SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _________ to
____________
Commission File No. 33-55254-37
NORAM GAMING AND ENTERTAINMENT, INC.
(Exact name of Registrant as specified in its charter)
NEVADA 87-0485316
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
THREE CANTON SQUARE
TOLEDO, OHIO 43624
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (419) 255-1515
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12 (g) of the Act: NONE
Check whether the issuer (l) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. [ X ]Yes [ ]
No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were $854,913.
As of March 21, 1997, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $3,978,125 based on 3,350,000 shares at a
last sale price of $1.1875
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of March 21,1997
$.001 PAR VALUE CLASS A COMMON STOCK 13,100,000 SHARES
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PART I
ITEM 1. Business.
Noram Gaming and Entertainment, Inc. (formerly Core Integration, Inc.), a
Nevada corporation (the "Company" "Noram Gaming") was incorporated in 1990 for
the purpose of developing venture businesses. On July 10, 1995, the name was
changed to Noram Gaming and Entertainment, Inc. Noram Gaming was formed by
Capital General Corporation and has acquired new management to acquire
corporations and develop certain businesses. During 1995, the Company issued
10,000,000 shares of its restricted common stock to acquire 100% of the
outstanding stock of Noram Ventures Holdings, Inc. ("Noram Ventures"). The
Company's executive offices are presently located at Three Canton Square,
Toledo, Ohio 43624, its telephone number at this location is (419) 255-1515 and
the telefax number is (419) 255-2332.
History and Background of Noram Gaming
George Zilba and Logan Anderson acquired controlling interest in Noram
Gaming with the intent of acquiring a viable business. George Zilba is the
current President and a Director with John Zilba as Vice President, Secretary
and a Director, Frank B. Bryan as Vice President, Treasurer, and Director,
Kenneth McDougal as a Director, and Andrew Mangino as a Director.
Management determined that it had expertise in the gaming field and expects
to acquire additional facilities in 1997 to use for bingo operations in the
United States and overseas.
ITEM 2. Properties
Noram Gaming
Office space is currently being provided by the Company's President at no
charge in Michigan. Office space is provided on an as-needed basis at no charge
in Ohio by one of the Company's attorneys, who is the President's son.
Brandon Facility in Brandon, Florida
This facility has approximately 11,000 square feet. The lease began May 26,
1995 and runs for five years with a renewal option of three years. Rent for the
first year is $6,290 per month, which includes $384 of Florida sales tax.
Succeeding years will have an increase of four percent over the base rent for
the previous year. This is a triple net lease. The Company charges the charity
$440 per session that the facility is used.
Highland Facility in Clearwater, Florida
This facility has approximately 14,000 square feet. The lease began
September 26, 1994 and is five years in length. Rent for each year is $7,215 per
month including sales tax of $440. This is a triple net lease. The Company
charges the charity $440 per session that the facility is used.
Oakwood Facility in Clearwater, Florida
This facility has approximately 11,800 square feet. The lease began
February 27, 1995 and is five years in length. Rent for each year is $4,710 per
month including sales tax of $287 with CPI increases capped at 5% annually. This
is a triple net lease. The Company charges the charity $375 per session the
facility is used.
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ITEM 3. Legal Proceedings.
The Company, its subsidiary and any of their property, are not involved in
any material pending legal proceeding. At this time, neither the Company, nor
its subsidiary, have any material bankruptcy, receivership, or similar
proceeding pending.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholders Matters.
Beginning December 18, 1995, the Company's common stock began trading on
the NASD- OTC System under the symbol NRAG. The information below was provided
by brokers and does not necessarily represent prices of actual sales of the
Company's common stock, nor does it take into account any brokerage discounts,
commissions, or fees.
Quarter High Bid High Ask Low Bid Low Ask
First 1995 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Second 1995 0.00 0.00 0.00 0.00
Third 1995 0.00 0.00 0.00 0.00
Fourth 1995 0.20 0.50 0.10 0.20
First 1996 1.50 2.00 .25 .50
Second 1996 2.625 3.00 1.875 2.00
Third 1996 2.75 3.00 1.25 2.00
Fourth 1996 1.25 1.50 .48 .625
The Company has not previously declared or paid any dividends on its common
stock and does not anticipate declaring any dividends in the foreseeable future.
ITEM 6. Management's Discussion and Analysis or Plan of Operation.
The Company has had limited operational history and is now engaged in the
leasing of facilities for bingo operations. All risks inherent in new and
inexperienced enterprises are inherent in the Company's business.
One of the facilities acquired in 1995 was determined to not be profitable
during 1996, and the lease on that facility was terminated. The $74,604
remaining unamortized cost of its acquisition was written off as an other
expense in 1996. Management feels that, even though the Company showed a
significant loss on that site, it acquired the services of a valuable employee
as a result of that transaction.
As of December 31, 1996, the Company had cash of $49,078 compared to cash
of $25,517 as of December 31, 1995, an increase of 23,561 (92%). The increase is
attributed to increased revenue.
Current assets as of December 31, 1996 were $81,390 compared to $32,617, an
increase of $48,773 (149%). The increase is due to an increase in cash and
inventory.
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Current liabilities as of December 31, 1996 were $479,703 compared to
$400,347, an increase of $79,356 (20%). The increase is mainly attributable to
an increase in bridge loans and accrued expenses.
Stockholders' deficit as of December 31, 1996 was $(279,576) compared to
$(150,739) for an increase of $128,837 (85%). The increase was mainly caused by
the net loss for the year.
Total revenues for the year ended December 31, 1996 were $854,913 compared
to $457,938 for 1995. The increase, $396,975 (87%) was due to expanded hours of
operation and decreased competition in the market.
Cost of Sales for the year ended December 31, 1996 were $207,703 compared
to $203,656 for 1995. This is a lower percentage of revenues due to improved
management controls and increased revenues based on higher traffic.
General and administrative expenses for the year ended December 31, 1996
were $641,603 compared to $536,080 in 1995. The increase of $105,523 (20%) was
caused by increased salary, rent, utilities, and similar items in 1996, due to
expansion of operations.
Depreciation and amortization expense for the year ended December 31, 1996
was $41,349 compared to $30,648 in 1995. The increase of $10,701 (35%) is due to
facilities being in operation for all of 1996 and the purchase of fixed assets
in 1996.
Interest expense for the year ended December 31, 1996 was $18,631 compared
to $34,893 in 1995. The decrease of $16,262 (47%) was due mainly to $25,000 paid
in connection with a bridge loan in 1995 which was not required in 1996.
In order for the Company to fund day to day operations it was necessary to
obtain a loan of $200,000 from a Canadian company in 1995. Upon the payment of
the loan 60,000 shares of common stock of the Company will be issued. The
Company also issued 100,000 warrants entitling the lender to purchase the
Company's stock at $2.00 per share anytime prior to August 1, 1998. The loan was
due April 30, 1996, but this date has been extended without penalty until the
Company is able to pay the obligation.
The Company was able to fund not only its current bingo operations, but
also an increase in research and development expenses, without significant new
borrowing in 1996. Management is confident that the three gaming facilities
currently being operated in Florida will continue to prove profitable, and that
additional facilities in the area can be successfully operated, generating
additional profits to assist in the development of other growth objectives.
Future Plans
The Company's plans for 1997 are as follows:
1. acquire up to two more bingo facilities in Florida by the middle of
1997.
2. sell gaming equipment in North and South America. At the present time,
expected profits cannot be projected.
3. establishment of casinos and bingo slot operations outside of the
United States.
4. gaming on the Internet.
THERE CAN BE NO GUARANTEE THAT THE COMPANY'S PLANS OR PROJECTIONS WILL BE
ACHIEVED DURING 1997 OR FUTURE YEARS.
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Financial Projections
Revenue and profit estimates for Internet gaming are truly explosive. At
the same time, getting a definitive handle on the numbers is difficult simply
because this area is brand new. The potential market is large but its real size
and its growth rate are not well known. Additional unknowns are gaming
regulations, competition, and the level of participation in such electronic
gaming opportunities.
Internet Gaming
The Company has developed a number of casino type games to be played over
the Internet, such as Keno, Draw Poker, Roulette, Blackjack, and a variety of
Slot Machines. These games will be played by "Club" members who have established
credit with the Company and instituted a simple electronic debit and credit
electronic funds transfer system. The Company anticipates finalizing contracts
related to Internet gaming in April, 1997, and projects a start of operations in
the third quarter of 1997.
At the present time there are some 50-55 million connected Internet users
on a world-wide basis. This number will certainly grow over the next several
years, but estimates of this growth rate vary widely. During any given day, it
is estimated that some 20-25% of these people are connected; this equates to
some 15 million people on-line at any given time. The demographics of these
Internet users is upscale with higher earnings and household income than the
median figures for the general population. The Company believes that it is
possible to attract one in every thousand to participate in gaming on its gaming
site. This equates to approximately 50,000 people. A reasonable estimate is that
this market segment will have sufficient disposable income to wager at the rate
of $100 to $150 per month. This equates to a revenue potential of some $60 to
$90 million per year.
Club Web
The Company plans to have the World Wide Web be the focal point of our
adult recreational gaming sites throughout the United States and abroad. Here
customers will dine and be entertained in a setting which provides access to
world wide gaming opportunities such as Sport Betting, Black Jack, Roulette,
Keno, and Bingo. In those states where lotteries have been legalized, we plan to
provide Video Poker and Blackjack terminals as an additional revenue source for
the Clubs and entertainment for our guests.
With terminals hooked into an offshore Internet server, customers will have
24 hours real time access to interactive on-line gaming. By setting up a "debit
account" with Club Web, they can bet in a cashless environment at their own
table while enjoying the company of friends. They can track box scores and play
Keno without the necessity of "runners" to collect bets and make payoffs.
Trips, tours, cruises, and events will enhance the value of Club
"membership" while promotional premiums will help to establish identity for the
Clubs.
Current usage of the Internet is estimated at approximately 50-55 million
people. This represents a 200% growth rate since early 1995 making it a
substantial "captive market" for gaming. It represents the core of our business
strategy.
International Gaming
The Company has established contacts in Venezuela to begin operating
casinos and bingo facilities in that country as soon as enabling legislation is
passed. Management expects passage in April, 1997.
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Equipment Distribution
The Company is negotiating to acquire distribution rights to represent
highly-respected manufacturers of gaming equipment and supplies. Management
anticipates that this could generate additional sales volume of $2.5 to $3
million with profits of 25% of sales.
ITEM 7. Financial Statements and Supplementary Data.
See Item 13.
ITEM 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
No independent accountant previously engaged as the principal accountant to
audit the Company's financial statements, nor an independent accountant who was
previously engaged to audit a significant subsidiary and on whom the principal
accountant expressed reliance in its report, has resigned or was dismissed. The
Company has not changed accountants nor has it had any disagreements with any
accountants.
PART III
ITEM 9. Directors and Executive Officers of the Registrant.
The following table shows the positions held by the Company's officers and
directors. The directors were appointed during 1995 and early 1996 and will
serve until the next annual meeting of the Company's stockholders, and until
their successors have been elected and have qualified. The officers were
appointed to their positions, and continue in such positions, at the discretion
of the directors.
Name Age Position
George C. Zilba 58 President, Director
John O. Zilba 55 Vice President, Director
Frank B. Bryan 59 Vice President, Director
Kenneth P. McDougal 63 Director
Andrew Mangino 61 Director
George C. Zilba (age 58) is a Director and President. Mr. Zilba has been
employed by the Company since July 1995, when he was elected to the Board of
Directors and accepted the position of President. He has also been the President
of Noram Ventures since March, 1994. Mr. Zilba received a Bachelor of Arts
degree from the University of Dayton, Dayton, Ohio, 1960. Mr. Zilba served in
the U.S. Army from 1960 to 1962 and obtained the rank of First Lieutenant. Since
1962, Mr. Zilba has been an independent business man in various family
businesses. Over the past thirty years, Mr. Zilba has owned and operated his own
management companies that have serviced bingo activities. His companies have
assisted over 300 charities and non-profit organizations in developing and
operating successful bingo facilities in eight states. With constantly
fluctuating state regulations regarding charitable gaming being the rule, Mr.
Zilba has distinguished himself as a knowledgeable and successful operator of
charitable bingo and gaming facilities evidenced by the many acknowledgments and
awards presented to him personally and to his company.
John O. Zilba (age 54) is Vice President and a Director of the Company. He has
been employed by the Company since August 1995 and became a Director in February
1996. Mr. Zilba is currently Director of Operations for the Company. He has
extensive background in bingo and related gaming
6
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activities. Mr. Zilba has managed gaming facilities in seven states over a
thirty year career. Mr. Zilba also has experience in Indian Gaming, having been
the management leader in a three-tribe gaming facility in Oklahoma. His
management capabilities have been responsible for the success of many operations
that had shown poor operating revenues prior to his arrival. Mr. Zilba is the
brother of George C. Zilba.
Frank B. Bryan (age 59) is Vice President and Director of the Company. Mr. Bryan
has a broad background in business which includes partnership and ownership in
several businesses as well as many years in the securities industry with both
U.S. and Canadian investment companies. Mr. Bryan attended Upper Canada College
and studied business administration at Ryerson Polytechnical University. Prior
to joining Noram in October of 1996, Mr. Bryan was President and Director of
Castello Casino Corp (1991-1996), a Canadian public company. Mr. Bryan is
registered under the Gaming Control Act / Gaming Control Commission, Province of
Ontario,
Andrew Mangino (age 61) is a Director of the Company. Mr. Mangino, a native of
Pennsylvania, attended University of Youngstown, Ohio, where he majored in
Business Administration. Mr. Mangino served with distinction as a U.S. Army
Paratrooper prior to his business career. Mr. Mangino's business career has been
primarily in gaming sales. He has won many sales and marketing awards during his
thirty-one years of sales and continues to operate his own gaming and bingo
sales organization in Cincinnati, Ohio. Andy is well known among gaming circles
in the U.S. and Canada, and brings to Noram a bright and aggressive attitude
coupled with his proven ability to help build a successful corporate marketing
program.
Kenneth P. McDougal (age 63) is a Director of the Company. Mr. McDougal has been
a Director since August 1995. He has an extensive and diversified background in
marketing, sales and management. Mr. McDougal is currently the Marketing and
Sales Director of television programming and gaming equipment for Indian Gaming
on tribal land throughout the United States. He has been involved in the sales
and manufacturing of gaming equipment since 1986.
ITEM 10. Executive Compensation.
Annual Compensation Table
Name Title Year Salary Other
George C. Zilba President, Director 1996 $ 75,000*
John O. Zilba Vice President, Director 1996 $ 22,000 **
* Includes $70,000 accrued at December 31, 1996.
** Received 10,000 restricted shares recorded at par value of $100.
ITEM 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of December 31, 1996, information
regarding the beneficial ownership of shares by each person known by the Company
to own five percent or more of the outstanding shares and information related to
beneficial ownership, by each of the directors and by the officers and directors
as a group.
7
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<TABLE>
<CAPTION>
Name and address Amount of Percent
Title of class of beneficial owner beneficial ownership of class
<S> <C> <C> <C>
Class A Common George C. Zilba 5,930,000 46.91%
(Restricted) 6620 Muller Dr.
Ottawa Lake, MI 49267-9515
Class A Common Frank Anderson 2,000,000 15.81%
(Restricted) c/o Dynamic Associates
7373 North Scottsdale Rd.. #B-150
Scottsdale, AZ 85253
Class A Common Logan Anderson 1,700,000 13.45%
(Restricted) 4915 East Doubletree, Ranch Road
Paradise Valley, AZ 85253
Class A Common Source Corporation 1,125,000 8.90%
1,125,000 shares International Ltd.
are Regulation S #2 St. Johns Place (upper)
8 Lanston Hill
Pembrooke 8413 Bermuda
Class A Common John Zilba 100,000 0.79%
(Restricted) 134 Brightwater Dr., Unit 2
Clearwater Beach, FL 34630
Class A Common Kenneth McDougal 10,000 0.08%
(Restricted) 6 Buttonbush Lane
Hilton Head, SC 29926
Class A Common Andrew Mangino 10,000 0.08%
10631 Stargate Lane
Cincinnati, OH 45240
Class A Common All Officers and Directors 6,050,000 47.86%
as a Group (4 persons)
</TABLE>
ITEM 12. Certain Relationships and Related Transactions.
During 1995, the Company paid $25,000 in interest to obtain a loan from a
Canadian company which is a sister corporation to an entity that owns 9.8% of
the Company's outstanding common stock.
8
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PART IV
ITEM 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following financial statements, financial statement schedules and
supplementary data are included:
F-1 Independent Auditor's Report
Financial Statements:
F-2 Consolidated Balance Sheet - December 31, 1996.
F-3 Consolidated Statements of Operations - Years Ended December 31, 1996
and 1995.
F-4 Consolidated Statement of Changes in Stockholders' Equity (Deficit)
Years ended December 31, 1996 and 1995.
F-5 Consolidated Statements of Cash Flows - Years ended December 31, 1996
and 1995.
F-6 Notes to Consolidated Financial Statements.
F-10 Independent Auditor's Report on Supplementary Financial Information
F-11 Schedule V - Property and Equipment
F-12 Schedule VI - Accumulated Depreciation and Amortization of Property
and Equipment
The following exhibits are included:
(3)(i) Articles of Incorporation are incorporated by reference.
(ii) By-Laws are incorporated by reference.
(27) Financial Data Schedule
(b) Reports on Form 8-K.
None
9
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
NORAM GAMING AND ENTERTAINMENT, INC.
Date: March 31, 1997 By: /S George C. Zilba
George C. Zilba, President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 31, 1997 By: /S George C. Zilba
George C. Zilba, President and Director
Date: March 31, 1997 By: /S John O. Zilba
John O. Zilba, Vice President, Secretary,
and Director
Date: March 31, 1997 By: /S Frank B. Bryan
Frank B. Bryan, Vice President,
Treasurer, and Director
10
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Smith & Company
certified public accountants
Members of: Crandall Building Suite 700
American Institute of 10 West 100 South
Certified Public Accountants Salt Lake City, Utah 84101
Utah Association of Telephone: (801) 575-8297
Certified Public Accountants Facsimile: (801) 575-8306
- ------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Noram Gaming and Entertainment, Inc. (A Development Stage Company)
We have audited the accompanying consolidated balance sheet of Noram Gaming and
Entertainment, Inc. (a development stage company) and Subsidiary as of December
31, 1996, and the related consolidated statements of operations, changes in
stockholders' equity (deficit), and cash flows for the years ended December 31,
1996, and 1995 and for the period of March 14, 1990 (date of inception) to
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Noram Gaming and
Entertainment, Inc. (a development stage company) and Subsidiary as of December
31, 1996, and the results of their operations, changes in stockholders' equity
(deficit) and their cash flows for the years ended December 31, 1996, and 1995
and for the period of March 14, 1990 (date of inception) to December 31, 1996 in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the financial
statements, the Company has a working capital deficiency of $398,313 at December
31, 1996 and an accumulated deficit of $467,779. The Company has suffered losses
from operations and has a substantial need for working capital. This raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are described in Note 10 to the consolidated
financial statements. The accompanying consolidated financial statements do not
include any adjustments that may result from the outcome of this uncertainty.
/s/ Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
March 22, 1997
F-1
<PAGE>
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, 1996
----------------------------
ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 49,078
Prepaid expenses 10,757
Inventory (Note 1) 21,555
----------------------------
TOTAL CURRENT ASSETS 81,390
PROPERTY AND EQUIPMENT (Note 1 and
Schedules V and VI) 120,474
OTHER ASSETS
Security deposits 6,552
----------------------------
$ 208,416
============================
LIABILITIES & EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 27,746
Bridge loans (Note 4) 215,000
Current portion of long-term debt (Note 6) 4,181
Accrued expenses 30,626
Accrued expenses - related parties (Note 5) 202,150
----------------------------
TOTAL CURRENT LIABILITIES 479,703
LONG-TERM DEBT (Note 6) 8,289
----------------------------
TOTAL LIABILITIES 487,992
Commitments and contingencies (Note 9) 0
STOCKHOLDERS' EQUITY (DEFICIT) (Note 3)
Common Stock $.001 par value:
Authorized - 25,000,000 shares
Issued and outstanding 12,640,000 shares 12,640
Additional paid-in capital 175,563
(Deficit) accumulated during the development stage (467,779)
----------------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (279,576)
----------------------------
$ 208,416
============================
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
3/14/90
(Date of
Year ended December 31, inception) to
1996 1995 12/31/96
------------------ ------------ ------------------
<S> <C> <C> <C>
Net sales $ 854,913 $ 457,938 $ 1,607,216
Cost of sales 207,703 203,656 492,408
------------------ ----------------- ------------------
GROSS PROFIT 647,210 254,282 1,114,808
General & administrative expenses 641,603 536,080 1,389,273
Depreciation & amortization 41,349 30,648 63,742
Interest expense 18,631 34,893 54,968
------------------ ------------------ ------------------
701,583 601,621 1,507,983
------------------ ------------------ ------------------
NET LOSS BEFORE OTHER (54,373) (347,339) (393,175)
Termination of facility lease (74,604) 0 (74,604)
------------------ ------------------ ------------------
NET LOSS BEFORE
INCOME TAXES (128,977) (347,339) (467,779)
INCOME TAXES 0 0 0
------------------ ------------------ ------------------
NET LOSS $ (128,977) $ (347,339) $ (467,779)
================== ================== ==================
Net loss per weighted average share $ (.01) $ (.03)
================== ==================
Weighted average number of common shares
used to compute net loss per
weighted average share 12,596,656 11,500,000
================== ==================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional Stock During
Par Value $.001 Paid-in Subscription Development
Shares Amount Capital Receivable Stage
------------- -------------- --------------- --------------- ---------------
Balances at 3/14/90
<S> <C> <C> <C> <C> <C>
(Date of inception) 0 $ 0 $ 0 $ 0 $ 0
Issuance of common stock
(restricted) at $.001 per
share at 3/14/90 1,000,000 1,000 (1,000)
Net income for period 0
------------- -------------- --------------- --------------- ---------------
Balances at 12/31/90 1,000,000 1,000 0 (1,000) 0
Cash received for
stock subscription 1,000
Net loss for year (1,000)
------------- -------------- --------------- --------------- ---------------
Balances at 12/31/91 1,000,000 1,000 0 0 (1,000)
Net income for year 0
------------- -------------- --------------- --------------- ---------------
Balances at 12/31/92 1,000,000 1,000 0 0 (1,000)
Net income for year 0
------------- -------------- --------------- --------------- ---------------
Balances at 12/31/93 1,000,000 1,000 0 0 (1,000)
Issuance of common stock
(restricted) for subsidiary
at $.001 per share* 10,000,000 10,000 27,063
Net income for year 9,537
------------- -------------- --------------- --------------- ---------------
Balances at 12/31/94 11,000,000 11,000 27,063 0 8,537
Sale of common stock
(Regulation S) at $.10
per share at 8/30/95 1,500,000 1,500 148,500
Net loss for year (347,339)
------------- -------------- --------------- --------------- ---------------
Balances at 12/31/95 12,500,000 12,500 175,563 0 (338,802)
Issuance of common stock
(restricted) at $.001 per
share for services at
7/9/96 140,000 140
Net loss for year (128,977)
------------- -------------- --------------- --------------- ---------------
Balances at 12/31/96 12,640,000 $ 12,640 $ 175,563 $ 0 $ (467,779)
============= ============== =============== =============== ===============
</TABLE>
* Transaction actually occurred July 10, 1995 but is reflected earlier under
the pooling-of-interests method of accounting.
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
3/14/90
(Date of
Year ended December 31, Inception) to
1996 1995 12/31/96
------------------ ------------------ ------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $ (128,977) $ (347,339) $ (467,779)
Adjustments to reconcile net loss to cash
provided (used) by operating activities:
Net book value of terminated lease 69,605 0 69,605
Stock issued for expenses 140 0 140
Depreciation and amortization 41,349 30,648 76,978
Changes in assets and liabilities:
Inventory (14,455) (5,852) (21,555)
Prepaid expenses (10,757) 0 (10,757)
Accounts payable (25,011) 46,953 27,746
Accrued expenses 98,971 132,705 232,776
------------------ ------------------ ------------------
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES 30,865 (142,885) (92,846)
INVESTING ACTIVITIES
Purchase of property and equipment (8,520) (204,035) (231,104)
Security deposits 0 (6,552) (6,552)
------------------ ------------------ ------------------
NET CASH USED
BY INVESTING ACTIVITIES (8,520) (210,587) (237,656)
FINANCING ACTIVITIES
Proceeds from sale of common stock 0 150,000 188,063
Loan proceeds 5,000 210,000 215,000
Loan repayments (3,784) (2,152) (23,483)
------------------ ------------------ ------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,216 357,848 379,580
------------------ ------------------ ------------------
INCREASE IN CASH
AND CASH EQUIVALENTS 23,561 4,376 49,078
Cash and cash equivalents at beginning
of year 25,517 21,141 0
------------------ ------------------ ------------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 49,078 $ 25,517 $ 49,078
================== ================== ==================
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 1,531 $ 28,506 $ 31,481
================== ================== ==================
</TABLE>
During 1995, the Company's subsidiary financed a van in the amount of $17,143.
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Principals of Consolidation
The consolidated financial statements for 1996 and 1995 include the
accounts of the Company and its wholly owned subsidiary, Noram Ventures,
which was incorporated March 4, 1994 under the laws of the State of
Florida, and does business under the name of Noram Ventures Holdings, Inc.
All significant intercompany balances and transactions have been eliminated
in consolidation.
Business Activity
The Company through its subsidiary, Noram Ventures Holdings, Inc. ("Noram
Ventures") is currently leasing premises in three locations in Florida to
charitable organizations that conduct bingo operations on the premises. The
Company receives revenue in the form of rent and also sells concessions,
souvenirs, and bingo supplies.
Revenue Recognition
Revenue is recognized when premises are rented and products are sold and
cash is collected.
Dividend Policy
The Company has not yet adopted any policy regarding payment of dividends.
Inventory
Inventory consists mainly of paper products used by the bingo operations
and concessions and novelty items and are valued at the lower of cost
(first-in, first-out basis) or market.
Property and Equipment
Property and equipment are recorded at cost. Expenditures for additions and
major improvements are capitalized. Expenditures for repairs and
maintenance and minor improvements are charged to expense as incurred. When
property or equipment is retired or otherwise disposed of, the related cost
and accumulated depreciation are removed from the accounts. Gains or losses
from retirements and disposals are recorded as other income or expense.
Property and equipment are depreciated over their estimated useful lives.
Leasehold improvements and acquisition costs are amortized over their
estimated useful lives or the lease term, whichever is shorter.
Depreciation and amortization are computed using straight-line and
accelerated methods over the following estimated useful lives:
Years
Bingo facility equipment................................ 7
Furniture and fixtures.................................. 5-7
Transportation equipment................................ 5
Leasehold improvements and acquisition costs............ 6-12
Cash and Cash Equivalents
For financial statement purposes, the Company considers all highly liquid
investments with an original maturity of three months or less when
purchased to be cash equivalents.
Income Taxes
The Company records the income tax effect of transactions in the same year
that the transactions enter into the determination of income, regardless of
when the transactions are recognized for tax purposes. Tax credits are
recorded in the year realized.
The Company utilizes the liability method of accounting for income taxes as
set forth in Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109). Under the liability method,
deferred taxes are determined based on the differences between the
financial statement and tax bases of assets and liabilities using enacted
tax rates in effect in the years in which the differences are expected to
reverse. An allowance against deferred tax assets is recorded when it is
more likely than not that such tax benefits will not be realized.
F-6
<PAGE>
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued)
Earnings (loss) per share
Earnings (loss) per common share are computed by dividing net earnings
(loss) by the weighted average common shares outstanding during each
period.
NOTE 2: DEVELOPMENT STAGE COMPANY
The Company was incorporated under the laws of the State of Nevada on March
14, 1990 as Core Integration, Inc. and has been in the development stage
since incorporation. On July 10, 1995, the name was changed to Noram Gaming
and Entertainment, Inc. The Company is now engaged in the leasing of
facilities to charities that conduct bingo operations.
NOTE 3: CAPITALIZATION
On the date of incorporation, the Company sold 1,000,000 shares of its
Class "A" common stock to Capital General Corporation for $1,000 cash for
an average consideration of $.001 per share. The Company's authorized stock
includes 25,000,000 shares of Class "A" common stock at $.001 par value.
During 1995, the Company issued 10,000,000 shares of its restricted common
stock to acquire Noram Ventures (See Note 11). Under the
pooling-of-interests method of accounting, the stock has been treated as
issued January 1, 1994. Also during 1995, the Company sold 1,500,000 shares
of Regulation S stock for $.10 per share, raising $150,000. During 1996,
the Company issued 140,000 shares of its restricted common stock for
services.
NOTE 4: BRIDGE LOANS
At December 31, 1996, the Company owes $215,000 to a Canadian company which
is a sister company to another company which owns 9.8% of the Company's
outstanding stock. One loan is for $200,000, bears interest at 8% per annum
and was due April 30, 1996 but has been extended without penalty until the
Company is able to pay the obligation. The loan is in the Company's name
and Noram Ventures is a guarantor. The Company is to pay 60,000 shares of
its common stock as bonus interest and will also issue 100,000 warrants
allowing the lender to purchase 100,000 shares of the Company's common
stock at $2.00 per share anytime before August 1, 1998. The second loan is
in the amount of $15,000, bears interest at 8% per annum and was due June
22, 1996 but has been extended without penalty until the Company is able to
pay the obligation. Both of the loans require the Company to repay the
obligation immediately if it raises equity capital in excess of $500,000
during the term of the agreement.
<PAGE>
NOTE 5: ACCRUED EXPENSES - RELATED PARTIES
At December 31, 1996, $162,150 is due to the Company's President for
compensation and amounts expended on the Company's behalf. Also, at
December 31, 1996, $40,000 is due to an entity owned 50% by the President's
sister-in-law who is also the wife of the Company's Vice President. He
became Vice President in early 1996 . The amount is due for the purchase of
various assets from the entity currently being used by the Company. Total
cost of the assets purchased was $80,000 which management considers was
fair market value in an arms-length transaction. In 1996, the Company
issued 10,000 shares of its common stock to each of the two owners of the
entity. The stock and $40,000 balance were to have been issued and paid
prior to December 31, 1995. The $40,000 was not paid due to cash flow
considerations.
NOTE 6: LONG-TERM DEBT
Long-term debt at December 31, 1996 is detailed as follows:
<TABLE>
<CAPTION>
Interest Principal Balance
Rate Current Long-term
--------------- ----------------- -----------------
<S> <C> <C> <C>
Ford Motor Company 9.90% $ 4,181 $ 8,289
================= =================
</TABLE>
The loan is secured by a van.
Scheduled principal reductions of the debt are as follows:
1997...............................$ 4,181
1998............................... 4,618
1999............................... 3,671
----- --------------
$ 12,470
==============
F-7
<PAGE>
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE 7: INCENTIVE STOCK OPTION PLAN
During 1995, the Company established an incentive stock option plan for
employees and directors of the Company. The maximum number of shares to be
issued under the plan is 1,000,000. The aggregate fair market value
(determined at the grant date) of the shares to which options become
exercisable for the first time by an optionee during any calendar year
shall not exceed $100,000. For 10% shareholders, the option price shall not
be less than 110% of the fair market value of the shares on the grant date
and the exercise period shall not exceed 5 years from the grant date. The
Company also can grant non-qualified stock options. On December 28, 1995, a
total of 800,000 options were granted at a price of $1.00 per share to six
individuals as follows: 150,000 options were granted to the Company's
President, 150,000 to the Secretary, 100,000 to the Vice President, 150,000
to the Company's second largest shareholder, 150,000 to the President of
the entity that loaned $215,000 to the Company, and 100,000 options (which
were subsequently canceled) were granted to an individual who provides
public relations services to the Company.
NOTE 8: INCOME TAXES
No federal income taxes were due for the years ended December 31, 1996 or
1995.
At December 31, 1996, the Company has a federal net operating loss
carryover of approximately $275,000. The federal loss will expire December
31, 2010.
At December 31, 1996, the Company has a deferred tax asset in the amount of
$-0-. There is a potential asset based on future reduction of income taxes
using the net operating loss carryforward. The amount has been reserved
100% due to the Company's losses. Management believes that the Company will
realize sufficient income in the future to utilize the net operating loss
carryforward. However, since future income can only be estimated, there is
not sufficient basis for recognition of any deferred tax asset at this
time.
NOTE 9: COMMITMENTS AND CONTINGENCIES
The Company conducts its operations in leased facilities under
noncancelable operating leases expiring through 2000. In addition, the
Company leases equipment under noncancelable operating leases expiring
through 1998. The minimum future rental commitments under operating leases
are as follows:
<TABLE>
<CAPTION>
Year ending
December 31, Facilities Equipment Total
------------ ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
1997....................$ 270,461 $ 6,631 $ 277,092
1998.................... 241,995 3,868 245,863
1999.................... 219,984 0 219,984
2000.................... 48,244 0 48,244
Thereafter................. 0 0 0
------------------ ----------------- -----------------
$ 780,684 $ 10,499 $ 791,183
================== ================= =================
</TABLE>
Rental expense for all operating leases was $255,714 and $154,594 for the
years ended December 31, 1996 and 1995 respectively.
<PAGE>
NOTE 10: GOING CONCERN
The financial statements are presented on the basis that the Company is a
going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business over a
reasonable length of time. At December 31, 1996, the Company has a deficit
in working capital of $398,313, a loss from operations for 1996 of $54,373
and an accumulated deficit of $467,779.
Management feels that expanding its operations to the Internet and a
combination of debt financing and sale of common stock will provide
sufficient working capital to allow the Company to continue as a going
concern.
F-8
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE 11: ACQUISITION OF SUBSIDIARY
On July 10, 1995, the Company acquired 100% of the outstanding stock of
Noram Ventures in a reverse acquisition (which was accounted for similar to
a pooling-of-interests). For the year ended December 31, 1996, the
Company's loss was $45,836 and the subsidiary's loss was $83,141 for a
total net loss of $128,977. For the year ended December 31, 1995, the
Company's loss was $24,981 and the subsidiary's loss was $322,358 for a
total net loss of $347,339. From inception, the Company's net loss is
$71,817 and the subsidiary's loss from inception is $395,962 for a total
accumulated deficit of $467,779.
Assets of the Company at December 31, 1996 (excluding intercompany items)
are $8,195 and the subsidiary's assets are $200,221 for total consolidated
assets of $208,416. Liabilities of the Company at December 31, 1996 are
$288,961 and the subsidiary's liabilities (excluding intercompany items)
are $199,031 for total consolidated liabilities of $487,992.
F-9
<PAGE>
Smith & Company
certified public accountants
Members of: Crandall Building Suite 700
American Institute of 10 West 100 South
Certified Public Accountants Salt Lake City, Utah 84101
Utah Association of Telephone: (801) 575-8297
Certified Public Accountants Facsimile: (801) 575-8306
- ------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
ON SUPPLEMENTARY FINANCIAL INFORMATION
Board of Directors
Noram Gaming and Entertainment, Inc.
Our audit of the basic financial statements presented in the preceding section
of this report was made primarily to form an opinion on such financial
statements taken as a whole. The additional information, contained in the
following pages, is not considered essential for the fair presentation of the
financial position of Noram Gaming and Entertainment, Inc. and Subsidiary, the
results of their operations and cash flows in conformity with generally accepted
accounting principles. The following information consisting of Schedule V and
Schedule VI is included to comply with reporting requirements of the Securities
and Exchange Commission. Such data was subjected to the audit procedures applied
in the audit of the basic financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
March 22, 1997
F-10
<PAGE>
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
SCHEDULE V - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Balance at Balance
Beginning Additions at End
of Period At Cost Retirement of Period
----------------- ------------------ ------------------- -----------------
Year ended
<S> <C> <C> <C> <C>
December 31, 1995:
Bingo facility
equipment $ 14,522 $ 45,100 $ 0 $ 59,622
Furniture & fixtures 2,027 1,360 0 3,387
Transportation
equipment 20,810 18,143 0 38,953
Leasehold improve-
ments and acquisition
costs 0 156,575 0 156,575
----------------- ------------------ ------------------- -----------------
$ 37,359 $ 221,178 $ 0 $ 258,537
================= ================== =================== =================
Year ended December 31, 1996:
Bingo facility
equipment $ 59,622 $ 6,806 $ 0 $ 66,428
Furniture & fixtures 3,387 850 0 4,237
Transportation
equipment 38,953 0 0 38,953
Leasehold improve-
ments and acquisition
costs 156,575 864 75,000 82,439
----------------- ------------------ ------------------- -----------------
$ 258,537 $ 8,520 $ 75,000 $ 192,057
================= ================== =================== =================
</TABLE>
F-11
<PAGE>
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
SCHEDULE VI- ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Expense at End
of Period At Cost Retirement of Period
----------------- ------------------ ------------------- -----------------
Year ended
<S> <C> <C> <C> <C>
December 31, 1995:
Bingo facility
equipment $ 1,556 $ 11,070 $ 0 $ 12,626
Furniture & fixtures 303 884 0 1,187
Transportation
equipment 3,122 10,703 0 13,825
Leasehold improve-
ments and acquisition
costs 0 7,991 0 7,991
----------------- ------------------ ------------------- -----------------
$ 4,981 $ 30,648 $ 0 $ 35,629
================= ================== =================== =================
Year ended December 31, 1996:
Bingo facility
equipment $ 12,626 $ 14,903 $ 725 $ 26,804
Furniture & fixtures 1,187 929 0 2,116
Transportation
equipment 13,825 10,051 0 23,876
Leasehold improve-
ments and acquisition
costs 7,991 15,466 4,670 18,787
----------------- ------------------ ------------------- -----------------
$ 35,629 $ 41,349 $ 5,395 $ 71,583
================= ================== =================== =================
Depreciation for year $ 28,112
Amortization for year 13,237
-----------------
$ 41,349
=================
</TABLE>
F-12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Noram
Gaming & Entertainment, Inc. December 31, 1996 financial statements and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000894555
<NAME> Noram Gaming & Entertainment Inc.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 49,078
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 21,555
<CURRENT-ASSETS> 81,390
<PP&E> 192,057
<DEPRECIATION> 71,583
<TOTAL-ASSETS> 208,416
<CURRENT-LIABILITIES> 479,703
<BONDS> 12,470
0
0
<COMMON> 12,640
<OTHER-SE> (292,216)
<TOTAL-LIABILITY-AND-EQUITY> 208,416
<SALES> 854,913
<TOTAL-REVENUES> 854,913
<CGS> 207,703
<TOTAL-COSTS> 682,952
<OTHER-EXPENSES> 74,604
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,631
<INCOME-PRETAX> (128,977)
<INCOME-TAX> 0
<INCOME-CONTINUING> (128,977)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (128,977)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
