SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended December 31, 1997 Commission File No. 0-18377
NuOASIS RESORTS INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
84-1126818
(I.R.S. Employer Identification Number)
4695 MacArthur Court, Suite 530, Newport Beach, CA 92660
(Address of principal executive offices) (Zip Code)
(714) 833-5381
(Registrant's telephone number, including area code)
N/A
(Former telephone number, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of capital stock, as of the latest practicable date.
Common Stock $.01 par; 48,840,300 shares as of February 28, 1998.
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NuOASIS RESORTS INC.
INDEX
Page
PART I
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of
December 31, 1997 (unaudited).....................................1
Condensed Consolidated Statements of Operations for the Three
and Six Months Ended December 31, 1997 and 1996 (unaudited).......3
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended December 31, 1997 and 1996 (unaudited)...........4
Notes to Condensed Consolidated Financial Statements ..............5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................11
PART II
Item 1. Legal Proceedings..................................................16
Item 2. Changes In Securities..............................................16
Item 3. Defaults Upon Senior Securities....................................16
Item 4. Submission Of Matters To A Vote Of Security Holders................16
Item 5. Other Information..................................................16
Item 6. Exhibits And Reports On Form 8-K...................................17
Signatures.........................................................18
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<TABLE>
<CAPTION>
NuOASIS RESORTS INC.
Condensed Consolidated Balance Sheet
As of December 31, 1997 (Unaudited)
ASSETS December 31,
1997
(Unaudited)
- -------------------------------------------------------- ------------------------
<S> <C>
Current assets:
Cash and cash equivalents $ 1,132,039
Accounts receivable, net 67,506
Due from affiliates 4,781,247
Inventory 33,031
------------------------
Total current assets 6,013,823
Property and equipment
Food manufacturing equipment 1,160,381
Gaming equipment 1,305,519
Accumulated depreciation and amortization (1,009,695)
-------------------------
Total property and equipment 1,456,205
Other assets:
Equity investments 7,294,704
Security deposits 1,975,134
Intangible assets, net 936,681
------------------------
Total other assets 10,206,519
------------------------
TOTAL ASSETS $ 17,676,547
========================
</TABLE>
See accompanying notes to these condensed consolidated financial statements
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<TABLE>
<CAPTION>
NuOASIS RESORTS INC.
Condensed Consolidated Balance Sheet
As of December 31, 1997 (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
1997
(Unaudited)
-------------------
<S> <C>
Current liabilities:
Accounts payable $ 801,772
Accrued expenses 45,986
Due to affiliates 2,958,785
Current maturities of long-term debt 807,963
-------------------
Total current liabilities 4,614,506 Long term liabilities:
Long-term debt 1,069,984
Total liabilities 5,684,490
Commitments and contingencies (Note 4)
Minority interest
4,112,813
Stockholders' equity
Preferred stock, Series D, $.01 par value; 24,000,000 shares authorized, issued
and outstanding at December 31,
1997 (aggregate liquidation of up to $10,000,000). 240,000
Common stock, $.01 par value; 50,000,000 shares
authorized; 48,840,300 shares issued and outstanding at
December 31, 1997 488,243
Additional paid-in-capital 52,395,599
Accumulated deficit (35,637,947)
Cost of 18,560,115 treasury shares (9,282,425)
Common stock subscription and stockholders' receivables (324,225)
--------------------
Total stockholders' equity 7,879,245
--------------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 17,676,548
====================
</TABLE>
See accompanying notes to these condensed consolidated financial statements
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<TABLE>
<CAPTION>
NuOASIS RESORTS INC.
Condensed Consolidated Statements of Operations
for Three and Six Months Ended
December 31, 1997 and 1996 (Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
---------------------------------------- ---------------------------------------
1997 1996 1997 1996
------------------- ------------------ ------------------ -----------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Gaming revenue $ 20,065 $ - $ 20,065 $ -
Food sales revenue 177,455 360,775 428,504 712,146
------------------- ------------------ ------------------ -----------------
Total revenue 197,520 360,775 448,569 712,146
------------------- ------------------ ------------------ -----------------
Cost of gaming
Cost of food sales revenue 2,022 - 2,022 -
Total cost of revenue 67,099 211,290 243,955 480,866
------------------- ------------------ ------------------ -----------------
69,121 211,290 245,977 480,866
------------------- ------------------ ------------------ -----------------
Gross profit 128,399 149,485 202,592 231,280
Depreciation and amortization 69,031 32,356 130,679 60,668
Legal and professional fees 281,298 587,305 642,150 1,167,447
Loss on sale of investment - - - 367,730
Write down of goodwill - 3,318,107 - 3,318,107
Selling, general and administrative
expenses 1,541,399 187,501 1,885,845 498,047
Minority interest (387,856) - (423,376) -
------------------- ------------------ ------------------ -----------------
Operating loss (1,375,473) (3,975,784) (2,032,706) (5,180,719)
------------------- ------------------ ------------------ ------------------
Other income (expense):
Other 33,534 - 33,534 -
Equity in earnings (loss) in affiliates (50,967) (286,066) 172,131 (286,066)
Interest expense (24,130) (27,735) (31,153) (47,906)
------------------- ------------------ ------------------ ------------------
Total other income (expense) (41,563) (313,801) 174,512 (333,972)
------------------- ------------------ ------------------ ------------------
Net loss before income tax provision (1,417,036) (4,289,585) (1,858,194) (5,514,691)
------------------- ------------------ ------------------ ------------------
Income tax benefit (provision) - - - -
------------------- ------------------ ------------------ -----------------
Net loss $ (1,417,036) $ (4,289,585) $ (1,858,194) $ (5,514,691)
=================== ================== ================== ==================
Basic and diluted loss per common share $ (.03) $ (.10) $ (.04) $ (.12)
================== ================== ================== ==================
Weighted average number of common
shares outstanding used to compute
basic and diluted loss per common share 48,840,300 45,048,500 48,840,300 45,098,500
=================== ================== ================== ==================
</TABLE>
See accompanying notes to these condensed consolidated financial statements
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<TABLE>
<CAPTION>
NuOASIS RESORTS INC.
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended
December 31, 1997 and 1996 (Unaudited)
Six Months Ended
December 31,
1997 1996
------------------------- -------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,858,194) $ (5,514,691)
Adjustments to reconcile net income (loss) to net cash
(used) provided by operating activities:
Depreciation and amortization 130,679 59,667
Effect of exercise of options - 5,300
Loss on sale of investment - 367,730
Write off of goodwill - 3,318,107
Minority interest (423,376) -
Equity in (income) losses in equity investments (172,131) 286,066
Increases (decreases) in changes in assets and liabilities:
Accounts receivable, net and due from affiliates 1,669,394 3,780,169
Inventory 2,142 26,408
Other assets (275) (5,995)
Accounts payable (1,873,196) (3,368)
Accrued expenses (19,561) (46,160)
Due to affiliates 1,448,223 478,949
------------------------- -------------------------
Net cash (used) provided by operating activities (1,096,295) 2,752,182
------------------------- ------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from note receivable 50,000 -
Proceeds from sale of investment 615,353 124,117
------------------------- ------------------------
Net cash provided by investing activities 665,353 124,117
------------------------- ------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds received from issuance of note payable 1,059,364 -
Proceeds received from repayment of shareholder notes receivable - 198,758
Principal payments on notes and leases payable (73,117) (3,038,804)
------------------------- -------------------------
Net cash provided (used) by financing activities 986,247 (2,840,046)
------------------------- -------------------------
Net increase in cash 555,305 36,253
------------------------- -------------------------
Cash and cash equivalents, beginning of period 576,734 50,436
------------------------- -------------------------
Cash and cash equivalents, end of period $ 1,132,039 $ 86,689
========================= =========================
</TABLE>
See accompanying notes to these condensed consolidated financial statements
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<TABLE>
<CAPTION>
NuOASIS RESORTS INC.
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended
December 31, 1997 and 1996 (Unaudited)
(Continued)
Six Months Ended
December 31,
1997 1996
------------------------- ------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest $ - $ 34,336
Income taxes $ - $ -
Non-cash investing and financing activities:
Exercise of options for reduction of debt $ - $ 29,200
Purchase of NPC (Note 2) for notes payable $ - $ 1,200,000
Purchase of NPC (Note 2) for accrued liability $ - $ 125,000
Options exercised for reduction of debt $ - $ 29,200
Effects of the consolidation of Cleopatra Hammamet
Cash $ 563,648 $ -
Account receivable $ 4,133,044 $ -
Gaming equipment $ 1,260,331 $ -
Security deposits $ 1,975,134 $ -
Accounts payables $ 1,429,104 $ -
Stockholders' equity $ 6,485,193 $ -
</TABLE>
See accompanying notes to these condensed consolidated financial statements
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 (Unaudited)
Note 1. General
Description of Business
NuOasis Resorts, Inc., formerly, Nona Morelli's II, Inc. (the "Company"), was
incorporated in Colorado on February 6, 1989 and became public in 1990. Through
its subsidiaries the Company (a) develops, owns, leases, manages and operates
hotels, gaming casinos and related operations (b) manufactures and distributes
specialty food products, and (c) invests in and develops real estate interests.
In addition to its hotel and gaming operations, the Company provides food,
entertainment and ancillary services.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
consolidated financial statements. In the opinion of management, all normal
adjustments, consisting of normal recurring accruals, considered necessary for a
fair presentation have been included. The unaudited condensed consolidated
financial statements include the condensed consolidated balance sheet as of
December 31, 1997, and the related condensed consolidated statements of
operations and cash flows of the Company and its subsidiaries for the three and
six months ended December 31, 1997 and 1996. These unaudited condensed
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements included in the Company's fiscal 1997 Form
10-KSB. The results of operations for the three and six months ended December
31, 1997 and 1996 are not necessarily indicative of the operating results for
the full year.
Principles of Consolidation and Management Estimates
The unaudited condensed consolidated financial statements, and references
therein to the Company, include the accounts of the Company and its wholly-owned
subsidiaries: NuOasis Properties Inc. ("NuOasis Properties"), NuOasis
International Inc. ("NuOasis International") and its subsidiaries, Cleopatra
Palace Limited ("Cleopatra") and Cleopatra Hammamet, a Tunisian corporation
("Cleopatra Hammamet"), Fantastic Foods International Inc. ("Fantastic Foods"),
ACI Asset Management Inc. ("ACI"), Casino Management of America, Inc. ("CMA"),
NuOasis Laughlin, Inc. ("NuOasis Laughlin") and NuOasis Las Vegas Inc. ("NuOasis
Las Vegas"). All material inter-company accounts and transactions have been
eliminated in consolidation.
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 the date of such statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. In the opinion of management, all normal
adjustments, consisting of normal recurring accruals, considered necessary for a
fair presentation have been included.
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 (Unaudited)
Loss Per Share
During the quarter ended December 31, 1997, the Company retroactively adopted
Statement of Financial Accounting Standards No 128, "Earnings per Share." The
standard requires public companies to present basic and diluted earnings per
share, instead of the primary and fully diluted earnings per shares that was
previously required.
Based on the fact that the Company incurred net losses in all periods presented,
the adoption of this statement had no impact on the accompanying financial
statements.
Incremental shares from assumed conversions are not included in computing the
diluted per share amounts as their effect would be anti-dilutive.
Reclassification of Prior Year Amounts
To enhance comparability, the fiscal 1997 financial statements have been
reclassified, where appropriate, to conform with the financial statement
presentation used in fiscal 1998.
Going Concern
The Company has experienced recurring net losses, has limited liquid resources
and negative working capital. Management's intent is to continue searching for
additional sources of capital and new operating and investment opportunities. In
the interim, the Company will continue operating with minimal overhead and
administrative functions will be provided by key employees and consultants, some
of whom are compensated primarily in the form of the Company's common stock.
Management estimates that the Company will need to utilize its common stock to
fund its operations through fiscal year 1998. Accordingly, the accompanying
consolidated financial statements have been presented under the assumption the
Company will continue as a going concern.
Note 2. Acquisitions and Sale of Investments
Acquisition of National Pools Corporation, NuOasis Las Vegas, NuOasis Laughlin
and CMA: Sale of Group V Corporation
In December 1995, Group V Corporation (formerly NuOasis Gaming Inc.) ("Group
V"), as a subsidiary of the Company, entered into an agreement with the
shareholders of National Pools Corporation ("NPC") to acquire all of the issued
and outstanding shares of NPC.
In June 1996, the Company, then the controlling parent of Group V, granted an
option (the "Group V Option") to Mr. Joseph Monterosso ("Monterosso), the new
President of Group V, to acquire 250,000 shares of Group V Series B Preferred
stock (the "Group V B Shares") owned by the Company. The Group V Option was
exercisable at a price of $13.00 per share.
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 (Unaudited)
In July 1996, the Company sold 497,157 shares of Group V common stock for an
approximate amount of $124,000. The Company's book value basis of the subject
shares was approximately $492,000, resulting in a loss on sale of investment at
September 30, 1996 of approximately $368,000.
In December 1996, Group V closed on the purchase of NPC, making NPC a
wholly-owned subsidiary of Group V.
In June 1997, following the Group V purchase of NPC, Monterosso exercised the
Group V Option to purchase 128,041 Group V B Shares, at $13.00 per share, by
payment to the Company of approximately $1,665,000. Additionally, in June 1997,
Group V sold CMA and its subsidiaries, NuOasis Las Vegas and NuOasis Laughlin,
to the Company for $1,140,000 in cash, notes receivable from Group V aggregating
$245,836, and a credit against the Company's intercompany account with Group V
of $95,000.
In August 1997, but effective June 1996, the Group V Option was amended (the
"Amended Option") canceling the right to acquire 100,000 of the 121,959
remaining Group V B Shares and increasing the exercise price for the balance, or
21,959 shares, from $13.00 per share to $72.20 per share. The Company
subsequently converted the 100,000 shares of Group V B Shares into 7.8 million
shares of Group V common stock. In September 1997, but effective June 1997,
Monterosso exercised the Amended Option to purchase 21,959 Group V B Shares, at
$72.20 per share, by payment to the Company of approximately $1,585,000 and the
release of the Company from liability (if any) arising from any events while
Group V was under the control of the Company. Also in September 1997, the
Company and Monterosso entered into a Put/Option Agreement (the "Put") under
which Monterosso had the option to purchase and the Company had the right to
require Monterosso to purchase all of the subject 7.8 million shares at a price
of $.15 per share.
Concurrent with the Put, the Company sold to Monterosso its interest in
6,000,000 New Class D Warrants to purchase common stock of Group V (the "Group V
D Warrants"). The consideration for the Group V D Warrants consisted of a
$1,800,000 promissory note due in September 1998 (the "Warrant Note"). The Group
V D Warrants had a book value of zero on the date of sale. As of the date of
this Report, $553,840 of the promissory note had been realized, resulting in the
Company recording a gain on sale in the amount of $553,840 during fiscal 1997.
As a result of the sale of the Group V B Shares and the Put, as discussed above,
a change in control of Group V occurred and, as of June 13, 1997, Group V is no
longer a controlled subsidiary of the Company. As of September 30, 1997, the
Company no longer held the Group V B Shares or the Group V D Warrants, however,
at December 31, 1997, the Company still maintained approximately 7,800,000
shares of Group V common stock.
In January 1998, the Company received consideration that reduced the principle
balances due under the Warrant Note and the Put to $1,080,000 and $720,000,
respectively.
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 (Unaudited)
Purchase of Replacement Property
In September 1997, NuOasis International agreed to acquire Replacement Property
from Group V consisting of marketable securities for a purchase price of
approximately $1,920,000. The consideration consists of $700,000 cash, treasury
shares held by the Company and a promissory note in the amount of $500,000.
Cleopatra Hammamet
In September 1997, to finance the remaining expenditures on the Hammamet Casino,
the Company and Cleopatra Hammamet Limited, a Tunisian corporation in
organization, ("Cleopatra Hammamet") entered into an agreement with Cedric
International Company Inc., a Panamanian corporation ("Cedric") pursuant to
which the Company and Cedric each agreed to contribute $1.5 million to the
capital of Cleopatra Hammamet, and Cedric further agreed to provide up to
$3,800,000 for use by Cleopatra Hammamet in making the first annual lease
payments on the Hammamet Casino. In exchange for such capital contribution, the
Company and Cleopatra agreed to a capital restructuring of Cleopatra Hammamet
which resulted in the Company holding a direct 70% interest in Cleopatra
Hammamet, with 70% of this interest pledged to Cedric with the agreement that
Cedric will return such interest when the Company reimburses Cedric for all
funds advanced prior to the first anniversary date of such agreement (on an all
or nothing basis) plus interest at the rate of 15% per annum. Construction on
the Hammamet Casino was completed and the facility was equipped and opened
December 6, 1997. In the event the Company is unable or elects not to reimburse
Cedric for its capital contribution to Cleopatra Hammamet, the Company's equity
interest in Cleopatra Hammamet will be permanently reduced to 21%.
Note 3. Long-Term Debt
In connection with the opening of Cleopatra Hammamet in December 1997, the
Company received advances from an officer of the Company and an unrelated party
in the amounts of $780,000 and $289,984, respectively, and bear interest at 10%
per annum and $1,000 per month, respectively. Both advances are been classified
as long term debt at December 31, 1997.
In December 1997, the Company issued a note in the amount of $500,000 to
Monterosso in connection with the purchase of replacement property (see Note 2).
The note bears interest at 6% per annum and is due July 1998.
Note 4. Commitments and Contingencies
Capital Requirements of Cleopatra, Cleopatra Hammamet and Cleopatra's World
At December 31, 1997, Cleopatra had approximately $1,000,000 remaining to be
paid as security deposits and advance rent before it could take possession of
the Cap Gammarth Casino and the Hammamet Casino. Additionally, there was
approximately $6,000,000 remaining to be paid for furniture, fixtures and
equipment, bankroll and pre-opening costs for the two casinos.
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 (Unaudited)
The Company financed the completion and opening of the Hammamet Casino through
the financing agreement with Cedric. To finance the remaining expenditures on
the Cap Gammarth Casino, the Company is negotiating possible joint ventures
between NuOasis International and foreign investment groups, and attempting
early collections of its receivables. The Cap Gammarth Casino is expected to be
completed in May 1998.
During fiscal 1997, Cleopatra's World made a partial payment on the lease on the
Cap Gammarth Resort and, simultaneously, filed a request for arbitration in its
dispute with the developer of the Cap Gammarth Resort claiming that the
developer had breached the terms of the lease by not completing for occupancy,
on a timely basis, the hotel, the shopping arcade, the health club or the beach
club comprising the resort in accordance with the terms of the lease, causing
Cleopatra's World significant loss of revenue and profits. Subsequent to the
close of fiscal 1997 the matter was removed from the arbitration calendar by
mutual agreement between the parties, however, the dispute has not yet been
resolved.
As to any future projects undertaken by the Company, additional project
financing will be required. Capital investments may include all or some of the
following: acquisition and development of land; acquisition of leasehold
investments and contract rights; and, construction of other facilities. In
connection with development activities relating to potential acquisitions or new
jurisdictions, the Company also makes expenditures for professional services
which are expenses as incurred. The Company's financing requirements would
depend upon actual development costs, the amounts and timing of such
expenditures, the amount of available cash flow from operations and the
availability of other financing arrangements, agreements, selling equity
securities, and selling or borrowing against assets (including current
facilities). The Company may also consider strategic combinations or alliances.
Although there can be no assurance that the Company can effectuate any of the
financing strategies discussed above, the Company believes that if it determines
to seek any additional licenses to operate gaming or permits to conduct hotel
operations in other jurisdictions it will be able to raise sufficient capital to
pursue its strategic plan.
If for any reason, Cleopatra, Cleopatra's World or NuOasis International are
unable to borrow or otherwise meet their commitments under current agreements to
provide the furniture, fixtures, equipment and working capital to open the Cap
Gammarth Casino or manage the Cap Gammarth Resort, or acquire, develop and
operate future casino gaming and hotel management projects, the Company may be
required to intercede and provide the requisite financing and working capital,
or be forced to sell all or a portion of the respective interests, or lose the
respective rights to the projects and properties entirely.
Note 5. Subsequent Events
Group V
In January 1998, the Company received consideration that reduced the principle
balances due under the Warrant Note and the Put to $1,080,000 and $720,000,
respectively (Note 2).
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(a) Significant Developments During the Quarter ended December 31, 1997
Group V
In September 1997, but effective June 1997, Monterosso exercised the
Amended Option to purchase 21,959 Group V B Shares, at $72.20 per share, by
payment to the Company of approximately $1,585,000 and the release of the
Company from liability (if any) arising from any events while Group V was under
the control of the Company. Also in September 1997, the Company and Monterosso
entered into a Put/Option Agreement (the "Put") under which Monterosso had the
option to purchase and the Company had the right to require Monterosso to
purchase all of the subject 7.8 million shares at a price of $.15 per share.
Concurrent with the Put, the Company sold to Monterosso its interest in
6,000,000 New Class D Warrants to purchase common stock of Group V (the "Group V
D Warrants"). The consideration for the Group V D Warrants consisted of a
$1,800,000 promissory note due in September 1998 (the "Warrant Note"). The Group
V D Warrants had a book value of zero on the date of sale. As of the date of
this Report, $553,840 of the promissory note had been realized, resulting in the
Company recording a gain on sale in the amount of $553,840 during fiscal 1997.
As a result of the sale of the Group V B Shares and the Put, as
discussed above, a change in control of Group V occurred and, as of June 13,
1997, Group V is no longer a controlled subsidiary of the Company. As of
September 30, 1997, the Company no longer held the Group V B Shares or the Group
V D Warrants, however, at December 31, 1997, the Company still maintained
approximately 7,800,000 shares of Group V common stock.
In January 1998, the Company received consideration that reduced the
principle balances due under the Warrant Note and the Put to $1,080,000 and
$720,000, respectively.
Purchase of Replacement Property
In September 1997, NuOasis International agreed to acquire Replacement
Property from Group V consisting of marketable securities for a purchase price
of approximately $1,920,000. The consideration consists of $700,000 cash,
treasury shares held by the Company and a promissory note in the amount of
$500,000.
Cleopatra Hammamet
In September 1997, to finance the remaining expenditures on the
Hammamet Casino, the Company and Cleopatra Hammamet Limited, a Tunisian
corporation in organization, ("Cleopatra Hammamet") entered into an agreement
with Cedric International Company Inc., a Panamanian corporation ("Cedric")
pursuant to which the Company and Cedric each agreed to contribute $1.5 million
to the capital of Cleopatra Hammamet, and Cedric further agreed to provide up to
$3,800,000 for use by Cleopatra Hammamet in making the first annual lease
payments on the Hammamet Casino. In exchange for such capital contribution, the
Company and Cleopatra agreed to a capital restructuring of Cleopatra Hammamet
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<PAGE>
which resulted in the Company holding a direct 70% interest in Cleopatra
Hammamet, with 70% of this interest pledged to Cedric with the agreement that
Cedric will return such interest when the Company reimburses Cedric for all
funds advanced prior to the first anniversary date of such agreement (on an all
or nothing basis) plus interest at the rate of 15% per annum. Construction on
the Hammamet Casino was completed and the facility was equipped and opened
December 6, 1997. In the event the Company is unable or elects not to reimburse
Cedric for its capital contribution to Cleopatra Hammamet, the Company's equity
interest in Cleopatra Hammamet will be permanently reduced to 21%.
(b) Going Concern
The Company has experienced recurring net losses, has limited liquid
resources, negative working capital. Management's intent is to continue
searching for additional sources of capital and, in the case of NuOasis
International, new casino gaming and hotel management opportunities. In the
interim, the Company intends to continue operating with minimal overhead and key
administrative functions provided by consultants who are compensated in the form
of the Company's common stock. It is estimated, based upon its historical
operating expenses and current obligations, that the Company may need to utilize
its common stock for future financial support to finance its needs during fiscal
year 1998. Accordingly, the accompanying consolidated financial statements have
been presented under the assumption the Company will continue as a going
concern.
(c) Liquidity and Capital Resources
A comparison of working capital, cash and cash equivalents and current
ratios are reflected in the following table:
December 31, June 30,
1997 1997
------------ -----------
(unaudited) (audited)
Working Capital (Deficit) $1,399,317 $1,027,674
Cash and Cash Equivalents $1,132,039 $ 576,734
Current Ratio 1.30 1.35
The most significant effects on working capital and its components
during the three months ended December 31, 1997 were the Company's financing
arrangements with Cedric, providing approximately $4 million in working capital,
the reorganization and restructuring of Cleopatra Hammamet and the continued
accrual of legal and professional advisory fees.
The Company's current plan for growth is to increase its working
capital by arranging debt and equity financing to finance the activities of its
subsidiaries and for future acquisitions in its three business segments.
Additionally, the Company anticipates receiving a distribution of net operating
revenues from its proposed international casino gaming and hotel management
activities; the two Tunisian casinos were subject to obtaining financing, but
were scheduled to be completed and opened during the fiscal year ended June 30,
1998 ("fiscal 1998"). On December 6, 1997, one of two casinos commenced
operations, however, there are no assurances that the opened casino will be able
to generate positive cash flows or that the second casino will open. As of
[NRI\10-QSB:123197.QSB]-16
12
<PAGE>
December 31, 1997, the Company's operations were derived from its food
manufacturing, new gaming operations and hotel management subsidiaries and,
therefore, there is considerable risk that the Company will not have adequate
working capital to sustain its current status or that the Company or its
subsidiaries may not be able to secure the required debt or equity financing to
complete their proposed projects on a timely basis. In such event the Company or
its subsidiaries may be forced to sell the projects or contribute them to a
third party on terms which would preclude the Company from realizing significant
future benefit, or any benefit at all from the projects. The Company may also
need to issue additional shares of its common stock to pay for services
incurred, to finance the operations of its subsidiaries or to continue to
sustain itself.
(d) Capital Expenditures
General
The Company has no commitments for material capital expenditures, but
the Company's subsidiaries are seeking financing commitments to complete their
various projects, as follows:
Capital Requirements
At December 31, 1997, Cleopatra had approximately $1,000,000 remaining
to be paid as security deposits and advance rent before it could take possession
of the Cap Gammarth Casino. Additionally, there was approximately $6,000,000
remaining to be paid for furniture, fixtures and equipment, bankroll and
pre-opening costs for the two casinos.
The Company financed the completion and opening of the Hammamet Casino
through the financing agreement with Cedric. To finance the remaining
expenditures on the Cap Gammarth Casino, the Company is negotiating possible
joint ventures between NuOI and foreign investment groups, and attempting early
collections of its receivables.
During fiscal 1997, Cleopatra's World made a partial payment on the
lease on the Cap Gammarth Resort and, simultaneously, filed a request for
arbitration in its dispute with the developer of the Cap Gammarth Resort
claiming that the developer had breached the terms of the lease by not
completing for occupancy, on a timely basis, the hotel, the shopping arcade, the
health club or the beach club comprising the resort in accordance with the terms
of the lease, causing Cleopatra's World significant loss of revenue and profits.
Subsequent to the close of fiscal 1997 the matter was removed from the
arbitration calendar by mutual agreement between the parties, however, the
dispute has not yet been resolved.
As to any future projects undertaken by the Company, additional project
financing will be required. Capital investments may include all or some of the
following: acquisition and development of land, acquisition of leasehold
investments and contract rights, and construction of other facilities. In
connection with development activities relating to potential acquisitions or new
jurisdictions, the Company also makes expenditures for professional services
which are expenses as incurred. The Company's financing requirements depend upon
actual development costs, the amounts and timing of such expenditures, the
amount of available cash flow from operations and the availability of other
financing arrangements including selling equity securities and selling or
borrowing against assets (including current facilities). The Company may also
consider strategic combinations or alliances. Although there can be no assurance
that the Company can effectuate any of the financing strategies discussed above,
the Company believes that if it determines to seek any additional licenses to
[NRI\10-QSB:123197.QSB]-16
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<PAGE>
operate gaming or permits to conduct hotel operations in other jurisdictions it
will be able to raise sufficient capital to pursue its strategic plan.
If for any reason, Cleopatra, Cleopatra's World or NuOI are unable to
borrow or otherwise meet their commitments under current agreements to provide
the furniture, fixtures, equipment and working capital to open the Cap Gammarth
Casino or manage the Cap Gammarth Resort, or acquire, develop and operate future
casino gaming and hotel management projects, the Company may be required to
intercede and provide the requisite financing and working capital, or be forced
to sell all or a portion of the respective interests, or lose the respective
rights to the projects and properties entirely.
(e) Cash Flows
Cash used by operating activities was $1,096,295 for the six months
ended December 31, 1997 as compared to $2,752,185 cash provided by operating
activities for the comparable period last year. The change is primarily
attributable to the collection of $3.9 million due from an affiliate during the
six months ended December 31, 1996. There was no similar receipt of cash during
the current period.
Cash provided by investing activities was $665,353 for the six months
ended December 31, 1997 as compared to $124,117 for the comparable period last
year. The change is primarily attributable to an increase in sales of
investments during the current period.
Cash provided by financing activities was $968,247 for the six months
ended December 31, 1997 as compared to $2,840,046 used by financing activities
for the comparable period last year. The change is primarily attributable to the
payment of $3 million in principal on certain of the Company's long term debt
during the same period last year, offset by $1 million of new debt issued during
the current period.
(f) Results of Operations
Three Months Ended December 31, 1997 Compared to Three Months
Ended December 31, 1996
The Company's total food sales for the three months ended December 31,
1997 were $177,455 as compared to $360,775, for the comparable period last year,
resulting in an decrease of $183,320 or 51%. The change is primarily
attributable to unrenewed and expired co-packing agreements.
The Company's total cost of food sales for the three months ended
December 31, 1997 were $67,099 as compared to $211,290 for the comparable period
last year, resulting in an decrease of $144,191 or 68%. The decrease in total
cost of food sales is again, primarily attributable to unrenewed and expired
co-packing agreements.
The Company's total gaming revenues for the three months ended December
31, 1997 were $20,065 as compared to none for the comparable period last year.
The gaming revenues are attributable to the opening of the Cleopatra Hammamet
casino. Since the casino opened December 7, 1997, there were no gaming revenues
earned during the same period last year.
The Company's total legal and professional fees, and general and
administrative expenses were $281,298 and $1,541,399, respectively, for the
three months ended December 31, 1997, as compared to $587,305 and $187,501,
respectively for the comparable period last year. The change in legal and
professional fees is primarily attributable to a decrease in professional
[NRI\10-QSB:123197.QSB]-16
14
<PAGE>
services provided by consultants under professional advisory and management
agreements over the same period last year. Additionally, an increase in general
and administrative expenses resulted from the opening of the Cleopatra Hammamet
casino
As a result of the NPC acquisition by Group V, the excess of the
purchase price over the fair market value of the net assets acquired was
approximately $3,318,107 and was assumed to be allocated to goodwill. Due to
Group V'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. Group V was
sold during June 1997, and is no longer consolidated with the Company, as such,
there was no such write off during this year.
The Company's total operating loss for the three months ended December
31, 1997 was $1,375,473 as compared to $3,975,784 for the same period last year.
The decrease of approximately $2.6 million is primarily attributable to the
write of goodwill from the Group V and NPC acquisition, discussed above, and
opening of the Cleopatra Hammamet casino.
The Company's total other expense for the current period was $41,563 as
compared to $313,801 for the same period last year. The change is primarily
attributable to a decrease in losses from equity investment in Cleopatra World
in the amount of $235,099.
Six Months Ended December 31, 1997 Compared to Six Months Ended
December 31, 1996
The Company's total food sales for the six months ended December 31,
1997 were $428,504 as compared to $712,146, for the comparable period last year,
resulting in an decrease of $283,642 or 40%. The decrease is primarily
attributable to unrenewed and expired co-packing agreements.
The Company's total cost of food sales for the six months ended
December 31, 1997 was $243,955 as compared to $480,866 for the comparable period
last year, resulting in an decrease of $236,911 or 49%. The decrease in total
cost of food sales is again, primarily attributable to unrenewed and expired
co-packing agreements.
The Company's total gaming revenues for the six months ended December
31, 1997 were $20,065 as compared to none for the comparable period last year.
The gaming revenues are attributable to the opening of the Cleopatra Hammamet
casino. Since the casino opened December 7, 1997, there were no gaming revenues
earned during the same period last year.
The loss on sale of investment in the amount of $367,730 is
attributable to the sale of 497,157 common shares of Group V during the six
months ended December 31, 1997. There were no such sales during the comparable
period this year.
The Company's total legal and professional fees, and general and
administrative expenses were $642,150 and $1,885,845, respectively, for the six
months ended December 31, 1997, as compared to $1,167,447 and $498,047,
respectively, for the comparable period last year. The change in legal and
professional fees is primarily attributable to a decrease in professional
services provided by consultants under professional advisory and management
agreements over the same period last year. Additionally, an increase in general
and administrative expenses resulted from the opening of the Cleopatra Hammamet
casino.
[NRI\10-QSB:123197.QSB]-16
15
<PAGE>
As a result of the NPC acquisition, the excess of the purchase price
over the fair market value of the net assets acquired was approximately
$3,318,107 and was assumed to be allocated to goodwill. Due to Group V'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. Group V was sold
during June 1997, and is no longer consolidated with the Company, as such, there
was no such write off during the comparable period this year.
The Company's total operating loss for the six months ended December
31, 1997 was $2,032,706 as compared to $5,180,719 for the comparable period last
year. The decrease of approximately $3.1 million is primarily attributable to
the write of goodwill from the Group V and NPC acquisition, discussed above, and
opening of the Cleopatra Hammamet casino.
The Company's total other income for the current period was $174,512,
as compared to other expense of $333,972 for the same period last year. The
change is primarily attributable to income from equity investments in Cleopatra
World the amount of $172,131.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
The Company knows of no significant changes in the status of the
pending litigation or claims against the Company as described in Form 10-KSB for
the Company's fiscal year ended June 30, 1997.
Item 2. Changes In Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission Of Matters To A Vote Of Security Holders
The Company did not submit any matters to a vote of security holders
during fiscal 1997 or 1996. In January 1998, the Company held a Special Meeting
of Shareholders, at which meeting the following actions were taken by its
shareholders:
(i) Jon L. Lawver was elected to serve as a director.
(ii) The Company was re-incorporated in the state of Nevada
pursuant to a statutory merger with NuOasis Resorts Inc.,
effectively changing the Company's name to "NuOasis Resorts
Inc."
Item 5. Other Information
None
[NRI\10-QSB:123197.QSB]-16
16
<PAGE>
Item 6. Exhibits And Reports On Form 8-K
(a) Exhibits:
Exhibit Number Description of Exhibit
-------------- -----------------------
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
[NRI\10-QSB:123197.QSB]-16
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
NuOASIS RESORTS INC.
Dated: April 2, 1998 By: /s/ Fred G. Luke
----------------------------------
Fred G. Luke,
President and Director,
NuOasis Resorts Inc.
Dated: April 2, 1998 By: /s/ Jon L. Lawver
-----------------------------
Jon L. Lawver,
Director, NuOasis Resorts Inc.
[NRI\10-QSB:123197.QSB]-16
18
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,132,039
<SECURITIES> 0
<RECEIVABLES> 67,506
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<PP&E> 2,465,900
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240,000
<COMMON> 488,243
<OTHER-SE> 7,151,002
<TOTAL-LIABILITY-AND-EQUITY> 17,676,548
<SALES> 197,520
<TOTAL-REVENUES> 197,520
<CGS> 69,121
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