SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended December 31, 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 1450, Newport Beach, CA 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 July 31, 2000
<PAGE>
NuOASIS RESORTS INC.
INDEX
Page
PART I
Item 1. Financial Statements
Consolidated Balance Sheets as of
December 31, 1999 (unaudited)................................... 1
Consolidated Statements of Operations
for the Three and Six Months Ended
December 31, 1999 and 1998 (unaudited).......................... 2
Consolidated Statements of Cash Flows
for the Six Months Ended
December 31, 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.................................................... 7
PART II
Item 1. Legal Proceedings.................................................. 9
Item 2. Changes In Securities.............................................. 9
Item 3. Defaults Upon Senior Securities.................................... 9
Item 4. Submission Of Matters To A Vote Of Security Holders................ 9
Item 5. Other Information.................................................. 9
Item 6. Exhibits And Reports On Form 8-K................................... 9
Signatures........................................................ 10
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NuOASIS RESORTS INC.
Condensed Consolidated Balance Sheet
As of December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash $ 503,000
Amounts receivable, net 512,000
Inventory 174,000
Other current assets 85,000
Total current assets 1,274,000
Property and equipment, net 252,000
Other assets:
Equity investments 2,561,000
Receivable from STTG 1,384,000
Land held for development 3,700,000
Other 598,000
Total other assets 8,243,000
TOTAL ASSETS $ 9,769,000
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 2,143,000
Accrued expenses 5,847,000
Due to affiliates, net 2,163,000
Note Payable to Affiliate 3,000,000
Current portion of notes payable 773,000
Total current liabilities 13,926,000
Notes Payable, net of current portion 3,356,000
Total liabilities 17,282,000
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 223,000
Accumulated deficit (50,660,000)
Total stockholders' equity (deficit) (7,513,000)
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) $ 9,769,000
</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 Six Months Ended
December 31, 1999 and 1998 (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1999 1998 1999 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue:
Hotel Rooms and Food $ 1,476,000 $ 981,000 $ 3,207,000 $ 2,820,000
Food Distribution - 131,000 - 263,000
Total revenue 1,476,000 1,112,000 3,207,000 3,083,000
Cost of Revenue:
Cost of Hotel Rooms
and Food 1,490,000 1,294,000 3,626,000 2,921,000
Cost of food
distribution - 119,000 - 239,000
Total cost of revenue 1,490,000 1,413,000 3,626,000 3,160,000
Gross (loss) profit (14,000) (301,000) (419,000) (77,000)
Depreciation and
amortization - 10,000 - 20,000
Legal and
professional fees 321,000 294,000 556,000 588,000
Selling, general
and administrative
expenses 517,000 754,000 1,063,000 1,507,000
Total operating
expenses 838,000 1,058,000 1,619,000 2,115,000
Operating (loss) (852,000) (1,359,000) (2,038,000) (2,192,000)
Gain on sale
of investments 695,000 - 695,000 -
Interest and other
expenses, net (103,000) (134,000) (240,000) 268,000
(592,000) (134,000) (455,000) 268,000
Net (loss) $ (260,000) $(1,493,000) $(1,583,000) $(2,460,000)
Items of other
comprehensive income:
Foreign currency
translation adjustments $ - $ 39,000 $ 72,000 $ 77,000
Basic and diluted
loss per common share $ (.00) $ (.02) $ (.02) $ (.03)
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 Six Months Ended
December 31, 1999 and 1998 (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,583,000) $(2,460,000)
Adjustments to reconcile
net loss to net cash
provided (used) by operating
activities:
Depreciation and amortization - 20,000
Increases (decreases) in changes
in assets and liabilities:
Accounts receivable, net of
due from affiliates 133,000 122,000
Inventory (1,000) 28,000
Other assets 72,000 123,000
Accounts payable 260,000 124,000
Accrued expenses 253,000 1,265,000
Due to affiliates 919,000 892,000
Net cash provided by operating
activities 53,000 114,000
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of equipment and
furnishings - (28,000)
Proceeds from sale of assets
and investments 601,000 27,000
Net cash provided (used) by
investing activities 601,000 (1,000)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Advances to STTG (200,000) (99,000)
Net cash (used) by
financing activities (200,000) (99,000)
Foreign currency effect on cash (72,000) -
Net increase in cash 382,000 14,000
Cash and cash equivalents,
beginning of period 121,000 148,000
Cash and cash equivalents,
end of period $ 503,000 $ 162,000
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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 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 Dectember 31, 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 December 31, 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").
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.
All material intercompany accounts and transactions have been eliminated in
consolidation.
4
<PAGE>
NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 (Unaudited)
1. Summary of Significant Accounting Policies and Description of Business
(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 in December 1999, the Company
forfeited its right to reacquire its interest in Cleopatra Hammamet.
Accordingly, the Company impaired its interest in Cleopatra Hammamet.
Going Concern Considerations
The Company has recurring losses from operations, and at December 31, 1999,
the Company had 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.
Unaudited Interim Financial Statements
The interim financial data as of December 31, 1999, and for the six months
ended December 31, 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 December 31, 1999, and the results of its operations and cash
flows for the three months ended December 31, 1999 and 1998.
5
<PAGE>
NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 30, 1999 (Unaudited)
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.
The Company is also a party to litigation with STTG due to significant delays in
completing the Le Palace Hotel. Through December 31, 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 December 31,
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.
6
<PAGE>
NuOASIS RESORTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 (Unaudited)
4. Subsequent Event
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
<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 December 31,
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, 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 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 December 31, 1999 Compared to Quarter Ended December 31, 1998
Revenues for the second quarter of fiscal 2000 were $1.5 million which was $.4
million greater than the revenues of the fiscal 1999 second 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 $1.5 million in the current quarter compared to $1.4
million in the fiscal 1999 second quarter. Only minimal expenditures are being
made to operate the hotel. Selling, general and administrative costs decreased
$234,000.
Six Months Ended December 31, 1999 Compared to Six Months Ended December 31,
1998
Revenues for the first six months of fiscal 2000 were $3.2 million which is $.1
million greater than the first six 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 quarter included $.3 millon related to food distribution.
Total cost of revenues were $3.6 million in the current six months compared to
$3.2 million in the first six months of fiscal 1999. The increase is due to
additional rent being accrued in the financial statements.
Selling, general and administrative costs decreased $494,000. 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.
8
<PAGE>
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 it's 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.
As of December 31, 1999, the Company had a working capital deficit of $12.7
million, which is approximately $300,000 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 $503,000 at December 31, 1999.
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.
9
<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
10
<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: December 31, 2000 By: /s/ Leonard J. Roman
Leonard J. Roman
Director and Chief
Financial Officer
11
