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, 1999 Commission File No. 0-18377
NuOASIS RESORTS INC.
(Exact name of registrant as specified in its charter)
Nevada 84-1126818
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
4695 MacArthur Court, Suite 1450, Newport Beach, CA 92660
(Address of principal executive offices) (Zip Code)
(949) 833-5381
(Registrant's telephone number, including area code)
4695 MacArthur Court, Suite 530, Newport Beach, CA N/A
(Former Address, if changed since last report) (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 X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of capital stock, as of the latest practicable date.
Common Stock $.01 par; 66,914,300 shares as of September 30, 1999
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NuOASIS RESORTS INC.
INDEX
Page
PART I
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 1999 (unaudited).................................. 1
Consolidated Statements of Operations
for the Three Months Ended September 30,
1999 and 1998 (unaudited)....................................... 2
Consolidated Statements of Cash Flows for
the Three Months Ended September 30,
1999 and 1998 (unaudited)....................................... 3
Notes to Consolidated Financial Statements ....................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 8
PART II
Item 1. Legal Proceedings................................................. 10
Item 2. Changes in Securities............................................. 10
Item 3. Defaults Upon Senior Securities................................... 10
Item 4. Submission of Matters to A Vote of Security Holders............... 10
Item 5. Other Information................................................. 10
Item 6. Exhibits and Reports on Form 8-K.................................. 10
Signatures........................................................ 11
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NuOASIS RESORTS INC.
Condensed Consolidated Balance Sheet
As of September 30, 1999 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 312,000
Amounts receivable, net 443,000
Equity investments 103,000
Inventory 172,000
Other current assets 85,000
Total current assets 1,115,000
Property and equipment, net 252,000
Other assets:
Equity investments 2,811,000
Receivable from STTG 1,284,000
Land held for development 3,700,000
Other 598,000
8,393,000
Total other assets $ 9,760,000
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 2,169,000
Accrued expenses 5,670,000
Due to affiliates, net 2,668,000
Note Payable to Affiliate 3,000,000
Current portion of notes payable 773,000
Total current liabilities 14,280,000
Notes Payable, net of current portion 3,356,000
Total liabilities 17,636,000
Stockholders' equity (deficit):
Preferred stock, Series D, $.01 par value;
24,000,000 shares authorized, issued and outstanding
(aggregate liquidation value of up to $10,000,000) 240,000
Common stock, $.01 par value; 75,000,000 shares authorized;
66,914,300 shares issued and outstanding 669,000
Additional paid-in-capital 42,364,000
Common stock subscriptions receivable (349,000)
Other comprehensive loss (234,000)
Accumulated deficit (50,566,000)
Total stockholders' equity (deficit) (7,876,000)
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) $ 9,760,000
</TABLE>
1
See accompanying notes to these condensed consolidated financial statements
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NuOASIS RESORTS INC.
Condensed Consolidated
Statements of Operations
for Three Months Ended
September 30, 1999 and 1998 (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1999 1998
(Unaudited) (Unaudited)
<S> <C> <C>
Revenue:
Hotel Rooms and Food $ 1,731,000 $ 1,839,000
Food Distribution - 131,000
Total revenue 1,731,000 1,970,000
Cost of Revenue:
Hotel Rooms and Food 2,136,000 1,627,000
Food Distribution - 119,000
Total cost of revenue 2,136,000 1,746,000
Gross (loss) profit (405,000) 224,000
Depreciation and amortization - 10,000
Legal and professional fees 235,000 294,000
Selling, general and administrative expenses 546,000 753,000
Total operating expenses 781,000 1,057,000
Operating (loss) (1,186,000) (833,000)
Earnings in equity investments -
Other income (expense) (137,000) (134,000)
(137,000) (134,000)
Net (loss) $ (1,323,000) $ (967,000)
Items of other comprehensive income:
Foreign currency translation adjustments 72,000 38,000
Comprehensive loss $ (1,251,000) $ (929,000)
Basic and diluted (loss) per common share $ (.02) $ (.01)
Weighted average number of common shares
outstanding used to compute net loss per
common share 66,914,300 66,914,300
</TABLE>
See accompanying notes to these condensed consolidated financial statements
2
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NuOASIS RESORTS INC.
Condensed Consolidated
Statements of Cash Flows
for the Three Months Ended
September 30, 1999 and 1998 (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,236,000) $ (968,000)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 2,000 10,000
Increases (decreases) in changes in assets
and liabilities:
Accounts receivable (64,000) 62,000
Inventory 1,000 14,000
Other assets, net (3,000) 174,000
Accounts payable (26,000) 62,000
Accrued expenses 177,000 632,000
Due to affiliates 1,240,000 71,000
Net cash provided by operating activities 91,000 57,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to STTG - (50,000)
Net cash (used) by investing activities - (50,000)
Foreign currency effect on cash 100,000 -
Net increase in cash 191,000 7,000
Cash and cash equivalents, beginning of period 121,000 148,000
Cash and cash equivalents, end of period $ 312,000 $ 155,000
</TABLE>
See accompanying notes to these condensed consolidated financial statements
3
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 (Unaudited)
1. Summary of Significant Accounting Policies and Description of Business
Description of Business
NuOasis Resorts, Inc. (formerly, Nona Morelli's II, Inc.) and its subsidiaries
(the "Company"), a Nevada corporation (formerly, a Colorado corporation),
operates as a holding company for leisure and entertainment-related businesses.
At September 30, 1999, the Company had seven wholly-owned subsidiaries and two
majority-owned subsidiaries engaged in food manufacturing and distribution,
casino gaming and hotel management.
The activities of the Company's subsidiaries are domestic and international,
with existing food manufacturing activities in the United States, and casino
gaming and hotel management activities in North Africa.
Principles of Consolidation
The September 30, 1999 consolidated financial statements, and references therein
to the Company, include the accounts of the Company and its wholly-owned
subsidiaries; NuOasis International, Inc. ("NuOasis International"), Fantastic
Foods International, Inc. ("Fantastic Foods"), Casino Management of America,
Inc. ("CMA") NuOasis Laughlin, Inc., ("NuLA") NuOasis Las Vegas, Inc. ("NuLV"),
ACI Asset Management Inc. ("ACI") and NuOasis Properties, Inc. ("NuOasis
Properties"), its 70% owned subsidiary, Cleopatra Palace Limited ("Cleopatra"),
and its 60% owned subsidiary Cleopatra's World, Inc. ("Cleopatra's World" or
"CWI").
All material intercompany accounts and transactions have been eliminated in
consolidation.
Going Concern Considerations
The Company has recurring losses from operations, and at September, 30, 1999,
the Company has a working capital deficit of $13 million. The Company requires
approximately $5 million of immediate working capital to complete the final
phase of construction of the Le Palace Hotel & Resort and the Cleopatra Cap
Gammarth Casino, as well as service certain past-due trade creditors. The
Company will require additional capital to meet obligations of the hotel and
casino as they become due during the next 12 months. The Company is currently a
plaintiff in litigation with the owners of the Cleopatra Cap Gammarth Casino due
to delays in the completion of the project by the owner. The Company has
received a judgment totaling approximately $292 million against Societe
D'Animation et de Loisirs Touristique, a Tunisian corporation ("SALT"), the
ultimate collectibility of which is unknown. The Company is a defendant in a
matter initiated by the owners of the Le Palace Hotel & Resort for unpaid rents.
4
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 (Unaudited)
1. Summary of Significant Accounting Policies and Description of Business
(continued)
Unaudited Interim Financial Statements
The interim financial data as of September 30, 1999, and for the three months
ended September 30, 1999 and 1998, is unaudited; however, in the opinion of
management, the interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly and Company's financial
position as of September 30, 1999, and the results of its operations and cash
flows for the three months ended September 30, 1999 and 1998.
2. Acquisition and Liquidation of Investments
As to any future projects undertaken by the Company, NuOasis International,
Cleopatra or Cleopatra's World, 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, 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 or Cleopatra's World 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 acquire and develop future casino gaming and hotel management
projects, the Company may be required to intercede and seek to 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.
3. Legal Proceedings
In July 1998, the Company filed a complaint for damages against SALT and several
others due to significant delays in completing the Cleopatra Cap Gammarth
project. In July 1999, the Company received a judgment of approximately $300
million against SALT. Although management is proceeding to collect upon this
judgment, there can be no assurance that the Company will ultimately realize any
amount from this judgment, and the accompanying financial statements do not
include amounts related to this gain contingency.
5
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 (Unaudited)
3. Legal Proceedings (continued)
The Company is also a party to litigation with STTG due to significant delays in
completing the Le Palace Hotel. Through September 30, 1999, the Company has not
paid rent to STTG in connection with the related lease arrangement. However, the
Company has purchased equipment and has paid opening costs of approximately $1.8
million, which were the responsibility of STTG. Subsequent to September 30,
1999, STTG received an arbitration award for calendar 1998 and 1997 rental
payments, net of amounts expended by the Company. As a result, the accompanying
financial statements include an estimate for rent at the Hotel based upon the
arbitration award.
4. Subsequent Events
In December 1998, the Hammamet Casino opened. The Company financed the
completion and opening of the Hammamet Casino through a financing 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. The Company pledged its rights to equity
interests in Hammamet to Cedric to secure the certain loans and investment by
Cedric. The Company and Cedric agreed that Cedric would return such interest
when, and if, the Company reimbursed Cedric for all funds advanced prior to the
first anniversary date of the agreement (on an all-or-nothing basis), plus
interest at the rate of 15% per annum. The Company did not reimburse Cedric, due
to sustained losses at the Hammamet Casino, and in December 1999, the Company
forfeited its right to reacquire its interest in Cleopatra Hammamet.
Accordingly, the Company impaired its interest in Cleopatra Hammamet.
In connection with its acquisition of CPRC, ORI issued 1,363,450 shares of ORI
common stock, common stock purchase warrants representing the right to acquire
7,200,000 shares at $30.00 per share, and promissory notes with an aggregate
face value of $180 million to NuOasis International. At the time of the
transaction, ORI had no ability to repay the notes, and therefore, the notes had
an estimated fair value substantially less than the face value at the date of
issuance. Based on the estimated enterprise value of ORI at the date of the
acquisition of approximately $16.6 million, management valued the debt at $7
million. On November 15, 1999, management of ORI agreed to extinguish this debt
and cancel the 7,200,000 warrants for the issuance of an additional 8,111,240
shares of ORI common stock. As a result, NuOasis International shareholders
control approximately 86% of the ORI's issued and outstanding common stock.
6
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 (Unaudited)
4. Subsequent Events (Continued)
Spinoff of five wholly-owned subsidiaries
In February 2000, the Company completed the spinoff of five of its wholly-owned
subsidiaries CMA, NuLA, NuLV, ACI and NuOasis Properties. The spinoff was
effected through the distribution of 812,500 shares of common stock and 300,000
shares of Series A preferred stock of each subsidiary to the respective NuOasis
shareholders of record on June 30, 1999. The shares of each of these companies
are restricted and no market is expected to develop until each of the
subsidiaries has filed a registration statement on Form 10-SB, and other reports
as required. In February 2000, registration statements on Form 10-SB were filed,
but were subsequently retracted. Each subsidiary intends to file a new
registration statement so that the unregistered shares become registered.
7
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Going Concern
The Company's working capital resources during the period ended September 30,
1999 were provided by utilizing the cash on hand at June 30, 1999 and from the
operations of the Le Palace Hotel. 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, 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 1999. Accordingly, the accompanying
consolidated financial statements have been presented under the assumption the
Company will continue as a going concern.
Results of Operations -
Quarter Ended September 30, 1999 Compared to Quarter Ended September 30, 1998
Revenues for the first quarter of fiscal 2000 were $1.7 million compared to $2.0
million for the first quarter of fiscal 1999. The decrease in fiscal 2000 was
due to no revenues being realized at Fantastic Foods and a lower occupancy at
the LePalace Hotel during fiscal 2000. To date, the hotel has not been able to
realize its potential due to the failure of the developer to complete certain
amenities at the hotel, the Cap Gammarth Casino and the surrounding properties
associated with the complex.
Total cost of revenues were $2.1 million in the current quarter compared to $1.7
million in the fiscal 1999 quarter. The increase in cost of sales was due the
accrual of rent at the LePalace Hotel and the required minimum overhead
necessary despite lower occupancy. The operating results of the LePalace Hotel
continue to be less than anticipated due to lower than expected occupancy levels
due to the developer not completing the adjoining properties in the Cap Gammarth
complex.
Liquidity and Capital Resources
The Company has recurring losses from operations and requires approximately $5
million of immediate working capital to complete the final phase of construction
of the Le Palace Hotel and Resort and the Cleopatra Cap Gammarth Casino and
service certain trade creditors. The Company will require additional capital to
meet obligations of the hotel and casino as they become due during the next 12
months. The Company is currently a plaintiff in litigation with the owners of
the Cleopatra Cap Gammarth Casino due to delays in the completion of the
projects by the owner. The Company has received a judgment totaling
approximately $300 million, the ultimate collectibility of which is unknown. The
Company is a defendant in a matter initiated by the owners of the Le Palace
Hotel and Resort for rents unpaid by the Company. The Company also requires
approximately $70 million to continue the development of its gaming facility in
Oasis, Nevada, and may be subject to foreclosure proceedings in the event the
Company is unable to raise the financing necessary to complete the project.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans with respect to these matters include
obtaining sources of capital to complete
8
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the projects, pay its trade creditors and its past-due rents. Meanwhile, the
Company will attempt to perfect its judgment against the landlords of the
Cleopatra Cap Gammarth Casino. There are no assurances that such financing will
be consummated on terms favorable to the Company, if at all, nor that the
Company will be successful in collecting on its judgment against the owners of
the Cleopatra Cap Gammarth Casino.
As of September 30, 1999, the Company had a working capital deficit of $13
million, which approximates the deficit at June 30, 1998 after giving effect for
losses in the current period. The Company has currently been accruing the rent
due on the Le Palace Hotel and the resulting cash from operations has been
funding its cash needs.
The Company had a cash balance of approximately $312,000 at September 30, 1999.
The limited cash balance is a direct result of the Company having limited
operations during the quarters.
The Company has no commitments for capital expenditures or additional equity or
debt financing and no assurances can be made that its working capital needs can
be met.
Additionally, as of September 30, 1999, the Company had no employees other than
its President. The Le Palace Hotel had approximately 185 employees.
9
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PART II: OTHER INFORMATION
Item 1.Legal Proceedings
No change from that previously in the Annual Report on Form 10KSB for
the year ended June 30, 1999.
Item 2.Changes in Securities
None
Item 3.Defaults Upon Senior Securities
None
Item 4.Submission Of Matters To A Vote Of Security Holders
None
Item 5.Other Information
None
Item 6.Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Number Description of Exhibit
27 Financial Data Schedule
(b) Reports on Form 8-K: None
10
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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: December 21, 2000 by: /s/ Leonard J. Roman
Leonard J. Roman
Chief Financial Officer and Director
