NUOASIS RESORTS, INC.
                       (formerly Nona Morelli's II, Inc.)

                   Index to Consolidated Financial Statements

Description                                                                Page

Independent Auditors' Reports...............................................F-2

Consolidated Balance Sheet as of June 30, 1997..............................F-4

Consolidated Statements of Operations for the years ended
  June 30, 1997 and 1996....................................................F-5

Consolidated Statements of Stockholders' Equity for the years
  ended June 30, 1997 and 1996..............................................F-6

Consolidated Statements of Cash Flows for the years ended
  June 30, 1997 and 1996....................................................F-7

Notes to Consolidated Financial Statements..................................F-9

                                                        F-1

<PAGE>

                               HASKELL & WHITE LLP
                                4901 Birch Street
                             Newport Beach, CA 92660
                   Telephone (714) 833-8312 Fax (714) 833-9421

                          INDEPENDENT AUDITORS' REPORT



Board of Directors
NuOasis Resorts, Inc. (formerly, Nona Morelli's II, Inc.)
Newport Beach, California

We have audited the accompanying  consolidated balance sheet of NuOasis Resorts,
Inc.  (formerly Nona Morelli's II, Inc.) and subsidiaries  (the "Company") as of
June  30,  1997,  and  the  related   consolidated   statements  of  operations,
stockholders'  equity and cash flows for the year  ended  June 30,  1997.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  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.
We believe that our audit provides 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 the Company as of
June 30, 1997,  and its results of operations  and cash flows for the year ended
June 30, 1997, in conformity with generally accepted accounting principles.

                                        /s/ HASKELL & WHITE LLP

Newport Beach, California
January 30, 1998

                                                        F-2

<PAGE>

                           Raimondo, Pettit & GLASSMAN
                A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
                          CERTIFIED PUBLIC ACCOUNTANTS
                          UNION BANK TOWER, SUITE 1250
                            21515 HAWTHORNE BOULEVARD
                           TORRANCE, CALIFORNIA 90503

                          INDEPENDENT AUDITORS' REPORT



Board of Directors
NuOasis Resorts, Inc. (formerly, Nona Morelli's II, Inc.)
Irvine, California

We  have  audited  the  accompanying   consolidated  statements  of  operations,
stockholders'  equity and cash flows of NuOasis  Resorts,  Inc.  (formerly  Nona
Morelli's II, Inc.) and subsidiaries (the "Company") for the year ended June 30,
1996. These  consolidated  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform our audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  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.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the results of operations and cash flows of
the Company  for the year ended June 30,  1996,  in  conformity  with  generally
accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has incurred recurring net losses
and has limited liquid resources. Such matters raise substantial doubt about the
Company's ability to continue as a going concern.  Management's  plans regarding
these matters are described in Note 1. The consolidated  financial statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.

                                        /s/ Raimondo, Pettit & Glassman

Torrance, California
November 8, 1996, except for information  relating to Cleopatra Palace, Ltd. and
National Pools  Corporation  included in Notes 2, 3 and 11, as to which the date
is November 29, 1996.

                                                       [NM\10-KSB\97:63097FS]-26

                                                        F-3

<PAGE>

<TABLE>
<CAPTION>

                              NUOASIS RESORTS, INC.
                       (formerly Nona Morelli's II, Inc.)
                           Consolidated Balance Sheet
                               As of June 30, 1997

<S>                                                                        <C>

ASSETS
Current assets:
 Cash                                                                      $            576,734
 Equity investments                                                                   2,487,544
 Due from affiliate, net                                                                553,840
 Amounts receivable, net of allowance
    for doubtful accounts of $50,391                                                    287,589
 Inventory                                                                               35,173
                                                                           --------------------
     Total current assets                                                             3,940,880
Property and equipment:
Food manufacturing equipment                                                          1,205,569
Accumulated depreciation and amortization                                              (964,730)
     Total property and equipment, net                                                  240,839
Other assets:
 Equity investments                                                                   3,317,720
 Due from affiliates, net                                                             1,543,674
 Intangible assets, net                                                               1,022,395
 Other assets                                                                            62,400
                                                                           --------------------
     Total other assets                                                               5,946,189
                                                                           --------------------
TOTAL ASSETS                                                               $         10,127,908
                                                                           ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                         $          1,109,225
  Accrued expenses                                                                       58,044
  Due to affiliates                                                                   1,510,562
  Current maturities of long-term debt                                                  235,375
     Total current liabilities                                                        2,913,206
ong term liabilities:
  Long-term debt                                                                        145,880
     Total liabilities                                                                3,059,086
Minority interest                                                                     1,619,298
Commitments and contingencies  (Notes 5 and 11)  Stockholders'  equity Preferred
stock, Series D, $.01 par value;
  24,000,000 shares authorized, issued and outstanding
  (aggregate liquidation of up to $10,000,000)                                          240,000
Common stock, $.01 par value;  50,000,000 shares authorized;
  48,824,300 shares issued and outstanding                                              488,243
Cost of 20,000,115 treasury shares                                                  (10,002,425)
Additional paid-in-capital                                                           48,827,297
Common stock subscription and stockholders' receivables                                (324,225)
Accumulated deficit                                                                 (33,779,366)
                                                                           ---------------------
     Total stockholders' equity                                                       5,449,524
                                                                           ---------------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                                   $         10,127,908
                                                                           =====================
</TABLE>

           See accompanying notes to consolidated financial statements

                                                       [NM\10-KSB\97:63097FS]-26

                                                        F-4

<PAGE>

<TABLE>
<CAPTION>

                              NUOASIS RESORTS, INC.
                       (formerly Nona Morelli's II, Inc.)
                      Consolidated Statements of Operations
                   For the Years Ended June 30, 1997 and 1996

                                                                       Years Ended June  30,
                                                           --------------------------------------------
                                                                   1997                   1996
                                                           --------------------- ----------------------
<S>                                                        <C>                   <C>

Food sales revenue                                         $          1,339,763  $            1,251,174
Gaming revenue                                                                -              11,407,317
                                                           --------------------- ----------------------
                                                                      1,339,763              12,658,491
Cost of food sales revenues                                             903,446                 838,453
                                                           --------------------  ----------------------
Gross profit                                                            436,317              11,820,038
                                                           --------------------- ----------------------
Operating expenses:
 Legal and professional fees                                          1,844,749               1,717,064
 Depreciation and amortization                                          128,578               4,621,014
 Gain on sale of investments                                           (553,840)                (38,510)
 General and administrative expenses                                    775,598               1,046,770
 Loss on sale of property and equipment                                  89,213                       -
 Minority interest                                                            -                (233,877)
 Write down of gaming interest                                                -               6,663,741
 Write down of beneficial ownership                                           -               2,600,000
 Other valuation expense                                                      -               1,839,483
                                                           --------------------- ----------------------
                                  Total operating expenses            2,284,298              18,215,685
                                                           --------------------- ----------------------
Operating loss                                                       (1,847,981)             (6,395,647)
                                                           --------------------- -----------------------
Other income (expenses):
 Interest expense                                                       (96,594)               (309,757)
 Losses in equity investments                                        (3,061,944)                      -
 Other income                                                            65,847                  63,334
                                                           --------------------- ----------------------
Total other expenses                                                 (3,092,691)               (246,423)
                                                           --------------------- -----------------------
Net loss before income tax benefit (provision)
 and discontinued operation                                          (4,940,672)             (6,642,070)
Income tax benefit (provision)                                          382,494                (997,932)
                                                           --------------------- -----------------------
Net loss before discontinued operation                               (4,558,178)             (7,640,002)
Discontinued operation:
 Net loss of discontinued operation                                  (3,118,107)             (1,079,638)
 Gain on disposal of discontinued operation                             350,249                       -
                                                           --------------------- ----------------------
Net loss                                                   $         (7,326,036) $           (8,719,640)
                                                           ===================== =======================
Per share amounts:
  Net loss before discontinued operation                   $               (.10) $                 (.18)
  Discontinued operations                                                  (.06)                   (.02)
                                                           --------------------- -----------------------
Net loss per common share                                  $               (.16) $                 (.20)
                                                           ===================== =======================
Weighted average number of common shares
 outstanding used to compute net loss per
 common share                                                         46,863,961             43,803,077
                                                           ===================== =======================

</TABLE>

           See accompanying notes to consolidated financial statements

                                                       [NM\10-KSB\97:63097FS]-26

                                                        F-5

<PAGE>

<TABLE>
<CAPTION>

                              NUOASIS RESORTS, INC.
                       (formerly Nona Morelli's II, Inc.)
                 Consolidated Statement of Stockholders' Equity
                   For the Years Ended June 30, 1997 and 1996

                                                      Preferred                    Common                      Treasury
                                                        Stock                       Stock                        Stock             
                                                                                                                                   
                                                                                                                                   
                                                ----------------------    ------------------------     --------------------------- 
                                                Shares        Amount        Shares       Amount        Shares          Amount
                                                ---------- -----------    ----------  ------------    ----------   ---------------
<S>                                             <C>        <C>            <C>         <C>             <C>          <C>             

Balance at July 1, 1995                         24,013,500 $   240,135    42,708,800  $    427,088           115   $       (2,425) 
Issuance of common stock for services                                      1,886,500        18,865                                 
Exchange of Gaming Interest                                                                           20,000,000      (10,000,000) 
Issuance of common stock on conversion of
  Series C preferred stock                        (13,500)        (135)       27,000           270                                 
Issuance of common stock for exercised options                               400,000         4,000                                 
Change in common stock subscription and                                                                                            
  stockholders receivable                                                                                                          
Net loss                                                                                                                           
                                             ------------- ------------  ------------ ------------- -------------  --------------- 
                                                                                                                                   
Balance at June 30, 1996                        24,000,000     240,000     45,022,300      450,223    20,000,115      (10,002,425) 
                                                                         --
Issuance of common stock                                                   3,802,000        38,020                                 
Net change in common stock subscription
  receivable                                                                                                                       
Net effects of the disposition of Group V                                                                                          
Net loss                                                                                                                           
                                             ------------- ------------  ------------ ------------- -------------  --------------- 
Balance at June 30, 1997                       24,000,000  $   240,000    48,824,300  $    488,243    20,000,115   $  (10,002,425) 
                                             ============= ============  ============ ============= =============  =============== 

</TABLE>

<TABLE>
<CAPTION>

                                                 Additional      Common Stock
                                                   Paid-In       Subscription      Accumulated
                                                   Capital        Receivable        (Deficit)          Total
                                                --------------  ----------------  --------------   -------------

<S>                                             <C>             <C>               <C>              <C>

Balance at July 1, 1995                         $   44,867,753  $       (946,814) $  (21,500,460)  $  23,085,277
Issuance of common stock for services                2,261,059                                         2,279,924
Exchange of Gaming Interest                                                                          (10,000,000)
Issuance of common stock on conversion of
  Series C preferred stock                                (135)
Issuance of common stock for exercised options         520,000          (400,000)                  -
Change in common stock subscription and                                                                  124,000
  stockholders receivable                                               (360,685)
Net loss                                                                              (8,719,640)       (360,685)
                                                --------------- ----------------  ---------------  --------------
                                                                                                      (8,719,640)
Balance at June 30, 1996                        
                                                
Issuance of common stock                             1,178,620                                         1,216,640
Net change in common stock subscription
  receivable                                                           1,383,274                       1,383,274
Net effects of the disposition of Group V                                              3,766,770       3,766,770
Net loss                                                                              (7,326,036)     (7,326,036)
                                                --------------- ---------------- ---------------  ---------------
Balance at June 30, 1997                        $   48,827,297  $       (324,225) $  (33,779,366)  $   5,449,524
                                                =============== ================ ================ ===============

</TABLE>

          See accompanying notes to consolidated financial statements.

                                                       [NM\10-KSB\97:63097FS]-26

                                                                F-6

<PAGE>

<TABLE>
<CAPTION>

                              NUOASIS RESORTS, INC.
                       (formerly Nona Morelli's II, Inc.)
                      Consolidated Statements of Cash Flows
                     For Years Ended June 30, 1997 and 1996

                                                                                      1997                   1996
                                                                              --------------------- ----------------------
<S>                                                                           <C>                   <C>

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss                                                                      $         (7,326,036) $          (8,719,640)
  Adjustments to reconcile net loss to net cash
   provided by operating activities:
    Depreciation and amortization                                                          128,578              4,621,014
    Common stock exchanged for services                                                  1,334,311              1,139,227
    Valuation expenses                                                                           -             11,103,224
    Income tax benefit                                                                    (382,494)                 3,800
    Gain on investments                                                                   (553,840)               (38,510)
    Loss on sale of property and equipment                                                  89,213                      -
    Minority interest                                                                             -              (233,877)
    Losses in equity investments                                                          3,061,944                     -
    Other                                                                                    45,414                84,000
    Discontinued operations                                                               2,767,858             1,079,638
  Increases (decreases) from changes in assets and liabilities:
    Accounts receivable, net                                                              (151,528)                19,280
    Due from affiliates                                                                  3,887,435             (1,819,479)
    Inventory                                                                               58,426                  5,522
    Other current assets                                                                    15,000                158,906
    Deposits and other assets                                                               (4,550)                29,230
    Accounts payable                                                                      (110,283)               (56,281)
    Accrued expenses                                                                      (598,101)               287,360
    Interest payable to affiliate                                                                -                235,001
    Due to affiliates                                                                     (182,814)               184,332
    Net liabilities of discontinued operations                                             964,615                      -
    Income taxes payable                                                                         -                778,952
                                                                              --------------------- ---------------------
Net cash provided by operating activities                                                3,043,148              8,861,699
                                                                              --------------------- ---------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Beneficial ownership interest                                                                  -             (9,604,598)
  Proceeds from sales of assets                                                            432,922                 38,510
  Purchase of leasehold improvements and equipment                                          (9,686)              (100,305)
                                                                              --------------------- ----------------------
Net cash provided by (used in) investing activities                                        423,236             (9,666,393)
                                                                              --------------------- ----------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from collection of stockholders' receivables                                    198,758                 65,500
  Proceeds from issuance of note payables                                                  100,000                350,000
  Principal payments on notes payables                                                  (3,238,844)              (189,240)
                                                                              --------------------- ----------------------
Net cash (used in) provided by financing activities                                     (2,940,086)               226,260
                                                                              --------------------- ---------------------

Net increase (decrease) in cash                                                            526,298               (578,434)
Cash and cash equivalents, beginning of period                                              50,436                628,870
                                                                              --------------------- ---------------------
Cash and cash equivalents, end of period                                      $            576,734  $              50,436
                                                                              ===================== =====================

</TABLE>

           See accompanying notes to consolidated financial statements

                                                       [NM\10-KSB\97:63097FS]-26

                                                            F-7

<PAGE>

<TABLE>
<CAPTION>

                              NUOASIS RESORTS, INC.
                       (formerly Nona Morelli's II, Inc.)
                      Consolidated Statements of Cash Flows
                     For Years Ended June 30, 1997 and 1996

                                                                                       1997                  1996
                                                                               -------------------- ---------------------
<S>                                                                            <C>                  <C>

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
    Interest                                                                   $            47,547  $            144,685
    Income taxes                                                               $             2,480  $              1,600

Non-cash investing and financing activities:
    Exercise of options for reduction of debt                                  $            29,200  $                   -
    Stock issued for services on behalf of Cleopatra                           $                 -  $             955,439
    Common stock issued for stockholder notes receivable                       $                 -  $             518,758
    Common stock exchanged for services                                        $         1,334,311  $           1,139,227
    Note received for sale of property and equipment                           $            50,000  $                   -
    Exchange of Hartcourt Shares for equity in Cleopatra's World
          and Cleopatra                                                        $          5,775,000 $
    Effects of the consolidation of Cleopatra from non-cash
      acquisition of controlling interest
          Cash                                                                 $           525,056  $                   -
          Due from affiliates, net                                             $         1,543,674  $                   -
          Equity investments                                                   $         3,800,022  $                   -
          Intangible assets                                                    $         1,029,617  $                   -
          Accounts payables                                                    $           793,698  $                   -
          Stockholders' equity                                                 $         6,104,671  $                   -

</TABLE>

           See accompanying notes to consolidated financial statements

                                                       [NM\10-KSB\97:63097FS]-26

                                                            F-8

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 1997 and 1996

Note 1.  Summary of Significant Accounting Policies and Description of Business

Description of Business

NuOasis Resorts,  Inc. (formerly,  Nona Morelli's II, Inc.) and its subsidiaries
(the  "Company"),  a  Nevada  corporation  (formerly,  a  Colorado  corporation)
operates as a holding company for leisure and entertainment-related  businesses.
At June 30, 1997,  the Company had seven  wholly-owned  subsidiaries  engaged in
food  manufacturing  and distribution,  casino gaming and hotel management,  and
real estate investments.

The  activities of the Company's  subsidiaries  are domestic and  international,
with existing food  manufacturing  activities in the United States and Asia, and
proposed  casino  gaming and hotel  management  activities  in North  Africa and
Europe.

Principles of Consolidation

The consolidated  financial  statements,  and references therein to the Company,
include the accounts of the Company and its wholly-owned  subsidiaries;  NuOasis
International,  Inc.  ("NuOasis  International")  and its 70% owned  subsidiary,
Cleopatra  Palace Limited  ("Cleopatra"),  Fantastic Foods  International,  Inc.
("Fantastic Foods"),  Casino Management of America,  Inc. ("CMA") and its wholly
owned subsidiaries, NuOasis Laughlin, Inc., ("NuLA") and NuOasis Las Vegas, Inc.
("NuLV"),  ACI Asset  Management  Inc.  ("ACI")  and  NuOasis  Properties,  Inc.
("NuOasis  Properties").  In addition,  the  consolidated  financial  statements
include the accounts of Group V Corporation,  formerly NuOasis Gaming,  Inc. and
its  subsidiaries  ("Group  V")  through  June 13,  1997,  the date in which the
Company  sold its  controlling  interest in Group V. All  material  intercompany
accounts and transactions have been eliminated in consolidation.

Minority Interest

The  accompanying  consolidated  balance  sheet  as of June  30,  1997  includes
minority interest of $1,619,298. Such amount represents 30% of the stockholders'
equity of Cleopatra that is not owned by the Company at June 30, 1997.

Management 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  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

                                                       [NM\10-KSB\97:63097FS]-26

                                                        F-9

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity of
three months or less on the date of acquisition to be cash equivalents.

Inventory

Inventory  is stated at the lower of cost or market,  computed on the  first-in,
first-out basis.

Property and Equipment and Depreciation

Property and equipment,  including  amounts  recorded under capital leases,  are
stated at cost.  Repairs and  maintenance are charged to expense as incurred and
expenditures for improvements are capitalized.  The Company  evaluates the usage
of its equipment throughout the fiscal year.

Depreciation of property and equipment, and amortization of assets under capital
leases is provided over the lesser of the  estimated  useful lives of the assets
or the lease term using the straight-line method.  Estimated useful lives are 28
to 32 years for buildings, 7 to 10 years for factory equipment, 5 to 7 years for
furniture, fixtures and transportation equipment.

Depreciation  expense,  including  amortization  of assets under  capital  lease
arrangements,  charged to  operations  was  $119,057  and $360,520 for the years
ended June 30, 1997 and 1996, respectively.

Equity Investments

In May 1993, the Financial  Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards  ("SFAS") No. 115,  "Accounting  For Certain
Investments  In Debt  and  Equity  Securities."  This  statement  addresses  the
accounting and reporting for investments in equity  securities that have readily
determinable  fair  values and  investment  in debt  securities.  The  statement
requires that management classify these investments as either  held-to-maturity,
available-for sale or trading securities.

As of June 30, 1997,  the Company  owns,  in the  aggregate,  980,000  shares of
restricted common stock of The Hartcourt  Companies,  Inc., 280,000 of which are
owned by Cleopatra,  and 7,800,000 shares of restricted common stock of Group V.
Management has classified these equity securities as  available-for-  sale based
on its intent to continue to exchange the equity securities for other assets. In
accordance  with SFAS No. 115,  these  equity  securities  are  presented in the
accompanying  consolidated  balance sheet as current  assets at their  estimated
fair market values.  At June 30, 1997, there are no unrealized  holding gains in
these  securities as their estimated fair market values  approximated the equity
securities' carrying values.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-10

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996


The Company has additional  equity  investments in private entities in which its
equity interest exceeds 20% but is less than 51%. Such investments are accounted
for  using the  equity  method  of  accounting  in  accordance  with  Accounting
Principles  Board ("APB") Opinion No. 18, whereby the Company's  investments are
increased  or  decreased  based  on its  portion  of the  income  or loss of the
investee.

Intangible Assets

At June 30,  1997,  intangible  assets  include  pre-opening  costs  and  gaming
licenses   owned  by  Cleopatra   in  the  amount  of  $575,891  and   $446,504,
respectively. The intangible assets are amortized over 15 years.

Amortization of Gaming Interest

The Company  amortized its interest in the profits of the two Macau casinos (see
Note 2) over a period of five years using the straight line method. Amortization
for  Fiscal  1997 and 1996  amounted  to $0 and  $4,268,544,  respectively.  The
Company's  Interest in the Macau casinos was sold  effective  June 30, 1996 (See
Note 2).

Impairment Loss

In accordance with SFAS No. 121, when indicators of impairment are present,  the
Company assesses  whether there has been a permanent  impairment in the value of
its  long-lived  assets by considering  such factors as estimated,  undiscounted
future net cash flows, trends and prospects and other economic factors.

Loss Per Share

The net loss per share is computed  based upon the  weighted  average  number of
shares of common  stock and  common  stock  equivalents  outstanding  during the
period.  Common stock equivalents were not considered in the calculations as the
effect would have been anti-dilutive.

Income Taxes

The  Company  accounts  for  income  taxes in  accordance  with  SFAS  No.  109,
"Accounting  for Income Taxes" which requires the use of the "liability  method"
of accounting for income taxes. Accordingly, deferred tax assets and liabilities
are determined based on the difference  between the financial  statement and tax
bases of assets and liabilities,  using enacted tax rates in effect for the year
in which the differences are expected to reverse. Current income taxes are based
on the  year's  income  taxable  for  federal  and state  income  tax  reporting
purposes.

Revenue Recognition

Food  sales and  related  cost of sales are  recognized  upon  shipment  of food
products.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-11

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

Discontinued Operation

As  discussed in Note 2, the Company  sold its  controlling  interest in Group V
during Fiscal 1997. Accordingly,  Group V's results have been accounted for as a
discontinued  operation in the accompanying  consolidated  financial statements.
The following table summarizes  amounts recorded as the net loss of discontinued
operation in the accompanying consolidated statements of operations:

<TABLE>
<CAPTION>

                                                       For the Year Ended         For the Year Ended
                                                          June 30, 1997              June 30, 1996
                                                   -------------------------- -------------------------
<S>                                                <C>                        <C>

General and administrative expenses                $                 287,329  $                 211,296
Professional services                                                490,406                    418,299
Write off of NPC goodwill (Note 2)                                 3,318,107                          -
Other                                                                171,315                          -
Loss on discontinued operations of CMA
  at GRPV                                                            219,497                    450,043
Gain on debt forgiveness                                          (1,368,454)                         -
                                                   -------------------------- -------------------------
          Net loss                                 $              3,118,200   $               1,079,638
                                                   ========================== =========================

</TABLE>

Employee Stock Options

In  October  1995,  FASB  issued  SFAS  No.  123,  "Accounting  for  Stock-Based
Compensation."  In conformity  with the  provisions of SFAS No. 123, the Company
has  determined  that it will not change to the fair value  method  presented by
SFAS No. 123 and will continue to follow APB Opinion No. 25 for  measurement and
recognition of employee  stock-based  transactions.  There were no stock options
granted to employees during fiscal 1997 or 1996.

Issuance of Stock for Services

Shares of the Company's  common stock issued to  non-employees  for services are
recorded in  accordance  with SFAS No. 123 at the fair market value of the stock
issued or the fair market value of the  services  provided,  whichever  value is
more reliably measurable.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-12

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

Fair Value of Financial Instruments

SFAS No. 107 requires disclosure about fair value for all financial  instruments
whether or not  recognized,  for financial  statement  purposes.  The fair value
amounts have been determined by the Company using available  market  information
and appropriate valuation  methodologies.  Considerable judgment is necessary to
interpret  market  data and  develop  estimated  fair  values.  The  Company has
determined that the fair value of all financial  instruments  approximated their
carrying value as of June 30, 1997.

Reclassification of Prior Year Amounts

To enhance comparability,  the 1996 financial statements have been reclassified,
where appropriate,  to conform with the financial statement presentation used in
Fiscal  1997.  In  addition,  reclassifications  have been made to  reflect  the
activities of Group V as a discontinued operation.

Going Concern

The  Company  has  experienced  recurring  net  losses  and has  limited  liquid
resources.  Management's  intent is to continue searching for additional sources
of capital and new  operating  opportunities.  In the interim,  the Company will
continue operating with minimal overhead and key  administrative  functions will
be provided by  consultants  who are  compensated  primarily  with the Company's
common  stock.  Management  estimates  that the  Company may need to utilize its
common  stock to fund its  operations  through  Fiscal  1998.  Accordingly,  the
accompanying  consolidated  financial  statements  have been presented under the
assumption the Company will continue as a going concern.

Recent Accounting Developments

In February 1997, FASB issued SFAS No. 128,  "Earnings Per Share" ("EPS").  SFAS
No. 128  requires  all  companies  to present  "basic"  EPS and,  if they have a
complex  capital  structure,  "diluted" EPS. Under SFAS No. 128,  "basic" EPS is
computed by dividing income  (adjusted for any preferred stock dividends) by the
weighted  average  number  of  common  shares  outstanding  during  the  period.
"Diluted" EPS is computed by dividing  income  (adjusted for any preferred stock
or convertible stock dividends and any potential income or loss from convertible
securities) by the weighted average number of common shares  outstanding  during
the period  plus the number of  additional  common  shares  that would have been
outstanding if any dilutive potential common stock had been issued. The issuance
of  anti-dilutive  potential  common  stock  should  not  be  considered  in the
calculation.  In addition,  SFAS No. 128 requires certain additional disclosures
relating to EPS. SFAS No. 128 is effective for financial  statements  issued for
periods ending after December 15, 1997.  Thus, the Company  expects to adopt the
provisions of this  statement in the year ending June 30, 1998 ("Fiscal  1998").
Management  does  not  expect  the  adoption  of  this  pronouncement  to have a
significant impact on the Company's financial statements.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-13

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996


In June 1997, the FASB issued SFAS No. 130,  "Reporting  Comprehensive  Income."
This statement  establishes standards for reporting and display of comprehensive
income and its components (revenues,  expenses, gains and losses) in an entity's
financial  statements.  This  statement  requires an entity to classify items of
other comprehensive  income by their nature in a financial statement and display
the accumulated balance of other  comprehensive  income separately from retained
earnings and additional  paid-in-capital in the equity section of a statement of
financial  position.  This pronouncement is effective for Fiscal years beginning
after  December 15, 1997 and the Company  expects to adopt the provision of this
statement  in  Fiscal  1998.  Management  does  not  expect  this  statement  to
significantly impact the Company's financial statements.

In June 1997,  the FASB issued SFAS No. 131,  "Disclosures  About Segments of an
Enterprise and Related  Information." This statement requires public enterprises
to report financial and descriptive  information about its reportable  operating
segments and  establishes  standards for related  disclosures  about product and
services, geographic areas, and major customers. This pronouncement is effective
for Fiscal years  beginning  after December 15, 1997 and the Company  expects to
adopt the  provisions  of this  statement  in Fiscal 1998.  Management  does not
expect  this  statement  to   significantly   impact  the  Company's   financial
statements.

Note 2.           Acquisition and Liquidation of Investments

Gaming Interest

In May 1995 the  Company  purchased  a 40% net  profits  interest  in the gaming
operations  conducted  at the Holiday Inn and Hyatt Hotels in Macau (the "Gaming
Interest")  from  Mr.  Ng  Man  Sun  ("Ng"),  doing  business  as  Dragon  Sight
International  Amusement  (Macau)  Company  ("Dragon").  The Gaming Interest was
transferred to NuOasis International in December 1995.

In August 1996, effective June 30, 1996, NuOasis  International  entered into an
agreement to sell the Gaming Interest.  The consideration for the sale consisted
of 20,000,000  shares of the  Company's  common stock  originally  issued by the
Company in the purchase of the Gaming  Interest (the "Ng  Shares").  On or about
September  30, 1996,  the Ng Shares were  tendered to a third party escrow agent
pending the closing of the purchase of  replacement  assets or properties  which
NuOasis  International  is currently  negotiating to purchase (the  "Replacement
Property").

          As a result of the sale,  the Company  recognized a $6.6 million write
          down of the book value of the Gaming Interest effective June 30, 1996,
          to bring the value of the shares  held in escrow for the  purchase  of
          the Replacement  Property to the basis of the stock originally  issued
          to Ng, which was $.50 a share or $10 million in  aggregate.  Until the
          purchase of the Replacement  Property,  the book value of the escrowed
          shares will be  presented  in a position  similar to  treasury  stock.
          Accordingly, the 20,000,000 treasury shares are recorded at their cost
          of $10,002,425 in the accompanying June 30, 1997 consolidated  balance
          sheet.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-14

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996


The gaming  revenues for the six months ended June 30, 1996 were  classified  as
Due from  Affiliate  as of June 30,  1996 in the  amount of  approximately  $3.9
million and were subsequently collected in August 1996. $3.2 million of the $3.9
million was used by the  Company as full  payment of the  principal  and accrued
interest  on the  original  note  issued as part of the  purchase  of the Gaming
Interest.

Cleopatra

In October 1993, the Company  acquired a 70% equity interest in Cleopatra Palace
Limited,  an Irish  corporation  ("Cleopatra").  Cleopatra  is the  lessee  of a
200,000  square  foot  casino  and  Las  Vegas-style  showroom  presently  under
construction  (the "Cap Gammarth  Casino")  pursuant to a Casino Lease Agreement
and  Operating  Management  Contract  with  Societe  Touristique   Tunisie-Golfe
("STTG").

In October 1994,  Cleopatra  entered into an agreement with Societe Loisirs Club
Hammamet ("Club  Hammamet") to lease and operate a 60,000 square foot casino and
French-style  cabaret  recently  completed in Hammamet,  Tunisia (the  "Hammamet
Casino").  During  Fiscal  1997,  the lease  with  STTG and the lease  with Club
Hammamet  were  each  modified  several  times  and,  as to the lease on the Cap
Gammarth Casino, the real property interest was transferred from STTG to Societe
D'Animation et de Loisirs Touristique, a Tunisian corporation ("SALT") resulting
in a change in lessor from STTG to SALT.

As part of the Gaming  Interest  acquisition,  the Company  transferred  certain
assets to Dragon including a 42% interest in Cleopatra.

In June 1997, the Company  reacquired the 42% interest in Cleopatra as part of a
recapitalization  of  Cleopatra  resulting  in  an  increase  in  the  Company's
ownership of Cleopatra to 70% from 28%.  Accordingly,  the accounts of Cleopatra
as of June 30, 1997, are consolidated  with the Company and the investment is no
longer accounted for using the equity method of accounting.

In September 1997,  Cleopatra assigned the lease with Club Hammamet to Cleopatra
Hammamet  Limited,  a Tunisian  corporation in  organization as of June 30, 1997
("Cleopatra Hammamet").  In exchange for the lease, Cleopatra received an equity
interest in Cleopatra Hammamet.

Cleopatra's World

During Fiscal 1997,  NuOasis  International  Inc.  exchanged  600,000  shares of
common  stock of The  Hartcourt  Companies  Inc.  for a 50% equity  ownership in
Cleopatra's  World  Inc.  a  British  Virgin  Island  corporation  ("Cleopatra's
World").  Cleopatra's  World is the  lessor of the Le Palace  Hotel and the real
estate and improvements surrounding the Cap Gammarth Casino.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-15

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996


Acquisition of NPC, NuOasis Las Vegas, NuOasis Laughlin and CMA; Sale of Group V

In December  1995,  Group V, as a  subsidiary  of the  Company,  entered into an
agreement with the shareholders of National Pools Corporation ("NPC") to acquire
all of the issued and outstanding shares of NPC.

In June 1996, the Company,  then the  controlling  parent of Group V, granted an
option (the "Group V Option") to Mr. Joseph  Monterosso  ("Monterosso),  the new
President  of Group V, to acquire  250,000  shares of Group V Series B Preferred
stock (the  "Group V B  Shares")  owned by the  Company.  The Group V Option was
exercisable at a price of $13.00 per share.

In December 1996,  Group V closed the purchase of NPC, making NPC a wholly-owned
subsidiary  of Group V. In June 1997,  following  the Group V  purchase  of NPC,
Monterosso exercised the Group V Option to purchase 128,041 Group V B Shares, at
$13.00  per  share,  by payment  to the  Company  of  approximately  $1,665,000.
Additionally,  in June 1997, Group V sold CMA and its wholly-owned subsidiaries,
NuLV and NuLA, to the Company for  $1,140,000  in cash,  notes  receivable  from
Group V aggregating  $245,836,  and a credit against the Company's  intercompany
account with Group V of $95,000.

In August 1997,  but  effective  June 1996,  the Group V Option was amended (the
"Amended  Option")  canceling  the  right  to  acquire  100,000  of the  121,959
remaining Group V B Shares and increasing the exercise price for the balance, or
21,959  shares,  from  $13.00  per  share  to  $72.20  per  share.  The  Company
subsequently  converted  the 100,000  shares of Group V B Shares into  7,800,000
shares of Group V common stock.  In September  1997,  but  effective  June 1997,
Monterosso  exercised the Amended Option to purchase 21,959 Group V B Shares, at
$72.20  per  share,  by payment  to the  Company  of  approximately  $1,585,000.
Concurrently,  Group V released the Company for liability,  if any, arising from
any events when the Company  controlled  Group V, in exchange for  approximately
$1,585,000.  Also in September  1997, the Company and Monterosso  entered into a
Put/Option  Agreement  (the  "Put")  under  which  Monterosso  had the option to
purchase  and the Company had the right to require  Monterosso  to purchase  the
Company's remaining 7,800,000 common shares at a price of $.15 per share.

Concurrent  with the  Put,  the  Company  sold to  Monterosso  its  interest  in
6,000,000 New Class D Warrants to purchase common stock of Group V (the "Group V
D Warrants").  Each Group V D Warrant is exercisable at $1.00 per share and will
entitle the holder to receive upon  exercise two shares of Group V common stock,
or a total of 12,000,000  common  shares.  The  consideration  for the Group V D
Warrants  consisted of a $1,800,000  promissory  note due in September 1998 (the
"Warrant Note").  The Group V D Warrants had a book value of zero on the date of
sale. As of the date of this Report,  $553,840 of the  promissory  note has been
realized,  resulting  in the  Company  recording a gain on sale in the amount of
$553,840 during Fiscal 1997.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-16

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996


As a result of the sale of the Group V B Shares and the Put, as discussed above,
a change in control of Group V occurred and, as of June 13, 1997,  Group V is no
longer a controlled  subsidiary of the Company. As of June 30, 1997, the Company
maintains  approximately  7,800,000  shares  of Group V common  stock  which are
included in equity investments (Note 3) in the accompanying consolidated balance
sheet. In connection with the sale  transactions  described  above,  the Company
recorded  an  aggregate  net gain on  disposal  of  discontinued  operations  of
approximately $350,000 during Fiscal 1997.

Sale of Pueblo Building

During  Fiscal 1996,  the Company  remodeled  and  improved its food  processing
equipment in its California  locations and leased its manufacturing  facility in
Pueblo, Colorado (the "Pueblo Building") held for sale. In connection therewith,
the Company  reevaluated  the use and value of its older equipment and wrote off
certain  impaired  equipment with a net book value of $1,073,303  which has been
recorded as Other Valuation Expense during Fiscal 1996.

On February 26, 1997, the lessee of the Company's  Pueblo Building  exercised on
option to purchase the Pueblo Building.  As part of the consideration  received,
the  Company's  mortgage  debt in the  principal  amount of  $215,392  was fully
satisfied,  it received cash in the amount of $148,820, and a note in the amount
of $50,000,  bearing 8% interest  per annum and secured by the Pueblo  Building.
The $50,000 note was paid in full  subsequent  to June 30, 1997.  In  connection
with the sale of the Pueblo  building,  the  Company  recorded a loss on sale of
approximately $89,000.

Note 3.           Equity Investments/Beneficial Ownership Interest

Effective December 31, 1995, the Company acquired an interest in three buildings
under construction  located in a large master planned commercial and residential
real estate  development  located in Beijing,  Peoples Republic of China ("PRC")
known as the Peony Garden Project ("Peony Garden") from Silver Faith Development
Limited ("SFDL"),  an affiliate of the Company and Ng. The purchase price of the
Company's  interest  in  Peony  Garden  was  $21  million  consisting  of  an 8%
Promissory Note issued by NuOasis  International  in the principal amount of $21
million (the "Peony  Garden  Note").  The Peony Garden Note was non recourse and
fully  collateralized by the interest acquired,  with the outstanding  principal
balance  convertible  into the shares of the Company's  common stock. In January
1996, the Company made a prepayment of principal on the Peony Garden Note in the
amount of $9.6 million.

On August 8, 1996,  the Company  entered  into an agreement  with The  Hartcourt
Companies,  Inc.  ("Hartcourt")  to sell its entire  interest in Peony Garden to
Hartcourt for $22 million.  The consideration  received by the Company consisted
of $10 million of Hartcourt common stock ("Hartcourt  Shares") and a $12 million
Convertible Promissory Note secured by the Peony Garden interest being sold (the
"Hartcourt  Note").  The sale  closed  on  October  8, 1996  and,  according  to
unaudited information received from Hartcourt,  the Hartcourt Shares represented
a 43% equity  interest in Hartcourt.  Concurrent with the closing of the sale of
the Company's  interest in Peony Garden, the Hartcourt Note was assigned to SFDL
in  exchange  for the  Peony  Garden  Note (the  "Note  Swap").  No  profit  was

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-17

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

recognized on the Note Swap or the transaction since the difference  between the
sales price and the Company's basis in Peony Garden represents approximately the
amount of  interest  on the Peony  Garden  Note that would  otherwise  have been
capitalized  during the  construction of the Peony Garden  project.  At June 30,
1996,  the  Company's  interest in Peony  Garden of $9.6  million was reduced to
approximately  $7 million,  the value of the Company's equity in Hartcourt on or
about the closing  date,  resulting in a $2.6 million write down during the year
ended June 30, 1996.

During the year ended June 30,  1997,  3.3  million  Hartcourt  Shares (of the 4
million  originally  acquired)  were  exchanged  to  acquire  additional  equity
ownership in Cleopatra and  Cleopatra's  World. As a result of the sale of Peony
and the exchange  involving the Hartcourt Shares,  the Company has the following
equity investments as of June 30, 1997:

<TABLE>
<CAPTION>

                                   Percentage Ownership          Book Value Basis of
          Investee                   at June 30, 1997            Equity Investments
----------------------------- ------------------------------  -------------------------
<S>                           <C>                             <C>

Current Assets:
--------------

Hartcourt                                 8% (A)              $               1,890,805
Group V Corporation                       16% (B)             $                 596,739
                                                              -------------------------
                                                              $               2,487,544
                                                              =========================
Non-Current Assets:

Cleopatra's World                        50% (C)              $                 182,698
SALT                                     20% (D)              $               3,135,022
Cleopatra                                70% (E)              $                      --
                                                              -------------------------
                                                              $               3,317,720
                                                              =========================
</TABLE>

          (A)     The  percentage  ownership is based upon  unaudited  financial
                  statements  of  Hartcourt  as of  December  31,  1997  (latest
                  available  as of  the  date  of  this  Report).  Based  on the
                  Company's percentage ownership, these securities are presented
                  at their June 30, 1997 estimated fair market value (Note 1).

          (B)     During Fiscal 1997, the Company sold its majority  interest in
                  Group V (Note  2),  leaving a  remaining  equity  interest  of
                  7,800,000 common shares valued at $596,739, the estimated fair
                  market value at June 30, 1997.

          (C)     In Fiscal  1997,  NuOasis  International  acquired  50% equity
                  ownership  in  Cleopatra's   World  in  exchange  for  600,000
                  Hartcourt  Shares  (Note  2).  The  value  of the  50%  equity
                  ownership is based upon the  Company's  basis in the Hartcourt
                  Shares that was given as  consideration  for this  investment,
                  reduced by $952,229 which represents the Company's  portion of
                  Cleopatra's World Fiscal 1997 net loss. Although the Company's
                  equity  ownership is 50%, the equity  method of  accounting is
                  used since  control of the Board of Directors  of  Cleopatra's
                  World  lies  with the other 50%  equity  owners.  Accordingly,
                  Cleopatra's World is not consolidated with the Company.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-18

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

         (D)      In Fiscal 1997,  Cleopatra  acquired a 20% interest in Societe
                  D'Animation  Et De Loisirs  Club  Touristique,  a  corporation
                  incorporated in Tunisia ("SALT"). SALT is the owner of the Cap
                  Gammarth Casino presently under construction and the lessor of
                  the Cap Gammarth  Casino leased by Cleopatra.  In exchange for
                  its 20%  interest in SALT,  Cleopatra  made lease  deposits of
                  $2,000,000 and transferred 1,100,000 Hartcourt Shares to SALT.
                  Cleopatra  subsequently  received $300,000 as compensation for
                  not  exercising  its   pre-emption   rights  on  a  subsequent
                  recapitalization   by  SALT,   resulting   in  a  dilution  of
                  Cleopatra's  interest  from 20% to 9%.  However,  Cleopatra is
                  currently  contesting  the  dilution  and,  accordingly,   the
                  interest is stated at 20% and the  $300,000  payment  received
                  was recorded by Cleopatra as a current liability. No financial
                  statements have been prepared for SALT to date.

          (E)     During June 1997,  Cleopatra  redeemed and  transferred to the
                  Company  2,400,000 shares of its common stock, and the Company
                  transferred  2,700,000  Hartcourt  Shares to  Cleopatra.  This
                  resulted in the increase of the Company's ownership percentage
                  to 70% from 49%.  Accordingly,  the accounts of Cleopatra  are
                  now  consolidated  with the Company and the  investment  is no
                  longer accounted for using the equity method of accounting.

The  Company's  ultimate  realization  of value  from the  Hartcourt  Shares  is
dependent  upon many  factors,  such as future  changes in the  equity  value in
Hartcourt,  which itself may be dependent upon  uncertainties  surrounding Peony
Garden, and upon the Company's ability to dispose of the Hartcourt Shares at its
current basis.

Cleopatra's  World and  Cleopatra's  ability to continue  as a going  concern is
dependent upon their ability to fulfill their  financial  commitments  (see Note
12) and the future  operations of the casinos and other  properties they intends
to manage.  The  uncertainties  surrounding  these matters raise doubt about the
ability of Cleopatra and Cleopatra's  World to continue as a going concern,  and
about the Company's  ultimate  recoverability of its investment in Cleopatra and
the  various  Cleopatra  subsidiaries.  No  adjustments  have  been  made to the
accompanying consolidated financial statements for these uncertainties.

Note 4.  Due From Affiliates

Due from affiliates, net is comprised of the following at June 30, 1997:


Advances to Cleopatra Hammamet                    $            1,750,900
Advances to Cleopatra's World                                  1,209,486
Due from Monterosso                                              553,840
Other                                                            126,962
                                                  ----------------------
Allowance for uncollectible amounts                            3,641,188
                                                              (1,543,674)
                                                  -----------------------
                                                  $             2,097,514
                                                  =======================

Advances to Cleopatra  Hammamet and Cleopatra's World are non-interest  bearing,
have no  stated  repayment  terms  and are  uncollateralized.  Amounts  due from
Monterosso were realized  subsequent to year end as described in Note 2, and are
therefore, classified as current assets.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-19

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

Note 5.           Long-Term Debt

Long-term debt at June 30, 1997 consists of the following:

<TABLE>
<CAPTION>
<S>                                                                      <C>

Note payable - bank
   Due November 1999,  payable in monthly principal  installments
   of $7,290 plus interest at prime plus 4%
   (12.5% at June 30, 1997)                                              $        211,490
Note payable - financial institution
   Due March 1998, payable in full, including interest at 18%                     100,000
Note payable - financial institution
   Due June 1998, payable in full, including interest at prime                     69,765
                                                                         ----------------
   plus 6% (14.5% at June 30,  1997)                                              381,255
Current Maturities of Long Term Debt                                             (235,375)
                                                                         -----------------
                                                                         $        145,880
</TABLE>

In October 1995,  Fantastic  Foods entered into a working capital loan agreement
(the "Loan") with a financial  institution,  whereby  Fantastic  Foods  borrowed
$350,000.  The loan was evidenced by a forty- seven month note bearing  interest
at the  rate of prime  plus 4% per  annum  and  collateralized  by all  accounts
receivable,   inventory,   and  equipment   related  to  Fantastic   Foods  food
manufacturing activities. At June 30, 1997, the outstanding principal balance of
the Loan was $211,490.

On  March  20,  1997,  Fantastic  Foods  entered  into a  working  capital  loan
agreement, collateralized by the Notes Receivables received from the sale of the
Pueblo  building  (Note 2), for $100,000  bearing  interest at 18% per annum and
maturing on March 19, 1998.

On July 22,  1996,  Fantastic  Foods  entered  into a  $150,000  line of  credit
agreement which is  collateralized  by the Fantastic Foods accounts  receivable.
The line of credit has an  outstanding  principal  balance of $69,765 as of June
30, 1997 and outstanding amounts bear interest at prime plus 6% with the line of
credit expiring June 22, 1998.

Minimum annual  principal  repayments of long-term debt in each of the next five
fiscal years, are as follows:


       Year Ending                             Amounts
        June 30,                                 Due
-------------------------              -------------
          1998                                        235,375
          1999                                        145,880
                                       ----------------------
                   Total               $              381,255
                                       ======================

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-20

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

Note 6.           Stockholders' Equity

Capitalization

Except for shares issued for services, there were no private offerings conducted
in Fiscal 1997 or 1996.

Preferred Stock

The Company has  authorized  25,000,000  shares of  preferred  stock,  which are
divided into four classes or series:  Series A, Series B, Series C and Series D.
All Series A and Series B preferred  stock was redeemed by the Company  prior to
or during Fiscal 1993, and returned to the preferred stock treasury.

In  October  1992,  the  Company  conducted  a  private  offering  of  Series  C
Convertible  Preferred Stock ("C Preferred").  During the Fiscal year ended June
30, 1995,  the Company  amended and restated the  Certificate  of  Designations,
Rights and  Preferences  of C  Preferred.  During the Fiscal year ended June 30,
1995, 870,033 shares of C Preferred were converted to 1,740,066 shares of common
stock.  During  Fiscal 1996 all  remaining C Preferred  was  converted to common
stock, and no C Preferred remains outstanding at June 30, 1997.

During the Fiscal year ended June 30,  1993,  the Company  designated a Series D
Voting  Convertible  Preferred  Stock out of the 24,130,000  redeemed  shares of
Series A,  Series B and  Series C  Preferred  Stock (the "D  Preferred").  The D
Preferred  consists of  24,000,000  shares  which were issued to NuVen  Advisors
Inc.,  formerly New World Capital Inc.  ("NuVen) in exchange for the  investment
securities  with an estimated  market value,  based upon  independent  legal and
valuation  opinions  at the time,  discounted  approximately  50% at the date of
transfer, of $10,000,000.  Due to the lack of a date and value certain as to the
redemption and incomplete trading history of the investment securities,  at June
30, 1993, the  $10,000,000  aggregate  estimated  market value of the investment
securities  was fully  reserved  by the Company by a charge  against  Additional
Paid-in Capital for financial statement purposes.

The D Preferred is  redeemable,  in whole or in part, at the option of the Board
of  Directors,  at any time,  at a  redemption  price of up to  $24,000,000,  or
convertible, at the option of the holder, into a maximum of 10,000,000 shares of
the Company's common stock. The right to convert the D Preferred expires in July
1998.

Common Stock Subscriptions and Stockholders' Receivable

Stock  subscriptions and stockholders'  receivables as of June 30, 1997 consists
primarily of receivables due from officers and consultants.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-21

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

During Fiscal 1996,  400,000  common shares were issued upon exercise of options
by the Chief Executive Officer of the Company in the amount of 440,000, or $1.10
per share.  The Company received a note receivable in the amount of $440,000 and
cash payments in the aggregate amount of $40,000 were made prior to year end and
approximately  $120,000  subsequent to year end. The note bears  interest of 10%
and is past  due.  The  note  receivable  has  been  classified  as  Stockholder
Receivable in the amount of $280,000 at June 30, 1997.

Treasury Stock

On August 5, 1996,  NuOasis  International  entered into an agreement with Ng to
sell the Gaming  Interest.  On or about  September 30, 1996,  the Ng Shares were
tendered to a third party  escrow  agent  pending the closing of the purchase of
the Replacement Property (see Note 2).

The  Company  recognized  a $6.6  million  write  down on the sale of the Gaming
Interest at June 30 1996 to bring the value of the shares held in escrow for the
purchase of the Replacement Property to the basis of the stock originally issued
to Ng, which was $.50 a share or $10 million in aggregate. The book value of the
escrowed shares is presented in a position  similar to treasury stock as of June
30, 1997 until such time as the Company  completes the intended  purchase of the
Replacement Property.  Accordingly,  the 20,000,000 treasury shares are recorded
at their cost of  $10,002,425  in the  accompanying  June 30, 1997  consolidated
balance sheet.

Employee Stock Benefit Plan

An employee  stock  benefit plan  ("ESBP") was  established  during Fiscal 1996,
covering  substantially all employees and consultants of the Company.  There are
no mandatory  contributions  required by either the Company or the employees and
consultants, however, the ESBP provides for the issuance of up to 500,000 common
shares of the Company at the discretion of the Board of Directors. During Fiscal
1997 and 1996, 0 and 16,000 shares were issued under the ESBP, respectively.  As
of June 30,  1997,  the  Board of  Directors  has not  approved  any  additional
issuances of common shares under the ESBP.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-22

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

Note 7.           Stock Option Plan

A summary of the status of stock  option  transactions  for the years ended June
30, 1997 and 1996 is as follows:

<TABLE>
<CAPTION>

                                                     1997                    1996
                                           ------------------------ ----------------------
<S>                                        <C>                      <C>

Outstanding at beginning of year                         1,560,000              1,320,000
     Granted                                                     -                700,000
     Exercised                                             (50,000)              (400,000)
     Canceled                                                    -                (60,000)
                                           ------------------------ ----------------------
Outstanding at end of year                               1,510,000              1,560,000
                                           ======================== ======================

Range of option exercise prices
 granted                                             $0.91 - $1.53           $0.91 - $1.53

</TABLE>

At  June  30,  1997,   options  for  1,510,000  shares  were  fully  vested  and
exercisable.

Exercised Options

On October 8, 1996,  50,000 common shares were issued upon exercise of an option
by the  Company's  former  Secretary  and Director in the amount of $29,200,  or
approximately  $.58 per share. In lieu of cash being received for payment of the
exercise price, the Company received a credit of $29,200 against amounts owed to
such officer for services performed pursuant to his consulting agreement.

Note 8.           Related Party Transactions

Transactions With Officers

In September 1994, the Company entered into an Employment Agreement with Fred G.
Luke, the Company's Chairman and Chief Executive Officer ("Luke"). Luke has been
serving as the Company's  Chairman and CEO since  approximately  July 1993. From
July 1993 through June 30, 1994, Luke received no compensation  for his services
as CEO but did receive  $9,000 for his services as a Director.  The terms of the
Employment Agreement call for Luke to receive  approximately  $10,000 per month,
retroactive to July 1, 1994, for five (5) years as a base salary; granted him an
option to purchase 1,000,000 shares of the Company's common stock exercisable at
$1.10 per  share;  provides  him with an  annual  bonus  based  upon a number of
factors  related to the Company's  growth and  performance  which  include;  (a)
serving on the Company's Board of Directors and as its Chief Executive  Officer;
(b) providing advice concerning mergers and acquisitions; (c) corporate finance;
(d) day to day  management;  (e)  guidance  with  respect  to  general  business
decisions; (f) other duties commonly performed by the Chief Executive Officer of
a publicly-held company; and requires the Company to purchase life insurance

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-23

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

coverage, reimbursement for vehicle expenses, and provide other fringe benefits.
No bonuses  have been  accrued,  paid or are owed as of the date of this Report.
The Company expensed $120,000 during each of the Fiscal Years 1997 and 1996, and
had no amounts due as of June 30, 1997.

In August 1995, Group V entered into an Employment Agreement with Luke, pursuant
to which he served as Group V's  President  from March 1994 through  August 1997
and as  Chairman  from  March  1994  through  November  1997.  The  terms of the
Employment  Agreement call for Luke to receive  approximately  $4,500 per month,
retroactive to April 1, 1994, for five (5) years as a base salary;  and, granted
him an option to  purchase  3,000,000  shares  of Group V's  common  stock at an
exercise price of $.12 per share.  Group V expensed $54,000 and $40,500,  during
Fiscal 1997 and 1996, respectively,  and had no amounts due as of June 30, 1997.
Luke's Employment Agreement with Group V was terminated by Luke effective May 5,
1997.

Effective January 1, 1994, the Company and John D. Desbrow  ("Desbrow")  entered
into a  Consulting  Agreement  for the  engagement  of Desbrow to perform  legal
services  and to hold the office of  Secretary  on behalf of the  Company  until
December 31, 1994. Under the Consulting  Agreement the Company contracted to pay
Desbrow  $150,000  payable in the  Company's  common  stock  issuable in monthly
increments  in arrears.  Under the terms of the  Consulting  Agreement,  Desbrow
invoices  the Company and applies  the net  proceeds  received  from the sale of
stock to the invoiced  amounts.  For purposes of any "profit"  computation under
Section 16(b), Desbrow and the Company agreed that the price paid for the shares
was deemed to be $150,000.  Pursuant to the terms of the  Consulting  Agreement,
the Company granted Desbrow an option to purchase 50,000 shares of the Company's
common  stock  exercisable  at a price of $.58 per share.  Effective  January 1,
1996, the Consulting  Agreement was renewed through December 31, 1996 and 50,000
shares were issued during  Fiscal 1996.  An  additional  option of 50,000 shares
exercisable  at a price of $1.53 per share was granted  during Fiscal 1996.  The
Company   expensed   $128,000  and  $150,000   during   Fiscal  1997  and  1996,
respectively,  and had $120,158 due as of June 30, 1997. Mr.  Desbrow's  renewed
consulting agreement terminated on May 9, 1997.

Effective  April 1, 1997,  Group V renewed a Consulting  Agreement  with Desbrow
through  March 31,  1997 to  perform  legal  services  and to hold the office of
Secretary.  Under the renewed  Consulting  Agreement  Group V contracted  to pay
Desbrow  $75,000  per annum for the  renewal  term  payable  in Group V's common
stock.  In May 1997,  102,030  common  shares were issued in  settlement  of all
amounts  owed to Desbrow as of May 5,  1997.  Under the terms of the  Consulting
Agreement,  Desbrow invoices Group V and applies the net proceeds  received from
the  sale of  stock  to the  invoiced  amounts.  For  purposes  of any  "profit"
computation under Section 16(b),  Desbrow and Group V have agreed the price paid
for the shares is deemed to be $75,000.  Group V expensed  $62,500 and  $43,750,
during Fiscal 1997 and 1996, respectively, and had no amounts due as of June 30,
1997.  Desbrow's renewed Consulting  Agreement with Group V terminated on May 5,
1997.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-24

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

Effective January 1, 1994, the Company entered into a Consulting  Agreement with
Jon L. Lawver and J. L. Lawver Corp. (collectively,  "Lawver") pursuant to which
Lawver was to perform professional  services and to hold the office of President
of Fantastic Foods for calendar year 1994. Pursuant to the Consulting  Agreement
the Company  agreed to pay Lawver 36,000  shares of the Company's  common stock,
issuable  in monthly  increments  in arrears  and  granted  Lawver the option to
purchase  50,000  shares of the Company's  common stock at an exercise  price of
$.58 per share. Under the terms of the Consulting Agreement, Lawver invoices the
Company  and  applies the net  proceeds  received  from the sale of stock to the
invoiced amounts.  For purposes of any "profit"  computation under Section 16(b)
Lawver and the Company have agreed the price paid for the shares is deemed to be
$100,000.  Lawver's  agreement  was renewed for the year ended June 30, 1995 and
124,000  shares were issued to him during Fiscal 1995.  During Fiscal 1996,  the
Consulting  Agreement  was again renewed with the same terms for Fiscal 1997 and
85,000 shares were issued to him during  Fiscal 1996 to apply  against  services
rendered.  An additional option of 50,000 shares exercisable at a price of $1.53
per share was granted during Fiscal 1996. The Company expensed  $100,000 in each
of Fiscal 1997 and 1996, and had approximately $49,000 due to Lawver at June 30,
1997.

In July 1995,  the Company  entered into a Consulting  Agreement  with Steven H.
Dong ("Dong"),  pursuant to which Dong is to perform accounting  services and to
hold the office of Chief Financial  Officer  through June 30, 1996.  Pursuant to
the  agreement  as amended  in  October  1995,  the  Company  agreed to pay Dong
$145,000 per annum in cash or in the Company's  common stock payable  monthly in
arrears and granted him an option to purchase  100,000  shares of the  Company's
common  stock at an  exercise  price of $1.53 per share.  Under the terms of the
Consulting  Agreement,  Dong  invoices  the Company and applies the net proceeds
received  from the sale of stock to the  invoiced  amounts.  For purposes of any
"profit"  computation  under  Section 16(b) Dong and the Company have agreed the
price paid for the shares is deemed to be  $145,000.  During  Fiscal  1996,  the
Consulting  Agreement  was renewed with the same terms through June 30, 1997. No
cash  payments  were made to Dong during  Fiscal 1997 or 1996,  however  450,000
shares  were  issued  during  1997  which  were used to apply  against  services
rendered.  The Company expensed $145,000 in each of Fiscal 1997 and 1996 and had
approximately $148,000 due to Dong as of June 30, 1997.

In July 1996,  Group V renewed a  Consulting  Agreement  with Dong,  pursuant to
which Dong is to  perform  accounting  services  and to hold the office of Chief
Financial  Officer  through  June 30, 1997.  Pursuant to the renewed  Consulting
Agreement  Group V agreed to pay Dong  $39,000 per annum in cash or in Group V's
common stock,  payable  monthly in arrears.  In May 1997,  237,500 common shares
were issued in settlement  of all amounts owed to Dong as of May 5, 1997.  Under
the terms of the renewed Consulting Agreement, Dong invoices Group V and applies
the net proceeds  received  from the sale of the stock to the invoiced  amounts.
For purposes of any "profit"  computation  under Section 16(b), Dong and Group V
have  agreed  the price  paid for the  shares is deemed to be  $39,000.  Group V
expensed $39,000 and $15,000 during Fiscal 1997 and 1996, respectively,  and had
no amounts due to Dong as of June 30, 1997. Dong's renewed Consulting  Agreement
with Group V was terminated effective May 5, 1997.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-25

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

In January 1996,  the Company  entered into a Consulting  Agreement  with Albert
Rapuano  ("Rapuano"),  pursuant to which Rapuano is to perform gaming consulting
services and to hold the office of President  of NuOasis  International  through
December 31, 1996. Pursuant to the agreement,  the Company agreed to pay Rapuano
$250,000 per annum in cash or in the Company's  common stock payable  monthly in
arrears and granted him an option to purchase  500,000  shares of the  Company's
common  stock at an  exercise  price of $.91 per  share.  Under the terms of the
Consulting Agreement,  Rapuano invoices the Company and applies the net proceeds
received  from the sale of stock to the  invoiced  amounts.  For purposes of any
"profit" computation under Section 16(b) Rapuano and the Company have agreed the
price paid for the shares is deemed to be $250,000.  No cash  payments were made
to Rapuano during Fiscal 1997,  however,  575,000 shares were issued during 1997
which  were  used to apply  against  services  rendered.  The  Company  expensed
$250,000  and  $115,000  during  Fiscal  1997 and  1996,  respectively,  and had
approximately $265,000 due to Rapuano as of June 30, 1997.

Transactions with  Directors and Affiliates

On March 17, 1994, Jonathan L. Small ("Small"), Attorney at Law, became a member
of the Board of  Directors  to fill a vacancy  caused  by the  resignation  of a
former  Director in June 1993. On October 29, 1993,  the Company  entered into a
Consulting  Agreement  with Small to retain his  services to evaluate  potential
acquisitions and to assist the Company in the general  development and execution
of its business plan.  Pursuant to the agreement,  Small was issued 1,600 shares
of the  Company's  common  stock.  On  January  5, 1995,  Small  entered  into a
Consulting  Agreement  effective  November 1, 1994, with the Company,  to retain
Small to serve on the Board of  Directors.  During the year ended June 30, 1996,
15,000  shares were issued to Small  which were used to apply  against  services
rendered.

The Luke Trust and Lawver  owns 93% and 7%,  respectively,  of NuVen.  Luke,  as
trustee of the Luke  Trust,  controls  the Luke  Trust and Jon L.  Lawver is the
majority shareholder of Lawver Corp. and thereby controls Lawver Corp.

On  June  14,  1993,  NuVen  acquired  the D  Preferred.  At  the  time  of  the
transaction,  NuVen was unrelated to the Company. As a result,  NuVen became the
Control Person of the Company. On June 14, 1993, Luke became a Director. On July
22,  1993,  following  the  resignation  of Frank  Morelli  II,  Luke became the
Company's Chief Executive  Officer,  Chief Financial Officer and Chairman of the
Board of Directors. The Luke Trust owns 93% of NuVen. Luke, as Co-Trustee of the
Luke Trust determines the voting of such shares and, as a result,  may be deemed
to  control  the Luke  Trust and the  disposition  of  24,000,000  shares of the
Company's D Preferred.

Effective  February 1, 1994, the Company entered into an Advisory and Management
Agreement with NuVen ("NuVen  Advisory  Agreement") to perform  professional and
advisory services for calendar year 1995. Pursuant to the Consulting  Agreement,
the Company agreed to pay NuVen $120,000  annually,  payable  monthly in $10,000
increments in arrears, and granted NuVen an option to purchase 100,000 shares of
the  Company's  common stock  exercisable  at a price of $.80 per share.  During
Fiscal 1996, the Advisory and  Management  Agreement was renewed for Fiscal 1997

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-26

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

with the same terms.  The Company  expensed  $120,000 in each of Fiscal 1997 and
1996, respectively, and had $3,500 due to NuVen as of June 30, 1997.

Effective October 1, 1995, Group V renewed its Advisory and Management Agreement
with NuVen for the  engagement  of NuVen to perform  professional  services  for
Fiscal  1997 and 1996.  Pursuant  to such  renewal,  Group V agreed to pay NuVen
$120,000  annually,  payable  monthly in arrears.  In May 1997,  787,180  common
shares were issued in settlement of all amounts owed to NuVen as of May 5, 1997.
Group  V  expensed   $120,000  and  $135,000,   during  Fiscal  1997  and  1996,
respectively,  and had no  amounts  due to NuVen as of June  30,  1997.  NuVen's
agreement with Group V was terminated effective May 5, 1997.

Effective  July 1, 1994,  NuOasis  International  entered  into an Advisory  and
Management  Agreement  with  NuVen  for  the  engagement  of  NuVen  to  perform
professional  and advisory  services for  calendar  year 1995.  Pursuant to such
agreement,  NuOasis International agreed to pay NuVen $120,000 annually, payable
monthly  in  $10,000  increments  in  arrears,  and  granted  NuVen an option to
purchase 1,100,000 shares of common stock of NuOasis  International  exercisable
at a price of 110% of the book value per share on the day of the  grant.  During
Fiscal 1996, the Advisory and  Management  Agreement was renewed for Fiscal 1997
with the same terms. NuOasis  International  expensed $120,000 in each of Fiscal
1997 and 1996, respectively, and had $100,000 due to NuVen as of June 30, 1997.

Effective  July  1,  1994,  NuOasis  Properties  entered  into an  Advisory  and
Management  Agreement  with  NuVen  for  the  engagement  of  NuVen  to  perform
professional  and  advisory  services  on behalf of NuOasis  Properties  for the
calendar year 1995. Pursuant to such agreement, NuOasis Properties agreed to pay
NuVen $120,000 annually,  payable monthly in arrears in $10,000 increments,  and
granted NuVen an option to purchase  1,100,000 shares of common stock of NuOasis
Properties  exercisable  at a price of 110% of the book  value  per share on the
date of the grant. During Fiscal 1996, the Advisory and Management Agreement was
renewed  for Fiscal  1997 with the same terms.  Minimal  amounts  were billed by
NuVen to NuOasis  Properties,  as little activity occurred in NuOasis Properties
for Fiscal 1997 and 1996.  NuOasis  Properties  had $600 due to NuVen as of June
30, 1997.

Effective  April 1, 1994, CMA entered into an Advisory and Management  Agreement
with NuVen for the  engagement  of NuVen to perform  professional  and  advisory
services.  Pursuant to such agreement CMA agreed to pay NuVen $120,000 annually,
payable monthly in $10,000 increments in arrears, and granted NuVen an option to
purchase up to 5% of CMA's  common  stock  outstanding  at the time of exercise,
exercisable  at a price of 110% of the book value of such shares.  During Fiscal
1996, the Advisory and Management Agreement was renewed for Fiscal 1997 with the
same terms.  CMA  expensed  $120,000  in each of Fiscal  1997 and 1996,  and had
$12,456 due to NuVen as of June 30, 1997.

During Fiscal 1994,  Group V entered into an agreement with  Structure  America,
Inc.  ("SAI") to issue 1,000,000 shares for consulting  services.  Such services
were  rendered  during  Fiscal 1995.  During  Fiscal 1996,  Group V entered into
another  agreement  with SAI to perform  consulting  services.  Pursuant to such
agreement, Group V agreed to issue 1,000,000 shares of Group V's common stock to

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-27

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

SAI and granted SAI an option to purchase  1,000,000  shares of Group V's common
stock  exercisable at $.12 per share. In May 1997,  1,000,000 common shares were
issued in  settlement  of all  amounts  owed to SAI as of May 5,  1997.  Group V
expensed  $200,000 and $75,000  during Fiscal year 1997 and 1996,  respectively,
and had no amounts due to SAI as of June 30, 1997.  SAI's agreement with Group V
was terminated effective May 5, 1997.

During  Fiscal  1996,  the  Company  renewed  an  agreement  with SAI to perform
consulting services.  The Company expensed  approximately  $255,000 and $465,000
during Fiscal 1997 and 1996,  respectively and had approximately $160,000 due to
SAI as of June 30, 1997.

Note 9.           Income Taxes

The Company and its controlled, domestic subsidiaries file a consolidated income
tax return for federal and a combined income tax return for state purposes.

The 1997 and 1996 income tax benefit (provision) is as follows:

<TABLE>
<CAPTION>

                                                       1997                           1996
                                               -------------------- ---------------------------------------
                                                    The Company          The Company
                                                        and                  and
                                                   Subsidiaries         Subsidiaries           Group V
                                                    (excluding           (excluding              and
                                                     Group V)             Group V)          Subsidiaries
                                               -------------------- -------------------  ------------------
<S>                                            <C>                  <C>

Current taxes:
  Current tax benefit (provision)
     Federal                                   $           976,280  $          (784,210) $                -
     State                                                 267,116             (209,920)                  -
                                               -------------------- -------------------- ------------------
  Total current tax benefit (provision)                  1,243,396             (994,130)                  -
                                               -------------------- -------------------- ------------------
Deferred taxes:
     Federal                                               880,583             2,060,904          2,570,356
     State                                                 143,279               558,092            379,808
     Change in valuation allowance                      (1,884,764)          (2,622,798)         (2,950,164)
                                               -------------------- -------------------- -------------------
 Total deferred tax benefit (provision)                   (860,902)              (3,802)                  -
                                               -------------------- -------------------- ------------------
Income tax benefit (provision)                 $           382,494  $          (997,932) $                -
                                               ==================== ==================== ==================
</TABLE>

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-28

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

For the years ended June 30, 1997 and 1996,  the  Company's  effective  tax rate
differs from the federal statutory rate as follows:

<TABLE>
<CAPTION>

                                                                      1997                      1996
                                                            ------------------------  ------------------------
<S>                                                         <C>                       <C>

Federal statutory rate                                                      (34.00%)                  (34.00%)
Minority interest                                                                 -                    (1.03%)
Effect of foreign controlled corporation
  loss for which no deferred tax amount was
  recognized                                                                 18.06%                    45.91%
Change in estimate of prior year liability                                        -                    (2.49%)
Change in valuation allowance                                                 9.92%                    17.11%
State taxes, net of federal effect                                            (.03%)                   (4.39%)
Utilization of net operating loss                                                 -                    (4.36%)
Other                                                                          .12%                    (3.83%)
                                                            ------------------------  ------------------------
Effective tax rate                                                           (5.93%)                   12.92%
                                                            ========================  ========================
</TABLE>

The Company utilized $0 and approximately  $3,860,000 in net operating losses to
offset  federal and state  taxable  income for the years ended June 30, 1997 and
1996, respectively.

At June 30, 1997, the components of net deferred tax asset are as follows:

Current:
   Deferred tax assets resulting from
     temporary differences                        $            177,653
  Valuation allowance                                         (177,653)
                                                  ---------------------
       Total current deferred tax asset           $                  0
                                                  ====================
Non-Current:
  Deferred tax assets resulting from loss
    carry forward                                 $          6,817,327
 Valuation allowance                                        (6,817,327)
                                                  ---------------------
      Total non-current tax asset                                    0
                                                  --------------------
       Net deferred tax asset                     $                  0
                                                  ====================

The deferred taxes result from temporary  differences relating to the difference
in the basis of assets and liabilities for financial and tax reporting purposes.
The  temporary  differences  relate  mainly to reserves  recorded for  financial
reporting purposes that are not deductible for tax purposes.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-29

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

As a result of changes in stock  ownership  which occurred in 1993 and 1995, the
Company's use of its net operating loss carry forwards may be limited by Section
382 of the Internal  Revenue Code until such net operating  loss carry  forwards
expire.  During Fiscal 1997,  the Company  obtained an  independent  third party
valuation of its stock for purposes of the  calculation  required by Section 382
in order to determine  whether  such net  operating  loss carry  forwards may be
limited.  Based on the results of the  independent  third party  valuation,  the
Company  reversed  amounts  originally  recorded in Fiscal 1996 for income taxes
payable and for the net deferred tax asset. Accordingly,  the Company recorded a
current year income tax benefit of $382,494.

Deferred tax assets have been computed using the maximum  expiration terms of 13
and 5 years (or total net  operating  losses  available of  approximately  $12.6
million and $7.8 million) for federal and state tax purposes,  respectively. Net
operating losses expire from the years 2004 through 2009.

No provision was made or benefits  recognized  in 1996 for U.S.  income taxes on
the  undistributed  earnings/  losses  of the  foreign  subsidiary  as it is the
Company's  intention to utilize those earnings in the foreign  operations for an
indefinite  period of time or repatriate  earnings only when tax effective to do
so. The foreign  subsidiary  had an  accumulated  deficit at June 30, 1996 which
would have resulted in an  unrecognized  temporary  difference for net operating
losses carried forward in the approximate amount of $3.4 million, with a related
unrecognized deferred tax benefit of approximately $1.3 million. The foreign net
operating loss carryforward may not be utilized for United States federal income
tax purposes.

Note 10.    Segment Information and Concentration of Credit Risk

Industry Segments

The relative contributions to revenues,  gross profit and identifiable assets of
the  Company's  active  industry  segments for the years ended June 30, 1997 and
1996 are as follows:

<TABLE>
<CAPTION>

                                                          1997                1996
                                                   ------------------- ------------------
<S>                                                <C>                 <C>

Revenues
   Food Manufacturing and Distribution             $        1,339,763  $        1,251,174
   Gaming/Entertainment                            $                -  $       11,407,317
Gross Profit
   Food Manufacturing and Distribution             $          436,317  $          412,721
   Gaming/Entertainment                            $                -  $       11,407,317

</TABLE>

Identifiable assets of the Company's food manufacturing and distribution segment
are $489,455 as of June 30, 1997 and are comprised primarily of net property and
equipment, trade accounts receivable and other receivables.  Identifiable assets
exclude intercompany loans, advances and investments.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-30

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

As of June 30,  1997,  the  Company's  assets  are  principally  located  in two
geographic areas: the United States and North Africa. The following is a summary
of the Company's June 30, 1997 assets by geographic area:

<TABLE>
<CAPTION>

                                         United States        North Africa             Total
                                     -------------------  --------------------  ------------------
<S>                                  <C>                  <C>                   <C>

Cash                                 $            (8,735) $           585,469   $          576,734
Equity investments                             2,487,544                    -            2,487,544
Due from affiliate                               553,840                    -              553,840
Other current assets                             322,762                    -              322,762
                                     -------------------- --------------------  ------------------
   Total current assets                        3,355,411               585,469           3,940,880
                                     -------------------- --------------------  ------------------
Property and equipment, net                      240,839                    -              240,839
Equity investments                                     -            3,317,720            3,317,720
Due from affiliates, net                               -            1,543,674            1,543,674
Other assets                                      62,400                    -               62,400
Intangible assets, net                                 -            1,022,395            1,022,395
                                     -------------------- --------------------  ------------------
   Total noncurrent assets                        303,239           5,883,789            6,187,028
                                     -------------------- --------------------  ------------------
            Total assets             $         3,658,650  $         6,469,258   $       10,127,908
                                     ==================== ====================  ==================

</TABLE>

Significant Customers and Concentration of Credit Risk

In the United States,  the Company maintains several cash accounts with a single
bank.  At June 30, 1997,  the  aggregate  bank  balance of such  accounts do not
exceed the federally-insured  limit. The Company also has approximately $585,000
on deposit with foreign banks.

The  Company  had  sales in excess  of 10% of total  food  sales to each of five
customers in Fiscal 1997 and 1996,  all of whom were  distributors.  At June 30,
1997, the Company had amounts due from four customers,  each in excess of 10% of
total food sales receivables.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-31

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

Note 11.    Commitments and Contingencies

Operating Leases

The  Company  leases  two  manufacturing  plants  in  California  for  its  food
processing   operations.   The  Company   also  leases   certain   equipment  on
non-cancelable  operating leases related to its food  manufacturing  activities.
NuVen  provides  office  space to the Company and its  subsidiaries,  along with
general and administrative personnel, office furniture and equipment,  telephone
and fax services,  accounting and automobiles  pursuant to the various  Advisory
and Management Agreements (Note 9).

At June 30, 1997  future  rental  payments  due under  non-cancelable  operating
leases,  ranging from 1-3 years for buildings and equipment  related to its food
manufacturing activities, are as follows:


           Year Ending                  Amounts
            June 30,                      Due
       ------------------         -----------------
              1998                $          12,900
              1999                           12,100
              2000                            5,400
                                  -----------------
                                  $          30,400
                                  =================

Rent expense  charged to operations was $101,681 and $96,328 for the years ended
June 30, 1997 and 1996 respectively.

Cleopatra,  Cleopatra  Hammamet and Cleopatra's  World are lessees under various
lease agreements related to the Cap Gammarth Casino, the Hammamet Casino and the
Cap Gammarth  Resort,  respectively,  which require  annual lease payments to be
made,  monthly or  quarterly,  over their  respective  terms,  which  range from
fourteen to twenty years. Annual lease payments by these entities in each of the
next five years and thereafter are as follows:

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-32

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

<TABLE>
<CAPTION>

                                                         Amounts Due
                       ------------------------------------------------------------------------------
                             Cleopatra
     Year Ending           Cap Gammarth          Cleopatra         Cleopatra's
       June 30                Casino             Hammamet             World              Total
---------------------  -------------------- ------------------ ------------------ -------------------
<S>                    <C>                  <C>                <C>                <C>

        1998           $          3,000,000 $        1,000,000 $        1,000,000 $         5,000,000
        1999                      3,000,000          2,000,000          3,500,000           8,500,000
        2000                      3,000,000          2,500,000          3,741,000           9,241,000
        2001                      3,300,000          3,000,000          4,007,150          10,307,150
        2002                      3,600,000          3,250,000          4,287,650          11,137,650
     Thereafter                  73,500,000         39,750,000         62,369,604         175,619,604
                       -------------------- ------------------ ------------------ -------------------
                       $         89,400,000 $       51,500,000 $       78,905,404 $       219,805,404
                       ==================== ================== ================== ===================

</TABLE>

Capital Requirements of Cleopatra, Cleopatra Hammamet and Cleopatra's World

During  Fiscal 1997,  the Company  negotiated a release of its  guarantee of the
obligation of Cleopatra  under the lease  agreement  related to the Cap Gammarth
Casino following a default by the lessor.

At June 30, 1997, the Company had approximately $2,000,000 remaining to be paid,
as security  deposits and advance rent,  to take  possession of the Cap Gammarth
Casino and Hammamet Casino.  Additionally,  there was  approximately  $6,000,000
remaining  to be paid  for  furniture,  fixtures  and  equipment,  bankroll  and
pre-opening costs for the two casinos.

The Hammamet  Casino was completed and opened on December 6, 1997 (see Note 13).
To finance the remaining expenditures on the Cap Gammarth Casino, the Company is
negotiating  possible joint ventures between NuOasis  International  and foreign
investment groups, and attempting early collections of its receivables.  The Cap
Gammarth Casino is expected to be completed in May 1998.

During  Fiscal  1997,  Cleopatra's  World made a partial  payment to STTG on the
lease on the Cap  Gammarth  Resort  and,  simultaneously,  filed a  request  for
arbitration  in its dispute with STTG  claiming that STTG had breached the lease
by not  completing  for occupancy,  on a timely basis,  the hotel,  the shopping
arcade,  the  health  club or the beach  club  comprising  the  resort,  causing
Cleopatra's  World  significant  loss of revenue and profits.  Subsequent to the
close of Fiscal 1997,  the matter was removed from the  arbitration  calendar by
mutual  agreement  between the  parties,  however,  the dispute has not yet been
resolved.

As to any future  projects  undertaken  by the Company,  NuOasis  International,
Cleopatra or Cleopatra's  World,  additional project financing will be required.
Capital  investments  may include all or some of the following:  acquisition and
development of land,  acquisition of leasehold  investments and contract rights,
and construction of other facilities.  In connection with development activities
relating to potential acquisitions or new jurisdictions,  the Company also makes
expenditures  for  professional  services  which are expenses as  incurred.  The

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-33

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

Company's  financing  requirements  depend upon actual  development  costs,  the
amounts and timing of such expenditures,  the amount of available cash flow from
operations,  the availability of other financing  arrangements including selling
equity  securities,  and selling or borrowing against assets (including  current
facilities).  The Company may also consider strategic combinations or alliances.
Although  there can be no assurance  that the Company can  effectuate any of the
financing strategies discussed above, the Company believes that if it determines
to seek any  additional  licenses to operate  gaming or permits to conduct hotel
operations in other jurisdictions it will be able to raise sufficient capital to
pursue its strategic plan.

If for any reason,  NuOasis  International,  Cleopatra or Cleopatra's  World are
unable to borrow or otherwise meet their commitments under current agreements to
provide the furniture,  fixtures,  equipment and working capital to open the Cap
Gammarth  Casino,  or  acquire  and  develop  future  casino  gaming  and  hotel
management  projects,  the Company may be required to intercede  and provide the
requisite  financing and working capital,  or be forced to sell all or a portion
of the respective  interests,  or lose the respective rights to the projects and
properties entirely.

Legal Proceedings

The Company is involved from time to time,  both as plaintiff and defendant,  in
litigation  that  originates  in the normal  course of business  development  or
operations. Counsel for the Company in each of the matters currently outstanding
as of the date of this report do not believe that any existing  litigation  will
result in an adverse judgment which would have a negative material impact on the
Company's consolidated financial condition.  Accordingly,  no provision has been
made in the accompanying financial statements for such contingencies.

Note 12.    Subsequent Events

Group V

In January 1998, the Company received  consideration  that reduced the principal
balances  due under the  Warrant  Note  issued on the  purchase of the Group V D
Warrants and the Put to $1,080,000 and $720,000, respectively.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-34

<PAGE>

                              NUOASIS RESORTS, INC.
                       (formerly, Nona Morelli's II, Inc.)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 1997 and 1996

Cleopatra Hammamet

In September 1997, to finance the remaining expenditures on the Hammamet Casino,
the  Company  and  Cleopatra  Hammamet  entered  into an  agreement  with Cedric
International  Company  Inc., a Panamanian  corporation  ("Cedric")  pursuant to
which the  Company  and Cedric each  agreed to  contribute  $1.5  million to the
capital  of  Cleopatra  Hammamet,  and  Cedric  further  agreed to provide up to
$3,800,000  for use by  Cleopatra  Hammamet  in making  the first  annual  lease
payments on the Hammamet Casino. In exchange for such capital contribution,  the
Company and Cleopatra agreed to a capital  restructuring  of Cleopatra  Hammamet
which  resulted  in the  Company  holding a direct  70%  interest  in  Cleopatra
Hammamet,  with 70% of this interest  pledged to Cedric with the agreement  that
Cedric will  return such  interest  when the Company  reimburses  Cedric for all
funds advanced prior to the first  anniversary date of such agreement (on an all
or nothing  basis) plus interest at the rate of 15% per annum.  Construction  on
the  Hammamet  Casino was  completed  and the  facility  was equipped and opened
December 6, 1997.  In the event the Company is unable or elects not to reimburse
Cedric for its capital contribution to Cleopatra Hammamet,  the Company's equity
interest in Cleopatra Hammamet will be permanently reduced to 21%.

                                                       [NM\10-KSB\97:63097FS]-26

                                                       F-35