FORM S-11 / A
(7451)
(As last amended in Release No. 33-7168, May
11, 1995, 60 F.R. 26604]
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form S-11 (AMENDMENT )
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(Amendment No.....7....)
CONTINENTAL WELLNESS CASINOS TRUST
(Name of small business issuer in its charter)
COLORADO
84- 0687501 (State or (Primary Standard
(I.R.S. Employer
jurisdiction of Industrial
Identification No.)
incorporation or Classification
(organization) (Code Number)
2205 Purple Majesty Court, Las Vegas, Nevada 89117-2747
Telephone Number (702) 240-4408 Fax Number (702) 240-4345
(Address and telephone number of principal executive offices)
Rick Eriksen , 2205 Purple Majesty Court, Las Vegas, Nevada
89117-2747
(Name, address and telephone number of Agent for services)
Fred Cruz, 2205 Purple Majesty Court, Las Vegas, Nevada 89117-2747,
Telephone Number: (702) 240-4408
<PAGE> 2
INITIAL PUBLIC
OFFERING
(As filed with the Securities Exchange
Commission on August 11, 1997 - Registration
No. 0-20217)
Filed Through the ELECTRONIC DATA GATHERING
CENTER (EDGAR)
Form S-11
Ammendment No. 7
CONTINENTAL WELLNESS CASINOS TRUST
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of - LAS
VEGAS, State of Nevada on March 31, 1998
(Registrant) (S) FRED CRUZ
By(Signature and Title) FRED CRUZ, President, Chief Executive Officer and
Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
(Signature) (S) RICK ERIKSEN
RICK ERIKSEN, Vice President, Secretary
Instructions for Signatures
(1) Who must sign; the small business issuer, its principal executive
officer, its controller or principal accounting officer and at least the
majority of the board of directors or persons performing similar functions. If
the issuer is a limited partnership then the general partner and a majority of
its board of directors if a corporation.
(2) Beneath each signature, type or print the name of each signatory.
Any person who occupies more than one of the specified positions shall indicate
each capacity in which he or she signs the registration
<PAGE> 3
STATEMENT. See Rule 402 of Regulation C concerning manual signatures and Item
601 of Regulations S-B concerning signatures by powers of attorney.
REGISTRATION FEE CALCULATION OF
Title of Each Amount Proposed
Proposed Amount
Class of To Be Minimum
Maximum Of
Securities Registered Offering
Aggregate Registration
To Be Registered Price Per
offering Fee
offering Price security
[S] [C] [C]
[C] [C]
Par Value Equity Unit Price
Equity Stock Class "A" 10,000,000 $0.003 $11.00
$110,000,000
Equity Stock Class "B" 5,000,000 No par $11.00
$55,000,000
Equity Stock, Class "A" Equity Stock Class "B"
$.003 par value No Par Value
$110,000,000 $55,000,000
Total..........
$165,000,000
(1) Estimated solely for the purpose of calculating
the registration fee.
(2) Represents Equity Units of Stock Purchase Class "A"
Class "B"
The (Class "B") to be distributed pro-rata to the
Buyer of Class "A" Equity Units or Shareholders of the
Company on the effective date of June 30, 1998.
This Registration Statement, at the rate of one
Class "B" for each four shares of Equity Units Class "A" Stock
purchased.
(3) Represents Class "A" shares of Equity Units of
Stock, par Value of $0.003 per share, issuable upon exercise
Of the Also registered hereunder are an indeterminate number
of shares of Equity Units of Stock that May become issuable
pursuant to antidilution Adjustments.
(4) Paid with original filing.
(5) There are firm commitments for the purchase of
the Class "B" Equity
Units of stock.
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registration shall file a further amendment
which specifically states that this Registration Statement
shall thereafter become effective in accordance with
Section 8 (a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such
date as the
<PAGE> 4
Commission, acting pursuant to said Section 8 (a), may be
determined.
SUBJECT TO COMPLETION, December 31, 1998
Prospectus
CONTINENTAL WELLNESS CASINOS TRUST
10,000,000 Equity Units Class "A"
5,000,000 Equity Units Class "B"
Continental Wellness Casinos Trust, a Colorado
organization (the "Company"), issuable upon exercise of
10,000,000 shares of its class "A" stock, par value $0.003
per share (the "Equity Stock"), issuable upon exercise of
10,000,00 Equity Stock Purchase Class "A"("Units" ) being
distributed to the purchasers of the Company at the rate of
one Class "B" for each four shares owned of Class "A" on
the date of this Prospectus. Each Class "A" entitles the
holder to receive one share of Class "B" Unit at a price of
$11.00 per share of the Class "A" Equity Units Shares,
commencing on the date of this Prospectus, until
July 31, 1998.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION. THE
COMPANY HAS ENGAGED IN NO OPERATIONS TO DATE. AN INVESTMENT IN THE SECURITIES OF
THE COMPANY IS HIGH SPECULATIVE AND SHOULD BE MADE ONLY BY THOSE PERSONS WHO CAN
AFFORD A LOSS OF THEIR ENTIRE INVESTMENT. See "Risk Factors" and "Dilution".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 5
Price to Public Proceeds Underwriting
Proceeds
And Commissions
(1) to Company (2)
[S] [C] [C]
[C]
Per Share $11.00 $--
$11.00
Total $165,000,000
$--
$165,000,000
Only $55,000,000 will be regenerated from purchase of the Class "B" only.
(1) The Shares are being offered on a straight best efforts, no premium
basis by the Company upon exercise of the Class "B" No person has agreed to
exercise any Class "B" to purchase or to take down any of the Shares. There can
be no assurance that any or all of the Class "B" will be exercised. The Company
has the right to reduce the exercise price of the Class "B" at any time. The
Company may extend the Class "B" exercise period until one year from the date of
this Prospectus, and may vary the terms off the Class "^B" in any extension
period.
(2) Before deducting approximately $16,500,000 legal, accounting and
other expenses of the offering.
The date of this Prospectus is September 8, 1998.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). The Company has also filed a Registration
Statement on Form SB2 with the Commission with the respect to the offering made
by this Prospectus. This Prospectus does not include all of the information
included in the Registration Statement.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete, and in each instance, reference is
made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in its entirety by
such reference. The Company will provide, without charge upon oral or written
request of any person, a copy of any information incorporated by reference
herein. Such request should be directed to the Company at 2205 Purple Majesty
Court, Las vegas, Nevada 89117-2747 Telephone; (702) 240-4408.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed information
and financial statements, 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 Class "B" Each
prospective investor is urged to read this Prospectus in its entirety.
THE COMPANY
22
(1) The Company has been engaged in the mining development industry. Since
October 1974, the Company has owned and operated thirty-nine mines (39) and one
mill site at Quincy, Plumas County, California and engaged in the exploration
of said mines for the production of precious metals like gold, silver and the
platinum group. None of the mines or the mill are being operated at the present
time, and the Company has no plans to reopen mining operations.
The Company will be engaged in the hotel and casino industry at Las Vegas,
Nevada. The Company intends to derive its income primarily (over 90%) from
rentals of hotel rooms and suites, in conjunction with the free provision of
a preventive medicine program including gene testing, exercise and nutrition
advice which will extend the lives of guests up to one hundred (100) years,
health permitting. Each rental of a room or suite on a long term basis (e.g., a
week or two for a 10 year term) will include at no extra cost membership in a
Life Extention Membership Club, for the purpose of receiving such services.
The Company believes that its competitive advantage lies in its ability to
provide preventative medicine to guests/members in combination with a one or two
week vacation at a famous Las Vegas Resort, and the opportunity of full or
partial reimbursement for the cost of the stay from their insurance carrier.
Another possible source of revenues for the Company, of unknown proportions,
if the Company is successful with this offering, is the casino operations.
The executive offices of the Company are located at 2205 Purple Majesty Court,
Las Vegas, Nevada 89117-2747, Telephone: (702) 240-4408.
THE OFFERING
Securities Offered:
10,000,000 shares of Class "A" are offered upon exercise of 5,000,000 Equity
Units shares of stock (Class "B"). The-Class "B" will be distributed pro-rata
to all shareholders of record as of the date of this Prospectus, on the basis of
one Unit for each four shares held as of such date. See "Description of
Securities 11 and "Plan of Distribution."
Equity Units Outstanding Before Offering.... 90,250,877 Class "A" Equity Units.
Equity Units Outstanding Before Offering.... 5,266,960 Class "B" Equity Units
Equity Units Outstanding After Offering 100,250,877 Class "A" Equity
Units
Equity Units Outstanding After Offering...10,266,960 Class "B" Equity Units
Use of Proceeds
The net proceeds of this offering, estimated to be $150,000,000 if all the Class
"B" are exercised, will be used to retire working capital indebtedness, pay
marketing costs, and for working capital purposes. See "Use of Proceeds".
Risk Factors
Investment in the securities offered hereby involves a high degree of risk and
immediate substantial dilution. See "Use of Proceeds".
Electronic Bulletin Board Symbol..........CWCT (applied for)
The company has never operated a Hotel and Casino Property.
<PAGE> 9
RISK FACTORS
The securities offered hereby are speculative, and prospective investors should
be aware that purchase of these securities involves a high degree of risk.
Accordingly, the securities should be purchased only hy 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 individuals 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 34.5% of the shares of the Company's outstanding
Equity Units, or approximately 31,631,086 of the outstanding voting stock, which
will likely give
<PAGE> 1 0
them a controlling interest in the Company's Equity Units 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 90,250,877 shares of Common Stock for aggregate
consideration of cash and services or $.25 to $7.00 Unit. 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 Equity Units
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 Equity Units and market making activities could be discontinued at any time.
<PAGE> 11
8. Dilution. Purchasers of the Shares offered by this Prospectus will
experience immediate and substantial dilution in that the net tangible value of
the Equity Units outstanding after the offering will be substantially less than
the per share public offering price of the Shares offered hereby. See 11
Dilutions".
9. Shares Eligible for Future Sale. Upon sale of the 10,000,000 Equity
Units Shares offered hereby, the Company will have outstanding 100,250,877 Class
"A" shares of Equity Units including 72,661,029 shares of Class "A" Equity Units
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 December 31, 1999,
after which sales may be made pursuant to Rule 144 under the Securities Act.
Sales of substantial amounts of the Equity Units 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.
II. Current Registration Statement and Blue Sky Qualification
Required of Equity Units. In order for a holder of a Unit 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 Equity Unit The Company has
undertaken to keep (and intends to keep) the registration statement filed in
connection with this offering effective with respect to the Units with the
Securities and Exchange Commission and state securities authorities for so long
as the Units remain execrable. 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 that the
Company will be able to maintain a current registration statement until July 31,
1998 when the Class "B" expire. Moreover, Blue Sky Qualification of the Class
"B" 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 Class
"B" are acquired in over the counter purchases or otherwise by residents of
jurisdictions where the Shares underlying the Units were not registered or
otherwise qualified for sale, such persons would not be able to exercise
their Class "B" 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 Class "B" in all states where
Class "B'' holders reside, unless the cost of such registration, in relation to
the number of Class "B" potentially execrable, is clearly disproportionate. In
addition, due to the Company's limited history or operations, it is possible
that one or more states where Class "B" 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 Class "B"
may be affected adversely by the Company's inability to maintain an effective
registration statement with respect to the underlying Shares or by the
nonqualification of the underlying Shares in the state of such holder's, or a
partial purchaser's residence. Holders of Class "B" may contact the Company in
order to ascertain the states in which the Shares underlying the Class "B" will
be qualified for sale.
12. Arbitrary Offering Price. The exercise price and other terms of the
Class "B" 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 Class "B" will be exposed to a substantial risk of a decline in the market
price of the Equity Units after this offering, if a market develops. See "Plan
of Distribution" The Company is applying for listing.
<PAGE> 13
13. Risks of low priced Stocks. The Common Stock is 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 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
recommended such securities to persons other than established customers and
accredited investors generally institutions with assets in excess of $5,000,000
or individuals with an Ct worth in excess of $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
this rule if the market price is at least $11.00 per share, or for Class "B" if
the Unit have an exercise price of at least $11.00 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 exempt 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 market, 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 customary 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.
PRICE AMENDMENT No. 1
While many NASDAQ stocks are covered by the definition of penny stock,
transactions in NASDAQ stock are exempt from all but the sole market maker
provision for (1) issuers who have $2,000,000 in tangible assets ($5,000,000 if
the issuer 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 a NASDAQ security directly with the NASDQ 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 NASDQ raises its requirements for
continued listing 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 on 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.
14. 95% CASH DIVIDENDS. The holders of Equity Units are Entitled to
receive dividends when, as and if declared by the Board of Directors out of
95% of profit legally available therefor. To date, the Company has not paid
any cash dividends. The Board does intend to declare cash dividends in the
foreseeable future, but instead
<PAGE> 15
intends to declare 95% dividends to Equity Holders and 5% for the Company 's
business operations. Since the Company may be required to obtain additional
financing, it is likely that there are no restrictions on the Company's ability
to declare any dividends. See "Market Price of Common Stock" and
"Description of Securities."
16. There is a risk factor because of the lack of experience in running
a hotel or a wellness center. However the Company have a great number of highly
experience hotel and casinos operators to accomplish all phases of these
operations.
DILUTION
The difference between the public offering price per share of Equity Units and
the pro form net tangible book value per share of Equity Units 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 December 31, l997 the Company's Equity Units had a net tangible book value
of $2,172,649,000 or $24,073 a share. After giving effect to the receipt of
the net proceeds from the sale of all Shares offered hereby, at a public
offering price of $11.00 per Share, the pro forma net tangible book $22,411 of
the Company at December 31, 1997 would have been $2,022,649,000 or $22,411 a
share, representing an immediate increase in net tangible book value of $1,662
per share to the present stockholders, and immediate dilution of $1,662 per
share to public investors. The following table illustrates dilution to public
investors on a per share basis, assuming all Class "B" are exercised. To the
extent less than all Equity 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 $20,710 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 $24,073 to $22,411 per share Equity Unit.
<PAGE 16>
Public offering price per share ..... $11.00
Net tangible book value per share..... before offering $24,073
Increase per share attributable to..... public investors $22,411
Pro forma net tangible book value..... per share after offering $22,411
Dilution per share to public investors $1,662
The following table sets forth with respect to the present stockholders and
public investors, a comparison of the number of shares of stock owned by the
present stockholders, the number of shares of Common Stock to be purchased from
the Company by the purchasers of the 15,000,000 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 underwriters under this offering
in accordance with Act of 1933.
<PAGE> 17
Stock -
Holders Shares Percent Total Percent
Average
Purchased Of Total Consideration Of Total
Price
Shares
Consideration Per
Share
Present
Stock
holders 90,250,877 $2,172,649,000 100%
$11.00
Public Class "A"
Investors 10,000,000 $110,000,000 100%
$11.00 Class "B"
5,000,000 $ 55,000,000 100%
Total $165,000,000 $2,337,649,000 100%
$11.00
Public Investors will be purchasing the Class "A" Equity Units with option to
Equity Units will be purchasing the Class "B" Equity Units per understanding.
<PAGE> 18
MARKET PRICE OF COMMON STOCK
The Common Stock has traded on the "pink sheets" maintained by the National
Quotation Bureau and on the NASD's Electronic Bulletin Board since April 25,
1976. The following table gives the high and low bid prices since December 31,
1997 reported by the market makers of the Equity Units. 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 Equity
Units currently is reflective of an established trading market.
1997 LOW HIGH
1st Quarter No Trading No Trading
2nd Quarter 6 3/8 7
3rd Quarter 6 1/2 7
4th Quarter 6 5/8 7
1996 LOW HIGH
1st Quarter No Trading No Trading
2nd Quarter No Trading No Trading
3rd Quarter No Trading No Trading
4th Quarter No Trading No Trading
1995 LOW HIGH
1st Quarter No Trading No Trading
2nd Quarter No Trading No Trading
3rd Quarter No Trading No Trading
4th Quarter No Trading No Trading
1994 LOW HIGH
1st Quarter No Trading No Trading
2nd Quarter No Trading No Trading
3rd Quarter No Trading No Trading
4th Quarter No Trading No Trading
1993 LOW HIGH
1st Quarter No Trading No Trading
Second Quarter No Trading No Trading
Thir Quarter No Trading No Trading
Fourth Quarter No Trading No Trading
1992
First Quarter No Trading No Trading
Second Quarter No Trading No Trading
Third Quarter No Trading No Trading
Fourth Quarter No Trading No Trading
The Company trading is pending approval. As of December 31, 1997
there were approximately 575 holders of Company Equity Units. No trading or
volume is available because the shares the Equity Units are waiting for approval
from the appropriate Stock Exchange before starting to trade. The shares
traded in 1997 were under Regulation S on the Taipei, Taiwan OTC Market by
the Trading Company named New City Trading Co., Ltd.
<PAGE> 20
USE OF PROCEEDS
If all Class "A" and "B" are exercised, of which there can be no assurance, the
net proceeds to the Company will be approximately $150,000,000 after deducting
offering expenses of $15,000,000 cost. The Company intends to utilize the net
proceeds during the 12 months period following the offering as follows: If less
than all of the Class B 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.
Equipment $2,488,700
Accounts Payable 30,226,000
Working Capital 3,081,900
Consolidation of Assembly Operation 1,080,000
Accrued Salaries 38,600
Additional Sales Personnel 1,035,000
Accrued Indebtedness 9,500
Total $371,960,000
Equipment includes the following:
Auto Insertion for Gene Testing $150,000
Chemical Analyzer 25,000
Auto Medic Equipment/Used (3) 30,000
Medical Supporting Equipment 1,040,000
Printing Equipment (1) 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 80,000
Total Medical Equipment $1,420,500
Computer PC 486DX 33Mhz
4MB Ram 200Mb Hard Disk (8) $302,000
Printers (4) 112,700
Laser Printers (2) 211,300
<PAGE> 21
Peripherals $203,000
Software 200,000
Total Computer 81,100
Other Office 82,100
Total Equipment $2,488,700
The purchase of the above equipment will enable the Company to bid on additional
larger Life Extension projects.
The Company will finance all the Accounts Payable from the proceeds it will
receive from guests of the hotel and casino for rentals of hotel rooms and
suites. No contract changes are expected because of the above.
<PAGE> 22
No proceeds of 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 the Life Extension Program at the hotel and casino, to be purchased in Las
Vegas, Nevada.
Accrued Salaries includes amounts due to indirect and managerial
personnel.
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 amounts 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 to 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 Trust was initially formed as a Colorado
corporation named Minerals Mining Corporation on October 29, 1974. The name was
subsequently changed, first to Grand American International Corporation, and
then to Continental Wellness Casinos, Inc. On March 26, 1998, the name was again
changed to its present name, Continental Wellness Casinos Trust.
The company was 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 mining 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 Sates
Forestry Department, Quincy, California. The company is not now engaged in any
mining operations and has no plans to re-open mining.
<PAGE> 23
The Company is in the process of getting State of Nevada approval for its Life
Extension Center, a longevity members association, for the purpose of helping
people live longer by using preventive medicine with gene testing for
discovery of predominant illness in the different subjects and repair said
genes by genetic engineering followed with a program of exercise and
nutrition. The member signs a rental agreement for a room or suite for a one
or two week period for ten years at cost of $1,000.00 per year, payable in
advance, and is automatically enrolled as a member of the association. This
will have a very material impact in the short and long liquidity of the Company.
The Company has no cash from any operations. The Life Extension Program will
prevent people fram getting sick, therefore, will reduce the cost of medical
treatments by preventing diseases; this should greatly enhance rentals.
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
all class are exercised, the Company will no 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
for income tax purposes. In December 1994 the Financial Accounting Standards
Board issued Statement 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 its fiscal year ended October 31, 1996. The adoption of FASB 109 is
not expected to have an adverse impact on the Company's financial position.
Capital expenditures will be connected to the offering and the acquisition of a
Hotel and Casino.
No known trends, events, or uncertainties will have any material
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.
<PAGE> 24
No material changes from period to period.
No seasonal aspects that will affect the financial conditions or results of
operations.
<PAGE> 25
BUSINESS
The Basic Plan
A. Basic Strategy - Continental Wellness Casinos Trust(CWCT) is a publicly
traded company which will operate a Life Extension Club where the members are
trained in how to live a longer life and a healthy life free of any diseases.
B. Overview of the Wellness Resort or Life Extension Club in the United
States. Life extension programs in the United States at the present time are
very limited, both in scope and areas served. Basically, people want 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. Characteristic of the Life Extension - The life extension program
that we will engage in consists of preventive medicine using the latest
medically approved techniques in the field of gene technology and by testing the
genes of all our members with a PCR machine. Following detection, illness
producing genes can be repaired; 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 type of
disease, with proper nutrition.
D. Recommendation - The hotel and casino resort will establish a membership
program where the members sign a room or suite rental contract for 10 years
which may be refundable by their group insurance plan.
The Life Extension Program and Membership Club
<PAGE> 26
A. Source of Revenue:
1. The signing of rental agreements by guest/members from our list of
available potential guests that also desire to join the Life Extension Club
at the rate of $1,000 per year per room week, and payable 10 years in advance.
2. The guest/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 guest/members from recommendations by other guests will
produce many leads because everybody desires to visit Las Vegas, Nevada, the
entertainment capital of the world and get a free vacation (because
their group insurance will pay for their rent).
B. Costs - The total cost for the rental of a room or suite is $1,000 for one
unit which consists of staying in the hotel and casino for one week and
receiving all the training on 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 may be fully refundable by their group insurance medical policy and is
tax deductible.
C. Net Revenue - Considering that the average 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 $1,000 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.
<PAGE> 27
D. Products - We will offer products and other services to ourguest/members
which will produce additional revenues to our company.
<PAGE> 29
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statement and supplementary data of Continental Wellness Casinos
Trust are located in subsequent pages.
I
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 Trustees 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:
<PAGE> 30
NAME AGE TITLE
Fred Cruz 75 President and Chief Executive
Officer, Chairman and Trustee
Rick Eriksen 40 Chief Financial Officer, Vice
President, Secretary and Trustee
Rick Eriksen Vice President, Secretary and Trustee
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, 75, 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 as he is retired.
RICK ERIKSEN, 40, Experience April 1996 to February 1998, National Sales
Manager, Partners Across America, Altamonte Springs, Florida, April 1995 to
March 1996--was a Licensed Real Estate Agent, Marriot Vacation Club
International (MVCI) Newport
Beach, California and Pacific Monarch Resorts, Laguna Hills California; November
1990 to April 1995 Commercial Investment Real Estate Agent Marcus & Millichap,
Inc., of California Newport Beach, California, July 1994 to April 1995 Century
21, Irvine/Santa Ana, California; February 1985 to October 1990 Commodity
Futures Broker for Clayton-Balfour Brokerage, Irvine, California; Credentials
California Real Estate License #01102626 issued February 11, 1991 and Expires on
March 14, 1999.
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 SubTrustee 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 realestate 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 Beta Phi, State Bar of California, San Diego County Bar
Association, California real-estate broker, listed in Who's Who in American
Law (1st edition). Received a BS 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.
MADRIGALE, ROBERT B., Baccarat / Mini Baccarat Floor Supervisor Mirage
Hotel/Resort & Casino, Las Vegas, Nevada from January 1990 to Present, Baccarat
Floor Supervisor Trump Plaza Hotel and Casino Atlantic City, New Jersey from
January 1987 to January 1990, Dealer Trump Plaza Hotel and Casino, Atlantic City
from 1983 to 1987, Dealer, Tropicana Hotel and Casino, Atlantic City, New Jersey
from March 1982 to November 1983, Licensed by the Nevada Gaming Board, Special
skills good leadership skilss, Excellent rapport with customers and fellows
workers. Completed all Management classes offered at the Mirage Hotel and
Casino, Las Vegas, Nevada.
STEIN, GARY, A well organized individual who possesses excellent people skills,
that have established is leadership and respect among my peers and clients.
Professional Gambling Industry Experience, November 1989 to present Mirage
Resorts Hotel and Casino as Floor Casino Supervisor Baccarat, Blackjack,
Roulette and Pai-Gow Poker. 1990 to present Community College of Souther
Nevada, Adjunct Professor; Casino Management, July 1987 to November 1989 MGM
Bally's, Casino Floor Supervisor, October 1985 to July 1987 Dealer, February
1984 to October 1985 Barbary Coast Hotel and Casino, Dealer, Education Community
College of Southern Nevada A.A.S in Casino Management, graduated with Honors,
University of Central Florida Majored in Finance, Long Island University Majored
Marketing and Sullivan County Community College, A.A.S. in Business
Administration. Licensed by the Nevada Gaming Board.
KLACSMANN, KARL L., Education: Clark County Community College Las Vegas, Nevada
A.A.S degree in Hotel Management 1975, University of Nevada Las Vegas, B.A.
degree Hotel Administration with majored on Casino Operations, Casino
Management, Hotel and Casino Marketing, Matemathics of Casino Gamings,
Survalance and Protection of Table Games. Work Experience: 1989 to present
Mirage Hotel and Casino Las Vegas, Nevada, Casino Gaming Department, 1982 to
1989 Sands Hotel Las Vegas, Nevada, Casino Executive, 1981 to 1982 Claridge
Hotel, Atlantic City, New Jersey, Casino Executive, 1980 to 1981 SAnd Hotel,
Atlantic City, New Jersey, Casino Executive, 1973 to 1979 Dunes Hotel and Casino
Las Vegas, Nevada Supervisory Manager of the Casino, 1972 to 1973 Stardust Hotel
and Casino Las Vegas, Nevada Dealer, 1970 to 1972 Hacienda Hotel and Casino Las
Vegas, Nevada Dealer, 1970 Completion of Nevada Gaming School, 1969 to 1970 Four
Seasons Restaurant, New York City, Assistant to the Director of the hotel.
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
Medical Complete 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
<PAGE> 33
held key management positions over a period of several years with the Westin
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 or 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 1958 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,
<PAGE> 34
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
Cash
or Number in Group served during 1995
None None
None
The Company pays no compensation to trustees for services as trustee.
<PAGE> 35
PRINCIPAL STOCKHOLDERS
The Company is not 50% owned by 5 or fewer individuals owning Equity Units or
Equity Stock as of August 1, 1998.
Name and address of Beneficial Owner: Number and Percent Shares
Percent Before Offering Percent After Offering
8% Kari L. Cruz: 7,958,512 Class "A" (1) 9%
2205 Purple Majesty Court
Las Vegas, NV 89117-2747
11% Frank Coberly: 10,806,960 Class "A" (1) 12%
950 N. Cascade Dr. Apt. 201
Woodburn, OR 97071-3152
3.5% Fred Cruz: 4,157,696 Class "A" (1) 4%
2205 Purple Majesty Court
Las Vegas, NV 89117-2747
8.5% Joseph Witzman: 3,266,960 Class "A" (2) 9.5%
5946 Soledad Mountain Road
La Jolla, CA 92037
All Officers and Directors as a group:
Frank Coberly: 10,806,960 Class "A" shares or 12 %
Fred Cruz: 4,157,696 Class "A" shares or 4%
for a Total as a Group of 14,964,656 shares of Equity Unit, or 16%
(1) Purchase for cash equivalent.
(2) 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 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.
The Company issued to Joseph Witzman 3,266,960 Class "B" common
shares of no par value in exchange the cancellation of some of the Company debt
and said Class "B" Common Shares were restricted shares that bear a ledgend 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
Securitie. 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 ledgend and are subject to the provisions of Securities and Exchange
Commission Rule 144.
<PAGE> 37
The holder of Class "A" Equity Units has promised to abide by the
restrictions invoked by the Securities and Exchange Commission Rule 144.
PLAN OF DISTRIBUTION
The Shares of Class "A" Unit are being offered on a "straight best efforts, no
minimum basis" upon exercise of Offering of the Units Purchase Class "B" (the
Class "B") at a price of $11.00 per share. No person has agreed to take down
or purchase any of the Shares and there can be no assurance that all Class
"B" will be exercised.
A total of Class "B" Units are being distributed to the Company's
Offerree's of record, or for purchase of one class "A" common stock under
this offering as of the effective date of this Prospectus, at the rate of
one for each four shares held of record.
The development of a trading market following the completion of this
offering will be dependent on broker-dealers in initiating quotations in
interdealer quotation mediums, in maintaining a trading position, and in
otherwise engaging in a market making activity in the Company's Common Stock.
No brokerdealer has agreed to engage in such activities, and there is no
assurance that any broad trading market for the Company's Common Stock will
develope following the offering.
No prospectus have been given to any investors, or potential investors.
<PAGE> 38
DESCRIPTION OF SECURITIES
Equity Units
The Company's Declaration of Trust authorizes the issuance of 500,000,000
shares of Equity Units $.003 par value par share, of which 90,250,877 shares
were distributed as of December 31, 1997 to holders of Equity Units which are
entitled to one vote for each share on all matters to be voted on by the stock-
holders. Holders of Equity Units have no cumulative voting rights. Holders
of shares of Equity Units are entitled to share ratably in dividends, if any,
as may he declared from time to time by the Board of Directors in its
discretion, from funds legally available therefor. In the event of a liquidation
dissolution or winding up of the Company, the holders of shares of common stock
are entitled to share pro rata all assets remaining after payment in full of
all liabilities. Holders of Equity Units have no preemptive rights to purchase
the Company's Equity Units. There are no conversion rights or redemption or
sinking fund provisions with respect to the Equity Units. All of the outstanding
shares of Equity Units are, and the shares offered by this Prospectus will be,
fully paid and non-assessable.
Class "B" Equity Units
The Equity Units Purchase Class "B" (the "Class "B") are to be
issued in fully registered form. Class "B" will be distributed to each
shareholder of record on the effective date of this Prospectus at the rate of
one Class "B" for each four shares owned. The following discussion of the
Warrants does not purport to be complete and is qualified in its entirety by
references to the form of Class "B" copy of which is filed as an exhibit to the
Registration Statement. See "Additional Information."
The holder of each Class "A" is entitled to purchase one share of Class "B" at
an exercise price of $11.00, at any time until July 31, 1998 provided that at
such time a current prospectus relating to the Equity Units is in effect and
the is qualified for sale or exempt from qualifications under applicable state
securities laws. The Class "B" are immediately transferable upon issuance. The
Company may in its sole discretion reduce
the exercise price or extend the exercise period for the Class " B" Equity
Units.
<PAGE> 39
The Class "B" may be exercised upon surrender of the certificate therefor on or
prior to the expiration date at the offices of the Company with the form of
"Election to Purchase" on the reverse side of the certificate filled out and
executed as indicated, accompanied by payment (in the form of a certified or
cashier's check payable to the order of the Company) of the full exercise price
for the number of being exercised.
No Class "B" have been issued as of the date of this offering.
The Class "B" contain provisions that protect the holders thereof against
dilution by adjustment of the exercise price in certain events, such as stock
dividends, stock splits, mergers, sale of substantially all of the Company's
assets at less than market value, sale of stock at below market price, and for
other unusual events (other than employee benefit and stock option plans for
employees or consultants to the company.)
The holders of a Class "B" will not posses any rights as a stockholder of the
Company unless and until he exercises a Equity Unit Class "B".
Other than as set forth, above, there are no options or Class "B" presently
outstanding for shares of the Equity Units.
<PAGE> 40
The transfer agent for the common stock and the warrant agent is American
Securities Transfer, Inc., P.O. Box 1596, Denver, Colorado 80201.
<PAGE> 41
The Company will extend the exercise period of the Class "B" to July 31, 1998 if
such change is necessary to complete the sale of the Class "B" Equity Units.
Shares Eligible for Future Sale
Upon sale of 15,000,000 shares offered hereby, the Company will have
outstanding 105,250,877shares of all classes of the above shares only those
shares sold in this offering by the Company and 17,367, 800 currently publicly
traded shares, will be freely traceable without restriction under the Securities
Act of 1933, as amended (the "Act"), unless acquired by "Affiliates" of the
Company as that term is defined by the Act, following which such shares will be
subject to resale restrictions but may be eligible for sale in the public market
pursuant to Rule 144 wider the Act.
In general, under Rule 144 as currently in effect a person (or
persons whose shares are aggregated) who has beneficially owned shares
acquired privately or indirectly from the Company or from an Affiliate, for at
least two years, or who is an Affiliate, is entitled to sell within any
threemonth period a number of such shares that does not exceed the greater
of 1% of the then outstanding shares of the Company's Equity Units or the
average weekly trading volume in the Company's Equity Units during the four
calendar weeks immediately preceding such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions, notice requirements and the
availability of current public informationnation about the Company. A
person (or persons whose shares are aggregated) who is not deemed to have
been an Affiliate at any time during the 90 days preceding a sale, and who
has beneficially owned restricted shares for at least three years, is
entitled to sell all such shares under Rule 144 without regard to the
volume limitations, current public information requirements, manner of sale
provisions, or notice requirements.
Sales of substantial amounts of the Equity Units of Company in the public market
could adversely affect prevailing market prices.
LEGAL MATTERS
The legality of the Shares offered hereby will be passed upon for the Company by
the law firm of Hand & Hand, Dana Point, California.
<PAGE> 43
EXPERTS
The audited financial statements included in this Prospectus and elsewhere in
this Registration Statement, to the extent and for the period indicated in their
reports, which appear elsewhere, have been audited by Luis Hidalgo, Jr., CPA.
Company, certified public accountants and are included herein in reliance upon
the authority of such firm as experts in giving said reports.
CONTINENTAL WELLNESS CASINOS TRUST
FINANCIAL DATA:
Report of Luis R. Hidalgo, CPA
Audited Financial Statements
Report of Luis R. Hidalgo, CPA Audited Financial
Statements
Consolidated Balance Sheets as of December 31, 1997
and October 31, 1996 audited as of March 15, 1998.
Continental Wellness Casinos Trust
Financial Data:
Report of Luis R. Hidalgo, CPA
Statements:
Audited Financial
Consolidated Balance Sheets an of December 31, 1997 and October 31, 1996 audited
as of March 15, 1998.
Statement of Stockholder's Equity:
Notes to the Consolidated Financial Statement
CONTINENTAL WELLNESS CASINOS TRUST
A
REAL ESTATE INVESTMENT TRUST
AUDIT REPORT
DECEMBER 31, 1997 AND OCTOBER 31, 1996
INDEX
Page
Auditor's certificate 1
Balance sheets December 31, 1997 and October 31, 1996 2
Statements of cash flows 3
Notes to financial statements 4-7
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Continental Wellness Casinos Trust
A Real Estate Investment Trust
Las Vegas, Nevada
I have audited the accompanying balance sheets of Continental Wellness Casinos
Trust A Real Estate Investment Trust as of December 31, 1997 and October 31,
1996, and the related statement of cash flows for the year ended December 31,
1997. 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 principles 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 and statement of cash flows referred to above
present fairly, in all material respects, the financial position of Continental
Wellness Casinos Trust A Real Estate Investment Trust as of December 31, 1997
and October 31, 1996, and the statement of cash flows for the year ended
December 31, 1997 in conformity with generally accepted accounting principles.
LUIS R. HIDALGO, Jr.
Certified Public Accountant
March 15, 1998
1
CONTINENTAL WELLNESS CASINOS TRUST
A
REAL ESTATE INVESTMENT TRUST
BALANCE SHEETS
December 31 , 1997 and October 31 , 1996
December 31, October 31,
1997 1996
(Dollars in Thousands)
ASSETS
Gold in storage (Note 2) $ 27,317 $
27,317
Investment in stocks 0.175
Deferred charges and other assets (Note 3)
Deferred mining exploration costs and
Deferred operating expenses 5,534
3,365
Proven reserves (Note 5)
Gold 2,032,380 2,665,600
Silver 112,955 91,580
Total assets $ 2,178,186 2,787,862
Loans payable (Note 12) - 31
STOCKHOLDERS' EQUITY
Common stock, Class "A" $0.003 par value
Authorized shares-500,000,000
Issued and outstanding-90,250,877 in 1997;
90,028,877 in 1996 271 270
Common stock, Class "B" no par value, with a stated
value of $1.00 per share.
Authorized shares-50,000,000 in 1997 and 1996
Issued and outstanding-5,266,960 in 1997 and 1996 5,266
5,266
Capital in excess of par (Note 14) 2,172,649 2,782,295
Total Liabilities and Stockholders equity $2,178,186
$2,787,862
See accompanying notes to Financial Statements.
March 15, 1998
2
CONTINENTAL WELLNESS CASINO TRUST
A
REAL ESTATE INVESTMENT TRUST
Statement of Cash Flows
For the year ended, December 31, 1997
(Dollars in Thousands)
Cash and cash equivalents at beginning of year $ -
Cash flows from operating activities
Payment of accrued payroll (594)
Payments to suppliers (280)
Net cash provided by operating activities
(874)
Cash flows from financing activities
Proceeds from sale of common stocks 1,480
Attorney's fees (100)
Commission to stock broker (486)
SEC fee (20)
Net cash flows from financing activities 874
Cash and cash equivalents at end of year $ -
See accompanying notes to Financial Statements
March 15, 1998
3
CONTINENTAL WELLNESS CASINOS TRUST
A
REAL ESTATE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
I . SUMMARY OF SIGNIFICANT ACCOUNTING POLICES:
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. 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 read_ 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, 90921, six (6) 55 gallon-drum containers of gold dust (powder form)
99.5 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 December 31, 1997 and October 31, 1996 are $290.34 and $380.80.
respectively. At these prices, the gold in storage would carry fair market
values of $22,098.358 in 1997 and $28,983,450 in 1996.
3. DEFERRED CHARGES AND OTHER ASSETS
This consists of: In Thousand Dollars
Deferred Mining Exploration Costs $ 3,253
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
obligation arising thereto.
Deferred Operating Expenses
Related to additional sale of Common "A" shares
(See Statement of Cash Flows) $1,480
Prior years expenses 801
Total Operating Expenses 2,281
Total Deferred Charges and Other Assets $ 5.534
4
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. In On April 13,
1996, the Company issued shares of stocks valued at $3,252,669 to pay for its
obligation arising thereto.
4. RELATED PARTY TRANSACTIONS
Grand American Bank Trust owns approximately 60% of the Company's
Class "A" common stock as of December 31, 1997.
5. PROVEN GOLD AND SILVER RESERVE:
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
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 December 31, 1997 and October 31, 1996 are as follows:
12-31 -97 10-31 -96
(Dollars in Thousands)
Gold : 7,000,000 troy ounces
@$290.34/troy ounce $2,032,380
@$380.80/troy ounce $2,665,600
Silver : 19,000,000 troy ounces
@$5.945/troy ounce 112,955
@$4.82/troy ounce 91,580
$2,145,335 $2,757,180
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 its 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 had exercised the authority granted.
5
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. The Secretary of the State of Colorado Corporation Office approved
the following on June 6, 1996:
a) The name Grand American Intentional Corporation be changed to
Continental Wellness Casinos, Inc.
b) The authorized capital stock, common shares Class "A" of the
Company be increased from 100,000,000 shares to 500,000,000 shares with a $0.003
par value per share
10. ACQUISITION OF A HOTEL AND CASINO IN LAS VEGAS, NEVADA.
The Company is in the process of concluding the purchase of the
Maxim Hotel and Casino in Las Vegas, Nevada, an 800-room hotel and casino.
11. 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
class "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 was
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 1997 of 90,250,877 and 90,028,877 in 1996
consist of:
Balance 1/31/94
Issued to Grand American Bank Trust 21,803,405
Balance 10/31/95 17.000,000
Issued to Grand American Bank Trust 38,803,405
Issued to Joseph Witzman 47,958,512
Balance 10/31/96 3,266,960
Issued under SEC Regulation "S" 90,028,877
Balance 10/31/97 222,000
90,250 877
6
12. 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 (formerly Grand American International
Corporation). This was paid in March, 1997
13. Unsecured and unrecorded personal loans of prior years were paid for
the year ended, December 31, 1997. These accounts were charged to Deferred
Charges and Other Assets.
14. CAPITAL IN EXCESS OF PAR
It is the excess of Total Assets over Liabilities and Common Stock
"A" and "B"
15. CHANGE OF NAME OF END OF ACCOUNTING YEAR
The Board of Directors adopted on December 22, 1997 the following
resolutions:
a) The name of the Company was changed to Continental Wellness
Casinos Trust.
A Real Estate Investment Trust
b) The accounting year was changed from October 31 December 31.
16. The October 31, 1996 balance sheet was per my audit report.
7
CONTINENTAL WELLNESS CASINOS TRUST
REAL ESTATE INVESTMENT TRUST
PROJECTED STATEMENT OF INCOME
FOR THE YEAR ENDED, DECEMBER 31, 1998
INDEX
Page
Report on Projected Income Statement 1
Projected Income Statement 2
To the Board of Directors and Stockholders
Continental Wellness Casinos Trust
A Real Estate Investment Trust
Las Vegas, Nevada
I have assembled, from information provided by management, the forecasted
statement of income for the year ended, December 31, 1998.
This projection is prepared for the acquisition of a hotel, casino and Life
Extension Program in Las Vegas, Nevada. This financial forecast omits the
summary of significant accounting policies. I have not compiled or examined the
forecast and express no assurance of any kind on it. Furthermore, there will
usually be differences between the forecasted and actual results because events
and circumstances frequently do not occur as expected, and those differences may
be material. I have no responsibility to update this report for events and
circumstances after the date of this report.
LUIS R. HIDALGO, Jr.
Certified Public Accountant
March 15, 1998
CONTINENTAL WELLNESS CASINOS TRUST
A
REAL ESTATE INVESTMENT TRUST
PROJECTED INCOME STATEMENT
For the year ended, December. 31,19S8
INCOME: (Dollars In Thousands)
Life Extension Membership Club $100,000
Hotel and Casino, Las Vegas, Nevada 75,000
Gold and Silver Mine Properties 150,000
Miscellaneous Income 25,000
Total Income 350,000
EXPENSES:
Life Extension Membership Club 61,704
Hotel and Casino, Las Vegas, Nevada 51,200
Gold and Silver Mines Properties 41,200
Other Expenses 754
Total Expenses 154,858
Net Income $195,142
Stickel & Associates P.O. Box 91, Tustin, Ca. 92681 (714) 751-4742
May 14, 1985
Minerals Mining and Energy Corp.
7750 E1 Camino Real, Suit K
Rancho La Costa, Ca. 92008
Attention: Stewart Douglas, President
Subject: Review of Literature and Inspection of Gold Claims n 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 Sections 13 Claims,
Plumas County, California, by Mm. H.Bird, dated June 1, 1976.
3) Bucks Lake Quadrangle, Map, USGS, 1:62,500, date 1950.
Gentlemen:
This letter presents our present 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.
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
alterations. There has been 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 the Tertiary. Although,
concentrations of gold have only 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 it 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 solver. 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 warranty or representation, either
expressed or implied, is included or intended in our proposals or reports or
contracts.
We appreciate the opportunity of presenting this report. If you have any
questions, please contact this office.
Very truly yours,
STICKEL L 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
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
