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Previous: HI TECH PHARMACAL CO INC, 10QSB, 1997-12-11 |
Next: PRUDENTIAL DRYDEN FUND, DEFA14A, 1997-12-11 |
PROSPECTUS
8,000,000 Shares
8,000,000 Warrants
Continental Wellness Casinos, Inc.
Common Stock
And
Warrants
All of the shares of Common Stock (the
"Common Stock") offered hereby (the
"Offering") are being offered by
Continental Wellness Casinos, Inc. (the
"Company"). The Common Stock will be
traded on the NASDAQ BULLETIN
BOARD Market under the symbol CWCI,
approval pending, the proposed sale price
for the Common Stock on the Stock Market
will be $5.00 per share in accordance with
offering.
Of the 8,000,000 shares of Common Stock
offered hereby, 1,600,000 shares (the
"Direct Shares") will be sold directly by the
Company. No underwriting discount or
commission will be paid on the Direct
Shares. The remaining 6,400,000 shares
(the "Public Shares") will be offered by the
several underwriters.
See "Risk Factors" beginning on page 9 for
a discussion of certain information that
should be considered in connection with an
investment in the Common Stock.
NEITHER THE NEVADA STATE
GAMING CONTROL BOARD NOR THE
GAMING COMMISSION NOR ANY
OTHER GAMING AUTHORITY HAS
PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS OR
THE INVESTMENT MERITS OF THE
SECURITIES OFFERED HEREBY. ANY
REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S><C> <C>
<C>
<C>
Price
Underwriting Discount (1)
Proceeds to Company (2)
Per Public Share $5.00 . . $ 0.48 $4.52
Per Public Warrant $5.00
$0.00
$5.00
Total (3) $40,000,000
$76,160,000
$76,160,000
</TABLE>
[S]
(1) The Company has agreed to indemnify
the several Underwriters against certain
Liabilities, including liabilities under the
Act of 1933, as amended. See
"Underwriting".
(2) Before deducting expenses payable by the
Company estimated to be $500,000.
(3) The Company has granted the Underwriters
a 30-day option to purchase in the
aggregate up to 1,260,000 additional shares
of Common Stock solely to cover over-allotments, if any. See
"Underwriting". If
the Underwriters exercise such option in
full, full, the total Price, Underwriting
Discount and Proceeds to Company will be
$ 6,300,000 $315,000 and $ 5,985,000
respectively.
The Public Shares are offered by the
several Underwriters, subject to prior sale,
when, as and if delivered to and accepted
by the Underwriters, and subject to
approval of certain legal matters by
counsel. It is expected that delivery of the
Public Share subject to this offering will be
made on or about August 31,1997 at the
offices of Continental Wellness Casinos,
Incorporated, 1820 E. Garry St., Suite 109,
Santa Ana, Calif. 92705.
Continental Wellness
Casinos, Inc.
The date of this Prospectus is
July 28, 1997
2.
DISCLAIMER
THE RECIPIENT OF THIS
DOCUMENT IS RESPONSIBLE FOR
CONDUCTING ITS OWN DETAILED
INVESTIGATION OF THE COMPANY,
AND THE COMPANY WILL
ACCOMMODATE SUCH AN
INVESTIGATION AT AN
APPROPRIATE TIME PRIOR TO
ACCEPTANCE OF ANY OTHER OFFER
MADE HEREBY.
Any securities offered hereby
do not represent that we are
the owners, operators of any
hotel or have been licensed by
the Nevada Gaming Authorities.
The information provided
herein is given to comply with
the requirements of the
Securities and Exchange
Commission, Washington, D.C.,
which requires that the best
information be given on the
Prospectus of any offering
that is selling securities to
the public. Any securities
offered hereby have been
registered and are subject to
approval by the United States
Securities and Exchange
Commission ("The SEC") or any
securities regulatory
authority of any state or
other jurisdiction, nor has
the SEC or any such authority
passed upon or endorsed the
merits of this Prospectus or
the accuracy of this
Prospectus. Any representation
to the contrary is unlawful.
This Prospectus does not
constitute and offer or
solicit to any person in any
state or jurisdiction if such
offer or solicitation is not
lawful. The Company is not
making any representations
that they are the owners ,
operators of any hotel, or had
been licensed by the Nevada
Gaming Authorities.
3.
IN CONNECTION WITH THE
OFFERING, THE UNDERWRITERS MAY
OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE
OR MAINTAIN THE MARKET PRICE
OF THE COMMON STOCK AT A
LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
IN CONNECTION WITH THE
OFFERING, THE UNDERWRITERS AND
SELLING GROUP MEMBERS MAY
ENGAGE IN PASSIVE MARKETING
TRANSACTIONS IN THE COMMON
STOCK ON NASDAQ IN ACCORDANCE
WITH RULE 10-B 6A UNDER THE
SECURITIES EXCHANGE ACT OF
1934. SEE "UNDERWRITING".
PROSPECTUS SUMMARY
The following summary is
qualified detailed
information and financial
data, included notes thereto
Appearing elsewhere in this
Prospectus. The information
in this Prospectus gives
effect to the Company sale of
securities but does not give
effect to the exercise of any
Warrants. Each prospective
investor is urged to read
this Prospectus in its
entirety.
THE COMPANY
The Company in engaged in the
mining development industry
since October 22, 1974, the
Company has owned and operated
thirty-nine mines (39) and one
(1) mill site at Quincy,
Plumas County, California and
is engaged in the exploration
of said mines for the
production of Precious metals
like gold, silver and Platinum
Group. In addition, the
company will be engaged in
the hotel and casino industry
at Las Vegas, Nevada. The
Company intends to convert all
the hotel room- into a Life
Extension Membership Club or a
Wellness Resort for the
purpose of extending the life
of our members by a program of
Preventative medicine which
includes Gene
Testing, exercise and
Nutrition which will extend
the life of our members up to
one hundred (100) years,
health permitting. None of
the mines are being operated
at present.
The Company believes that its
competitive advantage lies in
its ability to provide
relatively low cost
Preventative Medicine with
respect to the ability of our
members to receive a
comprehensive Life extension
Program with a free vacation
for one (1) week at a Las
Vegas Famous Resort and the
opportunity of full
reimbursement for the cost of
the program from their
insurance carrier. See
attached Business Plan Exhibit
attached to this offering.
Gaming Control Board
Regulations are included as an
exhibit.
The Company will operate the
casino Hotel and Casino upon
receiving full approval from
Nevada Gaming Control and the
Casino will produce great
revenues for the Company, if
the Company is successful with
this offering.
The executive offices of the
Company are located at 1820 E.
Garry Avenue, Suite 109, Santa
Ana, California 92705,
telephone (714) 477-0370.
4.
THE OFFERING :
Securities Offered:
8,000,000 shares of Common
Stock are offered upon
exercise of 8,000,000 Common
Stock Purchase Warrants
("Warrants"). The Warrants
will be distributed pro-rata
to all shareholders of record
as of the date of this
Prospectus, on the basis of
one Warrant for each four
shares held as of such date.
See "Description of
Securities" and "Plan of
Distribution."
Common Stock Outstanding Before
Offering.... 90,028,877
Common Stock Outstanding After Offering
98,028,877 . .
Use of Proceeds
The net proceeds of this
offering, estimated to be
$35,710,000 if all the
Warrants are exercised, will
be used to retire working
capital indebtness, pay
marketing costs, and for
working capital purposes. See
"Use of Proceeds".
Risk Factors
Investments in the securities
offered hereby involves a high
degree of risk and immediate
substantial dilution. See "Use
of Proceeds".
Electronic Bulletin Board
Symbol CWCI (applied for)
The company has never operated
a Hotel and Casino Property.
5.
RISK FACTORS
The securities offered hereby
are speculative, and
prospective investors should
be aware that purchase of
these securities a high degree
of risk. Accordingly, the
securities should be purchased
only by persons who can afford
to lose their entire
investment. The following
special risks, should be
considered:
1. Limited History of
Business Operations. The
Company has limited operating
history, having commenced
operations in 10-22-74. There
can be no assurance that the
Company will continue to be
profitable in the future.
Because of its limited
operating history, the
Company's use of proceeds from
this offering could vary from
the estimates given under the
caption "Use of Proceeds. "
See "Use of Proceeds."
2. Sufficiency of
Funds. The business of
casinos, hotel and life
extension can require
significant amounts of
capital. Management believes
that the proceeds of this
offering will be sufficient to
satisfy its anticipated cash
requirements for at least the
12 months following the
completion of this offering;
however, there can be no
assurance that any or all of
the Warrants will be exercised
and in such event the Company
may need further financing for
purchase of equipment and for
working capital purposes and
to continue growth of its
operations, of which there can
be no assurance, and there is
no assurance that the Company
will be able to obtain
additional financing on
satisfactory terms. No
arrangements have been made
at this time to raise capital
other than through this
offering and the Company has
not engaged in discussions
with any institutional or
private lenders for such
financing. See "Use of
Proceeds" and "Business." Any
such financing may involve the
issuance of additional shares
of Common Stock without the
prior notification or approval
of shareholders, including the
purchasers in this offering.
3. Competition:
Competition is intense in the
hotel and casino industries.
The Company competes not only
with similar enterprises in
the area, but also with
similar companies all over the
world. Many of the Company's
competitors have substantially
greater financial and
managerial resources than the
Company. See "Business -
Competition".
4. Dependence on Key
Personnel: The Company is
dependent upon members of
management with respect to
administration, production and
marketing. The loss of the
services of any of these
individual would materially
and adversely affect the
proposed activities of the
Company. The Company has no
employment contract with any
member of management and has
not obtained and does not
intend to obtain key man life
insurance on the life of any
member of management. See
"Management".
5. Control by Insiders.
At the completion of this
offering, directors and
officers of the Company and
other principal stockholders
and their families will own
61% of
6.
the shares of the
Company's outstanding Common
Stock or approximately
61,000,000 of the outstanding
voting stock, which will
likely givethem a controlling interest in
the Company's Common Stock and
the ability to elect the
entire Board of Directors. See
"Principal Stockholders."
6. Investment by Current
Stockholders. The Company's
current stockholders purchased
their 90,028,877 shares of
Common Stock for aggregate
consideration of cash and
services or S.25 per share.
These stockholders do not
intend to contribute
additional amounts of cash or
other property to the Company
in the future.
7. Limited Public Market. The
market for the Company's
Common Stock has been limited
and sporadic, and there can be
no assurance that a trading
market will develop following
this offering, or if such a
trading market develops, that
it will be sustained. No
person has agreed to make a
market in the Common Stock,
and market making activities
could be discontinued at any
time.
8 Dilution. Purchasers of the
Shares of Accrued by this
Prospectus will experience
immediate and substantial
dilution in that the net
tangible value of the Common
Stuck outstanding after the
offering will be
substantially less than the
per share public offering
price of the Shares offered
hereby. See "Dilutions".
9. Shares Eligible for Future
Sale. Upon sale of the
8,000,000 Shares offered
hereby, the Company will have
outstanding 90,028,877 shares
of Common Stock, including
72,661,029 shares of Common
Stock which are "Restricted
Securities," as defined under
Rule 144 promulgated under the
Securities Act of 1933. Such
shares will be subject to
resale restrictions and will
be ineligible for sale in the
public market until June 1955,
alter which sales may be mode
pursuit to Rule 144 under the
Securities Act. Sales of
substantial amounts of the
Common Stock of the Company in
the public market could
adversely affect prevailing
market prices. See
"Description of
Securities Shares Eligible for
Future Sale."
10. Foreign Operations. The
Company does not conduct any
foreign operations or business
outside of the United States.
11. Current Registration
Statement and Blue Sky
Qualification Required of
Warrants. In order for a
holder of
7.
a Warrant to exercise it there
must be a current registration
statement on file with the
Securities and Exchange
Commission and various state
securities regulatory
authorities to continue
registration of the Shares
underlying the Warrant. The
Company has undertaken to keep
(and intends to keep) the
registration statement filed
in connection with this
offering effective with
respect to the
Warrants with the Securities
and Exchange Commission and
state securities authorities
for so long as the Warrants
remain exercisable. However,
maintenance of an effective
registration statement will
subject the Company to
substantial continuing
expenses for legal and
accounting fees and there can
be no assurance the Company
will be able to maintain a
current registration statement
until December 31,1997 when
the Warrants expire. Moreover,
Blue Sky Qualification of the
Warrants and the underlying
shall be undertaken only in
those states in which the
Company's
shareholders reside as of the
date of this prospectus. if
the Warrants are acquired in
over the counter purchases or
otherwise by residents of
jurisdictions where the Shares
underlying the Warrants were
not registered or otherwise
qualified for sale, such
persons would not be able to
exercise their warrants unless
the Shares issuable thereunder
were registered in the
applicable jurisdiction or an
exemption from such
registration were available,
of which there can be no
assurance. The Company will
use its best efforts to
register the Shares underlying
the Warrants in all states
where warrant holders reside,
unless the cost of such
registration, in relation to
the number of Warrants
potentially exercisable, is
clearly disproportionate. In
addition, due to the Company's
limited history or operations,
it is possible that one or
more states where Warrant
holders reside will not permit
registration of
the underlying Shares until a
favorable history of
operations can be demonstrated
or other criteria complied
with. The value of the
Warrants may be affected
adversely by the Company's
inability to maintain an
effective registration
statement with respect to the
underlying Shares or by the -
non-qualification of the
underlying Shares in the state
of such holders or a partial
purchasers residence. Holders
of Warrants may contact the
Company in order to ascertain
the states in which the Shares
underlying the Warrants will
be qualified for sale.
12. Arbitrary Offering Price.
The exercise price and other
terms of the Warrants have
been determined arbitrarily by
the Company and do not bear
any relationship to the
assets, results of operations,
or book value of the Company,
or any other established
criteria of value. Purchasers
of the Shares underlying the
Warrants will be exposed to a
substantial risk of a decline
in the market price of the
Common Stock after this
offering, if a market
develops. See "Plan of
Distribution" The Company, is
applying for listing an NASDAQ
National Market and the
Pacific Stock Exchange.
While many NASDAQ stocks are
covered by the definition of
Penny Stock, transactions in
NASDAQ stock are exempt from
all but the sale market maker
provision for (1) issuers who
have $2,000,000 in tangible
assets ($5,000,000 if the
issuer
8.
has not been in continuous
operation for three years),
(ii) transactions in which the
customer is an institutional
accredited investor and (iii)
transactions that are not
recommended by the
broker/dealer,. In addition,
transactions in NASDAQ
security directly with the
NASDAQ market maker for such
securities, are subject only
to the sole market disclosure,
and the disclosure with regard
to commissions to be paid to
the broker/dealer and the
registered representatives.
Finally, all NASDAQ securities
are exempt if NASDAQ raises
its requirements for continued
listings so that any issuer
with less than $2,000,000 in
net tangible assets or
stockholder's equity would be
subject to delisting. These
criteria are more stringent
than the recent increase in
NASDAQ'S maintenance
requirements.
For as long as Company's
securities are subject to the
rules of Penny Stocks, the
market liquidity for the
Company's securities will be
severely affected by limiting
the ability of broker/dealers
to sell the Company's
securities and the ability of
purchasers in this offering to
sell their securities in the
secondary market.
13. Risks Low priced Stocks.
The Common Stock is not
eligible for quotation on the
Automated Quotation System of
the National Association of
Securities Dealers, Inc.
("NASDAQ").
In the absence of a security
being quoted on NASDAQ, or the
Company having $2,000,000 in
net tangible assets, trading
in the Common
9.
Stock is covered by Rule
15c2~6 promulgated under the
Securities Exchange Act of
1934 for non NASDAQ and non
exchange listed securities.
Under such rule,
broker/dealers who recommend
such securities to persons
other than established
customers and accredited
investors generally
institutions with assets in
excess of $5,000,00() or
individuals with an Ct worth
in excess of S 1,000,000 or an
annul income exceeding
$200,000 or $300,000 jointly
with their spouse) must make a
special written suitability
determination for the
purchaser and receive the
purchaser's written, agreement
to a transaction prior to
sale. Securities are also
exempt from this rule if the
market price is at least $5.
00 per share, or for warrants,
if the warrants have an
exercise price of at least
$5.00 per share.
The Securities Enforcement and
Penny Stock Reform Act of 1990
requires additional
disclosures related to the
market for penny stocks and
for trades in any stock
defined as Penny Stock. The
Commission has adopted
regulations under such Act
which would define a penny
stock to be any NASDAQ or non-NASDAQ equity security that
has a market price or exercise
price of less than $5.00 per
share and allow for the
enforcement against violators
of the proposed rules. In
addition, unless except, the
rules require the delivery,
prior to any transaction
involving a penny stock, of a
disclosure schedule prepared
by the Commission explaining
important concepts involving
the penny stock market, the
nature of such markets terms
used in such market, the
broker/Dealer's duties to the
customer, a toll-free
telephone number for inquiries
about the broker/dealer's
disciplinary history, and the
customer's rights and remedies
in case of fraud or abuse in
the sale. Disclosure must also
be made about commissions
payable to both the
Broker/Dealer and the
registered representative.
current quotations for the
securities, and if the
broker/dealer is the sole
market-maker, the
broker/dealer must disclose
this fact and its control over
the market. Finally, monthly
statements must be sent
disclosing recent price
information for the penny
stock held in the account and
information on the limited
market in penny stocks.
(SEE AMENDMENT No. 1)
10.
intends to retain all
earnings, for use in the
Company's bus ness operations.
Since the Company may be
required to obtain additional
financing, it is likely that
there will be restrictions on
the Company's ability to
declare any dividends. See
"Market Price of Common Stock"
and ~Distribution of
Securities."
14. NO CASH DIVIDENDS: The
holders of Common Stock are
entitled to receive dividends
when, as and if declared by
the Board of Directors out of
funds legally available
therefore. To date, the
Company has not paid any cash
dividends. The Board does not
intend to declare any cash
dividends in the foreseeable
future, but instead intends to
retain all earnings, if any,
for use in the Company's
business operations. Since the
Company may be required to
obtain additional financing,
it is likely that there will
be restrictions on the
Company's ability to declare
any dividends. See "Market
Price of Common Stock" and
"description of Securities".
15. There is a risk factor
because of the lack of
experience in running a hotel
or a wellness center.
DILUTION
The difference between the
public offering price per
share of Common Stock and the
pro forth net tangible book
value per share of Come Stock
after this offering
constitutes the dilution to
investors in this offering..
Net tangible book value per
share is determined by
dividing the net tangible book
value of the Company (total
tangible assets less total
liabilities) by the number of
outstanding shares of Common
Stock
At October 31, 1995, the
Company's Common Stock had a
net tangible book value of
$30,421,000 or $0.78 per
share. After giving effect to
the receipt of the net
proceeds frown the sale of all
Shares offered hereby, at a
public offering price of $5.00
per Share, the pro forma net
tangible book value of the
Company at December 31, 1996
would have been $70,421,000 or
$1.84 per share, representing
an immediate increase in net
tangible book value of $96 per
share to the present
stockholders, and immediate
dilution of $1.08 per share to
public investors. The
following table illustrates
diluting to public investors
on a per share basis, assuming
all
11.
Warrants are exercised. To the
extent less than all Warrants
are exercised, net proceeds to
the Company will be less and
dilution to investors in this
offering will be
proportionately greater. The
actual shares after dilution
will be $0.70 per share. The
shares will be free trading
shares and not subject to Rule
144.
The procedure after the
Dilution factor will be that
the net asset value of the
shares will be reduced from
$0.78 to $0.70 per share.
Public offering price
share....$5.00
Net tangible book value per
share before offering....$0.78
Increase per share
attributable to public
investors....$0.76
12.
Pro forma net tangible book
value per share after
offering....$1.84
Dilution per share to public
investors....$1.08
The following table sets forth
with respect to the present
stockholders and public
Investors a comparison of the
number of shares of Common
Stock owned by the present
stock Holders, the number of
shares of Common Stock to be
purchased from the Company by
the purchasers of the
8,000,000 Shares offered
hereby and the respective
aggregate consideration paid
to the Company and the average
price per share.
The present stockholders will
not be considered under this
offering in accordance with
Act of 1933.
<TABLE>
<S><C> <C> <C> <C>
<C> <C>
13.
Stock
Holders Shares Percentage Total
Purchased of Total Consideration Percent Of
Total Consideration
Present Shares Average
Price Per Share
Stock
holders 8,000,000 100% $40,000,000 100%
$5.00
Public
Investors 8,000,000 100% S40,000,000 100%
$5.00
Total 16.000.000 100% 80.000.000 100%
$5.00
<S></TABLE>
Public Investors will be
purchasing the shares and
present stockholders will be
purchasing the Warrants.
MARKET PRICE OF COMMON STOCK
The Common Stock has traded on
the "pink sheets" maintained
by the National Quotation
Bureau and on the NASDAQ's
Electronic Bulletin Board
since April 5, 1990. The
following table gives the high
and low bid prices since April
5, 1990, as reported by the
market makers of the Common
Stock. These prices are
without retail mark up of
markdowns and commissions, and
may not reflect actual
transactions. The Company does
not believe that trading of
its common stock currently is
reflective of an established
trading market.
<TABLE>
<S><C> <C> <C>
Low Bid High Bid
Period
1990
Second Quarter 1/16 1/10
(Commencing)
Third Quarter 1/16 1/10
Fourth Quarter
1/16 1/10
</TABLE>
[C]
<TABLE>
<S><C> <C>
15.
1991
First Quarter No Trading
Second Quarter " "
Third Quarter " "
Fourth Quarter " "
1992
First Quarter No Trading
Second Quarter " "
Third Quarter " "
Fourth Quarter " "
1993
First Quarter No Trading
</TABLE>
[S]
Second Quarter
The Common Stock does
not currently trade. As of
January 1, 1991, there were
approximately 575 holders of
Company common stock. No
trading or volume is available
because the shares have not
been trading since 1991.
USE OF PROCEEDS
If all 8,000,000
Warrants are exercised, of
which there can be no
assurance, the net proceeds
to the Company will be
approximately $7,200,000 after
deducting offering expenses of
approximately $800,000.The
Company intends to utilize the
net proceeds during the 12-month period following the
offering as follows . If less
than all of the Warrants are
exercised, the proceeds of
this offering will be spent
first to purchase equipment,
and for consolidation of
assembly operations and then
pro rata for the other
purposes set forth herein.
16.
<TABLE>
<S><C> <C>
Equipment 2,488,700
Accounts Payable 30,226,000
Working (capital 3,081,900
Consolidation of Assembly Operations
1,080,000
Accrued Salaries 38,600
Additional Sales Personnel 1,035,000
Accrued Indebtness 9,500
Total $ 37,960,000
Equipment includes the following:
Auto Insertion PCR Gene Testing
$ 150,000
Chemical Analyzer
25,000
Semi Auto Medic Equipment/Used (3)
30,000
Medical Supporting Equipment
1,040,000
Printing Equipment ( I )
100,000
Preparation Equipment (1)
20,000
Marketing Equipment
20,000
Medical Publications
7,500
Medical tech Manuals
5,000
Laboratory Miscellaneous Equipment
15,000
Refrigeration Equipment
8.000
Total Medical Equipment S 1,420,500
Computer PC 486DX 33Mhz
4MB Ram 200Mb Hard Disk (8) S 302,000
Printers (4) 1 12,700
Laser Printers (2) 211,300
Peripherals S 203,000
Software 200,000
Total Computer Equipment $ 1,029.1 00
Other Office Equipment $ 39,lOO
Total Equipment $ 2.488.700
</TABLE>
[S]
The purchase of the above
equipment will enable the
Company to bid on additional
larger Life Extension
projects. Accounts Payable
includes the purchase of a
HOTEL and Casino.
17.
The Company will finance all
the Accounts Payable from the
proceeds it will receive from
members of the Life Extension
Program. No contract changes
are expected because of the
above.
No proceeds of this offering
will be used for speculative
investment and only will be
used to pay operations as
needed.
Consolidation of Assembly
Operations represents the cost
of leasehold improvements and
moving expenses to consolidate
the contract medical
operations for Life Extension
Program at a Hotel and Casino,
Las Vegas, Nevada.
Accrued Salaries includes
amounts due to indirect and
managerial personnel.
18.
Additional Sales
Personnel includes the cost of
advertisement, travel and
training of personnel for the
states of California, Oregon,
Washington , Nevada, Utah,
Colorado, Arizona, New Mexico,
and Texas.
Accrued indebtedness
includes amount due to lawyers
and accountants. The Company
does not intend to use the
proceeds of this offering to
pay down its note.
Pending use of all the
proceeds, the Company will
make temporary investments of
the proceeds, including but
not limited lo interest
bearing savings accounts,
certificates of deposit, money
market and other liquid
assets.
The foregoing list of
expenditures is an estimate
and will vary due to changing
circumstances such as
variations in additional
contracts which may be
acquired. Any change in the
application of proceeds will
occur solely in the discretion
of the Company's Board of
Directors.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF
OPERATIONS
Summary of
significant Nature of the
Business Continental Wellness
Casinos, Inc.,a Colorado
corporation was incorporated
October 29, 1974. The company
is engaged in the discovery
and development of precious
metals mining properties
located in Quincy, Plumas
County, California which
consists of 750 acres of land
where 39 unpatented mine
claims are located. All
assessment work has been done
at the mines and all the
reports had been filed with
the Bureau of Land Management,
Sacramento, California and the
County of Plumas in accordance
with the mining rules and
regulations. The company has a
permit to operate on small
scale, the mines from the
United Sales Forestry
Department, (Quincy,
California). The company is
intent on going in a big
mining venture to recover the
gold and silver in the proven
reserves as soon as the price
of gold increases in value.
The results will be increased
gross revenues and liquidity.
Small scale operation is
limited to 20 tons per day
only.
The Company, is in the process
of getting their Live Longer
Center, a Longevity Members
Association which the purpose
is to make people live longer
by using preventive Medicine
with the genes testing for
discovery of
19.
predominant illness in the
different subjects and repair
said genes by genetic
engineering followed with a
program of exercise and
nutrition. The member signs
for a period of ten years and
receives one week of care at
the center. The cost for this
program is $10,000.00 per year
per member making it a good
way to slow down the cost of
medical treatments that is out
of control. This will have
material impact in the short
and long liquidity.
The Company has no cash from
my operations. The Life
Extension Program will prevent
people from getting sick,
therefore, will reduce the
cost of medical treatments by
preventing diseases.
The Company has no other
proposed sources of credit or
cash other than from its
operations and as proposed by
this offering. In the event
less than all of the Warrant
are exercised, the Company
will be required to seek
additional debt or equity
financing. There can be no
assurance that such financing
can be obtained. This will
help the Company's internal
and external source of
liquidity.
Income taxes provided on
income for the period in which
items of income and expense
are earned or incurred
regardless of when they are
recorded car income tax
purposes. In December 1994 the
Financial Accounting Standards
Board issued Statements of
Financial Accounting Standards
Number 109, "Accounting for
Income Taxes" (FASB ).
Adoption of FASB 109 is
required for fiscal years
beginning after December 15,
1994. The Company has adopted
FASB 109 for the fiscal year
ended October 31, 1996. The
adoption FASB 109 is not
expected to have an adverse
impact on the Company's
financial position.
Capital expenditure will be
connected to the offering and
the acquisition of a hotel and
casino.
No known trends, events, or
uncertainties will have any
material effect on the net
sales of the Company.
No significant element of
income or loss that will arise
from the small business
issuer's continuing
operations.
No material changes from
period to period.
No seasonal aspects that will
affect the financial condition
or results
of operations.
20.
BUSINESS
The Basic Plan
A. Basic Strategy - Wellness-Resort and Casino, Las Vegas ,
Nevada is a Wholly owned
subsidiary of Continental
Wellness Casinos, Inc., a
publicly traded company (CWCI)
which operates a life
Extension Club where the
members are rained in how to
live a longer life and a
healthy life free of any
diseases.
B. Overview of the Wellness
Resort on Life Extension Club
in the United States. The Life
Extension Program in the
United States are very limited
and people like to live
longer and the market is there
for the first
company that starts this
project to benefit from the
need for the program.
C. Characteristics of the Life
Extension - The Life Extension
Program that we are engaged in
consists of Preventative
Medicine by using the latest
medial approved techniques in
the field of genes Technology
and by testing the genes of
all our members with the PCR
machine the detection of
illness producing genes can be
repaired and many of the
illnesses associated with that
gene can be prevented. By the
use of proper supplements
needed by the human body we
can produce a better human
specimen that is free of any
types of disease and with the
proper nutrition.
D. Recommendations - The
Wellness Resort will establish
a membership program where the
members sign a contract for 10
years which is refundable by
their group insurance plan and
tax deductible in full.
THE LIFE EXTENSION PROGRAM AND
MEMBERSHIP CLUB:
21.
A, Source of Revenue:
1. The signing of
members from our list of
available members that desire
to join the Life Extension
Club at the rate of $l,OOO per
year and payable 10 years in
advance.
2. The members will be
acquired through direct
marketing by sending brochures
to a selected group of
citizens. No membership has
been sold to date.
3. The signing of members from
recommendations by other
members will produce many
leads because everybody
desires to visit Las Vegas,
Nevada,, the entertainment
capital of the world and
receive a one week vacation
free because their group
insurance will pay for their
membership fees.
B. Co - The total cost for the
Life Extension Club is $ 1,000
for one unit which consists of
staying in the Wellness Resort
Hotel and Casino for one week
and receiving all the training
of how to live longer and
healthier but they must sign
for ten (10) years and pay
$10,000 for the 10 years.
However, this program is fully
refundable by their group
insurance medical policy and
is tax deductible.
C. Net Revenue - Considering
that the Hotel and Casino that
we will be using for our
program has a combined total
of 1,000 rooms, 2,000 club
members per week with a total
of 104,000 week units at
$l,OOO per week unit will
bring a net revenue of
$104,000,000.00 per year.
However, the members are
paying 10 years in advance for
a grand total of $1.4 billion
of total revenue .
An EXHIBIT is hereby attached
reflecting the purchase of a
HOTEL and CASINO,Las Vegas,
Nevada. (EXHIBIT NO. 28)
22.
D. Products - We will offer a
great amount of products and
other services to our members
which will produce additional
revenues to our company.
F. Pro Forma Financials - The
following pages contain the
pro Forma financials which are
predicated results of start-up
companies. The personnel
expenses are forecasted to
increase as the volume builds
but in stair step fashion.
Volumes forecasted are
predicated on values actually
received by the Wellness
Resort.
WELLNESS RESORT HOTEL AND CASINO, LAS VEGAS, NEVADA
PRO FORMA PROFIT AND LOSS STATEMENT
YEAR ONE: -ENDING DECEMBER 31,1995
<TABLE>
<S><C> <C> <C> <C> <C> <C> <C>
<S><CAPTION> (In 000)
JAN FEB MAR APR MAY JUN
JUL
REVENUE
Member's Fee 52,000 52,000 52,000
52,000 52,000
52,000 52,000
Cost
Personnel
Doctors 200 200 200 200 200
200 200
Processing 25 25 25 25
25 25 25
Equipment 5.000 0 0 0
0 0 0
Hotel Cost 14 000 0 0 0
0 0 0
Salaries Others 300 300 300 300
300 300
</TABLE>
[S]
23.
<TABLE>
<S><C> <C> <C> <C> <C> <C> <C>
Total 19,525 525 525 525
525 525 525
Overhead
Advertising - 25 25 25
25 25 25 25
Insurance 30 30 30
30 30 30 30
Total Overhead 55 55 55
55 55 55 55
NetProfit Loss 32,420 51.420 51,420
51,420 51,420
51,420
</TABLE>
[S]
24.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial Statement and
supplementary data of
Continental Wellness Casinos
Inc. are located in adjacent
pages and are listed and
included under items. Exhibits
are incorporated herein by
reference.
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There are no disagreements with
accountants on accounting and
financial disclosure.
MANAGEMENT
The members of the Board of
Directors of the Company serve
until the next annual meeting
of stockholders, or until their
successors have been elected.
The officers serve at the
pleasure of the Board of
Directors. Information as to
the directors and executive
officers of the Company is as
follows:
25.
<TABLE>
<S><C> <C> <C>
NAME AGE TITLE
Fred Cruz, 73 PRESIDENT
Chief Executive Officer and Director
Fernando Juan Vice President of Finance, Chief
Financial Officer and Director
Basil Costin 48 Vice President and Director
</TABLE>
Identified herein are all
directors and executive
officers of the Company. The
information set forth as to
each Director and Executive
Officer has been furnished by
such person.
Fred Cruz, 73, is and has been
since October 1987, a director,
chairman of the board, and
president of the company. Cruz
held two doctorate degrees,
Doctor of Podiatric Medicine
and Doctor of Medicine.
Cruz had operated many medical
clinics in the State of
California and at present is
retired from his profession but
he has engaged in many business
ventures and has been working
with precious metals for the
last 30 years. Cruz no longer
has a license to practice
medicine or podiatry and he is
retired.
FRANK COBERLY, 82, retired
naval officer, United States
Navy. Holds position of
administrative and
supervisorial in nature. Since
retirement, he has been
involved in private investment
banking, selling and purchasing
securities for his portfolios.
He has great experience in
corporate management of many
millions in assets.
26.
DONALD STUDER, Attorney at Law,
in practice since January 9,
1969. Experience in contract
law, corporate law, labor law
and business administration.
President and Director of Grand
American International
Corporation since 1984 to
present. Attorney and Sub-Trustee of Grand American Bank
Trust since 1984 to present.
Negotiated the acquisition of a
full service bank in the United
Arab Emirates, engaged in the
general practice of law, with
emphasis on business, real-estate and labor law. Conducted
a real-estate brokerage for 3
years. Negotiated over 300
collective bargaining
agreements. Represented clients
in more than 100, each NLRB
proceedings, Superior Court and
Federal Court actions. Worked
with Brundage, Williams &
Zeilman Law Firm as a Staff
Attorney, specializing in labor
law. Opened own law office
while still employed with Ryan
Aeronautical Company. Handled
over 300 cases including
criminal, divorce, personal
injury, probate, bankruptcy and
contract matters. Phi-Kappa
Phi, Sigma Pi Sigma, Sigma Tau
Sigma, Phi Delta Phi, State Bar
of California, San Diego County
Bar Association, California
real-estate broker, listed in
Who's Who in American Law (1 st
edition). Received a B.S.
degree in Physics, with honors,
from the University of Florida
in April 1963, and a JD degree
Magna Cum Laude, from the
University of San Diego in
1968.
BASIL COSTIN, 47, Secretary of
the Company since November
1996. Costin is a former United
Nations Diplomat, based in
Geneva, Switzerland, and has
completed several diplomatic
missions for the U.N.
throughout Europe, the Mid-East
and Asia, involving support
services to the domestic
economical infrastructures of
developing nations. He also has
over 15 years of extensive
international business
experience, specializing in
international marketing,
related to the manufacturing-export industries, and he is
also experienced in
international banking,
financing, investments, as well
as in technical engineering
services related to the
engineering and building
industries. He has worked in
many regions of the world with
major American corporations in
management & executive level
positions. In 1981, he formed
his own international company,
Costin International, Ltd.,
specializing in international
marketing, consulting
management, and business
consulting services. He holds
an M.S. degree from Pacific
Western University,
27.
1979, in structural
engineering, A.A. degree in
Business Administration, Los
Angeles Valley College, and an
A.S. degree in Science
Applications from Los Angeles
Technical College.
FRANK VARESE, M.D., 67, Doctor
of Medicine with specialty in
Internal Medicine, Life
Extension and Nutrition.
Practice for last 30 years at
Laguna Medical Arts Complex.
Emphasis on Preventative
Medicine and Life Extension.
Author of many publications on
the subject of preventative
medicine, nutrition and life
extension. Graduate from a
recognized Medical School with
credentials in the medical
field.
JOHN MAVROS, Mavros has a broad
background on three continents
involving the operations and
sales of hotels and suite
properties. Has held key
management positions over a
period of several years with
the Western Century Plaza Hotel
in Los Angeles, opened the
Westin Philippine Plaza in
Manila, was general manager of
the Grande Bretagne Hotel in
Athens, Greece, served as Vice
President and General Manager
of the Registry Hotel
Corporation in Irvine and
Universal City, California,
served as Senior Vice President
of California Hotels
Corporation. Mavros is also a
member of the University of
Arizona Presidents Club, and
holds a Certified Hotel
Administrator designation from
the Educational Institute of
the American Hotel-Motel
Association.
LEWIS AKMAKJIAN, 75, graduate
in business and financing with
major in securities
transactions and operations.
Has been stockbroker since 195
and worked as follows in the
Securities Business: 1966,
Toluca Pacific Securities
Corporation, Manager, 1990 to
1995. H. J.Mayer and Company,
Broker-Manager, 1975 to 1988.
C. L. McKinne, broker and
manager, 1972 to 1975. G. L.
Bisbak as manager, 1958 to
1972. Foreman and Company as
Securities Broker Manager, 1955
to 1958. J.Logan and Company as
stockbroker manager. Specialist
securities analyst,
broker/dealer, underwriting,
selling and purchase of stocks
and bonds. License; CRD 2204
with approval granted in
California, National
Association of Securities
Dealers and New York Stock
Exchange.
EXECUTIVE COMPENSATION
The following table sets forth
all cash compensation paid or
accrued including bonuses paid
or accrued, to the following
persons during 1992, for
services rendered in all
capacities to the Company.
Number of Individual
Capacities in which
served during 1995
Cash or Number in Group
None None
None
The Company pays no
compensation to directors for
services as director.
28.
PRINCIPAL STOCKHOLDERS
Grand American Trust owns approximately 64%
of the Company's Class "A" common
stock as of October31. 1995.
<TABLE>
<S><C> <C> <C> <C>
Name and Address Number Percent Before
Percent After
Of
Beneficial Owner of Shares Offering
Grand American Bank Trust 63,008,512 (1) 70 %
64%
25872 Evergreen Road Class "A"
Laguna Hills, CA 92653
Frank Coberly 10,806,960 (1) 12% 11%
950 N. Cascade Dr. Apt. 201 Class "A"
Woodburn, OR 97071 -3152
V.G. Kelly & D. Kelly Trust 3,130.933(2) 3.5% 3.2%
936 West 21 st. Street Class "A"
Santa Ana, CA 92706
Joseph Witzman 3,266,960 (3) 3.6% 3.3%
5946 Soledad Mountain Road Class "A"
La Jolla, CA 92037
Forbes Family Trust 2,000,000 (2) 2.2%
2%
All Officers and 0% 0% 0%
Directors as a group
</TABLE>
[S]
29.
(1) Purchase for cash equivalent
(2) Purchase by surrendering debt of the
company.
(3) Purchase with cash and part given as
gift.
CERTAIN TRANSACTIONS
The Company is
authorized to issue 50,000,000
shares of no par value Class
"B" shares. The Company gave
authority to its Board of
Directors to issue such Class
"B" stock in one or more
series, and to fix the number
of share" in each series, and
all designations, relative
rights, preferences and
limitations of the stock
issued in each series. As of
April 13, 1994, the Board of
Directors have exercised the
authority granted.
The Company issued to
Joseph Witzman 3,266,960 Class
"B" common shares of no par
value in exchange for the
cancellation of some of the
Company debt and said Class
"B" Common Shares were
restricted shares that bear a
ledger and are subject to the
provisions of Securities and
Exchange Commission Rule 144.
The holder of said securities
has promised to abide by the
restrictions of Securities and
Exchange Commission Rule 144.
The Company also
issued to Joseph Witzman
3,266,960 Class "A" common
shares of $.003 par value in
exchange of the cancellation
of the balance of the Company
debt and said Class "A" common
shares were restricted shares
that bear a ledger and are
subject to the provisions of
Securities and Exchange
Commission Rule.
CONTINENTAL WELLNESS CASINOS,
INC.
FINANCIAL STATEMENTS INDEX
Report of Luis R. Hidalgo, CPA ..
Audited Financial Statements
Report of Luis R.Hidalgo, CPA
Audited Financial
Statements
Consolidated Balance Sheets as
of October 31, 1996 and 1995
CONTINENTAL WELLNESS CASINOS, INC.
BALANCE SHEETS
(Unaudited)
JANUARY 3l, 1997 AND 1996
APRIL 30, 1997 and 1996
JULY 31, 1997 and 1996
CONTINENTAL WELLNESS CASINOS, INC.
30.
FINANCIAL STATEMENTS INDEX
Report of Luis R. HIDALGO, CPA
Audited Financial Statements
Consolidated Balance Sheets as
of October 31, 1996 and 1995.
CONTINENTAL WELLNESS CASINOS, INC.
BALANCE SHEETS
(Unaudited)
January 31, 1997 and 1996
April 30, 1997 and 1996
Statement of Stockholder's Equity
Notes to the Consolidated Financial
Statements
Statement of Stockholder's Equity...
Notes to the Consolidated Financial
Statements
31.
CONTINENTAL WELLNESS CASINOS, INC.
BALANCE SHEET
OCTOBER 31, 1996 AND OCTOBER 31, 1995
CONTINENTAL WELLNESS CASINOS, INC.
BALANCE SHEETS
April 30, 1997 AND 1996
<TABLE>
<S><C> <C> <C>
1997 1996
<CAPTION> (Dollars in Thousands)
ASSETS
Gold in storage 25,022
28,653
Deferred mining exploration
costs 3,253 3,253
28,275 32,906
STOCKHOLDER'S EQUITY
Common stock, Class "A" $0.003
par value 500,000,000 authorized
shares, issued and outstanding
90,028,877 shares in 1997 and
38,803,405 in 1996 $ 270 $ 116
Common stock, Class "B" no par
value 50,000,000 authorized
shares, issued and outstanding -
3,266,960 shares in 1997 and 1996 33
33
Capital in excess of par
27,972 32,757
$ 28,275 $ 32,906
</TABLE>
[S]
See accompanying Notes to Financial Statements.
CONTINENTAL WELLNESS CASINOS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES :
Description of Business - The
Company is engaged in the
mining development industry.
Since October 22, 1974, the
Company has owned and operated
thirty-nine (39) mines and one
(1) mill site at Quincy, Plumas
County, California, and is
engaged in the exploration of
said mines for the production
of precious metal like gold and
silver.
Currency Transactions - There
are no assets and liabilities
of operations outside the
United States which need to be
translated into U.S. dollars
using current exchange rates.
Development Costs - The Company
will not capitalize property
taxes on its mining properties
until the mines are ready for
operation and development.
2. GOLD IN STORAGE AT BONDED
WAREHOUSE :
On October 9, 1990, the Company
deposited at NDS, United States
Customs Bonded Warehouse
located at 19801 So. Santa Fe
Ave., Rancho Dominguez,
California, 90221, six (6) 55
gallon-drum containers of gold
dust (powder form) 999.5 pure
weighing 76,112 ounces with a
value of $ 25,022,000 based on
the gold floor price of $
347.00 per troy ounce. The
market values of gold per troy
ounce as of April 30, 1997 and
1996 are $ 347.00 and $ 389.60,
respectively. At these prices,
the gold in storage would carry
fair market values of $
25,022,000 in 1997 and $
29,653,235 in 1996.
3. DEFERRED MINING EXPLORATION
COSTS
Deferred mining exploration
costs were incurred in prior
years with the amounts being
estimated based on the
prevailing costs of mining
exploration at that time due to
the absence of supporting
documentation. On April 13,
1994, the Company issued shares
of stock valued at $ 3,252,669
to pay for its obligations
arising thereto.
RELATED PARTY TRANSACTIONS :
Grand American Bank Trust owns
approximately 44 % of the
Company's Class "A" common
stock as of October 31, 1995.
5. PROVEN GOLD AND SILVER
RESERVES :
The process of estimating
mineral reserves is very
complex, requiring significant
subjective decision in the
evaluation of available
geological, engineering, and
economic data for each reserve.
The data for a given reserve
may change substantially over
time as a result of additional
development activity,
production under varying
economic conditions, etc.
Consequently, material revision
to the existing reserve
estimates may occur in the
future. Although every
reasonable effort was made to
ensure that the reserve
estimates reported represent
the most accurate assessment
possible, the significance of
the subjective decision
required, the variances in the
available data for various
reserves, make these estimates
generally less precise than
other estimates in connection
with financial disclosure.
Proven reserves are estimated
quantities of gold and silver
which geological and
engineering data demonstrate,
with reasonable certainty, to
be recoverable in the future
years from known reserves under
existing economic and operating
conditions.
Stickel and Associates,
independent consultants in
applied geology, geophysics and
engineering, has estimated
7,000,000 troy ounces of gold
and 19,000,000 troy ounces of
silver. The values of these
reserves based on average
market prices as of April 30,
1997 and 1996 are as follows :
<TABLE>
<S><C> <C> <C>
04-30-97
04-30-96
<CAPTION>(Dollars in Thousands)
Gold:7,000,000 troy ounces @ $ 347.00 /
troy ounce $2,429,000
@ $ 384.30 / troy $ 2,690,000
ounce
Silver:19,000,000 troy ounces
@ $ 4.78 / troy ounce 85,120
@ $ 5.34 / troy ounce 101,460
$2,514,120 $2,791,560
</TABLE>
[S]
6. STOCKHOLDERS' EQUITY :
The Company is authorized to
issue 50,000,000 shares of no
par value Class "B" shares. The
Company gave authority to the
Board of Directors to issue
such Class "B' stock in one or
more series, and to fix the
number of shares in each
series, and all designations,
relative rights, preferences
and limitations of the stock
issued in each series. As of
April 13, 1994, the Board of
Directors have exercised the
authority granted.
7. CONTINGENCIES :
The Company is not involved in
any legal proceeding which is
considered to be ordinary
routine litigation incident to
its business.
8. TAXES
The Company has not filed a
federal income tax return
because there are no earnings
to report.
9. BUSINESS SEGMENT
INFORMATION :
The Company considers its
primary business activity to be
comprised of only one segment,
the development of mines for
the extraction of gold and
silver and other precious
metals.
CONTINENTAL WELLNESS CASINOS , INC .
BALANCE SHEETS
JANUARY 31, 1997 AND 1996
<TABLE>
<S><C> <C> <C>
<CAPTION>(Dollars in Thousands)
ASSETS 1997 1996
Gold in storage 28,028 28,653
Deferred mining exploration
costs:
3,253 3,253
31.281 32,906
STOCKHOLDER' S EQUITY
Common stock, Class "A" S.0.003
par value 500,000,000 authorized
shares, issued and outstanding
90,028,877 shares in 1997 and
38,803,405 in 1996
$ 270 $ 116
Common stock, Class "B" no par
value 50,000,000 authorized
shares, issued and outstanding -
3,266,960 shares in 1997 and 1996
33 33
Capital in excess of par 30,978
32,757
S 31,281 S 32,906
</TABLE>
[S]
See accompanying Notes to Financial Statements.
4. RELATED PARTY TRANSACTIONS
:
Grand American Bank Trust owns
approximately 44 % of the
Company's Class "A" common
stock as of October 31, 1995.
5. PROVEN GOLD AND SILVER
RESERVES :
The process of estimating
mineral reserves is very
complex, requiring significant
subjective decision in the
evaluation of available
geological, engineering, and
economic data for each reserve.
The data for a given reserve
may change substantially over
time as a result of additional
development activity,
production under varying
economic conditions, etc.
Consequently, material revision
to the existing reserve
estimates may occur in the
future. Although every
reasonable effort was made to
ensure that the reserve
estimates reported represent
the most accurate assessment
possible, the significance of
the subjective decision
required, the variances in the
available data for various
reserves, make these estimates
generally less precise than
other estimates in connection
with financial disclosure.
Proven reserves are estimated
quantities of gold and silver
which geological and
engineering data demonstrate,
with reasonable certainty, to
be recoverable in the future
years from known reserves under
existing economic and operating
conditions.
Stickel and Associates,
independent consultants in
applied geology, geophysics and
engineering, has estimated
7,000,000 troy ounces of gold
and 19,000,000 troy ounces of
silver. The values of these
reserves based on average
market prices as of January 31,
l997 and 1996 are as follows :
<TABLE>
<S><C> <C> <C>
01-31-96 01-31-97
<CAPTION>(Dollars-in Thousands)
Gold:7,000,000 troy ounces
@$ 368.25 troy ounce $2, 577, 750
@ $ 384.30 / troy $ 2, 690, 000
ounce
Silver:19,000,000 troy ounces
Q $ 4.78 / troy ounce 90,820
Q $ 5.34 / troy ounce 101,460
$2,668,570 $2,791,560
</TABLE>
[S]
6 STOCKHOLDERS' EQUITY :
The Company is authorized to
issue 50,000,000 shares of no
par value Class "B" shares. The
Company gave authority to the
Board of Directors to issue
such Class "B' stock in one or
more series, and to fix the
number of shares in each
series, and all designations,
relative rights, preferences
and limitations of the stock
issued in each series. As of
April 13, 1994, the Board of
Directors have exercised the
authority granted.
7. CONTINGENCIES :
The Company is not involved in
any legal proceeding which is
considered to be ordinary
routine litigation incident to
its business.
8. TAXES
The Company has not filed a
federal income tax return
because there are no earnings
to report.
9. BUSINESS SEGMENT
INFORMATION :
The Company considers its
primary business activity to be
comprised of only one segment,
the development of mines for
the extraction of gold and
silver and other precious
metals.
CONTINENTAL WELLNESS CASINOS,
INC.
October 31, 1996 and October
31, 1995
CONTENTS
Pares
Independent Auditor's Report 1
Financial Statements 1
Balance Sheets
Notes to Financial Statements
LUIS R. HIDALGO
Certified Public Accountant
2056 Stevely Ave. Long Beach, Ca. 90815
Tel. (310) 430-4249 / Fax (310) 430-3332
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and
Stockholders Continental
Wellness Casinos, Inc.
Santa Ana, Ca.
I have audited the accompanying
balance sheets of
Continental Wellness Casinos,
Inc. As of October 31, 1996
CONTINENTAL WELLNESS CASINOS, INC.
OcTOBER 31, 1996 AND October 31, 1995
CONTENTS
Independent Auditor's Report
Financial Statements
Balance Sheets
Notes to Financial Statements
LUIS R. HIDALGO Certified Public Accountant
2056 Stevely Ave., Long Beach, Ca. 90815
Telephone (310) 430 4249 Fax (310) 430-3382
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Continental Wellness Casinos, Inc.
Santa Ana, California
I have audited the accompanying
balance sheets of Continental
Wellness Casinos, Inc. As of
October 31, 1996 and October
31, 1995. These financial
statements are the
responsibility of the
Company's management. My
responsibility is to express an
opinion on these financial
statements based on my audit.
I conducted my audit in
accordance with generally
accepted auditing standards.
These standards require that I
plan and perform the audit to
obtain reasonable assurance
about whether the financial
statements are free of material
misstatements. An audit
includes examining, on a test
basis, evidence supporting the
amounts and disclosures in the
financial statements. An audit
also includes assessing the
accounting principle, used and
significant estimates made by
management, as well as
evaluating the overall
financial statement
presentation. I believe that my
audit provides a reasonable
basis for my opinion.
In my opinion, the balance
sheets referred to above,
present fairly, in all material
respects, the financial
position of Continental
Wellness Casinos, Inc.. As of
October 31, 1995 in conformity
with generally accepted
accounting principles.
(S)___LUIS R. HIDALGO
LUIS R. HIDALGO,
Certified Public Accountant
November 29, 1996
CONTINENTAL WELLNESS CASINOS, INC.
BALANCE SHEETS
October 31, 1996 and October 31, 1995
<TABLE>
<S><C> <C> <C>
1996 1995
<CAPTION>(DOLLARS IN THOUSANDS)
ASSETS
Gold in storage (Note2) $27,317
$27,317
Deferred charges and
other assets
Deferred mining exploration
costs (Note3) 3,253
3,253
Deferred promotion and
operating expenses 112 -
Total assets $30,682 $30,570
</TABLE>
[S]
<TABLE>
<S><C> <C>
<C>
LIABILITIES AND STOCK HOLDER'S EQUITY
Loans Payable-Note12 $___31
STOCK HOLDER'S EQUITY
Common Stock, Class "A" $0.003 par value
Authorized shares - 500,000,000 in 1996;
100,000,000 in 1995
Issued and outstanding-90,028,377 in 1996
38,803,405 in 1995. $ 270
$ 116
Common stock, Class "B" no par value
Authorized shares-50,000,000 in 1996 and 1995
Issued and outstanding -3,266,960 in 1996 and 1995 33
33
Capital in excess of par $30,348
$30,421
Total stockholder's equity $30,651
Total Liabilities and Stockholder's Equity $30,682
$30,570
See accompanying notes to Financial Statements
</TABLE>
[S]
CONTINENTAL WELLNESS CASINOS, INC,
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business: The
Company is engaged in the
mining development industry.
Since October 22, 1974, the
Company has owned and operated
thirty-nine (39) mines and one
(1) mill site at Quincy,
Plumas County, California, and
is engaged in the exploration
of said mines for the
production of precious metals
like gold and silver. The
Company also applied for a
license in Las Vegas, Nevada
to conduct Life Extension
programs and to operate hotels
and casinos.
Currency Transactions: There
are no assets and liabilities
of operations outside the
United States which need to be
translated into U.S. dollars
using exchange rates.
Development Costs: The Company
will not capitalize property
taxes on its mining properties
until the mines are ready for
operation and development.
2. GOLD IN STORAGE AT BONDED
WAREHOUSE:
On October 9, 1990, the
Company deposited at NDS,
United States Customs Bonded
Warehouse located at 19801 S.
Santa Fe Ave.,Rancho
Dominguez, California, 90221,
Box (6) 53 gallon - drum
containers of gold dust
(powder form) 999.5 pure
weighing 76,112 troy ounces
with a value of $27,316,600
based on the gold floor price
of $358.90 per troy ounce. The
market values of gold per
troy ounce as of October 31,
1996 and October 31, 1995 are
$378.00 and $384.30,
respectively. At these prices
the gold in storage would
carry fair market values of
$28,770,336 in 1996 and
$29,249,841 in 1995.
3. DEFERRED MINING
EXPLORATION COSTS
Deferred mining exploration
costs were incurred in prior
years with the amounts being
estimated based on the
prevailing costs of mining
exploration at that time due
to the absence of supporting
documentation. On April 13,
1996, the Company issued
shares of stocks valued at
$3,252,669 to pay for its
obligations thereto.
4. RELATED PARTY
TRANSACTIONS
Grand American Bank Trust owns
approximately 71 % of the
Company's Class "A" common
stock as of :
October 31, 1996.
5. PROVEN GOLD AND SILVER
RESERVE:
The process of estimating
rescues is van complex,
requiring Cant subjective
decision in evaluation
available geological
engineering and economic data
for each reserves The data for
a given reserve may change
substantially over time as a
result of additional
development activity,
production under varying
economic conditions, and
Consequently, material effort
of revision to the existing
reserve estimates may occur in
the future. Although, every
reasonable effort was made to
ensure that the reserve
estimates reported represent
the most accurate assessment
possible, the significance of
the subjective decision
required, the variances in the
available data for various
reserves make these estimates
generally less precise than
other estimates in connection
with financial disclosure.
Proven reserves are estimated
quantities of gold and silver
which geological and
engineering data demonstrate,
with reasonable certainty, to
be recoverable in the future
years from known reserves
under existing economic and
operating conditions.
Stickel and Associates,
independent consultants in
applied geology, geophysics
and engineering, has estimated
7,000,000 troy ounces of gold
and 19,000,000 troy ounces of
silver. The values of these
reserves based on average
market price as of October 31,
1996 and October 31, 1995 are
as follows:
<TABLE>
<S><C> <C> <C>
<C>
10-15-96 10-31-95
<CAPTION> (Dollars in Thousands)
Gold: 7,000,000 troy/oz.
@$378.00 /troy ounce $2,646,000
@$384.30/troy ounce $2,690,100
Silver: 19,000,000 troy ounces
@ $4.85 / troy ounce 92,150
@ $5.34 /troy ounce 101,460
$2,738,150 $2,791,560
</TABLE>
[S]
C. STOCKHOLDER'S EQUITY:
The Company is authorized to
issue 50,000,000 shares of no
par value Class "B" shares. The
Company gave authority to its
Board d Directors to issue such
"B" stock in one or more
series, and to fix the number
of shares in each series, and
all designations, relative
rights, preferences and
limitations of the stock issued
in each series. As of April 13,
1994, the Board of Directors
had exercised the authority
granted.
7. CONTINGENCIES:
The Company is not involved in
any legal proceeding which is
considered to be ordinary
routine litigation incident to
its business.
3. TAXES:
The Company has not filed a
federal income tax return
because there are no earnings
to report.
g. The Secretary of the
State of Colorado Corporation
Office approved the following
on June 6, 1996:
a.) The name Grand American
International Corporation be
changed to Continental Wellness
Casinos, Inc.
B.) The authorized capital
"stock, common share" Class "A"
of the Company be increased
from 100,000,000 share. to
500,000,000 shares with a
$0.003 par value per share.
19. THE INCREASE OF THE ISSUED
AND OUTSTANDING CLASS "A"
COMMON SHARES. The Company on
December 6, 1995 by Company
Resolution approved the
issuance of 47,958,512 common
"A" shares to pay the mining
exploration cost of $3,252,669
that was paid by the Grand
American Bank Trust.
The Grand American Bank Trust
could not accept the shares
until a legal opinion is given
by the Regulators.
The Legal opinion was given on
February 15, 1996 and the
47,958,512 clear "A' shares
were issued to Grand American
Bank Trust in April 1996 by
American Securities Transfer,
Inc., transfer agent. The
Company by Certificate of
Resolution that we. approved on
March 22, 1996 issued 3,266,960
class "A" Restricted common
shares to Joseph Witzman in
payment of the Company's
obligation to him of $180,
953.75.
The outstanding shares in 1996
of 90,028,877 and 38,803,405 in
1995 consist of:
<TABLE>
<S> <C> <C>
Balance 1/31/94 21,803,405
Issued to Grand American Bank Trust
17.000 000
Balance 10/31/95 38,803,405
Issued to Grand American Bank Trust
47,958,512
I-sued to Joseph Witzman
3,266,960
Balance 10/31/96 90,028.877
</TABLE>
[S]
11. LOANS PAYABLE - This represents the amount owing
to Dolores M. Kelly, Successor Trustee of the Kelly
Family Exemption, UDT dated January 19, 1984 due
January 1, 1997, and personally guaranteed by Fred
Cruz, President of Continental Wellness Casinos, Inc.
(Formerly Grand American International Corporation)
STICKEL & ASSOCIATES P.O. Box 91, Tustin, Ca. 92618
(714) 751-4742
May 14, 1985
Mineral Mining and Energy Corp.
7750 El Camino Real, Suite K
Ranch La Costa, Ca. 92008
Attention; Stewart Douglas, President
LETTER OF CONSENT
We, Stickel & Associates
Consultants in Applied Geology,
Geophysics and Engineering,
hereby give the consent to
Mineral, Mining and Energy
Corporation to use our
Geologist and Mining Report
dated May 14, 1985 on the
mining properties known as
Blackhawk, Alan, MMC and Eean
Lode Claims Consisting of 750
acres.
STICKEL & ASSOCIATES
(S) J.F. STICKEL
J.F. STICKEL, RG 2999
GEOLOGIC EVALUATION OF GOLD CLAIMS
IN
PLUMAS COUNTY, CALIFORNIA
STICKEL & ASSOCIATES P.O. BOX 91, TUSTIN, CA.
92681
(714) 751-4742
May 14, 1985
Minerals, Mining and Energy Corp.
7750 El Camino Real, Suite K
Rancho La COSTA, cA. 92008
Attention: Stewart Douglas, President
Subject: Review of Literatrure and Inspection
of Gold
Claims in Plumas County,
California,
Blackhawk, Alan, MMC
and Dean Lode
Claims Consisting of
750 acres.
References: 1)Geology of the Pulga and Bucks Lake
Quadrangles,
Butte and Plumas Counties,
California,
USGS Prof. Paper 731, date 1973.
2)Examination
and sampling of the Blackhawk
and
Section 13
Claims, Plumas County, California,
by Wm. H.
Bird, date June 1, 1976.
3)Bucks Lake
Quadrangle, Map, USGS, 1:62,500,
Date 1950.
Gentlemen :
This letter presents our
geological engineering
evaluation of the subject gold
and silver claims that are
located in Plumas County,
California.
We visited and inspected the
property on April 19 and 20,
1985. The property consists of
approximately 750 acres of
lode claims with a reported
overlying of a few placer
claims. The properties lie
about 5 and 11 miles directly
west of Quincy on the Bucks
Lake Road.
The claims are named
Blackhawk, Alan, MMC, and
Dean. The Blackhawk, Alan and
MMC claims lie
in Sections 21, 22 and 27 of
T24N, R8E. The Dean claims lie
in the northwest corner of
Section 13, T24N, R8E.
Letter Report
MM&E Corporation
May 14, 1985
Page 2
GEOLOGY
These claims lie along the
southwest and northwest
borders of a northwest
trending zone or band of
highly fractured peridotite
altered to serpentine. Broad
fault zones bound the
peridotite bodies or bands and
there are no indications of
heat alteration. There has ben
no production from hard rock
mining, however, significant
placer hydraulicking and
sluicing has occurred. The
placer deposits occur in two
periods of erosion, the
Present and Tertiary.
Although, concentrations of
gold have been found in the
Blackhawk and Dean claims, it
does occur scattered
throughout the peridotite.
PRESENCE OF GOLD AND SILVER
Reference 2 indicates that
there is a conservative
10,000,000 tons of hard rock
ore reserves. Rock chip and
channel samples were obtained
from 10 to 50 foot sections of
road cuts and outcrops on
these claims and is reported
"consistently assayed high in
gold (Au)."
The highest gold value was
2.80 oz/ton, however, the
overall average was .7 oz/ton.
Silver (Ag) ranged from a
trace to 2.62 oz/ton. These
values varied greatly,
depending upon the freshness
of the outcrop. Assays also
indicated the presence of
platinoid metals.
Total amount of gold and
silver in these claims is
7,000,000 oz. Of gold and
19,000,000 oz. Of silver.
These figures were compiled
from data presented in
Reference 2.
It is reported that during the
summer of 1983, approximately
$30,000 worth of placer gold
was dredged from one of the
creeks flowing through the
Blackhawk claims. This gold
was dredged from an area of
the creek about 100 yards
long.
Stickel & Associates warrant
that our services are
performed, within the limits
prescribed by our clients,
with the usual thoroughness
and competence of the
geological engineering
profession. No other wearranty
or representation, either
expressed or implied, is
included or intended in our
proposals or reports or
contracts.
Letter Reports
MM&E Corporation
May 14, 1985
Page 3
We appreciate the opportunity
of presenting this report. If
you have any questions, please
contact this office.
Very truly yours,
STICKEL & ASSOCIATES
(S) J.F. STICKEL
J.F. STICKEL, RG 2999
JFS/hr
April 25, 1986
It is our opinion that the
described and proven
"indicated" ore reserves are
based on data as described
above.
STICKEL & ASSOCIATES
(S) J. F. STICKEL
J. F. STICKEL, RG 2999
RICHARD MCKNIGHT - 330 SOUTH
THIRD STREET
TELEPHONE
R. CLAY Hendrix
SUITE 900 AREA
CODE 702
DAVID MINCIN
LAS VEGAS,
NEVADA 89101~6032 388~7185
FAX-388~0036
ADMITTED IN NEVADA AND NEW YORK
June2, 1997
.
via fax: 369-2666
.
Gerald
Gordon, Esq.
Gordon &
Silver, Ltd.
3800 Howard
Hughes Pkwy., 14th Flr.
Las Vegas,
Nevada 89109
Dear Mr.
Gordon:
This firm
represents Continental
Wellness Casinos, Inc., with
regard to its
intent to tender an offer to
purchase the assets of the
Stratosphere
Corporation, Stratosphere
Gaming
Corp., and
any
other subsidiary or related
entity necessary to complete
the intended
transaction.
I
have enclosed a draft copy of
a Proposal to Purchase Assets
of
Stratosphere
Corp. and
Stratosphere Gaming Corp.
("Proposal") for your review
and your
clients'
review.
Because
the exhibits include all items
listed in each respective
Chapter 11
Bankruptcy
Petition, I have not attached
them. As you are likely aware,
my client's
intent
is to
purchase
each and every asset located
at, related to, and necessary
for
the operation
of the
Stratosphere Hotel & Casino.
The offer includes the real
property
located on or about Las Vegas
Blvd., and the improvements
thereon.
Upon your review
of the Proposal, please
contact me to discuss the
matter.
Sincerely,
(S) R. CLAY HENDRIX
R. Clay Hendrix, Esq.
W:\1 382Cont\530Gordon.ltr
PROPOSAL TO PURCHASE ASSETS OF
. STRATOSPHERE CORP. AND
STRATOSPHERE GAMING CORP.
THIS PROPOSAL is made
June 1997, by Continental
Wellness Casinos, Inc.,
("Buyer") to Stratosphere
Corp., and Stratosphere Gaming
Corp., ("Seller") for the
purpose of purpose of
purchasing Sellers' assets
(the "property") as follows:
1. Assets Purchased. Buyer
proposes to purchase all of
Sellers' assets, including but
not
limited to the following:
a. All real property
and improvements thereon more
particularly described in
Exhibit "A" free and clear of
any and all encumbrances
except as
specifically assumed by Buyer
in paragraph 2 hereof;
b. All personal
property described in Exhibit
"B" attached hereto free and
clear of encumbrances except
as specifically assumed by
Buyer in
paragraph 2 hereof;
c. The rights to all
patents, trademarks, licenses,
business and good will,
including but not limited to
the trade name Stratosphere,
Stratosphere
Tower, Stratosphere Hotel and
any other names, trade names,
logos, and
symbols used by Seller to
promote its business and
attractions;
d. $22,000,000.00 of
funds held in the "cage";
e. All fixtures and
trade fixtures not otherwise
listed in Exhibit "C" attached
hereto free and clear of all
encumbrances unless Buyer
specifically agrees
to pay the obligation; and
f. All records,
customer lists,
correspondence, files,
advertisements, work in
progress, and telephone
numbers.
2. Purchase Price. The
Purchase Price shall be
$330,000,000.00 allocated as
follows
(below figures approximate):
a. $203,000,000.00
assumption of first mortgage
bonds; _
b. 50,000,000.00 assumption
of Grand Casino Debt
identified in Exhibit
"D";
c. 27,000,000.00 assumption
of leases and executory
contracts identified in
Exhibit "E";
W:\1 382cont\523proposal.1tr
Stratosphere Proposal Page 1 of 8
-
d. 15,000,000.00 interest
payment to first mortgage
bondholders; and
e. 35,000,000.00 cash at the close of
escrow. The cash delivered at
closing will be modified based
upon the balances of items
paragraph 2, subparagraphs a.
through e. above.
3. Earnest Money Deposit.
Upon executing this agreement,
Buyer shall deposit with
the Escrow Agent and No/100
Dollars ($ .00) as Earnest
Money, which shall be applied
to the purchase price of the
assets transferred
hereunder.
4. Access to Property. On or
after the execution date
hereof, Buyer and/or Buyer's
representatives or agents
shall be permitted to enter on
to the Property from time
to time for physical
inspection, investigations, or
surveys of the Property.
Buyer's
inspection shall be during
normal business hours and by
appointment through
Seller and for Sellers' agent.
5. Feasibility. Buyer shall
have thirty (30) days from the
date escrow opens to notify
Seller whether Buyer approves
or disapproves of all
inspections and investigations
of the property. ("Review
Period") If Buyer notifies
Seller within the Review
Period that it disapproves the
findings and results from any
investigation or
inspection, then this
agreement and all Buyer's
obligations hereunder shall
immediately terminate, and the
escrow deposit, plus all
income earned thereon
shall be returned to Buyer
upon Buyer's written Notice of
Cancellation to the
Escrow Agent. Upon receiving
the written Notice of
Cancellation within the
Review Period, the Escrow
Agent shall release the
Earnest Money (and income
earned thereon) to Buyer
without Sellers' instruction,
order, or signature.
6. Inspections. Reports.
Licenses. Within seven (7)
days from the date escrow
opens, Seller shall provide
Buyer with true and correct
copies of all permits,
licenses, reports,
inspections, traffic studies,
environmental tests and other
similar
documents affecting the
Property or transfer of assets
hereunder in Sellers'
possession.
7. Escrow & Escrow Agent.
Per the terms of this
agreement, the Escrow Agent
shall be Land Title of Nevada.
Escrow shall open within two
(2) business days _
from the date that this
agreement is executed by
delivering an executed copy of
this agreement and the Earnest
Money to the Escrow Agent.
Escrow Agent shall
notify Seller and Buyer of the
time and date escrow is opened
on that same date.
Escrow Agent shall prepare
escrow instructions consistent
with the terms of this
agreement and any supplement
or amendment hereto.
8. Preliminary Title
Report. Upon signing this
agreement, Seller shall secure
a
W:\1 382cont\523proposal.1tr
Stratosphere Proposal Page 2 of 8
Preliminary Title Report from
the Escrow Agent and provide
the same to Buyer within five
(3) days from the date escrow
is opened. Buyer shall have
five (5) days to review the
Preliminary Title Report and
disapprove of any title
exceptions disclosed therein.
Upon receiving written notice
of Buyer's disapproval, if
any, Seller shall have two (2)
days to notify Buyer in
writing that the disapproved
item will be removed, modified
or insured against. If Seller
notifies Buyer of its intent
to remove, modify or insure
against the disapproved
exception, then this agreement
shall remain in full force and
effect. If Seller does not
timely notify Buyer that it
will remove, modify or insure
against the disapproved
item(s), then Buyer may
consider such factors during
the remainder of the Review
Period. All consensual or non-consensual liens of record
other than the first trust
deed specifically assumed by
Buyer shall be automatically
deemed rejected by Buyer
without providing notice to
Seller per the terms hereof
9. Title Policy. At Closing,
Seller shall deliver to Buyer
an ALTA Extended
Coverage Title Insurance
Policy issued by Escrow Agent
in favor of Buyer for the
full value of the real
property subject only to the
permitted exceptions or those
otherwise waived by expiration
of the Review Period without
Buyer's written
Notice of Cancellation. Seller
shall be responsible for the
preparation, review,
delivery, cost and expense of
any survey of the property
that may be required by
Escrow Agent.
10. Prorated Taxes. Real property
taxes and assessments and any
applicable use or sales tax
for the tax year in which the
closing occurs shall be
prorated between the Buyer and
the Seller.
11. Closing Costs. Buyer and Seller
shall split the reasonable and
necessary closing costs as is
normal and customary in Clark
County, Nevada. Nevertheless,
Seller shall purchase the
title policy required
hereunder, and pay transfer
taxes, and recording fees plus
the other normal and customary
costs.
12. Transfer of Real Property
at Closing. Seller shall
transfer to Buyer the real
property by Grant, Bargain &
Sales Deed free and clear of
liens and encumbrances
except as provided in
paragraph 2.
13. Transfer of Personal
Property at Closing. Seller
shall transfer to Buyer all ~ .
personal property purchased
hereunder, free and clear of
any encumbrance except
as provided in paragraph 2, by
Bill of Sale, Assignment
Agreement, and Affidavit
of Title with warranties of
title. Upon Buyer's demand,
Seller shall execute and
- deliver all other documents
necessary to give full effect
to the terms of this
agreement.
14. Closing. Closing shall
occur sixty (60) days from the
date escrow is opened unless
W:\1382cont\523proposal.1tr
Stratosphere Proposal Page 3 of 8
any necessary government or
court approval has not been
received by the Closing date.
At the time of closing, Seller
shall transfer title to the
assets transferred hereunder,
deliver possession of the
assets transferred hereunder,
and Buyer shall deliver the
purchase price stated
hereunder.
15. Bankruptcy Approval. Within five
(5) days from the date escrow
is opened, Seller shall move
the United States Bankruptcy
Court for approval of the sale
and transfer contemplated
hereunder on shortened time
and at Sellers' own expense.
16. Indemnification. On and after the
closing contemplated hereby,
Buyer agrees to indemnify
Seller against any and all
loss with respect to the
payment of any and all debts
and liabilities Buyer
specifically agreed to pay as
specified in paragraph 2
above.
17. This proposal is
subject to the following
conditions:
a. Buyer's counsel's
approval as to the steps and
proceedings in
connection with the acceptance
and sales agreement terms to
be
executed by the parties in the
event of such acceptance.
b. The preparation and
execution of a sales agreement
that conforms
to the terms and conditions of
this offer.
c. The approval of the
Gaming Control Board unless
otherwise
waived before the close of
escrow.
d. The approval Indoor
granting of any and all
licenses necessary for
Buyer to operate the assets
and ongoing business purchased
hereunder unless otherwise
waived by Buyer.
e. The final approval of
the United States Bankruptcy
Court in each
Seller's bankruptcy
proceeding.
18. Duration of Offer. This
offer shall expire on June ~
1997.
19. Inspection of Books.
Within five (a) days from the
date escrow is opened,
Sellers' an.
financial records and
corporate books, and all data
relating to its business,
shall be
open for Buyer's
inspection during business
hours. Buyer shall keep
confidential ~
all information about
Seller, or any of its
employees, officers, or
representatives
during any such
inspections and shall not
disclose or reveal such
information to
outside sources.
20. Conduct of Business
Pending Closing Between the
date of this agreement and
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the closing date, Seller
shall: conduct the business
agency in a business-like
manner; not increase
employment compensation or
benefits and use its best
efforts to preserve the
organizational efficiency and
work standards.
21. Sellers' Obligations.
Seller shall pay accounts
payable and other liabilities
incurred up to the date
of closing unless otherwise
specifically provided herein.
Seller shall indemnify
and hold Buyer harmless
against all such accounts
payable
and other liabilities.
Except as specifically
provided herein, Buyer is not
acquiring,
directly or indirectly,
any of Sellers' liabilities,
unless specifically stated,
and no
such assumption shall
accrue to Buyer by operation
of law or otherwise.
22. Sellers' Covenants.
Representations~tat~ &
Warranties. Seller covenants
represents
and warrants to Buyer:
a. Seller is the
Owner of and has good
marketable title to the assets
transferred
hereunder free from all
security interests or
encumbrances
unless
specifically identified to the
contrary.
b. The bill of sale
and instruments of assignment
to be delivered at the closing
will transfer all
personal property sold
hereunder free of all security
interests and
other encumbrances and will
contain the usual warranties
and
affidavit of
title.
c. Seller is not in
breach or default of any
contract, lease, or
arrangement to
be assigned under
this contract, and Seller
shall duly perform such
contracts, leases
and arrangements until
closing.
d. Seller has not
assigned or licensed any
interest in its trade name(s).
e. There are no
outstanding agreements with
any labor unions, or any
pension
or retirement
plans or programs for the
benefit of employees.
f. There are no
written or oral employment
agreements with any employee
which are not
terminable at will without
penalty, and salaries and
wages are
not in arrears.
g. Seller has and
shall continue to make current
and timely payment of
federal, state and
local employee withholding
taxes and all other taxes,
which are due or
may become due by reason of
the operation of the
business to tee
transferred.
h. There are no legal
actions or proceedings pending
or threatened against
Seller except
those identified in Sellers'
Bankruptcy Petitions.
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Stratosphere Proposal Page 5 of 8
I. Seller has not engaged a
broker for the sale of the
business and no broker is
involved in this transaction.
j. All of Sellers'
furniture, fixtures and
equipment are in good
operating
condition and repair, and the
buildings in which the
business is located
conform to all applicable
building codes, regulations,
ordinances and
zoning requirements.
k. Seller has complied with
applicable federal, state and
local laws in any way
related to the conduct and
operation of the business.
l. Neither this agreement,
the financial statements nor
the other documents
Seller provided to Buyer
hereunder contains any untrue
statement of
material fact or omits to
state a material fact, nor is
any document provided
hereunder otherwise
misleading.
The representations and
warranties in this paragraph
22 shall survive closing.
23. Buyer's Covenants. Buyer shall
indemnify and hold Seller
harmless from any liability on
the obligations Buyer
specifically assumes
hereunder.
24. Sellers ' Indemnification
of Buyer. Seller shall
indemnify and hold Buyer
harmless
of and from all
liabilities, losses or damages
arising out of any
misrepresentation,
breach of warranty or
nonfulfillment of any
provision of this agreement,
including
but not limited to, any
error or omission in any
statement delivered to Buyer
or any
claim, liability or
obligation of Seller (except
for those obligations Buyer
specifically agreed to
pay herein). Seller to remain
liable and hold Buyer harmless
for the actions of its
agents, employees and
predecessors in interest prior
to the
closing date even though
the claim may have been
brought after the closing
date.
25. Risk of Loss. Seller
shall assume the risk of loss
or damage to the assets to be
conveyed hereunder by
fire, theft, breakage, or
otherwise from the date of
this
agreement until the
closing date. If such loss
occurs, Seller shall repair
the
damage, if any, or
otherwise make good the loss
to Buyer by an appropriate
deduction from the sales
proceeds.
26. Buyer 's Default. In the event
the Buyer defaults under the
terms of this agreement (and
the performance is not
otherwise excused by the
failure of a condition
precedent or specific
paragraph of this agreement,
including but not limited to
Buyer's inability or failure
to receive the necessary
licencing or government
approval, or a breach of
Sellers' representations,
warranties, and covenants)
Sellers shall be entitled to
the Earnest Money deposited
hereunder as liquidated
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Stratosphere Proposal Page 6 of 8
damages, which amount is a
reasonable estimation of
Sellers' damages and does not
operate as a penalty.
27. Sellers ' Default. In the
event the Seller defaults
under the terms of this
agreement,
Buyer may elect any and
all remedies available at law
or in equity including
specific performance.
28. Binding Effect. This
agreement shall be binding
upon and inure to the benefit
of
both the parties hereto
and their respective heirs,
successors and assigns.
29. Non-waiver. No delay or
failure by either party to
exercise any right hereunder,
and no partial or single
exercise of any such right,
shall constitute a waiver of
that
or any other right,
unless otherwise expressly
provided herein.
30. Authority. The parties
represent that they have full
authority to bind their
respective corporations
by this agreement, and that
all appropriate and necessary
corporate action has been
taken in order to authorize
the transaction contemplated
thereby.
31. No Untrue Statements.
Seller represents and warrants
that none of the information
disclosed to Buyer in
relation to the transaction
contemplated by this agreement
omits or will omit to
state any material fact
necessary to make any
representation
or warranty herein made
not misleading.
32. Headings. Headings in
this agreement are for
convenience only and shall not
be
used to interpret or
construe its provisions.
33. Governing Law. This
agreement shall be governed by
and construed in
accordance with the laws
of the State of Nevada, and
jurisdiction shall be
appropriate only in
Nevada for any suit arising
from this transaction.
34. Time of the Essence.
Time is of the essence of this
agreement.
35. Notices. All notices hereunder
shall be in writing and
transmitted by fax machine or
delivered personally to the
parties and Escrow Agent as
follows:
Seller: Buyer: Escrow Agent:
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36. Attorney 's Fees. In the event
either party is forced to
retain an attorney to enforce
the terms and conditions of
their transactions, the
prevailing party shall be
entitled to a reasonable sum
as and for attorney's fees.
In witness whereof the parties
have signed this agreement.
CONTINENTAL WELLNESS STRATOSPHERE
CORPORATION
CASINOS, INC.
By: By:
STRATOSPHERE GAMING CORP.
BY:
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No dealer, sales person or other
individual has been authorized to
give any information or to make any
representations other than those
contained in this Prospectus, and,
if given or made, such information
or representations must not be
relied upon as having been
authorized by the Company or the
Underwriters. This Prospectus does
not constitute an offer to sell or
the solicitation of an offer to buy
any securities offered by this
Prospectus, nor does it constitute
an offer to sell or a solicitation
of an offer to buy the Common-Stock
by any person in any jurisdiction
in which such an offer or
solicitation is not authorized, or
in which the individual making such
an offer or solicitation is not
qualified to do so, or to any
individual to whom it is unlawful
to make such an offer or
solicitation. Neither the delivery
of this Prospectus nor any sale
made hereunder shall, under any
circumstances create any
implication that the information
contained herein is correct as of
any time subsequent to the date
hereof or that there has been no
change in the affairs of the
Company since such date.
TABLE OF CONTENTS
Prospectus Summary
Risk Factors
Use of Proceeds
Price Range of Common Stock
and Dividend Policy
Capitalization
Selected Consolidated
Financial
Information
Management's Discussion and
Analysis
of Financial Condition and
Results
of Operation
Business
Management
Principal Stockholders
Certain Transactions
Description of Capital
Stock
Underwriting
Legal Matters
Experts
Additional Information
Incorporation of Certain
Information
by Reference
Index to Consolidated
Financial
PROSPECTUS
8,000,000 Shares
8,000,000 Warrants
CONTINENTAL
WELLNESS CASINOS,
INC.
Common Stock
Continental Wellness
Casinos, Inc.
Tel. (800) 891-2026
July 28, 1997
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