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, 1998 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)
N/A 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 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; 66,914,300 shares as of September 30, 1998
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NuOASIS RESORTS INC.
INDEX
Page
PART I
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of September 30, 1998 (unaudited)............................ 1
Condensed Consolidated Statements of Operations
for the Three Months Ended September 30, 1998
and 1997 (unaudited)............................................ 2
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended September 30,
1998 and 1997 (unaudited)....................................... 3
Notes to Condensed Consolidated Financial
Statements ..................................................... 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................... 9
PART II
Item 1. Legal Proceedings.................................................. 11
Item 2. Changes in Securities.............................................. 11
Item 3. Defaults Upon Senior Securities.................................... 11
Item 4. Submission of Matters to A Vote of Security Holders................ 11
Item 5. Other Information.................................................. 11
Item 6. Exhibits and Reports on Form 8-K................................... 11
Signatures......................................................... 12
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NuOASIS RESORTS INC.
Condensed Consolidated Balance Sheet
As of September 30, 1998 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 154,614
Amounts receivable 625,175
Equity investments 715,000
Inventory 189,703
Other current assets 146,057
Total current assets 1,830,549
Property and equipment, net 127,984
Other assets:
Equity and other investments 2,000,000
Receivable from STTG 1,034,633
Security deposits and other assets 471,078
TOTAL ASSETS $ 5,464,244
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 2,010,092
Accrued expenses 3,596,708
Due to affiliates, net 1,106,064
Notes payable 453,557
Total current liabilities 7,166,421
Minority Interest 1,635,325
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 669,143
Treasury Shares (4,715,200)
Additional paid-in-capital 46,887,088
Common stock subscriptions receivable (674,288)
Accumulated other comprehensive loss (443,010)
Accumulated deficit (45,301,235)
Total stockholders' equity (deficit) (3,337,502)
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) $ 5,464,244
</TABLE>
See accompanying notes to consolidated financial statements
1
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NuOASIS RESORTS INC.
Condensed Consolidated
Statements of Operations
for Three Months Ended
September 30, 1998 and 1997 (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1998 1997
(Unaudited) (Unaudited)
<S> <C> <C>
Revenue:
Hotel Rooms and Food $ 1,839,100 $ -
Food Distribution 131,168 251,049
Total revenue 1,970,268 251,049
Cost of Revenue:
Hotel Rooms and Food 1,626,700 -
Food Distribution 119,498 176,856
Total cost of revenue 1,746,198 176,856
Gross profit 224,070 74,193
Depreciation and amortization 10,023 61,648
Legal and professional fees 294,025 360,852
Selling, general and administrative expenses 753,350 344,446
Minority interest - (35,520)
Total operating expenses 1,057,398 731,426
Operating (loss) (833,328) (657,233)
Earnings in equity investments - 223,098
Other income (expense) (134,222) (7,023)
(134,222) 216,075
Net (loss) $ (967,550) $ (441,158)
Items of other comprehensive income:
Foreign currency translation adjustments $ 38,695 $ -
Basic and diluted (loss) per common share $ (.01) $ (.01)
Weighted average number of common shares
outstanding used to compute net loss per
common share 66,914,300 48,824,300
</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, 1998 and 1997 (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1998 1997
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (967,550) $ (441,158)
Adjustments to reconcile net income
(loss) to net cash provided
(used) by operating activities:
Depreciation and amortization 10,023 61,648
Earnings in equity investments - (223,098)
Minority interest - (35,520)
Increases (decreases) in changes in assets
and liabilities:
Accounts receivable 61,371 132,394
Inventory 14,061 (1,949)
Other assets, net 173,767 (275)
Accounts payable 61,844 (413,884)
Accrued expenses 632,178 39,188
Due to affiliates 71,181 1,160,210
Net cash provided by operating activities 56,875 277,556
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances to STTG (50,000) -
Principal payments on notes payables - (51,244)
Net cash used by financing activities (50,000) (51,244)
Net increase in cash 6,875 226,312
Cash and cash equivalents, beginning of period 147,739 576,734
Cash and cash equivalents, end of period $ 154,614 $ 803,046
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ - $ 6,795
</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, 1998 (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, 1998, 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.
Restructuring
In July 1998, the Company entered into various agreements with Cleopatra and
Cleopatra's World, and other related Cleopatra subsidiaries, to effect a
restructuring which resulted in the Company disposing of its interest in
Cleopatra, decreasing its interest in Cleopatra Hammamet, and increasing its
interest in Cleopatra's World. To effect the restructuring (a) Cleopatra and
Cleopatra's World assigned to a newly-formed entity, Cleopatra Palace Resorts
and Casinos Limited a British corporation ("CPRC"), all of their rights, title
and interest in and to (i) the Letter of Intent dated July 7, 1996 between
Compagnie Monastirienne Immobiliere et Touristique S.A. ("CMI") and Cleopatra,
(ii) the Letter of Intent between Cleopatra and CMI dated July 7, 1996, (iii)
Cleopatra's rights to the Casino Lease and gaming license between Cleopatra and
the Government of Morocco, (iv) Cleopatra's rights to acquire certain real
estate and the building known as the "Casino Nuevo San Roque together with the
gaming license and the agreement in principle with Trans Mer S.A. to finance the
project, (v) certain trade accounts receivable, and (vi) Cleopatra's right to
the $1.5 million deposit which it tendered to Club Loisirs Hammamet, the Lessor
of the Hammamet Casino. As a result of the Cleopatra restructuring, the Company
became the 75% owner of CPRC and acquired an additional 10% equity interest in
Cleopatra's World.
Principles of Consolidation
The September 30, 1998 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.
4
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 (Unaudited)
1. Summary of Significant Accounting Policies and Description of Business
(continued)
Going Concern Considerations
The Company has recurring losses from operations, and at September, 30, 1998,
the Company has a working capital deficit of $5 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.
Minority Interest
The accompanying consolidated balance sheet as of September 30, 1998 includes
minority interest of $1,635,325. Such amount represents 30% of the stockholder's
equity of Cleopatra that is not owned by the Company at September 30, 1998.
Unaudited Interim Financial Statements
The interim financial data as of September 30, 1998, and for the three months
ended September 30, 1998 and 1997, 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, 1998, and the results of its operations and cash
flows for the three months ended September 30, 1998 and 1997.
2. Acquisition and Liquidation of Investments
In July 1998, Cleopatra, Cleopatra's World, and certain other Cleopatra-themed
entities effected a restructuring which resulted in the Company disposing of its
interest in Cleopatra, decreasing its rights to future equity interests in
Cleopatra Hammamet and increasing its interest in Cleopatra's World.
5
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 (Unaudited)
2. Acquisition and Liquidation of Investments (continued)
Cleopatra's World
Effective April 30, 1998, the Company acquired an additional 10% equity interest
in Cleopatra's World in exchange for $10,000,000 of notes payable issued by
NuOasis Resorts, Inc., 2,000,000 shares of treasury stock (Note 7), and 280,000
shares of common stock of The Hartcourt Companies Inc. In addition, the Company
also transferred its rights under the Warrant Note and the Put (see below) to
Cleopatra's World. As a result of this exchange, the Company's interest in
Cleopatra's World increased from 50% to 60% and, accordingly, the accounts of
Cleopatra's World are consolidated with those of the Company.
Flexweight Corporation
In May 1998, the Company entered into an "Exchange Agreement" with Flexweight
Corporation (currently, Oasis Resorts, Inc.) whereby the Company issued
3,250,000 shares of treasury stock in exchange for 1,000,000 shares of common
stock of Flexweight Corporation and an option to purchase shares in the future
such that the Company may maintain a 19.5% equity interest in Flexweight
Corporation or $2.5 million in market value.
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.
6
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 (Unaudited)
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.
The Company is also a party to litigation with STTG due to significant delays in
completing the Le Palace Hotel. Through September 30, 1998, 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,
1998, 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 November 1998, Group V Corporation and Joe Monterosso filed a claim against
the Company in connection with the purchase of securities from the Company
alleging material misrepresentation. In July 1999, the Company filed a cross
complaint against Group V Corporation and Joe Monterosso. The trial date for the
action is set for September 2000. Management believes the suit lacks substantial
merit and plans to vigorously defend against the complaint and pursue the cross
complaint. No provision has been made in the accompanying financial statements
for this contingency.
In September 1999, the Company settled a lawsuit for $51,000 where the Company
did not pay for consulting services under a consulting agreement. The Company
has fully accrued for this settlement as of September 30, 1998.
On October 19, 1998, ORI then entered into an exchange agreement with NuOasis
International to acquire NuOasis International's 75% interest in CPRC. CPRC had
previously acquired an equity interest in Cleopatra Cap Gammarth, which operates
the casino Cleopatra Cap Gammarth, a right to reacquire an interest in Cleopatra
Hammamet Limited, which operates the casino Cleopatra Hammamet Casino, and CWI
which operates the Le Palace Hotel & Resort at Cap Gammarth. All of the
properties are located in Tunisia. CPL is a predecessor company to CPRC, an
entity controlled by NuOasis International, which previously held the interests
in the Cleopatra Hammamet Casino and the Cleopatra Cap Gammarth Casino.
7
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NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 (Unaudited)
4. Subsequent Events (continued)
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 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, after the transaction, NuOasis
International shareholders controlled approximately 86% of the ORI's issued and
outstanding common stock.
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.
Treasury Shares
During the year ended June 30, 1999, the Company sold all of the remaining
Treasury Shares. The total amount received from the sale of 9,430,000 shares
amounted to $408,663. Because the fair value of the Company's common stock
issued in these transactions was less than the $.50 per share basis of the
common stock, the Company has reduced additional paid in capital for the
difference, which aggregated $4,306,537 during the year ended June 30, 1999.
8
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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,
1998 were provided by utilizing the cash on hand at June 30, 1998 and from the
operations of the Le Palace Hotel. 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 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, 1998 Compared to Quarter Ended September 30, 1997
Revenues for the first quarter of fiscal 1999 were $2.0 million compared to
$251,000 of revenues for the fiscal 1998 first quarter. The increase in revenues
was entirely due to the operations of the Le Palace Hotel Tunisia which only
opened in December 1997. To date, the hotel has not been able to realize its
potential due 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 $1.7 million in the current quarter compared to $.2
million in the fiscal 1998 quarter. As in revenues, the increase is due the
operations of the LePalace Hotel which only opened in December 1997. The
operating results of the LePalace Hotel were 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 Gammath 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
9
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obtaining sources of capital to complete 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 Cleoparta 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, 1998, the Company had a working capital deficit of $5
million, which approximates the deficit at June 30, 1998. 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 $155,000 at September 30, 1998.
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, 1998, the Company had no employees other than
its President. The Le Palace Hotel had approximately 175 employees.
10
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PART II: OTHER INFORMATION
Item 1.Legal Proceedings
See details provided in Note 3 - Legal Proceedings and Note 4 - Subsequent
events regarding changes in any of the Company's legal proceedings.
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
11
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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
