As filed with the Securities and Exchange Commission on June 1,
1996
Registration No. 0-20217
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INITIAL PUBLIC OFFERING
UNDER
FORM SB-2
CONTINENTAL WELLNESS CASINOS, INC.
(Name of small business issuer in its charter)
1820 E. Garry Avenue Suite 109
Santa Ana, California 92705
(714) 477-0370
__________________________________________________________________
(Address, and telephone number, of principal
executive offices and principal place of business)
Fred Cruz, M.D.
President and Chief Executive
1820 E. Garry Avenue Suite 109
Santa Ana, California 92705
________________________________________________________________________
(Name, address, and telephone number of agent for service)
Copy to:
Lewis Akmakjian, Manager
Toluca Pacific Securities Corporation
124 E. Olive Avenue
Burbank, California 91502
(213) 849-5811
________________________________________________________________________
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of this registration
statement.
If the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to rule 415 under the Securities Act of
1933, please check the following box : {X}
________________________________________________________________________
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount to Offering Price Aggregate Amount of
Securities to be Registered Be Registered Per Security(1) Offering price(1) Registration Fee
Common Stock Purchase 8,000,000 (2) (3) (4)
Warrants (2) . . . . .
Class "A"
Common Stock, $.003 par 8,000,000 $5.00 $2,500.00(3)
value(3) . . .
Class "A"
Total . . . . . . . . . . $40,000,000 $2,500.00(4)
<FN>
(1)Estimated solely for the purpose of calculating the registration fee.
(2)Represents 8,000,000 Common Stock Purchase Warrants (the "Warrants" to
be distributed pro-rata to the shareholders of record of the Company on the
effective date of this Registration Statement, at the rate of one Warrant
for each four shares of Common Stock held.
(3)Represents 8,000,000 shares of Common Stock, par value of $.003 per
share, issuable upon exercise of the Warrants. Also registered hereunder are
an indeterminate number of shares of Common Stock that may become issuable
pursuant to antidilution adjustments.
(4)Paid with original filing.
</FN>
____________________________
____________________________
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registration
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION, JUNE 1, 1996
Prospectus
CONTINENTAL WELLNESS CASINOS, INC.
8,000,000 Shares
Continental Wellness Casinos, Inc., a Colorado corporation (the
"Company") is hereby offering for sale 8,000,000 shares of its common stock,
par value $.003 per share (the "Common Stock"), issuable upon exercise of
8,000,000 Common Stock Purchase Warrants ("Warrants") being distributed to the
shareholders of the Company at the rate of one warrant for each four shares
owned of record on the date of this Prospectus. Each Warrant entitles the
holder to receive one share of Common Stock at a price of $5.00 per share of
the Class "A" Common Shares, commencing on the date of this Prospectus, until
December 31, 1996.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION.
THE COMPANY HAS ENGAGED IN NO OPERATIONS TO DATE. AN INVESTMENT IN THE
SECURITIES OF THE COMPANY IS HIGH SPECULATIVE AND SHOULD BE MADE ONLY BY
THOSE PERSONS WHO CAN AFFORD A LOSS OF THEIR ENTIRE INVESTMENT.
See "Risk Factors" and "Dilution."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriting Discounts Proceeds
Price to Public And Commissions(1) To Company(2)
Per Share $ 5.00 $ -- $ 5.00
Total $ 40,000,000.00 $ -- $40,000,000.00
<FN>
(1)The Shares are being offered on a straight best efforts, no minimum
basis by the Company upon exercise of the Warrant. No person has agreed to
exercise any Warrants or to purchase or take down any of the Shares. There
can be no assurance that any or all of the Warrants will be exercised. The
Company has the right to reduce the exercise price of the Warrants at any
time. The Company may extend the Warrant exercise period until one year from
the date of this Prospectus, and may vary the terms of the Warrants in any
extension period.
(2)Before deducting approximately $40,000 for legal, accounting and other
expenses of the offering.
</FN>
The date of this Prospectus is __________________, 1996
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities
and Exchange Commission (the "Commission"). The Company has also filed a
Registration Statement on Form SB-2 with the Commission with respect to the
offering made by this Prospectus. This Prospectus does not include all of the
information included in the Registration Statement. Copies of the
Registration Statement, as well as such reports and proxy statements and
other information filed by the Company with the Commission, can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its
Regional Offices located at 7 World Trade Center, New York 10048, and at
Citibank Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission, Washington, D.C. 20549,
during regular business hours.
Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and in each instance
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in its
entirety by such reference. The Company will provide, without charge upon
oral or written request of any person, a copy of any information incorporated
by reference herein. Such request should be directed to the Company
at 25872 Evergreen Road, Laguna Hills, California 92653-5402, telephone
(714) 951-6314.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements, including
notes thereto appearing elsewhere in this Prospectus. The
information in this Prospectus gives effect to the Company
sale of securities but does not give effect to the exercise
of any Warrants. Each prospective investor is urged to read
this Prospectus in its entirety.
The Company
The Company is engaged in the mining development industry. Since
October 22, 1974, the Company has owned and operated thirty-nine (39) mines
and one (1) mill site at Quincy, Plumas County, California and is engaged in
the exploration of said mines for the production of Precious metals like
gold, silver and Platinum Group. In addition the company will be engaged in
the hotel and casino industry at Las Vegas, Nevada by acquiring The Maxim
Hotel and Casino Las Vegas, Nevada the Company intends to convert all the
hotel rooms into a Life Extension Membership Club or a Wellness Resort for
the purpose of extending the life of our members by a program of Preventive
Medicine which includes Genes Testing, Exercise and Nutrition which will
extend the life of our members up to one hundred (100) years, health
permitting.
The Company believes that its competitive advantage lies in its ability
to provide relatively low cost Preventive Medicine with respect to the
ability of our members to receive a comprehensive Life Extension Program
with a free vacation for one (1) week at Las Vegas Famous Resort and the
opportunity of full reimbursement for the cost of the program from their
insurance carrier.
The Company will operate the Casino at the Maxim Hotel and Casino upon
receiving full approval from Nevada Gaming Control and the Casino will
produce great revenues for the Company. The Casino industry is one of the
most profitable industries in the national market.
The executive offices of the Company are located at 25872 Evergreen
Road, Laguna Hills, California 92653-5402, telephone (714) 951-6314.
The Offering
Securities Offered . . . 8,000,000 shares of Common Stock are offered upon
exercise of 8,000,000 Common Stock Purchase Warrants ("Warrants").
The Warrants will be distributed pro-rata to all shareholders of
record as of the date of this Prospectus, on the basis of one Warrant for each
four shares held as of such date. See "Description of Securities" and
"Plan of Distribution."
Common Stock Outstanding Before Offering: . .90,028.877
Common Stock Outstanding After Offering:. . 106,028,877
Use of Proceeds. . . . . The net proceeds of this offering, estimated to be
$35,710,000 if all the Warrants are exercised, will be used to retire working
capital indebtedness, pay marketing costs, and for working capital purposes.
See "Use of Proceeds."
Risk Factors . . . . . . Investment in the securities offered hereby involves
a high degree of risk and immediate substantial dilution. See "Risk Factors."
Electronic Bulletin Board symbol . . . .CWCI (applied for)
RISK FACTORS
The securities offered hereby are speculative, and prospective investors
should be aware that purchase of these securities involves a high degree of
risk. Accordingly, the securities should be purchased only by persons who can
afford to lose their entire investment. The following special risks, among
others, should be considered:
1. Limited History of Business Operations. The Company has limited
operating history, having commenced operations in 10-22-74. There can be no
assurance that the Company will continue to be profitable in the future.
Because of its limited operating history, the Company's use of proceeds from
this offering could vary from the estimates given under the caption "Use of
Proceeds." See "Use of Proceeds."
2. Sufficiency of Funds. The business of casinos, hotel and life
extension can require significant amounts of capital. Management believes
that the proceeds of this offering will be sufficient to satisfy its
anticipated cash requirements for at least the 12 months following the
completion of this offering; however, there can be no assurance that any or
all of the Warrants will be exercised and in such event the Company may need
further financing for purchase of equipment and for working capital purposes
and to continue growth of its operations, of which there can be no assurance,
and there is no assurance that the Company will be able to obtain
additional financing on satisfactory terms. No arrangements have been made
at this time to raise capital other than through this offering and the Company
has not engaged in discussions with any institutional or private lenders
for such financing. See "Use of Proceeds" and "Business." Any such
financing may involve the issuance of additional shares of Common Stock
without the prior notification or approval of shareholders, including the
purchasers in this offering.
3. Competition. Competition is intense in the hotel and casino
industries. The Company competes not only with similar enterprises in the
area, but also with similar companies all over the world. Many of the
Company's competitors have substantially greater financial and managerial
resources than the Company. See "Business - Competition."
4. Dependence on Key Personnel. The Company is dependent upon members
of management with respect to administration, production and marketing. The
loss of the services of any of these individuals would materially and
adversely affect the proposed activities of the Company. The Company has no
employment contract with any member of management and has not obtained and
does not intend to obtain key man life insurance on the life of any
member of management. See "Management."
5. Control by Insiders. At the completion of this offering, directors
and officers of the Company and other principal stockholders and their
families will own 61% of the shares of the Company's outstanding Common
Stock, or approximately 61,000,000 of the outstanding voting stock, which
will likely give them a controlling interest in the Company's Common Stock and
the ability to elect the entire Board of Directors. See "Principal
Stockholders."
6. Investment by Current Stockholders. The Company's current
stockholders purchased their 90,028,877 shares of Common Stock for aggregate
consideration of cash and services or $.25 per share. These stockholders do
not intend to contribute additional amounts of ash or other property to the
Company in the future.
7. Limited Public Market. The market for the Company's Common Stock
has been limited and sporadic, and there can be no assurance that a trading
market will develop following this offering, or if such a trading market
develops, that it will be sustained. No person has agreed to make a market
in the Common Stock, and market making activities could be discontinued at
any time.
8. Dilution. Purchasers of the Shares offered by this Prospectus will
experience immediate and substantial dilution in that the net tangible book
value of the Common Stock outstanding after the offering will be substantially
less than the per share public offering price of the Shares offered hereby.
See "Dilution."
9. Shares Eligible for Future Sale. Upon sale of the 8,000,000 Shares
offered hereby, the Company will have outstanding 90,028,877 shares of Common
Stock, including 72,661,029 shares of Common Stock which are "restricted
securities," as defined under Rule 144 promulgated under the Securities Act
of 1933. Such shares will be subject to resale restrictions and will be
ineligible for sale in the public market until June 1955, after which sales
may be made pursuant to Rule 144 under the Securities Act. Sales of
substantial amounts of the Common Stock of the Company in the public market
could adversely affect prevailing market prices. See "Description of
Securities--Shares Eligible for Future Sale."
10. Foreign Operations. The Company does not conduct any foreign
operations or business outside of the United States.
11. Currency Fluctuation/Exchange Rates. The Company had no currency
fluctuation or foreign exchange rate to report.
12. Current Registration Statement and Blue Sky Qualification Required
for Exercise of Warrants. In order for a holder of a Warrant to exercise it,
there must be a current registration statement on file with the Securities
and Exchange Commission and various state securities regulatory authorities
to continue registration of the Shares underlying the Warrant. The Company
has undertaken to keep (and intends to keep) the registration
statement filed in connection with this offering effective with respect to
the Warrants with the Securities and Exchange Commission and state securities
authorities for so long as the Warrants remain exercisable. However,
maintenance of an effective registration statement will subject the Company to
substantial continuing expenses for legal and accounting fees and there can
be no assurance that the Company will be able to maintain a current
registration statement until December 31, 1996 when the Warrants expire.
Moreover, Blue Sky Qualification of the Warrants and the underlying Shares will
be undertaken only in those states in which the Company's
shareholders reside as of the date of this prospectus. If the Warrants are
acquired in over the counter purchases or otherwise by residents of
jurisdictions where the Shares underlying the Warrants were not registered or
otherwise qualified for sale, such persons would not be able to exercise
their Warrants unless the Shares issuable thereunder were registered in the
applicable jurisdiction or an exemption from such registration were
available, of which there can be no assurance. The Company will use its best
efforts to register the Shares underlying the Warrants in all states where
Warrant holders reside, unless the cost of such registration, in relation to
the number of Warrants potentially exercisable, is clearly disproportionate.
In addition, due to the Company's limited history or operations, it is possible
that one or more states where Warrant holders reside will not permit
demonstrated or other criteria complied with. The value of the Warrants may
be affected adversely by the Company's inability to maintain an effective
registration statement with respect to the underlying Shares or by the
non-qualification of the underlying Shares in the state of such holder's, or a
potential purchaser's residence. Holders of Warrants may contact the
Company in order to ascertain the states in which the Shares underlying the
Warrants will be qualified for sale.
13. Arbitrary Offering Price. The exercise price and other terms of
the Warrants have been determined arbitrarily by the Company and do not bear
any relationship to the assets, results of operations, or book value of the
Company, or any other established criteria of value. Purchasers of
the Shares underlying the Warrants will be exposed to a substantial risk of a
decline in the market price of the Common Stock after this offering, if a
market develops. See "Plan of Distribution." The Company is applying for
listing on NASDAQ National Market and the Pacific Stock Exchange.
14. Risks of Low priced Stocks. The Common Stock is not eligible for
quotation on the Automated Quotation System of the National Association of
Securities Dealers, Inc. ("NASDAQ") Trading, if any, in the Common Stock will
be conducted in the over-the-counter market in the so-called "pink
sheets," or the NASD's "Electronic Bulletin Board." Consequently, an investor
may find it difficult to dispose of, or to obtain accurate quotations as to
the price of, the Company's securities.
In the absence of a security being quoted on NASDAQ, or the
Company having $2,000,000 in net tangible assets, trading in the Common
Stock is covered by Rule 15c2-6 promulgated under the Securities Exchange
Act of 1934 for non-NASDAQ and non-exchange listed securities. Under such
rule, broker/dealers who recommend such securities to persons other than
established customers and accredited investors (generally institutions with
assets in excess of $5,000,000 or individuals with an et worth in excess of
$1,000,000 or an annul income exceeding $200,000 or $300,000
jointly with their spouse) must make a special written suitability
determination for the purchaser and receive the purchaser's written agreement
to a transaction prior to sale. Securities are also exempt from this rule
if the market price is at least $5.00 per share, or for warrants, if the
warrants have an exercise price of at least $5.00 per share.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure related to the market for penny stocks and for trades
in any stock defined as a penny stock. The Commission has adopted
regulations under such Act which would define a penny stock to be
any NASDAQ or non-NASDAQ equity security that has a market price or exercise
price of less than $5.00 per share and allow for the enforcement against
violators of the proposed rules. In addition, unless except, the rules
require the delivery, prior to any transaction involving a penny stock, of a
disclosure schedule prepared by the Commission explaining important concepts
involving the penny stock market, the nature of such market, terms used in such
market, the broker/dealer's duties to the customer, a toll-free telephone
number for inquiries about the broker/dealer's disciplinary history, and the
customer's rights and remedies in case of fraud or abuse in the sale.
Disclosure must also be made about commissions payable to both the broker/
dealer and the registered representative, current quotations for the securities,
and if the broker/dealer is the sole market-maker, the broker/dealer must
disclose this fact and its control over the market. Finally, monthly
statements must be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny
stocks.
While many NASDAQ stocks are covered by the definition of
penny stock, transactions in NASDAQ stock are exempt from all but the sole
market-maker provision for (I) issuers who have $2,000,000 in tangible assets
($5,000,000 if the issuer has not been in continuous operation for three
years), (ii) transactions in which the customer is an institutional accredited
investor and (iii) transactions that are not recommended by the
broker/dealer. In addition, transactions in a NASDAQ security directly with the
NASDAQ market-maker for such securities, are subject only to the sole
market-maker disclosure, and the disclosure with regard to commissions to be
paid to the broker/dealer and the registered representatives.
Finally, all NASDAQ securities are exempt if NASDAQ raises
its requirements for continued listing so that any issuer with less
than $2,000,000 in net tangible assets or stockholder's equity would
be subject to delisting. These criteria are more stringent than the recent
increase in NASDAQ's maintenance requirements.
For as long as Company's securities are subject to the rules on penny
stocks, the market liquidity for the Company's securities will be severely
affected by limiting the ability of broker/dealers to sell the Company's
securities and the ability of purchasers in this offering to sell their
securities in the secondary market.
15. No Cash Dividends. The holders of Common Stock are entitled to
receive dividends when, as and if declared by the Board of Directors out of
funds legally available therefor. To date, the Company has not paid any cash
dividends. The Board does not intend to declare any cash dividends in the
foreseeable future, but instead intends to retain all earnings, if any, for
use in the Company's business operations. Since the Company may be required
to obtain additional financing, it is likely that there will be
restrictions on the Company's ability to declare any dividends. See "Market
Price of Common Stock" and "Description of Securities."
DILUTION
The difference between the public offering price per share
of Common Stock and the pro form net tangible book value per share of
Common Stock after this offering constitutes the dilution to investors in this
offering. Net tangible book value per share is determined by dividing the
net tangible book value of the Company (total tangible assets
less total liabilities) by the number of outstanding shares of Common Stock.
At October 31, 1995, the Company's Common Stock had a net
tangible book value of $30,421,000 or $0.78 per share. After giving effect to
the receipt of the net proceeds from the sale of all Shares offered hereby,
at a public offering price of $5.00 per Share, the pro forma net tangible
book value of the Company at December 31, 1996 would have been $70,421,000 or
$1.84 per share, representing an immediate increase in net tangible book
value of $96 per share to the present stockholders, and immediate
dilution of $1.08 per share to public investors. The following table
illustrates dilution to public investors on a per share basis, assuming all
Warrants are exercised. To the extent less than all Warrants are exercised,
net proceeds to the Company will be less and dilution to investors in this
offering will be proportionately greater.
Public offering price per share . . . . . . . . . . . . $5.00
Net tangible book value per share before offering. $0.78
Increase per share attributable to public investors . . $0.76
Pro forma net tangible book value per share after offering. 1.84
Dilution per share to public investors. . . . $1.08
The following table sets forth with respect to the present stockholders
and public investors, a comparison of the number of shares of Common Stock
owned by the present stockholders, the number of shares of Common Stock to be
purchased from the Company by the purchasers of the 8,000,000 Shares offered
hereby and the respective aggregate consideration paid to the Company and the
average price per share.
Percent
Percent Total of Total Average
Shares of Total Consi- Consi- Price
Stockholders Purchased Shares deration deration Per Share
Present Stockholders 8,000,000 100% $40,000,000 100% $5.00
Public Investors 8,000,000 100% 40,000,000 100% $5.00
Total 16,000,000 100% $80,000,000 100% $5.00
MARKET PRICE OF COMMON STOCK
The Common Stock has traded on the "pink sheets" maintained by the
National Quotation Bureau and on the NASD's Electronic Bulletin Board since
April 5, 1990. The following table gives the high and low bid prices since
April 5, 1990, as reported by the market makers of the Common Stock. These
prices are without retail mark up of markdowns and commissions, and may not
reflect actual transactions. The Company does not believe that trading of
its common stock currently is reflective of an established trading market.
Period Low Bid High Bid
1990
Second Quarter
(Commencing) $.50 $.75
Third Quarter .50 .75
Fourth Quarter .50 .75
1991
First Quarter -- --
Second Quarter -- --
Third Quarter -- --
Fourth Quarter -- --
1992
First Quarter -- --
Second Quarter -- --
Third Quarter -- --
Fourth Quarter -- --
1993
First Quarter -- --
Second Quarter -- --
The Common Stock does not currently trade. As of January 1, 1994,
there were approximately 115 holders of Company common stock.
The Company has not paid any dividends on its common stock. The
Company currently intends to retain any earnings for use in its business, and
therefore does not anticipate paying cash dividends in the foreseeable future.
USE OF PROCEEDS
If all 8,000,000 Warrants are exercised, of which there can be no
assurance, the net proceeds to the Company will be approximately $7,200,000
after deducting offering expenses of approximately $800,000. The Company
intends to utilize the net proceeds during the 12-month period following the
offering as follows. If less than all of the Warrants are exercised, the
proceeds of this offering will be sed first to purchase equipment, and for
consolidation of assembly operations, and then pro-rata for the other
purposes set forth herein.
Equipment $ 2,488,700
Accounts Payable 30,226,000
Working Capital 3,081,900
Consolidation of Assembly Operations 1,080,000
Accrued Salaries 38,600
Additional Sales Personnel 1,035,000
Accrued Indebtedness 9,500
Total $37,960,000
Equipment includes the following:
Auto Insertion PCR Gene Testing $ 150,000
Chemical Analyzer 25,000
Semi Auto Medic Equipment/Used (3) 30,000
Medical Supporting Equipment 1,040,000
Printing Equipment (1) 100,000
Preparation Equipment (1) 20,000
Marketing Equipment 20,000
Medical Publications 7,500
Medical tech Manuals 5,000
Laboratory Miscellaneous Equipment 15,000
Refrigeration Equipment 8,000
Total Medical Equipment $ 1,420,500
Computer PC 486DX 33Mhz
4MB Ram 200Mb Hard Disk (8) $ 302,000
Printers (4) 112,700
Laser Printers (2) 211,300
Peripherals 203,000
Software 200,000
Total Computer Equipment $ 1,029,100
Other Office Equipment 39,100
Total Equipment $ 2,488,700
The purchase of the above equipment will enable the Company to bid on
additional larger Life Extension projects.
Accounts Payable includes the purchase of Maxim Hotel and Casino.
Consolidation of Assembly Operations represents the cost of leasehold
improvements and moving expenses to consolidate the contract medical
operations for Life Extension Program at the Maxim Hotel and Casino, Las
Vegas, Nevada.
Accrued Salaries includes amounts due to indirect and managerial
personnel.
Additional Sales Personnel includes the cost of advertisement, travel
and training of personnel for the states of California, Oregon,
Washington, Nevada, Utah, Colorado, Arizona, New Mexico, and Texas.
Accrued indebtedness includes amounts due to lawyers and accountants.
The Company does not intend to use the proceeds of this offering to pay down
its note.
Pending use of all the proceeds, the Company will make temporary
investments of the proceeds, including but not limited to interest bearing
savings accounts, certificates of deposit, money market certificates and
other liquid assets.
The foregoing list of expenditures is an estimate and will vary due to
changing circumstances, such as variations in additional contracts which may
be acquired. Any change in the application of proceeds will occur solely in
the discretion of the Company's Board of Directors.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Summary of significant Accounting Policies Nature of the Business
Continental Wellness Casinos, Inc., a Colorado corporation was incorporated
October 29, 1974. The company is engaged in the discovery and development of
previous metals mining properties located in Quincy, Plumas County,
California which consists of 750 acres of land where 39 unpatented mines
claims are located. All assessment work has been done at the mines and all
the reports had been filed with the Bureau of Land Management, Sacramento,
California and the County of Plumas in accordance with the mining rules and
regulations. The company has a permit to operate on small scale, the mines
from the United Sates Forestry Department, Quincy, California. The company is
intent on going in a big mining venture to recover the gold and silver in the
proven reserves as soon as the price of gold increases in value.
The Company is in the process of getting their Live Longer Center, a
Longevity Members Association which the purpose is to make people live longer
by using preventive Medicine with the genes testing for discovery of
predominant illness in the different subjects and repair said genes by
genetic engineering followed with a program of exercise and nutrition.
The member signs for a period of ten years and receives one week of care at
the center. The cost for this program is $1,000.00 per year per member and
the fee is refundable by the member group insurance and it is also tax
deductible making it a good way to slow down the cost of medical treatments
that is out of control. For the starting of this program the company is using
the real estate that was acquired.
The Company has no other proposed sources of credit or cash other than
from its operations and as proposed by this offering. In the event less than
all of the Warrants are exercised, the Company will be required to seek
additional debt or equity financing. There can be no assurance that
such financing can be obtained. The Company may also sell its New Jersey
property to obtain cash for operations.
Income taxes are provided on income for the period in which items of
income and expense are earned or incurred regardless of when they are
recorded for income tax purposes. In December 1994 the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards Number
109, "Accounting for Income Taxes" (FASB 109). Adoption of FASB 109 is
required for fiscal years beginning after December 15, 1994. The Company has
adopted FASB 109 for its fiscal year ended December 31, 1995. The
adoption of FASB 109 is not expected to have an adverse impact on the
Company's financial position.
BUSINESS
The Basic Plan
A. Basic Strategy - Wellness Resort and Casino, Las Vegas, Nevada is a
wholly owned subsidiary of Continental Wellness Casinos, Inc., a publicly
traded company (CWCI) which operates a Life Extension Club where the members
are trained in how to live a longer life and a healthy life free of any
diseases.
B. Overview of the Wellness Resort or Life Extension Club in the United
States. The Life Extension Program in the United States are very limited and
people like to live longer and the market is there for the first company that
starts this project to benefit from the need of the program because of the
large cost of medical cases that amount to about 908 Billion and continues to
increase with no end in site.
C. Characteristic of the Life Extension - The Life Extension Program that we
are engaged in consists of Preventive Medicine by using the latest medical
approved techniques in the field of Genes Technology and by testing
the genes of all our members with the PCR machine the detection of illness
producing genes can be repaired and many of the illnesses associated with
that gene can be prevented. By the use of proper supplements needed by the
human body we can produce a better human specimen that is free of any type of
disease and with the proper nutrition to accompany these supplements the body
can build strong to combat all the pollutants and interferences to body type
we can build a strong and healthy body capable to live to 100 years
or more because the human body was built to live to 120 years so any
death before that is considered premature death.
D. Recommendation - The Wellness Resort will establish a membership program
where the members sign a contract for 10 years which is refundable by their
group insurance plan and tax deductible in full.
The Life Extension Program and Membership Club
A. Source of Revenue:
1. The signing of members from our list of available members that
desire to join the Life Extension Club at the rate of $1,000 per year and
payable 10 years in advance.
2. The signing of members through our marketing company in New York
that had promised 25,000 leaders per month.
3. The signing of members from recommendations by other members will produce
many leads because everybody desires to visit Las Vegas, Nevada, the
entertainment capital of the world and receive a one week vacation free
because their group insurance will pay for their membership fees.
B. Costs - The total cost for the Life Extension Club is $1,000 for one unit
which consists of staying in the Wellness Resort Hotel and Casino for one
week and receiving all the training of how to live longer and healthier but
they must sign for ten (10) years and pay $10,000 for the 10 years. However,
this program is fully refundable by their group insurance medical policy and
is tax deductible.
C. Net Revenue - Considering that the Maxim Hotel and Casino that we are
using for our program has a combined total of 1,000 rooms, 2,000 club members
per week with a total of 104,000 week units at $1,000 per week unit will
bring a net revenue of $104,000,000.00 per year. However, the members are
paying 10 years in advance for a grand total of $1.04 billion of total
revenue that we will receive.
D. Risk - There is no risk in this membership club because the members
monies will be fully guaranteed and protected by a policy of Lloyds of London
Insurance against all risk.
E. Products - We will offer a great amount of products and other services to
our members which will produce additional revenues to our company.
F. Pro Forma Financials - The following pages contain the pro forma
financials which are predicated results of start-up companies. The personnel
expenses are forecasted to increase as the volume builds but in stair step
fashion. Volumes forecasted are predicated on values actually received by the
Wellness Resort.
WELLNESS RESORT HOTEL AND CASINO, LAS VEGAS, NEVADA
PRO FORMA PROFIT AND LOSS STATEMENT
YEAR ONE - ENDING DECEMBER 31, 1995
JAN FEB MAR APR MAY JUN JUL
REVENUE (In 000)
Member's Fee 52,000 52,000 52,000 52,000 52,000 52,000 52,000
Cost
Personnel
Doctors 200 200 200 200 200 200 200
Processing 25 25 25 25 25 25 25
Equipment 5,000 0 0 0 0 0 0
Hotel Cost 14,000 0 0 0 0 0 0
Salaries Others 300 300 300 300 300 300 300
Total 19,525 525 525 525 525 525 525
Overhead
Advertising 25 25 25 25 25 25 25
Insurance 30 30 30 30 30 30 30
Total Overhead 55 55 55 55 55 55 55
Net Profit-Loss 32,420 51,420 51,420 51,420 51,420 51,420 51,420
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial Statement and supplementary data of Continental Wellness
Casinos Inc. Are located in adjacent pages and are listed and included under
items, Exhibits are incorporated herein by reference.
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There are no disagreements with accountants on accounting and financial
disclosure.
MANAGEMENT
The members of the Board of Directors of the Company serve until the
next annual meeting of stockholders, or until their successors have been
elected. The officers serve at the pleasure of the Board of Directors.
Information as to the directors and executive officers of the Company is as
follows:
Name Age Title
Fred Cruz, M.D. 73 President, Chief Executive Officer and Director
Mel Cruz 44 Vice President of Finance, Chief Financial Officer and
Director
Kari L. Cruz 64 Vice President, Secretary and Director
Identified herein are all directors and executive officers of the
Company. The information set forth as to each Director and Executive Officer
has been furnished by such person.
Fred Cruz, M.D., 73, is and has been since October 1987, a director,
chairman of the board, and president of the company. Dr. Cruz held two
doctorate degrees, Doctor of Podiatric Medicine and Doctor of Medicine. Dr.
Cruz had operated many medical clinics in the State of California and
at present is retired from his profession but he has engaged in many business
ventures and has been working with precious metals for the last 30 years.
Robert A. Govin, 68, is and has been a director, officer of the Company
since August 22, 1992. Govin has been in real estate as a broker and
investor for more than 30 years and at the present is retired.
Ronald P. Girskis, 33, is and has been a director and officer of the
Company since August 22, 1992. Girskis is an accountant and works for a
restaurant chain in the Los Angeles area.
Rick J. Eriksen, 38, is and has been a director and officer of the
Company since August 22, 1992. Eriksen is a real estate agent working for
the largest timeshare developer and one of the biggest hotel chains in the
world.
Kari L. Cruz, 63, is and has been a director and officer of the Company
since August 22, 1992. Cruz held a degree in business from a college in
Norway and has been employed by various concerns in accounting, and business
related occupations.
Mel Cruz, 44, is and has been a director and officer of the Company
since December 1, 1992. Cruz has been working for the United States Navy
Shipyard at Mare Island, California as an estimator on the ship repairs
business for the last 24 years.
Ronald F. Cruz, 46, is and has been a director and officer of the
Company since March 15, 1993. Cruz has been working for the United States
Navy Shipyard, Mare Island, California as a civil service employee in the
capacity of estimator for ship repairs for the last 25 years.
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid or accrued
including bonuses paid or accrued, to the following persons during 1992, for
services rendered in all capacities to the Company.
Number of Individual Capacities in which Cash
or Number in Group served during 1995 Compensation
None None None
The Company pays no compensation to directors for services
as director.
PRINCIPAL STOCKHOLDERS
Grand American Bank Trust owns approximately 64% of the Company's Class
"A" common stock as of October 31, 1995.
Name and Address Number of Percent Before Percent After
of Beneficial Owner of Shares Offering Offering
Grand American Bank Trust 63,008,512(1) 70% 64%
25872 Evergreen Road Class "A"
Laguna Hills, CA 92653
Frank Coberly 10,806,960(1) 12% 11%
950 N. Cascade Dr. Apt. 201 Class "A"
Woodburn, OR 97071-3152
V.G. Kelly & D. Kelly Trust 3,130,933(2) 3.5% 3.2%
936 West 21st Street Class "A"
Santa Ana, CA 92706
Joseph Witzman 3,266,960(3) 3.6% 3.3%
5946 Soledad Mountain Road Class "A"
La Jolla, CA 92037
Forbes Family Trust 2,000,000(2) 2.2% 2%
All Officers and Directors as a group 0 0% 0%
<FN>
(1) Purchase for cash or equivalent.
(2) Purchase by surrendering debt of the company.
(3) Purchase with cash and part given as gift.
</FN>
CERTAIN TRANSACTIONS
The Company is authorized to issue 50,000,000 shares of no par value
Class "B" shares. The Company gave authority to its Board of Directors to
issue such Class "B" stock in one or more series, and to fix the number of
shares in each series, and all designations, relative rights, preferences
and limitations of the stock issued in each series. As of April 13, 1994,
the Board of Directors have exercised the authority granted.
The Company issued to Joseph Witzman 3,266,960 Class "B" common shares
of no par value in exchange the cancellation of some of the Company debt and
said Class "B" Common Shares were restricted shares that bear a ledger and
are subject to the provisions of Securities and Exchange Commission Rule 144.
The holder of said securities has promised to abide by the restrictions of
Securities and Exchange Commission Rule 144.
The Company also issued to Joseph Witzman 3,266,960 Class "A" common
shares of $.003 par value in exchange of the cancellation of the balance of
the Company debt and said Class "A" common shares were restricted shares that
bear a ledger and are subject to the provisions of Securities and Exchange
Commission Rule 144. The holder of Class "A" common shares has
promised to abide by the restrictions invoked by the Securities
and Exchange Commission rule 144.
PLAN OF DISTRIBUTION
The Shares of Common Stock are being offered on a "straight best
efforts, no minimum basis" upon exercise of 8,000,000 Common
Stock Purchase Warrants (the "Warrants") at a price of $5.00 per share. No
person has agreed to take down or purchase any of the Shares and there can
be no assurance that any Warrants will be exercised.
A total of 8,000,000 Warrants are being distributed to the
Company's shareholders of record as of the effective date of this
Prospectus, at the rate of one Warrant for each four shares held of record.
The development of a trading market following the completion of this
offering will be dependent on broker-dealers in initiating quotations in
inter-dealer quotation mediums, in maintaining a trading position, and in
otherwise engaging in a market making activity in the Company's
Common Stock. No broker-dealer has agreed to engage in such activities, and
there is no assurance that any broad trading market for the Company's Common
Stock willdevelop following the offering.
DESCRIPTION OF SECURITIES
Common Stock
The Company's Articles of Incorporation authorizes the issuance of
500,000,000 shares of common stock, $.003 par value per share, of which
90,038,877 shares were outstanding as of June 1, 1996. Holders of shares of
common stock are entitled to one vote for each share on all matters to be
voted on by the stockholders. Holders of common stock have no cumulative
voting rights. Holders of shares of common stock are entitled to share
ratably in dividends, if any, as may be declared from time to time by the
Board of Directors in its discretion, from funds legally available therefor.
In the event of a liquidation, dissolution or winding up of the Company, the
holders of shares of common stock are entitled to share pro rata all assets
remaining after payment in full of all liabilities. Holders of common stock
have no preemptive rights to purchase the Company's common stock.
There are no conversion rights or redemption or sinking fund provisions
with respect to the common stock. All of the outstanding shares of common stock
are, and the shares offered by this Prospectus will be, fully paid and
non-assessable.
Warrants
The Common Stock Purchase Warrants (the "Warrants") are to be issued in
fully registered form. Warrants will be distributed to each shareholder of
record on the effective date of this Prospectus at the rate of one Warrant
for each four shares owned. The following discussion of the Warrants
does not purport to be complete and is qualified in its entirety by reference
to the form of Warrant, a copy of which is filed as an exhibit to the
Registration Statement. See "Additional Information."
The holder of each Warrant is entitled to purchase one share of Common
Stock at an exercise price of $5.00, at any time until December 31, 1996
provided that at such time a current prospectus relating to the Common Stock
is in effect and the Common Stock is qualified for sale or exempt from
qualifications under applicable state securities laws. The Warrants are
immediately transferrable upon issuance. The Company may in its sole
discretion reduce the exercise price or extend the exercise period for the
Warrants.
The Warrants may be exercised upon surrender of the certificate therefor
on or prior to the expiration date at the offices of the Company with the
form of "Election to Purchase" on the reverse side of the certificate filled
out and executed as indicated, accompanies by payment (in the form of a
certified or cashier's check payable to the order of the Company) of the full
exercise price for the number of Warrants being exercised.
The Warrants contain provisions that protect the holders thereof against
dilution by adjustment of the exercise price in certain events, such as stock
dividends, stock splits, mergers, sale of substantially all of the
Company's assets at less than market value, sale of stock at below market
price, and for other unusual events (other than employee benefit and stock
option plans for employees or consultants to the company).
The holder of a Warrant will not possess any rights as a stockholder of
the Company unless and until he exercises the Warrant.
Other than as set forth above, there are no options or warrants
presently outstanding for shares of the Common Stock.
The transfer agent for the common stock and the warrant agent is
American Securities Transfer, Inc., P.O. Box 1596, Denver, CO 80201.
Shares Eligible for Future Sale
Upon sale of the 8,000,000 shares offered hereby, the Company will have
outstanding 98,028,877 shares of Common Stock. Of the above shares only
those shares sold in this offering by the Company and 17,367,800 currently
publicly traded shares, will be freely tradeable without restriction
under the Securities Act of 1933, as amended (the "Act"), unless acquired by
"Affiliates" of the Company as that term is defined by the Act, following
which such shares will be subject to resale restrictions but may be eligible
for sale in the public market pursuant to Rule 144 under the Act.
In general, under Rule 144 as currently in effect a person (or persons
whose shares are aggregated) who has beneficially owned shares acquired
privately or indirectly from the Company or from an Affiliate, for at least
two years, or who is an Affiliate, is entitled to sell within any
three-month period a number of such shares that does not exceed the greater
of 1% of the then outstanding shares of the Company's Common Stock or the
average weekly trading volume in the Company's Common Stock during the four
calendar weeks immediately preceding such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions, notice requirements and the
availability of current public information about the Company. A person (or
persons whose shares are aggregated) who is not deemed to have been an
Affiliate at any time during the 90 days preceding a sale, and who has
beneficially owned restricted shares for at least three years, is entitled to
sell all such shares under Rule 144 without regard to the volume
limitations, current public information requirements, manner of sale
provisions, or notice requirements.
Sales of substantial amounts of the Common Stock of the Company in the
public market could adversely affect prevailing market prices.
LEGAL MATTERS
The legality of the Shares offered hereby will be passed upon for the
Company by the law firm of Hand & Hand, Dana Point, California.
EXPERTS
The audited financial statements included in this Prospectus and
elsewhere in this Registration Statement, to the extent and for the period
indicated in their reports, which appear elsewhere, have been audited by Luis
R. Hidalgo, Jr., CPA & Company, certified public accountants, and are included
herein in reliance upon the authority of such firm as experts in giving said
reports.
CONTINENTAL WELLNESS CASINOS, INC.
FINANCIAL STATEMENTS INDEX
Report of Luis R. Hidalgo CPA and Grant Thornton, CPA,
Audited Financial Statements . . . . . . . . . . . . . F1
Consolidated Balance Sheets as of June 15, 1996 and October 31, 1995
audited as of June 15, 1996 and October 31, 1995. . . . . .. F2
Consolidated Statements of Income and Retained Earnings
for the Maxim Hotel and Casino years ended June 30,1995
and 1994, months ended June 30, 1995 and 1994 . . . . . . .. F4
Consolidated Statements of Cash Flows for the Maxim Hotel and Casino
for the years ended June 30, 1995 and 1994, months ended
June 30, 1995 and 1994, . . . . . . . . . . . . . . . F5
Statement of Stockholders' Equity . . . . . . . . . . . . . F6
Notes to the Consolidated Financial Statements. . . . . . . F7
CONTINENTAL WELLNESS CASINOS, INC.
BALANCE SHEETS
JUNE 15, 1996 AND OCTOBER 31, 1995
CONTINENTAL WELLNESS CASINOS, INC.
JUNE 15, 1996 AND OCTOBER 31, 1995
CONTENTS
Pages
Independent Auditor's Report 1
Financial Statements
Balance Sheets 2
Notes to Financial Statements 3
LUIS R. HIDALGO
CERTIFIED PUBLIC ACCOUNTANT
2056 Stevely Avenue Long Beech, CA 90815
Telephone (310) 430-4249 Fax(310) 430-3382
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Continental Wellness Casinos, Inc.
Laguna Hills, California
I have audited the accompanying balance sheets of Continental Wellness
Casinos, Inc as of June 15, 1996 and October 31, 1995. These financial
statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted
auditing standards. These standards require that I plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. I believe that my
audit provides a reasonable basis for my opinion.
In my opinion, the balance sheets referred to above present fairly, in all
material respects, the financial position of Continental Wellness Casinos,
Inc as of June 15, 1996 aud October 31, 1995 in conformity with generally
accepted accounting principles.
s/Luis R. Hidalgo
LUIS R. HIDALGO
Certified Public Accountant
July 5, 1996
CONTINENTAL WELLNESS CASINOS, INC.
BALANCE SHEETS
June 15, 1996 and October 15, 1995
1996
1995
(Dollars
In Thousands)
ASSETS
Gold in storage (Note 2) $ 27,317 $ 27,317
Deferred charges and other assets
Deferred mining exploration costs (Note 3) 3,253 3,253
Deferred promotion and operating expenses 81 __________
Total assets $ 30,651 $ 30,570
STOCKHOLDERS' EQUITY
Common stock, Class "A" $0.003 par value
Authorized shares-500,000,000 in 1996;
100,000,000 in 1995
Issued and outstanding-90,028,877 in 1996;
38,803,405 in 1995. $ 270 $ 116
Common stock, Class "B" no par value
Authorized shares-50,000,000 in 1996 and 1995.
Issued and outstanding-3,266,960 in 1996 and 1995 33 33
Capital in excess of par 30,348 30,421
Total stockholders' equity $ 30,651 $ 30,570
See accompanying notes to Financial Statements.
CONTINENTAL WELLNESS CASINOS, INC
NOTES TO FINANCIAL STATEMENTS
I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Description of Business -
The Company is engaged in the mining development industry. Since October 22,
1974, the Company has owned aud operated thirty-nine (39) mines aud one (I)
mill site at Quincy, Plumas County, California, and is engaged in the
exploration of said mines for the production of precious metal like gold and
silver. The company also applied for a license in Las Vegas, Nevada to
conduct Life Extension programs, and to operate hotels and casinos.
Currency Transactions - There are 110 assets and liabilities of operations
outside tile United States which need to be translated into U. S. dollars
using exchange rates.
Development Costs - The Company will not capitalize property taxes on its
mining properties until the mines are ready for operation and development.
2.GOLD IN STORAGE AT BONDED WAREHOUSE:
On October 9, 1990, the Company deposited at NDS, United States Customs
Bonded Warehouse located at 19801 So. Santa Fe Ave., Rancho Dominguez,
California, 90221, six (6) 55 gallon-drum containers of gold dust
(powder form) 999.5 pure weighing 76,112 troy ounces with a value of
$27,316,600 based on the gold floor price of $358.90 per troy ounce. The
market values of gold per troy ounce as of June 15, 1996 and October 31, 1995
are $384.70 and $384.30, respectively. At these prices, the gold in storage
would carry fair market values of $29,280,286 in 1996 and $29,249,841 in 1995.
3.DEFERRED MINING EXPLORATION COSTS
Deferred mining exploration costs were incurred in prior years with the
amounts being estimated based on the prevailing costs of milling exploration
at that time due to the absence of supporting documentation. On April 13,
1994, the Company issued shares of stocks valued at $3,252,669 to pay
for its obligation arising thereto.
4.RELATED PARTY TRANSACTIONS
Grand American Bank Trust owns approximately 71% of the Company's Class "A"
common stock as of June 15, 1996.
5.PROVEN GOLD AND SILVER RESERVE:
The process of estimating mineral reserves is very complex, requiring
significant subjective decision in the evaluation of available geological,
engineering, and economic data for each reserve. The data for a given
reserve may change substantially over time as a result of additional
development activity, production under varying economic conditions, etc.
Consequently, material revision to the existing reserve estimates
may occur in the future. Although, every reasonable effort was made to ensure
that the reserve estimates reported represent the most accurate assessment
possible, the significance of the subjective decision required, the
variances in the available data for various reserves, make these estimated
generally less precise than other estimates in connection with financial
disclosure. Proven reserves are estimated quantities of gold and silver which
geological and engineering data demonstrate, with reasonable certainty, to be
recoverable in future years from known reserves under existing economic and
operating conditions.
Stickel aud Associates, independent consultants in applied geology,
geophysics and engineering, has estimated 7,000,000 troy ounces
of gold and 19,000,000 troy ounces of silver. The values of these reserves
based on average market prices as of June 15, 1996 and October 31, 1996
are as follows:
6-15-96 10-31-95
(Dollars in Thousands)
Gold 7,000,000 troy ounces
@$384.70/troy ounce $2,692,906
@$384.30/troy ounce $2,690,100
Silver 19,000,000 troy ounces
@$5.05/ troy ounce 95,950
@$5.34/troy ounce __________ __101,460
$2,788,856 $2,791,560
6. STOCKBROKER'S EQUITY
The Company is authorized to issue 50,000,000 shares of no par value
Class "B" shares. The Company gave authority to its Board of Directors to
issue such Class "B" stock in one or more series, and to fix the number of
shares in each series, and all designations, relative rights, preferences and
limitations of the stock issued in each series. As of April 13, 1994, the
Board of Directors had exercised the authority granted.
7.CONTINGENCIES
The Company is not involved in any legal proceedings which considered to
be ordinary routine litigation incident to its business.
8.TAXES
The Company has not filed a federal income tax return because there are
no earnings to report.
9.The Secretary of State of Colorado Corporation Office approved the
following on June 6, 1996:
a) The name Grand American International Corporation be changed to
Continental Wellness Casinos, Inc.
b) The authorized capital stock, common shares Class "A" of the Company
be increased from 100,000,000 shares to 500,000,000 shares with a $0.003 par
value per share.