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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended March 31, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
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Commission file number 0-8927
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NEVADA GOLD & CASINOS, INC.
3040 Post Oak Blvd., Suite 675
Houston, Texas 77056-6588
(713) 621-2245
Incorporated in I.R.S. Employer Identification No.
Nevada 88-0142032
Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.12 Per Share
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Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for any
shorter period that the registrant was required to file the reports), and (2)
has been subject to those filing requirements for the past 90 days.
[X] Yes [ ] No
Check here if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this Form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.
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The issuer's revenues for its most recent fiscal year (ending
March 31, 1999): $453,954
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The aggregate market value of the voting and non-voting common equity
held by non-affiliates as of June 30, 1999, was $14,810,629.
The number of shares outstanding of each of the issuer's classes of
common equity was 9,926,790 as of June 30, 1999.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
Nevada Gold & Casinos, Inc., which currently trades under the ticker
symbol "UWIN" (referred to in this Form 10-KSB as "UWIN"), has developed its
business primarily in the areas of gaming, real estate development, and
restaurant franchise operation. UWIN was founded in 1977 under the name Pacific
Gold & Uranium Corporation. On December 27, 1993, control of UWIN changed and
its primary focus was redirected from extractive mining to the development of
gaming and real estate properties in Colorado. UWIN is considered to be in the
development stage since December 27, 1993. In January 1994, UWIN changed its
name from Pacific Gold Corporation to Nevada Gold & Casinos, Inc.
Businesses of Issuer
Gaming Development
In April 1997, UWIN and Isle of Capri Casinos, Inc. ("Isle") (then
known as Casino America, Inc.), through wholly-owned subsidiaries, BlackHawk
Gold, Ltd. ("BHG"), and Casino America of Colorado, Inc. ("CAC"), respectively,
entered into a joint venture, the Isle of Capri- Black Hawk, L.L.C. ("IC-BH").
The purpose of the joint venture was the construction and operation of the IC-BH
Casino (the "Casino") and a hotel on the Black Hawk Property. The Casino opened
for business on December 30, 1998, and the Isle operates the Casino under a
management agreement for a fee based upon a percentage of the Casino's revenues
and operating profit. UWIN contributed property at a net value of $7.5 million
to IC-BH, and its total current ownership interest in IC-BH is 43%.
The Casino, with a 101,000-square-foot floor plate, is the largest
gaming facility in Colorado. The Casino is strategically located so that it is
the first casino encountered by customers traveling from Denver to Black Hawk.
The $112 million Casino features 1,089 slot machines, 14 blackjack tables, three
restaurants, an event center, and a 1,100-space covered parking garage.
Continued operation of the Casino is subject to approval of the Colorado Gaming
Commission, which is currently conducting its annual renewal financial and
background investigation of all members of the joint venture. Construction of a
$29 million 237-room hotel on top of the Casino began in June of 1999 and is
proceeding under a "guaranteed maximum price" contract. The hotel is expected to
be completed in July of 2000. Once the hotel is completed, the Casino will be
the largest hotel in the Black Hawk market.
UWIN intends to identify and pursue additional gaming ventures and
associated real estate resort/entertainment development projects with high
potential rates of return on investment. UWIN will create associations with
successful gaming operators for the acquisition and operation of the gaming
ventures, and will acquire, plan, and develop the real estate projects. UWIN
intends to utilize its expertise - project identification and development - to
create financially attractive investment opportunities while having a small,
knowledgeable, and responsive staff that is able to capitalize on projects in
developing markets.
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Real Estate Development
UWIN, through its wholly-owned subsidiary, Gold Mountain Development,
L.L.C. ("GMD"), owns approximately 170 acres of real property in the vicinity of
Black Hawk, Colorado.
The casinos currently operating in Black Hawk employ in excess of 5,000
individuals. Because only limited residential housing is available in Black
Hawk, these employees generally commute daily for distances of twenty-five miles
or more each way. With the exception of existing casinos, no commercial
facilities exist in Black Hawk to provide even the most basic amenities for
Black Hawk residents.
UWIN has entered into a contract with HealthyPlaces, Inc., to conduct a
feasibility study regarding developing a master-planned residential and
commercial project on the Property, to make proposals regarding a master-planned
community for the Property, and to obtain investors and/or joint venture
partners for it and UWIN in order to finance the projects. Sales of pad sites
may be made to assist in the funding of the project.
Sunrise Land and Minerals Corporation, a Nevada corporation UWIN
acquired in 1995 ("Sunrise"), owns approximately 300 acres of land in Nevada
County, California, including all surface, mineral, water, air, and timber
rights. Sunrise has been inactive since its acquisition in 1995. UWIN intends to
evaluate the highest and best use of Sunrise's land. In addition to potential
sales of sand, gravel, clay, and decorative rock from the property, the property
also has potential for residential and/or resort real estate development.
Restaurant Franchises
In August 1998, Restaurant Connections International, Inc. ("RCI"), was
formed with UWIN as a founding shareholder. UWIN currently owns an approximate
30% interest in RCI. In December 1998, RCI purchased the sole Pizza Hut
franchisee in Sao Paulo, Brazil, which owned and operated 18 Pizza Hut
restaurants and one KFC restaurant in Sao Paulo. The KFC restaurant is currently
being converted into a Pizza Hut restaurant. Additionally, UWIN believes that
gaming may become legalized once again in Brazil, and feels that having an
existing business presence in Brazil through RCI may give UWIN an advantage in
that market. However, UWIN cannot assure that gaming will become legalized again
in Brazil, or that it would in fact have an advantage if gaming is legalized in
Brazil. The Chairman of RCI is James Wong, who was elected a Director of UWIN in
March of 1999, and who is a turn-around expert and external change agent who has
done consulting work for Pizza Hut International, KFC, PepsiCo Food Systems,
American Express, ARCO, Budget Rent-A-Car, Compaq, EDS, Hitachi, Honeywell, and
other national and international corporations. The President of RCI is John
Wright, a former President of Wendy's International, Inc., among other
companies.
Mining Interests
In June 1998, Goldfield Resources, Inc. ("Goldfield"), a Nevada
corporation, was organized as a wholly-owned subsidiary of UWIN. The Board of
Directors approved the transfer of UWIN's land and Bureau of Land Management
mining claims in the State of Nevada, totaling
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approximately 9,000 mining claims, to Goldfield in exchange for shares of common
stock of Goldfield. Goldfield is not directly involved in mining operations, and
has secured a mining lease for its properties with Romarco Nevada, Inc.
("Romarco"), and retains a royalty interests under the lease. This lease permits
Goldfield to benefit financially from successful mining operations without
incurring the significant labor and machinery costs of operating mining
projects.
Competition
Casino
The gaming and casino industry is subject to intense competition,
particularly in the State of Colorado. As the number of gaming establishments in
Colorado has increased over the past three years, average revenues for some of
the smaller casinos located in Colorado have declined significantly. Future
initiatives could expand limited gaming in Colorado to other locations. In
addition to competing with other casinos in Black Hawk, the Casino may compete
for customers with casinos in other gaming jurisdictions. While UWIN believes
the Casino has some competitive advantages over the other gaming establishments
in the area as a primary result of its size and location, UWIN believes that
national, regional, state, and local competition for the gaming markets, in
general, will be extremely intense during the foreseeable future. Many potential
competitors have greater financial resources and have more experience and
expertise at operating casinos.
The Black Hawk Gaming Market consists of the cities of Black Hawk and
Central City, which are located approximately 35 miles west of Denver and
approximately 16 miles from Interstate 70, the main east-west artery from
Denver. Customers of the Black Hawk Gaming Market are primarily "day trippers"
from within a 100-mile radius of Black Hawk and Central City, which includes the
major population centers of Denver, Boulder, Fort Collins, and Golden, Colorado,
and Cheyenne, Wyoming. The Black Hawk Gaming Market is primarily characterized
by numerous small, privately- and publicly-owned gaming facilities. However, the
main competition for the Casino are the larger gaming facilities located in
Black Hawk, particularly those with a considerable number of on-site parking
spaces, established brand names, and existing reputations in the local market.
The Casino is currently the largest casino in Black Hawk in terms of gaming
positions, with Harvey's Wagon Wheel Casino Hotel, Colorado Central Station,
Bullwhackers, Canyon Casino, Fitzgerald's Black Hawk, and The Lodge Casino as
the largest primary competitors, each of which also offer on-site parking.
The Casino's closest competition is Colorado Central Station, which is
located at the intersection of Mill and Main Streets across from the Casino.
Colorado Central Station has approximately 700 slot machines, about 20 table
games, amenities such as a food court and bar, and around 690 valet parking
spaces.
Two additional casinos are under construction in Black Hawk. Riviera's
casino is under construction on a site directly across Main Street from the
Casino. Riviera reports that its facility is expected to contain a 31,000
square-foot casino with 1,000 slot and video poker machines and 14 gaming
tables, as well as a 400-seat entertainment lounge and a 550-space covered
parking garage, with an anticipated opening scheduled in December 1999. Also
expected to open in the first quarter of 2000 is Mardi Gras - Black Hawk, which
is currently under construction. Mardi
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Gras is expected to be a 68,000-square-foot casino, with 700 slot and video
poker machines, 8 blackjack tables, and a 500-space parking garage. These two
new casinos in Black Hawk are likely to create additional competition for IC-BH.
Casinos in Cripple Creek, Colorado (located a driving distance of 110
miles to the south of the Black Hawk Gaming Market), and the Native American
casinos located in the southwestern corner of Colorado, constitute the other
gaming competition in the state. UWIN believes that Cripple Creek provides only
limited competition to the Black Hawk Gaming Market because of its distance from
the Black Hawk Gaming Market and its relatively smaller facilities with fewer
amenities. UWIN believes that the Native American casinos are also too far
removed from the Black Hawk Gaming Market to provide any significant
competition.
Real Estate Development
UWIN anticipates that real estate development in the Black Hawk area
will become highly competitive. Certain of UWIN's competitors have or may have
significantly more real estate development experience and may have significantly
greater financial resources, permitting more extensive and more rapid
development. Other real estate developers have announced plans for multiple-use
real estate projects. UWIN assumes that other developers may do the same, all of
whom may proceed with real estate developments prior to UWIN.
Restaurants
Other global fast food restaurants have entered the Brazilian
marketplace and are general competitors of RCI. McDonald's, Bob's, and Subway
have each established a presence in Sao Paulo and in other areas of Brazil.
Domino's re-entered the pizza delivery market in Sao Paulo, Brazil in 1998, but
has closed two of its four locations. These restaurants and others have
significantly greater financial and other resources that could significantly
affect RCI's operations.
Mining Operations
Because of the current low price for gold, the entire gold mining
industry is depressed. The majority of mining companies cannot profitably
conduct mining operations and are not acquiring mining leases from landowners or
holders of mining claims. In general, mining leases with mining companies are
extremely difficult to obtain and retain in today's market. While UWIN's
wholly-owned subsidiary currently has a lease for its gold mining properties
with Romarco, UWIN cannot assure that the properties will always be leased or
that Romarco will not breach its lease agreement.
Governmental Regulations
Gaming
The ownership and operation of gaming facilities in Colorado are
subject to extensive state and local regulations. No gaming may be conducted in
Colorado unless licenses are obtained from the Colorado Limited Gaming Control
Commission (the "Gaming Commission"). In addition, the State of Colorado created
the Division of Gaming (the "CDG") within its
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Department of Revenue to license, implement, regulate, and supervise the conduct
of limited stakes gaming. The Director of the CDG ("CDG Director"), under the
supervision of the Gaming Commission, has been granted broad powers to ensure
compliance with the law and regulations. The Gaming Commission, CDG, CDG
Director, and the city authorities in Black Hawk that have responsibility for
regulation of gaming are collectively referred to as the "Colorado Gaming
Authorities."
The laws, regulations, and supervisory procedures of the Colorado
Gaming Authorities seek to maintain public confidence and trust that licensed
limited gaming is conducted honestly and competitively, that the rights of the
creditors of licensees are protected, and that gaming is free from criminal and
corruptive elements. The Colorado Gaming Authorities' stated policy is that
public confidence and trust can be maintained only by strict regulation of all
persons, locations, practices, associations, and activities related to the
operation of the licensed gaming establishments and the manufacture and
distribution of gaming devices and equipment.
The Gaming Commission is empowered to issue five types of gaming and
related licenses. The Casino in Black Hawk requires a retail gaming license,
which must be renewed each year, and the Colorado Division has broad discretion
to revoke, suspend, condition, limit, or restrict the licensee at any time.
Under Colorado gaming regulations, no person or entity can have an ownership
interest in more than three retail licenses, and UWIN's business opportunities
will be limited accordingly. The Casino's license, which was initially obtained
in 1998, is renewable annually. While UWIN believes that it has complied with
all requirements for maintaining IC-BH's gaming license, UWIN cannot assure that
no problems will arise during the renewal process.
UWIN cannot assure that it will be able to comply with or conduct
business in accordance with applicable regulations. Furthermore, UWIN cannot
assure that additional state or federal statutes or regulations will not be
enacted at some future date that could have a material adverse effect on its
business operations.
Real Estate Development
The proposed real estate development will be contingent upon UWIN
receiving all required licenses, permits, and authorizations, including state
and local land-use permits; excavation, building, and zoning permits;
architectural approvals; approval of street and traffic signal improvements; and
health and safety permits. Also, unanticipated changes or concessions required
by local, regulatory, and/or state authorities, or challenges from local or
special interest groups, could involve significant costs and could prevent or
delay the development of the real estate project. UWIN cannot assure that it
will receive the necessary permits, licenses, and approvals for the development
and construction of the real estate project. Any failure to receive any required
approvals could have a material impact on the real estate project and the
development potential.
RCI/Brazilian Law
The operation of RCI's restaurants in Brazil is subject to Brazilian
rules and regulations. UWIN believes RCI is in compliance with all of the
applicable rules and regulations, but cannot
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assure that RCI will continue to comply with them. Failure of RCI to comply with
existing or future regulations may have an adverse effect on RCI's operations.
Environmental Considerations
Casino
The Casino and hotel complex in Black Hawk is located in an area that
has been designated by the United States Environmental Protection agency ("EPA")
as a Superfund site on the National Priorities List due to contamination from
historic mining activity in the area. The EPA is entitled to proceed against
owners and operators of properties located within the Superfund site for
remediation and response costs associated with their properties and with the
entire site. The Casino is located within the drainage basin of the North Clear
Creek and, therefore, subject to potentially contaminated ground water from
upstream mining-related sources. Soil and ground water samples on the site
indicate that several contaminants existed in concentrations exceeding drinking
water standards. An affiliate of UWIN, in cooperation with the EPA and the
Colorado Department of Health, performed environmental analyses and tests and
removed all mined waste located on the gaming site. UWIN funded a total of
$583,290 to its affiliate to complete the remediation, which has been
capitalized as cost of the property. No further remedial activity has been
required to date with respect to the Casino property.
Real Estate Development
UWIN's real property in the vicinity of Black Hawk is also located in
an EPA National Priorities List area. A portion of the real estate development
property has already been remediated by UWIN's affiliate company mentioned
above; the remediation included disposing of waste tailings and rock located on
the property. This remediation was performed under a consent order in agreement
with the EPA and the EPA has issued a notification that no further action is
required to remediate known contamination on the parcel. UWIN cannot assure that
the EPA or other governmental entity, including an agency of the State of
Colorado, will not require additional remediation for contaminated soil that
might be uncovered during excavation or construction of the real estate
development project or for contamination in the groundwater that sampling might
disclose. No further remedial activity has been required to date with respect to
this real property.
Mining
Gold mining operations must be conducted in accordance with state and
federal rules and regulations. Under the lease agreement between UWIN's
wholly-owned subsidiary and Romarco, Romarco is primarily responsible for all
compliance and it has agreed to indemnify UWIN's subsidiary. However, Romarco's
failure to comply with any of the applicable rules or regulations could create
potential liability for UWIN's subsidiary.
Employees
As of March 31, 1999, UWIN has a staff of seven full-time employees who
are employed in executive, legal, accounting, and administrative functions.
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ITEM 2. PROPERTIES
General
UWIN's principal real properties consist of its 43% ownership interest
in IC-BH, which owns the Casino-hotel complex in Black Hawk, the 170 acres of
undeveloped land in and around Black Hawk, Colorado, and the 300 acres of
undeveloped land in Nevada County, California. The Colorado and the California
properties are intended for residential, commercial, and resort real estate
development. UWIN's mining properties are located in the Goldfield Mining
District of Nye and Esmeralda Counties, Nevada.
UWIN leases approximately 3,500 square feet of office space in Houston,
Texas, and a 1,300 square foot apartment/office in Denver, Colorado. The total
monthly rental for both facilities is currently $4,300. UWIN believes that its
existing facilities are adequate to meet its current needs and to accommodate
anticipated growth.
Investment Policies
UWIN has no limitations on the percentage of its assets that may be
invested in any one investment, or type of investment, and a change in this
policy does not require a vote of shareholders. UWIN acquires assets primarily
for possible income. UWIN is continually investigating new opportunities.
Descriptions of Real Estate and Operating Data
Casino-Hotel Complex
UWIN's primary asset is its 43% ownership interest in the Isle of Capri
- - Black Hawk Casino in Black Hawk, Gilpin County, Colorado. The Casino is
subject to liens created by the debt offering of $75 million in 13% First
Mortgage Notes through Jefferies & Company, Inc. (the "Notes"), that was used as
part of the financing for the Casino construction. The Notes mature August 31,
2004. Management of UWIN believes this property to be adequately covered by
insurance. The realty tax rate on this property is $28.021 per $1,000 in
property value; the annual realty taxes on this property are approximately
$65,500, and these taxes are paid for by IC-BH.
170 Acres of Undeveloped Land in and near Black Hawk, Gilpin County,
Colorado
UWIN's second largest asset is the 170 acres of undeveloped land
located in and near Black Hawk, Gilpin County, Colorado. This property is
subject to liens in the aggregate amount of $655,253, and $600,000 of that debt
obligation matures on August 19, 1999. UWIN is currently seeking refinancing of
the $600,000 debt. Because the land is undeveloped, no insurance is carried for
this acreage. The realty tax rate on this property is $28.021 per $1,000 in
property value, and the annual realty taxes on this property are approximately
$3,500.
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ITEM 3. LEGAL PROCEEDINGS
UWIN is not currently engaged in any material litigation that is not
routine or merely incidental to its business.
UWIN and H. Thomas Winn, its Chief Executive Officer and President,
have entered into a settlement agreement in principal with the staff of the
Denver Regional Office of the Securities and Exchange Commission ("Commission").
The settlement relates to the sale of certain unregistered shares of common
stock of UWIN through an affiliate of UWIN in order to, in part, finance UWIN's
operating expenses. Without admitting or denying any allegations, Mr. Winn will
accept a censure and UWIN and Mr. Winn will accept a cease and desist order from
committing any violations or causing any future violations of Sections 5(a) and
5(c) of the Act. The settlement offer is currently pending Commission approval.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 1, 1999, UWIN held its Annual Shareholders' Meeting in
Houston, Texas, and submitted several matters to the shareholders for approval.
First, Mr. Hubert T. Wen chose not to stand for re-election as a Director of
UWIN, and Mr. James Wong was nominated as a Director to take Mr. Wen's place.
The remaining three Directors, H. Thomas Winn, William G. Jayroe, and Paul
Burkett, all stood for re-election. Messrs. Wong, Winn, Jayroe, and Burkett were
all elected by a majority vote of the shareholders to serve as Directors of
UWIN. Second, a majority of the shareholders voted to amend the Articles of
Incorporation of UWIN to provide for a general business purpose for the Company
and to allow UWIN, through its Board of Directors, the right to redeem the
shares of stock of UWIN owned by any shareholder in the event that the
shareholder's ownership of the shares prevents the issuance or renewal of any
gaming license sought or owned by UWIN. Third, a majority of the shareholders of
UWIN approved the adoption of the 1999 Stock Option Plan, which allows the
Compensation Committee of the Board of Directors to award stock options,
performance stock, restricted stock, and stock appreciation rights to applicable
persons, and for which 1,200,000 shares of stock in UWIN have been set aside.
Finally, a majority of the shareholders of UWIN ratified the selection of
Pannell Kerr and Forster of Texas, P.C., as auditors for UWIN for the fiscal
year ending March 31, 1999.
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Part II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Nevada Gold and Casinos, Inc.'s common stock is traded on the
bulletin board under the symbol UWIN. The market for UWIN's common stock is
limited, volatile, and sporadic. The following table sets forth the high and
low sales prices relating to UWIN's common stock for the last two fiscal years.
These quotations reflect inter-dealer prices without retail mark-up, mark-down,
or commission, and may not reflect actual transactions:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------------------------
MARCH 31, 1999 MARCH 31, 1998
-------------------- ----------------------
HIGH BID LOW BID HIGH BID LOW BID
-------- ------- -------- -------
<S> <C> <C> <C> <C>
First Quarter $4.250 $2.156 $2.250 $1.375
Second Quarter 4.090 2.750 3.125 1.500
Third Quarter 5.688 3.688 2.125 1.250
Fourth Quarter 6.250 3.500 2.875 2.000
</TABLE>
Holders
As of June 30, 1999, UWIN had approximately 4,400 shareholders of
record.
Dividends
No dividends have ever been declared by UWIN on its common stock.
During the year ended March 31, 1999, UWIN paid dividends on its preferred
stock totaling $200,000. UWIN's losses do not currently indicate the ability
to pay any additional cash dividends, and UWIN does not indicate the intention
of paying cash dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussions of UWIN's results of operations and
financial position should be read in conjunction with the financial statements
and notes pertaining to them that appear elsewhere in this Form 10-KSB.
Management is of the opinion that inflation and changing prices, including
foreign exchange fluctuations, will have little, if any, effect on UWIN's
financial position or results of operations.
General
UWIN is primarily engaged in gaming, real estate development, and
restaurant franchise operations. Since 1993, UWIN's primary focus has been on
the development of its gaming and real estate properties in Colorado. UWIN is
a development stage enterprise that has reported net losses of $1,661,331 and
$2,580,644 for the fiscal years ended March 31, 1999, and 1998. UWIN's current
cash flow forecasts indicate that it will have negative cash flows from
operations for fiscal 2000. The long-term viability of UWIN is dependent on
successful
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operation of the Casino-hotel complex and the ability to raise additional debt
and equity. The accompanying financial statements have been prepared assuming
that UWIN will continue as a going concern. The short-term viability of UWIN
is dependent upon UWIN's ability to raise sufficient capital to meet its cash
requirements. In addition, UWIN and its venture partner, Isle, have developed
the Casino that commenced operations in December 1998; however, UWIN cannot
assure that the Casino will continue to be successful. The ownership and
operation of gaming facilities are subject to extensive state and local
regulations. UWIN cannot assure that it or Isle will be able to continue to
comply or conduct business in accordance with the applicable regulations. The
long-term viability of UWIN is dependent upon the continued successful
operation of the Casino and successful completion and operation of the hotel
being constructed on top of the Casino. The factors described above raise
substantial doubt about UWIN's ability to continue as a going concern. The
accompanying financial statements have been prepared assuming that UWIN will
continue as a going concern. If UWIN is unable to continue as a going concern,
the values realized from UWIN's assets may be less than the carrying amounts
reported in its financial statements. The accompanying financial statements do
not include any adjustments relating to the recoverability and classification
of asset-carrying amounts or the amount and classification of liabilities that
might result should UWIN be unable to continue as a going concern.
UWIN's 43% ownership of the IC-BH is being accounted for using the
equity method of accounting. UWIN's investment in the joint venture is stated
at cost, adjusted for its equity in the undistributed earnings or losses of the
project. During UWIN's year ended March 31, 1999, IC-BH's losses allocable to
UWIN through April 25, 1999, IC-BH's fiscal year end, totaled $2,155,710. In
accordance with the equity method of accounting, UWIN's investment account
balance was reduced to zero, and the remaining allocated loss of $1,499,436 is
not reflected in the financial statements.
Property held for development consists of undeveloped land located in
and around Black Hawk, Colorado, and Nevada County, California. UWIN has
capitalized certain direct costs of pre-development activities together with
capitalized interest. Property held for development is carried at the lower of
cost or net realizable value.
New Accounting Pronouncements
In November 1998, the Financial Accounting Standards Board ("FASB")
issued SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities," which established accounting and reporting standards for
derivative instruments and hedging activities. It requires that entities
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The provisions
of this statement are effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999. UWIN believes that this standard will not have
a material impact on its financial statements or the disclosures to the
financial statements.
Statement of position ("SOP") 98-5 "Reporting on the Cost of Start-up
Activities," requires all start-up and organizational costs to be expensed as
incurred. It also requires all remaining historically capitalized amounts of
these costs existing at the date of adoption to be expensed and reported as the
cumulative effect of a change in accounting principles. SOP 98-5 is effective
for all fiscal years beginning after December 31, 1998. UWIN believes the
adoption of SOP 98-5 will not have a material effect on its financial
statements.
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Results of Operations
Comparison of fiscal years ended March 31, 1999, and 1998
REVENUES. Revenues increased 196.3%, or $300,742, to $453,954 in the
year ended March 31, 1999, compared to $153,212 in fiscal 1998. The revenue
increase was attributable primarily to the factors set forth below.
INTEREST INCOME. Interest income increased to $86,693 in fiscal year
1999, from $0 in fiscal 1998. The increase was due primarily to loans to CCH,
an affiliate of UWIN, by GMD, a wholly-owned subsidiary of UWIN, of
approximately $1,325,000. As of March 31, 1999, the balance due to GMD on
these loans to the affiliate was $1,306,547.
OTHER INCOME. Other income increased 97.2%, or $3,010, to $6,106 in
the year ended March 31, 1999, compared to $3,096 in fiscal 1998. This
increase is due primarily to proceeds received from granting the City of Black
Hawk an easement for a water project on some of the GMD properties.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses decreased 24.8%, or $142,468, to $431,309 in the year ended March 31,
1999, compared to $573,777 in fiscal 1998. Although UWIN experienced an
increase in travel expenses of approximately $30,000, the decrease was
primarily due to a reduction in commissions and land maintenance fees of
approximately $124,000. Also, UWIN began paying Mr. Winn's salary directly in
September 1998, and therefore its contract with Aaminex for the services of Mr.
Winn, which was classified as a general and administrative expense, was
terminated in September 1998.
INTEREST EXPENSE. Interest expense increased 1.4%, or $3,008, to
$220,578 in the year ended March 31, 1999, compared to $217,570 in fiscal 1998.
SALARIES. Salaries increased 23.9%, or $59,827, to $310,037 in the
year ended March 31, 1999, compared to $250,210 in fiscal 1998. The increase
was due primarily to UWIN beginning, in September 1998, to pay Mr. Winn
directly a sum of $8,333 per month instead of through a retainer agreement with
Aaminex, as UWIN had done previously.
LEGAL AND PROFESSIONAL FEES. Legal and professional fees decreased
52.7%, or $339,243, to $304,824 in the year ended March 31, 1999, compared to
$644,067 in the year ended March 31, 1998. The decrease is primarily due to
UWIN expensing approximately $442,000 in consulting expenses from stock options
in fiscal 1998, as opposed to $0 in stock options in the year ended March 31,
1999. Additionally, $144,000 related to restricted stock issued for payment
for professional services in the year ended March 31, 1999, as compared to
$40,000 in professional services incurred in the year ended March 31, 1998.
OTHER EXPENSES. Other expenses increased 43.6%, or $33,445, to
$110,173 in the year ended March 31, 1999, compared to $76,728 in the year
ended March 31, 1998. The increase was due primarily to a write-off of
approximately $22,500 in expenses incurred in investigating an outside project.
12
<PAGE> 13
Historical Cash Flows
OPERATING ACTIVITIES. Cash used in operating activities during the
year ended March 31, 1999, amounted to $972,490, a decrease of 16.6%, or
$194,049 over the $1,166,539 of cash used for operations during fiscal 1998.
INVESTING ACTIVITIES. Cash used in investing activities during the
year ended March 31, 1999, amounted to $2,272,187, an increase of $3,009,555,
over the $737,368 of cash provided from investing activities in fiscal 1998.
The increase relates primarily to the repurchase of an interest in the Isle of
Capri for $500,000, advances to affiliates and RCI of $1,610,662, and
capitalized real estate costs of $191,881. The increase also is a result of a
$833,334 increase in cash in fiscal 1998 from the sale of a part interest in
Isle of Capri.
FINANCING ACTIVITIES. UWIN has financed its operating and investing
activities primarily from the proceeds of private placements of its common
stock and through debt. During the year ended March 31, 1999, UWIN received
$1,170,263 from cash sales of its common stock, an increase of 229.3%, or
$814,871, over the $355,392 received from cash sales of common stock in the
year ended March 31, 1998. During the year ended March 31, 1999, UWIN received
proceeds of $2,352,386 from debt, an increase of 99.5%, or $1,172,890, over the
$1,179,496 received from proceeds of debt in the year ended March 31, 1998.
During the year ended March 31, 1999, UWIN expended $271,105 for payments on
outstanding debt, a decrease of 73.7%, or $758,490, over the $1,029,595
expended for payments on outstanding debt in fiscal 1998.
Liquidity and Capital Resources
UWIN has financed its operations to date primarily through equity
securities and debt financing. During the year ended March 31, 1999, UWIN
borrowed over $1.7 million in short-term indebtedness to fund operations at an
annual interest rate of 12%. Of this amount, a $100,000 loan matured and was
paid in May 1999; $1,600,000 matures in August 1999, and UWIN is currently
seeking to refinance this debt or to convert this debt into equity; and $35,000
is due on demand. UWIN has an aggregate of $16,522 in mortgages payable at
interest rates of 8-8.5% due during its fiscal year ending March 31, 2000. In
addition, UWIN has an aggregate of $12,420 in long-term notes and capital
leases due during its fiscal year ending March 31, 2000.
As of March 31, 1999, UWIN had a cash balance of $161,234, and working
capital deficit of $1,523,117. As of the date of this Form 10-KSB, UWIN has
sufficient working capital to fund operations through July 1999. UWIN needs
additional financing to pursue its business strategy and the financing may be
raised through best efforts debt and/or equity offerings. In addition, UWIN is
currently negotiating for and seeking additional financing that management
believes will be consummated; however, UWIN cannot assure that the additional
financing will be achieved or that any financing obtained will be sufficient to
meet UWIN's working capital needs. If adequate funds are not available to
satisfy either short or long-term capital requirements, UWIN may be required to
limit its operations significantly, sell assets, or otherwise bring cash flow
into balance. UWIN does not expect that its internal source of liquidity will
improve until sufficient net cash is provided by operating activities and,
until then, UWIN will rely upon external sources for liquidity.
13
<PAGE> 14
Year 2000 Compliance Issues
The year 2000 poses certain issues for business and consumer
computing, particularly the functionality of software for two-digit storage of
dates and special meanings for certain dates such as 9/9/99. The year 2000 is
also a leap year, which may also lead to incorrect calculations, functions, or
system failure. The problem exists for many kinds of software, including
software for mainframes, PCs, and embedded systems.
In assessing the effect of the Year 2000 problem on UWIN, management
has identified, and is currently evaluating, the following three general areas:
Internal infrastructure;
Supplier/third-party relationships; and
Contingency plans.
A discussion of the three general areas as well as management's
ongoing and planned actions with regard to each is set forth below:
INTERNAL INFRASTRUCTURE. UWIN is in the process of verifying that all
of its personal computers, servers, and software are Year 2000 compliant. UWIN
is in the process of replacing or upgrading all items that have been found not
to be Year 2000-compliant. UWIN intends to determine if the software vendors
of all its critical applications have represented that their products are Year
2000-compliant. UWIN intends to obtain certification from its vendors that
these systems are Year 2000-compliant. The costs related to these efforts have
not been nor are they expected to be material to UWIN's business, financial
condition, or results of operations.
SUPPLIERS/THIRD-PARTY RELATIONSHIPS. UWIN intends to gather
information from vendor Web sites and available compliance statements to
identify and, to the extent possible, resolve issues involving the Year 2000
problem. UWIN relies on outside vendors for water, electrical, and
telecommunications services as well as climate control, building access, and
other infrastructure services. UWIN does not intend to independently evaluate
the Year 2000-compliance of the systems utilized to supply these services.
UWIN has received no assurance of compliance from the providers of these
services. UWIN cannot assure that these suppliers will resolve any or all Year
2000 problems with these systems before the occurrence of a material disruption
to UWIN's business. Any failure of these third-parties to resolve Year 2000
problems with their systems in a timely manner could have a material adverse
effect on UWIN's business, financial condition, or results of operation.
CONTINGENCY PLANS. UWIN has not currently developed a formal
contingency plan to be implemented as part of its efforts to identify and
correct Year 2000 problems affecting its internal systems. However, if UWIN
deems it necessary, it may take the following actions:
Accelerated replacement of affected equipment or software;
Short to medium-term use of backup equipment and software;
Wholesale backup of existing computerized data prior to
January 1, 2000;
Increased work hours for UWIN personnel; and/or
Other similar approaches.
14
<PAGE> 15
If UWIN is required to implement any of these contingency plans, these
plans could have a material adverse effect on UWIN's business, financial
condition, or results of operations.
Based on the actions taken to date as discussed above, UWIN is
reasonably certain that it has or will identify and resolve all Year 2000
problems that could materially adversely affect its business and operations.
ITEM 7. FINANCIAL STATEMENTS
The information required under Item 310(a) of Regulation S-B is
included in this report as set forth in the "Index to Financial Statements."
Index to Financial Statements
Report of independent public accountants 16
Balance sheets 17
Statements of operations 18
Statements of stockholders' equity 19-22
Statements of cash flows 23
Notes to financial statements 24-37
15
<PAGE> 16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Nevada Gold & Casinos, Inc.:
We have audited the accompanying consolidated balance sheets of Nevada Gold &
Casinos, Inc. and subsidiaries (a Nevada corporation in the development stage)
as of March 31, 1999 and 1998 and the related statements of operations,
stockholders' equity and cash flows for the years then ended and the 1999,
1998, and 1997 amounts included in the cumulative amounts during the
development stage (Inception - December 27, 1993). 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 audits. We did
not audit the financial statements of the Company for the periods prior to
April 1, 1996. Those statements were audited by other auditors whose report
has been furnished to us and our opinion, insofar as it relates to amounts for
the periods prior to April 1, 1996, included in the cumulative totals, is based
solely upon the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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 audits and the report of the other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Nevada Gold & Casinos, Inc. and
subsidiaries as of March 31, 1999 and 1998, and the results of their operations
and their cash flows for the years then ended and for the 1999 and 1998 amounts
included in the cumulative amounts for the period from Inception to March 31,
1999, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, revenues have not been
sufficient to cover the Company's operating expenses during the past several
years. In addition, there have been no significant revenues from the Company's
gaming operations to date since these activities are currently in the
development stage. Management does not expect significant increases in
revenues from any of its operations over the next year. The Company will
require substantial additional capital to fund the continued development of
gaming operations and real estate properties and to cover the Company's
anticipated operating deficits and debt maturities over the next several years.
The Company intends to fund such capital requirements through a combination of
debt and equity offerings. However, there is no assurance that these offerings
will be successful or that proceeds from these offerings, if successful, will
be sufficient to meet all of the Company's future cash requirements. The short
term viability of the Company is dependent upon the Company's ability to raise
sufficient capital to meet its cash requirements. In addition, the Company has
signed an Operating Agreement with Isle of Capri Casinos, Inc. (formerly known
as Casino America, Inc.), concerning the development and operation of a casino.
The casino commenced operations in December 1998. However, there is no
assurance that the casino will continue to be successful. The ownership and
operation of gaming facilities are subject to extensive state and local
regulations. There is no assurance that the Company will be able to comply or
conduct business in accordance with applicable regulations. The long term
viability of the Company is dependent upon successful completion and operation
of a casino hotel complex. The factors described above raise substantial doubt
about the Company's ability to continue as a going concern. The accompanying
financial statements have been prepared assuming that the Company will continue
as a going concern. If the Company is unable to continue as a going concern,
the values realized from the Company's assets may be less than the carrying
amounts reported in its financial statements. The accompanying financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern.
Pannell Kerr Forster of Texas, P.C.
Houston Texas
June 25, 1999
16
<PAGE> 17
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1999, AND 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 161,234 $ 154,367
Notes receivable 154,763 65,000
Other assets 153,315 18,211
------------- -------------
TOTAL CURRENT ASSETS 469,312 237,578
Investment in Isle of Capri Black Hawk -- 599,828
Colorado Real Estate (Gold Mountain Development, LLC.) 1,807,489 1,676,809
Mining properties (Goldfield Resources, Inc.) 480,812 480,812
Sunrise Land & Minerals, Inc. 371,750 525,000
Note Receivable from Affiliate 1,306,547 --
Furniture, fixtures and equipment, net of accumulated depreciation
Of $114,767 in 1999 and $81,677 in 1998 93,836 95,672
------------- -------------
TOTAL ASSETS $ 4,529,746 $ 3,615,699
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 102,494 $ 56,248
Accrued interest payable 125,993 49,154
Short term notes payable 1,735,000 279,591
Current portion of long term debt 28,942 73,187
------------- -------------
TOTAL CURRENT LIABILITIES 1,992,429 458,180
------------- -------------
LONG-TERM DEBT
Mortgages payable, net of current portion 38,731 111,023
Notes payable, net of current portion 508,240 521,718
------------- -------------
TOTAL LONG-TERM DEBT 546,971 632,741
------------- -------------
OTHER LIABILITIES
Deferred gain - 591,404
------------- -------------
TOTAL LIABILITIES 2,539,400 1,682,325
------------- ------------
STOCKHOLDERS' EQUITY
Preferred stock, $10 par value, 500,000 shares authorized,
141,490 shares outstanding at
March 31, 1999 and 1998, respectively 1,414,900 1,414,900
Common stock, $.12 par value, 20,000,000 shares authorized,
9,811,664 and 8,822,464 shares outstanding
March 31, 1999, and 1998, respectively 1,177,400 1,058,696
Additional paid in capital 8,695,495 7,095,896
Accumulated deficit prior to development stage (12/27/93) (2,296,077) (2,296,077)
Accumulated deficit during development stage (7,001,372) (5,340,041)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 1,990,346 1,933,374
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 4,529,746 $ 3,615,699
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 18
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1999, AND 1998
INCLUDING CUMULATIVE AMOUNTS DURING DEVELOPMENT STAGE SINCE DECEMBER 27, 1993
<TABLE>
<CAPTION>
CUMULATIVE
AMOUNTS
DURING
DEVELOPMENT
STAGE (SINCE
1999 1998 12/27/93)
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES
Royalty income $ 16,000 $ 15,000 $ 235,000
Gain on sale-part interest Isle of Capri
Black Hawk 147,851 135,116 282,967
Gain on sale of Colorado Real Estate 197,304 -- 197,304
Interest income 86,693 -- 86,693
Other income 6,106 3,096 505,372
------------- ------------ -------------
TOTAL REVENUES 453,954 153,212 1,307,336
------------- ------------ -------------
EXPENSES
General and administrative 431,309 573,777 2,134,242
Interest expense 220,578 217,570 925,170
Salaries 310,037 250,210 839,231
Legal and professional fees 304,824 644,067 2,216,842
Other 110,173 76,728 483,355
------------- ------------ -------------
TOTAL EXPENSES 1,376,921 1,762,352 6,598,840
------------- ------------ -------------
EQUITY IN EARNINGS (LOSS) OF ISLE OF
CAPRI BLACK HAWK (656,275) (971,504) (1,627,779)
EQUITY IN EARNING (LOSS) OF RCI (82,089) -- (82,089)
------------- ------------- -------------
NET LOSS $ (1,661,331) $ (2,580,644) $ (7,001,372)
============= ============= =============
PER SHARE INFORMATION
Net loss $ (1,661,331) $ (2,580,644) $ (7,001,372)
Preferred stock dividends accumulated (169,788) (146,047) (342,865)
------------- ------------- -------------
Loss available to common stockholders $ (1,831,119) $ (2,726,691) $ (7,344,237)
============= ============= =============
Weighted average number of common
Shares outstanding 9,274,986 8,494,093 7,373,512
============= ============= =============
Net loss per common share - basic $ (.20) $ (.32) $ (1.00)
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 19
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1999, AND 1998
INCLUDING CUMULATIVE AMOUNTS DURING DEVELOPMENT STAGE SINCE DECEMBER 27, 1993
[CAPTION]
<TABLE>
Stock Preferred Stock Common Stock
Subscriptions Shares Amount Shares * Amount
------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance at 3/31/93 $ - - $ - 1,426,939 $ 171,233
Stock issued for cash 133,333 16,000
Stock issued for property
12/27/93 3,166,667 380,000
Cash for stock subscriptions 295,500
Contribution of salaries to paid in
Capital by officer
Net loss
----------- ------- -------- --------- -----------
Balance at 3/31/94 295,500 4,726,939 $ 567,233
Stock subscriptions outstanding (295,500)
Stock issued for property
8/1/94 2,204,434 264,532
Stock issued for cash 3/31/94 390,000 46,800
Stock issued for cash 4/15/94 392.400 47,088
Stock issued for cash 8/15/94 295,371 35,445
Net loss
----------- ------- -------- --------- -----------
Balance at 3/31/95 $ - - $ 8,009,144 $ 961,098
-
Stock issued for cash 2/7/96 2,784 334
Stock issued associated with debt
Offering 3/31/96 9,820 1,178
Stock issued for promotional and
Employee benefits 2/8/96 4,151 498
Stock issued for accounting
Expenses 2/8/96 7,472 897
<CAPTION>
Additional Total
Paid Accumulated Stockholders'
In Capital Deficit Equity
---------- ----------- -------------
<S> <C> <C> <C>
Balance at 3/31/93 $ 2,559,028 $ (2,296,077) $ 434,184
Stock issued for cash 84,000 100,000
Stock issued for property
12/27/93 703,000 1,083,000
Cash for stock subscriptions 295,500
Contribution of salaries to paid in
Capital by officer 1,000 1,000
Net loss (113,203) (113,203)
------------ ------------- ------------
Balance at 3/31/94 $ 3,347,028 $ (2,409,280) $ 1,800,481
Stock subscriptions outstanding (295,500)
Stock issued for property
8/1/94 182,468 447,000
Stock issued for cash 3/31/94 46,800
Stock issued for cash 4/15/94 541,512 588,600
Stock issued for cash 8/15/94 486,610 522,055
Net loss (434,364) (434,364)
------------ ------------- ------------
Balance at 3/31/95 $ 4,557,618 $ (2,843,644) $ 2,675,072
Stock issued for cash 2/7/96 5,930 6,264
Stock issued associated with debt
Offering 3/31/96 20,917 22,095
Stock issued for promotional and
Employee benefits 2/8/96 13,189 13,687
Stock issued for accounting
Expenses 2/8/96 24,834 25,731
</TABLE>
19
<PAGE> 20
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1999, AND 1998
INCLUDING CUMULATIVE AMOUNTS DURING DEVELOPMENT STAGE SINCE DECEMBER 27, 1993
<TABLE>
<CAPTION>
Stock Preferred Stock Common Stock
Subscriptions Shares Amount Shares * Amount
------------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Additional stock issued for property
(Note 3) 1/19/96 50,000 6,000
Investment banker's option expense
Interest paid in stock 3/31/96 14,000 1,680
Net loss
-------- --------- ---------- ---------- ----------
Balance at 3/31/96 $ - - $ 8,097,371 $ 971,685
-
Stock issued for cash 4/30/96 1,667 200
Stock issued for services 8/9/96 2,000 240
Stock issued for note conversion 8/23/96 166,667 20,000
Stock issued for services 8/30/96 8,749 1,050
Stock issued for interest 9/4/96 833 100
Stock issued for note conversion 12/23/96 33,007 3,961
Stock issued for cash 12/23/96 5,000 600
Stock issued for services 12/31/96 2,596 312
Stock issued for note conversion and
Management fee 12/31/96 90,100 901,000
Stock issued for note conversion 2/27/97 31,917 3,830
Consultant and investment bankers
option expense
Other, including fractional shares (761) (92)
Net loss
-------- --------- ---------- ---------- ----------
Balance at 3/31/97 $ - 90,100 $ 901,000 8,349,046 $1,001,886
Stock issued for cash 6/23/97 65,974 7,917
Stock issued for services 6/23/97 2,300 276
Stock issued for note conversion 8/19/97 58,974 7,077
Stock issued for cash 8/19/97 11,765 1,412
Stock issued for note conversion and
Management fee 8/19/97 51,190 511,900
Stock issued for cash 9/3/97 11,765 1,412
<CAPTION>
Additional Total
Paid Accumulated Stockholders'
In Capital Deficit Equity
---------- ----------- -------------
<S> <C> <C> <C>
Additional stock issued for property
(Note 3) 1/19/96 (6,000)
Investment banker's option expense 225,000 225,000
Interest paid in stock 3/31/96 40,320 42,000
Net loss (598,752) (598,752)
----------- ------------ ------------
Balance at 3/31/96 $ 4,881,808 $ (3,442,396) $ 2,411,097
Stock issued for cash 4/30/96 3,550 3,750
Stock issued for services 8/9/96 5,760 6,000
Stock issued for note conversion 8/23/96 522,966 542,966
Stock issued for services 8/30/96 27,974 29,024
Stock issued for interest 9/4/96 2,400 2,500
Stock issued for note conversion 12/23/96 95,060 99,021
Stock issued for cash 12/23/96 6,900 7,500
Stock issued for services 12/31/96 312
Stock issued for note conversion and
Management fee 12/31/96 901,000
Stock issued for note conversion 2/27/97 47,238 51,068
Consultant and investment bankers
option expense 363,250 363,250
Other, including fractional shares 53 (39)
Net loss (1,613,078) (1,613,078)
----------- ------------ ------------
Balance at 3/31/97 $ 5,956,959 $ (5,055,474) $ 2,804,371
Stock issued for cash 6/23/97 87,083 95,000
Stock issued for services 6/23/97 3,036 3,312
Stock issued for note conversion 8/19/97 92,176 99,253
Stock issued for cash 8/19/97 18,588 20,000
Stock issued for note conversion and
Management fee 8/19/97 511,900
Stock issued for cash 9/3/97 18,588 20,000
</TABLE>
20
<PAGE> 21
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1999, AND 1998
INCLUDING CUMULATIVE AMOUNTS DURING DEVELOPMENT STAGE SINCE DECEMBER 27, 1993
<TABLE>
<CAPTION>
Stock Preferred Stock Common Stock
Subscriptions Shares Amount Shares* Amount
------------- --------------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Stock issued for
Compensation 10/31/97 10,000 1,200
Stock issued for cash 12/29/97 27,400 3,288
Stock issued for
Management fees-12/29/97 200 2,000
Stock issued for cash 1/16/98 5,601 672
Stock issued for note conversion 1/31/98 10,706 1,285
Stock issued for services 1/31/98 4,250 510
Stock issued for note conversion 2/1/98 33,770 4,052
Stock issued for cash 2/10/98 30,000 3,600
Stock issued for cash 2/25/98 25,295 3,035
Stock issued for services 2/28/98 38,000 4,560
Stock issued for note conversion 2/28/98 102,618 12,314
Stock issued for cash 2/28/98 32,555 3,907
Stock issued for cash 3/5/98 2,445 293
Consultant option expense
Net Loss
----------- ---------- ---------- ---------- -----------
Balance at 3/31/98 $ - 141,490 $ 1,414,900 8,822,464 $ 1,058,696
Stock issued for cash 6/11/98 76,595 9,191
Stock issued for note conversion 6/11/98 88,763 10,651
Stock issued for note conversion 6/18/98 60,000 7,200
Stock issued for cash 6/18/98 15,000 1,800
Stock issued for
Compensation 6/30/98 6,667 800
Preferred Stock dividends
Cancelled/retired stock 8/01/98 (42,750) (5,130)
Stock issued for cash 10/26/98 117,130 14,056
Stock issued for note conversion 10/26/98 188,200 22,584
Stock issued for asset 10/26/98 10,000 1,200
Stock issued for services 10/26/98 3,523 423
<CAPTION>
Additional Total
Paid Accumulated Stockholders'
In Capital Deficit Equity
---------- ----------- -------------
<S> <C> <C> <C>
Stock issued for
Compensation 10/31/97 13,800 15,000
Stock issued for cash 12/29/97 43,212 46,500
Stock issued for
Management fees-12/29/97 2,000
Stock issued for cash 1/16/98 9,421 10,093
Stock issued for note conversion 1/31/98 17,485 18,770
Stock issued for services 1/31/98 6,715 7,225
Stock issued for note conversion 2/1/98 57,744 61,796
Stock issued for cash 2/10/98 47,400 51,000
Stock issued for cash 2/25/98 39,965 43,000
Stock issued for services 2/28/98 50,915 55,475
Stock issued for note conversion 2/28/98 124,765 137,079
Stock issued for cash 2/28/98 61,093 65,000
Stock issued for cash 3/5/98 4,507 4,800
Consultant option expense 442,444 442,444
Net Loss (2,580,644) (2,580,644)
------------- ------------ -----------
Balance at 3/31/98 $ $ 7,095,896 $ (7,636,118) $ 1,933,374
Stock issued for cash 6/11/98 153,103 162,294
Stock issued for note conversion 6/11/98 139,490 150,141
Stock issued for note conversion 6/18/98 72,000 79,200
Stock issued for cash 6/18/98 35,450 37,250
Stock issued for
Compensation 6/30/98 9,200 10,000
Preferred Stock dividends (200,000) (200,000)
Cancelled/retired stock 8/01/98 (148,120) (153,250)
Stock issued for cash 10/26/98 261,746 275,802
Stock issued for note conversion 10/26/98 262,475 285,059
Stock issued for asset 10/26/98 23,800 25,000
Stock issued for services 10/26/98 8,193 8,616
</TABLE>
21
<PAGE> 22
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1999, AND 1998
INCLUDING CUMULATIVE AMOUNTS DURING DEVELOPMENT STAGE SINCE DECEMBER 27, 1993
<TABLE>
<CAPTION>
Stock Preferred Stock Common Stock
Subscriptions Shares Amount Shares* Amount
------------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Stock issued for services 11/24/98 117,778 14,133
Stock issued for cash 11/24/98 92,285 11,074
Stock issued for note conversion 11/24/98 34,329 4,120
Stock issued for
Employee gifts 12/30/98 4,350 522
Stock issued for services 1/18/99 3,000 360
Stock issued for services 3/12/99 1,284 154
Stock issued for cash 3/12/99 59,837 7,181
Stock issued for cash 3/31/99 137,253 16,470
Stock issued for services 3/31/99 15,956 1,915
Net loss
========== --========= ============ ========= -==========
Balance at 3/31/99 $ - 141,490 $ 1,414,900 9,811,664 $ 1,177,400
========== =========== ============ ========= ===========
<CAPTION>
<CAPTION>
Additional Total
Paid Accumulated Stockholders'
In Capital Deficit Equity
---------- ----------- -------------
Stock issued for services 11/24/98 157,867 172,000
Stock issued for cash 11/24/98 265,781 276,855
Stock issued for note conversion 11/24/98 98,866 102,986
Stock issued for
Employee gifts 12/30/98 9,266 9,788
Stock issued for services 1/18/99 7,140 7,500
Stock issued for services 3/12/99 3,696 3,850
Stock issued for cash 3/12/99 185,688 192,869
Stock issued for cash 3/31/99 208,723 225,193
Stock issued for services 3/31/99 45,235 47,150
Net loss (1,661,331) (1,661,331)
---------- ----------- -----------
Balance at 3/31/99 $8,695,495 $(9,297,449) $ 1,990,346
========== =========== ===========
</TABLE>
* Adjusted for three-for-one reverse stock split.
The accompanying notes are an integral part of these financial statements.
22
<PAGE> 23
NEVADA GOLD & CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1999, AND 1998
INCLUDING CUMULATIVE AMOUNTS DURING DEVELOPMENT STAGE SINCE DECEMBER 27, 1993
<TABLE>
<CAPTION>
CUMULATIVE
AMOUNTS
DURING
DEVELOPMENT
STAGE (SINCE
1999 1998 12/27/93)
------------ ------------ ------------
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (1,661,331) $ (2,580,644) $ (7,001,372)
Adjustment to reconcile net loss to net cash
Provided (used) by operating activities
Depreciation 33,090 26,401 105,961
Equity in net loss of Isle of Capri Black Hawk 656,275 971,504 1,627,779
Equity in net loss of RCI 82,089 - 82,089
Consultant, investment bankers, and other
Option expense 258,904 442,444 1,021,973
Gain on sale-part interest Isle of
Capri Black Hawk (147,851) (135,116) (282,967)
Gain on sale of Colorado Real estate (197,304) - (197,304
Other - 231 231
Changes in operating assets and liabilities:
Prepaid expenses and other assets (135,104) (2,985) 68,437
Accounts payable and liabilities 138,742 111,626 1,317,407
------------ ------------ ------------
NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES (972,490) (1,166,539) (3,257,766)
------------ ------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES:
Real estate and assets held for development (191,881) (85,211) (1,549,606)
Purchase of furniture, fixtures and equipment (6,254) (19,621) (54,913)
Proceeds from sale of part interest of
Isle of Capri Black Hawk - 833,334 833,334
Repurchase interest in Isle of Capri Black Hawk (500,000) - (500,000)
Advances to RCI (104,115) - (104,115)
Advances to affiliates (1,506,547) - (1,506,547)
Proceeds on disposition of property 36,610 8,866 45,746
------------ ------------ ------------
NET CASH PROVIDED
(USED) IN INVESTING ACTIVITIES (2,272,187) 737,368 (2,836,371)
------------ ------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES
Salaries contributed by officers - -
1,000
Common stock issued for cash, net of offering costs 1,170,263 355,392 2,547,218
Payment for fractional shares - - (36)
Proceeds from debt 2,352,386 1,179,496 7,118,044
Payments on debt (271,105) (1,029,595) (3,712,642)
Prepaid stock subscriptions - -
295,500
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,251,544 505,293 6,249,084
------------ ------------ ------------
NET INCREASE IN CASH 6,867 76,122 154,947
BEGINNING CASH BALANCE 154,367 78,245 6,287
------------ ------------ ------------
ENDING CASH BALANCE $ 161,234 $ 154,367 $ 161,234
============ ============ =============
SUPPLEMENTAL CASH FLOW INFORMATION:
CASH PAID FOR INTEREST $ 141,458 $ 149,057 $ 554,958
============ ============ =============
CASH PAID FOR TAXES - - -
============ ============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE> 24
1.BUSINESS
Nevada Gold & Casinos, Inc., which currently trades on the bulletin
board under the ticker symbol "UWIN" (referred to as "UWIN"), has developed its
business in the areas of gaming, real estate development, and restaurant
franchise operation. UWIN was founded in 1977 under the name Pacific Gold &
Uranium Corporation. On December 27, 1993, control of UWIN changed and its
primary focus was redirected from extractive mining to the development of
gaming and real estate properties in Colorado. UWIN is considered to be in the
development stage since December 27, 1993. In January 1994, UWIN changed its
name from Pacific Gold Corporation to Nevada Gold & Casinos, Inc.
In June 1997, UWIN and Isle of Capri Casinos, Inc. ("Isle") (then
known as Casino America, Inc.), through wholly-owned subsidiaries, BlackHawk
Gold, Ltd. ("BHG"), and Casino America of Colorado, Inc. ("CAC"), respectively,
entered into a joint venture, the Isle of Capri-Black Hawk, L.L.C. ("IC-BH").
The purpose of the joint venture was the construction and operation of the
IC-BH Casino (the "Casino") and a hotel on the Black Hawk Property. The Casino
opened for business on December 30, 1998, and the Isle of Capri operates the
Casino under a management agreement for a fee based upon a percentage of the
Casino's revenues and operating profit. UWIN's total current ownership
interest in IC-BH is 43%.
Construction of a $29 million 237-room hotel on top of the Casino
began in June 1999 and is proceeding under a "guaranteed maximum price"
design/build agreement. The hotel is expected to be completed in July 2000.
In addition, UWIN and its subsidiaries own interests in undeveloped
real estate, restaurant franchises, and gold mining claims.
UWIN's internally-generated cash flows from operations have
historically been and continue to be insufficient for its cash needs. UWIN has
historically relied upon equity and debt financing to fund operations. UWIN's
current cash forecasts indicate that there will be negative cash flows from
operations for the balance of the current fiscal year. It is likely that UWIN
will be required to seek debt or equity financing, curtail operations, or sell
assets in order to bring its cash flow into balance; however, currently UWIN
has no specific plans or commitments to take any of these courses of action.
Management's strategy is to raise additional funds through the sale of UWIN
debt and equity securities, including those held by affiliates of UWIN. In the
event that UWIN is required to take any of these courses of action, UWIN cannot
assure that it will be successful in its efforts.
The short-term viability of UWIN is dependent upon UWIN's ability to
raise sufficient capital to meet its cash requirements. In addition, UWIN and
its venture partner, Isle, have developed the Casino that commenced operations
in December 1998; however, UWIN cannot assure that the Casino will continue to
be successful. The ownership and operation of gaming facilities are subject to
extensive state and local regulations. UWIN cannot assure that it or Isle will
be able to continue to comply or conduct business in accordance with the
applicable regulations. The long-term viability of UWIN is dependent upon the
continued successful operation of the Casino and successful completion and
operation of the hotel being constructed on top of the Casino. The factors
described above raise substantial doubt about UWIN's ability to continue as a
going concern. The accompanying financial statements have been prepared
assuming that UWIN will continue as a going concern. If UWIN is unable to
continue as a going
24
<PAGE> 25
concern, the values realized from UWIN's assets may be less than the carrying
amounts reported in its financial statements. The accompanying financial
statements do not include any adjustments relating to the recoverability and
classification of asset-carrying amounts or the amount and classification of
liabilities that might result should UWIN be unable to continue as a going
concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND EQUIVALENTS. Interest-bearing deposits and other
investments, with original maturities of three months or less, are considered
cash and cash equivalents.
MINING PROPERTIES AND CLAIMS. UWIN capitalizes costs of acquiring and
developing mineral claims until the properties are placed into production. At
that time, costs will be amortized on a units-of-production basis. These costs
include the costs to acquire and improve the claims, including land-related
improvements, such as roads. UWIN carries these costs on its books at the
lower of its basis in the claims, or the net realizable value of the mineral
reserves contained in the claims. Other mining properties are recorded at
their acquisition price. At March 31, 1999, and 1998, management believes the
net realizable value of the mineral reserves is in excess of UWIN's cost in the
claims.
REAL ESTATE HELD FOR DEVELOPMENT. Property held for development
consists of undeveloped land located in and around Black Hawk, Colorado, and
Nevada County, California. UWIN has capitalized certain direct costs of pre-
development activities together with capitalized interest. Property held for
development is carried at the lower of cost or net realizable value.
NEW ACCOUNTING STANDARDS. In November 1998, the Financial Accounting
Standards Board ("FASB") issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities," which established accounting and reporting
standards for derivative instruments and hedging activities. It requires that
entities recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
The provisions of this statement are effective for all fiscal quarters of all
fiscal years beginning after June 15, 2000. UWIN believes that this standard
will not have a material impact on its financial statements or the disclosures
to the financial statements.
Statement of position ("SOP") 98-5 "Reporting on the Cost of Start-up
Activities," requires all start-up and organizational costs to be expensed as
incurred. It also requires all remaining historically capitalized amounts of
these costs existing at the date of adoption to be expensed and reported as the
cumulative effect of a change in accounting principles. SOP 98-5 is effective
for all fiscal years beginning after December 31, 1998. UWIN believes the
adoption of SOP 98-5 will not have a material effect on its financial
statement.
FURNITURE, FIXTURES, AND EQUIPMENT. UWIN depreciates furniture,
fixtures, and equipment over their estimated useful lives, ranging from 2 to 7
years, using the straight-line method. Expenditures for furniture, fixtures,
and equipment are capitalized at cost. When items are retired or otherwise
disposed of, income is charged or credited for the difference between net book
value and proceeds realized on the property. Ordinary maintenance and repairs
are charged to expense, and replacements and betterments are capitalized.
25
<PAGE> 26
LOSS PER SHARE DATA. Loss per share is based on the weighted average
number of common shares outstanding during each year.
RECLASSIFICATIONS. Certain prior-year balances have been reclassified
to conform to current year presentations.
BASIS OF PRESENTATION. These financial statements are consolidated
for all wholly-owned subsidiaries as of March 31, 1999, and 1998. Affiliated
companies in which UWIN does not have a controlling interest or for which
control is expected to be temporary are accounted for using the equity method.
All significant intercompany transactions and balances have been eliminated in
the financial statements.
USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that effect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
3. ISLE OF CAPRI BLACK HAWK
In April 1997, UWIN and Isle, through wholly-owned subsidiaries, BHG
and CAC, respectively, formed IC-BH. The purpose of IC-BH was the construction
and operation of the Casino and a hotel on the Black Hawk Property. The Casino
opened for business on December 30, 1998, and the Isle operates the Casino
under a management agreement for a fee based upon a percentage of the Casino's
revenues and operating profit. UWIN contributed property at a net value of
$7.5 million to IC-BH, and its total current ownership interest in IC-BH is
43%.
On August 20, 1997, IC-BH and Isle of Capri Capital Corp., a
wholly-owned subsidiary of IC-BH that had no operations, assets or liabilities,
issued $75,000,000 of 13% First Mortgage Notes due 2004, with contingent
interest, in order to finance the construction and development of the Casino.
The rights and obligations of CAC and BHG are governed in part by the
Amended and Restated Operating Agreement of the Isle of Capri-Black Hawk (the
"Agreement") dated as of July 1997. The Agreement provides that IC-BH will
continue until December 31, 2096, or until the time that dissolution may occur.
Pursuant to the Agreement, CAC contributed cash, land purchase rights, and
development costs to IC-BH and BHG contributed land to IC-BH.
On July 29, 1997, CAC, Isle, BHG, and UWIN also entered into a Members
Agreement (the "Members Agreement") that addressed the development of the
Casino, management of IC-BH, additional capital contributions, and other
matters. On August 20, 1997, CAC purchased from BHG a 4.2% ownership interest
(the "Transferred Interest") in IC-BH for $700,000, and BHG was given 180 days
to reaquire all or a portion of the Transferred Interest for $700,000 together
with interest. In addition, pursuant to the Members Agreement, BHG had the
right to sell up to an additional 4.8% ownership interest in IC-BH to CAC (the
"Put") for up to $800,000, and to repurchase, within 180 days, any ownership
interest sold pursuant to the Put, with the repurchase price being the price
for which the ownership interest was sold, together with interest. Pursuant to
the Put, CAC purchased from BHG (i) an additional .8% interest on November 13,
1997, for $133,333, and (ii) an additional 4% ownership interest on February
16, 1998, for
26
<PAGE> 27
$666,667, exhausting BHG's right to sell any additional interest under the
terms of the Put. BHG subsequently repurchased from CAC a 4% ownership
interest out of the Transferred Interest for $715,000, including interest. As
a result, BHG held a 40% ownership interest in IC-BH at March 31, 1998.
The 180-day period to repurchase the .8% ownership interest expired on
May 12, 1997, and the gain resulting from the sale was recognized in UWIN's
March 31, 1998, financial statements. The 180-day period for the repurchase of
the 4% ownership sold to CAC on February 16, 1998, expired on August 15, 1998,
and the $591,404 gain relating to the sale was deferred in UWIN's March 31,
1998, financial statements. In August of 1998, BHG repurchased from CAC 3% of
the ownership interest for $536,250, including interest. A gain of $147,851
was recorded on the sale of the 1% interest that was not repurchased by BHG.
UWIN's 43% ownership of the IC-BH is being accounted for using the
equity method of accounting. UWIN's investment in IC-BH is stated at cost,
adjusted for its equity in the undistributed earnings or losses of the project.
During UWIN's year ended March 31, 1999, IC-BH's undistributed earnings
allocable to UWIN through March 28, 1999 totaled $2,155,710. In accordance
with the equity method of accounting, UWIN's investment account balance was
reduced to zero, and the remaining allocated loss of $1,499,436 is not
reflected in the financial statements.
The following is a summary of condensed financial information
pertaining to the IC-BH as of its fiscal year ended April 25, 1999:
<TABLE>
<S> <C>
(in thousands)
Current assets $ 1,612
Property and equipment 40,942
Other assets 53,323
-------------
$ 95,877
-------------
Current liabilities $ 7,904
Long-term debt 75,000
Members' equity 12,973
-------------
$ 95,877
-------------
Revenue:
Casino $ 20,679
Food, beverage, and other 1,367
-------------
Total revenue $ 22,046
Operating expenses:
Casino 2,886
Gaming taxes 3,930
Food, beverage, and other 14,224
Depreciation 985
-------------
Total operating expenses $ 22,025
</TABLE>
27
<PAGE> 28
<TABLE>
<S> <C>
Operating income 21
Interest expense, net (5,207)
-------------
Net loss $ (5,186)
-------------
</TABLE>
The net loss of IC-BH for the fiscal year ended April 25, 1999,
includes $3,320,000 of one-time charges related to pre-opening costs which were
expensed as of December 30, 1998, the day the Casino opened.
4. REAL ESTATE AND ASSETS HELD FOR DEVELOPMENT
UWIN, through its wholly-owned subsidiary, Gold Mountain Development,
L.L.C. ("GMD"), owns approximately 170 acres of real property in the vicinity
of Black Hawk, Colorado. During the year ended March 31, 1999, GMD exchanged
certain acres of real property located in Gilpin County, Colorado, with Proland
Management, L.L.C. ("Proland"), in exchange for other acres of real property
owned by Proland, cash, Proland's assumption of some of UWIN's notes payable,
and purchaser-financed short-term notes receivable totaling $132,737. The note
receivable bears interest at rates ranging from 12% per annum to 16% per annum.
A gain on sale totaling $197,304 was recognized from this transaction.
The casinos currently operating in Black Hawk employ in excess of
5,000 individuals. Because only limited residential housing is available in
Black Hawk, these employees generally commute daily for distances of
twenty-five miles or more each way. With the exception of existing casinos, no
commercial facilities exist in Black Hawk to provide even the most basic
amenities for Black Hawk residents.
UWIN has entered into a contract with HealthyPlaces, Inc., to conduct
a feasibility study regarding developing a master-planned residential and
commercial project on the Property, to make proposals regarding a
master-planned community for the Property, and to obtain investors and/or joint
venture partners for it and UWIN in order to finance the projects. Sales of
pad sites may be made to assist in the funding of the project.
During fiscal 1995, UWIN agreed to purchase 100% of the outstanding
common stock of Sunrise Land and Minerals Corporation ("Sunrise") in exchange
for a seller-financed non-recourse note. UWIN retired that note on August 23,
1996, through the issuance of 166,667 shares of restricted UWIN common stock.
Sunrise owns 300 acres of land in Nevada County, California, including all
surface, mineral, water, air, and timber rights. Sunrise has been inactive
since its acquisition in 1995. During the year ended March 31, 1999, UWIN
revalued the real property owned by Sunrise to its estimated fair value. Based
on this valuation, on August 1, 1998, the original sellers of Sunrise returned
42,750 shares of UWIN's common stock which was subsequently canceled and
retired.
5. RESTAURANT CONNECTIONS INTERNATIONAL, INC.
In August 1998, Restaurant Connections International, Inc. ("RCI"),
was formed with UWIN as a founding shareholder. UWIN currently owns an
approximate 30% interest in RCI. In December 1998, RCI purchased the sole
Pizza Hut franchisee in Sao Paulo, Brazil, which owned and operated 18 Pizza
Hut restaurants and one KFC restaurant in Sao Paulo. The KFC
28
<PAGE> 29
restaurant is currently being converted into a Pizza Hut restaurant.
The Chairman of RCI is James Wong, who was elected a Director of UWIN in
March 1999.
6. MINING PROPERTIES AND CLAIMS
In June 1998, Goldfield Resources, Inc. ("Goldfield"), was
organized as a wholly-owned subsidiary of UWIN. The Board of Directors
approved the transfer of UWIN's land and Bureau of Land Management mining
claims in the State of Nevada, totaling approximately 9,000 mining claims,
to Goldfield in exchange for shares of common stock of Goldfield. Goldfield
is not directly involved in mining operations, and in August 1998 secured a
mining lease for its properties with Romarco Nevada, Inc. ("Romarco"), and
retains a royalty interests under the lease. This lease permits Goldfield
to benefit financially from successful mining operations without incurring
the significant labor and machinery costs of operating mining projects.
Under the terms of the lease with Romarco, Romarco makes an
advance royalty payment to UWIN of $2,000 per month each month for the
first twelve months of the lease agreement. Beginning August 1, 1999, the
advance royalty payment increases to $3,000 per month; on August 1, 2000,
it increases to $4,000 per month, and on August 1, 2001, it increases to
$5,000 per month. Beginning August 1, 2002, the $5,000 monthly payment is
to be adjusted, up or down, by the change in the Consumer Price Index using
the August 1, 1998, effective date as the base year. All advance royalty
payments are to be credited to the production royalty payable under the
lease. Romarco has agreed to pay UWIN a production royalty of 5% of all
"Ore" and "Product" as defined in the lease, with all credits and offsets
as provided in the lease, and Romarco may repurchase up to one percentage
point of the royalty for $2,500,000. Romarco has the right to terminate the
lease agreement at any time by giving UWIN written notice. If Romarco
terminates the lease, UWIN retains all advance royalty and other payments
made to it by Romarco as liquidated damages.
7. SHORT-TERM NOTES PAYABLE
The following notes will become due and payable on or before March
31, 2000:
<TABLE>
<CAPTION>
1999 1998
-------------- ---------------
<S> <C> <C>
Note payable to individual, bearing interest at 12%, payable on 8/13/99. $ 1,000,000 $ 0
Note payable to individual, bearing interest at 12%, payable on 8/19/99 600,000 0
Note payable to individual, bearing interest at 12%, payable on demand 35,000 0
Note payable to individual, bearing interest at 12%, payable on 5/15/99 100,000 0
Earnest money promissory note, dated 10/20/95, due on 9/30/97. 0 40,000
Notes payable to affiliate, bearing interest at 12%, payable on demand 0 162,791
</TABLE>
29
<PAGE> 30
<TABLE>
<CAPTION>
<S> <C> <C>
Note payable to individual, bearing interest at 12%, payable on demand 0 76,800
-------------- ---------------
Total short-term notes payable $ 1,735,000 $ 279,591
============== ===============
</TABLE>
8. LONG-TERM DEBT
MORTGAGES PAYABLE. Mortgages payable are comprised of three
mortgage notes of GMD, all secured by real property, consisting of
undeveloped land in the city of Black Hawk, Colorado, or in an adjacent
area in the County of Gilpin. The mortgage terms as of March 31, 1999, and
1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Notes payable, interest at 8%, payable in monthly payments of $177 to
$1,658, due December 1998 through February 2004 $ 0 $ 122,337
Note payable, interest at 8%, payable in monthly payments of $650
through April 2001. 14,403 18,178
Note payable, interest at 8.5%, payable in monthly payments of $575,
through December 2003. 26,893 31,304
Note payable, interest at 8%, payable in monthly payments of $500,
through July 2000. 13,957 0
-------------- ----------------
Total mortgages payable 55,253 171,819
Current portion of mortgages payable (16,522) (60,796)
-------------- ----------------
Long term mortgages payable $ 38,731 $ 111,023
============== ================
</TABLE>
The aggregate principal maturities on long term mortgages for the
years ending March 31 are as follows:
2000 $ 16,522
2001 21,474
2002 6,073
2003 6,189
2004 4,995
---------
Total $ 55,253
OTHER LONG-TERM NOTES AND CAPITAL LEASES PAYABLE. Long-term notes
and capital leases payable as of March 31, 1999, and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Capital leases for acquisition of computers, principal and interest
payments in the amounts of $1,345 monthly, maturing 2001. $ 20,660 $ 34,109
</TABLE>
30
<PAGE> 31
<TABLE>
<CAPTION>
<S> <C> <C>
Note payable to Isle , interest at the higher of 14.5% or Isle's highest
cost of funds plus 2%, maturing August 2000. 500,000 500,000
------------ ------------
520,660 534,109
Total other long term notes and capital leases payable
Current portion of other long-term notes and capital leases payable (12,420) (12,391)
------------ -------------
$ 508,240 $ 521,718
Other long term notes and capital leases payable ============ =============
</TABLE>
UWIN has entered into a lease agreement for four computers that
expires in 2001. Future minimum lease payments for capital leases for the
years ending March 31 are as follows:
2000 $ 16,138
2001 9,414
-------
25,552
Interest and sales tax (4,892)
Net Present Value $ 20,660
========
9. TAXES BASED ON INCOME
UWIN adopted SFAS No. 109, "Accounting for Income Taxes," effective
April 1, 1993. Under SFAS No. 109, deferred tax liabilities are determined
based on the difference between financial statement and tax bases of all
assets and liabilities, measured by using the enacted statutory tax rates.
SFAS No. 109 also provides for the recording of a deferred tax
asset for net operating loss carryforwards. For the year ended March 31,
1999, UWIN had net operating loss carryforwards amounting to $7,178,826.
The loss carryforwards expire in the years ending March 31 as follows:
2000 $ 103,298
2001 340,495
2002 206,292
2003 310,240
2004 76,101
2005 348,266
2006 278,648
2008 12,130
2009 111,926
2010 425,947
2011 602,051
2012 1,295,568
2013 1,166,696
2014 1,901,168
----------
$7,178,826
31
<PAGE> 32
The loss carryforwards are subject to certain limitations under
the Internal Revenue Code. UWIN has recorded a deferred tax asset in each
year amounting to $2,440,801 and $1,815,962 as of March 31, 1999, and 1998,
respectively, as a result of the future tax benefit of the net operating
loss carryforward, determined by applying the enacted statutory rate of 34%
to the carryforwards. However, UWIN believes that the utilization of these
net operating loss carryforwards could be significantly limited due to a
change in ownership in 1994. UWIN also has recorded a deferred tax asset
for compensation expense in connection with the issuance of stock options
and for losses of its equity investment that are not currently deductible
for Federal income tax purposes. Since the ability of UWIN to realize the
deferred tax assets is not certain, a valuation allowance has been recorded
for both years in an amount equal to the deferred tax assets:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1999 ACTIVITY 1998
------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 2,440,801 $ 624,839 $ 1,815,962
Stock options 186,211 (73,232) 259,443
Losses of equity investment 756,146 425,835 330,311
----------- --------- -----------
Total deferred tax assets 3,383,158 977,442 2,405,716
Valuation allowance for deferred tax assets (3,383,158) (977,442) (2,405,716)
----------- --------- -----------
Net deferred tax assets $ 0 $ 0 $ 0
=========== ========= ===========
</TABLE>
Reconciliations between the statutory federal income tax (benefit) rate and
UWIN's effective income tax (benefit) rate as a percentage of loss from
continuing operations were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------------------------
1999 1998
----------------------------------------------------------
<S> <C> <C> <C> <C>
PERCENT DOLLARS PERCENT DOLLARS
------- ------- ------- -------
Tax benefit at statutory federal rate (34%) $(564,853) (34%) $(877,419)
Permanent differences:
Expired NOL & other - 2,429 1% 32,847
Increase in valuation allowance related
to current year net operating loss 39% 646,397 14% 363,830
Stock options - - 6% 150,431
Suspended losses of Isle of Capri
Black Hawk (31%) (509,808) - -
Equity in losses of Isle of Capri
Black Hawk 26% 425,835 13% 330,311
------- --------- ------ ---------
Effective income tax benefit rate 0% $ 0 0% $ 0
======= ========= ====== =========
</TABLE>
10. STOCK OPTIONS AND WARRANTS
Options granted during the year ended March 31, 1998, for investor
relations totaled 529,444. Of the options granted, 150,000 options are
exercisable immediately, 85,000 options are exercisable in December 2000
and 44,444 options are exercisable in December 2001. The remaining 250,000
options are exercisable upon UWIN's receipt of equity offering or financing
32
<PAGE> 33
in accordance with the terms of the agreements. No options were granted
during the year ended March 31, 1999.
UWIN has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." Accordingly, compensation expense of $0 and
$442,444 has been recorded in 1999 and 1998, respectively, in accordance
with the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
Interpretations and SFAS No. 123 for equity awards to nonemployees.
Information regarding the options for 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
1999 1998
---- ----
<S> <C> <C>
Options outstanding, beginning of year 976,990 1,127,546
Options granted - 529,444
Options exercised (153,254) -
Options expired or cancelled - (680,000)
----------- ------------
Options outstanding, end of year 823,736 976,990
----------- ------------
Options exercisable, end of year 444,292 597,546
----------- ------------
Options available for grant, end of year - -
=========== ============
</TABLE>
Weighted average option exercise price information for 1999
and 1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Outstanding at beginning of year $2.21 $2.19
Granted during the year .00 2.34
Exercised during the year 1.70 .00
Expired or cancelled during the year .00 2.25
Outstanding at end of year 2.30 2.21
Exercisable at end of year 2.14 2.06
</TABLE>
Significant option groups outstanding at March 31, 1999, and
related weighted average price and life information is as follows:
<TABLE>
<CAPTION>
Options Options Exercise Remaining
Grant Date Outstanding Exercisable Price Life (Years)
---------- ----------- ----------- ----- ------------
<S> <C> <C> <C> <C> <C>
April 1994 14,666 14,666 $1.50 1 day
November 1995 70,000 70,000 4.50 8 months
April 1996 209,626 209,626 1.52 1
December 1997 100,000 50,000 2.25 3.8
December 1997 429,444 100,000 2.36 1.8
</TABLE>
The weighted average fair value at date of grant for options
granted during 1998 was $1.59 per option. The fair value of options at date
of grant was estimated using the Black-Scholes model with the following
weighted average assumptions:
33
<PAGE> 34
1998
----
Expected life (years) 3.5 years
Interest rate 5.70%
Dividend yield -
Had compensation costs for UWIN's stock option plan been
determined based on the fair value at the grant date in 1998 consistent
with the provisions of SFAS No. 123, UWIN's net loss would have increased
to the proforma amounts indicated below:
1998
----
Net loss - as reported $2,580,644
Net loss - proforma 2,580,644
Loss per share - as reported .32
Loss per share - proforma .32
In connection with the options outstanding at March 31, 1999,
28,668 shares were exercised in April 1999, and 65,292 shares expired on
April 11, 1999.
Additionally, 14,209 stock options that were issued to a Director
for services related to the environmental remediation project, at an option
price of $1.50, expired April 11, 1999.
UWIN granted options to purchase 666,667 shares of common stock at
$2.25 a share for financial advisory services during 1996, which were
cancelled on December 9, 1997.
At UWIN's annual shareholders' meeting in March 1999, a majority
of the shareholders approved the adoption of the 1999 Stock Option Plan,
which allows the Compensation Committee of the Board of Directors to award
stock options, performance stock, restricted stock, and stock appreciation
rights to applicable persons, and for which 1,200,000 shares of stock in
UWIN have been set aside. No options had been granted under this plan at
March 31, 1999.
11. SEGMENT REPORTING
During the year ended March 31, 1999, UWIN adopted SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information,"
which establishes standards for reporting financial and descriptive
information regarding an enterprise's operating segments.
UWIN operates in four business segments (i) gaming, (ii)
commercial and residential real estate development, (iii) restaurant
franchises, and (iv) mining properties and claims. The gaming segment
involves the operation of a casino entertainment complex in Black Hawk,
Colorado. The commercial and residential real estate segment involves the
development of a master-planned residential and commercial property project
adjacent to Black Hawk, Colorado. The restaurant franchise segment involves
an ownership interest in Pizza Hut franchises in Sao Paulo, Brazil. The
mining property and claims segment involves the leasing of its property and
retaining a royalty interest under the lease.
Summarized financial information concerning UWIN's reportable
segments is shown in the following table. The "Other" column includes
corporate-related items, results of insignificant operations, and segment
profit (loss) income and expense not allocated to reportable segments.
34
<PAGE> 35
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1999
-----------------------------------------------------------------------------------------------------
Restaurant Real
Gaming Franchise Mining Estate Other Totals
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 147,851 $ - $ 16,000 $ 203,410 $ 5,676 $ 372,937
Segment profit (loss) (181,999) - (63,534) (148,788) (528,646) (922,967)
Segment assets - 22,025 480,812 2,311,977 2,814,814
Interest expense 36,250 - 529 106,971 76,828 220,578
Interest income 81,017 81,017
Equity in income(loss)
Of equity investment (656,275) (82,089) (738,364)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1998
------------------------------------------------------------------------------------------------------
Restaurant Real
Gaming Franchise Mining Estate Other Totals
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 135,116 $ - 15,000 2,477 619 153,212
Segment loss (327,917) - (67,900) (300,392) (912,931) (1,609,140)
Segment assets 599,828 - 480,812 2,266,809 - 3,347,449
Interest expense 48,333 - - 35,157 134,080 217,570
- -
Interest income - - - - - -
Equity in income (loss)
Of equity investment (971,504) (971,504)
</TABLE>
Reconciliation of reportable segment assets to UWIN's consolidated
totals as of March 31 are as follows:
Assets 1999 1998
- --------- --------- -----
Total assets for reportabe segments 2,814,814 3,347,449
not allocated to segments 161,234 154,367
Other assets not allocated to segments 1,553,698 113,883
Consolidated total assets 4,529,746 3,615,699
--------- ---------
12. RELATED PARTY TRANSACTIONS
In the ordinary course of business, UWIN has entered into
transactions with its Officers, Directors, and other related entities. The
majority of these transactions include loans made or received from the
related party. Following is a description of those transactions during the
years ended March 31, 1999, and 1998.
During the year ended March 31, 1999, GMD loaned Clay County
Holdings, Inc. ("CCH") $1,306,547 for working capital purposes; also, CCH
loaned GMD $377,900. David K. McCaleb, then-Secretary of UWIN, was (and is)
President of CCH. In addition, CCH loaned RCI $600,000 for working capital
purposes. During the year ended March 31, 1998, Paul Burkett, a Director of
UWIN, loaned GMD $76,800, and this loan was redeemed on June 11, 1998, for
45,025 shares of UWIN's restricted common stock.
35
<PAGE> 36
In addition, during the year ended March 31, 1999, UWIN paid off a
working capital loan in the amount of $7,708 from ADT Resources, a
wholly-owned subsidiary of Aaminex Capital Corporation ("Aaminex"), an
affiliate of the President.
UWIN's President, Mr. Winn, is also the President of Aaminex. Mr.
Winn was employed by UWIN through a management agreement with Aaminex,
which shares office space and other expenses with UWIN, through August 31,
1998. The terms of the agreement provided that UWIN would pay $8,333 per
month to Aaminex for the full-time services of Mr. Winn. As of September 1,
1998, Mr. Winn is being paid directly by UWIN an annual salary of $100,000.
Effective December 31, 1996, the Board of Directors and the
holders of UWIN's common stock having at least a majority of the voting
power of the shares, approved and authorized the issuance of 500,000 shares
of preferred stock at $10 par value per share. UWIN subsequently issued
141,490 shares of 12% cumulative preferred stock, $10 par value, in
exchange for short-term notes payable to CCH, an affiliate of Mr. McCaleb,
the former Secretary of UWIN, and accrued management fees due to Aaminex,
an affiliate of the President of UWIN. These shares are callable by UWIN.
During the year ended March 31, 1999, UWIN paid dividends on the preferred
stock totaling $200,000. Undeclared cumulative dividends on the preferred
stock outstanding at March 31, 1999, and 1998 total $142,865 and $173,077,
respectively.
13. LEGAL PROCEEDINGS
UWIN and H. Thomas Winn, its Chief Executive Officer and
President, have entered into a settlement agreement in principal with the
staff of the Denver Regional Office of the Securities and Exchange
Commission ("Commission"). The settlement relates to the sale of certain
unregistered shares of common stock of UWIN through an affiliate of UWIN in
order to, in part, finance UWIN's operating expenses. Without admitting or
denying any allegations, Mr. Winn will accept a censure and UWIN and Mr.
Winn will accept a cease and desist order from committing any violations or
causing any future violations of Sections 5(a) and 5(c) of the Act. The
settlement offer is currently pending Commission approval.
UWIN is involved in one other legal proceeding that has arisen in
the ordinary course of business and that has not been fully adjudicated.
Although UWIN cannot assure the ultimate disposition of this matter and the
matter disclosed above, in the opinion of management, based upon
information available at this time, the cost of defense or settlement of
these actions, individually or in the aggregate, will not have a material
adverse effect on the financial position, results of operations, or cash
flows of UWIN.
14. YEAR 2000 ISSUE (UNAUDITED)
Management of UWIN has evaluated the impact of Year 2000 issues on
its computer systems and applications and developed a remediation plan.
Conversion and testing activities are in process and are expected to be
completed in 1999. UWIN's incremental costs specifically attributable to
the Year 2000 project are considered insignificant. To mitigate the effect
of outside influences and other dependencies relative to the Year 2000
issues, UWIN's plan includes procedures to contact third parties whose
success in addressing their own Year 2000
36
<PAGE> 37
issues will impact UWIN's initiative. To the extent that these third parties
would be unable to transact business in the year 2000 and later, UWIN's
operations could be adversely affected.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
37
<PAGE> 38
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Identification of Directors and Executive Officers
UWIN's Directors and Executive Officers are:
Name Age Position(s)
---- --- -----------
H. Thomas Winn 59 Chairman of the Board of Directors, Chief
Executive Officer, and President
Paul Burkett 77 Vice President and Director
William G. Jayroe 42 Secretary and Director
James Wong 52 Director
H. THOMAS WINN has served as Chairman, Chief Executive Officer, and
President of UWIN since January 1994. Mr. Winn is also President of Aaminex, and
during his tenure with Aaminex he was responsible for the merger of the Colorado
real property into Pacific Gold Corporation, UWIN's predecessor. Mr. Winn has
served as Chairman of Aaminex since 1983. Aaminex is a financial consulting and
venture capital firm that is involved in real estate, mining, and environmental
activities. Please see Item 3, Legal Proceedings, for a discussion of an
agreement in principle by and between Mr. Winn, UWIN, and the Securities and
Exchange Commission.
PAUL J. BURKETT has served as Vice President and a Director of UWIN
since 1991. Mr. Burkett has been involved in the mining industry for over 40
years. He has also served on the Board of Directors of Aaminex for 15 years. His
business for the past six years has concentrated on independent mining and real
estate ventures.
WILLIAM G. JAYROE has been a Director of UWIN for the past four years,
and was elected Secretary of UWIN in March of 1999. Mr. Jayroe has nearly two
decades of technology development, sales, and management expertise in the
petrochemical field. He began his career with a "Fortune 500" global oilfield
service company and left to begin his own company, Turbeco, Inc., which was
acquired by Flotek Industries, Inc., in late 1993. Mr. Jayroe left Flotek in
1998 and resigned as a Director in 1999. He is currently Executive Vice
President of Applied Training Resources, Inc., a privately-held company.
JAMES WONG has served as a Director of UWIN since March 1999. For the
past 10 years, Mr. Wong has been President and Chief Executive Officer of
Directions International, a management consulting firm. Mr. Wong has performed
consulting services as a turnaround manager and external change agent for Pizza
Hut International, KFC, PepsiCo Food Systems, American Express, ARCO, Budget
Rent-A-Car, Compaq, EDS, Hitachi, Honeywell, and other
38
<PAGE> 39
national and international corporations. Mr. Wong also helps his clients form
strategic alliances and joint ventures to capitalize on emerging markets. As
Chairman of RCI, Mr. Wong is currently involved in the turnaround of the Pizza
Hut franchises in Sao Paulo, Brazil, that were purchased by RCI in late 1998.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires UWIN's Directors and
Officers, and the persons who beneficially own more than ten percent of the
common stock of UWIN, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission. Copies of all filed reports are required
to be furnished to UWIN pursuant to Rule 16a-3 promulgated under the Exchange
Act. Based solely on the reports received by UWIN and on the representations of
the reporting persons, UWIN believes that these persons have complied with all
applicable filing requirements during the fiscal year ended March 31, 1999,
except in the following instances. Mr. Wong did not timely file a Form 3 in
March 1999, when he was elected a Director of UWIN. He subsequently filed his
Form 3 in July 1999. Mr. Burkett did not timely file a Form 4 in December 1998.
He subsequently filed his Form 4 in February 1999. Mr. David McCaleb, former
Secretary of UWIN, did not timely file a Form 4 in December 1998, but
subsequently filed the Form 4 in February 1999. Winstock Mining Corp. (US)
("Winstock") did not timely file Form 4's for May, July, August, September,
October, and November 1998, but subsequently filed them all in February 1999.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
- --------------------------------------------------------------------------------------------------------------
Awards Payouts
------ -------
Name and Securities All
Principal Other Annual Restricted Underlying LTIP Other
Position Year Salary Compensation Stock Award(s) Options/SARs Payouts Comp.
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
H. Thomas Winn, 1999 $100,000(1) -(2) - - - -
President/CEO 1998 $100,000(1) - - - - -
1997 $100,000(1) - - - - -
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Winn, the President, Chief Executive Officer, and a Director of UWIN, is
also President of Aaminex. Mr. Winn was employed by UWIN through a management
agreement with Aaminex, which shares office space and other expenses with UWIN,
through August 31, 1998. The terms of the agreement provided that UWIN would pay
$8,333 per month to Aaminex for the full-time services of Mr. Winn. As of
September 1, 1998, Mr. Winn is being paid directly by UWIN an annual salary of
$100,000.
(2) Mr. Winn received perquisites and other personal benefits valued at not more
than 10% of the total of the reported annual salary and bonus reported above.
39
<PAGE> 40
Option/SAR Grants Table
UWIN granted no options or SARs to its Officers or Directors during the
fiscal year ended March 31, 1999.
Aggregated Options/SAR Exercises and Fiscal Year-End Options/SAR Value Table
<TABLE>
<CAPTION>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
- ---------------------------------------------------------------------------------------------------------------------
Number of Value of
Unexercised Unexercised In-
Securities Underlying the-Money
Options/SARs at FY- Options/SARs at
Officer Shares Acquired End (#) Exercisable/ FY-End ($) Exerc-
Name on Exercise (#) Value Realized Unexerciseable iseable/Unexercis.
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
H. Thomas Winn, President
CEO, Director 8,334 $23,960.25 10,000 exerciseable $2,500.00
0 unexerciseable
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Long-Term Incentive Plan ("LTIP") Awards Table
UWIN granted no long-term incentives to any or its Officers or
Directors during the fiscal year ended March 31, 1999.
Compensation of Directors
UWIN's Directors receive no standard compensation for their services as
Directors, but are reimbursed their travel expenses.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
As of June 30, 1999, 9,926,790 shares of common stock of UWIN were
outstanding. The following table sets forth the ownership of any person
(including any "group") known to UWIN to be the beneficial owner of more than 5%
of any class of UWIN's outstanding voting stock.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
Name and Address Amount and Nature of
Title of Class of Beneficial Owner Beneficial Owner Percent of Class
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Winstock Mining Corp. (US)
Common Stock 1506-2008 Fullerton Ave. 1,604,378 16.1%
North Vancouver, BC V7P 3G7
- -----------------------------------------------------------------------------------------------------------
Aaminex Capital Corp. (1)
Common Stock 3040 Post Oak Blvd., Suite 675 1,437,845 14.4%
Houston, Texas 77056-6588
- -----------------------------------------------------------------------------------------------------------
Common Stock Clay County Holdings, Inc.
3040 Post Oak Blvd., Suite 675 2,709,678 27.2%
Houston, Texas 77056-6588
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Aaminex owns 176,371 shares outright, and 1,261,474 shares are the subject
of an option agreement to exercise the shares held by Winstock.
40
<PAGE> 41
Security Ownership of Management
The following table sets forth the ownership of UWIN common stock by
all Officers and Directors as of June 30, 1999.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
Name and Address Amount and Nature of
Title of Class of Beneficial Owner Beneficial Owner Percent of Class
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
H. Thomas Winn, CEO, President,
Common Stock and Director (1)
3040 Post Oak Blvd., Suite 675 1,456,179 14.6%
Houston, Texas 77056-6588
- -----------------------------------------------------------------------------------------------------------
Paul J. Burkett, Vice President and
Common Stock Director (2)
P.O. Box 761 263,698 2.6%
Goldfield, Nevada 89013
- -----------------------------------------------------------------------------------------------------------
William G. Jayroe, Secretary and
Common Stock Director (3)
3040 Post Oak Blvd., Suite 675 32,808 .3%
Houston, Texas 77056
- -----------------------------------------------------------------------------------------------------------
James Wong, Director
Common Stock 2329 Coit Road, Suite B 0 0%
Plano, Texas 75075
- -----------------------------------------------------------------------------------------------------------
Common Stock All Officers and Directors 1,752,685 17.6%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Except for 8,334 shares and options to purchase 10,000 shares that are owned
by Mr. Winn, all of the shares listed are controlled directly or indirectly
through Aaminex, of which Mr. Winn is President. 1,261,474 of these shares are
the subject of an option agreement to exercise the shares held by Winstock . As
long as the option remains contingent and unexercised, Mr. Winn exercises no
voting or investment power with respect to the shares subject to the options.
The shares listed are the same shares owned by Winstock. The information in this
table shall not be construed as a statement that Mr. Winn is the beneficial
owner of the securities covered by the statement for purposes of Sections 13(d)
or 13(g) of the Securities Act of 1933.
(2) Included in Mr. Burkett's beneficial ownership are options to purchase
10,000 shares.
(3) Included in Mr. Jayroe's beneficial ownership are options to purchase
10,000 shares.
41
<PAGE> 42
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended March 31, 1999, GMD loaned CCH $1,306,547 for
working capital purposes; also, CCH loaned GMD $377,900. David K. McCaleb,
then-Secretary of UWIN, was (and is) President of CCH. In addition, CCH loaned
RCI $600,000 for working capital purposes. During the year ended March 31, 1998,
Paul Burkett, a Director of UWIN, loaned GMD $76,800, and this loan was redeemed
on June 11, 1998, for 45,025 shares of UWIN's restricted common stock.
During the year ended March 31, 1999, UWIN paid off a working capital
loan in the amount of $7,708 from ADT Resources, a wholly-owned subsidiary of
Aaminex, an affiliate of the President.
UWIN's President, Mr. Winn, is also the President of Aaminex. Mr. Winn
was employed by UWIN through a management agreement with Aaminex, which shares
office space and other expenses with UWIN, through August 31, 1998. The terms of
the agreement provided that UWIN would pay $8,333 per month to Aaminex for the
full-time services of Mr. Winn. As of September 1, 1998, Mr. Winn is being paid
directly by UWIN an annual salary of $100,000.
Effective December 31, 1996, the Board of Directors and the holders of
UWIN's common stock having at least a majority of the voting power of the
shares, approved and authorized the issuance of 500,000 shares of preferred
stock at $10 par value per share. UWIN subsequently issued 141,490 shares of 12%
cumulative preferred stock, $10 par value, in exchange for short-term notes
payable to CCH, an affiliate of Mr. McCaleb, the former Secretary of UWIN, and
accrued management fees due to Aaminex, an affiliate of the President of UWIN.
These shares are callable by UWIN. During the year ended March 31, 1999, UWIN
paid dividends on the preferred stock totaling $200,000. At March 31, 1999, and
1998, the undeclared cumulative dividends on the preferred stock that remains
outstanding that remains unpaid totals $142,865 and $173,077, respectively.
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES, AND REPORTS ON FORM 8-K
(a) EXHIBITS
*3.1 - Articles of Incorporation
*3.1a - Amendment to Articles of Incorporation
*3.2 - Bylaws
*4.1 - Deed of Trust
*4.2 - Master Secured Note
*4.3 - Note Participation Agreement
*10.2 - Operating Agreement of Isle of Capri - Black Hawk,
L.L.C.
*10.3 - Amended and Restated Operating Agreement of
Isle of Capri Black Hawk, L.L.C.
*10.4 - Members Agreement
*10.5 - License Agreement
27 - Financial Data Schedule
- --------------------------
* Previously filed
42
<PAGE> 43
(b) FINANCIAL STATEMENTS AND SCHEDULES
Reference - Data submitted with this 10-KSB and under Item 8
17 Report of independent public accountants
18 Balance sheets
19 Statements of operations
20 Statements of shareholders' equity
23 Statements of cash flows
24 Notes to financial statements
(c) REPORTS ON FORM 8-K
None.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NEVADA GOLD & CASINOS, INC.
By: /s/ H. Thomas Winn
------------------
H. Thomas Winn, President
Date: July 14, 1999
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the date indicated.
Name & Position Date
--------------- ----
/s/ H. Thomas Winn July 14, 1999
------------------
H. Thomas Winn, President, CEO,
and Director
/s/ Paul J. Burkett July 14, 1999
-------------------
Paul J. Burkett, Director and
Vice President
/s/ William G. Jayroe July 14, 1999
---------------------
William G. Jayroe, Director and
Secretary
/s/ James Wong July 14, 1999
--------------
James Wong, Director
43
<PAGE> 44
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
*3.1 - Articles of Incorporation
*3.1a - Amendment to Articles of Incorporation
*3.2 - Bylaws
*4.1 - Deed of Trust
*4.2 - Master Secured Note
*4.3 - Note Participation Agreement
*10.2 - Operating Agreement of Isle of Capri - Black Hawk,
L.L.C.
*10.3 - Amended and Restated Operating Agreement of
Isle of Capri Black Hawk, L.L.C.
*10.4 - Members Agreement
*10.5 - License Agreement
27 - Financial Data Schedule
- --------------------------
* Previously filed
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 161,234
<SECURITIES> 0
<RECEIVABLES> 154,763
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 469,312
<PP&E> 93,836
<DEPRECIATION> 114,767
<TOTAL-ASSETS> 4,529,746
<CURRENT-LIABILITIES> 1,992,429
<BONDS> 38,731
0
1,414,900
<COMMON> 1,177,400
<OTHER-SE> 8,695,495
<TOTAL-LIABILITY-AND-EQUITY> 4,529,746
<SALES> 0
<TOTAL-REVENUES> 453,954
<CGS> 0
<TOTAL-COSTS> 1,376,921
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 738,364
<INTEREST-EXPENSE> 220,578
<INCOME-PRETAX> (1,661,331)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,661,331)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,661,331)
<EPS-BASIC> (.20)
<EPS-DILUTED> 0
</TABLE>
