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, 1997
[ ] 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.
[ ]Yes [ X ]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 $844,722.
As of June 15, 1998, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $2,929,039 based on 6,973,903 shares at a
last sale price of $.42.
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 April 1,1998
$.001 PAR VALUE CLASS A COMMON STOCK 14,522,903 SHARES
1
<PAGE>
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 acquired controlling interest in Noram Gaming with the
intent of acquiring a viable business. George Zilba is the 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.
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.
2
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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.
High Low
Quarter Sales Price Sales Price
First 1997 $ 1.25 $ 0.25
Second 1997 1.08 0.26
Third 1997 0.57 0.17
Fourth 1997 0.79 0.35
First 1996 1.50 0.25
Second 1996 2.625 1.875
Third 1996 2.75 1.25
Fourth 1996 1.25 0.48
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 continued to maintain the leasing operation of the
Florida bingo facilities while developing other gaming related interests.
As of December 31, 1997, the Company had cash of $8,985 compared to
cash of $49,078 as of December 31, 1996, a decrease of $40,093 (82%). The
decrease is attributed to increased operating costs.
Current assets as of December 31, 1997 were $48,106 compared to
$81,390, a decrease of $33,284 (41%). The decrease is due mainly to a decrease
in cash.
Current liabilities as of December 31, 1997 were $766,308 compared to
$479,703, an increase of $286,605 (60%). The increase is mainly attributable to
an increase in bridge loans and accrued expenses.
Stockholders' deficit as of December 31, 1997 was $(424,564) compared
to $(279,576) for 1996 for an increase of $144,988 (52%). The increase was
mainly caused by the net loss for the year.
3
<PAGE>
Total revenues for the year ended December 31, 1997 were $844,722
compared to $854,913 for 1996, for a decrease of about 1%.
Cost of Sales for the year ended December 31, 1997 were $197,872
compared to $207,703 for 1996. This is a lower percentage of revenues due to
improved management controls.
General and administrative expenses for the year ended December 31,
1997 were $1,689,842 compared to $641,603 in 1996. The increase of $1,048,239
(163%) was caused by increased salary, rent, utilities, and similar items in
1997 in attempting to expand operations. About $909,000 of these expenses were
paid with S-8 stock, rather than cash.
Depreciation and amortization expense for the year ended December 31,
1997 was $31,049 compared to $41,349 in 1996. The decrease of $10,300 (25%) is
due to fewer facilities being in operation for all of 1997.
Interest expense for the year ended December 31, 1997 was $20,324
compared to $18,631 in 1996, for an increase of about 9%.
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. During 1997, the Company received
$354,918 in the form of loans and $40,000 from stock sales.
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 1998 are as follows:
1. Complete the development and begin the marketing of the "Winner Take
All" three (3) number video, class II gaming system.
2. Launch an aggressive program for the sale of Vaprel bingo equipment in
North America and establish a network of supporting distributors in the
United States and Canada.
3. Continue the promotion and development of Lottery projects and other
gaming opportunities in South America, especially Venezuela.
4. Establish joint venture partnerships with other public and private
companies for the development and implementation of gaming
opportunities such as Internet Bingo.
5. Eventually, disengage the Company from the business of leasing
charitable bingo facilities, as other opportunities develop and
additional revenue takes place.
THESE ARE THE ESTABLISHED GOALS FOR 1998. THE COMPANY INTENDS TO WORK TOWARD THE
REALIZATION OF THESE PLANS, BUT THERE CAN BE NO GUARANTEE THAT THE COMPANY'S
PLANS OR PROJECTION WILL BE ACHIEVED DURING 1998 OR FUTURE YEARS.
4
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"Winner Take All" Three (3) number Video Gaming System
The Company has entered into a Joint Venture agreement with World Touch
Gaming of Norcross, GA, for the development, manufacturing and marketing of the
"Winner Take All" system. This unique Class II gaming system is designed to
become a major source of revenue for the Company and the gaming facilities in
which the system will be placed. The Company intends to market this "global"
system to Casinos, Indian Gaming Facilities, Riverboats, Cruise Ships, Charity
Bingo Halls, and Company owned facilities, where permitted by law.
The Company plans to market the system beginning in the third quarter
of 1998.
Vaprel Equipment
In 1997, the Company obtained the rights of exclusive distributorship
in North America for the sale of bingo and gaming equipment manufactured by
Vaprel, of Valencia, Spain. Vaprel, known as the world leader in the
manufacturing and sales of 90# bingo equipment and other high quality products
for the bingo industry, intends to introduce 90# bingo to the North American
market during 1998, through NorAm and the network of distributors that the
Company intends to set up.
South American Gaming Interests
The Company has been part of a Joint Venture project for the
installation of Video Lottery Terminals ("VLT") on behalf of the State of
Cojedes, Republic of Venezuela. At this time, the installation of the machines
has been delayed due to a problem regarding the proper custom code for the
VLT's. The Company is also currently in negotiations with various South American
States for the installation and marketing of traditional paper lottery systems.
The Company expects to have at least one paper lottery in operation before the
end of the third quarter of 1998. The Company is simultaneously continuing its
efforts to have the proper identification included in the Venezuela Customs Code
for the future importation of the VLT's.
Internet Bingo
The Company currently is not active in an effort to engage in Internet
Bingo, although, the Company does have a long range plan to enter the Internet
Gaming market within the next two years.
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.
5
<PAGE>
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 59 President, Director
John O. Zilba 56 Vice President, Director
Frank B. Bryan 60 Vice President, Director
Kenneth P. McDougal 64 Director
Andrew Mangino 62 Director
George C. Zilba (age 59) 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 56) 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 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 60) 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 62) 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
6
<PAGE>
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 64) 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.
<TABLE>
<CAPTION>
Annual Compensation Table
Name Title Year Salary Other
- ------------------ ------------------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
George C. Zilba President, Director 1997 $ 75,000* **
John O. Zilba Vice President, Director 1997 $ 23,961 ***
</TABLE>
* Includes $5,250 accrued at December 31, 1997.
** Received 40,000 S-8 shares valued at $27,500.
*** Received 40,000 S-8 shares valued at $27,500.
ITEM 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of December 31, 1997, 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.
<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 6,099,000(A) 42.25%
(Restricted) 6620 Muller Dr.
Ottawa Lake, MI 49267-9515
Class A Common Logan Anderson 1,570,000 10.88%
(Restricted) 4730 Marguerite Street
Vancouver, BC V6J4G9
Class A Common John Zilba 100,000(B) 0.69%
(Restricted) 134 Brightwater Dr., Unit 2
Clearwater Beach, FL 34630
Class A Common Kenneth McDougal 15,000 0.10%
(Restricted) 6 Buttonbush Lane
Hilton Head, SC 29926
Class A Common Andrew Mangino 15,000 0.10%
10631 Stargate Lane
Cincinnati, OH 45240
Class A Common All Officers and Directors 6,229,000 43.15%
as a Group (4 persons)
</TABLE>
(A) Includes 150,000 options held by George Zilba
(B) Includes 100,000 options held by John Zilba
7
<PAGE>
ITEM 12. Certain Relationships and Related Transactions.
During 1997, the President and Vice President each received 40,000 S-8 shares of
common stock valued at $27,500.
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, 1997.
F-3 Consolidated Statements of Operations - Years Ended December 31,
1997 and 1996.
F-4 Consolidated Statement of Changes in Stockholders' Equity
(Deficit) - Years ended December 31, 1997 and 1996.
F-5 Consolidated Statements of Cash Flows - Years ended December 31,
1997 and 1996.
F-6 Notes to Consolidated Financial Statements.
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
8
<PAGE>
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: June 17, 1998 By: /S
------------------- -------
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: June 17, 1998 By: /S
-------------------- -------
George C. Zilba, President and Director
Date: June 17, 1998 By: /S
-------------------- -------
John O. Zilba, Vice President, Secretary,
and Director
Date: June 17, 1998 By: /S
-------------------- -------
Frank B. Bryan, Vice President, Treasurer,
and Director
9
<PAGE>
SMITH & COMPANY
A Professional Corporation of
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: 10 West 100 South, SUITE 700
AMERICAN INSTITUTE OF Salt Lake City, Utah 84101
CERTIFIED PUBLIC ACCOUNTANTS Telephone: (801) 575-8297
UTAH ASSOCIATION OF Facsimile: (801) 575-8306
CERTIFIED PUBLIC ACCOUNTANTS E-mail: [email protected]
- --------------------------------------------------------------------------------
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, 1997, and the related consolidated statements of operations, changes in
stockholders' equity (deficit), and cash flows for the years ended December 31,
1997, and 1996, and for the period of March 14, 1990 (date of inception) to
December 31, 1997. 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, 1997, and the results of their operations, changes in stockholders' equity
(deficit), and their cash flows for the years ended December 31, 1997, and 1996,
and for the period of March 14, 1990 (date of inception) to December 31, 1997 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 $(718,202) at
December 31, 1997 and an accumulated deficit of $(1,562,144). 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 12 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
May 22, 1998
F-1
<PAGE>
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, 1997
----------------------------
ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 8,985
Receivable from employees 5,000
Prepaid expenses 9,159
Inventory (Note 1) 24,962
----------------------------
TOTAL CURRENT ASSETS 48,106
PROPERTY AND EQUIPMENT (Note 3) 132,843
OTHER ASSETS
Security deposits 11,952
Investment in joint venture (Note 4) 152,515
----------------------------
$ 345,416
============================
LIABILITIES & (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 51,241
Bridge loans (Note 5) 359,000
Current portion of long-term debt (Note 7) 4,617
Demand loans payable - related parties (Note 6) 210,918
Accrued expenses 50,782
Accrued expenses - related parties (Note 6) 89,750
----------------------------
TOTAL CURRENT LIABILITIES 766,308
LONG-TERM DEBT (Note 7) 3,672
----------------------------
TOTAL LIABILITIES 769,980
Commitments and contingencies (Note 11) 0
STOCKHOLDERS' (DEFICIT) (Note 8)
Common Stock $.001 par value:
Authorized - 25,000,000 shares
Issued and outstanding 14,184,800 shares 14,185
Additional paid-in capital 1,123,395
(Deficit) accumulated during the development stage (1,562,144)
----------------------------
TOTAL STOCKHOLDERS' (DEFICIT) (424,564)
----------------------------
$ 345,416
============================
</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
1997 1996 12/31/97
------------------ ------------------ ------------------
<S> <C> <C> <C>
Net sales $ 844,722 $ 854,913 $ 2,451,938
Cost of sales 197,872 207,703 690,280
------------------ ------------------ ------------------
GROSS PROFIT 646,850 647,210 1,761,658
General & administrative expenses 1,689,842 641,603 3,079,115
Depreciation & amortization 31,049 41,349 94,791
Interest expense 20,324 18,631 75,292
------------------ ------------------ ------------------
1,741,215 701,583 3,249,198
------------------ ------------------ ------------------
NET LOSS BEFORE OTHER (1,094,365) (54,373) (1,487,540)
Termination of facility lease 0 (74,604) (74,604)
------------------ ------------------ ------------------
NET LOSS BEFORE
INCOME TAXES (1,094,365) (128,977) (1,562,144)
INCOME TAXES 0 0 0
------------------ ------------------ ------------------
NET LOSS $ (1,094,365) $ (128,977) $ (1,562,144)
================== ================== ==================
Net loss per weighted average share $ (.08) $ (.01)
================== ==================
Weighted average number of common shares
used to compute net loss per
weighted average share 13,741,747 12,596,656
================== ==================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS 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)
Issuance of common stock (S-8)
for services at:
$.50 per share 1/27/97 460,000 460 229,540
$.6875 per share 3/19/97 478,500 478 328,490
$1.0625 per share 4/11/97 50,000 50 53,075
$.8125 per share 4/22/97 285,000 285 231,278
$.7187 per share 5/1/97 6,300 6 4,522
$.484 per share 5/22/97 3,000 3 1,449
$.36 per share 6/18/97 3,500 4 1,256
$.28 per share 7/9/97 7,500 8 2,093
$.21 per share 8/8/97 20,000 20 4,180
$.38 per share 9/5/97 11,000 11 4,169
Sale of common stock (S-8)
at $.40 per share at 10/21/97 100,000 100 39,900
Issuance of common stock (S-8)
at $.40 per share for services
at 11/3/97 120,000 120 47,880
Net loss for year (1,094,365)
------------- -------------- --------------- --------------- ---------------
Balances at 12/31/97 14,184,800 $ 14,185 $ 1,123,395 $ 0 $ (1,562,144)
============= ============== =============== =============== ===============
</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
1997 1996 12/31/97
----------------- ----------------- -----------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $ (1,094,365) $ (128,977) $ (1,557,184)
Adjustments to reconcile net loss to cash provided
(used) by operating activities:
Net book value of terminated lease 0 69,605 69,605
Stock issued for expenses 909,377 140 909,517
Depreciation and amortization 31,049 41,349 108,027
Changes in assets and liabilities:
Inventory (3,407) (14,455) (24,962)
Prepaid expenses 1,598 (10,757) (9,159)
Accounts receivable (5,000) 0 (5,000)
Accounts payable 23,495 (25,011) 51,241
Accrued expenses (92,244) 98,971 135,572
----------------- ----------------- -----------------
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES (229,497) 30,865 (322,343)
INVESTING ACTIVITIES
Purchase of property and equipment (43,418) (8,520) (274,522)
Security deposits (5,400) 0 (11,952)
Investment in joint venture (152,515) 0 (152,515)
----------------- ----------------- -----------------
NET CASH USED
BY INVESTING ACTIVITIES (201,333) (8,520) (438,989)
FINANCING ACTIVITIES
Proceeds from sale of common stock 40,000 0 228,063
Loan proceeds 354,918 5,000 569,918
Loan repayments (4,181) (3,784) (27,664)
----------------- ----------------- -----------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 390,737 1,216 770,317
----------------- ----------------- -----------------
INCREASE IN CASH
AND CASH EQUIVALENTS (40,093) 23,561 8,985
Cash and cash equivalents at beginning
of year 49,078 25,517 0
----------------- ----------------- -----------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 8,985 $ 49,078 $ 8,985
================= ================= =================
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 847 $ 1,531 $ 32,328
================= ================= =================
</TABLE>
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, 1997
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Principals of Consolidation
The consolidated financial statements for 1997 and 1996
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, 1997
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: PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1997 are summarized as
follows:
<TABLE>
<CAPTION>
Net
Accumulated Book
Cost Depreciation Value
------------- ------------------ -------------
<S> <C> <C> <C>
Bingo facility equipment $ 69,828 $ 38,832 $ 30,996
Furniture and fixtures 5,062 2,863 2,199
Transportation equipment 38,953 29,906 9,047
Leasehold improvements and
acquisition costs 82,439 31,031 51,048
Gaming equipment 39,193 0 39,193
------------- ------------------ -------------
$ 235,475 $ 102,632 $ 132,843
============= ================== =============
</TABLE>
NOTE 4: JOINT VENTURE
On September 1, 1997, the Company entered into a joint venture
agreement with a Venezuelan company to develop gaming
operations in Venezuela. Operations are anticipated to begin
in 1998.
NOTE 5: BRIDGE LOANS
At December 31, 1997, the Company had bridge loans as follows:
<TABLE>
<CAPTION>
<S> <C>
Note payable - company, interest at 8% per year, due
April 30, 1996, extended without penalty
pending equity financing $ 200,000
Note payable - company, interest at 8% per year, due
June 22, 1996, extended without penalty
pending equity financing 15,000
Note payable - individual, interest at 8% per year,
due August 18, 1998 44,000
Note payable - individual, interest at 10% per year,
due in monthly installments of $10,000 per month
beginning in January, 1998 100,000
---------------
$ 359,000
===============
</TABLE>
NOTE 6: ACCRUED EXPENSES AND LOANS - RELATED PARTIES
At December 31, 1997, $89,750 is due to the Company's
President for compensation. Also, at December 31, 1997,
$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 considered 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.
F-7
<PAGE>
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE 6: ACCRUED EXPENSES AND LOANS - RELATED PARTIES (continued)
The Company has also received short-term loans from
shareholders and other individuals, totaling $170,918. The
Company is attempting to find the means to satisfy these loans
through sale of Company stock or direct issuance of stock in
exchange for release from the debt.
NOTE 7: LONG-TERM DEBT
Long-term debt at December 31, 1997 is detailed as follows:
<TABLE>
<CAPTION>
Interest Principal Balance
Rate Current Long-term
<S> <C> <C> <C>
Ford Motor Company 9.90% $ 4,617 $ 3,672
================= =================
</TABLE>
The loan is secured by a van.
Scheduled principal reductions of the debt are as follows:
1998...............................$ 4,617
1999............................... 3,672
-------------
$ 8,289
=============
NOTE 8: 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
13). 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. During 1997, the Company sold 100,000 shares of S-8
stock for $.40 per share, raising $40,000. The Company also
issued 1,444,800 shares of S-8 stock for services.
During 1997, the Company filed Form S-8 Registration
Statements to authorize the issuance of up to 2,600,000 shares
of common stock at prevailing market rates, in exchange for
services to be performed by employees and consultants. At
December 31, 1997, 1,444,800 shares had been issued.
NOTE 9: 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 10: INCOME TAXES
No federal income taxes were due for the years ended December
31, 1997 or 1996.
At December 31, 1997, the Company has a federal net operating
loss carryover of approximately $1,004,000. The federal loss
will expire December 31, 2010.
F-8
<PAGE>
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE 10: INCOME TAXES (continued)
At December 31, 1997, the Company has a deferred tax asset in
the amount of $0. There is a potential asset based on future
reduction of income taxes using the net operating loss
carryforward. The amount has been reserved 100% due to the
Company's losses. Management believes that the Company will
realize sufficient income in the future to utilize the net
operating loss carryforward. However, since future income can
only be estimated, there is not sufficient basis for
recognition of any deferred tax asset at this time.
NOTE 11: COMMITMENTS AND CONTINGENCIES
The Company conducts its operations in leased facilities under
noncancellable operating leases expiring through 2000. In
addition, the Company leases equipment under noncancellable
operating leases expiring through 1998. The minimum future
rental commitments under operating leases are as follows:
<TABLE>
<CAPTION>
Year ending
December 31, Facilities Equipment Total
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
1998....................$ 241,995 $ 3,868 $ 245,863
1999.................... 219,984 0 219,984
2000.................... 48,244 0 48,244
Thereafter................. 0 0 0
----------------- ----------------- -----------------
$ 510,223 $ 3,868 $ 514,091
================= ================= =================
</TABLE>
Rental expense for all operating leases was $227,094 and
$255,714 for the years ended December 31, 1997 and 1996
respectively.
NOTE 12: 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, 1997, the Company has a deficit in working
capital of $718,202, a loss from operations for 1997 of
$1,094,365 and an accumulated deficit of $1,562,144.
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.
NOTE 13: 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, 1997, the Company's loss was $939,934 and
the subsidiary's loss was $154,431 for a total net loss of
$1,094,365. 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. From inception, the
Company's net loss is $1,011,751 and the subsidiary's loss
from inception is $550,393 for a total accumulated deficit of
$1,562,144.
Assets of the Company at December 31, 1997 (excluding
intercompany items) are $199,902 and the subsidiary's assets
are $145,514 for total consolidated assets of $395,416.
Liabilities of the Company at December 31, 1997 are $556,026
and the subsidiary's liabilities (excluding intercompany
items) are $213,954 for total consolidated liabilities of
$769,980.
F-9
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Noram Gaming and Entertainment, Inc. and Subsidiary December
31, 1997 financial statements and is qualified in its entirety by
reference to such financial statements
</LEGEND>
<CIK> 0000894555
<NAME> Noram Gaming and Entertainment Inc.
</TABLE>
