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 March 31, 2000 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 (Former Zip Code, if changed
since last report) 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 March 31, 2000.
<PAGE>
NuOASIS RESORTS INC.
INDEX
Page
PART I
Item 1. Financial Statements
Consolidated Condensed Balance Sheet
as of March 31, 2000 (unaudited)................................ 1
Consolidated Condensed Statements of Operations
for the Three and Nine Months Ended
March 31, 2000 and 1999 (unaudited)............................. 2
Consolidated Condensed Statements of
Cash Flows for the Nine Months Ended
March 31, 2000 and 1999 (unaudited)............................. 3
Notes to Consolidated Condensed
Financial Statements ........................................... 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations.................................................... 8
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 March 31, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 695,000
Amounts receivable, net 412,000
Inventory 173,000
Other current assets 85,000
Total current assets 1,365,000
Property and equipment, net 249,000
Other assets:
Equity investments 2,561,000
Land held for development 3,700,000
Other 598,000
Total other assets 6,859,000
TOTAL ASSETS $ 8,473,000
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 2,116,000
Accrued expenses 4,439,000
Due to affiliates, net 3,549,000
Note Payable to Affiliate 3,000,000
Current portion of notes payable 773,000
Total current liabilities 13,877,000
Notes Payable, net of current portion 3,356,000
Total liabilities 17,233,000
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 42,365,000
Common stock subscriptions receivable (350,000)
Other comprehensive loss 223,000
Accumulated deficit (51,907,000)
Total stockholders' equity (deficit) (8,760,000)
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) $ 8,473,000
</TABLE>
See accompanying notes to these condensed consolidated financial statements
1
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NuOASIS RESORTS INC.
Condensed Consolidated Statements of Operations
for Three and Nine Months Ended
March 31, 2000 and 1999 (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue:
Hotel Rooms
and Food $ 1,102,000 $ 914,000 $ 4,309,000 $ 3,734,000
Food Distribution - - - 262,000
Total revenue 1,102,000 914,000 4,309,000 3,996,000
Cost of Revenue:
Cost of Hotel
Rooms and Food 1,449,000 1,188,000 5,075,000 4,108,000
Cost of food
distribution - - - 239,000
Total cost
of revenue 1,449,000 1,188,000 5,075,000 4,347,000
Gross (loss)
profit (347,000) (274,000) (766,000) (351,000)
Depreciation
and amortization - 10,000 - 30,000
Legal and
professional fees 146,000 294,000 702,000 882,000
Selling, general
and administrative
expenses 305,000 594,000 1,267,000 1,780,000
Total operating
expenses 451,000 898,000 1,969,000 2,692,000
Operating (loss) (798,000) (1,172,000) (2,735,000) (3,043,000)
Gain on sale
of investments - - 695,000 -
Interest and
other expenses, net (103,000) (134,000) (343,000) (403,000)
(103,000) (134,000) 352,000 (403,000)
Loss from
continuing operations (901,000) (1,306,000) (2,383,000) (3,446,000)
Discontinued
operations:
Loss from operations
of wholly-owned
subsidiaries spun
off to
stockholders, net
of income taxes
of none 22,000 160,000 123,000 480,000
Net loss $ (923,000) $ (1,466,000) $ (2,506,000) $ (3,926,000)
Items of other
comprehensive income:
Foreign currency
translation
adjustments - 39,000 72,000 116,000
Comprehensive Loss $ (923,000) $ (1,427,000) $ (2,434,000) $ (3,810,000)
Basic and diluted
loss per
common share $ (.01) $ (.02) $ (.04) $ (.06)
Weighted average
number of common
shares outstanding
used to compute
basic and diluted
loss per common
share 66,914,300 66,914,300 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 Nine Months Ended
March 31, 2000 and 1999 (Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended March 31,
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,506,000) $(3,926,000)
Adjustments to reconcile net loss to net cash
(used) provided by operating activities:
Depreciation and amortization - 30,000
Gain on sale of investments (695,000) -
Increases (decreases) in changes in
assets and liabilities:
Accounts receivable (433,000) 33,000
Inventory - 30,000
Other assets (30,000) 99,000
Security Deposits - 321,000
Accounts payable (80,000) 186,000
Accrued expenses 530,000 2,450,000
Due to/due from affiliates, net 1,705,000 774,000
Net cash (used) provided by operating activities (1,509,000) (3,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and furnishings - (147,000)
Proceeds from sale of assets and investments 2,011,000 27,000
Net cash provided (used) by investing activities 2,011,000 (120,000)
Foreign currency effect on cash 72,000 116,000
Net increase (decrease) in cash 574,000 (7,000)
Cash and cash equivalents, beginning of period 121,000 148,000
Cash and cash equivalents, end of period $ 695,000 $ 141,000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $ - $ -
</TABLE>
See accompanying notes to these condensed consolidated financial statements
3
<PAGE>
NuOASIS RESORTS INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2000 (Unaudited)
1. General
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 March 31, 2000, the Company had two wholly-owned subsidiaries and one
majority-owned subsidiary 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.
In February 2000, the Company completed the spinoff of approximately 90% of five
of its previously wholly-owned subsidiaries Casino Management of America, Inc.
("CMA"), NuOasis Laughlin, Inc., ("NuLA"), NuOasis Las Vegas, Inc. ("NuLV"), ACI
Asset Management Inc. ("ACI") and NuOasis Properties, Inc. ("NuOP"). CMA, NuLA,
NuLV, ACI and NuOP are, in substance, shell companies, as they had no
significant, non-affiliated assets, liabilities or operations at March 31, 2000
or for the two previous years. The spinoff was effected through the distribution
of one share of common stock of each subsidiary for every 10 shares of the
Company's outstanding stock payable to the respective NuOasis stockholders of
record on June 30, 1999. The shares of each of these companies is 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.
Accordingly, the accompanying consolidated financial statements for the three
and nine months ended March 31, 2000 include the results of operations and cash
flows from each of the spun-off subsidiaries for the period of July 1, 1999
through the effective date of spin-off of February 4, 2000. As of March 31,
2000, management estimates that the Company owns approximately 10% of the
outstanding common stock and 100% of the outstanding preferred stock of each
subsidiary, and management has valued these securities at $0 based on the
factors described above.
Principles of Consolidation
The March 31, 2000 consolidated financial statements, and references therein to
the Company, include the accounts of the Company and its two remaining
wholly-owned subsidiaries; NuOasis International, Inc. ("NuOI") and Fantastic
Foods International, Inc. ("Fantastic Foods"). NuOI at March 31, 2000 owned
approximately 75% of Oasis Resorts, Inc.("ORI") and its majority owned
subsidiaries, Cleopatra Palace Resorts and Casinos ("CPRC") 75%, CPRC's 60%
owned subsidiary Cleopatra's World, Inc. ("Cleopatra's World" or "CWI"). The
operations of CMA, NuLa, NuLV, ACI and NuOP have been included in the
Consolidated Statement of Operations through February 4, 2000, the effective
date of their spinoff.
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 NuOI. At the time of the transaction, ORI had no
ability to repay the notes, and therefore, the notes had an estimated fair value
4
<PAGE>
NuOASIS RESORTS INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2000 (Unaudited)
1. General (continued)
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.
All material intercompany accounts and transactions have been eliminated in
consolidation.
Going Concern Considerations
The Company has recurring losses from operations, and at March 31, 2000, the
Company had a working capital deficit of $14 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.
As to any future projects undertaken by the Company, NuOI, CPRC 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.
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
5
<PAGE>
NuOASIS RESORTS INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2000 (Unaudited)
1. General (continued)
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.
If for any reason, CPRC 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.
Unaudited Interim Financial Statements
The interim financial data as of March 31, 2000, and for the three and nine
months ended March 31, 2000 and 1999, 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 March 31, 2000, and the results of its operations and cash flows
for the three and nine months ended March 31, 2000 and 1999.
2. Legal Proceedings
SALT Judgment
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.
STTG Arbitration
The Company is also a party to arbitration with STTG due to significant delays
in completing the Le Palace Hotel. Through March 31, 2000, 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. In the third quarter of fiscal
2000, 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.
6
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2000 (Unaudited)
2. Legal Proceedings (continued)
Group V/Monterosso Litigation
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 ("Group V Litigation"). In July 1999, the
Company filed a cross complaint against Group V Corporation and Joe Monterosso.
The trial date for the action is currently set for March 2001. Management
believes the suit lacks substantial merit and plans to vigorously defend against
the complaint and pursue the cross complaint.
Effective July 15, 2000, the Company entered into an Indemnification Agreement
and Agreement to Defend with YSRO Program Exchange B.V., a Netherlands
corporation ("YSRO"). Under the terms of this agreement, the Company exchanged
cash of $200,000, its interest in the Group V Litigation, and Fred G. Luke's
interest in the Group V Litigation. In return, YSRO agreed to undertake the
obligation to pay all costs and expenses, limited to its net assets, in
defending the Company and Fred G. Luke and in pursuit of counterclaims against
one more of the plaintiffs.
3. Subsequent Event
At March 31, 2000, the Company had an ownership interest in Oasis Resorts
International, Inc. ("ORI") that exceeded 50%, and as a result, the Company
consolidated the accounts of ORI with its financial statements. During the
quarter ended September 30, 2000, the Company disposed of certain of its shares
of ORI common stock, and ORI issued additional shares of its common stock to a
party other than the Company. These transactions decreased the Company's
ownership interest in ORI to approximately 47% at September 30, 2000.
7
<PAGE>
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 March 31,2000
were provided by utilizing the cash on hand at June 30, 1999, and cash generated
from the operations of the Le Palace Hotel and the sale of investments. The
Company has experienced recurring net losses, has limited liquid resources, and
significant negative working capital.
Management's intent is to continue searching for additional sources of capital
and, in the case of NuOI, new casino gaming and hotel management opportunities.
In the interim, the Company intends to continue operating with minimal overhead
and key administrative functions will be 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 2000. 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 March 31, 2000 Compared to Quarter Ended March 31, 1999
Revenues for the third quarter of fiscal 2000 were $1.1 million which was $.2
million greater than the revenues of the fiscal 1999 third quarter. This
increase in revenue was entirely due to the operations of the Le Palace Hotel,
Tunisia. Although revenues have increased, 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 $1.4 million in the current quarter compared to $1.2
million in the fiscal 1999 third quarter. Only minimal expenditures are being
made to operate the hotel. Selling, general and administrative costs decreased
$289,000 as a result of cost cutting measures.
Legal and professional fees decreased in the third quarter of fiscal 2000 from
$294,000 to $146,000 due to both legal costs incurred in connection with the
SALT litigation in fiscal 1999 and the use of consultants associated with the
operations in Tunisia of the LePalace Hotel in fiscal 1999.
Interest expense, net decreased $31,000 from the fiscal 1999 quarter due to
principal payments on outstanding notes payable.
Nine Months Ended March 31, 2000 Compared to Nine Months Ended March 31, 1999
Revenues for the first nine months of fiscal 2000 were $4.3 million which is $.3
million greater than the first nine months of fiscal 1999. The revenues in
fiscal 2000 were entirely due to the operations of the Le Palace Hotel Tunisia,
while the fiscal 1999 period included $.3 millon related to food distribution.
Total cost of revenues were $5.1 million in the current nine months compared to
$4.3 million in the first nine months of fiscal 1999. The increase is due to
additional rent incurred by the LePalace Hotel.
8
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Selling, general and administrative costs decreased $513,000. The fiscal 1999
period included significant expenses associated with the December 1997 opening
of the LePalace Hotel and $.2 million of costs related to food distribution.
Legal and professional fees decreased in the fiscal 2000 period from $882,000 in
fiscal 1999 to $702,000 due to both legal costs incurred in connection with the
SALT litigation in fiscal 1999 and the use of consultants associated with the
operations in Tunisia of the LePalace Hotel in fiscal 1999.
Interest expense, net in fiscal 2000 decreased $60,000 from the fiscal 1999
period due to principal payments on outstanding notes payable.
During the fiscal 2000 period the Company recognized a gain on sale of
investments of $695,000. This gain resulted primarily from sales of investments
by NuOI.
Discontinued Operations
Discontinued operations represent the results of operations from the five
subsidiaries that were 90% spun off to shareholders in February 2000. The losses
from discontinued operations reported were principally comprised of accrued but
unpaid advisory fees to an affiliated entity. The reduction in the reported
losses in fiscal 2000 from fiscal 1999 is entirely due to an amendment to the
advisory agreements reducing the monthly fee.
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 party to arbitration 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 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.
9
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
As of March 31, 2000, the Company had a working capital deficit of $14 million,
which is approximately $1.4 million greater than the deficit at June 30,1999.
The Company has currently been accruing the rent due on the Le Palace Hotel &
Casino and the resulting cash from operations has been funding its cash needs.
The Company had a cash balance of approximately $695,000 at March 31, 2000. The
limited cash balance is a direct result of the Company having limited operations
during the quarter. The increase in cash is due to NuOI selling certain
investments for cash.
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.
10
<PAGE>
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, 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
11
<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: January 4, 2001 By: /s/ Leonard J. Roman
Leonard J. Roman
Director and Chief
Financial Officer
