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, 1998
-----------------
[ ] 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)
FIVE 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 $737,420.
As of February 9, 2000, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $901,102 based on 10,601,200 shares at a
last sale price of $0.085.
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 December 31, 1999
- -------------------------------------- ------------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK 16,379,200 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 Five 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 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
<PAGE>
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 and now trades under the symbol NORE. 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 1998 $ 0.42 $ 0.18
Second 1998 0.46 0.14
Third 1998 0.32 0.16
Fourth 1998 0.24 0.07
First 1997 1.25 0.25
Second 1997 1.08 0.26
Third 1997 0.57 0.17
Fourth 1997 0.79 0.35
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, 1998, the Company had cash of $15,721 compared to
cash of $8,985 as of December 31, 1997, an increase of $6,736 (75%). The
increase is attributed to decreased operating costs.
Current assets as of December 31, 1998 were $188,705 compared to
$48,106, an increase of $140,599 (292%). The increase is due mainly to an
increase in inventory.
Current liabilities as of December 31, 1998 were $858,694 compared to
$766,308, an increase of $92,386 (12%). The increase is mainly attributable to
an increase in loans and accrued expenses.
Stockholders' deficit as of December 31, 1998 was $(644,892) compared
to $(424,564) for 1997 for an increase of $220,328 (52%). The increase was
mainly caused by the net loss for the year.
3
<PAGE>
Total revenues for the year ended December 31, 1998 were $737,420
compared to $844,722 for 1997, for a decrease of about 13%. The Company is
increasing its emphasis on selling gaming equipment rather than on the bingo
operations.
Cost of Sales for the year ended December 31, 1998 were $202,440
compared to $197,872 for 1997.
General and administrative expenses for the year ended December 31,
1998 were $911,919 compared to $1,689,842 in 1997. The decrease of $777,923
(46%) was caused mainly by a reduction in consulting fees. About $276,000 of
these expenses were paid with S-8 and Regulation S stock, rather than cash
($909,000 in 1997).
Depreciation and amortization expense for the year ended December 31,
1998 was $25,613 compared to $31,049 in 1997. The decrease of $5,436 (18%) is
due to fewer facilities being in operation for all of 1998.
Interest expense for the year ended December 31, 1998 was $30,446
compared to $20,324 in 1997, for an increase of about 50%.
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 1998, the Company received
$109,267 in the form of loans and $96,200 from stock sales ($354,918 and $40,000
in 1997).
Management plans to continue with its stated objective in the 1997
narrative to divest itself of the bingo halls in Florida and concentrate on the
sale and installation of the Vaprel bingo equipment, continued development of
the keno blowers, Internet gaming and the pursuit of other gaming opportunities
which will promote Company growth.
Future Plans
The Company's plans for 1999 are as follows:
I. Complete the development and begin the marketing of the "ThunderBolt" three
(3) number video, class II gaming system.
II. 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.
III. Establish joint venture partnerships with other public and private
companies for the development and implementation of gaming opportunities
such as Internet Bingo.
IV. 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 1999. 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 1999 OR FUTURE YEARS.
4
<PAGE>
"ThunderBolt" 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
"ThunderBolt" 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 began marketing 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.
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.
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.
5
<PAGE>
Name Age Position
- -----------------------------------------
George C. Zilba 61 President, Director
John O. Zilba 58 Vice President, Director (resigned April, 1999)
Frank B. Bryan 62 Vice President, Director
Kenneth P. McDougal 66 Director
Andrew Mangino 64 Director
George C. Zilba (age 61) 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 58) was Vice President and a Director of the Company until
April, 1999. He has been employed by the Company since August 1995 and became a
Director in February 1996. Mr. Zilba was formerly 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 62) 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 64) 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 66) 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.
6
<PAGE>
ITEM 10. Executive Compensation.
Annual Compensation Table
<TABLE>
<CAPTION>
Name Title Year Salary Other
- --------------------------- ------------------------ ----------- ------------- ---------
<S> <C> <C> <C> <C>
George C. Zilba President, Director 1998 $ 82,500
John O. Zilba Vice President, Director 1998 $ 19,385 **
</TABLE>
* Includes $30,000 accrued at December 31, 1998. ** Received 100,000 S-8
shares valued at $35,000.
ITEM 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of December 31, 1998, 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) 37.46%
(Restricted) 6620 Muller Dr.
Ottawa Lake, MI 49267-9515
Class A Common Frank B. Bryan 0 0.00%
Five Canton Square
Toledo, Ohio 43624
Class A Common John Zilba 100,000 0.61%
(Restricted) 134 Brightwater Dr., Unit 2
Clearwater Beach, FL 34630
Class A Common Kenneth McDougal 15,000 0.09%
(Restricted) 6 Buttonbush Lane
Hilton Head, SC 29926
Class A Common Andrew Mangino 15,000 0.09%
10631 Stargate Lane
Cincinnati, OH 45240
Class A Common All Officers and Directors 6,229,000 38.26%
as a Group (5 persons)
</TABLE>
(A) Includes 150,000 options held by George Zilba
7
<PAGE>
ITEM 12. Certain Relationships and Related Transactions.
During 1999, John Zilba received 100,000 S-8 shares of common stock valued at
$35,000.
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, 1998.
F-3 Consolidated Statements of Operations - Years Ended December 31, 1998
and 1997.
F-4 Consolidated Statement of Changes in Stockholders' Equity (Deficit) -
Years ended December 31, 1998 and 1997.
F-5 Consolidated Statements of Cash Flows - Years ended December 31, 1998
and 1997.
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: February 18, 2000 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: February 18, 2000 By: /S
------------------ -------
George C. Zilba, President and Director
Date: February 18, 2000 By: /S
------------------ -------
Andrew Mangino, Director
Date: February 18, 2000 By: /S
------------------ -------
Frank B. Bryan, Vice President, Treasurer,
and Director
9
<PAGE>
Smith
&
Company
A Professional Corporation of Certified Public Accountants
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, 1998, and the related consolidated statements of operations, changes in
stockholders' equity (deficit), and cash flows for the years ended December 31,
1998, and 1997, and for the period of March 14, 1990 (date of inception) to
December 31, 1998. 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, 1998, and the results of their operations, changes in stockholders' equity
(deficit), and their cash flows for the years ended December 31, 1998, and 1997,
and for the period of March 14, 1990 (date of inception) to December 31, 1998 in
conformity with generally accepted accounting principles.
/s/ Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
February 15, 2000
10 West 100 South, Suite 700o Salt Lake City, Utah 84101-1554
Telephone: (801) 575-8297o Facsimile: (801) 575-8306
E-mail: [email protected]
Members: American Institute of Certified Public Accountants o
Utah Association of Certified Public Accountants
F-1
<PAGE>
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
1998
-----------------
ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 15,721
Receivable from employees 5,000
Prepaid expenses 12,845
Inventory (Note 1) 155,139
-----------------
TOTAL CURRENT ASSETS 188,705
PROPERTY AND EQUIPMENT (Note 3) 68,037
OTHER ASSETS
Security deposits 11,952
Accounts receivable (Note 4) 15,271
Investment in joint venture (Note 5) 0
-----------------
$ 283,965
=================
LIABILITIES & (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 81,266
Bridge loans (Note 6) 259,000
Current portion of long-term debt (Note 8) 13,509
Demand loans payable - related parties (Note 7) 309,858
Accrued expenses 75,311
Accrued expenses - related parties (Note 7) 119,750
-----------------
TOTAL CURRENT LIABILITIES 858,694
LONG-TERM DEBT (Note 8) 70,163
-----------------
TOTAL LIABILITIES 928,857
Commitments and contingencies (Note 12) 0
STOCKHOLDERS' (DEFICIT) (Note 9)
Common Stock $.001 par value:
Authorized - 25,000,000 shares
Issued and outstanding 16,129,700 shares 16,130
Additional paid-in capital 1,606,773
(Deficit) accumulated during the development stage (2,267,795)
-----------------
TOTAL STOCKHOLDERS' (DEFICIT) (644,892)
-----------------
$ 283,965
=================
</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
1998 1997 12/31/98
------------------ ------------------ ------------------
<S> <C> <C> <C>
Net sales $ 737,420 $ 844,722 $ 3,189,358
Cost of sales 202,440 197,872 892,720
------------------ ------------------ ------------------
GROSS PROFIT 534,980 646,850 2,296,638
General & administrative expenses 911,919 1,689,842 3,991,034
Depreciation & amortization 25,613 31,049 120,404
Interest expense 30,446 20,324 105,738
------------------ ------------------ ------------------
967,978 1,741,215 4,217,176
------------------ ------------------ ------------------
NET LOSS BEFORE OTHER (432,998) (1,094,365) (1,920,538)
Joint venture loss (Note 5) (152,515) 0 (152,515)
Loss on equipment disposal (40,138) 0 (40,138)
Termination of facility lease (80,000) 0 (154,604)
------------------ ------------------ ------------------
(272,653) 0 (347,257)
------------------ ------------------ ------------------
NET LOSS BEFORE
INCOME TAXES (705,651) (1,094,365) (2,267,795)
INCOME TAXES 0 0 0
------------------ ------------------ ------------------
NET LOSS $ (705,651) $ (1,094,365) $ (2,267,795)
================== ================== ==================
Net loss per weighted average share $ (.05) $ (.08)
================== ==================
Weighted average number of common shares
used to compute net loss per
weighted average share 15,315,061 13,741,747
================== ==================
</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>
(Continued)
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional Stock During
Par Value $.001 Paid-in Subscription Development
------------------------------
Shares Amount Capital Receivable Stage
------------- -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balances at 12/31/97 14,184,800 $ 14,185 $ 1,123,395 $ 0 $ (1,562,144)
Issuance of common stock(S-8)
for expenses and
settle liabilities at:
$.29 per share 1/12/98 37,500 38 10,662
$.35 per share 1/16/98 55,000 55 19,195
$.34 per share 2/3/98 31,470 31 10,669
$.32 per share 2/13/98 40,000 40 12,760
$.30 per share 3/20/98 40,000 40 11,960
$.15 per share 4/1/98 71,333 71 10,629
$.35 per share 4/22/98 100,000 100 34,900
$.23 per share 4/30/98 44,584 45 10,655
$.24 per share 6/1/98 42,800 43 10,657
$.31 per share 6/5/98 25,000 25 7,725
$.23 per share 7/7/98 46,930 47 10,653
$.22 per share 8/12/98 49,537 50 10,650
$.25 per share 8/13/98 25,000 25 6,225
$.18 per share 8/17/98 50,000 50 9,050
$.25 per share 8/26/98 50,000 50 12,450
$.17 per share 9/3/98 62,210 62 10,638
$.25 per share 10/2/98 25,000 25 6,225
$.25 per share 10/29/98 25,000 25 6,225
$.11 per share 11/12/98 98,736 99 10,762
$.22 per share 11/12/98 100,000 100 21,900
$.19 per share 11/19/98 47,000 46 8,766
Sale of common stock (S-8) at:
$.25 per share 2/25/98 62,800 63 15,637
$.20 per share 4/13/98 100,000 100 20,350
$.32 per share 4/22/98 100,000 100 31,950
Sale of common stock (restricted)
at $.18 per share 6/1/98 215,000 215 38,485
Issuance of common stock
(Regulation S) for expenses
at $.31 per share 4/16/98 400,000 400 123,600
Net loss for year (705,651)
------------- -------------- --------------- --------------- ---------------
Balances at 12/31/98 16,129,700 $ 16,130 $ 1,606,773 $ $ (2,267,795)
============= ============== =============== =============== ===============
</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-5
<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
1998 1997 12/31/98
----------------- ----------------- -----------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $ (705,651) $ (1,094,365) $ (2,267,795)
Adjustments to reconcile net loss to cash provided
(used) by operating activities:
Net book value of terminated lease 0 0 154,604
Book value of disposed assets 40,138 0 40,138
Joint venture loss non-cash 152,515 0 152,515
Stock issued for expenses 280,023 909,377 1,189,540
Depreciation and amortization 25,613 31,049 133,640
Changes in assets and liabilities:
Inventory (130,177) (3,407) (155,139)
Prepaid expenses (3,686) 1,598 (12,845)
Accounts receivable (15,271) (5,000) (20,271)
Accounts payable 21,734 23,495 72,975
Accrued expenses 142,820 (92,244) 198,353
----------------- ----------------- -----------------
NET CASH (USED)
BY OPERATING ACTIVITIES (191,942) (229,497) (514,285)
INVESTING ACTIVITIES
Purchase of property and equipment (945) (43,418) (275,467)
Security deposits 0 (5,400) (11,952)
Investment in joint venture 0 (152,515) (152,515)
----------------- ----------------- -----------------
NET CASH (USED)
BY INVESTING ACTIVITIES (945) (201,333) (439,934)
FINANCING ACTIVITIES
Proceeds from sale of common stock 96,200 40,000 324,263
Loan proceeds 109,267 354,918 679,185
Loan repayments (5,844) (4,181) (33,508)
----------------- ----------------- -----------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 199,623 390,737 969,940
----------------- ----------------- -----------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 6,736 (40,093) 15,721
Cash and cash equivalents at beginning
of year 8,985 49,078 0
----------------- ----------------- -----------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 15,721 $ 8,985 $ 15,721
================= ================= =================
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 3,678 $ 847 $ 36,006
================= ================= =================
</TABLE>
During 1998, 597,900 shares of stock were issued to retire $109,100 of debt.
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Principals of Consolidation
The consolidated financial statements for 1998 and 1997
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. The Company also sells bingo equipment.
Revenue Recognition
Revenue is recognized when premises are rented and products
are sold and cash is collected. Accounts receivable are
recorded when equipment sales are made.
Dividend Policy
The Company has not yet adopted any policy regarding payment
of dividends.
Inventory
Inventory consists of equipment for resale and 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.
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues, and expenses during
the reporting period. Estimates also affect the disclosure of
contingent assets and liabilities at the date of the financial
statements. Actual results could differ from these estimates.
Such estimates of significant accounting sensitivity are
allowance for doubtful accounts and reserves for obsolete
inventory.
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-7
<PAGE>
NOTES TO CONSOLIDATE FINANCIAL STATEMENTS (continued)
December 31, 1998
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
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 and selling bingo
equipment.
NOTE 3: PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 are summarized as
follows:
<TABLE>
<CAPTION>
Net
Accumulated Book
Cost Depreciation Value
------------- ------------------ -------------
<S> <C> <C> <C>
Bingo facility equipment $ 69,828 $ 47,687 $ 22,141
Furniture and fixtures 5,062 3,757 1,305
Transportation equipment 38,953 33,525 5,428
Leasehold improvements and
acquisition costs 82,439 43,276 39,163
------------- ------------------ -------------
$ 196,282 $ 128,245 $ 68,037
============= ================== =============
</TABLE>
NOTE 4: ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1998 is from one customer.
The receivable is secured by equipment and was not collected
in 1999. Accordingly, the receivable is not shown as a current
asset.
NOTE 5: 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 began in 1998, but were
unprofitable. The joint venture was discontinued and the
Company recorded a loss of $152,515.
NOTE 6: BRIDGE LOANS
At December 31, 1998, the Company had bridge loans as follows:
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
----------
$ 259,000
==========
NOTE 7: ACCRUED EXPENSES AND LOANS - RELATED PARTIES
At December 31, 1998, $119,750 is due to the Company's
President for compensation and $107,269 is due to him for
advances to the Company. Also, at December 31, 1998, $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-8
<PAGE>
NOTES TO CONSOLIDATE FINANCIAL STATEMENTS (continued)
December 31, 1998
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTE 7: ACCRUED EXPENSES AND LOANS - RELATED PARTIES (continued)
The Company has also received short-term loans from
shareholders and other individuals, totaling $162,589. 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 8: LONG-TERM DEBT
Long-term debt at December 31, 1998 is detailed as follows:
<TABLE>
<CAPTION>
Interest Principal Balance
Rate Current Long-term
----------------- -----------------
<S> <C> <C> <C>
Ford Motor Company(1) 9.90% $ 3,672 $ 0
Lease settlement 9.00% 9,837 70,163
----------------- -----------------
$ 13,509 $ 70,163
================= =================
</TABLE>
(1)The loan is secured by a van.
Scheduled principal reductions of the debt are as follows:
1999...............................$ 13,509
2000............................... 14,189
2001............................... 55,974
-------------
$ 83,672
=============
NOTE 9: 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
1998, the Company sold 194,850 shares of S-8 stock and 215,000
shares of restricted stock, raising $96,200. The Company also
issued 1,135,050 shares of S-8 stock and 400,000 shares of
Regulation S stock for expenses of $280,023 and debt
retirement of $109,100.
During 1997 and 1998, the Company filed Form S-8 Registration
Statements to authorize the issuance of up to 4,150,000 shares
of common stock at prevailing market rates, in exchange for
services to be performed by employees and consultants. At
December 31, 1998, 2,774,700 shares had been issued.
NOTE 10: 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 11: INCOME TAXES
No federal income taxes were due for the years ended December
31, 1998 or 1997.
At December 31, 1998, the Company has a federal net operating
loss carryover of approximately $1,933,000. The federal loss
will expire December 31, 2010 through December 31, 2018.
F-9
<PAGE>
NOTES TO CONSOLIDATE FINANCIAL STATEMENTS (continued)
December 31, 1998
NORAM GAMING AND ENTERTAINMENT, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTE 11: INCOME TAXES (continued)
At December 31, 1998, the Company has a deferred tax asset in
the amount of $0. There is a potential asset based on future
reduction of income taxes using the net operating loss
carryforward. The amount has been reserved 100% due to the
Company's losses. Management believes that the Company will
realize sufficient income in the future to utilize the net
operating loss carryforward. However, since future income can
only be estimated, there is not sufficient basis for
recognition of any deferred tax asset at this time.
NOTE 12: COMMITMENTS AND CONTINGENCIES
The Company conducts its operations in leased facilities under
noncancellable operating leases expiring through 2000. The
minimum future rental commitments under operating leases are
as follows:
Year ending
December 31, Facilities
----------------- -------------
1999....................$ 219,984
2000.................... 48,244
Thereafter................. 0
-----------------
$ 268,228
=================
Rental expense for all operating leases was $230,622 and
$227,094 for the years ended December 31, 1998 and 1997
respectively.
NOTE 13: 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, 1998, the Company has a deficit in working
capital of $624,152, a loss from operations for 1998 of
$396,998 and an accumulated deficit of $2,151,795.
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 14: 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, 1998, the Company's loss was $504,061 and
the subsidiary's loss was $201,590 for a total net loss of
$705,651. 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. From inception, the Company's
net loss is $1,515,812 and the subsidiary's loss from
inception is $751,983 for a total accumulated deficit of
$2,267,795.
Assets of the Company at December 31, 1998 (excluding
intercompany items) are $0 and the subsidiary's assets are
$283,965 for total consolidated assets of $283,965.
Liabilities of the Company at December 31, 1997 are $499,216
and the subsidiary's liabilities (excluding intercompany
items) are $429,641 for total consolidated liabilities of
$928,857.
NOTE 15: WARRANTS
At December 31, 1998, there are 5,000 warrants outstanding to
purchase the Company's common stock at $.75 during the three
year period ending August 17, 2001. Under the Black-Sholes
Model, these warrants have a value of about $225.
Also outstanding are 50,000 warrants to purchase the Company's
common stock at $.11 per share during the three year period
ending November 10, 2001. Under the Black-Sholes Model, these
warrants have a value of about $3,350.
NOTE 16: SUBSEQUENT EVENTS
In 1999, the Company agreed to an $80,000 settlement to
terminate a lease. The Company entered into the lease in late
1997 with the intent of operating a bingo hall. Local
authorities refused to allow the Company to operate such a
facility and the Company was unable to terminate its lease
until the settlement was reached.
Also, in April 1999, the Company sold one operation, closed
the other two locations, and its subsidiary ceased operations.
F-10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Noram Gaming and Entertainment, Inc. and Subsidiary December
31, 1998 financial statements and is qualified in its entirety by
reference to such financial statements
</LEGEND>
<CIK> 0000894555
<NAME> Noram Gaming and Entertainment, Inc.
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1.00
<CASH> 15,721
<SECURITIES> 0
<RECEIVABLES> 5,000
<ALLOWANCES> 0
<INVENTORY> 155,139
<CURRENT-ASSETS> 188,705
<PP&E> 196,282
<DEPRECIATION> 128,245
<TOTAL-ASSETS> 283,965
<CURRENT-LIABILITIES> 858,694
<BONDS> 0
0
0
<COMMON> 16,130
<OTHER-SE> (661,022)
<TOTAL-LIABILITY-AND-EQUITY> 283,965
<SALES> 737,420
<TOTAL-REVENUES> 737,420
<CGS> 202,440
<TOTAL-COSTS> 202,440
<OTHER-EXPENSES> 967,978
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,446
<INCOME-PRETAX> (705,651)
<INCOME-TAX> 0
<INCOME-CONTINUING> (705,651)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (705,651)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
</TABLE>
