrad Dell'Oca Trust 992,480 1,155,037 -
14
<PAGE>
Dan Monterosso 1,746,628 2,149,450 -
Daniel F. Sweet 179 179 -
David Hinckley 5,148 5,148 -
David Kamachi 50,856 50,856 -
Domenik Migliorato 6,053 6,053 -
Douglas Coats 19,826 19,826 -
Dr. Brian Heslip 50,934 50,934 -
Dr. Mark Heslip 19,812 19,812 -
Drake Heslip 711 711 -
Edward Jasinski 126,906 126,906 -
Gary Collins 22,438 22,438 -
Gene Blount 5,978 5,978 -
Gennaro & Gena Bonfiglio 258,726 258,726 -
George & Henrietta Rees 7,392 7,392 -
George Kern 16,325 16,325 -
Gerald Hill 38,916 38,916 -
Henry Jones 2,498 2,498 -
Heslip Trust 58,036 58,036 -
James Cerretani 281,371 281,371 -
James Tuchi 25,428 25,428 -
Janice Winkler 16,790 16,790 -
Jeff Waller 139,428 139,428 -
Jim Messner 515,424 515,424 -
John Collins 11,098 11,098 -
John Valencia 7,878 7,878 -
Joseph Andre 284,232 284,232 -
Joseph Monterosso President & Director 2,487,566 2,508,131 -
Kenneth Steiner 772,512 772,512 -
Leland & Kathrine Rees 174,495 174,495 -
Mario Desenna 16,008 16,008 -
Mark Heslip 1,435 1,435 -
Mary Bernstein 14,921 14,921 -
Mary Milnee McCann 22,952 22,952 -
Mason Latch 17,862 17,862 -
Matt Kern 16,325 16,325 -
Michael Collins 10,951 10,951 -
Michael Walsh 18,412 18,412 -
Nick Sanford 128,544 128,544 -
Nicole Heslip 718 718 -
Norma McLean 25,013 31,510 -
Pat Kuleto 253,890 253,890 -
Philip Guzzo 7,878 7,878 -
Pickett Communications 239,654 239,654 -
Raymond Benetti, Jr. 8,177 8,177 -
Robert P. Jasinski 25,428 25,428 -
Robert Rapp Trust 22,985 22,985 -
Ronald McGee 139,686 176,987 -
Roy Larson 19,812 19,812 -
Russell & Marcy McCann 1,860,428 2,369,744 -
Ryan McCann 7,472 7,472 -
SoftBox 318,468 318,468 -
15
<PAGE>
Steven Jensen 19,695 19,695 -
Theo Suter 632,223 744,121 -
Thomas Saberi 515,034 515,034 -
Tony Gibbs 2,092 2,092 -
Victor Lombardi 514,098 514,098 -
Vincent Puccio 253,890 253,890 -
Wally Gauger 382,200 382,200 -
William Burgers 14,252 14,252 -
William Liggett 12,540 12,540 -
Winona Bjorklund 33,746 33,746 -
ITEM 8. PLAN OF DISTRIBUTION.
The Company has been advised by the Selling Security Holders that they may offer
the Shares for sale at any time or from time to time. Such sales may be made in
the over-the-counter market, or in privately negotiated transactions. Sales of
shares in the over-the-counter market may be by means of one or more of the
following: (a) a block trade in which a broker or dealer will attempt to sell
the Shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a dealer as principal
and resale by such dealer for its account pursuant to this prospectus; and (c)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers. In effecting sales, brokers or dealers engaged by the Selling
Security Holders may arrange for other brokers or dealers to participate.
The Selling Security Holders have advised the Company that they have made no
agreement or arrangements with any underwriters, brokers or dealers regarding
the resale of the shares prior to the date of this Prospectus. Shares may be
sold from time to time to purchasers directly by any of the Selling Security
Holders. Alternatively, subject to the overriding requirements of Rule 144, if
applicable, the Selling Security Holders may from time to time offer the shares
through underwriters, dealers or agents, who may receive compensation in the
form of discounts and commissions. Such compensation, which may be in excess of
ordinary brokerage commissions, may be paid by the Selling Security Holders
and/or the purchasers of the shares for whom such underwriters, dealers or
agents may act. The Selling Security Holders and any dealers or agents that
participate in the distribution of the shares may be deemed to be "underwriters"
as defined in the 1933 Act and any profit on the sale of the shares by them and
any discounts, commissions or concessions received by any such dealers or agents
might be deemed to be underwriting discounts and commissions under the 1933 Act.
Shares may be sold from time to time in one or more transactions at a fixed
offering price, which may be changed, or at varying prices determined at the
time of sale or at negotiated prices. The Company will pay all of the expenses
incident to the offering and sale of the shares to the public other than
commissions and discounts of underwriters, dealers or agents, if any.
If the Company is notified by the Selling Security Holders that any material
arrangement has been entered into with an underwriter for the sale of shares a
supplemental prospectus will be filed, if required, disclosing such of the
following information as the Company believes appropriate; (i) the name of the
participating underwriter; (ii) the number of shares involved; (iii) the price
at which such shares are sold; (iv) the commissions paid or discounts or
concessions allowed to such underwriter; and (v) other facts material to the
transaction.
16
<PAGE>
In connection with this offering the Company and the Selling Security Holders
have agreed to indemnify each other against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended.
ITEM 9. LEGAL PROCEEDINGS.
The Company's legal proceedings during fiscal year 1997 were associated with
Nona Morelli's II, Inc. ("Nona") and CMA and therefore do not involve the
Company since CMA was sold to Nona in June 1997 and Nona is no longer a
controlling parent.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
(a) IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Registrant, pursuant to its bylaws, maintains a Board of Directors of
between one and twenty five directors and officers, composed of President,
Secretary and Chief Financial Officer. Any two or more officer positions may be
held by the same person. The directors and officers during fiscal year 1997 are
as follows:
- -------------------------------------------------------------------------------
Position Held
Name with the Registrant Age Dates of Service
- -------------------------------------------------------------------------------
Joseph Monterosso Director and President 49 November 25, 1996 to Present
Chairman of the Board August 8, 1997 to Present
Dennis Houston Director 53 August 8, 1997 to Present
Chief Operating Officer July 1, 1997 to Present
(NPC)
Leland Rees Director 47 May 5, 1997 to Present
Steven H. Dong Chief Financial Officer 31 July 16, 1995 to December
18, 1997
Paula Amanda Director 46 May 5, 1997 to June 30, 1997
Fred G. Luke Chairman of the Board 51 March 30, 1994 to August 8,
1997
President; March 30, 1994 to November
25, 1996
Chief Financial Officer March 30, 1994 to October
24, 1994
Royce Warren Director 56 May 5, 1997 to August 8,
1997
John D. Desbrow Secretary 42 March 30, 1994 to July 20,
1994 and November 8, 1994
to May 9, 1997
Director March 30, 1994 to July 20,
1994
17
<PAGE>
All directors of the Registrant hold office until the next annual meeting of
stockholders and until their successors have been elected and qualified.
Vacancies in the Board of Directors are filled by the remaining members of the
Board until the next annual meeting of stockholders. The same current Directors
stand for election at the Registrant's next annual meeting. The officers of the
Registrant are elected by the Board of Directors at its first meeting after each
annual meeting of the Registrant's stockholders and serve at the discretion of
the Board of Directors or until their earlier resignation or death.
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.
(b) BUSINESS EXPERIENCE
The following is a brief account of the business experience for at least the
past five years of each director, director nominee and executive officer of the
Registrant, including principal occupations and employment during that period,
and the name and principal business of any corporation or other organization in
which such occupation and employment were carried on.
All of the directors are elected at the annual meeting of shareholders to serve
for one year or until their successors are elected and have qualified. Officers
serve at the discretion of the Board of Directors.
New Directors and Officers
JOSEPH MONTEROSSO: 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. Prior to NPC, 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. Department of
Transportation 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.
18
<PAGE>
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.
DENNIS D. HOUSTON: Mr. Houston has served as Chief Operating Officer of NPC
since July 1, 1997, and as a Director of the Registrant since August 8, 1997. In
1996, Mr. Houston joined the Chesapeake and Potomac Telephone Co. (a former Bell
Operating Company) as a telecommunications consultant. He progressed through
various executive management positions in several of the (former) Bell Operating
Companies before moving to AT&T headquarters in New York City. His tenure with
the Bell System provided him with responsibilities and experience in commercial
operations, business office operations, network design, pricing, profitability,
public relations, personnel, Capitol Hill liaison, finance, sales and marketing.
With the advent of divestiture, Mr. Houston formed his own company initially
specializing in acquisitions and importing and exporting of telecommunication
equipment. Subsequently he formed several companies, including an organization
to franchise long distance companies, as well as the acquisition of financially
distressed telecommunications companies. In 1989, he led a group to acquire the
controlling interests in Uni-Net, Inc., a telecommunications holding company,
and subsequently merged its long distance telephone interests with Discount
Communications Services to help form the Universal Network Services
organization.
19
<PAGE>
LELAND E. REES: 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.
Former Directors and Officers
STEVEN H. DONG: Mr. Dong served as Chief Financial Officer of the Registrant,
from July 16, 1995 through December 18, 1997. Mr. Dong, a Certified Public
Accountant, previously worked with the international accounting firm of Coopers
& Lybrand LLP since 1988. As a Business Assurance Manager with Coopers & Lybrand
LLP, Mr. Dong's experience consisted of providing financial accounting and
consulting services to privately and publicly held companies. Additionally, Mr.
Dong served as Chief Financial Officer of Nona Morelli's II, Inc. from July 16,
1995 through June 30, 1997 and of Hart Industries, Inc. and The Toen Group, Inc.
from April 24, 1996 through June 30, 1997. 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.
PAULA AMANDA: Ms. Amanda 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.
20
<PAGE>
FRED G. LUKE: Mr. Luke has been Chairman of the Board and President of the
Registrant since March 30, 1994 through August 8, 1997, and November 25, 1996,
respectively. Mr. Luke has over twenty-six (26) years of experience in domestic
and international financing and the management of privately 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 former position with the Registrant, Mr. Luke
currently serves as Chairman and Chief Executive Officer of the Registrant's
former parent company, Nona, as well as Chairman and President of NuVen
Advisors, Inc., ("NuVen Advisors"), President and Director of The Toen Group,
Inc. ("Toen"), President of Hart Industries, Inc. ("Hart"), and Chairman and
President of Diversified Land & Exploration Co. ("DL&E"). Both Hart, DL&E and
Toen are public companies which were formerly traded on NASDAQ or the OTC
Bulletin Board. None have ongoing operations. NuVen Advisors provides
managerial, acquisition and administrative services to public and private
companies including Nona, Hart, Toen and formerly the Registrant. Mr. Luke
received a Bachelor of Arts Degree in Mathematics from California State
University, San Jose in 1969.
JOHN D. DESBROW: Mr. Desbrow served as Secretary of the Registrant from March
30, 1994 to July 20, 1994 and from November 8, 1994 to May 9, 1997. He was also
a director of the Registrant from March 30, 1994 to July 20, 1994. Additionally,
Mr. Desbrow was Secretary of Nona from December 20, 1993 to May 9, 1997. 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 also served as a Director and
Secretary of Hart Industries, Inc. and as a director of The Toen Group Inc.
through May 9, 1997.
ROYCE WARREN: Mr. Royce 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.
21
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of December 15, 1997, the stock ownership of
each person known by the Registrant to be the beneficial owner of five percent
or more of the Registrant's voting securities and each officer, director,
director nominees, and all officer's and directors as a group. Unless otherwise
indicated, each person has beneficial voting and investment power with respect
to the shares owned.
NAME AND ADDRESSES OF SHARES OF COMMON STOCK
BENEFICIAL OWNERS BENEFICIALLY OWNED
- --------------------- ----------------------
NUMBER PERCENTAGE
------ -----------
Nona Morelli's II, Inc.(1) 7,800,000 (2) 16%
Structure America, Inc. 2,000,000 5%
550 N. Jefferson
Loveland, CO 80537
NuVen Advisors, Inc.(1)(5) 2,000,000 8%(5)
Universal Network Services, Inc.(6) 1,712,802 14%(6)
Suite 200
Two Corporate Plaza Drive
Newport Beach CA 92660
Fred G. Luke(1)(5) 1,131,176 8%(5)
Steven H. Dong 3%
Two Corporate Plaza Dr., # 200 1,312,500(4)
Newport Beach CA 92660
Joseph Monterosso 21,211,644(3) 35%
550 15th Street
San Francisco, CA 94103
John D. Desbrow(1) 123,750
1406 Estelle Lane
Newport Beach Ca 92660
Dennis D. Houston(6) 5,250,000(4) 17%(6)
Two Corporate Plaza Dr., #200
Newport Beach CA 92660
All directors and executive 29,736,946 43%
officers as a group
- -------------------------------------
22
<PAGE>
(1) The address is 4695 MacArthur Court, Ste. #530, Newport Beach CA 92660.
(2) 7,800,000 common shares are subject to a Put/Option Agreement with Mr.
Monterosso.
(3) 21,211,644 common shares assumes full conversion of 18,098 shares of Series
B Preferred shares (common stock equivalent of 1,411,644 common shares) and
full conversion of 6,000,000 New Class D Warrants (common stock equivalent
of 12,000,000 common shares) and complete exercise of an option to purchase
7,800,000 shares of common stock held by Mr. Monterosso.
(4) With respect to Mr. Dong and Mr. Houston, 800,000 and 5,250,000 shares,
respectively are subject to options granted and unexercised.
(5) 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. The 8% percentage shares of Common Stock
beneficially owned includes both 2,000,000 and 1,131,176 shares held by
NuVen and Fred G. Luke, respectively.
(6) Dennis Houston is the President and majority shareholder of Universal
Network Services, Inc. and as a result may be deemed the control person of
Universal Network Services, Inc. The 14% percentage shares of common stock
beneficially owned includes both 21,959 Series B Preferred Shares (common
stock equivalent of 1.712,802 common shares) and 5,250,000 common shares
beneficially held by Universal Network Services, Inc. and Dennis Houston,
respectively.
The following table sets forth, as of December 15, 1997, the 14% Preferred Stock
ownership of all holders of more than five percent of the 14% Preferred Stock of
the Registrant. No officers or directors own any shares of the 14% Preferred
Stock.
NAME AND ADDRESS OF 14% PREFERRED STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED
------------------- --------------------
NUMBER PERCENTAGE
-------------- ----------------
Raymond C. Kitely
20079 Glen Arbor Court
Saratoga, CA 95070 30,000 17.6%
Eli Moshe
110 S. Sweetzer,
No. 301
Los Angeles, CA 90048 10,000 5.9%
23
<PAGE>
Walter K. Theis, M.D.
1200 Corsica Drive
Pacific Palisades, CA 90272 20,000 11.8%
David Seror,
Chapter 7 Trustee for the
Estate of David A. Paletz
221 N. Figueroa St., Room 800
Los Angeles, CA 90012 77,500 45.6%
Neil Miller
2790 Forrester Drive
Los Angeles, CA 90064 15,000 8.8%
David Sheetrit
c/o Moshe Shram
929 East Fourteenth Street
Los Angeles, CA 90021 10,000 5.9%
------------------------------- -------------- ----------------
ITEM 12. DESCRIPTION OF SECURITIES.
This registration statement covers up to 35,334,992 shares of the Company's $.01
par value common stock. The Company is authorized to issue up to 333,000,000
shares of common stock. 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. The Certificate of
Incorporation does not provide for cumulative voting at the election of
directors or preemptive rights.
In the event of liquidation, dissolution, or winding up of the Company, holders
of 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 that has a liquidation
preference.
Up to 18,160,000 shares that are covered by this registration statement are
shares that may be issued upon the exercise of certain warrants to purchase
common stock held by certain Selling Security Holders. The outstanding warrants
consist of the following:
1,570,000 New Class A Redeemable Common Stock Purchase Warrants (the "Class A
Warrants") outstanding. The Class A Warrant grants the holder the right to
acquire one share of the Company's common stock at a price of $.50 per share.
The Warrant Agreement that created the Class A Warrants was executed in June
1993 in connection with a private placement of the Company's common stock. The
Company subsequently amended the Warrant Agreement to extend the term of the
Class A Warrants to the period ending 365 days subsequent to the effective date
of this registration statement.
24
<PAGE>
3,080,000 New Class B Redeemable Common Stock Purchase Warrants (the "Class B
Warrants") outstanding. The Class B Warrant grants the holder the right to
acquire one share of the Company's common stock at a price of $.75 per share.
The Warrant Agreement that created the Class B Warrants was executed in June
1993 in connection with a private placement of the Company's common stock. The
Company subsequently amended the Warrant Agreement to extend the term of the
Class B Warrants to the period ending 365 days subsequent to the effective date
of this registration statement.
1,510,000 New Class C Redeemable Common Stock Purchase Warrants (the "Class C
Warrants") outstanding. The Class C Warrant grants the holder the right to
acquire one share of the Company's common stock at a price of $1.00 per share.
The Warrant Agreement that created the Class A Warrants was executed in August
1993 in connection with a private placement of the Company's common stock. The
Company subsequently amended the Warrant Agreement to extend the term of the
Class C Warrants to the period ending 365 days subsequent to the effective date
of this registration statement.
12,000,000 New Class D Redeemable Common Stock Purchase Warrants (the "Class D
Warrants") outstanding. The Class D Warrant grants the holder the right to
acquire one share of the Company's common stock at a price of $.50 per share.
The Warrant Agreement that created the Class D Warrants was executed in March
1994 in connection with a Stock Purchase Agreement between the Company and Nona
Morelli's II, Inc. The Class D Warrants expire on March 30, 2004.
ITEM 13. INTEREST OF NAMED EXPERTS AND COUNSEL.
None.
ITEM 14. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES.
Under Delaware law, a corporation may indemnify its officers, directors,
employees, and agents under certain circumstances, including indemnification of
such persons against liability under the Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
25
<PAGE>
ITEM 15. ORGANIZATION WITHIN LAST 5 YEARS.
Since 1992, substantially all of the Company's efforts have been directed toward
merging with or acquiring another company or companies. In September 1992, prior
management established a wholly-owned subsidiary to pursue domestic gaming
activities. This subsidiary, Ba-Mak Gaming International, Inc., ceased
operations and was liquidated under the supervision of the United States
Bankruptcy Court in fiscal 1996.
In fiscal 1995, the Company acquired Casino Management of America, Inc. ("CMA")
and CMA became a wholly-owned subsidiary of the Company. CMA formed two
wholly-owned subsidiaries, NuOasis Las Vegas, Inc. and NuOasis Laughlin, Inc.
for the purpose of acquiring gaming assets in the Las Vegas and Laughlin, Nevada
area, respectively. CMA, NuOasis Las Vegas, Inc. and NuOasis Laughlin, Inc.
never achieved revenues from operations.
On June 13, 1996, the Company's controlling shareholder, Nona Morelli's II, Inc.
("Nona") entered into an Option Agreement (the "Option Agreement") with Joseph
Monterosso, President of National Pools Corporation ("NPC") and an individual
previously unrelated to the Company. The Option Agreement granted Monterosso
and/or his assigns the option to purchase the 250,000 Series B Preferred Stock
owned by Nona at $13.00 per share, or a total of $3,250,000, with a minimum
purchase of 110,000 shares.
Subsequent to the Option Agreement, the Company acquired NPC under a Stock
Purchase Agreement with each of the shareholders of NPC pursuant to which the
Company issued a series of Secured Promissory Notes (the "Notes") in the
aggregate amount of $1,200,000 and 1,000,000 shares of the Company's common
stock in exchange for all of the outstanding shares of NPC. The Notes are
convertible into a total of 241,900,000 shares of the Company's common stock
contingent upon NPC's operations achieving certain financial goal over the next
several years. The Notes are non-recourse, secured by the assets of NPC, bear
interest at 8% per year, 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 the Company's restricted common stock.
On June 13, 1997, Mr. Monterosso partially exercised the Option Agreement and
purchased 128,041 shares of the Company's Series B Preferred Stock from Nona.
Nona subsequently bought the Company's wholly-owned subsidiary, CMA, for
$1,140,000. The Company intends to make most, if not all, of the $1,140,000 cash
proceeds available to NPC so that NPC can pursue its business plan.
On August 22, 1997 and effective June 13, 1996, the Option Agreement was amended
(the "Amended Option") to increase the exercise price for 21,959 of the Series B
Shares from $13.00 per share to $72.20 per share, or approximately $1,585,000
for the 21,959 shares of Series B Preferred Stock. The option to purchase the
remaining 100,000 Series B Shares was terminated. Concurrently, Nona granted Mr.
Monterosso a new option to purchase the remaining 100,000 Series B Shares at an
exercise price of $11.70 per share. Additionally, as consideration for granting
the new option, Nona acquired the right to require Mr. Monterosso to purchase
all or any remaining unexercised shares of the 100,000 Series B Shares in its
entirety by September 1, 1998.
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Closing on September 2, 1997, but effective June 10, 1997, Mr. Monterosso
exercised the Amended Option to purchase 21,959 Series B Shares, at $72.20 per
share, by payment to Nona of approximately $1,585,000. The 21,959 Series B
Shares acquired may be immediately converted into 1,712,802 shares of restricted
Group V common stock.
Concurrent with the exercise of the Amended Option, Group V released Nona from
liability, if any, arising from any events while Nona controlled Group V, in
exchange for approximately $1,585,000 in marketable securities.
On September 2, 1997, Nona sold to Mr. Monterosso 6,000,000 New Class D Warrants
in consideration for a $1,800,000 promissory note secured by the New Class D
Warrants, due in September 1998. Each New Class D Warrant is exercisable at
$1.00 per share and entitles Mr. Monterosso to receive, upon exercise, two
shares of common stock, or a total of 12,000,000 common shares if all New Class
D Warrants are exercised. The New Class D Warrants expire on March 30, 2004, and
to date, none of the New Class D Warrants have been exercised.
On September 2, 1997, Nona granted to Mr. Monterosso an option to purchase
7,800,000 common shares of the Company exercisable at $0.15 per share after
Nona's election to convert the 100,000 shares of Series B Preferred Stock into
7,800,000 common shares.
As a result of the acquisition of NPC and the sales and purchases of the Series
B Preferred Stock, as discussed above, a change in control of the Registrant has
occurred and the Registrant is now no longer a controlled subsidiary of Nona.
In September 1997, the Company agreed to acquire a 50% convertible net profits
interest ("Net Profits Interest") in Universal Network Services, Inc. ("UNSI").
NPC's Chief Operating Officer is a shareholder and officer of UNSI. The Net
Profits Interest will provide the Company with up to 50% of UNSI's net operating
profit and grant the Company the option to convert its Net Profits Interest into
an equity interest of up to 100% of UNSI's issued and outstanding common stock.
No agreements have yet been executed and negotiations are still in process. UNSI
is an interexchange carrier that provides telecommunications services to both
residential and business customers throughout the United States and certain
foreign countries.
In October 1997, the Company agreed in principle to purchase a fifty percent net
profits interest in Magnet Telecom, Inc. ("MTI") a privately held
telecommunications network marketing company and an affiliate of UNSI. As of
this date of this registration statement, no agreements have been finalized.
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Also in October 1997, the Company and Lottoworld, Inc. agreed in principle to
form a new joint venture company whereby Lottoworld will assign all of its
publishing assets, including the Lottoworld Magazine, to the new joint venture
company. As of this date no agreements have been finalized.
ITEM 16. DESCRIPTION OF BUSINESS.
Group V Corporation (formerly, NuOasis Gaming, Inc.) ("Group V", the "Company",
or the "Registrant") was originally incorporated in the State of Delaware in
1987. As of the date of filing this Report, the Registrant has no current
ongoing business. The Registrant is presently evaluating business opportunities
for possible acquisition within the gaming and telecommunication industry and
during the fiscal year ended June 30, 1997, the Registrant acquired National
Pools Corporation, a developer of a group play system in state lotteries in the
United States and foreign countries.
THE BUSINESS AND HISTORY OF NATIONAL POOLS CORPORATION
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(TM)". The Hit-LoTTo(TM) program uses debit
cards, telecommunications, 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(TM) program.
NPC plans to offer its proprietary Hit-LoTTo(TM) service to the public through
the sale of a prepaid card, the "Hit-LoTTo(TM) Value Card." The Hit-LoTTo(TM)
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-LoTTo(TM) Value Card enabling
participation in the program. To join a pool, callers will simply call
1-800-Hit-LoTTo(TM), enter their Hit-LoTTo(TM) card number and Personal
Identification Number ("PIN"), and be automatically entered into the open pool.
NPC 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-LoTTo(TM) 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-LoTTo(TM) 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.
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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 Picks" 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-LoTTo(TM). 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-LoTTo(TM)
Value Card, it can then be easily "recharged"; the card balance can also be
transferred to a new Hit-LoTTo(TM) Value Card. Hit-LoTTo(TM) 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-LoTTo(TM) Value Card one business day after the lottery draw. NPC will
process winning tickets and claim prize winnings with the Lottery on behalf of
pool members. When pool winnings are over $600, NPC will provide the names of
the individual winning 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 that
state's Group Play. Prize amounts of $1 million, or more, will generally be paid
by the State Lottery directly to winners over a 20 year period by the Lottery.
NPC does not participate in any winnings or prizes.
NPC provides its Hit-LoTTo(TM) Value Card with a valuable second feature, long
distance calling service. The Hit-LoTTo(TM) Value Card can be used to make long
distance calls from any touch tone telephone in the United States to anywhere
around the world. At the end of a long distance call, NPC will debit the
Hit-LoTTo(TM) Value Card for the cost of the call.
NPC's objective is to attract 1.5% of the more than $2.5 billion average monthly
lottery tickets purchased in the United States to become members of an NPC
administered Hit-LoTTo(TM) pool through the convenience of the telephone and the
Hit-LoTTo(TM) Value Card.
NPC intends to introduce its Hit-LoTTo(TM) 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-LoTTo(TM) 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-LoTTo(TM) took place, after the concept is successfully proven in
smaller markets. Arizona, Illinois, and Missouri are states presently under
consideration. The precise legal and regulatory approvals required depend on the
laws of the state involved. NPC has retained the law firm of Bagatelos & Fadem
and the former chairman of the lottery consulting division of KPMG Peat Marwick
to do legal research 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 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.
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NPC has obtained three opinions on the legality of its Hit-LoTTo(TM) 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 now does not intend to introduce
its Hit-LoTTo(TM) 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-LoTTo(TM) program in San Diego, California. In addition to
establishing telephone lines in which players could call to enter pools, a
limited publicity and advertising campaign was launched in San Diego, as an
attempt to secure retail outlets for the Hit-LoTTo(TM) 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-LoTTo(TM) retail outlet. Follow-up calls to those merchants
(approximately 30 to 50 per day) resulted in a 50% favorable response from those
called. One hundred pools were formed on the 1-900-Hit-LoTTo(TM) number which
was in operation for only a few days. The 1-800-Hit-LoTTo(TM) 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 limited funding, the experiment was restricted to several weeks of
publicity and advertising and one week of operation. NPC's management deemed the
results successful in that the Hit-LoTTo(TM) program attracted media interest,
retail vendors of Hit-LoTTo(TM) cards proved receptive and, in the relatively
limited time phone lines were open, customers appeared willing to play lottery
games under the Hit-LoTTo(TM) 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-LoTTo(TM) 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
("Monterosso") as the President and Chief Executive Officer of NPC, 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 additional stock purchases by NPC
shareholders to allow NPC to operate.
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While the Company's management is confident about the viability of the
Hit-LoTTo(TM) program and believes that acquiring NPC and assisting in the
funding of the launch of its Hit-LoTTo(TM) program represents an excellent
opportunity for the Company, the ultimate market acceptance of the Hit-LoTTo(TM)
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-LoTTo(TM) program.
Although the Hit-LoTTo(TM) program is trademarked and the system is proprietary,
the Registrant expects competition from those who may have more personnel and
greater financial resources than the Registrant. NPC is also dependent on group
play by the general public in states that Hit-LoTTo(TM) is sold. As of the date
of this Report, there have been no sales generated by NPC.
ACQUISITION OF NATIONAL POOLS CORPORATION
On June 13, 1996, Nona Morelli's II, Inc. ("Nona"), the then controlling parent
of Group V, granted an option (the "Option") to Joseph Monterosso, the current
President of the Company, to acquire 250,000 Series B Preferred Shares of Group
V (the "Series B Shares") owned by Nona. The Option is exercisable at a price of
$13.00 per share.
On December 19, 1996, Group V entered into Stock Purchase Agreements with each
of the shareholders of NPC pursuant to which Group V agreed to issue a series of
Secured Promissory Notes (the "Notes") in the aggregate principal amount of
$1,200,000 and 1,000,000 shares of Group V's restricted 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 maximum of 241,900,000 shares of
Group V common stock. The conversion of the Notes are contingent upon NPC's
operations achieving certain financial goals over the next several fiscal years.
The terms of the conversion are, 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 Group V common stock. The Notes are
non-recourse to Group V, secured by the assets of NPC, bear interest at 8% per
annum, and are due and payable on May 31, 1999. As part of this acquisition,
Nona and Group V agreed to a debt assumption agreement whereby all Group V debt
in excess of $20,000 on December 24, 1996, except for amounts owed to certain
affiliates, which have been converted into shares of Group V common stock, was
assumed by Nona. The NPC Stock Purchase Agreements closed on December 24, 1996.
On June 13, 1997, Mr. Monterosso exercised the Option to purchase 128,041 Series
B Shares, at $13.00 per share, by payment to Nona of approximately $1,665,000.
The 128,041 Series B Shares acquired may be immediately converted into 9,987,198
shares of restricted Group V common stock. Additionally, on June 13, 1997, Group
V sold its wholly owned subsidiary, CMA, to Nona for cash of $1,140,000, notes
receivable from NPC aggregating $245,836 and a credit against the Nona
intercompany account of $95,000.
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On August 22, 1997 and effective June 13, 1996, the Option was amended (the
"Amended Option") to increase the exercise price for 21,959 of the Series B
Shares from $13.00 per share to $72.20 per share, or approximately $1,585,000
for the 21,959 shares of Series B Preferred Stock. The option to purchase the
remaining 100,000 Series B Shares was terminated. Concurrently, Nona granted Mr.
Monterosso a new option to purchase the remaining 100,000 Series B Shares at an
exercise price of $11.70 per share. Additionally, as consideration for granting
the new option, Nona acquired the right to require Mr. Monterosso to purchase
all or any remaining unexercised shares of the 100,000 Series B Shares in its
entirety by September 1, 1998.
Closing on September 2, 1997, but effective June 10, 1997, Mr. Monterosso
exercised the Amended Option to purchase 21,959 Series B Shares, at $72.20 per
share, by payment to Nona of approximately $1,585,000. The 21,959 Series B
Shares acquired may be immediately converted into 1,712,802 shares of restricted
Group V common stock.
Concurrent with the exercise of the Amended Option, Group V released Nona from
liability, if any, arising from any events while Nona controlled Group V, in
exchange for approximately $1,585,000 of marketable securities.
On September 2, 1997, Nona sold to Mr. Monterosso 6,000,000 New Class D Warrants
in consideration for a $1,800,000 promissory note secured by the New Class D
Warrants, due in September 1998. Each New Class D Warrant is exercisable at
$1.00 per share and entitles Mr. Monterosso to receive, upon exercise, two
shares of common stock, or a total of 12,000,000 common shares if all New Class
D Warrants are exercised. The New Class D Warrants expire on March 30, 2004, and
to date, none of the New Class D Warrants have been exercised.
On September 2, 1997, Nona granted to Mr. Monterosso an option to purchase
7,800,000 common shares of the Company exercisable at $0.15 per share after
Nona's election to convert the 100,000 shares of Series B Preferred Stock into
7,800,000 common shares.
As a result of the acquisition of NPC and the sales and purchases of the Series
B Preferred Stock, as discussed above, a change in control of the Registrant has
occurred and the Registrant is now no longer a controlled subsidiary of Nona.
In September 1997, the Company agreed to acquire a 50% convertible net profits
interest ("Net Profits Interest") in Universal Network Services, Inc. ("UNSI").
NPC's Chief Operating Officer is a shareholder and officer of UNSI. The Net
Profits Interest will provide the Company with up to 50% of UNSI's net operating
profit and grant the Company the option to convert its Net Profits Interest into
an equity interest of up to 100% of UNSI's issued and outstanding common stock.
No agreements have yet been executed and negotiations are still in process. UNSI
is an interexchange carrier that provides telecommunications services to both
residential and business customers throughout the United States and certain
foreign countries.
In October 1997, the Company agreed in principle to purchase a fifty percent net
profits interest in Magnet Telecom, Inc. ("MTI") a privately held
telecommunications network marketing company and an affiliate of UNSI. As of
this date of this report, no agreements have been finalized.
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Also in October 1997, the Company and Lottoworld, Inc. agreed in principle to
form a new joint venture company whereby Lottoworld will assign all of its
publishing assets, including the Lottoworld Magazine, to the new joint venture
company. As of this date no agreements have been finalized.
OTHER BUSINESS HISTORY
In September 1992, prior management redirected the Registrant's focus to the
legalized gaming business. In this connection, on December 15, 1992, the
Registrant established a gaming subsidiary in Louisiana named Phillips Gaming
International, Inc., a Louisiana corporation. On December 8, 1993, Phillips
Gaming International, Inc. changed its corporate name to Ba-Mak Gaming
International, Inc. ("Ba-Mak"). On April 8, 1993, Ba-Mak obtained a license to
distribute and conduct route operations of electronic video bingo machines to
licensed charitable gaming locations in the state of Louisiana. Ba-Mak filed for
protection under Chapter 11 of the U.S. Bankruptcy Code in October 1995.
Operations of Ba-Mak continued through April 20, 1995, at which time Ba-Mak
converted its Chapter 11 bankruptcy proceeding into a proceeding under Chapter 7
of the Bankruptcy Code (the Ba-Mak Bankruptcy). As a result, all gaming
operations at Ba-Mak ceased and the Chapter 7 Trustee took possession of
Ba-Mak's assets and liquidated such assets for the benefit of Ba-Mak's
bankruptcy estate. Gaming revenues from Ba-Mak will not recur in future years
due to the bankruptcy and liquidation of Ba-Mak.
Since 1992, substantially all of the Registrant's efforts were directed toward
acquiring or merging with another company (or companies), preserving remaining
capital, raising additional capital and creating a new operating entity, in
addition to settling certain pending lawsuits and other obligations of the
Registrant.
On January 13, 1994, the Registrant entered into a Stock Purchase and Business
Combination Agreement (the "1994 Stock Purchase Agreement") with Nona and Nona's
wholly-owned subsidiary, Casino Management of America, Inc. ("CMA"), whereby the
Registrant agreed to purchase all of the outstanding capital stock of CMA from
Nona in exchange for the Registrant issuing to Nona a) 2,000,000 shares of
common stock; b) 250,000 shares of Series B Convertible Preferred Stock; c)
6,000,000 New Class D common stock purchase warrants; and d) an option to
purchase up to an additional 6,000,000 shares of common stock. The closing
occurred on March 30, 1994 (the "Closing Date"), whereby CMA became a
wholly-owned subsidiary of the Registrant. The former Board of Directors, with
the exception of Gary L. Blum, resigned and elected replacement Directors
nominated by Nona.
At the Closing, the Registrant issued to Nona, 2,000,000 shares of the
Registrant's common stock, 250,000 shares of Series B Preferred Stock, 6,000,000
New Class D Warrants, and an option to purchase up to an additional 6,160,000
shares of the Registrant's common stock, exercisable under certain conditions
(the "Nona Option"). A Certificate of Designations, Preferences and Rights, a
Warrant Certificate and an Option Agreement setting forth the terms and
conditions of the Series B Preferred Stock, the New Class D Warrants and the
Nona Option, respectively, were prepared and approved by the Registrant prior to
the Closing Date and were filed as Exhibits to a Current Report on Form 8-K
dated March 31, 1994 and filed on April 11, 1994.
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As a result of the 1994 Stock Purchase Agreement with Nona, a change in voting
control of the Registrant occurred in March 1994 and the Registrant effected the
corporate name change to "NuOasis Gaming, Inc." on September 23, 1994. Based on
30,000,000 shares of common stock outstanding at September 30, 1994, Nona could
vote 40.2% of the Registrant's voting securities by virtue of its ownership of
491,847 shares of common stock and 250,000 shares of Series B Preferred Stock,
and the Registrant became, at that time, a controlled subsidiary of Nona, a
publicly-held company whose shares are traded on NASD-OTC Bulletin Board.
While under the control of Nona, the Registrant sought to divide its business
segments, both development stage and operational, into separate subsidiaries.
The restructuring was undertaken to allow the Registrant to redefine its
business segments and focus on specific business opportunities. The
restructuring entailed a change in the Board of Directors, upper and local
management and a segregation of the Registrant's then operational segment from
its developmental stage segments in separate subsidiaries.
Following the Ba-Mak bankruptcy, the Registrant began evaluating business
opportunities for possible acquisition. Since then, the Registrant has acquired
NPC and concurrently sold CMA and its subsidiaries back to Nona (see above). The
Registrant will continue to operate as a holding company and supervise and
provide administrative and other services to NPC and other businesses which may
be acquired.
HISTORICAL OPERATING SUBSIDIARIES
(1) BA-MAK GAMING INTERNATIONAL, INC.
On September 30, 1994, Ba-Mak had agreements with five charitable gaming
establishments in New Orleans at which 140 video bingo machines were operating.
Ba-Mak recognized as gaming revenues the gross funds deposited in video bingo
machines. Ba-Mak realized gross profits, or "net win" as represented by the
difference between gross funds deposited into the machines and payments to
customers. Ba-Mak realized net operating profits by way of the percentage of the
net win after payments to the charitable organizations, the location owners and
the State of Louisiana for gaming taxes. On October 28, 1994, Ba-Mak filed for
protection under Chapter 11 of the U.S. Bankruptcy Code in the Eastern District
of Louisiana. Commencing October 28, 1994, Ba-Mak, as a Debtor-in-Possession,
continued to operate as a charitable bingo route operator in Louisiana. In April
1995, operations ceased when the bankruptcy proceeding was converted to a
proceeding under Chapter 7. 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 secured claim. The remaining 35 machines and Ba-Mak's office
equipment were sold by the Trustee. The Registrant has filed a Proof of Claim
with the Bankruptcy Court for the intercompany advances made to Ba-Mak.
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As of the date of this Report, the Trustee's administration of the bankruptcy
estate is ongoing. Due to the amount of other creditor claims filed in Ba-Mak's
estate and the amount received by the Trustee, the Registrant does not
anticipate receiving any sums on its Claim. Ba-Mak did not have any employees
during the last three fiscal years.
(2) CASINO MANAGEMENT OF AMERICA, INC.
CMA was formed for the purpose of acquiring gaming investments and businesses
and did not have any operations during the last three fiscal years. CMA was sold
to Nona in June 1997 (See NPC above).
(3) NUOASIS LAS VEGAS, INC. AND NUOASIS LAUGHLIN, INC.
NuOasis Las Vegas, Inc. and NuOasis Laughlin, Inc., both wholly-owned
subsidiaries of CMA did not have any operations during the last three fiscal
years. NuOasis Las Vegas, Inc. and NuOasis Laughlin, Inc. were formed for the
purpose of acquiring gaming assets in the metropolitan Las Vegas, Nevada and
Laughlin, Nevada areas. NuOasis Las Vegas, Inc. and NuOasis Laughlin, Inc., were
sold, as part of CMA, to Nona in June 1997 (See NPC above).
CHANGE IN FISCAL YEAR
During Fiscal 1996, the Registrant elected to change its fiscal year end from
September 30 to June 30 to facilitate and coincide with Nona's fiscal year end
of June 30. The election of change in fiscal year was reported on a Current
Report on Form 8-K filed on November 10, 1995.
ITEM 17. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
(a) Plan of Operation
The Company, through its wholly owned subsidiary, National Pools Corporation
("NPC"), plans to offer its proprietary HIT-LOTTO(TM) service to the public
through the sale of a prepaid card, the HIT-LOTTO(TM) Value Card. The
HIT-LOTTO(TM) 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-LOTTO(TM) Value Card
enabling participation in the program.
The sale of the Company's wholly owned subsidiary, Casino Management of America,
Inc. ("CMA") to Nona Morelli's II, Inc. ("Nona") was approved by the
stockholders of the Company at its Annual Meeting of Stockholders held May 5,
1997. Following receipt of the proceeds from the sale of CMA, the Company
intends to contribute most if not all of the proceeds to NPC for working
capital. In the opinion of management, the proceeds from these transactions
should be able to satisfy the Company's cash requirements for the next 12
months.
Further, this registration statement covers the resale of 18,160,000 shares of
the Company's common stock that are issuable upon exercise of the Class A
Warrants, Class B Warrants, Class C Warrants, and Class D Warrants (collectively
the "Warrants"). If the Warrants are exercised, the Company will receive
$10,605,000 in cash from the sale of the shares of common stock underlying the
Warrants. While there can be no assurance that all or any part of the Warrants
will be exercised, the resulting cash proceeds from the sale of the shares of
common stock underlying the Warrants, if any, will be available to the Company
for general corporate purposes, including additional funding for NPC's plan of
operation.
35
<PAGE>
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 $436,180 and $677,525 as of September 30, 1997 and
June 30, 1997, respectively, and working capital of $1,606,230 and $1,926,180 as
of September 30, 1997 and June 30, 1997, respectively. The decrease in working
capital is a direct result of cash used for operating activities. As of the date
of this Registration Statement, the Registrant has no material commitments for
capital expenditures.
Prior to the acquisition of NPC and sale of CMA, the Registrant received
financial support from Nona, and was dependent upon Nona for future working
capital. Nona is no longer a controlling parent and will not longer fund the
Registrant. The Registrant's plan is to continue searching for additional
sources of equity and working capital and new operating opportunities. In the
interim, the Registrant's existence is dependent upon the success of NPC's
Hit-LoTTo(TM) product, which has not yet been sold as of the date of the Report.
The Registrant may need to utilize its working capital of $1,606,230 at
September 30, 1997, and utilize its common stock to support its financial
obligations until the Hit-LoTTo(TM) product is first sold.
The Registrant is also pursuing other joint venture, merger or acquisition
opportunities which may provide additional capital resources during fiscal 1998.
Acquisitions and Dispositions
- -----------------------------
On June 13, 1996, Nona Morelli's II, Inc. ("Nona"), the then controlling parent
of Group V, granted an option (the "Option") to Joseph Monterosso, the current
President of the Company, to acquire 250,000 Series B Preferred Shares of Group
V (the "Series B Shares") owned by Nona. The Option is exercisable at a price of
$13.00 per share.
On December 19, 1996, Group V entered into Stock Purchase Agreements with each
of the shareholders of NPC pursuant to which Group V agreed to issue a series of
Secured Promissory Notes (the "Notes") in the aggregate principal amount of
$1,200,000 and 1,000,000 shares of Group V's restricted 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 maximum of 241,900,000 shares of
Group V common stock. The conversion of the Notes are contingent upon NPC's
operations achieving certain financial goals over the next several fiscal years.
The terms of the conversion are, 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 Group V common stock. The Notes are
non-recourse to Group V, secured by the assets of NPC, bear interest at 8% per
annum, and are due and payable on May 31, 1999. As part of this acquisition,
Nona and Group V agreed to a debt assumption agreement whereby all Group V debt
in excess of $20,000 on December 24, 1996, except for amounts owed to certain
affiliates, which have been converted into shares of Group V common stock, was
assumed by Nona. The NPC Stock Purchase Agreements closed on December 24, 1996.
36
<PAGE>
On June 13, 1997, Mr. Monterosso exercised the Option to purchase 128,041 Series
B Shares, at $13.00 per share, by payment to Nona of approximately $1,665,000.
The 128,041 Series B Shares acquired may be immediately converted into 9,987,198
shares of restricted Group V common stock. Additionally, on June 13, 1997, Group
V sold its wholly owned subsidiary, CMA, to Nona for cash of $1,140,000, notes
receivable from NPC aggregating $245,836 and a credit against the Nona
intercompany account of $95,000.
On August 22, 1997 and effective June 13, 1996, the Option was amended (the
"Amended Option") to increase the exercise price for 21,959 of the Series B
Shares from $13.00 per share to $72.20 per share, or approximately $1,585,000
for the 21,959 shares of Series B Preferred Stock. The option to purchase the
remaining 100,000 Series B Shares was terminated. Concurrently, Nona granted Mr.
Monterosso a new option to purchase the remaining 100,000 Series B Shares at an
exercise price of $11.70 per share. Additionally, as consideration for granting
the new option, Nona acquired the right to require Mr. Monterosso to purchase
all or any remaining unexercised shares of the 100,000 Series B Shares in its
entirety by September 1, 1998.
Closing on September 2, 1997, but effective June 10, 1997, Mr. Monterosso
exercised the Amended Option to purchase 21,959 Series B Shares, at $72.20 per
share, by payment to Nona of approximately $1,585,000. The 21,959 Series B
Shares acquired may be immediately converted into 1,712,802 shares of restricted
Group V common stock.
Concurrent with the exercise of the Amended Option, Group V released Nona from
liability, if any, arising from any events while Nona controlled Group V, in
exchange for approximately $1,585,000 of marketable securities.
On September 2, 1997, Nona sold to Mr. Monterosso 6,000,000 New Class D Warrants
in consideration for a $1,800,000 promissory note secured by the New Class D
Warrants, due in September 1998. Each New Class D Warrant is exercisable at
$1.00 per share and entitles Mr. Monterosso to receive, upon exercise, two
shares of common stock, or a total of 12,000,000 common shares if all New Class
D Warrants are exercised. The New Class D Warrants expire on March 30, 2004, and
to date, none of the New Class D Warrants have been exercised.
On September 2, 1997, Nona granted to Mr. Monterosso an option to purchase
7,800,000 common shares of the Company exercisable at $0.15 per share after
Nona's election to convert the 100,000 shares of Series B Preferred Stock into
7,800,000 common shares.
As a result of the acquisition of NPC and the sales and purchases of the Series
B Preferred Stock, as discussed above, a change in control of the Registrant has
occurred and the Registrant is now no longer a controlled subsidiary of Nona.
37
<PAGE>
In September 1997, the Company agreed to acquire a 50% convertible net profits
interest ("Net Profits Interest") in Universal Network Services, Inc. ("UNSI").
NPC's Chief Operating Officer is a shareholder and officer of UNSI. The Net
Profits Interest will provide the Company with up to 50% of UNSI's net operating
profit and grant the Company the option to convert its Net Profits Interest into
an equity interest of up to 100% of UNSI's issued and outstanding common stock.
No agreements have yet been executed and negotiations are still in process. UNSI
is an interexchange carrier that provides telecommunications services to both
residential and business customers throughout the United States and certain
foreign countries.
In October 1997, the Company agreed in principle to purchase a fifty percent net
profits interest in Magnet Telecom, Inc. ("MTI") a privately held
telecommunications network marketing company and an affiliate of UNSI. As of the
date of this Report, no agreements have been finalized.
Also in October 1997, the Company and Lottoworld, Inc. agreed in principle to
form a new joint venture company whereby Lottoworld will assign all of its
publishing assets, including the Lottoworld Magazine, to the new joint venture
company. As of this date no agreements have been finalized.
Cash Flows
- ----------
Cash used in operating activities increased to $271,545 for the three months
ended September 30, 1997, from $118,539 for the same period last year, which was
primarily attributable to the acquisition of NPC (discussed above).
Cash provided by financing activities of $30,200 for the three months ended
September 30, 1997, decreased from $120,467 for the same period last year, which
was attributable to collections of stockholder receivables when compared to the
same period last year. The remaining stockholder receivables are not due until
later this fiscal year.
Results of Operations
- ---------------------
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1997 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1996
There were no revenue producing operations during the quarters ended September
30, 1997 and 1996.
Total General and Administrative expenses increased by $156,384 during the
quarter ended September 30, 1997, as compared to the same period last year.
Since there were no operations during the quarter, General and Administrative
expenses are comprised mostly of corporate and other office related overhead.
Additionally, the acquisition of NPC contributed to the increase of General or
Administrative expenses since the acquisition occurred on December 24, 1996, and
there was no NPC related expenses in the same period last year.
Depreciation and Amortization expense increased by $4,410 during the current
quarter which was a direct result of acquiring depreciable assets in the NPC
acquisition, whereas there were no depreciable assets during the same quarter
last year.
38
<PAGE>
Interest expense increased by $17,385 during the current quarter which was a
result from issuing and acquiring interest bearing debt associated with the
acquisition of NPC.
Professional services of $177,848 during the current quarter remained
approximately the same as last year since the Company is continuing to utilize
attorneys, accountants and other advisors relating to the continued potential
acquisitions (see Note 2 of the footnotes to accompanying unaudited consolidated
condensed financial statements included elsewhere herein at Item 1).
YEAR ENDED JUNE 30, 1997 COMPARED TO THE NINE MONTHS ENDED JUNE 30, 1996
There were no gaming revenues during the year ended June 30, 1997 or the nine
months ended June 30, 1996. Revenues are dependent upon the sale of NPC's
HitLoTTo(TM) product, of which there have been no sales as of the date of this
registration statement.
There were no costs of good sold during fiscal year 1997 and 1996 due to having
no sales during the same periods.
General and administrative expenses totaled $287,329 for the year ended June 30,
1997, representing an increase of $127,551 from the nine months ended June 30,
1996. Professional services totaled $490,406 for the year ended June 30, 1997,
representing an increase of $182,308 from the nine months ended June 30, 1996.
The increase in general and administrative expenses was primarily attributable
to comparing a longer year of twelve months ended June 30, 1997 to a shorter
year of nine months ended June 30, 1996. Additionally, the Registrant incurred
additional expenses since acquiring NPC on December 24, 1996 (see above).
Interest expense increased by $137,089 during the period which was a result from
issuing and acquiring interest bearing debt associated with the acquisition of
NPC (see above).
As a result of the NPC acquisition (see above), the excess of the purchase price
over the fair market value of the net assets acquired was approximately
$3,318,107 and was 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 was 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.
The net losses of CMA are presented in the Company's consolidated statements of
operations as discontinued operations. Such net losses decreased in fiscal year
1997 to $219,497 representing a $109,767 decrease relative to fiscal year 1996.
However, this decrease is primarily the result of a prior period, nonrecurring
valuation charge of $270,000. Excluding this nonrecurring charge, the fiscal
year 1997 net loss increased by $160,233 primarily as a result of increased
legal expenses and a longer fiscal year.
During fiscal year 1997, the Company recorded debt forgiveness income in the
amount of $1,368,454 as certain obligations were satisfied by the Company for
less than amounts originally recorded. Such amounts are presented in the
Company's consolidated statement of operations as an extraordinary item.
39
<PAGE>
As a result of acquiring NPC (see above) and due to a longer current fiscal
year, the Registrant's net loss from operations increased to $3,118,200 during
the year ended June 30, 1997 as compared to $797,140 during last year.
As of June 30, 1997, the Registrant had net operating loss carryforwards of
approximately $9,510,000 available for federal income tax purposes that expire
through 2010. If there would be a greater than 50% change in the ownership of
the Registrant's common stock, Internal Revenue Code Section 382 would place
certain restrictions on the amount of the net operating loss ("NOL") that could
be utilized in future years. Internal Revenue Code Section 382 limits the use of
NOL's to the extent of an amount equal to the fair market value of the
Registrant just prior to the 50% or greater change in ownership multiplied by
the Federal Long Term Discount Rate. A valuation allowance was recorded in the
financial statements to offset the tax benefit resulting from utilization of the
NOL carryforward due to the uncertainty surrounding the realization of such tax
asset.
40
<PAGE>
ITEM 18. DESCRIPTION OF PROPERTY.
(1) NATIONAL POOLS CORPORATION
NPC leases office space in San Francisco, California. The San Francisco lease
expires June 2002.
(2) BA-MAK GAMING INTERNATIONAL, INC.
In April 1993, Ba-Mak entered into a non-cancelable lease agreement for its
office and warehouse in Louisiana. The lease expired May 31, 1996 and provided
for monthly rental payments starting at $1,750 with annual increases of $125.
The lease has been included in Ba-Mak's bankruptcy proceedings under Chapter 7
of the Bankruptcy Code.
On September 30, 1994, the Registrant, through Ba-Mak, provided video bingo
gaming devices to five (5) charitable bingo halls in southern Louisiana. Ba-Mak
leased approximately 1,000 square feet of industrial/office space in the New
Orleans area from where it supervised the related gaming activities and where it
maintained the gaming devices. As of June 30, 1997, all of Ba-Mak's property was
subject to its Chapter 7 bankruptcy proceedings.
(3) CASINO MANAGEMENT OF AMERICA, INC.
CMA did not have any properties during the last three fiscal years. CMA was sold
to Nona in June 1997 (See NPC above).
(4) NUOASIS LAS VEGAS, INC. AND NUOASIS LAUGHLIN, INC.
NuOasis Las Vegas, Inc. and NuOasis Laughlin, Inc. did not have any properties
during the last three fiscal years. NuOasis Las Vegas, Inc. and NuOasis
Laughlin, Inc., were sold, as part of CMA, to Nona in June 1997 (See NPC above).
ITEM 19. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There were no related transactions during the last two fiscal years for which
the amount of the transaction or series of similar transactions exceeded $60,000
other than the following:
(a) ISSUANCE OF OPTIONS AND WARRANT PURCHASE AGREEMENT
On June 13, 1996, Nona Morelli's II, Inc. ("Nona"), the then controlling parent
of Group V, granted an option (the "Option") to Joseph Monterosso, the current
President of the Company, to acquire 250,000 Series B Preferred Shares of Group
V (the "Series B Shares") owned by Nona. The Option is exercisable at a price of
$13.00 per share.
41
<PAGE>
On December 19, 1996, Group V entered into Stock Purchase Agreements with each
of the shareholders of NPC pursuant to which Group V agreed to issue a series of
Secured Promissory Notes (the "Notes") in the aggregate principal amount of
$1,200,000 and 1,000,000 shares of Group V's restricted 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 maximum of 241,900,000 shares of
Group V common stock. The conversion of the Notes are contingent upon NPC's
operations achieving certain financial goals over the next several fiscal years.
The terms of the conversion are, 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 Group V common stock. The Notes are
non-recourse to Group V, secured by the assets of NPC, bear interest at 8% per
annum, and are due and payable on May 31, 1999. As part of this acquisition,
Nona and Group V agreed to a debt assumption agreement whereby all Group V debt
in excess of $20,000 on December 24, 1996, except for amounts owed to certain
affiliates, which have been converted into shares of Group V common stock, was
assumed by Nona. The NPC Stock Purchase Agreements closed on December 24, 1996.
On June 13, 1997, Mr. Monterosso exercised the Option to purchase 128,041 Series
B Shares, at $13.00 per share, by payment to Nona of approximately $1,665,000.
The 128,041 Series B Shares acquired may be immediately converted into 9,987,198
shares of restricted Group V common stock. Additionally, on June 13, 1997, Group
V sold its wholly owned subsidiary, CMA, to Nona for cash of $1,140,000, notes
receivable from NPC aggregating $245,836 and a credit against the Nona
intercompany account of $95,000.
On August 22, 1997 and effective June 13, 1996, the Option was amended (the
"Amended Option") to increase the exercise price for 21,959 of the Series B
Shares from $13.00 per share to $72.20 per share, or approximately $1,585,000
for the 21,959 shares of Series B Preferred Stock. The option to purchase the
remaining 100,000 Series B Shares was terminated. Concurrently, Nona granted Mr.
Monterosso a new option to purchase the remaining 100,000 Series B Shares at an
exercise price of $11.70 per share. Additionally, as consideration for granting
the new option, Nona acquired the right to require Mr. Monterosso to purchase
all or any remaining unexercised shares of the 100,000 Series B Shares in its
entirety by September 1, 1998.
Closing on September 2, 1997, but effective June 10, 1997, Mr. Monterosso
exercised the Amended Option to purchase 21,959 Series B Shares, at $72.20 per
share, by payment to Nona of approximately $1,585,000. The 21,959 Series B
Shares acquired may be immediately converted into 1,712,802 shares of restricted
Group V common stock.
Concurrent with the exercise of the Amended Option, Group V released Nona from
liability, if any, arising from any events while Nona controlled Group V, in
exchange for approximately $1,585,000 of marketable securities.
On September 2, 1997, Nona sold to Mr. Monterosso 6,000,000 New Class D Warrants
in consideration for a $1,800,000 promissory note secured by the New Class D
Warrants, due in September 1998. Each New Class D Warrant is exercisable at
$1.00 per share and entitles Mr. Monterosso to receive, upon exercise, two
shares of common stock, or a total of 12,000,000 common shares if all New Class
D Warrants are exercised. The New Class D Warrants expire on March 30, 2004, and
to date, none of the New Class D Warrants have been exercised.
42
<PAGE>
On September 2, 1997, Nona granted to Mr. Monterosso an option to purchase
7,800,000 common shares of the Company exercisable at $0.15 per share after
Nona's election to convert the 100,000 shares of Series B Preferred Stock into
7,800,000 common shares.
As a result of the acquisition of NPC and the sales and purchases of the Series
B Preferred Stock, as discussed above, a change in control of the Registrant has
occurred and the Registrant is now no longer a controlled subsidiary of Nona.
In September 1997, the Company agreed to acquire a 50% convertible net profits
interest ("Net Profits Interest") in Universal Network Services, Inc. ("UNSI").
NPC's Chief Operating Officer is a shareholder and officer of UNSI. The Net
Profits Interest will provide the Company with up to 50% of UNSI's net operating
profit and grant the Company the option to convert its Net Profits Interest into
an equity interest of up to 100% of UNSI's issued and outstanding common stock.
No agreements have yet been executed and negotiations are still in process. UNSI
is an interexchange carrier that provides telecommunications services to both
residential and business customers throughout the United States and certain
foreign countries.
In October 1997, the Company agreed in principle to purchase a fifty percent net
profits interest in Magnet Telecom, Inc. ("MTI") a privately held
telecommunications network marketing company and an affiliate of UNSI. As of the
date of this Report, no agreements have been finalized.
Also in October 1997, the Company and Lottoworld, Inc. agreed in principle to
form a new joint venture company whereby Lottoworld will assign all of its
publishing assets, including the Lottoworld Magazine, to the new joint venture
company. As of the date of this report no agreements have been finalized.
(b) ADVISORY AGREEMENTS WITH AFFILIATES
The Luke Family Trust and Lawyer Corp. owns 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. Effective October 1, 1995, Group V and CMA renewed Advisory and
Management Agreements with NuVen Advisors for the engagement of NuVen Advisors
to perform professional services for Fiscal 1997 and 1996. Pursuant to such
renewal, Group V and CMA agreed to pay NuVen Advisors $120,000 annually, payable
monthly in arrears. In May 1997, 787,180 common shares were issued in settlement
of all amounts owed to NuVen Advisors as of May 5, 1997. The Company expensed
$240,000 and $135,000, during Fiscal 1997 and 1996, respectively, and had no
amounts due to NuVen Advisors as of June 30, 1997. NuVen Advisors' agreement, as
it relates to Group V, was terminated effective May 5, 1997.
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. In May 1997, 1,000,000 common shares
were issued in settlement of all amounts owed to SAI as of May 5, 1997. The
Registrant expensed $200,000 and $75,000 during fiscal years 1997 and 1996,
respectively and had no amounts due to SAI as of June 30, 1997. SAI's agreement
was terminated effective May 5,1997.
43
<PAGE>
(c) OPERATING LEASE
The Company sublets office space in San Francisco, California from a
stockholder. The related lease expires in June 2002 and future minimum payments
required under the lease term aggregate $223,268.
(d) UNSI TRANSACTION
In September 1997, the Company agreed to acquire a 50% convertible net profits
interest ("Net Profits Interest") in Universal Network Services, Inc. ("UNSI").
NPC's Chief Operating Officer is a shareholder and officer of UNSI. The Net
Profits Interest will provide the Company with up to 50% of UNSI's net operating
profit and grant the Company the option to convert its Net Profits Interest into
an equity interest of up to 100% of UNSI's issued and outstanding common stock.
No agreements have yet been executed and negotiations are still in process. UNSI
is an interexchange carrier that provides telecommunications services to both
residential and business customers throughout the United States and certain
foreign countries.
(e) MAGNET TELECOM, INC.
In October 1997, the Company agreed in principle to purchase a fifty percent net
profits interest in Magnet Telecom, Inc. ("MTI") a privately held
telecommunications network marketing company and an affiliate of UNSI. As of the
date of this Report, no agreements have been finalized.
(f) LOTTOWORLD, INC.
Also in October 1997, the Company and Lottoworld, Inc. agreed in principle to
form a new joint venture company whereby Lottoworld will assign all of its
publishing assets, including the Lottoworld magazine, to the new joint venture
company. As of this date no agreements have been finalized.
44
<PAGE>
ITEM 20. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Following the completion of the Registrant's public offering in July 1988, the
Registrant's common shares have been traded in the over-the-counter market and
were quoted in the NASDAQ System under the symbol ENPQ commencing March 1, 1990.
On May 12, 1992, the Registrant was delisted from the NASDAQ System and, on the
same day, was listed on the NASD-OTC Bulletin Board where it currently trades
under the symbol "GRPV". The Registrant's securities are not publicly traded on
any other market. Set forth below are the high and low bid prices for the Common
Stock of the Registrant for each quarterly period commencing July 1995:
Bid Price of Common Stock
Fiscal 1998 Low High
--------------------------- --- ----
Quarter ended 9/30/97 $.16 $.23
Quarter ended 12/31/97 $.12 $.22
Fiscal 1997 Low High
---------------------------- --- ----
Quarter ended 09/30/96 $.19 $.49
Quarter ended 12/31/96 $.11 $.28
Quarter ended 03/31/97 $.15 $.23
Quarter ended 06/30/97 $.16 $.40
Quarter ended 09/30/97 $.16 $.23
Fiscal 1996 Low High
----------------------------- --- ----
Quarter ended 09/30/95 $.01 $.24
Quarter ended 12/31/95 $.01 $.24
Quarter ended 03/31/96 $.01 $.22
Quarter ended 06/30/96 $.01 $.62
Such quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commissions and may not necessarily represent actual transactions.
As of December 15, 1997, the Registrant had 3,927 shareholders of record and in
excess of 2,000 persons who were beneficial shareholders of its common stock.
The Registrant has never paid cash dividends on its common stock. At the present
time, the Registrant's anticipated capital requirements are such that it intends
to follow a policy of retaining earnings, if any, in order to finance the
development of its business. Dividends on common stock may not be paid unless
provision has been made for payment of preferred dividends.
45
<PAGE>
ITEM 21 EXECUTIVE COMPENSATION.
(a) SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth in summary form the
compensation received during each of the Registrant's last three completed
fiscal years by the Registrant's President. No other executive earned in excess
of $100,000.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
Restricted
Name and Fiscal Other Annual Stock LTIP All Other
Principal Year Salary ($) Bonus ($) Compensation Award(s) Options Payouts Compensation
Position ---- ---------- --------- ------------ --------- ------- ------- ------------
($) ($)
--- ---
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Joseph 1995 $0 - - - - - -
Monterosso
President 1996 $0 - - - - - -
and Director
(11-25-96 to 1997 $77,083 (1) - - - - - -
Present)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Amounts accrued for fiscal year 1997 represent salary from December 24,
1996, through June 30, 1997, as NPC was acquired on December 24, 1996.
46
<PAGE>
(b) OPTION AND LONG-TERM COMPENSATION
There were no options granted during fiscal year 1997.
The following table sets forth in summary form the aggregate options exercised
during fiscal year 1997, the value of unexercised options, as of June 30, 1997,
for the Registrant's President and four most highly compensated executive
officers other than the President.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTION/SAR'S AT FISCAL IN-THE-MONEY
YEAR-END (#) OPTIONS/SAR'S AT FISCAL
YEAR-END ($)
---------------------- ------------------------
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE (d) UNEXERCISABLE
- -------------------- ------------- ------------ --------------------- -------------------
<S> <C> <C> <C> <C>
Fred G. Luke, Former
President and 1,131,176 $124,479 None N/A
Director
NuVen Advisors, 2,000,000 $220,000 None N/A
Inc.(1)
Steven H. Dong, 275,000 $30,250 None N/A
Former CFO
John D. Desbrow, 275,000 $30,250 None N/A
Former Secretary
- -----------------------------------------
</TABLE>
(1) 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.
There were no awards under long-term incentive plans.
(c) PENSION PLANS AND OTHER BENEFIT OR ACTUARIAL PLANS
The Registrant has no annuity, pension or retirement plans or other plans for
which benefits are based on actuarial computations.
(d) EMPLOYMENT, CONSULTING AND ADVISORY MANAGEMENT CONTRACTS
NEW OFFICERS AND DIRECTORS
Effective July 1, 1997, the Company entered into an employment agreement with
Dennis Houston to serve as NPC's Chief Operating Officer and a Director of the
Company. The agreement compensates Mr. Houston at the rate of $100,000 per annum
through December 31, 1997, and a the rate of $200,000 per annum through June 30,
2000, payable in cash or in common stock. The agreement also granted Mr. Houston
an option to purchase 5,250,000 common shares of the Company at an exercise
price of $0.50 per share and participation in the Company's management bonus
program.
47
<PAGE>
On April 1, 1994, NPC entered into an employment agreement with Joseph
Monterosso to serve as the NPC's Chief Executive Officer. In conjunction with
the acquisition of NPC, Mr. Monterosso became the Company's President and
Director on November 25, 1996, and Chairman on August 8, 1997. Subsequent to
June 30, 1997, the Board ratified the agreement with Mr. Monterosso. The
agreement initially compensates Mr. Monterosso $125,000 per annum and $250,000
per annum upon the first sale of the Company's HitLoTTo(TM) Value Card, payable
in cash or in common stock of the Company.
FORMER OFFICERS AND DIRECTORS
In August 1995, the Company entered into an employment agreement with Fred G.
Luke, the Company's former Chairman and President. Mr. Luke served as the
Company's Chairman and President since approximately March 31, 1994 through
August 8, 1997, and November 25, 1996, respectively. The terms of the employment
agreement call for Mr. Luke to receive $4,500 per month, retroactive to April 1,
1994, for five (5) years as a base salary; and grant him an option to purchase
3,000,000 shares of the Company's common stock at an exercise price of $.12 per
share. In May 1997, 198,715 common shares were issued in settlement of all
amounts owed to Mr. Luke as of May 5, 1997. The Company expensed $54,000 and
$40,500 during Fiscal 1997 and 1996, respectively, and had no amounts due to Mr.
Luke as of June 30, 1997. Mr. Luke's employment agreement was terminated
effective May 5, 1997.
Effective April 1, 1996, the Company renewed a consulting agreement with John D.
Desbrow, through March 31, 1997, to perform legal services and to hold the
office of Secretary. Under the renewed consulting agreement the Company
contracted to pay Mr. Desbrow $75,000 per annum for the renewal term payable in
the Company's common stock. In May 1997, 102,030 common shares were issued in
settlement of all amounts owed to Mr. Desbrow as of May 5, 1997. Under the terms
of the consulting agreement, Mr. Desbrow invoiced the Company and applied 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 $75,000. The
Company expensed $62,500 and $43,750, during Fiscal 1997 and 1996, respectively,
and had no amounts due to Mr. Desbrow as of June 30, 1997. Mr. Desbrow's renewed
consulting agreement was terminated on May 5, 1997.
Effective July 1, 1997, the Company entered into an employment agreement with
Steven Dong to serve as the Company's Chief Financial Officer. The agreement
compensates Mr. Dong $105,000 per annum through June 30, 1998, and $125,000 per
annum through June 30,1999, payable in cash or in common stock of the Company.
The agreement also granted Mr. Dong an option to purchase 800,000 common shares
of the Company at an exercise price of $0.50 per share and participation in the
Company's management bonus program. Mr. Dong resigned as Chief Financial Officer
on December 18, 1997.
48
<PAGE>
In July 1996, the Company renewed a consulting agreement with Steven H. Dong,
pursuant to which Mr. Dong is to perform accounting services and to hold the
office of Chief Financial Officer through June 30, 1997. Pursuant to the renewed
consulting agreement the Company agreed to pay Mr. Dong $39,000 per annum in
cash or in the Company's common stock, payable monthly in arrears. In May 1997,
237,500 common shares were issued in settlement of all amounts owed to Mr. Dong
as of May 5, 1997. Under the terms of the renewed consulting agreement, Mr. Dong
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. Dong and the Company have agreed the price paid for the
shares is deemed to be $39,000. The Company expensed $39,000 and $15,000 during
Fiscal 1997 and 1996, respectively, and had no amounts due to Mr. Dong as of
June 30, 1997. Mr. Dong's renewed consulting agreement was terminated effective
May 5, 1997.
The Luke Family Trust and Lawver Corp. owns 93% and 7%, respectively, of NuVen
Advisors. Fred G. Luke, as trustee of the Luke Trust, controls the Luke Trust
and Mr. Jon Lawyvr is the majority shareholder of Lawver Corp. and thereby
controls Lawver Corp. Effective October 1, 1995, Group V and CMA renewed
Advisory and Management Agreements with NuVen Advisors for the engagement of
NuVen Advisors to perform professional services for Fiscal 1997 and 1996.
Pursuant to such renewal, Group V and CMA agreed to pay NuVen Advisors $120,000
annually, payable monthly in arrears. In May 1997, 787,180 common shares were
issued in settlement of all amounts owed to NuVen Advisors as of May 5, 1997.
The Company expensed $240,000 and $225,000, during Fiscal 1997 and 1996,
respectively, and had no amounts due to NuVen Advisors as of June 30, 1997.
NuVen Advisors' agreement was terminated, as it relates to Group V, effective
May 5, 1997.
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. In May 1997, 1,000,000 common shares
were issued in settlement of all amounts owed to SAI as of May 5, 1997. The
Registrant expensed $200,000 and $75,000 during fiscal years 1997 and 1996,
respectively and had no amounts due to SAI as of June 30, 1997. SAI's agreement
was terminated effective May 5,1997.
(e) DIRECTOR COMPENSATION
The Registrant has no standard arrangements by which its directors are
compensated.
(f) INTERLOCKING RELATIONSHIPS OF DIRECTORS
As of the date of this Report, there are no interlocking relationships of
Directors.
49
<PAGE>
Item 22. Financial Statements.
The following are true and correct copies of the Company's financial statements
as required by Item 310 of Regulation S-B.
50
<PAGE>
HASKELL & WHITE LLP
Certified Public Accountants
4901 Birch Street
Newport Beach CA 92660
Telephone (714) 833-8312 Fax (714) 833-9421
INDEPENDENT AUDITORS' REPORT
Board of Directors
Group V Corporation
(formerly, NuOasis Gaming, Inc.)
We have audited the accompanying consolidated balance sheet of Group V
Corporation (formerly, NuOasis Gaming, Inc.) and subsidiaries (the "Company") as
of June 30, 1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for the year ended June 30, 1997. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
June 30, 1997, and the results of its operations and its cash flows for the year
ended June 30, 1997, in conformity with generally accepted accounting
principles.
/s/ HASKELL & WHITE LLP
---------------------------------
Newport Beach, California
September 29, 1997
51
<PAGE>
RAIMONDO, PETTIT & GLASSMAN
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
CERTIFIED PUBLIC ACCOUNTANTS
UNION BANK TOWER, SUITE 1250
21515 HAWTHORNE BOULEVARD
TORRANCE, CALIFORNIA 90503
TELEPHONE: (310) 540-5990 FAX: (310) 543-3066
INDEPENDENT AUDITORS' REPORT
Board of Directors
Group V Corporation
(formerly, NuOasis Gaming, Inc.)
Irvine, California
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Group V Corporation (formerly, NuOasis
Gaming, Inc.) and subsidiaries (the "Company") for the nine months ended June
30, 1996. 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 consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
the Company for the nine months ended June 30, 1996, in conformity with
generally accepted accounting principles.
/s/ RAIMONDO, PETTIT & GLASSMAN
---------------------------------------
Torrance, California
October 31, 1996
52
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Consolidated Balance Sheet
As of June 30, 1997
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 677,525
Due from escrow (Note 2) 1,585,468
Advances 371,990
Prepaid expenses 85,000
------------
Total Current Assets 2,719,983
------------
FIXED ASSETS:
Equipment 45,232
Less accumulated depreciation (6,763)
------------
Total Fixed Assets, net 38,469
------------
OTHER ASSETS: 22,247
------------
TOTAL ASSETS $ 2,780,699
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 412,246
Loans payable 17,463
Accrued salaries 313,069
Accrued interest 51,025
------------
Total Current Liabilities 793,803
------------
LONG TERM DEBT:
Convertible notes payable (Note 3) 1,200,000
------------
Total Liabilities 1,993,803
------------
COMMITMENTS AND CONTINGENCIES (NOTE 7)
STOCKHOLDERS' EQUITY:
Preferred stock - par value $.01; authorized 1,000,000 shares; 14% cumulative
convertible; issued and outstanding 170,000 shares (aggregate liquidation of
$304,425) 1,700
Preferred Stock Series B - par value $2.00; convertible;
authorized, issued and outstanding 250,000 shares (aggregate
liquidation of $500,000) 500,000
Common stock - par value $.01; authorized 333,000,000 shares;
40,059,880 shares issued and outstanding 400,598
Stockholder receivables (584,167)
Additional paid-in capital 16,086,793
Accumulated deficit (15,618,028)
-------------
Total Stockholders' Equity 786,896
-------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,780,699
=============
See accompanying notes to consolidated financial statements.
53
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Consolidated Statements of Operations
For the Year Ended June 30, 1997 and Nine Months Ended June 30, 1996
For the Year Ended For the Nine Months
June 30, 1997 Ended June 30, 1996
------------------ -------------------
COSTS AND EXPENSES:
General and administrative $ 287,329 $ 159,778
Depreciation and amortization 34,226 -
Professional services (Note 5) 490,406 308,098
Interest expense, net 137,089 -
Write off of goodwill (Note 2) 3,318,107 -
------------- ------------
Totals 4,267,157 467,876
------------- ------------
LOSS BEFORE DISCONTINUED
OPERATION AND EXTRAORDINARY ITEM (4,267,157) (467,876)
DISCONTINUED OPERATION (NOTE 1):
Net loss of discontinued operation (219,497) (329,264)
------------- ------------
EXTRAORDINARY ITEM (NOTE 8):
Debt forgiveness 1,368,454 -
------------- ------------
NET LOSS $ (3,118,200) $ (797,140)
============= =============
Net loss applicable to common stock $ (3,142,000) $ (814,990)
============= =============
PER SHARE AMOUNTS:
Loss before discontinued
operation and extraordinary item $ (.13) $ (.02)
Discontinued operation (.01) (.01)
Extraordinary item .04 -
------------- -------------
NET LOSS PER SHARE $ (.10) $ (.03)
============= =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 31,240,255 29,057,660
============= =============
See accompanying notes to consolidated financial statements.
54
<PAGE>
<TABLE>
GROUP V CORPORATION
(formerly NuOasis Gaming, Inc.)
Consolidated Statements of Stockholders' Equity
For the Year Ended June 30, 1997 and
Nine Months Ended June 30, 1996
<CAPTION>
Preferred Preferred Stock Common
Stock Series B Stock Total
-------------------- -------------------- -------------------- Additional Stock-
Stockholder Paid-In Accumulated holder's
Shares Amount Shares Amount Shares Amount Receivables Capital Deficit Equity
--------- --------- --------- --------- --------- --------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, 170,000 $ 1,700 250,000 $ 500,000 26,131,176 $ 261,312 $(1,473,773) $12,110,626 $(11,702,688) $ (302,823)
October 1, 1995
Conversion of loan 3,000,000 30,000 170,000 200,000
for stock
Exercise of stock 868,824 8,688 95,570 104,258
options
Collection of 26,693 26,693
stockholder
receivable
Net loss (797,140) (797,140)
--------- --------- --------- --------- ---------- --------- ----------- ----------- ------------ ------------
Balances, 170,000 1,700 250,000 500,000 30,000,000 300,000 (1,447,080) 12,376,196 (12,499,828) (769,012)
June 30, 1996
Exercise of stock 5,433,676 54,336 (584,167) 597,704 67,873
options
Issuance of stock 3,626,204 36,262 612,947 649,209
Sale of CMA to 1,447,080 799,478 2,246,558
stockholder
Issuance of stock in
connection with the 1,000,000 10,000 115,000 125,000
acquisition of NPC
Issuance of release 1,585,468 1,585,468
to stockholder
Net loss (3,118,200) (3,118,200)
--------- --------- --------- --------- ---------- --------- ----------- ----------- ------------ ------------
Balances, 170,000 $ 1,700 250,000 $ 500,000 40,059,880 $ 400,598 $ (584,167) $16,086,793 $(15,618,028) $ 786,896
June 30, ========= ========= ========= ========= ========== ========= =========== =========== ============ ============
1997
55
</TABLE>
<PAGE>
<TABLE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Consolidated Statements of Cash Flows
For the Year Ended June 30, 1997 and
Nine Months Ended June 30, 1996
<CAPTION>
For the Year For the Nine
Ended Months Ended
June 30, 1997 June 30, 1996
------------- -------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (3,118,200) $ (797,140)
Adjustments to reconcile net loss to net cash
used in operating activities:
Write-off of goodwill 3,318,107 -
Debt forgiveness (1,368,454) -
Loss from discontinued operations 219,497 329,264
Common stock issued for payment of services 170,113 -
Depreciation and amortization 34,226 -
Increase (decrease) from changes in:
Prepaid expenses (85,000) -
Advances (371,992) -
Stockholder receivable - 143,962
Other current assets (4,133) 57,866
Accounts payable (105,878) 34,505
Due to affiliates 950,502 416,871
Accrued expenses 26,032 (113,836)
Net liabilities of discontinued operations (209,367) (97,774)
--------------- ------------------
Net cash used in operating activities (544,547) (26,282)
---------------- ------------------
INVESTING ACTIVITIES:
Proceeds from sale of CMA 1,140,000 -
--------------- -----------------
Net cash provided by investing activities 1,140,000 -
--------------- -----------------
FINANCING ACTIVITIES:
Proceeds from loans 34,881 -
Proceeds from stockholder receivables 121,259 -
Proceeds from issuances of equity securities 67,873 25,500
Repayments of loans (142,025) -
--------------- ----------------
Net cash provided by financing activities 81,988 25,500
--------------- -----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 677,441 (782)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 84 866
--------------- -----------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 677,525 $ 84
=============== =================
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the period for:
Interest $ - $ -
-
Income taxes $ 800 $ 1,600
-
NON-CASH FINANCING ACTIVITIES:
Common stock issued for stockholder receivable $ 584,167 $ 78,758
Debt converted to common stock $ 125,000 $ 200,000
Gain on sale of CMA (Note 2) $ 799,478 $ -
Release of liability to Nona (Note 2) $ 1,585,468 $ -
See accompanying notes to consolidated financial statements.
56
</TABLE>
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Notes To Consolidated Financial Statements
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITIES
DESCRIPTION OF BUSINESS
Group V Corporation (formerly, NuOasis Gaming, Inc.) and its subsidiaries (the
"Company"), operate as a holding company for leisure and entertainment related
businesses. Group V Corporation was originally incorporated in the State of
Delaware in 1987. During the year ended June 30, 1997 ("Fiscal 1997") and the
nine months ended June 30, 1996 ("Fiscal 1996"), the Company engaged in gaming
and investment development activities, primarily in the United States.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements for the year ended June 30,
1997, include the accounts of Group V Corporation ("Group V"), Casino Management
of America, Inc. ("CMA") through its disposal date of June 13, 1997 (Note 2),
and National Pools Corporation ("NPC") from its date of acquisition December 24,
1996 (Note 2).
The accompanying consolidated financial statements for the nine months ended
June 30, 1996, include the accounts of Group V and CMA.
As used herein, the above is collectively referred to as the "Registrant" or the
"Company" unless the context indicates otherwise. All intercompany accounts and
transactions have been eliminated in consolidation.
DISCONTINUED OPERATION
The sale of CMA in June 1997 has been accounted for as a discontinued operation
and, accordingly, its operating results have been segregated and reported as
discontinued operations in the accompanying consolidated statements of
operations and cash flows for the year ended June 30, 1997 and the nine months
ended June 30, 1996. There are no net assets related to CMA in the accompanying
consolidated balance sheet as of June 30, 1997. The following table summarizes
amounts recorded as the net loss of discontinued operation in the accompanying
consolidated statements of operations:
57
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Notes To Consolidated Financial Statements
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITIES
(CONTINUED)
For the Year Ended For the Nine Months
June 30, 1997 Ended June 30, 1996
---------------------- ----------------------
General and administrative expenses $ 100 $ 272,774
Professional services 219,397 95,000
Gain on sale of investment - (38,510)
---------------------- ---------------------
Net loss of discontinued operation $ 219,497 $ 329,264
====================== =====================
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.
CHANGE IN FISCAL YEAR
During Fiscal 1996, the Company elected to change its fiscal year end from
September 30 to June 30 to coincide with the fiscal year end of Nona Morelli's
II, Inc., the Company's then controlling parent.
CASH EQUIVALENTS
Cash equivalents are highly liquid investments with a maturity of three months
or less when acquired.
CONCENTRATION OF CREDIT RISK
As of June 30, 1997, the Company had cash on deposit with a financial
institution that exceeded the federally insured limit by approximately $545,000.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards ("SFAS") No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized, for
financial statement purposes. Disclosure about fair value of financial
instruments is based on pertinent information available to management as of June
30, 1997. Considerable judgment is necessary to interpret market data and
develop estimated fair value. The Company has determined that the fair value of
all financial instruments approximated their carrying value as of June 30, 1997
EQUIPMENT
Equipment is recorded at cost. Depreciation is provided using the straight-line
method over the estimated useful lives of the related assets which is five to
seven years. Maintenance and repairs are charged to operations as incurred.
58
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Notes To Consolidated Financial Statements
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITIES
(CONTINUED)
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes," which requires the use of the "liability method"
of accounting for income taxes. Accordingly, deferred tax liabilities and assets
are determined based on the difference between the financial statement and tax
bases of assets and liabilities, using enacted tax rates in effect for the year
in which the differences are expected to reverse. Current income taxes are based
on the year's income taxable for federal and state income tax reporting
purposes.
ACCOUNTING FOR EMPLOYEE STOCK OPTIONS
In October 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123, "Accounting for Stock-Based Compensation." In conformity with the
provisions of SFAS No. 123, the Company has determined that it will not change
to the fair value method presented by SFAS No. 123 and will continue to follow
Accounting Principle Board Opinion No. 25 for measurement and recognition of
employee stock-based transactions. There were no stock options granted to
employees during Fiscal 1997 and 1996.
ISSUANCE OF STOCK FOR SERVICES
Shares of the Company's common stock issued for services are recorded in
accordance with SFAS No. 123 at the fair market value of the stock issued or the
fair market value of the services provided, whichever value is more reliably
measurable. The value of the services are typically stipulated by contractual
agreements.
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 ($23,800 and $17,850 for
Fiscal 1997 and Fiscal 1996, 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.
RECLASSIFICATION OF PRIOR YEAR AMOUNTS
To enhance comparability, Fiscal 1996 consolidated financial statements have
been reclassified, where appropriate, to conform with the financial statement
presentation used in Fiscal 1997, and to disclose the discontinued operations of
CMA.
59
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Notes To Consolidated Financial Statements
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITIES
(CONTINUED)
RECENT ACCOUNTING DEVELOPMENTS
In February 1997, FASB issued SFAS No. 128, "EARNINGS PER SHARE" ("EPS"). SFAS
No. 128 requires all companies to present "basic" EPS and, if they have a
complex capital structure, "diluted" EPS. Under SFAS No. 128, "basic" EPS is
computed by dividing income (adjusted for any preferred stock dividends) by the
weighted average number of common shares outstanding during the period.
"Diluted" EPS is computed by dividing income (adjusted for any preferred stock
or convertible stock dividends and any potential income or loss from convertible
securities) by the weighted average number of common shares outstanding during
the period plus the number of additional common shares that would have been
outstanding if any dilutive potential common stock had been issued. The issuance
of anti-dilutive potential common stock should not be considered in the
calculation. In addition, SFAS No. 128 requires certain additional disclosures
relating to EPS. SFAS No. 128 is effective for financial statements issued for
periods ending after December 15, 1997. Thus, the Company expects to adopt the
provisions of this statement in fiscal year 1998. Management does not expect the
adoption of this pronouncement to have a significant impact on the Company's
financial statements.
In June 1997, the FASB issued SFAS No. 130, "REPORTING COMPREHENSIVE INCOME."
This statement establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in an entity's
financial statements. This statement requires an entity to classify items of
other comprehensive income by their nature in a financial statement and display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in-capital in the equity section of a statement of
financial position. This pronouncement is effective for fiscal years beginning
after December 15, 1997 and the Company expects to adopt the provision of this
statement in fiscal year 1998. Management does not expect this statement to
significantly impact the Company's financial statements.
In June 1997, the FASB issued SFAS No. 131, "DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION." This statement requires public enterprises
to report financial and descriptive information about its reportable operating
segments and establishes standards for related disclosures about product and
services, geographic areas, and major customers. This pronouncement is effective
for fiscal years beginning after December 15, 1997 and the Company expects to
adopt the provisions of this statement in fiscal year 1998. Management does not
expect this statement to significantly impact the Company's financial
statements.
60
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Notes To Consolidated Financial Statements
NOTE 2. ACQUISITION OF NATIONAL POOLS CORPORATION
On June 13, 1996, Nona Morelli's II, Inc. ("Nona"), the then controlling parent
of Group V, granted an option (the "Option") to Joseph Monterosso, the current
President of the Company, to acquire 250,000 Series B Preferred Shares of Group
V (the "Series B Shares") owned by Nona. The Option is exercisable at a price of
$13.00 per share.
On December 19, 1996, Group V entered into Stock Purchase Agreements with each
of the shareholders of NPC pursuant to which Group V agreed to issue a series of
Secured Promissory Notes (the "Notes") in the aggregate principal amount of
$1,200,000 and 1,000,000 shares of Group V's restricted 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 maximum of 241,900,000 shares of
Group V common stock. The conversion of the Notes are contingent upon NPC's
operations achieving certain financial goals over the next several fiscal years.
The terms of the conversion are, 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 Group V common stock. The Notes are
non-recourse to Group V, secured by the assets of NPC, bear interest at 8% per
annum, and are due and payable on May 31, 1999 (Note 3). As part of this
acquisition, Nona and Group V agreed to a debt assumption agreement whereby all
Group V debt in excess of $20,000 on December 24, 1996, except for amounts owed
to certain affiliates, which have been converted into shares of Group V common
stock, was assumed by Nona (Note 8). The NPC Stock Purchase Agreements closed on
December 24, 1996.
On June 13, 1997, Mr. Monterosso exercised the Option to purchase 128,041 Series
B Shares, at $13.00 per share, by payment to Nona of approximately $1,665,000.
The 128,041 Series B Shares acquired may be immediately converted into 9,987,198
shares of restricted Group V common stock. Additionally on June 13, 1997, Group
V sold its wholly owned subsidiary, CMA, to Nona for cash of $1,140,000, notes
receivable from NPC aggregating $245,836, and a credit against the Nona
intercompany account of $95,000. The Fiscal 1997 operations of CMA through the
sale date of June 13, 1997 has been presented as a discontinued operation in the
accompanying consolidated statements of operations (Note 1). The gain on sale of
CMA of $799,478 has been accounted for as a capital contribution in the
accompanying consolidated statements of stockholders' equity.
On August 22, 1997 and effective June 13, 1996, the Option was amended (the
"Amended Option") to increase the exercise price for 21,959 of the Series B
Shares from $13.00 per share to $72.20 per share, or approximately $1,585,000
for the 21,959 shares of Series B Preferred Stock. The option to purchase the
remaining 100,000 shares of Series B Shares was terminated. Concurrently, Nona
granted Mr. Monterosso a new option to purchase the remaining 100,000 Series B
Shares at an exercise price of $11.70 per share. Additionally, as consideration
for granting the new option, Nona acquired the right to require Mr. Monterosso
to purchase all or any remaining unexercised shares of the 100,000 Series B
Shares in its entirety by September 1, 1998.
61
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Notes To Consolidated Financial Statements
NOTE 2. ACQUISITION OF NATIONAL POOLS CORPORATION (CONTINUED)
Closing on September 2, 1997, but effective June 30, 1997, Mr. Monterosso
exercised the Amended Option to purchase 21,959 Series B Shares, at $72.20 per
share, by payment to Nona of approximately $1,585,000. The 21,959 Series B
Shares acquired may be immediately converted into 1,712,802 shares of restricted
Group V common stock. Concurrent with the exercise of the Amended Option, Group
V released Nona from liability, if any, arising from any events while Nona
controlled Group V, in exchange for approximately $1,585,000 of marketable
securities. Such marketable securities have not yet been delivered from escrow
and, accordingly, the consideration to be received by the Company has been
presented in the accompanying consolidated balance sheet as due from escrow.
Additionally, such consideration has been accounted for as a capital
contribution in the accompanying statements of stockholders' equity.
On September 2, 1997, Nona sold to Mr. Monterosso 6,000,000 New Class D Warrants
in consideration for a $1,800,000 promissory note secured by the New Class D
Warrants, due in September 1998. Each New Class D Warrant is exercisable at
$1.00 per share and entitles Mr. Monterosso to receive, upon exercise, two
shares of common stock, or a total of 12,000,000 common shares if all the of the
New Class D Warrants are exercised. The New Class D Warrants expire on March 30,
2004, and to date, none of the New Class D Warrants have been exercised.
On September 2, 1997, Nona granted to Mr. Monterosso an option to purchase
7,800,000 common shares of the Company exercisable at $0.15 per share after
Nona's election to convert its remaining 100,000 shares of Series B Preferred
Stock into 7,800,000 common shares.
As a result of the Company's acquisition of NPC and the sales and purchases of
the Series B Preferred Stock, as discussed above, a change in control of the
Registrant has occurred and the Registrant is now no longer a controlled
subsidiary of Nona.
BASIS OF PRESENTATION OF ACQUISITION
The acquisition of NPC presents Group V as the accounting acquiror. Since
conversion of the Notes (see Note 3) is based upon future earnings of NPC, which
is ultimately based upon the success of the Hit- LoTTo(TM) program, the
probability of the conversion is currently undeterminable and uncertain.
Although control of Group V may be transferred to the NPC shareholders upon
conversion of the Notes due to this uncertainty, the acquisition of NPC has been
accounted for under the purchase method of accounting in accordance with APB No.
16 with Group V deemed the accounting acquiror.
62
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Notes To Consolidated Financial Statements
NOTE 2. ACQUISITION OF NATIONAL POOLS CORPORATION (CONTINUED)
The following table summarizes the assets acquired and liabilities assumed by
the Company in connection with its acquisition of NPC, which closed on December
24, 1996.
Employee advances $ 30,939
Fixed assets, net 45,232
Software, net 38,245
Other assets 5,455
Goodwill 3,318,107 (a)
Liabilities assumed (2,112,978)
------------
Total consideration $ 1,325,000 (b)
============
(a) The excess of the purchase price over the fair market value of the net
assets acquired was approximately $3,318,107 and was 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 was immediately written off due to the uncertainty of
realizing any future benefit from this asset.
(b) Total consideration consists of convertible notes payable of
$1,200,000 (Note 3) and common stock aggregating $125,000 based on the
fair value of the Company's common stock on the close date.
NOTE 3. CONVERTIBLE NOTES PAYABLE
In connection with the Stock Purchase Agreements with each of the shareholders
of NPC (Note 2), the Company issued Secured Promissory Notes (the "Notes") in
the aggregate principal amount of $1,200,000. The Notes are convertible into a
maximum of 241,900,000 shares of Group V common stock. The conversion of the
Notes is contingent upon NPC's operations achieving certain financial goals over
the next several fiscal years. The terms of the conversion are, 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 Group V
common stock. The Notes are non-recourse to Group V, secured by the assets of
NPC, bear interest at 8% per annum, and are due and payable on May 31, 1999. As
such, the Notes are included in long-term debt at June 30, 1997 in the
accompanying consolidated balance sheet.
63
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Notes To Consolidated Financial Statements
NOTE 4. STOCKHOLDERS' EQUITY
COMMON SHARES RESERVED FOR ISSUANCE
At June 30, 1997, shares of common stock were reserved for the exercise and
conversion of the following:
Preferred stock:
14% Preferred Stock issued and outstanding 170,000
Series B Preferred Stock issued and outstanding 19,500,000
Redeemable common stock purchase warrants:
New Class A (exercisable at $.50 per share) 1,530,000
New Class B (exercisable at $.75 per share) 3,080,000
New Class C (exercisable at $1.00 per share) 1,510,000
New Class D (exercisable at $.50 per share) 12,000,000
1993 Incentive and Non-qualified Stock
Options - available for grant 1,200,000
1991 Non-qualified Stock Options - available for grant 600,000
1989 Incentive Stock Options - available for grant 500,000
1989 Non-qualified Stock Options: available for grant 500,000
Other Stock Options:
Grants outstanding 847,500
NPC Convertible Notes Payable 214,900,000
-----------
Total 256,337,500
===========
None of the common stock purchase warrants have been exercised as of the date of
this report, accordingly no shares have been issued or reflected in the
stockholders' equity section of the accompanying consolidated balance sheet.
PREFERRED STOCK
During 1989, stockholders authorized the issuance of up to 1,000,000 shares of
preferred stock with a par value of $.01 per share.
During 1989, the Company sold 750,000 shares of preferred stock designated as
14% cumulative convertible preferred stock (the "14% Preferred Stock"). The 14%
Preferred Stock is redeemable, in whole or in part, at the option of the Company
at a redemption price of $100 per share plus any unpaid dividends thereon to the
redemption date. The 14% Preferred Stock has a liquidation value of $1.00 per
share, ranks, as to dividends and liquidation, prior to the common stock and is
convertible at the option of the holder upon 30 days notice into one share of
common stock, subject to adjustments in certain events. Each share is entitled
to one vote and an annual dividend of $.14 per share. Dividends are cumulative
and payable quarterly when declared. Dividends on common stock may not be paid
unless provision has been made for payment of preferred dividends.
No 14% Preferred Stock was converted and no dividends were declared or paid on
the 14% Preferred Stock during Fiscal 1997 and 1996. Dividends in arrears
aggregated $158,225 at June 30, 1997.
64
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Notes To Consolidated Financial Statements
NOTE 4. STOCKHOLDERS' EQUITY (CONTINUED)
The 14% Preferred Stock has a liquidation preference of the original purchase
price ($1.00 per share) plus unpaid dividends on each share thereof. 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. Subject to
anti-dilution 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 of dilution, i.e. proportional adjustments
for stock splits and stock dividends will be made.
In March 1994, pursuant to a stock purchase agreement with Nona and CMA, the
Company issued 250,000 shares of Series B Preferred Stock to Nona. 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 nonassessable shares of common stock, or a
total of 19,500,000 shares of common stock if all of the shares of Series B
Preferred Stock are converted. As discussed in Note 2, Nona sold 150,000 shares
of Series B Preferred Stock to Mr. Monterosso and converted the remaining
100,000 shares of Series B Preferred Stock into 7,800,000 shares of the
Company's common stock (Note 2).
PRIVATE SALE OF COMMON STOCK AND NEW WARRANTS
During June 1993, the Company undertook a private placement of 25 units for an
aggregate sales price of $250,000 ("Private Placement I"), with each unit
consisting of 40,000 shares of common stock, 40,000 New Class A redeemable
common stock purchase warrants ("New Class A Warrants") and 40,000 New Class B
redeemable common stock purchase warrants ("New Class B Warrants"). Each New
Class A Warrant entitles the holder to purchase one share of common stock at the
price of $.50 per share for the period from August 1, 1993 to the effective date
of a registration statement registering the common stock and the common stock
underlying the New Class A Warrants offered and issuable under the related
private placement memorandum. Each New Class B Warrant entitles the holder to
purchase one share of common stock at the price of $.75 per share for the period
from August 1, 1993 to the effective date of a registration statement
registering the common stock and the common stock underlying the New Class B
Warrants offered and issuable under the related private placement memorandum.
During July 1993, the Company undertook a private placement of an additional 25
units for an aggregate sales price of $250,000 ("Private Placement II"), with
each unit consisting of 40,000 shares of common stock, 40,000 New Class A
Warrants, and 40,000 New Class B Warrants.
During August 1993, the Company undertook a private placement of an additional
20 units for an aggregate sales price of $200,000 ("Private Placement III"),
with each unit consisting of 40,000 shares of common stock, 40,000 New Class A
Warrants, and 40,000 New Class B Warrants.
In connection with Private Placements I, II and III, the Company received
proceeds of $559,000 (net of sales agent and other direct costs which aggregated
$141,000) from the sale of 70 units and issued 2,800,000 shares of common stock,
2,800,000 New Class A Warrants and 2,800,000 New Class B Warrants during fiscal
year 1993.
65
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Notes To Consolidated Financial Statements
NOTE 4. STOCKHOLDERS' EQUITY (CONTINUED)
In September 1993, in an effort to encourage early exercise, the Company offered
one New Class C redeemable common stock purchase warrant ("New Class C
Warrants") for each New Class A Warrant exercised on or before September 30,
1993. In connection with that offer, 1,550,000 New Class A Warrants were
exercised resulting in the issuance of an additional 1,550,000 shares of common
stock for $775,000 and 1,550,000 New Class C Warrants. Each New Class C Warrant
entitles the holder to purchase one share of common stock at the price of $1.00
per share.
The Company received $50,000, $300,000 and $1,090,000 from other private sales
of 300,000, 1,371,500 and 1,090,000 shares of restricted common stock during
1993, 1992 and 1991, respectively. The 1993 private sales included 100,000 New
Class A Warrants and 100,000 New Class B Warrants. No amounts were recorded on
the balance sheet for the issuance or valuation of the warrants as all proceeds
were recorded in common stock and additional paid-in-capital accounts. All New
Class A, B and C Warrants are exercisable up to one year after the effective
date of the registration of the underlying stock. As of the date of this report,
the registration of the underlying stock has not been finalized and therefore is
not yet effective.
In March 1994, pursuant to a stock purchase agreement with Nona and CMA, the
Company issued 6,000,000 New Class D Warrants to Nona. Each New Class D Warrant
is exercisable at $1.00 per share 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, and to date, none of the New Class D Warrants have been
exercised. In September 1997, Nona sold the New Class D Warrants to Mr.
Monterosso for a $1,800,000 promissory note secured by the New Class D Warrants
(Note 2).
1993 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLANS
Under stock option plans adopted on January 22, 1993, the Company's Board of
Directors may grant "incentive stock options" and "non-qualified stock options"
whereby option holders may purchase up to 1,200,000 shares of common stock prior
to the termination of the plan on January 22, 2003. Incentive stock options may
only be granted to officers and other employees; non-qualified stock options may
be granted to employees, advisors, consultants and members of the Board of
Directors of the Company. Incentive stock options may not be granted at a price
less than 100% of fair market value as of the date of grant to officers and
employees who own less than 10% of the Company's common stock and 110% of fair
market value to those officers and employees who own more than 10%.
Non-qualified stock options may be granted at a price to be determined by the
compensation committee of the Board of Directors on the date such non-qualified
stock options are granted. Options are exercisable from the date of grant and
expire no later than ten years from the date of grant or such earlier date as
determined by the compensation committee at the date of grant. However, the term
of an incentive stock option granted to an officer or other employee who at the
time of grant owns at least 10% of the Company's common stock, shall not exceed
five years. No options have been granted under the 1993 incentive and
non-qualified stock options plans.
66
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Notes To Consolidated Financial Statements
NOTE 4. STOCKHOLDERS' EQUITY (CONTINUED)
1991 NON-QUALIFIED STOCK OPTIONS
Under a stock option plan adopted on February 1, 1991, the Company's Board of
Directors may grant "non-qualified stock options" whereby employees may purchase
up to 600,000 shares of common stock prior to the termination of the plan on
February 1, 2001. Options must be granted at no less than 85% of fair market
value as of the date of grant. Options are exercisable from the date of grant
and expire no later than five years from the date of grant. No options were
issued or exercised during fiscal years 1997 or 1996. During Fiscal 1997,
150,000 options expired and were canceled. 600,000 options remain available for
grant as of June 30, 1997.
1989 INCENTIVE STOCK OPTIONS
Under a stock option plan adopted on July 30, 1989, the Company's Board of
Directors may grant "incentive stock options" whereby employees may purchase up
to 500,000 shares of common stock prior to the termination of the plan on July
30, 1999. Options may not be granted at a price less than 100% of fair market
value as of the date of grant to officers and employees who own less than 10% of
the Company's common stock and 110% of fair market value to those officers and
employees who own more than 10%. Options are exercisable from the date of grant,
and expire no later than five years from the date of grant. No options were
issued or exercised during fiscal years 1997 or 1996. During Fiscal 1997, 50,000
options expired and were canceled. 500,000 options remain available for grant as
of June 30, 1997.
1989 NON-QUALIFIED STOCK OPTIONS
Under a stock option plan adopted on July 30, 1989, the Company's Board of
Directors may grant "non-qualified stock options" whereby employees may purchase
up to 500,000 shares of common stock prior to the termination of the plan on
July 30, 1999. Options must be granted at no less than 85% of fair market value
as of the date of grant. Options are exercisable from the date of grant and
expire no later than five years from the date of grant. No options were issued
or exercised during fiscal years 1997 or 1996. During Fiscal 1997, 200,000
options expired and were canceled. 500,000 options remain available for grant as
of June 30, 1997.
THE NONA OPTION
In March 1994, pursuant to a stock purchase agreement with Nona and CMA, the
Company granted to Nona a nontransferable option for the purchase of up to
6,160,000 shares of the Company's common stock. The exercise price and total
number of shares that can be purchased upon exercise of the option is equal to
the exercise price and number of shares of common stock subject to New Class A,
New Class B and New Class C Warrants outstanding at the Closing Date that
eventually expired unexercised. The Warrant Agreements extend the expiration
dates of the respective warrants to one year after the effective date of a
registration statement, at which time Nona may exercise its option provided all
the New Class A, B and C Warrants have not been exercised. Nona does not hold
any of the New Class A, B or C Warrants, nor is it currently entitled to
exercise its Option. In conjunction with the sale of the New Class D Warrants
(Note 2), Nona also sold its rights to exercise any remaining unexercised New
Class A, New Class B and New Class C Warrants.
67
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Notes To Consolidated Financial Statements
NOTE 4. STOCKHOLDERS' EQUITY (CONTINUED)
OTHER STOCK OPTIONS
A summary of other stock option transactions for Fiscal 1997 and 1996 is as
follows:
Year Nine Months
Ended Ended
June 30, 1997 June 30, 1996
----------------- -------------------
Outstanding at beginning of year 6,281,176 5,875,000
Granted - 1,275,000
Exercised (5,433,676) (868,824)
Canceled - -
Issued - -
----------------- -------------------
Outstanding at end of year 847,500 6,281,176
================= ===================
Range of option exercise prices granted - $.12 - $1.00
STOCK OPTIONS GRANTED
There were no stock options granted in Fiscal 1997 and the stock options granted
in Fiscal 1996 are described in Note 5.
STOCK OPTIONS EXERCISED
During Fiscal 1997, 5,433,676 common shares were issued upon exercise of options
by affiliates of the Company in the aggregate amount of $652,041 or $.12 per
share. The Company received notes in the aggregate amount of $584,167 and
aggregate cash payments of $67,874 as consideration for the exercise of these
options. The notes are due May 1998 and earn interest at 10% per annum.
During Fiscal 1996, 868,824 common shares were issued upon exercise of options
by the President of the Company in the amount of $104,258, or $.12 per share.
The Company received a note receivable in the amount of $78,758 and a cash
payment of $25,500 as consideration for the exercise of these options. The note
receivable was fully paid during Fiscal 1997.
SHARES ISSUED TO ADVISORS
During Fiscal 1997, 3,626,040 common shares were issued primarily to advisors
and consultants for services rendered during Fiscal 1997 and 1996. In accordance
with SFAS No. 123, the Company recorded related expenses based on the fair value
of the services received which was more reliably measurable.
68
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Notes To Consolidated Financial Statements
NOTE 5. RELATED PARTY EMPLOYMENT AND CONSULTING AGREEMENTS
FORMER OFFICERS AND DIRECTORS
In August 1995, the Company entered into an Employment Agreement with Fred G.
Luke, the Company's former Chairman and President. Mr. Luke served as the
Company's Chairman and President since approximately March 31, 1994 through
August 8, 1997, and November 25, 1996, respectively. The terms of the Employment
Agreement call for Mr. Luke to receive $4,500 per month, retroactive to April 1,
1994, for five (5) years as a base salary; and, grant him an option to purchase
3,000,000 shares of the Company's common stock at an exercise price of $.12 per
share. In May 1997, 198,715 common shares were issued in settlement of all
amounts owed to Mr. Luke as of May 5, 1997. The Company expensed $54,000 and
$40,500 during Fiscal 1997 and 1996, respectively, and had no amounts due to Mr.
Luke as of June 30, 1997. Mr. Luke's Employment Agreement was terminated
effective May 5, 1997.
Effective April 1, 1996, the Company renewed a consulting agreement with John D.
Desbrow through March 31, 1997 to perform legal services and to hold the office
of Secretary. Under the renewed consulting agreement the Company contracted to
pay Mr. Desbrow $75,000 per annum for the renewal term payable in the Company's
common stock. In May 1997, 102,030 common shares were issued in settlement of
all amounts owed to Mr. Desbrow as of May 5, 1997. 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 $75,000. The Company
expensed $62,500 and $43,750, during Fiscal 1997 and 1996, respectively, and had
no amounts due to Mr. Desbrow as of June 30, 1997. Mr. Desbrow's renewed
consulting agreement was terminated on May 5, 1997.
In July 1996, the Company renewed a consulting agreement with Steven H. Dong,
pursuant to which Mr. Dong is to perform accounting services and to hold the
office of Chief Financial Officer through June 30, 1997. Pursuant to the renewed
consulting agreement the Company agreed to pay Mr. Dong $39,000 per annum in
cash or in the Company's common stock, payable monthly in arrears. In May 1997,
237,500 common shares were issued in settlement of all amounts owed to Mr. Dong
as of May 5, 1997. Under the terms of the renewed consulting agreement, Mr. Dong
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. Dong and the Company have agreed the price paid for the
shares is deemed to be $39,000. The Company expensed $39,000 and $15,000 during
Fiscal 1997 and 1996, respectively, and had no amounts due to Mr. Dong as of
June 30, 1997. Mr. Dong's renewed consulting agreement was terminated effective
May 5,1997. Effective July 1, 1997, NPC entered into a new employment agreement
with Mr. Dong to perform accounting services and to hold the office of Chief
Financial Officer (see below.)
The Luke Family Trust and Lawver Corp. owns 93% and 7%, respectively, of NuVen
Advisors. Fred G. Luke, as trustee of the Luke Trust, controls the Luke Trust
and Mr. Jon Lawver is the majority shareholder of Lawver Corp. and thereby
controls Lawver Corp. Effective October 1, 1995, Group V and CMA renewed
Advisory and Management Agreements with NuVen Advisors for the engagement of
NuVen Advisors to perform professional services for Fiscal 1997 and 1996.
Pursuant to such renewal, Group V and CMA agreed to pay NuVen Advisors $120,000
annually, payable monthly in arrears. In May 1997, 787,180 common shares were
issued in settlement of all amounts owed to NuVen Advisors as of May 5, 1997.
The Company expensed $240,000 and $225,000, during Fiscal 1997 and 1996,
respectively, and had no amounts due to NuVen Advisors as of June 30, 1997.
NuVen Advisors' agreements were terminated effective May 5, 1997.
69
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Notes To Consolidated Financial Statements
NOTE 5. RELATED PARTY EMPLOYMENT AND CONSULTING AGREEMENTS (CONTINUED)
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 year 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. In May 1997, 1,000,000
common shares were issued in settlement of all amounts owed to SAI as of May 5,
1997. The Registrant expensed $200,000 and $75,000 during fiscal years 1997 and
1996, respectively, and had no amounts due to SAI as of June 30, 1997. SAI's
agreement was terminated effective May 5, 1997.
NEW OFFICERS AND DIRECTORS
Effective July 1, 1997, the Company entered into an employment agreement with
Dennis Houston to serve as the NPC's Chief Operating Officer and a Director of
the Company. The agreement compensates Mr. Houston $100,000 per annum through
December 31, 1997, and $200,000 per annum through June 30, 2000, payable in cash
or in common stock. The agreement also granted Mr. Houston an option to purchase
5,250,000 common shares of the Company at an exercise price of $0.50 per share
and participation in the Company's management bonus program.
On April 1, 1994, NPC entered into an employment agreement with Joseph
Monterosso to serve as NPC's Chief Executive Officer. In conjunction with the
acquisition of NPC, Mr. Monterosso became the Company's President and Director
on November 25, 1996, and Chairman on August 8, 1997. The agreement compensates
Mr. Monterosso $125,000 per annum and $250,000 per annum upon the first sale of
the Company's HitLoTTo(TM) Value Card, payable in cash or in common stock of the
Company.
Effective July 1, 1997, the Company entered into an employment agreement with
Steven H. Dong to serve as the Company's Chief Financial Officer. The agreement
compensates Mr. Dong $105,000 per annum through June 30, 1998, and $125,000 per
annum through June 30, 1999, payable in cash or in common stock of the Company.
The agreement also granted Mr. Dong an option to purchase 800,000 common shares
of the Company at an exercise price of $0.50 per share and participation in the
Company's management bonus program.
NOTE 6. INCOME TAXES
The income tax effects of significant items comprising the Company's net
deferred income tax assets and liabilities as of June 30, 1997 and 1996 are as
follows:
1997 1996
-------------- --------------
Accrued expenses $ 185,000 $ -
Valuation allowance (185,000) -
-------------- --------------
Current portion of deferred tax liabilities $ - $ -
============== ==============
Depreciation and amortization $ (3,000) $ 154,000
Net operating loss carryforwards 3,470,000 2,796,000
Valuation allowance (3,467,000) (2,950,000)
-------------- --------------
Long-term portion of deferred tax liabilities $ - $ -
============== ==============
70
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Notes To Consolidated Financial Statements
NOTE 6. INCOME TAXES (CONTINUED)
The reconciliation of income taxes computed at the federal statutory tax rate to
income tax expense at the effective income rate is as follows:
1997 1996
-------- --------
Federal statutory income tax (benefit) rate (34.0)% (34.0)%
Increases (decreases) resulting from:
Goodwill 36.1 -
Net change in valuation allowance (2.1) 34.0
-------- --------
Effective income benefit rate -% -%
======== ========
The Company has federal and state net operating losses ("NOL's") approximating
$9,510,000 and $4,150,000, respectively. A significant portion of the NOL's
resulted from the acquisition of NPC and may be subject to ownership change
limitations. The federal NOL's carryforwards begin to expire in fiscal year
2005. The state NOL's carryforwards begin to expire in fiscal year 1998. In
addition, utilization of the NOL's may be limited under Section 382 of the
Internal Revenue Code due to additional ownership changes.
At June 30, 1997 and 1996, a 100% valuation allowance has been provided to
reduce the Company's net deferred tax assets for the amount by which the
deferred tax asset exceeded the net deferred tax liability resulting from all
temporary differences. The Company has provided the allowance since management
could not determine that is was "more likely than not" that the benefits of the
deferred tax assets would be realized.
NOTE 7. COMMITMENTS AND CONTINGENCIES
OPERATING LEASE
The Company sublets office space in San Francisco, California from a
stockholder. The related lease expires June 2002. Future minimum annual rental
payments required under the terms of the lease are as follows for the years
ending June 30,:
1998 $ 41,221
1999 42,870
2000 44,585
2001 46,369
2002 48,223
------------
Total $ 223,268
============
Rent expense aggregated $22,811 and $540 in Fiscal 1997 and 1996, respectively.
LEGAL PROCEEDINGS
The Company's legal proceedings during Fiscal 1997 were associated with Nona and
CMA and therefore do not involve the Company since CMA was sold to Nona and
since Nona is no longer a controlling parent (Note 2).
71
<PAGE>
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Notes To Consolidated Financial Statements
NOTE 8. EXTRAORDINARY ITEM
During Fiscal 1997, NPC extinguished a note payable, related accrued interest
and certain trade obligations aggregating $1,475,503 by making aggregate cash
payments of $153,033. In addition, as discussed in Note 2, Nona assumed
liabilities of the Company aggregating $45,984. Such debt forgiveness has been
recorded as an extraordinary gain in the accompanying consolidated statements of
operations. The extraordinary item has not been presented net of tax due to the
Company's current year net loss and existing net operating loss carryforwards.
NOTE 9. SUBSEQUENT EVENT
In September 1997, the Company agreed in principle to acquire a 50% convertible
net profits interest ("Net Profits Interest") in Universal Network Services,
Inc. ("UNSI"). NPC's Chief Operating Officer is a shareholder and officer of
UNSI. The Net Profits Interest will provide the Company with up to 50% of UNSI's
net operating profit and grant the Company the option to convert its Net Profits
Interest into an equity interest of up to 100% of UNSI's issued and outstanding
common stock. No agreements have yet been executed and negotiations are still in
process. UNSI is an interexchange carrier that provides telecommunications
services to both residential and business customers throughout the United States
and certain foreign countries.
72
<PAGE>
GROUP V CORPORATION
(FORMERLY, NUOASIS GAMING, INC.)
CONSOLIDATED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1997 (UNAUDITED)
SEPTEMBER 30,
1997
----------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 436,180
Marketable securities 1,585,468
Advances 519,400
----------------
Total Current Assets 2,541,048
----------------
Fixed assets
Equipment 45,232
Less accumulated depreciation (11,173)
----------------
Total Fixed Assets, net 34,059
----------------
Other assets 4,405
----------------
TOTAL ASSETS $ 2,579,512
================
CURRENT LIABILITIES:
Accounts payable $ 441,329
Due to affiliates 391,538
Accrued expenses and accrued interest 101,951
----------------
Total Current Liabilities 934,818
----------------
LONG TERM LIABILITIES:
Notes payable 1,200,000
----------------
Total Long Term Liabilities 1,200,000
----------------
Total Liabilities 2,134,818
----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
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
Preferred Stock Series B - par value $2.00; authorized,
issued and outstanding 150,000 shares (aggregate liquidation
of 300,000) 300,000
Common stock - par value $.01; authorized 333,000,000
shares; 47,859,880 shares issued and outstanding 478,598
Additional paid-in capital 16,208,793
Stockholders' receivables (553,967)
Accumulated deficit (15,990,430)
----------------
Total Stockholders' Equity 444,694
----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 2,579,512
================
See accompanying notes to these consolidated condensed financial statements
73
<PAGE>
GROUP V CORPORATION
(FORMERLY, NUOASIS GAMING, INC.)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1997 1996
------------ ------------
(UNAUDITED) (UNAUDITED)
Costs and expenses:
General and administrative $ 173,258 $ 16,874
Professional Services 177,848 172,193
Depreciation and amortization 4,410 -
Interest expense, net 17,385 -
------------ ------------
Totals 372,901 189,067
------------ ------------
Net loss $ (372,901) $ (189,067)
============ ============
Net loss applicable to
common stock $ (378,851) $ (195,107)
============ ============
Net loss per common share $ (.01) $ (.01)
============ ============
Weighted average common
shares outstanding 42,179,445 29,651,740
============ ============
See accompanying notes to these consolidated condensed financial statements
74
<PAGE>
<TABLE>
GROUP V CORPORATION
(FORMERLY, NUOASIS GAMING, INC.)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------
1997 1996
----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Operating activities:
Net loss $ (372,901) $ (189,067)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 4,410 -
Increase (decrease) from changes in: -
Advances (62,409) -
Other assets 17,841 -
Accounts payable, accrued expenses and interest 80,507 (24,289)
Due to affiliate 61,007 94,827
----------- ----------
Net cash used in operating activities (271,545) (118,529)
----------- ----------
Financing activities:
Proceeds from stockholders' receivables 30,200 120,467
----------- ----------
Net cash provided by financing activities 30,200 120,467
----------- ----------
Net (decrease) increase in cash and cash equivalents (241,345) 1,938
Cash and cash equivalents, beginning of period 677,525 84
----------- ----------
Cash and cash equivalents, end of period $ 436,180 $ 2,022
=========== ==========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Income taxes $ - $ -
Interest $ - $ -
Non-cash investing and financing activities:
Preferred Stock Series B Converted to Common Stock $ 200,000 $ -
</TABLE>
See accompanying notes to these consolidated condensed financial statements
75
<PAGE>
GROUP V CORPORATION
(FORMERLY, NUOASIS GAMING, INC.)
NOTES TO CONSOLIDATED CONDENSED STATEMENTS
SEPTEMBER 30, 1997 (UNAUDITED)
NOTE 1.GENERAL
PRINCIPLES OF CONSOLIDATION
Group V Corporation and its subsidiary ("the Company"), operates as a holding
company for leisure and entertainment related businesses. Group V Corporation
was incorporated in the State of Delaware in 1987. During the quarter ended
September 30, 1997, the Company and its wholly-owned subsidiary were engaged in
gaming and investment development activities. The activities of the Company's
subsidiaries have been primarily in the United States.
The accompanying unaudited consolidated condensed financial statements include
the accounts of Group V Corporation (formerly, NuOasis Gaming, Inc.) ("Group V",
the "Company" or the "Registrant") and its wholly-owned subsidiary, National
Pools Corporation ("NPC"). As used herein, the above is 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 consolidated condensed
financial statements reflect all adjustments, consisting of normal recurring
accruals, necessary to present fairly the Registrant's financial position as of
September 30, 1997, and its results of operations and cash flows for the three
months then ended. Information included in the unaudited consolidated condensed
balance sheet as of September 30, 1997 has been derived from the Registrant's
audited consolidated balance sheet included in the Registrant's 1997 Form
10-KSB. The accompanying unaudited consolidated condensed financial statements
should be read in conjunction with the consolidated financial statements and
other information in the fiscal 1997 Form 10-KSB. The unaudited results of
operations for the three months ended September 30, 1997 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.
CASH EQUIVALENTS
Cash equivalents are highly liquid investments with a maturity of three months
of less when acquired.
CONCENTRATION OF CREDIT RISK
As of September 30, 1997, the Company had cash on deposit with a financial
institution that exceeded the federally insured limit by approximately $305,000.
77
<PAGE>
GROUP V CORPORATION
(FORMERLY, NUOASIS GAMING, INC.)
NOTES TO CONSOLIDATED CONDENSED STATEMENTS
SEPTEMBER 30, 1997 (UNAUDITED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards ("SFAS") No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized, for
financial statement purposes. Disclosure about fair value of financial
instruments is based on pertinent information available to management as of
September 30, 1997. Considerable judgment is necessary to interpret market data
and develop estimated fair value. The Company has determined that the fair value
of all financial instruments approximated their carrying value as of September
30, 1997.
EQUIPMENT
Equipment is recorded at cost. Depreciation is provided using the straight-line
method over the estimated useful lives of the related assets which is five to
seven years. Maintenance and repairs are charged to operations as incurred.
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"ACCOUNTING FOR INCOME TAXES," which requires the use of the "liability method"
of accounting for income taxes. Accordingly, deferred tax liabilities and assets
are determined based on the difference between the financial statement and tax
bases of assets and liabilities, using enacted tax rates in effect for the year
in which the differences are expected to reverse. Current income taxes are based
on the year's income taxable for federal and state income tax reporting
purposes.
ACCOUNTING FOR EMPLOYEE STOCK OPTIONS
In October 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION." In conformity with the
provisions of SFAS No. 123, the Company has determined that it will not change
to the fair value method presented by SFAS No. 123 and will continue to follow
Accounting Principle Board Opinion No. 25 for measurement and recognition of
employee stock-based transactions.
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 quarter ended
September 30, 1997.
LOSS PER COMMON SHARE
Loss per common share is computed based on the net loss for each period, as
adjusted for dividends required on preferred stock ($5,950 and $5,950 for the
three months ended September 30, 1997, and 1996, 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.
78
<PAGE>
GROUP V CORPORATION
(FORMERLY, NUOASIS GAMING, INC.)
NOTES TO CONSOLIDATED CONDENSED STATEMENTS
SEPTEMBER 30, 1997 (UNAUDITED)
REVENUE RECOGNITION
There were no revenues during the three months ended September 30, 1997 and
1996.
RECLASSIFICATION OF PRIOR YEAR AMOUNTS
To enhance comparability, the fiscal 1997 consolidated financial statements have
been reclassified, where appropriate, to conform with the financial statement
presentation used in fiscal 1998.
NOTE 2. ACQUISITIONS
NATIONAL POOLS CORPORATION
On June 13, 1996, Nona Morelli's II, Inc. ("Nona"), the then controlling parent
of Group V, granted an option (the "Option") to Joseph Monterosso, the current
President of the Company, to acquire 250,000 Series B Preferred Shares of Group
V (the "Series B Shares") owned by Nona. The Option is exercisable at a price of
$13 per share.
On December 19, 1996, Group V entered into Stock Purchase Agreements with each
of the shareholders of NPC pursuant to which Group V agreed to issue a series of
Secured Promissory Notes (the "Notes") in the aggregate principal amount of
$1,200,000 and 1,000,000 shares of Group V's restricted 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 maximum of 241,900,000 shares of
Group V common stock. The conversion of the Notes are contingent upon NPC's
operations achieving certain financial goals over the next several fiscal years.
The terms of the conversion are, for every $250,000 of net annual operating
income achieved by NPC, $7,500 in principal amount of the Notes may be converted
in 1,511,875 shares of restricted Group V common stock. The Notes are
non-recourse to Group V, secured by the assets of NPC, bear interest at 8% per
annum, and are due and payable on May 31, 1999. As part of this acquisition,
Nona and Group V agreed to a debt assumption agreement whereby all of Group V
debt in excess of $20,000 on December 24, 1996, except for amounts owned to
certain affiliates, which have been converted into shares of Group V common
stock, was assumed by Nona. The NPC Stock Purchase Agreements closed on December
24, 1996.
On June 13, 1997, Mr. Monterosso exercised the Option to purchase 128,041 Series
B Shares, at $13 per share, by payment to Nona of approximately $1,665,000. The
128,041 Series B Shares acquired may be immediately converted in 8,987,198
shares of restricted Group V common stock. Additionally on June 13, 1997, Group
V sold it wholly owned subsidiary, CMA, to Nona for cash of $1,140,000, notes
receivable from NPC aggregating $245,836, and a credit against the Nona
intercompany account of $95,000.
79
<PAGE>
GROUP V CORPORATION
(FORMERLY, NUOASIS GAMING, INC.)
NOTES TO CONSOLIDATED CONDENSED STATEMENTS
SEPTEMBER 30, 1997 (UNAUDITED)
On August 22, 1997, and effective June 13, 1997, the Option was amended (the
"Amended Option") to increase the exercise price for 21,959 of the Series B
Shares from $13 per share to $72.20 per share, or approximately $1,585,000 for
the 21, 959 shares of Series B Preferred Stock. The option to purchase the
remaining 100,000 shares of Series B shares was terminated. Concurrently, Nona
granted Mr. Monterosso a new option to purchase the remaining 100,000 Series B
Shares at an exercise price of $11.70 per share. Additionally, as consideration
for granting the new option, Nona acquired the right to require Mr. Monterosso
to purchase all or any remaining unexercised shares of the 100,000 Series B
Shares in its entirety by September 1, 1998.
Closing on September 2, 1997, but effective June 30, 1997, Mr. Monterosso
exercised the Amended Option to purchase 21,959 Series B Shares, at $72.20 per
share, by payment to Nona of approximately $1,585,000. The 21,959 Series B
Shares acquired may be immediately converted into 1,712,803 shares of
restricted Group V common stock. Concurrent with the exercise of the Amended
Option, Group V released Nona from liability, if any, arising from any events
while Nona controlled Group, in exchange for approximately $1,585,000 of
marketable securities ("Marketable Securities"). Subsequent to June 30, 1997,
the Marketable Securities have been delivered from escrow and, accordingly, the
consideration received by the Company has been presented in the accompanying
unaudited consolidated condensed balance sheet as marketable securities.
Additionally, such consideration has been accounted for as a capital
contribution.
On September 2, 1997, Nona sold to Mr. Monterosso 6,000,000 New Class D Warrants
in consideration for a $1,800,000 promissory note secured by the New Class D
Warrants, due in September 1998. Each New Class D Warrant is exercisable at $1
per share and entitles Mr. Monterosso to receive, upon exercise, two shares of
common stock, or a total of 12,000,000 common shares if all the New Class D
Warrants have been exercised.
On September 2, 1997, Nona granted to Mr. Monterosso an option to purchase
7,800,000 common shares of the Company exercisable at $0.15 per share after Nona
converted its remaining 100,000 shares of Series B Preferred Stock into
7,800,000 common shares.
As a result of the Company's acquisition of NPC and the sales and purchases of
the Series B Preferred Stock, as discussed above, a change in control of the
Registrant has occurred and the Registrant is now no longer a controlled
subsidiary of Nona.
UNIVERSAL NETWORK SERVICES, INC.
In September 1997, the Company agreed in principle to acquire a 50% convertible
net profits interest ("Net Profits Interest") in Universal Network Services,
Inc. ("UNSI"). NPC's Chief Operating Officer is a shareholder and officer of
UNSI. The Net Profits Interest will provide the Company with up to 50% of UNSI's
net operating profit and grant the Company the option to convert its Net Profits
Interest into and equity interest of up to 100% of UNSI's issued and outstanding
common stock. No agreements have yet been executed and negotiations are still in
process. UNSI is an interexchange carrier that provided telecommunications
services to both residential and business customers throughout the United States
and certain foreign countries.
780
<PAGE>
GROUP V CORPORATION
(FORMERLY, NUOASIS GAMING, INC.)
NOTES TO CONSOLIDATED CONDENSED STATEMENTS
SEPTEMBER 30, 1997 (UNAUDITED)
MAGNET TELECOM, INC.
In October 1997, the Company agreed in principle to purchase a fifty percent net
profits interest in Magnet Telecom, Inc. ("MTI") a privately held
telecommunications network marketing company and an affiliate of UNSI. As of the
date of this Report, no agreements have been finalized.
LOTTOWORLD, INC.
Also in October 1997, the Company and Lottoworld, Inc. agreed in principle to
form a new joint venture company whereby Lottoworld will assign all of its
publishing assets, including the Lottoworld Magazine, to the new joint venture
company. As of the date of this report no agreements have been finalized.
NOTE 3. NEW DIRECTORS
During the quarter ended September 30, 1997, Mr. Joseph Monterosso replaced Mr.
Fred G. Luke as Chairman and Mr. Dennis D. Houston replaced Mr. Royce Warren as
a Director.
NOTE 4. SUBSEQUENT EVENT
During October 1997, the Company agreed in principle with Nona to exchange the
Marketable Securities for $700,000 in cash, a $500,000 promissory note and
1,440,000 unrestricted common shares of Nona. As of the date of this Report, no
agreements have been finalized.
81
<PAGE>
ITEM 23. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
A Current Report on Form 8-K dated July 3, 1997 was filed on July 9, 1997,
reporting under Item 4. a change of accountants on July 3, 1997 from Raimondo
Pettit & Glassman (now known as Raimondo Pettit Group) to Haskell & White LLP.
82
<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Delaware law, a corporation may indemnify its officers, directors,
employees, and agents under certain circumstances, including indemnification of
such persons against liability under the Securities Act of 1933. A true and
correct copy of Section 145 of the Delaware General Corporation Law which
addresses indemnification of officers, directors, employees and agents is
attached hereto as Exhibit 99.1
In addition, Section 102(b)(7) of the Delaware General Corporation Law and the
Company's Certificate of Incorporation provide that a director of this
corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) for
paying a dividend or approving a stock repurchase in violation of Section 174 of
the Delaware General Corporation Law; or (iv) for any transaction from which the
director derived an improper personal benefit.
The Company's Certificate of Incorporation and Bylaws contain provisions that no
director of the Company shall be liable to the Company for monetary damages for
breach of fiduciary duty as a director involving any act or omission of such
director other than (i) for breach of director's duty of loyalty to the Company
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) in respect
of certain unlawful dividend payments or stock redemptions or repurchases, or
(iv) for any transaction from which the director derived an improper personal
benefit.
The effect of these provisions may be to eliminate the rights of the Company and
its stockholders (through stockholders' derivative suits on behalf of the
Company) to recover monetary damages against a director for breach of fiduciary
duty as a director (including breaches resulting from negligent or grossly
negligent behavior) except in the situations described in clauses (i) - (iv) of
the preceding sentence.
83
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering, all of which are to be borne by the
Company, are:
Registration Fee - Securities and Exchange Commission $3,683
Stock Certificates - estimate for printing additional certificates* $2,000
Prospectus Printing* $2,500
State Blue Sky Registration Fees* $1,500
Accounting Fees and Disbursements* $5,000
Legal Fees* $25,000
-------
Total: $39,683
=======
*Estimated
No expenses are to be borne by the Selling Security-Holders except possible
transfer agent fees to remove restrictive legends on certificates.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In May 1997, the Company issued 1,000,000 shares of its $.01 par value common
stock to 46 persons who were shareholders of National Pools Corporation ("NPC").
In December 1996, the Company acquired NPC and the 1,000,000 shares were issued
as part of the purchase price for the acquisition. The transfers of the
Company's common stock in exchange for the shares of NPC referred to above were
exempt from registration under Section 4(2) of the Securities Act of 1933. All
of the shares issued in the above transaction are being registered for resale by
this registration statement.
In August 1997, the Company issued 3,750,000 shares of its $.01 par value common
stock to certain creditors of National Pools Corporation. The transfers of the
Company's common stock in exchange for the obligations owed to various creditors
of National Pools Corporation referred to above were exempt from registration
under Section 4(2) of the Securities Act of 1933. All of the shares issued in
the above transaction are being registered for resale by this registration
statement.
In September 1997, certain holders of the Company's Series B Preferred Stock
exercised their right to convert each share of the Company's Series B Preferred
Stock into 78 shares of the Company's common stock. The conversion of the Series
B Preferred Stock results in the issuance of 19,500,000 shares of common stock.
The issuance of the Company's common stock in exchange for the outstanding
Series B preferred stock of the Company was exempt from registration under
Section 4(2) of the Securities Act of 1933. 3,900,000 of the shares issued in
the above transaction are being registered for resale by this registration
statement.
ITEM 27. EXHIBITS.
The following is a list of exhibits required by Item 601 of Regulation S-B that
are filed or incorporated by reference. The exhibits that are incorporated by
reference from the Company's prior SEC filings are noted on the exhibit index.
The other exhibits are attached hereto and being filed with the SEC as part of
this registration statement.
84
<PAGE>
Exhibit Description of Exhibits
Number
- ------------------------------------------------------------------------------
3.1 Restated Certificate of Incorporation(1)
3.2 By-Laws (filed as Exhibit 3.2 of the Registrant's Registration
Statement on Form S-18, File No. 33-19883-NY, and incorporated
herein by reference thereto).
3.3 Certificate of Amendment of Certificate of Incorporation. (12)
3.4 Certificate of Amendment of Certificate of Incorporation.
3.5 Certificate of Amendment of Certificate of Incorporation.
4.5 Certificate of Designations, Preferences and Rights of 14%
Cumulative Convertible $.01 par value Preferred Stock.(1)
4.6 Letter Extending Exercise Period of Class A Warrants and Class B
Warrants.(3)
4.7 Letters Reducing Exercise Price of Class A Warrants, Class B
Warrants and Class C Warrants.(4)
4.8 Warrant Agreement dated September 13, 1994 with Douglas J. Phillips.
(7)
4.9 Certificate of Designations, Preferences and Rights of Series B
Convertible Preferred Stock of E.N. Phillips Company (10)
4.10 New Class D Warrant Agreement to Purchase Common Stock(10)
4.11 Option Agreement(10)
4.12 Amendment No. 1 to Warrant Agreement (New Class A Redeemable Common
Stock Purchase Warrants)
4.13 Amendment No. 1 to Warrant Agreement (New Class B Redeemable Common
Stock Purchase Warrants)
4.14 Amendment No. 1 to Warrant Agreement (New Class C Redeemable Common
Stock Purchase Warrants)
5.1 Opinion of Counsel
9.1 Form of Irrevocable Proxy Coupled with Right of First Refusal.(4)
10.1 Amended 1989 Non-Qualified Stock Option Plan.(1)
85
<PAGE>
10.2 1989 Incentive Stock Option Plan.(1)
10.3 1991 Non-Qualified Stock Option Plan (incorporated by reference
herein from Proxy Statement for February 14, 1992 Annual Meeting
filed on February 5, 1992).
10.4 Employment Agreement between Phillips Gaming International, Inc. and
James R. Martin (incorporated by reference herein from amendment on
Form 8 filed February 4, 1993 to Form 8-K dated November 23, 1992).
10.5 1993 Incentive Stock Option Plan and 1993 Non-Qualified Stock Option
Plan (incorporated by reference herein from Proxy Statement for
March 4, 1993 Annual Meeting filed on February 5, 1993).
10.6 Employment Agreement of December 7, 1993 between E.N. Phillips
Company and Douglas J. Phillips (incorporated by reference from
10-KSB for fiscal year ended September 30, 1993, filed on or about
March 28, 1994.)
10.7 Stock Purchase and Business Combination Agreement of January 13,
1994 between Nona Morelli's II, Inc., Casino Management of America,
Inc. and E.N. Phillips Company (incorporated by reference from
10-KSB for fiscal year ended September 30, 1993, filed on or about
March 28, 1994.)
10.9 Settlement Agreement dated September 13, 1994 between E.N. Phillips
Company and Douglas J. Phillips.(7)
10.10 Settlement Agreement and Mutual Release between Douglas J. Phillips,
Hal B. Phillips and E.N. Phillips Company and Stephen A. Weiner.(7)
10.11 Advisory and Management Agreement dated February 1, 1995 between
NuOasis Gaming, Inc. and NuVen Advisors, Inc.(11)
10.12 Advisory and Management Agreement dated July 1, 1994 between Casino
Management of America, Inc. and NuVen Advisors, Inc.(11)
10.13 Employment Agreement dated August 30, 1995 between NuOasis Gaming,
Inc. and Fred G. Luke.(11)
10.14 Consulting Agreement dated July 1995 between NuOasis Gaming, Inc.
and Steven Dong.(11)
10.15 Consulting Agreement dated October 15, 1994 between E.N. Phillips
Company and Kenneth R. O'Neal.(8)
10.16 Engagement Letter and Fee Agreement dated November 29, 1995 between
NuOasis Gaming, Inc. and J.L. Lawver Corp.(8)
10.17 Engagement Letter and Fee Agreement dated October 4, 1994 between
NuOasis Gaming, Inc. and John Ris.(8)
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<PAGE>
10.18 Engagement Letter and Fee Agreement dated November 15, 1994 between
NuOasis Gaming, Inc. And Geoffrey G. Riggs.(8)
10.19 Engagement Letter and Fee Agreement dated September 13, 1994 between
E.N. Phillips Company and Structure America, Inc.(8)
10.20 Engagement Letter and Fee Agreement dated October 18, 1994 between
NuOasis Gaming, Inc. and OTC Communications.(8)
10.21 Engagement Letter and Fee Agreement dated November 1, 1994 between
NuOasis Gaming, Inc. and Citigate, Inc.(8)
10.22 Consulting Agreement dated April 1, 1994, between NuOasis Gaming,
Inc. and John D. Desbrow.(8)
10.23 Engagement Letter and Fee Agreement dated March 7, 1994 between
NuOasis Gaming, Inc. and John Ris.(9)
10.24 Consulting Agreement dated April 21, 1995 between NuOasis Gaming,
Inc. and Sandra V. Alsina.(9)
10.25 Fee Agreement dated April 12, 1995 between NuOasis Gaming, Inc. and
Richard O. Weed.(9)
10.26 First Addendum to Consulting Agreement dated November 22, 1994
between NuOasis Gaming, Inc. and John D. Desbrow.(9)
10.27 Consulting Agreement dated January 1995 between NuOasis Gaming, Inc.
and Edward S. Luke.(9)
10.28 Engagement Letter and Fee Agreement for Services with Structure
America, Inc. (13)
10.29 Second Addendum to Consulting Agreement between NuOasis Gaming, Inc.
and John D. Desbrow.(13)
10.30 Second Addendum to Consulting Agreement between NuOasis Gaming, Inc.
and Steven H. Dong.(13)
10.31 Fee Agreement with Skjerven, Morrill, MacPherson, Franklin & Freil,
L.L.P.(14)
10.32 Consulting Agreement with Paula Amanda.(14)
10.33 Consulting Agreement with Norma McLean.(14)
21.1 Subsidiaries of the registrant (15)
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23.1 Consent of Counsel
23.2 Consent of Haskell & White LLP
23.3 Consent of Raimondo Pettit Group (formerly, Raimondo, Pettit &
Glassman)
99.1 Additional Exhibits [8 Del. Code Ann. ss.145 Indemnification of
officers, directors, employees and agents].
(1) Previously filed by the Registrant in Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form S-18 filed October 23, 1989 (File
No. 33-19883-NY) and incorporated herein by reference.
(2) Previously filed by the Registrant in Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form S-18 filed January 26, 1990 (File
No. 33-19883-NY) and incorporated herein by reference.
(3) Previously filed by the Registrant in Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form S-18 filed March 28, 1990 (File No.
33-19883-NY) and incorporated herein by reference.
(4) Previously filed by the Registrant in Post-Effective Amendment No. 6 to the
Registrant's Registration Statement on Form S-18 filed June 25, 1990 (File No.
33-19883-NY) and incorporated herein by reference.
(5) Previously filed by the Registrant in Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form S-1 filed December 19, 1995 and
incorporated herein by reference.
(6) Previously filed by the Registrant in the Form 10-K filed February 14, 1995
and incorporated herein by reference.
(7) Previously filed by the Registrant in the Form 10-KSB filed June 29, 1995
and incorporated herein by reference.
(8) Previously filed by the Registrant in a Registration Statement on Form S-8
filed December 7, 1994, File No. 33-87102.
(9) Previously filed by the Registrant in a Registration Statement on Form S-8
filed May 3, 1995, File No. 33-91862.
(10) Previously filed by the Registrant in a Current Report on Form 8-K dated
March 31, 1994, filed April 11, 1994.
(11) Previously filed by the Registrant on January 18, 1996 in its Annual Report
on Form 10KSB for the fiscal year ended September 30, 1995.
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<PAGE>
(12) Previously filed by the Registrant on April 2, 1996 in its amended Annual
Report on Form 10KSB/A for the fiscal year ended September 30, 1995.
(13) Previously filed by the Registrant on November 22, 1996 in its Annual
Report on Form 10KSB for the fiscal year ended June 30, 1996.
(14) Previously filed by the Registrant in a Registration Statement on Form S-8
filed May 12, 1997.
(15) Previously filed by the Registrant on October 9, 1997 in its Annual Report
on Form 10KSB for the fiscal year ended June 30, 1997.
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The Company hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement; and
(iii) Include any additional or changed material information on the plan of
distribution.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
89
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of San
Francisco, State of California.
Group V Corporation
Date: January 21, 1998 By:/s/ Joseph Monterosso
------------------------
Joseph Monterosso, President,
Chairman and
Principal Accounting Officer
Group V Corporation and
National Pools Corporation
Date: January 21, 1998 By: /s/ Dennis D. Houston
-----------------------
Dennis D. Houston, Chief
Operating Officer
National Pools Corporation and
Director, Group V Corporation
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Date: January 21, 1998 By:/s/ Joseph Monterosso
------------------------
Joseph Monterosso, President,
Chairman and
Principal Accounting Officer
Group V Corporation and
National Pools Corporation
Date: January 21, 1998 By:/s/ Dennis D. Houston
------------------------
Dennis D. Houston, Chief
Operating Officer
National Pools Corporation and
Director, Group V Corporation
Date: January 21, 1998 By:/s/ Leland Rees
------------------
Leland Rees, Director,
Group V Corporation
90
<PAGE>
EXHIBIT LIST AND PAGE NUMBERS
Exhibit No. Description Page No.
- ----------- ----------- --------
3.4 Certificate of Amendment to Certificate of Incorporation 92
(Amendment to increase the number of authorized shares).
3.5 Certificate of Amendment to Certificate of Incorporation 94
(Amendment to change the Company's name to Group V Corporation).
4.12 Amendment No. 1 to Warrant Agreement (New Class A Redeemable 95
Common Stock Purchase Warrants)
4.13 Amendment No. 1 to Warrant Agreement (New Class B Redeemable 97
Common Stock Purchase Warrants)
4.14 Amendment No. 1 to Warrant Agreement (New Class C Redeemable 99
Common Stock Purchase Warrants)
5.1 Opinion of Counsel. 101
23.1 Consent of Counsel. 104
23.2 Consent of Haskell & White LLP. 106
23.3 Consent of Raimondo Pettit Group (Formerly, Raimondo, 108
Pettit & Glassman
99.1 Additional Exhibits [8 Del. Code Ann.ss.145 Indemnification 110
of officers, directors, employees and agents].
91
<PAGE>
Exhibit 3.4
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NuOASIS GAMING, INC.
NuOasis Gaming, Inc., a corporation organized under and by virtue of the
General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That by written consent of the Board of Directors of NuOasis
Gaming Inc. (the "Corporation"), pursuant to ss.141(f) of the General
Corporation Law of the State of Delaware resolutions were duly adopted on March
27, 1997 setting forth proposed amendments to the Certificate of Incorporation
of the Corporation, declaring said amendments to be advisable and to be
considered for approval by the Corporation's stockholders. The resolutions
setting forth the proposed amendments are as follows:
RESOLVED that the Board of Directors do hereby adopt, declare advisable
and approve that Article FOURTH of the Corporation Certificate of Incorporation,
be amended and restated in its entirety in the manner set forth hereinbelow:
FOURTH The Corporation shal1 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 of the par value of $.01. 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 may be of stock with par value or
stock without par value and which classes or series may have such voting
power, full or limited or no voting powers and such designations,
preferences and 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 a class or series subsequent to the issue of shares of that class or
series."
SECOND: That thereafter the approval of the holders of a majority of all
outstanding classes of stock entitled to vote thereon was obtained together with
the approval of the holders of a majority of the shares of common stock voting
separately as a class at a meeting of shareholders held on May 5, 1997 pursuant
to ss.242(b)(1) and ss.222 of the General Corporation Law of the State of
Delaware.
92
<PAGE>
THIRD: That said amendment was duly adopted in accordance with the
provisions of ss.242 of the General Corporation Law of the State of Delaware.
FOURTH: That the capital of said Corporation shall not be reduced under
or by reason of said amendment.
IN WITNESS WHEREOF, NuOasis Gaming Inc. has caused this certificate to
be signed by Joseph Monterosso, its President, and attested by John D. Desbrow
its Secretary this 5th day of May, 1997.
NuOASIS GAMING. INC.
By: /s/ Joseph Monterosso
--------------------------
Joseph Monterosso, President
ATTEST:
By: /s/ John D. Desbrow
--------------------------
John D. Desbrow Secretary
93
<PAGE>
Exhibit 3.5
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
NuOASIS GAMING, INC.
[TO CHANGE THE NAME OF THE CORPORATION TO GROUP V CORPORATION]
By unanimous resolution of the board of directors and by the affirmative
vote of the holders of a majority of the voting power of the shares entitled to
vote, NuOasis Gaming, Inc. hereby amends its Certificate of Incorporation as
follows:
RESOLVED, that the Certificate of Incorporation is amended by striking
Article First of such Certificate of Incorporation and by inserting and
substituting the following so that Article First shall read:
FIRST: The name of the Corporation is Group V Corporation.
This amendment has been adopted in accordance with Section 242 of the
General Corporation Law of the State of Delaware.
The undersigned, being the President, hereby certifies, under penalties
of perjury, that the foregoing resolution is a valid resolution duly adopted by
the board of directors and by the affirmative vote of the holders of a majority
of the voting power of the stockholders entitled to vote thereon at the Annual
Meeting of Stockholders held May 5, 1997.
Dated: May 20, 1997
/s/ Joseph Monterosso
---------------------
Joseph Monterosso, President
94
<PAGE>
Exhibit 4.12 Amendment No. 1 to Warrant Agreement (New Class A Redeemable
Common Stock Purchase Warrants)
95
<PAGE>
AMENDMENT NO. 1
TO
WARRANT AGREEMENT
This Amendment, made this 20th day of February, 1996, but effective
retroactive to August 1, 1994, is by and between NuOasis Gaming, Inc. (formerly
known as E.N. Philips Company), a Delaware corporation (the "Company"), and
American Stock Transfer & Trust Company (the "Warrant Agent").
WHEREAS, the Company and its Warrant Agent entered into that certain
Warrant Agreement, dated as of June 3, 1993, which provides the terms of the
Company's New Class A Redeemable Common Stock Purchase Warrants; and
WHEREAS, the Company and the Warrant Agent desire to amend Section 5.1
of the Warrant Agreement as herein provided.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto have agreed and do hereby agree as
follows:
Section 5.1 of the Warrant Agreement is hereby amended to read as
follows:
"5.1 Term of Warrants. Subject to the terms of this Agreement, each
Holder shall have the right, which may be exercised commencing on issuance and
until one year after the effective date of a registrations statement registering
the Common Stock issuable upon exercise of the Warrants, to purchase from the
company the number of fully paid and non-assessable Warrant Shares which the
Holder may at the time be entitled to purchase on exercise of such Warrants."
Except as amended and modified by this Agreement, the terms and
conditions of the Warrant Agreement shall otherwise remain in force and effect
as stated therein.
NUOASIS GAMING, INC.
By: /s/ John D. Desbrow
---------------------------------
Name: John D. Desbrow
Title: Secretary
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: /s/ Herbert J. Lemmer
---------------------------------
Name: Herbert J. Lemmer
Title: Vice President
96
<PAGE>
Exhibit 4.13 Amendment No. 1 to Warrant Agreement (New Class B Redeemable
Common Stock Purchase Warrants)
97
<PAGE>
AMENDMENT NO. 1
TO
WARRANT AGREEMENT
This Amendment, made this 20th day of February, 1996, but effective
retroactive to November 1, 1994, is by and between NuOasis Gaming, Inc.
(formerly known as E.N. Philips Company), a Delaware corporation (the
"Company"), and American Stock Transfer & Trust Company (the "Warrant Agent").
WHEREAS, the Company and its Warrant Agent entered into that certain
Warrant Agreement, dated as of June 3, 1993, which provides the terms of the
Company's New Class B Redeemable Common Stock Purchase Warrants; and
WHEREAS, the Company and the Warrant Agent desire to amend Section 5.1
of the Warrant Agreement as herein provided.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto have agreed and do hereby agree as
follows:
Section 5.1 of the Warrant Agreement is hereby amended to read as
follows:
"5.1 Term of Warrants. Subject to the terms of this Agreement, each
Holder shall have the right, which may be exercised commencing on issuance and
until one year after the effective date of a registrations statement registering
the Common Stock issuable upon exercise of the Warrants, to purchase from the
company the number of fully paid and non-assessable Warrant Shares which the
Holder may at the time be entitled to purchase on exercise of such Warrants."
Except as amended and modified by this Agreement, the terms and
conditions of the Warrant Agreement shall otherwise remain in force and effect
as stated therein.
NUOASIS GAMING, INC.
By: /s/ John D. Desbrow
---------------------------------
Name: John D. Desbrow
Title: Secretary
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: /s/ Herbert J. Lemmer
---------------------------------
Name: Herbert J. Lemmer
Title: Vice President
98
<PAGE>
Exhibit 4.14 Amendment No. 1 to Warrant Agreement (New Class C Redeemable Common
Stock Purchase Warrants)
99
<PAGE>
AMENDMENT NO. 1
TO
WARRANT AGREEMENT
This Amendment, made this 20th day of February, 1996, but effective
retroactive to August 31, 1995, is by and between NuOasis Gaming, Inc. (formerly
known as E.N. Philips Company), a Delaware corporation (the "Company"), and
American Stock Transfer & Trust Company (the "Warrant Agent").
WHEREAS, the Company and its Warrant Agent entered into that certain
Warrant Agreement, dated as of August 31, 1993, which provides the terms of the
Company's New Class C Redeemable Common Stock Purchase Warrants; and
WHEREAS, the Company and the Warrant Agent desire to amend Section 5.1
of the Warrant Agreement as herein provided.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto have agreed and do hereby agree as
follows:
Section 5.1 of the Warrant Agreement is hereby amended to read as
follows:
"5.1 Term of Warrants. Subject to the terms of this Agreement, each
Holder shall have the right, which may be exercised commencing on issuance and
until one year after the effective date of a registrations statement registering
the Common Stock issuable upon exercise of the Warrants, to purchase from the
company the number of fully paid and non-assessable Warrant Shares which the
Holder may at the time be entitled to purchase on exercise of such Warrants."
Except as amended and modified by this Agreement, the terms and
conditions of the Warrant Agreement shall otherwise remain in force and effect
as stated therein.
NUOASIS GAMING, INC.
By: /s/ John D. Desbrow
---------------------------------
Name: John D. Desbrow
Title: Secretary
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: /s/ Herbert J. Lemmer
---------------------------------
Name: Herbert J. Lemmer
Title: Vice President
100
<PAGE>
Exhibit 5.1 Opinion of Counsel.
101
<PAGE>
ARCHER & WEED
Special Project Counsel
4695 MACARTHUR COURT, SUITE 530, NEWPORT BEACH, CALIFORNIA 92660
TELEPHONE (714) 475-9086 FACSIMILE (714) 475-9087
EMAIL: [email protected]
WRITER'S DIRECT NUMBER
(714) 475-9088
January 16, 1998
Board of Directors
Group V Corporation
550 15th Street
San Francisco, CA 94103
RE: Form SB-2 Registration Statement
Dear Members of the Board:
As special project counsel to Group V Corporation, a Delaware
corporation (the "Company"), in connection with that certain Form SB-2
registration statement dated January 16, 1998, I have been asked to provide an
opinion of counsel as to the legality of the securities being registered,
indicating whether they will, when sold, be legally issued, fully paid and
non-assessable.
In rendering this opinion, I have assumed, without independently
verifying such assumptions, and this opinion is based and conditioned upon the
following: (i) the genuineness of the signatures on and the enforceability of
all instruments, documents and agreements examined by me and the authenticity of
all documents furnished for my examination as originals and the conformity to
the original documents of all documents furnished to me as copies; (ii) where an
executed document has been presented to me for my review, that such document has
been duly executed on or as of the date stated and that execution and delivery
was duly authorized on the part of the parties thereto; (iii) each of the
foregoing certificates, instruments and documents being duly authorized,
executed and delivered by or on behalf of all the respective parties thereto,
and such instruments and documents being legal, valid binding obligations of
such parties; (iv) the truth and accuracy of representations and statements made
in the documents received from the State of Delaware; and (vi) the Company will
be operated in accordance with the terms of its charter documents and the laws
of the State of Delaware and the terms of the instruments or documents referred
to above.
102
<PAGE>
ARCHER & WEED
Based upon the foregoing, I am of the opinion that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, the
jurisdiction of its incorporation.
2. The terms and provisions of the common stock conform to the
description thereof contained in the registration statement, and the form of the
stock certificates used to evidence the common stock are in good and proper form
and no stockholder is entitled to preemptive rights to subscribe for or purchase
any of the common stock,
3. The issuance and the sale of the shares of common stock has been duly
and validly authorized and the securities will, when sold, be duly legally
issued, fully paid and non-assessable shares of common stock of the Company.
I am admitted to practice in the State of California and the State of
Texas. I am not admitted to practice in Delaware, the state of incorporation of
the Company, or in any other jurisdictions other than California and Texas, in
which the Company may own property or transact business. My opinions herein are
with respect to federal law only and, to the extent my opinions are derived from
the laws of other jurisdictions, are based upon an examination of all relevant
authorities and the documents referenced herein and are believed to be correct.
I have not directly obtained legal opinions as to such matters from attorneys
licensed in such other jurisdictions. No opinion is expressed upon any conflict
of law issues. My opinions are qualified to the extent that enforcement of
rights and remedies are subject to bankruptcy, insolvency, fraudulent
conveyance, moratorium, and other laws of general application or equitable
principles affecting the rights and remedies of creditors and security holders
and to the extent that the availability of the remedy of specific performance or
of injunctive relief is subject to the discretion of the court before which any
proceeding may be brought.
This opinion is limited to matters existing as of this date and no
responsibility is assumed to advise you of changes (factual or legal) which may
hereafter occur, whether deemed material or not.
I furnish this opinion to you as special counsel for the Company and it
is solely for your benefit. This opinion is not to be used, circulated, quoted
or otherwise referred to in whole or in part for any other purpose, except as
set forth in my consent.
Very truly yours,
Richard O. Weed
103
<PAGE>
Exhibit 23.1 Consent of Counsel.
104
<PAGE>
ARCHER & WEED
Special Project Counsel
4695 MACARTHUR COURT, SUITE 530, NEWPORT BEACH, CALIFORNIA 92660
TELEPHONE (714) 475-9086 FACSIMILE (714) 475-9087
EMAIL: [email protected]
WRITER'S DIRECT NUMBER
(714) 475-9088
January 16, 1998
Board of Directors
Group V Corporation
550 15th Street
San Francisco, CA 94103
RE: Form SB-2 Registration Statement
Dear Members of the Board:
I hereby consent to the inclusion of my opinion letter dated January 16,
1998 in the registration statement on Form SB-2 to be filed by Group V
Corporation.
Very truly yours,
Richard O. Weed
105
<PAGE>
Exhibit 23.2 Consent of Haskell & White LLP
106
<PAGE>
Haskell & White LLP
- --------------------------------------------------------------------------------
CERTIFIED PUBLIC ACCOUNTANTS
4901 Birch Street
Newport Beach, California 92660
Telephone (714) 833-8312
Fax (714) 833-9421
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Group V Corporation
(formerly, NuOasis Gaming, Inc.) on Form SB-2 of our report dated September 29,
1997, appearing in the Prospectus, which is part of this Registration Statement.
HASKELL & WHITE LLP
Certified Public Accountants
January 20, 1998
Newport Beach, California
107
<PAGE>
Exhibit 23.3 Consent of Raimondo Pettit Group (formerly, Raimondo, Pettit &
Glassman)
108
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in the registration statement on Form SB-2 of our
report dated October 31, 1996, on our audit of the financial statements of Group
V Corporation (formerly NuOasis Gaming, Inc.) and Subsidiaries.
Torrance, CA
January 20, 1998 RAIMONDO PETTIT GROUP
(formerly Raimondo, Pettit, & Glassman)
109
<PAGE>
Exhibit 99.1 8 Del. Code Ann. ss.145
DELAWARE CODE
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IV. DIRECTORS AND OFFICERS
ss. 145. Indemnification of officers, directors, employees and agents;
insurance.
(a) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
110
<PAGE>
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because the person has
met the applicable standard of conduct set forth in subsections (a) and (b) of
this section. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
111
<PAGE>
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 436180
<SECURITIES> 1585468
<RECEIVABLES> 519400
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2541048
<PP&E> 45232
<DEPRECIATION> (11173)
<TOTAL-ASSETS> 2579512
<CURRENT-LIABILITIES> 934818
<BONDS> 0
0
301700
<COMMON> 478598
<OTHER-SE> (335604)
<TOTAL-LIABILITY-AND-EQUITY> 2579512
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 372901
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17385
<INCOME-PRETAX> (372901)
<INCOME-TAX> 0
<INCOME-CONTINUING> (372901)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (372901)
<EPS-PRIMARY> (.01)
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