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 September 30, 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
(Address of principal executive offices)
92660
(Zip Code)
(714) 833-5381
(Registrant's telephone number, including area code)
2 Park Plaza, Suite 470, Irvine, California
(Former Address, if changed since last report)
92614
(Former Zip Code, if changed since last report)
N/A
(Former telephone number, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the 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
Consolidated Balance Sheets as of September 30, 1997
(unaudited) ...............................................1
Consolidated Statements of Operations for the Three
Months Ended September 30, 1997 and 1996 (unaudited).......3
Consolidated Statements of Cash Flows for the Three
Months Ended September 30, 1997 and 1996 (unaudited).......4
Notes to Consolidated Financial Statements .................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................10
PART II
Item 1. Legal Proceedings...........................................13
Item 2. Changes In Securities.......................................13
Item 3. Defaults Upon Senior Securities.............................13
Item 4. Submission Of Matters To A Vote Of Security Holders.........13
Item 5. Other Information...........................................13
Item 6. Exhibits And Reports On Form 8-K............................13
Signatures..................................................14
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NuOASIS RESORTS INC.
Condensed Consolidated
Balance Sheet
As of September 30, 1997 (Unaudited)
ASSETS September 30,
1997
(Unaudited)
---------------------
Current assets:
Cash and cash equivalents $ 803,046
Accounts receivable, net 105,691
Due from affiliate 2,147,018
Inventory 37,122
Other current assets -
--------------------
Total current assets 3,092,877
Property and equipment
Food manufacturing equipment 1,074,649
Other 136,412
Accumulated depreciation and amortization (989,013)
---------------------
Total property and equipment 222,048
Other assets:
Equity investments 6,028,362
Intangible assets, net 979,538
Other assets 62,675
--------------------
Total other assets 7,070,575
--------------------
TOTAL ASSETS $ 10,385,500
====================
See accompanying notes to these condensed consolidated financial statements
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NuOASIS RESORTS INC.
Condensed Consolidated
Balance Sheet
As of September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30,
1997
(Unaudited)
-------------------
<S> <C>
Current liabilities:
Accounts payable, trade $ 695,341
Accrued expenses 87,175
Due to affiliates 2,670,772
Current maturities of long-term debt to affiliate 194,575
-------------------
Total current liabilities 3,647,863 Long term liabilities:
Long-term debt 145,880
Total long term liabilities 145,880
Total liabilities 3,793,743
Commitments and contingencies
Minority interest 1,583,777
Stockholders' equity
Preferred stock, Series D, $.01 par value; 24,000,000 shares
authorized, issued and outstanding at September
30, 1997 (aggregate liquidation of up to $10,000,000) 240,000
Common stock, $.01 par value; 50,000,000 shares
authorized; 48,824,300 shares issued and outstanding at
September 30, 1997 488,243
Additional paid-in-capital 48,827,297
Accumulated deficit (34,220,910)
Cost of 20,000,115 treasury shares (10,002,425)
Common stock subscription and stockholders' receivables (324,225)
--------------------
Total stockholders' equity 5,007,980
--------------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 10,385,500
====================
</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 Months Ended
September 30, 1997 and 1996 (Unaudited)
Three Months Ended September 30,
-------------------------------------------
1997 1996
(Unaudited) (Unaudited)
------------------ ------------------
<S> <C> <C>
Food sales revenue $ 251,049 $ 351,371
------------------ ------------------
Total revenue 251,049 351,371
------------------ ------------------
Cost of food sales revenue 176,856 269,576
------------------ ------------------
Total cost of revenue 176,856 269,576
------------------ ------------------
Gross profit 74,193 81,795
------------------ ------------------
Depreciation and amortization 61,648 28,312
Legal and professional fees 360,852 580,142
Loss on sale of investment - 367,730
Selling, general and administrative expenses 344,446 310,546
Minority interest (35,520) -
------------------ -------------------
Total operating expenses 731,426 1,286,730
------------------ -------------------
Operating income (loss) (657,233) (1,204,935)
------------------ --------------------
Earnings in equity investments 223,098 -
Other income (expense) (7,023) (20,171)
------------------ --------------------
216,075 (20,171)
------------------ --------------------
Net income (loss) before income tax provision (441,158) (1,225,106)
------------------ --------------------
Income tax benefit (provision) - -
------------------ -------------------
Net income (loss) $ (441,158) $ (1,225,106)
================== ====================
Net income (loss) per common share $ (.01) $ (.03)
================== ====================
Weighted average number of common shares
outstanding used to compute net loss per
common share 48,824,300 45,048,500
================== ====================
</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 Three Months Ended
September 30, 1997 and 1996 (Unaudited)
Three Months Ended September 30,
---------------------------------------------
1997 1996
--------------------- ----------------------
<S> <C> <C>
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (441,158) $ (1,225,106)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization 61,648 28,312
Services exchanged for stock - 278,673
Loss on sale of investment - 367,730
Earnings in equity investments (223,098) --
Minority interest (35,520) --
Increases (decreases) in changes in assets and liabilities:
Accounts receivable 132,394 3,921,005
Inventory (1,949) 3,193
Other assets (275) (16,238)
Accounts payable (413,884) (44,068)
Accrued expenses 39,188 (45,188)
Due to affiliates 1,160,210 (218,770)
--------------------- ----------------------
Net cash provided by operating activities 277,556 3,049,543
--------------------- ----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investment - 124,117
--------------------- ----------------------
Net cash provided by investing activities - 124,117
--------------------- ----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds received from repayment of shareholder notes receivable - 177,643
Principal payments on notes payables (51,244) (3,023,621)
--------------------- ----------------------
Net cash used by financing activities (51,244) (2,845,978)
--------------------- ----------------------
Net increase (decrease) in cash 226,312 327,682
--------------------- ----------------------
Cash and cash equivalents, beginning of period 576,734 50,436
--------------------- ----------------------
Cash and cash equivalents, end of period $ 803,046 $ 378,118
===================== ======================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for:
Interest $ 6,795 $ 20,171
Income taxes - -
Non-cash investing and financing activities:
Common stock issued for services $ - $ 278,673
</TABLE>
See accompanying notes to these condensed consolidated financial statements
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 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
September 30, 1997, and the related condensed consolidated statements of
operations and cash flows of the Company and its subsidiaries for the three
months ended September 30, 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 Annual Report for fiscal 1997 on
Form 10-KSB. The results of operations for the three months ended September 30,
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 subsidiary, Cleopatra
Palace Limited ("Cleopatra"), 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 at 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
September 30, 1997 (Unaudited)
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,
negative working capital and two of its operating subsidiaries were disposed of
during fiscal 1996 and fiscal 1997. 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 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.
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.
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997 (Unaudited)
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 September 30, 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
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997 (Unaudited)
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. Commitments and Contingencies
Capital Requirements of Cleopatra, Cleopatra Hammamet and Cleopatra's World
At September 30, 1997, Cleopatra had approximately $2,000,000 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.
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
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997 (Unaudited)
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 4. 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.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(a) Significant Developments During the Quarter ended September 30, 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
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997 (Unaudited)
Company. As of September 30, 1997, the Company no longer held the Group V B
Shares or the Group V D Warrants, however, at September 30, 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
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.
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997 (Unaudited)
(c) Liquidity and Capital Resources
A comparison of working capital, cash and cash equivalents and current
ratios are reflected in the following table:
September 30, June 30,
1997 1997
--------------------- -------------------
(unaudited) (audited)
--------------------- -------------------
Working Capital (Deficit) $ (554,985) $ (1,923,964)
Cash and Cash Equivalents $ 803,046 $ 50,436
Current Ratio .85 .68
The most significant effects on working capital and its components
during the three months ended September 30, 1997 were the continued accrual of
legal and professional advisory fees and cash received from the collection of
receivables and advances due from affiliates.
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
September 30, 1998, the Company's sole operations were derived from its food
manufacturing 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:
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997 (Unaudited)
Capital Requirements
At September 30, 1997, Cleopatra had approximately $2,000,000 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.
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 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
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.
[NRI\10-QSB:093097.QSB]-15
12
<PAGE>
NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997 (Unaudited)
(e) Cash Flows
Cash provided by operating activities was $277,556 for the three months
ended September 30,1997 as compared to $3,049,543 for the comparable period last
year. The decrease is primarily attributable to the collection of $3.8 million
due from an affiliate during the three months ended September 30, 1996.
There was no similar receipt of cash flow during the current period.
There was no cash provided by investing activities during the three
months ended September 30, 1997 as compared to $124,117 for the comparable
period last year. The decrease is primarily attributable to not having sales of
investments during the current period as there were during the comparable period
last year.
Cash used by financing activities was $51,244 for the three months
ended September 30, 1997 as compared to $2,845,978 for the comparable period
last year. The decrease 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. There was no such payment made during the current period.
(f) Results of Operations
Three Months Ended September 30, 1997 Compared to Three Months Ended
September 30, 1996
The Company's total food sales for the three months ended September 30,
1997 were $251,049 as compared to $351,371, for the comparable period last year,
resulting in a decrease of $100,322 or 29%. The decrease is primarily
attributable to unrenewed and expired co-packing agreements.
The Company's total cost of food sales for the three months ended
September 30, 1997 were $176,856 as compared to $269,576 for the comparable
period last year, resulting in a decrease of $92,720 or 34%. The decrease in
total cost of food sales is primarily attributable to unrenewed and expired co-
packing agreements. The change in sales also caused a slight decrease of 6% in
relative total cost of sales.
There was no loss on sales of investments during the current period, as
compared to $367,730 during the comparable period last year. There was no such
sales of investments during the current period.
The Company's total legal and professional fees and selling, general
and administrative expenses were $705,298 for the three months ended September
30, 1997, as compared to $890,688 for the comparable period last year. The
decrease is primarily attributable to the continued efforts of minimizing
professional services, legal fees and general corporate overhead.
The Company's total operating loss for the three months ended September
30, 1997 was $657,233 as compared to an operating loss of $1,204,935 for the
comparable period last year. The improvement is primarily attributable to having
no loss on sales of investments as there was during the same period last year
and having lower legal and professional and selling, general and administrative
expenses during the current period compared to the same period last year.
[NRI\10-QSB:093097.QSB]-15
13
<PAGE>
NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997 (Unaudited)
Earnings in equity investments in the amount of $223,098 is
attributable to the net earnings from the Company's investment in Cleopatra's
World. There was no such earnings during the comparable period last year since
the investment in Cleopatra's World was made in November 1996.
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
In January 1998, following the close of fiscal 1997, 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
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:093097.QSB]-15
14
<PAGE>
NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997 (Unaudited)
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: March 18, 1998 By: /s/ Fred G. Luke
----------------------------------
Fred G. Luke,
President and Director
Dated: March 18, 1998 By: /s/ Jon L. Lawver
----- ----------------------------------
Jon L. Lawver, Director
[NRI\10-QSB:093097.QSB]-15
16
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 803,046
<SECURITIES> 0
<RECEIVABLES> 2,252,709
<ALLOWANCES> 0
<INVENTORY> 37,122
<CURRENT-ASSETS> 3,092,877
<PP&E> 1,211,061
<DEPRECIATION> (989,013)
<TOTAL-ASSETS> 10,385,500
<CURRENT-LIABILITIES> 3,647,863
<BONDS> 0
0
240,000
<COMMON> 488,243
<OTHER-SE> 4,279,737
<TOTAL-LIABILITY-AND-EQUITY> 10,385,500
<SALES> 251,049
<TOTAL-REVENUES> 251,049
<CGS> 176,856
<TOTAL-COSTS> 176,856
<OTHER-EXPENSES> 731,426
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,023
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (441,158)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (441,158)
<EPS-PRIMARY> (.01)
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</TABLE>
